                                                                        FILED
                                                                    Jul 24 2019, 6:05 am

                                                                        CLERK
                                                                    Indiana Supreme Court
                                                                       Court of Appeals
                                                                         and Tax Court




ATTORNEY FOR APPELLANT                                     ATTORNEY FOR APPELLEES
Ian P. Goodman                                             Michael T. McNally
Cantrell Strenski & Mehringer LLP                          Delk McNally LLP
Indianapolis, Indiana                                      Carmel, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA

KWD Industrias SA DE CV,                                   July 24, 2019
Appellant,                                                 Court of Appeals Case No.
                                                           18A-CC-2751
        v.                                                 Appeal from the Marion Superior
                                                           Court
IPM LLC and                                                The Honorable Patrick J. Dietrick,
Mark Reynolds,                                             Judge
Appellees.                                                 Trial Court Cause No.
                                                           49D12-1506-CC-21389



Brown, Judge.




Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019                           Page 1 of 12
[1]   KWD Industrias SA DE CV (“KWD”) appeals from the trial court’s decision

      to set aside default judgment. We affirm.


                                       Facts and Procedural History

[2]   On June 29, 2015, KWD filed a complaint against IPM LLC (“IPM”) and

      Mark Reynolds (together, “Appellees”) alleging claims of breach of contract

      and unjust enrichment against IPM for which it sought $46,800 together with

      interest and costs, and claims of conversion and deception against Reynolds for

      which it sought actual losses and treble damages of $140,400 plus attorney fees,

      interest, costs, and an additional award of punitive damages. KWD asserted

      that it provided $46,800 to Reynolds on behalf of IPM to purchase certain

      equipment from IPM and that IPM failed to provide the equipment or return

      the funds.


[3]   The Joint Venture and Non-Disclosure Agreement, referenced in and attached

      to the complaint as an exhibit, was executed on July 17, 2013, provided that its

      initial term was July 17, 2013, through July 17, 2014, and included provisions

      related to renewal, maintenance of equipment, product pricing, manufacturing

      rights, and the ownership of equipment and tooling. The agreement provided:

      “All equipment and tooling transferred to [KWD’s] manufacturing facilities

      including assembly cells, fixtures, test equipment, stamping presses, and other

      equipment required [f]or the current manufacturing process will remain the sole

      property of [IPM].” Appellant’s Appendix Volume II at 25.




      Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019       Page 2 of 12
[4]   Attorney Steven Fulk filed an appearance to represent Appellees in August

      2015 and later filed an answer, affirmative defenses, and counterclaims against

      KWD alleging an action in replevin seeking the return of property valued in

      excess of $170,000, damages for the wrongful retention of the property, and

      attorney fees and costs; civil conversion seeking treble damages, attorney fees,

      and costs; unjust enrichment; and malicious prosecution. Appellees asserted

      that the parties agreed, as part of a joint venture, that they would provide

      certain property including two assembly lines for the manufacture of heavy-

      duty commercial solenoid switches, tools and various parts and inventory

      necessary for the operation; that KWD instructed them to ship equipment,

      assembly lines, and tools to a location in Mexico; that they shipped four trucks

      worth of property to Mexico in 2013 and 2014; and that KWD unlawfully

      retains certain equipment including the assembly lines and tools.


[5]   The chronological case summary (“CCS”) indicates that KWD filed a motion

      for judgment on the pleadings as to Appellees’ malicious prosecution claim in

      November 2015, the court entered an order of dismissal as to that count in

      March 2016, and Appellees filed a motion to accept interlocutory appeal which

      was denied in June 2016. On September 19, 2016, the parties submitted a case

      management order signed by Attorney Fulk for Appellees and Attorney Ian

      Goodman for KWD, and the court approved the plan and set a final pre-trial

      conference for August 15, 2017, and trial for September 6, 2017. The

      Appellant’s Appendix includes responses by Appellees to KWD’s second set of

      interrogatories together with a certificate of service signed by Attorney Fulk


      Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019         Page 3 of 12
      dated November 2, 2016, and responses to KWD’s second requests for

      admissions together with a certificate of service signed by Attorney Fulk dated

      October 14, 2016. It also includes a letter to Attorney Goodman dated May 22,

      2018, which referenced an enclosure of the original transcript of the deposition

      of Reynolds taken on July 13, 2017. An entry in the CCS dated August 18,

      2017, states the court granted a motion for continuance, and entries dated

      September 6, 2017, state the final pre-trial conference was scheduled for 2:30

      p.m. on April 18, 2018, and the bench trial was scheduled to begin on May 2,

      2018. An entry in the CCS dated September 7, 2017, states “Automated

      ENotice Issued to Parties” and “Hearing Scheduling Activity – 9/6/2017:

      Steven T Fulk; Ian Peter Goodman.” Id. at 9.


[6]   On April 18, 2018, the court held the scheduled final pre-trial conference at

      which Attorney Fulk did not appear on behalf of Appellees. The following day,

      April 19, 2018, KWD filed a motion for sanctions against Appellees which

      stated that, because of their failure to appear at the pre-trial conference, it

      sought default judgment in its favor for the relief sought in its complaint,

      dismissal of Appellees’ counterclaims, attorney fees, and costs. On April 20,

      2018, the court scheduled a hearing on KWD’s motion for April 25, 2018, and

      the CCS indicates automated e-notices were sent to Attorney Fulk and Attorney

      Goodman. An April 25, 2018 CCS entry indicates a hearing was held. 1




      1
          The record does not contain a transcript of this hearing.


      Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019           Page 4 of 12
[7]   On May 14, 2018, the court issued an order which granted KWD’s motion for

      sanctions, entered default judgment in favor of KWD and against IPM for

      $46,800 plus costs of $151 and against Reynolds for $140,400 plus attorney fees

      of $22,747.39 and costs of $151, and ordered that Appellees’ counterclaims be

      dismissed with prejudice. On June 1, 2018, KWD filed a motion for leave of

      court to communicate directly with Appellees stating that its counsel had not

      heard from Appellees’ counsel since January 8, 2018; that Comment [6] to Ind.

      Rules of Professional Conduct 4.2 provides a lawyer may seek a court order in

      exceptional circumstances to authorize communication otherwise prohibited by

      the rule 2; that it “believes the circumstances described in this Motion are

      exceptional”; that it held judgments against Appellees and that “to collect its

      judgments it must have the ability to communicate with” them; and that it “has

      no expectation that counsel for [Appellees] will communicate with counsel for

      [KWD] or appear in Court on behalf of [Appellees].” Appellees’ Appendix

      Volume II at 3. According to Appellees, the court granted KWD’s June 1, 2018

      motion on the same day and shortly after that counsel contacted Reynolds.




      2
        Ind. Rule of Professional Conduct 4.2 provides that “a lawyer shall not communicate about the subject of
      the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless
      the lawyer has the consent of the other lawyer or is authorized by law or a court order.” Comment [6] states:
              A lawyer who is uncertain whether a communication with a represented person is
              permissible may seek a court order. A lawyer may also seek a court order in exceptional
              circumstances to authorize a communication that would otherwise be prohibited by this
              Rule, for example, where communication with a person represented by counsel is
              necessary to avoid reasonably certain injury.

      Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019                                Page 5 of 12
[8]   On July 24, 2018, Appellees by new counsel filed a motion under Ind. Trial

      Rule 60 requesting that the court set aside its May 14, 2018 order and set the

      matter for a pre-trial conference. The motion stated that the dispute arises out

      of a failed joint venture between KWD and IPM; that Appellees, represented by

      Attorney Fulk, filed an answer and counterclaims; that neither IPM nor

      Reynolds was notified of either the final pre-trial conference or the scheduling

      of the bench trial; that “[i]t is unknown to undersigned counsel whether Mr.

      Fulk had notice as he has not responded to undersigned counsel’s attempts to

      contact him”; and that, “[t]o date, Mr. Fulk has not responded to inquiries as to

      why he failed to appear.” Appellant’s Appendix Volume II at 74-75. Appellees

      further argued that KWD filed its motion for sanctions on April 19, 2018;

      “[f]rom a review of the docket, this appears to be the first time either party

      sought sanctions of any kind in this matter”; neither IPM nor Reynolds

      received notice of the motion or of the April 25, 2018 hearing; and, shortly after

      the court granted KWD’s motion for leave to communicate with Appellees on

      June 1, 2018, “counsel contacted Mark Reynolds directly” and “[t]his was the

      first time that Mark Reynolds and [IPM] learned of Steven Fulk’s failure to

      appear at the final pre-trial conference, the Motion for Sanctions, and that

      judgment had been entered against them.” Id. at 75-76. Appellees stated that

      they believed their attorney was diligently protecting their interests and that

      they have meritorious claims and defenses.


[9]   In a Declaration of Mark Reynolds referenced in Appellees’ motion to set aside,

      Reynolds stated that he and IPM were not notified of the April 18, 2018 final


      Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019         Page 6 of 12
       pre-trial conference, the scheduling of the bench trial, or the April 25, 2018

       hearing. He stated: “I have reviewed my communications with my attorney

       and his staff, and I have been unable to identify any communications regarding

       the above dates and deadlines.” Id. at 82. He further stated that IPM provided

       KWD with two complete manufacturing assembly lines and equipment, KWD

       did not pay for the assembly lines and equipment, it is believed KWD still has

       possession of the property, and the value of the property is approximately

       $156,000. On August 24, 2018, KWD filed a response in opposition to

       Appellees’ motion to set aside arguing that Appellees “simply ask the Court to

       let them off the hook for Mr. Fulk’s apparent error.” Id. at 89.


[10]   On August 28, 2018, the court held a hearing and on October 19, 2018, it

       entered an order granting Appellees’ motion to set aside the May 14, 2018

       order, conditioned upon Appellees reimbursing KWD’s counsel $3,145, the

       amount of attorney fees incurred in procuring the order. As the amount was

       paid, the May 14, 2018 order was set aside. KWD appeals.


                                                     Discussion

[11]   The issue is whether the trial court abused its discretion in granting Appellees’

       motion to set aside the May 14, 2018 order. A grant of equitable relief under

       Ind. Trial Rule 60 is within the discretion of the trial court. Wagler v. West Boggs

       Sewer Dist., Inc., 980 N.E.2d 363, 371 (Ind. Ct. App. 2012), reh’g denied, trans.

       denied, cert. denied, 571 U.S. 1131, 134 S. Ct. 952 (2014). An abuse of discretion

       occurs when the trial court’s judgment is clearly against the logic and effect of


       Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019          Page 7 of 12
       the facts and inferences supporting the judgment for relief. Id. When reviewing

       the trial court’s determination, we will not reweigh the evidence. Id.


[12]   KWD asserts this case has been pending for nearly three years, for the entirety

       of that period Attorney Fulk was Appellees’ counsel of record, and the court

       abused its discretion “because Appellees presented evidence of only mere

       neglect, not excusable neglect.” Appellant’s Brief at 12. It argues there is no

       evidence that Appellees made any efforts to check the status of the litigation

       and that they did not designate evidence of their attempts to contact Attorney

       Fulk regarding the action. Appellees respond that the trial court’s decision is

       supported by Trial Rule 60(B)(1) and (8), that KWD concedes that Attorney

       Fulk’s conduct in failing to communicate with and abandoning his clients

       constitutes exceptional circumstances, that they further established excusable

       neglect, and that they have meritorious defenses and counterclaims.


[13]   Ind. Trial Rule 55(C) provides that default judgment may be set aside in

       accordance with Trial Rule 60(B). Trial Rule 60(B) provides in part: “On

       motion and upon such terms as are just the court may relieve a party or his legal

       representative from a judgment, including a judgment by default, for the

       following reasons: (1) mistake, surprise, or excusable neglect; . . . (8) any reason

       justifying relief from the operation of the judgment, other than those reasons set

       forth in sub-paragraphs (1), (2), (3), and (4).” It also states that a movant filing

       a motion “for reasons (1) . . . and (8) must allege a meritorious claim or

       defense.” The trial court’s residual powers under subsection (8) may only be



       Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019          Page 8 of 12
       invoked upon a showing of exceptional circumstances justifying extraordinary

       relief. Wagler, 980 N.E.2d at 372.


[14]   A motion under Rule 60(B)(1) does not attack the substantive, legal merits of a

       judgment, but rather addresses the procedural, equitable grounds justifying the

       relief from the finality of a judgment. Kmart v. Englebright, 719 N.E.2d 1249,

       1254 (Ind. Ct. App. 1999), trans. denied. There is no general rule as to what

       constitutes excusable neglect. Id. Each case must be determined on its

       particular facts. Id. The following facts have been held to constitute excusable

       neglect, mistake, or surprise:


               (a) absence of a party’s attorney through no fault of party; (b) an
               agreement made with opposite party, or his attorney; (c) conduct
               of other persons causing party to be misled or deceived; (d)
               unavoidable delay in traveling; (e) faulty process, whereby party
               fails to receive actual notice; (f) fraud, whereby party is prevented
               from appearing and making a defense; (g) ignorance of the
               defendant; (h) insanity or infancy; (i) married women deceived or
               misled by conduct of husbands; (j) sickness of a party, or illness
               of member of a family.


       Id. (citing Cont’l Assurance Co. v. Sickels, 145 Ind. App. 671, 675, 252 N.E.2d 439,

       441 (1969), reh’g denied).


[15]   “A default judgment is not generally favored, and any doubt of its propriety

       must be resolved in favor of the defaulted party.” Allstate Ins. Co. v. Watson, 747

       N.E.2d 545, 547 (Ind. 2001) (citation and brackets omitted). It is “an extreme

       remedy and is available only where that party fails to defend or prosecute a suit.

       It is not a trap to be set by counsel to catch unsuspecting litigants.” Id. (citing
       Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019           Page 9 of 12
       State v. Van Keppel, 583 N.E.2d 161, 162 (Ind. Ct. App. 1991) (noting Indiana

       law strongly prefers disposition of cases on their merits), trans. denied). This

       court has considered the amount of money involved, the material issues of fact

       accompanying the allegations, the length of the delay, and lack of prejudice in

       concluding that a trial court did not abuse its discretion in allowing a case to be

       heard on the merits. See Green v. Karol, 168 Ind. App. 467, 475, 344 N.E.2d

       106, 111 (1976). See also Kmart, 719 N.E.2d at 1253 (“A cautious approach to

       the grant of motions for default judgment is warranted in cases involving

       material issues of fact, substantial amounts of money, or weighty policy

       determinations.”) (citation and internal quotation marks omitted).


[16]   The record reveals that, in September 2017, the court scheduled a final pre-trial

       conference for 2:30 p.m. on April 18, 2018, and an automated notice was sent

       to Attorney Fulk and Attorney Goodman. Attorney Fulk did not appear at the

       April 18, 2018 conference, and one day later, on April 19th, KWD filed its

       motion for sanctions requesting default judgment in its favor and dismissal of

       the counterclaims against it, resulting in the court’s May 14, 2018 default

       judgment against IPM in the total amount of $46,951 and against Reynolds in

       the total amount of $163,298.39. KWD sought and obtained leave of court to

       communicate directly with Appellees on June 1, 2018, on the basis of

       “exceptional circumstances,” Appellees’ Appendix Volume II at 3, and,

       according to Appellees, counsel directly contacted Reynolds shortly after that,

       which was the first time Appellees learned of Attorney Fulk’s failure to appear

       at the final pre-trial conference, KWD’s motion for sanctions, and that the court


       Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019         Page 10 of 12
       had entered default judgment. In his declaration, Reynolds states that he and

       IPM did not receive notice of the final pre-trial conference, the motion for

       sanctions, or the hearing on the motion for sanctions and that Attorney Fulk

       had not responded to inquiries as to why he failed to appear.


[17]   Based upon the record and in light of the issues of fact accompanying the claims

       raised in the complaint and counterclaims, that less severe sanctions had not

       been previously requested or imposed, the absence of evidence of prejudice to

       KWD, and the amount of money at issue, we conclude Appellees demonstrated

       mistake, surprise, or excusable neglect and exceptional circumstances

       supporting relief under Trial Rule 60(B).


[18]   Appellees must also show they alleged a meritorious defense or claim. Trial

       Rule 60(B) by its terms requires only an allegation of a meritorious defense or

       claim. A meritorious defense is one demonstrating that, if the case was retried

       on the merits, a different result would be reached. Baxter v. State, 734 N.E.2d

       642, 646 (Ind. Ct. App. 2000). The moving party need not prove absolutely the

       existence of a meritorious defense. Bunch v. Himm, 879 N.E.2d 632, 637 (Ind.

       Ct. App. 2008). Rather, the party must make a prima facie showing of a

       meritorious defense. Id. Appellees were required only to allege a meritorious

       defense and were not required to present evidence to satisfy the requirement.

       See Goodson v. Carlson, 888 N.E.2d 217, 222 n.9 (Ind. Ct. App. 2008).


[19]   Appellees have alleged facts which, if true, may support their defenses or

       counterclaims and lead the fact-finder to reach a different result. KWD raises


       Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019       Page 11 of 12
       claims of breach of contract and unjust enrichment against IPM and claims of

       conversion and deception against Reynolds. In response, Appellees assert

       affirmative defenses including, among others, that KWD failed to mitigate its

       damages and that its claims are barred by the doctrine of unclean hands and

       fraud. Appellees also raise several counterclaims against KWD including an

       action in replevin seeking the return of property valued in excess of $170,000

       and damages, civil conversion seeking treble damages, and unjust enrichment.

       They allege that KWD is unlawfully detaining property which belongs to them.

       Reynolds states in his declaration that IPM provided KWD with two complete

       manufacturing assembly lines, KWD did not pay for the equipment and

       assembly lines, it is believed KWD still has possession of the property, and the

       value of the property is approximately $156,000.


                                                     Conclusion

[20]   Appellees demonstrated grounds for setting aside the entry of default judgment

       under Trial Rule 60 and alleged a meritorious defense or claim. Under these

       circumstances, we cannot say the trial court abused its discretion in granting

       Appellees equitable relief from the finality of default judgment.


[21]   For the foregoing reasons, we affirm the trial court’s decision to set aside the

       May 14, 2018 order.


[22]   Affirmed.


       Mathias, J., and Pyle, J., concur.



       Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019        Page 12 of 12
