                                                                          FILED
                                                                      Dec 07 2018, 8:28 am

                                                                          CLERK
                                                                      Indiana Supreme Court
                                                                         Court of Appeals
                                                                           and Tax Court




ATTORNEY FOR APPELLANTS                                    ATTORNEY FOR APPELLEES
Ralph E. Sipes                                             Paul J. Podlejski
Anderson, Indiana                                          Anderson, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA

Southside Automotive of                                    December 7, 2018
Anderson, Inc., and                                        Court of Appeals Case No.
David Amadio,                                              18A-SC-471
Appellants-Defendants,                                     Appeal from the Madison Circuit
                                                           Court
        v.                                                 The Honorable Thomas L. Clem,
                                                           Judge
Celeste Smith and Byron Swain,                             Trial Court Cause No.
Appellees-Plaintiffs                                       48C05-1709-SC-3029




Baker, Judge.




Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018                           Page 1 of 9
[1]   Southside Automotive of Anderson, Inc. (Southside), and David Amadio

      appeal the trial court’s denial of their motion to set aside a default judgment for

      Celeste Smith and Byron Swain. Finding that the default judgment should have

      been set aside, we reverse and remand for further proceedings. 1


                                                     Facts
[2]   In late May 2017, Smith and Swain went to Southside to look for a car. They

      became very interested in a 2007 BMW 530xi. The two spoke with Amadio, the

      president of the company, about the car’s condition. Amadio claimed that “the

      car was in mint condition . . . a rare find . . . [and] it appeared to be in good

      shape.” Tr. Vol. II p. 11. Relying upon Amadio’s advice, on June 2, 2017,

      Smith and Swain purchased the BMW “as-is” for $7,490 with all fees included.

      Smith and Swain agreed to pay $4,000 immediately as a down payment and to

      return on June 5, 2017, to pay an additional $2,500. Thereafter, they would pay

      the remaining $990 in two monthly installments of $495.


[3]   One day later, immediately after picking up the BMW, Smith and Swain started

      having problems with it. The car started “knocking” and “backfiring” quite

      loudly, id. at 13, so Smith called Amadio to inform him about the issues.

      Amadio assured Smith that he had an excellent mechanic who would fix any




      1
        Because of our disposition, we are not analyzing the amount awarded or the appropriateness of allowing
      the car to remain with Smith and Swain.

      Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018                             Page 2 of 9
      minor problems the car might have. The two dropped the car off at Southside to

      have it fixed.


[4]   Smith and Swain did not hear from Amadio for another three weeks before they

      called him again. Amadio said the repairs were not complete and that he would

      need more time. Finally, after nearly three months, on August 28, 2017, Smith

      and Swain picked up the car. The next day, the two experienced even more

      problems. The BMW “almost caught fire,” “it began smoking,” and “the

      [check] engine light came on.” Id. at 17. On September 1, 2017, Smith and

      Swain took the car to Resf Motors, a BMW certified service center, to get a

      proper diagnosis. Resf Motors informed the couple that the necessary repairs

      would cost $1,927. Amadio refused to cover those costs.


[5]   On September 13, 2017, Smith and Swain filed a small claims suit against

      Southside and Amadio, arguing that they sold a car they falsely claimed to be in

      “mint condition,” appellants’ app. vol. II p. 22; that it took Southside and

      Amadio almost three months to make repairs; that Smith and Swain were

      without a vehicle for that entire time; and that even after making repairs, the car

      continued to malfunction. Smith and Swain sought $6,700 in damages and

      $107 in court costs. A hearing was set for September 29, 2017.


[6]   After receiving notice of this suit, on September 20, 2017, Amadio went to the

      Madison Circuit Court and asked the court reporter if he or Southside needed

      legal counsel for the September 29, 2017, hearing. She said, “You don’t have to

      worry about that. He doesn’t operate that way. If you need an attorney, he will


      Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018       Page 3 of 9
      tell you.” Id. at 16. The fact that the court reporter made this statement is not

      challenged, and the trial court made no finding to the contrary. The next day,

      Southside and Amadio filed a counterclaim, denying Smith and Swain’s small

      claims allegations and arguing that the two had failed to pay the remaining

      purchase price ($3,490) or to return the BMW to Southside.2


[7]   At the September 29, 2017, hearing, Smith and Swain appeared pro se and

      Amadio appeared pro se and on behalf of Southside. Though Amadio is the

      president of Southside, Southside technically failed to appear at the hearing

      because it was not represented by an attorney. So, while Amadio appeared and

      spoke for himself, he was not permitted to appear and speak on behalf of

      Southside. The trial court admonished Amadio, who is not an attorney, for

      attempting to represent Southside without a law license:


                 Okay. Do you know that it’s illegal for you to be here today in this
                 capacity?

                                                           ***

                 You can’t represent yourself in this type of case okay, because it’s
                 against the corporation. . . . So, let’s try to do this and let’s let
                 plaintiffs talk about their case for a minute and see if we can get
                 somewhere[.]

      Tr. Vol. II p. 5-6.




      2
          At this point, Smith and Swain had only paid the initial $4,000 down payment.


      Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018                 Page 4 of 9
[8]    Amadio explained what the court reporter had told him about not needing legal

       counsel for a small claims proceeding:


               [W]hen I tried to reach you to find out about procedural . . .
               aspects and I explained to [the court reporter] what my question
               concerning whether [sic] had to have an attorney, she said that . . .
               the whole goal was to keep costs down that that . . . if I need . . . to
               have one, you would let me know.

       Id.


[9]    Smith and Swain spoke at length about the incident without interruption or

       pause. Amadio only spoke for a short amount of time and could not refute any

       of Smith or Swain’s statements made against him. The trial court allowed

       Amadio to speak only on his own behalf, drastically limiting what he could do.

       Specifically, Amadio was not allowed to admit evidence or cross-examine

       Smith and Swain, and the trial court restricted what Amadio could say.

       Specifically, the court said, at different moments, as follows:


                    • “[Y]ou wouldn’t be able to do that.”
                    • “That’s—that’s out of bounds.”
                    • “Hang on, stop right there.”

       Id. at 31-33.


[10]   Ultimately, Amadio asked if the hearing could be delayed so Southside could

       obtain proper legal representation, but the trial court stated that it would be

       unnecessary and too expensive to “correct the matter.” Id. at 43. After the

       informal hearing, the trial court entered a default judgment against both

       Southside and Amadio in favor of Smith and Swain, awarding them $6,000, the


       Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018           Page 5 of 9
       maximum amount permissible under small claims jurisdiction.3 Appellant’s

       App. Vol. II p. 7. The trial court did not order Smith and Swain to return the

       BMW to Southside.4


[11]   On October 27, 2017, Southside and Amadio filed a motion to correct errors

       and to set aside the September 29, 2017, entry of default judgment, which the

       trial court denied on January 24, 2018. Southside and Amadio now appeal.


                                   Discussion and Decision
[12]   Southside and Amadio’s core argument is that the trial court erred for three

       reasons, one of which we find dispositive: the default judgment should have

       been set aside because it was based on Amadio’s mistake.


[13]   We will reverse a denial of a motion to set aside a default judgment only when

       the trial court’s judgment was clearly against the logic and effect of the facts and

       inferences supporting the judgment for relief. Whelchel v. Cmty. Hosps., 629

       N.E.2d 900, 902 (Ind. Ct. App. 1994). On appeal, we give the trial court

       substantial deference regarding its initial decision to enter a default judgment.

       Bennett v. Andry, 647 N.E.2d 28, 31 (Ind. Ct. App. 1995).




       3
           See Ind. Code § 33-29-2-4(b)(1).
       4
         Though we are not analyzing the amount the trial court awarded Smith and Swain, we question the fairness
       of this apparent double recovery. The two received the maximum amount permissible under small claims
       jurisdiction and were able to keep the car without having to make the final payments.

       Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018                            Page 6 of 9
[14]   Default judgments are appropriate only when a party has not appeared in

       person or by counsel. Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind. 1999).

       Therefore, the default judgment against Amadio was erroneous because he

       actually did appear at the hearing. To the extent the trial court entered a default

       judgment against Amadio, it is reversible error. And even if the trial court

       instead intended to rule against Amadio on the merits, that would also be

       erroneous because Amadio was not afforded a full opportunity to present his

       case at the hearing. Therefore, we reverse the judgment against Amadio and

       remand for a new hearing.


[15]   With respect to Southside, it is undisputed that while Amadio could represent

       himself in the informal proceeding, he could not represent Southside, a separate

       entity, because he was not an attorney. Ind. Small Claims Rule 8(c)(3). Amadio

       argues that he relied to his detriment on the words of the court reporter, who

       opined that the trial court judge probably would not require Southside to have

       an attorney. Amadio alleges that this caused his mistaken belief that he could

       represent both himself and Southside.


[16]   A default judgment may be set aside under Indiana Trial Rule 60(B)(1) for

       mistake, surprise, or excusable neglect. Johnston, 711 N.E.2d at 1264. Although

       there is no fixed rule or standard for determining what constitutes a mistake,

       State v. Mooney, 51 N.E.3d 281, 284 (Ind. Ct. App. 2016), as a general rule, our

       courts favor deciding cases on the merits in the face of procedural errors that

       mistakenly cause attorneys to miss deadlines or lose contact. Dalton Corp. v.

       Myers, 65 N.E.3d 1142, 1146 (Ind. Ct. App. 2016). The burden is on the movant

       Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018        Page 7 of 9
       to establish grounds for Trial Rule 60(B) relief for mistake, surprise, or

       excusable neglect by affidavit or other evidence. JK Harris & Co., LLC v. Sandlin,

       942 N.E.2d 875, 881 (Ind. Ct. App. 2011).


[17]   While it is clear that Southside should have had an attorney, its failure to retain

       one stemmed from Amadio’s reliance on the court reporter’s statement. In our

       view, Amadio reasonably relied on the information provided by the court

       reporter and appeared at the hearing, with a mistaken but understandable belief

       that he could speak on behalf of himself and the company he heads.


[18]   When the trial court realized what had happened, it should have continued the

       hearing so that Southside could retain counsel. Instead, it refused to do so and

       dramatically restricted what Amadio could and could not say during the

       hearing, thereby affecting the rights of both Southside and Amadio. Under

       these circumstances, the trial court erred by denying Southside’s motion to set

       aside the default judgment based on mistake.


[19]   In sum, a default judgment should not have been granted against Amadio

       because he was present. A judgment on the merits could also not have been

       entered against him because he was not permitted to fully defend himself or

       prove his counterclaim. As for Southside, the better practice would have been a

       continuance rather than a default. But having entered the default judgment, the

       trial court should have later set it aside based on mistake. Both Amadio and

       Southside are entitled to a new hearing.




       Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018          Page 8 of 9
[20]   The judgment of the trial court is reversed and remanded for further

       proceedings.


       May, J., and Robb, J., concur.




       Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018    Page 9 of 9
