                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                               December 10, 2013 Session

KERYL FILLERS, as personal representative of the ESTATE OF JOHN J. CRAIG
                    V . DWIGHT A. COLLINS, ET. AL.


                  Appeal from the Chancery Court for Knox County
                  No. 1836152 Hon. Daryl R. Fansler, Chancellor




             No. E2013-01210-COA-R3-CV-FILED-FEBRUARY 18, 2014




This appeal involves Wife’s attempt to set aside a judgment entered against her relating to
her failure to fulfill seven promissory notes. The trial court granted Wife’s motion to set
aside, in part, affirming her liability for three of the seven notes but holding that Wife was
not liable for the remaining notes. Wife appeals. We affirm the decision of the trial court.

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                            Affirmed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which C HARLES D. S USANO,
J R., P.J., and D. M ICHAEL S WINEY, J., joined.

Barry W. Eubanks, Seymour, Tennessee, for the appellant, Cindy J. Collins.

Dudley W. Taylor, Knoxville, Tennessee, for the appellee, Keryl Fillers, as personal
representative of the Estate of John J. Craig.

                                         OPINION

                                    I. BACKGROUND

       John J. Craig and Hazel I. Craig (collectively “Lenders”) agreed to loan their nephew,
Dwight A. Collins (“Husband”), and his wife, Cindy A. Collins (“Wife”), money on several
different occasions from 1993 until 2011. Each time, Lenders required either Husband or
Husband and Wife (collectively “Borrowers”) to execute a promissory note evidencing the
debt obligation. The amount loaned to Borrowers was as follows:
    Note       Signed by               Date             Principal              Amount Remaining

    1          Borrowers               11/22/1993       $25,000               $22,000

    2          Borrowers               11/22/1993       $10,000               $10,000

    3          Borrowers               1/31/1996        $32,000               $32,000

    4          Husband                 12/11/1998       $10,000               $5,000

    5          Husband                 1/23/2003        $25,000               $25,000

    6          Husband                 1/19/2006        $10,000               $10,000

    7          Husband                 8/24/2011        $102,854.04           $102,854.04



                                       TOTAL            $214,854.04           $206,854.04

Borrowers regularly made minimal payments, which were largely applied to the interest on
each note.

        On August 27, 2012, Lenders filed suit against Borrowers in an effort to recover on
the promissory notes. Borrowers filed a motion to dismiss, claiming that Knox County was
not the appropriate venue. Lenders objected and filed a motion for summary judgment. The
court designated November 19, 2012, as the hearing date for Borrowers’ motion to dismiss
and for Lenders’ motion for summary judgment. Having received no response, Lenders filed
a motion to deem the statement of material facts admitted. Borrowers asserted that the
motion was premature when a motion to dismiss was pending.

        The trial court granted the motion for summary judgment because Borrowers failed
to appear at the hearing date and still had yet to respond to the motion for summary judgment
and attached statement of material facts. During the pendency of the action, Ms. Craig died,
causing her interests to be transferred to Mr. Craig, who also subsequently died. Keryl
Fillers, as personal representative of the estate of Mr. Craig (“the Estate”), sought an order
of substitution to proceed on the Estate’s behalf. The trial court granted the request.

        Approximately three months after the final order was entered, Wife filed a motion to
set aside the judgment pursuant to Rule 60.02 of the Tennessee Rules of Civil Procedure.1
Wife asserted that her attorney of record “inadvertently failed” to respond to Lenders’


1
    Husband did not contest the judgment and is not a party to this appeal.
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motions and to attend the hearing because of “personal circumstances amounting to mistake,
inadvertence, or excusable neglect, or in the alternative, good cause.” Wife claimed that she
had meritorious defenses to the claims and that Lenders would not be prejudiced if the
judgment against her were set aside. Wife’s attorney filed an affidavit in which he stated that
he neglected to appear “due to personal circumstances in [his] life, including [his] own
illness and death of a close relative.”

        Wife filed an affidavit in which she attested that she was not made aware of the
hearing date. Regarding her meritorious defenses, Wife asserted that she was current with
her interest payments relating to Notes 1 and 2, that the statute of limitations had expired on
Note 3, and that she never received any payment from Note 3 because the note was “actually
a replacement note for [Notes 1 and 2].” Relative to the remaining notes, she claimed that
Husband created those obligations without her involvement.

        The Estate, through Ms. Fillers, responded by asserting that Wife had failed to present
a meritorious defense to the judgment and that the Estate would suffer significant prejudice
if the judgment were set aside because Lenders were no longer available to testify. Ms.
Fillers claimed that Note 3 was not a replacement note as evidenced by the fact that Wife
remitted payments on Notes 1 and 2 after Note 3 was executed and by the fact that Wife also
made interest payments on Note 3. She asserted that in January 2011, Husband
acknowledged the additional obligation created by Note 3 with her and Lenders. She stated
that Borrowers agreed that each note was a joint obligation and that Wife remitted interest
payments on Notes 4 and 5. She noted that Wife was listed as a borrower on Note 7 and that
Wife signed the check that was issued after Note 7 was executed. Relative to Wife’s failure
to appear, she said that the hearing date was initially scheduled for the court to hear Wife’s
own motion to dismiss.

        Following a hearing, the trial court denied Wife’s motion to set aside the judgment
as it related to Notes 1 through 3 but granted the motion as it related to Notes 4 through 7.
This timely appeal followed.




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                                        II. ISSUES

       We consolidate and restate the issues raised on appeal as follows:

       A. Whether the trial court should have analyzed the motion to set aside the
       judgment pursuant to Rule 59.04 of the Tennessee Rules of Civil Procedure.

       B. Whether the trial court erred in denying the motion to set aside the
       judgment as it related to Notes 1 through 3.

                             III. STANDARD OF REVIEW

        We review a trial court’s award or denial of relief pursuant to Rules 59.04 or 60.02
of the Tennessee Rules of Civil Procedure under an abuse of discretion standard. Federated
Ins. Co. v. Lethcoe, 18 S.W.3d 621, 624 (Tenn. 2000); Underwood v. Zurich Ins. Co., 854
S.W.2d 94, 97 (Tenn. 1993); Ferguson v. Brown, 291 S.W.3d 381, 386 (Tenn. Ct. App.
2008). Unless the trial court abused its discretion, its ruling on such motions may not be
reversed on appeal. Id. A trial court abuses its discretion only when it “applies an incorrect
legal standard, or reaches a decision which is against logic or reasoning or that causes an
injustice to the party complaining.” Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001);
State v. Shirley, 6 S.W.3d 243, 247 (Tenn. 1999).

       Our review of the record is de novo with the presumption that the trial court’s factual
findings are correct. We will honor those findings unless the evidence preponderates against
them. Tenn. R. App. P. 13(d); Wright v. City of Knoxville, 898 S.W.2d 177, 181 (Tenn.
1995). The presumption of correctness does not attach to the trial court’s conclusions of law.
Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996).

                                    IV. DISCUSSION

                                             A.

       Citing Ferguson, the Estate claims that Wife’s motion to set aside the judgment
should have been considered as a motion for relief under Rule 59.04 of the Tennessee Rules
of Civil Procedure. 291 S.W.3d at 386-87. “Rule 59.04 allows a party to seek relief from
a judgment within thirty days after being entered; conversely, Rule 60.02 affords a party a
means to seek relief from a final, non-appealable judgment.” Id. at 387. In this case, Rule
60.02 was the appropriate avenue for relief because the judgment at issue was a final, non-
appealable judgment.



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                                                B.

        Wife argues that the trial court erred by failing to set aside the judgment in its entirety.
She claims that her failure to appear or to file a response to the motion for summary
judgment was not willful, that she had meritorious defenses to each count in the complaint,
and that the Estate would not be prejudiced if the judgment were set aside in its entirety. The
Estate responds that Wife failed to present a meritorious defense to the remaining counts and
that it would be prejudiced if the judgment were set aside in its entirety.

       A final judgment may be set aside pursuant to Rule 60.02 of the Tennessee Rules of
Civil Procedure when

       On motion and upon such terms as are just, the court may relieve a party or the
       party’s legal representative from a final judgment, order or proceeding for the
       following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2)
       fraud [ ], misrepresentation, or other misconduct of an adverse party; (3) the
       judgment is void; (4) the judgment has been satisfied, released or discharged,
       or a prior judgment upon which it is based has been reversed or otherwise
       vacated, or it is no longer equitable that a judgment should have prospective
       application; or (5) any other reason justifying relief from the operation of the
       judgment. The motion shall be made within a reasonable time, and for reasons
       (1) and (2) not more than one year after the judgment, order or proceeding was
       entered or taken.

Relief under this rule is considered “an exceptional remedy.” Nails v. Aetna Ins. Co., 834
S.W.2d 289, 294 (Tenn. 1992). The function of the rule is to “strike a proper balance
between the competing principles of finality and justice.” Banks v. Dement Constr. Co., Inc.,
817 S.W.2d 16, 18 (Tenn. 1991) (quoting Jerkins v. McKinney, 533 S.W.2d 275, 280 (Tenn.
1976)). “Rule 60.02 is meant to be used only in those few cases that meet one or more of the
criteria stated.” Toney v. Mueller Co., 810 S.W.2d 145, 146 (Tenn. 1991).

       Wife argues that her failures to appear and to respond were due to “mistake,
inadvertence, surprise or excusable neglect.” Tenn. R. Civ. P. 60.02(1). “[W]e find
instructive those factors that are used to determine if a default judgment should be vacated
under Rule 60.02(1)” because of the similarity between default judgments and the grant of
a motion for summary judgment for failure to respond. Henry, 104 S.W.3d at 481. “When
a defendant fails to answer a complaint, the plaintiff may obtain a default judgment without
a hearing on the merits.” Id. (analogizing a default judgment with a dismissal for failure to
prosecute). Similarly, when an adverse party fails to respond to a motion for summary
judgment, the motion may be granted without a hearing and without the benefit of opposing

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affidavits. Tenn. R. Civ. Pro. 56.06. The factors at issue include: “(1) whether the default
was willful; (2) whether the defendant has a meritorious defense; and (3) whether the non-
defaulting party would be prejudiced if relief were granted. Id. (citing Tennessee Dep’t of
Human Servs. v. Barbee, 689 S.W.2d 863, 866 (Tenn. 1985)).

        By virtue of setting aside a portion of the judgment entered against Wife, the trial
court necessarily found that Wife’s failure to appear or to respond was not willful. While the
Estate disagrees with the court’s finding, neither party appeals the finding. Wife did not
offer a defense to the judgment as it related to Notes 1 and 2 other than to assert that her
interest payments were not properly reflected in the documentation provided to the court.
Her defense to the judgment as it related to Note 3 was more comprehensive in that she
claimed that Note 3 was a replacement note for Notes 1 and 2 and that the statute of
limitations had expired. She said that she never “took any action” with respect to Note 3 but
simply continued payment on Notes 1 and 2. A review of the record reveals that Note 3 does
not reference the alleged “initial loans” represented by Notes 1 and 2. Moreover, Wife’s
defenses to each count would require extensive testimony to ascertain the extent of her
payments, the validity of Note 3, and whether she ever acknowledged the debt represented
by Note 3 to extend the statute of limitations. While some of the evidence could be gathered
from bank statements and other records, the Estate is greatly prejudiced by the absence of
Lenders, who possessed firsthand testimony concerning their interactions with Wife relating
to the notes. Accordingly, we conclude that Wife failed to demonstrate a ground for relief
pursuant to Rule 60.02(1).

        Wife also claims that she is entitled to relief pursuant to Rule 60.02(5). “Relief under
Rule 60.02(5) is only appropriate in cases of overwhelming importance or in cases involving
extraordinary circumstances or extreme hardship.” Lethcoe, 18 S.W.3d at 624. Such is not
the case here. With these considerations in mind, we hold that the trial court did not abuse
its discretion by refusing to set aside the entirety of the judgment against Wife.

                                     V. CONCLUSION

       The judgment of the trial court is affirmed, and the case is remanded for such further
proceedings as may be necessary. Costs of the appeal are taxed to the appellant, Cindy J.
Collins.


                                            ______________________________________
                                            JOHN W. McCLARTY, JUDGE




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