Proper Procedure Remains Paramount When Pursuing Relief From Judgment
Rubin & Levin partner Joshua Casselman recently prevailed at the Indiana Court of Appeals in a case that has reenforced the importance of complying with proper procedures to obtain relief from judgment under Trial Rule 60(B). Default judgments are generally disfavored under Indiana law and trial courts are given considerable discretion to set aside such judgments. Nevertheless, judgment debtors must comply with Trial Rule 60(B) to obtain relief. This was reaffirmed by the Indiana Court of Appeals in Automotive Finance Corp. v. Kayiji [1].
In Automotive Finance Corp. v. Kayiji, Bernard Kayiji and his acquaintance Raymond executed a Demand Promissory Note and Security Agreement as president and vice president of a car Dealership, respectively. The Agreement also contained a personal guaranty executed by both Bernard and Raymond. Pursuant to the terms of the Agreement, Lender loaned Dealership funds to purchase vehicles for its inventory. After Dealership defaulted on the loan, Lender filed suit against Dealership, Bernard, and Raymond.
According to Bernard, upon receipt of a copy of the complaint at his home, Bernard approached Raymond about the suit and accused Raymond of wrongly using his name without authorization. Bernard asked Raymond to remove his name from the lawsuit; Raymond took the papers from Bernard and promised to do the “right thing.” Based on Raymond’s assurances, Bernard did not respond to Lender’s complaint or otherwise appear in court. Shortly thereafter, Lender moved for and was granted default judgment against Dealership and Bernard. [2]
After learning his wages were being garnished, Bernard filed a police report in Washington D.C. for identity theft and fraud. Bernard then filed a slew of actions, pro se, over the following years, each of which was eventually dismissed: a complaint against Lender and Raymond in Washington, D.C. alleging he never signed the Agreement and Guaranty; a complaint against Lender in Virginia alleging identity theft and claiming he did not sign the Agreement and Guaranty; and a counterclaim against Lender in response to garnishment proceedings, which Bernard took all the way to the Supreme Court of Virginia. During this time, Bernard never challenged the judgment in Indiana.
Eleven years after judgment was entered, Bernard retained counsel in Indiana and for the first time filed a motion for relief from judgment pursuant to Trial Rule 60(B)(8). Bernard argued Raymond’s fraudulent scheme to use Bernard’s signature to obtain loans constituted extraordinary circumstances warranting relief from judgment and asserted as a meritorious defense that his signature was forged. In addition, Bernard cited his history of filings over the years as evidence of his relentless attempt to present his case and defenses. Following a hearing on Bernard’s motion, the trial court entered findings of fact and conclusions thereon, finding the debt owed to Lender was the result of extrinsic fraud and this unconscionable scheme to influence the court to issue a default judgment against Bernard was furthered by Raymond’s promise to handle the lawsuit. The judgment was thereby vacated and Lender appealed.
On appeal, the Court of Appeals considered whether the trial court abused its discretion when it granted Bernard’s motion under Trial Rule 60(B)(8). Pursuant to Trial Rule 60(B)(8), the court may relieve a party from judgment for any reason justifying relief other than those reasons set forth in subparagraphs (1)-(4) of Trial Rule 60(B). A motion brought pursuant to Trial Rule 60(B)(8) must also be filed within a reasonable time, whereas a motion brought under subparagraphs (1)-(4) must be filed within one year after judgment is entered. Lender argued Bernard’s motion though framed as a motion under Trial Rule 60(B)(8) was more properly a claim under Trial Rule 60(B)(3) for fraud and thus time barred. The Court agreed, holding Bernard’s claim of fraud fell squarely under Trial Rule 60(B)(3) and it was improper to seek relief under Trial Rule 60(B)(8) as an attempt to circumvent the one-year time limitation.
Notwithstanding the foregoing, the Court then examined whether the trial court abused its discretion when it determined Bernard’s motion was an independent action for fraud. Trial Rule 60(B) and caselaw expounding thereon provide that a court may entertain an independent action to relieve a party from judgment on the basis of extrinsic fraud, i.e., fraud outside the issues of the case that prevented trial of the issue(s), or fraud on the court, i.e., an unconscionable scheme to improperly influence the court’s decision that prevented the opposing party from fully and fairly presenting his/her case. The Court concluded no independent action for fraud existed. Even if it agreed Raymond engaged in an unconscionable scheme to defraud Bernard, the Court could not agree that Bernard made a claim for extrinsic fraud or fraud on the court. Specifically, the Court determined Bernard’s failure to respond to Lender’s complaint was the result of his own choices; he was not prevented by Raymond. Moreover, Bernard’s claim was one of intrinsic fraud, i.e., fraud involving perjury or falsification of documents, not extrinsic fraud. While the Court expressed sympathy for Bernard that his signature may have been forged and he trusted that Raymond would get him out of the lawsuit, the Court concluded that did not change the fact that Bernard did not follow proper procedures required by the Trial Rules.
Article written by Chase Hickey, Associate, who assisted on the briefing of this case at the Indiana Court of Appeals.
[1] Automotive Finance Corp. v. Kayiji, 203 N.E.3d 1046 (Ind. Ct. App. 2022). Although initially released as a “memorandum” decision, the Indiana Court of Appeals entered an order on January 23, 2023 granting a motion for publication.
[2] Lender’s claims against Raymond were dismissed at this time due to Raymond filing bankruptcy, and Raymond was not a party to this appeal.