Wayne A. Howes v. Mark Swanner

05/17/2017

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

Assigned on Briefs April 3, 2017

WAYNE A. HOWES, ET AL. V. MARK SWANNER, ET AL.

Appeal from the Circuit Court for Montgomery County

No. MC-CC-CV-DD-11-2599 Ross H. Hicks, Judge

No. M2016-01892-COA-R3-CV

Homeowners filed suit for breach of contract and fraud and/or negligent representation

against the owners of a restoration business who performed repairs on their house after a

fire. When the defendants failed to respond to or appear at the hearing on the plaintiffs’

motion for summary judgment, the trial court granted summary judgment for the

plaintiffs. The defendants then filed a Tenn. R. Civ. P. 60 motion and affidavits stating

that they did not receive notice of the hearing on the motion for summary judgment. The

trial court held a hearing on the Rule 60 motion and denied the motion. Because there is

no transcript or statement of the evidence regarding the hearing on the summary

judgment motion or on the Rule 60 motion, we must accept the trial court’s findings of

fact. We find no abuse of discretion in the trial court’s denial of the plaintiffs’ Rule 60

motion.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed

ANDY D. BENNETT, J., delivered the opinion of the Court, in which CHARLES D. SUSANO,

JR., and KENNY W. ARMSTRONG, JJ., joined.

Jacob P. Mathis, Clarksville, Tennessee, for the appellants, Mark Swanner and Robin

Swanner.

Gregory D. Smith, Clarksville, Tennessee, for the appellees, Wayne A. Howes and

Starlene K. Howes.

OPINION

FACTUAL AND PROCEDURAL BACKGROUND

Wayne and Starlene Howes (“Homeowners”) own a home located on Broadripple

Drive in Clarksville, Tennessee. In January 2011, Homeowners’ home sustained

substantial damage in a fire, and their insurer, State Farm Insurance Company (“State

Farm”), acknowledged that they had a valid claim under their fire insurance policy. Upon

the recommendation of their State Farm agent, Homeowners contracted with Mark and

Robin Swanner, owners and operators of Ultra Clean Restoration (also known as Ultra

Clean Carpet Cleaning) (“Ultra Clean”), to do clean-up, repairs, and restoration work on

their home.

On October 31, 2011, Homeowners filed this action against Ultra Clean, State

Farm, and their State Farm agent.1 The complaint alleges, in pertinent part, as follows:

On or about January 18, 2011, Defendant, Mark Swanner, came to 1765

Broadripple Drive, Clarksville, Tennessee and requested that Plaintiff . . .

personally obtain the building permit to begin work on 1765 Broadripple

Drive, Clarksville, Tennessee. . . .

Unusual business practices by Defendant Mark Swanner caused Plaintiffs

to have concern regarding Defendant, Mark Swanner and his company,

Ultra Clean Restoration . . . . Upon investigation, the quality of work being

done by the Defendants, Mark and Robin Swanner, also came into question.

Around May 11, 2011, these concerns were voiced to Defendant, Steve R.

Ray [the State Farm agent].

Investigation revealed that neither Defendant, Mark Swanner nor

Defendant, Robin Swanner had a contractor’s license as is required for jobs

of over $25,000.00 by Tenn. Code Ann. § 62-6-103. Defendant, Mark

Swanner, was paid approximately $87,500.00 regarding 1765 Broadripple

Drive, Clarksville, Tennessee and some of the checks paid were in excess

of $25,000.00 prior to this fact coming to light with Plaintiffs.

....

Due to concerns over poor workmanship, work ethic and the failure to

disclose the lack of contractor’s license, Plaintiffs sought to dismiss

Defendants Mark Swanner and Robin Swanner from further work on 1765

Broadripple Drive, Clarksville, Tennessee on the basis of both breach of

contract and fraud or misrepresentation. Defendant, Steve R. Ray . . .

insisted that the Defendants, the Swanners, should continue working on

1765 Broadripple Drive, Clarksville, Tennessee.

Defendant, State Farm, would not issue new checks to allow another

contractor, one who had a license, to finish repairs on 1765 Broadripple

Drive, Clarksville, Tennessee. As a result, Plaintiffs sought reimbursement

from both Defendants, the Swanners, and from Defendant, State Farm, to

1

State Farm and Homeowners’ State Farm agent, Steve R. Ray, are not involved in this appeal.

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either refund costs paid or to get an independent licensed home inspector to

examine and approve work already done by the Swanners. These options

were declined and therefore, Plaintiffs filed the pending suit.

The Homeowners alleged causes of action against the Swanners for breach of contract

and for fraud and/or negligent misrepresentation.

The Swanners filed a pro se response to the complaint detailing their own version

of the facts. The response states, in pertinent part, as follows:

After the Demo work had been done and prior to the rebuild, defendant

Mark Swanner told the Plaintiff, Wayne Howes that he was a certified

restoration contractor, not a General Contractor and could not exceed

$25,000 in rebuilding repairs without a license. The Defendant told the

Plaintiff that he could become his own contractor and pull the building

permits himself or he could get someone else to do the remaining rebuild.

The Plaintiff, Wayne Howes stated that he wanted the defendant Mark

Swanner to do the rebuild. At no time whatsoever, did the Defendant Mark

Swanner mislead the Plaintiff, Wayne Howes regarding the contractor’s

license. . . . The Plaintiff, Wayne Howes, was well aware of the fact that

the Defendant was not a General Contractor. The fact is that the Plaintiff,

Wayne Howes, became his own contractor when he pulled the permits

himself.

. . . On a daily basis, the Plaintiff, Wayne Howes came to the property and

requested changes and upgrades be made by the Defendants and changes

and upgrades were done on a daily basis. At no time whatsoever during

these daily visits did the Plaintiff, Wayne Howes make any complaints

about workmanship.

According to the Swanners, a dispute arose between the parties because

Homeowners wanted to see all of the Swanners’ invoices to State Farm and “wanted to

know how much profit was made on each invoice.” The Swanners refused to provide this

information “because they were using the insurance adjuster[’s] estimate to do the job, as

was normal, and the overhead and profit had been built into the estimate.” At a meeting

regarding the invoices, the parties also discussed upgrades and changes to the property.

The Swanners alleged that Homeowners refused “to pay anything out of pocket for those

significant changes and upgrades and stated they should be paid for by the Defendant[s’]

overhead and profit.” The Swanners allegedly informed Homeowners that Homeowners

were in breach of the contract and refused to continue work on the project until payment

for the upgrades and changes was resolved. In September 2011, the State Farm agent met

with Mr. Swanner and stated that Homeowners wanted to know if he would consider

finishing the work on their home. Because, according to their response, working with

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Homeowners “had been a nightmare and they had breached the contract,” Mr. Swanner

declined their request. The Swanners’ response further states: “At no time during this

whole ordeal was there ever any mention of poor workmanship.”

On March 9, 2015, Homeowners filed a motion for summary judgment and

statement of undisputed material facts supported by an affidavit from Russell Hamilton, a

general contractor.2 The motion included a notice of hearing for May 4, 2015. The

motion was heard on that day, but the Swanners did not appear at the hearing. In its

order, entered on May 6, 2015, the trial court made the following pertinent findings of

fact:

Defendants did not respond to the motion for summary judgment, did not

respond to the Tenn. R. Civ. P. 56.03 Statement of Undisputed Material

Facts, nor did Defendants present counter-affidavits to Plaintiffs’ expert

affidavit;

As noted on the front page of the Plaintiffs’ Motion for Summary Judgment

filed on March 9, 2015, this matter was set for hearing on May 4, 2015, (56

days between the motion being filed and the hearing on said motion);

. . . Defendants did not appear for the hearing on Plaintiffs’ motion for

summary judgment.

Plaintiffs’ expert found damages caused by Defendants and against

Plaintiffs in the amount of $53,296.00 in his expert opinion as set out by an

affidavit filed on March 9, 2015.

The court granted summary judgment in favor of Homeowners and ordered that a

judgment in the amount of $53,296.00 be entered in their favor against the Swanners.

The Swanners, through a newly retained attorney, filed a motion pursuant to Tenn.

R. Civ. P. 60 for relief from the judgment entered by the court on May 6, 2015. They

argued that they did not receive notice of the hearing held on May 4, 2015. Each of the

Swanners submitted an affidavit stating, in pertinent part, that they “did not receive

notice of the hearing in this matter, which was held on May 4, 2015.” The Swanners’

2

In his affidavit, Mr. Hamilton gave estimates regarding how much it would cost to complete the work on

Homeowners’ house. He further gave his professional opinion regarding applicable breaches of a

Tennessee contractor’s duty of care and/or loyalty to the client. Mr. Hamilton stated that he had

personally inspected Homeowners’ home and opined that “much of the work performed . . . would not

pass codes and was not adequately completed . . . .” Mr. Hamilton further discussed omissions and

deficiencies in the contract between the parties. In Mr. Hamilton’s opinion, the total amount of damages

was $53,296.

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Rule 60 motion was heard on June 15, 2015 and, on June 30, 2015, the court entered an

order denying the motion.

The Swanners filed a notice of appeal of the trial court’s June 30, 2015 order, and

this Court dismissed the appeal for lack of jurisdiction because the order appealed was

not a final judgment. Howes v. Swanner, No. M2015-01389-COA-R3-CV, 2016 WL

659199 (Tenn. Ct. App. Feb. 17, 2016). On September 1, 2016, the trial court entered a

final order incorporating its 2014 consent order dismissing with prejudice State Farm and

the State Farm agent, its May 21, 2015 order granting Homeowners’ motion for summary

judgment, and its June 30, 2015 order denying the Swanners’ Rule 60 motion. The

Swanners appeal from the September 1, 2016 final order denying their Rule 60 motion.

STANDARD OF REVIEW

We review a trial court’s decision on a Rule 60 motion under an abuse of

discretion standard. Discover Bank v. Morgan, 363 S.W.3d 479, 487 (Tenn. 2012). It is

well-established that, “‘A trial court abuses its discretion only when it applies an

incorrect legal standard, or reaches a decision which is against logic or reasoning that

causes an injustice to the party complaining.’” Caldwell v. Hill, 250 S.W.3d 865, 869

(Tenn. Ct. App. 2007) (quoting Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001)).

The abuse of discretion standard does not permit an appellate court to substitute its

judgment for that of the trial court. Id. Thus, under this standard, we give great deference

to the trial court’s decision. Henry v. Goins, 104 S.W.3d 475, 479 (Tenn. 2003).

The trial court’s findings of fact are presumed to be correct and will not be

overturned unless the evidence preponderates otherwise. TENN. R. APP. P. 13(d); Bogan

v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). We review conclusions of law de novo with

no presumption of correctness. Broadbent v. Broadbent, 211 S.W.3d 216, 220 (Tenn.

2006); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).

ANALYSIS

The Swanners assert that the trial court should have granted them relief from the

judgment pursuant to Tenn. R. Civ. P. 60.02(1), for “mistake, inadvertence, surprise or

excusable neglect.” They focus their arguments on the last ground, excusable neglect.

A party seeking relief from a final judgment bears the burden of proof to show

their entitlement to such relief. Henry, 104 S.W.3d at 482. In Fillers v. Collins, No.

E2013-01210-COA-R3-CV, 2014 WL 631239 (Tenn. Ct. App. Feb. 18, 2014), a case

similar to the present case, the trial court granted summary judgment in favor of the

plaintiffs because the defendants “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.”

Fillers, 2014 WL 631239, at *1. One of the defendants filed a motion to set aside the

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judgment asserting that her attorney “inadvertently failed” to respond to the motion and

attend the hearing due to personal circumstances constituting “mistake, inadvertence, or

excusable neglect” pursuant to Tenn. R. Civ. P. 60.02(1). Id. at *1, *3. The trial court

granted in part and denied in part the defendant’s motion to set aside the judgment. Id. at

*2. In affirming the decision of the trial court, the appellate court applied the following

reasoning:

“[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 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 nondefaulting 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)).

Fillers, 2014 WL 631239, at *3.

Thus, based on Fillers, to determine whether a party who fails to respond to a

motion for summary judgment and appear at the hearing is entitled to Rule 60.02(1)

relief, we apply the same factors used with respect to setting aside default judgments

under Rule 60.02(1). Our Supreme Court has stated that “‘[t]here is much more reason

for liberality in reopening a judgment when the merits of the case never have been

considered than there is when the judgment comes after a full trial on the merits.’” Tenn.

Dep’t of Human Servs. v. Barbee, 689 S.W.2d 863, 866 (Tenn. 1985) (quoting 11 Charles

Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 2857 (1973));

see also World Relief Corp. of Nat’l Ass’n of Evangelicals v. Messay, No. M2005-01533-

COA-R3-CV, 2007 WL 2198199, at *5 (Tenn. Ct. App. July 26, 2007). Thus, “a motion

to vacate a default judgment should be granted whenever ‘there is a reasonable doubt as

to the justness of dismissing the case before it can be heard on its merits.’” World Relief,

2007 WL 2198199, at *5 (quoting Henry, 104 S.W.3d at 481).

Before we begin examining the relevant factors, it is important to note that the

record on appeal does not contain a transcript or a statement of the evidence of any of the

hearings below, including the hearing at which summary judgment was granted and the

hearing denying Rule 60 relief. Under Tenn. R. App. P. 24, it is the duty of the appellant

“to prepare the record which conveys a fair, accurate, and complete account of what

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transpired in the trial court regarding the issues which form the basis of the appeal.” In re

M.L.D., 182 S.W.3d 890, 894 (Tenn. Ct. App. 2005); see also TENN. R. APP. P. 24(b), (c).

Thus, it is the appellant’s responsibility to provide the court with a transcript or a

statement of the evidence “from which we can determine whether the evidence

preponderates for or against the findings of the trial court.” Id. at 894-95. If there is no

transcript or statement of the evidence, “we conclusively presume that the findings of fact

made by the trial court are supported by the evidence and are correct.” Id. at 895.

Because the Swanners did not include a transcript or statement of the evidence in the

record, we must presume that the trial court’s findings of fact are correct.

Our Supreme Court has held that, in applying the three-factor Rule 60 analysis

regarding “excusable neglect” adopted by the court in Henry v. Goins (and quoted above

from Fillers), the threshold determination is whether the defaulting party acted willfully.

Discover Bank, 363 S.W.3d at 493-94. If the defaulting party’s actions were willful, the

judgment cannot be set aside on grounds of excusable neglect. Id. at 494. If the actions

were not willful, the court must consider the remaining two factors. Id. In the present

case, the Swanners argue that their actions in failing to respond to the motion and appear

at the hearing were not willful because they did not receive notice of the hearing.

In the context of Rule 60, willful conduct refers to “‘strategic decision[s] to

default,’” “‘conduct that is more than merely negligent or careless,’” and “conduct that is

“‘egregious and not satisfactorily explained.’” McBride v. Webb, No. M2006-01631-

COA-R3-CV, 2007 WL 2790681, at *3 (Tenn. Ct. App. Sept. 25, 2007) (quoting Am.

Alliance Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996); SEC v. McNulty,

137 F.3d 732, 738 (2d Cir. 1998)). Since 2003, when the Supreme Court adopted the

three-factor test in Henry v. Goins, 104 S.W.3d at 481, “Tennessee courts have wrestled

with the apparent incompatibility of ‘excusable neglect’ and ‘willfulness.’” Pryor v.

Rivergate Meadows Apartment Assocs. Ltd. P’ship, 338 S.W.3d 882, 886 (Tenn. Ct. App.

2009). One decision offered the following explanation: “This approach [under the Henry

factors] has been to find that negligence, a form of neglect, may be excusable and to

employ willfulness as a critical factor in distinguishing neglect that is excusable from that

which is not.” World Relief, 2007 WL 2198199, at *7 n.9 (citing Am. Alliance Ins., 92

F.3d at 59-62).

Homeowners’ motion for summary judgment includes a notice of hearing at the

bottom of the one-page motion along with a certificate of service executed by their

counsel stating that the motion was mailed to the defendants at 575 Forest Retreat Road,

Hendersonville, Tennessee.3 Under Tennessee law, “[a] certificate of service is prima

facie evidence that a motion was served in the manner described in the certificate, and

raises a rebuttable presumption that it was received by the person to whom it was sent.”

McBride, 2007 WL 2790681, at *3. This presumption may, however, be rebutted by

3

In their affidavit in support of their Rule 60 motion, the Swanners state that this is their correct address.

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proof that the document was not, in fact, received. Estate of Vanleer v. Harakas, No.

M2001-00687-COA-R3-CV, 2002 WL 32332191, at *8 (Tenn. Ct. App. Dec. 5, 2002).

Each of the Swanners submitted an affidavit stating that he or she did not receive “notice

of the hearing.” The Swanners argue that these affidavits rebut the presumption that they

received notice. They further assert that their lack of notice of the hearing “and their

immediate actions taken to protect their rights subsequent to learning of the granting of

Summary Judgment for the first time demonstrate that their failure to appear was not

willful.”

While we acknowledge that the Swanners’ affidavits are evidence concerning

service of process, the Swanners ignore the findings of the trial court from the hearing on

their Rule 60 motion. In its order denying Rule 60 relief, the trial court made the

following pertinent findings:

Counsel for Plaintiff pointed out to newly hired counsel for Defendants that

the motion for summary judgment had the notice of hearing on the bottom

of the one (1) page motion in bold setting a hearing date for said motion on

May 4, 2015.

At the hearing on the Tenn. R. Civ. P. 60 [motion], counsel for Plaintiffs

pointed out the very carefully crafted wording of the Rule 60 motion and

affidavits which said Defendants did not receive a notice [of] hearing, but

did not state that Defendants failed to receive the motion for summary

judgment. Counsel for Plaintiffs asked that Defendants be placed under

oath to answer whether they received the motion for summary judgment.

Defendant, Mark Swanner, was present and testified. Defendant, Robin

Swanner was not in court on June 15, 2015. Mr. Swanner acknowledged

receiving the statement of undisputed facts which contains a certificate of

service for the same date as the motion for summary judgment, which was

filed on March 9, 2015.

The motion for summary judgment states that it was accompanied by the statement of

undisputed material facts and a memorandum of law. The motion, statement of

undisputed facts, and memorandum have the same certificate of service date. Based upon

the trial court’s findings of fact and its denial of the Swanners’ Rule 60 motion, it appears

that the trial court found the Swanners’ testimony (by affidavit and at the hearing) that

they failed to receive notice of the hearing not to be credible. A trial court’s assessment

of credibility is entitled to great weight on appeal because the trial court “observed the

manner and demeanor of the witnesses and was in the best position to evaluate their

credibility.” Union Planters Nat’l Bank v. Island Mgmt. Auth., Inc., 43 S.W.3d 498, 502

(Tenn. Ct. App. 2000).

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The trial court implicitly found that the Swanners received the notice of the

hearing. The burden of proof was on the Swanners to introduce evidence as to why their

actions were not willful. See H.G. Hill Realty Co., LLC v. Re/Max Carriage House, Inc.,

428 S.W.3d 23, 37-38 (Tenn. Ct. App. 2013) (holding that there was no basis for

concluding the appellant’s actions were not willful because he failed to show they were

not willful). In Brown v. Juarez, No. E2013-00979-COA-R3-CV, 2014 WL 1408147

(Tenn. Ct. App. Apr. 10, 2014), a case similar to the case at hand, plaintiffs filed a Rule

60.02 motion to set aside an order dismissing their case, and their attorney admitted that

he had received the motion to dismiss but “that he simply overlooked the notice of

hearing.” Brown, 2014 WL 1408147, at *1. The trial court denied the motion. Id. On

appeal, the court reasoned as follows:

While counsel was negligent in failing to appear or respond to the motion,

his behavior cannot be characterized as a willful decision to ignore the

motion and allow an order of dismissal to be entered against Plaintiffs.

McBride v. Webb, No. M2006-01631-COA-R3-CV, 2007 WL 2790681, at

*3 (Tenn. Ct. App. Sept. 25, 2007) (providing that willfulness includes a

strategic decision and conduct that is more than mere negligence or

carelessness but is egregious and not satisfactorily explained). However,

his neglect was not excusable because he would have noticed the hearing

date if he had simply read the motion in its entirety. Knowing that

Defendants sought an order of dismissal against Plaintiffs, he also failed to

even respond to the motion within a reasonable amount of time. With these

considerations in mind, we conclude that Plaintiffs failed to carry their

burden of proving entitlement to relief under Rule 60.02 of the Tennessee

Rules of Civil Procedure.

Id. at *4 (emphasis added). Applying this reasoning to the present case, we conclude that

the Swanners’ failure to respond to the motion for summary judgment and to appear at

the hearing was not willful but also was not excusable neglect in that, had they read the

motion for summary judgment, they would have been aware of the hearing. In light of

this conclusion, the trial court did not abuse its discretion in denying their motion for

Rule 60 relief.

Our analysis under factor one alone is sufficient to affirm the trial court’s decision.

See Brown, 2014 WL 1408147, at *4; H.G. Hill, 428 S.W.3d at 37-38 (holding that, when

a defaulting party did not dispute certificates of service and failed to meet his “burden to

show that his failure to answer was not willful,” the trial court did not err in denying Rule

60 relief). We further note, however, that the Swanners did not address the other two

factors, meritorious defense and prejudice, in their Rule 60 motion. When making a

motion under Rule 60.02, “[t]he burden is upon the movant to set forth in a motion or

petition and supporting affidavits facts explaining why the movant was justified in failing

to avoid the mistake, inadvertence, surprise or neglect.” Tenn. State Bank v. Lay, 609

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S.W.2d 525, 527 (Tenn. Ct. App. 1980) (citing Hopkins v. Hopkins, 572 S.W.2d 639, 640

(Tenn.1978)). In support of their motion for summary judgment, Homeowners submitted

the affidavit of an expert to establish liability and damages. The Swanners submitted no

evidence with their Rule 60.02 motion to show a meritorious defense to Homeowners’

claims or the absence of prejudice.

We have previously stated that “the trial court is in the best position to assess the

various factors that should be considered in determining whether a default judgment

should be vacated.” Barbee, 689 S.W.2d at 867. This same reasoning applies to a

motion for summary judgment where the defendants fail to respond or appear at the

hearing. See Fillers, 2014 WL 631239, at *3. We conclude that the trial court did not

abuse its discretion in denying the Swanners’ motion for Rule 60 relief.

CONCLUSION

The judgment of the trial court is affirmed, and this matter is remanded with costs

of appeal assessed against the appellants. Execution may issue if necessary

________________________________

ANDY D. BENNETT, JUDGE

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