Summary
In Carr v. Charter Natl. Life Ins. Co., 22 Ohio St.3d 11, 488 N.E.2d 199 (1986), the Supreme Court found that the evidence presented in a default judgment hearing must support the damages awarded, particularly punitive damages.
Summary of this case from Favors v. BurkeOpinion
No. 85-451
Decided January 29, 1986.
Civil procedure — Failure to provide discovery — Entry of default judgment — Default judgment may be entered, when.
O.Jur 3d Judgments §§ 577, 678.
When the evidence presented at a default judgment hearing is insufficient to support the damages awarded, the trial court abuses its discretion when it denies a Civ. R. 60(B) motion to the extent that the motion challenges the amount of the award.
APPEAL from the Court of Appeals for Tuscarawas County.
Plaintiff-appellee Vallie Carr and her late husband, Paul, purchased a trailer from defendant Schwartz Mobile Home Sales, Inc. ("Schwartz") of New Philadelphia, Ohio. The sale was financed by Sentinel Savings Association, now defendant Vanguard Federal Savings Loan ("Vanguard") of Vandergrift, Pennsylvania, holder of the note and security agreement. Through Schwartz, the Carrs purchased a credit life insurance policy on Paul Carr's life, which was written by defendant-appellant, Charter National Life Insurance Company ("Charter"), of St. Louis, Missouri. The policy was purchased to pay the remaining debt on the mobile home if Mr. Carr were to die before the debt was retired. When Mr. Carr did in fact die before the loan was repaid, a claim was presented to Vanguard which then submitted the claim to Charter. Charter paid $9,471.99 on the claim. However, because an additional $9,178.01 was required to repay the loan, Vanguard had Schwartz repossess the trailer.
Mrs. Carr, on behalf of herself and as administratrix of her husband's estate, and the Carr children, as heirs at law, filed this action on November 1, 1983, naming Charter, Vanguard and Schwartz as defendants, seeking $200,000 in compensatory damages and $2,000,000 in punitive damages. Charter answered the complaint and filed a cross-claim against Vanguard.
In the same month that they filed the complaint, plaintiffs also served certain requests for admissions, interrogatories and requests for production of documents, all of which were never answered by Charter. Because of the withdrawal of Charter's local counsel on January 18, 1984, the company was granted leave to file interrogatory responses and produce documents until February 17, 1984. Plaintiffs' request for admissions was deemed admitted. An additional set of plaintiffs' interrogatories was sent to Charter on March 1, 1984 and also went unanswered. On March 30, 1984, the court granted plaintiffs' motion to compel answers and ordered Charter to answer plaintiffs' interrogatories and produce the requested documents. When Charter failed to comply with this order, plaintiffs filed a motion for default judgment against the company. After a brief hearing on the issue of damages at which only Mrs. Carr testified and during which no documentation of damages was offered, the court on May 23, 1984 awarded plaintiffs a judgment in the amount of $200,000 and $4,002 in attorney fees.
Appellant Charter asserted that it first learned of the default judgment on November 1, 1984. On November 9, Charter filed a motion to set aside the default judgment under Civ. R. 60(B). Supporting affidavits alleged that the failure to answer the discovery requests resulted from counsel's illness, which had caused him to suffer memory lapses for a significant period of time.
After a hearing on November 26, 1984, the court denied Charter's motion to set aside the default judgment. Upon appeal, the court of appeals affirmed.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Space, O'Meara McLane and Douglas J. O'Meara, for appellees.
Syler, Redinger, Wright Traver and Dennis D. Traver, for appellant.
We do not find adequate evidence in the record to excuse Charter's repeated failures to cooperate with discovery proceedings. We also find inadequate evidence, however, to support an award of damages of $200,000 and an award of attorney fees. Therefore, while we do not hold that the default judgment should have been vacated, we do hold that the awards of damages and attorney fees were an abuse of discretion.
The record reveals that plaintiffs simply did not present sufficient evidence to justify an award of $200,000 in compensatory damages, particularly where the amount allegedly due on the contract was only $9,178.01. Mrs. Carr testified that she and her family had suffered emotional upset resulting from the defendants' conduct. However, no medical evidence of any kind was offered to support this testimony. Nor did plaintiffs introduce any evidence of alternative living expenses Mrs. Carr may have incurred as a result of the repossession. Mrs. Carr alleged that her credit rating had been affected by the incident, but she only "assumed" that she had been turned into the credit bureau. No evidence of any credit denials was offered.
Instead of presenting evidence relating to compensatory damages, plaintiffs offered evidence of Charter's financial condition, presumably to support an award of punitive damages. Evidence was introduced at the default hearing that Charter had "Twenty-Six Million in reserves" and had "made Five Million in the year previous to March 1984." Counsel requested that the court award judgment "in the amount asked for and an amount the company can afford to pay." The trial judge did not characterize the award as punitive. Nevertheless, given the total lack of competent, credible evidence to support such a large amount of compensatory damages, the award constitutes a punitive measure that is inappropriate under the facts shown here.
Punitive damages are not recoverable against an insured for refusal to pay a valid claim unless the refusal is both unjustified and in bad faith. Hoskins v. Aetna Life Ins. Co. (1983), 6 Ohio St.3d 272, 277. In such cases, the insured must establish that the company was guilty of oppression, fraud or malice. Id. at 278. Plaintiffs presented no evidence to indicate that Charter was guilty of oppression, fraud or malice.
In addition to the $200,000 in damages awarded, the court also awarded attorney fees of $4,002. Attorney fees are recoverable only when an award of punitive damages is proper. See Columbus Finance v. Howard (1975), 42 Ohio St.2d 178 [71 O.O.2d 174]. Because the evidence did not support an award of punitive damages, the award of attorney fees must be set aside.
The trial court correctly held a Civ. R. 55(A) hearing to determine the proper amount of damages to be awarded. The evidence presented did not, however, justify a $200,000 award of compensatory damages; nor did the evidence support an award of punitive damages or attorney fees. Civ. R. 60(B) provides for relief from "a final judgment, order or proceeding." When the evidence presented at a default judgment hearing is insufficient to support the damages awarded, the trial court abuses its discretion when it denies a Civ. R. 60(B) motion to the extent that the motion challenges the amount of the award.
We reverse the judgment of the court of appeals and remand this cause to the trial court for a hearing on the issue of damages.
Judgment reversed and cause remanded.
SWEENEY, LOCHER, HOLMES, C. BROWN and DOUGLAS, JJ., concur.
CELEBREZZE, C.J., concurs in judgment only.