Property-Owners Insurance Company v. Yagelski et al

Filing 44

OPINION AND ORDER: DENYING 39 MOTION for Default Judgment as to Defendants Raymond T. Yagelski, Erica L. Yagelski and R&E Midwest Construction Co., Inc. d/b/a Midwest Construction Company by Plaintiff Property-Owners Insurance Company, with leave to re-file after judgment is reached with regard to the nondefaulting defendants. Signed by Chief Judge Philip P Simon on 10/18/2016. (lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
PROPERTY-OWNERS
INSURANCE, CO.,
Plaintiff,
v.
RAYMOND T. YAGELSKI,
ERICA L. YAGELSKI, R&E
MIDWEST CONSTRUCTION
CO., INC. d/b/a MIDWEST
CONSTRUCTION CO., BRANDON
GOLD, and REBECCA SKURA,
Defendants.

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CAUSE NO. 2:14-CV-267-PPS

OPINION AND ORDER
This matter is before the Court on Plaintiff Property-Owners Insurance, Co.’s
Motion for Entry of Default Judgment Against Defendants Raymond T. Yagelski, Erica
L. Yagelski, and R&E Midwest Construction Co., Inc. d/b/a/ Midwest Construction
Co. [DE 39.] Because granting the motion for default judgment would risk the
possibility of inconsistent adjudications with respect to the remaining nondefaulting
parties, Property-Owner’s motion is denied at this time.
Property-Owners brought this declaratory judgment action seeking a declaration
that it owed no duty to defend or indemnify Defendants Raymond T. Yagelski, Eric L.
Yagelski, and Midwest Construction under the terms of their insurance policy with
Property-Owners concerning claims made by Defendants Brandon Gold and Rebecca
Skura against Defendants Raymond T. Yagelski, Eric L. Yagelski, and Midwest

Construction in an action filed in the Lake County Circuit Court. [DE 1 at 21.] In that
state court action, Gold and Skura allege claims of negligence and home improvement
fraud against the Yagelskis and Midwest Construction. [Id. at 3-6.] At a status
conference held in this action on October 14, 2016, at which counsel for PropertyOwners and Gold and Skura appeared telephonically, the parties represented that the
state court action is currently in discovery. [DE 43.]
The Yagelskis and Midwest Construction have failed to appear or otherwise
defend in this action. On September 8, 2016 the Clerk of this Court entered default
against them. [DE 38.] Property-Owners now seeks the entry of default judgment
against them, despite the fact that judgment has not yet been entered against the
Yagelskis and Midwest Construction in the state court action, so the parties have no
idea for how much Property-Owners would have to indemnify the Yagelskis and
Midwest Construction, if at all. It does not seem appropriate to grant a default
judgment, specifically regarding Property-Owners’ duty to indemnify, when the issues
in the underlying state court action have yet to be resolved.
There is an additional wrinkle in this case. Gold and Skura, the two other
defendants in this action, filed an answer to the complaint and now are in the midst of
litigating this action. In situations where default judgment is sought from fewer than all
defendants, “courts have recognized that if an entry of a default judgment against a
defendant in a multi-defendant action could result in inconsistent judgments, entry of
default judgment prior to adjudication of the merits of the case with regard to the
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nondefaulting parties may be improper.” State Farm Fire & Cas. Co. v. Nokes, No.
2:08-CV-312 PPS, 2010 WL 679057, at *2 (N.D. Ind. Feb. 23, 2010) (quoting State Farm
Mut. Auto Ins. Co. v. Jackson, 736 F. Supp. 958, 961 (S.D. Ind. 1990)); see also Frow v. De la
Vega, 82 U.S. 552, 554 (1872); Marshall & Ilsley Co. v. Pate, 819 F.2d 806, 811-12 (7th Cir.
1987). Within the Seventh Circuit, this notion is narrowly construed and applied only
where the theory of recovery is of joint liability, or when “the nature of the relief is such
that [it] is necessary that judgments against the defendants be consistent.” Nokes, 2010
WL 679057, at *2 (citing Jackson, 736 F. Supp. at 961); see also Home Ins. Co. of Il. v. ADCO
Oil Co., 154 F.3d 739, 741 (7th Cir. 1998) (“In a suit against multiple defendants a default
judgment should not be entered against one until the matter has been resolved as to
all.”).
Nokes illustrates this principle. There, seven of eleven defendants had failed to
answer or otherwise defend against the plaintiff insurance company’s complaint
seeking declaratory judgment. Nokes, 2010 WL 679057, at *3. However, the four
remaining nondefaulting defendants were in the process of resolving the matter on the
merits through litigation. Id. As the Court there explained:
If [the nondefaulting Defendants] are successful, the judgment
will state that [Plaintiff] has a duty to indemnify the
policyholder Donald Nokes and is liable for a judgment
rendered against him. But a default judgment against the
defaulting Defendants would find that [Plaintiff] has no duty
to indemnify Nokes under the same insurance policy. The
possibility of such inconsistency weighs against granting
[Plaintiff]’s default motion, at least at this point.

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Id. at *3.
The risks in Nokes are present in this case as well. If I were to grant PropertyOwners’ motion for default judgment against the Yagelskis and Midwest Construction
and the nondefaulting defendants end up winning on the merits of the case that is still
ongoing, inconsistent judgments arising out of the same conduct would result. For
these reasons, Property-Owners’ motion must be denied at this time. Of course,
Property-Owners is free to re-raise the issue after the case against the non-defaulting
defendants has been resolved.
ACCORDINGLY:
Plaintiff’s Motion for Default Judgment [DE 39] is DENIED with leave to re-file
after judgment is reached with regard to the nondefaulting defendants.
SO ORDERED.
ENTERED: October 18, 2016
_s/ Philip P. Simon______________
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT

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