Fidelity & Deposit Company of Maryland v. Jack Isom Construction Co., Inc. et al

Filing 28

OPINION AND ORDER: GRANTING 23 Amended Motion for Relief From Default Judgment 23 . The Clerk is ORDERED to VACATE the Default Judgment Order 12 as to Defendant Billy Jack Isom and VACATE the Clerk's Entry of Judgment 13 as to Defendant Billy Jack Isom. The Motion for Relief From Default Judgment 21 is DENIED AS MOOT and the Motion to Strike Supplemental Affidavit 27 is DENIED AS MOOT. Signed by Judge Rudy Lozano on 4/17/2018. (Copy mailed to Jack Isom Construction Co, Inc.)(lhc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
LAFAYETTE DIVISION
FIDELITY & DEPOSIT
COMPANY OF MARYLAND,
Plaintiff,
vs.
JACK ISOM CONSTRUCTION
CO., INC., and BILLY
JACK ISOM,
Defendants.

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Cause No. 4:17-CV-21

OPINION AND ORDER
This matter is before the Court on: “Defendant, Billy Jack
Isom’s Verified Rule 60 Motion for Relief from Default Judgment,”
filed by Defendant, Billy Jack Isom, on January 24, 2018 (DE #21);
(2) “Defendant, Billy Jack Isom’s Amended Verified Rule 60 Motion
for Relief From Default Judgment,” filed by Defendant, Billy Jack
Isom, on January 25, 2018 (DE #23); and (3) Plaintiff’s Motion to
Strike Supplemental Affidavit of Billy Jack Isom or, in the
Alternative, Motion for Leave to File Response to Supplemental
Affidavit of Billy Jack Isom” (DE #27).

For the reasons set forth

below, the Amended Motion for Relief From Default Judgment (DE #23)
is GRANTED and the Clerk is ORDERED to VACATE the Default Judgment
Order (DE #12) as to Defendant Billy Jack Isom and VACATE the
Clerk’s Entry of Judgment (DE #13) as to Defendant Billy Jack Isom.

The Motion for Relief From Default Judgment (DE #21) is DENIED AS
MOOT and the Motion to Strike Supplemental Affidavit (DE #27) is
DENIED AS MOOT.

BACKGROUND
Plaintiff, Fidelity & Deposit Company of Maryland (“F&D”)
filed a complaint against Defendants Jack Isom Construction Co.,
Inc. and Billy Jack Isom (“Isom”), on February 27, 2017.

(DE #1.)

On March 24, 2017, F&D filed an acknowledgment of service showing
that the complaint had been mailed by “certified mail receipt,” and
while there is no signature, the tracking information shows that
the complaint was delivered to Isom’s home address on March 4,
2017.

(DE #7.)
On June 12, 2017, F&D filed a request for entry of default

because neither defendant had filed an appearance, answered, or
otherwise responded to the complaint.

The Clerk entered default

against Isom and Jack Isom Construction Co. on June 13, 2017.
#10.)

(DE

On July 25, 2017, F&D filed a request for entry of default

judgment against the Defendants. (DE #11.) On September 25, 2017,
this Court granted the motion, issuing default judgment against
both Isom and Jack Isom Construction Co., jointly and severally.
(DE #12.)
F&D

initiated

October 18, 2017.

supplemental
(DE #14.)

proceedings

with

a

motion

on

Magistrate Judge Andrew P. Rodovich
2

granted

supplemental

and

ordered the parties to appear in person on November 15, 2017.

(DE

#15.)

the

verified

motion

for

proceedings

Isom’s attorney contacted F&D’s counsel for the first time

on November 9, 2017.

(Kutch Aff., DE #27-1 at ¶ 4.)

F&D’s counsel

agreed to file a motion to continue the hearing on proceedings
supplemental so long as Isom provided a list of assets.
In

the

motion

to

continue

the

hearing

on

(Id.)

proceedings

supplemental, counsel for F&D represented that “[t]he parties are
currently discussing potential settlement of this matter” and that
they

needed

approximately

settlement.” (DE #16.)
the hearing.

30

days

“to

consider

potential

The Court granted the motion to continue

(DE #17.)

On December 8, 2017, Isom’s counsel requested more time to
complete the list of assets. (Kutch Aff., DE #27-1 at ¶ 5.)

On

December 13, 2017, F&D filed a second motion to continue the
hearing on the proceedings supplemental.
F&D

represented

potential

that

settlement

approximately

30

settlement.”

(Id.)

“[t]he
of

parties

this

are

matter”

additional

days

(DE #18.)
currently

and

“to

Once again,

that

discussing

they

consider

needed

potential

The Court granted the second motion to

continue the hearing on proceedings supplemental.

(DE #19.)

Joshua Kutch, an attorney for F&D, stated in his affidavit
that “[i]n a letter dated January 15, 2018, Jack’s counsel provided
an utterly incomplete list of Jack’s assets, as the first sentence
3

of the letter stated, ‘I am still trying to piece together the
financial history of Jack Isom and locate what remaining assets he
has personally.’”

(Kutch Aff., DE #27-1 at ¶ 6.)

On January 24, 2018, Isom filed a Verified Rule 60 Motion for
Relief from Default Judgment, and attached an affidavit from Isom.
(DE #21.)

A day later, on January 25, 2018, Isom filed an Amended

Verified Rule 60 Motion for Relief from Default Judgment, also
attaching an affidavit of Isom.

(DE #23.)

Later that same day, F&D filed a memorandum in opposition.
(DE #24.)

The Court issued an order vacating the supplemental

hearing which was set for January 26, 2018.

(DE #25.)

On January 29, 2018, Isom filed a Supplemental Affidavit in
support of the Amended Rule 60 Motion.

(DE #26.)

F&D filed a

motion to strike, or alternatively, to file a response, to the
supplemental affidavit on February 21, 2018.

(DE #27.)

DISCUSSION
Generally, when a movant seeks relief from entry of a default
before entry of judgment, Rule 55(c) applies, but a request to set
aside a default judgment is controlled by Rule 60.

Merrill Lynch

Mortg. Corp. v. Narayan, 908 F.2d 246, 252 (7th Cir. 1990).

The

standards for determining whether to vacate an entry of default
under Rule 55 or a default judgment under Rule 60 are essentially
the same, although the test is applied more liberally when default
4

judgment has not yet been entered.

See Bluegrass Marine Inc. v.

Galena Road Gravel, Inc., 211 F.R.D. 356, 357 (S.D. Ill. 2002).
This circuit favors a policy of promoting a trial based on the
merits, rather than default judgments.

Cracco v. Vitran Express,

Inc., 559 F.3d 625, 630-31 (7th Cir. 2009); see also C.K.S. Eng’rs,
Inc. v. White Mountain Gypsum Co., 726 F.2d 1202, 1205 (7th Cir.
1984) (a “default judgment, like a dismissal, is a harsh sanction
which should usually be employed only in extreme situations . . .
.”).
Under

both

Rule

55

and

Rule

60,

the

moving

party

must

demonstrate good cause for the default, quick action to correct it,
and a meritorious defense. See Passarella v. Hilton Int'l Co., 810
F.2d 674, 676 (7th Cir. 1987); Bluegrass, 211 F.R.D. at 357.
In this case, the affidavit Isom attached to the Amended Rule
60 Motion establishes that Isom is 82 years old, and has been in
poor health for some time.

(Isom Aff., DE #23-1 at ¶¶ 1-4.)

He

was the founder and owner of Jack Isom Construction Company, Inc.
until he retired in 2009 and turned the business over to his son,
Billy Ray Isom. (Id. ¶¶ 5-6.)

In 2014 and 2015, Billy Ray Isom

liquidated the assets of Jack Isom Construction Company, Inc. (Id.
¶ 7.)

Isom has not talked to his son, Billy Ray, for more than 2

years. (Id. ¶ 8.) Isom was hospitalized in St. Elizabeth Hospital
in Lafayette, Indiana, in January 2017 when he received a new
defibrillator.

(Id. ¶ 9.) Isom attested that on February 9, 2017,
5

he went with his wife to Fort Myers, Florida, and remained there
until mid-April 2017. (Id. ¶ 10.)

While in Florida, he was

hospitalized on at least two occasions with pneumonia/congestive
heart problems.

(Id. ¶ 11.)

After returning to his home in

Monticello, Indiana, in April 2017, he was hospitalized on various
occasions.

(Id. ¶ 12.) Isom states he was not physically present

in the state of Indiana from February until mid-April of 2017, and
that he never received the summons and complaint in this case.
(Id. ¶ 13.) He also attests that “my son, Billy Ray Isom, has
failed to advise me as to the fact of the lawsuit and the subject
matter of the lawsuit, and it was only when I received notice for
proceedings

supplemental

that

I

was

made

cognizant

of

this

lawsuit.” (Id. ¶ 14.)
The decision to grant or deny a Rule 60(b) motion lies within
the sound discretion of the district court.

See United States v.

Golden Elevator, Inc., 27 F.3d 301, 303 (7th Cir. 1994); Bally
Export Corp. v. Balicar, Ltd., 804 F.2d 398, 400 (7th Cir. 1986).
While relief pursuant to Rule 60(b) is an “extraordinary remedy and
is granted only in exceptional circumstances,” McCormick v. City of
Chicago, 230 F.3d 319, 327 (7th Cir. 2000), “[t]his Circuit has a
well established policy favoring a trial on the merits over a
default judgment.”

Sun v. Bd. of Tr. Of Univ. Of Ill., 473 F.3d

799, 811 (7th Cir. 2007).

Since trial on the merits is favored,

“it is appropriate that Rule 60(b)(1) be liberally applied in the
6

context of default judgments, especially where those judgments
result

from

honest

mistakes

carelessness or negligence.”

rather

than

willful

misconduct,

Ellingsworth, Jr. v. Chrysler, 665

F.2d 180, 185 (7th Cir. 1981).
Under the first prong of the test, whether there was good
cause or excusable neglect for the default, the Court must take
Isom’s affidavit for what it is worth, and he has sworn under oath
that he did not become aware of the lawsuit until he received
notice

of

the

proceedings

supplemental.

F&D’s

motion

proceedings supplemental was filed on October 18, 2017.

for

(DE #14.)

Additionally, Isom has established that he is elderly, in poor
health, was in and out of the hospital during the period after the
complaint was filed, and that he was out of the state of Indiana
from February to mid-April of 2017 (the complaint was mailed to
Isom on March 4, 2017). Moreover, Isom has been estranged from his
son for 2 years and did not hear about the lawsuit from him. From
an equitable standpoint, this Court is sympathetic to Isom’s health
issues.

The Seventh Circuit has emphasized that the remedy

afforded by Rule 60(b) is “essentially equitable in nature and is
to be administered upon equitable principles” and that the “common
thread running through all the decisions is that the ruling on a
rule 60(b) motion to vacate a default judgment should depend
largely on the willfulness of the defaulting party’s actions.”
C.K.S. Eng’rs, 726 F.2d at 1205, 1208. The Court is satisfied that
7

Isom was not intentionally or willfully ignoring the litigation and
the default was not willful.

Rather, it seems that Isom’s actions

were due to mere inadvertence or excusable neglect.

Recognizing

the discretion granted to district court judges in this situation,
this Court finds that good cause or excusable neglect has been
shown for the default.
The second prong of the test is whether the party took quick
action to correct the default.

Isom claims he did he not find out

about the lawsuit until he received notice of the proceedings
supplemental (which were filed in October 2017), but he did not
file the instant Rule 60 motion until January 2018.

This lag in

time would be more troublesome to the Court were it not for F&D’s
counsel’s statement that Isom’s counsel contacted him in early
November 2017, to discuss continuing the hearing on the proceedings
supplemental.

Moreover,

F&D’s

own

submissions

to

the

Court

establish that in November and December 2017, the parties were
actively engaged in settlement negotiations.

While the better

course would have been for Isom’s attorney to file the motion to
vacate default judgment immediately after learning of the lawsuit
and default judgment, it is evident from the record in this case
that once Isom found out about the lawsuit, his counsel promptly
engaged in settlement negotiations.

Because of this evidence that

Isom and his counsel did not intentionally shirk the litigation,
but actively engaged in settlement negotiations, and filed the
8

instant motion within a reasonable amount of time, the Court finds
that this prong is satisfied as well.
Finally, the third prong of the test is that Isom has shown a
meritorious defense.

His memorandum states that “upon information

and belief, there exists a good and valid defense to some or all of
the averments and paragraphs contained in the Plaintiff’s Complaint
with respect to the Defendant, Billy Jack Isom.”
This

is

pretty

scant

detail.1

However,

there

(DE #23 at 2.)
is

one

last

consideration the parties did not bring to the Court’s attention.
The

default

$4,496,582.73.

judgment

in

this

case

was

for

an

amount

of

The Seventh Circuit has found that “the amount of

money at stake might be a legitimate factor for a court to consider
on a motion to vacate a default judgment, since relief under Rule
60(b) is essentially equitable in nature and is to be administered
upon equitable principles.”

C.K.S. Eng’rs, 726 F.2d at 1208.

Given the large amount of money at stake in this case, and this
Court’s “policy of favoring trial on the merits over default
judgment,” Cracco, 559 F.3d at 631, this Court finds the last prong
is satisfied as well.

1

The Court notes that Isom also filed a supplemental affidavit on
January 29, 2018 (DE #26), in which he states it is not Isom’s signature on
the Agreement of Indemnity, and that he believes his son created and
fraudulently signed the document as part of his effort to take over the
construction company. (DE #26.) F&D has moved to strike this affidavit,
pointing out procedural problems such as Isom did not ask for leave from the
Court to file the supplemental affidavit and it was untimely filed. (DE #27.)
Because the Court can rule on the instant Rule 60 motion without consideration
of this supplemental affidavit, the motion to strike is denied.

9

A default judgment is a “weapon of last resort, appropriate
only when a party wilfully disregards pending litigation.”
473 F.3d at 811.

Sun,

In this case, the Court finds that Isom

demonstrated excusable neglect for the default, and that equity
strongly weighs in favor of vacating the default.

As such, the

default judgment as to defendant Isom will be vacated.

CONCLUSION
For the reasons set forth above, the Amended Motion for Relief
From Default Judgment (DE #23) is GRANTED and the Clerk is ORDERED
to VACATE the Default Judgment Order (DE #12) as to Defendant Billy
Jack Isom and VACATE the Clerk’s Entry of Judgment (DE #13) as to
Defendant Billy Jack Isom. The Motion for Relief From Default
Judgment (DE #21) is DENIED AS MOOT and the Motion to Strike
Supplemental Affidavit (DE #27) is DENIED AS MOOT.

DATED: April 17, 2018

/s/ RUDY LOZANO, Judge
United States District Court

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