Libbey Memorial PMC, Inc. d/b/a Hot Springs Health Spa, Inc. v. Odes Goodsell

ca01-421

DIVISION II

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

WENDELL L. GRIFFEN, JUDGE

CA01-421

October 17, 2001

LIBBEY MEMORIAL PMC, INC. AN APPEAL FROM PULASKI

d/b/a HOT SPRINGS HEALTH COUNTY CIRCUIT COURT

SPA, INC. [CV99-10181]

APPELLANT

V. HON. JOHN WARD, JUDGE

ODES GOODSELL

APPELLEE AFFIRMED

Appellant Libbey Memorial P.M.C., d/b/a Hot Springs Health Spa, appeals from a default award in favor of appellee Odes Goodsell for damages he sustained when he fell on appellant's premises. Appellant raises three points on appeal. It argues that the trial court erred 1) in failing to follow federal precedent in determining whether a default judgment was proper; 2) in finding that appellee sufficiently stated a cause of action to sustain a default judgment; and 3) in allowing the jury to award damages based on speculation as to the amount of the present value of appellee's future medical expenses. We find no error and affirm.

Appellant is a provider of hot water spa treatments in Hot Springs, Arkansas. On December 3, 1998, appellee paid for a spa treatment at appellant's place of business. He took an elevator downstairs to take a hot bath in one of appellant's larger pools. Aftersoaking in the pool, he proceeded upstairs to take a steam bath. While walking down a set of stairs, appellee grabbed a handrail for support. The handrail came loose and he fell down the steps. Appellee subsequently filed a negligence suit against appellant.

The complaint was served on appellant on December 13, 1999, and was received by appellant's insurance carrier on December 15, 1999. It is undisputed that appellant filed its answer on January 6, 2000, three days after it was due. It is also undisputed that the claims adjuster for appellant's insurance carrier, Gary Stevens, delayed referring the complaint to the insurance company's legal department until after the time for filing the answer had expired. In its answer, appellant reserved the issue of whether appellee had pleaded facts upon which relief could be granted.

On January 7, 2000, appellee filed for a default judgment. On January 12, 2000, appellant filed a response to appellee's motion for a default judgment motion, a motion for enlargement of time in which to file a responsive pleading, and interrogatories and requests for production of documents. Appellee filed a motion to strike appellant's answer on January 24, 2000. Appellant filed its responses to appellee's interrogatories and requests for production on appellee on January 30, 2000. Appellant filed an amended answer on July 5, 2000, asserting the affirmative defense that appellee had signed a waiver of liability. On July 7, 2000, the trial court conducted a hearing on appellee's motion for a default judgment and appellant's motion for enlargement of time to file a responsive pleading. From the bench, the court ruled:

Rule 55 sets out several considerations. One of those, of course, that has been stated is mistake, inadvertence. There has been some clarification of that under the law thatit is not simple mistake. I am not exactly sure what that is, but simple mistake isn't included.

In a case like this, where the insured gets the - gets served, I believe, on the 13th and gets the complaint in the hands of or notice to the insurance company on the 15th, I just, there has to be something in the Rules for when it is time for you to do something - and in this case, it's time to file an answer.

...

In this case, I think I have to agree with [appellee's attorney]. It's just simple mistake, just overlooked it. And I don't think I ought to be giving additional time in situations of simple mistake, where an insurance company gets notice two days after a complaint.

...

I am required to follow the Rules. And the Rules, I think, compel me in this particular case not to allow the answer to be filed late . . .

With regard to this default, I think it's rather clear - it is to me at least - that in the cases I've read, simple mistake is not sufficient to set it aside, nor would I in the future under 55(c). The guy just laid it aside and that's just not good enough under the law.

The court entered a default judgment in favor of appellee and scheduled a hearing on the damages for December 5, 2000.

Prior to the damages hearing, appellant filed a motion in limine, arguing that appellee's proof to be offered concerning the costs of appellee's medical treatment did not provide the degree of medical certainty needed to establish the value of appellee's future medical expenses. It further argued that appellee did not intend to present any evidence that would enable a jury to make a calculation regarding the present value of future medical expenses. Appellant asserted that in the absence of such evidence, the jury could not make an award of future medical expenses without speculation. The court responded, "I think the jury normally does that without any help from anybody" and later stated, "I think they've got enough in here to talk about future medical." Judgment was subsequently entered inappellee's favor for $200,000. Appellant filed a motion for a new trial and a judgment notwithstanding the verdict, which were both denied by the trial court. This appeal followed.1

I. Grant of Motion for Default Judgment

Appellant first argues that unless the court sets aside the default judgment on the facts of this case, it will be misapplying the more liberal version of Arkansas Rule of Civil Procedure 55, which "reflects a clear preference for deciding cases on the merits rather than on technicalities," and allows a trial judge to set aside a default judgment on the basis of "mistake, inadvertence, surprise or excusable neglect' or "or any other reason justifying relief from the operation of the judgment." Addition to Reporter's Notes, 1990 Amendment. The Reporter's Notes also state that: In deciding whether to enter a default judgment, the court should take into account the factors utilized by the federal court, including: whether the default is largely technical and the defendant is not ready to defend; whether the plaintiff has been prejudiced by the defendant's delay in responding; and whether the court would later set aside the default judgement under Rule 55(c).

Appellant maintains that the trial judge failed to apply these factors, and therefore that this court must hold, as a matter of law, that a trial court's failure to consider and apply thesefactors in accordance with federal case law is an abuse of discretion. We disagree.

The facts are undisputed about why appellant's answer was filed late. Appellant's insurance carrier originally opened a file on appellee on February 2, 1999, but denied appellee's claim and closed the file. The complaint was served on appellant on December 13, 1999, and appellant forwarded the complaint to Gary Stevens, an insurance adjuster for appellant's insurance carrier. Stevens reopened appellee's file and contacted appellee's attorney for the purpose of determining if there was any additional information that would convince the insurance company that the claim had merit. He said that appellee's attorney indicated that he would have to contact his client. Stevens did not remember whether appellee's attorney stated he would call him back, but his "impression" was that appellee's attorney would "be getting back to me."

Stevens did not again act on appellee's file until December 28, 1999, when he "started" filling out a referral of the claim to the insurer's litigation department, which would then refer the complaint to the insurer's counsel. However, Stevens did not complete the referral until January 4, one day after a response was due. At that point, he completed the litigation referral and telephoned appellee's attorney requesting agreement for extension to file an answer. Appellee's attorney refused.

Appellant's counsel notes that between December 15, when the complaint was received, and January 3, the deadline for filing a response, there were six weekend days, three holidays (Christmas Eve, Christmas and New Year's Day), two days following weekend days, and two additional days when Stevens was not in the office. Stevens testifiedthat he was out of his office on December 23, 24, 27, and 31. Therefore, appellant asserts that Steven had only approximately one-half of the time available during this period in which to handle appellee's complaint. Stevens also testified that he handled from 150-170 claims and that the holiday season would have affected his ability to handle claims because of the "distractions." He agreed with his counsel that his conduct in failing to forward the paperwork in this case was "inadvertent."

Appellant maintains that Stevens' handling of the complaint was either inadvertence or excusable neglect, because he deferred taking action on the complaint on the assumption that he would hear from appellee's attorney before an answer became due, and then lost track of time "during the press of the holiday season." It notes that appellee's counsel even referred to his action as "straight inadvertence." Appellant asserts that there is no evidence that Stevens' conduct was deliberate or wilful.

Appellant argues that the record shows that at the time the default judgment was entered, it was defending itself. By the time it filed its late answer, discovery was essentially complete and the matter had been set for trial. Appellant contends that it introduced proof of a meritorious defense because appellee had signed a waiver and that appellee's counsel conceded that it was hard to show prejudice where appellant missed a deadline by three days. Finally, appellant argues that the trial judge's decision is "wholly based" on its perceived distinction between mistake and simple mistake, a distinction not supported by Rule 55 or by case law. It maintains that our courts have never found that a simple mistake was not grounds for avoiding default.

Appellant's "liberalization" argument has previously been addressed and rejected by our appellate courts. In Layman v. Bone, 333 Ark. 121, 967 S.W.2d 561 (1998), our supreme court affirmed the denial of the defendant's motion to enlarge the time for filing a complaint and the grant of a default judgment where counsel filed a late answer relying on a client's erroneous information regarding the date he was served with the complaint. The Layman court noted that any failure to file an answer on time could be referred to as a mistake in the sense that an error of some sort caused the failure to file on time. However, the Layman court characterized counsel's actions as inexcusable neglect, rather than mistake, because counsel failed to check the record to determine the proper date of service. See id. Further, the Layman court noted that it is not the intent of the rule to hold that any error whatsoever should excuse compliance as this would deprive a trial court of its discretion in rendering a default judgment. See id.

The Layman court further noted that the Reporter's Notes following Rule 55 suggest that our courts look to federal cases to determine which factors to consider, such as a lack of prejudice to the plaintiff, the defendant's preparedness to defend, and the avoidance of largely technical default judgments. See id. While the Layman court acknowledged that those are factors that may influence a trial court in determining whether mistake or inadvertence is of the type that would allow the trial court to set aside the default judgment, it did not hold that it is error if our courts do not consider these factors. See id. Further, this court has recently rejected the argument that Arkansas should follow federal precedent and should require trial courts to explicitly state which factors should be used in consideringwhether to set aside default judgments. See Tyrone v. Dennis, 73 Ark. App. 209, 39 S.W.3d 800 (2001).

Accordingly, we hold that the trial court was not required to consider the federal factors before entering the default judgment. Nonetheless, the trial court considered at least two of these factors: the reason for the error and whether he would later be willing to set aside the default judgment. In addition, the trial judge's characterization of Stevens' actions as a "simple mistake" merely reflects the court's findings that Stevens' conduct was inexcusably negligent, and should be contrasted with excusable neglect, similar to the manner in which the Layman court characterized the attorney's negligent conduct in that case.

Appellant also cites Johnson v. Dayton Electric Mfg. Co., 140 F.3d 781, 784 (8th Cir. 1998), for the proposition that "[o]ur courts have consistently sought to distinguish between contumacious or intentional delay or disregard for deadlines and procedural rules and a marginal failure to meet pleading or other deadlines." Johnson and other federal cases cited by that court demonstrate that federal courts considering whether to affirm default judgments seem to require a showing that the defendant's failure to respond was willful. See, e.g., In re Jones Truck Lines, Inc., 63 F.3d 685 (8th Cir. 1995); Swink v. City of Pagedale, 810 F.2d 791 (8th Cir. 1987). However, Arkansas courts have not adopted the "willfulness" requirement. Appellant offers no arguments, other than those already advanced and rejected in Layman and Tyrone, that convince us to do so.

Our courts do not reverse a trial court's grant of a default judgment in the absence ofan abuse of discretion. See Layman v. Bone, supra; Tyrone v. Dennis, supra. We hold that the trial court did not abuse its discretion in granting appellee's motion for a default judgment. Although Stevens initially delayed referring the complaint to the appellant's legal department because he was under the "impression" that appellee's attorney would reply to his request for information that might cause appellant to change its posture with regard to appellant's claim, that was no excuse for simply laying the complaint aside in the face of the procedural requirement that a responsive pleading was due in the coming days.

Moreover, Stevens merely "started" filling out a referral on December 29. He did not actually complete the referral until January 4. Stevens knew that even after he filled out the referral, additional time would pass before the complaint was forwarded to the legal department. The fact that Stevens handled between 150 and 170 claims simultaneously does not excuse his conduct. To the contrary, it suggests that because he handles numerous claims, he was remiss in not having a better system established to ensure that he forwards the complaints in a timely manner.

Nor can we excuse Stevens' conduct because the time for responding occurred during the Christmas holiday season. Appellant's counsel asserted below that appellant only had "half of the time" available to deal with appellee's complaint. This simply is not true. For purposes of determining when the answer was due, weekends are only excluded if the last day of the period occurs on a Saturday, Sunday, or a legal holiday. See Ark. R. Civ. P. 6(a). Stevens was out of his office on December 23, 24, 27, and 31. However, there were only three holidays during the relevant time frame, Christmas Eve, Christmas and New Year'sDay. See Ark. Code Ann. § 1-5-101(a)(1), (9) & (10) (1996); Ark. R. Civ. P. 6(a) (designating "legal holiday" as those days designated as a holiday by the President or Congress of the United States or designated by the laws of this State). Moreover, the fact that a holiday may occur within a twenty-day period is already accounted for by the rules. See Ark. R. of Civ. P. 6(a). While Rule 55 has been liberalized, it has not been so liberalized as to excuse a party from filing a timely response due to the season of the year in which the complaint is filed.

Finally, appellee's counsel conceded below that it was difficult to demonstrate prejudiced where appellant filed its response three days late. However, appellant concedes that since the liberalization of Rule 55, our appellate courts have consistently affirmed the grant of default judgments for marginal failures to meet pleading deadlines where no prejudice occurred. See, e.g., Layman v. Bone, supra, (affirming grant of default judgment and denial of motion to enlarge time for filing a response where counsel filed late answer relying on client's erroneous information regarding the date he was served with the complaint); Tyrone v. Dennis, supra (affirming denial of motion to set aside a default judgment where answer was filed thirteen days late because counsel incorrectly calculated the deadline for responding); Moore v. Taylor Sales, Inc., 59 Ark. App. 30, 953 S.W.2d 889 (1997) (affirming grant of a default judgment where appellant's counsel was suffering with health problems and was working reduced hours, but kept his office open during the relevant time period and assured the plaintiff that the response would be filed); Divelbliss v. Suchor, 311 Ark. 8, 841 S.W.2d 600 (1992) (affirming denial of motion to set aside default judgmentwhere the insurance agent received a copy of the summons and complaint but took no action for at least five months); and B.F. Engineering, Inc. v. Cotroneo, 309 Ark. 175, 830 S.W.2d 835 (1992)(affirming where insurance agent received two summonses and complaints in two different actions stemming from the same action, but mistakenly thought that the answer filed in the first suit also answered the second and failed to forward the second complaint to the insurance company's counsel). Clearly, the lack of demonstrated prejudice is not fatal in this case.

Based on the foregoing authorities, we hold that the trial court did not abuse its discretion in granting appellee's motion for a default judgment.

II. Failure to Plead a Cause of Action

Appellant also argues that appellee's complaint fails to state a cause of action for negligence, and asserts that where the facts in the complaint are insufficient to support a judgment, a default judgment will be reversed. See Kohlenberger, Inc. v. Tyson Foods, Inc., 256 Ark. 584, 510 S.W.2d 555 (1974). We hold that appellee sufficiently pled a cause of action for negligence.

A default admits only those facts alleged in the complaint and if they are insufficient to support the judgment, it will be reversed. See id. Although it is unnecessary that a complaint set out the evidence relied upon or a history of transactions leading up to the essential facts, it is necessary that substantive or issuable facts be alleged, and conclusions stated cannot be considered on default. See id. The facts constituting the cause of action must be averred by stating them in direct and positive allegations, and not by way of argument, inference or belief. Every fact and element essential to the cause of action must be stated. See id.

The duty of a business owner to its invitees, is stated in Restatement (Second) of Torts, § 343 as follows:

A possessor of land is subject to liability for bodily harm caused to business visitors by a natural or artificial condition thereon if, but only if, he

(a) knows, or by the exercise of reasonable care could discover, the condition which, if known to him, he should realize as involving an unreasonable risk to them, and

(b) has no reason to believe that they will discover the condition or realize the risk involved therein, and

(c) invites or permits them to remain upon the land without exercising reasonable care

(i) to make the condition reasonably safe, or

(ii) to give a warning adequate to enable them to avoid the harm.

See also Jenkins v. Hestand's Grocery, Inc., 320 Ark. 485, 898 S.W.2d 30 (1995).

The complaint in this case alleged, inter alia, that 1) appellee was a business invitee and appellant owed him a duty to use ordinary care to maintain the premises in a reasonably safe condition; 2) appellee injured himself when the handrail came loose and he fell; 3) appellant's failure to keep its handrail attached to its support constituted a failure to use ordinary care to maintain the premises in a reasonably safe condition; 4) appellant knew or should have known that its clientele would consist of numerous elderly persons; 5) because the business involves water and steam which creates slippery surfaces, hand railings and other supports are of grave importance; 6) the area in which appellee fell was near a group of small hot tubs; and 7) appellant's failure to maintain its premises in a reasonably safe condition was the proximate cause of appellee's fall and injuries.

On appeal, appellant alleges that the complaint is deficient because it contains no allegations that appellant knew the hand rail was not sufficiently attached, that appellant could have discovered the insufficient attachment through the exercise of ordinary care, or that the insufficient attachment was so unapparent to a business invitee that it could not be discovered in time to avoid injury. It maintains that the mere allegation of a failure to keep a handrail sufficiently attached does not satisfy the requirement of Jenkins v. Hestand's Grocery, Inc., supra.

The appellant in Jenkins made a purchase in appellee's grocery store, attempted to exit the store, and fell before she reached her vehicle. She argued that her fall occurred when she stepped in the middle of the slope of a ramp and her foot went forward from under her. See Jenkins v. Hestand's Grocery, Inc., supra. The Jenkins court determined that there was nothing before the trial court to indicate that appellee had any knowledge whatsoever that the ramp was dangerous or involved an "unreasonable risk" to its invitees. Further, the Jenkins court held that appellant failed to show that the condition she alleged to have caused her fall constituted a "danger" or that it presented an "unreasonable risk" to invitees. See Jenkins v. Hestand's Grocery, Inc., supra; see also Morehart v. Dillard's Dep't. Stores, Inc., 322 Ark. 290, 908 S.W.2d 331 (1995).

Here, despite appellant's assertion to the contrary, appellee's complaint does more than merely allege that appellant failed to keep the guardrail properly attached. Unlike the complaint in Jenkins, appellee's complaint asserts facts to show that appellant should have known that a loose guardrail would present a danger to its business invitees. Appellee alleged that appellant's business involves water and steam; that its premises contained slippery surfaces; that the guardrail and stairs were located near a group of hot tubs; that appellant knew or should have known that guardrails are of grave importance, given that it has elderly clientele; and that appellant failed to use ordinary care to keep its premises in a reasonably safe condition. Appellee was not required to plead that appellant actually knew that the handrail was loose. It is clear that appellee pleaded sufficient facts to allege that appellant should have known that a loose guardrail would present a danger or unreasonable risk to its invitees and that it should have discovered the condition of the loose rail if it exercised ordinary care. Therefore, we hold that the trial court did not err in determining that appellee sufficiently pled a cause of action for negligence as a business invitee.

III. Calculation of Damages

Appellant's final argument is that the trial court erred in allowing the jury to calculate the present value of appellee's future medical expenses when appellee offered no proof of present value. Appellant maintains that absent evidence regarding the amounts and dates of expenditures and the interest rate to be used, the jury must have based its calculation on "speculation and ignorance." We hold that the trial court did not err in submitting the issue of appellee's future medical expenses to the jury.

It is within the trial court's discretion to submit the issue of future medical expenses to a jury. See Williams v. Gates, 275 Ark. 381, 630 S.W.2d 34 (1982). However, an award of damages may not be based on speculation or conjecture. See Sumlin v. Woodson, 211 Ark. 214, 199 S.W.2d 936 (1947). Our courts have held that future medical expenses need not be proven with the same specificity as past medical expenses. See Wal-Mart Stores, Inc. v. Londagin, 344 Ark. 26, 37 S.W.3d 620 (2001). However, there must be some evidence that medical treatment will be necessary in the future. See id. Further, it is not speculation and conjecture to calculate future medical expenses where a jury has before it a history of medical expenses that have accrued as of the date of trial. See id; Williams v. Gates, supra. Where the doctor testifies that the injured party might need future treatment and the injured party testifies he still suffers pain, that testimony is sufficient for consideration of the element of future medical expenses. See Willson Safety Prods. v. Eschenbrenner, 302 Ark. 228, 788 S.W.2d 729 (1990). However, it is error for a trial court to instruct the jury with regard to future medical expenses where there is no testimony by a physician that the victimwould need future medical care. See Arthur v. Zearley, 337 Ark. 125, 992 S.W.2d 67 (1999).

Appellant first raised its objection during a hearing on a motion in limine. It argued that appellee was not presenting evidence that would enable a jury to calculate his future medical expenses and, absent such evidence, that the jury's award would be improperly based on speculation. During the hearing on damages, appellant objected generally to the jury instructions, stating that the jury could not consider the present value of future medical expenses without guidance from someone who knows how to do it, probably in the form of their expert or something like that." In response, the trial judge stated: "I practiced law for twenty-four years and I'm beginning my thirteenth year on the bench, and I don't remember ever having a requirement that when we tell the jury about future medical, that we also have to give them the particular figure regarding the earning power of money."

Appellee's orthopedist, Dr. Richard Peek, testified by deposition that appellee suffers from a bulging disk that impinges on his sciatic nerve and causes pain in his lower back and left leg. He stated that appellee will be required to take twenty-five milligrams of Vioxx, an anti-inflammatory medication, once per day as long as he experiences no side effects. He indicated that medication was the best way to treat his chronic back and sciatic pain at that time, but he contemplated that appellee might receive future injections or other treatments, including x-rays or scans. Dr. Peek stated that he will probably see appellee three times per year, unless his conditions worsens. He indicated that Doctor Fewell, appellee's family doctor, will monitor appellee's medication, and that appellee should see Dr. Fewell three orfour times per year. Dr. Peek also opined that appellee will probably require from four to six weeks of physical therapy. He stated that appellee's condition is permanent and that his "current rate of treatment and medication and symptoms" will "continue on an ongoing basis."

Appellee submitted an exhibit detailing his medical expenses as of the date of the trial, which totaled $11,647.76. He testified that he saw Dr. Fewell, his family physician, the week prior to the hearing, because he was experiencing "a heap of pain." He described the pain in his left leg and lower back as constant, and "somewhere between" "mild" and "as bad as you can go." Appellee testified that he takes Vioxx every day and that he has difficulty sleeping and driving. He stated that his Vioxx costs $77.39 each month; that each visit with Dr. Peek costs $60; that each visit with Dr. Fewell costs $52; and that an average week of physical therapy costs $280.

Further, the court took judicial notice of Arkansas Code Annotated section 18-2-105 (1987), the mortality table that showed a man of appellee's age has an average life expectancy of 13.67 years. The trial court also instructed the jury to determine the amount of future medical expenses; that it could consider how long the plaintiff is likely to live; that mortality tables may be considered, but are not conclusive; and that it must reduce any reasonably certain future expenses to present value by taking into consideration the rate at which money will earn interest, if invested, until the time in the future when these losses actually occurred, to compensate for the reasonable earning power of money.

The foregoing evidence was sufficient for a jury to calculate future medical expenseswithout resort to speculation or conjecture. This is not a case like Arthur, supra, in which there was no evidence presented that the plaintiff would need future medical treatment. To the contrary, here, there was considerable evidence, including a list of appellee's medical expenses as to the date of the trial, testimony by appellee and Dr. Peek, and the mortality table, to establish a reliable estimate of his future medical expenses. In addition, the jury was given the standard instructions regarding the calculation of the present value of future medical expenses.

Appellant cites no authority for the proposition that the jury must be instructed as to a specific interest rate or that expert testimony is required on the reasonable earning power of money and we know of no such requirement. Accordingly, we hold that the trial court did not abuse its discretion in submitting the issue of appellee's future medical expenses to the jury.

Affirmed.

Bird, J., and Hays, S.J., agree.

1 In its notice of appeal, appellant indicates that it appeals from the August 7, 2000 order granting appellee's motion for a default judgment and the order denying appellant's motion for a new trial and judgment notwithstanding the verdict. However, appellant limits his arguments on appeal to the granting of the default judgment and the speculatory nature of the jury's award. It offers no argument regarding the trial court's denial of its motion for a new trial and judgment notwithstanding the verdict. Therefore, we deem that appellant has waived these arguments on appeal. See, e.g., Stevens v. State, 319 Ark. 640, 893 S.W.2d 773 (1995).