HENSLEY INDUSTRIES, INC. v. RYDER INTEGRATED LOGISTICS, INC.
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RENDERED:
AUGUST 23, 2002; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-001848-MR
HENSLEY INDUSTRIES, INC.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE LAURANCE B. VANMETER, JUDGE
ACTION NO. 99-CI-03215
v.
RYDER INTEGRATED LOGISTICS, INC.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BUCKINGHAM, HUDDLESTON AND JOHNSON, JUDGES.
JOHNSON, JUDGE:
Hensley Industries, Inc., has appealed from an
opinion and order entered by the Fayette Circuit Court on July
25, 2001, which granted the appellee, Ryder Integrated Logistics,
Inc., summary judgment.1
The entry of summary judgment followed
the entry of an opinion and order on March 7, 2000, which had set
aside a default judgment.
Having concluded that the trial court
did not abuse its discretion by setting aside the default
judgment, and that there is no genuine issue as to any material
1
Kentucky Rules of Civil Procedure (CR) 56.02.
fact, and that Ryder was entitled to judgment as a matter of law,
we affirm.
In early August 1996, Hensley and Ryder entered into an
oral contract.
The crux of this agreement was that Ryder would
pay Hensley for providing the tractors and drivers necessary to
deliver trailers loaded with cargo to Ryder's customers.2
On
March 17, 1998, Hensley and Ryder reduced their oral agreement to
writing in a formal written contract.
After entering into the written contract, Hensley's
drivers were involved in three separate accidents which either
damaged or destroyed three trailers.3
Ryder subsequently
informed Hensley that it was going to hold Hensley liable for the
damages to the trailers and the cargo caused by the accidents.4
Hensley, either by direct payments or as deductions from payments
due from Ryder to Hensley for services already performed,
eventually paid Ryder $90,163.12 for the damages caused by the
2
The delivery of a trailer loaded with freight to a customer
is known in the transportation business as a "dropship" delivery.
Hensley's drivers would pick up a trailer provided by Ryder which
had been loaded with cargo and deliver the loaded trailer to a
particular destination, where the driver would then leave the
trailer and the cargo for the customer. Hensley's drivers would
not load or unload the cargo.
3
The accidents occurred on May 28, 1998, August 13, 1998,
and December 7, 1998.
4
As will be discussed later, uncontested evidence in the
record shows that Ryder did not own the trailers damaged in the
accidents. Instead, Ryder had leased those trailers from other
entities.
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accidents.5
On September 13, 1999, Hensley filed a complaint in
Fayette Circuit Court claiming that it had "inadvertently paid"
Ryder the aforementioned damages.
Hensley demanded a judgment
from Ryder in the sum of $90,163.12.
According to testimony from
Robert Fatovic, general counsel for Ryder, his office log in
Miami, Florida, indicated that a copy of Hensley's complaint was
received on or about September 30, 1999.6
However, the complaint
was apparently mishandled or misrouted, and Ryder's corporate
counsel was never notified of its receipt.
As a result, Ryder
failed to answer Hensley's complaint in a timely manner.
Hensley
subsequently moved the trial court for a default judgment to be
entered against Ryder pursuant to CR 55.01.
On November 19,
1999, the trial court granted Hensley's motion and it entered a
default judgment against Ryder in the amount of $90,163.12.
According to Fatovic, Ryder first became aware that it
was in default on or about January 20, 2000.
On January 31,
2000, Ryder moved the trial court to set aside the default
judgment pursuant to CR 55.02.
The trial court granted Ryder's
motion in an opinion and order entered on March 7, 2000.
5
Ryder’s evidence that the damage to the three trailers was
$15,500.00, $34,744.00, and $31,000.00, respectively, has not
been challenged. The remaining amount of $8,919.12 was for the
damage to the cargo. Hensley is only contesting the $81,244.00
claimed as the damages to the trailers.
6
Fatovic stated that when complaints from various places in
the United States, Canada, Europe, and South America are filed
against Ryder, those complaints are routed to the legal
department in Miami, Florida.
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Subsequently, on April 27, 2001, Ryder filed its motion for
summary judgment, arguing that by the plain terms of the March
17, 1998, written contract Hensley was responsible for any
damages to the trailers while under Hensley's "care, custody or
control."
The trial court entered an opinion and order on July
25, 2001, granting Ryder's motion for summary judgment.
This
appeal followed.
Hensley claims the trial court abused its discretion by
setting aside the default judgment.
Specifically, Hensley
argues:
Kentucky law on motions to set aside
default judgments is very clear. To prevail
on such a motion, a moving party must
establish each of the following elements to
the satisfaction of the Court:
1.
A valid excuse for the failure to timely
file a responsive pleading.
2.
A meritorious defense to the basic claim
set out in the complaint.
3.
The absence of prejudice to the nondefaulting party. Sunrise Turquois,
Inc. v. Chemical Design Company, Inc.,
Ky.App., 899 S.W.2d 856 (1995).
[Ryder] makes very little attempt to
establish a "valid excuse" for its obvious
failure to timely file a responsive pleading.
They admit that they received the complaint
and summons in their corporate legal
department. . . . Nevertheless, the legal
department simply "lost" the complaint and
failed to respond in a timely fashion. They
offer no excuse other than their own
negligence or inadvertence. Simply put,
under no circumstances can this be found to
be a valid excuse for [Ryder's] failure to
timely respond.
Hensley argues that since Ryder admitted to being the sole party
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at fault in the loss of the complaint, the trial judge "was not
within his discretion" in setting aside the default judgment.
We
disagree.
CR 55.02 provides that a trial court may set aside a
default judgment for "good cause" shown in accordance with CR
60.02; and among the grounds for relief listed under CR 60.02 are
"mistake" and "excusable neglect."
In Kidd v. B. Perini & Sons,
Inc.,7 the former Court of Appeals discussed the broad discretion
afforded trial courts in determining whether to set aside default
judgments and the standard to be applied by appellate courts in
reviewing those decisions:
[C]ourts “possess and exercise a very large
discretion in vacating judgment by default
for the purpose of permitting defense to be
made on the merits.” Freeman on Judgments,
42 Ed. p. 934. We expressed the rule in
Wilson v. Rockcastle Mining, Lumber, & Oil
Co., 200 Ky. 484, 255 S.W. 88, 90 [(1923)],
in the following language: “In granting and
refusing new trials, trial courts have a
broad discretion, which will not be
interfered with, except in case of abuse, and
this court is less inclined to set aside a
judgment granting than one refusing a new
trial.”
Further, in Green Seed Co. v. Harrison Tobacco Storage Warehouse,
Inc.,8 this Court stated:
The law clearly disfavors default
judgments. Moreover, the trial court has
wide discretion to set aside a default
judgment. The moving party, however, cannot
have the judgment set aside and achieve his
7
313 Ky. 727, 731-32, 233 S.W.2d 255, 257 (1950).
8
Ky.App., 663 S.W.2d 755, 757 (1984).
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day in court if he cannot show good cause and
a meritorious defense. Good cause is most
commonly defined as a timely showing of the
circumstances under which the default
judgment was procured [citations omitted].
Clearly, a trial court is given broad discretion to determine
whether to set aside a default judgment; and on review, the
burden will be even heavier for a party seeking to overturn a
trial court's determination to have the case decided on the
merits.
After Ryder was notified that it was in default, it
promptly took full responsibility for the mistake and explained
to the trial court why it had failed to respond to Hensley's
complaint.
Ryder explained that receipt of the complaint was
noted in its legal department’s logbook on September 30, 1999,
but the complaint was lost and it was never sent to anyone in its
legal department for a response.
Fatovic stated that this was
“the first instance to my knowledge in which our system failed
and the complaint was lost.”
In its motion to set aside the default judgment, Ryder
set forth in detail its argument in support of its meritorious
defense.
Obviously, the trial court agreed with Ryder’s claim of
a meritorious defense because it not only set aside the default
judgment, but subsequently it granted Ryder summary judgment.
Hensley’s claim that it was prejudiced because it “has gone from
having a judgment in its favor to having [a] judgment entered
against it” is not convincing.
As Ryder points out, if “loss of
the default judgment is undue prejudice sufficient enough to
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preclude setting aside a default, then no default judgment could
ever be set side.”
For the foregoing reasons, we cannot say that
the trial court abused its discretion in setting aside the
default judgment that had been entered against Ryder.
Hensley has also appealed the summary judgment awarded
to Ryder.
Summary judgment is proper "if the pleadings,
depositions, answers to interrogatories, stipulations, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."9
In Paintsville Hospital Co. v. Rose,10 the Supreme Court of
Kentucky held that for summary judgment to be proper the movant
must show that the adverse party cannot prevail under any
circumstances.
The Court has also stated that "the proper
function of summary judgment is to terminate litigation when, as
a matter of law, it appears that it would be impossible for the
respondent to produce evidence at the trial warranting a judgment
in [its] favor."11
The standard of review on appeal of a summary
judgment is whether the trial court correctly found that there
was no genuine issue as to any material fact and that the moving
9
CR 56.03.
10
Ky., 683 S.W.2d 255 (1985).
11
Steelvest, Inc. v. Scansteel Service Center, Inc., Ky.,
807 S.W.2d 476, 480 (1991).
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party was entitled to judgment as a matter of law.12
There is no
requirement that the appellate court defer to the trial court
since factual findings are not at issue.13
"The record must be
viewed in a light most favorable to the party opposing the motion
for summary judgment and all doubts are to be resolved in [its]
favor."14
Hensley argues that there is a "substantial dispute"
between the parties as to the meaning of the terms of the written
contract.
Specifically, Hensley argues:
[T]he parties entered into an oral contract
in 1996. Based on that understanding,
[Hensley] began to haul freight for [Ryder].
[Hensley] provided the drivers and the power
units. [Ryder] provided the trailers and the
freight. . . .
The parties entered into a written
contract on March 17, 1998. . . . The
written contract is entirely consistent with
the oral agreement under which the parties
had already been operating.
. . .
All of Mr. Hensley's15 testimony was
consistent with his position that [Hensley]
was not responsible for damages to the
trailers owned by [Ryder]. He stated that
prior to the time of the written contract,
there had been trailer damage for which no
reimbursement had been sought.
12
Scifres v. Kraft, Ky.App., 916 S.W.2d 779, 781 (1996).
13
Goldsmith v. Allied Building Components, Inc., Ky., 833
S.W.2d 378, 381 (1992).
14
Steelvest, supra at 480.
15
Willie Hensley was the president of Four H Trucking, which
ran the trucking business for Hensley Industries, Inc.
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Hensley is relying on the parties' prior dealings under
the oral contract as a factor to be considered in interpreting
the subsequent written contract entered into by the parties on
March 17, 1998.
This argument ignores the fact that the written
contract contained an integration clause, which read as follows:
This Agreement, together with all
schedules, attachments and exhibits hereto,
constitutes the entire agreement between
Ryder and [Hensley] with respect to the
subject matter hereof and shall supersede all
prior oral or written representations and
agreements [emphasis added].
It is well-established that in such a case, evidence of prior
agreements between the parties and/or the prior course of dealing
between the parties is ordinarily not admissible when
interpreting the meaning of a subsequent written contract.
In City of Covington v. Kanawha Coal & Coke Co,16 the
former Court of Appeals stated:
[P]arol evidence or usage or custom is
admissible to annex incidents or to show what
things are to be treated as incidental to the
principal thing which is the subject of the
contract. . . . “This evidence is admitted
on the principle that the parties did not
intend to express in writing the whole of the
contract by which they were to be bound, but
only to make their contract with reference to
the known and established usages and customs
relating to the subject matter.”
However, in the case sub judice, the parties did expressly
provide that the written contract would supersede all prior
agreements and representations between the parties and that the
16
121 Ky. 681, 685-86, 89 S.W. 1126, 1127 (1905) (quoting 2
Greenleaf on Evidence § 294).
-9-
written contract constituted the "entire agreement."
Hence,
unless there is an ambiguity in the written agreement, there is
no need to resort to the parties' prior dealings to supplement
the terms of the written instrument.
In Gibson v. Sellars,17 the former Court of Appeals
stated:
Extrinsic proof is competent and may be
employed in construing language, the meaning
of which is obscure or which is susceptible
of two or more interpretations. However,
because of the inherent danger of the rule,
its use is permitted only in those cases
where the language to be construed is so
ambiguous or obscure in meaning as to defy
interpretation otherwise. An extension of the
rule would result in chaos and confusion, and
it would be impossible to determine the
rights of the parties to a contract without
viewing all the circumstances surrounding the
execution of the document in question.
Therefore, extrinsic evidence, i.e., evidence apart from the four
corners of the written instrument, should not be considered in
interpreting the contract absent a finding that the terms of the
written agreement are "so ambiguous or obscure in meaning as to
defy interpretation otherwise."
In the instant case, we conclude
that the meaning of the contract terms between Ryder and Hensley
are clear and unambiguous.
Thus, a resort to parol evidence is
not necessary.18
17
Ky., 252 S.W.2d 911, 913 (1952).
18
See Veech v. Deposit Bank of Shelbyville, 278 Ky. 542,
550, 128 S.W.2d 907, 911 (1939) (holding that "[i]f the contract
is so clear and free from ambiguity as to be self-interpretative
no construction is necessary but it should stand as it is written
and should be enforced according to its express terms in the
(continued...)
-10-
Three provisions in the contract lead us to the
conclusion that summary judgment in favor of Ryder was proper.
First, the "indemnification clause" clearly states that Hensley
agreed to indemnify Ryder for costs incurred arising out of "any
act" by Hensley, including possible damages to "any property."
The clause reads in part:
[Hensley] agrees to indemnify, defend
and hold Ryder and its customers . . .
harmless from and against any and all
liabilities, damages, fines, penalties,
costs, claims, demands and expenses
(including reasonable attorneys' fees and
costs) of whatever type or nature, including,
but not limited to . . . (c) damage or
destruction of any property . . . arising out
of
(i) any act or omission by
[Hensley], its agents, employees. .
. [emphases added].
The uncontested evidence in the record shows that Ryder did not
own the trailers which were damaged in the accidents.
Ryder had leased those trailers from other entities.
Instead,
Hence,
Ryder was liable to those entities for the damages resulting from
the accidents.
We hold that the trailers damaged in the
accidents fit well within the sweeping language of this
"indemnification clause" and that Hensley is bound by the terms
of the contract to indemnify Ryder for the damages incurred.
Second, an "insurance clause" placed Hensley on notice
that it was responsible for maintaining comprehensive insurance
18
(...continued)
absence of showing of fraud, mistake, or a plea and showing of
grounds for reformation").
-11-
coverage.
This clause reads in part:
(a) [Hensley] shall maintain the following
types . . . of insurance:
. . .
(ii) Comprehensive general
liability insurance, including
blanket contractual coverage, for
bodily injury and tangible property
damage in the minimum amount of One
Million Dollars ($1,000,000.00)
combined single limit per
occurrence [emphases added].
Once again, we hold that the trailers damaged in the accidents
fit well within this very broad and sweeping language of
“tangible property” and that Hensley is bound by the terms of the
contract to pay Ryder for the damages incurred.
Finally, Hensley agreed that it would be liable for any
property damaged while under its care, custody, and control.
The
"property damage clause" reads in part:
[Hensley's] goal is to manage the
Transportation Service in a manner which
eliminates damage claims. Except as
otherwise provided, [Hensley] shall have the
sole and exclusive care, custody, and control
of all property tendered to [Hensley] for
transportation hereunder until delivery to
the consignee. [Hensley] shall be liable for
the full actual loss, damage or injury to
said property while said property is in
[Hensley's] care, custody, or control. . .
[emphases added].
As mentioned above, Hensley would pick up the cargo-filled
trailers at a particular location and deliver them to a certain
destination.
Both the cargo and the trailers were left at the
drop-off point.
We hold that the trailers were therefore a part
of the "property tendered to [Hensley] for transportation" and
-12-
the “property damage clause” mandated that Hensley pay Ryder for
any damage to the trailers while under Hensley's care, custody,
and control.
Each of the aforementioned provisions, both
individually and collectively, lead us to the conclusion that
Hensley agreed pursuant to the March 17, 1998, contract to pay
for the damage to the trailers.
Therefore, since there was no
genuine issue as to any material fact and since Ryder was
entitled to judgment as a matter of law, summary judgment in
favor of Ryder was proper.
For the foregoing reasons, the opinions and orders of
the Fayette Circuit Court are affirmed.
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF FOR APPELLEE:
James Dean Liebman
Frankfort, Kentucky
B. Todd Thompson
Clay M. Stevens
Louisville, Kentucky
ORAL ARGUMENT FOR APPELLEE:
Clay M. Stevens
Louisville, Kentucky
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