Peay v. Barnett

Zarnoch, J. On its surface, this case seems to involve a simple question-whether the Circuit Court for Baltimore City correctly denied a defendant's motion to vacate a default judgment against her where there was a defect in service of process, but where she likely had actual notice of the proceedings and did not diligently challenge the judgment for more than six years. Logic would suggest an obvious yes. However, relevant caselaw blocks an easy answer here. For the U.S. Supreme Court has said that "[a] defendant is always free to ignore judicial proceedings, risk a default judgment, and then challenge that judgment on jurisdictional grounds in a collateral proceeding." Ins.

Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinée , 456 U.S. 694 , 706, 102 S.Ct. 2099 , 72 L.Ed.2d 492 (1982). And the Court of Appeals of Maryland, relying on the proposition that there can be no valid proceeding against a defendant in the absence of proper service, has allowed a challenge four years after entry of a default judgment and six years after actual knowledge of the litigation by the defaulting party. See Little v. Miller , 220 Md. 309 , 153 A.2d 271 (1959). Further complicating this increasingly complicated issue is a trend in the caselaw-particularly in federal courts-making it easier to find that a defaulting defendant has waived personal jurisdiction by his or her conduct.

See Ins. Corp. of Ireland , supra , 456 U.S. at 703 -05 , 102 S.Ct. 2099 . In reliance upon this authority, we conclude that in this case, the circuit court, rather than focusing on post-judgment diligence, should have considered whether the appellant, Phlonda Peay, has waived personal jurisdiction. Thus, we reverse and remand this case for further proceedings.

BACKGROUND AND PROCEDURAL HISTORY In 2006, appellee Reginald Barnett, who was an inmate at the Maryland Correctional Adjustment Center ("Super Max") was seriously injured after several officers entered his cell and shackled him. Barnett was taken to the hospital in Super Max, and then transported to an outside hospital to have his wounds sutured, and ultimately, was transferred to a different prison facility. 1 On February 19, 2008, Barnett filed a complaint in the Circuit Court for Baltimore City against several officers whom Barnett alleged were involved in the incident. 2 The defendants included appellant Phlonda Peay, who was a captain at Super Max at the time of Barnett's injuries. Although Barnett alleged that only some of the officers were directly involved, he asserted that Peay, along with three others, approved and supervised the other officers' conduct. According to the docket, Peay was originally listed as "Capt.

Phlander Peay." The complaint stated that Peay and the five other officers had the mailing address of the DPSCS in Baltimore City. On May 20, 2008, a notice of a motions hearing was mailed to Peay and the other five officers via DPSCS. A similar notice was sent to the same address on June 2, 2008, and another on June 12, 2008 and June 19, 2008. On July 9, 2008, Barnett filed a request to defer dismissal, apparently because he had not yet been able to serve the six individual officers.

The court granted the request and deferred dismissal until December 31, 2008. Another notice of a motions hearing was mailed to Peay at DPSCS on August 11, 2008, and again on September 2, 3, and 5, 2008. After the court denied the third motion to dismiss filed by the State of Maryland, DPSCS, and the Department of Public Safety, more notices were sent to Peay on September 22 and October 22, 2008. A private process server went to Peay's Owings Mills apartment on December 25, 2008 to serve Peay with the complaint and a summons.

Peay's sister, Donna Dingle, answered the door. The process server filed an affidavit on December 31, 2008 stating that Peay's "sister and co-resident" had been served with the papers at Peay's Owings Mills home address in Baltimore County. Peay did not file an answer to the complaint. The docket indicates that after Dingle was served at Peay's home address, the court's notices were sent to Peay with her correct name, often to both her home address as well as to DPSCS.

Reminder notices were mailed to all of the defendants on May 14, 2009. The trial was set to begin on August 3, 2009. On June 2, 2009, Barnett filed a request for an order of default against the five remaining defendants, including Peay. On July 1, 2009, the circuit court entered a default order against each of the defendants and notice of the default order was mailed to Peay's Owings Mills address. 3 On August 7, 2009, the circuit court directed the Clerk of the Court to enter judgment in favor of Barnett, and against the five remaining defendants for $250,000 in compensatory non-economic damages, and $250,000 in punitive damages.

All five defendants were held jointly and severally liable for a total of $500,000. Copies of the final judgment were mailed on the same day. From January of 2010 through June of 2015, Barnett filed multiple requests for writs of garnishment of wages against the defendants' employers, including a writ of garnishment to Peay's then-employer, the University of Maryland Medical System, which was served on or around on June 1, 2015. Approximately nine months after the writ was filed, on March 28, 2016, Peay took action for the first time in this case by filing a motion to set aside the judgment of default and requesting a hearing.

Peay's motion included two affidavits and a copy of her lease during the period when Peay's sister, Dingle, was served. The first was the sworn statement of Peay, stating that Dingle was only visiting Peay and their mother, who lived on the floor above Peay, and that Dingle did not live with Peay on December 25, 2008 or any other relevant time. The second was an affidavit from Dingle, stating that she did not live with Peay at the time of service and did not give her the papers that were served on her on December 25, 2008. Peay's lease indicated that it was effective at the time the papers were served on her sister and that Peay was the only named tenant in the residence.

On May 25, 2016, the circuit court held a hearing on Peay's motion to set aside the judgment. In a July 15, 2016 memorandum opinion, the circuit court found that service on Peay's sister was invalid, and that this constituted a "mistake" under Md. Rule 2-535(b). However, the circuit judge denied the motion because Peay had not diligently sought to set aside the judgment. Peay appealed to this Court.

DISCUSSION This case requires consideration of procedural rules relating to service of process, personal jurisdiction, the entry of a default judgment, and a circuit court's discretion to set aside or revise an order of default. Typically, we review the circuit court's decision whether to grant a motion to revise a judgment pursuant to Md. Rule 4 2-535(b) 5 under an abuse of discretion standard. See Rule 2-535(b) ; Wells v. Wells , 168 Md. App. 382 , 394, 896 A.2d 1082 (2006) ("The existence of a factual predicate of fraud, mistake, or irregularity, necessary to support vacating a judgment under Rule 2-535(b), is a question of law. If the factual predicate exists, the court's decision on the motion is reviewed for abuse of discretion.") (Citation omitted).

The basis of Peay's motion to set aside the judgment is that she was not properly served with notice of the proceedings. Rule 2-121(a) governs the proper method of service of process, and requires the following: Service of process may be made within this State or, when authorized by the law of this State, outside of this State (1) by delivering to the person to be served a copy of the summons, complaint, and all other papers filed with it; (2) if the person to be served is an individual, by leaving a copy of the summons, complaint, and all other papers filed with it at the individual's dwelling house or usual place of abode with a resident of suitable age and discretion ; or (3) by mailing to the person to be served a copy of the summons, complaint, and all other papers filed with it by certified mail requesting: "Restricted Delivery-show to whom, date, address of delivery." Service by certified mail under this Rule is complete upon delivery. [...] Thus, because service was not made on Peay, herself, to be valid, it must have been left "with a resident of suitable age and discretion" at Peay's "dwelling house or usual place of abode." Rule 2-121(a). The circuit court's decision "[w]hether a person has been served with process is essentially a question of fact." Wilson v. Md. Dep't of Env't , 217 Md. App. 271 , 286, 92 A.3d 579 (2014) (Alteration in original) (quoting Harris v. Womack , 75 Md. App. 580 , 585, 542 A.2d 409 (1988) ). A. The Two-Step Default Judgment Process Rule 2-613 governs the default judgment process.

An underlying purpose of the default judgment rule is to provide the plaintiff "a means of relief against the delay and neglect of defendants." See Smith-Myers Corp. v. Sherill , 209 Md. App. 494 , 508, 60 A.3d 90 (2013) (quoting Glass v. Glass , 284 Md. 169 , 172, 395 A.2d 485 (1978) ); see also Md. Rule 2-613. The Rule provides the circuit court with broad discretion to vacate an order of default before it becomes an enrolled, final judgment. See Md. Rule 2-613(a). Additionally, prior to 1984, Maryland's default judgment process provided the circuit court with the power to enter a default judgment once the time period for which a defendant was required to plead expired; that judgment was considered final and the defendant could file an immediate appeal, even before the court determined damages.

See Franklin Credit Mgmt. Corp. v. Nefflen , 436 Md. 300 , 313, 81 A.3d 441 (2013) (hereinafter Franklin Credit II ). 6 In 1984, the Rules were changed to reflect a two-step default process. See id. at 317 , 81 A.3d 441 . Today the Rule provides that, once "the time for pleading has expired" and a defendant has not pled, upon the plaintiff's request, "the court ... shall enter an order of default." Md. Rule 2-613(b).

The remainder of the Rule provides, in pertinent part, the following: (c) Promptly upon entry of an order of default, the clerk shall issue a notice informing the defendant that the order of default has been entered and that the defendant may move to vacate the order within 30 days after its entry. [...] (d) The defendant may move to vacate the order of default within 30 days after its entry. The motion shall state the reasons for the failure to plead and the legal and factual basis for the defense to the claim. (e) If the court finds that there is a substantial and sufficient basis for an actual controversy as to the merits of the action and that it is equitable to excuse the failure to plead, the court shall vacate the order. (f) If a motion was not filed under section (d) of this Rule or was filed and denied, the court, upon request, may enter a judgment by default ..., if it is satisfied (1) that it has jurisdiction to enter the judgment and (2) that the notice required by section (c) of this Rule was mailed. [...] Md. Rule 2-613(c)-(f).

Under the current process, after the time for pleading has expired, the circuit court enters an order of default, which is "interlocutory in nature and can be revised by the court at any time up until the point a final judgment is entered." Bliss v. Wiatrowski , 125 Md. App. 258 , 265, 724 A.2d 1264 (Citations omitted), cert. denied , 354 Md. 571 , 731 A.2d 970 (1999). "Because the defendant has an opportunity, under section (d) ... to vacate the order of default that, in effect, is an adverse finding on liability, the defendant does not enjoy the same opportunity once the default judgment is entered." Franklin Credit Mgmt. Corp. v. Nefflen , 208 Md. App. 712 , 733, 57 A.3d 1015 (2012) (hereinafter Franklin Credit I ) (quoting Wells , 168 Md. App. at 393 , 896 A.2d 1082 ), aff'd , Franklin Credit II , supra , 436 Md. 300 , 81 A.3d 441 . At the expiration of thirty days, if the defendant does not move to vacate or the motion is denied, and the court "is satisfied (1) that it has jurisdiction to enter the judgment and (2) that the notice required by section (c) of this Rule was mailed," the court may determine damages and enter a default judgment.

See Rule 2-613(f). The default judgment is the circuit court's final determination of both liability and damages. 7 See Franklin Credit I , 208 Md. App. at 731 -33 , 57 A.3d 1015 ("[A] default judgment is a final judgment for which the court's revisory power is limited."). In her motion to set aside the default judgment, Peay primarily advanced two contentions to justify setting aside the default judgment: (1) she was not properly served, because her sister, Dingle, was not a "resident" under Rule 2-121 at the time of attempted service; and (2) that she "has a meritorious defense to the claim and to a judgment entered against her by default," because she was not present when Barnett claims he was assaulted by officers at Super Max. Peay's bases for setting aside the judgment mirror the criteria required under Rule 2-613(c) for a motion to vacate an order of default within thirty days after entry of the order of default.

However, Peay filed her motion to set aside the default well beyond the thirty-day window after entry of the order. To give the circuit court the power to vacate the default judgment, therefore, another rule must apply. B. The Circuit Court's Revisory Power Under Rule 2-535(b) Rule 2-535(a) provides broad discretion to the circuit court to revise its judgment within thirty days after entry. 8 However, Rule 2-613(g) expressly restricts the circuit court from exercising its revisory powers under 2-535(a) in default judgment cases. See Rule 2-613(g).

We reviewed our caselaw explaining this restriction in Franklin Credit I : [U]nlike an order of default, ... a default judgment is a final judgment for which the court's revisory power is limited . [ Bliss , 125 Md. App. at 265 , 724 A.2d 1264 ]. Accord [ Wells , 168 Md. App. at 393 , 896 A.2d 1082 ] ("[W]hen a default judgment is entered, the court retains the broad revisory power only 'as to the relief granted.' "); Holly Hall Publ'n, Inc. v. County Banking and Trust Co. , 147 Md. App. 251 , 259 n. 6, 807 A.2d 1201 , cert. denied , 371 Md. 614 , 810 A.2d 961 (2002) ("a default judgment is not subject to the revisory power under 2-535(a), except as to the relief granted."). 208 Md. App. at 732 -33 , 57 A.3d 1015 . Despite Rule 2-613(g)'s restriction on the court's revisory power under Rule 2-535(a), the Rule leaves open the court's power to revise the judgment under 2-535(b). See Wells , 168 Md. App. at 394 , 896 A.2d 1082 ("The narrow revisory power of the court under Rule 2-535(b) is unaffected by Rule 2-613(g).").

Subsection (b) provides: "On motion of any party filed at any time, the court may exercise revisory power and control over the judgment in case of fraud, mistake, or irregularity." Rule 2-535(b) ; see Pickett v. Noba, Inc. , 114 Md. App. 552 , 556-57, 691 A.2d 268 (1997). Once the circuit court enters its default judgment in compliance with Rule 2-613, therefore, that judgment "may be stricken or revised only upon a showing of fraud, mistake, or irregularity in conformance with Md. Rule 2-535(b)." Dir. of Fin. of Baltimore City v. Harris , 90 Md. App. 506 , 511, 602 A.2d 191 (1992) ; see also Wells , 168 Md. App. at 394 , 896 A.2d 1082 (quoting Md. Rule 2-535(b) ) ("That revisory power [under Rule 2-535(b) ], which the court has after a judgment is enrolled ... requires a showing of 'fraud, mistake, or irregularity.' "). 9 Unlike the court's power to vacate a default order under Rule 2-613(c), Rule 2-535(b) provides the circuit court's power to revise a default judgment after the judgment becomes final. See Thacker v. Hale , 146 Md. App. 203 , 231, 806 A.2d 751 (2002) (quoting Eliason v. Comm'r of Pers. , 230 Md. 56 , 59, 185 A.2d 390 (1962) ) (explaining that Rule 2-535(b)"embraces all the power the courts of this State have to revise and control enrolled judgments and decrees"). Additionally, "[a] motion may be treated as a motion to revise under Md. Rule 2-535 even if it is not labeled as such." Pickett , 114 Md. App. at 557 , 691 A.2d 268 (Citation omitted).

For purposes of this appeal, therefore, and as the circuit court did below, we treat Peay's motion to set aside the default judgment as a motion to revise under Rule 2-535(b). The court's revisory power under subsection (b) "is an exception to the general rule." See Pelletier v. Burson , 213 Md. App. 284 , 290, 73 A.3d 1180 (2013). As such, "Maryland courts have narrowly defined and strictly applied the terms fraud, mistake, [and] irregularity, in order to ensure finality of judgments." Id. (Alteration in original) (quoting Thacker , 146 Md. App. at 217 , 806 A.2d 751 ).

Our policy favoring the finality of judgments, therefore, guides our application of the court's Rule 2-535(b) revisory power. To ensure the finality of judgments, the movant must carry his or her significant burden of proof-to establish "[t]he existence of fraud, mistake, or irregularity ... by 'clear and convincing evidence.' " Id. (quoting Das v. Das , 133 Md. App. 1 , 18, 754 A.2d 441 (2000) ). Peay did not argue in her motion to set aside the default judgment that any particular ground under Rule 2-535(b) applied. 10 The primary assertion in Peay's motion relating to a "fraud, mistake, or irregularity" was that her sister, Dingle, was not a "resident" at Peay's home as required by Rule 2-121(a), and therefore, that she was not properly served.

Because she was not properly served, Peay argues that the circuit court had no personal jurisdiction over her, and therefore, the default judgment is void. 1. Improper Service of Process, if Not Waived, Constitutes a "Mistake" Under Rule 2-535(b). We have previously held that "[i]mproper service of process is a proper ground to strike a judgment under Rule 2-535." Pickett , 114 Md. App. at 558 , 691 A.2d 268 (citing Miles v. Hamilton , 269 Md. 708 , 309 A.2d 631 (1973) ). Based on the Court of Appeals' and this Court's prior interpretations of Rule 2-535(b), the only ground pertinent to the facts of this case is that of "mistake." A "mistake" under the Rule refers only to a "jurisdictional mistake." See Chapman v. Kamara , 356 Md. 426 , 436, 739 A.2d 387 (1999) (citing Claibourne v. Willis , 347 Md. 684 , 702 A.2d 293 (1997) ) ("Mistake is limited to a jurisdictional mistake.").

The Court of Appeals elaborated on this principle in Chapman that "[t]he typical kind of mistake occurs when a judgment has been entered in the absence of valid service of process; hence the court never obtains personal jurisdiction over a party." Id. (quoting Tandra S. v. Tyrone W. , 336 Md. 303 , 317, 648 A.2d 439 (1994) ). Peay filed with her motion to set aside the judgment two affidavits indicating that Dingle did not live with Peay at the time of service. Peay also attached a copy of her lease at the time the process server attempted service, which listed her as the only lessee of the apartment.

Dingle's affidavit does not indicate whether she told the process server that she did or did not live at Peay's address, and neither party put forth any evidence to explain why the process server's affidavit indicated that notice was served on Peay's "sister and co-resident." Although Peay's sister stated that she "did not give to [Peay] any paperwork which was served on [her]" at Peay's address, Peay has never asserted whether she actually received the papers, and neither explained what happened to them after they were given to Dingle at Peay's home on Christmas Day. Both Peay and Dingle affirm in their affidavits, however, that Dingle did not live at Peay's home and, therefore, was not a "resident" under Rule 2-121(a). In this case, the circuit court found that Peay was not properly served because the papers were served on Dingle, who the court found was not a "resident" under Rule 2-121(a) at the time of attempted service. 11 Assuming Peay did not waive the right to raise the defense of lack of personal jurisdiction or insufficiency of service of process, this defect would typically constitute the prototypical "jurisdictional mistake" under Rule 2-535(b). See Chapman , 356 Md. at 436 , 739 A.2d 387 . 2.

Mere Lack of Diligence Does Not Prevent a Court From Revising a Void Judgment. Once the circuit court determined that the defect in service of process constituted a "mistake," it proceeded to address a second hurdle that a party seeking relief generally must cross if requesting revision under Rule 2-535(b). That is, the moving party must prove that she exercised ordinary diligence and acted in good faith. See Capobianco v. Gordon , 19 Md. App. 662 , 668, 313 A.2d 517 (1974) (Citations omitted). 12 The "diligence and good faith test" emerged in our courts of equity more than a century ago and developed alongside the requirement for "strong" evidence of fraud, mistake, or irregularity to justify the revision of an enrolled judgment.

See Craig v. Wroth , 47 Md. 281 , 282 (1877). In this case, the circuit court applied the "diligence and good faith test" and concluded that, although Peay had established that a "mistake" had occurred in the defect of service of process, she had not demonstrated that she exercised diligence and good faith in bringing the motion. The court emphasized that Peay had waited six years to move to vacate the default judgment, "failed to even allege that she did not receive subsequent Motions for Order of Default, an Order of Default, a Motion for Default Judgment and a Default Judgment," and that she "inexplicably waited until March 28, 2016, nearly nine (9) months after the writ [of garnishment] was issued, to challenge any of the underlying judgments." 13 The court concluded: Because Defendant Peay is unable to establish any basis for failing to respond to any of the notices and motions sent to her dwelling, all seeking a judgment against her, and her failure to participate or challenge these orders for six years, there is no basis to determine that Defendant Peay acted in good faith or with due diligence. It is clear from our courts' prior analyses of grounds under Rule 2-535(b), however, that the equitable considerations of "diligence and good faith" do