BELL v. WATKINS (2025)

MEMORANDUM DECISION

Statement of the Case

[1] Britney Bell ¹ and Charles Willoughby appeal from the trial court's order confirming the entry of a default judgment against them in a land contract foreclosure case brought by Jason Watkins. The court entered a default judgment and entered a damages award against them. The trial court later set aside the default judgment as to damages and ordered the land to be sold and the proceeds of the sale to be applied against the judgment. Watkins challenges the court's decision to set aside and modify the damages judgment on appeal. And Watkins contests the trial court's reduction of the attorney's fee award. Concluding that the trial court did not err, we affirm.

Facts and Procedural History

[2] Watkins is the record owner of property located at 5428 South Black Ankle Road in Bloomfield. At the pertinent time, he was purchasing the property from his grandparents. The purchasing arrangement called for him to make payments over time on a Home Equity Line of Credit (HELOC) held at IU Credit Union in his grandparents’ names.

[3] On November 27, 2020, Watkins entered into a Residential Lease Agreement (RLA) with Willoughby and Bell. Watkins drafted the agreement and neither side received the assistance of counsel at that time. Among the terms of the RLA, Bell and Willoughby were required to make monthly rental payments of $415 and to pay all taxes and insurance due every six months.

[4] The RLA also included a provision allowing Bell and Willoughby to purchase the property from Watkins. That language was as follows:

The Tenant shall pay all taxes and insurance every 6 months as agreed upon previously, as they are renting to own the home and land attached. They were made aware that the property is as is and agree that they are responsible for all repairs hereafter. They have agreed to paying the $415.00 a month that will go to the house payment that is held by IU Credit Union as they work towards getting a mortgage or pay off the remaining balance. The above has all been discussed prior to move in. They are allowed to make changes to the property as they see fit, as they work towards owning the home and property (agreed that this is their home as they pay off the mortgage)[.] No profit will be made by the LANDLORD (J. Watkins) as agreed upon prior.

Appellants’ App. Vol. 2, p. 155. When the RLA was signed, the balance on the HELOC was $44,634.96. Although it was not explicitly provided for in the RLA, Watkins told Bell and Willoughby that the purchase price was $47,270.91. Appellants’ App. Vol. 4, p. 40. The difference between the HELOC balance and the stated purchase price was the amount Watkins’ grandparents paid Watkins’ sister to relinquish her interest in the property.

[5] Bell and Willoughby failed to make all payments due under the RLA. So Watkins brought the present action against them in small claims court seeking their eviction and damages. After the parties appeared at the eviction hearing, the court noted that the “matter is a contract for [the] purchase of real estate and therefore [is] not within small claims jurisdiction.” Appellants’ App. Vol. 2, p. 4.² The court ordered the matter to be transferred to the civil plenary docket.

[6] When Bell failed to answer the complaint, Watkins moved for default judgment as to her, which the trial court entered on February 6, 2024. Next, Willoughby submitted a filing that Watkins moved to strike. The trial court ordered Willoughby to supplement his filing by March 22, 2024. The order stated: “If Defendant [Willoughby] does not timely supplement his responsive pleading with an Answer (to Plaintiff's Complaint) that complies with the Indiana Rules of Trial Procedure, Plaintiff [Watkins] may pursue a default judgment and/or additional dispositive relief.” Appellants’ App. Vol. 3, p. 33.

[7] Willoughby did not supplement his responsive pleading by the deadline set by the court. So Watkins filed a motion for default judgment on April 3, which the court granted on April 19. The court's order granted the default judgment and also entered “an in personam judgment against Defendants, Charles Willoughby and Britney [Bell] in the amount of $42,965.45 [constituting accelerated principal balance, late fees, property taxes, and insurance], attorney fees of $8,925.28, and costs of $143, for a total judgment of $52,033.73 with statutory interest running from the date of judgment.” Id. at 67. The court also issued a decree of foreclosure on the RLA and outlined the necessary steps for eviction should that become necessary. The court ordered a sheriff's sale of the real estate “to satisfy the sums found due to [Watkins] as soon as said sale can be had.” Id.

[8] Thereafter, Willoughby and Bell each filed letters with the court asking the court to set aside the default judgments. Several responsive pleadings were filed by the parties, the last of which filed by Willoughby and Bell alleged new claims including violations of the RLA or statutes on Watkins’ part.

[9] The court's August 14 order denied the request to set aside the judgment as to the issue of breach, but granted the request to set aside the judgment as to the issue of damages. Willoughby and Bell appealed that order. This Court temporarily stayed the appeal and remanded the case to the trial court for a hearing on damages, if necessary.

[10] The trial court originally awarded $47,270.91 in damages to Watkins, which included the amount his grandparents paid his sister to relinquish her right to the property. At the damages hearing, Watkins agreed that he was only entitled to the payoff balance of the IU Credit Union HELOC. Therefore, the court concluded that the damages for unpaid rent was $44,634.96. Late fees of $790.00 were also awarded. The court also concluded that because the RLA included a provision obligating Willoughby and Bell to pay all taxes and insurance every six months and they failed to do so, a prorated portion of the real estate tax assessment due in 2020 payable in 2021 should be awarded to Watkins. Instead of $1,754.04, the court awarded the prorated amount of $163.39 (or 34/365) to Watkins for that year. The total tax delinquency award to Watkins was $4,826.57. Similarly, the trial court prorated the 2024 homeowners’ insurance delinquency amount up to the date of the damages hearing. The court awarded Watkins $4,013.25 in homeowners’ insurance reimbursement. Applying the total of $13,575.00 paid toward the RLA, the damages award without attorney's fees was $40,689.78. As for the argument challenging the application of payments made by Willoughby and Bell, the trial court concluded that all payments were credited against the principal balance of the IU Credit Union HELOC and late fees, finding no language in the RLA prohibiting that method of applying the funds.

[11] On the issue of attorney fees, the court cited Article XVIII of the RLA, which provided for attorney's fees to be assessed “[s]hould it become necessary for [Watkins] to employ an attorney to enforce any of the conditions or covenants of this Agreement, including the collection of Rent or gaining possession of the Premises[.]” Appellants’ App. Vol. 3, p. 115. The provision further stated that Willoughby and Bell agreed “to pay all expenses so incurred, including all reasonable attorneys’ fees and costs.” Id. Watkins’ attorney submitted an affidavit and supporting documents requesting reimbursement for $8,925.28 in attorney's fees. The court noted that “this litigation was as much induced by the non-traditional, ambiguous, and confusing nature of this transaction and Agreement which was drafted by [Watkins] without the assistance of counsel.” Appellants’ App. Vol. 4, p. 75. The court concluded that Willoughby and Bell “should not be compelled to fund the majority of this litigation for that reason.” Id. The court found that Watkins “has incurred $2,200.00 of attorney fees directly related to Defendants’ failure to appear and Motion to Set Aside which could have been avoided by Defendants appearing as ordered before this Court.” Id. Therefore, the court awarded Watkins “$2,200.00 in attorney fees incurred through the date of Hearing.” Id.

[12] In sum, the court awarded Watkins $42,889.78, plus court costs of $167.00, and noted that Willoughby and Bell were entitled to a right of redemption. The court ordered a stay of the foreclosure sale pending the resolution of an appeal. Additionally, the court noted that Watkins “may be authorized to pursue additional damages, foreclosure fee costs, and other remedies after resolution of the appeal or upon further directive of the Indiana Court of Appeals.” Id. at 76.

[13] The parties appeal from the trial court's order denying the motion to set aside the default judgment, the motion to set aside the damages award, and reduction of the attorney's fees award. We address them in turn.

Discussion and Decision

I. Denial of Motion to Set Aside Default Based on Breach of RLA

[14] Trial Rule 60(B) provides a mechanism for obtaining relief from default judgment under certain limited circumstances, and the burden is on the movant to establish grounds for such relief. Ind. Ins. Co. v. Insurance Co. of N. America, 734 N.E.2d 276, 279 (Ind. Ct. App. 2000), trans. denied. We review the trial court's ruling on a Trial Rule 60(B) motion using an abuse of discretion standard. Speedway SuperAmerica, LLC v. Holmes, 885 N.E.2d 1265, 1270 (Ind. 2008). An abuse of discretion occurs only when the trial court's action is against the logic and effect of the facts before it and inferences drawn therefrom. In re Paternity of P.S.S., 934 N.E.2d 737, 741 (Ind. 2010) (quoting Fairfield v. Fairfield, 538 N.E.2d 948, 950 (Ind. 1989)).

[15] The trial court found that Bell failed to respond to the trial court proceedings for nearly four months. And the trial court provided Willoughby with additional time in which to bring his answer to Watkins’ complaint in compliance with the Indiana Rules of Trial Procedure. He did not. The court's order made the consequences of his failure to supplement his responsive pleading clear. “If Defendant [Willoughby] does not timely supplement his responsive pleading with an Answer (to Plaintiff's Complaint) that complies with the Indiana Rules of Trial Procedure, Plaintiff [Watkins] may pursue a default judgment and/or additional dispositive relief.” Appellants’ App. Vol. 3, p. 33. On April 3, Watkins pursued a default judgment and additional dispositive relief. Again, Willoughby and Bell did not object to the motion for default judgment until April 25, days after the court entered default judgment on April 19, and three weeks after Watkins’ motion was filed.

[16] In her attempt to set aside the default judgment, Bell offered various reasons. Id. at 71. She argued excusable neglect in that she, as a pro se litigant, was unfamiliar with the legal process, and she was dealing with personal issues and health conditions. Id. She further alleged as newly discovered evidence an argument challenging Watkins’ submission of the HELOC as evidence, to which she did not object during the proceedings. Id. She also claimed her argument challenging the HELOC constituted a meritorious defense. Id.

[17] In his attempt to set aside the default judgment, Willoughby offered excusable neglect in that as a pro se litigant, he was unfamiliar with the legal process and he experienced difficulties with his laptop during the relevant period. Id. at 69. And, like Bell argued, he claimed as newly discovered evidence an argument challenging Watkins’ submission of the HELOC as evidence, to which he did not object during the proceedings. Id. He also claimed his argument challenging the HELOC constituted a meritorious defense. Id.

[18] The trial court correctly concluded that the default judgment should not be set aside. Neither Willoughby nor Bell filed requests for additional time due to the issues, technical or otherwise, that they were facing. Nor did they deny knowledge of receipt of the order instructing Willoughby to supplement his response or face the consequence of default. The court also found that Willoughby and Bell did not claim to have paid the purchase price, but instead, it was deemed admitted that they stopped paying the monthly installments per the terms of the RLA.

[19] Moreover, “[i]t is well settled that pro se litigants are held to the same legal standards as licensed attorneys.” Basic v. Amouri, 58 N.E.3d 980, 983 (Ind. Ct. App. 2016). “This means that pro se litigants are bound to follow the established rules of procedure and must be prepared to accept the consequences of their failure to do so.” Id. at 983-84. Bell failed to communicate with the court or respond to Watkins’ complaint until after the default judgment was entered against her. And Willoughby was given the opportunity to cure the defects in his response to Watkins’ complaint, but did not do so despite the court's warning of the consequence. Neither Bell nor Willoughby have established excusable neglect. And the trial court did not abuse its discretion by reaching that conclusion.

[20] Next, Bell and Willoughby make arguments concerning what they deem to be newly discovered evidence. “Newly discovered evidence is ‘material evidence ․ which, with reasonable diligence, could not have been discovered and produced at trial.’ ” Scales v. Scales, 891 N.E.2d 1116, 1120 (Ind. Ct. App. 2008) (quoting Ind. Trial Rule 59(A)(1)). “A person seeking relief based on newly discovered evidence, whether under Trial Rule 59 or Trial Rule 60, must demonstrate each of the following nine requirements:

(1) the evidence has been discovered since the trial; (2) it is material and relevant; (3) it is not cumulative; (4) it is not merely impeaching; (5) it is not privileged or incompetent; (6) due diligence was used to discover it in time for trial; (7) the evidence is worthy of credit; (8) it can be produced upon a retrial of the case; and (9) it will probably produce a different result at retrial.

County Materials Corp. v. Ind. Precast. Inc., 187 N.E.3d 253, 265 (Ind. 2022) (quoting Bunch v. State, 964 N.E.2d 274, 283 Ind. Ct. App. 2012), trans. denied), trans. denied. None of their arguments constitute newly discovered evidence as defined by our case law and trial rules. Their arguments that—(1) the indebtedness they agreed to pay was not a lien against the real estate; (2) the HELOC is not a mortgage; (3) the HELOC has already been satisfied, albeit by Watkins and not Bell and Willoughby; and (4) that consumer protections in the form of the Consumer Financial Protection Act and/or the Truth in Lending Act apply in this action—are not newly discovered evidence. All of these points are legal arguments which could have been discovered in time to respond to Watkins’ complaint.

[21] And to the extent they claim those arguments constitute a meritorious defense to Watkins’ complaint, they are mistaken. The fact that the HELOC is not a mortgage on the real estate at issue, and that the word mortgage was used to describe the indebtedness in the RLA, is not a meritorious defense to their nonpayment of the installments as required by contract. And the fact that Watkins paid off the HELOC and collected the balance due per the Residential Agreement directly from Bell and Willoughby does not relieve them of the duty to make the installment payments. Moreover, Willoughby and Bell failed to prove that any provision of the Consumer Financial Protection Act and/or the Truth in Lending Act provide a meritorious claim or defense to the failure to make payments under the RLA. In sum, they have not made “a prima facie showing of a meritorious defense, that is, a showing that ‘will prevail until contradicted and overcome by other evidence.’ ” Outback Steakhouse of Florida, Inc. v. Markley, 856 N.E.2d 65, 73 (2006) (quoting Smith v. Johnston, 711 N.E.2d 1259, 1265 (Ind. 1999)).

[22] The trial court did not abuse its discretion by denying the motion to set aside the default judgment.

II. Motion To Set Aside Damages Judgment

[23] “First, we note that default judgments actually consist of two stages in cases of this type: (1) the entry of default and (2) the entry of appropriate relief including damages.” Stewart v. Hicks, 395 N.E.2d 308, 313 (Ind. Ct. App. 1979). The court found that Willoughby did establish a potentially meritorious defense as to the damages component of its order. More specifically, the court concluded that Willoughby “alleges payments that were not properly credited by [Watkins], and he links the inability to advance proof of those payments to the purported cause of his neglect in timely responding” to Watkins’ complaint. Appellants’ App. Vol. 4, p. 58. The court noted that Willoughby's argument about damages, “coupled with excusable neglect arising from confusion in the different procedural posture of the small claims proceedings versus the civil plenary pleadings, supports granting Defendants a new hearing limited in scope to the issue of damages.” Id. at 58-59. Watkins contends that the trial court erred by finding that Willoughby established a meritorious claim or defense and should have denied the request under the same standard as used for the default judgment relating to the breach of the RLA. Appellee's Br. pp. 15-16.

[24] A trial court may correct a mistake at any time until an appeal is filed and may grant relief for “any other reason justifying relief from the operation of the judgment.” Ind. Trial Rule 60(B)(8); Ind. Appellate Rule 8 (“The Court on Appeal acquires jurisdiction on the date the Notice of Completion of Clerk's Record is noted in the Chronological Case Summary.”). And “[t]he trial court's discretion is broad in [default judgment] cases because each case has a unique factual background.” Shane v. Home Depot USA, Inc., 869 N.E.2d 1232, 1234 (Ind. Ct. App. 2007). Willoughby and Bell asked the trial court to revisit its damages award, contending that not all payments were represented by Watkins’ damages request, or that they were not applied correctly. We find no abuse of discretion in the trial court's decision to do so.

[25] The court ultimately determined that some of the items should be prorated. For example, the homeowners’ insurance and real estate tax delinquencies were prorated because Willoughby and Bell entered into the RLA on November 27, 2020. They had no obligation to make those payments prior to that time. And the court correctly reduced the rental payment delinquency amount by the amount Watkins’ grandparents paid Watkins’ sister to relinquish her right to the property. The RLA required Willoughby and Bell to pay off only the amount of the IU Credit Union HELOC. Additionally, the court correctly determined that there was nothing in the RLA to prevent Watkins from applying the payments to the principal balance of the IU Credit Union HELOC and late fees. We agree with the trial court's conclusion that a damages hearing was necessary based on Willoughby and Bell's assertion of a meritorious defense as to damages.

III. Reduction of Attorney's Fee Award

[26] Watkins also appeals from the trial court's decision to reduce the $8,925.28 attorney's fee award upon revisiting the issue of damages. “Indiana follows the ‘American Rule’ that each party involved in litigation must pay its own attorney's fees.” Hill v. Davis, 850 N.E.2d 993, 996 (Ind. Ct. App. 2006). “Generally, attorney's fees are not recoverable from the opposing party as costs, damages, or otherwise, ‘in the absence of an agreement between the parties, statutory authority, or rule to the contrary.’ ” Id. (quoting Swartz v. Swartz, 720 N.E.2d 1219, 1223 (Ind. Ct. App. 1999) (citations omitted)). Here, Article XVIII of the RLA provided for an award of attorney's fees should Watkins have to hire an attorney to enforce any of the terms or conditions of the RLA or collect rent or gain possession of the premises.

[27] “[A] trial court's decision as to the amount of an attorney's fee award is reviewed under an abuse of discretion standard.” Id. “An award of attorney's fees will be reversed on appeal only where an abuse of the trial court's discretion is apparent on the face of the record.” Id. “An abuse of discretion occurs when the trial court's award is clearly against the logic and effect of the facts and circumstances before the court.” Id.

[28] Here, the trial court observed that there were procedural differences between small claims and civil plenary actions.³ And these differences were more complicated because the RLA was, according to the trial court, a nontraditional, ambiguous, and confusing transaction, which was drafted by Watkins without the assistance of counsel. The court concluded that “Defendants should not be compelled to fund the majority of this litigation for that reason.” Appellants’ App. Vol. 4, p. 75. Instead, the court found that $2,200 of attorney's fees directly related to Willoughby's and Bell's failure to appear and the motion to set aside, which could have been avoided had they appeared. Id. We find no abuse of the court's discretion in the trial court's determination as to a reasonable fee under the facts of this case.

Conclusion

[29] The trial court did not abuse its discretion by denying the motion to set aside the default judgment as to breach of the RLA. Additionally, the trial court did not abuse its discretion by revisiting and setting aside the default judgment as to damages. The damages award imposed was supported by the evidence in the record. And the trial court did not abuse its discretion by reducing the amount of the attorney's fee award to reflect the amount associated with Willoughby's and Bell's failure to appear and prosecution of the motion to set aside the default judgment. Therefore, we affirm in all respects.

[30] Affirmed.

FOOTNOTES

1.   Britney Bell was also known as Britney Dillinger. We will use the surname “Bell” when referring to her in this decision.

2.   The small claims court did not have subject matter jurisdiction to hear the matter in part because it exceeded the $10,000 jurisdictional limit. Indiana Code § 33-29-2-4 (2021).

3.   For example, in small claims actions “[a] defendant is considered to have complied with the statute and rule requiring the filing of an answer upon entering an appearance personally or by attorney. The appearance constitutes a general denial and preserves all defenses and compulsory counterclaims, which may then be presented at the trial of the cause.” Ind. Code § 33-29-2-5(b) (2004).

Crone, Senior Judge.

Tavitas, J., and Kenworthy, J., concur.