Eagle Motorsport Corp, d/b/a Eagle Motorsport Used Cars, Appellant-Defendant v. Joe L. Pena, Appellee-Plaintiff (2026)

MEMORANDUM DECISION

Statement of the Case

[1] Eagle Motorsport Corp, d/b/a Eagle Motorsport Used Cars (“EM”), appeals the trial court's denial of its motion to set aside a default judgment issued in favor of Joe Pena (“Pena”). EM argues that the trial court abused its discretion when it denied EM's motion to set aside the default judgment. Concluding that the trial court abused its discretion, we reverse the trial court's judgment and remand this case to the trial court for further proceedings consistent with this decision.

[2] We reverse and remand with instructions.

Issue

Whether the trial court abused its discretion when it denied EM's motion to set aside the default judgment.

Facts 1

[3] On April 11, 2023, Pena went to EM to look for a truck to purchase. He noticed a 2012 Ford F-350 truck (“the truck”),² which EM was selling “AS IS – NO DEALER WARRANTY[.]” (App. Vol. 2 at 22). Pena told the EM salesperson (“the salesperson”) that he was interested in the truck but that he would only purchase it if it included a warranty. The salesperson told Pena that EM could not provide a warranty but that he could assist Pena in purchasing a third-party warranty.

[4] Pena agreed to purchase the truck from EM and a third-party warranty from Cars Protection Plus (“CPP”) (“the CPP warranty”). Pena signed a purchase agreement (“the purchase agreement”) for the truck, which provides, in relevant part, as follows:

WARRANTY DISCLAIMER:

Unless Seller provides a written warranty, or enters into a service contract within 90 days from the date of this contract, this vehicle is being sold “AS IS – WITH ALL FAULTS” and Seller makes no warranties, express or implied, on the vehicle, and there will be no implied warranties of merchantability or of fitness for a particular purpose.

(App. Vol. 2 at 21).

[5] Pena also signed a CPP warranty application (“the CPP warranty application”), which provides as follows: “I have read, understand, and agree to the Terms and Conditions as stated on this entire Service Contract Application.” (App. Vol. 2 at 25). One of the terms of the CPP warranty application provides as follows:

3. COMPONENTS AND EXPENSES NOT COVERED (Applies to all SCHEDULE OF COVERAGE levels)

* * * * *

d. We do not provide any coverage for Vehicles modified or altered AT ANY TIME beyond original manufacturer's specifications with or without Your knowledge, including but not limited to the following modifications: WHEELS/TIRES (not to manufacturer's specifications unless Your Vehicle has been classed under EXTRA ELIBILITY Oversize Tires Coverage)[.]

(App. Vol. 2 at 27). The total purchase price, including the truck, the CPP warranty, sales tax, and fees, was $35,729.92.

[6] The following month, May 2023, while Pena was in Texas, he heard the truck's brakes make a grinding noise. Pena took the truck to a Midas Auto Service Experts (“Midas”) in Texas. A Midas service technician inspected the truck and determined that it needed new rear brakes, including calipers, rotors, pads, and brake hoses. Pena agreed to the repairs, which were $1,352.59. The CPP warranty covered the cost of the repairs.

[7] Later that month, Pena noticed additional problems with the truck. Specifically, he noticed white smoke coming from the tailpipe as well as a banging sound coming from the engine. Pena took the truck to a mechanic in Niles, Michigan, where Pena lived. The mechanic determined that Pena needed engine repairs and that the estimated cost of the repairs was $1,403.49. Although Pena assumed that the repairs would be covered by the CPP warranty, CPP notified Pena that it would not pay for the repairs. Specifically, CPP directed Pena to the terms of the warranty, which provided that CPP did not provide coverage for vehicles modified or altered beyond the original manufacturer's specifications, including wheels and tires. According to CPP, it would not pay for the repairs because the truck had customized tire rims.

[8] Nine months later, in February 2024, Pena, by counsel, sent a demand letter (“the demand letter”) to EM. The demand letter alleged that EM had violated the Indiana Deceptive Consumer Sales Act ³ (“the DCSA”) because EM's salesperson had “represented to [Pena] that the [CPP] warranty would cover any issues that [Pena] had with the [truck].” (App. Vol. 2 at 44). Further, according to the demand letter, the EM salesperson who had “assisted [Pena] in obtaining the Warranty ․ knew or reasonably should have known that the [truck] had a part that would prevent the [CPP warranty] from being honored.” (App. Vol. 2 at 44). The demand letter further alleged that, as a result of EM's salesperson's “deceptive and fraudulent statements and acts[,]” EM had violated the DCSA. (App. Vol. 2 at 44).

[9] In addition, the demand letter alleged that “[g]iven [EM's] blatant violations of the [DCSA],” Pena was “permitted to recover treble (3x) damages of $45,019.99 ($33,095.50 + $11924.49), plus $3,000.00 in attorney[ ] fees, for a total amount of $138,059.97.” (App. Vol. 2 at 46). According to the demand letter, Pena wished “to resolve the matter in good faith.” (App. Vol. 2 at 46). Thus, the demand letter further provided that “[i]n exchange for foregoing his claims, [Pena] demand[ed] the sum of $48,019.99 ($45,019.99 in damages + $3,000.00 in attorney[ ] fees ․ so that he m[ight] repair the defective [truck] that [EM had] refused to repair under the Warranty that [EM]’s deceptive acts [had] led him to sign.” (App. Vol. 2 at 46). Lastly, according to the demand letter, Pena's “offer of $48,019.99 remain[ed] open until March 4, 2024.” (App. Vol. 2 at 47).

[10] EM did not respond to Pena's demand letter, and in August 2024, Pena filed a multi-count complaint against EM. Specifically, Pena alleged that EM had: (1) “breached the Warranty and the Contract by failing to perform its obligations thereunder, including but not limited to, replacing the engine at no cost to [Pena] under the Warranty[;]” (2) “breach[ed] the express warranties provided by the Warranty” by “fail[ing] to honor the Warranty and replace the [truck's] engine[;]” (3) committed fraud in the inducement by “knowingly or recklessly represent[ing] to [Pena] that the third-party warranty would cover any issues that [Pena] m[ight] have with the [truck;]” (4) committed constructive fraud “when it improperly and deceptively misrepresented to [Pena] that the Warranty it sold to [Pena] would provide sufficient coverage of any repairs needed on the [truck] as the [truck] was purchased ‘As-Is – No Dealer Warranty[;]” (5) committed statutory fraud pursuant to Indiana Code § 35-43-5-4 by “ma[king] material misrepresentations with the intent to deceive [Pena] and induce him to purchase the Warranty[;]” and (6) violated the DCSA by “represent[ing] that the [truck] was covered by the Warranty but then proceeded to refuse to perform repairs to the [truck] pursuant to the Warranty.” (App. Vol. 2 at 12-19).

[11] Pena attached to his complaint the following documents: (1) the purchase agreement; (2) a buyer's guide, which provided that the truck was being sold as is with no dealer warranty; (3) a receipt for Pena's down payment on the truck; (4) the CPP warranty application, which included the terms and conditions of the warranty; (5) a receipt from Midas for the brake repairs done in Texas; (6) an estimate from the Michigan mechanic for the costs to repair the truck's engine; and (7) a copy of the demand letter. Pena did not include CPP, the provider of the warranty, as a defendant in the complaint.

[12] At the end of October 2024, Pena filed a motion for default judgment. According to Pena, EM had been served with the complaint on August 12, 2024 and had failed to file an answer. Pena asked the trial court to enter a judgment against EM and to award him $150,039.92 in damages. Specifically, Pena requested $45,019.99 in compensatory damages, $135,059.97 in treble damages ($45,019.99 x 3),⁴ and $14,979.95 in attorney fees. In the alternative, Pena asked the trial court to set a hearing on the damages. The following day, the trial court, without holding a hearing either on the motion or the damages, granted Pena's motion and ordered EM to pay Pena $150,039.92.

[13] In April 2025, EM filed a motion to set aside the default judgment. In an affidavit attached to the motion, EM's owner, Ibrahim Qasim, explained that “[f]or reasons unknown to [him], the mail containing the Complaint [had not gotten] to [him][,]” and that he had not been aware of Pena's complaint until his “assets [had been] frozen.” (App. Vol. 2 at 71). In its motion, EM specifically explained that “[a] former employee, unauthorized to accept service, [had] signed for the certified mail and [had] failed to notify [EM].” (App. Vol. 2 at 69). EM asked the trial court to set aside the default judgment because of excusable neglect and for equitable reasons. In addition, EM alleged that it had the following meritorious defense:

The Complaint center[ed] on alleged misrepresentations concerning an extended warranty provided by [CPP]. Pena's own exhibits confirm that the [truck] was sold “As-Is” and that the extended warranty was a separate agreement. [EM] had no contractual relationship or privity with [CPP]. The damages claimed stem entirely from that third-party warranty provider's alleged refusal to honor its agreement.

(App. Vol. 2 at 69). The trial court did not hold a hearing on EM's motion to set aside the default judgment and issued an order denying the motion the following day.

[14] EM now appeals.

Decision

[15] EM argues that the trial court abused its discretion when it denied his motion to set aside the default judgment. We agree.

[16] As the parties note, our Indiana Supreme Court has explained that we review the trial court's ruling on a motion to set aside a default judgment for an abuse of discretion. Huntington National Bank v. Car-X Associates Corporation, 39 N.E.3d 652, 655 (Ind. 2015). However, our supreme court has also explained that where, as here, a trial court rules on a Trial Rule 60(B) motion based on a paper record without conducting an evidentiary hearing, the appellate court is “in as good a position as the trial court to determine the force and effect of the evidence.” In re Adoption of C.B.M., 992 N.E.2d 687, 691 (Ind. 2013) (cleaned up). In other words, “[w]hen the trial court does not hold an evidentiary hearing and judge witness credibility, de novo review is appropriate.” On the Level Fence & Deck, Inc. v. Indiana Bell Telephone Company, 217 N.E.3d 599, 601-02 (Ind. Ct. App. 2023), trans. denied. But even applying the abuse-of-discretion standard cited by the parties, we conclude that the trial court's decision should be reversed. See id. at 602.

[17] “Indiana Law strongly prefers disposition of cases on their merits.” Id. at 602 (cleaned up). Accordingly, a trial court considering a motion to set aside a default judgment “must balance the need for an efficient judicial system with the judicial preference for deciding disputes on the merits.” Id. (cleaned up). “That said, because a default judgment is generally disfavored, any doubt as to its propriety must be resolved in favor of the defaulted party.” Id.

[18] On a motion to set aside a default judgment, the burden is on the movant to show sufficient grounds for relief under Indiana Trial Rule 60(B). Front Row Motors, LLC v. Jones, 5 N.E.3d 753, 758 (Ind. 2014). Here, EM has asserted two independent grounds for relief: (1) excusable neglect under T.R. 60(B)(1); and (2) equitable reasons under T.R. 60(B)(8). Both grounds require EM to “allege a meritorious ․ defense.” See T.R. 60(B). Accordingly, we first address whether EM has alleged a meritorious defense to Pena's action.

[19] This Court has previously held that “to successfully allege a meritorious ․ defense pursuant to Rule 60(B), a party seeking relief from a default judgment must state a factual basis for his purported meritorious ․ defense, but at this initial stage such a showing is not governed by the rules of evidence.” Logansport/Cass County Airport Authority v Kochenower, 169 N.E.3d 1143, 1149 (Ind. Ct. App. 2021). Here, EM argues that it has a factual basis for a meritorious defense to each of the six counts in Pena's complaint. Specifically, EM first contends that Pena signed a purchase agreement for the truck, which clearly provided that EM was selling the truck as is – with all faults. The purchase agreement further provided that EM had made no express or implied warranties on the truck. In addition, Pena signed a CPP warranty application, which provided that he had read, understood, and agreed to the terms and conditions as stated in the application. One of those terms clearly stated that the warranty did not provide coverage for modified vehicles, including modifications to wheels and tires. As pointed out by EM, “[u]nder Indiana law, a party to a contract is presumed to understand and assent to the terms of the contracts he ․ signs[.]” Albanese Confectionary Group, Inc. v. Cwik, 165 N.E.3d 139, 145 (Ind. Ct. App. 2021) (cleaned up), trans. denied.

[20] Regarding the specific breach of warranty counts, EM argues that it was CPP that had provided the warranty and denied coverage. According to EM, it was not a party to Pena's contract with CPP. Regarding the specific fraud counts, EM argues that Indiana Trial Rule 9(B) requires that a plaintiff plead the “who, what, when, where, and how” of the alleged fraud. State ex rel. Harmeyer v. Kroger Company, 114 N.E.3d 488, 494 (Ind. Ct. App. 2018), trans. denied. According to EM, Pena's “fraud counts fail to meet the heightened pleading standard required.” (EM's Br. 21).

[21] EM further argues that the damages alleged in the complaint “were [s]peculative and [u]nsupported.” (EM's Br. 25) (bold emphasis removed). Specifically, EM first argues that the sole specific damage alleged in the complaint was a $1,400 engine repair that CPP refused to cover. Yet, “the damages awarded in default ․ [were] over $150,000[.]” (EM's Br. 25). EM further argues that the nearly $15,000 in attorney fees awarded in the default judgment were “facially unreasonable when measured against the scope of the case and that this was all incurred in obtaining a default judgment.” (EM's Br. 26). Based on the facts and circumstances in this case, we conclude that EM has successfully alleged meritorious defenses to Pena's claims, including damages.

[22] We now turn to EM's claim that the trial court abused its discretion by denying his motion to set aside the default judgment based on T.R. 60(B)(8). In Huntington, 39 N.E.3d at 653, our Indiana Supreme Court determined that even though Huntington had failed to establish excusable neglect under T.R. 60(B)(1), Huntington was still entitled to show that the denial of its motion to set aside was not just and reasonable under the circumstances.

[23] “Under Trial Rule 60(B)(8), a trial court has the discretion to set aside a default judgment for any reason justifying relief from the operation of the judgment other than those set forth in certain other subsections of Trial Rule 60 if the party's motion is filed within a reasonable time and the party alleges a meritorious defense. Huntington, 39 N.E.3d at 658 (cleaned up). The equitable considerations under T.R. 60(B)(8) are broad and may include things like the strength of the meritorious defense, the amount of money involved, the minimal prejudice to the non-movant if the action is reinstated, and the promptness in which the movant filed the motion to set aside the default judgment. See Huntington, 39 N.E.3d at 658; see also Lloyd v. Kuznar, 180 N.E.3d 353, 364 (Ind. Ct. App. 2021) (explaining that “[e]quity considerations” supported setting aside the default judgment entered against Lloyd and that trial courts should consider the degree of financial harm to the defaulted party when deciding whether to set aside a default judgment), reh'g denied, trans. denied.

[24] Here, Pena purchased the truck and the CPP warranty for $35,729.92. When CPP refused to cover the truck's $1,403.49 engine repair, Pena sent a demand letter to EM alleging that he had suffered $138,059.97 in damages. Pena further stated that he was willing to accept $48,019.99, including damages and attorney fees, to forgo his claims. When EM did not respond to the demand letter, Pena filed a multi-count complaint against EM. When EM failed to file an answer, Pena filed a motion for default judgment and requested $150,039.92 in damages. The very next day, the trial court granted Pena's motion and awarded him $150,039.92 in damages without holding a hearing on the motion or on damages. EM quickly sought to set aside the default judgment, filing its motion as soon as it realized that its assets had been frozen. However, the trial court denied EM's motion the following day without holding a hearing.

[25] Given EM's meritorious defenses to Pena's claims, the magnitude of the damages award that was issued without a hearing, the promptness in which EM sought to set aside the default judgment, and the lack of any demonstrated prejudice to Pena, we hold that the trial court abused its discretion by denying EM's motion to set aside the default judgment on equitable grounds under T.R. 60(B)(8). Accordingly, we reverse the trial court's judgment denying EM's motion to set aside the default judgment, instruct the trial court to vacate the default judgment, and remand for proceedings consistent with this decision.

[26] Reversed and remanded with instructions.

FOOTNOTES

2.   In his complaint, Pena identifies the truck as a Ford F-250. However, all of the sales and service documents that were attached to the complaint identify the truck as a Ford F-350.

3.   Ind. Code § 24-5-0.5 et seq.

4.   Pena requested treble damages pursuant to the DCSA.

Pyle, Judge.

Vaidik, J., and Mathias, J., concur.