COA affirms relief from default judgment for defendant claiming identity theft

Default judgment against a man claiming to be the victim of identity theft in a criminal case was properly set aside, the Indiana Court of Appeals ruled Monday. The court held that the man was not required to provide a factual basis for his defense in the initial stages of the proceeding.

After the Bank of New York Mellon issued $95,000 worth of bonds to the Logansport/Cass County Airport Authority in 2018, the bank in 2019 sent an invoice for the first payment of $64,811.50. However, the invoice was intercepted by a third party and was altered, resulting in the airport authority’s first payment going to a Chase Bank account opened in Jerra Kochenower’s name. The account holder issued wire transfer instructions for the stolen funds to several other parties before closing the account.

The airport authority discovered the theft five days later, but the bank was only able to return $9,994. The airport authority then filed a complaint against unknown defendants, later amending its complaint to specifically name Kochenower.

Kochenower did not file a timely response or answer to the complaint, so the airport authority sought and was granted default judgment for $164,452.50 in damages, $12,900 in attorney fees and $296.36 in court costs. Kochenower, however, eventually responded with a letter claiming he was a victim of identity theft and had never opened the bank account.

Kochenower submitted a police incident report and a letter from Chase Bank stating he had not opened the account. He also said he did not respond to the complaint because he had presented it to Chase Bank as evidence of identity fraud, and the bank said “they were going to take care of it.”

The Cass Superior Court construed the letter as a motion to set aside default judgment under Indiana Trial Rule 60(B), which it granted. On appeal, the airport authority claimed the trial court erred in granting the motion because Kochenower did not submit admissible evidence in support of his asserted meritorious defense.

However, Judge Edward Najam, writing for a unanimous panel of the Indiana Court of Appeals, wrote that the Indiana Supreme Court “has not held that the meritorious claim or defense requirement means that the moving party’s submission must be in an admissible form at the time of the Rule 60(B) motion.”

While the airport authority’s position was supported by Bross v. Mobile Home Estates, Inc., 466 N.E.2d 467, 469 (Ind. Ct. App. 1984), Bross was later rejected by Shane v. Home Depot USA, Inc., 869 N.E.2d 1232, 1238 (Ind. Ct. App. 2007), Najam wrote. Shane, he said, corresponds with Indiana Supreme Court guidance in Outback Steakhouse of Fla., Inc. v. Markley, 856 N.E.2d 65, 73-74 (Ind. 2006), and Smith v. Johnston, 711 N.E.2d 1259 (Ind. 1999).

“A Trial Rule 60(B)(1) motion for relief from judgment is a prayer for temporary equitable relief, not a final judgment, and, as such, it is addressed to the sound discretion of the trial court and requires the court to assess whether it would be ‘unjust to allow the judgment to stand.’ Outback Steakhouse, 856 N.E.2d at 73-74 (quoting Smith, 711 N.E.2d at 1265),” Najam wrote. “A Rule 60(B)(1) motion, at least when used to seek relief from a default judgment, contemplates an eventual trial or hearing on the merits, at which the moving party will be required to prove the facts alleged in the motion by competent evidence. In this respect, a Rule 60(B)(1) motion for relief from default judgment is more akin to motion practice under Rule 12(B)(6) than summary judgment practice under Rule 56(C). See Shane, 869 N.E.2d at 1238.

“Therefore, we hold that, to successfully allege a meritorious claim or defense pursuant to Rule 60(B), a party seeking relief from a default judgment must state a factual basis for his purported meritorious claim or defense, but at this initial stage such a showing is not governed by the rules of evidence,” Najam concluded. “Our conclusion is consistent with the manner in which the trial court applied Rule 60(B) in this case, and, thus, the court did not err as a matter of law in its application of the Rule.”

Also, the panel held, the trial court did not abuse its discretion in setting aside the default judgment because Kochenower made a prima facie showing of a meritorious defense.

The case is Logansport/Cass County Airport Authority v. Jerra Kochenower, Barry Heinley, James Brown, Joseph Robert Morsman, Robert Allen James, James C. Mizell, BNY Mellon, Unknown Members, Shareholders, Officers, Partners, Sole Proprietors, or Other Affiliates of Any Other Defendant, 20A-PL-2143.

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