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Hello and welcome! My name is ***** ***** I am a licensed attorney who will try my very best to help with your situation or get you to someone who can. There may be a slight delay in my responses as I research statutes or ordinances and type out an answer or reply, but rest assured, I am working on your question.
Questions are, 1. Is there way to resolve this without suing the individual?
The only way to potentially get the judgment removed would be to file a motion to vacate the judgment with the judge that originally entered the default against you. The problem here is that you had notice of the lawsuit and didn't respond within the applicable time frame after receiving notice, normally 20 or 30 days. That presents a problem with getting the judgment dismissed unless you have a really good reason for why you didn't respond in time...or file an appeal after you were notified about the judgment. There is no question that you would have won and the case would have been dismissed against you, but you have to defend in order to win. So you would have to come up with a convincing reason why you didn't respond for the judge to vacate the judgment.
2. Do I have legal grounds for a suit if there is no other resolution?
Unfortunately no, the person filed a suit against who they thought was responsible and received a default judgment due to your failure to respond in a timely manner. Presumably you didn't file an appeal within 30 days, which would have been your next step to challenge the judgment even if you didn't file in time.. So the plaintiff didn't do anything improper here, they just sued the wrong person but won and got their judgment paid anyway by the right "person" (i.e. the church)