COLORADO COMP. v. RAYCOMM

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Docket Number

No. 95CA1545

Advocates

Pearson, Milligan Horowitz, P.C., Robert M. Horowitz, Susan D. Maez, Denver, Colorado, for Plaintiff-Appellee. Burg Eldredge, P.C., David P. Hersh, Matthew D. Bailis, Denver, Colorado, for Defendant-Appellant.

Judges

Opinion by JUDGE KAPELKE.

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Smart Summary

Factual and Procedural Background

On May 3, 1995, Colorado Compensation Insurance Authority (plaintiff) filed a lawsuit against Raycomm Transworld Industries, Inc. (defendant) and another party seeking recovery of unpaid workers' compensation insurance premiums. The defendant's registered agent was served with the summons and complaint on May 25, 1995. Although the defendant’s initial deadline to respond was June 26, 1995, plaintiff’s counsel agreed to extend this deadline to July 10, 1995. The plaintiff filed a motion for default judgment on July 12, 1995, at which time the defendant had not yet filed an answer. The defendant filed its answer on July 16, 1995, before the entry of default or the default judgment. Despite this, on July 24, 1995, the trial court entered a default judgment against the defendant. The defendant subsequently moved to set aside the default judgment, but the trial court denied this motion. Following a hearing on damages, the court entered a judgment in favor of the plaintiff for $276,430.84 plus postjudgment interest and costs. The defendant appealed the entry of default judgment and the denial of the motion to set aside it.

Legal Issues Presented

Whether the trial court erred in entering a default judgment against the defendant who filed an answer before the entry of default and before the court entered the default judgment.
Whether the trial court abused its discretion in denying the defendant’s motion to set aside the default judgment (not addressed by the appellate court due to resolution of the first issue).

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
10 C. Wright, A. Miller & M. Kane, Federal Practice & Procedure § 2682 (1983)	Proper procedure for entry of default and default judgment under Federal Rule of Civil Procedure 55, analogous to C.R.C.P. 55	Supported the principle that a default judgment cannot be entered if an answer is filed before entry of default by clerk or court.
6 Moore's Federal Practice § 55:03[1]	Discussion of Fed.R.Civ.P. 55 and entry of default judgments	Reinforced the rule that default judgment is improper if an answer precedes default entry.
Tarbell v. Jacobs, 856 F. Supp. 101 (N.D.N.Y. 1994)	Application of procedural requirements for default and default judgment	Provided precedent supporting reversal where default judgment was entered despite answer filed before default.
Systems Industries, Inc. v. Han, 105 F.R.D. 72, 74 (E.D. Pa. 1985)	Standards for entry of default judgment after an answer is filed	Used to confirm that default judgment was improper under the facts where answer preceded default.

Court's Reasoning and Analysis

The court analyzed the timing of the defendant’s answer in relation to the entry of default and the default judgment. C.R.C.P. 55(a) requires that a default be entered only after a party has failed to plead or otherwise defend. The court emphasized that a default judgment cannot be properly entered if the defendant files an answer before the clerk or court enters the default. Although the defendant’s answer was late, it was still filed before any default was entered or the default judgment was granted. Therefore, the trial court erred in granting the default judgment against the defendant. Because this error was dispositive, the court declined to address the defendant’s argument regarding the denial of the motion to set aside the default judgment.

Holding and Implications

The judgment of the trial court is reversed, and the cause is remanded with directions for further proceedings on the merits.

The direct effect of this decision is that the default judgment against the defendant is vacated, allowing the case to proceed on substantive grounds. No new legal precedent beyond the application of existing procedural rules was established.

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Colorado Compensation Insurance Authority, Plaintiff-Appellee, v. Raycomm Transworld Industries, Inc. d/b/a Royalpar/Ewing, a Delaware corporation, Defendant-Appellant.

Opinion by JUDGE KAPELKE.

Defendant, Raycomm Transworld Industries, Inc., appeals from the default judgment entered in favor of plaintiff, Colorado Compensation Insurance Authority, and from the trial court's denial of a motion to set aside the default judgment. We reverse and remand with directions.

On May 3, 1995, plaintiff filed this action against defendant and another party, seeking to recover alleged unpaid workers' compensation insurance premiums. Defendant's registered agent was served with a summons and a copy of the complaint on May 25, 1995. Pursuant to C.R.C.P. 12(a), defendant would have been required to respond to the complaint by June 26, 1995. However, plaintiff's counsel agreed to an extension of time until July 10, 1995.

Plaintiff filed a motion for default judgment on July 12, 1995. At that time, defendant had not filed an answer or any other document with the trial court.

On July 16, 1995, before entry of a default, defendant filed its answer. Defendant also filed a response to plaintiff's motion for default judgment on July 21, 1995. On July 24, 1995, the trial court entered an order granting default judgment against defendant. Thereafter, defendant filed a motion to set aside the default judgment, which the trial court denied.

Following a hearing to determine the amount of plaintiff's damages, the trial court entered judgment in favor of plaintiff in the amount of $276,430.84 plus postjudgment interest and costs.

Defendant first contends that the trial court erred in entering the default judgment because it filed its answer before the entry of default and before the trial court entered the default judgment. Under the circumstances here, we agree.

C.R.C.P. 55(a) provides in relevant part, as follows:

When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter his default.

While the court itself may also enter the default, it may not properly enter a default judgment if an answer has been filed before entry of default by either the clerk or the court. See 10 C. Wright, A. Miller M. Kane, Federal Practice Procedure 2682 (1983); 6 Moore's Federal Practice § 55:03[1] (discussing Fed.R.Civ.P. 55, the federal counterpart of C.R.C.P. 55). See also Tarbell v. Jacobs, 856 F. Supp. 101 (N.D.N.Y. 1994); Systems Industries, Inc. v. Han, 105 F.R.D. 72, 74 (E.D. Pa. 1985).

Thus, although defendant's answer here was filed late, because it was filed before a default had been entered and before the trial court had ruled on the motion for default judgment, the court should have denied the motion and erred in not doing so.

In view of our conclusion that default judgment should not have been entered, we need not address defendant's additional contention that the court abused its discretion in denying the motion to set aside the default judgment.

The judgment is reversed, and the cause is remanded for further proceedings on the merits.

JUDGE HUME and JUDGE ROTHENBERG concur.