Jensen v. Luecke

Grosse

UNPUBLISHED OPINION

Grosse, J. — A decision to vacate a default judgment is a matter of equity within the sound discretion of the trial court. Appellate courts are less likely to find an abuse of discretion if a trial court vacates a default judgment than if it has denied a motion to vacate a default judgment. Here, the trial court found good cause existed to vacate a default judgment and the appellant fails to establish any abuse of discretion. We affirm.

FACTS

On October 22, 2009, Soren and Janice Jensen (Jensen) served a summons and complaint alleging negligent misrepresentation and/or fraudulent concealment and breach of contract and warranty on Dave Luecke and Diane Van Ackeren (Luecke), from whom they had purchased a house. Jensen alleged that Luecke knew of, but intentionally and/or negligently failed to disclose, water damage in the bathroom and the true extent of water damage to the framing of the house resulting from an inadequate weather seal. On December 9, 2009, Jensen filed the summons and complaint, as well as proof of service, in Skagit County Superior Court. On January 7, 2010, Jensen filed a motion for default and obtained a default judgment for $27,768.97 on the ex-parte calendar.

On February 1, 2010, Luecke filed a pro se motion to set aside the default judgment. Luecke attached an "Answer to Complaint" and declarations claiming that he had sent the answer to Jensen's counsel in August 2009. Jensen opposed the motion, arguing that under CR 55(a)(2), "A party that has been found in default may not file pleadings in the action without leave of court." After a hearing on February 26, 2010, the trial court struck all Luecke's pleadings "pursuant to CR 55(a)(2)," denied the motion to set aside the default judgment, awarded Jensen attorney fees and costs of $500, and granted Luecke leave to file a renewed motion for relief from the default judgment after payment of the fee award.

CR 55(a)(2) provides:

Pleading After Default. Any party may respond to any pleading or otherwise defend at any time before a motion for default and supporting affidavit is filed, whether the party previously has appeared or not. If the party has appeared before the motion is filed, he may respond to the pleading or otherwise defend at any time before the hearing on the motion. If the party has not appeared before the motion is filed he may not respond to the pleading nor otherwise defend without leave of court. Any appearances for any purpose in the action shall be for all purposes under this rule 55.

On January 5, 2011, Luecke appeared pro se at an ex-parte hearing and asked the court to strike the $500 fee and cost award. The court denied the motion and Luecke paid $500 into the court registry. On January 6, now represented by counsel, Luecke filed a motion to vacate the default judgment. In support, Luecke filed a declaration claiming that he was served with Jensen's summons and complaint in July, he sent an answer to Jensen's attorney in August, and Jensen served him with a duplicate summons and complaint in October. Luecke explained that he did not file an answer to the second complaint because it appeared that it had not been filed and he had already given his answer to Jensen's attorney. Luecke also filed a copy of the same answer he had filed with his previous motion to vacate the default judgment.

In response, Jensen moved to strike Luecke's motion because he failed to pay the $500 cost and fee award directly to Jensen, rather than into the court registry, prior to filing his motion to vacate the default judgment. Jensen also argued that Luecke failed to file any evidence of a defense and his delay in filing the motion was unreasonable. Jensen claimed he would be prejudiced if the judgment were vacated because discovery had not been conducted, the judgment had been a lien against Luecke's real property, and the judgment had accumulated interest. Jensen's attorney also filed a declaration acknowledging that he had spoken with Luecke in November 2009, but stating that he could find no evidence in his office that an answer had been received before he sought the default judgment. In reply, Leucke filed a declaration stating that he had telephone conversations with Jensen's attorney after receiving service in July 2009 and after the second service in October 2009, and that they had exchanged e-mails. He also stated that he had informed Jensen's attorney that he was representing himself, and that counsel acknowledged and understood that he was representing himself.

At a hearing on January 21, 2011, Luecke argued that Jensen's counsel should have acknowledged that he had already received an answer when he requested a default judgment. He also argued that his defense was stated in his declaration, to which he had attached his answer, and that Jensen had not been prejudiced because the judgment had not yet been paid and he was still living in the house. When the court inquired about the delay in filing the motion to vacate the default judgment, defense counsel had no explanation but argued that the motion was timely filed within a year of the judgment. Jensen argued that Luecke failed to present a viable defense and to file his motion with due diligence and that prejudice should be presumed. Jensen also asked for an award of fees and costs.

The trial court found: "Good cause exists to grant relief from judgment; plaintiffs are entitled to compensation of $1,750 for these proceedings." The trial court ordered the default judgment vacated on condition that Luecke pay the $1,750 by January 31.

Jensen appeals.

ANALYSIS

Jensen first argues that the trial court erred by failing to strike Luecke's motion and supporting papers for violation of the February 2010 order granting leave to file a renewed motion to vacate the default judgment. Jensen contends that Luecke violated the order because he paid the $500 in fees and costs into the court registry rather than directly to Jensen. But the trial court had discretion to determine whether Luecke's payment into the court registry satisfied its order. The February 2010 order stated that "the Plaintiff is awarded attorney fees and costs in the amount of $500" and further provided that no motion would "be filed or heard until the fee and cost award made herein is paid." The order did not specifically prohibit payment into the court registry. Jensen fails to establish any abuse of discretion in the trial court's decision to hear the motion after Luecke paid $500 into the court registry.

We note that while CR 55(a)(2) limits the right of a party who has not appeared in an action to defend against a motion for default, CR 55(c) and CR 60 do not require a party to obtain leave of the trial court before filing a motion to set aside a default order or a default judgment. But because Luecke has not appealed and Jensen does not assign error to the February 2010 order, the order is not properly before us on review.

Jensen also assigns error to the order vacating the default judgment. A motion to vacate a default judgment is addressed to the sound discretion of the trial court. This court will not disturb the trial court's disposition unless it clearly appears that the trial court abused its discretion or its exercise of discretion was manifestly unreasonable or based on untenable reasons or grounds.

Griggs v. Averbeck Realty, Inc., 92 Wn.2d 576, 582, 599 P.2d 1289 (1979); Hwang v. McMahill, 103 Wn. App. 945, 949, 15 P.3d 172 (2000).

Griggs, 92 Wn.2d at 582; Prest v. Am. Bankers Life Assurance Co., 79 Wn. App. 93, 97, 900 P.2d 595 (1995).

Default judgments are disfavored in the law because "[i]t is the policy of the law that controversies be determined on the merits rather than by default." This court is less likely to find an abuse of discretion if a trial court has set aside a default judgment rather than if it has refused to do so.

Griggs, 92 Wn.2d at 581 (alternation in original) (quoting Dlouhy v. Dlouhy, 55 Wn.2d 718, 721, 349 P.2d 1073 (1960)).

Griggs, 92 Wn.2d at 582.

In deciding a motion to vacate a default judgment, a trial court should primarily consider whether the moving party has a defense on the merits, and whether the moving party's failure to timely appear in the action was the result of mistake, inadvertence, surprise, or excusable neglect. If a strong defense on the merits exists, a court will spend little time inquiring into the reasons that resulted in entry of the default judgment. But if the moving party shows only a minimal prima facie defense, the court will scrutinize the other considerations more carefully. In addition, a court considers two secondary factors in making its determination: whether the moving party acted with due diligence after notice of entry of the default judgment, and whether vacating the judgment will result in a substantial hardship to the opposing party.

White v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968).

White, 73 Wn.2d at 352.

Calhoun v. Merritt, 46 Wn. App. 616, 619, 731 P.2d 1094 (1986).

White, 73 Wn.2d at 352.

A proceeding to vacate a default judgment is equitable in character and relief is to be afforded in accordance with equitable principles. The trial court should exercise its authority "'liberally, as well as equitably, to the end that substantial rights be preserved and justice between the parties be fairly and judiciously done.'"

Griggs, 92 Wn.2d at 581-82 (quoting White, 73 Wn.2d at 351).

With regard to the first consideration, Jensen contends that Luecke did not attempt to establish a valid defense. But Luecke asserted a prima facie defense in his answer, which was attached to his declaration in support of his motion to vacate the default judgment. Jensen's complaint alleged that Luecke "knew of the hidden defect[s]" caused by the "chronic leak in the bathroom" and "along the length of the second floor deck," "but intentionally or negligently misrepresented the condition of the house." In his answer, Luecke states that he had no knowledge of the bathroom leak and no knowledge of any damage to the framing of the house. Luecke states that he did not personally complete the repairs of the occasional leaks occurring during strong storms, but relied on the information provided by the building contractor who performed repairs. Because the question of Luecke's knowledge is central to Jensen's claims and requires determinations of credibility, the trial court could reasonably determine that a trial on the merits would not be useless, even though Luecke did not submit additional facts and evidence in affidavit form with the motion to vacate the default judgment.

Griggs, 92 Wn.2d at 582-83 (trial court did not abuse discretion by finding subsequent trial would not be useless based on known facts and theory of defense despite counsel's failure to set out facts in affidavit form).

As to the reason for his failure to appear in the action, Luecke claimed that he was served with the summons and complaint twice, once in July 2009 and once in October 2009. Luecke claimed that he informed Jensen's attorney that he was representing himself and that he wrote an answer and caused it to be mailed to counsel in August 2009. Based on his conversations and e-mail exchanges with Jensen's counsel, Luecke believed the attorney had received his answer. He also claimed that he did not further respond to the second service of the identical complaint because he did not believe the complaint had been filed with the court and he thought his previously mailed answer would suffice. Luecke also stated that he recalled giving Jensen's attorney "a separate letter further stating [his] defense, detail by detail." Luecke indicated that he did not learn that the complaint had been filed with the court until he received notice of the entry of the default judgment.

Jensen's counsel disputed Luecke's claims, stating in his declaration that the case was initiated in October 2009 with the service of the summons and complaint on Luecke. Counsel stated that he never received Luecke's answer in the mail. Counsel also pointed out inconsistencies in the copies of Luecke's answer later filed in court as well as his proof of service. Counsel stated that he spoke with Luecke on the telephone on November 2, 2009 and again on November 12, when counsel "told him the lawsuit would be filed if no written response was received." Counsel stated that he spoke to Luecke again on November 13 and 18, and each time Luecke promised to send a response, but counsel received nothing.

The trial court did not make explicit findings resolving the disputed issues. But based on this record, the trial court could have reasonably determined that Luecke had prepared and sent an answer and a letter stating his defense to Jensen's counsel and believed counsel received them before the case was filed with the court. The trial court could have also determined that Luecke was under the mistaken impression based on their November conversations that Jensen's attorney would contact him if any further answer was necessary before filing the complaint with the court. Thus, the trial court could have properly found that Luecke's failure to appear in the case between the filing of the complaint on December 9, 2009, and the entry of the default judgment on January 7, 2010, was the product of excusable negligence, mistake, or inadvertence.

See, e.g., C. Rhyne & Assocs. v. Swanson, 41 Wn. App. 323, 327, 704 P.2d 164 (1985) (where plaintiff served summons and complaint on defendant but did not file with the court, and defendant served timely answer, defendant's failure to answer nearly identical complaint served three months later was excusable neglect).

As to the secondary factors, Jensen argues that Luecke's delay of nearly one year was unreasonable, inexcusable, and intentional. Jensen also claims that Luecke failed to demonstrate that Jensen would not be prejudiced by vacation of the default judgment.

The record reflects that Jensen's counsel sent copies of the default judgment to Luecke on January 19, 2010 and Luecke filed his unsuccessful pro se motion to set aside the default judgment on February 1, 2010. On February 26, the trial court denied the motion and granted conditional leave to renew the motion. On March 3, Luecke filed a notice of appearance and a motion to modify the February 26 order. On March 5, Luecke filed a third party complaint against the builder of the house at the center of the dispute with Jensen. On January 5, 2011, Luecke renewed his motion to modify the February 26 order at the ex-parte calendar. After his motion was denied, Luecke paid the $500 and appeared with counsel the next day. Luecke did not offer any explanation for his lack of action between March 2010 and January 2011 at the hearing on the motion to vacate the default judgment.

As to the potential prejudice to Jensen, the essential question in the final factor considered in a motion to vacate a default judgment is whether there is a "showing of . . . any undue hardship which would have accrued to plaintiff had defendants' motion been granted and a trial on the merits afforded to the parties." But "the prospect of trial cannot constitute, without more, 'substantial hardship.'" Here, it is undisputed that the judgment is outstanding and Jensen still owns the house. Although Jensen stated in his papers before the trial court that discovery had not been undertaken in the intervening year and interest had accrued on the judgment, he did not claim that he would be unable to conduct discovery or make a claim for interest if the default judgment were vacated. Contrary to Jensen's arguments, nothing in the record required the trial court to find that Luecke's delay in paying the $500, obtaining counsel, and filing a second motion to vacate the default judgment created a situation in which Jensen would suffer undue hardship if the judgment were vacated. Under these circumstances, Jensen fails to demonstrate any abuse of discretion in the trial court's decision to vacate the default judgment.

White, 73 Wn.2d at 356-57.

Pfaff v. State Farm Mut. Auto. Ins. Co., 103 Wn. App. 829, 836, 14 P.3d 837 (2000).
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Finally, Jensen requests attorney fees on appeal based on the attorney fee provision in the contract between the parties for the sale of the house. Because the contract does not appear in the record and Jensen has not prevailed on appeal, we decline to award attorney fees or costs.

Affirmed.

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WE CONCUR:

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