Lomas and Nettleton Co. v. Wiseley

• Decision Date: 18 October 1989
• Docket Number: No. 88-1452,88-1452
• Citation: 884 F.2d 965
• Parties: The LOMAS AND NETTLETON COMPANY, Plaintiff-Appellee, v. William E. WISELEY and Brenda S. Wiseley, Defendants, and Thomas P. Kasten, Intervening Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 965

884 F.2d 965

14 Fed.R.Serv.3d 1124

The LOMAS AND NETTLETON COMPANY, Plaintiff-Appellee, v. William E. WISELEY and Brenda S. Wiseley, Defendants and Thomas P. Kasten, Intervening Defendant-Appellant.

No. 88-1452.

United States Court of Appeals Seventh Circuit.

Argued Oct. 4, 1988.

Decided Sept. 1, 1989.

Rehearing Denied Oct. 18, 1989.

Lori F. Kaplan, Murray J. Feiwell, J. Greg Easter, Feiwell & Associates, Indianapolis, Ind., for plaintiff-appellee.

David A. Brooks, Martin Bedrock, Knox, Ind., for defendants and intervening defendant-appellant.

Before CUDAHY, COFFEY and MANION, Circuit Judges.

MANION, Circuit Judge.

Thomas Kasten appeals the district court's order setting aside a foreclosure sale at which he purchased property. Kasten argues that the district court erred in setting aside the sale on the ground that the judgment creditor's attorney negligently failed to attend the sale and submit his client's bid. We reverse.

I.

The subject of this diversity action is a residential lot in Hammond, Indiana. The plaintiff-appellee, Lomas & Nettleton Company ("L & N") held the mortgage on the property. Mortgagors William and Brenda Wiseley, who are not parties to this appeal, defaulted on the mortgage. L & N obtained a default judgment of foreclosure and the court issued an order that the property be sold at public sale.

John Million, local counsel for L & N in Monticello, Indiana, was to attend the sale and submit a bid on behalf of L & N. The sale took place at the scheduled date and time, September 8, 1987, at 12:00 noon, but Million did not appear. The intervening defendant-appellant, Thomas Kasten, apparently was the only bidder present and purchased the property for $1,000.

Sixteen days later, L & N moved under Fed.R.Civ.P. 60(b) that the sale be set aside. The district court granted this motion and, after Kasten requested reconsideration, held an evidentiary hearing. Million testified that he had known the date and time of the sale and had noted it on his calendar. On the morning of the sale, however, clients detained him in his office. He had an appointment at 11:30, and met with that client between 11:30 and noon, during which time he also took one or two phone calls. Another client stopped in the office around 11:45, and Million talked to him for a few minutes. Million said he noticed his secretary leaving for lunch about noon, but continued talking to his client, "not watching the clock." Around 12:20 or 12:30, his client left and Million realized that he had missed the sale. He hurried to the courthouse, arriving there at 12:35 or 12:40. The county treasurer told him that the marshall had already concluded the sale and left.

Million testified that he had attended foreclosure sales before and was familiar with the procedure and aware that bidding would close at noon. Kasten's counsel asked him, "The only thing that kept you from attending the sale was the fact that you had clients in the office at the time?" Million responded, "Yeah, and I didn't kick 'em out. I kept talking to 'em." He explained that he had been instructed to bid $30,000 for the lot, or if there was competitive bidding, to offer up to $33,233.64, the amount of the judgment.

On the basis of Million's testimony, the district court determined that the sale should be set aside. Kasten now appeals that order.

II.

Fed.R.Civ.P. 60(b) provides:

On motion and on such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered ... (3) fraud ... (4) the judgment is void; (5) the judgment has been satisfied ... or (6) any other reason justifying relief from the operation of the judgment.

This court reviews a decision to grant or deny a Rule 60(b) motion only for abuse of discretion. North Central Illinois Laborers' District Council v. S.J. Groves & Sons Co., Inc., 842 F.2d 164, 167 (7th Cir.1988). Such a decision stands unless the district court was "very far off base," relying on "forbidden factors" or failing to take into account a relevant factor. Id. at 168 (quoting Tolliver v. Northrop Corp., 786 F.2d 316, 319 (7th Cir.1986)).

L & N's Rule 60(b) motion presented two grounds for relief: inadvertence or excusable neglect on the part of counsel (Rule 60(b)(1)) and unjust enrichment of Kasten at L & N's expense (presumably under Rule 60(b)(6)). The district court accepted both grounds; both are now at issue on appeal.

With respect to the first issue, this court has stated frequently that Rule 60(b)(1)'s reference to "inadvertence or excusable neglect" does not authorize relief from the consequences of negligence or carelessness. S.J. Groves, 842 F.2d at 167; Western Transportation Co. v. E.I. DuPont De Nemours and Co., 682 F.2d 1233, 1236 (7th Cir.1982); Bershad v. McDonough, 469 F.2d 1333, 1337 (7th Cir.1972). Rather, it requires some justification for an error, beyond a mere failure to exercise due care. ¹ Western Transportation, 682 F.2d at 1236. This court has stated, in upholding a denial of Rule 60(b)(1) relief requested on the basis of an attorney's negligence, that it would be an abuse of discretion to grant Rule 60(b) relief on the basis of a negligent mistake. Id. "Neither ignorance nor carelessness on the part of the litigant or his attorney provide grounds for relief under Rule 60(b)(1)." Kagan v. Caterpillar Tractor Co., 795 F.2d 601, 607 (7th Cir.1986). Thus the question presented is whether the district court abused its discretion in holding that Million's mistake was excusable.

In justifying the error, the district court relied on Million's status as a "county seat lawyer," finding that his failure to appear was excusable because "he simply had a client that he couldn't get--immediately get rid of without just walking out of an office..... And it is a sole practitioner in a county seat town in north central Indiana." ² S.J. Groves indicates that the factors upon which the district court granted relief--the nature of Million's practice and the fact that he had a client in his office--are not sufficient to support a finding of excusable neglect. In S.J. Groves, the defendant corporation, against which a default judgment had been entered, requested relief from the judgment because its in-house counsel had simply neglected to answer the complaint. The defendant explained that the in-house staff was small--only two attorneys--and that one of the two was disabled at the time; consequently one attorney was left to handle all incoming documents and overlooked the complaint in the resulting pressure and confusion. This court affirmed the district court's holding that this breakdown of internal procedures "may have been inadvertent, but [was] not excusable." Id. at 166. The decision reiterated that counsel's carelessness does not justify Rule 60(b)(1) relief. Id. at 167. Attorney negligence was also held insufficient to warrant Rule 60(b)(1) relief in Western Transportation (computational error) and Bershad (error in listing number of shares of stock used to calculate amount of judgment).

Million testified that he had notice of the sale, planned to attend and simply became distracted and failed to realize the time. In S.J. Groves, counsel advanced an argument similar to Million's; that is, he became preoccupied with other work and neglected his responsibility to a particular client. S.J. Groves is not distinguishable from the case at bar; if anything, Million has offered even less justification for his error than did counsel in that case. If Million's oversight in this case can be termed "excusable," it is difficult to conceive of what the distinction between simple negligence and excusable neglect might be. Million's own testimony offered no real excuse, beyond carelessness, for his failure to attend the sale.

At this juncture we note that L & N is apparently satisfied with its judgment. Rather, it is the proceeding to enforce the judgment--the foreclosure sale--that the court has set aside under Rule 60(b). Just as federal law, not state law, governs the grant or denial of a new trial, Wiedemann v. Galiano, 722 F.2d 335, 337 (7th Cir.1983), so too federal law applies in this 60(b) proceeding. See also General Foam Fabricators v. Tenneco Chemicals, Inc., 695 F.2d 281, 288 (7th Cir.1982). "The grounds and procedures for setting aside a federal judgment are entirely a matter of federal law, on which state law may be disregarded." 11 Wright and Miller Federal Practice and Procedure Sec. 2853. In an unusual circumstance involving a substantive right under state law, to have a judgment (and presumably a proceeding) reopened, "the federal court sitting in diversity will give effect to the state-created right." Id.

One could argue that Indiana case law regarding setting aside sheriff's sales creates a "substantive" right under 60(b)(6), thus justifying relief. After examining Indiana law and the facts of this case, we think there is no applicable substantive right.

Under Indiana law the trial court does have discretion in determining whether setting aside a sale is appropriate. Fox v. Jackson, 116 Ind.App. 390, 64 N.E.2d 799, 801 (1946). In this case, however, the court improperly relied upon Million's status as a small-town sole practitioner to excuse his mistake. S.J. Groves and Ellingsworth require more than a breakdown of internal office procedures or a careless oversight. The district court also expressed the view that the Seventh Circuit's law was not so rigid as to preclude relief when unjust enrichment would result. On the contrary, this court has commented that it would indeed be an abuse of discretion to grant relief on the basis of negligence. Western Transportation, 682 F.2d at 1236. To the extent that one party's benefiting from opposing counsel's error may be...