Bella v. Aurora Air, Inc.

• Decision Date: 06 July 1977
• Citation: 566 P.2d 489,279 Or. 13
• Parties: Allen BELLA and Fae Bella, husband and wife, Appellants, v. AURORA AIR, INC., dba Madras Air Service, Leo John Demers and Kenneth Binder, Respondents.
• Court: Oregon Supreme Court

Page 489

566 P.2d 489

279 Or. 13

Allen BELLA and Fae Bella, husband and wife, Appellants, v. AURORA AIR, INC., dba Madras Air Service, Leo John Demers and Kenneth Binder, Respondents.

Supreme Court of Oregon, In Banc.

Argued and Submitted at Pendleton May 2, 1977.

Decided July 6, 1977.

Douglas A. Shepard, Madras, argued the cause and filed briefs for appellants.

James C. Waggoner, of Martin, Bischoff, Templeton & Biggs, Portland, argued the cause and filed a brief for respondents Aurora Air, Inc., dba Madras Air Service and Leo John Demers.

Rudy R. Lachenmeier, of Vergeer, Samuels, Roehr & Sweek, Portland, argued the cause and filed a brief for respondent Kenneth Binder.

Before DENECKE, C. J., ^* and HOWELL, BRYSON, LENT, LINDE and CAMPBELL, JJ.

LINDE, Justice.

Plaintiffs, Mr. and Mrs. Allen Bella, appeal from a judgment n. o. v. that set aside a jury verdict for damage done to their mint crop by a herbicide which defendant Aurora was engaged to spray by airplane on the wheat field of their neighbor, Kenneth Binder. Most of the issues on appeal require this court to sort out the effects of procedural delays by the parties beyond the deadlines imposed by law: a late notice of crop damage by plaintiffs, a late appearance by defendants Aurora Air, Inc., and its owner, Leo John Demers, after default, and finally a late motion for judgment n. o. v.

The history of the case is this:

On Friday, June 13, 1975, Mr. Demers sprayed the herbicide 2,4-D on Mr. Binder's wheat field. Plaintiffs observed some of the mist reaching their adjoining property, and over the weekend a part of their mint crop began to show signs of damage. Mr. Bella called Demers to the farm to inspect the damage on Monday, June 16. Later he filed with the State Department of Agriculture a report of the loss, see ORS 634.172, which was dated August 15 and asserted discovery of the damage on June 15; but the report was not actually mailed before August 21 and received by the department on August 22. This was also the first time defendant Binder was notified. Plaintiffs' mint field was harvested on September 15, 1975.

The Bellas filed this action on October 28, 1975, and summons was served on Demers and Aurora that day. When these defendants had filed no appearance within 10 days, ORS 15.040, 16.040, plaintiffs on November 10, 1975, took a default judgment against them for $13,229.67 and costs. On November 12, Aurora and Demers moved to set aside the default judgment as having been due to their mistake, inadvertence, and excusable neglect, ORS 18.160. The trial court granted this motion on November 18 and on November 25 entered an amended order setting aside the default judgment.

The case went to trial on plaintiffs' second amended complaint in July, 1976, resulting in a verdict for plaintiffs in the sum of $7,451.85. Judgment on this verdict was filed on August 5. Defendant Binder moved for judgment notwithstanding the verdict on August 9. On August 17, after the 10-day period prescribed by ORS 18.140 and 17.615 had elapsed, defendant Aurora Air, Inc., but not Demers, filed its motion asking for judgment n. o. v. and "joining" in Binder's earlier motion. The trial court granted judgment n. o. v. for all defendants with a memorandum opinion dated August 27, modified after reconsideration on September 20, 1976. This appeal followed.

For the sake of clarity, we shall deal separately with the positions of Aurora Air and its owner, Mr. Demers, and that of its customer, Mr. Binder.

I. Bella v. Aurora Air, Inc., and Demers

A. The default judgment. ORS 18.160 empowers a trial court "in its discretion" to set aside a judgment taken against a party "through his mistake, inadvertence, surprise or excusable neglect." A trial court's order allowing or refusing a motion to set aside a default under this section is tested only for abuse of the granted discretion, so it is incumbent upon appellants to show such abuse.

Defendants' affidavit in support of their motion recited that on the same day the complaint and summons were served on them, they sent these documents to their liability insurance broker in Oakland, California, who transmitted them by way of the Los Angeles office of the underwriters' agents to their claims office in Memphis, Tennessee. The affidavit asserted, and we have no reason to doubt, that the delay before this office could assign counsel to defend its insured reflected the normal time spent in transmitting these documents through the mail. Of course this does not in itself establish unavoidable delay and due diligence on the part of defendants. It is the named defendants who are summoned, not the insurance company with whom they may have contracted. This is different from cases like Wagar v. Prudential Ins. Co., 276 Or. 827, 556 P.2d 658 (1976) and Lowe v. Institutional Investors Trust, 270 Or. 814, 529 P.2d 920 (1974), which involved failures or delays of communication among offices of defendant companies. While the question in such cases is whether there was inadvertence or excusable neglect within the defendant organizations, here it is whether the trial judge abused his discretion in relieving defendants from the consequences of their reliance on their insurance company to defend them; for as long as the statutory summons explicitly warns the named defendant of the risks of a failure to appear within the stated time, ORS 15.040, this reliance is not excusable neglect as a matter of course. See Rogue Valley Memorial Hospital v. Salem Ins. Agency, Inc.,265 Or. 603, 609, 510 P.2d 845 (1973); St. Arnold v. Star Expansion Ind.,268 Or. 640, 655, 521 P.2d 526, 522 P.2d 477 (1974).

Another factor in the trial court's discretion is whether defendants accompanied their claim of mistake, inadvertence, or excusable neglect with the tender of a meritorious defense. While the statute does not mention it, decisions of this court since White v. Northwest Stage Co., 5 Or. 99 (1873), have required trial courts to consider the offered defense against plaintiff's complaint before setting aside a default. See also Mayer v. Mayer, 27 Or. 133, 39 P. 1002 (1895). Plaintiffs in this case urge that an answer consisting merely of a general denial does not meet this requirement, which seems to have long been the rule in many jurisdictions. See cases collected in 174 A.L.R. 43 (1948). Defendants argue that their answer, by admitting much of the complaint and denying the rest, left no doubt which issues they were prepared to contest, and the trial court so understood it. In our view, the requirement of presenting a meritorious defense does not turn on the form of the tendered motion or pleading; its object is that the trial court satisfy itself that there are in fact substantial issues to be decided before allowing a party to reopen a defaulted case. From the information before it the court could conclude that there were such issues in this case.

Finally, a fact that may have moved the trial court to exercise its discretion in favor of defendants is that they filed their motion to set aside the default judgment within two days after it had been entered. Diligence and lack of prejudice to plaintiffs are relevant even if not compelling circumstances, see Hanthorn v. Oliver, 32 Or. 57, 62-63, 51 P. 440 (1897); Burke v. Rachau, 262 Or. 323, 338, 497 P.2d 1154 (1972). On balance, we conclude that the court's order setting aside the default judgment did not exceed its discretion under ORS 18.160.

B. The judgment n. o. v. After Aurora and Demers succeeded in having their default set aside, the case was tried to a jury, which returned a verdict for $7,451.85 damages against all defendants. Judgment on this verdict was entered on August 5, 1976. On August 17, Aurora moved for a judgment notwithstanding the verdict. This motion also claimed to "join" in a similar motion that had been filed on August 9 by defendant Binder. No motion was filed on behalf of defendant Demers. The trial court granted judgment n. o. v. for all defendants, on the ground that plaintiffs had failed to comply with the requirements of notice of loss from aerial spraying imposed by ORS 634.172.

Plaintiffs attack the judgment n. o. v. for Aurora because Aurora's motion was not filed within the statutory 10-day deadline, ORS 18.140, 17.615. Aurora offers three responses. First, it argues that the court's error in granting its untimely motion "would be harmless in view of (Aurora's earlier) motions for nonsuit and directed verdict and defendant's consequent right to appeal." That might be so if Aurora had in fact cross-appealed from the denial of those earlier motions, but it did not; so those rulings are not before us. The mere fact that they were made cannot relieve a party from the time limit when the motion for judgment n. o. v. requires an earlier motion for a directed verdict, ORS 18.140. The substitution of the correct ruling for an erroneous judgment n. o. v. without a cross-appeal, see ORS 19.130(2), was permitted in German v. Kienow's Food Stores, 246 Or. 334, 425 P.2d 523 (1967), but in that case defendant had moved for a new trial in the alternative, and both motions were timely.

Second, Aurora asserts that it "merely joined" belatedly in defendant Binder's timely motion. But Aurora, the pesticide applicator, and Binder, its customer, were separate defendants, represented by separate counsel, and arguably subject to distinct theories of liability and different applications of ORS 634.172, the law at issue on the motions. A ruling for Binder on his defense would not necessarily establish a defense for Aurora. If the court was to accept Aurora's defense after the verdict, it had to do so on Aurora's own timely motion.

Finally, however, Aurora argues that no motion at all is needed for a judgment n. o. v. because the court could grant it on its own motion. Such judgments are governed by ORS 18.140, which, insofar as applicable here, provides:

. . . (W)hen a motion for a...