Brown v. McCormick

• Citation: 608 F.2d 410
• Decision Date: 17 October 1979
• Docket Number: No. 77-1870,77-1870
• Parties: Marlin BROWN, Plaintiff-Appellee, v. Jon D. McCORMICK and Lyda N. McCormick, his wife, Defendants-Appellants, and Split Rock Ranch, Inc., Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 410

608 F.2d 410

Marlin BROWN, Plaintiff-Appellee, v. Jon D. McCORMICK and Lyda N. McCormick, his wife Defendants-Appellants and Split Rock Ranch, Inc., Defendant.

No. 77-1870.

United States Court of Appeals Tenth Circuit.

Argued July 16, 1979.

Decided Oct. 17, 1979.

Charles D. McAtee, of Eidson, Lewis, Porter & Haynes, Topeka, Kan. (K. Gary Sebelius, Topeka, Kan., with him, on brief), for defendants-appellants.

John R. Hamilton, of Crane, Martin, Claussen, Hamilton & Barry, Topeka, Kan. (Margaret A. Gatewood, Topeka, Kan., with him, on brief), for plaintiff-appellee.

Before SETH, Chief Judge, and BARRETT and McKAY, Circuit Judges.

SETH, Chief Judge.

This appeal concerns the validity of a default judgment entered against defendants in 1971, and the propriety of an injunction against defendants under 28 U.S.C. § 2283 from proceeding against the plaintiff in the Arizona courts. The plaintiff, Mr. Marlin Brown, instituted this action in the United States District Court for the District of Kansas through a supplemental complaint filed pursuant to 28 U.S.C. § 2283 to protect his 1971 judgment against the defendants. The defendants responded by a motion for relief from judgment under Fed.R.Civ.P. 60(b)(4). The district court after a three-day hearing denied the 60(b) motion and enjoined the defendants from proceeding with their action in the Arizona state court. This appeal followed.

A brief outline of the sequence of events is necessary. This appeal from the § 2283 injunction and denial of Rule 60(b)(4) relief does not concern the merits of the original lawsuit. The district court repeatedly said as much during the hearing and confined the testimony to the issues raised by the supplemental complaint and motion. Accordingly, we are concerned only with matters relating to the validity of the original default judgment and the issues arising from Rule 60(b)(4) and § 2283.

The genesis of the original lawsuit was a meeting between the parties before us in Council Grove, Kansas. Jon and Lyda McCormick who were Arizona residents were visiting relatives, and during this trip contacted Mr. Marlin Brown for assistance with some problems they were experiencing in Arizona. Mr. Brown was an attorney who had retired from active practice. The McCormicks apparently had overextended themselves on the purchase of the Z-Bar-T ranch in Arizona and needed legal and financial help. An agreement was reached, and Mr. Brown made several trips to Arizona, invested personal funds in the ranch, loaned money to the McCormicks, and attempted to reacquire 100 percent control of the ranch for them. The relationship soured, however, and Mr. Brown filed suit against the McCormicks in the Kansas federal court seeking a declaratory judgment on the agreement and damages for the alleged breach. Jurisdiction was based on diversity of citizenship and the Kansas long-arm statute, K.S.A.1975 Supp. 60-308(b). The McCormicks' attorney subsequently filed an out of time appearance and was granted a 30-day extension to respond. Mr. Brown then amended his complaint to include as a defendant Split Rock Ranch, Inc., a corporation previously formed by the McCormicks and others for the purpose of owning and managing the Z-Bar-T ranch. Split Rock timely filed its answer. The McCormicks, however, failed to meet the extension date. Mr. Brown then filed a notice for default judgment and shortly thereafter the McCormicks' attorney asked for leave to withdraw. This was granted and a second attorney then entered his appearance, was granted an extension, and then filed a general denial. Depositions were scheduled, cancelled due to attorney conflict, rescheduled, and eventually not taken due to the McCormicks' failure to appear. Their second attorney asked to withdraw. The district judge ordered the McCormicks' pleadings stricken as a Fed.R.Civ.P. 37 sanction, and scheduled a default judgment hearing or trial. Following that hearing default judgment was entered against the McCormicks. Nine months had passed since the filing of the original complaint. Of crucial importance is that the McCormicks never appealed and did not seek to set aside the judgment until this action was brought against them.

Approximately three years later, the McCormicks instituted an action in the Arizona state court seeking adjudication, among other things, of the matters raised in the original lawsuit. Marlin Brown unsuccessfully defended on the basis of res judicata. He then returned to the district court and filed the supplemental complaint with which we are here concerned.

Appellants' basic contention below and here is that the default judgment is void. They raise several issues in support of this argument. They contend the court lacked In personam jurisdiction, and also lacked subject matter jurisdiction because the defendant Split Rock, Inc. should have been realigned as a party plaintiff. They contend the Rule 37 sanctions denied them due process of law, and that the default judgment was obtained by fraud on the court. They also urge that the default judgment was in excess of the pleadings and unconstitutionally deprived them of grazing leases included in the order of judgment. The district court made extensive findings with regard to each issue and concluded they were without merit. We must agree because on the basis of the record before us the findings are not clearly erroneous.

Rule 60(b) operates to relieve a party from judgment only upon such terms as are just. It is an extraordinary procedure that permits the court which rendered judgment to grant relief from the judgment upon a showing of good cause within the rule. See 6A Moore's Federal Practice P 60.02; 7 Moore's Federal Practice P 60.19. The rule concerns matters outside the issues raised and considered by the court in reaching its judgment. It is clearly Not a substitute for appeal and must be considered with the obvious need for the finality of judgments. See Daily Mirror, Inc. v. New York News, Inc., 533 F.2d 53 (2d Cir.), Cert. denied, 429 U.S. 862, 97 S.Ct. 166, 50 L.Ed.2d 140. As to time limits not expressed in the rule, See Misco Leasing, Inc. v. Vaughn, 450 F.2d 257 (10th Cir.).

As to the assertion that there was a lack of In personam jurisdiction, we find the arguments of appellants unpersuasive. We agree fully with the analysis and the conclusion by the trial court on this issue. The same conclusion must be reached as to the assertions that there was collusion in that the Split Rock corporation answered before it was served, and there had been communication between the attorneys.

As indicated above, the appellants here urge that the default judgment court did not have subject matter jurisdiction because it did not realign the defendant Split Rock Ranch, Inc. as a plaintiff. Appellants urge in their 60(b) motion that the corporation's interest was not adverse to that of plaintiff, and realignment would have destroyed diversity. The pleadings show an allegation of citizenship as to plaintiff and the corporate defendant (and the individual defendants). This was denied by the answer of the McCormicks, as was everything else in the complaint. The answer was a general denial in the very broadest terms. Nevertheless, the trial court thereupon made findings in the default judgment as to diversity. These findings were from what appeared in the complaint and answer and during the course of the default trial. (The corporate defendant did not default.) This, in our view, was a "litigation" of sorts of the issue as to whether the corporation was an adverse party. Of course, there was no motion or any suggestion that the parties be realigned until the proceedings which are the subject of this appeal. In these circumstances the trial judge, in view of the denial of the diversity allegations, considered the proper material. These were the entire diversity facts and the issue was raised, and any realignment issue was necessarily included and determined. Again, it should be pointed out that Split Rock Ranch, Inc. did not default, moved for trial, and went to trial at the same hearing wherein the default judgment was entered.

Rule 60(b) obviously is not a substitute for an appeal and cannot be used for appellate review of matters determined by the trial court on the basis of facts before the court. See 1B Moore's Federal Practice P 0.407, P 60.25(3) and P 60.41(1). There is no indication that anything outside the original record has been advanced as a reason to reconsider the determination originally made. It is obvious that if the judgment is void, it may be attacked in a variety of ways. See V. T. A., Inc. v. Airco, Inc., 597 F.2d 220 (10th Cir.). However, in the situation before us it appears that the motion is sought as an appeal from the original trial court's determination. Thus this challenge by the use of Rule 60(b) is not available to attack the judgment. It is nothing more than an appeal. In any event, the record clearly shows that as of the time the pleadings were filed, the determination made by the default trial court was correct. The face of the pleadings and other material before the court indicated that the plaintiff and the defendants were adversaries. The trial court from which this appeal was taken found that the plaintiff and defendants were adversary parties, and we agree. The plaintiff and the nonparty Richins brothers who controlled the corporation were obviously at odds with each other and with different interests in the several issues. The corporation had denied on information and belief plaintiff's claim to corporate shares. The default court was entirely correct in its findings. The matter was resolved on the basis of the pleadings and the nature of the suit as expressly held in Smith v. Sperling, 354 U.S. 91, 77 S.Ct. 1112, 1 L.Ed.2d 1205, and the companion cases of Swanson v. Traer, 354 U.S. 114, 77 S.Ct. 1116, 1 L.Ed.2d 1221, and Carr v. Beverly Hills Corp., 354 U.S. 917, 77 S.Ct....