Burke v. Rachau

• Jurisdiction: Oregon
• Parties: Alberta BURKE, Respondent, v. Beverly RACHAU and George E. Rachau, Appellants.
• Citation: 262 Or. 323,497 P.2d 1154
• Court: Oregon Supreme Court
• Decision Date: 14 June 1972

Page 1154

497 P.2d 1154

262 Or. 323

Alberta BURKE, Respondent, v.Beverly RACHAU and George E. Rachau, Appellants.

Supreme Court of Oregon, In Banc.

Argued and Submitted May 2, 1972.

Decided June 14, 1972.

George M. Joseph, Portland, argued the cause for appellants.With him on the briefs were Bemis, Breathouwer & Joseph, Portland, and Harry F. Samuels, Walter H. Sweek and Vergeer, Samuels, Roehr & Sweek, Portland.

Carl G. Helm, LaGrande, argued the cause for respondent.With him on the brief were Helm & Wasley, LaGrande.

TONGUE, Justice.

This is an appeal from an order denying a motion to set aside a default judgment in a personal injury case.¹

The question whether a trial court has abused its discretion in refusing to set aside a default judgment ordinarily depends upon the facts and circumstances of each case.In this case it appears from the affidavits filed in support and in opposition to that motion that on May 12, 1969, plaintiff's attorney wrote a letter to an insurance adjuster employed by defendants' insurance company.By that letter the adjuster was informed that plaintiff had retained the attorney to represent her and that he would forward to the adjuster a list of her medical 'specials.'This was in response to a previous letter from the adjuster to the plaintiff indicating that defendants were insured by that company and requesting copies of medical bills.

The adjuster then called plaintiff's attorney by telephone and said that he had a statement from plaintiff indicating that defendants were not responsible and suggesting that the attorney 'drop the matter.'At that time the adjuster was told that if he would send that statement to the attorney and if it then appeared that the facts were 'otherwise than (as) related' to him by plaintiffhe would ask her to obtain other counsel.According to plaintiff's attorney, defendants' insurance adjuster 'promised to forward the statement immediately,' but never kept that promise.

After waiting until November 10, 1969, plaintiff's attorney sent a second letter to defendants' insurance adjuster reminding him of that promise and stating that the statute of limitations would run in 'the immediate future,' with the result that it would be necessary to file a complaint unless the case could be settled.Again, defendants' insurance adjuster failed to send the promised statement and made no response to that letter.

Having heard nothing from the adjuster, plaintiff's attorney then prepared and filed a complaint on December 5, 1969, praying for $15,000 in general damages and $1,006.65 in special damages.On that same day, the complaint was served upon defendants in the same county, with the usual summons to the effect that unless defendants appeared and answered the complaint within 10 days, judgment would be taken against them.

On or about December 11, 1969, the insurance adjuster made his only further contact with plaintiff's attorney by calling his office by telephone.According to the affidavit of the associate of plaintiff's attorney (who was not in) the adjuster told him that the insurance company would employ an attorney to defend the case and asked for an extension of time for appearance.Also, according to that affidavit, 'I asked how long he needed.He stated he would like until December 19, 1969, and I stated that this was satisfactory.'The associate of plaintiff's attorney, according to his affidavit, then placed in the file a memorandum stating that the adjuster 'called wanted time to make an appearance--I gave him to 12/19/69.'

The affidavit of the adjuster, however, denied that portion of the affidavit and stated that he gave the attorney the name of a witness who would testify that plaintiff was intoxicated at the time of the accident and was told the attorney 'would contact the witness and would contact me at a later date,' and that 'his firm would not take a default without notice to me.'

The associate of plaintiff's attorney, however, by his affidavit denied any agreement for extension of time to appear 'except as hereinabove stated'(i.e., an agreement to extend such time to December 19, 1969) and 'specifically' denied 'that I stated or agreed that if an appearance was necessary (the adjuster) or anyone else, would be so advised.'

No appearance was then filed on behalf of defendants, however, and nothing further was heard by plaintiff's attorney from the adjuster.

On February 20, 1970, after waiting for two months, plaintiff's attorney filed a motion for default and default was entered on that date.No appearance on behalf of defendants had been made by then and that motion was not served on defendants personally.Neither was notice given to the adjuster.

On April 15, 1970, plaintiff's attorney filed an 'application' for 'relief demanded in plaintiff's complaint.'On May 20, 1970, no appearance having yet been made on behalf of defendants, 'proof' of defendants' negligence and plaintiff's injuries was offered and the court entered judgment for $15,000 in general damages and $951.65 in special damages.

On June 4, 1970, defendants filed a motion to set aside the default judgment, supported by the affidavit of one of defendants' attorneys setting forth his version of the conversation and agreement in December 1969 between the insurance adjuster and the associate of plaintiff's attorney, as previously stated.A proposed answer denying negligence and alleging contributory negligence was also tendered.A counteraffidavit by the associate of plaintiff's attorney was then filed on June 12, 1970, and on July 11, 1970, a reply affidavit by the insurance adjuster was filed.The affidavits have been previously summarized.

On July 20, 1970, a hearing was held on defendants' motion to set aside the default judgment.No witnesses were heard and no record was made of that hearing, at which the court orally denied defendants' motion.

On July 23, 1970, defendants filed a 'motion for reconsideration.'In support of that motion defendants filed a legal memorandum in which it was contended that in previously denying defendants' motion to set aside the default judgmentthe trial court'was unaware of the custom throughout the insurance industry' that 'cases are often settled after filing and negotiations are often carried out after filing and before the case is referred to defense counsel.'In further support of that contention defendants filed a 'supplemental affidavit' of the insurance adjuster stating that the custom is to the effect that when a lawsuit is filed the claims adjuster will 'frequently' contact plaintiff's attorney to request an extension of time in which to appear and that:

'* * * Whenever an extension of time is given, the claims adjuster customarily relies upon the representation of plaintiff's counsel that no default will be taken until a demand is made by plaintiff's attorney that an appearance be made and customarily such plaintiff's counsel will afford the time to appear for such period as may be necessary for the claims adjuster to forward defensive documents to counsel to appear on behalf of the defendant or defendants.This is an established custom between insurance claims departments and members of the Bar and claims adjusters universally in this state consider that such an agreement is binding and that a default will not be taken once a plaintiff's counsel knows the identity of the insurance company involved and the identity of the insurance adjuster handling the claim.'

The affidavit was served on plaintiff's attorney on the morning of September 14, 1970, the date on which the hearing was held on that motion.At that hearing plaintiff's attorney denied the existence of such a custom and contended that, in any event, the court had previously found in favor of plaintiff'with respect to the agreement of December 6' and that 'this determines the matter * * *.'The trial court then again denied defendants' motion, after which defendants made an offer of proof by testimony of the adjuster and attorney.That testimony, for the most part, covered the same matters as previously stated by the affidavits, including the further contention relating to the existence of a custom.

On October 19, 1970, the court entered a written order denying defendants' motion to set aside the default judgment.That order set forth specific findings of fact, including a finding of fact that shortly after the filing of the complaint there was a conversation between defendants' insurance adjuster and the associate of plaintiff's attorney in which the adjuster said that his company would employ an attorney to defend the action and asked for, and was granted, an extension of time for an appearance until December 19th.The order of the court also recited the following rules of that court:

'RULE 2.FILING OF PLEADINGS.

'a.If additional time is required by a party to make an appearance an application should be filed with the Court within the time required for such appearance requesting additional time . . .

'RULE 10. STIPULATIONS.

'No agreement or stipulation between the parties or their attorneys concerning any of the proceedings before the court will be regarded or enforced unless the same be made in open court or reduced to writing and subscribed by the party or the attorney to be bound thereby.'

The order then stated that no such application, agreement or stipulation was made.Finally, the order stated, as conclusions of law, that it had been agreed that defendants have an extension of time for appearance until December 19, 1969; that 'no further or other agreement was made between plaintiff and said company or defendants'; that defendants were in default, and that 'there was no mistake, inadvertence, surprise or excusable neglect on the part of defendants.'

Defendants contend that in denying that motion the trial court abused discretion and that 'the ends of substantial justice' require that the default judgment be set aside, quoting...