Cassidy v. Tenorio

• Decision Date: 04 April 1988
• Docket Number: No. 87-2217,87-2217
• Citation: 856 F.2d 1412
• Parties: David W. CASSIDY, Plaintiff-Appellee, v. Juan C. TENORIO; Juan C. Tenorio & Associates, a Guam Corporation; Juan C. Tenorio & Associates, a corporation organized under the laws of the Commonwealth of the Northern Mariana Islands, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1412

856 F.2d 1412

12 Fed.R.Serv.3d 412

David W. CASSIDY, Plaintiff-Appellee, v. Juan C. TENORIO; Juan C. Tenorio & Associates, a Guam

Corporation; Juan C. Tenorio & Associates, a corporation

organized under the laws of the Commonwealth of the Northern

Mariana Islands, Defendants-Appellants.

No. 87-2217.

United States Court of Appeals, Ninth Circuit.

Submitted April 4, 1988. ^*

Decided Sept. 12, 1988.

Jeffrey R. Siegel, Gill & Siegel, Agana, Guam, for defendants-appellants.

G. Patrick Civille, Moore, Ching, Boertzel & Lawlor, Agana, Guam, for plaintiff-appellee.

Appeal from the United States District Court for the District of Guam.

Before WALLACE, REINHARDT and NOONAN, Circuit Judges.

WALLACE, Circuit Judge:

Tenorio appeals from the decision of the Appellate Division of the District Court of Guam, affirming the Guam Superior Court's denial of his motion to set aside a default judgment and denial of his motion for reconsideration. We have jurisdiction pursuant to 28 U.S.C. Sec. 1292 and 48 U.S.C. Sec. 1424-3(c), and we affirm.

I

Cassidy and Tenorio were business partners who jointly owned and operated several small corporations in Guam and Saipan. Among these corporations was a travel agency, Taga Travel, Inc. (Taga Travel), with offices in both Guam and Saipan. Together with a third director and shareholder of Taga Travel, Cassidy and Tenorio executed on February 11, 1983, a guaranty to the Bank of Guam (the Bank) in order to secure a $200,000 line of credit for Taga Travel. Under the terms of the guaranty, the three signatories jointly and severally guaranteed the loans that Taga Travel borrowed pursuant to this credit facility.

Prosperity, unfortunately, did not smile upon Taga Travel. By April 1983, Taga Travel's financial situation had deteriorated to the point where the Bank demanded that Cassidy honor the $200,000 guaranty to repay sums that Taga Travel took out under its line of credit. To honor this guaranty, on February 14, 1984, Cassidy obtained a personal loan from the Bank for $200,000, at 18% interest, the proceeds of which were used to repay Taga Travel's debt to the Bank.

On October 4, 1985, Cassidy wrote Tenorio demanding that Tenorio indemnify him for $100,000, half of the amount that Cassidy had paid to the Bank on behalf of Taga Travel. Cassidy requested that Tenorio contact him by October 18, 1985, to discuss the matter and unequivocally threatened to take necessary legal action if the two of them could not agree upon a satisfactory settlement by that date. In a follow-up letter dated October 9, 1985, Cassidy informed Tenorio that he had retained the services of a law firm, renewed his previous demand for indemnification in the amount of $100,000, and assured Tenorio that, upon payment of this sum, the two of them would then have a cause of action for contribution from the third co-guarantor of Taga Travel's debts to the Bank. As with his earlier correspondence, Cassidy concluded this letter by threatening to take legal action to seek contribution from Tenorio for these debts if some accommodation was not reached by October 18, 1985.

Tenorio eventually visited Cassidy's lawyer, Boertzel, in late October or November of 1985 to discuss Cassidy's claim for contribution. During this meeting, Boertzel and his partner, Moore, inquired about Tenorio's assets and began negotiating with him regarding Cassidy's demand for contribution. Boertzel delivered to Tenorio, on December 9, 1985, a Forbearance and Reimbursement Agreement, which allegedly incorporated the terms of the understanding reached during their prior encounter. Under this agreement, Tenorio would sign a promissory note in which he would promise to pay Cassidy his $100,000 share according to a specified schedule of payments, in exchange for a promise by Cassidy to forbear from taking legal action against him. The cover letter accompanying the proposed agreement requested that Tenorio schedule an appointment with Boertzel so that the documents could be signed by December 13, 1985.

On December 18, 1985, Boertzel spoke with Tenorio by telephone about finalizing the arrangement. Acting upon Boertzel's advice, the following day Tenorio contacted attorney Perez to represent him in his negotiations with Cassidy. Because he was leaving town, Perez called Boertzel to request a two-week extension of the deadline for consummating the deal. That same day, a letter was hand delivered to Perez in which, upon Cassidy's orders, Boertzel denied the request for an extension on the grounds that Cassidy "has been negotiating with Mr. Tenorio since early October on this matter" and that, "[i]n the intervening period, Mr. Tenorio has had ample opportunity to consult with counsel." Perez was then advised that December 27, 1985, one week later, was the new deadline for signing the Forbearance and Reimbursement Agreement.

On the following day, December 20, 1985, Tenorio executed the Forbearance and Reimbursement Agreement. In so doing, he signed a promissory note to Cassidy and also signed guarantees by two corporations under his control.

On February 5, 1986, Boertzel wrote Tenorio notifying him that he was in default under the terms of the promissory note and the Forbearance and Reimbursement Agreement. Boertzel also warned Tenorio that unless these defaults were cured by February 11, 1986, Cassidy would "exercise his rights under the aforementioned documents." On February 11, Tenorio requested an extension of time in order to seek legal counsel. When Boertzel wrote back on February 13, he recognized that "it is certainly your right to retain counsel to advise you regarding your obligations under the guaranty and security agreements, the forbearance agreement, and the promissory note which you executed on December 20, 1985," but informed Tenorio that Cassidy refused to grant any extensions of time. In addition, Boertzel pointed out that Tenorio was now guilty of additional breaches of his obligations under the agreements, but granted an additional ten days within which to make good on these latest defaults.

When no cure was forthcoming, Cassidy filed suit in the Superior Court of Guam on March 24, 1986, against Tenorio and his two corporations that had executed guarantees on his behalf. The complaint alleged that Tenorio was in default under the terms of the promissory note that he executed on December 20, 1985. Although the defendants were properly served on March 27, 1986, no answer or other responsive pleading was filed. Cassidy thereafter moved for a default judgment on April 18, 1986. Default was then entered against Tenorio and his two corporations by the Clerk of the Court on April 25, 1986. A Judgment of Default was subsequently entered by the Superior Court on April 28, 1986.

Tenorio, represented by a new attorney, filed a motion to set aside the default judgment on May 23, 1986, alleging that his default was not willful and that he had meritorious defenses to enforcement of the promissory note. Cassidy opposed the motion, and on June 27, 1986, following a hearing, the trial court denied the motion. Shortly thereafter, on July 10, 1986, Tenorio filed a motion to reconsider the court's earlier decision. Ruling from the bench, the court denied this motion. A formal decision and order denying Tenorio's motion for reconsideration was entered on August 22, 1986. In neither instance was the trial court requested to state specific reasons for the ruling.

On appeal, the Appellate Division of the District Court of Guam held that it was not an abuse of discretion for the trial court to deny both Tenorio's motion to set aside the default judgment and his motion to reconsider. Applying the test that we articulated in Falk v. Allen, 739 F.2d 461 (9th Cir.1984) (per curiam) (Falk ), the Appellate Division found that because the default was the result of Tenorio's own culpable conduct, and because no evidence of a meritorious defense appeared in the record, the denial of the two post-judgment motions was proper.

Tenorio timely appeals to this court, arguing that the trial court abused its discretion in its two rulings. The Appellate Division reviews a trial court's decision denying a motion for relief from judgment for an abuse of discretion. Id. at 462. We in turn review the decisions of the Appellate Division de novo. Guam v. Yang, 850 F.2d 507, 511 (9th Cir.1988) (en banc).

II

Tenorio brought his motion to set aside the default judgment under Rule 55(c) of the Guam Rules of Civil Procedure. Like Fed.R.Civ.P. 55(c), Guam Rule 55(c) provides that "[f]or good cause shown, the court may set aside the entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)." (Emphasis added.) Just like Fed.R.Civ.P. 60(b), Guam Rule 60(b) permits the trial court to relieve a party from a final judgment for "mistake, inadvertence, surprise, or excusable neglect," or "fraud ..., misrepresentation or other misconduct of an adverse party."

Rulings on motions for relief from judgment brought pursuant to Fed.R.Civ.P. 60(b) are committed to the sound discretion of the trial court; accordingly, they are reviewed for an abuse of discretion. Thompson v. Housing Authority of the City of Los Angeles, 782 F.2d 829, 832 (9th Cir.), cert. denied, 479 U.S. 829, 107 S.Ct. 112, 93 L.Ed.2d 60 (1986). Because Guam R.Civ.P. 60(b) is identical to Fed.R.Civ.P. 60(b), we will apply Ninth Circuit law and review the Superior Court's denial of the motions for relief under the Guam provision for an abuse of discretion. Guam v. Yang, 850 F.2d at 512 n. 8 ("We interpret Guam statutory provisions that track ... Federal Rules ... in the same way that we interpret the Federal Rules.").

For the same reason, we will apply the same standard that we apply in reviewing a district court's decision to grant or deny a motion brought under Fed.R.Civ.P. 60(b) to reopen a default judgment in determining whether the trial court abused...