Evans v. Brentmar, No. 97-1238-L-1; A110625.

• Decision Date: 05 February 2003
• Docket Number: No. 97-1238-L-1; A110625.
• Citation: 62 P.3d 847,186 Or. App. 261
• Parties: Robert M. EVANS and Margaret M. Evans, Appellants, v. Olafur E. BRENTMAR, Benjamin M. Erskine, and Terry M. Mitchell, Respondents.
• Court: Oregon Court of Appeals

62 P.3d 847

186 Or. App. 261

Robert M. EVANS and Margaret M. Evans, Appellants, v. Olafur E. BRENTMAR, Benjamin M. Erskine, and Terry M. Mitchell, Respondents.

Nos. 97-1238-L-1; A110625.

Court of Appeals of Oregon.

Argued and Submitted January 4, 2002.

Decided February 5, 2003.

Douglas J. Richmond, Medford, argued the cause for appellants. With him on the briefs was Kellington, Krack, Richmond, Blackhurst & Sutton, LLP.

Joel DeVore, Eugene, argued the cause for respondents. With him on the brief was Luvaas, Cobb, Richards & Fraser, P.C.

Before EDMONDS, Presiding Judge, and KISTLER and SCHUMAN,¹ Judges.

SCHUMAN, J.

Plaintiffs appeal from a judgment dismissing their claims and awarding damages, attorney fees, and costs to defendants on defendants' counterclaim. ORS 19.245(2)(b). The judgment, based on plaintiffs' default, was entered on June 1, 2000, "nunc pro tunc, as of April 8, 1998." Plaintiffs contend that the court erred in denying their motion to set aside the default judgment against them, in awarding attorney fees, and in entering the judgment nunc pro tunc. We hold that the court erred in awarding attorney fees and costs, in directing that the judgment be entered "nunc pro tunc, as of April 8, 1998," and in awarding interest from that date. In all other respects, we affirm.

Plaintiffs leased rural property in southern Oregon to defendants. Disputes arose. Plaintiffs accused defendants of failing to make agreed-on improvements, using the land for illegal activities, and not paying rent. Defendants, in turn, accused plaintiffs of making the land unusable by running a herd of cattle on it. On August 12, 1996, plaintiffs filed a forcible entry and detainer action (FED) against defendants, alleging a breach of the lease agreement. In the same month, defendants filed an answer with affirmative defenses and a counterclaim for damages and attorney fees, alleging that it was plaintiffs who had breached the lease. Three months passed without any response to defendants' counterclaim from plaintiffs, who, apparently, had left their residence in Ashland and moved to Utah. Finally, on November 25, 1996, plaintiffs filed an amended complaint adding a claim for breach of contract and seeking damages, attorney fees, and costs but still not responding to the counterclaim. On December 6, 1996, defendants filed an answer to the amended complaint, addressing only plaintiffs' new breach of contract claim. On the same day, defendants confessed judgment on the FED. The court entered an order requiring defendants to vacate the property at the end of the lease term, to pay rent, and to maintain insurance. The order did not address plaintiffs' breach of contract claim or defendants' counterclaim, instead postponing treatment of those claims to "a subsequent hearing, preferably through court-annexed arbitration * * * to be set up by Plaintiffs filing a pleading to set forth Plaintiffs' claims for damages."

The arbitration either did not occur or did not succeed, because after nine months, in September 1997, the court set a trial date for December and sent the parties a "Notice" of a pretrial hearing to be held on November 10. Under a caption in capital letters stating, "IMPORTANT NOTICE: PLEASE READ," the notice declared: "Failure to appear at the [pretrial hearing] indicated above at the time and place specified may result in an order being rendered against you in this case." Plaintiffs did not attend the hearing. Between November 19 and December 1, defendants sent several proposed orders of default to the trial court and to plaintiffs at their addresses in Ashland and Utah (plaintiffs' counsel had withdrawn in October 1997 and plaintiffs remained unrepresented for two years, until November 1999). After the last proposed order was sent, the trial court signed an order of default granting defendants the full amount prayed for in their counterclaim. The order was entered in the trial court register on December 9. It did not mention plaintiffs' claims for damages.

Another 10 weeks passed, and, on February 26, 1998, defendants submitted to the court, but not to plaintiffs, a statement of attorney fees. Thereafter, on April 9, 1998, the court entered a money judgment based on the default order of December 9, 1997, and awarded defendants damages, attorney fees, and costs. Like the order, the judgment did not mention plaintiffs' claim for damages.

Nineteen months passed without any word from plaintiffs. Finally, in September 1999, the trial court issued a writ of execution authorizing the Jackson County Sheriff to seize plaintiffs' property in satisfaction of the judgment against them. On November 8, the day before the sheriff's sale, plaintiffs, having retained counsel, tendered the full amount due to defendants and filed a motion to vacate and set aside the default order and judgment. Defendants, for their part, filed a satisfaction of judgment.

The hearing on plaintiffs' motion to set aside the default occurred on December 20, 1999. Plaintiffs raised several arguments attacking the default, principally that defendants had not provided them with "written notice of the application for an order of default at least 10 days * * * prior to entry of the order of default," as required by ORCP 69 A(1). The trial court denied plaintiffs' motion. Plaintiffs moved that the court reconsider and argued, for the first time, that the judgment of default was not final because it did not dispose of all claims against all parties and did not contain the necessary language ("an express determination that there is no just reason for delay") to make it final under ORCP 67 B. The court denied the motion to reconsider but agreed that the earlier April 1998 judgment was not final. To rectify that problem, the court, after several hearings, ultimately entered an amended judgment dismissing plaintiffs' original claim for damages, awarding damages and attorney fees to defendants on their counterclaim, and announcing that the judgment, although entered on June 1, 2000, was nunc pro tunc April 8, 1998.

We turn first to plaintiffs' argument that the trial court erred in denying their motion to set aside the default judgment. We review the denial of a motion to set aside a default for abuse of discretion, State ex rel. Johnson v. Bail, 140 Or.App. 335, 339, 915 P.2d 439 (1996),aff'd, 325 Or. 392, 938 P.2d 209 (1997) mindful, however, that the court has no discretion to act outside of legal standards. Plaintiffs' argument derives from ORCP 69 A(1), which describes the circumstances under which a party may obtain a default:

"When a party against whom a judgment for affirmative relief is sought has been served with summons pursuant to Rule 7 or is otherwise subject to the jurisdiction of the court and has failed to plead or otherwise defend as provided in these rules, the party seeking affirmative relief may apply for an order of default. If the party against whom an order of default is sought has filed an appearance in the action, or has provided written notice of intent to file an appearance to the party seeking an order of default, then the party against whom an order of default is sought shall be served with written notice of the application for an order of default at least 10 days, unless shortened by the court, prior to entry of the order of default. These facts, along with the fact that the party against whom the order of default is sought has failed to plead or otherwise defend as provided in these rules, shall be made to appear by affidavit or otherwise, and upon such a showing, the clerk or the court shall enter the order of default."

Plaintiffs contend that defendants had to notify them of the application for a default order 10 days before the order was entered and that defendants did not do so. They also contend that, even if they had adequate notice, they did not "fail[ ] to plead or otherwise defend." Their supposed failure, they argue, was based on their lack of response to defendants' counterclaim, but that counterclaim ceased to exist when defendants did not repeat it in their supplemental answer to plaintiffs' amended complaint. Therefore, according to plaintiffs, there was nothing to reply to, so they cannot default for failing to reply. Defendants counter that (1) plaintiffs were not entitled to notice; (2) even if they were, defendants properly and timely notified them; (3) defendants' amended answer did not abandon their counterclaim; and (4) because plaintiffs did not file a responsive pleading to that counterclaim as required by ORCP 13 B ("[t]here shall be a reply to a counterclaim denominated as such * * * "), they "failed to plead or otherwise defend" as required by ORCP 69 A(1) and therefore defaulted.

We begin with the issue of notice. Plaintiffs contend that they never received notice of the impending default as required by ORCP 69 A(1). Defendants respond that no notice was required and that, in any event, plaintiffs received notice. We need not decide if notice is or is not required because we agree with defendants' alternative argument: Plaintiffs received notice.

Plaintiffs maintain that "[t]here is no record indicating that an application for an order of default was ever served upon the Plaintiffs as required by ORCP 69 A." That is incorrect. On November 20, defendants' lawyer sent a letter to plaintiffs that stated:

"Within please find proposed Order of Default. I will forward to you that Order signed by the Court. Subsequently, a Judgment of Default will be entered and I will forward to you that document as well."

The record contains a certificate of service from defendants' lawyer dated November 20, 1997. The order of default was entered on December 9. Although the letter does not use the precise language of the rule—it does not recite that defendants are making an "application for an order of default"—it states that the draft order is a "proposed order of default." It clearly warns plaintiffs of...