Gifford v. Casper Neon Sign Co., Inc.

• Decision Date: 08 February 1982
• Docket Number: No. 5534,5534
• Citation: 639 P.2d 1385
• Parties: Maxine GIFFORD, dba The Closet, Appellant (Defendant), v. CASPER NEON SIGN CO., INC., a Wyoming corporation, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 1385

639 P.2d 1385

Maxine GIFFORD, dba The Closet, Appellant (Defendant), v. CASPER NEON SIGN CO., INC., a Wyoming corporation, Appellee (Plaintiff).

No. 5534.

Supreme Court of Wyoming.

Feb. 8, 1982.

Michael K. Shoumaker of Badley, Rasmussen & Shoumaker, Sheridan, for appellant.

John Burk and Cherie Shelton Norman, Casper, for appellee.

Before ROSE, C. J., and RAPER, THOMAS, ROONEY and BROWN, JJ.

THOMAS, Justice.

The issue to be resolved in this case is the nature of the showing of a meritorious defense which must be made under Rule 60(b), W.R.C.P., ¹ in order to obtain relief from a judgment based upon a cognovit clause in a contract. The district court held that the appellant failed to make a sufficient showing. Under our previously articulated requirements for review of an order denying relief under Rule 60(b), we consider only whether the district court committed an abuse of discretion. We shall hold that in the circumstances of this case there was an abuse of discretion, and we shall reverse the district court.

This case is before us for a second time. The essential facts are set forth in Gifford v. Casper Neon Sign Co., Wyo., 618 P.2d 547 (1980), and they need be summarized only briefly here. The appellant, Maxine Gifford, did enter into a contract with the Casper Neon Sign Company. The contract required monthly payments for a period of five years; and the appellee, Casper Neon Sign Company, Inc., agreed to furnish a sign during that period. Upon default, payments under the lease were accelerated, and the lease contained a cognovit provision which reads as follows:

"In the event of any breach of this Lease Agreement by him, Lessee and each of them, hereby authorize and empower any attorney at law to appear for them or any of them, before any court of competent jurisdiction, whether or not said court is a court of record, within the State of Wyoming, or elsewhere and the Lessee, and each of them, thereby expressly waive the issuance and service of process and authorize any attorney at law duly admitted to practice before said court to confess judgment against them, or all or any of them, in favor of the Lessor, for the amount then unpaid, including attorneys fees and all other expenses therein provided for, and to release all error and waive all right and benefit of an appeal on behalf of the Lessee and to consent to the immediate issuance of execution. The venue of any said suit or action may, at the option of the Lessor, be laid in Natrona County, State of Wyoming."

Relying upon this provision, the appellee obtained a judgment against the appellant in the amount of $4,678.06, which included $750.00 in attorney's fees.

In our earlier case the appellant here appealed from that judgment, urging the unconstitutionality of the cognovit provision in the lease. We there held that there was no constitutional infirmity manifested by the record with respect to the cognovit provision in the lease, and the judgment was affirmed except for that portion relating to attorneys' fees. This court remanded the case to the district court with instructions that it was necessary for the appellee to establish the attorneys' fees and the reasonableness of those fees by appropriate evidence. Relying upon our earlier decision in Westring v. Cheyenne National Bank, Wyo., 393 P.2d 119 (1964), we did indicate that the appellant had an avenue for relief in pursuing a motion under Rule 60(b), W.R.C.P., to reopen the judgment.

After this court's opinion in the prior case was filed the appellant did file a Motion to Vacate the Judgment. This motion was filed pursuant to Rule 60(b), W.R.C.P., and the grounds for relief there set forth were stated as follows:

"1. That it is unconstitutional under the Federal Constitution-Fourth Amendment

"2. That it is unconstitutional under the Constitution of the State of Wyoming, Article I, Section 8 and Article I, Section 6

"3. That a contract providing Confession of Judgment is unconscionable

"4. That the court lacked jurisdiction"

At the same time there was filed the original of an Affidavit by the appellant reciting as follows "I, Maxine Gifford being first duly sworn do depose and say:

"1. That I am a resident of Sheridan County, Wyoming.

"2. That I have a high school education and I am a hairdresser as a profession.

"3. That on September 9, 1976, I signed a contract with Casper Neon Sign Co. None of the provisions related to a Confession of Judgment were explained or understood by me. (See a copy of the contract attached hereto and incorporated by reference).

"4. That I have substantive counterclaim because Casper Neon Sign Company would not keep the sign in working order. This matter was being negotiated in 1979 by my attorney, Bruce Badley, who corresponded with Casper Sign Company.

"5. That I was unaware of any lawsuit until May 22, 1980, when my attorneys received a copy of the Judgment.

"6. That at no time did I knowingly waive my rights to a hearing or to assert my counterclaim."

In addition the appellant filed a memorandum of law in support of the Motion to Vacate Judgment.

After the case had been remanded to it the district court held a hearing upon the motion to reopen the judgment which had been submitted by the appellant, and at that hearing it also heard evidence with respect to the attorneys' fees. Insofar as is pertinent, the decision letter of the district court which is in the file states with respect to the issues posed by this appeal:

"Defendant has now moved under 60(b) with defendant's own affidavit in support, and submits an argument on unconstitutionality and unconscionability.

"The Court concludes that the requirements of 60(b) for setting aside judgment are not met. Practice, primarily federal, requires a showing of meritorious defense, strongly suggesting movant should set forth the pleading he would serve if permitted.

"In this case the proposed defense (or counterclaim) is merely suggested in broad terms: affidavit, paragraph 4 '... I have substantive counterclaim because Casper Neon Sign Company would not keep the sign in working order'. No demand on defendant, nor plaintiff response is shown, nor whether prolonged default preceded or accompanied the alleged lack of maintenance. There is of course no formal pleading set out. I concluded this does not constitute meritorious defense shown. Motion denied.

"The Court regards the showing attempted by defendant as insufficient to establish a possibility of unconstitutionality or unconscionability, but more fundamentally, these issues are not reached since the application to reopen under 60(b) is denied."

Thereafter the court entered its Order, which denied the Motion to Vacate Judgment, and entered an Amended Judgment with respect to attorneys' fees, which Amended Judgment was in favor of the appellee and against the appellant for the debt due under the contract, including adjusted attorneys' fees. This judgment continues, of course, to be premised upon the cognovit clause in the contract.

The appellant manifests a dedicated commitment to establishing the unconstitutionality of the cognovit provision in the lease. Because of her approach we are not persuaded that appellant heard, and if she did hear she apparently has chosen not to heed what this court said previously with respect to the constitutional issue. The appellant's statement of the issues on appeal is as follows:

"I. STATE ACTION TO ENFORE (sic) A COGNOVIT PROVISION IS UNCONSTITUTIONAL IN CIRCUMSTANCES SIMILAR TO MRS. GIFFORD' S BECAUSE OF THE FOURTEENTH AMENDMENT TO THE UNITED STATES CONSTITUTION.

"II. STATE ACTION TO ENFORCE A COGNOVIT PROVISION UNDER THE CIRCUMSTANCES OF THIS CASE ARE (sic) UNCONSTITUTIONAL.

"A. Enforcement Of This Cognovit Contract Violates Article 1, Section 6 of the Wyoming Constitution "B. Enforcement Of This Cognovit Contract Violates Article 1, Section 8 of the Wyoming Constitution

"III. THE CONTRACT PROVISIONS CONCERNING CONFESSION OF JUDGMENT AND CHANGE OF VENUE ARE UNCONSCIONABLE."

Appellee makes the following statement of the issues:

"I. The trial court did not abuse its discretion in denying the appellant's Rule 60(b) Motion.

"II. The Fourteenth Amendment to the United States Constitution does not preclude state action to enforce a cognovit provision under the facts presented.

"III. The Wyoming Constitution does not preclude the enforcement of cognovit provision under the facts presented.

"A. Enforcement of the cognovit provision does not violate Article 1, Section 6 of the Wyoming Constitution.

"B. Enforcement of the cognovit provision does not violate Article 1, Section 8 of the Wyoming Constitution.

"IV. The contract provision concerning confession of judgment and change of venue are (sic) not unconscionable."

We note that it is only the appellee that raises the question of abuse of discretion by the trial court in denying the motion submitted pursuant to Rule 60(b), W.R.C.P. Nevertheless, we shall consider what showing must be made of a meritorious defense in order to demonstrate an entitlement to relief from a cognovit judgment under Rule 60(b), W.R.C.P. We shall do this in the context of an abuse of discretion by the trial judge.

It must be remembered that the issue in an appeal from an order denying relief under Rule 60(b), W.R.C.P., is rather severely limited. Paul v. Paul, Wyo., 631 P.2d 1060 (1981); McBride v. McBride, Wyo., 598 P.2d 814; Atkins v. Household Finance Corporation of Casper, Wyoming, Wyo., 581 P.2d 193 (1978); Martellaro v. Sailors, Wyo., 515 P.2d 974 (1973); Turnbough v. Campbell County Memorial Hospital, Wyo., 499 P.2d 595 (1972); and Kennedy v. Kennedy, Wyo., 483 P.2d 516 (1971). In McBride v. McBride, supra, at 816, the court described the limitations upon the appeal in this language:

" * * * An order denying relief under our Rule 60(b) is appealable, but proceeding under the rule is not to be regarded as a substitute for an appeal. Since the granting of relief pursuant...