Gilbert v. Stancorp Financial Group Inc.

• Decision Date: 30 December 2009
• Docket Number: 160804103.,A140136.
• Parties: Nanette GILBERT, Plaintiff-Appellant, v. STANCORP FINANCIAL GROUP INC., Defendant, and Standard Insurance Co., an Oregon corporation, Defendant-Respondent.
• Court: Oregon Court of Appeals

225 P.3d 71

233 Or. App. 57

Nanette GILBERT, Plaintiff-Appellant, v. STANCORP FINANCIAL GROUP INC., Defendant, and Standard Insurance Co., an Oregon corporation, Defendant-Respondent.

160804103.

A140136.

Court of Appeals of Oregon.

Argued and Submitted November 18, 2009.

Decided December 30, 2009.

George W. Kelly, Eugene, argued the cause and filed the briefs for appellant.

Jonathan W. Henderson, Portland, argued the cause for respondent. With him on the brief were Nicole M. Rhoades, Matthew R. Wiese, and Davis Rothwell Earle & Xochicua P.C.

Before LANDAU, Presiding Judge, and SCHUMAN, Judge, and ORTEGA, Judge.

SCHUMAN, J.

When defendant did not file a timely response to plaintiff's personal injury complaint and summons, plaintiff took a default judgment. On defendant's motion, the trial court set aside the judgment pursuant to ORCP 71 B(1)(a), which provides that the court "may relieve a party * * * from a judgment for * * * mistake, inadvertence, surprise, or excusable neglect." Plaintiff appeals, arguing that the court abused its discretion by providing relief to defendant. We affirm.

As we explain below, but state here in order to put the facts in context, the resolution of this case depends on whether the record contains evidence supporting the court's finding that defendant failed to file an answer because it mistakenly understood that, when plaintiff sought the default judgment, the parties were engaged in settlement negotiations.

Most of the facts are procedural and, except where noted, undisputed. Plaintiff's complaint alleged that she was injured when the front wheels of a grocery cart that she was pushing sank into a shallow pothole in a parking lot owned by defendant Standard Insurance Company. The alleged incident occurred on March 6, 2006. Some time thereafter, plaintiff's attorney filed a claim with defendant's insurer, One Beacon, and the claim was denied. On January 9, 2008, plaintiff's attorney and One Beacon's claims handler, Fleming, had a telephone conversation during which, according to Fleming's follow-up letter mailed the same day, Fleming reasserted One Beacon's "position that there is no liability on the part of our insured." The letter went on to request, however, that plaintiff's attorney send the insurer

"photos of the pothole in question * * * as well as all medical bills and records for [plaintiff] for my review. * * * Once I have received all material I will take another look at our liability position and we can discuss it again.

"I look forward to working with you to bring this claim to a resolution."

A few weeks later, as the statute of limitations neared, plaintiff's attorney sent Fleming a courtesy copy of the complaint he planned to file, along with the medical bills and records that Fleming had requested. He also requested that Fleming send him a copy of the medical bills that the insurer had paid on behalf of plaintiff. A week later, on February 21, 2008, plaintiff's attorney sent Fleming more medical records.

Two days later, plaintiff filed a complaint seeking $400,000 in damages and served the complaint and a summons on defendant's registered agent. The summons contained the following language:

"IN THE NAME OF THE STATE OF OREGON: You are hereby required to appear and defend the complaint filed against you in the above entitled cause within 30 days from the date of service of this summons on you; and if you fail to appear and defend, the plaintiff will apply to the court for the relief demanded in the complaint.

"Notice to defendant:

"READ THESE PAPERS CAREFULLY

"You must `appear' in this case or the other side will win automatically. To `appear' you must file with the court a legal paper called a `motion' or `answer' * * * within 30 days [as required by ORCP 7 C(2)]."

Thirty days passed with no response from defendant and no written notice from defendant that it intended to file an appearance. The lack of written notice relieved plaintiff of the requirement that she provide ten days' notice of her intent to seek an order of default, ORCP 69 A(1), and, in fact, she sought (ex parte) and received such an order on the thirty-third day. The default judgment was entered shortly thereafter, on April 23, 2008.

Nearly three months passed. Then, on July 16, defendant moved to set aside the default. In support of the motion, defendant submitted a two-page affidavit signed by Fleming, reciting the history of her correspondence with plaintiff's attorney and stating:

"Based on my conversations and dealings with [plaintiff's attorney], I understood that [he] would not seek a default against the defendant because he was continuing to evaluate his client's claim and he was not yet in a position to make a settlement demand.

"On March 11, 2008, I received a summons and Amended Complaint from the insured[.] At this time, due to my continuing dealings with [plaintiff's attorney], I understood that [he] did not require a responsive pleading and would not attempt to default the defendant. At this time I understood that [plaintiff's attorney] would continue to submit to me information relating to his client's medical issues and expenses, and would provide a settlement demand."

Plaintiff's attorney responded with a declaration stating, "At no time or in any manner did I state, suggest or imply to One Beacon or anyone else that I would not seek a default against the defendant." He also stated that all of his dealings with Fleming and her supervisor, even after the default judgment, had been cordial, and neither had "claimed that we had an arrangement, understanding or implicit bargain of any sort."

The court held a hearing on defendant's motion and heard the parties' arguments, but took no new evidence. It subsequently set aside the default judgment. The court did not make any express findings and did not set out its reasoning. This appeal ensued.

The court's authority to set aside a judgment derives from ORCP 71 B(1)(a):

"On motion and upon such terms as are just, the court may relieve a party or such party's legal representative from a judgment for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect[.]"

We review the court's decision to grant such relief for abuse of discretion. Litton and Char-Olé Ranch, Inc., 281 Or. 687, 690, 576 P.2d 369 (1978); Knox v. GenX Clothing, Inc., 215 Or.App. 317, 319, 168 P.3d 1251 (2007). Under that standard, we will affirm the court unless its decision is not within the range of lawful alternatives. State v. Rogers, 330 Or. 282, 312, 4 P.3d 1261 (2000). When the court's decision rests on factfinding, we are bound by the court's findings if they are supported by any evidence. Or. Const. Art. VII (Amended), § 3. Recognizing that a default judgment deprives a party of its "day in court," we liberally construe ORCP 71 B so as to avoid that result "when it can be done without doing violence to the regular disposition of litigation." National Mortgage Co. v. Robert C Wyatt, Inc., 173 Or.App. 16, 23-24, 20 P.3d 216, rev. den., 332 Or. 430, 30 P.3d 1183 (2001). One aspect of such liberal construction is that we view the facts in the light most favorable to the party seeking relief from default. Id. at 18, 20 P.3d 216. Further, we have granted relief from default under ORCP 71 B(1) when the defaulted party believed that settlement negotiations were pending, Mary Ebel Johnson, P.C. v. Elmore, 221 Or.App. 166, 169, 189 P.3d 35, rev. den., 345 Or. 301, 194 P.3d 147 (2008), and where the defaulted party was "surprised" because the adversary's taking of the default was contrary to the defaulted party's understanding that a settlement would...