Hiatt v. Congoleum Industries, Inc.

• Decision Date: 27 September 1977
• Citation: 569 P.2d 567,279 Or. 569
• Parties: Wendell HIATT, Respondent, v. CONGOLEUM INDUSTRIES, INC., a Foreign Corporation, Appellant, KDL Investment Co., an Oregon Corporation, doing business under the assumed business name, Imperial Floors, Defendant.
• Court: Oregon Supreme Court

Page 567

569 P.2d 567

279 Or. 569

Wendell HIATT, Respondent, v. CONGOLEUM INDUSTRIES, INC., a Foreign Corporation, Appellant KDL Investment Co., an Oregon Corporation, doing business under the assumed business name, Imperial Floors, Defendant.

Supreme Court of Oregon, Department 2.

Argued and Submitted March 11, 1977.

Decided Sept. 27, 1977.

Graham M. Hicks, Portland, argued the cause for appellant. With him on the brief were Miller, Anderson, Nash, Yerke & Wiener and Richard A. Edwards, Portland.

Lee Omlid, Eugene, argued the cause for respondent. On the brief was Larry J. Anderson, of Anderson & Richmond, Eugene.

Before DENECKE, C. J., and BRYSON, LINDE and DAVIS, JJ.

DENECKE, Chief Justice.

Plaintiff brought this action alleging that floor covering he purchased did not properly adhere to the floor and plaintiff was required to replace it, to his damage. Plaintiff named as defendants Congoleum Industries, the manufacturer, Wanke Panel Co., the distributor, and K. D. L. Investment Co., the seller and installer. Wanke's demurrer was sustained and the case against it was dismissed. The jury returned a verdict in favor of KDL. A default judgment was entered against Congoleum, the trial court denied Congoleum's motion to set aside the default judgment, and Congoleum appeals. We reverse.

Congoleum asserts that the default against it must be set aside and judgment entered in its favor upon the reasoning stated in State ex rel. Everett v. Sanders, 274 Or. 75, 78, 544 P.2d 1043 (1976). Accord, Jones v. Jones, 276 Or. 1125, 1133, 557 P.2d 239 (1976). We held in those cases that where an action is brought against several defendants and an appearing defendant asserts a defense common to the other defendants, this defense, if successful, inures to the benefit of defaulting defendants. The result, then, is that final judgment must be entered in favor of the defaulting defendants.

The initial complaint alleged in the first cause of action that all the defendants were negligent. The second cause of action alleged that KDL breached an implied warranty and the third cause alleged KDL breached an express warranty. Wanke demurred upon the ground the complaint improperly united several causes of action; that is, the second and third causes of action were directed only at KDL and were based upon a transaction solely between plaintiff and KDL which was not the same transaction as that alleged in the first cause of action. The demurrer was sustained.

The sustaining of Wanke's demurrer does not afford a basis for setting aside the default against Congoleum. The principle of State ex rel. Everett v. Sanders, supra, 274 Or. 75, 544 P.2d 1043, is that the successful defense of one defendant inures to the benefit of a defaulting defendant only if the defense "goes to the whole right of the plaintiff to recover at all." State ex rel. Everett v. Sanders, supra, 274 Or. at 78, 544 P.2d at 1045, quoting from Bronn v. Soules, 140 Or. 308, 313, 11 P.2d 284, 13 P.2d 623 (1932). Wanke's defense was not of this kind. Its defense did not go to the merit of plaintiff's claim and if the defense had not been raised by demurrer it would have been waived. ORS 16.330.

Congoleum also contends that under the principle of State ex rel. Everett v. Sanders, supra, 274 Or. 75, 544 P.2d 1043, the defendant's verdict entered for KDL requires that the court set aside the default against Congoleum.

In State ex rel. Everett v. Sanders, supra, 274 Or. at 81, 544 P.2d at 1046, we stated that if the defaulting defendant "occupied exactly the same legal position as did the * * * (successful) defendants" the default must be set aside. For this case the principle perhaps can be more clearly stated, if the ground upon which the successful defendant prevailed would necessarily have caused the defaulting defendant to have prevailed, the default must be set aside.

To make this determination the pleadings in plaintiff versus KDL and plaintiff versus Congoleum must be examined. Plaintiff proceeded against KDL first on the theory of a warranty of implied fitness for a particular purpose and, second, on an express warranty. Both alleged warranties were that the floor covering was suitable and would adhere to a concrete surface. KDL alleged as an affirmative defense that plaintiff knew and was advised of the quality and properties of the floor covering purchased and knowingly made all decisions regarding the material to be purchased. KDL also alleged as an affirmative defense that plaintiff failed to give reasonable notice of a breach of warranty.

Plaintiff alleged against Congoleum that it negligently failed to supply instructions to Wanke to enable it to notify KDL that the floor covering was not suitable for use upon concrete. Plaintiff further alleged that Congoleum negligently failed to supply instructions to enable prospective customers to determine the proper use of this particular floor covering.

There was a general verdict in favor of KDL. The jury may have decided that there was a breach of warranty but that plaintiff failed to give reasonable notice. The jury may have found that KDL made no express or implied warranties or it may have found KDL had no way of knowing how the floor covering was to be used. We cannot find that because the jury found for KDL it necessarily would have found for Congoleum. Therefore, we cannot conclude that the default judgment against Congoleum must be set aside because of the jury verdict in favor of KDL.

Congoleum further contends that if it is not entitled to have the default judgment set aside and judgment entered in its favor, it is entitled to have the default judgment set aside, to file a responsive pleading, and to have a trial on the merits. Congoleum argues it is entitled to such relief because the default judgment was taken against it through "mistake, inadvertence, surprise or excusable neglect." ORS 18.160.

Plaintiff duly served Congoleum by personally serving the Corporation Commissioner and sending copies to Congoleum's office in New Jersey by certified mail. The certified letter was received and signed for by J. Fridy, an employee of Congoleum, on November 14, 1973. Congoleum made no appearance and did not ask for any extension of time within which to appear. In September 1974 plaintiff took an order of default against Congoleum. Immediately after the verdict was entered in favor of KDL plaintiff obtained a default judgment against Congoleum on January 22, 1976.

On February 2, 1976, Congoleum's legal department in New Jersey received a letter from plaintiff's attorney enclosing a copy of the default judgment and demanding payment. On February 19, 1976, Oregon attorneys, on behalf of Congoleum, filed a motion to set aside the default judgment. Affidavits were filed in support of the motion. In April the trial court denied the motion. The order states no findings, conclusions or reasons. The comments of the trial court during argument on the motion do not indicate on what ground it made its ruling.

The affidavits stated the following: J. Fridy retired from Congoleum in 1973 after 45 years of service with Congoleum. He had been mail supervisor and since retirement had occasionally worked in a relief capacity in the mailroom. His instructions were to forward any legal document to the legal department and it was his practice to do so. He was working in the mailroom when the postoffice records state the complaint in plaintiff's action was received, but he has no recollection of receiving it or any other like document.

A member of the legal department of Congoleum stated that he investigated in the legal department and other departments. No one in Congoleum had any knowledge of the lawsuit until he received the copy of the default judgment by mail from plaintiff's attorney. At that time he replied to plaintiff's attorney and turned the case over to the Oregon attorneys who subsequently filed the motion to set aside the default.

ORS 18.160 provides that the court "may, in its discretion, (set aside a default) taken against him" "through his mistake, inadvertence, surprise or excusable neglect."

The phrase in the statute, "in its discretion," is troublesome. That phrase has been part of the Oregon law since Deady's Civil Code, ch 1, § 100. Statutes of other states frequently also contain the term, "in its discretion." 1 Freeman, Judgments (5th ed), 573, § 290. Freeman writes:

"Under the uniform construction given to these statutes, the signification of the words 'at its discretion,' used in them, has been materially limited. The 'discretion' here referred to is not 'the power of acting without other control than one's own judgment.' 'It is not a mental discretion, to be exercised ex gratia, but is a legal discretion to be exercised in conformity to law." 1 Freeman, supra, at 576, § 291.

We have stated the same principle. In Wagar v. Prudential Ins. Co., 276 Or. 827, 833, 556 P.2d 658, 661 (1976), we quoted from an earlier case: " 'True, the grant of such relief rests within the discretion of the court, but the discretion here spoken of is an 'impartial discretion, guided and controlled in its exercise by fixed legal principles;' * * *." Thompson v. Connell, 31 Or. 231, 48 P. 467, 65 Am.St.Rep. 818 (1897).

In Washington County v. Clark, 276 Or. 33, 38, 554 P.2d 163, 165 (1976), in reversing an order denying a motion to vacate a default judgment, we quoted from Coleman v. Meyer, 261 Or. 129, 134, 493 P.2d 48 (1972):

"Our decision is in accordance with the further principle: ' * * * (T)he court's discretion is controlled by fixed legal principles and must not be exercised arbitrarily, but, rather, it should be exercised to conform with the spirit of the statute and not to defeat the ends of substantial justice."

Our recent decisions illustrate some of the "fixed legal principles" governing the trial court's discretion in passing upon motions to set aside default judgments.

If the facts are in...