Hochhalter v. Great Western Enterprises, Inc.

• Decision Date: 13 November 1985
• Docket Number: No. 85-48,85-48
• Citation: 708 P.2d 666
• Parties: A.C. HOCHHALTER and Ester R. Hochhalter, Appellants (Defendants), v. GREAT WESTERN ENTERPRISES, INC., a Wyoming Corporation, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 666

708 P.2d 666

A.C. HOCHHALTER and Ester R. Hochhalter, Appellants (Defendants), v. GREAT WESTERN ENTERPRISES, INC., a Wyoming Corporation, Appellee (Plaintiff).

No. 85-48.

Supreme Court of Wyoming.

Nov. 13, 1985.

John B. Rogers, Cheyenne, for appellants.

Frederick J. Harrison, Rawlins, for appellee.

Before THOMAS, C.J., ROSE, ^* ROONEY, BROWN and CARDINE, JJ.

ROSE, Justice.

This case involves the rendering of a judgment by default under Rule 55, W.R.C.P. Appellants contend that the district court abused its discretion in refusing to set aside the default judgment. They urge that the judgment should have been set aside pursuant to Rules 60(b)(6) and 55(b)(2), W.R.C.P., ¹ because the neglect of their counsel justified such relief and because they did not receive the notice required by Rule 55(b)(2). We hold that the trial court did not abuse its discretion in refusing to set aside the default judgment and that, under the facts of this case, appellants were not entitled to the notice contemplated by Rule 55(b)(2), for the reason that they had not appeared in the action.

We will affirm.

FACTS

As part of the consideration for a motel purchased from Great Western Enterprises, Inc., A.C. Hochhalter and Ester Hochhalter executed a promissory note for $44,000. On April 13, 1984, Great Western filed suit in district court in Wyoming alleging that the Hochhalters had defaulted on this note. Although the Hochhalters were properly served on April 26, 1984, they did not answer the complaint. On July 11, 1984, the clerk of court filed an entry of default and on July 13, 1984 the district court entered a judgment by default due to the Hochhalters' failure to answer, otherwise plead, or appear.

No further action was taken until October 1, 1984, when the Hochhalters moved to set aside the entry of default and default judgment, which motion the court denied on January 4, 1985. The Hochhalters have appealed from this order.

As grounds for the claim that they were entitled to have their motion to set aside granted, the Hochhalters rely on the following uncontroverted evidence. When they received the complaint, the Hochhalters contacted Dean Grossenbach, their attorney in Colorado. From April through August 1984 the Hochhalters' attorney continued to assure them that he was actively and aggressively pursuing their defenses against Great Western. It turns out, however, that Grossenbach was not pursuing their interests in this litigation. The first indication that he was representing appellants' interests in this case came on May 29, 1984, when Grossenbach called Great Western's attorney and requested a ten-day extension of time within which to file the answer that was already overdue. Grossenbach also telephoned plaintiff's attorney sometime between May 29 and June 8 representing that the answer had mistakenly been sent to Pueblo, Colorado, but that it had been returned and was being delivered to the correct court. In fact, no answer was ever filed.

Despite receiving notice that a judgment by default had been entered against them on July 13, 1984, the Hochhalters continued to rely upon Grossenbach's assurances that he was representing them. The Hochhalters later realized that Grossenbach was not, in fact, representing their interests and, sometime in August or September, they decided to seek new counsel. Finally, on October 1, 1984, the Hochhalters' newly retained counsel filed a motion to set aside the default.

In their motion to set aside the default, the Hochhalters argued that their failure to enter a formal appearance was due to the personal and psychological problems of Grossenbach. The Hochhalters also related that they had not received the three-day written notice of the application for default judgment as required by Rule 55(b)(2), supra n. 1. They urged that although no formal appearance had been made on their behalf, contacts between the parties had clearly demonstrated an intent to defend and they were therefore entitled to notice under Rule 55(b)(2).

Following a hearing on this motion, the district court found that the Hochhalters had been properly served and that the default judgment had been entered after the expiration of any extension and that there had not been any appearance entered either by the defendants or their counsel. The court also found that Grossenbach was grossly negligent in his representation of the Hochhalters. From these findings the court concluded:

"1. Neither the Defendants [n]or counsel for the Defendants appeared in the action, and the three (3) day notice provided for under W.R.C.P. 55(b) was not applicable.

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"4. The Defendants have not substantiated by adequate proof that relief from the Judgment for mistake, inadvertence, surprise, or excusable neglect is appropriate pursuant to WRCP 60(b).

"5. The Court finds there to be no other reason for excuse for the judgment."

ISSUES

Although worded differently, the Hochhalters (appellants) and Great Western (appellee) basically agree on the issues presented to this court. There are two.

1. Whether the court abused its discretion in refusing to set aside the default judgment under Rule 60(b), W.R.C.P.

2. Whether the appellants had appeared in the action and were thus entitled to the three-day written notice required by Rule 55(b)(2).

SETTING ASIDE THE DEFAULT JUDGMENT

Before we discuss the positions of the parties in this case, it will be helpful to summarize some of our past holdings concerning Rule 60(b), supra n. 1.

" * * * A motion under Rule 60(b), W.R.C.P. is addressed to the sound discretion of the court and must be clearly substantiated by adequate proof." Atkins v. Household Finance Corporation of Casper, Wyoming, Wyo., 581 P.2d 193, 195 (1978).

"Our review is limited to the question of whether the trial court abused its discretion" since the granting of relief under Rule 60(b)(6) is left to the court's discretion. U.S. Aviation, Inc. v. Wyoming Avionics, Inc., Wyo., 664 P.2d 121, 127 (1983). Finally, we have said:

" * * * The rule applies to special situations justifying extraordinary relief, but a showing of such exceptional circumstances should be made. A reversal of an order denying relief under Rule 60(b) will be ordered only if the trial court was clearly wrong." McBride v. McBride, Wyo., 598 P.2d 814, 816 (1979).

With these rules in mind we address appellants' claims.

Appellants contend that the neglect of counsel is a circumstance that we have recognized as justifying the setting aside of a default under Rule 60(b). Appellants argue that the trial court's finding of fact to the effect that their attorney was grossly negligent, together with their contention that the negligence "appears to have been as a result of personal problems or psychological disorders," justifies relief in this case. Although the Hochhalters concede that the denial of a Rule 60(b) motion lies within the sound discretion of the court, Annis v. Beebe & Runyan Furniture Company, Wyo., 685 P.2d 678 (1984), they urge that the trial court's discretion is not unbounded and that the provisions of Rule 60 are to be liberally construed. Gifford v. Casper Neon Sign Co., Inc., Wyo., 639 P.2d 1385 (1982).

Appellee Great Western Enterprises, Inc. agrees that the personal problems or psychological disorders of an attorney which cause him to neglect a case may represent a circumstance justifying relief under Rule 60(b). See Sanford v. Arjay Oil Company, Wyo., 686 P.2d 566 (1984). However, it is Great Western's contention that appellants failed to produce evidence to establish that the Hochhalters' original attorney did in fact have such personal problems.

We agree that appellants did not produce sufficient evidence of attorney Grossenbach's alleged personal or psychological problems. The only evidence presented on this question was the affidavit of A.C. Hochhalter in which he stated that Mr. Grossenbach had separated from his wife and had relocated in Colorado Springs, Colorado, sometime between February 1, 1984, and August 1, 1984. This statement is certainly not sufficient for this court to conclude that the trial court abused its discretion when it refused to find that the personal problems or psychological infirmities of Mr. Grossenbach were sufficient to justify relief under Rule 60(b)(6).

In Sanford v. Arjay Oil Company, supra, we relied, in part, on United States v. Cirami, 563 F.2d 26 (2nd Cir.1977), for the proposition that personal problems of a party's attorney which cause him to neglect a case may justify relief under Rule 60(b)(6). In United States v. Cirami the court originally upheld the trial court's refusal to set aside the default judgment pursuant to Rule 60(b)(6) on the ground that the defaulted party had not produced evidence establishing why his attorney had failed to represent their interests. Only after affidavits were presented, from the attorney and others, which showed that the attorney was suffering from a mental disorder which manifested itself in his failure to complete work promised and that he was seeing a psychiatrist during the time in which judgment was entered, did the court of appeals hold that there was sufficient evidence for relief under Rule 60(b)(6).

As the above clearly shows, a party is not entitled to relief under Rule 60(b)(6) merely because he alleges that personal problems or psychological disorders of his attorney were the cause of his failure to formally appear in an action. The defaulted party must present sufficient evidence to support his claim. Here the only evidence which supports the Hochhalters' claim is an affidavit from A.C. Hochhalter in which he states that Grossenbach separated from his wife and relocated his practice sometime between February and August, 1984. These bare statements are insufficient to justify relief under Rule 60(b)(6), and we cannot hold that refusing to grant relief under the rule in reliance upon this scanty evidence is sufficient to constitute an...