Hotel Last Frontier Corp. v. Frontier Properties, Inc.

Citation79 Nev. 150,380 P.2d 293
Decision Date03 April 1963
Docket NumberNo. 4542,4542
PartiesHOTEL LAST FRONTIER CORPORATION, a corporation, Appellant, v. FRONTIER PROPERTIES, INC., a corporation, Respondent.
CourtSupreme Court of Nevada

G. William Coulthard and Franklin N. Smith, Las Vegas, for appellant.

Calvin C. Magleby, Las Vegas, for respondent.

THOMPSON, Justice.

Did prejudicial error occur when the district court refused to set aside the default judgment entered below? The appeal presents this question.

Frontier Properties, Inc. sought a declaratory judgment as to the correct construction to be given certain provisions of a lease and agreement executed concurrently between it, as lessee, and Hotel Last Frontier Corporation as lessor. It alleged the existence of a genuine controversy between the parties with respect to such provisions. Process was served February 19, 1962. Default was entered March 20, 1962. Proof was presented to the court and judgment entered on March 26, 1962. One day later, the defendant, Hotel Last Frontier Corporation, filed a motion to set aside the default judgment, asserting mistake, inadvertence, surprise and excusable neglect, NRCP 60(b)(1), 1 supporting same with the affidavit of counsel and annexing the answer to be filed should its motion be granted. 2 Its motion was denied and the judgment permitted to stand.

Over the years this court has frequently expressed itself as to a district court's exercise of discretion in either setting aside a default judgment or refusing to do so. See (1) cases where a default judgment was set aside and the ruling affirmed on appeal: Howe v. Coldren, 4 Nev. 171; State of Nevada v. Consolidated V. & C. M. Co., 13 Nev. 194; Bowman v. Bowman, 47 Nev. 207, 217 P. 1102; Cicerchia v. Cicerchia, 77 Nev. 158, 360 P.2d 839; Blakeney v. Fremont Hotel, Inc., 77 Nev. 191, 360 P.2d 1039; Anderson v. Havas, 77 Nev. 223, 361 P.2d 536; (2) cases where a default judgment was set aside and the ruling reversed on appeal; Haley v. Eureka Co. Bank, 20 Nev. 410, 22 P. 1098; Esden v. May, 36 Nev. 611, 135 P. 1185; Lukey v. Thomas, 75 Nev. 20, 333 P.2d 979; Kelso v. Kelso, 78 Nev. 99, 369 P.2d 668; (3) cases where the default judgment was not set aside and the ruling affirmed on appeal: Harper v. Mallory, 4 Nev. 447; Guardia v. Guardia, 48 Nev. 230, 229 P. 386; Bryant v. Gibbs, 69 Nev. 167, 243 P.2d 1050; (4) cases where the default judgment was not set aside and ruling reversed on appeal: Evans v. Cook, 11 Nev. 69; Horton v. New Pass Gold & Silver Min. Co., 21 Nev. 184, 27 P. 376; Stretch v. Montezuma M. Co., 29 Nev. 163, 86 P. 445; Baumann v. Nevada Colony Corp., 44 Nev. 10, 189 P. 245; Wagner v. Anderson, 63 Nev. 453, 174 P.2d 612.

The divergent results of the cited cases are, in the main, explainable because of the different facts involved. The general principle of review here to be applied is that the lower court's exercise of discretion will not be disturbed in the absence of an abuse. Blakeney v. Fremont Hotel, Inc., 77 Nev. 191, 360 P.2d 1039; Bryant v. Gibbs, 69 Nev. 167, 243 P.2d 1050. To recognize that judicial discretion may be abused is to acknowledge the existence of limits within which the exercise of discretion must occur. In Goodman v. Goodman, 68 Nev. 484, 489, 236 P.2d 305, 307, it is stated: 'Yet even within the area of discretion where the court's discernment is not to be bound by hard and fast rules, its exercise of discretion in the process of discernment may be guided by such applicable legal principles as may have become recognized as proper in determining the course of justice. A clear ignoring by the court of such established guides, without apparent justification, may constitute abuse of discretion.'

What guides have been announced to indicate the course of action to be taken by the court in deciding the question here presented? We shall mention some of them. (1) The showing required by NRCP 60(b)(1), formerly NCL 8640, of mistake, inadvertence, surprise, or excusable neglect, singly, or in combination, must, of course, be made. Blundin v. Blundin, 38 Nev. 212, 147 P. 1083. What facts will establish the existence of one or more of the specified conditions is largely discretionary. Yet, guides have been declared. Prompt application to remove the judgment is a persuasive factor. Howe v. Coldren, 4 Nev. 171; likewise, the absence of an intent to delay proceedings, Blakeney v. Fremont Hotel, Inc., 77 Nev. 191, 360 P.2d 1039; Anderson v. Havas, 77 Nev. 223, 361 P.2d 536. The lack of knowledge of the party or counsel as to procedural requirements has been given weight, Cicerchia v. Cicerchia, 77 Nev. 158, 360 P.2d 839. Good faith is significant. Haley v. Eureka Co. Bank, 20 Nev. 410, 22 P. 1098. (2) The showing required by case precedent that a 'meritorious defense' exist to the claim for relief asserted, also must be made. The total absence of such a showing has defeated the movant's application to set aside the judgment. Kelso v. Kelso, 78 Nev. 99, 369 P.2d 668; Guardia v. Guardia, 48 Nev. 230, 229 P. 386; Lukey v. Thomas, 75 Nev. 20, 333 P.2d 979. The method employed to satisfy this requirement is a matter concerning which prior decisions of this court have not been in harmony. For example, in Howe v. Coldren, 4 Nev. 171, the affidavit of counsel that the defendant 'has a good, legal and meritorious defense,' without more, was frowned upon in the absence of an averment that the affiant was familiar with the facts of the case. See also State of Nevada v. Consolidated V. & C. M. Co., 13 Nev. 194, and in Esden v. May, 36 Nev. 611, 135 P. 1185, the affidavit of counsel that 'affiant is advised and believes that the defendants have a meritorious and perfect defense' was rejected as insufficient, and counsel was not permitted to testify as to what his clients had informed him as to the nature of their defense, the court apparently being of the view that only the client could so testify. Yet, later in Bowman v. Bowman, 47 Nev. 207, 217 P. 1102, the court, citing Howe but ignoring Esden, said '[w]e perceive no reason why the attorney could not make the affidavit as well as the defendant, if he [is] familiar with the facts * * *.' In Baumann v. Nevada Colony Corp., 44 Nev. 10, 189 P. 245, the party made the affidavit asserting that he had stated the facts to his attorneys and had been advised that a meritorious defense existed. In addition, a verified answer was submitted with the motion. Cf. Wagner v. Anderson, 63 Nev. 453, 174 P.2d 612, where the facts constituting the claimed defense were specifically set forth.

Because of such lack of harmony, we deem it proper to announce our view regarding acceptable procedures to satisfy the requirement that a 'meritorious defense' be shown. They are: (1) the fact testimony or affidavit of one possessing testimonial qualifications, which factual information, if true, would tend to establish a defense to all or part of the claim for relief asserted; or (2) the opinion of counsel for a party, based upon facts related to him (without setting forth such facts), that a meritorious defense exists to all or part of the claim for relief asserted; or (3) the tendering of a responsive pleading in good faith, with the moving papers, which responsive pleading, if true, would tend to establish a meritorious defense to all or part of the claim for relief asserted; or (4) any combination of the above.

(3) Finally we mention, as a proper guide to the exercise of discretion, the basic underlying policy to have each case decided upon its merits. In the normal course of events, justice is best served by such a policy. Because of this policy, the general observation may be made that an appellate court is more likely to affirm a lower court ruling setting aside a default judgment than it is to affirm a refusal to do so. In the former case a trial upon the merits is assured, whereas in the latter it is denied forever. The court's language in the early case of Howe v. Coldren, 4 Nev 171, 175-176, is especially apt: 'Running over the New York digest, we find several cases where the appellate court has held that it would reverse the ruling of a nisi prius court in refusing to set aside a default; but we do not see a reference to a single case where an order setting aside a default has been reversed. Certainly there are strong reasons why an appellate court should interfere in the one case and not in the other. If there is a refusal to set aside a default, a ruinous judgment may be sustained against a party who, upon hearing, might have interposed a perfectly good defense. By sustaining the default, he would forever be debarred the right of a hearing. If, then, a nisi prius court refuses to set aside a default when a party shows with reasonable certainty that he has a good defense, and he has only been guilty of carelessness and inattention to his business, but no willful or fraudulent delay, it would be highly proper even for an appellate court to...

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