Miranda v. Contreras, 98-CV-1160.

• Decision Date: 18 May 2000
• Docket Number: No. 98-CV-1160.,98-CV-1160.
• Parties: Fernando E. MIRANDA, Appellant, v. Pedro CONTRERAS, Appellee.
• Court: D.C. Court of Appeals

754 A.2d 277

Fernando E. MIRANDA, Appellant, v. Pedro CONTRERAS, Appellee.

No. 98-CV-1160.

District of Columbia Court of Appeals.

Argued April 13, 2000.

Decided May 18, 2000.

Richard K. Green, Rockville, MD, for appellant.

Henry A. Escoto, Washington, DC, for appellee.

Before SCHWELB and RUIZ, Associate Judges, and KING, Senior Judge.

RUIZ, Associate Judge:

Appellant, Fernando E. Miranda, appeals from the entry of an adverse default judgment in the amount of $15,643.26. Miranda argues that the trial court abused its discretion by refusing to set aside the default judgment without first holding a hearing to inquire into the factual dispute over whether Miranda was served properly with the summons and complaint and whether assurances were made by opposing counsel that he would agree to consent to striking the default in the event that settlement negotiations were unsuccessful. Given the law's preference for resolution on the merits rather than by default, we agree that on the facts of this case a hearing is necessary to resolve the parties' contrary factual allegations. Accordingly, we remand for a hearing, findings of fact and conclusions of law concerning counsel's representations and, if necessary, on whether Miranda was properly served with process.¹

Factual Summary

Appellee, Pedro Contreras, commenced this action by filing a complaint in the Superior Court for the District for Columbia on October 28, 1997. The complaint, styled as an action for "Unjust Enrichment," alleges that Miranda and Contreras "entered into a binding contract on or about May 5, 1995," in which Contreras would "loan [Miranda] the sum of $49,963.26 to develop a business venture known as the El Chaparrastique Restaurant" in return for consideration in the form of a partnership in the restaurant.² According to allegations in the complaint, the contract was subsequently modified by written agreement between the parties and provided for the repayment of the $49,963.26 to Contreras. The modified written agreement states that Contreras loaned Miranda the money to open the restaurant and, having paid Contreras the sum of $3,000, Miranda would repay the balance in eighteen monthly payments of $2610.00. Miranda allegedly made eleven such payments and then discontinued the payments.

A notarized affidavit of service stating that Miranda was personally served at his Maryland address with a copy of the summons, complaint and initial order on November 8, 1997, was filed with the court on November 10, 1997. No response to the complaint having been filed, the clerk's office entered a default against Miranda on December 18, 1997, pursuant to Superior Court Civil Rule 55(a). On February 17, 1998, counsel for Contreras filed a "Motion for Judgment and Request for Ex Parte Proof Hearing." On February 26, 1998, Miranda filed an "Opposition to Motion for Judgment and Motion to Set Aside Default," accompanied by a verified "Answer and Counterclaim."

Miranda's opposition to the motion for judgment, signed by Miranda's counsel, Richard K. Green, recounted that Miranda hired the attorney on December 2, 1997, and represented that the summons and complaint had been found between the main door and the storm door of Miranda's residence. The motion further averred that on December 3, 1997, Mr. Green contacted Contreras' counsel, Henry A. Escoto, informing Mr. Escoto that service was insufficient and requesting documentary evidence of Contreras' claims in hope of a prompt resolution of the claims. On December 19, 1997, Mr. Green notified Mr. Escoto that he would be out of the area for the Christmas holidays and requested an extension of time to answer the complaint until after the first of the year when settlement discussions might moot the necessity of filing an answer. Mr. Green was notified by Mr. Escoto on January 5, 1998, that a default had been entered in the case, at which time Mr. Escoto allegedly agreed to consent to the striking of the default if settlement negotiations were unsuccessful. According to Miranda's motion, thereafter, when the parties were unable to agree on settlement terms, Mr. Escoto refused to enter into the agreed-upon consent motion and instead filed Contreras' motion for judgment.

The verified "Answer and Counterclaim," signed and "duly sworn on oath" by Miranda, avers "insufficiency of process" as Miranda's first defense: "The complaint was found laying in front of the defendant's front door by the defendant's wife." The answer pleads numerous defenses, including duress, supported by an allegation that "[t]he plaintiff publicly communicated a threat to kill the defendant if he did not agree to pay money to the plaintiff."

On March 23, 1998, the trial court docketed an order granting judgment to Contreras in the amount of $18,270.00 without a hearing. On March 31, 1998, Miranda moved the court to alter, amend or vacate the judgment, repeating the "representation by the plaintiff's counsel that he consented to setting aside the default if settlement were not reached." In response, Contreras' "Opposition to Defendant's Motion to Alter, Amend or Vacate," signed by Mr. Escoto, does not claim directly that no such representation was made, only that Mr. Green's "allegations are without merit," apparently because "[a]t no time did undersigned counsel advise, persuade, encourage or suggest to Defendant's counsel not to respond to the complaint." On May 1, 1998, the court entered an order leaving the default intact but vacating the judgment pending an ex parte proof hearing on the issue of damages. On June 12, 1998, the court held an ex parte proof hearing on damages and thereafter judgment was entered in favor of Contreras in the reduced sum of $15,643.26.

Analysis

I. Setting Aside the Default Judgment

"The ruling on a motion to vacate default judgment is within the sound discretion of the trial judge." Dunn v. Profitt, 408 A.2d 991, 992 (D.C.1979). However, we have often noted that "[a] strong judicial policy favors deciding cases on their merits rather than by default judgment." Hawkins v. Lynnhill Condominium Unit Owners Ass'n, 513 A.2d 242, 244 (D.C.1986) (per curiam). "Where a timely motion is made to vacate a default judgment, the policy of favoring trial on the merits will often justify reversal where even a slight abuse of discretion has occurred in refusing to set aside a judgment." Dunn, 408 A.2d at 993. "In exercising its discretion, the trial court must choose what is right and equitable under the circumstances and the law and state the reasons which support its conclusion." Firemen's Ins. Co. v. Belts, 455 A.2d 908, 909 (D.C.1983) (per curiam) (internal quotation omitted).

A. Rule 60(b)(6)

Superior Court Civil Rule 60(b) provides that "the Court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for ... (6) any other reason justifying relief from the operation of the judgment." Super. Ct. Civ. R. 60(b)(6). Miranda argues that the default judgment should have been set aside under Rule 60(b)(6) because he has demonstrated good cause for the failure to file an answer or other responsive document; namely, that the parties promptly and in good faith engaged in negotiations and that Contreras' counsel agreed to consent to striking of the default if settlement negotiations were unsuccessful. "Rule 60(b)(6) is properly invoked in extraordinary circumstances or where a judgment may work an extreme and undue hardship," but is "not narrowly defined." Starling v. Jephunneh Lawrence & Assocs., 495 A.2d 1157, 1161 (D.C. 1985). In order to determine whether to set aside a default judgment, the court considers the following factors: whether the movant 1) had actual notice of the proceeding; 2) acted in good faith; 3) presented an adequate prima facie defense; and 4) acted promptly. See Dunn, 408 A.2d at 993

.

It is the trial court's "responsibility to inquire where matters are raised which might entitle the movant to relief under Rule 60(b)." Starling, 495 A.2d at 1162. In the present case "the record fails to show that the trial judge even considered these factors, despite their applicability." Dunn, 408 A.2d at 993. In Miranda's "Opposition to Motion for Judgment and Motion to Set Aside Default," and again in Miranda's "Motion to Alter, Amend or Vacate Judgment," Mr. Green indicated that "[p]laintiff's counsel agreed to consent to striking the default if settlement negotiations were unsuccessful." Mr. Escoto, for his part, appears to have generally denied that Mr. Green was misled.³ In the appellate brief and at oral argument, Mr. Escoto has stated that he made no such representation as alleged. The trial court did not inquire into, and the record is silent as to whether it considered, counsels' discussions in rejecting Miranda's opposition to entry of judgment. With respect to Miranda's motion to set aside the default, the trial court noted only that the "alleged `motion' included in the opposition ... was not properly before the court," apparently because it was not filed separately from the opposition to entry of judgment. There is also no indication that the trial court considered, or, if so, how it resolved, counsels' conflicting allegations in the order denying in part Miranda's motion to alter, amend or vacate the judgment, which was properly presented to the court.⁴ Although Miranda's counsel concedes that he could have filed a paper with the court once he was on notice of the attempted service so as to prevent the original default,⁵ we nevertheless believe that a judgment secured by misrepresentations by one counsel to another is an "extraordinary circumstance" warranting relief under Rule 60(b)(6). See, e.g., D.C. Prof'l. Conduct R. 8.4 (2000) ("It is professional misconduct for a lawyer to: ... (c) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation[ ]...."); D.C. Bar Voluntary Standards for Civility in Prof'l. Conduct ¶ 6 (2000) ("While we...