Nevada Indus. Guaranty Co. v. Sturgeon

• Decision Date: 08 May 1964
• Docket Number: No. 4701,4701
• Citation: 391 P.2d 862,80 Nev. 254
• Parties: NEVADA INDUSTRIAL GUARANTY CO., a Nevada corporation, Appellant, v. Linda STURGEON, dba the Motor Mart, Respondent.
• Court: Nevada Supreme Court

Page 862

391 P.2d 862

80 Nev. 254

NEVADA INDUSTRIAL GUARANTY CO., a Nevada corporation, Appellant, v. Linda STURGEON, dba the Motor Mart, Respondent.

No. 4701.

Supreme Court of Nevada.

May 8, 1964.

Babcock & Sutton, Las Vegas, for appellant.

Carl F. Martillaro, Carson City, for respondent.

BADT, Chief Justice.

Respondent caused a default judgment to be entered against appellant upon respondent's complaint for damages for breach of contract. The only question presented to this court is whether the court below abused its discretion in denying appellant's motion to set aside the default judgment.

Personal service was made on defendant May 7, 1963, by service on its resident agent, Howard Babcock, in Clark County, Nevada. Babcock, on that date, forwarded the summons and complaint to the appellant and informed it that it had 20 days within which to answer the complaint. ¹ On May 28, one day after the expiration of such statutory period of 20 days for appearance, the appellant contacted Babcock and inquired as to the status of the action. Babcock informed the appellant that he had been under no instructions to act in the case on its behalf. However, he immediately telephoned Martillaro, counsel for respondent, and informed him that by reason of a federal court order entered May 7, 1963, approving appellant's petition for a Chapter X Reorganization, 11 U.S.C.A. § 548, the state court action was stayed. Babcock also asserts that he inquired of Martillaro as to the status of the action and that Martillaro indicated that no default had been taken and that respondent would prosecute her claim in the federal court action. This was denied by Martillaro, who stated that he had made no such representation and that the only matter that transpired over the telephone was Babcock's statement concerning the effect of the federal court order. Babcock wrote Martillaro a letter confirming their conversation. The letter was brief, and we quote it here:

'This will confirm our telephone conversation of this date, concerning the above matter, at which time I advised that on May 7, 1963 the United States District Court for the District of Nevada entered it's Order approving the petition of Nevada Industrial Guaranty, Co. Enclosed please find thermofax copy of said Order.

'As you know, the entry of this Order stays all pending litigation affecting the debtor.'

It is immediately apparent that the letter contained no mention of any representation by Martillaro that respondent would prosecute her claim in the federal court.

Although Babcock's affidavit stated that Martillaro had said on the phone on May 28 that nothing was on file with the exception of the complaint and summons and that no default had been taken, this is likewise flatly denied by Martillaro. Babcock says that he further advised Martillaro that he had been retained for the purpose of the Chapter X proceedings, and further that the defendant corporation had a branch office in Reno and retained counsel for certain purposes in the conduct of its business in the northern part of the state. Martillaro's affidavit states that Babcock 'informed me that he was the attorney for the defendants.' Martillaro stated in his affidavit that he had made no representation that no default had been taken, nor that he would dismiss the state action and file his claim in the bankruptcy proceedings.

The corporation's default was entered May 28, 1963, and judgment was entered July 2, 1963, and notice of judgment served on Babcock August 5, 1963. On August 12, 1963, appellant moved to set aside the default judgment upon the grounds of 'mistake, inadvertence, surprise and excusable neglect of counsel for said defendant as provided for in Rule 60(b)(1)' NRCP. It was supported by Babcock's affidavit as heretofore recited, and by submission on September 6, 1963 (the day the motion was heard), of an answer and cross-complaint. Martillaro, in addition to his affidavit, testified that the full extent of the conversation was Babcock's information that he was attorney for the defendants; that on May 7 he had received the summons and complaint and filed a petition in bankruptcy and advised that the entry of the May 7 order by the federal court stayed all state litigation affecting the debtor; that 'there was no talk at all concerning the taking of a default or the non-taking of a default. He merely informed me he had filed the bankruptcy petition and under the law all proceedings were stayed. If he was under this impression I was not going to disenchant him, Your Honor.' The court, in denying the motion, said: 'Counsel delayed for over a month after entering the default before bringing the matter on for hearing. It was only after judgment and sometime after that, that either counsel or the defendant attempted to do something. In other words they just sat back and sweat it out until execution was issued. I don't think that is a mistake, inadvertence, surprise or excusable neglect. The motion to set aside the default judgment is denied.'

In denying the motion to set aside the default judgment the trial court necessarily based this on implied factual determinations of the disputed facts as above recited. Such factual determinations would include the following: that Martillaro did not represent to Babcock that he, Martillaro, would prosecute plaintiff's claim in the federal court proceedings; that Martillaro did not state that no default had been taken, nor did he imply that no default would be taken; that Babcock was not the attorney for the defendants in the instant case, but represented Nevada Industrial Guaranty Co. in the bankruptcy proceedings in the federal court.

These facts, in our opinion, distinguish the case of Hotel Last Frontier Corp. v. Frontier Properties, 79 Nev. 150, 380 P.2d 293, relied...