Overboe v. Brodshaug

• Decision Date: 05 June 2008
• Docket Number: No. 20070263.,20070263.
• Citation: 2008 ND 112,751 N.W.2d 177
• Parties: David A. OVERBOE, Plaintiff and Appellant v. Susanne BRODSHAUG, Defendant and Appellee.
• Court: North Dakota Supreme Court

751 N.W.2d 177

2008 ND 112

David A. OVERBOE, Plaintiff and Appellant v. Susanne BRODSHAUG, Defendant and Appellee.

No. 20070263.

Supreme Court of North Dakota.

June 5, 2008.

David A. Overboe, pro se, Fargo, ND, plaintiff and appellant.

Christopher M. McShane, Ohnstad Twichell, P.C., West Fargo, ND, for defendant and appellee.

CROTHERS, Justice.

[¶ 1] David Overboe appeals from an order vacating a default judgment that had awarded him $21,334.57 and from a subsequent judgment awarding him $3,642.75 in his action against Susanne Brodshaug to collect attorney fees for representing her in a divorce action. We conclude the district court did not abuse its discretion in vacating the default judgment, did not err in allowing Brodshaug to use defensive recoupment to Overboe's collection action, did not err in refusing to apply N.D.C.C. §§ 13-01-14 and 13-01-15 to Overboe's claims, and did not err in applying the usury statutes to his action. We affirm the order vacating the default judgment and the subsequent judgment.

I

[¶2] In 1996, Overboe orally agreed to represent Brodshaug in her divorce action. After a trial, a divorce judgment was entered in May 1997. In April 1998, Overboe filed a post-judgment motion in the divorce action, seeking to find Brodshaug's ex-husband in contempt and to vacate property division and spousal support provisions in the divorce judgment. The court denied Brodshaug's motion in June 1998, concluding she had failed to follow the proper procedure for contempt or for relief from the divorce judgment.

[¶3] In February 1999, Overboe served a summons and complaint on Brodshaug in this collection action, seeking $11,145.01 for legal fees and service charges for his representation of her in the divorce action. Brodshaug's counsel served Overboe with a notice of appearance in March 1999. In January 2004, Overboe filed the summons and complaint in the district court and served Brodshaug's counsel with an affidavit, an eight-day notice before entry of a default judgment, and a notice of hearing for a default judgment under N.D.R.Civ.P. 55. Brodshaug served and filed an answer in February 2004, denying she owed Overboe the amount sought in his complaint, claiming his calculation of service charges violated N.D.C.C. §§ 47-14-09 and 47-14-10, and alleging Overboe was not entitled to recover attorney fees for his negligent representation of her in the post-judgment proceedings. In February 2004, the district court held a hearing on Overboe's request for a default judgment, at which Overboe submitted an affidavit of proof stating Brodshaug owed him "$11,145.01 plus service charges, costs and disbursements in the amount of $10,189.56 for legal services performed." At the hearing, the court noted that neither Brodshaug nor her counsel were present and that her counsel's office had been telephoned to ask whether counsel would be attending the hearing. The court stated it had been informed counsel was out of the office. In March 2004, the court entered a default judgment against Brodshaug for $21,334.57. Overboe did not thereafter serve Brodshaug with a notice of entry of the default judgment.

[¶4] In November 2006, Brodshaug moved to vacate the default judgment. The district court granted Brodshaug's motion and vacated the default judgment. Overboe thereafter replied to Brodshaug's answer, asserting her legal malpractice claim was barred by a two-year statute of limitations. The court subsequently denied Overboe's motion for summary judgment on his assertion that Brodshaug's legal malpractice claim was barred by the two-year statute of limitations. In February 2007, Brodshaug disclosed that her expert witness, Mark Fraase, was expected to testify at trial regarding "divorce procedures, spousal support, and other related matters."

[¶5] After a bench trial, the district court found Overboe and Brodshaug entered into an oral agreement for Overboe to represent Brodshaug in her divorce; the agreement included an understanding for the price of the services but did not include an agreement for service charges or late fees for unpaid balances; the parties agreed Brodshaug would pay Overboe upon completion of his representation of her; Overboe worked for Brodshaug until June 1998; Brodshaug owed Overboe $8,455.50 for legal services, of which $3,598.50 represented legal services for her post-judgment motion, which the court found Overboe did not perform in a reasonably careful and competent manner; Overboe sporadically sent Brodshaug bills, with no billing statements from August 1998 to December 2006; from February 1997 until August 1998, Overboe charged Brodshaug a monthly service charge of 1.5 percent per month on all unpaid balances, including past service charges and charges less than 30 days old; and the parties agreed Overboe would extend credit to Brodshaug until Overboe had completed his representation of her. The court decided N.D.C.C. § 13-01-14 was not applicable because Overboe intended to extend credit for a period beyond thirty days and he had failed to comply with the monthly notice requirement for billings in N.D.C.C. § 13-01-15. The court decided the interest charged by Overboe for the unpaid balance of attorney fees exceeded the rate allowed under N.D.C.C. § 47-14-09 and was usurious, ordered forfeiture of the usurious interest under N.D.C.C. §§ 47-14-09 and 47-14-10, reduced the principal due for attorney fees by the $3,598.50 incurred for the post-judgment work the court found was not done in a competent manner, and applied a 25 percent penalty to reduce the remaining principal under N.D.C.C. § 47-14-10. As a result, the court awarded Overboe $3,642.75 in his action against Brodshaug.

II

[¶6] Overboe argues the district court abused its discretion in vacating the default judgment. He claims Brodshaug failed to show sufficient grounds under N.D.R.Civ.P. 60(b) to justify vacating the default judgment and she failed to show she had a meritorious defense to the action. He claims that Brodshaug failed to establish extraordinary grounds for relief under N.D.R.Civ.P. 60(b)(vi) and that she was limited to relief under N.D.R.Civ.P. 60(b)(iii).

[¶7] Rule 60(b), N.D.R.Civ.P., authorizes a district court to grant relief from a judgment for "fraud ... misrepresentation, or other misconduct of an adverse party," or for "any other reason justifying relief from the operation of the judgment." The decision to grant or deny a motion vacating a default judgment is within the discretion of the district court. Beaudoin v. South Tex. Blood & Tissue Ctr., 2005 ND 120, ¶ 33, 699 N.W.2d 421; Gepner v. Fujicolor Processing, Inc., 2001 ND 207, ¶ 13, 637 N.W.2d 681. Absent an abuse of discretion, we will not reverse a district court's decision to vacate a default judgment. Filler v. Bragg, 1997 ND 24, ¶ 9, 559 N.W.2d 225. "A [district] court abuses its discretion if it acts in an arbitrary, capricious, or unreasonable manner, or if it misinterprets or misapplies the law." Id. "A [district] court acts in an arbitrary, unreasonable, or unconscionable manner when its decision is not the product of a rational mental process by which the facts and law relied upon are stated and considered together for the purpose of achieving a reasoned and reasonable determination." Beaudoin, at ¶ 33 (quoting Gepner, at ¶ 13).

[¶8] In Beaudoin, 2005 ND 120, ¶ 33, 699 N.W.2d 421 (quoting Gepner, 2001 ND 207, ¶ 14, 637 N.W.2d 681), this Court explained the following standards for consideration of motions to vacate a default judgment under N.D.R.Civ.P. 60:

"This Court has emphasized that N.D.R.Civ.P. 60(b) is to be liberally construed and applied, and trial courts should be more lenient in granting motions to vacate default judgments than in vacating judgments in cases which have been tried on their merits. The relevant factors were summarized in CUNA Mortgage v. Aafedt, 459 N.W.2d 801, 803 (N.D.1990) (citations omitted):

This court has long encouraged trial courts to be more lenient when entertaining Rule 60(b) motions to vacate default judgments as distinguished from "litigated" judgments, that is, judgments entered after trial on the merits. While a trial court certainly has discretion to grant or deny a Rule 60(b) motion to vacate a default judgment, the range of that discretion is limited by three important considerations. First, Rule 60(b) is remedial in nature and should be liberally construed and applied. Second, decisions on the merits are preferable to those by default. Third, as a consequence of the first two considerations, where timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that cases may be decided on their merits.

Gepner v. Fujicolor Processing, Inc., 2001 ND 207, ¶¶ 13-14, 637 N.W.2d 681 (internal citations and quotations omitted); see also Suburban Sales & Serv., Inc. v. District Court of Ramsey County, 290 N.W.2d 247, 252 (N.D.1980) (noting that no cases were discovered in which our trial courts were held to have abused their discretion in vacating a judgment, but citing several occasions in which our trial courts abused their discretion in refusing to vacate a judgment under Rule 60(b))."

Beaudoin, at ¶ 33.

[¶ 9] In First Nat'l Bank v. Bjorgen, this Court also described several relevant criteria for district courts to consider in deciding motions for relief from a judgment:

"[T]he general desirability that a final judgment should not be lightly disturbed; the procedure provided by Rule 60(b) is not a substitute for an appeal; the Rule should be liberally construed for the purpose of doing substantial justice; whether, although the motion is made within the maximum time, if any, provided by the Rule, the motion is made within a reasonable time; if relief is sought from a default judgment or a judgment of dismissal where there has been no consideration of the merits, whether in...