Plaza Del Lago Townhomes v. Highwood Build.

• Decision Date: 07 September 2006
• Docket Number: No. 05CA0607.,05CA0607.
• Citation: 148 P.3d 367
• Parties: PLAZA DEL LAGO TOWNHOMES ASSOCIATION, INCORPORATED, Plaintiff-Appellee, v. HIGHWOOD BUILDERS, LLC, Defendant-Appellant.
• Court: Colorado Court of Appeals

148 P.3d 367

PLAZA DEL LAGO TOWNHOMES ASSOCIATION, INCORPORATED, Plaintiff-Appellee, v. HIGHWOOD BUILDERS, LLC, Defendant-Appellant.

No. 05CA0607.

Colorado Court of Appeals, Div. IV.

September 7, 2006.

COPYRIGHT MATERIAL OMITTED

James M. Harm, Denver, Colorado, for Plaintiff-Appellee.

The Haskins Law Firm, Thomas M. Haskins III, Carrie Kelly, Colorado Springs, Colorado, for Defendant-Appellant.

Opinion by Judge CARPARELLI.

Defendant, Highwood Builders, LLC (owner), appeals the trial court's default judgment in favor of plaintiff, Plaza del Lago Townhomes Association, Incorporated (the HOA). Owner also appeals the trial court's order denying its motion to set aside default judgment. We affirm the default judgment, vacate the order denying the motion to set aside the judgment, and remand for further findings of fact and conclusions of law.

I. Facts

Owner owns thirty lots in a development that is subject to assessments by the HOA. As relevant to this appeal, the HOA filed a complaint against owner, seeking damages based on the foreclosure of an assessment lien resulting from owner's failure to pay its homeowners' association dues. On December 8, 2004, the HOA served an attorney in Colorado Springs, who was owner's registered agent.

Owner asserts that, after it received the complaint and summons, its Colorado Springs counsel retained a Denver attorney to assist it, that the parties entered into what owner refers to as a standstill agreement, and that, based on the agreement, it did not file an answer. The HOA contends that there was only an agreement to discuss settlement.

Between January 4 and January 28, 2005, the parties communicated to arrange a meeting to discuss settlement. Nonetheless, on January 20, 2005, the HOA moved for default judgment based on the lack of an answer. On January 28, 2005, the parties met to discuss settlement, and owner provided the HOA with a draft of its answer and counterclaims. The HOA did not inform owner that it had filed a motion for default judgment.

Without holding a hearing, the trial court entered default judgment in favor of the HOA and awarded approximately $540,000 in damages. One day after the entry of default judgment, owner filed an answer and counterclaims. On February 7, 2005, the HOA filed a motion to amend the default judgment and asked that the court reduce the amount of damages to approximately $102,000.

Two days later, owner filed motions to set aside the original default judgment, to quash the HOA's motion to amend judgment, and for sanctions. On March 14, 2005, without a hearing, the trial court found that owner failed to file an answer by the deadline, the parties had not agreed to postpone the deadline, and owner's failure to answer was not the result of excusable neglect. The court also found that the HOA did not commit a fraud on owner or the court. The court denied owner's motion to set aside the default judgment, its motion to quash the HOA's motion to amend default judgment, and its motion for sanctions.

II. Default Judgment

Owner contends the trial court erred by entering default judgment because (1) the HOA did not give owner's counsel notice of its motion for default judgment, (2) the HOA provided insufficient evidence to the court for the default and amended default judgments, and (3) the clerk did not enter a default pursuant to C.R.C.P. 55(a). We reject these contentions.

A. Notice

Owner contends that it appeared in the action before the HOA filed for default and that as a result, it was entitled to three days written notice prior to the trial court's entry of default judgment. Accordingly, owner argues that the default judgment must be vacated for lack of notice. We disagree.

1. Law

"If the party against whom judgment by default is sought has appeared in the action, the party . . . shall be served with written notice of the application for judgment at least three days prior to the hearing on such application." C.R.C.P. 55(b).

A defendant is entitled to notice under C.R.C.P. 55(b) when it engages in conduct "sufficient to indicate to the trial court that the defendant had an interest in participating in the litigation." R.F. v. D.G.W., 192 Colo. 528, 530, 560 P.2d 837, 839 (1977). To be entitled to notice, however, it is essential that the defendant have somehow communicated with the court. Realty World-Range Realty, Ltd. v. Prochaska, 691 P.2d 761, 763 (Colo.App.1984) (concluding that the defendants were not entitled to notice when they did not make any contact with the court prior to the entry of default); Carls Constr., Inc. v. Gigliotti, 40 Colo.App. 535, 536, 577 P.2d 1107, 1108-09 (1978) (holding that the defendant sufficiently appeared and triggered the notice requirements by filing a letter with the trial court). A plaintiff's knowledge that a defendant intends to defend a lawsuit is, by itself, insufficient to constitute an "appearance" under C.R.C.P. 55(b). Sisneros v. First Nat'l Bank, 689 P.2d 1178, 1181 (Colo. App.1984); Biella v. State Dep't of Highways, 652 P.2d 1100, 1102 (Colo.App.1982), aff'd, 672 P.2d 529 (Colo.1983).

Thus, when determining whether a defendant has appeared in an action for purposes of C.R.C.P. 55(b), we do not apply the same rules as we would apply to determine whether a court has jurisdiction over the person. R.F. v. D.G.W., supra, 192 Colo. at 530, 560 P.2d at 838; Carls Constr., Inc. v. Gigliotti, supra, 40 Colo.App. at 536, 577 P.2d at 1108; see also Yard v. Ambassador Builder Corp., 669 P.2d 1040, 1041 (Colo.App.1983) ("[d]efendant having failed to plead or otherwise appear in the district court action, plaintiffs were entitled to entry of, and judgment by, default without notice to the nonappearing defendant").

Nonetheless, even apart from its use in determining jurisdiction, the term "appearance," when used more generally in the law, refers to interactions with the court, not to communications with opposing counsel. See Black's Law Dictionary 94-95 (7th ed.1999). This general use is reflected in R.F. v. D.G.W., supra, where the supreme court held that the defendant had "appeared in the action" because his conduct was "sufficient to indicate to the trial court that the defendant had an interest in participating in the litigation." R.F. v. D.G.W., supra, 192 Colo. at 530, 560 P.2d at 839 (emphasis added). It is also reflected in First National Bank v. Fleisher, 2 P.3d 706, 715 (Colo.2000), where the supreme court concluded that C.R.C.P. 55(b) required notice when the defendant "indicated a willingness to submit to the jurisdiction of the court and to defend against [the plaintiff's] allegations."

The Seventh Circuit Court of Appeals reached a similar conclusion in Zuelzke Tool & Engineering Co. v. Anderson Die Castings, Inc., 925 F.2d 226 (7th Cir.1991). There, the court applied Fed.R.Civ.P. 55(b)(2), which is substantially similar to C.R.C.P. 55(b). The court stated that the plain meaning of the phrase "has appeared in the action" is that the "party has actually made some presentation or submission to the district court in the pending action." Zuelzke Tool & Eng'g Co. v. Anderson Die Castings, Inc., supra, 925 F.2d at 230. The court explained that, rather than "distort the meaning of a concrete term such as `appearance' in order to provide a mechanism to save a party from a default judgment," it is more appropriate for a trial court to grant relief under Fed.R.Civ.P. 60(b) (the counterpart to C.R.C.P. 60(b)) when, "for example, a defaulted party is lulled or induced into inaction by settlement discussions and foregoes filing an appearance and responsive pleading." Zuelzke Tool & Eng'g Co., Inc., v. Anderson Die Castings, Inc., 925 F.2d at 230-31; accord Town & Country Kids, Inc., v. Protected Venture Inv. Trust # 1, Inc., 178 F.R.D. 453, 454 (E.D.Va.1998).

However, owner suggests that we rely on federal cases that have held that a defendant's indication to the plaintiff that it intends to defend the suit is sufficient to constitute an appearance and, thus, to require the plaintiff to give notice of a motion for default judgment. See Muniz v. Vidal, 739 F.2d 699, 701 (1st Cir.1984) (stating that a sufficient appearance occurs when a party indicates a clear purpose to defend the suit); H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 692 (D.C. Cir. 1970) (requiring a party to demonstrate a clear purpose to defend the suit in order to trigger the notice provision of Fed.R.Civ.P. 55(b)(2)); CSB Corp. v. Cadillac Creative Adver., Inc., 136 F.R.D. 34, 35 (D.R.I. 1990) (holding that an indication of a clear intent to participate in settlement negotiations and to defend the suit constitutes an appearance).

Although the supreme court has stated that the phrase "appeared in the action" does not refer to "technical concepts of appearance as the word is used in analysis of jurisdiction over the person," the decisions of Colorado courts have uniformly relied on the defendant's communication with the court. R.F. v. D.G.W., supra, 192 Colo. at 530, 560 P.2d at 838. We have found no case in which the court concluded that communication with opposing counsel was sufficient to require notice under C.R.C.P. 55(b). As there are federal cases consistent with the rulings of Colorado courts, we decline to rely on the federal decisions presented by the HOA.

Therefore, we conclude that the phrase "appeared in the action" as used in C.R.C.P. 55(b) requires that a defendant communicate with the court in a manner that demonstrates to the court that the defendant is aware of the proceedings and intends to participate in them. Although we recognize the rationale of the federal cases, the words of the rule, the general understanding of what constitutes an appearance in an action, and past applications of the rule by Colorado courts persuade us that communication with the court is required. Therefore, we decline to follow the federal cases on which owner relies.

2. No Appearance

Here,...