Resolution Trust Corp. v. Ferri

• Decision Date: 16 August 1995
• Docket Number: No. 21402,21402
• Citation: 901 P.2d 738,120 N.M. 320,1995 NMSC 55
• Parties: The RESOLUTION TRUST CORPORATION in its capacity as receiver of the ABQ Federal Savings Bank, Albuquerque, New Mexico, Plaintiff-Appellant, v. Carol FERRI, Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 738

901 P.2d 738

120 N.M. 320

The RESOLUTION TRUST CORPORATION in its capacity as receiver

of the ABQ Federal Savings Bank, Albuquerque, New

Mexico, Plaintiff-Appellant, v. Carol FERRI, Defendant-Appellee.

No. 21402.

Supreme Court of New Mexico.

Aug. 16, 1995.

[120 N.M. 321] Gary Don Reagan, P.A., Mark Terrence Sanchez, Hobbs, for appellant.

[120 N.M. 322] Law Offices of Louis N. Colon, Louis N. Colon, Albuquerque, for appellee.

OPINION

FROST, Justice.

1. This case involves the proper interpretation of SCRA 1986, 1-060(B)(6) (Repl.Pamp.1992). Plaintiff-Appellant Resolution Trust Corporation (RTC) appeals from the trial court's order setting aside a default judgment under SCRA 1-060(B)(6) over nineteen months after entry of judgment. Defendant-Appellee Carol Ferri argues that the court properly acted within its equitable powers under SCRA 1-060(B)(6) in setting aside the judgment because of a mistake of law in the default judgment and because of her attorney's negligence. We reverse and remand.

I. FACTS

2. On February 26, 1991, RTC filed a complaint against Carol Ferri and Gino Ferri for money due on five secured promissory notes. Gino Ferri's signature appears on three of the notes and Carol Ferri's signature appears on the other two. RTC properly served Carol Ferri in person with process. Carol Ferri did not answer the complaint. RTC also served Carol Ferri with a subpoena duces tecum on February 27, 1991. On March 15, 1991, RTC filed a motion for substitution of party to change its status from conservator of the failed ABQ Federal Savings Bank to that of party plaintiff as receiver of the bank. RTC also submitted an application for an order to show cause requiring Gino and Carol Ferri to appear and deliver to RTC the collateral on the notes. The trial court issued the order commanding both Gino and Carol Ferri to appear before the court on April 3, 1991. Carol Ferri was served personally with the motion for substitution of party, the application for the order to show cause, and the order itself on March 21, 1991. Neither Gino nor Carol Ferri appeared at the hearing.

3. As a result of their absence from the hearing for the order to show cause, the trial court entered a default judgment against both Carol and Gino Ferri on the five notes and awarded title of the collateral securing the notes to RTC. In the default judgment the trial court made Carol Ferri jointly and severally liable for all five notes, despite the fact that her signature appeared on only two of the notes. Apparently, both RTC and the trial court mistakenly presumed that Gino and Carol Ferri were married and were thus jointly liable for all five notes. In fact, Carol Ferri is Gino Ferri's mother.

4. In September 1992 RTC applied for a writ of garnishment against Carol Ferri's wages, which the trial court granted on December 2, 1992. Again, Ferri had notice of the application for garnishment but failed to take any action. On March 25, 1993, over nineteen months after the trial court entered the default judgment against her, Carol Ferri appeared in court and filed a motion to set aside the default judgment and writ of garnishment. She alleged that the trial court had erred in making her jointly and severally liable for all five notes since only two of the notes bore her name. She also alleged that the signatures on those two notes were forgeries. Finally she claimed that, although she had received all the court papers, she had forwarded all of the documents to her attorney, Jake Evans, who failed to take any action. Based on these facts, the trial court set aside the default judgment and the writ of garnishment under SCRA 1-060(B)(6). RTC then filed this interlocutory appeal.

II. DISCUSSION

5. SCRA 1-060(B) provides in relevant part:

B. Mistakes; inadvertence; excusable neglect; newly discovered evidence; fraud, etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons:

(1) mistake, inadvertence, surprise or excusable neglect;

(2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 1-059;

(3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party;

(4) the judgment is void;

(5) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or

(6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more than one-year after the judgment, order or proceeding was entered or taken.

In order to be entitled to relief under SCRA 1-060(B), the party seeking to set aside a default judgment must demonstrate applicable grounds for vacating the judgment under the rule as well as a meritorious cause of action or defense. Rodriguez v. Conant, 105 N.M. 746, 749, 737 P.2d 527, 530 (1987). Once the movant makes such a showing, the district court has the discretion to set aside the default, and on appeal we will only overturn the court's ruling if it has abused that discretion. Id.

6. In Rodriguez we emphasized that because the law disfavors a default judgment, the movant's claimed grounds for relief under SCRA 1-060(B) and meritorious defense should be viewed liberally. Id. However, this Court has also made it clear that a party seeking to set aside a judgment cannot claim exceptional circumstances and rely upon SCRA 1-060(B)(6) in order to circumvent the one-year limit within which to advance grounds set out in SCRA 1-060(B)(1) through (3). Marinchek v. Paige, 108 N.M. 349, 351, 772 P.2d 879, 881 (1989); Wehrle v. Robison, 92 N.M. 485, 487, 590 P.2d 633, 635 (1979).

7. In the present case Ferri did not challenge the default until over a year had passed. Therefore, because the judgment was neither void, SCRA 1-060(B)(4), nor satisfied, SCRA 1-060(B)(5), the trial court could only grant her relief if her claim fell within SCRA 1-060(B)(6), any other reason justifying relief. The trial court did not specify on what factual basis it applied SCRA 1-060(B)(6). It merely noted that its decision was grounded in fairness and equity. However, at the hearing on the motion to set aside the default, Ferri only presented two possible grounds for overturning the judgment: mistake of law and attorney negligence. We examine these arguments separately.

A. Mistake of Law

8. Ferri strenuously argues on appeal that the trial court erred in relying on incorrect information in ordering the default judgment, and therefore the court was entitled to correct its error by setting aside the judgment. The error at issue was making Ferri jointly and severally liable on all five notes, based on the mistaken belief that she and Gino Ferri were married, when she should have been liable for only two of the notes. Accordingly, Ferri's argument is simply that the default judgment on the notes contained a mistake of law. However, as our Court of Appeals noted in Deerman v. Board of County Commissioners, 116 N.M. 501, 505, 864 P.2d 317, 321 (Ct.App.), cert. denied, 116 N.M. 364, 862 P.2d 1223 (1993), a mistake of law falls under SCRA 1-060(B)(1) (relief based on mistake, inadvertence, surprise or excusable neglect).

9. In Deerman the Court of Appeals noted that allowing the trial court to correct judicial errors under SCRA 1-060(B)(1) fosters judicial efficiency by reducing the need for unnecessary appeals. Id.; see also 7 James W. Moore et al., Moore's Federal Practice p 60.22 (2d ed. 1995) (noting majority of federal circuit courts allow correction of judicial error under Federal Rule 60(B)(1)). However, SCRA 1-060(B) should not be used as a substitute for appeal nor as a means of circumventing the appeals process. Phelps Dodge Corp. v. Guerra, 92 N.M. 47, 50, 582 P.2d 819, 822 (1978). Accordingly, in Deerman the Court of Appeals properly concluded that "a motion pursuant to Rule 60(B)(1) to correct an error of law by the district court must be filed before the expiration of the time for appeal." Deerman, 116 N.M. at 506, 864 P.2d at 322; see also 7 Moore et al., supra, p 60.22 (noting that reasonable time for relief from judicial error should not exceed time allowed for appeal).

10. In the present case Ferri filed her motion to set aside the default based on judicial error after the one-year time limit for bringing SCRA 1-060(B)(1) claims had passed and well after the period for filing an appeal had elapsed. Ferri therefore relied on SCRA 1-060(B)(6) which has no fixed time limit. However, we have long held that SCRA 1-060(B)(6) provides relief only for reasons other than those enumerated in SCRA 1-060(B)(1) through (5). Marinchek, 108 N.M. at 351, 772 P.2d at 881; Wehrle, 92 N.M. at 487, 590 P.2d at 635 (quoting Parks v. Parks, 91 N.M. 369, 371, 574 P.2d 588, 590 (1978)); 11 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 2864, at 217 (1973) (noting that, under Federal Rule 60(B), clause (6) and clauses (1) through (5) are mutually exclusive). Accordingly, "[a] party seeking to set aside a default judgment under Rule 1-060(B)(6) must show the existence of exceptional circumstances and reasons for relief other than those set out in Rules 1-060(B)(1) through (5)." Rodriguez, 105 N.M. at 750, 737 P.2d at 531; see also Wehrle, 92 N.M. at 487, 590 P.2d at 635 ("An individual must establish the existence of exceptional circumstances to obtain relief under Rule 60(b)(6).").

11. Ferri has not presented any exceptional circumstances surrounding the judicial error that would take this case outside the confines of SCRA 1-060(B)(1). Cf. Deerman, 116 N.M. at 507, 864 P.2d at 323 ("To establish extraordinary circumstances justifying their...