Rogue Valley Memorial Hospital v. Salem Ins. Agency, Inc.

Citation265 Or. 603,510 P.2d 845
PartiesROGUE VALLEY MEMORIAL HOSPITAL, an Oregon non-profit corporation, Respondent, v. SALEM INSURANCE AGENCY, INC., an Oregon corporation, Coastal States Life Insurance Co., a Georgia corporation, Defendants, Samuel H. Oetinger, Appellant.
Decision Date01 June 1973
CourtSupreme Court of Oregon

John P. Cooney, Medford, argued the cause and filed the briefs for appellant.

William V. Deatherage, Medford, argued the cause for respondent. With him on the brief were Frohnmayer & Deatherage, Medford.

TONGUE, Justice.

This is an appeal from an order denying the motion of defendant Oetinger to set aside a default judgment. We affirm.

Defendant's motion was based upon ORS 18.160. 1 Although that statute is to be construed to the end that every defendant should have an opportunity to have his day in court, a motion to vacate a default judgment is nevertheless addressed to the sound discretion of the trial judge. That discretion must not be exercised arbitrarily, but in accordance with established legal principles. The refusal of a trial judge to grant such a motion will not be overruled, however, except for manifest abuse. Coleman v. Meyer, 261 Or. 129, 134, 493 P.2d 48 (1972).

In this case the trial judge, after considering affidavits filed by the parties and argument by counsel, denied defendant's motion, based upon findings that defendant '* * * failed to establish his excusable negligence or that he has a valid defense to the complaint * * *.'

1. The trial court did not abuse its discretion in finding that defendant failed to establish his 'excusable neglect.'

The complaint in this case was filed on July 14, 1972. On July 24, 1972, defendant was personally served with a summons and a copy of the complaint. The complaint sought to foreclose a hospital lien claimed by plaintiff against a former patient as the result of hospital expenses incurred by the patient. It alleged that the patient had an insurance policy with an insurance company, incorporated in Georgia, which was also named as defendant; that defendant Oetinger was an agent for that company; that the policy covered the hospital expenses of the patient; that plaintiff had 'duly filed a lien substantially in the form prescribed by ORS 87.570 with the county clerk'; that 'defendants acknowledged receipt' of a copy of that lien and thereafter 'made payments' to the patient, but none to the hospital, and prayed for judgment in the sum of $1144.38, plus interest, costs and attorneys fees.

It appeared from the affidavit of plaintiff's attorney that the lien was filed 'on or about February 15, 1972' and was served on defendant on that date and that letters demanding payment were then addressed to defendant, dated April 7, April 11, April 17, and May 22, 1972. It also appears from that affidavit that after the summons and complaint were served upon defendant Oetinger, in July 24, 1972, and after the entry of the default judgment on August 16, plaintiff's attorney called defendant Oetinger on September 21, by telephone and notified him of the judgment; that on September 22, 1972, the defendant insurance company filed an answer, but that plaintiff's attorney heard nothing from defendant Oetinger until the filing of his motion to set aside the judgment on December 11, 1972.

That motion was supported by the affidavit of defendant Oetinger that he sold a policy of insurance providing for coverage for loss of income during hospitalization and time off work; that a claim was made under that policy and on December 28, 1971, January 20, 1972, and February 22, 1972, checks to the insured were transmitted to her by the insurance company through Oetinger; that thereafter, near the end of February, a copy of the hospital lien was sent to Oetinger and was forwarded by him to the insurance company, and that when he was served with wummons and complaint he contacted the insurance company by telephone, informed it of the service, and mailed the summons and complaint to it.

The affidavit also stated that defendant Oetinger took no steps to respond to the summons and complaint because he understood that he did all that was necessary by forwarding the documents to Coastal States; that he did not know he needed an attorney to represent him in the matter and felt that the insurance company would take care of the entire matter; and that he further understood that no judgment could be taken without a trial.

Subsequently, defendant's attorney also filed an affidavit stating that he was retained by defendant Oetinger on November 16, 1972, that after conference with Oetinger he prepared the documents supporting the Motion to Set Aside Default Judgment and that the Motion, tendered Answer, and Affidavit were filed December 11, 1972, the delay between the date when he was retained and the filing of the documents being necessitated by the need to confer by telephone and mail documents back and forth between Salem and Medford.

Defendant's attorney contends in his brief that:

'Tested by the standards of reality, Oetinger cannot be faulted for his blind, though misplaced, faith that the judge would 'do the right thing.' He knew that the plaintiff had no claim against him, personally, and it was not unreasonable for him to indulge the mistaken assumption that before acting, the judge would review the matter and 'do the right thing."

In Marsters v. Ashton, 165 Or. 507, 514, 107 P.2d 981 (1941), we held that neglecting to consult an attorney because of assurances by a third person that payments would be made did not constitute excusable neglect in failing to make an appearance, under the circumstances of that case. In this case, defendant Oetinger's affidavit stated that he relied upon the insurance company to do what was necessary to protect him. He did not, however, state any facts from which the court could find that the insurance company gave him any assurance that it would do so, much less that he acted reasonably or was otherwise justified on relying upon any such assurances.

Moreover, this summons included the following 'Notice to Defendant,' as now required by ORS 15.040(2):

'READ THESE PAPERS CAREFULLY! You must 'appear' in this case or the other side will win automatically. To 'appear' you must file with the court a legal paper called a 'motion,' 'demurrer' or 'answer.' This paper must be given to the court within 20 days along with the required filing fee. It must be in proper form and have proof of service on the plaintiff or his attorney to show that the other side has been given a copy of it.

'If you have questions, you should see an attorney immediately.'

It is also well established that a defendant seeking relief under ORS 18.160 from a default judgment must not only show that the judgment was entered against him through mistake, inadvertence, surprise or excusable neglect, but must also show that he acted with reasonable diligence after knowledge of the default judgment and inexcusable delay will preclude him from relief. Koukal v. Coy et ux., 219 Or. 414, 418-- 420, 347 P.2d 602 (1959); Reeder v. Reeder, 191 Or. 598, 601, 232 P.2d 78 (1951); and Steeves v. Steeves, 139 Or. 261, 265, 9 P.2d 815 (1932). In this case no explanation is offered for the delay of nearly two months after a telephone call from plaintiff's attorney until defendant Oetinger consulted the attorney who then proceeded to file a motion to set it aside.

As for defendant's claim of 'blind, though misplaced, faith that the judge would 'do the right thing," we are constrained to say that in our judicial system of 'justice under law,' the courts must necessarily establish rules of law and are not always free to dispense abstract justice according to the lights of each litigant. We have previously stated the established rules by which the courts seek to accomplish justice in cases such as this and which are controlling in this case. After considering the entire record, and upon the application of such rules to thd facts of this case, we cannot say that the trial judge abused his discretion in finding 'that the defendant Oetinger has failed to establish his excusable negligence.'

2. The tender of a meritorious defense does not of itself require a trial court to set aside a default judgment which, although perhaps voidable, is not void.

Defendant also contends that the default judgment in this case should be set aside because he has a 'meritorious defense' in that plaintiff's hospital lien was not filed within 15 days, as required by ORS 87.565, but filed at least one day late and in that defendant Oetinger, as the insurance agent, was neither an insurer nor a person 'obligated to compensate the injured person on account of said injury,' so as to be subject to the hospital lien, even if timely filed.

In Burke v. Rachau, 95 Adv.Sh. 28, 42--43, 262 Or. 323, 497 P.2d 1154 (1972), we held that although the claim of a meritorious defense is a necessary requirement to be established by a defendant who seeks to set aside a default judgment, proof of that requirement alone does not require that a default judgment must be set aside on motion under ORS 18.160, as in this case, in the absence of a sufficient showing of 'mistake, inadvertence, surprise or excusable neglect.'

In addition, however, defendant contends not only that it had a 'meritorious defense,' but that this default judgment is completely void so as to be subject to collateral attack. This raises the question whether a judgment based upon a statutory lien that was filed one day late or upon a complaint which fails to state a cause of suit to foreclose such a lien is void, or only voidable.

Oregon, like most states, has held that one who would foreclose a statutory lien must bring himself clearly within the terms of the statute, and that such a statute is to be strictly construed as to persons entitled to its benefit and as to the procedure necessary to perfect the lien....

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