Roso v. Henning, 19934

• Decision Date: 04 June 1997
• Docket Number: No. 19934,19934
• Citation: 1997 SD 82,566 N.W.2d 136
• Parties: Eric A. ROSO, Plaintiff and Appellee, v. Daniel HENNING and Veblen Cheese Factory, Inc., Defendants and Appellants. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 136

566 N.W.2d 136

1997 SD 82

Eric A. ROSO, Plaintiff and Appellee, v. Daniel HENNING and Veblen Cheese Factory, Inc., Defendants

and Appellants.

No. 19934.

Supreme Court of South Dakota.

Considered on Briefs June 4, 1997.

Decided July 9, 1997.

Nancy J. Turbak of Turbak Law Office, Watertown, for plaintiff and appellee.

Steven M. Johnson, Mark F. Marshall of Johnson, Heidepriem, Miner, Marlow & Janklow, Sioux Falls, for defendants and appellants.

KONENKAMP, Justice.

¶1 Following service of a summons and complaint with no response, plaintiff obtained a default judgment without notice to defendants. Yet before suit, plaintiff and defendants' insurer engaged in settlement negotiations. Was this a sufficient "appearance" to require notice before taking a default judgment? We conclude these negotiations constituted an appearance, and defendants' failure to respond resulted from excusable neglect. We therefore reverse the circuit court's refusal to set aside the default judgment.

Facts

¶2 On November 12, 1993, Eric Roso and his passenger were injured while driving near Kranzburg when they were struck from behind by a Veblen Cheese Factory truck driven by Daniel Henning. Both Roso and the passenger hired the same attorney to prosecute their claims for damages. The passenger's case proceeded to court first, where he eventually won a jury award of $80,000. The attorney then conferred with defendants' insurer, CNA, to settle Roso's claim. These negotiations proved unsuccessful, and on June 27, 1996, counsel sent a letter to CNA stating that if the $115,000 settlement demand was not met, suit would commence in ten days. On July 5, 1996, CNA telephoned Roso's counsel to inform her no further offer was forthcoming. Veblen Cheese and Henning were served on July 12 with a summons and complaint in Lea County, New Mexico, the place where the company had relocated. No copy was sent to CNA's claims representative, who had handled the matter since 1993, or to defendants' lawyer in the passenger's case. Doug Tobkin, a Veblen Cheese corporate officer, claims he then sent the summons and complaint to insurance agent, Culbert-Davis, in Sioux Falls, following the same procedure he took when served in the earlier proceedings. Culbert-Davis did not receive them. In the end, the judge concluded Tobkin never sent the documents.

¶3 Without giving notice to defendants, Roso applied for a default judgment. At the ex parte hearing on August 28, 1996, the circuit court acknowledged on the record a familiarity with the facts from presiding in the passenger's case. After taking evidence on damages, the court entered a judgment for $350,000, the exact amount requested by counsel. On September 5, 1996, defendants received Notice of Entry of the Default Judgment. Tobkin called the claims manager at Culbert-Davis and faxed the summons, complaint, and judgment. This was the first phone call the manager recalled receiving from Tobkin on the matter. Tobkin then retained attorney Roger Ellyson to request that the judgment be set aside; he also spoke to attorney Reed Rasmussen, who had represented defendants in the passenger's suit. Tobkin told Rasmussen he was not sure if he had mailed the summons and complaint when the company was served.

¶4 On September 6, 1996, Ellyson filed a Motion to Set Aside Judgment by Default, and Rasmussen later filed a Notice of Appearance as co-counsel. A hearing was held on the motion in October, but the court denied relief and later rejected a motion for reconsideration, striking from the record Tobkin's affidavit explaining why he initially was unsure if he mailed the pleadings. The court concluded Tobkin's testimony was not credible. It ruled: (1) Tobkin had inexcusably failed to send the pleadings to the insurance agent and failed to follow up with a phone call to confirm his company's interests were being protected; and (2) there was no meritorious defense. This appeal followed.

Standard of Review

¶5 "For good cause," SDCL 15-6-55(c) allows a court to "set aside a judgment by default in accordance with § 15-6-60(b)." "The decision to grant or deny relief from a default judgment rests with the sound discretion of the trial court and we will not disturb the trial court's decision absent an abuse of that discretion." First Federal Sav. & Loan Ass'n v. Strub, 427 N.W.2d 836, 838 (S.D.1988); see In re Estate of Nelson, 1996 SD 27, p 15, 544 N.W.2d 882, 886 ("The trial court may grant relief from final judgment based on mistake, surprise, newly discovered evidence and for any other reason which justifies relief. The trial court's discretion is to be exercised liberally in accord with legal and equitable principles in order to promote the ends of justice.") (citations omitted). Ultimately, "any doubt [should be] resolved in favor of an application to set aside a judgment in order that the case may be tried upon the merits." National Surety Corp. v. Shoemaker, 86 S.D. 302, 309, 195 N.W.2d 134, 138 (1972).

Analysis and Decision

¶6 A default judgment may be taken against a party who has "failed to plead or otherwise defend " a suit. SDCL 15-6-55(a). The mechanism for obtaining a default judgment is set forth in SDCL 15-6-55(b)(1):

By the Court. In all cases the party entitled to a judgment by default shall apply to the court therefor; but no judgment by default shall be entered against a minor or incompetent person unless represented in the action by a guardian, conservator or guardian ad litem who has appeared therein. If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by representative, his representative) shall be served with written notice of the application for judgment at least three days prior to the hearing on such application. If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required by any statute of this state. (Emphasis added).

If an appearing party has not been given notice of hearing on an application for default judgment, prejudice is conclusively presumed. Heitman v. Gross, 70 S.D. 510, 512, 19 N.W.2d 508, 509 (1945)(construing predecessor statute).

¶7 Courts take an expansive view toward the definition of "appearance," often finding it when a party shows an intent to defend. Muniz v. Vidal, 739 F.2d 699, 700 (1st Cir.1984)("strong authority" requires court to look beyond formal actions to evaluate appearance); Lutomski v. Panther Valley Coin Exchange, 653 F.2d 270, 271 (6th Cir.1981); Charlton L. Davis & Co. P.C. v. Fedder Data Center, 556 F.2d 308, 309 (5th Cir.1977); H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir.1970); Christy v. Carlisle, 94 Nev. 651, 584 P.2d 687, 689 (1978); Shoemaker, 86 S.D. at 311, 195 N.W.2d at 139 (quoting with approval H.F. Livermore Corp., supra, liberalizing definition of "appearance"); 10 J. Moore, Moore's Federal Practice p 55.21[b] (3d ed 1997); 10 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2686 (2d Ed. 1983 & 1997 Supp.). A comment by the Sixth Circuit Court of Appeals is representative: "Though it is true that defendants made no formal appearance and filed no papers, courts now look beyond the presence or absence of such formal actions to examine other evidence of active representation." Lutomski, 653 F.2d at 271; see generally Peterson v. McMillan, 70 S.D. 56, 58, 14 N.W.2d 97, 98 (1944)(written stipulation between parties extending time for answer constituted appearance necessitating notice for taking of default judgment).

¶8 A default judgment is an extreme remedy, Tank v. Munstedt, 504 N.W.2d 866, 868-69 (S.D.1993), and should only be granted when "the adversary process has been halted because of an essentially unresponsive party." H.F. Livermore Corp., 432 F.2d at 691; Sun Bank of Ocala v. Pelican Homestead & Sav., 874 F.2d 274, 276 (5th Cir.1989)(also noting an appearance is "not ... confined to physical appearances in court or the actual filing of a document in the record"); Shoemaker, 86 S.D. at 311, 195 N.W.2d at 139 (but not "every exchange between the parties constitutes an appearance"--default judgment appropriate when process stopped by unresponsive party). The Rules of Civil Procedure "are designed for the just, speedy, and inexpensive disposition of cases on their merits, not for the termination of litigation by procedural maneuver. Default judgments are a drastic remedy, not favored by the Federal Rules and resorted to by courts only in extreme situations." Sun Bank, 874 F.2d at 276 (footnotes omitted). Indeed, "[a]n appearance within the contemplation of [the rule] does not necessarily require some presentation or submission to the court. (Citation omitted). That rule is designed to insure fairness to a party or his representative who has indicated a clear purpose to defend the suit." Christy, 584 P.2d at 689. ¹

¶9 Failure to submit a responsive pleading or a formal appearance in court will not always eliminate the notice requirement before seeking a default judgment. In considering the sufficiency of an appearance, the Fifth Circuit Court of Appeals offered sound advice:

We are aware of the burden that delay imposes on litigants, and of a busy trial court's need to maintain an efficient procedural regimen that provides for trial on the merits in those cases that warrant trial. Courts, however, can deal with obstinate and dilatory parties in a variety of ways, and judgment by default should not be the first resort. In a suit that had been in progress for months and in which counsel for [Defendant] was fully aware that [Third-Party...