SAIF v. Harris

• Decision Date: 02 June 1999
• Citation: 161 Or. App. 1,983 P.2d 1066
• Parties: SAIF CORPORATION, a public corporation, Respondent, v. Nita J. HARRIS, dba Oak Hill Roofing, Appellant.
• Court: Oregon Court of Appeals

983 P.2d 1066

161 Or. App. 1

SAIF CORPORATION, a public corporation, Respondent, v. Nita J. HARRIS, dba Oak Hill Roofing, Appellant.

(95C-12509; CA A98928)

Court of Appeals of Oregon.

Argued and Submitted January 15, 1999.

Decided June 2, 1999.

Steven M. Lippold, Salem, argued the cause for appellant. With him on the briefs was Clark, Lindauer, McClinton, Fetherston, Edmonds & Lippold.

Denise G. Fjordbeck, Assistant Attorney General, argued the cause for respondent. With her on the brief was Hardy Myers, Attorney General, and Michael D. Reynolds, Solicitor General.

Before LANDAU, Presiding Judge, and EDMONDS, Judge, and ROSSMAN, Senior Judge.

EDMONDS, J.

Defendant appeals from the trial court's denial of a motion to set aside a judgment by default, ORCP 71, and a subsequent denial of a motion to set aside both the order of default, ORCP 69 C, and the judgment. We affirm.

Plaintiff, SAIF Corporation, brought an action against defendant, the owner of a roofing company, for unpaid workers' compensation premiums. Defendant had been audited by SAIF and had failed to make a timely administrative appeal from a final billing. On August 15, 1995, plaintiff brought this action seeking $22,518 for the alleged amount of unpaid premiums, $225,180 in statutory damages under ORS 656.758¹ and $75,000 in punitive damages.

Within three weeks of the filing of its complaint, plaintiff requested the production of certain documents from defendant. Subsequently, defendant filed an answer denying that she had misrepresented the amount of her payroll and asserting that if any violation occurred under ORS 656.758, it was not willful. In December 1995, plaintiff acknowledged in a letter to defendant that it had received some requested documents, but not all of them. In April 1996, plaintiff filed a motion to compel defendant to produce the remainder of the documents. Defendant did not respond to the motion, and on May 15, the trial court granted plaintiff's motion. A week later, defendant submitted a memorandum opposing plaintiff's motion to compel, arguing that the requests raised questions regarding federal and state constitutional guarantees against self-incrimination. In June, the trial court vacated the order to compel and allowed defendant additional time to comply with the discovery request.²

Defendant did not produce the remaining documents, and on November 7 the trial court ordered her to produce them within 30 days. On December 6, plaintiff sent a letter to defendant stating that it intended to seek sanctions for defendant's noncompliance. On December 9, plaintiff filed a motion to strike defendant's answer and sought a default order. Plaintiff's supporting affidavit stated that "[d]efendant has not produced a single document." The next day, defendant delivered 1,026 pages of documents to plaintiff. However, defendant did not respond in court to plaintiff's motion.

On December 27, the trial court told plaintiff that it would grant the motion to strike and enter an order of default because it had not received a response from defendant. Plaintiff submitted a proposed order, and on January 6, 1997, the trial court signed the order. The next day after the order was filed, defendant submitted a response and objection to the motion and order of default.³

On January 15, plaintiff moved for a money judgment for the amounts requested in its original complaint and supported its motion with an affidavit of a SAIF audit manager stating facts in support of its contention that defendant had intentionally under-reported her payroll. Again, defendant did not respond to the motion, and the trial court entered judgment against her. In February, defendant moved for relief from the judgment under ORCP 71. In July 1997, the trial court denied defendant's motion for relief from the judgment on the ground that defendant had not also moved against the order of default under ORCP 69 C.⁴ Alternatively, it reasoned that because defendant had willfully failed to comply with the order compelling discovery and had not made the showing required by ORCP 71 B(1)⁵ or 71 C,⁶ the judgment was proper. Defendant appealed to this court from the order denying her motion.

While the appeal on the denial of the first motion was pending in this court, defendant filed a second motion with the trial court in December 1997, seeking relief from both the order of default and the judgment. In her motion, she argued that the default order should be set aside because less onerous sanctions were available to the court for the discovery violations and because, in her view, ORS 656.758(3) was unconstitutional, thereby rendering the judgment under it void. The trial court denied that motion, ruling that ORS 656.758 was constitutional and that it did not have subject matter jurisdiction over the order of default because of the earlier appeal.⁷ Defendant then appealed that denial also.

The appeals were consolidated. Defendant's first assignment of error challenges the denial of her initial motion, and her second assignment of error challenges the denial of the subsequent motion. She makes the following arguments in support of her first assignment of error: first, that neither ORCP 69 C nor ORCP 71 B requires a party to file a motion under ORCP 69 C as a prerequisite to relief; second, that she has demonstrated good cause for relief from the order of default under ORCP 69 C; third, that she has demonstrated the required showing of surprise, mistake, inadvertence or excusable neglect under ORCP 71 B; and fourth, that she is entitled to relief under ORCP 71 C.⁸

An order of default and a judgment by default can be severable for purposes of appeal. See Denkers v. Durham Leasing Co., 299 Or. 544, 548, 704 P.2d 114 (1985) (holding that "an `entry of default' and an `entry of default judgment' are two separate events"). Each has a separate legal effect.⁹ An order of default "establishes only the truth of the factual allegations contained in the complaint and does not admit that the facts alleged constitute a valid claim for relief." Rajneesh Foundation v. McGreer, 303 Or. 139, 142, 734 P.2d 871, on recons. 303 Or. 371, 737 P.2d 593 (1987). A judgment by default is an adjudication that the pleadings against the defaulting party constitute a claim for relief. Id. at 143-44, 146, 734 P.2d 871. However, those principles do not preclude us from regarding a motion to set aside a judgment under ORCP 71 as also embracing a motion to set aside the underlying order of default when the order of default, as in this case, has been subsumed by the default judgment. See King v. Mitchell, 188 Or 434, 447-49, 214 P.2d 993, 216 P.2d 269 (1950) (holding, under a previous statute, that a motion to set aside a default judgment can be regarded as also a motion to vacate an order of default).

In this case, defendant's initial motion asserted grounds for relief from both the order of default and the judgment, although it sought only to vacate the default judgment and not the default order. Defendant described the events leading up to the discovery violation and attacked plaintiff for not disclosing to the trial court that defendant had produced some of the documents. Then defendant argued that fairness dictated that she be permitted to proceed to trial and that the controversy be resolved on its merits. Under the circumstances, we will regard defendant's initial motion as seeking to set aside both the judgment and the order of default.

Alternatively, the trial court ruled that defendant had "willfully" failed to comply with the order compelling production and concluded that she had not made an adequate showing to vacate the judgment. We review the trial court's ruling for an abuse of discretion. Kosatka and Kosatka, 137 Or.App. 379, 382, 904 P.2d 195 (1995), rev. den. 322 Or. 613, 911 P.2d 1231 (1996). In the light of defendant's delays in furnishing discovery and her noncompliance with the trial court's directives, we conclude that the trial court did not abuse its discretion in denying defendant's initial motion under ORCP 71 B and C. Based on the record before it, it was within the trial court's discretion to rule that there was nothing excusable about defendant's failure to furnish complete discovery or to respond timely to pending motions before the court after it had initially vacated its order to compel and granted her additional time to comply with the request.

Defendant next assigns error to the trial court's denial of her second motion. That motion sought relief from the order of default and the judgment. Defendant makes the following arguments in support of her second assignment of error: first, that the trial court had jurisdiction while an appeal was pending on the earlier order, ORCP 71 B(2); second, that the judgment was void to the extent that it awarded statutory penalties based on an unconstitutional statute; third, that the trial court failed to make appropriate findings and consider less onerous sanctions before entering the order of default; fourth, that plaintiff's proof was insufficient to award statutory damages; and fifth, that the money judgment should not have been entered before she had an opportunity to respond.

The trial court ruled that it was without jurisdiction because of the pending appeal on the denial of the initial motion to set aside the judgment. We disagree with the trial court's ruling. Although the order denying the first motion was on appeal, ORCP 71 B and C contemplate separate grounds for the setting aside of a judgment. For example, an initial motion could be based on excusable neglect while a subsequent motion could be based on newly discovered evidence. Nothing in the rules or in ORS 19.270¹⁰ prohibits a court from exercising jurisdiction over the judgment by considering an alternate ground for vacation while an order denying a motion to vacate the judgment is on appeal. See, e.g., ORCP 71 B(2).¹¹ In other words, what was on appeal and what ...