Shirk v. Bowling, Inc.

• Decision Date: 11 April 2001
• Docket Number: No. 98-3634-FT.,98-3634-FT.
• Citation: 624 N.W.2d 375,2001 WI 36,242 Wis.2d 153
• Parties: Sandra L. SHIRK, Plaintiff-Appellant, v. BOWLING, INC., Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

242 Wis.2d 153

2001 WI 36

624 N.W.2d 375

Sandra L. SHIRK, Plaintiff-Appellant, v. BOWLING, INC., Defendant-Respondent-Petitioner.

No. 98-3634-FT.

Supreme Court of Wisconsin.

Oral argument January 3, 2001.

Decided April 11, 2001.

For the defendant-respondent-petitioner there were briefs by Scott C. Beightol, Brenda S. Kasper and Michael Best & Friedrich LLP, Milwaukee, and oral argument by Scott C. Beightol.

For the plaintiff-appellant there was a brief by Russell C. Brannen, Jr., and O'Neil, Cannon & Hollman, S.C., Milwaukee, and oral argument by Russell C. Brannen, Jr.

¶ 1. N. PATRICK CROOKS, J

The issue presented by this case is whether a circuit court may deny a motion for default judgment based on the preemptive use of the statute governing relief from judgments, Wis. Stat. § 806.07(1)(1995-96),¹ when the party opposing the motion claims excusable neglect for its untimely answer. Petitioner, Bowling, Inc. (Bowling), seeks review of an unpublished decision of the court of appeals, Shirk v. Bowling, Inc., No. 98-3634-FT, unpublished slip op. (Ct. App. Oct. 12, 1999). The court of appeals reversed a circuit court order which denied a motion for default judgment brought by Sandra Shirk (Shirk) based on Bowling's lack of a timely answer to her complaint. The circuit court, Judge Charles F. Kahn presiding, denied Shirk's motion based on the preemptive use of Wis. Stat. § 806.07(1). The court concluded that it would be compelled to reopen the case if Bowling brought a motion to vacate the judgment under § 806.07.² After denying Shirk's motion for default judgment, the court granted summary judgment in favor of Bowling. Shirk appealed the summary judgment to the court of appeals. The court of appeals reversed, holding that the circuit court applied the wrong legal standard in denying Shirk's motion for default judgment. According to the court of appeals, the circuit court should have addressed whether Bowling established excusable neglect for its untimely answer, and should not have relied upon the policy against default judgments, which favors allowing parties to have their day in court.

¶ 2. We hold that the circuit court, based on the preemptive use of Wis. Stat. § 806.07(1), properly denied Shirk's motion for default judgment. We further hold that Bowling established excusable neglect under Wis. Stat. § 806.07(1)(a) due to the fact that, when read together, the summons and the notice of service were confusing or misleading. Accordingly, we reverse the decision of the court of appeals, and the cause is remanded to the court of appeals.³

I

¶ 3. This case arose out of a post-employment dispute between Shirk and Bowling. Shirk filed a complaint against Bowling after Bowling terminated her as its Chief Executive Officer (CEO), seeking a lump sum payment of severance pay, additional wages, and an award for expenses and attorneys' fees.

¶ 4. On March 6, 1998, Shirk served a summons, complaint and notice of service on the Department of Financial Institutions (DFI) pursuant to the statute governing service to foreign corporations, Wis. Stat. § 181.66(2).⁴ The summons named Bowling as the defendant and contained the instruction that Bowling must answer the complaint within twenty days of receiving the summons or the court may enter judgment against Bowling. On March 16, 1998, the DFI mailed an authenticated copy of the Summons and Complaint, and the original Certificate of Service on the DFI showing service on March 6, 1998, as required by Wis. Stat. § 181.66, to the last known address of Bowling.

¶ 5. On March 17, 1998, Bowling received the copy of the summons and complaint. In addition, Bowling received a Notice of Service from Shirk that stated: Please take notice, that on the 6th day of March, 1998, as reflected in the attached Certificate from the Department of Financial Institutions, a copy of the appended authenticated Summons and Complaint was served upon you through the aforesaid Department, all pursuant to Wisconsin Statutes § 181.66(2). Reference is herewith made to the contents of the appended Summons for further instructions.

¶ 6. On March 30, 1998, Shirk moved for default judgment because Bowling did not answer her complaint within 20 days of the March 6 service on the DFI. Bowling then filed an answer to Shirk's complaint on April 1, 1998.

¶ 7. The circuit court denied Shirk's motion because the court determined that it would be required to reopen the case if Bowling brought a motion to vacate the default judgment under Wis. Stat. § 806.07(1). In addition, the court recognized the policy in Wisconsin to allow litigants their day in court and to decide cases based on the merits rather than on "legal traps or time limits." Tr. of Mot. Hr'g at p. 4. Lastly, the court noted that Bowling had filed an answer and was ready to defend Shirk's complaint. After denying Shirk's motion for default judgment, the circuit court granted summary judgment in favor of Bowling.

¶ 8. The court of appeals reversed, holding that the circuit court applied the wrong legal standard in making its decision. According to the court of appeals, the circuit court should have addressed whether Bowling had established excusable neglect, rather than simply stating a preference for deciding the case based on the merits. In addition, the court of appeals held that Bowling's three excuses for its late answer "were legally insufficient, as a matter of law, to establish excusable neglect." Shirk, slip op. at 4. The court of appeals did not address whether the circuit court properly granted Bowling's motion for summary judgment.

II

[1, 2]

¶ 9. The present case requires us to determine whether a circuit court may deny a motion for default judgment based on the preemptive⁵ use of Wis. Stat. § 806.07(1)(a) when the party opposing the motion claims that its untimely answer was due to excusable neglect. A circuit court has discretion in deciding whether to grant a motion for default judgment. Oostburg State Bank v. United Savings & Loan Ass'n, 130 Wis. 2d 4, 11, 386 N.W.2d 53 (1986). We will not reverse a circuit court's decision unless the court erroneously exercised its discretion. Id..⁶

¶ 10. Bowling contends that the circuit court did not erroneously exercise its discretion. According to Bowling, the circuit court, in the present case, followed the court of appeals decision in Johns v. County of Oneida, 201 Wis. 2d 600, 549 N.W.2d 269 (Ct. App. 1996). In Johns, the court of appeals held that a circuit court could deny a motion for default judgment, without a finding of excusable neglect, if the court concluded that it would be required to vacate the judgment under Wis. Stat. § 806.07(1)(h). 201 Wis. 2d at 606. The reasoning behind the Johns decision was that it would be a needless use of judicial time and resources to grant a default judgment and then immediately vacate that judgment. Id. In addition, Bowling claims that the Johns decision follows language from this court in Willing v. Porter, 266 Wis. 428, 63 N.W.2d 729 (1954). In Willing, we stated that it would be a "useless waste" if a court granted a motion for default judgment, and then immediately considered a motion to set aside that judgment on the same grounds that were argued to deny the motion in the first place. 266 Wis. at 430. Bowling urges us to follow the holding of Johns and the language and holding of Willing.

¶ 11. Bowling also argues that the circuit court was not required to use the phrase "excusable neglect" to exercise properly its discretion when denying Shirk's motion for default judgment. Relying on Hedtcke v. Sentry Ins. Co., 109 Wis. 2d 461, 326 N.W.2d 727 (1982), Bowling claims that a circuit court makes an implicit finding of excusable neglect so long as it adequately recites the grounds for its decision. In the present case, Bowling contends that the circuit court adequately recited the grounds for its decision when it stated the policy preference for deciding cases on the merits and allowing litigants their day in court. Accordingly, Bowling claims that the circuit court did not erroneously exercise its discretion, even though it did not expressly use the phrase "excusable neglect."

¶ 12. Lastly, Bowling contends that it was misled by Shirk's use of a faulty summons based on an obscure service statute and that this constitutes grounds for a finding of excusable neglect. Bowling claims that it was reasonable to believe that the 20-day period in which to answer Shirk's complaint began when Bowling received the summons on March 17, rather than on March 6, the day the summons and complaint were served on the DFI. Bowling compares the facts of the present case to the facts of Jackson v. Employe Trust Funds Board, 230 Wis. 2d 677, 602 N.W.2d 543 (Ct. App. 1999). In Jackson, the court of appeals held that a circuit court did not erroneously exercise its discretion in denying a motion for default judgment, when the party opposing the motion claimed to be misled by an ambiguous service statute. 230 Wis. 2d at 694-95. Bowling argues that the notice of service which referred to Wis. Stat. § 181.66, combined with the language of the summons itself, created an ambiguity as to when its answer was due. Bowling therefore claims that its failure to file an answer within 20 days of the date that service was effected on the DFI was excusable neglect.

¶ 13. By contrast, Shirk contends that the circuit court erroneously exercised its discretion in denying her motion for default judgment. Shirk argues that Bowling failed to set forth the specific details of its claimed excusable neglect. Shirk compares the facts of the present case to the facts of Hedtcke, which this court found to be insufficient to establish excusable neglect. 109 Wis. 2d at 472. In Hedtcke, we held that a lawyer's claim of the press of other legal business, without stating "specific incidents and a persuasive explanation," failed to establish excusable neglect. 109 Wis. 2d at 473....