Smith v. Widman Trucking & Excavating, Inc.

• Decision Date: 27 August 1980
• Docket Number: No. 79-2479,79-2479
• Citation: 627 F.2d 792
• Parties: Donald R. SMITH, Treasurer, State of Illinois, and Michael J. Bakalis, Comptroller, State of Illinois, Plaintiffs-Appellees, v. WIDMAN TRUCKING & EXCAVATING, INC., and Jean Pomagalski, S.A., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 792

627 F.2d 792

Donald R. SMITH, Treasurer, State of Illinois, and Michael J. Bakalis, Comptroller, State of Illinois Plaintiffs-Appellees, v. WIDMAN TRUCKING & EXCAVATING, INC., and Jean Pomagalski S.A., Defendants-Appellants.

No. 79-2479.

United States Court of Appeals Seventh Circuit.

Argued May 29, 1980.

Decided Aug. 1, 1980.

As Amended Aug. 27, 1980.

Al J. Pranaitis, Alton, Ill., for defendants-appellants.

John H. Germeraad, Asst. U. S. Atty., Springfield, Ill., for plaintiffs-appellees.

Before CASTLE, Senior Circuit Judge, and SPRECHER and WOOD, Circuit Judges.

SPRECHER, Circuit Judge.

Widman Trucking & Excavating, Inc. (Widman) and Jean Pomagalski, S.A. (Pomagalski), defendants in this statutory interpleader action, appeal from the district court's October 5, 1979 decision finding the Small Business Administration (SBA) entitled to funds previously distributed to Widman, Pomagalski and other defendants. ¹ Widman and Pomagalski contend that the district court abused its discretion in setting aside its December 22, 1977 order distributing the fund. They also contend that the court lost jurisdiction over the fund and the parties when the fund was distributed pursuant to the December 22, 1977 order. Finally, they contend that the court erred in finding the SBA entitled to all of the fund, ² rather than ordering a pro rata distribution. We find these contentions without merit and therefore affirm the decision of the district court.

I

The interpleaded fund arose from an Illinois Court of Claims judgment in favor of Donald Caplan and Pere Marquette Ski Corporation (Marguette) entered on February 14, 1977. The State of Illinois was aware of conflicting claims to the amount awarded and therefore filed this statutory interpleader action on September 27, 1977, and deposited the fund with the district court. On December 21, 1977, after answers had been filed by the various defendants, the district court was informed that the parties had agreed to a distribution of the fund. An order embodying the agreement was prepared by counsel for Widman and entered by the court on December 22, 1977. ³ The fund was distributed on that day.

Donald Caplan filed a motion to set aside this order of distribution under Fed.R.Civ.P. 60(b)(1) on March 2, 1978. The motion was argued on April 12, 1978. On September 7, 1978, the district court set aside its order of December 22, 1977, and on October 5, 1979, the court entered the order appealed from, finding the initial distribution in error and awarding $73,311.48 to the SBA. After denial of a motion to reconsider, Widman and Pomagalski brought this appeal.

The facts underlying the various claims to the fund and the facts underlying Caplan's Rule 60(b)(1) motion will be noted where relevant in the discussion that follows.

II

Caplan moved to set aside the stipulated judgment of December 22, 1977, under Fed.R.Civ.P. 60(b)(1), ⁴ alleging that it had been entered without his actual consent and authorization due to a misunderstanding between his regular counsel and local trial counsel. The motion was supported by affidavits of both attorneys setting out the details of their misunderstanding. No affidavit was filed by Caplan himself.

A

Rule 60(b) is to be used to disturb the finality of judgments only on narrow grounds and upon a showing of exceptional circumstances. See Brennan v. Midwestern United Life Insurance Co., 450 F.2d 999, 1003 (7th Cir. 1971), cert. denied, 405 U.S. 921, 92 S.Ct. 957, 30 L.Ed.2d 792 (1972); Mayberry v. Maroney, 529 F.2d 332, 335 (3d Cir. 1976). The rule is not intended to enable litigants to avoid the consequences of a decision to settle or compromise which in retrospect appears unfortunate. See Sampson v. Radio Corporation of America, 434 F.2d 315, 317 (2d Cir. 1970); Sadowski v. Bombardier Ltd., 539 F.2d 615, 618 (7th Cir. 1976). Rule 60(b) is, however, to be liberally interpreted in favor of setting aside judgments upon a proper showing of mistake, inadvertence, surprise or excusable neglect. See Beshear v. Weinzapfel, 474 F.2d 127, 131 (7th Cir. 1973). The decision whether a proper showing has been made is committed to the sound discretion of the district court. See Bradford Exchange v. Trein's Exchange, 600 F.2d 99, 102 (7th Cir. 1979). A district court's decision to grant or deny a Rule 60(b) motion will be reversed on appeal only if it is shown that the court abused its discretion. See Ben Sager Chemicals International, Inc. v. E. Targosz & Co., 560 F.2d 805, 809 (7th Cir. 1977). An abuse of discretion is established only where no reasonable man could agree with the district court; if reasonable men could differ as to the propriety of the court's action, no abuse of discretion has been shown. See Beshear, supra, 474 F.2d at 134.

While neither ignorance nor carelessness by a party or his attorney is a proper basis for Rule 60(b) relief, Ben Sager, supra, 560 F.2d at 809, courts are reluctant, under certain circumstances, to attribute to a client the mistakes of his attorney. See A. F. Dormeyer Co. v. M. J. Sales & Distributing Co., 461 F.2d 40, 42 (7th Cir. 1972). Upon a proper showing, even a consent judgment may be set aside under Rule 60(b). See Fleming v. Huebsch Laundry Corp., 159 F.2d 581 (7th Cir. 1947); Associates Discount Corp. v. Goldman, 524 F.2d 1051 (3d Cir. 1975); Thomas v. Colorado Trust Deed Funds, Inc., 366 F.2d 136 (10th Cir. 1966). In particular, a consent judgment shown to have been entered without express authority from the client or without the client's actual consent may be the subject of Rule 60(b) relief. This court recently set out the governing legal principles for such cases:

An attorney may not consent to a final disposition of his client's case without express authority. . . . Although an attorney of record is presumed to have his client's authority to compromise and settle litigation, a judgment entered upon an agreement by the attorney may be set aside on affirmative proof that the attorney had no right to consent to its entry.

Bradford Exchange, supra, 600 F.2d at 102 (citations omitted). See also Associates Discount, supra, 524 F.2d at 1053; Thomas, supra, 366 F.2d at 139. The question in this case, therefore, is whether the district court was presented with affirmative proof that the December 22, 1977 judgment was agreed to by Caplan's local trial counsel without Caplan's consent or authorization.

Comparison of the facts presented in this case with those presented in our recent decision in Bradford Exchange, supra, reveals that the district court was well within its discretion in granting the motion to vacate. In Bradford Exchange, the defendant moved under Rule 60(b) to modify a portion of a judgment to which its attorney had agreed, alleging that the attorney had misunderstood his instructions with respect to acceptable settlement terms. The defendant submitted the affidavit of its manager, relating what the attorney's instructions had been, and the affidavit of the attorney, relating his mistaken interpretation of the instructions. The district court found the affidavits unpersuasive and denied the motion. This court reversed, finding that the defendant had presented affirmative evidence that its attorney had consented to the settlement at issue without express authority. ⁵

In this case, Caplan's motion and the affidavits of his attorneys set forth a misunderstanding not directly between attorney and client as in Bradford Exchange, but rather between the client's two attorneys. The district court had before it the motion, the attorneys' affidavits and the correspondence between the attorneys, attached as exhibits to the affidavits. ⁶ These materials served precisely the purpose served by the affidavits in Bradford Exchange : they explained to the court the alleged misunderstanding and how it came about. Widman and Pomagalski contend that the evidence reveals that the true motivation for Caplan's motion was not a misunderstanding between attorneys, but rather an after-the-fact realization that the December 22, 1977 judgment left Caplan personally liable to the SBA for a substantial sum. There is evidence in the record which might support this characterization and we cannot say that Caplan's proof is of such persuasive force that had the district court denied the motion, we would be willing to reverse for abuse of discretion. We are not, however, faced with this issue. The district court found the materials submitted by Caplan to be persuasive and granted the motion. We can find no abuse of discretion in this decision to grant the motion to vacate. At the very least, reasonable men could differ as to the propriety of the district court's action; accordingly, we may not reverse that decision.

B

Widman and Pomagalski direct much of their attention on this appeal to an attack upon the admissibility of the evidence presented through the attorneys' affidavits. They contend that the affidavits consist almost entirely of inadmissible hearsay. While this contention may be accurate with respect to some of the affidavit evidence, it is not accurate with respect to much of that evidence. Much of the evidence in the affidavits is not inadmissible hearsay because it was offered not to prove the truth of the matter asserted, but rather to illustrate the misunderstanding between counsel by relating the communications between them and the impressions formed as a result thereof. This evidence would be admissible for the limited purpose it was intended to serve. Indeed, it is difficult to conceive of an alternative method of proving that the alleged misunderstanding in fact occurred. The affidavits presented sufficient admissible evidence to support the district court's decision.

More important, we have been unable to discover in the record before us any objection by any party in the court below to these affidavits. A number of parties, including Widman and Pomagalski, submitted memoranda and affidavits in...