Sunwest Bank of Albuquerque v. Roderiguez

• Decision Date: 13 March 1989
• Docket Number: No. 17814,17814
• Citation: 770 P.2d 533,1989 NMSC 11,108 N.M. 211
• Parties: SUNWEST BANK OF ALBUQUERQUE, Plaintiff-Appellant, v. Albert RODERIGUEZ and Patsy RODERIGUEZ, d/b/a A R Roofing Co., Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 533

770 P.2d 533

108 N.M. 211

SUNWEST BANK OF ALBUQUERQUE, Plaintiff-Appellant, v. Albert RODERIGUEZ and Patsy RODERIGUEZ, d/b/a A R Roofing Co., Defendants-Appellees.

No. 17814.

Supreme Court of New Mexico.

March 13, 1989.

[108 NM 212] Modrall, Sperling, Roehl, Harris & Sisk, P.A., Charles A. Armgardt, Albuquerque, for plaintiff-appellant.

Franchini, Wagner, Oliver, Franchini & Curtis, Gene Franchini, Albuquerque, for defendants-appellees.

OPINION

RANSOM, Justice.

Sunwest Bank of Albuquerque (Sunwest) appeals from the setting aside of a default judgment entered in its favor against appellee Patsy Roderiguez (Roderiguez). We reverse.

On December 12, 1986, Albert and Patsy Roderiguez, husband and wife, executed and delivered to Sunwest a promissory note for a loan of $24,718.53 intended for the Roderiguezes' business, A R Roofing Company. The note required the Roderiguezes to make three quarterly payments of $2,000 each, followed by one final payment of $18,718.53 on or before December 15, 1987. Prior to the note's maturity date, Albert Roderiguez and Sunwest executed a modification agreement to the note, which eliminated the three monthly payments, and which made the entire debt due on or before the maturity date. The Roderiguezes defaulted on the note.

On February 5, 1988, Sunwest filed a complaint against the Roderiguezes, d/b/a A R Roofing Company, for money due on the promissory note. Roderiguez was served personally with a complaint and a summons addressed to her alone. Roderiguez entered no appearance and filed no answer or other pleading in response. Sunwest subsequently moved for and was granted a default judgment.

Ten days after the judgment was filed, Roderiguez moved to set it aside pursuant to SCRA 1986, 1-060(B)(1).¹ Roderiguez argued that her failure to answer was due to excusable neglect, and that she possessed a meritorious defense. See Rodriguez v. Conant, 105 N.M. 746, 737 P.2d 527 (1987). A party seeking relief from a default judgment must show the existence of grounds for relief under Rule 1-060(B), and a meritorious defense. Id. (consideration also given to intervening equities).

In her motion, Roderiguez asserted that she and her husband separated in February 1987, and since that time she has had no control of or connection with A R Roofing. She maintained further that she expected her husband who had complete control of the business to step forward and defend this matter because only he had the facts and records available to answer the complaint. After hearing argument, the trial court entered an order setting aside the judgment, finding excusable neglect and the existence of a meritorious defense.

Sunwest asserts first that the reason offered by Roderiguez for her failure to respond timely to its complaint did not constitute excusable neglect. Sunwest contends that the trial court abused its discretion in finding to the contrary. See id. (trial court's ruling to set aside a default judgment not reversible except for an abuse of discretion). A trial court has abused its discretion in setting aside a default judgment if its decision constituted arbitrary or unreasonable action. Conejos County Lumber Co. v. Citizens Savings and Loan Ass'n, 80 N.M. 612, 614, 459 P.2d 138, 140 (1969). Further, because default judgments are disfavored and causes generally should be tried upon their merits, we have counseled trial courts to be liberal in determining the existence of grounds that satisfy Rule 60(B). Rodriguez, 105 N.M. at 749, 737 P.2d at 530.

We first address Sunwest's contention that the trial court's decision was arbitrary in light of the judge's statement that he would be affirmed on appeal whether he found excusable neglect or not. Sunwest maintains that this pronouncement was indicative of an exercise of unbridled discretion and that the judge rendered his decision without determining whether the facts substantiated a finding that Roderiguez' neglect was excusable. See Springer Corp. v. Herrera, 85 N.M. 201, 202, 510 P.2d 1072, 1073 (1973). Discretion "is not a mental discretion to be exercised as one pleases, but is a legal discretion, to be exercised in conformity to law." Id.

We do not agree with Sunwest's characterization of the proceedings. The statement simply reflected the trial judge's opinion that it would be reasonable to find either excusable or inexcusable neglect based upon the evidence presented. Accordingly, no matter which way he ruled, the judge opined that he would not be reversed for an abuse of discretion. Furthermore, the decision of the trial court is contained in the order setting aside the judgment, not in his pronouncements from the bench. See Ulibarri v. Gee, 106 N.M. 637, 640, 748 P.2d 10, 13 (1987) (comments from bench not to be substituted for material facts appearing as findings in decision). In his order, the trial judge found that Roderiguez' failure to answer timely was due to excusable neglect, and that she had a meritorious defense. Unless the trial court was unreasonable in making such findings, his decision to set aside the default judgment will not be disturbed.

When Roderiguez was served with the complaint and summons, she allegedly had been disassociated from A R Roofing for approximately one year. Although the summons was addressed to her alone, the complaint captioned the defendant as "Albert and Patsy Roderiguez d/b/a A R Roofing Co." Embroiled in the midst of marriage settlement negotiations, Roderiguez was under the mistaken impression that any problems associated with the business were her husband's responsibility. Furthermore, she asserted that because of the circumstances she was without the resources to respond to the complaint. We find this latter point unpersuasive.

Sunwest argues Roderiguez failed to answer because she was convinced of her own nonliability. As a matter of policy, it insists that a litigant should not be excused from responding to a complaint under such circumstances. However, we believe it to be appropriate to apply the excusable neglect policy on a case by case basis depending upon the circumstances of each case. Moreover, by moving quickly to set aside the judgment, Roderiguez demonstrated that she was not deliberately attempting to ignore her legal obligations. Given the liberal standard that we have announced for the trial court's exercise of discretion, we cannot say that the finding of excusable neglect was arbitrary or unreasonable.

Sunwest also argues that Roderiguez failed to establish a meritorious defense to the action. We previously have noted that "there is no universally accepted standard as to what satisfies the requirement that a party show a meritorious defense." New Mexico Educators Fed. Credit Union v. Woods, 102 N.M. 16, 17-18, 690 P.2d 1010, 1011-12 (1984) (quoting Springer Corp. v. Herrera, 85 N.M. 201, 203, 510 P.2d 1072, 1074 (1973)). The finding of a meritorious defense is addressed to the sound discretion of the trial court; in making that determination the court should be liberal. Rodriguez, 105 N.M. at 749, 737 P.2d at 530. The object is to ascertain whether there is some possibility that the outcome of the suit after trial will be different from the result achieved by the default. 10 C. Wright, A. Miller, M. Kane, Federal Practice and Procedure Sec. 2697, at 531 (1983).

In Springer Corp., we stated that we were "not unmindful that some federal courts require a statement of underlying facts to support an allegation that a meritorious defense exists." 85 N.M. at 203, 510 P.2d at 1074 (citing Gomes v. Williams, 420 F.2d 1364 (10th Cir.1970); Trueblood v. Grayson Shops of Tennessee, Inc., 32 F.R.D. 190 (E.D.Va.1963)). Having made that observation, the Springer Corp. court went no further and the opinion could be read to have eschewed such a requirement. However, citing Springer Corp., we stated in Phelps Dodge Corp. v. Guerra, 92 N.M. 47, 50, 582 P.2d 819, 822 (1978), that there must be "some material grounds to support the claims on which the application for relief depends." To the extent Springer Corp. can be read to the contrary, we overrule it and hold that to establish the existence of a meritorious defense sufficient to warrant setting aside a default judgment the movant must proffer some statement of underlying facts to support the allegation.

Litigants must show a meritorious defense going beyond the mere notice requirements that would suffice if plead before default. Reeves v. Wisenor, 102 Idaho 271, 629 P.2d 667 (1981); see also United Imports and Exports, Inc. v. Superior Court, 134 Ariz. 43, 653 P.2d 691 (1982) (en banc); Kirtland v. Fort Morgan Auth. Sewer Serv., Inc., 524 So.2d 600 (Ala.1988); Peterson v. La...