TERLYUK v. KRASNOGOROV

• Decision Date: 29 September 2010
• Docket Number: 071012482,A139901.
• Parties: Nina TERLYUK, individually and as guardian for minor Andrey Terlyuk, Plaintiffs-Appellants, v. Viktor KRASNOGOROV, Defendant-Respondent, and Does 1-10, Defendants.
• Court: Oregon Court of Appeals

237 Or.App. 546

240 P.3d 740

Nina TERLYUK, individually and as guardian for minor Andrey Terlyuk, Plaintiffs-Appellants, v. Viktor KRASNOGOROV, Defendant-Respondent, and Does 1-10, Defendants.

071012482; A139901.

Court of Appeals of Oregon.

Argued and Submitted Dec. 08, 2009.

Decided Sept. 29, 2010.

Elena E. Tsiprin, Bellevue, argued the cause for appellants. With her on the briefs was Law Offices of Elena E. Tsiprin.

Brian R. Talcott, Portland, argued the cause for respondent. With him on the brief was Dunn Carney Allen Higgins & Tongue LLP.

Before LANDAU, Presiding Judge, and SCHUMAN, Judge, and SERCOMBE, Judge.

SERCOMBE, J.

The trial court granted defendant's motion to set aside a default judgment on plaintiffs' personal injury claim pursuant to ORCP 71 B(1)(a) (“mistake, inadvertence, surprise, or excusable neglect”), and plaintiffs appeal, contending that defendant failed to establish a basis for relief from the default judgment. Defendant argued to the trial court that relief should be allowed because of his mistake or excusable neglect. Plaintiffs contend that the trial court based its order setting asidethe judgment on a determination that defendant's default was the result of a mistake. Plaintiffs assert that the undisputed facts do not support the trial court's conclusion that defendant's default was the result of the type of “mistake” for which relief is authorized by ORCP 71 B. We sustain the trial court's order on the ground of defendant's excusable neglect and conclude, further, that the trial court did not abuse its discretion in granting defendant's motion for relief. See Litton and Char-Olé Ranch, Inc., 281 Or. 687, 690, 576 P.2d 369 (1978) (stating abuse of discretion standard); Mary Ebel Johnson, P.C. v. Elmore, 221 Or.App. 166, 170-71, 189 P.3d 35, rev. den., 345 Or. 301, 194 P.3d 147 (2008) (same). We accordingly affirm.

The pertinent facts are largely undisputed. Plaintiffs and defendant were involved in an automobile collision, and defendant's insurer, Allstate, acknowledged liability for plaintiffs' claim and assumed responsibility for its processing. Plaintiffs' property damage claim was resolved, and only their claim for personal injury remained in dispute. Negotiations to resolve that claim failed, and plaintiffs filed their complaint on October 25, 2007, and served defendant on December 24, 2007, pursuant to ORCP 7 D(4). ¹ UnderORCP 7 C(2), defendant was obliged to appear and defend against the complaint within 30 days. Plaintiffs did not send a copy of the summons and complaint to Allstate at that time. On January 8, 2008, Allstate closed its file on the claim.

On January 25, 2008, as required by ORCP 69 A(2), ² plaintiffs mailed a letter to Allstate enclosing a copy of the summons and complaint and providing notice of intent to take a default judgment. Allstate's claims adjuster received the letter but mistakenly understood it to be a courtesy copy of a summons and complaint that had been filed but not yet served. The adjuster telephoned the insured, defendant's father, and left a message to expect service of summons. Shortly afterwards, she sent the insured a letter stating that plaintiff “will be filing suit against you and/or [defendant]” and “to properly handlethis lawsuit, we will need animmediate phone call when the lawsuit is filed.” She did not refer the matter to defense counsel, because, under Allstate's internal claims handling process, a file is referred to a litigation adjuster only after actual service of summons. Thus, Allstate did not take action on defendant's behalf to timely appear and defend the action and did not respond to the notice of intent to take default judgment.

On February 29, 2008, plaintiffs filed their motion for default judgment. After a hearing on March 14, 2008, the trial court granted plaintiffs' motion and entered a general judgment of default. On March 31, 2008, plaintiffs sent Allstate's adjuster notice of the order of default and default judgment, and, on April 3, 2008, plaintiffs sent the adjuster notice of the entry of judgment.

On April 21, 2008, Allstate, on behalf of defendant, filed a motion to set aside the default judgment. In an affidavit submitted with the motion, Allstate's adjuster stated that she had misread plaintiffs' letter of January 25 and had understood it to be only a courtesy copy of a complaint that had been filed by plaintiffs but not yet served. She averred that she did not realize that the letter was notice of intent to take a default judgment on a claim that plaintiffs had previously filed and that “[a]t no point was [she] aware that [defendant] had been served.”

ORCP 71 B(1) provides, in part:

“On motion and upon such terms as are just, a court may relieve a party or such party's legal representative from a judgment for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect[.] * * * A motion for reason[ ] (a) * * * shall be accompanied by a pleading or motion under Rule 21 A which contains an assertion of a claim or defense. The motion shall be made within a reasonable time, and for reason[ ] (a), * * * not more than one year after receipt of notice by the moving party of the judgment.”

Thus, a motion under ORCP 71 B(1)(a) should be granted if:

“(1) the judgment was entered by virtue of mistake, inadvertence, surprise, or excusable neglect; (2) the defendant acted with reasonable diligence after knowledge of thejudgment; and (3) the defendant possesses a meritorious defense to the action.”

Charles Schwab & Co. v. Pletz, 95 Or.App. 48, 52, 768 P.2d 407 (1989).

At the hearing to set aside the default judgment, defendant argued that his failure to appear in the case was the result either of excusable neglect or an innocent “mistake”-the insurance adjuster's misreading of the January 25 notice. The parties and the court discussed whether the adjuster's misreading of the notice was a mistake within the meaning of ORCP 71 B(1)(a) and plaintiffs' view that if there was a mistake by the adjuster, it was not reasonable. The court then discussed with counsel whether the requirement of “excusable” applies in the context of the “mistake” ground for relief. ³ It concluded that, although the court was not sure whether a requirement of excusability applies to a mistake under ORCP 71 B(1)(a), “even if it did, [the adjuster's misreading of the January 25 letter is] the kind of thing that courts will say if it is remedied promptly enough will be allowed to go forward.” ⁴ The courtgranted the motion and set aside the default judgment.

Plaintiffs appeal, asserting that the adjuster's misreading of the January 25 notice was not the type of mistake for which ORCP 71 B(1)(a) authorizes the trial court to grant relief. Plaintiffs argue that, as used in ORCP 71 B(1)(a), the word “excusable,” which modifies “neglect,” also modifies the other bases for relief from a judgment described in ORCP 71 B(1)(a). Thus, in plaintiffs' view, a proper reading of ORCP 71 B(1)(a) requires that whatever basis is asserted for relief from a judgment-mistake, inadvertence, surprise, or neglect-that basis must also be “excusable.” Plaintiffs contend that a mistake is excusable only if it is reasonable under the circumstances. Plaintiffs contend that an evaluation of the circumstances in support of relief from a judgment of default must encompass an inquiry into whether the given reason for the default is “excusable” and that, in failing to consider whether the adjuster's mistake was reasonable and therefore excusable, the trial court committed legal error. In plaintiffs' view, in light of the clarity of the January 25 letter and the adjuster's expertise, the adjuster's misreading of the January 25 letter either was not a mistake at all or was an unreasonable mistake and therefore not excusable.

Defendant asserts that plaintiffs' textual and contextual construction of ORCP 71 B(1)(a) is inconsistent with the grammatical structure of the phrase, which clearly sets forth four distinct grounds for setting aside a judgment, only the last of which-neglect-is modified by “excusable.” Defendant points out that the four grounds listed in ORCP 71 B(1)(a) are separated by commas and set forth in the disjunctive, thereby emphasizing that they are distinct. Given that structure, in defendant's view, the term “excusable” can only be understood to modify the term that it precedes, “neglect,” and there is no basis in the text or context of ORCP 71 B(1)(a) to apply the word “excusable” to the other three terms.

Additionally, defendant asserts that the circumstances found by the trial court fit squarely within the commonly understood meaning of “mistake,” which is defined in Webster's Third New Int'l Dictionary 1446 (unabridged ed. 2002), as “a misunderstanding of the meaning or implication of something.” For that additional reason, defendant contends, the trial court properly found that the default was theresult of a mistake and properly exercised its discretion to set aside the default judgment.

Thus, the issue presented by the parties on appeal is whether ORCP 71 B allows the exercise of judicial discretion to grant relief from a default judgment on the basis of a mistake alone or whether the mistake must be reasonable in character or, if the mistake is also neglectful, whether that neglect must be excusable.

Because a default judgment deprives a party of its day in court, the court liberally construes ORCP 71 B(1)(a) so as to avoid that result “when it can be done without doing violence to the statute and established rules of practice that have grown up promotive of the regular disposition of litigation.” Wagar v. Prudential Ins. Co., 276 Or. 827, 833, 556 P.2d 658 (1976); National Mortgage Co. v. Robert C. Wyatt, Inc., 173 Or.App. 16, 23-24, 20 P.3d 216, rev. den., 332 Or. 430, 30 P.3d 1183 (2001). “One aspect of such liberal construction is that we view the facts in the light most favorable to the party...