Thompson v. Goetz

• Decision Date: 14 May 1990
• Docket Number: No. 890281,890281
• Citation: 455 N.W.2d 580
• Parties: Roger THOMPSON and Phyllis Thompson, Plaintiffs and Appellees, v. William GOETZ, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 580

455 N.W.2d 580

Roger THOMPSON and Phyllis Thompson, Plaintiffs and Appellees, v. William GOETZ, Defendant and Appellant.

Civ. No. 890281.

Supreme Court of North Dakota.

May 14, 1990.

Wheeler Wolf, Bismarck, for plaintiffs and appellees; argued by William D. Schmidt.

James L. Norris (argued), Bismarck, for defendant and appellant.

ERICKSTAD, Chief Justice.

William Goetz appeals from an order denying his Rule 60(b), N.D.R.Civ.P., motion to vacate a default judgment granted in favor of Roger and Phyllis Thompson. We treat the appeal as a petition for exercise of our supervisory jurisdiction, grant the supervisory writ, and direct the district court to vacate the default judgment.

Goetz served as the Thompsons' lawyer for a number of years, assisting them with legal matters pertaining to their business and farming operations as well as their personal affairs. On November 10, 1988, the Thompsons brought a lawsuit against Goetz.

Count I of the complaint seeks $390,000 in damages for legal malpractice. The Thompsons allege that between 1985 and 1987, Goetz represented them in an action brought against them by the First National Bank of Hettinger [Bank] to foreclose real estate and chattel mortgages the Bank had on their land, cattle, and machinery. The Thompsons allege that Goetz agreed to process an application for Small Business Administration [SBA] disaster program benefits and that those benefits were to be used to refinance their loans from the Bank. According to the Thompsons, after their application was initially denied by the SBA, Goetz agreed to appeal that decision for them but failed to do so. The Thompsons allege that "[a]s a direct and proximate result of [Goetz's] failure to process the appeal with regard to [their] application for SBA disaster benefits, [they] have been damaged to the extent that they are no longer eligible for consideration for said program in an amount equal to the application amount of $390,000."

Count II of the complaint seeks an unspecified amount of compensatory and punitive damages for "fraudulent misrepresentations." The Thompsons allege, among other things, that Goetz told them they needed to sign certain documents to accompany the SBA application which would establish their ownership interests in the farm, cattle, and machinery. According to the Thompsons, after executing the documents they discovered that the papers consisted of a stipulation dismissing their bankruptcy petition and a warranty deed and bill of sale transferring title to their land, cattle, and machinery to the Bank.

Count III of the complaint seeks compensatory damages for breach of contract. The Thompsons allege that in July 1988, they entered into an agreement with Goetz to settle their claims against him. According to the Thompsons, although Goetz made one payment due under the terms of the agreement, he has failed to make other payments due and meet other conditions of the contract. The Thompsons seek "damages equal to the amount [Goetz] was obligated to pay in connection with said agreement."

Goetz did not answer the complaint.

On January 6, 1989, the Thompsons filed a motion for default judgment pursuant to Rule 55, N.D.R.Civ.P. The trial court determined that Goetz, through counsel who subsequently withdrew as his counsel, had made an appearance and directed the Thompsons' counsel to provide Goetz at least eight days written notice of the application for judgment. On January 24, 1989, the Thompsons filed an amended motion for default judgment. The Thompsons requested that the trial court "enter judgment against the defendant determining that the defendant is liable for the damages sought in Counts I, II and III. Further, plaintiffs move the court for an order setting a hearing for the sole purpose of determining the amount of damages sustained by the plaintiffs." Although an affidavit of default was filed with the amended motion, no affidavit of proof was filed. ¹ On February 6, 1989, judgment was entered finding Goetz "liable for the relief sought" in counts I, II, and III of the complaint and ordering that a hearing be held pursuant to Rule 55(a)(2), N.D.R.Civ.P., "for the purpose of hearing the evidence and assessing damages against" Goetz. The Thompsons filed a notice of entry of judgment on March 16, 1989.

A hearing for the purpose of determining damages was set for April 6, 1989. On April 5, 1989, an attorney entered an appearance for Goetz and requested a continuance of the hearing on damages, which was granted. On April 7, 1989, Goetz moved, pursuant to Rule 60(b), N.D.R.Civ.P., to vacate the default judgment "for excusable neglect and any other reason justifying relief from the operation of the judgment." Goetz supported the motion with, among other things, affidavits from himself, his wife, and a clinical psychologist indicating that Goetz's neglect in answering the complaint was based on his psychological inability to deal with the Thompsons' claims and allegations. Goetz also presented a proposed answer to the Thompsons' complaint.

Although noting that the defenses in the proposed answer "appear on their face to be meritorious," the trial court determined that Goetz's neglect was not excusable and denied the motion to vacate the default judgment. The court also said:

"All of the claims for damages asserted by the Plaintiffs are speculative and I have denied Plaintiffs any monetary award to this point. It will be necessary for Plaintiffs to prove their damages pursuant to Rule 55(a)(2), NDRCiP. Most of the defenses Defendant raises in his proposed answer may be argued at the hearing on damages. At this point, I have not concluded whether to submit the issue of the amount of damages, if any, to a jury."

With the hearing on damages pending, Goetz appealed from the order denying his motion to vacate the default judgment.

Although the parties have not questioned the appealability of the trial court's order, we must dismiss an appeal on our own motion if we conclude that it fails to grant jurisdiction. Peterson v. Zerr, 443 N.W.2d 293, 296 (N.D.1989). The framework for analyzing this court's jurisdiction in cases where there is an appeal and there are unadjudicated claims remaining to be resolved by the trial court is settled. First, the order appealed from must meet one of the criteria set forth in Sec. 28-27-02, N.D.C.C. O'Neil v. Prosper Oil Company, 448 N.W.2d 626, 627 (N.D.1989). Second, if the order does meet one of the statutory criteria, there must also be a Rule 54(b), N.D.R.Civ.P., certification. Gast Construction Co. v. Brighton Partnership, 422 N.W.2d 389, 390 (N.D.1988).

We have held that an order denying a motion to vacate a default judgment is an appealable order under Sec. 28-27-02, N.D.C.C. United Accounts, Incorporated, Bismarck v. Palmer, 141 N.W.2d 472, 473 (N.D.1966). However, if some claims remain unadjudicated in the underlying action, an order denying a motion to vacate a default judgment requires a Rule 54(b) order certifying that there is no just reason for delay and directing the entry of a final judgment for the order to be appealable. See Bieganek v. Taylor, 801 F.2d 879 (7th Cir.1986); Tarnoff v. Jones, 15 Ariz.App. 88, 486 P.2d 200 (1971). We have said that the term "claims" is used in a general sense in Rule 54(b) to include "issues." Sargent County Bank v. Wentworth, 434 N.W.2d 562, 564 (N.D.1989); Mitzel v. Schatz, 167 N.W.2d 519, 526 (N.D.1968).

The default judgment in this case may be more accurately described as a "partial" default judgment because it leaves the issue of damages pending. In Sheets v. Letnes, Marshall & Fiedler, Ltd., 311 N.W.2d 175, 179 (N.D.1981), this court held that a partial summary judgment on the issue of liability, although not a final determination of a legal malpractice claim, was an appealable order under Sec. 28-27-02(5), N.D.C.C., and did not need to be accompanied by a Rule 54(b) certification. However, Sheets "predates the 'shift in our appellate procedure regarding the applicability of Rule 54(b) certification to orders that are appealable pursuant to Section 28-27-02, N.D.C.C.' " Peterson v. Zerr, supra, 443 N.W.2d at 296 [quoting Harmon Motors v. First Nat'l Bank & Trust, 436 N.W.2d 240, 241 (N.D.1989) ]. In this case, there is no Rule 54(b) order in the record certifying either the default judgment or the order denying the motion to vacate the default judgment as a final judgment. Because of the development of our law concerning the relationship between Rule 54(b) and Sec. 28-27-02 since our decision in Sheets, we cannot consider this matter on appeal.

But the same issue inherent in Sheets is present here, i.e., the partial default judgment on the issue of liability eliminates any defenses to liability. This so affects the fundamental merits of the case that we will consider the appeal as a request to exercise our supervisory jurisdiction and, exercising our discretion, we will consider the issues on their merits. See Garrison Memorial Hospital v. Rayer, 453 N.W.2d 787 (N.D.1990); Odden v. O'Keefe, 450 N.W.2d 707 (N.D.1990); Minot Daily News v. Holum, 380 N.W.2d 347 (N.D.1986).

Goetz asserts that the trial court erred, as a matter of law, in granting default judgment on the question of liability without requiring the production of any supporting evidence by the Thompsons. We agree.

Rule 55(a), N.D.R.Civ.P., provides in pertinent part:

"(a) Entry. If a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise appear and the fact is made to appear by affidavit or otherwise, the court may direct the clerk to enter an appropriate judgment by default in favor of the plaintiff and against the defendant as follows:

"(1) When the plaintiff's claim against a defendant is for a sum certain or for a sum which can by computation be made certain, the court, upon affidavit of the amount due and upon production of the written instrument, if any, upon which the...