Wood v. James W. Fowler Co.

• Decision Date: 07 June 2000
• Citation: 168 Or. App. 308,7 P.3d 577
• Parties: M.R. WOOD and Mary Wood, husband and wife, Respondents, v. JAMES W. FOWLER CO., an Oregon corporation, Appellant.
• Court: Oregon Court of Appeals

7 P.3d 577

168 Or. App. 308

M.R. WOOD and Mary Wood, husband and wife, Respondents, v.JAMES W. FOWLER CO., an Oregon corporation, Appellant.

(973636; CA A106029)

Court of Appeals of Oregon.

Argued and Submitted March 30, 2000.

Decided June 7, 2000.

James M. Callahan, Portland, argued the cause for appellant.With him on the briefs was Callahan & Shears, P.C.

Dennis L. Bartoldus, Newport, argued the cause for respondents.With him on the brief was Philip A. Hingson.

Before De MUNIZ, Presiding Judge, and HASELTON and WOLLHEIM, Judges.

HASELTON, J.

Defendant appeals from the trial court's denial of its motion to set aside a judgment of default.ORS 19.205(2)(c).¹The dispositive issue is whether the trial court erred in determining that defendant had not established that its failure to appear was the product of "excusable neglect" within the meaning of ORCP 71 B(1)(a).We conclude that this case is materially indistinguishable from Reitz v. Coca-Cola,36 Or.App. 487, 584 P.2d 791(1978), and, consequently, reverse and remand.

The material facts are uncontroverted.In late March 1997, plaintiffs' attorney sent a demand letter to defendant, asserting that defendant had committed trespass and timber trespass on plaintiffs' property.The letter stated that, if defendant did not respond within 20 days, plaintiffs would file suit.Defendant did not respond.

In July 1997, plaintiffs filed this action, alleging claims of trespass and timber trespass.On August 4, 1997, a deputy sheriff served the summons and complaint on a receptionist at defendant's office.The receptionist gave the complaint to James Fowler, defendant's president and registered agent.Fowler reviewed the complaint and decided that it should be transmitted to defendant's insurance agent "to be tendered to our liability carrier for defense."Consequently, Fowler gave the complaint to defendant's comptroller, Paul Beals, and told Beals to transmit the original summons and complaint to defendant's insurance agent.²

Beals's "ordinary" or "usual" practice was to give the original summons and complaint to a member of defendant's clerical staff with instructions to mail those documents to defendant's insurance agent.For unknown reasons, that did not occur in this case.As a result, defendant failed to file a timely responsive pleading and, on September 10, 1997, plaintiffs obtained an order of default against defendant.

On September 25, 1997, Beals telephoned defendant's insurance agent to ask about the status of the action and was told that the agent had never received any notice of the action.Beals then searched his office and found the original summons and complaint.Defendant immediately sent the summons and complaint to its insurance agent who, in turn, forwarded the documents to defendant's insurer.

On October 6, 1997, defendant filed a motion to set aside the order of default, along with an answer to plaintiffs' complaint.³Defendant contended that its failure to appear was the result of "inadvertence" or "excusable neglect" within the meaning of ORCP 71 B(1)(a).The court denied defendant's motion and, on December 12, 1997, entered a judgment of default.Defendant appealed from that judgment, and we ultimately dismissed that appeal in December 1998.See n 1 above.Meanwhile, however, in November 1998, defendant moved to set aside the judgment of default, again on grounds of "inadvertence" or "excusable neglect."After issuing a comprehensive letter opinion, the trial court denied that motion.⁴This appeal followed.

We begin with our standard of review.We review denials of motions to set aside default judgments for abuse of discretion.See, e.g., Duvall v. McLeod,160 Or. App. 685, 690, 984 P.2d 287, rev allowed329 Or. 527, 994 P.2d 128(1999);Walters v. Kmart Corp.,149 Or.App. 65, 68, 942 P.2d 286, rev den326 Or. 59, 944 P.2d 948(1997).Nevertheless, that discretion is hardly unlimited—indeed, there may be no context in which we have so frequently reversed for abuse of discretion—and its contours are, in Judge Joseph's phrase, "murkily defined."Hackett v. Alco Standard Corp.,71 Or.App. 24, 33 n. 7, 691 P.2d 142(1984), rev den298 Or. 822, 698 P.2d 963(1985).Perhaps as a result, our case law almost invariably reduces to fact-matching and analogy; viz:"The facts pertaining to `excusable neglect' in this case are similar to those in Reitz[or Mount] and so, by analogy, the denial of relief from default in this case must [or must not] be an abuse of discretion."⁵That, in essence, is the process we follow here.

ORCP 71 B(1) provides, in part:

"On motion and upon such terms as are just, the 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[.]"

That rule "is to be construed liberally to the end that every litigant shall have his day in court and his rights and duties determined only after a trial upon the merits of the controversy."King v. Mitchell,188 Or. 434, 441-42, 214 P.2d 993(1950), King v. Mitchell,188 Or. 434, 216 P.2d 269(1950)(construing predecessor statute).See alsoHiatt v. Congoleum Industries,279 Or. 569, 579, 569 P.2d 567(1977)("Ordinarily, if [a movant] presents reasonable grounds excusing his default, the courts are liberal in granting relief, for the policy of the law is to afford a trial upon the merits 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.").

The principal, and ultimately dispositive, issue on appeal is whether defendant's failure to appear was the product of excusable neglect.⁶Defendant argues that the circumstances here are materially indistinguishable from those in Reitz and Hackett.Plaintiffs counter that this case is more closely analogous to Lowe v. Institutional Investors Trust,270 Or. 814, 529 P.2d 920(1974),Mount v. Massachusetts Mutual Life Ins. Co.,103 Or.App. 156, 796 P.2d 388,rev dismissed311 Or. 151, 806 P.2d 129(1991), andWalker v. Allied Fidelity Ins. Co.,97 Or. App. 568, 777 P.2d 990,rev den308 Or. 466, 781 P.2d 1215(1989).We agree with defendant.

We begin with Lowe, the earliest of the precedents that plaintiffs invoke.There, the plaintiff filed a suit to foreclose a lien and effected service on one of the defendant's executives, Bulfamante, who was authorized to accept service for the defendant.The defendant failed to appear, and the plaintiff obtained a judgment of default.Thereafter, the defendant moved to set aside the default judgment on grounds of "excusable neglect."In support of that motion, the defendant submitted an affidavit from Bulfamante in which he stated that he had no recollection of having been served with the complaint but that it was his "customary" practice on being served to forward legal process to the defendant's legal department.Lowe,270 Or. at 818, 529 P.2d 920.Bulfamante further averred that a search of the defendant's corporate files had not yielded the summons and complaint.The trial court denied the motion to set aside the default, and the Supreme Court affirmed:

"The affidavit thus establishes only that Mr. Bulfamante has no recollection of having been served and that he has been unable to find the summons and complaint in his files or in the files of [defendant].It is obvious that the affidavit does not establish any mistake, inadvertence or surprise and we conclude it is insufficient to establish excusable neglect.Indeed, it can be suggested that the affidavit shows inexcusable neglect."Id.

In Hiatt,the plaintiff served the defendant by serving the corporation commissioner and sending copies to the defendant's office in New Jersey by certified mail.Fridy, an employee of the defendant's mail room, signed for the certified letter.Thereafter, the defendant entered no appearance, and the plaintiff obtained a default judgment.After receiving notice of the default judgment, the defendant moved to set aside that judgment on grounds of excusable neglect.In support of that motion, defendant submitted affidavits from Fridy, the mail room employee, and other corporate employees:

"[Fridy's] instructions were to forward any legal document to the legal department and it was his practice to do so.He was working the mailroom when the postoffice records state the complaint in plaintiff's action was received, but he has no recollection of receiving it or any other like document.

"A member of [the defendant's] legal department stated that he investigated in the legal department and other departments.No one in [the defendant] had any knowledge of the lawsuit until he received the copy of the default judgment by mail from plaintiff's attorney."Hiatt,279 Or. at 574, 569 P.2d 567.

The trial court denied the motion to set aside the default judgment, and the Supreme Court reversed:

"[T]he only evidence is that the summons and complaint were received by a part-time employee who had no memory of the incident.His instructions were to send such documents to the legal department and it was his practice to do so.For reasons not known, the documents were not received by the legal department.There is nothing implausible about such evidence.We regard these facts as amounting to a case of excusable neglect as a matter of law[.]"Id. at 577, 569 P.2d 567.

In so holding, the court, although acknowledging certain "similarities," explained that Lowe was materially distinguishable:

"Lowe involved personal service, an event of greater impact than the receipt of a letter containing a summons and complaint in a mail room.The personal service was made upon an officer of the corporation who was assigned the duty of acting as the corporate agent to receive service.

"We concluded in Lowe that a trial court could reasonably find that it was inexcusable negligence for a corporate agent for service to have lost and...