Case Title: Hochhalter v. Great Western Enterprises, Inc.

Citation: 

Docket Number: 85-48

State: wyoming

Court: Wyoming Supreme Court

Date: 1985-11-13T00:00:00Z

Document:
Hochhalter v. Great Western Enterprises, Inc.1985 WY 187708 P.2d 666Case Number: 85-48Decided: 11/13/1985A.C. HOCHHALTER AND ESTER R. HOCHHALTER, APPELLANTS (DEFENDANTS), 

v. 

GREAT WESTERN ENTERPRISES, INC., A WYOMING CORPORATION, APPELLEE (PLAINTIFF).
Supreme Court of Wyoming
A.C. HOCHHALTER AND ESTER 
R. HOCHHALTER, APPELLANTS (DEFENDANTS), 

v. 

GREAT WESTERN 
ENTERPRISES, INC., A WYOMING CORPORATION, APPELLEE 
(PLAINTIFF).

Rehearing Denied December 
19, 1985.

 
 
Appeal from the District 
Court, CarbonCounty, Robert A. Hill, 
J.

 
 
John B. Rogers, 
Cheyenne, for appellants.

Frederick J. 
Harrison, Rawlins, for appellee. 

Before THOMAS, C.J., 
ROSE,* ROONEY, BROWN and CARDINE, 
JJ.

* Retired November 1, 
1985.

ROSE, 
Justice.

[¶1.]     This case involves the 
rendering of a judgment by default under Rule 55, W.R.C.P. Appellants contend 
that the district court abused its discretion in refusing to set aside the 
default judgment. They urge that the judgment should have been set aside 
pursuant to Rules 60(b)(6) and 55(b)(2), W.R.C.P.,1 because the neglect of their 
counsel justified such relief and because they did not receive the notice 
required by Rule 55(b)(2). We hold that the trial court did not abuse its 
discretion in refusing to set aside the default judgment and that, under the 
facts of this case, appellants were not entitled to the notice contemplated by 
Rule 55(b)(2), for the reason that they had not appeared in the 
action.

[¶2.]     We will 
affirm.

FACTS

[¶3.]     As part of the 
consideration for a motel purchased from Great Western Enterprises, Inc., A.C. 
Hochhalter and Ester Hochhalter executed a promissory note for $44,000. On April 
13, 1984, Great Western filed suit in district court in Wyoming alleging that the 
Hochhalters had defaulted on this note. Although the Hochhalters were properly 
served on April 26, 1984, they did not answer the complaint. On July 11, 1984, 
the clerk of court filed an entry of default and on July 13, 1984 the district 
court entered a judgment by default due to the Hochhalters' failure to answer, 
otherwise plead, or appear.

[¶4.]     No further action was 
taken until October 1, 1984, when the Hochhalters moved to set aside the entry 
of default and default judgment, which motion the court denied on January 4, 
1985. The Hochhalters have appealed from this order.

[¶5.]     As grounds for the 
claim that they were entitled to have their motion to set aside granted, the 
Hochhalters rely on the following uncontroverted evidence. When they received 
the complaint, the Hochhalters contacted Dean Grossenbach, their attorney in 
Colorado. From 
April through August 1984 the Hochhalters' attorney continued to assure them 
that he was actively and aggressively pursuing their defenses against Great 
Western. It turns out, however, that Grossenbach was not pursuing their 
interests in this litigation. The first indication that he was representing 
appellants' interests in this case came on May 29, 1984, when Grossenbach called 
Great Western's attorney and requested a ten-day extension of time within which 
to file the answer that was already overdue. Grossenbach also telephoned 
plaintiff's attorney sometime between May 29 and June 8 representing that the 
answer had mistakenly been sent to Pueblo, Colorado, but that it had been returned and 
was being delivered to the correct court. In fact, no answer was ever 
filed.

[¶6.]     Despite receiving 
notice that a judgment by default had been entered against them on July 13, 
1984, the Hochhalters continued to rely upon Grossenbach's assurances that he 
was representing them. The Hochhalters later realized that Grossenbach was not, 
in fact, representing their interests and, sometime in August or September, they 
decided to seek new counsel. Finally, on October 1, 1984, the Hochhalters' newly 
retained counsel filed a motion to set aside the default. 

[¶7.]     In their motion to set 
aside the default, the Hochhalters argued that their failure to enter a formal 
appearance was due to the personal and psychological problems of Grossenbach. 
The Hochhalters also related that they had not received the three-day written 
notice of the application for default judgment as required by Rule 55(b)(2), 
supra n. 1. They urged that although no formal appearance had been made on their 
behalf, contacts between the parties had clearly demonstrated an intent to 
defend and they were therefore entitled to notice under Rule 
55(b)(2).

[¶8.]     Following a hearing on 
this motion, the district court found that the Hochhalters had been properly 
served and that the default judgment had been entered after the expiration of 
any extension and that there had not been any appearance entered either by the 
defendants or their counsel. The court also found that Grossenbach was grossly 
negligent in his representation of the Hochhalters. From these findings the 
court concluded:

"1. Neither the 
Defendants [n]or counsel for the Defendants appeared in the action, and the 
three (3) day notice provided for under W.R.C.P. 55(b) was not 
applicable.

* * * * * 
*

"4. The Defendants have 
not substantiated by adequate proof that relief from the Judgment for mistake, 
inadvertence, surprise, or excusable neglect is appropriate pursuant to WRCP 
60(b).

"5. The Court finds there 
to be no other reason for excuse for the judgment."

ISSUES

[¶9.]     Although worded 
differently, the Hochhalters (appellants) and Great Western (appellee) basically 
agree on the issues presented to this court. There are 
two.

1. Whether the court 
abused its discretion in refusing to set aside the default judgment under Rule 
60(b), W.R.C.P.

2. Whether the appellants 
had appeared in the action and were thus entitled to the three-day written 
notice required by Rule 55(b)(2).

SETTING ASIDE THE DEFAULT 
JUDGMENT

[¶10.]  Before we discuss the positions of the 
parties in this case, it will be helpful to summarize some of our past holdings 
concerning Rule 60(b), supra n. 1.

"* * * A motion under 
Rule 60(b), W.R.C.P. is addressed to the sound discretion of the court and must 
be clearly substantiated by adequate proof." Atkins v. Household Finance Corporation of 
Casper, Wyoming, Wyo., 581 P.2d 193, 195 
(1978).

"Our review is 
limited to the question of whether the trial court abused its discretion" since 
the granting of relief under Rule 60(b)(6) is left to the court's discretion. U.S. Aviation, Inc. v. Wyoming Avionics, 
Inc., Wyo., 664 P.2d 121, 127 (1983). Finally, we 
have said:

"* * * The rule applies 
to special situations justifying extraordinary relief, but a showing of such 
exceptional circumstances should be made. A reversal of an order denying relief 
under Rule 60(b) will be ordered only if the trial court was clearly wrong." McBride v. McBride, Wyo., 598 P.2d 814, 816 
(1979).

With these rules 
in mind we address appellants' claims.

[¶11.]  Appellants contend that the neglect of 
counsel is a circumstance that we have recognized as justifying the setting 
aside of a default under Rule 60(b). Appellants argue that the trial court's 
finding of fact to the effect that their attorney was grossly negligent, 
together with their contention that the negligence "appears to have been as a 
result of personal problems or psychological disorders," justifies relief in 
this case. Although the Hochhalters concede that the denial of a Rule 60(b) 
motion lies within the sound discretion of the court, Annis v. Beebe & Runyan Furniture 
Company, Wyo., 685 P.2d 678 (1984), they urge that the trial court's 
discretion is not unbounded and that the provisions of Rule 60 are to be 
liberally construed. Gifford v. Casper 
Neon Sign Co., Inc., Wyo., 639 P.2d 1385 (1982). 

[¶12.]  Appellee Great Western Enterprises, Inc. 
agrees that the personal problems or psychological disorders of an attorney 
which cause him to neglect a case may represent a circumstance justifying relief 
under Rule 60(b). See Sanford v. Arjay Oil Company, Wyo., 686 P.2d 566 
(1984). However, it is Great Western's contention that appellants failed to 
produce evidence to establish that the Hochhalters' original attorney did in 
fact have such personal problems.

[¶13.]  We agree that appellants did not produce 
sufficient evidence of attorney Grossenbach's alleged personal or psychological 
problems. The only evidence presented on this question was the affidavit of A.C. 
Hochhalter in which he stated that Mr. Grossenbach had separated from his wife 
and had relocated in Colorado 
Springs, Colorado, 
sometime between February 1, 1984, and August 1, 1984. This statement is 
certainly not sufficient for this court to conclude that the trial court abused 
its discretion when it refused to find that the personal problems or 
psychological infirmities of Mr. Grossenbach were sufficient to justify relief 
under Rule 60(b)(6).

[¶14.]  In Sanford v. Arjay Oil Company, supra, we 
relied, in part, on United States v. 
Cirami, 563 F.2d 26 (2nd Cir. 1977), for the proposition that personal 
problems of a party's attorney which cause him to neglect a case may justify 
relief under Rule 60(b)(6). In United 
States v. Cirami the court originally upheld the trial court's refusal to 
set aside the default judgment pursuant to Rule 60(b)(6) on the ground that the 
defaulted party had not produced evidence establishing why his attorney had 
failed to represent their interests. Only after affidavits were presented, from 
the attorney and others, which showed that the attorney was suffering from a 
mental disorder which manifested itself in his failure to complete work promised 
and that he was seeing a psychiatrist during the time in which judgment was 
entered, did the court of appeals hold that there was sufficient evidence for 
relief under Rule 60(b)(6).

[¶15.]  As the above clearly shows, a party is 
not entitled to relief under Rule 60(b)(6) merely because he alleges that 
personal problems or psychological disorders of his attorney were the cause of 
his failure to formally appear in an action. The defaulted party must present 
sufficient evidence to support his claim. Here the only evidence which supports 
the Hochhalters' claim is an affidavit from A.C. Hochhalter in which he states 
that Grossenbach separated from his wife and relocated his practice sometime 
between February and August, 1984. These bare statements are insufficient to 
justify relief under Rule 60(b)(6), and we cannot hold that refusing to grant 
relief under the rule in reliance upon this scanty evidence is sufficient to 
constitute an abuse of discretion by the trial court.

[¶16.]  This does not end our inquiry, however. 
We must determine whether the court's finding that attorney Grossenbach "was 
grossly negligent in his representation," while at the same time refusing to 
grant relief to the Hochhalters under Rule 60(b)(6) was an abuse of discretion. 
Such a finding does not necessarily mandate the setting aside of the default 
under Rule 60(b)(6), and we find no abuse of discretion in the trial court's 
failure to do so under the factual circumstances of this 
case.

[¶17.]  Some courts have held that gross 
negligence by counsel constitutes a special circumstance and have accordingly 
granted relief under Rule 60(b)(6). Jackson v. Beech, 205 A.D.C. 84, 636 F.2d 831 (D.C. Cir. 1980); L.P. Steuart, 
Inc. v. Matthews, 117 A.D.C. 279, 329 F.2d 234 (D.C. Cir. 1964), cert. 
denied 379 U.S. 824, 85 S. Ct. 50, 13 L. Ed. 35 
(1964). Other courts have refused to grant relief under Rule 60(b)(6) due to 
counsel's gross negligence. Schwarz v. 
United 
States, 384 F.2d 833 (2nd Cir. 1967). 
Professor Moore disagrees with the courts who have granted relief due to the 
attorney's "gross" negligence:

"* * * To hold, however, 
that as a general proposition the litigant is not responsible for his attorney's 
conduct of the case would be destructive of the entire pattern of sanctions set 
forth in the Rules, and of course in the teeth of the decision in Link [infra]." 7 Moore Federal Practice ¶ 
60.27[2] n. 45.

Professor Moore 
observes that the Supreme Court in Link 
v. Wabash Railroad Company, 370 U.S. 626, 82 S. Ct. 1386, 8 L. Ed. 2d 734, reh. denied 371 U.S. 873, 83 S. Ct. 115, 9 L. Ed. 2d 112 (1962), made it plain 
that the neglect of the attorney is to be treated as the neglect of the 
party.

[¶18.]  In Link v. Wabash Railroad Company, Justice 
Harlan stated:

"There is certainly no 
merit to the contention that dismissal of petitioner's claim because of his 
counsel's unexcused conduct imposes an unjust penalty on the client. Petitioner 
voluntarily chose this attorney as his representative in the action, and he 
cannot now avoid the consequences of the acts or omissions of this freely 
selected agent. Any other notion would be wholly inconsistent with our system of 
representative litigation, in which each party is deemed bound by the acts of 
his lawyer-agent and is considered to have `notice of all facts, notice of which 
can be charged upon the attorney.' [Citation.]" 370 U.S.  at 633-634, 
82 S. Ct.  at 1390.

[¶19.]  Although the question of the granting of 
relief under Rule 60(b)(6) was not directly before the court in Link,2 we find the above statement to be 
applicable to Rule 60(b)(6) cases as well. We hold that a litigant is not 
necessarily entitled to relief under Rule 60(b)(6) solely because his counsel 
was grossly negligent. To hold otherwise would be inconsistent with holding each 
party "bound by the acts of his lawyer-agent."3 In view of this holding and the 
failure of appellants to produce sufficient evidence as to attorney 
Grossenbach's alleged personal problems or psychological disorders, we hold that 
the trial court did not abuse its discretion in refusing to grant relief under 
Rule 60(b).

LACK OF 
NOTICE

[¶20.]  The second issue for decision is whether 
the trial court abused its discretion in refusing to set aside the default 
judgment entered against appellants without the three-day notice required by 
Rule 55(b)(2). It is conceded that appellants did not receive the notice in 
question. Appellants contend that the default must be set aside because of this 
lack of notice, while appellee states that, since appellants had never appeared 
in the action, they were therefore not entitled to the notice contemplated by 
Rule 55(b)(2).

[¶21.]  The following are the facts upon which 
appellants rely in urging their contention that they made an appearance for the 
purposes of Rule 55(b)(2). Attorney Grossenbach telephoned appellee's attorney 
three days after an answer was due and requested an extension. Sometime prior to 
June 8, 1984, Grossenbach told appellee's attorney's secretary that an answer 
had been filed even though it subsequently appeared that an answer had never 
been filed. Settlement negotiations with appellee's representatives had taken 
place some two months before the complaint had been filed.

[¶22.]  We were confronted with the question of 
what constitutes an appearance under Rule 55(b)(2) in Booth v. Magee Carpet Company, Wyo., 548 P.2d 1252 (1976). There the defendant's attorney telephoned the attorney for 
plaintiff after the answer was due and requested additional time in which to 
answer. The plaintiff's attorney did not grant this additional time, and instead 
he undertook to enter a default. The defendant therefore appealed to this court 
and raised the issue of whether he had made an appearance and was entitled to 
the three-day written notice under Rule 55(b)(2). Under those circumstances we 
held that the defendant had not made an appearance as contemplated by Rule 
55(b)(2). Like the defendant in Booth, appellants here claim that the telephone 
call requesting an extension constituted an appearance. We cannot 
agree.

[¶23.]  Appellants urge that a number of 
authorities support their contention that an appearance was made. In Booth v. Magee Carpet Company, we 
dismissed a number of the cases upon which appellants rely, as inapplicable to 
the situation in which a telephone call made after the answer was due, and which 
requested additional time, was claimed to have constituted an appearance.4 548 P.2d  at 1254. We have 
considered the appellant's remaining authorities and have determined that those 
courts were also not confronted with the factual situation presented in both 
this case and Booth. There is no reason to depart from our holding in Booth v. Magee Carpet Company to the 
effect that the telephone call, described above, did not constitute an 
appearance for purposes of Rule 55(b)(2).

[¶24.]  Although Booth v. Magee Carpet Company provides 
sufficient support for our holding that there was no appearance in this case, we 
note that other courts have held that there was no appearance when the party had 
done more than make a telephone call to its opponent's attorney. In Rutland Transit Company v. Chicago Tunnel 
Terminal Company, 233 F.2d 655 (7th Cir. 1956), the court held that a number 
of requests for delays in the entry of default did not constitute an appearance. 
In Taylor v. Boston and Taunton 
Transportation Co., 720 F.2d 731, 733 (1st Cir. 1983), the court held that 
merely informing the court that the attorney intended to file an answer did not 
constitute an appearance.

[¶25.]  Appellants, however, rely upon more than 
Grossenbach's telephone calls to support their claim of an appearance. They also 
note that Grossenbach indicated that an answer had been drafted and that there 
had been settlement negotiations prior to the filing of the complaint. We fail 
to see how Grossenbach's statement that an answer had been sent to the court has 
any effect on whether there was an appearance when it is clear that no answer 
had ever been received by the court or appellee, and appellants do not contend 
that an answer was actually sent. Likewise, we do not believe that settlement 
discussions some two months before the complaint was even filed can constitute 
an appearance.

"An appearance in an 
action involves some submission or presentation to the court by which a party 
shows his intention to submit himself to the jurisdiction of the court." U.S. Aviation, Inc. v. Wyoming Avionics, 
Inc., Wyo., supra, 664 P.2d  at 124.

"An appearance 
contemplates a pending action." Id. 
at 126. Settlement discussions well before the complaint was filed do not 
constitute an appearance under Rule 55(b)(2).

[¶26.]  Finally, we deal with appellants' 
contention that Sanford v. Arjay Oil 
Company, supra, compels the conclusion that an appearance was made in this 
case. In Sanford, we held that the trial court did not abuse its discretion in 
setting aside a default judgment when one of the justifications for doing so was 
that the notice provisions of Rule 55(b)(2) were not met. There we held that 

"* * * [a] party will be 
deemed to have appeared * * * when contacts between the parties clearly 
demonstrate an intent to defend. [The defaulted party] manifested its intent to 
defend by filing responsive pleadings, engaging in extensive discovery and 
stipulating to Sanford's amended complaint." 686 P.2d  at 
571.

While these 
actions amounted to contacts clearly demonstrating an intent to defend, a 
telephone call asking for an extension of time, along with settlement 
discussions before the complaint was ever filed, do not.

[¶27.]  Our view of this case makes it 
unnecessary to determine whether appellants established a meritorious defense. 
Booth v. Magee Carpet Company, supra, 
548 P.2d  at 1255. "The movant must of course establish that his cause has merit 
but he must further come within the statutory scheme of Rule 60(b)." United States v. Cirami, 535 F.2d 736, 
742 (2nd Cir. 1976).

[¶28.]  We find no abuse of discretion in 
refusing to grant relief from the default judgment.

[¶29.]  Affirmed.

1 Rule 60(b)(6), W.R.C.P., 
provides in relevant part:

"(b) * * * On motion, and 
upon such terms as are just, the court may relieve a party or his legal 
representative from a final judgment * * * for the following 
reasons:

* * * * * 
*

"(6) Any other reason 
justifying relief from the operation of the judgment."

Rule 55(b)(2), 
W.R.C.P., provides in relevant part:

"* * * If the party 
against whom a judgment by default is sought has appeared in the action, he (or, 
if appearing by representative, his representative) shall be served with written 
notice of the application for judgment at least 3 days prior to the hearing on 
such application."

2 In Link, the United States Supreme Court 
affirmed the dismissal of an action after the plaintiff's attorney failed to 
appear for a pretrial conference. The Court upheld the dismissal as within the 
trial court's authority to dismiss a plaintiff's action, because of his failure 
to prosecute, under Rule 41(b), F.R.C.P. The plaintiff never moved to set aside 
the default under Rule 60(b). 370 U.S.  at 635-636, 82 S. Ct.  at 
1391.

3 At this point we note 
the response of the court in Inryco, Inc. 
v. Metropolitan Engineering Company, Inc., 708 F.2d 1225, 1235 (7th Cir. 
1983), cert. denied 464 U.S. 937, 104 S. Ct. 347, 78 L. Ed. 2d 313, to the concern 
that a default judgment places the burden upon the innocent 
litigant:

"* * * The idea that a 
default judgment may penalize the innocent and let the guilty lawyer go free is 
tempered by the fairly common knowledge that a viable avenue for relief exists 
for truly deserving litigants. Just as with other professionals, a remedy for an 
attorney's professional negligence is a suit for 
malpractice."

4 Booth v. Magee Carpet Company held that 
the following cases were not applicable: H.F. Livermore Corporation v. 
Aktiengesellschaft Gebruder Loepfe, 139 A.D.C. 256, 432 F.2d 689 (D.C. Cir. 
1970); Dalminter, Inc. v. Jessie Edwards, 
Inc., 27 F.R.D. 491 (S.D.Tex. 1961); and Hutton v. Fisher, 359 F.2d 913 (3rd Cir. 
1966).