Opinion ID: 4503120
Heading Depth: 2
Heading Rank: 1

Heading: Counts remaining on appeal

Text: As a preliminary matter, following the dismissal without prejudice of the following claims, the circuit court dismissed them with prejudice in its final judgment, and they are 35  FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER  therefore not further discussed in this opinion: Count I (declaratory judgment), Count II (accounting), Count VII (intentional infliction of emotional distress), Count IX (statutory fraudulent transfer), Count X (common law fraudulent transfer), and Count XII (punitive damages). Also not discussed are Count IV (conversion) and Count XI (constructive trust/equitable lien), as the circuit court had ruled against Chen on those claims after the bench trial and she did not appeal. Thus, at issue are Count III (breach of contract) and Count VIII (unjust enrichment), for which the circuit court granted Chen a default judgment with damages in the amount of $406,392.89, and Count V (fraud) and Count VI (intentional/negligent misrepresentation), for which the circuit court awarded the same damages after the bench trial on damages. B. Whether the circuit court erred in denying Defendants’ HRCP Rule 55(c) motion to set aside entry of default
HRCP Rule 55(c) governs the setting aside of an entry of default. HRCP Rule 55(c) provides that “[f]or good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b).” The circuit court and the ICA cited to BDM for the proposition that Hawaiʻi courts apply the three-prong test 36  FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER  applicable to HRCP Rule 60(b) motions to determine whether to grant a motion to set aside an entry of default filed pursuant to HRCP Rule 55(c): [A] motion to set aside a default entry or a default judgment may and should be granted whenever the court finds (1) that the nondefaulting party will not be prejudiced by the reopening, (2) that the defaulting party has a meritorious defense, and (3) that the default was not the result of inexcusable neglect or a wilful act. Chen, SDO at 2.15 15 In BDM, this court referred to the “excusable neglect” standard governing HRCP Rule 60(b) motions despite the “good cause” language of HRCP Rule 55(c) on the premise that the setting aside of a defendant’s default, alone, would not allow litigation to proceed, and that the circuit court would also need to grant an extension of time for the defendant to answer the complaint, else “an anomalous situation in which [defendants] would be forced to remain in default but [plaintiff] would be foreclosed from obtaining entry of a default” would result. 57 Haw. at 75, 549 P.2d at 1149. BDM stated that the “excusable neglect” standard of HRCP Rule 6(b) governing enlargements of time for performing an act “required or allowed to be done at or within a specified time” would therefore also have to be considered with respect to whether an extension of time to answer the complaint should be considered. 57 Haw. at 75-76, 549 P.2d at 1149. The premise that an official extension of time pursuant to the “excusable neglect” standard would be necessary to allow a circuit court defendant to file an answer to the complaint after expiration of the twenty days provided for by HRCP Rule 12(a) (2000) was, however, mistaken. If default has not been requested and entered pursuant to HRCP Rule 55(a), there is no HRCP rule rendering an answer filed after twenty days of service of process ineffective. In fact, in our circuit courts, counsel and parties often provide the courtesy of informally extending time for answering complaints without court involvement, and simply do not request a formal entry of default until after the courtesy time has expired. See Guidelines of Professional Courtesy and Civility for Hawaiʻi Lawyers Section 2(a) (2018) (“[A] lawyer who manifests professional courtesy and civility [] [a]grees to reasonable requests for extensions of time or continuances without requiring motions or other formalities.”). Thus, BDM’s premise for juxtaposing the “excusable neglect” standard under HRCP Rule 6(b) and HRCP Rule 60(b) to HRCP Rule 55(c) motions to set aside default judgments was in error. In any event, BDM further noted that “[i]t is difficult for us to imagine a case in which ‘good cause’ might be found for setting aside an entry of default and yet ‘excusable neglect’ for the failure to file the answer, which failure occasioned the entry of the default, should not also be found.” 57 Haw. at 76, 549 P.2d at 1149. 37  FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER  Although HRCP Rule 55(c) provides that “[f]or good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)[,]” the parties, the circuit court, and the ICA all agree Defendants were required to also meet the three-prong test applicable to motions to set aside default judgments under HRCP Rule 60(b), which requires a showing that “(1) the nondefaulting party will not be prejudiced by the reopening, (2) that the defaulting party has a meritorious defense, and (3) that the default was not the result of inexcusable neglect or a wilful act.” BDM, 57 Haw. at 76, 549 P.2d at 1150.