Opinion ID: 901251
Heading Depth: 2
Heading Rank: 2

Heading: Whether the trial court abused its discretion by denying Ashley and Ashley Hospitality's motion to vacate the default judgment.

Text: [¶ 12. ] The law allows a court to set aside a default judgment under certain circumstances. SDCL 15-6-60(b). The statute provides in part: On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: (1) Mistake, inadvertence, surprise, or excusable neglect; . . . (4) The judgment is void; . . . Id. As previously discussed, the default judgment is not void. Therefore, defendants have no claim for relief based upon the reason that [t]he judgment is void. Id. The trial court's refusal to set aside the judgment under this provision of the statute was not an abuse of discretion. [¶ 13.] In the alternative, Defendants argue that under SDCL 15-6-60(b)(1) the court may grant them relief. This is true if the party `(1) acted with excusable neglect and (2) had a meritorious defense.' Upper Plains Contracting, Inc., 2002 SD at ¶13, 656 NW2d at 327 (quoting Hermsen, 1997 SD at ¶10, 572 NW2d at 838). `Excusable neglect must be neglect of a nature that would cause a reasonably prudent person under similar circumstances to act similarly.' Id. (citing Peterson v. LaCroix, 420 NW2d 18, 19-20 (SD 1988)). `The term excusable neglect has no fixed meaning and is to be interpreted liberally to insure that cases are heard and tried on the merits.' Id. (citing Eby v. Misar, 345 NW2d 381, 383 (SD 1984)). Ashley had the burden of bringing forth evidence to support his claims. [¶ 14.] First, Ashley contends that he believed that his letter sufficed as an answer and precluded Estes from obtaining a default judgment. Second, his excuse for not appearing at the hearing was that he had a hearing in a different matter, which his wife felt he needed to attend. Ashley admits to receiving notice of the default hearing but faults Estes for not contacting him for a mutually agreeable hearing time. The trial court rejected Ashley's excuse. The judge explained his reasoning at the conclusion of the hearing as follows: [Ashley] was fully aware of his obligations, received legal service of the proceedings in this case, never proceeded to file an Answer although he submitted a document which does not comport to an Answer, nor was it filed with the Court. It was a document which expressed an intention of future action but didn't stand as an Answer to the Complaint. It advised that he would be contacting a lawyer because he believed he had some defenses available. That is inadequate. The excuse that he was otherwise engaged on the particular time in question is inadequate in light of the fact that he could easily have made efforts to contact counsel, get it rescheduled, talk to the Court, talk to opposing counsel, make some efforts to avoid the activity that would occur with the default judgment hearing which he had notice of; he failed to respond to that as well as the original Complaint in any substantive fashion. The record indicates that the trial court considered Ashley's excuses and found them without merit. Ashley's response or lack thereof is not that of a reasonably prudent person under similar circumstances. Upper Plains Contracting, Inc., 2003 SD at ¶13, 656 NW2d at 327. We cannot say that the trial court abused its discretion. [¶ 15.] In denying Ashley's Motion to Vacate, the trial court also determined Ashley had not shown a meritorious defense. Ashley claims affirmative defenses of illegality and lack of consideration for the promissory note and underlying agreement. In order to prevail, Ashley must make a prima facie showing that upon a trial he would be entitled to a judgment more favorable to himself than the judgment from which he is seeking relief. Hermsen, 1997 SD at ¶13, 572 NW2d at 839. Ashley `must present facts either by answer or affidavit from which it could be inferred that upon a trial he would be entitled to a judgment more favorable to himself than the judgment from which he is seeking relief.' Hrachovec v. Kaarup, 516 NW2d 309, 311 (SD 1994) (citing Eby, 345 NW2d at 383). See Pettigrew v. City of Sioux Falls, 5 SD 646, 60 NW 27 (1894) ; Peterson, 420 NW2d at 19.) [¶ 16.] The facts surrounding the underlying action began with Ashley Hospitality's purchase of a liquor license from Estes for the purchase price of $180,000 on October 1, 2000. The seller-financed purchase required Ashley Hospitality to pay Estes a $2,500 interest payment each month until June 1, 2001 at which time a balloon payment of $180,000 was to be paid. Estes retained a security interest in the license. Financial difficulties of Ashley Hospitality prompted renegotiations on June 1, 2001. The parties renegotiated an Extension Agreement wherein Ashley personally guaranteed and signed a promissory note for $200,000. Subsequently Ashley faced criminal charges that placed the license in jeopardy. Estes sought to foreclose his security interest under the provisions of the security agreement. The parties entered into a settlement agreement wherein the liquor license returned to Estes. Additionally, Ashley personally guaranteed a promissory note to Estes in the amount of $50,000according to Estes this amount represented the deficiency had Estes foreclosed under the security agreement. Ashley claims the original agreement requiring a monthly interest-only payment amounted to a lease of a liquor license and was illegal, or at least against public policy. Ashley further claims that he received no consideration for the promissory note executed as part of the settlement agreement. [¶ 17.] Ashley cites no authority in support of his claim that the interest-only monthly payments constitute a lease under the law nor does he cite authority that under these circumstances the contract would be illegal. We have previously held that our laws allow a creditor to take a security interest in a licensee's liquor license as it is property between those two parties. Rushmore State Bank v. Kurylas, Inc., 424 NW2d 649, 655 (SD 1988) (citations omitted). Further, Ashley's claim of lack of consideration for the settlement agreement is contradicted by the document language. The settlement agreement between Ashley and Estes clearly recites that Ashley Hospitality was in default and the reconveyance of the license and promissory note for $50,000 satisfied all obligations of Ashley Hospitality to Estes. The agreement stated: Ashley Hospitality and John Ashley shall have no further obligation to Bret Estes except as to payment of the [$50,000] promissory note . . . Ashley's argument centers on his perceived disparity of the bargain in that Estes received the liquor license, the interest payments of $55,000 plus the promissory note of $50,000. In hindsight, Ashley claims his circumstances forced him into making a bad bargain. The trial court in reviewing the evidence found the notes and agreements to be valid and legal instruments and that Ashley had failed to raise any substantive defenses. Ashley failed to make a prima facie showing that he would receive a more favorable judgment than the default judgment. [¶ 18.] Under this set of facts, we cannot conclude the trial court abused its discretion in either entering the default judgment or denying the motion to vacate. [¶ 19.] Affirmed. [¶ 20.] GILBERTSON, Chief Justice, and KONENKAMP and ZINTER, Justices, concur. [¶ 21.] SABERS, Justice, concurs in result.