Court Opinion

ID: 9567730
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:57:11.510835+00
Date Added: 2024-06-11T10:20:33.312455
License: Public Domain

SUTIN, Judge (concurring in part and dissenting in part). I concur with the majority opinion that U.S.F.&G. is not an indispensable party, and I dissent for failure to set aside the default judgment, or at least to reverse the judgment to try the issue of damages. I. U.S.F.&G. is not an Indispensable Party. Defendant contends that U.S.F.& G. was an indispensable party. This was an afterthought. Under this record, U.S.F.&G. had no claim against defendant for reimbursement of compensation benefits because U.S.F.&G. was to be reimbursed from plaintiff’s judgment. U.S.F.&G. was, therefore, not an indispensable party. The reason for the lengthy analysis in the majority opinion was to clear up the judicial mess of the past caused by language used in § 59-10-25, supra. The time has come to avoid skirting around a conflict in decisions, error appearing therein, and vagueness of expression. A definite rule is necessary to guide the legal profession and district courts in the future. Legislative amendment of § 59-10-25, supra, is mandatory. II. The Trial Court Failed to Exercise Discretion Before Entry of Default Judgment. The onerous consequences which follow a default judgment require perspective of our approach to this subject. In Gilbert v. New Mexico Const. Co., 35 N.M. 262, 295 P. 291 (1931), Justice Watson said: To deprive a party of his day in court is a severe penalty for his merely negligent failure to appear. Such penalty should be avoided if it can be done without impeding or confusing administration or perpetrating injustice. Courts should bear in mind that default judgments are not favored since the law prefers that claims be tried on their merits, Wooley v. Wicker, 75 N.M. 241, 403 P.2d 685 (1965), in the absence of a showing of prejudice to the plaintiff. Ballard v. Billings & Spencer Co., 36 A.D.2d 71, 319 N. Y.S.2d 191 (1971); Tolson v. Hodge, 411 F.2d 123 (4th Cir.1969); Horn v. Intelectron Corp., 294 F.Supp. 1153 (S.D.N.Y.1968). Rule 55(b) [§ 21-1-1(55) (b), N.M.S.A. 1953 (Repl.Vol. 4)] did not declare “open season” against defaulting defendants. Ballard, supra. It must be liberally construed in order to provide relief from the onerous consequences of defaults arid default judgments. Any doubts about whether relief should be granted should be resolved in favor of the defaulting defendant. Tolson, supra. In fact, only a slight abuse of discretion may justify reversal. Barr v. Rhea Radin Real Estate, Inc., 251 A.2d 634 (D.C.App.Ct.1969). It has often been said that matters involving large sums .of money should not be determined by default judgment if it can reasonably be avoided. Tozer v. Charles A. Krause Milling Co., 189 F.2d 242 (3rd Cir.1954); Horn v. Intelectron Corp., supra; Trueblood v. Grayson Shops of Tennessee, Inc., 32 F.R.D. 190 (D.C.Va.1963). A careful reading of the cases on this subject will prove that default judgments should be granted only where a party has evidenced a disregard for the judicial process or hardship will result. Kinnear Corporation v. Crawford Door Sales Company, 49 F.R.D. 3 (D.S.C.1970). We must remember that Rules of Civil Procedure are in the administration of justice and transcend in importance mere inconvenience to a party litigant. Every man is entitled to his fair day in court. Salitan v. Carrillo, 69 N.M. 476, 368 P.2d 149 (1961). With this philosophical legal approach,' we encounter a new basis for reversal under Rule 55(b), supra, a matter of first impression on this subject. Does the district court have a duty to investigate the failure of defendant to appear and then, based upon the facts and circumstances, exercise his discretion in granting or denying a default judgment? In my opinion, the answer is “yes.” Rule 55(b), supra, provides in part: Judgment by default may be entered as follows: in all cases the party entitled to a judgment by default shall apply to the court therefor; ... If, in order to enable the court to enter judgment . it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper. . . . (Emphasis added). This division of the rule was derived from Rule 55(b) of The Federal Rules of Procedure with deletion of paragraph (1) dealing with the entry of default judgment by the clerk. Because paragraph (1) exists in The Federal Rules of Procedure, the question of hearings and references has not arisen in federal courts. The grant or denial by the court of entry of “a default judgment lies within the sound discretion of the trial court. This proposition is supported by good sense. And its soundness is also demonstrable by reference to Rule 55(c), which authorizes the trial court to set aside an entry of default on a showing of good cause.” 6 Moore’s Federal Practice § 55.05(2). (1972). What is meant by “judicial discretion?” It has been variously defined in Independent, etc., Co. v. N.M. C.R. Co., 25 N.M. 160, 178 P. 842 (1919), and Pankey v. Hot Springs Nat. Bank., 42 N.M. 674, 84 P.2d 649 (1938). When these definitions are coalesced they mean to me that a trial judge should act honestly in accordance with what is fair, equitable and wholesome as discerned by his personal wisdom and experience. He should note the difference between right and wrong, and he should avoid mere whim and caprice, prejudice and affectation. This discretion is governed by principle and by regular procedure for the accomplishment of the ends of right and justice. Human nature dictates that the exercise of discretion will change from judge to judge. “An abuse of discretion is said to occur when the court exceeds the bounds of reason, all the circumstances before it being considered.” Independent, etc., Co., supra. It is obvious that if a trial judge does not exercise discretion, his ruling is arbitrary and capricious. When plaintiff appeared for default judgment, the following occurred: MR. COWPER: Your honor, this is a default matter but the Court wanted to hear evidence from Mr. Herrera before setting damages. THE COURT: How much damages are you asking? MR. COWPER: We are asking for $250,000.00. THE COURT: What happened to the Defendant ? MR. COWPER: The Defendant has simply not answered, not responded at all. THE COURT: Alright, let’s hear the testimony. At this point in the proceedings, no discretion was exercised. No facts or evidence relative to non-appearance was presented. The defendant is a well known, large, solvent corporation. Should inquiry have been made about the failure of defendant to appear? Does common sense indicate that defendant would abhor a default judgment of $250,000.00? Does justice dictate that defendant would want to have its day in court? Was this a matter about which the trial court should make an investigation? An “investigation” is a “judicial inquiry.” State ex rel. Smilack v. Bushong, 93 Ohio App. 201, 112 N.E.2d 675 (1952). When a defendant is served with process and fails to appear, inquiry should be made. The defendant should be notified that a default has been entered; that defendant may appear and may offer, orally or by affidavit, such evidence as it may desire, and it may file a proposed answer to show whether it has a meritorious defense, together with statements of witnesses and reports of any investigation. If a hearing is held, the court will then determine, upon a review of the foregoing, whether defendant has evidenced a disregard for judicial process, whether defendant has a meritorious defense, and whether hardship to plaintiff will result. See Trueblood, supra; Kinnear Corporation, supra. Trueblood, supra, was cited in Wakely v. Tyler, 78 N.M. 168, 429 P.2d 366 (1967). Based upon the facts, evidence and testimony, the trial court can then exercise its discretion and determine whether to grant or deny default judgment. This procedure is necessary to enable the court to enter judgment. Since the trial court did not exercise its discretion for entry of the default judgment, the default judgment should be vacated and this cause should be remanded to the trial court to make an inquiry, and to conduct a hearing, if necessary, before entry of its order. III. The Existence of Grounds for Setting Aside the Default Judgment are Present. I concur with the majority opinion that grounds for setting aside the default judgment exist pursuant to Rule 60(b) because defendant’s default was due to excusable neglect. IV. Defendant Established a Meritorious Defense to Plaintiffs Complaint. What is a “meritorious defense” to a claim for relief based on negligence ? A meritorious defense means “a defense worthy of presentation, not one which is sure of success.” If there is a conflict in evidence over whether the defendant was guilty of negligence, or the plaintiff guilty of contributory negligence, it is obviously a meritorious defense. Medford Red Cab, Inc. v. Duncan, 341 Mass. 708, 172 N.E.2d 260 (1961). We have no occasion to determine at this time whether the statements made or facts pleaded are sufficient in law. Barto v. Sioux City Electric Co., 119 Iowa 179, 93 N.W. 268 (1963); Spencer v. American United Cab Association, 59 Ill. App.2d 165, 208 N.E.2d 118 (1965); Dann v. Gumbiner, 29 Ill.App.2d 374, 173 N.E.2d 525 (1961); see, Annot., 174 A.L.R. 10 at 59, 132 (1948). On page 132, the author says: In connection with actions for injuries to person or property based on defendant’s negligence the commonest defense is a simple denial of any negligent conduct, and, as has been previously pointed out, this is generally regarded as meritorious for purposes of relief against a judgment. However, even though no precedent on the precise point has been uncovered, a “defense” which will warrant opening of a default judgment is not made out by a claim over against a third party as defendant contends. Stone Conveyor Company v. Nickerson, Sup., 235 N.Y.S.2d 1017 (1962). In its motion to set aside the default judgment, defendant stated it had a méritorious defense to all or part of plaintiff’s claim. In support thereof, defendant submitted an affidavit of the vice president and secretary of defendant corporation. By sworn affidavit, defendant stated: . ; that based upon a preliminary investigation of the accident or incident, which is the subject matter of the above suit, affiant is informed and believes that it was not caused by negligence or conduct of Springer Corporation, but probably by conduct on the part of the manufacturer of the equipment involved, which equipment was delivered by Springer Corporation, as delivering agent for the manufacturer, to plaintiffs employer. (Emphasis added). Section 21-1-1(8) (b), N.M.S.A.1953 (Repl.Vol. 4) is entitled “Defenses — Form of Denials.” It reads in part: A party shall state in short and plain terms his defenses to each claim asserted and shall admit or deny the averments upon which the adverse party relies. If he is without knowledge or information sufficient to form a belief as to the truth of an averment, he shall so state and this has the effect of a denial. (Emphasis added). “Answers that set forth that defendant has not sufficient knowledge or information to form a belief in legal effect constitute denials.” McHenry v. Ford Motor Co., 269 F.2d 18, at 23 (6th Cir.1959). This is typical where denials are-made by corporations because an officer of a corporation rarely has personal knowledge and must rely on information received from subordinates. National Millwork Corp. v. Preferred Mut. F. Ins. Co., 28 F.Supp. 952, at 953 (D.C.N.Y.1939). Thus, in Wagg v. Hall, 42 F.R.D. 589 (D.C.1967) the court said: . . . Before granting a motion to vacate a default judgment, the courts invariably require either a specific recitation of facts that support a “reasonable showing” of a meritorious defense . or else at least a credible aliegation that such a defense exists. (Emphasis added). A footnote says: The single statement to the contrary in Trueblood v. Grayson Shops of Tennessee, Inc., 32 F.R.D. 190, 196 (E.D.Va.1963) is not supported by the cases cited therein. This footnote is applicable to the quotation from Trueblood, supra, quoted in the majority opinion. Plaintiff claims that defendant, by contract of sale, sold the Wabco scraper to plaintiff’s employer; that pursuant to this contract, defendant delivered the scraper to plaintiff’s employer; that defendant was negligent in delivering the self loader to plaintiff’s employer. If defendant’s statement of facts, supra, were inserted in an answer, it would constitute “a defense worthy of presentation.” In territorial days, in considering a motion to set aside a default judgment, the court, in Metzger v. Waddell, 1 N.M. 400, at 407-408 (1867) said: Motions of this kind are addressed to the sound discretion of a court, and in all ordinary cases where merit is shown, the courts consider it the exercise of sound discretion to grant such motions. In the effort to administer justice, which is the plain duty of all courts, such a motion is never refused unless there is no merit in-the defense set up, or there has been gross negligence on the part of a defendant. In the effort to administer justice, courts must look to the rights of all the parties litigant, and be guided by the lights of the decisions of other courts upon similar questions, under similar circumstances. “Justice, justice shalt thou pursue,” has been the guiding light in the administration of these legal principles. V. The Judgment was Excessive. Defendant’s motion to set aside the default judgment claimed the judgment excessive and not supported by the evidence. In support of this point, defendant submitted requested findings that plaintiff was 31 years old with net take home pay of $540.-00 (per month); that plaintiff is not permanently disabled. See Dyne v. McCullough, 36 N.M. 122, 9 P.2d 385 (1932). These requested findings were based on plaintiff’s testimony at the time of hearing on default. The trial court found that defendant failed to prove the allegations contained in the motion and its motion was denied. The record supports defendant’s requested finding that plaintiff was not permanently disabled and the court’s finding is in error. The entry of a default judgment against a defendant is not considered an admission by defendant of the amount of unliquidated damages claimed by plaintiff. 6 Moore’s Federal Practice § 55.07 (1972 Ed.). A default judgment entered on well-pleaded allegations in a complaint establishes defendant’s liability. Where damages are unliquidated and uncertain, Rule 55(b), supra, requires plaintiff to prove the extent of the injuries established by the default. Trans World Airlines, Inc. v. Hughes, 449 F.2d 51 (2nd Cir.1971). This court has the power to remit an excessive judgment, Jackson v. Southwestern Public Service Company, 66 N.M. 458, 349 P.2d 1029 (1960), or reverse to try the issue of damages. Foster v. New Albany Machine & Tool Co., Inc., 63 N.J.Super. 262, 164 A.2d 492 (1960). A judgment of $250,000.00 for the injuries sustained by plaintiff is shockingly excessive. The least we can do in seeking justice is to reverse and require a hearing on the issue of damages. VI. Reversal Should be "Upon Such Terms as are Just.” Rule 60(b), supra, provides that a trial court may relieve a party from a final judgment “upon such terms as are just.” That same rule should apply to this court. The defendant should be required to pay all costs, expenses and attorney fees incurred by plaintiff in this court and in the court below as a penalty in lieu of its day in court. 7 Moore’s Federal Practice, at 239, 240 (1972).