Court Opinion

ID: 7977356
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:01:25.572816+00
Date Added: 2024-06-11T16:34:56.724468
License: Public Domain

Hallam, J.
Appeal from an order opening a judgment and granting leave to answer. Defendant is an insurance corporation. The moving affidavit alleges that certain of its officers and directors, including its president, dissipated and squandered all of the assets of the company in the purchase of certain gold bonds of the Williamsville, Greenville & St. Louis Railway Co., and also gave notes of the company in part payment. The notes sued on in this action are some of these. This suit was commenced in January, 1913. It is alleged that at that time the affairs of the company were in the control of its president; that he handed the summons to an attorney whom he had secured to look after the .interests of himself and his associates; that this attorney interposed an answer, but later withdrew it and stipulated for judgment, and on July 8, 1913, judgment was entered for *437$5,201.90, tbe amount demanded in tbe complaint. In July, August and September, 1913, three blocks of said gold bonds, of tbe face value of $2?,000, were sold at three separate execution sales for tbe aggregate amount, over expenses, of $2,906.10. Tbe affidavit further states, that tbe stockholders and directors knew nothing of this suit; that tbe company in fact bad a good defense to tbe notes and tbe president' bad personal knowledge of facts sufficient to make ■ a defense, but that be did not act in good faith toward defendant and withheld such information and allowed judgment to go against defendant; that tbe acts of tbe president and the attorney were indifferent, careless and negligent and amounted to excusable neglect on tbe part of defendant. There is no direct allegation of bad faith on tbe part of the attorney, but from all of tbe allegations of tbe affidavit it is fairly inferable either that be was ignorant of the facts constituting tbe defense, or that through indifference, which could amount to no less than bad faith, be ignored them.
It is further alleged that, on September 1, 1913, tbe stockholders bad a meeting and appointed a committee to make an investigation, that at a meeting on September 15 a new board of directors was elected, and that on the conclusion of tbe investigation, and about tbe last of November, this application was made. Tbe trial court made an order'that tbe judgment be vacated and the answer allowed to stand on condition of payment to tbe attorney for tbe plaintiff tbe sum of $250. It appears that plaintiff himself purchased tbe bonds sold at tbe execution sale and, so far as it appears, still has them. In view of tbe payment required of defendant as a condition to opening tbe judgment, it is not apparent that plaintiff will suffer any substantial prejudice from tbe delay in determination of tbe case on its merits.
Tbe matter of opening a default judgment rests in tbe discretion of tbe trial court. That discretion is a judicial one and is not to be exercised capriciously or arbitrarily, yet tbe discretion of tbe court should be liberally indulged to relieve a party from default, to tbe end that tbe judgment of tbe court should be rendered in a controverted case only after a trial on tbe merits. Tbe action of tbe trial court in relieving a party of a default will not be reversed *438except for palpable abuse of discretion. Where there has never been a trial on the merits and the defendant shows that he has a good defense, and no substantial prejudice appears to the plaintiff from the delay, it is the duty of the trial court to relieve the defendant of his default if he furnishes any reasonable excuse therefor, and the action of the court in so doing will not be disturbed. Jorgensen v. Boehmer, 9 Minn. 166 (181); Martin v. Curley, 70 Minn. 489, 73 N. W. 405; White v. Gurney, 92 Minn. 271, 99 N. W. 889; Barrie v. Northern Assurance Co. 99 Minn. 272, 109 N. W. 248; Hendricks v. Conner, 104 Minn. 399, 116 N. W. 751; Dr. Shoop Family Medicine Co. v. Oppliger, 124 Minn. 535, 144 N. W. 743.
It is well settled, a corporation may have opened a judgment entered by default because of the intentional neglect or bad faith of the officer on whom the summons is served or who is charged with the duty of making defense. Bray v. Church of St. Brandon, 39 Minn. 390, 40 N. W. 518; J. H. Queal & Co. v. Bulen, 89 Minn. 477, 95 N. W. 310. Corporation officers are trustees and, while their acts in general bind the corporation, still in the event of bad faith their acts may be repudiated by the stockholders who are the beneficiaries of the trust.
Beyond doubt an attorney has authority to bind his client by a stipulation for judgment. G. S. 1913, § 4950; Bray v. Doheny, 39 Minn. 355, 40 N. W. 262; Wells v. Penfield, 70 Minn. 66, 72 N. W. 816. At the same time it is clear that a party may, in a proper case, be relieved from a stipulation made by his attorney. This has been recognized in this state from early times. Bingham v. Board of Supervisors of Winona County, 6 Minn. 82 (136). In several cases it has been said that the court may relieve a party from the stipulation of his attorney if improvidently made, or made under a clear mistake or procured by fraud or collusion; Hildebrandt v. Robbecke, 20 Minn. 83 (100); Bray v. Doheny, 39 Minn. 355, 40 N. W. 262; Eidam v. Finnegan, 48 Minn. 53, 50 N. W. 933; or if in equity and good conscience it ought not to stand; Wells v. Penfield, 70 Minn. 66, 72 N. W. 816. The same principles are generally recognized in other jurisdictions. Thompson, Trials, 195; 36 Cyc. 1295. The circumstances under which the court may relieve *439against a stipulation of an attorney are not clearly defined. In Bingham v. Board of Supervisors of Winona County, 6 Minn. 82 (136), it was said tbe settlement of issues by stipulation should have as much effect as their determination by the verdict of a jury, and it should require the same or as strong reasons to set the stipulation aside as would be required to set aside a verdict. It is not necessary to define the precise limits of the power of the court in this particular. It is sufficient for purposes of this case to say that the court may, in its discretion, open a judgment entered upon stipulation of an attorney and allow a trial on the merits, where the attorney has, from ignorance of facts or from bad faith, stipulated for judgment against a client who has a just defense, and where no substantial prejudice will result to the opposing party from the incident delay.
Applying the foregoing rules, it must be held that the order of the trial court in opening this judgment must be sustained.
The affidavit on which the application is based was made- by the present attorney for defendant. It was made upon knowledge acquired as a member of the investigating committee above mentioned. It is urged that he could not in this or any other manner, except from hearsay, know that the directors of the corporation, other than those acting with its president, were ignorant of the entry of the judgment until September, 1913. It is true he could have no other than hearsay knowledge of the state of mind of these directors, but from his investigation he could determine whether notice of such facts was ever conveyed to them through the usual channels. There is no intimation that any of these directors did in fact have any such knowledge. Two parties claimed by plaintiff to be directors were brought into the case, but they each denied being even stockholders. We do not wish to relax the rule that a party asking to have a default judgment opened bears the burden of excusing his default, but it is not necessary for a corporation defendant to produce the affidavit of all its officers and directors as to ignorance of the entry of judgment in order to make out a prima facie case, at least where no likelihood .of knowledge on their part appears.
*440Tbe delay until November in making tbe application, was not, under tbe circumstances above disclosed, an inexcusable delay.
Order affirmed.