Court Opinion

ID: 167571
Source: CourtListenerOpinion
Date Created: 2010-08-14 09:58:48+00
Date Added: 2024-06-11T17:24:53.262261
License: Public Domain

F I L E D
                                                                  United States Court of Appeals
                                                                          Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                         June 2, 2006
                            FOR THE TENTH CIRCUIT                    Elisabeth A. Shumaker
                                                                         Clerk of Court

    JOHN F. MULLIN, individual,
    husband; DIANE L. MULLIN,
    individual, wife,

                Plaintiffs-Appellees,

    v.                                                 No. 05-4039
                                                (D.C. No. 2:03-CV-952-DS)
    HIGH MOUNTAIN, doing business                        (D. Utah)
    as High Mountain Properties, a Utah
    limited liability company,

                Defendant-Appellant.

                            ORDER AND JUDGMENT *

Before KELLY, BRISCOE, and LUCERO, Circuit Judges.

         High Mountain, LLC (“High Mountain”) appeals from the district court’s

order denying its motion for relief from a default judgment entered in favor of

*
  After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. The court generally disfavors the citation of orders and
judgments; nevertheless, an order and judgment may be cited under the terms and
conditions of 10th Cir. R. 36.3.
John and Diane Mullin. We exercise our jurisdiction under 28 U.S.C. § 1291 and

AFFIRM.

      John and Diane Mullin contracted with High Mountain to manage two

condominium units the Mullins had purchased. Disputes arose between the

parties, and on October 28, 2003, the Mullins sued High Mountain asserting three

claims in connection with (1) an alleged breach of a rental management agreement

between the two parties, and (2) an alleged theft of the Mullins’ personal property

from another condominium unit managed by High Mountain. On November 18,

2003, High Mountain’s counsel telephoned counsel for the Mullins seeking

additional time to respond to the complaint. The Mullins’ counsel never

responded to this request. A default certificate was prepared and was properly

served on High Mountain on December 11, 2003, and entered by the district court

on December 15, 2003. A form for default judgment was filed with the district

court on January 8, 2004, a copy of which was also properly served on High

Mountain.

      High Mountain’s counsel insists that as soon as he learned that High

Mountain was served with the default judgment, he immediately telephoned

opposing counsel. During this call, he allegedly informed the Mullins’ counsel

that, although he thought High Mountain’s insurance agency would be defending

the suit, he intended to file an answer to ensure that default judgment was not

                                        -2-
entered. Moreover, Mullins’ counsel allegedly indicated that the default

certificate and form of judgment were filed to get High Mountain’s attention, and,

most importantly, that the Mullins’ would stipulate to setting aside any default

judgment.

      Counsel for the Mullins, however, does not recall having any conversation

with High Mountain’s counsel on January 8, 2004. In addition, he contends that

he would not have agreed to set aside a default judgment without first consulting

his clients. It is undisputed that no documentation has been submitted by High

Mountain supporting its counsel’s assertion that the call took place. 1 Default

judgment in favor of the Mullins was signed by the district court on January 8,

2004, and entered on January 9, 2004. Three days later, High Mountain filed its

answer to the original complaint. High Mountain admits that it failed to check the

court docket after it submitted its answer to see if default judgment had been

entered, and claims that it did not learn of the entry of the default judgment until

April 2004, when the Mullins sent copies of documentation concerning the default

judgment to High Mountain. 2

1
  Mullins’ counsel does recall speaking with High Mountain’s counsel on January
29, 2004, two weeks after default judgment was entered. Evidence exists that a
call between the parties occurred on this day.
2
  The record shows that Mullins’ counsel faxed copies of the documentation
regarding the default judgment to High Mountain’s new counsel, evidently
retained by High Mountain’s insurance company, on April 19, 2004, and that a
                                                                  (continued...)

                                         -3-
      On February 20, 2004, after default judgment had been entered, High

Mountain declared bankruptcy. The Mullins sought an order from the bankruptcy

trustee lifting the automatic stay of the action imposed by initiation of the

bankruptcy proceedings, which was granted on September 23, 2004, to allow the

Mullins to pursue an action nominally against High Mountain so that the Mullins

could recover from High Mountain’s insurance carrier. Once the stay was lifted,

High Mountain sought permission from the bankruptcy trustee to seek relief from

the default judgment. In a letter dated October 4, 2004, the bankruptcy trustee

informed High Mountain’s new counsel that “your representation of High

Mountain’s insurer in the above-referenced case does not require action by the

bankruptcy court.” Almost two months later, on November 23, 2004, High

Mountain filed a motion seeking relief from the default judgment pursuant to

Federal Rule of Civil Procedure 60(b)(1).

      The district court found that High Mountain’s eleven month delay in filing

its Rule 60(b) motion was unreasonable. In its order, it directly addressed High

Mountain’s claim of an alleged phone call between the parties stipulating that a

default judgment would be set aside. In the course of rejecting this excuse, the

court observed that under the local rules any stipulation between the parties must

2
 (...continued)
letter was sent to the Mullins’ counsel on April 30, 2004, officially notifying him
of the change of counsel.

                                          -4-
be approved by the court. Moreover, the court noted that “[e]ven if there actually

was a stipulation between the parties regarding setting aside the default judgment

Counsel for High Mountain should have filed its motion for relief from default

judgment and a stipulated order when he filed the Answer on January 12, 2004.”

Additionally, the district court found that the delay had caused substantial

prejudice to the Mullins’ case, given that the Mullins had “been unable to conduct

discovery, preserve evidence, obtain documentation, and otherwise structure their

case for resolution on the merits.” It would be difficult to do so after the delay,

the court concluded, because “High Mountain has ceased to do business, turned

its business records over to a bankruptcy trustee for liquidation, dismissed its

employees, and essentially ceased to exist.”

      This court reviews a district court’s denial of a Rule 60(b) motion for abuse

of discretion. Zurich N. Am. v. Matrix Serv., Inc., 426 F.3d 1281, 1293 (10th

Cir. 2005) (internal citation and quotations omitted). Rule 60(b) relief is

extraordinary and may only be granted in exceptional circumstances. Id. We may

reverse only if we conclude there is no reasonable basis for the district court’s

decision to deny relief and that its decision to deny Rule 60(b) relief is wrong.

Id. (emphasis added).

       Rule 60(b) of the Federal Rules of Civil Procedure strikes a delicate

balance between two countervailing impulses of the judiciary: “The desire to

                                          -5-
preserve the finality of judgments and the incessant command of the court’s

conscience that justice be done in light of all the facts.” Cessna Fin. Corp. v.

Bielenberg Masonry Contracting, Inc., 715 F.2d 1442, 1444 (10th Cir. 1983)

(internal quotations omitted). Under Rule 60(b)(1), “the court may relieve a party

. . . from a final judgment . . . for . . . mistake, inadvertence, surprise, or

excusable neglect.” 3 A motion under Rule 60(b)(1) must be made within a

reasonable time and not more than one year after the judgment. Fed. R. Civ. P.

60(b). However, a Rule 60(b) “motion is not timely merely because it has been

filed within one year of the judgment.” White v. Am. Airlines, Inc., 915 F.2d

1414, 1425 (10th Cir. 1990). Instead, the court examines “the facts of each case,

taking into consideration the interest in finality, the reason for delay, the practical

ability of the litigant to learn earlier of the grounds relied upon, and prejudice to

other parties.” Ashford v. Steuart, 657 F.2d 1053, 1055 (9th Cir. 1981).

3
  In its memorandum in support of its motion for relief, High Mountain alluded to
the catchall clause of Rule 60(b)(6), which provides for relief when there is “any
other reason justifying relief from the operation of the judgment.” The facts of
this case neither require nor support reliance on that provision. “Rule 60(b)’s
categories are mutually exclusive. The clear import of the language of clause
(b)(6) is that the clause is restricted to reasons other than those enumerated in the
[other 60(b)] clauses.” Zurich N. Am., 426 F.3d at 1293 (internal quotation and
citation omitted). High Mountain provided no grounds for relief other than those
that properly fall under Rule 60(b)(1). Further, Rule 60(b)(6) relief is unavailable
because a motion brought pursuant to Rule 60(b)(6), like a motion brought
pursuant to Rule 60(b)(1), must also be filed within a reasonable time.

                                            -6-
       As an initial matter, High Mountain effectively argues that the district court

was required to draw all factual inferences in its favor when deciding its Rule

60(b) motion. This position misunderstands the district court’s role in deciding

Rule 60(b) motions. In order to grant a Rule 60(b) motion the district court must

make two distinct findings: “a justification for relief [under one of the clauses of

the rule] and a meritorious defense.” Olson v. Stone (In re Stone), 588 F.2d 1316,

1319 (10th Cir. 1978). As we have noted previously:

       [A] party seeking to establish [a justification for relief] must plead
       and prove it. The opposing party is entitled to present controverting
       evidence demonstrating the absence of [justification for relief],
       which evidence may be introduced by way of affidavit, deposition, or
       testimony. After considering the pleadings and the evidence, if any,
       the court determines whether [justification for relief] has in fact been
       established.

Id. (internal citation omitted). 4

       Turning to High Mountain’s justifications for its delay, we conclude that

the district court did not abuse its discretion in finding that High Mountain’s

delay was unreasonable in light of the circumstances. High Mountain contends

that the first three months of its delay were excusable because it did not know

4
  High Mountain is correct that under the second prong of the analysis, whether a
meritorious defense exists, the movant’s factual allegations are taken as true and
all reasonable inferences are made in its favor. Olson, 588 F.2d at 1319 (citations
omitted). Because High Mountain failed to establish the first element,
justification for relief, the district court did not consider whether High Mountain
established the second element, existence of a meritorious defense.

                                          -7-
until April 2004 that default judgment against it had been entered on January 9,

2004. It is undisputed, however, that on January 8, 2004, High Mountain was

served with the certificate of default and, although unsigned, the filing of the

form default judgment. High Mountain argues it justifiably ignored those

documents because of the alleged January 8, 2004 phone call between its counsel

and the Mullins’ counsel. Based on its findings that there was no written

agreement between the parties stipulating that entry of a default judgment would

be set aside, and no documentary evidence was presented to it to prove the

disputed existence of such a call, the district court did not abuse its discretion in

rejecting this claim. Moreover, the district court found that even if such a call did

occur, the stipulation did not have legal effect because, under the applicable local

rules, all stipulations between the parties affecting the “course or conduct of any

civil proceedings” must be approved by the court. See DUCivR 83-6. Finally, it

concluded that High Mountain should have included an order reflecting such a

stipulation and a Rule 60(b) motion to set aside the default judgment when it filed

its original answer.

      With respect to the next six months of delay, High Mountain argues that it

did not file its Rule 60(b) motion because it needed to obtain permission from the

bankruptcy trustee to move for relief from the default judgment, which High

Mountain contends was not granted until October 4, 2004. Although the trial

                                          -8-
court did not address the effect of the bankruptcy filing on High Mountain’s delay

in its order denying High Mountain’s Rule 60(b) motion, this court may affirm the

district court’s judgment on a ground not relied on by the district court “provided

the litigants have had a fair opportunity to develop the record.” Ross v. U.S.

Marshal, 168 F.3d 1190, 1194 n.2 (10th Cir. 1999) (internal citation omitted).

High Mountain did not initiate the bankruptcy proceedings until more than one

month after default judgment had been entered. Any delay caused by these

proceedings was of High Mountain’s own creation; it chose to initiate bankruptcy

proceedings after the default judgment had already been entered. Additionally,

High Mountain has failed to cite any binding authority that it was required to

obtain leave from the trustee before seeking relief from the default judgment.

Further, High Mountain delayed filing its Rule 60(b) motion for another forty-

nine days after obtaining “permission” from the trustee to respond. Based upon

High Mountain’s stated reason’s for its delay, we see no basis to conclude the

district court abused its discretion in finding that High Mountain’s eleven month

delay in filing its Rule 60(b) motion was unreasonable.

      Furthermore, the district court did not err in determining that a delay of

almost a year substantially prejudiced the Mullins. It concluded that during the

delay the Mullins were unable to “conduct discovery, preserve evidence, obtain

documentation, and otherwise structure their case for resolution.” This finding

                                         -9-
was based on the district court’s recognition that, after High Mountain declared

for bankruptcy, it “ceased to do business, turned its business records over to a

bankruptcy trustee for liquidation, dismissed its employees, and essentially ceased

to exist.” High Mountain argues that the evidence still exists or could be easily

located. Even if all of the previous officers and employees of the company could

be tracked down and evidence still obtained, the district court correctly noted it

would be more difficult to proceed against High Mountain a year later and post-

bankruptcy.

      Accordingly, we do not “find[] a complete absence of a reasonable basis”

for the district court’s denial of High Mountain’s motion for relief, nor are we

“certain that the decision is wrong.” Zurich N. Am., 426 F.3d at 1289 (quotation

omitted). 5 The district court’s order denying High Mountain’s motion for relief

from default judgment is AFFIRMED.

                                                     Entered for the Court

                                                     Carlos F. Lucero
                                                     Circuit Judge

5
  Because we conclude that the district court did not abuse its discretion in
finding High Mountain’s eleventh month delay was unreasonable, we do not
address the second prong of the analysis, i.e., whether High Mountain offered a
meritorious defense to the Mullins’ claims.

                                         -10-