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Tag: default

2021 UT 33 – Gillman v. Gillman

IN THE SUPREME COURT OF THE STATE OF UTAH

 

BROOKELYN GILLMAN, CINDY MAUGHAN, CHANCELOR MAUGHAN,
AND JOHN MAUGHAN,

Appellants,
v.

GARY WALKER GILLMAN AND LANCE FINN GILLMAN,

Appellees.

No. 20190404

Heard November 9, 2020
Filed July 22, 2021

On Interlocutory Appeal

Fourth District, Spanish Fork
The Honorable Jared Eldridge
No. 180300090

Attorneys:

James K. Tracy, James C. Dunkelberger, and Hyrum J. Bosserman,

Salt Lake City, for appellants

Michael F. Skolnick, Jeremy R. Speckhals, and Calvin C. Curtis,
Salt Lake City, for appellees

JUSTICE PETERSEN authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE, JUSTICE
HIMONAS, and JUSTICE PEARCE joined.

JUSTICE PETERSEN, opinion of the Court:

INTRODUCTION

¶1 The defendants in this case missed the deadline to file an answer. The court clerk entered their default and the plaintiffs moved for default judgment. The defendants quickly opposed the motion and requested that the default certificate be set aside under Utah Rule of Civil Procedure 55(c). The district court granted the defendants’ request, concluding they had shown “good cause” under the rule. The plaintiffs then filed this interlocutory appeal, arguing the district court abused its discretion in setting aside the default certificate.

¶2 We affirm.

BACKGROUND

¶3 Decedents Glade and Betty Gillman left behind trusts for the benefit of their children: appellees Gary Walker Gillman and Lance Finn Gillman (collectively, the uncles), along with two other siblings who are deceased. The deceased siblings’ share was to pass to their children: appellants Brookelyn Gillman, Cindy Maughan, Chancelor Maughan, and John Maughan (collectively, the cousins), along with two additional non-party cousins. After becoming concerned with their uncles’ handling of the trusts, the cousins sued Gary Gillman for alleged mismanagement of the trusts and both uncles for unjust enrichment. The cousins also sought an accounting of trust funds and a declaratory judgment establishing their rights under the trusts.

¶4 The cousins filed their complaint in May 2018. The uncles timely moved for dismissal or, in the alternative, for summary judgment on each claim. The cousins opposed the motion to dismiss and moved the court to convert the motion to one for summary judgment under rule 56 of the Utah Rules of Civil Procedure. They also requested that the summary judgment disposition be delayed so the parties could conduct discovery.

¶5 On October 10, 2018, the district court heard argument on the matter and orally granted the motion to convert. The court deferred ruling on the summary judgment motion and ordered a period of discovery. At the end of the hearing, the court ordered the cousins to prepare an order memorializing its decision. Over a month later, on November 16, 2018, the cousins’ counsel sent the uncles’ counsel, Calvin Curtis (Curtis), a proposed order.

¶6 Two weeks later, Curtis emailed the cousins’ counsel, informing them he had been away for the Thanksgiving holiday and would look at the order and respond the following Monday. But he did not follow up. Just over five weeks later, on January 8, 2019, the cousins’ counsel emailed Curtis again to inform him they would file the order on January 11 if Curtis did not respond. Counsel also wrote that they anticipated the uncles’ answer would be due by the end of January.

¶7 On January 10, Curtis responded that the order was “fine,” that the uncles consented to entry, and that he would “be back in touch shortly on the remainder” of the email. The cousins’ counsel filed the order and the court entered it on January 16, 2019. The order specified that the uncles’ answer was due within fourteen days of the entry of the order, which was January 30.

¶8 On February 1, two days after the answer deadline, Curtis emailed the cousins’ counsel and informed them that the uncles were going to engage separate litigation counsel and Curtis expected to “have word on that within a couple days.” A week later, on February 8, the cousins’ counsel emailed Curtis and asked if he would be filing an answer. Curtis did not immediately respond.

¶9 On February 14, the cousins filed a proposed order entering the uncles’ default. It was entered the next day. Four days later, Curtis emailed the cousins’ counsel and informed them that the uncles had engaged separate litigation counsel, who would be in touch about the answer and proposed litigation schedule. The cousins’ counsel did not respond. Instead, on February 20, they filed a motion for default judgment.

¶10 Five days later, the uncles filed a motion opposing default judgment, which included a footnote requesting “that the Court set aside [the] default certificate.”1 It included an affidavit from Curtis, which stated that: (1) on or about February 1, he advised the cousins’ counsel that he would “be engaging separate litigation counsel”; (2) he had interacted with litigation counsel and their firm on other matters but first contacted them about the instant case on January 31, 2019; (3) he had “experience in litigating trust and estate matters,” but had reduced his litigation practice, and because the previous motion hearing had been “focused . . . on procedural rules,” the advisability of hiring separate counsel was “reinforced in [his] mind”; (4) between January 31 and February 19, he communicated with litigation counsel about the mechanics of their involvement in the matter but never discussed a due date for the answer; and (5) both parties had previously sought and received extensions in the case, but Curtis had never requested an extension for the answer, nor did he “envision or foresee the possibility of entry of default based on a three week delay” in filing the answer.

¶11 Also included as an exhibit to the opposition was the uncles’ proposed answer, in which they asserted the following defenses: (1) failure to state a claim upon which relief can be granted; (2) expiration of the statute of limitations on one or more claims; (3) waiver, release, and estoppel; and (4) unclean hands.

¶12 The district court denied the cousins’ motion for default judgment and granted the uncles’ request to set aside the default certificate. In its written order, the court noted that the case was “a close call.” To determine whether the uncles had shown “good cause” to set aside the default certificate under rule 55(c), the court considered factors that have been outlined by the court of appeals in Pierucci v. U.S. Bank, NA, 2015 UT App 80, ¶ 9, 347 P.3d 837, and Roth v. Joseph, 2010 UT App 332, ¶ 16, 244 P.3d 391. Specifically, the court analyzed “whether the default was willful, whether defendant alleges meritorious defenses, whether defendant acted expeditiously to set aside the default certificate, any prejudice to plaintiff and the existence of a public interest in the outcome.”

¶13 First, the court found that, while Curtis “could have been more diligent,” it was “not convinced that [his] omissions r[ose] to the level of willfulness.” Next, the court recognized that the uncles had asserted meritorious defenses and had acted expeditiously to set aside the default certificate and oppose the motion for default judgment. The court rejected the cousins’ contention that they would be prejudiced if the default certificate were set aside. And it found that the public interest weighed in favor of deciding the case on the merits because “Utah courts disfavor default judgments.”

¶14 The cousins sought this interlocutory appeal of the court’s decision. We exercise jurisdiction under Utah Code section 78A-3-102(3)(j).

STANDARD OF REVIEW

¶15 We review a district court’s decision to set aside a default certificate for an abuse of discretion. Lund v. Brown, 2000 UT 75, ¶ 9, 11 P.3d 277. While the “court has broad discretion in deciding whether to set aside a default [certificate],” a “decision premised on flawed legal conclusions . . . constitutes an abuse of discretion.” Id. (citation omitted).

ANALYSIS

¶16 The cousins contend that the district court abused its discretion in setting aside the entry of default in this case. Their primary argument is that to show “good cause” to set aside a default certificate under rule 55(c), the moving party must establish as a threshold matter that some event, exigency, or other cause beyond the party’s own inaction caused the default. They argue that if the defaulting party cannot proffer some reasonable justification for the default along these lines, the party has necessarily not shown “good cause.” And they assert that because the uncles did not offer any explanation for their late filing other than their counsel’s inaction, the uncles did not demonstrate good cause as a matter of law, and the district court should not have proceeded to consider whether other equitable factors—such as the ones identified by the court of appeals in Roth and Pierucci— weighed in favor of setting aside the default.

¶17 As we will explain, this is an incorrect reading of rule 55(c).

I. THE RULE 55(C) “GOOD CAUSE” STANDARD

¶18 When a party fails “to plead or otherwise defend as provided by” our rules of civil procedure, the opposing party may request that the clerk of court enter default—sometimes called a default certificate—against the defaulting party. UTAH R. CIV. P. 55(a). This is “an interlocutory step” taken before the opposing party moves for default judgment under rule 55(b). 10A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 2692 (4th ed. 2021).2 Obtaining an entry of default is not an onerous task. “[A]ll that must be shown . . . is that the defendant has failed to answer . . . in a timely fashion.” Skanchy v. Calcados Ortope SA, 952 P.2d 1071, 1076 (Utah 1998).

¶19 Once a default certificate is entered, the defaulting party may move for it to be set aside under rule 55(c). A district court may grant such a request “[f]or good cause shown.” UTAH R. CIV. P. 55(c).

¶20 “Good cause” is not defined by our rules of civil procedure. Black’s Law Dictionary defines “good cause” as a “legally sufficient reason”—“often the burden placed on a litigant . . . to show why a request should be granted or an action excused.” Good Cause, BLACK’S LAW DICTIONARY (11th ed. 2019). Accordingly, rule 55(c) requires only that a movant make a showing that is sufficient to persuade the district court that the default should be set aside. Nowhere does the rule require the movant to show that the default was caused by an event, exigency, or other external cause.

¶21 The cousins essentially read rule 55(c) to require the moving party to show good cause for the default. But that is not what the rule says. It provides: “For good cause shown the court may set aside an entry of default.” UTAH R. CIV. P. 55(c). And as discussed above, good cause is the burden placed on the movant to show why a request should be granted. Thus, in this context, the movant must show why there is good cause to set aside the default—not why there is good cause for the default. Of course, a party might argue that a default certificate should be set aside because the late filing was caused by events beyond the party’s control. Indeed, a party could proffer any fact or factor that is relevant to determining whether there is good cause to set aside a default. But the cousins’ reading of rule 55(c) inserts particular requirements that are simply not found in the text of the rule. See Bryner v. Cardon Outreach, LLC, 2018 UT 52, ¶ 21, 428 P.3d 1096 (“We will not infer substantive terms into the text that are not already there.” (citation omitted)).

¶22 The cousins also argue that their reading of the rule is supported by our appellate case law. They assert that “Utah appellate courts have consistently required some event, exigency, or other cause to justify setting aside default or default judgment.” This may be an accurate observation of the factual circumstances that are often involved in such appeals. But the cousins have not cited any case involving rule 55(c) in which we or the court of appeals have held that “good cause” encompasses the mandatory threshold showing they urge.

¶23 Further, the cousins rely heavily on case law interpreting the “excusable neglect” standard found in rule 60(b)(1). In those cases, we have held that “excusable neglect requires some evidence of diligence in order to justify relief.” Jones v. Layton/Okland, 2009 UT 39, ¶ 20, 214 P.3d 859; see also Sewell v. Xpress Lube, 2013 UT 61, ¶ 29, 321 P.3d 1080 (“To qualify for relief under rule 60(b)(1), a party must show he has used due diligence. Due diligence is established where the ‘failure to act was the result of . . . the neglect one would expect from a reasonably prudent person under similar circumstances.’” (alteration in original) (citation omitted)).

¶24 The cousins assert that our analysis of the excusable neglect standard applies equally here because the standard for setting aside a default certificate under rule 55(c) is the same as the standard for vacating a default judgment under rule 60(b). But that is incorrect.

¶25 While a default certificate may be set aside for “good cause shown,” UTAH R. CIV. P. 55(c), a court is given discretion to vacate a default judgment only upon a showing of, among other things, “mistake, inadvertence, surprise, or excusable neglect,” id. 60(b)(1). And “the vacation of a default judgment is subject to the explicit provisions of Rule 60(b), which places additional restraints upon the court’s discretion.” 10A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 2692; see UTAH R. CIV. P. 60(c) (establishing a filing deadline applicable to a motion under rule 60(b)(1)). Thus, the standard to set aside a default certificate is lower than the standard necessary to set aside a default judgment. See 10A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 2696 (“Any of the reasons sufficient to justify the vacation of a default judgment under Rule 60(b) normally will justify relief from a default entry and in various situations a default entry may be set aside for reasons that would not be enough to open a default judgment.”).

¶26 “Th[e] distinction [between relief from a default certificate and a default judgment] reflects the different consequences of the two events and the different procedures that bring them about.” Id. § 2692. A default certificate is but a step on the way to a default judgment. See UTAH R. CIV. P. 55; Skanchy, 952 P.2d at 1076; Roth v. Joseph, 2010 UT App 332, ¶¶ 15, 17, 244 P.3d 391. In contrast, a default judgment generally ends the litigation and requires a more onerous showing. See UTAH R. CIV. P. 55(b)(2) (providing, for example, that a court may hold a hearing to establish damages or “the truth of any averment, . . . or to make an investigation of any other matter” before entering a default judgment). Thus, a party seeking relief from a default judgment bears a higher burden than a party seeking only to set aside a default certificate.

¶27 The federal courts interpret their rules similarly. See, e.g., Let’s Go Aero, Inc. v. Cequent Performance Prods., Inc., 78 F. Supp. 3d 1363, 1371 (D. Colo. 2015) (“The good cause required for setting aside an entry of default ‘poses a lesser standard for the defaulting party than the excusable neglect which must be shown for relief from judgment under Fed. R. Civ. P. 60(b).’” (citation omitted)); Insituform Techs., Inc. v. AMerik Supplies, Inc., 588 F. Supp. 2d 1349, 1352 n.2 (N.D. Ga. 2008) (“The ‘excusable neglect’ standard . . . is more rigorous than the ‘good cause’ standard.” (citation omitted)).

¶28 This is not to say that cases involving rule 60(b)(1) are irrelevant to the rule 55(c) analysis. While the standards vary, we note that oftentimes the reasons for relief from either type of default will be similar. See 10A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE §§ 2694, 2696. So, rule 60(b)(1) cases may shed light on circumstances and factors that will often be relevant to a rule 55(c) analysis. However, these cases have not grafted additional requirements onto rule 55(c).3

¶29 Accordingly, we reject the cousins’ argument that the good cause standard requires a movant to make an initial showing that the default was caused by some event, exigency, or other external cause before considering any other relevant factors.

¶30 Because we have not previously had occasion to interpret rule 55(c), we take this opportunity to identify some guiding principles to assist district courts in analyzing whether to set aside a default certificate. Vacatur of a default is an equitable remedy that necessarily requires the district court to exercise its discretion and consider the facts unique to each case. “By their nature, equitable inquiries are designed to be flexible, taking into account all relevant factors in light of the particular circumstances.” Jones, 2009 UT 39, ¶ 17. In other words, the movant can assert, and the court may consider, any fact relevant to the decision to set aside a default because “the question is always whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” Id.

¶31 With that in mind, any doubts should be resolved in favor of setting aside a default certificate and allowing the case to proceed on the merits. See, e.g., Helgesen v. Inyangumia, 636 P.2d 1079, 1081 (Utah 1981) (noting that courts should exercise discretion “in furtherance of justice and should incline towards granting relief in a doubtful case to the end that the party may have a hearing”). The policy that “courts should be liberal in granting relief against default judgments so that cases may be tried on the merits” is equally applicable to default certificates. See Erickson v. Schenkers Int’l Forwarders, Inc., 882 P.2d 1147, 1149 (Utah 1994). So, underlying any inquiry into whether a default certificate should be set aside is the principle that defaults generally are disfavored and cases should be tried on the merits where possible.

¶32 But we recognize the competing need for judicial efficiency and adherence to deadlines. “In exercising discretion under Rule 55(c), the court will be very cognizant of the competing policies and values that are relevant to entering defaults and setting them aside. Both the default entry and judgment play an important role in the maintenance of an orderly, efficient judicial system.” 10A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 2693 (footnote omitted). If parties were able to miss deadlines without recourse, it would delay the litigation process and place unnecessary strain on the judicial system. Thus, the entry of default can be “a useful remedy to a good faith litigant who is confronted by an obstructionist adversary” and “a means of encouraging an unwilling or uncooperative party to honor the rules established for . . . litigation.” Id.

¶33 These competing policies illustrate why the district court is granted wide discretion in its rule 55(c) determination: the court is in the best position to know whether the conduct of a defaulting party is such that the need to enforce deadlines in a particular case outweighs the general policy that cases should be adjudicated on the merits.

¶34 Our court of appeals has identified several factors that could be relevant to this determination in a given case: “whether the default was willful, whether the defendant alleges a meritorious defense, whether the defendant acted expeditiously to correct the default, whether setting the default aside would prejudice the plaintiff, and the extent, if any, to which the public interest is implicated.” Roth, 2010 UT App 332, ¶ 16; see also Pierucci v. U.S. Bank, NA, 2015 UT App 80, ¶ 9, 347 P.3d 837. These factors have also appeared frequently in federal case law applying rule 55(c). See, e.g., In re OCA, Inc., 551 F.3d 359, 369 (5th Cir. 2008); Let’s Go Aero, 78 F. Supp. 3d at 1371; Peoples v. Fisher, 299 F.R.D. 56, 59 (W.D.N.Y. 2014); Insituform Techs., 588 F. Supp. 2d at 1352.

¶35 We agree that these considerations could be relevant in an appropriate case. However, we make clear that these factors do not form a “test” that must be applied in all circumstances. Rather, we reiterate that “[e]quitable inquiries defy distillation into any formal legal test; instead, the question is always whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” See Jones, 2009 UT 39, ¶ 17. We caution that not every principle will weigh equally or be relevant in a particular case. And the factors identified are not an exhaustive list. A district court can consider anything that is relevant to determining whether the default certificate should be set aside. But because the factors identified in Roth may often be relevant to a rule 55(c) inquiry, we briefly discuss each one and offer related considerations that could be relevant in individual cases.

¶36 First, a court could consider whether the defaulting party’s failure to answer was willful. “A willful default is an ‘intentional failure’ to respond to litigation.” In re OCA, Inc., 551 F.3d at 370 n.32 (citation omitted). “Mere negligence or carelessness is insufficient to support a finding of willfulness. Willfulness requires egregious conduct that is not satisfactorily explained,” such as “when a defendant ignores a complaint without action and fails to offer an explanation for its failure to respond to a motion or pleading,” Peoples, 299 F.R.D. at 59 (citations omitted), or “cho[oses] to play games,” Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000) (citation omitted).

¶37 Likewise, a court could consider more generally the defaulting party’s conduct throughout the litigation—assuming some litigation has taken place, as it has here. For example, if a party has been actively engaged or otherwise diligent in the case and the default appears to be an anomaly, that would weigh in favor of vacating the entry of default. But if the party has been repeatedly dilatory or otherwise noncooperative, the court may decide default is warranted and decline to set it aside. See 10A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 2693 (“The default procedure offers a useful remedy to a good faith litigant who is confronted by an obstructionist adversary.”).

¶38 Next, a court could consider whether the defaulting party acted promptly to cure the default. There is no hard-and-fast rule to determine what constitutes prompt action in every case. Courts should look at the response to the default in relation to the overall context of the litigation.

¶39 Further, a court could consider whether the non-defaulting party would be unduly prejudiced if the default certificate were vacated. Some courts have held that delay by itself is insufficient to show prejudice. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 98 (2d Cir. 1993) (recognizing that “delay standing alone does not establish prejudice”). These courts require a showing that the delay will “result in the loss of evidence, create increased difficulties of discovery, or provide greater opportunity for fraud and collusion.” Peoples, 299 F.R.D. at 61 (citation omitted).

¶40 But although we agree that delay can be especially pernicious when it leads to loss of evidence or witnesses, or otherwise influences litigation, we decline to categorically disqualify delay itself as a sufficient basis for a finding of prejudice. Instead, we leave to the district court’s discretion whether delay in a particular case has become sufficiently egregious to constitute prejudice on its own. And it is appropriate for the court to consider whether, if any harm was done to the non-defaulting party, the harm can be remedied with a sanction less drastic than default. See Jones, 2009 UT 39, ¶ 22 n.15 (“The district court’s equitable discretion extends to fashioning the remedy as well as granting it. In other words, a district court may, as part of exercising its equitable discretion, in appropriate cases, condition the relief from judgment on the moving party’s payment of attorney fees incurred by the nonmoving party as a result of the moving party’s neglect or satisfaction of any other equitable condition.”).

¶41 Additionally, it could be relevant whether the defaulting party has a meritorious defense. This is a low bar. “A defense is meritorious if it is good at law so as to give the factfinder some determination to make.” Am. All. Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996) (citation omitted). This does not mean the court must consider whether the defendant will ultimately succeed on the merits. A meritorious defense is merely an indication of the defendant’s ability and desire to litigate the case on the merits. Conversely, “if the defendant fails to present a meritorious defense sufficient to support a finding on the merits for the defaulting party,” the court may exercise its discretion not to allow the case to proceed. Lacy, 227 F.3d at 293. In such an instance, setting aside the default would be futile. Our policy favoring adjudication on the merits would be overcome because there would be no real legal issues to adjudicate.

¶42 We again emphasize that district courts have wide discretion in determining whether a party has shown good cause. The considerations we have discussed here are by no means a complete list, and they may not be relevant in every case. Courts should take the unique circumstances of each case into consideration and determine “whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” See Jones, 2009 UT 39, ¶ 17.

II. THE DISTRICT COURT’S RULE 55(C) ORDER

¶43 To prevail on appeal, the cousins must demonstrate that the district court abused its discretion in vacating the default certificate. “Though broad, the court’s discretion is not unlimited. As a threshold matter, a court’s ruling must be ‘based on adequate findings of fact’ and ‘on the law.’” Lund v. Brown, 2000 UT 75, ¶ 9, 11 P.3d 277 (citation omitted). In light of the principles and considerations we identify today and the district court’s findings, the cousins have not carried their burden.

¶44 We find no error of law in the district court’s ruling. In analyzing whether to set aside the default certificate, the district court considered the factors previously identified by the court of appeals, specifically: “whether the default was willful, whether the defendant alleges a meritorious defense, whether the defendant acted expeditiously to correct the default, whether setting the default aside would prejudice the plaintiff, and the extent, if any, to which the public interest is implicated.” See Roth v. Joseph, 2010 UT App 332, ¶ 16, 244 P.3d 391; see also Pierucci v. U.S. Bank, NA, 2015 UT App 80, ¶ 9, 347 P.3d 837. As we have discussed, a court is not required to apply these factors. But where they are relevant, it is certainly not legal error to do so. A court may consider any relevant factor.

¶45 And the court’s decision was supported by adequate findings. The district court determined that the uncles’ default was not willful. It recognized that the answer the uncles filed as an exhibit alleged four defenses, all of which it categorized as “meritorious.” The court found that the uncles acted expeditiously in moving to set aside the default and oppose the motion for default judgment. The court determined setting aside the default certificate would not prejudice the cousins. And it awarded the cousins attorney fees to compensate for the cost incurred in moving for the default certificate and default judgment. Finally, the court recognized that although the case was a “close call,” the public interest weighed in favor of adjudicating the case on the merits.

¶46 The cousins argue that the case before us is like Jones v. Layton/Okland, in which we affirmed a district court’s refusal to vacate a default judgment because the defaulting party failed to show “even a minimum level of diligence” prior to default entering. 2009 UT 39, ¶ 29, 214 P.3d 859. In Jones we noted that in the realm of a rule 60(b) motion to vacate a default judgment, “excusable neglect requires some evidence of diligence in order to justify relief.” Id. ¶ 20. Upon examination of the record, we found it to be “utterly devoid of any diligence by Jones that would justify his neglect.” Id. ¶ 28. So we were able to affirm that district court’s decision because there was “simply no basis in the record for us to conclude that the district court abused its discretion by refusing to set aside” the default judgment in that case. Id. ¶ 30.

¶47 We disagree with the cousins’ comparison. The uncles’ conduct is not akin to the defendant’s behavior in Jones, which was “utterly devoid” of diligence.4 The record shows that the uncles were actively involved in the case—they filed a timely motion to dismiss, participated in oral argument, and communicated with opposing counsel. And when Curtis determined he was out of his element, he sought to engage litigation counsel and informed the cousins’ counsel of this fact. When the default certificate was entered, the uncles responded within days. It is arguable that a court could find this level of diligence sufficient to warrant vacation of a default judgment, not to mention a default certificate. “Even where a course of events does not make it strictly impossible for a party to meet its legal obligations, the party’s choice to attend to another matter, or even its simple failure to attend to its legal obligation, may be sufficiently diligent and responsible, in light of the attendant circumstances, to justify excusing it from the full consequences of its neglect.” Id. ¶ 22. So while the court in Jones was within its discretion to deny relief from a default judgment under the circumstances before it, so too is the court here within its discretion to grant relief from a default certificate in light of the facts here.

¶48 Further, we note that the delay caused by the uncles’ failure to respond was not substantial in the context of the litigation—considering the extensions the parties had given each other and the time it took for the cousins to file their proposed order. Indeed, the cousins’ briefing to this court acknowledges that “[t]he parties, through counsel, communicated for months leading up to the deadline to answer.”

¶49 The district court determined these circumstances constituted good cause to set aside the default. And it did not abuse its discretion in doing so.5

CONCLUSION

¶50 In determining whether there is good cause to set aside a default certificate under rule 55(c), a district court should weigh any relevant facts and circumstances of the case before it and decide whether it would be fundamentally fair to grant the requested equitable relief. Adjudication on the merits is preferred, and courts should err on the side of granting rule 55(c) motions where it is appropriate. We conclude the district court did not abuse its discretion in finding there was good cause to set aside the default certificate here. We affirm.

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Young v. Hagel – 2020 UT App 100 – Rule 73(c) appear or appoint counsel

2020 UT App 100

THE UTAH COURT OF APPEALS

JOSHUA J. YOUNG, Appellee,
v.
MICHAELA M. HAGEL, Appellant.

Opinion
No. 20190661-CA
Filed June 25, 2020

Second District Court, Farmington Department
The Honorable John R. Morris
No. 156700664

Steve S. Christensen and Clinton R. Brimhall, Attorneys for Appellant
Mark R. Hales, Attorney for Appellee

JUDGE RYAN M. HARRIS authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN FORSTER and
DIANA HAGEN concurred.

HARRIS, Judge:

¶1        After nearly four years of contested litigation in a child custody case, the district court entered a default order against Michaela M. Hagel after her attorney purported to withdraw and she did not file a response to a notice to appear or appoint counsel. After learning of the default order, Hagel asked the district court to set it aside, but the district court denied her motion. Hagel now appeals that denial, and we reverse.

BACKGROUND

¶2        Hagel and Joshua J. Young have a child (Child) together. In 2011, a Texas court entered an “agreed order” appointing Young as Child’s “sole managing conservator” and limiting Hagel to “reasonable supervised visitation,” finding that it would not be in Child’s best interest for Hagel to have “specific periods of possession” of Child. The Texas court also ordered that Child have no contact with Hagel’s current husband. In 2015, after relocating to Utah, Young registered the Texas order with the Utah district court.

¶3        Soon after the Texas order was registered in Utah, both Young and Hagel—through counsel—filed competing petitions to modify it. Young alleged that Hagel had allowed the Child to have contact with her husband, and therefore asked the court to allow Hagel to exercise parent-time only in Utah and only under professional supervision. In her petition, Hagel asserted that her circumstances had changed, and that she not only should be allowed unsupervised parent-time, but that she should be awarded sole physical custody of Child. After over a year of litigation, the parties reached agreement on modification of the Texas order, and in 2016 the Utah district court entered an order encapsulating that agreement and superseding the Texas order.

¶4        Over a year later, in early 2018, Hagel filed a motion for an order to show cause, asking the court to hold Young in contempt for alleged violations of the operative custody order. Young responded by filing a counter-motion of his own, alleging that Hagel had violated the order, and asking the court to hold her in contempt. The matter came before a court commissioner, who recommended that the parties be ordered to participate in mediation. No party objected to that recommendation, and the district court entered an order commanding the parties to mediate their differences, and stating that if mediation proved unsuccessful, then the parties should “schedule a pre-trial conference to certify the issues for [an] informal trial.”

¶5        The parties complied with the court’s order, and participated in mediation, but they were not able to reach agreement on the issues raised in the competing cross-motions for contempt. After the unsuccessful mediation, Hagel’s attorney filed a notice announcing his withdrawal, incorrectly certifying that no motions were currently pending,[1] and incorrectly identifying the client from whose representation he was attempting to withdraw. Hagel’s counsel did not file a motion asking the court for permission to withdraw, and the court did not sign an order authorizing counsel to withdraw.

¶6 In response to Hagel’s attorney’s notice of withdrawal, Young’s attorney filed a document captioned “Notice of Appearance,” but which was apparently intended to serve as a notice to appear or appoint counsel. See Utah R. Civ. P. 74(c). Young’s attorney mailed a copy of the document to Hagel at her home address. In the document, Young’s attorney told Hagel that she “has the responsibility to formally appear personally or to appoint counsel in this matter,” and that “the failure to file a formal personal Notice of Appearance will result in striking all your pleadings, an entry of default, and [Young’s] pleadings being exclusively used to create any pending orders consistent with Rule 55(b)(1)(A) of the Utah Rules of Civil Procedure.” The document did not purport to give Hagel a firm deadline by which any such appearance had to be made, although it did state that “[n]o further proceedings shall be held in the case until 20 days after” the document was filed.[2]

¶7        Hagel filed no response to the “Notice of Appearance,” either personally or through counsel. About two months later, Young filed a motion asking the court to enter default against Hagel due to her lack of response. However, Young did not serve a copy of his motion on Hagel and, predictably, she did not respond to it. A court clerk later entered a default certificate.

¶8        After obtaining the default certificate, Young then filed a “Motion for Default Orders,” in which he asked the district court to hold Hagel in contempt. He also asked the court to order certain modifications to the parties’ custody arrangement, including requiring that Hagel exercise parent-time exclusively in Utah, that Young would be allowed to claim Child for tax purposes, and that Hagel pay his attorney fees. Young did not serve a copy of this motion on Hagel, and Hagel did not respond to it. The district court, without holding a hearing, entered Young’s requested order (the Order), captioned “Order of Modification.” In that order, the court held Hagel in contempt for various reasons, including smoking around Child, “harassing” Young’s spouse, and for a child support arrearage; entered judgment against her for $850 related to unpaid child support; and “restrained” her from “calling [the] cops to do welfare checks” on Child and from “calling CPS.”[3] The court also ordered that Young “is awarded his attorney fees.” In addition, the court ordered that all of Hagel’s parent-time “must occur in Utah” and that Young could “claim [Child] for tax purposes.” Following entry of the Order, Young mailed Hagel a copy of it, as required by rules 5(a)(2)(D) and 58A(g) of the Utah

Rules of Civil Procedure, even though he had not served her with copies of any of the motions leading up to the Order.

¶9        About three weeks later, a new attorney representing Hagel entered an appearance and filed a motion asking the district court to set aside the Order. The motion invoked rule 60(b) of the Utah Rules of Civil Procedure, and asserted that Hagel’s actions in failing to respond to the “Notice of Appearance” and the motions for default were due to excusable neglect. Hagel also pointed out, among other things, that her previous attorney’s notice of withdrawal was improper under rule 74(a) of the Utah Rules of Civil Procedure, which states that, when motions are pending, “an attorney may not withdraw except upon motion and order of the court.” Young opposed the motion, and the court denied it in a written ruling and order.

ISSUE AND STANDARD OF REVIEW

¶10 Hagel now appeals, arguing that the court improperly denied her motion to set aside the Order. Though district courts have “broad discretion” to grant or deny rule 60(b) motions, that discretion is “not unlimited,” especially in the context of default judgments. See Menzies v. Galetka, 2006 UT 81, ¶ 54, 150 P.3d 480 (quotation simplified); see also Lund v. Brown, 2000 UT 75, ¶ 10, 11 P.3d 277 (stating that “the nature of a default judgment and the equitable nature of rule 60 provide further limits” on a court’s discretion). When a default judgment is at issue, rule 60(b) motions “should be liberally granted because of the equitable nature of the rule,” and courts “should exercise [their] discretion in favor of granting relief so that controversies can be decided on the merits rather than on technicalities.” Menzies, 2006 UT 81, ¶ 54. A district court abuses its discretion if it denies a rule 60(b) motion to set aside a default judgment in a case where all of the requirements for the granting of that motion are met. See id. (stating that “it is an abuse of discretion for a district court to deny a 60(b) motion to set aside a default judgment if there is a reasonable justification for the moving party’s failure and the party requested 60(b) relief in a timely fashion”); Lund, 2000 UT 75, ¶ 11 (stating that “it is quite uniformly regarded as an abuse of discretion to refuse to vacate a default judgment where there is reasonable justification or excuse for the defendant’s failure to appear, and timely application is made to set it aside” (quotation simplified)); see also Katz v. Pierce, 732 P.2d 92, 93 (Utah 1986) (per curiam) (“Where there is doubt about whether a default should be set aside, that doubt should be resolved in favor of doing so.”). And, “[i]f a district court’s ruling on a 60(b) motion is based on clearly erroneous factual findings or flawed legal conclusions, the district court has likely abused its discretion.” Menzies, 2006 UT 81, ¶ 55.

ANALYSIS

¶11      A litigant is “entitled to have a default judgment set aside under rule 60(b)” if three requirements are satisfied: “(1) the motion is timely; (2) there is a basis for granting relief under one of the subsections of [rule] 60(b); and (3) the movant has alleged a meritorious defense.”[4] Menzies, 2006 UT 81, ¶ 64. It is uncontested that Hagel’s rule 60(b) motion was filed in a timely fashion; we therefore focus our discussion on the other two requirements, both of which are contested here.

A

¶12      To meet the second requirement, Hagel must demonstrate that at least one of the subsections of rule 60(b) provides a basis for setting aside the Order. In an effort to make this showing, Hagel points to subsection (1) of rule 60(b), and asserts that her failure to respond to the “Notice of Appearance” and to Young’s default motions was the result of excusable neglect. See Utah R. Civ. P. 60(b)(1) (stating that a court “may relieve a party . . . from a judgment [or] order . . . for . . . mistake, inadvertence, surprise, or excusable neglect”). We find Hagel’s assertion persuasive, because her failure to respond to the “Notice of Appearance” did not, by itself, automatically place her in default.

¶13      According to our rules, “default” may be entered against a party who “has failed to plead or otherwise defend” the case, see id. R. 55(a), and a party who is “in default” is no longer entitled to receive service of motions and other papers filed in the case, see id. R. 5(a)(2) (stating that “[n]o service is required on a party who is in default”). Young did not serve Hagel with copies of his motions for default, and asserts that he was not required to do so because Hagel was “in default,” for purposes of rule 5, once Hagel failed to respond to the “Notice of Appearance” within twenty-one days. The district court appears to have credited this argument; indeed, an implied premise of its order of dismissal was that Hagel was in default for failing to respond to the notice.

¶14 Young correctly notes that a litigant who is properly served with a complaint and who fails to make a timely response is considered to be in default and no longer entitled to service of documents, even if the clerk has not yet entered a default certificate. See Abrogast Family Trust v. River Crossings, LLC, 2010 UT 40, ¶ 23, 238 P.3d 1035 (stating that, “unless a party enters a formal appearance through a pleading in the trial court, it has not appeared and is not entitled to service under rule 5” (quotation simplified)); see also Cutting v. Allenstown, 936 F.2d 18, 21 n.1 (1st Cir. 1991) (“Where defendants . . . were served with the summons and d[id] not appear and answer within the required period, they [we]re parties in default for Rule 5(a) purposes,” notwithstanding that “the clerk had yet to enter a default” (quotation simplified)). In the context of a litigant who has failed to respond at all to a duly-served complaint, the outcome of these cases aligns with the text of the operative rules; after all, such a litigant has “failed to plead or otherwise defend” the case, which is the prerequisite for “default” in our rules. See Utah R. Civ. P. 55(a).

¶15 But a litigant who fails to timely respond to a notice to appear or appoint has not necessarily “failed to plead or otherwise defend” against allegations raised in a complaint. Such a litigant, by definition, has been involved in the case, with counsel, for some time already before the attorney’s withdrawal, and suddenly finds herself without counsel. Courts should not automatically infer, solely from a newly pro se litigant’s failure to file any document within twenty-one days of the filing of a notice to appear or appoint, that the litigant has no further interest in litigating the case.

¶16 And no provision in our rules requires any such automatic inference. Rule 74(c) directs opposing counsel to send the newly pro se party a notice “informing the party of the responsibility to appear personally or appoint counsel,” and prescribes a twenty-one-day hiatus in the litigation, but rule 74 does not set forth any deadline (as, for instance, rule 12(a) does for responding to a complaint) for the newly pro se party to file any particular document. See generally Utah R. Civ. P. 74. And rule 74 likewise does not set forth any particular consequence that will necessarily be visited upon the newly pro se party for failure to file any document within any particular timeframe; no provision of that rule or any other indicates that a party who fails to respond to a rule 74(c) notice is “in default.” Thus, we disagree with Young’s contention that Hagel was in default here; while she did not file a response to the “Notice of Appearance,” she had been actively litigating the case for years and thus had not failed to “plead or otherwise defend” the case. See id. R. 55(a). And because she was not in “default” under rule 55(a), we cannot consider her “in default” for the purposes of rule 5(a)(2).

¶17      To be sure, a newly pro se party is not entitled to remain inactive indefinitely, and the opposing party, after expiration of the twenty-one-day hiatus mandated by rule 74(c), may of course seek relief from the court. In appropriate cases, and among other potential sanctions, the opposing party may ask the court to enter default against the newly pro se party. But that party is still entitled to be served with a copy of all documents filed in the case, including any motion seeking sanctions, and should not be considered to be in “default”—under either rule 55(a) or rule 5(a)(2)—merely by virtue of failing to respond to the notice to appear or appoint.[5]

¶18      The Order contains no explicit analysis of why the district court considered Hagel in “default.” The court appears to have based that conclusion solely on her failure to respond to the “Notice of Appearance.” But this conclusion was unwarranted. Given her active participation in the litigation up to that point, including the recent mediation, Hagel had not failed to plead or otherwise defend the case; to the contrary, she had shown a longstanding desire to advocate for custody of Child. A party should not be considered in default simply for failing to respond to a notice to appear or appoint, and we are aware of no other ground upon which the court might have presumed that Hagel was no longer interested in participating in the litigation.

¶19      Hagel, of course, cannot be faulted for failing to respond to Young’s motions for default, because she was not served with those papers and there is no indication that she was even aware that they had been filed. Because she was not “in default,” she was entitled to service of those papers. See Utah R. Civ. P. 5(a)(2). And we think it likely that, if served with those motions, Hagel would have responded to them. And we have doubts about whether the district court would have granted those motions for default if Hagel had responded to them. Default was a harsh sanction in this case, especially considering that the case involved custody of Child[6] and that Hagel had vigorously litigated the matter for years.[7]

¶20 For all of these reasons, the district court erred by presuming that Hagel was in “default,” and where a district court grants a rule 60(b) motion on the basis of a “flawed legal conclusion[], the district court has likely abused its discretion.” Menzies v. Galetka, 2006 UT 81, ¶ 55, 150 P.3d 480. Hagel was under no rule-based deadline to respond to Young’s “Notice of Appearance” in any particular time frame, and had done nothing else—other than not respond to that notice—to merit an assumption that she was uninterested in participating in a lawsuit in which she had actively participated for nearly four years. And because Young erroneously considered Hagel to be “in default” pursuant to rule 5, Hagel was never served with copies of Young’s motions for default. Under these circumstances, we are hard-pressed to identify any neglect at all on Hagel’s part; certainly any such neglect was entirely excusable.[8] Accordingly, Hagel has demonstrated that rule 60(b)(1) provides a basis for setting aside the Order.

B

¶21 To meet the third requirement, Hagel must “allege[] a meritorious defense.” Menzies, 2006 UT 81, ¶ 64. This requirement exists in order to “prevent the necessity of judicial review of questions which, on the face of the pleadings, are frivolous,” id. ¶ 108 (quotation simplified), and “ensures that vacating the judgment will not be an empty exercise or a futile gesture,” see Judson v. Wheeler RV Las Vegas, LLC, 2012 UT 6, ¶ 14, 270 P.3d 456. “This requirement does not set an overly burdensome threshold.” Menzies, 2006 UT 81, ¶ 108. To meet it, a party need not present evidence supporting the claimed defenses, but merely must articulate a “clear and specific proffer of a defense that, if proven, would preclude total or partial recovery by the claimant.” Judson, 2012 UT 6, ¶ 23 (quotation simplified). “Even general denials that would allow a litigant to prevail if proven are sufficient.” Menzies, 2006 UT 81, ¶ 108 (quotation simplified); see also Somer v. Somer, 2020 UT App 93, ¶ 11 n.5 (citing cases, and stating that “proof beyond allegations stating a claim or defense is unnecessary”).

¶22 Here, Hagel proffers potentially meritorious defenses to several of the Order’s provisions. First, she contends that her child support arrearage was only $350, and that the judgment entered against her for $850 is incorrect. Second, she proffered to the district court that many of the other facts alleged by Young in support of his contempt request were inaccurate; for instance, she proffered that she had never smoked around Child or harassed Young’s spouse. Third, she proffered that Young’s request that all of her parent-time occur in Utah would be unduly burdensome and inappropriate. In the context of a custody and contempt dispute, these denials are sufficient under the Menzies standard. While Young argues on appeal that Hagel “provided no details” supporting her defense and “failed to prove facts that would preclude the relief granted” to Young, definitive proof is not required. Under the circumstances, we conclude that Hagel has alleged defenses to much of the Order that, if proven, would result in significant portions of the Order being improvident. Thus, Hagel has met the third requirement.

CONCLUSION

¶23        Hagel meets all three of the requirements for relief under rule 60(b). Accordingly, the district court abused its discretion by denying her motion to set aside the Order. We therefore reverse the court’s denial of Hagel’s rule 60(b) motion, vacate the Order, and remand for further proceedings consistent with this opinion.

Utah Family Law, LC | divorceutah.com | 801-466-9277

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[1] A few weeks prior to the mediation, Young’s attorney did the same thing—he filed a notice of (but not a motion for) withdrawal of counsel, incorrectly certifying that no motions were pending. Before the mediation occurred, however, Young was able to retain new counsel, and was represented by that counsel at the mediation.

[2] Rule 74(c) of the Utah Rules of Civil Procedure prescribes a period of twenty-one days, rather than twenty, in which “[n]o further proceedings shall be held in the case” following the filing of a notice to appear or appoint counsel.

[3]  The court actually entered two separate versions of the “Order of Modification,” electronically signed fourteen seconds apart. The only discernible difference between the two orders is that the first one contains the $850 judgment and the second one does not. Neither order purports to supersede the other, and neither one was ever set aside, and it is therefore unclear which order governs. Because we vacate the Order, we need not further consider this question.

[4] This third requirement need not be met if the movant successfully invokes subsection (4) of rule 60(b), a provision that allows relief if the judgment is void. See Judson v. Wheeler RV Las Vegas, LLC, 2012 UT 6, ¶ 15, 270 P.3d 456. On appeal, Hagel does not invoke rule 60(b)(4), and therefore she must satisfy all three requirements.

[5] We find support for this conclusion in the local rules of Utah’s federal courts, which provide that “[a]n unrepresented party who fails to appear within twenty-one (21) days after entry of the order [allowing attorney withdrawal], or within the time otherwise required by the court, may be subject to sanction . . . , including but not limited to dismissal or default judgment.” See DUCiv R83-1.4(e)(5), https://www.utd.uscourts.gov/local-civilrules#eProcedureWithdrawal [https://perma.cc/TN4L-HD37] (emphasis added).

[6] Before modifying a custody order to transfer custody of a child from one parent to another, a district court—even in a default setting—must “take evidence and then make findings that a substantial change of circumstances has occurred and that transferring custody of the child is in the child’s best interests.” Wright v. Wright, 941 P.2d 646, 652 (Utah Ct. App. 1997); see also Chaparro v. Torero, 2018 UT App 181, ¶ 40, 436 P.3d 339 (stating that a court “cannot avoid making these findings by modifying custody arrangements as a sanction”). In this case, although the court did not transfer custody of Child from one parent to the other, the Order did modify Hagel’s parent-time (by requiring that all of it occur in Utah) and “restrained” Hagel from contacting police to “do welfare checks” and from “calling CPS” for any reason, and the court made no finding that any of these new provisions were in Child’s best interest.

[7] We also note that Standard 16 of Utah’s Standards of Professionalism and Civility mandates that “[l]awyers shall not cause the entry of a default without first notifying other counsel whose identity is known, unless their clients’ legitimate rights could be adversely affected.” Utah Sup. Ct. R. Prof. Practice 14­301(16) (LexisNexis 2019). In Arbogast Family Trust v. River Crossings, LLC, 2010 UT 40, 238 P.3d 1035, our supreme court held that an attorney could violate this standard even while complying with rule 5 of the Utah Rules of Civil Procedure, and that an attorney who sent a letter revoking an open-ended extension and demanding an answer to a complaint within twenty days was still required, by the standard, to notify the other side when, at the expiration of the new twenty-day deadline, it sought entry of default from the court. Id. ¶¶ 5, 42. In this case, we acknowledge that Young told Hagel, in the “Notice of Appearance,” that default “will result” if she did not respond, but we are troubled that Hagel received no other notice that a motion for default was later filed. The actions taken by Young’s attorney appear to have been based on a good-faith (albeit incorrect) interpretation of rule 5(a)(2). Nevertheless, we caution attorneys to keep Standard 16 in mind in similar situations.

[8] Hagel identifies two other reasons why any neglect on her part should be excused: she asserts that her attorney’s withdrawal was improper, and notes that the “Notice of Appearance” was materially inaccurate. We do not rest our decision upon these arguments, in part because Hagel has not provided any evidence—for instance, through an affidavit—that either condition actually contributed to her failure to respond to the notice. However, both conditions merit additional mention.

Hagel is correct that her attorney’s withdrawal was improper. Rule 74(a) of the Utah Rules of Civil Procedure provides that, “[i]f a motion is pending . . . , an attorney may not withdraw except upon motion and order of the court.” At the time her attorney filed his notice of withdrawal, the contempt motions were still pending. In that situation, any proper withdrawal could only occur with court approval, which was never obtained. We caution attorneys not to attempt withdrawal, by notice only, when motions are pending.

It is also important for attorneys to take care when drafting notices to appear or appoint counsel. Such notices are, by definition, intended for consumption by newly-attorneyless litigants. We recognize that it is “the substance of [a document] rather than its caption that governs its interpretation,” Fish v. Fish, 2016 UT App 125, ¶ 7, 379 P.3d 890, and that parties who choose to represent themselves in court “will be held to the same standard of knowledge and practice as any qualified member of the bar,” Lundahl v. Quinn, 2003 UT 11, ¶ 3, 67 P.3d 1000 (quotation simplified). But when a litigant receives a notice to appear or appoint, that litigant may not yet have chosen to represent herself; she is suddenly and (often) involuntarily unrepresented. It is a moment of potentially great confusion and uncertainty for litigants, and it is a moment at which courts’ leniency toward pro se litigants should be near its zenith. See Noor v. State, 2019 UT 3, ¶ 57, 435 P.3d 221 (stating that courts should be “lenient to pro se litigants because of their lack of knowledge of law and procedure,” and should “grant pro se litigants every consideration that may reasonably be indulged” (quotation simplified)). It is not difficult to envision situations in which a poorly drafted notice to appear or appoint could lead to excusable neglect on the part of the newly pro se party.

 

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What if you don’t get divorced and just move away?

What if you don’t get divorced and just move away?

The risks and dangers in just up and moving away from (abandoning) your spouse are manifold. Here are a few that come to mind:

  • If you disappear and your spouse files for divorce and you cannot be found to be served with a copy of 1) the summons and 2) complaint for divorce, you could have default judgment entered against you without your knowledge and without you having appeared in the action to defend yourself.
    • you may lose most or all of the marital assets (even your premarital assets) by having them awarded to your spouse;
    • you may be ordered to pay most or all of the marital debts and obligations; and
    • you may be ordered to pay unfair amounts of child and/or spousal support
  • You are still responsible to care for your spouse, which means (at least in the jurisdiction where I practice divorce and family law) that if your spouse incurs debts and obligations for what are known as “necessaries”:

Morrison v. Federico, 232 P.2d 374 (Utah 1951):

The statute making “expenses of the family” chargeable upon the property of both spouses and permitting them to be sued jointly and separately, places liability upon both parties only where expenses incurred are necessary for the family benefit including expenditures proper to support the family and necessary to promote the well-being of its members and does not include attorney’s fees for legal services performed in a contemplated divorce action where reconciliation occurs.

  • 30-2-9. Family expenses–Joint and several liability:

(1) The expenses of the family and the education of the children are chargeable upon the property of both spouses or of either of them separately, for which expenses they may be sued jointly or separately.

(2) For the expenses described in Subsection (1), where there is a written agreement signed by either spouse that allows for the recovery of agreed upon amounts, a creditor or an assignee or successor in interest of the creditor is entitled to recover the contractually allowed amounts against both spouses, jointly and severally.

(3) Subsection (2) applies to all contracts and agreements under this section entered into by either spouse during the time the parties are married and living together.

(4) For the purposes of this section, family expenses are considered expenses incurred that benefit and promote the family unit. Items purchased pursuant to a written contract or agreement during the marriage that do not relate to family expenses are not covered by this section.

(5) The provisions of Subsections (2) and (3) do not create a right to attorney’s fees or collection fees as to the nonsigning spouse for purchases of:

(a) food or clothing; or

(b) home improvements or repairs over $5,000.

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Utah Family Law, LC | divorceutah.com | 801-466-9277

https://www.quora.com/What-if-you-don-t-get-divorced-and-just-move-away/answer/Eric-Johnson-311

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2018 UT App 210 – Silva v. Silva – sheriff’s sale, attorney fees

2018 UT App 210 – Silva v. Silva
THE UTAH COURT OF APPEALS

DAVID SILVA, Appellee,
v.
BONNIE SILVA, Appellant.

Opinion No. 20160171-CA
Filed November 8, 2018
Third District Court, Salt Lake Department
The Honorable Robert P. Faust
No. 140908706

J. Spencer Ball, Attorney for Appellant
Shawn D. Turner, Attorney for Appellee

JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion, in which JUDGES GREGORY K. ORME and DAVID N. MORTENSEN concurred.

CHRISTIANSEN FORSTER, Judge:

¶1        Bonnie Silva appeals the district court’s denial of her motions to set aside a default judgment and a sheriff’s sale following that judgment. She also challenges the district court’s award of attorney fees. We vacate the district court’s rulings and remand for further proceedings.

BACKGROUND

¶2        Bonnie Silva and David Silva divorced in 2010. The marital estate included interests in fifteen parcels of real property—four properties held jointly, one property held by David, and ten properties held by Bonnie.[1] The decree allocated the properties and ordered the parties to execute quitclaim deeds within thirty days, conveying their interests in the properties to one another as specified in the decree. If either party failed to execute a quitclaim deed, the divorce decree authorized the other party to seek a court order to transfer title. One of the properties awarded to David was a residential property located on Dennis Drive in West Valley City, Utah (the Dennis Drive Property).

¶3        In June 2010, pursuant to the divorce decree, Bonnie executed a quitclaim deed as “Grantor Bonnie Moore, now known as Bonnie Silva,” purportedly conveying the Dennis Drive Property to David. But when David attempted to record the deed, he discovered that “Bonnie Moore[,] as Trustee for the Consolidated Trust,” actually held title to the Dennis Drive Property. He further discovered that one week before he had filed for divorce in September 2008, Bonnie had conveyed the Dennis Drive Property and other properties then in her name to herself and her daughters, K.V. Lum and R. Carter, as trustees of a trust known as the Consolidated Trust. After learning these facts, David sent a revised quitclaim deed to Bonnie, but she did not sign and return it as requested. Several months later, Bonnie, as a trustee of the Consolidated Trust, again conveyed the Dennis Drive Property and other properties to Lum, as trustee of the Consolidated Trust.

¶4        In October 2010, David filed a Motion for Contempt with the district court. Because he claimed he could not locate Bonnie, David filed a Motion for Alternative Service, which the court granted. The district court held an evidentiary hearing and entered a default judgment finding Bonnie in contempt for failing to convey the Dennis Drive Property to David. However, the court left open a window during which Bonnie could cure the contempt. If Bonnie did not convey the Dennis Drive Property to David within thirty days, the court would enter a $219,000 judgment against her. Bonnie did not convey the property to David during this time. A few months later, Lum, as a trustee of the Consolidated Trust, conveyed title to the Dennis Drive Property to Carter, as a trustee of the Consolidated Trust. The district court then entered a contempt judgment against Bonnie, reducing slightly the $219,000 by amounts David owed to Bonnie under the divorce decree.

¶5        The following month, David instituted this action against Bonnie and her daughters alleging fraudulent conveyance and seeking to quiet title to the Dennis Drive Property. David filed a motion for alternative service recounting his prior unsuccessful efforts to serve Bonnie. David asserted that the process server had attempted personal service at Bonnie’s last known address four separate times. The district court ordered alternative service by publication, which David accomplished.

¶6        Bonnie did not answer the complaint. The district court clerk consequently entered a default certificate against Bonnie, and the court ordered an evidentiary hearing on damages. Concerned that Bonnie may have received inadequate notice of the hearing, the district court rescheduled the hearing and required additional service on Bonnie. David attempted service by mailing copies of the notice of hearing to what David claimed was Bonnie’s last known address by both regular and certified mail. David also attempted personal service whereby the process server left the notice at Bonnie’s last known residence on three separate occasions. David then completed service by publication again.

¶7        Bonnie did not appear at the hearing on damages. In its Findings of Fact and Conclusions of Law, the district court concluded that “Service of Process of the Complaint and notice of the evidentiary hearing on damages were in accordance with the Rules of the Court, the Statutes of Utah, and the Constitutional requirements of due process.” The district court also determined that Bonnie had fraudulently conveyed the Dennis Drive Property and her other properties to the Consolidated Trust. Accordingly, the district court ruled that the contempt judgment entered in the divorce action attached to the properties, that Bonnie and her daughters were enjoined from transferring or encumbering the properties, and that David “may levy execution on the properties . . . and sell the amount of the property necessary to satisfy the judgment.” Finally, the district court awarded attorney fees and costs to David. The district court thus entered default judgment against Bonnie in the amount of the contempt judgment, now attached to Bonnie’s properties. The court also awarded costs and attorney fees totaling nearly $50,000. The district court clerk subsequently issued a writ of execution on three of Bonnie’s properties, including the Dennis Drive Property.

¶8        Later that month, Bonnie’s counsel entered an appearance in the district court and filed a motion pursuant to rule 60(b)(1) of the Utah Rules of Civil Procedure seeking to set aside the default judgment on the basis of excusable neglect and to quash the writ of execution. The district court held a hearing, which Bonnie and her counsel attended. At that hearing, Bonnie maintained that the default judgment should be set aside on the ground of excusable neglect because she did not receive actual notice of the action and service was insufficient under the circumstances. Bonnie acknowledged that service complied with the law, but she argued that David knew where Bonnie was located and could easily have contacted her to give her actual notice of his claims.

¶9        Bonnie filed an affidavit with her rule 60(b) motion and a second affidavit with her reply motion. In her first affidavit, Bonnie alleged that she had not received notice of the current action against her. She further alleged that she received a call from David notifying her that “something was wrong with the quitclaim deed” but that “David never indicated to [her] in that telephone call that there was any court proceeding.” In her second affidavit, Bonnie alleged that David knew of various means of contacting her, including her two email addresses or through their respective children and the renters of their properties. David did not refute these allegations.

¶10 The district court denied Bonnie’s motion to set aside based upon excusable neglect on the ground that “service [of the notice] and the resulting default were appropriate.” The court reached this conclusion, in part, because the court determined Bonnie provided no evidence—despite her two affidavits— supporting her assertions that David knew where Bonnie was located and that she did not receive actual notice of the proceedings. And although the court recited the law relative to excusable neglect, the court did not address excusable neglect in its analysis. Similarly, the court denied the motion to quash for Bonnie’s failure to provide evidence of irreparable harm.

¶11      Four days later, the Dennis Drive Property and the other two properties subject to the writ of execution were sold at a sheriff’s sale. Bonnie responded with a motion for a temporary restraining order (TRO), a motion to void the execution sale, and a motion to join the sale purchasers as parties to the action. After a hearing, the district court denied the TRO on the ground that Bonnie had failed to meet the required elements for relief. The court denied the motion to join the purchasers on the ground that “[Bonnie] cites rules that apply before a judgment is made and are not applicable for a case as this one where judgment was entered.” The court noted that “even if there was no judgment in this case, there is no basis, claim, or cause of action asserted against the purchasers.” The court denied the motion to void the execution sale on the ground that the court had already ruled at the TRO hearing that the notice of sale was properly served.

¶12      Bonnie appealed the district court’s denial of her motions to set aside the default judgment and the sheriff’s sale, and the district court’s award of attorney fees to David. We issued an opinion in this matter on July 28, 2017. See Silva v. Silva, 2017 UT App 125, 402 P.3d 36, vacated, Jan. 9, 2018. We subsequently granted a petition for rehearing, vacated that opinion, and reheard the matter.

ISSUES AND STANDARDS OF REVIEW

¶13 Bonnie asserts two claims of error on appeal.[2] First, she contends that the district court abused its discretion in denying her motion to set aside the default judgment. We generally review a district court’s denial of a rule 60(b) motion under an abuse of discretion standard. Utah Res. Int’l, Inc. v. Mark Techs. Corp., 2014 UT 60, ¶ 11, 342 P.3d 779.

¶14       Second, Bonnie contends that the district court abused its

discretion in denying her motion to set aside the sheriff’s sale, claiming she lacked notice and pointing to irregularities in the sale. “A district court’s decision to set aside a sheriff’s sale is to be reviewed for an abuse of discretion.” Meguerditchian v. Smith, 2012 UT App 176, ¶ 9, 284 P.3d 658 (quotation simplified).

ANALYSIS

I. Rule 60(b) Motion

¶15 Bonnie first contends that the district court abused its discretion in denying her rule 60(b) motion to set aside the default judgment. “Rule 60(b) of the Utah Rules of Civil Procedure provides a mechanism for a party to obtain relief from a final order or judgment . . . .” Asset Acceptance LLC v. Stocks, 2016 UT App 84, ¶ 13, 376 P.3d 322. “[A] movant is entitled to have a default judgment set aside under [rule] 60(b) if (1) the motion is timely; (2) there is a basis for granting relief under one of the subsections of 60(b); and (3) the movant has alleged a meritorious defense.”[3] Menzies v. Galetka, 2006 UT 81, ¶ 64, 150 P.3d 480.

¶16 With respect to the second requirement, Bonnie asserted excusable neglect as a basis for relief. See Utah R. Civ. P. 60(b)(1). The excusable neglect inquiry is a flexible one in which the district court is granted broad discretion “to consider all relevant factors and give each factor the weight that it determines it deserves.” Jones v. Layton/Okland, 2009 UT 39, ¶¶ 17, 25, 214 P.3d 859. In such equitable inquiries, “the question is always whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” Id. ¶ 17. Courts are generally encouraged to be “indulgent toward setting a judgment aside where there is reasonable justification or excuse for the defendant’s failure to answer and when timely application is made.” Miller v. Martineau & Co., 1999 UT App 216, ¶ 25, 983 P.2d 1107 (quotation simplified). Indeed, upon a timely motion to set aside, “it is quite uniformly regarded as an abuse of discretion to refuse to vacate a default judgment where there is reasonable justification or excuse for the defendant’s failure to appear.” Arbogast Family Trust v. River Crossings, LLC, 2008 UT App 277, ¶ 23, 191 P.3d 39 (quotation simplified), aff’d, 2010 UT 40, 238 P.3d 1035.

¶17 Here, the district court did not address whether Bonnie’s failure to respond to the complaint was due to excusable neglect. Instead, the court’s analysis focused only on the propriety of its order authorizing alternative service. In its decision denying Bonnie’s motion to set aside, the court observed that the court had approved the alternative service and that Bonnie’s counsel had “admitted at the hearing that service upon [her] was legally proper.” On this basis, the district court concluded that “service and the resulting default were appropriate.” But the question before the court was not whether service or entry of default judgment was technically appropriate. Indeed, despite proper service and entry of an otherwise appropriate default judgment, parties under our rules are afforded an opportunity to set a judgment or final order aside. The correct inquiry, then, is whether Bonnie’s lack of actual notice constitutes a reasonable justification to set aside the default “under principles of fundamental fairness in light of the particular facts.” Jones, 2009 UT 39, ¶ 17. While the particular circumstances of service of process may shed light on whether Bonnie’s failure to respond was reasonable and excusable, the district court failed to address this issue.

¶18 Bonnie argues that David had “many means at his disposal to contact [her] to give notice that he was suing her, including calling and emailing her.” Her affidavit alleges that he knew “her two active email addresses, her telephone number, . . . her children, and many other means he had after 13 years of marriage” to contact her. If Bonnie’s unrefuted allegations are to be believed, then David, contrary to his representations to the court when he filed his motion for alternative service, had the ability to contact Bonnie through means that would have been more likely to reach her. If this is the case, then there was likely “reasonable justification” for Bonnie’s failure to answer. See Arbogast Family Trust, 2008 UT App 277, ¶ 23.

¶19 The district court did not address whether these circumstances made Bonnie’s failure to respond excusable. Rather, the court merely ended its inquiry upon determining that (1) the alternative service was adequate and (2) Bonnie admitted the technical legality of that service of process. Because this determination did not address Bonnie’s excusable neglect argument, we vacate the district court’s ruling and remand for further proceedings.

II. Sheriff’s Sale

¶20 Bonnie also challenges the district court’s refusal to set aside the sheriff’s sale of three of her properties to satisfy the judgment. A court “may set aside a sheriff’s sale where (1) a debtor’s property is sold at a grossly inadequate price and (2) there were irregularities during the sale that contributed to the inadequacy of price or circumstances of unfairness during the redemption period caused by the conduct of the party benefitted by the sale.” Pyper v. Bond, 2011 UT 45, ¶ 15, 258 P.3d 575.

¶21 Bonnie points to two irregularities in the sale that she believes justify setting it aside. First, she asserts that she and her attorney did not receive proper notice of the sale as outlined by rules 69B(b), 64(a)(10), and 5 of the Utah Rules of Civil Procedure. Second, she points out that the sheriff’s sale disposed of all three properties together rather than as separate parcels. She asserts that this is contrary to rule 69B(d), which directs, “The property shall be sold in such parcels as are likely to bring the highest price. Severable lots of real property shall be sold separately.” Utah R. Civ. P. 69B(d). Bonnie maintains that these irregularities contributed to a grossly inadequate sale price, pointing out that the Dennis Drive Property alone was valued at $219,000 at “the bottom of the real estate depression in Utah,” yet the Dennis Drive Property plus two other single family dwellings were sold together at auction for only $186,000 in 2016.

¶22 In its ruling on Bonnie’s motion to set aside the default judgment, the district court did not fully address her arguments. The ruling states simply that the court had “already addressed at the previous hearings the issue of notice of the sale (not required to be served on counsel and notice of sale not done under Rule 5).” From what we can glean from the record, this ruling seems to be based on the court’s reading of rule 69B(b)(3), which states that “[i]f the property is real property, the officer shall post written notice” of the sale. Id. R. 69B(b)(3). The district court appears to have taken this statement in the rule to mean that only posting of notice, rather than service on the defendant pursuant to rule 5, is required under 69B. But in examining the structure of rule 69B(b), this is not the case.

¶23 The rule first states, “The officer shall set the date, time and place for sale and serve notice thereof on the defendant . . . .” Id. R. 69B(b) (emphasis added). The rule then goes on to state, “The officer shall publish notice of the date, time and place of sale as follows . . . .” Id. Rule 69B(b)(3), on which the district court appears to have relied for its determination that “if it’s real property . . . [t]he manner [of service] is different,” is only a subpart of subsection (b) and describes the manner in which notice is to be published with respect to real property. It does not negate the requirement in the first sentence of subsection (b) regarding service upon the defendant. Rule 64(a)(10) defines “serve” for purposes of rule 69B as “any method of service authorized by Rule 5,” id. R. 64(a)(10), and rule 5 requires service upon a party’s attorney where the party is represented by counsel, id. R. 5(b). Thus, the district court’s determination that service upon Bonnie’s attorney was not required was erroneous.

¶24 Nevertheless, the defect in service does not necessarily mean that the sheriff’s sale should be set aside. See Pyper, 2011 UT 45, ¶ 15 (stating that a sheriff’s sale may be set aside where the price is “grossly inadequate” and there are “irregularities during the sale that contributed to the inadequacy of price or circumstances of unfairness”). Further analysis is needed to make this determination. Because the district court erred in its determination regarding notice and did not fully address Bonnie’s other arguments, we remand for the district court to address those arguments.

III. Attorney Fees on Appeal

¶25 Finally, both parties request an award of attorney fees incurred on appeal. Bonnie contends that “[e]quity requires that [she] be granted her attorney’s fees for having to make this appeal.” David counters that even if Bonnie is “able to prevail on appeal, [she] would not be entitled to [her] fees,” because she was “not awarded fees below.” David also requests attorney fees on appeal because he was awarded fees in the default judgment.

¶26 “When a party is entitled to attorney fees below and prevails on appeal, that party is also entitled to fees reasonably incurred on appeal.” Jordan Constr., Inc. v. Federal Nat’l Mortgage Ass’n, 2017 UT 28, ¶ 71, 408 P.3d 296 (quotation simplified). “In Utah, attorney fees are awardable only if authorized by statute or by contract.” Jones v. Riche, 2009 UT App 196, ¶ 1, 216 P.3d 357 (quotation simplified). “However, in the absence of a statutory or contractual authorization, a court has inherent equitable power to award reasonable attorney fees when it deems it appropriate in the interest of justice and equity.” Stewart v. Utah Public Service Comm’n, 885 P.2d 759, 782 (Utah 1994). “Courts have exercised that inherent power in several categories of cases,” such as “when a party acts in bad faith, vexatiously, wantonly, or for oppressive reasons.” Id. (quotation simplified).

¶27 The parties present no contract or statute authorizing attorney fees under the circumstances. Further, neither party has made the required showing or otherwise persuaded us that equity requires an award of attorney fees. Accordingly, we decline to exercise our equitable power and deny each party’s request for attorney fees incurred on appeal.

CONCLUSION

¶28 We conclude that the district court did not address Bonnie’s arguments for setting aside the default judgment and the sheriff’s sale. Accordingly, we vacate the district court’s rulings on these motions and remand for the district court to fully address Bonnie’s arguments. We deny each party’s request for attorney fees incurred on appeal.

Utah Family Law, LC | divorceutah.com | 801-466-9277

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[1] Because Bonnie and David share a last name, we refer to them by their first names throughout this opinion. We intend no disrespect by this apparent informality.

[2] Bonnie also asserts that the attorney fees award associated with the default judgment was not supported by findings regarding the reasonableness of the award. Because we vacate the district court’s decision based on Bonnie’s first argument, we do not address her attorney fees argument in detail.

[3] Because we conclude that the district court failed to properly analyze Bonnie’s excusable neglect argument—the basis she alleged for relief—we do not consider the other requirements.

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How can I get a divorce if I don’t know where my spouse is?

If I’m married with a child (separated for 4 years), how do I get a divorce and establish a child support order, if I don’t know where my spouse is? (might not be in the same country)?

In Utah, where I practice divorce law, the process is as follows (it is likely similar in other jurisdictions too):

1. Prepare and file the complaint for divorce (and a few other initial required documents as part of the filing process) with the court (Utah Rules of Civil Procedure, Rule 3).

2. Make duly diligent efforts to locate your spouse you are suing for divorce. Check his/her last few last-known residential and work addresses and see if he/she is there. Check and see if he/she is staying with close family members or friends or at a boyfriend’s/girlfriend’s house. Try contacting him/her on his/her last few last-known telephone numbers and work and personal e-mail addresses he/she uses or has used in the past. Look on social media to see if that gives you any hints as to where he/she may be. Ask common friends and contacts of yours and your spouse if they know where to find your spouse. That’s a duly diligent search (Utah Rules of Civil Procedure, Rule 4(d)(5)(A)).

3. If, despite your duly diligent search, the whereabouts of your spouse are still unknown, if service is impracticable under the circumstances, or if there is good cause to believe that your spouse is avoiding service, you may file a motion to allow service by some other means. Your motion must include an affidavit or declaration describing your efforts to identify, locate, and serve your spouse, or the circumstances that make it impracticable to serve him/her. (Id.)

If your spouse is located in a foreign country, you still have to get him/her served (either personally or by alternative means), and that process is a little complex (not extremely complex, but it takes some effort). Here are two links that introduce you to that process: How to Serve a Spouse with Divorce Papers in another Countryand How to Get an International Divorce.

4. If the motion is granted, the court will order service of the complaint and summons by means reasonably calculated, under all the circumstances, to apprise your spouse of the action (Utah Rules of Civil Procedure, Rule 4(d)(5)(B)). What does “means reasonably calculated, under all the circumstances, to apprise” mean? Back when newspapers were so ubiquitous, it meant placing a notice in the “legal notices” section of a newspaper of general circulation in a county where your spouses was believed to be or likely to be, for 3–4 weeks. But now that far fewer people read newspapers, “means reasonably calculated to apprise” means still possibly the publication in the newspaper or a text message to the person’s last-known telephone number(s), an e-mail, a certified letter, or a post or instant message on social media, if your spouse has an active social media profile.

5. After you have filed proof of attempted alternate service with the court, if the time for publication has passed (usually at least 21 -30 days), and if your spouse has not filed a responsive pleading, he/she will be in default. You can then apply to the court for entry of default and for default judgment (Utah Rules of Civil Procedure, Rule 55 Default).

6. As long as your complaint for divorce is sworn or verified and contains all of the factual allegations and information that the court will either grant default judgment “on the pleadings” themselves or after a brief hearing in which you would appear before the court to provide the court with testimony and evidence to establish your claims.

7. If default judgment is granted, the court will either draft the documents needed to process your case to a close or ask you or your lawyer to prepare those documents: findings of fact and conclusions of law and a decree of divorce. If you sought an award of child support in your complaint for divorce and the court granted that request, your decree will contain provisions awarding you child support, along with the other relief you sought in your complaint.

And that’s it.*

* If, after entry of default against your spouse were to try to have his/her default and default judgment overturned (“set aside” is the language the court rules use), then if he/she can show the court good cause to set the default judgment aside, then it can set aside so that the case can be argued and decided on the merits of the case, instead of by default (Utah Rules of Civil Procedure, Rule 55(c)).

Utah Family Law, LC | divorceutah.com | 801-466-9277

https://www.quora.com/If-you-are-still-legally-married-with-a-child-separated-for-4-years-how-do-you-get-a-divorce-establish-a-child-support-order-if-you-do-not-know-where-your-spouse-is-Might-not-be-in-the-same-country/answer/Eric-Johnson-311

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