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Melendrez v. Bode (7/25/97), 941 P 2d 1254
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Notice: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring errors to the
attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska
99501, phone (907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
RICHARD J. MELENDREZ, )
) Supreme Court No. S-6879
Appellant, )
) Superior Court No.
v. ) 1KE-94-307 CI
)
DALE M. BODE and NADJA D. ) O P I N I O N
BODE, )
)
Appellees. ) [No. 4856 - July 25, 1997]
)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Ketchikan,
Thomas M. Jahnke, Judge.
Appearances: David W. Rosendin, Ketchikan,
for Appellant. Kevin G. Miller, Ketchikan, for Appellees.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, Eastaugh, and Fabe, Justices.
COMPTON, Chief Justice.
FABE, Justice, dissenting.
I. INTRODUCTION
Dale Bode and Nadja Bode sued to quiet title to property
that Richard Melendrez formerly had owned. Melendrez did not
respond to the complaint, and the court entered his default.
Melendrez then appeared and opposed the Bodes' application for a
default judgment. Nevertheless, the superior court entered a
default judgment for the Bodes. Melendrez appeals. We reverse.
II. FACTS AND PROCEEDINGS
In September 1988, Melendrez sold property to Miles
Bainter and Patricia Bainter. The purchase price was $75,000. The
Bainters paid $15,000 as a down payment and were to pay Melendrez
the balance in annual installments. [Fn. 1] The Bainters made
several payments, the last of which was in September 1991.
Payments reduced the principal balance due to approximately
$39,715. The Bainters made no further payments to Melendrez,
because they "were unsure of his whereabouts"and had "learned that
Melendrez was trying to sell the property or his interest in [the]
contract."
In April 1993, the Bainters quitclaimed their interest in
the property to David Gubser and Karen Gubser. In May, the Gubsers
offered to pay Melendrez the remaining balance on the original
sales contract in exchange for a quitclaim deed from him.
Melendrez did not respond to their offer. In June, the Gubsers
quitclaimed their interest in the property to the Bodes.
On April 4, 1994, the Bodes filed, in superior court, a
complaint to quiet title. On April 6, Melendrez was served with
the complaint. [Fn. 2] On May 5, the clerk entered Melendrez's
default. [Fn. 3] On May 12, counsel for Melendrez entered his
appearance in superior court. On July 1, the Bodes requested the
court "to enter a default judgment against the Defendants quieting
title in Plaintiffs on payment to Defendant, Richard J. Melendrez
of $28,231.32." On July 8, Melendrez answered the Bodes'
complaint. On July 13, he moved to set aside the entry of default.
In November the superior court entered a default judgment
quieting title in the Bodes. The court deleted a paragraph in the
Bodes' proposed order requiring the Bodes to pay Melendrez
"$28,231.32 in full satisfaction of all amounts due Melendrez by
virtue of the original Contract for Sale,"noting that "[t]he
payment to Melendrez was not pleaded and therefore cannot be the
subject of a default judgment." Melendrez moved the court to
reconsider the judgment or to amend it to include a money judgment
in his favor. The court refused. [Fn. 4] Melendrez appeals. [Fn.
5]
III. DISCUSSION
A. Standard of Review
This court reviews the superior court's refusal to set
aside the entry of default and its entry of a default judgment for
an abuse of discretion. See Murat v. F/V Shelikof Strait, 793 P.2d
69, 73 (Alaska 1990); Peter Pan Seafoods v. Stepanoff, 650 P.2d
375, 378-79 (Alaska 1982). "An abuse of discretion will only be
found by this court when we are left with a definite and firm
conviction, after reviewing the whole record, that the trial court
erred in its ruling." Peter Pan Seafoods, 650 P.2d at 378-79.
B. The Default Judgment
The Bodes admit that their right to quiet title in the
property should be conditioned on the payment of $28,231.32 to
Melendrez. The superior court abused its discretion by
unconditionally granting quiet title in the Bodes.
Alaska Rule of Civil Procedure 54(c) provides in part:
"A default judgment shall not be different in kind from or exceed
in amount that prayed for in the demand for judgment." This court
interpreted Rule 54(c) in Oaks v. Grocers Wholesale, Inc., 377 P.2d
1001 (Alaska 1963). Oaks gave a promissory note, secured by
certain property, to Grocers. Id. at 1002. When Oaks defaulted on
the note, Grocers sued. Id. In its prayer for relief, Grocers
requested a foreclosure and sale of the mortgaged property. Id.
When Oaks failed to answer the complaint, Grocers obtained a
default judgment on the note. Id.
This court concluded that the default judgment was
improper because Grocers' demand for judgment sought only
foreclosure, not a money judgment against Oaks:
The rule [54(c)] says clearly that a judgment
by default shall not be different in kind from that prayed for in
the demand for judgment. There is no doubt that the demand for
judgment is a portion of the complaint distinct from the statement
of the claim, since it is specifically required to be included in
the complaint under Civ. Rule 8(a). It is this demand, and not the
complaint as a whole, that determines the relief which may be
granted in a judgment by default.
. . . .
Rule 54(c) is an absolute ban against the
entry of any judgment by default which is different in kind from
that prayed for. If a judgment is entered in violation of the
rule, then it is clearly erroneous and invalid.
Id. at 1003 (footnotes omitted).
In their prayer for relief, the Bodes requested that the
court declare that they own the property in fee simple and that the
defendants have no estate, right, title, lien, or interest in the
property. They did not mention in their prayer that Melendrez may
be entitled to a payment. Although the superior court did not cite
Oaks, its decision to eliminate the payment provision from the
default judgment is a strict application of the rule enunciated
there: the Bodes did not provide for a payment to Melendrez in
their prayer for relief, therefore the default judgment cannot
include such a payment.
The superior court's strict application of the rule
contravened the purpose of Rule 54(c) and the holding in Oaks.
Rule 54(c) and the holding in Oaks were fashioned to prevent a
plaintiff from seeking a default judgment different in kind or more
extensive than that sought in the complaint. See Oaks, 377 P.2d at
1002. Absent such a rule, defendants would have to defend every
lawsuit. Otherwise, a defendant could find himself, as did Oaks,
held to answer for a judgment greater than that anticipated (on the
basis of the plaintiff's prayer for relief).
In this case, in contrast to Oaks, the plaintiffs sought
less extensive relief in their default judgment request than they
did in their complaint. In their complaint the Bodes asked the
court to declare them fee simple owners of the property, free of
any liens or encumbrances or payment obligations. In their default
judgment request, the Bodes asked the court to declare them fee
simple owners of the property free of any liens or encumbrances,
upon their payment to Melendrez of $28,231.32. The relief sought
in the complaint and in the default judgment request are not
"different in kind": in both the Bodes sought quiet title to the
property. Nor does the relief in the latter "exceed in amount"
that sought in the demand for judgment. From the Bodes'
perspective, the relief sought in the application for default
judgment is less extensive: quiet title, but only after they make
a substantial payment to Melendrez. [Fn. 6]
A default judgment that grants lesser relief than that
sought in the prayer for relief poses no danger of prejudice to the
defaulting defendant. The prayer puts the defendant on notice of
his or her potential liability in the lawsuit. If the defendant
chooses to default in the face of that liability and the default
judgment entered is for a lesser amount, the result may be a
windfall to the defendant. Thus, such a default judgment is
consistent with the rationale behind Rule 54(c) and the holding in
Oaks. Indeed, limiting the plaintiff's relief to that requested in
the application for a default judgment is fully consistent with the
overarching principle that the court should not grant a litigant
more than the litigant has requested.
C. The Refusal to Set Aside the Entry of Default
Our conclusion that the default judgment was error does
not resolve the question whether the superior court erred in
refusing to set aside the entry of default. That is, the superior
court justifiably may have refused Melendrez's motion and properly
proceeded to enter a default judgment, but entered an erroneous
judgment. Alaska Civil Rule 55(e) provides that "[f]or good cause
shown the court may set aside an entry of default." Whether the
defendant has shown "good cause"is a question of equity, left to
the discretion of the trial court. Hertz v. Berzanske, 704 P.2d
767, 771 (Alaska 1985). However, a meritorious defense is one of
the elements the trial court must consider in setting aside an
entry of default.
In exercising its discretion to set aside
an entry of default, a court should consider the following factors:
whether the defendant has established the required meritorious
defense, prejudice to plaintiffs, the culpability of defendant's
conduct, the length of the period of default, the size of any
potential award to plaintiffs, and alternative sanctions against
the defendant. The court should also consider whether the parties
had prior contact such that the plaintiff should have given
defendant notice that a default would be sought. Disposition of a
case on the merits is strongly favored.
Id.
The meritorious defense requirement demands "something
more than a perfunctory statement that a meritorious defense
exists." Id. at 772. It demands a showing that if relief is
granted, the outcome of the suit may be different from the outcome
obtained if the entry of default is allowed to stand. Id. To
satisfy the "different outcome"standard, the defendant need not
show that the prevailing party will be different; it is enough if
the defendant demonstrates a defense that may substantially reduce
the plaintiff's award. See id.
Although Melendrez's briefing on the subject leaves much
to be desired, he offered enough evidence to show a meritorious
defense according to the above standard. He argued that the
original purchasers, the Bainters, had no interest to transfer,
because they defaulted on their obligations. The fact that there
is no deed transferring Melendrez's interest to the Bainters
supports this argument. Thus he may be able to show that the Bodes
are not entitled to quiet title. Melendrez also plausibly argued
that the amount he is owed on the contract is greater than the
$28,231.32 the Bodes admit to owing.
The other factors do not weigh clearly on one side of the
scale. The prejudice to the Bodes is not great; their chief
allegation of prejudice is that they have "undergone considerable
effort and expense in pursuing this matter and obtaining the Entry
of Default." See Hertz, 704 P.2d at 773 ("The mere fact that the
nondefaulting party will be required to prove his case without the
inhibiting effect of the default upon the defaulting party does not
constitute prejudice which should prevent a reopening."). The size
of the potential award to the Bodes is substantial, considering the
value of the property and the resources of Melendrez.
Additionally, as an alternative sanction, the court could have
preconditioned setting aside the default on Melendrez reimbursing
the Bodes for the costs they incurred in obtaining the default.
On the other hand, Melendrez is entirely culpable for the
entry of default. He attempted to avoid service. After he had
been served, he failed to respond to the summons and complaint,
claiming, incredibly, that he was unaware there was a suit pending
against him. Moreover, the length of the default, more than two
months (May 5 to July 13), is substantial, and Melendrez offers no
persuasive explanation for the two-month delay between his
counsel's entry of appearance and his motion to set aside the entry
of default. Given Melendrez's culpability regarding entry of the
default, and his unexplained delay in moving to set aside the
default, we conclude that the court did not abuse its discretion in
refusing to set aside the default.
IV. CONCLUSION
The superior court's denial of Melendrez's motion to set
aside the entry of default is AFFIRMED. The default judgment is
REVERSED and the case REMANDED for a determination of the payment
to which Melendrez is entitled.FABE, Justice, dissenting.
While I agree with the court's conclusion that the
trial court erred in granting the Bodes greater relief than they
sought in their application for default judgment, I believe that
the trial court also abused its discretion by denying Melendrez's
motion to set aside the entry of default. [Fn. 1] The factors in
Hertz v. Berzanske, 704 P.2d 767, 771 (Alaska 1985), and the
relevant policy considerations support trying this case on the
merits.
Under the court's own analysis, four of the six Hertz
factors weigh in favor of setting aside the entry of default in
this case. Op. at 8-10. As the court points out, Melendrez
raised a meritorious defense, any prejudice to the Bodes was not
great, the amount at stake is substantial, and alternative
sanctions could easily be imposed. Op. at 9-10. Counsel for
Melendrez entered an appearance in the case one week after
default was entered and just five weeks after the complaint was
served on Melendrez. Although two months elapsed before a motion
to set aside entry of default was forthcoming, this brief delay
does not justify the trial court's actions in the context of this
case. During the two months between the entry of default and the
motion to set it aside, the court did not take any action on the
case, nor did the delay prejudice the Bodes, who were apparently
already in possession of the property. Indeed, the trial court
did not grant the Bodes' request to enter judgment until four
months after Melendrez moved to set the entry of default aside.
Admittedly, Melendrez is at fault for apparently
attempting to avoid service and failing to respond to the summons
and complaint. However, depriving him of a chance to prove his
defense to the quiet title action is a harsh penalty for his
behavior. See Gregor v. Hodges, 612 P.2d 1008, 1010 (Alaska
1980) (stating that, under the Rule 60(b) standard, the
"forfeiture of real property would be a harsh sanction to impose
for [defendant's] neglect if her defense were indeed
meritorious"). In addition, as the court notes, Op. at 10, any
harm caused by his conduct can be adequately remedied by
requiring him to reimburse the Bodes for the cost of obtaining
the default and by such other corrective sanctions as the trial
court may deem appropriate. See Hertz, 704 P.2d at 773 & n.8.
This position also finds support in the "strong policy
favoring resolution of cases on their merits." Id. at 773; accord
Peter Pan Seafoods, Inc. v. Stepanoff, 650 P.2d 375, 380
(Alaska 1982) (stating that "a trial on the merits is always
preferred over a default judgment"). This policy is particularly
compelling in the context of a motion to set aside an entry of
default. As the Hertz court pointed out, "the 'good cause'
standard for setting aside a default entry is more flexible and
lenient than the Rule 60(b) standard for setting aside a default
judgment." 704 P.2d at 770. The entry of default, after all, is
"simply an interlocutory order that in itself determines no
rights or remedies." Id. at 770. Therefore, in close cases,
"all doubts should be resolved in favor of the party seeking
relief." 10 Charles Alan Wright et al., Federal Practice and
Procedure sec. 2693, at 485 (1983).
In conclusion, I would hold that the superior court
abused its discretion by refusing to set aside the entry of
default.
FOOTNOTES
Footnote 1:
The sales contract contains a clause prohibiting the Bainters'
assignment of the contract and a clause granting Melendrez the
right to reenter and take possession of the property in the event
of the Bainters' default. The sales contract further provides that
Melendrez would execute a deed quitclaiming the property to the
Bainters and would deliver that deed to them "upon the fulfillment
of Buyer's obligations to Seller." There is no such deed in the
record. The Bainters did record the contract. However, Melendrez
apparently remained the record owner of the property, as he was
billed for real property taxes.
Footnote 2:
The Bodes contend that Melendrez was served. Melendrez
"strongly dispute[s]"this contention. In light of the declaration
of service by the process server, and Melendrez's admission that he
"was approached by a male individual who asked if I was Richard
Melendrez, and I heard Mr. Bode's voice talking to me, and I got up
and left the restaurant,"the only reasonable conclusion is that
Melendrez was served, but refused to accept the papers. See
Nielsen v. Braland, 119 N.W.2d 737 (Minn. 1963) ("If the process
server and the defendant are within speaking distance of each
other, and such action is taken as to convince a reasonable person
that personal service is being attempted, service cannot be avoided
by physically refusing to accept the summons.").
Footnote 3:
The clerk entered the remaining parties' default on June 28.
Footnote 4:
The court observed:
Whether Melendrez is owed payment under a
contract is not an issue that was properly placed in issue in this
litigation. Whether it should have been pleaded, and whether the
judgment in this case is a bar to pleading it in a different case,
are questions the court does not decide in this case.
Footnote 5:
In his "Statement of Issue Presented for Review,"Melendrez
asserts only that the superior court erred "in denying [his] motion
to set aside the Clerk's entry of default prior to the Superior
Court's entry of default judgment against [him]." Whether the
superior court's default judgment was erroneous is a distinct
argument, and Melendrez perhaps should have separately addressed
it. However, the omitted argument reasonably can be viewed as
implicit in the argument Melendrez makes.
Footnote 6:
It is important to note that the $28,231.32 amount specified
by the Bodes was not the only amount on which the superior court
could enter a default judgment. Alaska Civil Rule 55(c)(1)
specifically provides that
If, in order to enable the court to enter
judgment or to carry it into effect, it is necessary to take an
account or to determine the amount of damages or to establish the
truth of any averment by evidence or to make an investigation of
any other matter, the court may conduct such hearings or order such
references as it deems necessary and proper.
FOOTNOTES (Dissent)
Footnote 1:
Assuming that the court's holding in Part III.C is correct, I also note an inconsistency in
the opinion. The opinion's conclusion implies that the only issue on remand is "a determination of
the payment to which Melendrez is entitled." Op. at 10. As I read Alaska Civil Rule 55(c)(1) and
Peter Pan Seafoods, Inc. v. Stepanoff, 650 P.2d 375, 378 (Alaska 1982), the superior court must
determine whether the Bodes are entitled to any of the relief they seek. Thus, on remand, the
superior court must determine whether the Bodes are entitled to a judgment quieting title before it
decides the amount the Bodes owe Melendrez.
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