Nelson v. Property Management Services

SHEPARD, Justice. This is an appeal from an order of the district court vacating and setting aside a default judgment entered in the small claims division of the magistrate court. We affirm the order of the district court. Plaintiff-appellant Nelson filed a complaint in small claims court against Property Management Services, Inc., her former employer, for $444 allegedly expended by [579] her on behalf of her employer. Service was perfected on PMSI and trial was set some 45 days later on a Monday at 9:00 a.m. PMSI failed to appear at the time for trial and did not appear until 12:30-1:00 p.m. of that same date. In the interim a default judgment had been granted to Nelson. PMSI advances the following reason for its failure to appear at the 9:00 a.m. trial time. PMSI’s manager, who was a necessary witness at the trial, was required to fly to Boise from Portland, Oregon, and the airline flight from Portland would not arrive in Boise until 10:35 a.m. Hence, the PMSI manager called PMSI’s local attorney and requested that the attorney secure a continuance of the trial time, following which the attorney contacted PMSI’s manager and indicated that the trial time had been moved to 1:00 p.m. in the afternoon. PMSI moved to set aside the default judgment and following a hearing thereon, the magistrate judge denied such motion, stating that although PMSI was properly served process, its attorney neglected to inform PMSI of the time of trial and hence the default was not entered as a result of excusable neglect. Appeal from the denial of that motion was taken to the district court. On such appeal, evidently no transcript of the hearing before the magistrate court was available. The district court heard the matter de novo and testimony was taken thereon. A transcript of the district court hearing is a part of the record here. The district court, in rendering his decision, indicated that if possible, cases should be heard on the merits rather than by default and that all presumptions are in favor of setting aside a default if there is good reason to do so. It is apparent in the district court’s decision that he believed that there was a meritorious defense to the action and that there existed a justifiable excuse for the failure of PMSI to appear. The district court then remanded the cause for hearing upon the merits in the small claims division of the magistrate court. On appeal here, Nelson asserts that PMSI’s appeal of the order of the magistrate court denying PMSI’s motion to set aside the default judgment was improper and beyond the jurisdiction of the district court, since I.R.C.P. 81(k) states: “[A]ny party who defaults or does not appear at the small claim proceeding shall have no right to appeal the judgment in the small claim proceeding to the district court.” It is argued that permitting an appeal from a denial of a motion to set aside a default judgment entered in the small claims court is merely a back door method of rendering inoperable I.R.C.P. 81(k). We do not agree. Assuming that I.R.C.P. 81(k) would withstand a due process challenge, we nevertheless hold that it does not bar an appeal in the instant situation. To adopt the position advanced by Nelson would insulate any decision of a magistrate sitting in the small claims court from review, regardless of lack of jurisdiction or of how outrageous or erroneous that decision might be. Nelson next asserts that the district court erred in holding a de novo hearing and taking additional testimony as to the existence of a meritorious defense and as to whether the conduct of PMSI in failing to appear at the trial was the result of excusable neglect. As above noted, a hearing was held before the magistrate on the motion to set aside the default, but the record of that hearing was evidently not before the district court. The magistrate’s decision is largely conclusory. Hence we cannot determine whether the evidence sustains the magistrate’s conclusion that PMSI’s failure to appear at trial was not the result of excusable neglect. We affirm the action of the district court in holding a de novo hearing. See Winn v. Winn, 101 Idaho 270, 611 P.2d 1055 (1980). Nelson lastly argues that the district court abused its discretion in setting aside the default judgment of the magistrate. We disagree. It is clear that a motion to set aside a default judgment is addressed to the sound legal discretion of the court and will not be reversed unless an abuse of discretion clearly appears. Hearst Corporation v. Keller, 100 Idaho 10, 592 P.2d 66 (1979); Fisher v. Bunker Hill Co., 96 Idaho 341, 528 P.2d 903 (1974). Our review of the [580] record indicates sufficient evidence was taken before the district court to conclude that PMSI had a meritorious defense to the action and that its failure to appear was a result of excusable neglect. Nelson relies heavily upon Hearst Corporation v. Keller, supra. Insofar as that decision is pertinent here, it provides only that a mistake sufficient to warrant setting aside a default judgment must be of fact and not of law. As pointed out in Hearst, the party who there sought to be excused from a default judgment offered no sufficient factual explanation as to the failure to appear, but only argued that he was unaware of the law requiring an answer and counterclaim to preclude the entry of a default judgment. It was there held that such an excuse was a mistake of law and not of fact and not sufficient to set aside the default. Here PMSI contended that its failure to' appear was due to a mistake in fact, i.e., its attorney agent had advised it that the trial was postponed until 1:00 p.m. of the same day and it appeared at said time. Hearst is thus inapposite to the instant case.1 The order of the district judge setting aside the default judgment is affirmed. No costs allowed. No attorney’s fees on appeal. HUNTLEY, J., McQUADE and DUNLAP, JJ. Pro Tem., concur. Footnotes [1] Nelson contends on appeal to this Court that the district court further abused its discretion in failing to consider that one of Nelson’s witnesses had moved from Idaho in the interim and would be unavailable for retrial. That contention is sustained only by Nelson’s ex parte unsworn letter to the district judge. No sworn testimony of that circumstance was presented by Nelson at the hearing before the district judge, albeit she had the opportunity to do so.