Opinion
No. 279.
Argued February 3, 1972. —
Decided February 29, 1972.
APPEAL from judgments and orders of the circuit court for Milwaukee county: MICHAEL G. EBERLEIN, County Judge of Shawano County, Presiding. Affirmed.
For the appellants there was a brief by Fulton, Menn Nehs of Appleton, and oral argument by David L. Fulton.
For the respondents there was a brief by Axel, Aaron Goldman and Cook Franke, S.C., attorneys, and Gordon K. Aaron and Terence T. Evans of counsel, all of Milwaukee, and oral argument by Mr. Evans and Mr. Gordon K. Aaron.
Facts.
Plaintiffs-respondents are William T. Collings, Robert E. Cook, Harry F. Franke, Thomas J. Regan, Marilyn Regan and Byron Axel, all Wisconsin residents. Defendants-appellants are Walter J. Phillips, Warren L. Johnson and Phillips Johnson, a partnership, all Minnesota domiciled. The action was brought for recovery of damages on the basis of alleged errors of the defendant, Warren L. Johnson, in the preparation and certification of an audit for the year 1968 whereby plaintiffs allegedly were induced to invest or retain investments in stocks or bonds issued by Quarterback Sports Federation, Inc., a corporation with its principal offices in Minnesota.
On August 21, 1970, the action was commenced by the service of summons and complaint upon defendant Walter J. Phillips, personally and allegedly as authorized agent for the defendant Warren L. Johnson and as partner of the defendant, Phillips Johnson. Actual damages of $65,000 and punitive damages of $1,000,000 were sought. On September 10, 1970, the statutory (sec. 263.05, Stats.) time for service of an answer, i.e., twenty days, expired. On September 11, 1970, plaintiffs moved for entry of default judgment. On September 23, 1970, a hearing on the motion for default judgment was held in the circuit court for Milwaukee county. On September 23, 1970, an order for judgment was made. On September 24, 1970, a default judgment for plaintiffs was entered in the amount of $62,791.86 actual damages and $250,000 punitive damages.
On September 30, 1970, plaintiffs, by Minnesota counsel, commenced an action in Minnesota to validate and enforce the judgment. On October 20, 1970, defendants, by Minnesota counsel, filed an answer in the Minnesota action, erroneously alleging on information and belief that the Wisconsin judgment had been vacated and set aside.
On November 3, 1970, defendants, by Wisconsin counsel, filed in the circuit court for Milwaukee county an affidavit alleging excusable neglect in failing to answer, stating that the file of the case had been misplaced and contact had been made with plaintiffs' counsel after entry of judgment, though inability of defendants' counsel to attend a scheduled meeting between counsel on the case because of a conflict in appointments had prevented discussion of the case. Defendants moved the court for an order vacating and setting aside the default judgment and for permission to enter an attached proposed answer. The proposed answer responded to each of 27 paragraphs of the complaint, and denied that the business activities of the individual defendants and partnership in the state of Wisconsin were substantial or a proper basis to give the Wisconsin court jurisdiction. On November 4, 1970, the Milwaukee county circuit court issued an order to show cause why the default judgment should not be vacated and the proposed answer entered, and stayed further proceedings by plaintiffs, including the Minnesota action.
On November 13, 1970, a hearing was held in the circuit court on the order to show cause to vacate the judgment and permit filing of the proposed answer. On December 17, 1970, after hearing oral arguments and considering briefs, the acting circuit court judge, Honorable MICHAEL G. EBERLEIN, who had entered the default judgment, entered an order modifying the judgment by striking the $250,000 in punitive damages, finding error in granting punitive damages in the absence of a showing of malice on the part of the defendants. On the issue of excusable neglect, the court found that the neglect of the defendants was not excusable in view of the long delay in their response and the implausibility of a lawsuit for over a million dollars being forgotten or lost in any law office; further finding the proposed answer and affidavit of defense counsel insufficient under sec. 269.46(1), Stats., in that no party submitted an affidavit based on personal knowledge; and further finding plaintiffs could suffer irreparable damage through further delay because the defendants' liability policy limit was $500,000, but other suits over $4,000,000 were pending and could deplete the insurance before these plaintiffs could share it.
On January 8, 1971, a further order was entered, in effect overruling defendants' objections to the proposed findings of fact and conclusions of law as to the motion to vacate. On January 11, 1971, the amended judgment was entered. On January 26, 1971, new counsel for defendants was substituted by order of the court. On January 28, 1971, defense counsel served on plaintiffs notice of new motions seeking leave to renew motions and raising the defense of lack of trial court jurisdiction. On February 12, 1971, after hearing arguments on the new motions by substituted counsel, the court denied the motion and an order was entered denying defendants' motions. Defendants appeal.
Defendants map out three alternative routes that could lead to reversal: (1) Upholding defendants' contention that the trial court was "without jurisdiction" to enter a default judgment against them; (2) vacating the judgment on the ground it was secured by "excusable neglect" of the defendants; and (3) setting aside the judgment "in the interest of justice." None of the suggested roads to reversal are available to defendants on this record.
Objection to jurisdiction. By statute in this state, an ". . . appearance of a defendant who does not object to the jurisdiction of the court over his person is a general appearance and gives the court personal jurisdiction over him." Here, following entry of default judgment, defendants moved the court to vacate the judgment on the grounds of their excusable neglect. The order to show cause, making no mention of jurisdiction, sought to have a proposed answer admitted, the answer seeking ". . . judgment dismissing plaintiffs' complaint on the merits." The hearing on the motion to vacate (a 71-page record) contains no mention of the word "jurisdiction." By such appearance and argument, defendants did secure a modification of the judgment, an 80 percent reduction in amount by reason of the striking of punitive damages. An objection to a court's jurisdiction is properly made by motion, but the motion must be ". . . supported by an accompanying affidavit setting forth all material facts relied upon by movant to show the court's lack of personal jurisdiction." The motion to vacate on the ground of excusable neglect was not such motion, and the accompanying affidavit was not such affidavit. Instead it was a general appearance clearly giving the trial court personal jurisdiction over the defendants under sec. 262.16(1), Stats. A motion seeking to raise the issue of jurisdiction was made by substituted counsel, but it was made after the defendants had generally appeared and submitted to the jurisdiction of the court. By then it was too late.
Sec. 262.16(1), Stats.
Pursuant to sec. 269.46(1), Stats., providing: "The court may, upon notice and just terms, . . . relieve a party from a judgment, order, . . . or other proceeding against him obtained, through his mistake, inadvertence, surprise or excusable neglect. . . . "
Sec. 262.16(2), Stats., providing: ". . . An objection to the court's jurisdiction over the person . . . shall be raised as follows: "(a) By motion when a defect is claimed in the service of the summons without a complaint; or when the defect appears upon the face of the record other than the complaint; or in case of a judgment on cognovit or by default." (Emphasis supplied.)
Pavalon v. Thomas Holmes Corp. (1964), 25 Wis.2d 540, 547, 131 N.W.2d 331.
Excusable neglect. Wisconsin statutes provide that a court" may, upon notice and just terms relieve a party from a judgment, order . . . against him obtained, through his . . . excusable neglect. . . ." This section "confers wide discretion on the trial court." The trial court found no excusable neglect, and the question is whether such ruling constituted an abuse of such discretion. An extended hearing, plus briefs and arguments, was held. The trial court rejected the claim that defendants' counsel "didn't even know the file was in his office," stating, ". . . the plaintiffs in this case sued for one million sixty five thousand dollars and the court can't visualize a suit of that size lying around in any law office or insurance office for the period of time involved in this law suit." The trial court noted that ". . . The motion to vacate the default judgment (order to show cause) along with the proposed answer is dated November 4, 1970 (55 days after default)." The trial court correctly cited this court as having held that ". . . Prompt action by a defaulting party to remedy the situation caused by his neglect is a material factor to be considered when determining whether such neglect is `excusable.'. . ." The trial court further found that defendants' attorney, on or about October 1, 1970, had ". . . telephoned Attorney Aaron's [plaintiffs' attorney] office in Milwaukee and said he would call back on this case. On October 5, 1970, he again called Aaron's office, made an appointment for October 6, 1970, but did not keep it. His excuse for not keeping the appointment was that he had a court conflict. No further word from him was received by Attorney Aaron until the motion to vacate on November 4, 1970. . . ." This court has repeatedly held that ". . . the press of other trials and business is not such `excusable neglect' as to make it an abuse of discretion not to grant relief under such statutes as secs. 269.46 (1) and 269.45(2)." On this record there clearly was no abuse of discretion on the part of the trial court in finding no "excusable neglect" and in denying the application to vacate the judgment.
Sec. 269.46(1), Stats.
Cruis Along Boats, Inc. v. Standard Steel Products Mfg. Co. (1964), 22 Wis.2d 403, 410, 126 N.W.2d 85.
Id. at page 410.
Id. at page 409, citing Millis v. Raye (1962), 16 Wis.2d 79, 113 N.W.2d 820; Jolitz v. Graff (1960), 12 Wis.2d 52, 106 N.W.2d 340; Millar v. Madison (1943), 242 Wis. 617, 9 N.W.2d 90.
Interest of justice. By statute in Wisconsin, in any action or proceeding brought to this court by appeal or writ of error, this court "may in its discretion" reverse the judgment or order appealed from if it shall appear from the record ". . . that it is probable that justice has for any reason miscarried. . . ." This court has stated that the authority conferred by this statute "`is exercised with "some reluctance and with great caution" and only in the event of a probable miscarriage of justice.'" In criminal cases, this court has stated, to reverse in the interest of justice "`. . . we would at least have to be convinced that the defendant should not have been found guilty and that justice demands the defendant be given another trial.'"
Sec. 251.09, Stats.
Nadolinski v. State (1970), 46 Wis.2d 259, 270, 174 N.W.2d 483, quoting Commodore v. State (1967), 33 Wis.2d 373, 383, 147 N.W.2d 283. See also: Kablitz v. Hoeft (1964), 25 Wis.2d 518, 527, 131 N.W.2d 346, stating "interest of justice" reversals to be used "sparingly."
Commodore v. State, supra, at page 383, quoting from Lock v. State (1966), 31 Wis.2d 110, 118, 142 N.W.2d 183.
There is a particular reason for both reluctance and caution where the situation presented is that of seeking to set aside a default judgment where there has been no trial or testimony as to the truth or falsity of facts alleged in a complaint and denied in a proposed answer. It is a rare case where the record would affirmatively and conclusively show the defendant should have won if a full trial were had on the merits. If lack of record alone is to be an argument for "interest of justice" reversals, the application of sec. 251.09, Stats., would become near automatic on appeal of a trial court's denial of a motion to vacate a default judgment. The legislative requirement of sec. 269.46(1), making "mistake, inadvertence, surprise or excusable neglect" the required conditions for relief would be supplanted by any such broad interpretation of "interest of justice." The "interest of justice" reversal is and ought to be particularly difficult to obtain in a default judgment situation where sec. 269.46(1) applies.
See: Wagner v. Springaire Corp. (1971), 50 Wis.2d 212, 220, 221, 184 N.W.2d 88, indicating "Since . . . the neglect was not shown to be excusable, we need not consider the merits of the defense. . . . "
This court has stated that it will not order a new trial in the interest of justice, under sec. 251.09, Stats., ". . . unless the court, viewing the case as a whole, is convinced that there has been a probable miscarriage of justice." This means that ". . . the evidence and the law must be such that the plaintiff [defendants here] probably should have won and should therefore be given another chance. . . ." We agree with the statement in respondents' brief that ". . . There is absolutely no showing on this record that a reversal of this judgment would subsequently result in a victory for the defendants. In fact, all the inferences in the record point the other way. . . ." The trial court in its opinion noted that "In this case Exhibit 3 . . . indicates there is now pending in Federal Court in Minnesota, an action entitled Barry Vogel et al. . . . against the same defendants. It is the same cause of action as in this case and the plaintiffs there are asking for three and a half million dollars." The trial court also noted, "Exhibit 1 is a letter from the St. Paul Insurance Co. of Minneapolis dated August 26, 1970, . . . apparently stating that the aggregate limit of their policy (malpractice) is $500,000. In plaintiffs' brief they also state there are other suits pending in Minnesota against the same defendants for over four million dollars." It is not difficult to see why an insurance carrier would prefer a single class action on behalf of all stockholders and bond purchasers with substantial claims against these defendants. But without necessarily having to agree with the trial court's holding that the effort to set aside this judgment is "a race to the bank," we find nothing in this record or from any reasonable inferences deriving therefrom to establish any probability that defendants would prevail on the merits if this judgment were set aside. We find no basis, viewing the record as a whole, to conclude that justice has probably miscarried.
Puls v. St. Vincent Hospital (1967), 36 Wis.2d 679, 693, 154 N.W.2d 308.
Savina v. Wisconsin Gas Co. (1967), 36 Wis.2d 694, 704, 154 N.W.2d 237.
By the Court. — Judgments and orders affirmed.