Appeal from the District Court of the Second Judicial District, State of Idaho, Nez Perce County. Hon. Jeff M. Brudie, District Judge.
The opinion of the court was delivered by: Schwartzman, Judge Pro Tem
Order of the district court denying motion to set aside entry of default under Rule 55(c), reversed and case remanded.
Richard Keane, Lisa Keane, Keane Land Company, LLC, and Keane and Co. Construction, Inc. (collectively "the Keanes") appeal from the entry of default judgment. The Keanes assert that the district court abused its discretion by denying their motion to set aside the entry of default, and erred by refusing to grant relief from a void judgment.
On February 24, 2009, Dave Dorion filed a complaint against the Keanes asserting various claims including breach of contract and unjust enrichment. Dorion asserted that he was entitled to a one-half ownership interest in an airplane hangar, a leasehold interest in the underlying property, and compensation for labor performed constructing the hangar. The Keanes did not respond and default was entered on March 27. However, on May 21 the court granted the Keanes' motion to set aside the entry of default. The Keanes then filed an answer on May 27, denying most of the allegations set forth in the complaint and asserting that Dorion had failed to state a claim upon which relief could be granted, that Dorion's cause of action--which sought specific performance of a contract for real property--was not evidenced by a writing and was thus barred by the statute of frauds, and that Richard Keane and Lisa Keane should be removed as individual parties because they acted through their businesses.
More than fourteen months later, after a trial setting had been vacated in favor of mediation which proved unsuccessful, the Keanes' attorney requested leave to withdraw as counsel. On August 5, 2010, the district court entered an order (hereinafter "order to appear") granting the motion and directing the Keanes to "appoint another attorney to appear, or to appear in person by filing a written notice with the Court stating how they will proceed without an attorney, within twenty (20) days," and providing notice that the failure to do so "shall be sufficient grounds for entry of default and default judgment against you without further notice." The Keanes apparently contacted another attorney, who in turn called Dorion's attorney on August 30 to request additional time for the Keanes to decide whether or not to retain him, explaining that he had spoken with the Keanes, but had not yet been retained. Based on his conversation with opposing counsel, the attorney believed that Dorion would wait a "reasonable time" before pursuing default. Dorion's attorney, however, stated that he agreed only to wait twenty-four hours. Dorion filed a motion for entry of default on September 1, which the court granted on September 9.
On September 17, the Keanes' new attorney entered an appearance and filed a motion to set aside the entry of default on the ground that the default was the result of a miscommunication between the attorneys representing the parties. The court took the issue under advisement and, on December 29, entered an order denying the Keanes' motion to set aside the entry of default and granting Dorion's competing motion for default judgment. Judgment was entered on January 14, 2011, awarding Dorion a one-half ownership interest in both the airplane hangar building and the leasehold interest in the property, together with a money judgment of $10,220.
The Keanes filed a notice of appeal on February 4. On March 21, the Keanes filed a motion for relief from the default judgment under Idaho Rule of Civil Procedure 60(b)(4) asserting, for the first time, that the order to appear did not strictly comply with the notice provisions of Rule 11(b)(3), and that Dorion's motion for entry of default was filed prematurely in violation of Rule 11(b)(3). Based on these alleged defects, the Keanes argue the default judgment was void. The district court denied the Keanes' Rule 60(b) motion. This appeal followed.
The Keanes assert that the district court abused its discretion by denying Keane's motion to set aside the entry of default pursuant to Rule 55(c). We agree, and decline to address the Rule 60(b)(4) issue.
A. Relief from Entry of Default Under I.R.C.P. 55(c)
"The legal standard for a motion to set aside a default or default judgment under I.R.C.P. 55(c) is either 'for good cause shown' or the grounds found in I.R.C.P. 60(b)." Bach v. Miller, 148 Idaho 549, 552, 224 P.3d 1138, 1141 (2010). Because judgments by default are not favored, a trial court should grant relief in doubtful cases in order to decide the case on the merits. Meyers v. Hansen, 148 Idaho 283, 287, 221 P.3d 81, 85 (2009). A court's refusal to set aside entry of default is reviewed for abuse of discretion. McGloon v. Gwynn, 140 Idaho 727, 729, 100 P.3d 621, 623 (2004); McFarland v. Curtis, 123 Idaho 931, 933, 854 P.2d 274, 276 (Ct. App. 1993). Where the trial court makes factual findings that are not clearly erroneous, applies correct criteria pursuant to the applicable legal standards to those facts, and makes a logical conclusion, while keeping in mind the policy favoring relief in doubtful cases and resolution on the merits, the court will be deemed to have acted within its discretion. See Idaho State Police ex rel. Russell v. Parcel I: Lot 2 in Block 3, 144 Idaho 60, 62, 156 P.3d 561, 563 (2007); Suitts v. Nix, 141 Idaho 706, 708, 117 P.3d 120, 122 (2005); Shelton v. Diamond Int'l Corp., 108 Idaho 935, 938, 703 P.2d 699, 702 (1985); Avondale on Hayden, Inc. v. Hall, 104 Idaho 321, 326, 658 P.2d 992, 997 (Ct. App. 1983). "One of the requirements of good cause is the showing of a meritorious defense." Bach, 148 Idaho at 553, 224 P.3d at 1142. This policy recognizes that it would be an idle exercise and a waste of judicial resources for a court to set aside a judgment or entry of default if there is in fact no genuine justiciable controversy. Id.; Meyers, 148 Idaho at 289, 221 P.3d at 87; Ponderosa ...