January 7, 1964 —
February 4, 1964.
APPEAL from an order of the circuit court for Milwaukee county: ROBERT C. CANNON, Circuit Judge. Reversed.
For the appellants there were briefs and oral argument by Charles Saggio of Milwaukee.
For the respondents there was a brief by Glassner, Clancy Glassner of Milwaukee, and oral argument by Lawrence Clancy.
Action by plaintiffs, William E. Glassner and Jerome C. Saltzstein, co-owners, d/b/a Home Bank Building Annex, against defendants, Medical Realty, Inc., and A.J. Verdone, M.D. to recover rent due and owing under a written lease. Plaintiffs are the lessors under such lease and Medical Realty, Inc., the lessee. Payment of the rent was personally guaranteed by Verdone.
The lease, which was entered into on November 29, 1959, covers most of the third floor of a building in the city of Milwaukee known as Home Bank Building Annex. The term commenced December 1, 1959, and will end November 30, 1969. Paragraphs 2 and 6 of the lease provide as follows:
"2. As rent for said premises Lessee shall pay to Lessor at its office, the sum of $102,345.00; payable as follows: $135.00 for month of December, 1959; $180.00 for month of January, 1960; $410.00 for month of February, 1960 and $410.00 for month of March, 1960 and the remaining balance of $101,210.00 shall be payable on the first business day of each month in monthly installments of EIGHT HUNDRED SEVENTY-TWO and 50/100 ($872.50) DOLLARS, in advance and without demand in legal currency of the United States.
"6. If any monthly installment of rent or any charge included herein as rent shall remain unpaid 30 days after the date on which the same is due, then all rent for the entire unexpired term of this lease shall at once become due and payable, and (a) Lessor may, without demand, proceed by distress and sale to levy such rent and all costs and officers' commissions, and (b) any attorney may, as attorney for Lessee, at the sole request of Lessor, sign an agreement for entering in any competent court (1) an amicable action and judgment in ejectment against Lessee and (2) an amicable action and confession of judgment in assumpsit for all rent and other charges due."
The summons and complaint in the above action were served on defendants on July 17, 1961. The complaint alleged there had been default in payment of rent for thirty days and alleged that under the terms of the lease there was now due $89,867.50 with interest from July 1, 1961. The summons and complaint were not filed until August 29, 1962, at which time plaintiffs took a default judgment before the clerk of the circuit court, in the sum of $79,462.90. It is undisputed that no answer or notice of appearance was served by or on behalf of defendants, and that plaintiffs did not serve a notice of application for judgment or a notice of entry of judgment.
On June 19, 1963, defendants obtained an order to show cause why the default judgment should not be vacated and set aside and why defendants should not be permitted to interpose an answer to plaintiffs' complaint. This motion was supported by: (1) A proposed answer, which generally denied the allegations in the complaint and alleged that defendants were still in possession of the premises and were making rental payments; (2) a counterclaim, praying for, among other things, a credit of $15,000 for remodeling done at expense of defendants; and (3) affidavits by defendants. Paragraph 4 of the affidavit of defendant Verdone averred as follows:
"After the commencement of the instant lawsuit there were negotiations among the parties and said attorney relating to adjustments which matters are the subject matter of said lawsuit. William E. Glassner, Jr, served the summons and complaint on defendants on July 17, 1961. At the time of said service said William E. Glassner, Jr., assured defendants that he would not file the same in court, but that they would continue their negotiations."
In opposition to defendants' motion to vacate, plaintiffs submitted an affidavit of William E. Glassner, Jr., paragraph 4 of which averred in part:
"That your affiant made no statement at the time of said service assuring A.J. Verdone or anyone else that the same would not be filed in court, or that negotiations would be continued until disputes were settled;. . ."
The latter affidavit also averred that on September 27, 1961, the affiant Glassner sent the following letter by registered mail to defendant Verdone:
"In view of the time we have spent in attempting to collect our rent with the checks you have given us during the past several months, we find it necessary to inform you that all future rent must be paid by certified check, money order, or cash.
"Paragraph #2 of your lease requires that monthly rental be paid in advance, without demand, in legal currency of the United States, and we will expect all future rent to be paid in accordance with the terms of the lease.
"This letter shall not be construed in any way as waiving action heretofore commenced, or as enlarging or modifying in any way the terms of the lease — or your previous breach of the lease.
"We do not want to be in the position of pursuing our action, but we must have all payments made promptly, without the necessity of our incurring undue expense and time in forcing collection." (Italics supplied.)
Plaintiffs' affidavits also established that both before and after commencement of the action checks tendered by defendants were returned by the bank on which drawn on the ground of insufficient funds; and that defendants continued to be delinquent in payment of rent after the afore-quoted letter of September 27, 1961.
The circuit court by order entered June 26, 1963, denied defendants' motion to vacate the judgment, and defendants have appealed from this order.
The pertinent issues presented by this appeal are:
(1) Is the judgment void because entered by the clerk without notice of application for judgment having been given to the defendants?
(2) If the judgment is not void for lack of notice, did the trial court abuse its discretion in refusing to vacate it?
Failure to Give Notice of Application for Judgment.
The procedure to be followed in entering a default judgment is specified in sec. 270.62, Stats. The cause of action set forth in plaintiffs' complaint is one on contract for money only and is therefore governed by sub. (3) of the statute. Therefore no notice of application for judgment was required to be served upon defendants as a condition for entering the default judgment. Egan v. Sengpiel (1879), 46 Wis. 703, 708, 1 N.W. 467. Cf. Velte v. Zeh (1925), 188 Wis. 401, 206 N.W. 197.
The material provisions of such statute are:
"(1) Nature of default. A default judgment may be entered as provided in this section if no issue of law or fact has been joined and if the time for joining issue has expired.
"(2) General. Upon filing with the court the summons and complaint and proof of service of the summons on one or more of the defendants and an affidavit that the defendant is in default according to subsection (1), the plaintiff may apply to the court for judgment according to the demand of the complaint. . . . If the defendant has appeared in the action, he shall be entitled to notice of the application for judgment.
"(3) Actions on contract for money only. In any action on contract for the recovery of money only, the plaintiff may file with the clerk the summons and complaint, proof of personal service of the summons on one or more of the defendants and an affidavit that the defendant is in default according to subsection (1). The clerk shall thereupon enter judgment for the amount demanded in the complaint against the defendants who are in default."
The application of defendants to vacate the judgment is made under sec. 269.46, Stats. Inasmuch as defendants' application to vacate the judgment was made more than sixty days after the end of the term at which it was entered, sub. (3) has no application, and sub. (1) of this statute is controlling. Egan v. Sengpiel, supra, holds that the failure to give notice of application for judgment, when required under sub. (2) of sec. 270.62, does not render the judgment void, the opinion stating (p. 708):
The material portions of this statute are:
"(1) The court may, upon notice and just terms, at any time within one year after notice thereof, relieve a party from a judgment, order, stipulation or other proceeding against him obtained, through his mistake, inadvertence, surprise or excusable neglect and may supply an omission in any proceeding.
". . .
"(3) All judgments and court orders may be reviewed by the court at any time within 60 days from service of notice of entry thereof, but not later than 60 days after the end of the term of entry thereof."
"But if the defendant were entitled to notice of the application for judgment, the want of such notice would not render the judgment void. Morrison v. Austin and Lindauer v. Clifford, supra; Gorman v. Ball, 18 Wis. 24; Aetna Ins. Co. v. McCormick, 20 Wis. 265; Bonnell v. Gray, 36 Wis. 574; Salter v. Hilgen, 40 Wis. 363."
Therefore, even if notice of entry of the instant judgment had been required, failure to give such notice would not have rendered the judgment void.
Exercise of Discretion by Trial Court.
We now turn to the question of whether it was abuse of discretion for the trial court to have refused to vacate the judgment. The only reason advanced by defendants for not having entered an appearance in the action or served an answer was the claim supported by the affidavit of defendant Verdone that, at the time of the service of the summons and complaint, plaintiffs' attorney assured defendants that he would not file these papers in court and that the parties would continue their negotiations. This statement is directly contradicted by the affidavit of plaintiffs' attorney. The registered letter sent to Verdone on September 27, 1961, by plaintiffs' attorney, in which it was stated: "This letter shall not be construed in any way as waiving action heretofore commenced," constituted a plain warning to defendants that the action would be prosecuted if the defendants continued in their default. The only way the action could be prosecuted would be to file a summons and complaint and attempt to take judgment.
The trial court made no finding with respect to the disputed issue of fact as to whether plaintiffs had promised that they would not file the summons and complaint. Had such promise been made, the entry of the order denying the application to vacate the judgment would have been improper and would have constituted an abuse of discretion. A presumption of regularity attends this order and on this record we must assume that the trial court concluded that no such promise had been made. This being so it necessarily follows that there was no abuse of discretion on the part of the trial court refusing to vacate the judgment.
Exercise of the Discretionary Power of this Court.
Past decisions of this court clearly establish the principle that a judgment cannot be vacated under sub. (1) of sec. 269.46, Stats., after the lapse of sixty days subsequent to the expiration of the term of court at which the judgment was rendered because of error committed in rendering the judgment. Loomis v. Rice (1875), 37 Wis. 262; Landon v. Burke (1873), 33 Wis. 452; and Spafford v. Janesville (1862), 15 Wis. 526 (*474). The reason for this is that under sub. (1) of sec. 269.46 (formerly R. S. 1858, ch. 125, sec. 38), the power to grant relief from a judgment, more than sixty days after the end of the term of court at which it was rendered, is limited solely to cases of mistake, inadvertence, surprise, or excusable neglect. See Loomis v. Rice, supra, and cases cited therein. Therefore, even though there had been errors in the judgment which might shock the conscience of the trial court, it is powerless to grant relief from the judgment after this sixty-day period (after the end of the term of court) has elapsed, i.e., where there is no proper showing of mistake, inadvertence, surprise, or excusable neglect.
At the time these cited cases were decided, relief from a judgment, except on the basis specified in R. S. 1858, ch. 125, sec. 38 (which is now sub. (1) of sec. 269.46, Stats.), could not be granted after the expiration of the term. Sub. (3) of sec. 269.46 now permits such relief under the conditions specified in such subsection for the additional period of sixty days subsequent to the ending of the term of court at which judgment was rendered.
Sec. 251.09, Stats., however, grants to this court the broad power to reverse an order or judgment on appeal where "it is probable that justice has for any reason miscarried." There are two reasons why it would shock the conscience of this court to permit the instant default judgment to stand unmodified. The first is that the course of conduct of the parties clearly discloses that the judgment is only serving the purpose of providing the plaintiff-lessors with security against the contingency of the defendants again becoming delinquent in their rent. Plaintiffs have permitted the defendant-lessee to continue in possession upon paying the monthly instalments of rent specified in the original lease. As the judgment now stands, however, there is nothing to prevent the plaintiffs from utilizing the judgment to levy upon assets of defendants even though defendants may not be currently in default in paying such monthly instalments. The second feature is that the judgment is, by its very terms, drawing interest.
We construe our discretionary power under sec. 251.09, Stats., as only extending to reversal of the order appealed from and that such statute gives us no power to directly modify the default judgment. Therefore, in order to prevent what may be a serious miscarriage of justice, we have decided to reverse the order appealed from and to remand the matter to the trial court with directions to open up the judgment, so as to permit a trial of the issues raised by defendants' proposed answer and counterclaim. This does not mean that the trial court should vacate the judgment. The default judgment may be opened up so as to permit a defense on the merits letting the judgment stand in the meantime until the outcome of such trial on the merits. Spohn v. Norden (1959), 7 Wis.2d 383, 386, 96 N.W.2d 831; State ex rel. Chinchilla Ranch, Inc., v. O'Connell (1952), 261 Wis. 86, 97, 51 N.W.2d 714; State ex rel. Bornemann v. Schultz (1952), 260 Wis. 395, 402, 50 N.W.2d 922.
By the Court. — The order appealed from is reversed, and cause remanded with directions to permit the opening up of the judgment as outlined in the last paragraph of the within opinion.
The majority opinion takes the long road home. After holding the trial court did not abuse its discretion in refusing to set aside the judgment, the majority recognizes the injustice of a judgment for security purposes and seeks to remedy its effects by the exercise of the court's discretionary powers. In my opinion, the plaintiffs are not entitled on their present showing to any judgment even as security. The trial court abused its discretion in refusing to set aside the judgment under sec. 269.46, Stats., and I would reverse and allow the filing of the answer and the counterclaim. No justification exists to complicate and confuse this case with the concept of opening up a judgment but not vacating it.