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Applied Underwriters Captive Risk Assurance Co., Inc. v. Oceanside Laundry, LLC

Supreme Court of Nebraska

June 22, 2018

Applied Underwriters Captive Risk Assurance Company, Inc., an Iowa corporation, appellee,
v.
Oceanside Laundry, LLC, doing business as Campus Laundry, appellant.

          1. Motions to Vacate: Appeal and Error. The decision to vacate an order is within the discretion of the court; such a decision will be reversed only if it is shown that the district court abused its discretion.

         2. Judges: Words and Phrases. A judicial abuse of discretion exists when the reasons or rulings of a trial judge are clearly untenable, unfairly depriving a litigant of a substantial right and denying just results in matters submitted for disposition.

         3. Service of Process: Waiver. A general appearance waives any defects in the process or notice, the steps preliminary to its issuance, or in the service or return thereof.

         4. Jurisdiction: Pleadings: Parties. A party will be deemed to have appeared generally if, by motion or other form of application to the court, he or she seeks to bring its powers into action on any matter other than the question of jurisdiction over that party.

         5. Default Judgments. When determining whether to set aside a default judgment, two competing interests must be considered: the right of a litigant to defend the action on the merits and judicial efficiency.

         6. Default Judgments: Proof: Time. Where a judgment has been entered by default and a prompt application has been made at the same term to set it aside, with the tender of an answer or other proof disclosing a meritorious defense, the court should on reasonable terms sustain the motion and permit the cause to be heard on the merits.

         7. Default Judgments: Motions to Vacate: Words and Phrases. In the context of a motion to vacate a default judgment, a meritorious or substantial defense or cause means one which is worthy of judicial inquiry [300 Neb. 334] because it raises a question of law deserving some investigation and discussion or a real controversy as to the essential facts.

         8. Default Judgments: Motions to Vacate. Although a defendant seeking to vacate a default judgment is required to present a meritorious defense, it is not required that the defendant show he will ultimately prevail in the action, but only that the defendant show that he has a defense which is recognized by the law and is not frivolous.

          Appeal from the District Court for Douglas County: J. Michael Coffey, Judge. Reversed and remanded with directions.

          Kristopher J. Covi, of McGrath, North, Mullin & Kratz, PC, L.L.O., for appellant.

          Jeffrey A. Silver for appellee.

          Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke, JJ., and Vaughan, District Judge. Vaughan, District Judge.

         INTRODUCTION

         This appeal involves a default judgment against Oceanside Laundry, LLC, doing business as Campus Laundry (Oceanside). Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA), filed a breach of contract action against Oceanside. When Oceanside did not file a responsive pleading, the district court for Douglas County granted AUCRA's motion for default judgment. The district court subsequently denied Oceanside's motion for reconsideration or, in the alternative, to set aside the default judgment on the basis of several defenses. Oceanside now appeals the district court's orders. Because we conclude that Oceanside made prompt application to set aside the default judgment and demonstrated at least one meritorious defense in support of its motion, we reverse, and remand with directions to vacate the default judgment and allow Oceanside a reasonable time in which to file an appropriate responsive pleading.

         [300 Neb. 335] BACKGROUND

         Oceanside, a California-based limited liability company doing business as Campus Laundry, entered a reinsurance participation agreement (RPA) with AUCRA, an Iowa corporation with its principal place of business in Douglas County. Nebraska. On December 12, 2016, AUCRA brought a breach of contract action against Oceanside in the district court for Douglas County.

         Initially, AUCRA unsuccessfully attempted to serve process on Oceanside via certified mail, using a California address for Campus Laundry. AUCRA next filed a praecipe that requested personal service at the same address by an authorized process server in California. According to the proof of service, on January 25, 2017, a civil process server personally served "'John Doe' (Caucasian male, 30's, 5'9", 200 lbs., Brown eyes, Brown hair) Person in Charge.''

         Oceanside did not file a responsive pleading.

         On March 23, 2017, AUCRA filed a motion for default judgment and sent notice of the hearing to the same address it used to serve Oceanside the summons.

         At the hearing on the motion for default judgment, counsel for Oceanside made an appearance and opposed the motion, alleging improper service of process. The district court received Oceanside's affidavit evidence that AUCRA did not serve a summons on any person authorized by the company to receive service of process on its behalf.

         In support of AUCRA's motion for default judgment, it offered an exhibit consisting of a copy of the RPA, a series of statements for Oceanside's account with AUCRA, and an affidavit designating the most recent balance as the amount due and owing. The RPA provides that it shall be governed exclusively by the laws of Nebraska and that any matter shall be resolved exclusively by the courts of Nebraska. Additionally, the RPA states that AUCRA may apply to a court of competent jurisdiction for relief in the event of breach.

          [300 Neb. 336] Oceanside's counsel objected to AUCRA's exhibit on relevance grounds and argued that the balance cited by AUCRA as the amount due and owing may not be accurate because the balances fluctuate over time. The district court received AUCRA's exhibit over Oceanside's objection. Oceanside's counsel then reiterated the position ...


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