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DARLINGTON DAVENPORT v. CLINTON W. SACKETT

Minnesota Supreme Court1939-10-06No. No. 32,079
206 Minn. 69

Summary

Holding. The court affirmed the trial court's order granting the motion to vacate the judgment, finding no abuse of discretion because the record presented a factual question within the trial court's discretion and a discharge in bankruptcy constitutes a meritorious defense.

Davenport sued Sackett to recover a debt exceeding $21,000, commencing the action in May 1935. Sackett filed for bankruptcy in 1936 and informed the court and plaintiff's attorney of the adjudication before the initial hearing date. However, plaintiff and his attorney proceeded with the case a few days later without further notice to defendant, obtained a default judgment, and did not disclose this development during subsequent bankruptcy proceedings. Sackett did not learn of the default judgment until July 1937, approximately sixteen months after it was entered.

Sackett moved to vacate the judgment, arguing he had been misled by his attorney into believing the state court proceedings would cease due to the bankruptcy filing and that he lacked actual knowledge of the default hearing or judgment entry. Plaintiff countered with affidavits suggesting Sackett must have known of these developments, pointing to a hearing before a New York Stock Exchange arbitration committee as potential notice, though plaintiff offered no direct evidence that Sackett received such notice at that hearing or elsewhere.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether a trial court abuses discretion in vacating a judgment entered by default when defendant claims lack of actual notice due to bankruptcy proceedings
  • Whether a bankruptcy discharge is a valid basis for vacating a judgment
  • Standard for setting aside judgments based on defendant's claimed ignorance of proceedings

Procedural posture

This is an appeal from a trial court order granting defendant's motion to vacate a default judgment entered in a debt collection action.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Loring, Justice.

This is an appeal from an order granting a motion to vacate a judgment in a suit brought to recover an indebtedness in excess of $21,000. This suit was commenced May 1, 1935. The defendant answered May 20, 1935, and after failing to negotiate a settlement of the matter in controversy he filed a petition in bankruptcy, listing plaintiff’s claim as a liability. He Avas adjudicated a bankrupt on March 12, 1936. On that or the following day he served a supplemental answer upon plaintiff’s attorney setting up the adjudication in bankruptcy and filed the same in court. This pleading was returned by plaintiff’s attorney. The case Avas put upon the calendar in Hennepin county and assigned for hearing. Defendant’s counsel in his affidavit in support of the motion to vacate the judgment asserted that before the opening of court on the day first set for the hearing in the Hennepin county district court he appeared and advised the plaintiff’s attorney, the court, and the clerk that the defendant had been adjudicated a bankrupt. He asserted that he then left the courtroom in the belief that in view of such bankruptcy no further proceedings would be had therein. Two or three days later the plaintiff and his attorney appeared Avithout further notice to defendant and proved up the plaintiff’s case as upon default. The plaintiff’s attorney was instructed by the court to draft findings. April 30,1936, the plaintiff and his attorney were present at the defendant’s general hearing in the bankruptcy proceedings and conducted a protracted examination of defendant but without disclosing the fact of the preAdous default hearing. February 8, 1937, the defendant was discharged in bankruptcy. Judgment in the state district court proceedings was not entered until April 21, 1937. Defendant’s counsel asserted in his affidavit in support of the motion here under consideration that neither he nor the de fendant knew that plaintiff and his counsel had appeared on March 3.6, 1936, in the district court and had proved up their case as upon default, and that they had not learned of it until the 27th day of July, 1937, on which day they prepared their affidavits and made their motion to vacate and set aside the judgment. The same inference may properly he drawn from defendant’s affidavit. They made the same assertion relative to the entry of the judgment. They both swore that defendant was advised by his attorney that because of the bankruptcy proceedings there would be no further proceedings in the state district court and that no further attention need be paid to that action. The plaintiff presented affidavits of himself, his attorney, and others stating facts from which he inferred that the defendant must have long known of the default proceedings, and the subsequent entry of judgment. His attorney and others denied the conversation which defendant’s attorney claims took place in the district courtroom. Much stress is laid by plaintiff upon a hearing had in New York before the arbitration committee of the New York Stock Exchange, in which one Hopwood was the accused and defendant was a witness. Nowhere in plaintiff’s affidavits was there any positive assertion that at that hearing or elsewhere either defendant or his attorney was advised that the case had been proved up as upon default or that judgment bad been entered. The matter was left entirely in the domain of inference. The affidavits therefore presented a question of fact upon a matter which lay within the discretion of the court. We have sustained trial courts in cases where judgment creditors have made a much stronger showing than in the case at bar. Isensee Motors v. Rand, 196 Minn. 267, 264 N. W. 782; Northwest Thresher Co. v. Herding, 126 Minn. 184, 148 N. W. 57, L. R. A. 1916F, 837.

A discharge in bankruptcy is a meritorious defense. That defendant’s counsel may have had an erroneous impression as to the effect of the adjudication does not bar the relief here sought. Baxter v. Chute, 50 Minn. 164, 52 N. W. 379, 36 A. S. R. 633. Other questions argued by plaintiff are not pertinent to the question presently before us.

Upon the record before us we find no abuse of discretion on the part of the trial court, and its order must be affirmed.