Defendant-Appellant Rodney Lindquist, dba American Fitness Wholesalers of Oahu (Lindquist), appeals the district court of the second circuit's March 18, 1999 Order Granting Judgment against him and in favor of Plaintiff-Appellee Fitness and Nutrition Hawaii, Inc. (F&NI-Hawaii) for $19,950. We vacate and remand for a trial on the merits.
F&NI-Hawaii filed its complaint against Lindquist on April 29, 1998, on an alleged debt. Lindquist was served with the Complaint and Summons on July 6, 1998. Three days later, Lindquist sent the Complaint and Summons via facsimile to attorney James J. Bickerton (Bickerton). However, Bickerton did not see the facsimile until July 13, 1998. Bickerton, using July 13 as the date of service, miscalculated the return date as July 27. On the actual return date, July 20, 1998, Lindquist was not present or represented; consequently, Judge Yoshio Shigezawa entered a default judgment in the amount of $19,950 against Lindquist.
Bickerton later learned that he had miscalculated the return date when he contacted Ryther L. Barbin (Barbin), F&NI-Hawaii's counsel, to ask for a continuance of the return date.
Lindquist filed a Motion to Set Aside Default Judgment on
September 28, 1998. At the November 23, 1998 hearing on the
motion, Lindquist was represented by attorney Mark R. Zenger, due
to Bickerton's scheduling conflict. In his motion, Lindquist
denied liability based on allegations of nonexistence of the debt
and a general pattern of fraud on the part of F&NI-Hawaii and
parties related to F&NI-Hawaii. Judge Rhonda I. L. Loo, noting
in part that Lindquist may have a meritorious defense, granted
the motion and set the trial for March 1, 1999. (1)
On the March 1, 1999 trial date, Lindquist had yet to file the
Order Setting Aside Default Judgment. Just before trial was to
commence, F&NI-Hawaii made an oral motion for judgment on the
pleadings, which the court granted. The pertinent exchanges on
the March 1, 1999 trial date were as follows: The Court: All right. Where is this? The Bailiff: Page 4. The Court: I have that. Apparently a default had been entered. Mr. Bickerton: That's correct, Your Honor. The Court: Then there was supposed to have been an order setting
aside the default to be filed by defendant's counsel, and
apparently it was not filed. Mr. Bickerton: That's also correct, Your Honor. The Court: Where does that leave us, Mr. Barbin? Mr. Barbin: Well, Your Honor, as you say, the default was set
aside in November 23rd and trial was set for today. The default
-- the order has not been presented to the Court this morning.
It was presented to me for signature and I just signed it. And I
understand that Mr. Zenger has it. I believe he probably filed
it this morning but I'm not sure. Mr. Zenger: I have it, Your Honor, but I haven't been able to
locate Judge Loo as of this morning, who was the judge who heard
the motion. The Court: Well, the motion was granted when? Mr. Bickerton: Your Honor, the complaint was filed in April, the
judgment was entered in August, and the motion to set aside the
default was filed in November -- was ordered in November. The Court: And what's today's date? Mr. Bickerton: Well, today's March 1st, Your Honor. The Court: March. How much time is there between November and
March? Quite a bit. There used to be. Has that changed? Mr. Bickerton: There still is, Your Honor, but may I address the
Court? The Court: Well, if you really want to, go ahead. Mr. Bickerton: Well, Your Honor, what occurred was, Mr. Bar -- I sent an order to Mr. Barbin in December, early December, I
believe, and Mr. Barbin returned it. The problem was that when
he returned it -- it was my error -- there were some spelling
errors on his name. He took it upon himself to correct those
errors by hand, Your Honor. And on the signature page as well as
the non-signature page, what occurred after that is, is an office
snafu on my part. I changed offices, I had a secretary change,
and it got lost in the shuffle, Your Honor. And I tried to find where it was. I haven't found the original, it was changed. So I called Mr. Barbin's office last week in an effort to get a
hold of him, he was out. I spoke to his secretary about it, I
also spoke with the District Court people about it. And we
brought it over here today, [M]r. Barbin graciously signed it,
and it's the same order that -- The Court: All right. I'm satisfied that -- Mr. Barbin: Your Honor, if I may, Your Honor. In addition to that matter, there also has been no answer filed
in this case. There has not been a general denial either in this
case. And so at this time, Your Honor, I'd ask for a judgement
[sic] on the pleadings on the ground that no answer has been
filed, no general denial, no counter claim, no defenses have been
presented. So based on Rule 8 of the Rules of District Court Civil Procedure
I'd ask that this matter be -- that a judgment be granted on the
pleadings. The Court: You're telling me that a general denial has not been
entered; is that correct, Madam Clerk? The Clerk: (Inaudible). The Court: Was this -- this case, I assume, was called at our
Monday calendar call, but at that time the defendants did not
appear and a default was entered, correct? Mr. Bickerton: That's correct. The Court: There was a motion to set aside the default, the
motion was granted. Now, when the Court granted the motion did the Court stipulate
that an answer be filed? Mr. Barbin: Well, Your Honor, it's my recollection that the
Court satisfied [sic] the default and allowed the defendant time
to file an answer, but that was not included in the proposed -- The Court: Excuse me, because if I don't do it now I'll forget. Mr. Barbin: Okay. The Court: What do the minutes show relative to what Mr. Barbin
has just told us? The Clerk: (Inaudible) and the default was set aside (inaudible)
and this matter was set for trial. The Court: All right. I think it's implicit that an answer
should be filed, even if the minutes don't specifically require
it. I think in a situation like that it is always the case that
an answer be filed, and no answer, apparently, was filed. Mr. Bickerton: Your Honor, we're prepared to file an answer once
a [sic] order was signed. And if you look at our motion and our
memorandum, we specifically set forth the grounds of our denial
and the grounds of (inaudible) defenses. They're in the motion,
Your Honor. The Court: Look. It seems to me you're compounding the felony
here. You tell me you were prepared to file your answer and as
soon as the order is entered, but then it takes you from November to March just to file the order. Now let's give some of the problem to Mr. Barbin. Let's give him
10 days of it, which is probably 5 more than he's responsible for
if indeed he's responsible for any, but that leaves you with
months of complete foul up. And then you walk in here and say,
well, we'll do it today. That's not good enough. It's just not good enough. I'm going to grant your motion. An Order Granting Judgment was entered on March 18, 1999, in the
amount of $19,950, against Lindquist. The Order stated: THIS MATTER having come on for Trial on March 1, 1999 at 9:30
a.m. before the Honorable John Vail, Judge of the above-entitled
Court and Ryther L. Barbin, Esq. appearing as counsel for
Plaintiff, Fitness and Nutrition, Inc, and Mark R. Zenger, Esq.
and James J. Bickerton, Esq. appearing as counsel for Defendant,
Rodney Lindquist, dba American Fitness Wholesalers of Oahu and
the court having found that Defendants [sic] failed to timely
file its written Order Setting Aside Default Judgment and Answer
to the Complaint herein. IT IS HEREBY Ordered, Adjudged and Decreed that Judgment is
entered against Defendant in the amount of $19,950. Lindquist timely filed this appeal on April 16, 1999. Lindquist presents his issues on appeal in a rather fragmented
manner. What his presentation boils down to is the contention
that the court erred under each of three interpretations of the
Order Granting Judgment: (1) the court sanctioned Lindquist for
failing to timely file the written Order Setting Aside Default
Judgment and Answer to the Complaint; (2) the court granted F&NI-Hawaii's oral motion for judgment on the pleadings; or (3) the
court granted a second default judgment. The standard of review when the court's order is construed as a
sanction is the abuse of discretion standard. Compass
Development, Inc. v. Blevins, 10 Haw. App. 388, 397-98, 876 P.2d
1335, 1340 (1940). There is an abuse of discretion when the
trial court has "'clearly exceeded the bounds of reason or
disregarded rules or principles of law or practice to the
substantial detriment of a party litigant.'" Richardson v. Sport
Shinko (Waikiki Corp.), 76 Hawaii 494, 504, 880 P.2d 169, 179
(1994) (quoting Amfac Inc. v. Waikiki Beachcomber Inv. Co., 74
Haw. 85, 114, 839 P.2d 10, 26 (1992)). On appeal, the granting of a motion for judgment on the pleadings
is reviewed de novo. Ruf v. Honolulu Police Department, 89 Haw.
315, 319, 972 P.2d 1081, 1085 (1995). In determining what law applies in this appeal, it is necessary
to first determine how the March 18, 1999 Order Granting Judgment
is to be characterized. The transcript of the hearing that day
shows, at least ostensibly, that the court granted F&NI-Hawaii's
oral motion for judgment on the pleadings. (2)
However, the Order
Granting Judgment signed by the court states that the court having found that Defendants [sic] failed to timely
file its written Order Setting Aside Default Judgment and Answer
to the Complaint herein. IT IS HEREBY Ordered, Adjudged and Decreed that Judgment is
entered against Defendant in the amount of $19,950. We look to the written Order Granting Judgment in interpreting
the court's action. Rules of the District Courts of the State of Hawaii (RDC) Rule 23. We do so because the
substance of the order is not settled until the written order is
filed. Id.; see also Carnation Company v. Huanani Enterprise
Corporation, 1 Haw. App. 466, 620 P.2d 273 (1980). In civil cases of conflict between the written order and the oral
order, the written order supersedes the oral order. In Ching v.
Tong, 39 Haw. 20 (1950), the appellant urged the Hawaii Supreme
Court to adopt the trial judge's oral findings of fact that were
rendered before entry of the written decree. The written
decision was incongruent with the oral findings. The supreme court grounded itself upon the written decree and not
the oral decision, reasoning that the written decision "being as
it is final in form, and determinative of the rights of the
parties to the controversy, was the final and appealable decree
upon which the appeal was allowed and the jurisdiction of the
court invoked." Id. at 22; see also Price v. Christman, 2 Haw.
App. 212, 214, 629 P.2d 633, 635 (1981) ("an appeal filed prior
to written entry of the court's oral order is ineffective to give
the appellate court jurisdiction over the appeal unless there has
been something of record that could be construed as a refiling
within the proper appeal period."); State v. English, 68 Haw. 46,
52, 705 P.2d 12, 16 (1985). In this case, the written Order Granting Judgment does not state
that judgment on the pleadings was granted. Nor does it express
itself as a second default judgment. The Order does not justify
its judgment on the pleadings by the fact that the default
judgment was not set aside or the fact that an answer was not
filed. The Order levies judgment against Lindquist because he
"failed to timely file" his order setting aside the default
judgment and his answer. Hence, according to the Order, his was not a failure to defend on
the merits. He was punished for being dilatory. Though not
dispositive, the court's oral reasoning preceding its oral
decision clearly characterizes the Order as a sanction: Look. It seems to me you're compounding the felony here. You
tell me you were prepared to file your answer and as soon as the
order is entered, but then it takes you from November to March
just to file the order. Now let's give some of the problem to Mr. Barbin. Let's
give him 10 days of it, which is probably 5 more than he's
responsible for if indeed he's responsible for any, but that
leaves you with months of complete foul up. And then you walk in
here and say, well, we'll do it today. That's not good enough. It's just not good enough. I'm going to grant your motion. We conclude that the Order Granting Judgment was a sanction and
commence our discussion on that basis. 1. The court abused its discretion when it Sanctioned Lindquist
by granting judgment in favor of F&NI-Hawaii. The inherent power of the court is "based upon the substantial
principles of right and wrong, to be exercised for the prevention
of error and injury, and for the furtherance of justice." A-One
Building Co. v. Yee, 32 Haw. 15, 18 (1931). The inherent power
of the court to prevent undue delays and to achieve the orderly
disposition of cases must be weighed against the policy of law,
which favors disposition of litigation on the merits. Compass,
10 Haw. App. at 401-402, 876 P.2d at 1341; Shasteen, Inc. v.
Hilton Hawaiian Village Joint Venture, 79 Hawaii 103, 107, 899
P.2d 386, 390 (1995). In Shasteen, a commercial dispute, the trial date was continued
four times over three years for various reasons. In addition,
the plaintiff failed to properly appear at a settlement
conference and failed to file a settlement conference statement.
One of the defendants filed a motion to dismiss, and the circuit
court granted its motion, citing the plaintiff's "failure to file
a Settlement Conference Statement, attend the Settlement
Conference, appear with counsel, and otherwise prosecute its case
and for good cause shown." Id. at 106, 899 P.2d at 389. On appeal, the Hawaii Supreme Court approved several general
principles to govern the propriety of such sanctions, among them
that "a dismissal of a complaint is such a severe sanction, that
it should be used only in extreme circumstances where there is
clear record of delay or contumacious conduct . . . and where
lesser sanctions where would not serve the interest of
justice[,]" and that "an order of dismissal cannot be affirmed
absent deliberate delay, contumacious conduct, or actual
prejudice[.]" Id. at 107, 899 P.2d at 390 (emphasis added)
(brackets, footnote, internal quotation marks and citations
omitted). The supreme court found that there was no deliberate (3)
delay by
the plaintiff. Though the case was continued four times, only
two of the continuances were a result of requests by the
plaintiff. And those two continuances were based on the
legitimate unavailability of plaintiff's counsel. Id. at 108,
899 P.2d at 391. The supreme court further found that there was no contumacious
conduct (4)
on the part of the plaintiff. Id. at 108-09, 899 P.2d
at 391-92. Derelictions on its part in connection with the
settlement conference were apparently spawned by the ambiguous
advice of former counsel. Id. The supreme court noted in this
connection that there is a "'preference for giving parties an
opportunity to litigate claims or defenses on the merits[.]'"
Id. at 109, 899 P.2d at 392 (quoting Oahu Plumbing & Sheet Metal,
Ltd. v. Kona Constr., Inc., 60 Haw. 372, 380, 590 P.2d 570, 576
(1979)). The supreme court also found that the movant did not suffer
actual prejudice. Although a continuance was likely to happen,
it had not yet happened, and thus any prejudice to the movant was
speculative. Moreover, it was also speculative that the
continuance would have resulted in a determination of deliberate
delay, contumacious conduct, or actual prejudice. Id. at 109,
899 P.2d at 392. The supreme court therefore held that the circuit court abused
its discretion by dismissing the case with prejudice because
there was nothing in the record that indicated "(1) a deliberate
attempt on the part of the Shasteen corporation to delay the
prosecution of this case, or (2) that the Shasteen corporation
acted in a manner that we would consider contumacious conduct, or
(3) that the Hilton suffered actual prejudice[.]" Id. at 109,
899 P.2d at 392. a. Deliberate Delay and Contumacious Conduct As noted above, both deliberate delay and contumacious conduct
require the willful intent to delay the proceedings or to disobey
the court. In this case, Lindquist exhibited neither. Lindquist was served with the Complaint on July 6, 1998. Three
days later, Lindquist sent the Complaint and Summons via
facsimile to Bickerton. Bickerton did not see the facsimile
until July 13, 1998. Bickerton, using July 13 as the date of
service, miscalculated the return date as July 27. This
unfortunate, but not willful, mistake led to Lindquist's absence
on the return date and to the default judgment against Lindquist.
Lindquist then filed a Motion to Set Aside Default Judgment.
Judge Loo granted the motion and required Lindquist to submit the
order setting aside default judgment. Bickerton did prepare the
order. However, a series of inadvertent misadventures ensued
which prevented submission of the order to the court until the
day of trial. This unfortunate trail of events does not constitute deliberate
delay or contumacious conduct. In fact, it shows Lindquist's
desire, however thwarted it may have been, to proceed diligently. With respect to Lindquist's failure to file a written answer,
Judge Loo did not require Lindquist to submit an answer. At the
November 23, 1998 hearing, Judge Loo set the trial date for March
1, 1999. (5)
By setting the trial date, the court implied that the
case was at issue. Rule 13 of the Rules of the District Courts
of the State of Hawaii (1999) states, in pertinent part, that
"[a]ny case at issue may be advanced and set for a pretrial or
settlement conference or be immediately placed on the trial
calendar for hearing or trial." (Emphasis added). "Whenever the parties come to a point in the pleadings which is
affirmed on one side and denied on the other, they are said to be
at issue." Black's Law Dictionary 125 (6th ed. 1990). Lindquist
did not file an answer. For the case to be at issue and hence
ready for trial, Judge Loo must have treated Lindquist's
appearance at the hearing and the defensive allegations in his
motion as a general denial. District Court Rules of Civil
Procedure Rule 8(b) (1999) provides, in pertinent part, that "an
appearance without written answer shall be deemed to constitute a general denial of the truth of the facts stated
in the complaint[.]" Judge Loo did not require Lindquist to file an answer; thus
Lindquist's failure to file an answer did not constitute
deliberate delay or contumacious conduct. b. Actual Prejudice As discussed above, Lindquist was not required to file a written
answer, so its absence cannot be the source of prejudice to F&NI-Hawaii. At the hearing in which the court set aside the default
and set the case for trial, F&NI-Hawaii did not complain that it
would be unable to proceed to trial without an answer to its
complaint. In his Motion to Set Aside Default Judgment, filed
three months before trial, Lindquist described the specific
defenses he planned to pursue at trial. F&NI-Hawaii cannot claim
that it did not know what defenses Lindquist planned to pursue. Moreover, F&NI-Hawaii appeared at trial and was ready to try its
case. Nowhere in the March 1, 1999 transcript did F&NI-Hawaii
claim that it was unprepared to try its case. Thus, F&NI-Hawaii
suffered no actual prejudice by Lindquist's failure to file a
written answer. And the fact that Barbin signed the order
setting aside the default judgment on the morning of trial and
stood ready to go to trial that day belies any claim that F&NI-Hawaii suffered prejudice by the absence of an order setting
aside the default judgment. The granting of judgment in favor of F&NI-Hawaii was an extreme
sanction. There was no clear record of delay or contumacious
conduct on Lindquist's part; nor was there actual prejudice
suffered by F&NI-Hawaii. There was apparently no consideration
or application of lesser sanctions for the dilatoriness of
Lindquist's attorneys. In entering a $19,950 judgment against Lindquist for the
derelictions of his attorneys, for which Lindquist apparently had
no responsibility whatsoever, the court abused its discretion. 2. Assuming arguendo that the court meant to grant judgment on
the pleadings, there was a general denial and the motion for
judgment on the pleadings should have been denied. In order to obtain judgment on the pleadings, "'the movant [must]
clearly establish[] that no material issue of fact remains to be
resolved and that he [or she] is entitled to judgment as a matter
of law.'" Mendes v. Heirs and/or Devisees of Kealakai, 81
Hawaii 165, 168, 914 P.2d 558, 561 (App. 1996) (quoting 5A C.
Wright and A. Miller, Federal Practice and Procedure: Civil
(Federal Practice) § 1368, at 518 (2d ed. 1990)) (footnote
omitted). Moreover, "the trial court is required to view the
facts presented in the pleadings and the inferences to be drawn
therefrom in the light most favorable to the nonmoving party."
Mendes, 81 Hawaii at 168, 914 P.2d at 561. See also Burns v.
Consolidated Amusement Co., 182 F.R.D. 609, 610 (D. Haw. 1998). As noted above, Judge Loo implicitly treated Lindquist's
appearance at the hearing on the Motion to Set Aside Default
Judgment as a general denial. Thus there were material issues of
fact to be controverted on the basic allegations of the
complaint. Moreover, taking Lindquist's statement of the facts as set forth
in the Motion to Set Aside Default Judgment as true, there were
material issues of fact with respect to Lindquist's defenses. As
Judge Loo apparently concluded, the Motion raised questions as to
"alter ego, co-mingling, possibly some payment of the invoices."
With all these material issues of fact unresolved, judgment on
the pleadings should not have been granted, if indeed that is
what the court did via its Order Granting Judgment. 3. Assuming arguendo that the court meant to grant a second
default judgment, the court erred. There is nothing in the record saying that the order was treated
as a reimposition of the default. The Order Setting Aside
Default Judgment was not filed until March 4, 1999. Hence at the
time of the trial, March 1, 1999, the default judgment was still
in effect. Ordering a second default judgment was unnecessary. This could
not have been what the court intended in issuing the Order
Granting Judgment. If it was, the court erred. For the foregoing reasons, we vacate and remand for a trial on
the merits. DATED: Honolulu, Hawaii, September 27, 2000. On the briefs: James J. Bickerton, Alan B. Burdick, Scott K. Saiki (Bickerton Saunders Dang & Bouslog) and Mark R. Zenger for defendant-appellant. Ryther L. Barbin for plaintiff-appellee. The Court is aware that -- has to look at whether or not the non-defaulting
party would not be prejudiced by the re-opening, that the defaulting party has
meritorious defense, and that the default was not a result of excusable [sic]
neglect or willful act. I have seen the declaration by Mr. Bickerton, who appears to be the previous
attorney in this matter. . . . The Court, I find that obviously the calendaring of the events was not a
result of excusable [sic] neglect or willful act. Obviously the non-defaulting party -- well, I don't think -- will not be prejudiced by the re-opening. Obviously, I'm sure, Mr. Barbin's clients want this matter to be
taken care of already, but the Court doesn't believe that the non-defaulting
party will not [sic] be prejudiced by the re-opening. As far as the meritorious defenses go, the Court has read Mr. Zenger's motion.
There is some question here about possible alter ego, co-mingling, possibly
some payment of the invoices. I'm not really sure at this point. So the Court is going to find that it could be that the defaulting party has a
meritorious defense, so I am going to grant the motion to set aside default
judgment. So shall we reset this, gentlemen, for trial? . . . . The Court: Okay. We'll set it for trial. . . . . Either the last week in February, first week in March. Both are available.
Do you gentlemen have any preference? Mr. Zenger: First week in March, Your Honor. The Court: Okay. Mr. Barbin? Mr. Barbin: That's fine, Your Honor. The Court: All right. Can we set it for the first week in March, please? The Clerk: March 1st, 1999 at 9:50 a.m.. The Court: All right. Mr. Zenger, will you prepare the order, please? Mr. Zenger: Yes, Your Honor. The Court: Thank you very much. In addition to that matter, there also has been no answer filed in this case.
There has not been a general denial either in this case. And so at this time,
Your Honor, I'd ask for a judgment on the pleadings on the ground that no
answer has been filed, no general denial, no counter claim, no defenses have
been presented. So based on Rule 8 (sic) of the Rules of District Court Civil Procedure I'd
ask that this matter be - that a judgment be granted on the pleadings. . . . . The Court: . . . I'm going to grant your motion.
0 Mr. Barbin: Your Honor, if I may, Your Honor.
0 "Deliberate" is defined as "willful rather than merely intentional."
Black's Law Dictionary 426 (6th ed. 1990).