Trent v. Deutsche Bank National Trust Co. ( 2024 )

No. 216 April 10, 2024 759
IN THE COURT OF APPEALS OF THE
STATE OF OREGON
Steven D. TRENT,
Plaintiff-Appellant,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Trustee for GSAMP Trust 2007-HSBC1 Mortgage
Passthrough Certificate, Series 2007-HSBC1,
Defendant-Respondent,
and
Tommy M. HOPKINS,
Patricia A. Hopkins and all other interested parties,
Defendants.
Klamath County Circuit Court
18CV12034; A177165
Marci Warner Adkisson, Judge.
Argued and submitted November 15, 2023.
Jennifer J. Martin argued the cause for appellant. Also
on the briefs were Kevin O’Connell and Hagen O’Connell
Hval LLP.
Emilie K. Edling argued the cause for respondent. Also
on the brief was Houser LLP.
Before Aoyagi, Presiding Judge, Joyce, Judge, and Jacquot,
Judge.
JOYCE, J.
Affirmed.
760 Trent v. Deutsche Bank National Trust Co.
JOYCE, J.
Plaintiff appeals from an order setting aside a $12
million default judgment against defendant. The trial court
entered the order when, after plaintiff attempted to enforce
the judgment, defendant moved to set aside under several
ORCP 71 provisions. The trial court granted the motion to
set aside under each of those provisions. We conclude that
the trial court properly exercised its authority in vacating
the judgment under ORCP 71 C; thus we need not, and do
not, address the alternative grounds. See Heritage Properties
v. Wells Fargo Bank, 318 Or App 470, 478-79, 508 P3d 577
(2022) (explaining that because the trial court’s order set-
ting aside a judgment “rested on three entirely separate,
independent legal bases, * * * any one could provide a suffi-
cient basis for the court’s order”). We affirm.
In 2005 plaintiff obtained a $240,550 loan that
encumbered property in Klamath Falls. The loan was pooled
with other loans into a legal trust, of which defendant was
the trustee. An entity called Specialized Loan Servicing
(SLS) serviced all the loans and properties in the trust. It
also handled any litigation concerning the loans, which SLS
undertook in the name of defendant as trustee.
In 2014, plaintiff defaulted on the loan, and SLS
initiated a judicial foreclosure action on behalf of defendant.
Plaintiff did not appear, and the trial court entered a gen-
eral judgment of foreclosure in May 2015. Defendant pur-
chased the property at an execution sale in August 2015 and
sold the property to third parties in June 2016.
In March 2018, plaintiff filed a complaint against
defendant challenging the foreclosure action and judgment.
Plaintiff sued on multiple grounds, including “theft by decep-
tion,” ORS 164.085. Despite the fact that that is a criminal
statute with no private cause of action, his complaint stated
that under that statute he was “entitled to damages for theft
plus exemplary damages.” Plaintiff requested an award of
$12 million, including $9 million in punitive damages.
Plaintiff served defendant with the summons and
complaint in April 2018. After defendant failed to appear, in
August 2018, plaintiff filed an “Ex Parte Motion for Order of
Cite as 331 Or App 759 (2024) 761
Default and Declaration in Support,” a “Motion for Default
Judgment Monetary Damages Only,” and a proposed final
judgment. Those documents, which contained many defi-
ciencies, are relevant to resolving the legal question on
appeal; we therefore describe them in detail.
The one-page motion for default judgment contained
just one paragraph, which stated:
“The Plaintiffs, having received the order of the court,
hereby pray that the court grant the monetary relief sought
in the default, and the Plaintiffs further waive any and all
claims for declaratory relief to avoid the necessity of serv-
ing and suing the current owners of the property as addi-
tional real parties in interest. The Plaintiffs, instead, elect
to simply seek monetary damages and pray the court enter
the default judgment for monetary relief as sought in the
complaint and in the attached default judgment (proposed).”
Plaintiff’s motion did not comply with ORCP 69 D,
which governs motions for judgment by default and provides
that:
“(1) A party seeking a judgment by default must file a
motion, supported by affidavit or declaration. Specifically,
the moving party must show:
“(1)(a) that an order of default has been granted or is
being applied for contemporaneously;
“(1)(b) what relief is sought, including any amounts due as
claimed in the pleadings;
“(1)(c) whether costs, disbursements, and/or attorney fees
are allowable based on a contract, statute, rule, or other
legal provision, in which case a party may include costs,
disbursements, and attorney fees to be awarded pursuant
to Rule 68.”
Plaintiff did not submit an affidavit or declaration
with his motion, and thus the required information in each
provision of ORCP 69 D(1) was absent, including the $12
million amount of plaintiff’s damages claim.
The procedural defects continued with plaintiff’s pro-
posed final judgment, which stated, in a lengthy paragraph,
that the court grants “judgment on the complaint a finding
that the Mortgage and note in favor of the Defendant * * * is
762 Trent v. Deutsche Bank National Trust Co.
breached; and the judgment was fraudulently obtained * * *.”
At the end of the paragraph the judgment stated that “the
Court hereby grants the Plaintiff judgment in favor of [plain-
tiff] and against Defendant * * * for compensatory damages
in the amount of three million dollars or according to proof.”
In the next paragraph, the proposed judgment “[g]rant[s] the
Plaintiff Judgment against the Defendant * * *, and order[s]
the Defendants to be obligated to pay treble exemplary dam-
ages to the Plaintiff in the sum of nine million dollars.”
The final judgment did not comply with ORCP 69
D(2), which provides that “[t]he form of judgment submitted
shall comply with all applicable rules and statutes.” First,
the judgment did not include a separate section “placed
immediately above the judge’s * * * signature * * * clearly
labeled at its beginning as a money award,” as required by
ORS 18.042(4). Second, the judgment did not identify the
Oregon Department of Justice as a judgment creditor, as
required by ORS 18.042(2)(a), and ORS 31.735(1) and (2).1
Further, the judgment stated that “the Clerk/Court has
entered the default of the defendants,” despite the fact that
the trial court never entered an order of default against
defendant.
Notwithstanding those deficiencies, the trial court
entered the judgment on August 28, 2018, awarding $12
million in damages.
Defendant first received actual notice of the judg-
ment in July 2021 when plaintiff attempted to enforce it
in California. One month later, in August 2021, defendant
filed a motion to vacate in the trial court. Defendant argued,
among other things, that the trial court should exercise its
inherent authority to set aside the default judgment. See
ORCP 71 C (allowing the trial court to set aside a judgment
in the exercise of “the inherent power of a court”).2
1
Under ORS 31.735(1)(b), 60 percent of plaintiff’s punitive damages “is pay-
able to the Attorney General for deposit in the Criminal Injuries Compensation
Account of the Department of Justice Crime Victims’ Assistance Section.”
Additionally, the final judgment did not contain a certificate of service showing
that plaintiff had served notice on the Director of the Crime Victims’ Assistance
Section, as required by UTCR 5.100(2) and (5).
2
Because we do not decide the case based on whether defendant’s failure to
appear was justified as excusable neglect under ORCP 71 B(1)(a), we do not detail the
Cite as 331 Or App 759 (2024) 763
Defendant argued that the trial court should exer-
cise its inherent authority to set aside the judgment because
plaintiff’s claim of $9 million in punitive damages was “both
procedurally and substantively defective.” Defendant noted
the excessive amount of the judgment and that the motion
for default judgment and the final judgment did not comply
with a number of rules and statutes.
After a hearing on the motion, the trial court
“adopt[ed] the Defendant’s arguments and * * * grant[ed] the
motion * * * based upon the arguments made here today and
the record * * * in the court file.” Plaintiff appeals from the
trial court’s order, arguing, among other things, that the trial
court abused its discretion in vacating the judgment pursu-
ant to its inherent powers recognized in ORCP 71 C. For its
part, defendant reprises the arguments that it made below.3
We review for abuse of discretion, see MBNA America Bank v.
Garcia, 227 Or App 202, 207, 205 P3d 53 (2009), and affirm.
ORCP 71 C reserves the trial court’s “inherent
power * * * to entertain an independent action to relieve a
party from a judgment.” Generally, “a trial court has inher-
ent authority to correct or set aside a judgment, provided
that it does so” both (1) within a “reasonable time” and (2) for
“good and sufficient reason.” Patrick v. State of Oregon,
178 Or App 97, 104, 36 P3d 976 (2001) (internal citations
omitted). “What is a reasonable time is ordinarily a matter
within the discretion of the trial court[,]” depending on “all
of the facts of the case.” Miller v. Miller, 228 Or 301, 305, 365
P2d 86 (1961); see also Bailey v. Steele, 263 Or 399, 402-03,
502 P2d 586 (1972) (three-year passage of time did not fore-
close trial court’s exercise of its inherent authority to modify
judgment; “courts have held that delays of several months
various explanations that defendant proffered for why it did not appear. Suffice to
say that SLS mailroom staff did not follow SLS’s processes for litigation documents.
3
Defendant further argues that plaintiff lacked standing to object to the
motion to vacate and lacks standing to appeal because plaintiff is not the “real
party in interest” after allegedly assigning his rights to a third party. Because
there is no copy of the assignment in the record, we do not know the terms or
validity of the assignment and thus we cannot conclude that plaintiff is not the
real party in interest. See Triphonoff v. Sweeney, 65 Or 299, 307, 130 P 979 (1913)
(when a defendant contends that an action is not prosecuted by the real party in
interest, “the defendant must state facts which constitute the defense and which
show that the plaintiff is not the real party in interest”).
764 Trent v. Deutsche Bank National Trust Co.
or years in making applications to set aside judgments may
not be unreasonable, depending upon the circumstances”).
In terms of what constitutes a good and sufficient
reason, “[i]t is well settled that a trial court can exercise its
inherent authority to vacate a judgment only to make a tech-
nical amendment, to correct an error of the court, or in other
extraordinary circumstances.” Kneefel v. McLaughlin, 187
Or App 1, 5, 67 P3d 947 (2003) (internal quotation marks omit-
ted). By way of example, in Taylor v. Morrison, 188 Or App 519,
522-23, 72 P3d 654 (2003), the trial court declined to vacate a
supplemental judgment awarding attorney fees to the plain-
tiff after the defendant argued that there was no statutory or
contractual basis for the award. On appeal, we determined
that it was “within the scope of the inherent authority rec-
ognized under ORCP 71 C” for the trial court “to determine
whether it had made a mistake in entering the supplemental
judgment.” Id. at 524. We vacated the supplemental judgment
after concluding that, because there was no legal basis for the
attorney fee award, the trial court erred in entering the sup-
plemental judgment and in declining to exercise its inherent
authority to set the judgment aside. Id. at 525.
Yet a trial court’s discretion to determine what is a
“good and sufficient reason” under ORCP 71 C is not unbounded.
For instance, a trial court has no discretion under ORCP 71 C
to vacate its own judgment “for the sole purpose of contraven-
ing or circumventing other important limitations that flow
from the finality of judgments.” Patrick, 178 Or App at 105. A
trial court, for example, has no discretion to vacate or modify
its own judgment for “the sole purpose of extending the time
for appeal.” Far West Landscaping v. Modern Merchandising,
287 Or 653, 658-59, 601 P2d 1237 (1979) (while recognizing
that “[t]here is no doubt but that under normal circumstances
trial courts have inherent authority to vacate or amend their
judgments[,]” concluding nonetheless that the trial court had
no authority to set aside one judgment and enter another for
the sole purpose of lengthening the statutory time for appeal).
Nor does a trial court have discretion to vacate or modify a
judgment to “allow parties to circumvent res judicata or to
assert new substantive arguments.” Condliff v. Priest, 82
Or App 115, 118-19, 727 P2d 175 (1986) (the trial court had
Cite as 331 Or App 759 (2024) 765
acted outside the permissible range of its discretion when it
modified the judgment to allow the defendant “belatedly to
assert a defense which was not timely raised” by the parties
who appeared in the action).
In light of the scope of the trial court’s discretion
under ORCP 71 C, we conclude that the trial court here did
not abuse its discretion. We begin with whether the trial
court acted within a reasonable time based on the facts before
it. The length of time between the default judgment and
the order setting aside the judgment was three years. That
length of time reflects the length of time during which defen-
dant was unaware of the default judgment and, correspond-
ingly, the time during which the trial court was presumably
unaware of its mistake. Once plaintiff attempted to enforce
it, defendant moved to vacate the judgment one month later,
alerting the trial court to the situation. The trial court, in
light of those circumstances, acted within a reasonable time.
Likewise, the trial court’s basis for granting defen-
dant’s motion to vacate constituted good and sufficient rea-
son. As an initial matter, Oregon has a “longstanding policy
disfavoring default judgments.” Wells Fargo Bank, N.A. v.
Jasper, 289 Or App 610, 616, 411 P3d 388 (2017). That policy
reflects a preference for the regular disposition of litigation
on the merits “to the end that every litigant shall have [their]
day in court.” King v. Mitchell, 188 Or 434, 441-42, 214 P2d
993 (1950).
Our conclusion that the trial court acted within the
permissible bounds of its discretion is consistent both with
that policy and with the express rules and statutes that
govern pleading requirements and judgments by default. It
is significant that the deficiencies in plaintiff’s pleadings—
from complaint to default-related documents—were egre-
gious and evident on their face. In light of those deficiencies,
the trial court clearly erred in entering the default judg-
ment. To begin with, plaintiff’s punitive damages claim in
his complaint was based on a criminal statute that allowed
no private cause of action, let alone creating an entitlement
to $9 million in punitive damages.4 Generally, a trial court
4
Plaintiff also sought $3 million in compensatory damages under the
criminal statute, with no private cause of action, and under several other legal
766 Trent v. Deutsche Bank National Trust Co.
errs when it enters an award that is not legally authorized.
See Taylor, 188 Or App at 525 (concluding that the trial court
erred in entering a judgment awarding attorney fees when
there was no contractual or statutory basis for the award
and in declining to exercise its discretion to set the errone-
ous judgment aside).
Additionally, ORS 31.725(2) provides that an ini-
tial pleading “may not contain a request for an award of
punitive damages. At any time after the pleading is filed,
a party may move the court to allow the party to amend
the pleading * * *. The party making the motion may submit
affidavits and documentation supporting the claim for puni-
tive damages.” Here, the initial pleading—the only pleading
that the court considered—included the request for punitive
damages; no motion to amend was filed. Consequently, the
court was never provided with any affidavits or documenta-
tion supporting the claim for punitive damages. That failure
precluded the trial court from determining whether plain-
tiff “fail[ed] to set forth specific facts supported by admissi-
ble evidence adequate to avoid the granting of a motion for
a directed verdict to the party opposing the motion on the
issue of punitive damages.” ORS 31.725(3)(a). If a plaintiff
fails to set forth those specific facts, the trial court must
deny the motion to amend the pleading. Id.Because of those procedural deficiencies, the court
erred in entering a judgment that included punitive dam-
ages even if there had been a legal basis for the damages.
See Moser v. DKN Ind., 191 Or App 346, 349, 82 P3d 1052
(2004) (plaintiff was not entitled to recover any punitive
damages because his initial complaint included a request
for punitive damages, and he did not provide affidavits or
documentation supporting the claim for punitive damages).5
theories. That request for damages under the criminal statute, just as with the
request for punitive damages, has no legal basis. As to the other causes of action,
the parties did not argue that those should be treated differently for purposes of
the default motions. Accordingly, neither do we.
5
We acknowledge that had defendant appeared in the action, it could have
raised the pleading defects. Defendant’s failure to appear, however, does not
invalidate the trial court’s authority to vacate a default judgment under ORCP
71 C. See ORCP 69 F (“If a judgment by default has been entered, the court may
set it aside in accordance with Rule 71 B and C.”).
Cite as 331 Or App 759 (2024) 767
Further, the court erred in entering the judgment
because both it and the motion for default judgment and the
final judgment did not comply with several rules and stat-
utes, beginning with ORCP 69. That rule requires that “[a]
party seeking a judgment by default must file a motion, sup-
ported by affidavit or declaration,” and “must show” that “an
order of default has been granted or is being applied for con-
temporaneously”; and “what relief is sought, including any
amounts due as claimed in the pleadings[.]” ORCP 69 D(1)
(emphases added). Moreover, the final judgment was not in
the proper format, with a separate section clearly labeled
as a money award, as required by ORS 18.042(4) and ORCP
69 D(2). Those requirements are not simply performative;
to the contrary, the rules and statutes that govern plead-
ing requirements and default judgments enable the trial
court to determine whether entry of judgment is proper and
whether further evidence is needed.6
In light of (1) the lack of legal basis for, at a mini-
mum, the award of $9 million in punitive damages; (2) the
procedural impropriety of awarding punitive damages
sought in the initial complaint, without any information to
support whether such an award was supported by the facts;
and (3) the impropriety of entering a default judgment with-
out a corresponding order of default and without information
about the amount of the award, the trial court was entitled
to exercise its inherent authority to correct its own error in
entering the judgment.7 Accordingly, under the abuse of dis-
cretion standard of review, where we will reverse a decision
under ORCP 71 C only if it was legally impermissible, we
conclude that the trial court did not abuse its discretion in
setting aside the judgment.
Affirmed.
6
See ORCP 69 D(3) (“The court, acting in its discretion, may conduct a hear-
ing, make an order of reference, or make an order that issues be tried by a jury, * * *
in order to enable the court to determine the amount of damages, to establish the
truth of any averment by evidence or to make an investigation of any other matter.
The court may determine the truth of any matter upon affidavits or declarations.”).
7
We also note that a judgment awarding punitive damages that does not
list the Department of Justice as a judgment creditor or contain the requisite
certificate of service prejudices the state. See Williams v. RJ Reynolds Tobacco
Company, 351 Or 368, 382, 271 P3d 103 (2011) (“the statutory designation of the
state as a judgment creditor is a mechanism that allows the state to enforce com-
pliance with” the statute that allocates punitive damages to the state).