Submitted Under Third Circuit Rule 12(6) July 2, 1973.
Resubmitted Under Third Circuit Rule 12(6) September 12, 1973.
Submitted Under Third Circuit Rule 12(6) July 2, 1973
Before GIBBONS and HUNTER, Circuit Judges.
Resubmitted Under Third Circuit Rule 12(6) Sept. 4, 1973
Before GIBBONS, HUNTER and WEIS, Circuit Judges.
OPINION OF THE COURT
GIBBONS, Circuit Judge.
In this diversity contract action, the defendant, Alladin International, Inc. (Alladin), appeals from the refusal of the district court to set aside a default judgment. The plaintiff, Ingridhutte Kurt Wokan (Ingridhutte), a West German glassware manufacturer, on April 20, 1972, filed a complaint in two counts. The first count sought $3,048.00, the price of goods actually delivered to Alladin. The second count sought $17,498.75 plus interest and storage charges, for goods ordered by Alladin, never delivered, but allegedly specially manufactured and not resalable. Process was served on Alladin's president on May 2, 1972. Alladin did not respond in any manner, and a default judgment in the amount of $23,495.26 was entered on July 21, 1972. Thereafter, Ingridhutte issued execution attaching Alladin's bank account at Fidelity Bank. Judgment was entered against the garnishee bank on August 17, 1972, in the amount of $9,796.36.
Counsel for Alladin (who is also an officer of the corporation) learned on August 14, 1972, that the account at Fidelity Bank had been attached. That day he called Ingridhutte's attorney, advising that the funds attached represented money which had been advanced to Alladin by two of his acquaintances for the purpose of permitting Alladin to make a 20% settlement offer to its creditors, and that such a settlement offer had been made to and accepted by Alladin's creditors other than Ingridhutte. On August 22, Alladin filed a motion pursuant to Fed.R.Civ.P. 55(c) and 60(b) to set aside the default judgment.
The first ground asserted for setting aside the default judgment was that it had been entered without notice to Alladin's counsel, in violation of Rule 55(b)(2). This ground is entirely without merit. From the time the complaint was filed until August 14, 1972, there was no word from, never mind appearance, on behalf of Alladin. See Port-Wide Container Co. v. Interstate Maintenance Corp., 440 F.2d 1195 (3d Cir. 1971).
The second ground for setting aside the default judgment was that it resulted from "mistake, inadvertence, surprise, or excusable neglect." Fed.R.
A motion pursuant to Rule 60(b)(1) for relief from a judgment is addressed to the sound discretion of the district court, and we may not disturb that court's action in the absence of an abuse of discretion. Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951); Orange Theatre Corp. v. Rayherstz Amusement Corp., 130 F.2d 185, 187 (3d Cir. 1942), cert. denied, 322 U.S. 740, 64 S.Ct. 1057, 88 L.Ed. 1573 (1943). Here the facts relied upon to establish such "mistake, inadvertence, surprise, or excusable neglect" are, to say the least, weak. But the district court held them to be sufficient, and Ingridhutte has not urged by cross appeal that this holding was an abuse of discretion. The sole substantial issue on the appeal is the propriety of the condition to reopening.
Rule 60(b) gives the district court explicit authority to impose terms upon the opening of a default judgment. Rarely, however, have the federal courts had occasion to discuss what those terms may be. The few cases which have dealt with the problem are collected in Annot., Propriety of Conditions Imposed in Granting Relief From Judgment Under Rule of Civil Procedure 60(b), 3 A. L.R.Fed. 956 (1970). The condition most commonly imposed is the payment of costs or attorneys fees. E.g., Hendricks v. Alcoa Steamship Co., 32 F.R.D. 169 (E.D.Pa.1963). The imposition of a condition that a bond be posted to secure any judgment is discussed in Thorpe v. Thorpe, 124 U.S.App.D.C. 299, 364 F.2d 692 (D.C.Cir.1966); there the district court entered an order vacating a default on condition that the defendant deposit in a joint savings account for himself and the plaintiff the amount demanded in the complaint, which actually exceeded the amount of the default judgment. The defendant, unable to make such a deposit, appealed. Judge Leventhal wrote:
Judge Leventhal's opinion in Thorpe v. Thorpe, supra, is as close as we have found to an authority in point. The order here, of course, is somewhat different in that it requires security only for the unsatisfied part of the judgment rather than for an amount in excess thereof equal to the original demand. The $9,796.36 obtained from Fidelity Bank was not affected by the order. As to that sum, apparently, it was intended that Alladin run the risk of not getting back any excess over the amount due on the first count if its defense on the second count should prevail. The security required was for the unpaid part of the judgment. We have the same difficulty with this condition to vacating the default as did Judge Leventhal with the condition imposed in Thorpe. We think it perfectly proper for a district court in an appropriate case to impose the condition to vacating a default judgment that the judgment holder not be deprived of any payment or security he has obtained as a result of the judgment. But it is difficult to imagine what set of circumstances would justify the imposition of a condition that the now disputed claim be made more secure than it was prior to the court's action on the Rule 60(b) motion. There may be such circumstances, but they do not appear in this record.
In Thorpe v. Thorpe, supra, the District of Columbia Circuit remanded for findings which might support the unusual condition imposed, and for consideration of other less drastic conditions. Possibly in that domestic dispute circumstances justifying a requirement of pre-judgment security could at a hearing appear. We do not think any such circumstances could appear in this commercial lawsuit. Nevertheless, because the district court's action under Rule 60(b) is discretionary, we believe a remand is appropriate. As we said earlier, Alladin's factual showing of "mistake, inadvertence, surprise, or excusable neglect" was rather thin. Quite possibly the court was led to the exercise of discretionary power to reopen in part because of a mistaken belief that the condition of pre-judgment security for the full amount of Ingridhutte's claim could be imposed on this record. Since we hold otherwise, the district court should have an opportunity to reconsider the motion to vacate the default judgment on the second count.
Nothing in this opinion shall be construed as a ruling upon the effect on the default judgment or the garnishment of Fidelity Bank of the Chapter XI proceeding.
The case will be remanded to the district court for further proceedings consistent with this opinion.