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Duling v. Markun

April 11, 1956


Author: Duffy

Before DUFFY, Chief Judge, and LINDLEY and SWAIM, Circuit Judges.

DUFFY, Chief Judge.

Plaintiffs brought this action as the executors of the will of Jack Marks, deceased, alleging defendants were indebted to the Marks Estate in the sum of $44,404.91 and interest. The claim was based upon two checks of $25,000 each, executed by Marks and delivered by him to defendant Markun in August, 1950 and November, 1950, respectively.

The complaint herein was filed on March 11, 1954, and, together with the summons, was served on defendants on March 16, 1954. A notice of appearance by defendants was filed on March 30, 1954. Thereafter occurred a pattern of flagrant disregard of Federal Rules of Civil Procedure, 28 U.S.C.A., insofar as the dates for filing pleadings are concerned. Although answer or other responsive pleading by defendants should have been filed by April 5, 1954, defendants did nothing until after June 7, 1954, on which date plaintiffs requested the clerk of the District Court to enter a default pursuant to Rule 55(a), Federal Rules of Civil Procedure. Just why the clerk did not enter a default does not appear from the record. Nine days thereafter on June 16, 1954, defendants moved for an extension of time to June 28, 1954 in order to answer the complaint. The application made no showing of "excusable neglect", but the motion was granted ex parte the following day. Thereafter, plaintiffs moved to vacate the order entered on June 17, 1954, but the motion was denied. On June 25, 1954 plaintiffs moved for a default judgment to be entered by the Court pursuant to Rule 55(b)(2) on the ground defendants had failed to answer or otherwise defend within the time prescribed by Rule 12(a), Federal Rules of Civil Procedure. This motion was denied.

On June 11, 1954 notice was served on the attorney who had appeared for defendants, that the deposition of defendant Markun would be taken on June 23, 1954. A subpoena was served on Markun to appear at a designated time and place. The day before the deposition was to be taken the attorney for defendant requested, by telephone, that the deposition be postponed, representing that defendant Markun was suffering from a bad case of poison ivy. The request for a postponement was refused because the principal counsel for plaintiffs was, at that time, en route from Clarksburg, West Virginia to Indianapolis. Neither defendant nor his attorney appeared pursuant to the notice and subpoena, and when inquiry was made at the office of defendant's attorney, the latter's secretary read what purported to be a doctor's certificate to the effect that defendant Markun was confined to bed because of heat exhaustion. On June 25, 1954, because of defendant's failure to appear for examination, plaintiffs moved for default pursuant to Rule 37(d), Federal Rules of Civil Procedure. This motion was denied.

On June 28, 1954, the last day for filing answers under the Court's order of June 16, 1954, each defendant filed a motion to dismiss the complaint on the ground the allegations thereof were not sufficient to state a claim. On January 18, 1955 defendants were granted leave to withdraw their motions to dismiss and on that date, nine and one-half months after the answers were originally due, each defendant filed an answer. On February 2, 1955 each defendant filed a motion for summary judgment which motions were granted on May 20, 1955.

Jack Marks was a resident of Clarksburg, West Virginia. Defendant Louis Markun was his nephew, and resided in Indianapolis, Indiana. On August 28, 1950 Marks executed a check for $25,000, and on November 13, 1950, another check for $25,000, each payable to the order of defendant Louis Markun, each was drawn on funds personally owned by Marks, and each check was delivered to Markun. The checks were promptly deposited by Markun in an Indianapolis bank, and were paid in due course. Markun personally endorsed the checks, and beneath his signature on each check appeared "For deposit only. Maple Road Village, Inc." The defendant Markun is the president and a director of Maple Road Village, Inc., and he, his wife and son own all of the stock of the corporation.

Jack Marks died on July 27, 1952. However, before his death there had been repaid to him by defendant Markun the sum of $10,500, consisting of two payments of $250 each, received respectively on September 29, 1950 and November 1, 1950, and twenty monthly payments of $500 each, beginning in December, 1950, and ending July, 1952. All of such payments were made by checks drawn on the account of the defendant Maple Road Village, Inc., twenty of the checks being signed by defendant Markun, and two by Markun's wife. Twenty of the checks contained on their face the notation that they were in payment of "interest."

In opposition to the motion for summary judgment, plaintiffs filed the affidavit of Marguerite Wyckoff who was the bookkeeper for Jack Marks. She disclosed that at Marks' direction she recorded in his journal or ledger the twenty-two checks received from defendant Markun as payments of interest, and that she furnished such monthly payment figures to the accountant who prepared Jack Marks' income tax returns. Miss Wyckoff also swore that in 1952, when Jack Marks was very ill and about one month before his death, defendant Markun telephoned asking that she advise Jack Marks that if he (Marks) should have need for the money, he (Markun) would arrange to repay to Marks the $50,000, or any part thereof that Marks might require. Proof was also made that in Marks' income tax returns the monthly payments from Markun were listed as "income from interest."

On this appeal plaintiffs urge as error 1) the District Court's denials of the several motions by defendants for default judgment were an abuse of discretion, and 2) the Court was in error in granting defendants' motions for summary judgment, as there were genuine issues of material facts which must be resolved.

The apparently callous disregard by defendants for the provisions of the Federal Rules of Civil Procedure pertaining to time limitations within which pleadings must be filed, would have justified the entry of a default judgment for plaintiffs. However, the Court elected to disregard the defaults. There may have been some reasons known to the Court which do not appear in the record. The defaults may have been due to the frequent change in attorneys representing the defendants, for defendants have had at least four sets of attorneys in this proceeding. It should be mentioned, however, the attorneys for defendants on this appeal were not, in any way, involved in the defaults.

Whether a default should be entered or a default judgment be set aside, is a matter resting in the sound discretion of the trial judge. Jones v. Jones, 7 Cir., 217 F.2d 239; Tozer v. Charles A. Krause Milling Co., 3 Cir., 189 F.2d 242. Under the circumstances of this case, we cannot say that the District Court abused its discretion in failing to enter a default judgment.

If the pleadings, depositions and affidavits on file show there is no genuine issue as to any material fact, and that defendants are entitled to judgment as a matter of law, then the trial court was correct in entering a summary judgment for defendants. Plaintiffs insist that there were and are genuine issues as to material facts, and in any event defendants were not entitled to judgment as a matter of law.

The primary issue in this case is as to the nature of the transaction whereby Marks handed over to defendant Markun the two $25,000 checks. In arguing it was a loan, plaintiffs point out that Marks, in making entries in his books, treated the monthly payments as interest, and also that Marks paid income tax on such payments on the basis that they were payments of interest. Plaintiffs also emphasize the willingness of Markun, when Marks was ill, to pay back the entire $50,000 if Marks desired that he should do so. They also point to the fact that Markun and his wife, on February 27, 1951, executed a mortgage to Marks in the sum of $50,000. Although the recital in the mortgage that the loan was evidenced by two $25,000 notes is erroneous, the dates of the alleged notes conform almost exactly to the dates when defendant Markun received the two $25,000 checks from Jack Marks. This mortgage was released by Marks on February 18, 1952, but this release did not purport to discharge the debt, if one existed. It might be here noted that defendant Markun's explanation of the debt recitals in the mortgage is that he was in financial ...

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