Appeal from Superior Court of Skagit County. Docket No: 95-2-01113-9. Date filed: 07/29/96. Judge signing: Hon. Stanley K. Bruhn.
PER CURIAM - Deborah Soo Jung bought a restaurant business from Joseph Rivas in February 1995. In August of that year he filed suit against Jung for replevin and damages arising from alleged breach of the purchase and sale agreement. In spite of a settlement agreement reached by the parties, Rivas sought and was granted a default judgment against Jung. We agree with Jung that the trial court abused its discretion in denying her motion to vacate the default judgment because she showed both a valid excuse for failing to answer and a prima facie defense to the alleged breach of contract. We reverse and remand.
Under the purchase and sale agreement, the parties agreed on a sale price of $45,000 for the business and a provision that all equipment would be in "good working order on closing." Rivas alleged in his complaint that Jung failed to pay according to the agreement. In particular, he asserted that a $4,000 check Jung gave him as part of the down payment was dishonored, and she failed to make payments due on promissory notes. The record indicates that Jung was personally served with the complaint on August 29, 1995.
In support of the motion to vacate, Jung submitted only the declaration of her daughter, Zion Jung, who stated that her mother and father are native Koreans who cannot "speak or understand English with even nominal proficiency." Zion Jung stated that when she was in the restaurant shortly after the closing date of the sale, she observed "significant problems with the walk-in cooler, the electrical system, the meat cooler, the water heater, the deep fryer, and the cafe's ventilation system." She asserted that each of the items required "either significant repair or replacement" and that they spent "several thousand dollars" repairing some items.
Zion Jung also asserted that on September 13, 1995, she and her mother met with Rivas about the lawsuit. The daughter acted as interpreter for her mother. The parties agreed that if Jung returned the restaurant to Rivas, he would dismiss the lawsuit. Jung also told Rivas she wanted to remove certain equipment she had purchased, and Rivas did not object. Approximately two days later, Jung returned the keys to Rivas.
In his declaration in opposition to the motion to vacate, Rivas acknowledged they had reached a settlement agreement in September 1995, *fn1 but contended Jung violated its terms by removing several pieces of equipment from the premises. He thus did not feel bound by the agreement. He also generally denied that the equipment was not in working order but did admit the ventilation system was malfunctioning.
In granting the default judgment, the trial court entered findings that Jung had failed to make payments under the sale agreement and that Rivas should be granted judgment for $34,000 plus costs and attorney fees. After receiving a copy of the default judgment, Jung's attorney filed a notice of appearance on December 4. Jung later obtained new counsel, who filed a motion to vacate on May 24, 1996. Jung argued she had a meritorious defense of breach of contract and misrepresentations by Rivas. Further, she had not answered the complaint because she relied on Rivas' agreement to dismiss the complaint.
The trial court denied the motion to vacate and Jung appeals.
Default judgments are not favored because "'it is the policy of the law that controversies be determined on the merits . . .'" *fn2 On the other hand, the orderly system of Justice mandates compliance with judicial summons. *fn3 Therefore, the decision on a motion to vacate a default judgment is guided by equitable principles: "The overriding reason should be whether or not Justice is being done." *fn4 The trial court's decision will not be reversed on appeal unless the appellant shows an abuse of discretion. *fn5 Such an abuse of discretion is less likely to be found if the trial court sets aside the default judgment than if it refuses to do so. *fn6
In exercising its discretion, the court first considers whether there is substantial evidence to support at least a prima facie defense to the claim asserted. *fn7 "Any prima facie defense to the plaintiff's claim, albeit tenuous, is sufficient to support a motion to vacate a default judgment." *fn8 The second factor in evaluating a motion to vacate is the reason for the party's failure to timely appear, i.e., whether it was the result of mistake, inadvertence, surprise or excusable neglect. *fn9
Other, secondary considerations are whether the moving party acted with due diligence after notice of entry of the default judgment, and whether substantial hardship will result to the opposing party. *fn10
Defense on the merits. Jung contends she presented evidence of a meritorious defense: material breach of contract and misrepresentation by Rivas excusing her performance. In particular, she argued below that certain equipment was not in good working order as promised by Rivas. She alleged she "withheld payment . . . to offset some of the losses caused by Plaintiff's misrepresentations regarding La Tienda's equipment . . . ."
The breach of a promise by one party to a bilateral contract, so material as to justify the refusal of the other party to perform a contractual duty, discharges that duty. *fn11 Jung alleges a material breach in that she was deprived of functional kitchen equipment for ...