M E M O
TO: Joint Procedure Committee
FROM: Gerhard Raedeke
RE: Article XII, N.D.R.Ct.; Collections
Judge Wefald has petitioned the Supreme Court to adopt a set of rules governing collections. The Court has referred the petition to the Joint Procedure Committee for a recommendation.
The proposed rules would appear in the North Dakota Rules of Court as a new article, i.e., "XII. Collections." The first rule, Rule 12.1 addresses the applicability of Article XII. The article would govern collection agencies and attorneys who file collection actions.
The second rule, Rule 12.2 contains stylistic requirements for pleadings. Currently, N.D.R.Ct. 3.1 already contains stylistic requirements for "pleadings and other instruments." The proposal is limited to "pleadings." Otherwise, the requirements in Rule 12.2 are basically the same as in Rule 3.1, except Rule 12.1 has additional requirements for proportional and monospaced typeface. Those requirements are the same as found in N.D.R.App.P. 32.
The third rule, N.D.R.Ct. 12.3, contains procedures for obtaining a default judgment. Subdivision (a) is a partial re-write of N.D.R.Civ.P. 5 with a few additions. The proposal expressly requires pleadings to have been properly served before a default judgment may be granted. The affidavit showing a party has failed to plead or otherwise appear is expressly named by the proposal as the "Affidavit of Default."
The proposal also states a motion is only necessary when the defendant has filed an answer or otherwise appeared. Rule 55 does not state a motion is unnecessary. Rule 55 provides: "If a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise appear and the fact is made to appear by affidavit or otherwise, the court may direct the clerk to enter an appropriate judgment by default . . . ." The proposal does not state how an application for default judgment is to be made when there has been no appearance. Rule 7(b), N.D.R.Civ.P., is instructive. It provides: "An application to the court for an order shall be by motion . . . ."
The proposal provides if a motion is used proper motion procedures, including service and notice must be given. Rule 55 provides otherwise. Rule 55 only requires notice if a defendant makes an appearance. Rule 55 provides: "If the party against whom judgment by default is sought has appeared in the action, the party . . . must be served with written notice of the application for judgment at least 8 days before the hearing on the application." However, "[r]egardless of whether or not [a] defendant has made an appearance, it is common practice to serve the defendant with notice of a pending hearing." Wilson v. Wilson, 364 N.W.2d 113, 115 (N.D. 1985).
The proposal provides if a defendant has appeared appropriate relief can be obtained through a summary judgment motion. Under N.D.R.Civ.P. 56, summary judgment is to be rendered if it is shown "there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." However, under Rule 55, the issue is not whether there is a genuine issue of material fact, but whether the defendant is in default. An appearance does not immunize a defending party from being in default for failure to plead or otherwise defend. 10A Wright, Miller § Kane, Federal Practice and Procedure: Civil 3d § 2682 (1998). A motion for summary judgment and default are distinct motions.
In subdivision (b) of Rule 12.3, the proposal lists documents which must be filed with the clerk of court to obtain a default judgment. The documents which must be filed include: 1) the filing fee; 2) the summons and complaint; 3) proof of service of the summons and complaint; 4) an affidavit of default; 5) an affidavit of proof; 6) an affidavit of costs and disbursements; 7) an order for judgment; and 8) a judgment. The proposal refers to the documents as pleadings. Rule 7(a), N.D.R.Civ.P., defines pleadings as the complaint, answer, reply, etc. Rule 55 does not specify exactly what documents must be filed.
Is it necessary or helpful to specify the filing fee, summons and complaint must be filed for the court to consider an application for default judgment?
For the third document, proof of service, the proposal adds a new requirement. If the signed receipt for service by mail under Rule 4(d)(2)(A)(v) is not legible, the affidavit of mailing must identify the signature as belonging to the person against whom the default judgment is sought. Alternatively, if service is made in accordance with a statute, an affidavit of compliance must be submitted.
For the fifth document, an affidavit of proof, if prejudgment interest is sought, the attached documentation must establish a written agreement between the parties for charging interest. The calculations as to the amount of accrued interest must be shown along with the calculations as to a daily rate of interest from and after the date of the affidavit of proof.
The proposal may be contrary to statutory law. For prejudgment interest, it requires documentation establishing a written agreement between the parties. Section 32-03-04, N.D.C.C., governs prejudgment interest in contract cases as follows:
Every person who is entitled to recover damages certain or capable of being made certain by calculation, the right to recover which is vested in the person upon a particular day, also is entitled to recover interest thereon from that day, except for such time as the debtor is prevented by law or by the act of the creditor from paying the debt.
Section 32-03-05, N.D.C.C., governs prejudgment interest in tort cases as follows:
In an action for the breach of an obligation not arising from contract and in every case of oppression, fraud, or malice, interest may be given in the discretion of the court or jury.
The statutes governing prejudgment interest do not require documentation establishing a written agreement between the parties.
The sixth document required by the proposal is an affidavit of costs and disbursements. The proposal indicates one dollar may be claimed for the cost of having an affidavit notarized. Section 44-05-03, N.D.C.C., allows five dollars.
The seventh document required by the proposal is an order for judgment. The proposal requires the order for judgment to recite the amount of accrued interest claimed together with interest accruing at the daily rate. The proposal only provides for interest to accrue until the judgment is satisfied if the rate of interest agreed to by the parties is higher than the legal rate of interest. The proposal does not provide for interest to accrue at the legal rate of interest until the judgment is satisfied if there is no agreement as to the rate by the parties. Normally, the rate of postjudgment interest is calculated according to N.D.C.C. § 28-20-34.(1)
Finally, the proposal provides findings of fact and conclusions of law are unnecessary. Rule 52, N.D.R.Civ.P., already provides findings of fact and conclusions of law are unnecessary on decisions of motions.
The fourth rule, N.D.R.Ct. 12.4, governs post-judgment collection proceedings. Subdivision (a) requires service under N.D.R.Ct. 4 for any further proceedings in which the assistance of the court is sought after judgment is entered. The proposal would change practice under Mid-Dakota Clinic v. Kolsrud, 1999 ND 244. In Mid-Dakota Clinic, the court said the trial court erred in concluding post-judgment documents must be served in accordance with the service of process requirements in N.D.R.Civ.P. 4. Id. at ¶ 16. Post-judgment discovery documents are subject to service under N.D.R.Civ.P. 5. Id. at ¶ 16. In addition, the court said a supplementary proceeding is not a new and independent action, requiring service of a summons. Id. at ¶ 17.
Proposed subdivision (b) of Rule 12.4 requires a judgment creditor to exhaust all remedies provided under N.D.C.C. ch. 27-21, before a postjudgment action will be considered by the district court. The proposal prohibits the judgment creditor from undertaking discovery under N.D.R.Civ.P. 69 in "aid of execution" until exhaustion of the remedies provided in N.D.C.C. ch. 28-21, "Execution of the Judgment." Again the proposal is contrary to case law. In Mid-Dakota Clinic, the court held execution is not required before discovery can be utilized under N.D.R.Civ.P. 69. 1999 ND 244, ¶ 15. The court explained:
Post-judgment discovery procedures are an inexpensive means to obtain information about a debtor's assets, without increasing the debtor's burden with the cost of an execution levy. Foregoing an execution also conserves law enforcement resources, because a sheriff's office need not be involved in every attempt to determine assets available to satisfy a judgment.
Id. at ¶ 15.
Finally, proposed subdivision (b) provides: "The district court has the discretion to require the judgment creditor to exhaust all remedies before any proceeding is held under N.D.C.C. 28-25." Currently, N.D.C.C. 28-25-01, provides for an examination of a judgment debtor if the execution is returned unsatisfied, or if it appears to the court that the judgment debtor is unjustly refusing to apply property to the satisfaction of the execution. Under N.D.C.C. § 28-25-01, it does not appear the court has discretion to require the judgment debtor to appear and answer unless the requirements of the statute are satisfied.
The last proposed rule, Rule 12.5 requires a satisfaction of judgment to be filed with the clerk of district court within 10 days. Currently, N.D.C.C. § 28-20-34 does not require a satisfaction of judgment to be filed within a specified time.
1. Interest rate on judgments. Interest if payable on judgments recovered in the courts of this state at the same rate as is provided in the original instrument upon which the action resulting in the judgment is based, which rate may not exceed the maximum rate provided in section 47-14-09. If such original instrument contains no provision as to an interest rate, or if the action resulting in the judgment was not based upon an instrument, interest is payable at the rate of twelve percent per annum and may not be compounded in any manner or form. Interest on all judgments recovered in the courts of this state before July 1, 1981, must remain at the rate per annum which was legally prescribed at the time the judgments were entered, and such interest may not be compounded in any manner or form.