Hummell v. Hansen

23CA2150 Hummell v Hansen 10-24-2024

COLORADO COURT OF APPEALS

Court of Appeals No. 23CA2150
Jefferson County District Court No. 22CV30833
Honorable Ryan P. Loewer, Judge

Britton Hummell d/b/a Dream Team Colorado LLC, a Colorado limited liability
company,

Plaintiff-Appellant,

v.

Verna M. Hansen and the Verna M. Hansen Trust,

Defendants-Appellees.

ORDER REVERSED AND CASE
REMANDED WITH DIRECTIONS

Division VII
Opinion by JUDGE PAWAR
Tow and Schutz, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)
Announced October 24, 2024

LMB Partners, PLLC, Adam F. Aldrich, Denver, Colorado, for Plaintiff-Appellant

Law Offices of Gabriel Montalvo, PLLC, Gabriel Montalvo, Colorado Springs,
Colorado, for Defendants-Appellees
¶1 Britton Hummell,1 a general contractor, appeals the district

court’s denial of his motion to set aside the default judgment

entered against him and in favor of homeowner, Verna M. Hansen

and the Verna M. Hansen Trust (collectively “Hansen”). We

conclude that the district court erred by denying Hummell’s motion

because Hummell established excusable neglect. We therefore

reverse and remand with directions.

I. Background

¶2 Hansen hired Hummell to renovate the primary suite in her

house. While the renovation was underway, they noticed a water

leak in the kitchen that was unrelated to the in-progress

renovation. Hummell initially estimated that fixing the kitchen leak

would cost $5,000. Hansen asked Hummell to send the kitchen

repair estimate to her home insurance provider. Hummell did so,

but first conducted additional investigation into the extent of the

leak and damage. That additional investigation caused him to

1 Hummell filed the complaint in this action as “Britton Hummell,

d/b/a Dream Team Colorado, LLC.” No party contests Hummel’s
standing to pursue the subject claims or this appeal.

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revise the estimate to $12,500, and he sent that revised estimate to

Hansen’s insurer.

¶3 Apparently, Hummell’s submission of the revised $12,500

estimate triggered a breakdown in the relationship between the

parties. Hansen hired a different contractor to finish repairing the

kitchen leak. Hansen also contends that Hummell walked off the

job before completing the primary suite renovation. Hummell

contends that he completed the primary suite renovation and that

Hansen failed to pay him what he was owed under their contract.

¶4 In July 2022, Hummell sued Hansen in an action that

included claims for breach of contract and foreclosure of a

mechanic’s lien. Before Hansen answered the complaint,

Hummell’s counsel was allowed to withdraw, leaving Hummell

unrepresented.

¶5 In October 2022, Hansen answered the complaint and brought

eight counterclaims against Hummell, including fraud, breach of

contract, insurance fraud, a spurious lien, and violations of the

Colorado Consumer Protection Act (CCPA) and Colorado

Construction Trust Fund statute. When Hummell failed to file a

reply to the counterclaims within the required twenty-one days,

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Hansen moved for entry of a clerk’s default against him. Hummell

filed a pro se response to that motion on November 3, 2022. In it,

he told the court that he was “in between counsel” and

“interviewing a new lawyer.” He asked the court for “3 weeks to hire

a new lawyer.” Based presumably on Hummell’s representations,

the court denied Hansen’s motion for entry of default.

¶6 One month later, Hummell still had not replied to Hansen’s

counterclaims. On December 2, 2022, Hansen renewed her motion

for entry of default. Hummell failed to respond to this motion. The

court granted the motion a few weeks later, entering a default on

December 29, 2022, and deeming Hummell’s liability admitted as to

Hansen’s counterclaims.

¶7 A few months later, on April 17, 2023, Hansen moved for entry

of a default judgment. Hansen sought monetary damages in the

amount that she paid the other contractor to complete the primary

suite renovation, which she claimed was $44,900. Additionally,

and despite failing to plead a claim for exemplary damages, she

asked the court to treble the monetary damages to $134,700. She

also asked for $50,000 in non-monetary damages, over $29,000 in

attorney fees and costs, and pre and postjudgment interest. Less

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than an hour after the motion was filed, the district court

summarily granted it, entering judgment using the form submitted

by Hansen’s counsel, which the court did not modify or support

with factual findings or legal analysis.

¶8 The next month, on May 31, 2023, Hummell resurfaced. He

filed a pro se motion to set aside the default judgment, explaining

that he had been in Texas working for the winter and hadn’t been

receiving mail sent to his Colorado home, which was the only

address he had provided to the court. Hummell asserted excusable

neglect and contended that he had completed the primary suite

renovation and hadn’t been paid. He later renewed his motion to

set aside the judgment, this time represented by counsel. The

renewed motion laid out Hummell’s excusable neglect argument in

more detail, including explaining his defenses to Hansen’s

counterclaims and arguing that trebling Hansen’s economic

damages was error. The district court denied the motion without

explanation or analysis.

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¶9 Hummell appeals, arguing that he established excusable

neglect, and the court therefore erred by denying his motion to set

aside the judgment.2 We agree with Hummell that the court erred.

II. The District Court Abused its Discretion

¶ 10 A court may set aside a default judgment in accordance with

C.R.C.P. 60(b). C.R.C.P. 55(c). As relevant here, Rule 60(b)(1)

allows a court to consider setting aside a judgment if the moving

party demonstrates excusable neglect for failing to previously

respond. Under this rule, the burden is on the moving party to

establish excusable neglect by clear and convincing evidence.

McMichael v. Encompass PAHS Rehab. Hosp., LLC, 2023 CO 2, ¶ 13.

We review a court’s determination about whether a party has met

this burden for an abuse of discretion, meaning we will reverse only

if the ruling was manifestly arbitrary, unreasonable, or unfair. Id.

at ¶¶ 12, 15.

2 Hummell also appealed the judgment itself. But that part of the
appeal was dismissed as untimely. We therefore limit our review to
the district court’s denial of his motion to set aside the judgment.

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A. Setting Aside Default Judgments for Excusable Neglect

¶ 11 Default judgments are disfavored and “should be imposed only

in extreme circumstances.” Id. at ¶ 11 (quoting Beeghly v. Mack, 20

P.3d 610, 613 (Colo. 2001)). Consequently, we liberally construe

the criteria for setting aside a default judgment in favor of the

movant. See Goodman Assocs., LLC v. WP Mountain Properties, LLC,

222 P.3d 310, 320 (Colo. 2010).

¶ 12 Our supreme court has identified three factors that “guide” a

court’s decision whether to set aside a default judgment based on

excusable neglect: (1) whether the neglect that led to the default

judgment was excusable; (2) whether the moving party has alleged a

meritorious claim or defense; and (3) whether relief from the

judgment is consistent with considerations of equity. Id. at 319.

These three factors constitute a balancing test, not boxes to be

checked, and each factor must be considered in relation to the

others when resolving an excusable neglect argument. Id. at 321.

The failure to satisfy one of the three guiding factors is not

necessarily fatal to a claim of excusable neglect. That said, such a

failure can be fatal depending on the particular facts of the case.

Id.

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¶ 13 That the three guiding factors constitute a balancing test

rather than a checklist of prerequisites leads to a seemingly

paradoxical possibility: a party may be able to carry its burden to

establish excusable neglect overall even if, under factor one, the

neglect that led to the default judgment was not excusable. This

possibility exists because whether to set aside a default judgment is

“at its core an equitable decision” where the “goal is to promote

substantial justice.” Id. at 319.

¶ 14 Indeed, our supreme court has signaled its acceptance of this

possibility. In Goodman, the court noted the United States

Supreme Court’s refusal to treat factor one as a threshold

determination that must be satisfied before reaching factors two

and three. Id. at 321 (citing Pioneer Inv. Servs. Co. v. Brunswick

Assocs. Ltd. P’ship, 507 U.S. 380, 395 n.14 (1993)). Our supreme

court explained that although Colorado’s excusable neglect

standards were not identical to the Supreme Court’s, Colorado’s

standard “similarly ascribes a more flexible meaning to excusable

neglect and requires joint consideration of the reasons for the

neglect and the surrounding circumstances.” Id. at 322. Thus, we

read Goodman as leaving open the possibility that a party could

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carry its overall excusable neglect burden even if the neglect that

led to the default judgment was not excusable.

B. Hummell Established Excusable Neglect

¶ 15 We now turn to whether Hummell established excusable

neglect here, using the three factors described above as our “guide,”

and with the aim to make this “equitable decision” in a way that

“promote[s] substantial justice.” Id. at 319. We conclude that

Hummell carried his burden to establish excusable neglect despite

the fact that his neglect that led to the default judgment was not

excusable.

¶ 16 Under factor one, the neglect that led to the default judgment

is excusable if a reasonably careful person in the same situation

would have acted with the same neglect as the movant. See

McMichael, ¶ 14. Hummell’s failure to respond to the counterclaims

was not excusable under this definition. After he failed to answer

the counterclaims within three weeks as required by Rule 12(a)(4)

and Hansen had moved for entry of default, Hummell asked the

court, on November 3, 2022, for an additional three weeks to hire a

lawyer. The court effectively granted him that additional three

weeks. But Hummell’s next filing in the case occurred on May 31,

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2023, more than five months later. Hummell knew in November

2022 that if he did not respond to Hansen’s counterclaims in the

extra three weeks he requested, he risked a default judgment. A

reasonably careful person in this situation would not effectively

disappear from the case for the next five-plus months.

¶ 17 Moving to factor two, we conclude that Hummell presented a

meritorious defense to the counterclaims. To qualify as

meritorious, Hummell’s defenses must have been legally sufficient

and supported by factual allegations, but he did not need to prove

those factual allegations. See Goodman, 222 P.3d at 319. At the

outset, we note that Hansen has conceded a meritorious defense to

two claims. In her response to Hummell’s motion to set aside,

Hansen conceded that “a mechanic’s lien cannot be dismissed via

the spurious lien documents/spurious lien statute” as alleged in

her spurious lien counterclaim. And she concedes on appeal that

her CCPA claim “is inapplicable.” Hansen also concedes that both

the award of exemplary damages and the associated prejudgment

interest award were not legally supported.

¶ 18 As for the other counterclaims, as part of his motion, Hummell

filed an affidavit and screenshots of text messages between him and

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Hansen. His affidavit said that he submitted the revised $12,500

estimate for the kitchen repair to Hansen’s insurer at her direction,

and that the insurer paid her, not him, that full amount. The text

messages can be read to support that assertion.

¶ 19 Hummell also asserted in the affidavit that he completed the

scope of work under the contract for the primary suite and paid for

all labor and materials necessary to do so. These allegations

constituted potentially meritorious defenses to the breach of

contract and fraud-based counterclaims, as well as the

counterclaim based on the Colorado Construction Trust Fund

statute. Thus, Hummell has asserted potentially meritorious

defenses to all Hansen’s counterclaims (though we express no

opinion about whether those defenses would prevail).

¶ 20 Turning to factor three, equitable considerations strongly

supported granting Hummell’s motion to set aside. Hummell

argued in his motion that he would be unfairly prejudiced if the

judgment stood because the district court improperly trebled

Hansen’s economic damages and the award of $50,000 in non-

economic damages was not grounded in any evidence or factual

findings. See Goodman, 222 P.3d at 323 (the judgment’s unfairness

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to the moving party is an appropriate equitable consideration). On

appeal, Hansen concedes that the district court should not have

trebled the economic damages because she failed to plead a

counterclaim for exemplary damages — an error that resulted in an

$89,800 windfall to her.

¶ 21 What’s more, it appears from the record that the district court

failed to follow the required procedure in determining the amount of

economic and non-economic damages in the first place. After an

entry of default, a court must hold a hearing on damages unless the

action is “for a liquidated amount or a sum calculable by

mathematical processes alone.” Kwik Way Stores, Inc. v. Caldwell,

745 P.2d 672, 679 (Colo. 1987). If the damages are unliquidated a

hearing is required. Id. And at that hearing “the defaulting

defendant must have ‘the opportunity to participate fully,’” which

includes “a right ‘to cross-examine witnesses and to present

mitigating evidence.’” Dickinson v. Lincoln Bldg. Corp., 2015 COA

170M, ¶ 24 (quoting Kwik Way Stores, 745 P.2d at 679). There is

no indication in the record that Hansen’s economic or non-

economic damages were liquidated. Therefore, the district court

should have held a hearing and given Hummell the opportunity to

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contest those amounts instead of summarily granting Hansen the

damages she requested less than an hour after she requested them.

¶ 22 Other equitable considerations we are directed to account for

include the timeliness of Hummell’s motion, Hansen’s detrimental

reliance on the judgment, and any prejudice Hansen would suffer if

the motion were granted. See McMichael, ¶ 17. Hummell’s motion

was filed well within the 182 days prescribed by Rule 60(b). And it

does not appear from the record, nor does Hansen argue on appeal,

that she has detrimentally relied on the judgment or would be

prejudiced if it were set aside.

¶ 23 Having analyzed the three factors, we return to the

overarching principles that guide our inquiry. We are reminded

that the question before us is an equitable one whose goal is to do

substantial justice. See Goodman, 222 P.3d at 319. And we are

mindful that we must liberally construe the factors in Hummell’s

favor because “[d]isposing of a case on procedural grounds rather

than on the merits warrants serious caution and should only occur

in the rarest of occasions.” McMichael, ¶ 11.

¶ 24 In light of these guiding principles, we conclude that the

district court abused its discretion by denying Hummell’s motion to

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set aside the default judgment. True, Hummell’s neglect that led to

the default judgment was not excusable. But he presented

meritorious defenses to Hansen’s counterclaims. And the equities

heavily favor setting aside the judgment, given the district court’s

failure to hold a damages hearing and Hansen’s concession that the

court erred by trebling the damages at her request.

¶ 25 We find further support for our conclusion that denying

Hummell’s motion was manifestly arbitrary and unreasonable in

the summary nature of the denial. The district court provided no

explanation for its ruling and there was no evidence that it

considered the three factors or general principles discussed in this

opinion. Our supreme court has held that a court abuses its

discretion by failing to consider these factors and principles when

ruling on a motion to set aside a default judgment. Buckmiller v.

Safeway Stores, Inc., 727 P.2d 1112, 1115-17 (Colo. 1986). We

follow that holding here.

¶ 26 In light of this conclusion, we deny Hansen’s request for

attorney fees.

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C. The Clerk’s Entry of Default

¶ 27 Having concluded that the default judgment must be set aside,

we are faced with the question of what to do, if anything, with the

clerk’s entry of default. In his motion to set aside in the district

court and his opening brief, Hummell requested that the clerk’s

entry of default also be set aside. But his only argument in support

of setting aside the clerk’s default was the excusable neglect

argument we analyzed above. Apparently, Hummell assumes that

reversal of the default judgment necessarily reverses the clerk’s

default. But this assumption seems incorrect because our civil

rules set out different legal standards for setting aside default

judgments and clerk’s entries of defaults.

¶ 28 Rule 55(c) provides that a court may set aside a clerk’s entry of

default “[f]or good cause shown.” In contrast, and as discussed

above, a default judgment may be set aside for excusable neglect.

C.R.C.P. 55(c), 60(b)(1). Hummell presents a persuasive and well-

supported argument that he established excusable neglect to set

aside the default judgment. But he presents no argument at all

about whether he has shown good cause to set aside the clerk’s

entry of default. Nor does he present any argument about why

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setting aside the default judgment necessarily requires setting aside

the clerk’s entry of default.

¶ 29 Under these circumstances, we conclude that Hummell has

failed to properly challenge on appeal the clerk’s entry of default.

See Vallagio at Inverness Residential Condo. Ass’n v. Metro. Homes,

Inc., 2017 CO 69, ¶ 40 (declining to address argument presented

without supporting argument or authority). We therefore decline to

address it, expressing no opinion about whether the clerk’s entry of

default should remain in place or whether the district court is

bound by it on remand.

III. Disposition

¶ 30 The order denying Hummell’s motion to set aside the default

judgment is reversed and the case is remanded to the district court

with instructions to grant the motion and conduct further

proceedings consistent with this opinion.

JUDGE TOW and JUDGE SCHUTZ concur.

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