Before Schwelb and Ruiz, Associate Judges, and King, Senior Judge.
The opinion of the court was delivered by: Ruiz, Associate Judge
Appeal from the Superior Court of the District of Columbia (Hon. Herbert B. Dixon, Jr., Trial Judge)
(Argued April 13, 2000 Decided May 18, 2000)
Appellant, Fernando E. Miranda, appeals from the entry of an adverse default judgment in the amount of $15,643.26. Miranda argues that the trial court abused its discretion by refusing to set aside the default judgment without first holding a hearing to inquire into the factual dispute over whether Miranda was served properly with the summons and complaint and whether assurances were made by opposing counsel that he would agree to consent to striking the default in the event that settlement negotiations were unsuccessful. Given the law's preference for resolution on the merits rather than by default, we agree that on the facts of this case a hearing is necessary to resolve the parties' contrary factual allegations. Accordingly, we remand for a hearing, findings of fact and conclusions of law concerning counsel's representations and, if necessary, on whether Miranda was properly served with process. *fn1
Appellee, Pedro Contreras, commenced this action by filing a complaint in the Superior Court for the District for Columbia on October 28, 1997. The complaint, styled as an action for "Unjust Enrichment," alleges that Miranda and Contreras "entered into a binding contract on or about May 5, 1995," in which Contreras would "loan [Miranda] the sum of $49,963.26 to develop a business venture known as the El Chaparrastique Restaurant" in return for consideration in the form of a partnership in the restaurant. *fn2 According to allegations in the complaint, the contract was subsequently modified by written agreement between the parties and provided for the repayment of the $49,963.26 to Contreras. The modified written agreement states that Contreras loaned Miranda the money to open the restaurant and, having paid Contreras the sum of $3,000, Miranda would repay the balance in eighteen monthly payments of $2610.00. Miranda allegedly made eleven such payments and then discontinued the payments.
A notarized affidavit of service stating that Miranda was personally served at his Maryland address with a copy of the summons, complaint and initial order on November 8, 1997, was filed with the court on November 10, 1997. No response to the complaint having been filed, the clerk's office entered a default against Miranda on December 18, 1997, pursuant to Superior Court Civil Rule 55 (a). On February 17, 1998, counsel for Contreras filed a "Motion for Judgment and Request for Ex Parte Proof Hearing." On February 26, 1998, Miranda filed an "Opposition to Motion for Judgment and Motion to Set Aside Default," accompanied by a verified "Answer and Counterclaim."
Miranda's opposition to the motion for judgment, signed by Miranda's counsel, Richard K. Green, recounted that Miranda hired the attorney on December 2, 1997, and represented that the summons and complaint had been found between the main door and the storm door of Miranda's residence. The motion further averred that on December 3, 1997, Mr. Green contacted Contreras' counsel, Henry A. Escoto, informing Mr. Escoto that service was insufficient and requesting documentary evidence of Contreras' claims in hope of a prompt resolution of the claims. On December 19, 1997, Mr. Green notified Mr. Escoto that he would be out of the area for the Christmas holidays and requested an extension of time to answer the complaint until after the first of the year when settlement discussions might moot the necessity of filing an answer. Mr. Green was notified by Mr. Escoto on January 5, 1998, that a default had been entered in the case, at which time Mr. Escoto allegedly agreed to consent to the striking of the default if settlement negotiations were unsuccessful. According to Miranda's motion, thereafter, when the parties were unable to agree on settlement terms, Mr. Escoto refused to enter into the agreed-upon consent motion and instead filed Contreras' motion for judgment.
The verified "Answer and Counterclaim," signed and "duly sworn on oath" by Miranda, avers "insufficiency of process" as Miranda's first defense: "The complaint was found laying in front of the defendant's front door by the defendant's wife." The answer pleads numerous defenses, including duress, supported by an allegation that "[t]he plaintiff publicly communicated a threat to kill the defendant if he did not agree to pay money to the plaintiff."
On March 23, 1998, the trial court docketed an order granting judgment to Contreras in the amount of $18,270.00 without a hearing. On March 31, 1998, Miranda moved the court to alter, amend or vacate the judgment, repeating the "representation by the plaintiff's counsel that he consented to setting aside the default if settlement were not reached." In response, Contreras' "Opposition to Defendant's Motion to Alter, Amend or Vacate," signed by Mr. Escoto, does not claim directly that no such representation was made, only that Mr. Green's "allegations are without merit," apparently because "[a]t no time did undersigned counsel advise, persuade, encourage or suggest to Defendant's counsel not to respond to the complaint." On May 1, 1998, the court entered an order leaving the default intact but vacating the judgment pending an ex parte proof hearing on the issue of damages. On June 12, 1998, the court held an ex parte proof hearing on damages and thereafter judgment was entered in favor of Contreras in the reduced sum of $15,643.26.
I. Setting Aside the Default Judgment
"The ruling on a motion to vacate default judgment is within the sound discretion of the trial judge." Dunn v. Profitt, 408 A.2d 991, 992 (D.C. 1979). However, we have often noted that "[a] strong judicial policy favors deciding cases on their merits rather than by default judgment." Hawkins v. Lynnhill Condominium Unit Owners Ass'n, 513 A.2d 242, 244 (D.C. 1986) (per curiam). "Where a timely motion is made to vacate a default judgment, the policy of favoring trial on the merits will often justify reversal where even a slight abuse of discretion has occurred in refusing to set aside a judgment." Dunn, 408 A.2d at 993. "In exercising its discretion, the trial court must choose what is right and equitable under ...