Default Judgments - July 2014

Terry Jessop & Bitner Newsletter

Issue 11, July 2014

Have you ever filed for default judgment in a lawsuit based upon a simple promissory note? The debtor owes the money, has no defenses, and does not answer the complaint. Should be easy, right? Not always, especially not in our new electronic world. Recently, a judge in the Third District Court refused to enter a default, stating that the provisions of the contract . . . "[could not] be readily located or determined nor can the court determine from these documents that defendant assented to these terms." The court granted the plaintiff an opportunity to try again by either removing a claim for attorney's fees and interest, or "filing with the court a legible, signed copy of the contract with the relevant provisions highlighted for the court, including provisions that specifically tie the purported interest rate to a contract signed by defendant."

Do I Need the Original?

In an electronic era where most contracts, documents and correspondence are electronically stored and the originals destroyed, we cannot forget that courts require proof by a preponderance of the evidence and that the evidence must be presented in a form that is admissible under the rules of the court. Under Utah law you can't get attorney's fees unless: (i) you are entitled to them under an applicable statute; or (ii) your defendant has signed a contract agreeing to pay them in the event of a breach. Most promissory notes, written contracts and credit card agreements have provisions allowing for attorney's fees. The problem is those terms are often buried deep in the contract in very small print, and frequently under a paragraph heading bearing another name. Another problem occurs when a business hires a minimum-wage employee to scan all their documents. Unless he or she is well-trained it is very possible that the attorney's fees provision may not get scanned as part of the contract. Many of the current contracts used by financial institutions are signed on one side but refer to terms on the other. Unless both pages are scanned it is highly likely that a judge may claim he cannot determine that certain provisions, like an attorney's fee clause, are tied to the contract signed by the defendant.

The Trouble with Credit Card Contracts

Some of the biggest offenders are credit card contracts. These contracts may be based on some kind of a master or Loanliner agreement, which are triggered by usage rather than a signature. The document we consider to be the Visa contract probably does not contain language authorizing attorney's fees. If you cannot prove that the borrower agreed to the small print because the signature page is somewhere else, a judge may refuse to award attorney's fees, default interest rates or other relief provided by the contract. In this era of electronic ease, we must maintain an adequate level of vigilance when it comes to the contracts we want courts to enforce. We must also remember that in certain circumstances, we may be required to produce original contracts with original ink signatures. Although rare, those instances do arise on occasion. If you are interested in having your contracts reviewed to make certain you comply with current law and applicable court rules or if you wish to have your policies and procedures governing paper retention examined, please feel to contact us.

©Terry Jessop & Bitner July 2014