Acupan v. Venzon

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
20-JUN-2024
07:48 AM
Dkt. 130 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

NORMAN KARL DOMINGCIL ACUPAN and MARISA CLAIRE
IHARA VALENCIANO, Plaintiffs-Appellees, v.
JEFFERSON VENZON, as Guardian of Milisav Michele
Nedeljkovic, Defendant-Appellant,
and
JOHN DOES 1-10; JANE DOES 1-10; DOE
PARTNERSHIPS 1-10; DOE CORPORATIONS 1-10; AND
DOE GOVERNMENTAL ENTITLES 1-10, Defendants

and

JEFFERSON VENZON, as Guardian of Milisav Michele
Nedeljkovic, Third-Party Plaintiff/Third-Party
Counterclaim Defendant-Appellant, v.
ALL ISLANDS, INC., doing business as CENTURY 21
ALL ISLANDS, Third-Party Defendant/Third-Party
Counterclaimant-Appellee

APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT
(CIVIL NO. 16-1-00005)

SUMMARY DISPOSITION ORDER
(By: Hiraoka, Presiding Judge, and Wadsworth and Nakasone, JJ.)

Defendant/Third-Party Plaintiff/Third-Party
Counterclaim Defendant-Appellant Jefferson Venzon (Venzon), as
Guardian of Milisav Michele Nedeljkovic (Nedeljkovic), appeals
from the Judgment, entered on March 19, 2020, in the Circuit
Court of the Fifth Circuit (Circuit Court).1/ The Judgment

1/
The Honorable Gary W.B. Chang presided. Pursuant to Hawai#i
Rules of Appellate Procedure (HRAP) Rule 43(a), and this court's March 24,
2021 order, Venzon has been substituted as the Defendant/Third-Party
Plaintiff/Third-Party Counterclaim Defendant-Appellant in place of
(continued...)
NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

followed entry of the Circuit Court's: (1) January 6, 2017 order
granting Plaintiffs-Appellees Norman Karl Domingcil Acupan and
Marisa Claire Ihara Valenciano's (Plaintiffs) motion for default
judgment against Nedeljkovic; and (2) March 13, 2018 order
denying Nedeljkovic's motion to set aside default judgment.
On appeal, Nedeljkovic contends2/ that the Circuit Court
erred in: (1) its application of the factors set forth in BDM,
Inc. v. Sageco, Inc., 57 Haw. 73, 549 P.2d 1147 (1976), for
evaluating a motion to set aside the entry of default or default
judgment; (2) taking judicial notice of alleged facts related to
a health condition at issue in the case; and (3) "in its finding
that Lolita Lacaden [(Lacaden)] is 'employed or associated with
Legal Aid.'"
After reviewing the record on appeal and the relevant
legal authorities, and giving due consideration to the issues
raised and the arguments advanced by the parties, we resolve
Nedeljkovic's contentions as follows, and vacate the Judgment.
Nedeljkovic contends that the Circuit Court misapplied
the factors set forth in BDM and thereby abused its discretion in
denying Nedeljkovic's August 24, 2017 motion to set aside default
judgment (Motion to Set Aside Default).
Hawai#i Rules of Civil Procedure (HRCP) Rule 55(b)
governs the entry of default and judgment by default. HRCP Rule
55(c), in turn, governs the setting aside of the entry of default
and judgment by default, as applicable. Specifically, HRCP Rule
55(c) provides that "[f]or good cause shown the court may set
aside an entry of default and, if a judgment by default has been
entered, may likewise set it aside in accordance with Rule
60(b)."
In Chen v. Mah, 146 Hawai#i 157, 457 P.3d 796 (2020),
the supreme court ruled that prospectively, an HRCP Rule 55(c)
motion to set aside entry of default is to be evaluated based

1/
(...continued)
Nedeljkovic, who filed this appeal, as well as the opening and reply briefs,
and who has since died.
2/
Although Venzon is now the Appellant, we refer to the contentions
and arguments contained in Nedeljkovic's opening and reply briefs as
Nedeljkovic's.

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only on whether there has been a showing of "good cause." Id. at
176, 457 P.3d at 815. However, such motions decided prior to
Chen must still be evaluated under the three-prong test
established in BDM, which is the standard we apply here. See
Chen, 146 Hawai#i at 174, 457 P.3d at 813. Under BDM, "a motion
to set aside a default entry or a default judgment may and should
be granted whenever the court finds (1) that the nondefaulting
party will not be prejudiced by the reopening, (2) that the
defaulting party has a meritorious defense, and (3) that the
default was not the result of inexcusable neglect or a wilful
act." BDM, 57 Haw. at 76, 549 P.2d at 1150 (citing 10 Wright &
Miller, Federal Practice and Procedure § 2696 (1973)). All three
prongs must be satisfied for a trial court to grant a motion to
set aside entry of default. See The Nature Conservancy v.
Nakila, 4 Haw. App. 584, 589-91, 671 P.2d 1025, 1030-31 (1983);
see also Chen, 146 Hawai#i at 174, 457 P.3d at 813 (addressing
the third prong first because it was dispositive).
Because Nedeljkovic's "meritorious defense" argument is
central to his appeal, we address that argument first. Under
BDM's second prong, Nedeljkovic had the burden of establishing
that he had a meritorious defense to Plaintiffs' claims. In
their Complaint, Plaintiffs alleged that they had entered into a
November 15, 2015 contract with Nedeljkovic under which he
promised to sell certain real property (the Property) to
Plaintiffs in exchange for money (the Purchase Contract); they
asserted claims for breach of contract and breach of the implied
covenant of good faith and fair dealing against Nedeljkovic. In
moving to set aside default, Nedeljkovic argued that he had a
meritorious defense to these claims – specifically, that he
lacked the legal capacity to enter into the Purchase Contract
because he was suffering from a specific health condition at that
time.3/

3/
On appeal, Nedeljkovic summarily asserts that he "also proffered
other potentially meritorious defenses." However, at the December 19, 2017
hearing of his motion to set aside default, Nedeljkovic stated that his "sole
argument" regarding the breach of contract claim was "incapacity[,]" and that
is the only discernible argument he makes in his opening brief. See HRAP Rule
28(b)(7) ("Points not argued may be deemed waived.").

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The supreme court has recently construed BDM's
meritorious defense prong as follows:

A meritorious defense does not mean a triumphant
defense; it's closer to a valiant defense. A favorable
outcome is not something the defaulting party needs to show.
Rather, the . . . movant only needs to present some factual
support - bare allegations will not do - that paves the way
to a different outcome. "All that is necessary to satisfy
the meritorious defense requirement is to allege sufficient
facts that, if true, would constitute a defense" to the
underlying matter. United States v. Aguilar, 782 F.3d 1101,
1107 (9th Cir. 2015) (cleaned up).

JK v. DK, 153 Hawai#i 268, 275, 533 P.3d 1215, 1222 (2023)
(emphasis added); see also Aguilar, 782 F.3d at 1107 ("'[T]he
question whether the factual allegation is true' is not to be
determined by the court when it decides the motion to set aside
the default. Rather, that question 'would be the subject of the
later litigation.'" (quoting United States v. Signed Personal
Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1094 (9th Cir.
2010)) (original brackets omitted)).
In support of the Motion to Set Aside Default,
Nedeljkovic made specific allegations and submitted certain
evidence regarding the health condition underlying his lack-of-
capacity defense. The evidence included a July 2017 medical
record; late-2015 and early-2016 email communications from Winnie
Lu (Lu), Nedeljkovic's realtor in the sale of the Property; and
deposition testimony of Timothy Jeffrey (Jeffrey), Nedeljkovic's
attorney-in-fact.
In denying the Motion to Set Aside Default, the Circuit
Court ruled that Nedeljkovic had failed to establish through
medical records or other evidence that he was incapacitated in
2015 when he entered into the Purchase Contract. The court
acknowledged that Lu's email comments about Nedeljkovic were
"very significant," but interpreted them, "as best as the Court
can tell," as merely "expressing frustration" in having to deal
with Nedeljkovic's indecisiveness and complaints about various
"life issues." The court concluded that "[t]he lack of evidence
in this case is fatal to . . . Nedeljkovic's [meritorious
defense] argument."
Although it is true that Nedeljkovic did not submit

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medical records or other evidence definitively establishing that
he was legally incapacitated in 2015, that is not the standard he
was required to meet to satisfy BDM's meritorious defense prong
at this stage of the litigation. Nedeljkovic presented – in
addition to bare allegations – some factual support for his
incapacity defense, including the July 2017 medical record, the
Lu emails and the Jeffrey deposition testimony. We conclude that
Nedeljkovic alleged sufficient facts that, if true, would
constitute a defense to Plaintiffs' claims. See JK, 153 Hawai#i
at 275, 533 P.3d at 1222.
We next address BDM's third prong, whether
Nedeljkovic's default resulted from "inexcusable neglect or a
wilful act." 57 Haw. at 76, 549 P.2d at 1150. Nedeljkovic
offered two reasons below for his default – his health condition
and his inability to secure a lawyer.4/ The Circuit Court
concluded, however, that "Nedeljkovic and his support[,]" i.e.,
Jeffrey and Lacaden, "were simply negligent in allowing the case
to fall into default and to wait until August 24, 2017, to move
to set aside the default remedy."
A finding of neglect or carelessness, by itself, could
not defeat Nedeljkovic's Motion to Set Aside Default. See JK,
153 Hawai#i at 276, 533 P.3d at 1223. The neglect had to be
"[i]nexcusable." Id. Here, Nedeljkovic submitted evidence that
he was suffering from a specific health condition affecting his
capacity by July 2017 – evidence that the Circuit Court credited
as probative of Nedeljkovic's condition at that time. Moreover,
Nedeljkovic's unrepresented status and his apparent struggle to
find counsel "frame[] [his] neglect." Id. In these
circumstances, we view the record as showing that Nedeljkovic's
default was not the result of inexcusable neglect or a wilful
act.

4/
Regarding the latter assertion, Nedeljkovic submitted Jeffrey's
deposition testimony that in February 2016, he attempted to secure counsel for
Nedeljkovic, but "[n]obody on Kauai that I went to, would take the case."
Nedeljkovic's counsel also stated that he had "spoken to at least two of the
Kauai-based attorneys that . . . Jeffrey contacted in hopes of securing
representation for . . . Nedeljkovic. Both attorneys indicated that the
position of Plaintiffs' father played a prominent role in their unwillingness
to represent . . . Nedeljkovic." Id. at 200 (some letter cases altered).

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Lastly, we examine whether Nedeljkovic's neglect
prejudiced Plaintiffs. See id. at 275, 533 P.3d at 1222. The
Circuit Court concluded that Plaintiffs would be prejudiced by
the reopening of the case because they have been waiting since
November 2015 to occupy the Property, and they assert they have
suffered reputational harm and harm to their credit because of
this case.
These alleged harms do not appear to be the result of
Nedeljkovic's default, but of the nature of the underlying
litigation. Plaintiffs "do[] not explain how setting aside the
default causes prejudicial harm to [their] case." Id. They do
not, for example, "point to common signs of prejudice, like lost
evidence or unavailable witnesses."5/ Id. We thus conclude that
Plaintiffs will suffer no prejudice, for purposes of the
applicable BDM standard, if the case reopens.
Therefore, we conclude that the Circuit Court abused
its discretion in denying the Motion to Set Aside Default. In
light of our decision, we need not address Nedeljkovic's second
and third contentions.
For the reasons discussed above, we vacate the
Judgment, entered on March 19, 2020, in the Circuit Court of the
Fifth Circuit, and remand the case for further proceedings
consistent with this Summary Disposition Order.
DATED: Honolulu, Hawai#i, June 20, 2024.

On the briefs:
Keith K. Hiraoka
Matthew Mannisto Presiding Judge
(Law Office of Matthew
Mannisto)
for Defendant-Appellant. Clyde J. Wadsworth
Associate Judge
Donna E. Richards and
Mark R. Zenger
(Richards & Zenger) Karen T. Nakasone
for Plaintiffs-Appellees. Associate Judge

5/
We recognize that Nedeljkovic has died since the Motion to Set
Aside Default (and this appeal) was filed. However, Plaintiffs have not
suggested that Nedeljkovic's death has prejudiced their case.

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