## Facts

- A farmer entered forward grain contracts with a grain elevator to deliver specified quantities at fixed prices.
- Due to drought and poor yields, the farmer could not deliver the full contracted amounts.
- The contracts permitted a buyout (closing out by paying the difference between contract price and market price).
- The farmer repeatedly sought an early buyout when the price differential was small, but the elevator refused.
- After a widespread drought drove market prices sharply higher, the elevator permitted a buyout at the higher market price, producing a much larger claimed liability.
- The elevator sued to recover the buyout amount plus interest and obtained a default judgment after the farmer failed to appear or answer.
- The farmer moved to vacate the default judgment under N.D.R.Civ.P. 60(b), alleging excusable neglect and a meritorious defense tied to the elevator’s conduct and the buyout timing.
- The district court denied Rule 60(b) relief, and the farmer appealed.

## Issues

1. Whether the district court abused its discretion by denying relief from a default judgment under N.D.R.Civ.P. 60(b) where the movant asserted excusable neglect, a meritorious defense, and minimal prejudice to the nonmovant.

## Decision

- The North Dakota Supreme Court reversed the order denying the motion to vacate and remanded for further proceedings.
- The court held the district court abused its discretion in refusing to set aside the default judgment.
- The court emphasized the state policy disfavoring default judgments and favoring decisions on the merits in close cases.
- The court concluded the farmer made an adequate showing of excusable neglect and a meritorious defense and that vacating the judgment would not cause substantial prejudice beyond delay.

## Legal Principles

- Relief from a default judgment under Rule 60(b) is discretionary, but courts should apply the rule liberally to permit adjudication on the merits when the circumstances warrant.
- A party seeking to vacate a default judgment must generally show (1) excusable neglect, (2) a meritorious defense, and (3) lack of substantial prejudice to the opposing party.
- “Meritorious defense” for Rule 60(b) purposes requires a showing that, if proven at trial, would constitute a defense to the claim; it need not be proven conclusively at the motion stage.
- In evaluating excusable neglect, courts consider the context and surrounding circumstances rather than applying a rigid or mechanical test.
- Delay alone typically does not constitute substantial prejudice sufficient to defeat Rule 60(b) relief absent a showing such as loss of evidence or unavailability of witnesses.

## Conclusion

The court required the default judgment to be set aside because the movant promptly sought Rule 60(b) relief, presented a plausible defense based on the elevator’s handling of the buyout timing, and showed that reopening the case would not substantially prejudice the elevator, making denial of relief an abuse of discretion.


Underwood Farmers Elevator v. Leidholm, 460 N.W.2d 711 (N.D. 1990)