LaFountaine v. State Farm Mutual Automobile Insurance

No. 84-526
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985

RONALD E. LA FONTAINE and BARBARA
J. LA FONTAINE,
Plaintiffs and Appellants,

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPATdY 1
Defendant and Respondent.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Nat Allen, Judge presiding.

COUNSEL OF RECORD:

For Appellants:
Gerald P. LaFountain, Billings, Montana

For Respondent :
Moulton, Bellingham, Longo & Mather; William Mather,
Billings, Montana

Submitted on Briefs: Feb. 22, 1985
Decided: April 9, 1985

Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

This is an appeal from an order and judgment of the
District Court of the Thirteenth Judicial. District,
Yellowstone County. The court set aside a default judgment
obtained by plaintiffs and entered a judgment of $4,031.50
against plaintiffs' attorney, Gerald P. LaFountain, for
sanctions pursuant to § 37-61-406, MCA. We affirm.
On September 14, 1.983, plaintiffs filed a complaint
against State Farm Mutual alleging bad faith in settling a
claim arising from an automobile accident between plaintiffs
and State Farm's insured. Plaintiffs attempted to serve
defendant at its Billings Claim Office. Defendant did not
answer the complaint and on October 6, 1983, plaintiffs filed
a motion for default judgment with the Clerk of Court in
Vellowstone County. On November 9, 1983, defendant filed a
motion to dismiss or in the alternative to quash the return
of service of summons. After a hearing, the court granted
defendant's motion and quashed service because plaintiff had
not served the defend-ant, a foreign insurer, in accordance
with S 33-1-602, MCA, which requires that service upon a
foreign insurer be made on the Commissioner of Insurance.
The court held this to be the exclusive means of serving
process upon a foreign insurer.
Plaintiffs then appealed to this Court. We dismissed
plaintiffs' appeal without prejudice on April 10, 1984, on
the grounds that the order appealed from was not an
appealable order. We remanded the case to the District
Court.
 On May 4, 1984, plaintiffs' attorney, Gerald P.
LaFountain, presented himself to Hardin E. Todd and Harry M.
Reed, Clerk and Deputy Clerk of Yellowstone County and
represented to Todd and Reed that he had won the appeal
before the Montana Supreme Court and was entitled to a
default judgment. Reed signed a judgment by default in favor
of plaintiffs and against State Farm for $150,000 in punitive
damages plus $385 in costs. Notice of entry of judgment was
served the same day. Later in the day, Reed had second
thoughts about the matter and conferred with Judge Holmstrom
who flagged the file to prevent execution.
On May 9, 1984, after defendant learned a default
judgment was entered against it, defendant moved to vacate
the default judgment and obtain sanctions against plaintiffs'
counsel.
On May 18, 1984, without leave of the court, plaintiffs'
counsel served notice of taking depositions on six persons
who plaintiffs claimed had knowledge of the facts of the
case. On May 21, 1984, defendant moved the District Court to
stay the taking of depositions until after the motion to set
aside the default judgment was heard. The court granted
defendant's motion ex parte.
A hearing was held on June 1 and continued on to June 6,
7 and 8, 1984. At issue were defendant's motion to set aside
the default judgment, the imposition of sanctions against
plaintiffs' counsel, Gerald P. LaFountain, and the propriety
of staying plaintiffs' depositions. On July 12, 1984,
findings of fact and conclusions of I.aw were entered. The
District Court vacated the default iudgrnent declaring it void
because defendant. was not properly served. Plaintiff was not
to take depositions without leave of the court until 30 days
after defendant was properly served pursuant to Rule 30 (a),
M.R.Civ.P. The court found LaFountain guilty of deceiving
the court and State Farm within the terms of $ 37-61-406,
MCA. The court scheduled a hearing for Zuly 20, 1984 to
determine the appropriate sanctions. After a hearing, the
court in its order and judgment of July 31, 1984 ordered
Gerald P. LaFountain to pay $4,031-. to State Farm pursuant
50
to 37-61-406, MCA.
ORDER VACATING DEFAULT JUDGMENT
Any default judgment entered against defendant in this
case was void for want of jurisdiction. Kraus v. Treasure
Belt Min. CG. (1965), 146 Mont. 432, 408 P.2d 151. Personal
jurisdiction over defendant State Farm was never obtained
because no valid service of process was ever made. Service
of process upon a foreign insurer may be made only by service
of process upon the Commissioner of Insurance of the State of

Ptontana under S 33-1-602, MCA; and see Reed v. Woodmen of the
World (1933), 94 Mont. 374, 22 P.2d 819. State Farm js an
Illinois corporation.
The Clerk of the District Court may enter a default
judgment under Rule 55 (b)(1), M. R.Civ. P. , only when the
amount of the claim is a sri certain.
ur The prayer for
punitive damages in plaintiff's complaint was not a sum
certain within the meaning of Rule 55(b) ( I ) , M.R.Civ.P. Even
if service of process on the defendant was proper the Clerk
was without legal authority to enter the default judgment.
For the above-stated reasons the District Court was correct
in vacating the C'efault judgment which plaintiffs claimed.
STAY OF DEPOSITIONS
Since plaintiffs never properly served the defendant,
the District Court was correct in ruling that plaintiffs
should not take depositions, pursuant to Rules 26(c) and
30 (a), M..R.Civ.P.

SANCTIONS
Gerald P. 1,aFountai.n contends that the adjudication of
sanctions under 5 37-61-406, MCA, is a criminal proceeding so
he is entitled to trial by jury, proof beyond a reasonable
doubt, the presumption of innocence, and a11 other rights
guaranteed a criminal defendant. Section 37-61-406, MCA,
provides:
"Any attorney or counselor who is guilty of any
deceit or collusion or consents to any deceit or
collusion with intent to deceive the court or a
party forfeits to the party injured by his deceit
or collusion treble damages. He is also guilty of
a misdemeanor. "
This statute was first passed by the Montana Legislature
in 1895. It has never been amended, only recodified. In
codification, this statute appears in the section of the Code
dealing with regulation of attorneys. In the 90 years S
37-61-406, MCA, has been in existence, this Court has never
been presented with a case requiring its interpretation.
The statute was borrowed from a section of the
California Penal Code which was enacted in 1872. In 1939,
Cal-ifornia repealed Penal Code S 160 containing the same
statutory languaqe as $$ 37-61-406, MCA, and enacted 5 6128 of
the Business and Professional Code of California which deals
with deceit by attorneys. Section 6128 provides for criminal
penalties only. We are unaware of California appellate cases
dealing with the issue at bar.
The Montana statute seems to be a hybrid using language
generally found in criminal statutes and language found in
statutes creating civil liability. For example, the wrords
guilty and misdemeanor connote criminalj-ty; treble damages
paid to the injured party connotes civil liability, as
distinguished from a fine payable to the State of Montana
which would indicate a criminal offense.
When we construe a statute, the intent of the
Legisla-ture is controlling. It is the duty of this Court to
give effect to the purpose of the statute, to construe it to
promote justice, and to give such construction to the statute
as wil.1 preserve the constitutional rights of the parties.
Mackin v. State (Mont. 1980), 621 P.2d 477, 481, 37 St.Rep.
1998, 2002. We think the statute ha.s a dua.1 purpose. One
purpose is to compensate the innocent party who incurred.
additional time and expense as a result of the deceit of the
culpable attorney. The other is to punish by criminal action
any attorney who deceives the court or the other party.
Hence, if criminal penalties are sought und.er this
statute, the accused lawyer must be indicted and prosecuted
by the State. He is entitled to a.11 of the rights guaranteed
und.er the Constitution of the United States and the Montana
Constitution.. On the other hand, if only monetary sanctions
are sought under the statute, the determination can be made
i-n a civi.1 proceeding.
In this case, LaFountain misrepresented to the Clerk of
the District Court that a default judgment had been
reinstated by order of the Montana Supreme Court. He
procured from the clerk, instead of from a judge, a judgment
based upon default without the hearing required in Rule
55 (b)(2), M.R.Civ.P. The District Court found LaFounta-in
intended to deceive the court or a party within the meaning
of 5 37-61-406, MCA. The finding is supported by the
evidence. We find the award. of $4,031..
.50 to be reasonable
and therefore affirm the judgment.
 \
Justice 4

F7e Concur: