No. 85-587
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
TWENTY-SEVENTH STREET, INC., a
Fontana Corporation,
Plaintiff and Respondent,
BOB JOHNSON and BEVERLY JOHNSON,
d/b/a PAIL INN,
Defendants and Appellants.
APPEAL FROM: District Court of .the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable William J. Speare, Judge presiding.
COUNSEL OF RECORD:
For Appel-lant
:
Calton & Hamman; Robin A. Wolf£, Billings, Montana
For Respondent:
English & Lee; Bruce E. Lee, Billings, Montana
Submitted on Briefs: Feb. 26, 1986
Decided: April 1 , 1986
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
Bob Johnson and Beverly Johnson d/b/a Rail Inn appeal
from an order of the District Court, Thirteenth Judicial
District, Yellowstone County denying their motion to set
aside a default judgment. We reverse and remand.
The sole issue on appeal is whether the District Court
erred in not setting aside the default judgment on the basis
of mistake, inadvertence or excusable neglect.
Bob and Beverly Johnson are the owners of the Rail Inn
Motel in Forsyth. In the summer of 1983, they neqotiated
with Cash Register Systems, Inc. for a cash register and a
drink mixer. The salesman told them that because the
equipment would be left at the motel, they had to sign a
lease, but that no payments would be due until the equipment
was installed and operating properly. The Johnsons signed a.
lease agreement with Rubick Leasing Co. that obligated them
to pay $359.37 per month for the next four years. Johnsons
claimed the equipment was never properly installed so the
Johnsons returned it to Cash Register Systems, Inc. in July
1983.
Meanwhile, Rubick Leasing assigned its interest in the
lease to Twenty-seventh Street, Inc. In September 1984,
Twenty-seventh Street instituted an action against the
Johnsons for over $14,000. The Johnsons hired an attorney
who entered negotiati-ons with Twenty-seventh Street, Inc. In
January 1985 the Johnsons dismissed their attorney. He filed
a praecipe to clerk and sent a letter to opposing counsel
explaining he had been dismissed. In March 1985, he moved to
withdraw as counsel of record. On the same day the attorney
also moved for additional time for Johnsons to file their
answer and get substitute counsel. However, the motion for
withdrawal did not include any documentation that the
Johnsons agreed to the dismissal. The motion wa.s never set
for hearing and the Court did not issue an order allowing the
attorney to withdraw. On June 12, 1985, Twenty-seventh
Street moved for default judgment. They served notice of
this motion on the attorney of record. On June 19 defa-ult
judgment was entered and the next day Twenty-seventh Street
executed on the Johnson's bank account.
The Johnsons hired a new attorney who moved to set aside
the default judgment against. the Johnsons under Rule 60 (b),
M.R.Civ.P. on the basis of mistake, inadvertence, surprise,
or excusable neglect. The District Court denied this motion.
The Johnsons have appealed.
Rule 55 (c) of the Montana Rules of Civil Procedure
allows a default judgment to be set aside in accordance with
Rule 6 0 (b) . Rule 60 (b) states that a judgment may be set
aside due to mistake, inadvertence, surprise or excusable
neglect. The Johnsons contend the facts show mistake and
excusable neglect, thus the judgment should be set aside.
They contend they received no notice of the impending default
judgment, and that they had believed the suit was resolved by
their first attorney. Twenty-seventh Street argues the facts
show inexcusable negligence and wanton disregard of the
judicial process. They argue they properly served the
attorney of record and it would have been improper for them
to communicate directly with the Johnsons. The court file
shows that counsel for Twenty-seventh Street had in fact
communicated by letter with the Johnsons on October 5, 1983,
when Johnsons were represented by counsel.
The standard of review of a refusal to set aside a
default judgment is a slight abuse of discretion by the
District Court. If a motion to open a default is made, and
is supported by a showing that leaves responsible minds in
doubt, courts tend to resolve doubts in favor of the motion,
since courts favor a tri.a.1 on the issues over a default
judgment. Cure v. Southwick (1960), 137 Mont. 1, 349 P.2d
575; Patterson v. Patterson (1947), 120 Mont. 127, 179 P.2d
536; Brothers v. Brothers (1924), 71 Mont. 378, 230 P. 60.
In Reynolds v. Gladys Belle Oil Co. (1926), 75 Mont.
332, 243 P. 576, we dealt with a similar situation. In
Reynolds a default judgment was entered against a foreign
corporation because the registered agent of the company
forwarded the papers served on him to the attorney who had
Seen general counsel of the company. Unbeknownst to the
agent, the company had dismissed that attorney. The papers
mailed to the a.ttorney did not come into the hands of the
president of the company until the day before the default
judgment was entered.
We held in Reynolds that the agent was negligent and
opened the default judgment for further proceedings.
Likewise here, the attorney was negligent in not properly
withdrawing and not notifying his former clients of the
pending motion for judgment of default. e reverse the
denial of the motion to set aside the judgment and remand for
further proceedings.
Twenty-seventh St.reet also contends that this appeal is
moot to the extent that the judgment has been satisfied by
execution. We disagree. If a judgment has been paid
voluntarily, it amounts to an accord and satisfaction.
However, if a judgment has been pa.id under legal coercion,
that judgment remains a proper subject for judicial review.
State v. Rafn (1956), 130 Mont. 554, 304 P . 2 d 91.8. In this
case, the judgment was partially paid after execution by
Twenty-seventh Street. That does not constitute voluntary
payment which wou1.d moot the issues on appeal.
The denial by the District Court of the motion to set
aside the default judgment is reversed and the cause remanded
for further proceedings. \
We Concur:
A