No. 89-567
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
CYLENE BLUME ,
Plaintiff and Respondent,
METROPOLITAN LIFE INSURANCE
COMPANY,
Defendant and Appellant.
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 Appellant:
George C. Dalthorp and Dennis Nettiksimmons,
Crowley, Haughey, Hanson, Toole & Dietrich,
Billings, Montana
For Respondent:
Frank C. Richter, Richter & Torkelson, Billings,
Montana h
Submitted on Briefs: March 22, 1 9 9 0
Decided: May 31 l g g O
Filed:
Justice John Conway Harrison delivered the opinion of the Court.
~etropolitanLife Insurance Company appeals the denial of its
motion to set aside a default judgment issued by the Thirteenth
Judicial District Court, Yellowstone County. We find the District
Court improperly denied the motion to set aside. We reverse.
The sole issue to be decided is whether the ~istrictCourt
abused its discretion in failing to set aside the default judgment
entered against the defendant Metropolitan Life Insurance Company.
plaintiff Cylene Blume filed a complaint against her former
employer, ~etropolitan Life Insurance Company (~etropolitan)
alleging wrongful termination. Because Metropolitan is an out-
of-state corporation, service was made through the State ~uditor
and commissioner of Insurance, Andrea llAndyll
Bennett, who sent the
complaint, summons and discovery documents by certified mail,
return receipt requested. The certified mail containing the
summons, complaint and documents was received and entered in
~etropolitan'smail log, but was apparently lost before anyone in
a position of authority at Metropolitan ever saw the summons and
complaint. Metropolitan failed to file an answer and a default
judgment was eventually entered against Metropolitan in the amount
of $185,986.43. Upon discovering the default judgment,
Metropolitan immediately moved to set it aside and accompanied the
motion with supporting affidavits. Because the District Court
failed to rule on the motion within 45 days, it was deemed denied
pursuant to Rule 60(c), M.R.Civ.P.
The Montana Rules of Civil Procedure allow for the setting
aside of a default judgment:
2
For 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).
Rule 55(c), M.R.Civ.P.
On motion and upon such terms as are just, the
court may relieve a party or his legal
representative from a final judgment, order,
or proceeding for the following reasons: (1)
mistake, inadvertence, surprise, or excusable
neglect; . . . The motion shall be made within
a reasonable time, and for reasons (I), (2),
and (3) when a defendant has been personally
served, whether in lieu of publication or not,
not more than 60 days after the judgment,
order or proceeding was entered or taken, or,
in a case where notice of entry of judgment is
required by Rule 77(d), not more than 60 days
after service of notice of entry of judgment.
. . .
Rule 60(b), M.R.Civ.P.
Where a trial court denies a motion to set aside a default
judgment the standard of review is that Ifno great abuse of
discretion need be shown to warrant reversal," or, alternatively,
Iltslight abuse1 is sufficient to reverse an order refusing to set
aside a default.I1 Lords v. Newman (1984), 212 Mont. 359, 364, 688
P.2d 290, 293. The Lords court, which drew a distinction between
the standards of review applied to cases where motions to set aside
default judgments had been granted and those that had been denied
based its holding on two basic tenets: (1) every litigated case
should be tried on its merits and default judgments are not favored
and (2) trial courts have a certain amount of discretion when
considering a motion to set aside a default judgment. Lords at
363, 688 P.2d at 293. Keeping in mind these underlying concerns
we now turn to the merits of the appellantls arguments.
Clearly, the burden of proof rests on the party seeking to set
aside the default judgment. Rule 55 (c), M.R.Civ. P. and Siewing v.
Pearson Co. (1987), 226 Mont. 458, 461, 736 P.2d 120, 122.
As noted in Rule 55(c), a default judgment may only be set
aside "for good cause shown." We have previously specified what
is necessary to establish such good cause:
"In order to justify the district court in
granting the motion, the defendant was
required to show: (a) That he proceeded with
diligence; (b) his excusable neglect; (c) that
the judgment, if permitted to stand, will
affect him injuriously, and that he has a
defense to plaintiff Is cause of action upon
the merits."
Kootenai Corp. v. Dayton (1979), 184 Mont. 19, 26, 601 P.2d 47, 51
(quoting Eder v. Bereolos (1922), 63 Mont. 363, 368, 207 P. 471,
Metropolitan presented a great deal of evidence to support its
motion to set aside the default judgment, including:
1. Metropolitan's mail room log, with an entry showing
receipt of mail from Andrea Bennett on February 9, 1989.
2. An affidavit from a general clerk in the administrative
staff in the law department in Metropolitan's home office,
explaining the standard procedure for distributing mail such as
that received from Andrea Bennett which is not addressed to a
particular member of the law department, and stating the mail from
Ms. Bennett should have been delivered to Janine Wright.
3. An affidavit from Janine Wright, senior paralegal at
Metropolitan who receives all new litigation cases against
Metropolitan, stating that she has no record of ever having
received the mail from Ms. Bennett and concluding it never arrived
in her in-box to be processed.
4. An affidavit from Marianne Feller, the administrative
manager in Metropolitan's law department, stating that all mail not
directed by name to a member of the law department would be given
to her or a member of her staff from Janine Wright and that she has
no independent recollection of ever having seen the mail in
question.
5. An affidavit from Lynn DiStasio, assistant general counsel
for Metropolitan, detailing (a) correspondence between her and
plaintiff's counsel, Frank Richter, regarding Richter's
representation of the plaintiff and other employees in
Metropolitan's Billings office in a separate matter;
(b) communication, by letter and by telephone, between her and
Richter regarding Richter's representation of the plaintiff in
connection with plaintiff's termination of employment with
Metropolitan; (c) the lack of correspondence or phone calls from
Richter, other than statements for his services, to Ms. DiStasio
in connection with Richter's representation of the plaintiff after
December 20, 1989; (d) the fact that she was unaware of the lawsuit
brought by plaintiff before August 21, 1989; (e) the events leading
to Metropolitan's discovery that a default judgment had been
entered against Metropolitan; and (f) the immediate steps taken by
Metropolitan to have the default set aside, including hiring a
Billings law firm on August 22, 1989 to represent Metropolitan in
this matter and requesting that that firm promptly move to set
aside this default judgment.
6. A second affidavit from Lynn DiStasio detailing the
thorough searches she made attempting to track down the missing
mail from Andrea Bennett and stating this was the only piece of
5
mail reported missing for the whole of 1989. DiStasio also notes
that while attorney Richter had threatened to file a lawsuit in
this matter, DiStasio had no knowledge or information causing her
to believe he actually intended to or did file the lawsuit on
behalf of the plaintiff against Metropolitan.
The evidence presented by Metropolitan shows that, upon
learning of the default judgment against it, Metropolitan proceeded
with the utmost diligence. ~etropolitanhired a Billings firm to
represent it within days of discovering the default judgment and
filed a motion to set aside the default judgment within a week of
discovering the default. Also, the motion to set aside the default
judgment was filed within 60 days after the entry of judgment, as
required by Rule 60(b), M.R.Civ.P.
The evidence produced by Metropolitan further demonstrates
that its failure to appear was not due to any inexcusable neglect
or disrespect for the court or judicial process. There is no doubt
that the summons and complaint sent by commissioner of Insurance
Andrea Bennett was received at the mail room of ~etropolitan'shome
office in New York. What happened to the summons and complaint
from that point is a mystery, but it is obvious from the affidavits
of Metropolitan personnel that there is a tried and proven
procedure in place at the Metropolitan home office for handling
mail such as that from Andrea Bennett containing the summons and
complaint. ~etropolitan employees, including assistant general
counsel DiStasio, made a concerted effort to find the mail after
the discovery of the default judgment. The mail still has not been
found, but it appears to be the only piece of mail reported missing
during all of 1989.
6
Negligence or inadvertence directly traceable
to a party litigant or his attorney, no less
excusable than that disclosed by this record,
has many times been held sufficient to warrant
the opening of a default, and trial courts
have not infrequently been reversed for their
refusal to set aside defaults under such
circumstances.
Greene v. Montana Brewing Co. (1905), 32 Mont. 102, 107, 79 P. 693,
694. The neglect in Greene resulted from an inexperienced
stenographer signing an acceptance of service and subsequently
misplacing a complaint served upon the law firm for which she
worked. The trial court's denial of the motion to set aside the
default judgment in Greene was reversed by this Court. Here, as
in Greene, the neglect is excusable.
There is no doubt that if the judgment is allowed to stand
defendant ~etropolitanwill be injuriously affected. A judgment
in excess of $185,000 adversely affects even the biggest
corporation.
When Metropolitan filed its motion to set aside the default
judgment it also filed a proposed answer to plaintiff's complaint.
Metropolitan asserts that it had good cause to terminate
plaintiff's employment because she participated in an unauthorized
signing of a company document and improperly paid premiums on
behalf of a policyholder. Metropolitan's proposed answer is
sufficient to constitute a meritorious defense. No affidavit of
merit is required. Keller v. Hanson (1971), 157 Mont. 307, 309,
485 P.2d 705, 707. The proposed answer does not have to
demonstrate the truth of the allegation of the answer, and it is
not appropriate to discuss the merits of the answer beyond finding
a prima facie defense. Eder v. Bereolos (1922), 63 Mont. 363, 368,
2 0 7 P. 471, 472; W o r s t e l l v . Devine ( 1 9 5 9 ) , 135 Mont. 1, 6 , 335
Metropolitan has s a t i s f i e d a l l f o u r requirements f o r s e t t i n g
a s i d e a d e f a u l t judgement. W e h o l d t h e D i s t r i c t C o u r t abused i t s
discretion i n r e f u s i n g t o v a c a t e t h e d e f a u l t judgment and w e ,
therefore, reverse.
i b , ~ s a h c ; d d
Justi e