No. 93-475
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
IN THE MARRIAGE OF
CAROL A . MARTIN,
Petitioner and Respondent,
and
RONALD I. MARTIN,
Respondent and Appellant.
COUNSEL OF RECORD:
For Appellant:
Debra D. Parker, Murphy, Robinson,
Heckathorn & Phillips, Kalispell, Montana
For Respondent:
Katherine R. C u r t i s , Kaplan & Curtis,
Columbia Falls, Montana
Submitted on Briefs: February 17, 1994
Decided: May 1 7 , 1 9 9 4
Filed:
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Ronald I. Martin appeals from an order of the District Court
for the Eleventh Judicial District, Flathead County, denying his
motion to set aside default.
We reverse and remand.
The issues on appeal are:
1. Does this Court have jurisdiction to consider appellantls
appeal?
2. Did the District Court abuse its discretion when it
entered and refused to set aside appellant's default?
3. Did the District Court err by including in its
distribution of the marital estate that property which was awned by
a corporation, other shareholders, and the partiest son?
On January 8, 1992, respondent Carol Martin filed a petition
for dissolution and served the petition and summons to appellant
Ronald Martin on January 10, 1992. On January 24, 1992, appellant
informed respondenttsattorney of his present address and that he
would be acting pro se. In the following months, appellant and
respondent's attorney exchanged correspondence pertaining to
marital assets and the corporate assets owned by the parties as
majority shareholders in Martin s Peat, Inc. The parties adult
children owned eight percent interest in the corporate assets. On
May I and May 26, 1992, respondent's attorney sent a letter to
appellant requesting he file his response to the dissolution
petition so that the matter could proceed and a trial date be set.
On June 10, 1993, respondent filed a notice of intent to enter
default with the District Court. Although an attempt was made on
June 7, 1993, to personally serve notice to appellant, service was
not made because he was out of town on vacation for two weeks. At
the hearing on June 11, 1993, the court granted respondent's motion
for entry of default, and after considering the evidence, the court
also entered its findings of fact, conclusions of law, and decree
of dissolution. A copy of the decree was served on appellant by
mail on that same date. Appellant retained an attorney, and on
June 23, 1993, he filed a motion to set aside the default, and also
for reconsideration and amendment of the June 11 decree due to the
court's distribution of non-marital property.
On August 5, 1993, during a hearing on the motion, the
District Court denied the motion to set aside the default, and in
response to appellant's amendment request, suggestedthat appellant
schedule an evidentiary hearing. On August 9, 1993, appellant
filed his appeal to this Court. On August 26, 1993, the District
Court entered its order denying appellant's motion to set aside the
default, and on October 1, 1993, notice of entry of the order was
served upon appellant's attorney.
ISSUE 1
Does this Court have jurisdiction to consider appellant's
appeal?
Respondent argues that this appeal is not properly before this
Court because appellant failed to file his appeal to the June 11,
1993, default within 30 days of entry, pursuant to Rule 5(c),
M.R.App.P. She also argues that he failed to file his appeal after
the entry date of the August 26, 1993, order denying his motion to
set aside default, and prematurely filed his appeal on June 9,
1993. Alternatively, she contends that he lost his right to appeal
the order by not filing by November 2, 1993, because the notice of
entry of order was served on appellant's attorney on October 1,
1993. We disagree.
Rule 1, M.R.App.P., allows this Court to consider an appeal
from an entry of a final judgment or special proceeding commenced
in a district court or from any special order made after final
judgment. An order made after final judgment setting aside or
refusing to vacate a default judgment is a special order. Marriage
of Rex (1982), 199 Mont. 328, 330, 649 P.2d 460, 461. "A final
judgment is one in which is there has been a final determination"
of the parties' rights. Kirchner v. Western Montana Regional
Community Mental Health Center, Inc. (Mont. 1993), 861 P.2d 927,
929, 50 St. Rep. 1299, 1300.
On August 5, 1993, during a hearing on the motion to set aside
default, the District Court denied the motion, thus making a final
determination of the parties' rights. See Marriage of Cox (1987),
226 Mont. 176, 736 P.2d 97 (finding minute entry was an effective
dismissal of appellant's subject matter jurisdiction motion).
Appellant had 30 days from the August 5, 1993, dismissal of his
motion to perfect his appeal; he filed his notice of appeal on
August 9, 1993, before the 30-day time limit.
In an appeal from a default judgment, this Court has
jurisdiction to hear both the refusal to set aside the entry of
default and the judgment entered by default. Lords v. Newman
(l984), 212 Mont. 359, 366, 688 P.2d 290, 294. This Court has
jurisdiction to review both the refusal of the District Court to
set aside the entry of default on August 5, 1993, and the judgment
by default entered June 11, 1993.
ISSUE 2
id the District Court abuse its discretion when it entered
and refused to set aside appellantlsdefault?
Our review standard of a trial court's refusal to set aside a
default is that "no great abuse of discretion need be shown to
warrant reversal," and our review is on a case-by-case basis.
Lords, 688 P.2d at 294. Policy favors that a litigated case should
be decided on its merits, and judgments by default are not favored.
In re the Marriage of whiting (1993), 259 Mont. 180, 854 P.2d 343.
The burden of proof is on the one seeking to set aside the default.
Siewing v. Pearson Co. (1987), 226 Mont. 458, 461, 736 P,2d 120,
122. An entry of default may be set aside by showing good cause;
default judgment may be set aside pursuant to Rule 60(b),
M.R.Civ.P. Rule 5 5 ( c ) , M.R.Civ.P. Good cause is shown by: the
defendant proceeded with diligence to set aside the default
judgment; the defendant's excusable neglect; the judgment will be
injurious to the defendant if allowed to stand; and the defendant
has a meritorious defense to the plaintiff's cause of action.
Blume v. ~etropolitanLife Ins. Co. (lggO), 242 Mont. 465, 467, 791
P.2d 784, 786. Rule 60(b) (1), M.R.Civ.P., allows a default
judgment to be set aside due to mistake, inadvertence, surprise, or
excusable neglect.
After reviewing the record and applying the above analysis, we
determine that the District Court abused its discretion when it
failed to grant the motion to set aside the default.
Appellant proceeded with diligence after the District Court
entered the June 11, 1993, judgment by default by retaining an
attorney and filing a motion to set aside the default on June 23,
1993.
In order to set aside default, an appellant must demonstrate
excusable neglect. Respondent argues that appellant was
sufficiently warned by letter "several times" that she would
proceed as necessary if he did not answer. Respondent does not
direct us to the record, and the only reference to the letter in
the record was in the transcript of the August 11, 1993, hearing
where respondent's attorney stated to the court that she sent a
letter to appellant in December 1992 informing him that she would
"proceed as necessary" if he failed to respond. The letter dated
December 1992 was not entered as evidence nor filed with the
District Court, and is not within the record. Those papers and
exhibits filed in the district court are part of the record on
appeal. Rule 9, M.R.App.P. A party's mere reference to certain
documents does not bring them within the record. 4 C.J.S. Awweal
and Error 5 456 (1993). Because the documents are not in the
record, we cannot review them on appeal.
Appellant contends that the District Court erred by not
finding excusable neglect because his case is similar to In re
Marriage of Broere (Mont. 1994), 867 P.2d 1092, 51 St. Rep. 17,
where the appellant, acting pro se in the dissolution case, was
affirmatively misled by the respondentls attorney that his
telefaxed response had been filed. Appellant argues that the
present case is analogous to Broere because respondent's attorney
repeatedly communicated to him that nothing could happen in the
dissolution proceedings until he filed a formal response.
On May 1, 1992, respondent's attorney wrote to appellant,
stating in pertinent part:
Dear Mr. Martin:
It will be necessary for you to file a formal response
with the Court in this matter so that I can request that
a trial date be set. The Court will not set a trial date
unless the case is Itat issue." which rewires that the
Res~ondent file a Response. I would appreciate your
filing your Response by May 15, 1992, so that we can
proceed with this matter. Thank you. [Emphasis added].
On May 19, 1992, appellant answered the letter, and received
the following reply from respondent's attorney:
Dear Mr. Martin:
In response to your letter of May 19, 1992, in this
matter, I must repeat mv reauest that vou file a formal
Response with the Court so that we can proceed with this
matter. I cannot reauest a Court date until vou have
done so, and while I am hopeful that a trial will not be
necessary, I do not want to further delay getting a date
from the Court.
... The process will be infinitely cheaper, easier
and quicker if you will cooperate with Rex Boller. If
you choose not to do so, we will have to obtain the
necessary information fromyouthrough formalmeans, such
as interrogatories, requests for production. ... This
is not intended as a threat, but simply to make clear
that we intend to proceed with a valuation of all
property, and will do so formallv if necessary. ...
The extent to which the process becomes adversarial
depends upon whether or not you and Carol cooperate to
the fullest extent of your ability. [Emphasis added].
Threats to proceed Mformally if necessaryw would be clear to
an attorney trained in the law. Those untrained in the law are
"often misled and get entire different meanings from conversations
than one trained in the legal field.'' Broere, 867 P.2d at 1094
(citing Waggoner v. Glacier Colony of ~utterites(19531, 127 Mont,
140, 148, 258 P.2d 1162, 1166). In Broere, after receiving
appellant's telefaxed letter responding to the petition of
dissolution, the respondent's attorney mistakenly sent the
appellant a note of issue stating that his response had been filed.
A few days later default was granted and respondent s motion to set
aside the default was denied. This Court held that the district
court abused its discretion by not setting aside the default
because the appellant was affirmatively, though innocently, misled
by the respondent's attorney that his response had been filed.
Broere, 867 P.2d at 1094.
Similarly, in the present case appellant was misled by
respondent's attorney who communicated to him that the matter would
not proceed in court until he filed his formal response, and then
entered default during a two week period when appellant was out of
town. Prior to the default, appellant communicated to both
respondent and her attorney his objections to respondent's division
of marital assets, and also communicated his desire to settle the
matter without court intervention. See Whitinq, 854 P.2d at 346
(finding that appellant's default was unwillful by her attempts to
resolve the dissolution issues for weeks prior to the default).
Moreover, the judgment will be injurious to appellant if allowed to
stand because the record reveals that a portion of the assets
awarded were corporate assets, part of which appellant argues are
required in the operation of the business, which further indicates
that appellant has a meritorious defense to the property
distribution.
Respondent argues that she would be prejudiced if this Court
set aside the default because it would violate the interests of
justice that require finality of the case. However, respondent
waited 17 months before attempting to put appellant in default
which shows a lack of urgency to finalize matters. In contrast,
the harm to appellant is great by having the default entered
against him without any possibility of presenting his arguments.
We hold that the District Court abused its discretion by not
setting aside the default and the denial of the District Court is
reversed.
ISSUE 3
Did the District Court err by including in its distribution of
the marital estate that property which was owned by a corporation,
other shareholders, and the parties' son?
Appellant argues that the District Court erred by distributing
corporate property belonging to the parties, as well as other
minority shareholders, consisting of bank accounts and real and
personal property. Respondent cites In re Marriage of Reich
(1986), 222 Mont. 192, 720 P.2d 286, for support that the
distribution of corporate assets was proper because the parties
hold a 92 percent interest in shares, and the court apparently felt
that the 8 percent interest owned by the adult children of the
parties had no value. We disagree.
Section 40-4-202 (1),MCA, directs the lower court to equitably
apportion assets tlbelonging either ox both, however and whenever
to
acquired and whether the title thereto is in the name of the
husband or wife or both."
A district court cannot distribute corporate property where
the corporation itself is not a party to the marital dissolution.
Reich, 720 P.2d 286; Buxbaum v. Buxbaum (l984), 214 Mont. 1, 692
P.2d 411. Corporate shares belonging to the parties in a
dissolution proceeding are a marital asset subject to distribution
within S 40-4-202, MCA. In re Marriage of Westland (l993), 257
Mont. 169, 848 P.2d 492.
Although the general rule is that corporate property cannot be
transferred unless the corporation is a party to the dissolution
proceedings, in the past this Court has approved the transfer of
corporate property but under facts peculiar to the case. In Reich,
we approved the district court's distribution of a corporate
vehicle to the wife because the husband was the corporationFssole
shareholder, and as such he could authorize the transfer of the
vehicle. Reich, 720 P.2d at 288. We remanded the case for the
husband's decision whether to accept the distribution of the
vehicle or to substitute property of equal value. Reich, 720 P.2d
at 288.
In Westland, we affirmed the District Court's apportionment of
corporate ranch properties as part of the marital property
distribution because a significant portion of the corporate real
property belonged to the parties, and the intended partition could
take place by the husband's transfer of his shares to the wife.
Westland, 848 P.2d at 494.
None of the facts found in Reich or Westland are present here.
Information in the record reveals that the District Court
distributed corporate property by awarding real property to
respondent owned by Martin's Peat, Inc. Also, a boat and trailer
awarded to respondent was owned by another family member.
Appellant argues that bank accounts belonging to the corporation
were also distributed. We are unable to ascertain ownership of the
remaining assets. Upon remand, we direct the District Court to
determine ownership of the corporate and marital assets before
distributing the marital property.
We reverse and remand to the District Court for further
proceedings in accordance with this opinion.
We concur:
May 17, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid,
to the following named:
Steven E. Cummings, Esq.; Debra D. Parker, Esq.
Murphy, Robinson, Heckathorn & Phillips, PC.
P.O. Box 759
Kalispell, MT 59903-0759
Katherine R. Curtis, Esq.
Kaplan & Curtis
P.O. Box 329
Columbia Falls, MT 59912-0329
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTmA
BY: IG \
y\
DeppP'