Nelson v. Old Coyote

No. 97-184

IN THE SUPREME COURT OF THE STATE OF MONTANA

1998 MT 37N

NORMAN NELSON,

Plaintiff 2 ndent,

v.

ELNORA A. OLD COYOTE
and JOHN WINSTON WRIGHT,

Defendants and Appellants

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Mike Salvagni, Judge presiding.

COUNSEL OF RECOlUl:

For Appellant:

Joseph M. Bradley, Bradley Law Office, Laurel, Montana

For Kespondent:

Carolyn S. Parker, Bowen & Parker, Bozeman, Montana

Submitted on Briefs: December 18, 1997

Decided: February 24, 1998
Filed:

I
derk
Justice James C. Nelson delivered the Opinion of the Court.

71 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal

Operating Rules, the following decision shall not be cited as precedent but shall be filed as

a public document with the Clerk of the Supreme Court and shall be reported by case title,

Supreme Court cause number and result to the State Reporter Publishing Company and to

West Group in the quarterly table of noncitable cases issued by this Court.

72 This is an appeal fiom the Eighteenth Judicial District Court's Order and

Memorandum entered January 28, 1997, denying a motion for relief fiom defaults and

default judgment filed by Elnora A. Old Coyote and John Winston Wright (Appellants)

pursuant to Rules 55(c), 60(b)(l) and 60(b)(3), M.R.Civ.P. We affirm.

Background

73 On April 15, 1996, Norman Nelson (Nelson) filed his complaint in District Court

seeking to quiet title to a tract of land in Gallatin County on which he was residing. He

pleaded theories of adverse possession, fraud, breach of contract, undue influence, unjust

enrichment, deceit, moral obligation and he claimed damages. At the same time, Nelson also

filed his application for a preliminary injunction and for a temporary restraining order. These

various pleadings were duly served on the Appellants. The Hon. Larry W. Moran, District

Judge, now retired, set a hearing on the application for injunctive relief for April 29, 1996.

This date was continued. On May 7, 1996, however, Appellant Old Coyote and Nelson

entered into and filed an agreement as to the restraining order. Attorney John Bradley

2
appeared for Appellant Old Coyote in conjunction with this agreement and filed an

unsupported Rule 12(b)(6), M.R.Civ.P. motion to dismiss Nelson's complaint on May 8,

1996. Attorney Bradley also appeared for Appellant Wright by filing a similar motion to

dismiss on June 13, 1996.

74 Judge Moran denied Appellant Old Coyote's motion to dismiss on June 6, 1996, and

granted her 20 days in which to further plead. On June 24, 1996, Nelson filed his motion

requesting that the court deny Appellants' motions to dismiss noting that they had been

granted two extensions of time in which to plead. Attorney Bradley was served by mail with

this response. Appellants did not respond to this motion. However, the record does not

reflect that any "extensions" to plead, other than the two unsupported motions to dismiss,

were requested by Appellants or granted by the court. In any event, Wright's motion to

dismiss was denied on June 26, 1996. In this order, Judge Moran required that "Defendants

shall file Answer or otherwise plead by July 10, 1996." On July 23, 1996, the court entered

an amended order for preliminary injunction. Counsel of record were served by mail. On

August 1, 1996, Nelson's counsel filed a lispendens; this document indicates that, in addition

to the Clerk and Recorder, copies were directed to Appellants.

75 Appellants having failed to answer or file any hrther appearances in the lawsuit, on

August 8, 1996, Nelson filed his Rule 55(b)(2), M.R.Civ.P. motion for entry of default

judgment. This motion was supported by a brief and was served by mail on counsel for

Appellants. The motion requested that Nelson be granted ownership of a 180' x 180' portion
of the real property described in the complaint on which his house is located; that he receive

an unencumbered conveyance of such property by valid deed based on a survey which he

would obtain; that he be granted his attorney's fees and costs; and that he be granted other

relief deemed proper. By minute order dated August 14, 1996, the clerk set a hearing on this

motion for September 9, 1996, at 9:00 am. The record reflects that the clerk mailed a copy

of this minute order by certified mail to Attorney Bradley and that the order was received on

August 30, 1996. The initials "JMB" appear on the certified-mail receipt card. Appellants

did not timely file any written opposition to Nelson's motion for default judgment, nor did

they appear either personally or by counsel at the September 9, 1996 hearing on the motion.

76 At the hearing, Nelson presented sworn testimony in support of his complaint.

Following the hearing, Judge Moran granted Nelson's motion and ordered that default

judgment be entered against Appellants granting and conveying to Netson, by valid deed and

following the survey, an unencumbered title to the 180' x 180' parcel. Nelson was also

awarded his attorney's fees and costs. Counsel of record were served by mail with this order.

On October 7, 1996, the court entered a decree quieting title, ordered a survey and appointed

the clerk of court as a special master to convey the real property to Nelson. Again, counsel

of record were served by mail with this document. On November 1, 1996, counsel for

Nelson filed a notice to the court indicating that a preliminary survey had been completed

and had been presented to the court for approval along with an attached letter from the

surveyor. Attorney Bradley was served by mail with a copy of this notice.
17 On November 29, 1996, Appellants, by Attorney Bradley, entered their first

appearance in the suit since the June motions to dismiss wcrc filed. Appellants filed their

motion for relief from defaults and default judgment under Rules 55(c), 60(b)(l) and

60(b)(3), M.R.Civ.P. The motion was supported by a brief and the affidavits of Appellants

and four other persons. On December 3, 1996, Nelson's counsel filed notice of entry of the

October 7, 1996 decree and a notice to the court and affidavit of fees; she served these

documents by mail on counsel for Appellants. By minute order dated December 9, 1996, the

clerk of court set a hearing on Appellants' motion for relief from defaults and default

judgment for January 15, 1997, at 9:00 am. Counsel of record were served by mail.

Appellants filed objections to Nelson's bill of costs and attorney's fees (December 9, 1996);

a motion for stay (December 9, 1996); a notice of hearing (December 13, 1996); and another

affidavit (January 14, 1997). On December 11, 1996, Nelson filed his objection to the

motions for stay and for relief from defaults and default judgment. Counsel of record served

each other by mail with these various documents.

18 Appellants' motions for relief from defaults and default judgment and for stay were

heard on January 15, 1997, by the Hon. Mike Salvagni, Judge Moran's successor in office.

Nelson and Old Coyote testified; Wright did not attend the hearing; counsel for the parties

offered argument. With leave of the court, Nelson filed an amended response to Appellants'

motion for relief from defaults and default judgment and a supporting hearing brief on

January 21, 1997. Appellants filed two supplemental briefs in support of their motion
(January 24 and 27, 1997). The court entered its Order and Memorandum on January 28,

1997, denying Appellants relief. Appellants timcly filcd their notice of appeal from the

court's order denying their motion for relief from defaults and default judgment.

Issue

79 The sole issue on appeal is whether the District Court abused its discretion in denying

Appellants' motion for relief from defaults and from default judgment. We hold that the

court committed no abuse of discretion under the facts and procedural background of this

case.

Discussion

710 Rule 55(c), M.R.Civ.P., provides in relevant part:

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).

Our standard of review of a district court's refusal to set aside default is whether there was

a slight abuse of discretion by the court. Waldher v. F.D.I.C. (1997), 282 Mont. 59,62,935

P.2d 1101, 1103 (citing Twenty-Seventh Street, Inc. v. Johnson (1986), 220 Mont. 469,471,

716 P.2d 210,211). In this case, however, Appellants did not file their Rule 55(c) motion

until after default judgment had been entered against them. As we stated in Karlen v. Evans

(1996), 276 Mont. 181,915 P.2d 232:

As a general rule, cases are to be tried on their merits and judgments by default
are not favored. Maulding v. Hardman (1993), 257 Mont. 18, 23, 847 P.2d
292,296 (citing Lords v. Newman (1984), 212 Mont. 359,363,688 P.2d 290,
293). If the trial court refused to set aside the judgment, then only a slight
 abuse of discretion need be shown to warrant reversal. & , 688 P.2d at 293.
If the trial court has set aside the judgment and the appellant requests that the
judgment be reinstated, then a manifest abuse of discretion must be shown to
warrant reversal. Lords,688 P.2d at 293.

Karlen, 276 Mont. at 185, 915 P.2d at 235. Since, in the instant case, the District Court

refused to set aside the default judgment, our discussion will center on whether Appellants

have demonstrated a slight abuse of discretion on the part of the District Court which would,

therefore, warrant reversal.

Ill Appellants ground their Rule 55(c) motion in Rules 6O(b)(l) and 60(b)(3), M.R.Civ.P.

Rule 6O(b)(l) allows the court to relieve a party from a final judgment for "mistake,

inadvertence, surprise, or excusable neglect." Rule 60(b)(3) allows the court to grant this

same relief on the basis of "fraud (whether heretofore denominated intrinsic or extrinsic),

misrepresentation, or other misconduct of an adverse party." A party seeking to set aside a

default judgment must show both a good cause for doing so under Rule 60(b), M.R.Civ.P.,

and the existence of a meritorious defense. Maulding, 257 Mont. at 23, 847 P.2d at 296

(citing First Nat. Bank of Cut Bank v. Springs (1987), 225 Mont. 62,67,73 1 P.2d 332,335).

I12 In ruling on their motion, the District Court considered Appellants' Rule 55(c) motion

first in the context of Rule 60(b)(l) and then, separately, in the context of Rule 60(b)(3).

With regard to the former, the court ruled that the Appellants missed three filing deadlines.

The court observed that on June 6, 1996, Appellant Old Coyote's motion to dismiss was

denied and that she was given 20 days to further plead. She failed to do so. In the meantime,
Appellant Wright filed his motion to dismiss on June 13, 1996, and this motion was denied

on June 26, 1996. Both Appellants were given until July 10, 1996, to further plead and, as

the court correctly noted, the Appellants did nothing.

113 The court next pointed out that on August 8, 1996, Nelson filed his motion and brief

for entry of default judgment. Notice of the September 9, 1996 hearing was served upon

Appellants' counsel by certified mail. Appellants did not respond to the motion and did not

appear at the hearing. Both the order directing that default judgment be entered against

Appellants filed on September 9, 1996, and the decree quieting title to the subject property

filed on October 7, 1996, were served by mail upon counsel of record. Once again,

Appellants did nothing further. They finally filed their Rule 55(c) motion on November 29,

1996--morethan four and one-half months after the July 10, 1996 date on which they were

ordered to answer or otherwise plead.

114 The court noted that in their brief in opposition to the default judgment, Appellants'

counsel advised that he was absent from his law office for much of the months of July and

August 1996 due to illness. Counsel further pointed out that he is a sole practitioner who

operates his law office without a secretary or receptionist. Moreover, he claimed that during

his illness mail addressed to him was picked up from the post office by other persons,

including relatives and friends. Nonetheless, the court found that at the hearing on

Appellants' motion to set aside the default judgment, Attorney Bradley did not provide the

court with any reasons why his illness was so severe that he could not look at his mail or
calendar hearings for two months. The court noted that Appellants' counsel did not present

any medical evidence to substantiate his illness claim, nor did he request any continuances

due to illness during the progress of the case. Moreover, Attorney Bradley made no

arrangements with another attorney to look after his cases and he gave no fhrther explanation

for missing three important filing deadlines.

115 The District Court cited our decision in Morris v. Frank Transportation Co. (1979),

184 Mont. 74,601 P.2d 698, wherein we ruled that the defendant's illness did not constitute

excusable neglect for purposes of Rule 60(b)(l). Citing Dudley v. Stiles (1963), 142 Mont.

566,568,386 P.2d 342,343, we concluded that a failure to appear due to forgetfulness and

the press of other more important business is not sufficient to establish excusable neglect.

Even the most liberal approach to this problem cannot save Appellant's case.
". . . A liberal court cannot find excusable neglect where a defendant has
willingly slumbered on his rights and ignored the judicial machinery
established by law."

w, Mont. at 76, 601 P.2d at 699 (quoting Dudley, 142 Mont. at 568, 386 P.2d at
184

716 We agree with the District Court's analysis. Appellants' attorney argues in his brief

on appeal that he was absent a good deal of time from his office during the months of July

and August 1996; that he is a solo practitioner and operates without the benefit of a secretary

or receptionist; and that due to his illness (severe depression), relatives and friends, none of

whom were attorneys, picked up his mail from the post office. He contends that his chronic

depression, which became severe during the period in question, rendered him unable to

9
perform detailed or lengthy mental tasks. Moreover, Appellants' counsel argues that this

"information would have been made available to the District Court upon request. Judge

Salvagni did not even inquire into the nature of counsel's illness, however."

717 In point of fact, Judge Salvagni did inquire of Attorney Bradley as to the reason for

his failure to timely respond; it was Attorney Bradley who failed to adequately explain to the

court the basis for his failure to appear on this clients' behalf. The transcript of the January

15,1997 hearing reveals the following exchange:

THE COURT: I have a question of you. Why did you not appear at the
hearing on the motion for default?

MR. BRADLEY: I don't dispute that Mrs. Parker properly sent notice to my
office of that hearing, but I didn't personally see it. That's not necessarily an
excuse that's acceptable under law. I was out of the office sick. I didn't sign
for the letter. I don't have anybody else in my office. I don't have any
secretaries or lawyers. I'm the only person in there. And when I was out of
the office, two different people were picking up my mail. One is my mother;
one is a friend of mine. And they sign "JMB" on those receipts when they
pick them up, because the certified letter was not restricted delively.

THE COURT: Did you receive a copy of Judge Moran's order requiring
the Defendants to respond by July loth, I believe it was?

MR. BRADLEY: That was his motion--that was his order denying our
motion to dismiss on behalf of Defendant Wright, and yes, I did receive that.

THE COURT: Why didn't you respond by July loth?

MR. BRADLEY: This is a complicated case, your Honor, and, again, I was
out of the office quite a bit this summer due to illness.
Our witnesses are widely scattered. Mr. Wright lives in Texas. A
grandson, you have an affidavit from him, he's going to school in Georgia.
Mrs. Old Coyote lives in Huntley. Some of the witnesses--and there is one
affidavit from a nonrelative that's filed from Mr. Mike Cech. He lives in
 Bozeman. For us to gather the information in that time was very difficult,
especially due to my absences.
And I would note that according to Ms. Parker's affidavit of fees, she
started work on this case a good six or eight months before she filed the
Complaint, based on what she's charging for there. So they had lots of time.
Now, obviously in hindsight it would have been better for me to ask the
Court for additional time to answer. I didn't do that because of my absences
from the office.
When we did get the notice--or the order that default had been entered
and a decree had been granted, wc timely filed this motion to set that aside
within 60 days. So I think we are here in timely fashion.

118 From this colloquy it is apparent that even when given the opportunity to do so,

Attorney Bradley did not adequately explain his claim of illness to the court. He did not

present any basis on which the court could have concluded that his depression was so severe

that it completely incapacitated him and precluded him from appearing on behalf of his

clients. Furthermore, Attorney Bradley's explanation rings hollow when one considers that

he represented Appellant Old Coyote in connection with the negotiation and drafting of the

May 7, 1996 agreement regarding the temporary restraining order; that he filed a motion to

dismiss on behalf of Appellant Old Coyote on May 8, 1996; and that he filed a motion to

dismiss on behalf of Appellant Wright on June 13, 1996.

119 Attorney Bradley chose to practice law without the benefit of even a sccrctary to

receive and open the mail and tend to his office matters in his absence. Indeed, though he

apparently knew that he was subject to bouts of severe depression, he failed to demonstrate

that he had established any sort of contingency plan or arrangement with another attorney to

monitor him or his practice if he became incapacitated because of his illness. Rather, he
chose to rely on non-lawyer friends and relatives to pick up his mail.

720 We conclude that the District Court correctly determined that Appellants failed to

meet their burden to demonstrate good-cause grounds for granting relief from default

judgment under Rule 60(b)(l), M.R.Civ.P.

7 21 Similarly, Appellants' argument that the court should have granted their motion for

relief under Rule 60(b)(3), M.R.Civ.P., is also without merit. As noted by the District Court,

Appellants' motion under Rule 60(b)(3), was based on their allegation that Nelson had

committed fraud by misleading the court to award a 180' x 180' lot rather than the 60' x 60'

lot evidenced in writing. Appellants contended that the statute of frauds and par01 evidence

rule should have prevented the court from considering the larger lot size and, as a corollary

to this argument, that the relief granted on default, namely the easement across their property,

exceeded the demand for judgment under Rule 54(c), M.R.Civ.P. The court disagreed,

concluding that Nelson's testimony indicated that he had been led to believe that he owned

the larger lot and that this testimony was supported by the fact that the residence he built for

himself extended beyond the boundaries of the 60' x 60' lot. Moreover, the court noted that

Nelson's complaint identified the 180' x 180' lot as the property being sought in the quiet title

action and the adverse possession action. Accordingly, the court concluded that Appellants'

failure to answer and contest Nelson's claim for the 180' x 180' lot did not impute fiaud on

Nelson's part.

722 Again, we agree with the District Court. Intrinsic fraud consists of false or fraudulent
representation or concealment made during court proceedings. Falcon v. Faulkner (1995),

273 Mont. 327,332,903 P.2d 197,200 (citing Lance v. Lancc (1981), 195 Mont. 176, 180,

Extrinsic fraud has been defined as some intentional act or conduct by which
the prevailing party has prevented the unsuccessful party from having a fair
submission of the controversy. [Citation omitted.] Extrinsic fraud is collateral
to the matters tried by the court, but docs not include fraud in the matters on
which the judgment was rendered.

In re Marriage of Miller (1995), 273 Mont. 286,292,902 P.2d 1019, 1022-23 (citing Pilati

v. Pilati (1979), 181 Mont. 182, 193, 592 P.2d 1374, 1380; and Salway v. Arkava (1985),

215 Mont. 135, 140,695 P.2d 1302, 1306).

123 Our examination of the record in this case does not reveal that Nelson's default

judgment was obtained on the basis of either intrinsic or extrinsic fraud as required by Rule

60(b)(3), M.R.Civ.P. Indeed, Appellants' brief on appeal demonstrates little more than that

they disagree with the allegations and claims in Nelson's complaint and with his testimony

at the default hearing on September 9, 1996. However, a dispute as to the allegations and

claims in a complaint and a disagreement as to a witness' testimony at a hearing do not,

without more, impute fraud. In point of fact, it is precisely these sorts of disputes and

disagreements that litigation and the fact-finding process--assuming one participates in it--

are designed to resolve.

124 We conclude that the court correctly found no basis for vacating Nelson's default

judgment under Rule 60(b)(3), M.R.Civ.P., on the facts of this case.
725 Finally, Appellants contend that we should find a slight abuse of discretion on the part

of the District Court because further litigation will result from the default judgment; because

they were prejudiced by a change ofjudgeship during the pendency of their motion; because

the court's order denying their motion to set aside the defaults and default judgment is not

supported by the record; and because they believe that Nelson also committed serious

procedural errors. In our view, none of these contentions support a finding of abuse of

discretion, slight or otherwise, on the part of the District Court.

726 On the matter of further litigation, Appellants contend that further litigation will be

necessary because Nelson does not have access to his newly decreed plot except over

Appellants' land. Nelson disputes this allegation contending there is an existing road, built

at his expense, which accesses the entire property. Even if, theoretically, some sort of hrther

proceedings are necessary to resolve this access issue, Appellants cite no on-point authority

for the proposition that the possibility of future litigation is grounds to set aside Nelson's

default judgment. Similarly, Appellants contend that the possibility of the property being

encumbered by a prior mortgage and questions regarding the survey and ownership of other

improvements on the subject property will require fiu-ther litigation. Again, these sorts of

speculative arguments are not grounds to set aside the default judgment.

727 Appellants claim they were prejudiced by the change of judges during the pendency

of this case. This argument is without merit. While Judge Salvagni did assume jurisdiction

of this case from Judge Moran after Judge Moran's retirement, there is absolutely no proof
that Judge Salvagni was not thoroughly familiar with the case when he entered his order and

memorandum on January 28,1997, denying Appellants' Rule 55(c) motion or that the change

ofjudges somehow prejudiced Appellants. We will not speculate, as Appellants do, on what

Judge Moran might have done had he remained on the case. If Appellants' case was not

adequately presented at the hearing on their motion to set aside the default judgment, that is

not the fault of Judge Salvagni, and we will not hold the District Court in error for

Appellants' own failure of proof.

128 Next, Appellants contend that substantial portions of the District Court's rationale in

denying their motion for relief are not supported by the record. Having reviewed the record,

we are not persuaded that this argument has any merit. The court's rationale is supported by

the record. Similarly, Appellants contend that Nelson committed procedural errors at least

as serious as their own failure to answer. Appellants do not explain how exactly they were

prejudiced by these alleged errors or why "equity requires that the entire case be opened on

the merits." Accordingly, we reject this argument as well.

129 Finally, Appellants contend that they have meritorious defenses under the statute of

frauds and other theories that would be available to defeat the allcgations in Nelson's

complaint. The short answer to this contention is that before the court can grant a motion to

set aside a default judgment, the movant must establish not only that he had a meritorious

defense but also that there was "good cause" for not answering the complaint or responding

or defending in any way in the first place. Maulding, 257 Mont. at 23,857 P.2d at 296; Rule
55(c), M.R.Civ.P. Because, as noted above, Appellants failed in their burden to establish

"good cause"--i.e., mistake, inadvertence, surprise, or excusable neglect under Rule 60(b)(l),

or fraud, misrepresentation, or misconduct of an adverse party under Rule 60(b)(3)--the

District Court need not address, nor do we need to review, the claim that the defaulted party

has meritorious defenses. Svrings, 225 Mont. at 67,731 P.2d at 335.

7/30 In summary, on the record presented on appeal, we find no abuse of discretion, slight

or othenvise, by the District Court in its denial of Appellants' motion to set aside defaults and

default judgment entered in favor of Nelson.

7/31 Affirmed.

We Concur: /'