Salway v. Arkava

NO. 84-392
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985

YARLENE J. SALWAY and PATRICIA ROESCH,
Plaintiffs and Appellants.

DR. MORTON ARKAVA, Social Work Dept.,
University of Montana; DR. ROBERT
DEATON, Director, Continuing Education,
Social Work Dept., UNIVERSITY OF
MONTANA,
Defendants and Respondents.

APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable James E . Wheelis, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Meloy Law Firm; Peter M. Pleloy, Helena, Montana

For Respondent:
1,eRoy H. Schramm, [Jniversity Systems, Helena, Montana

Submitted on Briefs: Jan. 10, 1985
Decided: February 21, 1985

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Filed. /Y?j5

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

Patricia. Roesch brings this appeal from an order of the
District Court, Fourth Judicial. District, Missoula County.
The order denied appellant's motion under Rule 60, M.R.Civ.P.
to set aside a previous judgment against her in Missoula
County.
Appellant and her coplaintiff , Ma.rlene Salway , brought
an action against the respondents herein alleging that they
were wrongfully denied renewal of contracts with the
University of Montana Social Work Department. Plaintiffs
all-eged that they experienced harassment and intimidation
based on sex or race that culminated in defendant's failure
to renew their teachin.g contracts. The case was tried to the
court and jud-gment was rendered on December 23, 1982.
Plaintiff Salway prevailed, but Ms. Roesch was denied relief.
Marlene Salway secured a judgment from the defendants based
on race discrimination. She is not a party to this motion.
In denying relief to Ms. Roesch, the court made the
following findings:
"FINDINGS --
OF FACT
"19. In September 1977, the defendants hired the
plaintiff Patricia Roesch as a faculty member in
the Social Work Department and she continued to
work for the defendants on a yearly contract basis
until her 1978-1979 contract expired..
"20. The defendant terminated Ms. Roesch in 1979
because there were not enough funds in 1979 to
retain all the faculty members, and Ms. Roesch had
been the last hired.
"21.. Af ter the defendants terminated Ms. Roesch,
they did not hire a replacement for her vacated
position.
"22. The plaintiffs in 1at.e 1978 or early 1979
fj led complaints with Lynda Brown, the defendant's
Equa.1 Employment Opportunity Officer, in which they
 alleged sexual d.iscrimir,ation in the Social Work
Department.
"24. The defendants d i d . not retaliate, discha-rge
or discriminate again.st the plaintiffs because they
filed a complaint with Lynda Brown.
"25. The defendants did not discriminate against
Ms. Salway or Ms. Roesch because of their sex in
terminating their employment or refusing to grant
tenure.
"26. The defendants did comply with the
requirements of M.C.A. 5 49-3-201 (1979) and they
did not, during the period of the plaintiffs'
employment, 'underutilize minority group persons.'
"CONCLUSIONS - -
OF LAW
"8. The defendants did not unlawfully discriminate
against the plaintiff Patricia Roesch on the basis
of sex. The plaintiff Roesch has failed to make a
prime facie case for unlawful employment
discrimination based on disparate treatment.
Specifically, Ms. Roesch failed to prove the
position for which she applied remained open or was
filled with a non-protected class employee after
the defendants terminated her. The preponderance
of the credible evidence established that Ms.
Roesch was not retained because the defendants
could not fund the position. The defendants were
within their rights to terminate Bls. Roesch, a
non-tenured faculty member, without cause if they
did so for non-discriminatory reasons. Board of
Trustees of Billings v. State (1979), - Mont .
-, 664 P.2d 770.
"9. The defendants did not unlawfully discriminate
against the plaintiff Patricia Roesch because she
had sought the assistance of 1,ynda Brown, the EEO
officer for the defendants, in dealing with what
she perceived as unfair treatment by the
defendants; the plaintiff had complained to Lynda
Brown about sex discrimination in the department.
Applying the Strong test set out in Conclusion of
Law No. 4 to Ms. Roesch's allegations, this court
must conclude that the preponderance of the
credible evidence establishes that the defendants
terminated Ms. Roesch because they were unable to
fund her position and not because she complained to
1,ynda Brown. '
'
AppelJ.ant contends the adverse findings of the District
Court were based on the fact that the University established
in court that it lacked funds to continue her position. Dr.
grkava, head of the Social Work Department at the University
and respondent herein, testified. at trial that there were no
funds available to renew fl. Roesch's contract.
is Ke is also

personall-y named as a defendant in this case and allegedly
responsible for the discrimination.
On February 2, 1984, the United States Department of
Justice filed a criminal information charging that Dr. Arkava
misused federal funds granted to the University. Dr. Arkava
was accused of funneling grant monies into his own pocket.
Arkava pled guilty to the charges. It is undisputed that the
amount of money diverted by Dr. Arkava during the time
appellant was out of work, from 1979 to 1982, far exceeded
appell.antlssalary.
After Dr. Arkava pled guilty to the criminal
information, Roesch filed a motion under Rule 60, M.R.Civ.P
to vacate the judgment against her in this case.
The District Court denied the motion stating that the
time to file a Rule 60 (b)( 3 ) motton had passed; that the
fraud alleged by appellant was intrinsic fraud consisting of
false testimony so the motion must be denied under the
authority of Pilati v. Pilati (1979), 181 Mont. 182, 592 P.2d
1374. This appeal followed.
Appellant contends that respondents were able to
interpose the lack of funds defense and defeat her claim of
discrimination only because of the fraudulent conduct and
misrepresentations at trial of Dr. Arkava who was an aaent of
the University of Montana. Appellant states that because Dr.
Arkava had misappropriated department money that could have
been used to fund her position there was no legitimate
financial reason for not renewing her contract. The
testimony at trial that funds were not available was false or
at least misleading since Dr. Arkava continued to divert
funds after appellant's contract lapsed. Appellant contends
the fraud perpetrated by the respondents in this case whether
denominated as intrinsic or extrinsic fraud is sufficient to
set aside the judgment. We disagree.
The original judgment was entered on December 23, 1982;
service of notice of entry of judgment was made on December
27, 1982. A party is allowed only 60 days after service of

notice of entry of judgment to file a motion for relief from
judgment under Rules 60 (b) ( I ) , b(2), or b(3) M.R.Civ.P. Rule
60 (b)(2) covers evidence that could not have been discovered
in time to move for a new trial under Rule 59(b) and Rule
60 (b)(3) provides for relief from a final judgment based. on
fraud, (whether heretofore denominated intrinsic or
extrinsic) misrepresentation, or other misconduct of an
adverse party. These grounds for relief might apply to the
instant case but are time-ba.rred because Roesch's motion was
not filed un.til March 22, 1984, more than a year after
judgment.
Rule 60 (b), M. R.Civ. P. contains a residual clause which
provides :
". . . This rule does not limit the power of a
court to entertain an independent a-ction to relieve
a party from judgment, order, or proceeding, or to
grsnt relief to a defendant, not actually
personally notified as may be required by law, or
to set aside a judgment for fraud upon the court. "
There is no time limitation imposed under the Rule on a
motion for relief under the residual clause. The residual
clause recognizes the inherent power of a court of equity to
set aside its judgments. This power predates the Rules of
Civil Procedure. We construe a motion brought under the
resic?ual clause of Rule 60(b) to be an independent action
within the meaning of the Rule and the district courts may
consider the substantive grounds contained in such a motion
without requiring a separate action to be filed.. Other

grounds f o r m o d i f i c a t i o n of a judgment a v a i l a b l e under Rule

6 0 c o u l d t h e n be j o i n e d i n t h e same motion. Such a p r a c t i c e

would s i m p l i f y t h e p r o c e d u r e f o r o b t a i n i n g r e l i e f under Rule

60 and would be consistent with the mandate of Rule 1,

M.R.Civ.P. which s t a t e s t h a t t h e s e r u l e s s h a l l b e c o n s t r u e d

t o secure t h e j u s t , s p e e d y , and i n e x p e n s i v e d e t e r m i n a t i o n of

every action.

The r e s i d u a l c l a u s e o f Rule 60 by i t s t e r m s s e t s f o r t h

three separate avenues to obtain relief from judgment.

Courts of general jurisd-iction have from the beginning

possessed t h e power t o entertain equitable actions to set

a s i d e judgments. Perhaps t h e c h i e f , although c e r t a i n l y n o t

the exclusive, basis for the independent action is fraud;

though there is some authority that intrinsic fraud w i l l

s u p p o r t such an a c t i o n t h e g e n e r a l view i s t - h a t f r a u d must be

extrinsic. See 7 Moore's F e d e r a l P r a c t i c e 5 60.33, 60-350.

Montana h a s t y p i c a l l y a d h e r e d t o t h e g e n e r a l r u l e . Lance v .

Lance ( 1 9 8 1 ) , 195 Mont. 176, 635 P.2d 571; M i l l e r v. Killer

(Mont. 1 9 8 0 ) , 616 P.2d 313, 37 St..Rep. 1523; Selway v . Burns

( 1 9 6 7 ) , 1 5 0 Mont 1, 429 P.2d 640; M i n t e r v. Minter (1936),

103 Mont. 219, 62 P.2d 233.

Extrinsic fraud i s c o l l a t e r a l t o t h e m a t t e r s t r i e d by

the court, and not to fraud in t h e m a t t e r s on which the

judgment was r e n d e r e d . Hall v. Hall ( 1 9 2 4 ) , 70 Mont. 460,

467, 226 P. 469, 471. P i l a t i , 181 Mont. a t 188, 592 P.2d a t

1377. Extrinsic fraud has also been defined as some

i n t e n t i o n a l a c t o r c o n d u c t by which t h e p r e v a i l i n g p a r t y h a s

prevented the unsuccessful party from having a fair

submission of t h e c o n t r o v e r s y . P i l a t i , 181 Mont. a t 193, 592

P.2d at 1380. We think the above criteria are proper
guidelines to follow in det-ernining whether an equitable
action under Rule 60 to set aside a judgment, proceeding or
order will Lie.
Fraud contemplated in the residual clause is a narrower
species of fraud than the type of fraud referred to in Rule
60b (3) . To hold that the type of fraud denominated in the
residual clause of Rule 60(b) is equivalent to that
envisioned by subsection b(3) would render the time
limitations imposed in Rule 60 meaningless.
The second ground for relief under the residual clause
arises when the defendant has not been personally notified as
may be required by law. This basis for relief is not
relevant to the case at bar.
k third and separate ground for relief under the
residual clause is the power of a court to set aside a
judgment for fraud upon the court. The power of the court to
set aside a judgment on the basis of fraud upon the court is
inherent and independent of statute, and the timeliness of
the proceedings to set aside a prior judgment as obtained is
not subject to the 60-day time limitation in Rule 60(h),
M.R.Civ.P., but must ultimately depend upon equitable
principles and the sound discretion of the Court. Pilati,
181 Mont. at 190-91, 592 P.2d at 1379 quoting In Re Ead
Yellow Hair (1973), 162 Mont. 107, 111, 509 P.2d 9, 12.
Fraud upon the court should, we believe, embrace only
that species of fraud which does or attempts to subvert the
integrity of the court itself, or is fraud perpetrated by
officers of the court so that the judicial machinery cannot
perform in the usual manner in its impartial task of
adjudicatinff cases that are presented for adjudication.
Re]-ief should be denied in the absence of such conduct. 7
Moore's Federal Practice, 60.33 at 60-360; See Kerwit
Medical Products, Inc. v. N & H Instrument, Inc. (5th Cir.

1980), 616 F.2d 833. Fraud which attempts to defile the
court has been construed to include only the most egregious
conduct, such as bribery of a judge or member of the jury;
the fabrication of evidence in which an attorney has been
implicated; or the employment of counsel to influence the
court. Hazel Atlas Class Co. v. Hartford Empi-re Co. (1944),
322 U.S. 238, 64 S.Ct. 997, 88 L.Ed 1250; Rozier v. Ford
Motor Co. (5th Cir. 1978), 573 F.2d 1332; Moore's, at 60-357.
Fraud inter parties without more is not fraud upon the court

and should be left to a motion under Rule 60b(3) or to the
independent action. Moore's, at 60-361-.
The overwhelming majority of courts including Montana
hold that perjury at trial does not constitute fraud upon the
court. See Lance v. Lance (1981), 195 Mont. 176, 635 P.2d
571; Serzysko v. Chase Fanhattan Bank (2d Cir. 1972), 461
F.2d 699 cert.denied (1972), 403 U.S. 883, 93 S.Ct. 173, 34
L.Ed.2d 139. Perjury is intrinsic fraud upon a party, not
fraud upon the court.
In this case appellant alleges two instances of fraud.
First, there are the fraudulent activities of Dr. Arkava
which deprived the Social Work Department and the university
of substantial funds. Second, there is the in-court
testimony by Dr. Arkava that Led the court to believe there
were no funds available.
The first instance of fraud does not constitute fraud
upon the court. It was not aimed at subverting the integrity
of the trial court or interfering with the judicial
machinery.
 Illegally appropriating the grant money was an activity
extrinsic or collateral to the court pr~ceedings involving
Ms. Roesch. Extrinsic fraud, however, must directly and
materially affect the outcome of the case. The fraud
practiced by Dr. Arkava is too remote to plaintiff's cause of
action. The fraud practiced by Dr. Arkava affected the funds
available to the Department of Social Work but it did not
directly affect the appellant's cause of action which was
predicated on discrimination and retaliation. Any employee
in appellant's postion, the contracting employee with the
least. amount of tenure, would. not have been retaine?
regardless of sex. A teacher who was not a member of a
"suspect class" would have likewise been terminated. We find
it significant that the appellant.'^ teaching contract was not
awarded to anyone else. The fraudulent activity practiced by
Dr. Arkava in misappropriating government funds, although
reprehensible, is not the type of fraud that furnishes
grounds on which to vacate the judgment in this case.
We have stated before that false statements made during
the course of trial do not constitute sufficient grounds to
vacate a judgment under the residual. clause in Rule 60 (b),
M.R.Civ.P. In the Marriage of Woolsey (Mont. 1984), - P.2d

-- , 41 St.Rep. 2349, we reiterated our statement in Lance v.
Lance (1981), 195 Mont. 176, 635 P.2d 571:
"Intrinsic fraud upon the court, that is
representatious or concealments made during court
proceedings assuming they are false or fraud-ulent
are nevertheless not grounds for reopening a decree
of judgment."
We find that the allegations of fraud relied upon. by
appellant. fall short of what is legally required to vacate a
final judgment.
Af firmed.
We Concur:
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C h i e f Justice