Case Title: COUNTRYWIDE HOME LOANS, INC., a Wyoming corporation; and AMERICA'S WHOLESALE LENDER, a corporation v. FIRST NATIONAL BANK OF STEAMBOAT SPRINGS, N.A. and THE BANK OF NEW YORK TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT SERIES 1997; and MORTGAGE ELECTRONIC SYSTEMS, INC., a corporation v. FIRST NATIONAL BANK OF STEAMBOAT SPRINGS, N.A.

Citation: 

Docket Number: 06-3

State: wyoming

Court: Wyoming Supreme Court

Date: 2006-10-17T00:00:00Z

Document:
COUNTRYWIDE HOME LOANS, INC., a Wyoming corporation; and AMERICA'S WHOLESALE LENDER, a corporation v.  FIRST NATIONAL BANK OF STEAMBOAT SPRINGS, N.A.  and THE BANK OF NEW YORK TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT SERIES 1997; and MORTGAGE ELECTRONIC SYSTEMS, INC., a corporation v. FIRST NATIONAL BANK OF STEAMBOAT SPRINGS, N.A.2006 WY 132144 P.3d 1224Case Number: No. 06-3, 06-4Decided: 10/17/2006
OCTOBER 
TERM, A.D. 2006

 
 
COUNTRYWIDE 
HOME LOANS, INC., a Wyoming Corporation; and AMERICA'S    

WHOLESALE 
LENDER, a corporation, 

Appellants 
(Defendants),

 
 
v.

 
 
FIRST 
NATIONAL BANK OF STEAMBOAT SPRINGS, N.A.,

Appellee 
(Plaintiff). 

 
 
THE BANK 
OF NEW YORK TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT SERIES 1997; and 
MORTGAGE ELECTRONIC SYSTEMS, INC., a corporation,  

Appellants 
(Defendants),

 
 
v.

                                                                                                

FIRST 
NATIONAL BANK OF STEAMBOAT SPRINGS, N.A., 

Appellee 
(Plaintiff).

 
 
 
 
 
 

Appeal 
from the DistrictCourtofCarbonCounty

The 
Honorable Wade E. Waldrip, Judge

 
 

Representing 
Appellants:

James R. 
Salisbury and Sean C. Chambers of RISKE, SALISBURY & KELLY, P.C., Cheyenne, Wyoming.  
Argument by Mr. Salisbury.

 
 

Representing 
Appellees:

            
Thomas 
A. Thompson and Brandon W. Snyder of MacPHERSON, KELLY & THOMPSON, LLC, 
Rawlins, Wyoming.  
Argument by Mr. Thompson. 

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL*, KITE, and BURKE, JJ.

 
 
*Chief 
Justice at time of oral argument.

 
 

KITE, 
Justice.

[¶1] 
     In this mortgage 
foreclosure action, the district court declined to apply the doctrine of 
equitable subrogation and instead strictly applied Wyoming's "first in time 
is first in right" recording statute.  
The result was an order granting summary judgment in favor of First 
National Bank of Steamboat Springs, N.A. (First National Bank), holding its 
mortgage had priority over all other recorded liens and allowing it to proceed 
with foreclosure.  In their appeal 
from the order, Countrywide Home Loans, Inc., (Countrywide) and 
America's Wholesale Lender (AWL) ask 
this Court to reverse the district court and adopt the doctrine of equitable 
subrogation so as to place Countrywide in the primary lien position formerly 
occupied by AWL.  In a consolidated 
appeal from the same action, Mortgage Electronic Systems, Inc. (MES) and the 
Bank of New York Trustee Under the Pooling and Servicing Agreement Series 1997 
(Bank of New York) ask this Court to reverse the district court's order denying 
a motion to set aside default judgments entered against them.  We affirm both of the district court's 
orders.

 
 
ISSUES

 
 
[¶2]      Countrywide and 
AWL present the following issue:

 
 
Whether 
the District Court, Second Judicial District, Carbon County, Wyoming, correctly applied the doctrine of 
equitable subrogation to determine the relative priorities of the mortgages 
encumbering the subject property.

 
 
First 
National Bank restates the issue as follows:

 
 
I.          
Whether the District Court erred as a matter of law in declaring Appellee 
First National Bank's mortgage a valid, enforceable and superior lien to that of 
Appellant Countrywide's mortgage and that Countrywide was not entitled to be 
equitably subrogated to First National's priority?

 
 
II.          
Whether the District Court abused its discretion in denying a motion 
under W.R.C.P. 60(b) seeking to set aside the default judgments entered against 
Appellants Mortgage Electronic Systems and Bank of New York and denying to 
dismiss the complaint?

 
 
[¶3]      The Bank of New 
York and MES present the following issue: 

 
 
ISSUE 
I:

 
 
Whether 
the District Court, Second Judicial District, Carbon County, Wyoming, erred in 
Denying the Motion to Set Aside Default and Entry of Default of The Bank of New 
York Trustee under the Pooling and Servicing Agreement Series of 1997 and 
Mortgage Electronic Registration Systems and a companion Motion to Dismiss 
Complaint for Foreclosure of the Bank of New York Trustee under the Pooling and 
Servicing Agreement Series of 1997.

 
 
(a)       Whether the 
District Court erred in denying the motion of The Bank of New York Trustee under 
the Pooling and Servicing Agreement Series of 1997 to set aside the entry of 
default and default judgment, and to dismiss the Complaint for 
Foreclosure.

 
 
(b)       Whether the 
District Court erred in denying the motion of Mortgage Electronic Registration 
Systems to set aside the entry of default and default 
judgment.

 
 
 
 
FACTS

 
 
[¶4]      Elmer Lee 
Ketcham, Jr. and Anita Ketcham owned real property located in Carbon County, Wyoming.  
On November 12, 1997, they obtained a loan of $100,000 from AWL, which 
they secured by executing a mortgage on the CarbonCounty property.  The AWL mortgage was recorded in the 
CarbonCounty clerk's office on 
November 13, 1997.  AWL assigned the 
mortgage to the Bank of New York and the assignment was recorded in the clerk's 
office on May 26, 1998.

 
 
[¶5] 
     On June 4, 2002, 
the Ketchams pledged the CarbonCounty property as collateral for a 
business loan made by First National Bank to Blue Gate West, a Colorado corporation in 
which the Ketchams were principles.  
This mortgage was recorded in the CarbonCounty clerk's office on July 22, 
2002.

 
 
[¶6] 
     On April 2, 2003, 
the Ketchams executed a third mortgage on the property in favor of Countrywide 
and MES in exchange for a loan of $97,500.  
The purpose of this loan was to pay off the 1997 AWL mortgage.  Countrywide obtained a title insurance 
commitment, which listed the 1997 AWL mortgage and the 2002 First National Bank 
mortgage as prior liens on the property.  
The 2003 Countrywide mortgage was recorded in the CarbonCounty clerk's office on April 15, 
2003.  The Ketchams used the funds 
borrowed from Countrywide to pay off the 1997 AWL mortgage, making the final 
payment in August of 2004. 

 
 
[¶7]      Meanwhile, in 
June of 2003, the Ketchams failed to make their monthly payment to First 
National Bank on the 2002 mortgage.  
Under the terms of the loan agreement, the failure to make the payment 
constituted a default entitling First National Bank to foreclose on the 
property.  First National Bank filed 
a complaint for foreclosure naming the Ketchams, Countrywide, the Bank of New 
York, MES and AWL as defendants and claiming the First National Bank lien was 
the first and senior lien on the CarbonCounty property.

 
 
[¶8]      MES and the Bank 
of New York did not answer the complaint in the time prescribed so First 
National Bank moved for entry of default against them.  The clerk of the district court entered 
defaults against both non-responding defendants.  First National Bank then moved the 
district court to enter a default judgment against the Bank of New York and MES, 
which motions the district court granted.  
The Bank of New York and MES filed motions to set aside the default 
judgments, which the district court denied.

 
 
[¶9]      In the meantime, 
First National Bank filed a motion for summary judgment requesting the district 
court to declare as a matter of law that its lien on the Ketchams' CarbonCounty property was superior to the 
interests of all others; the Ketchams were in default; and First National Bank 
was entitled to foreclose.  
Countrywide and AWL also moved for summary judgment.  They asked the district court to apply 
the doctrine of equitable subrogation and hold as a matter of law that the 2003 
Countrywide mortgage was subrogated to the 1997 AWL mortgage, making the 
Countrywide mortgage superior in priority to all encumbrances recorded after 
1997.

 
 
[¶10]  The district court issued a decision letter in 
which it declined to apply the doctrine of equitable subrogation.  Instead, the court applied Wyo. Stat. 
Ann. § 34-1-121 (LexisNexis 2005) to hold that First National Bank's 2002 
mortgage had priority over all other encumbrances on the Ketchams' property, 
including the 2003 Countrywide mortgage. The district court denied Countrywide's 
summary judgment motion and granted summary judgment in favor of First National 
Bank.

            
         
   

 
 
STANDARD 
OF REVIEW

 
 
[¶11]  Our standards for reviewing summary 
judgment orders are well established.

 
 
Summary 
judgment is appropriate when no genuine issue as to any material fact exists and 
the prevailing party is entitled to judgment as a matter of law.  A genuine issue of material fact exists 
when a disputed fact, if it were proven, would have the effect of establishing 
or refuting an essential element of the cause of action or defense which the 
parties have asserted.  We examine 
the record from the vantage point most favorable to the party who opposed the 
motion, and we give that party the benefit of all favorable inferences which may 
fairly be drawn from the record.  We 
evaluate the propriety of a summary judgment using the same standards and 
materials as the lower court used.  
We do not accord deference to the district court's decisions on issues of 
law.  

            

Budd-Falen 
Law Offices, P.C. v. Rocky Mt. Recovery, Inc., 2005 
WY 77, ¶ 13, 114 P.3d 1284, 1288 (Wyo. 2005).  We review the district court's decisions 
on issues of law de novo.  Reed v. Cloninger, 2006 WY 37, ¶ 10, 131 P.3d 359, 364-65 (Wyo. 2006).  
Because the question of whether equitable subrogation should be applied 
is one of law, we review the district court's decision in that regard de novo. 

 
 
[¶12]  The decision whether to set aside a default 
judgment under W.R.C.P. 60(b) rests in the sound discretion of the court and an 
order denying such a motion will be reversed only upon a showing that the 
district court abused its discretion.  
Chamberlain v. Ruby Drilling Co., 
Inc., 986 P.2d 846, 847 (Wyo. 1999).   An abuse of discretion occurs when 
a court:

[a]cts 
in a manner which exceeds the bounds of reason under the circumstances.  In determining whether there has been an 
abuse of discretion, the ultimate issue is whether or not the court could 
reasonably conclude as it did.  An 
abuse of discretion has been said to mean an error of law committed by the court 
under the circumstances.  

            

Hodges 
v. Lewis & Lewis, Inc., 2005 
WY 134, ¶ 11, 121 P.3d 138, 143 (Wyo. 2005).

 
 
            

DISCUSSION

 
 
 
 
Equitable 
Subrogation

 
 
[¶13]  Countrywide and AWL ask this Court to reverse 
the district court's ruling, adopt the doctrine of equitable subrogation and 
apply it in the instant case so that Countrywide's 2003 lien would be subrogated 
to the priority position of the 1997 AWL lien.  They urge this Court to adopt the 
doctrine as set out in Restatement (Third) of Property (Mortgages) § 7.6 
(1997):

 
 

(a)          
One who 
fully performs an obligation of another, secured by a mortgage, becomes by 
subrogation the owner of the obligation and the mortgage to the extent necessary 
to prevent unjust enrichment. Even though the performance would otherwise 
discharge the obligation and the mortgage, they are preserved and the mortgage 
retains its priority in the hands of the subrogee.

 
 

(b)         
By way 
of illustration, subrogation is appropriate to prevent unjust enrichment if the 
person seeking subrogation performs the obligation:

 
 
(1) in 
order to protect his or her interest;

 
 
(2) 
under a legal duty to do so;

 
 
(3) on 
account of misrepresentation, mistake, duress, undue influence, deceit, or other 
similar imposition; or

 
 
(4) upon 
a request from the obligor or the obligor's successor to do so, if the person 
performing was promised repayment and reasonably expected to receive a security 
interest in the real estate with the priority of the mortgage being discharged, 
and if subrogation will not materially prejudice the holders of intervening 
interests in the real estate.

            

[¶14] 
  In declining to apply the 
Restatement, the district court relied on § 34-1-121, which provides in relevant 
part as follows:

 
 
§ 
34-1-121.  Recorded instrument as 
notice to subsequent purchasers; recordation of instruments issued by 
United States or state of 
Wyoming.

 
 
(a) Each 
and every deed, mortgage, instrument or conveyance touching any interest in 
lands, made and recorded, according to the provisions of this chapter, shall be 
notice to and take precedence of any subsequent purchaser or purchasers from the 
time of the delivery of any instrument at the office of the register of deeds 
(county clerk), for record.

 
 
 
 
Reading 
this provision strictly to mean that lien priority is determined by the date of 
recording, the district court held First National Bank's 2002 mortgage had 
priority over Countrywide's subsequent 2003 mortgage. 

 
 
[¶15] In 
reaching this result, the district court concluded application of the 
Restatement was not appropriate:

 
 
where a 
lender has actual and constructive notice of a junior mortgagee and could have 
taken any one of a number of steps to protect its interests. [Countrywide] could 
have asked for a subordination agreement or an assignment of the AWL mortgage; 
it did neither of these things and now seeks to rely upon the concept that it 
"expected" to step into AWL's priority without anything more.  The argument goes that, in recognizing 
the doctrine of equitable subrogation, [First National Bank] is not prejudiced 
and "loses nothing" because it remains second in priority (before it was behind 
AWL; now it would be behind [Countrywide]). But, this Court believes equity 
requires looking at things from a different perspective:  [Countrywide] entered into the third 
mortgage on the property with knowledge of [First National Bank's] prior loan to 
Ketcham. Why should [Countrywide] get the benefit (and be unjustly enriched) by 
leaping over [First National Bank] to assume AWL's priority status. 
[Countrywide] has done nothing to deserve this advantage. 

 
 
[¶16]  Countrywide argues the district court's 
approach does not account for the equities of this case and ignores the purpose 
equitable "subrogation serves in the modern mortgage re-financing context."  Countrywide contends the modern trend 
among courts is to apply equitable subrogation as set forth in the Restatement. 
Countrywide asserts the district court's approach is contrary to the purpose 
served by applying the doctrine  
because:  1) the Ketchams, 
Countrywide and AWL reasonably expected Countrywide would have first priority; 
2) Countrywide would not have agreed to re-finance the 1997 AWL mortgage if it 
had known it would not have first priority; 3) First National Bank's position 
would not change if subrogation were allowed; 4) First National Bank should not 
be moved forward in priority simply because Countrywide knew of the 2002 
mortgage when it paid off the AWL mortgage; 5) First National Bank accepted the 
risks inherent in accepting a second priority lien when it demanded additional 
collateral from the Ketchams; and 6) giving the 2002 mortgage priority results 
in an inappropriate windfall to First National Bank.  Before addressing these assertions, we 
consider § 34-1-121 and our precedent on the doctrine of equitable 
subrogation.

 
 
[¶17]  By statute and case decision, Wyoming is a filing date 
priority jurisdiction.  Section 
34-1-121; Barnhart Drilling Co., Inc. v. 
Petroleum Fin., Inc., 807 P.2d 411, 413 (Wyo. 1991) citing Marple v. Wyo. Prod. Credit Ass'n, 750 P.2d 1315 
(Wyo. 1988); Crozier v. Malone, 366 P.2d 125 
(Wyo. 
1961).  That is, as the Wyoming 
legislature expressly provided in § 34-1-121, a mortgage properly recorded in 
the county clerk's office provides notice to subsequent purchasers and takes 
precedence over later conveyances.1  As stated in Crozier, 366 P.2d  at 127, a subsequent 
purchaser (or mortgagee) has constructive notice of any burden upon title from 
the date of recordation. 

 
 
[¶18]  Countrywide asks this Court to recognize 
an equitable exception to Wyoming's "first in time" statutory 
provision.  Specifically, 
Countrywide asks us to recognize the doctrine of equitable subrogation as set 
forth in the Restatement and apply it in this case so Countrywide, by extending 
a loan to the Ketchams in 2003 to pay off their 1997 mortgage with AWL, is 
subrogated to AWL's primary lien position.  
In other words, by executing the 2003 mortgage which allowed the Ketchams 
to pay off the 1997 mortgage, Countrywide seeks to stand in the shoes of AWL and 
be given priority over all post-1997 encumbrances. 

 
 
[¶19]  This Court has not previously considered 
the Restatement version of equitable subrogation.  However, in addressing the concept of 
subrogation, this Court long ago stated:

 
 
The 
right of subrogation may arise and sometimes must arise from contract.  This is conventional subrogation.  The right is sometimes given in the 
absence of contract, is then a creation of the court of equity, and is given 
when otherwise there would be a manifest failure of justice.  This is legal subrogation.  It is a mode which equity adopts to 
compel the ultimate payment of a debt by one who in justice, equity, and good 
conscience ought to pay it, though it is not exercised in favor of a mere 
intermeddler.  This principle, 
adopted from the Roman law and at first sparingly exercised, has come to be one 
of the great principles of equity of our jurisprudence, and courts incline to 
extend it rather than restrict it. One instance in which legal subrogation is 
applied is in connection with the protection of a lien, and the rule is 
universal that one who has an interest in property by lien or otherwise, in 
making payment of prior liens, including taxes, is not a mere volunteer, and 
that he will be entitled, upon payment of a superior lien in order to protect 
his own lien, to be subrogated to the rights of the superior lienholder.  

 
 

Wyoming 
Bldg. & Loan Ass'n v. Mills Const. Co., 38 
Wyo. 515, 269 P. 45, 48-49 (1928) (citations omitted).

 
 
 [¶20]  We applied this reasoning in Gaub v. Simpson, 866 P.2d 765, 768 (Wyo. 
1993) to uphold the application of legal subrogation2 under the following facts:  Gaub sold real property to Cook; Simpson 
purchased Cook's interest in the property by paying Gaub the amount Cook owed; 
Gaub failed to record the deed to Simpson; with Gaub still appearing as the 
record owner, the IRS filed an income tax lien against the property for income 
taxes Gaub owed; Simpson paid the taxes in order to avoid the lien on his 
property; and Simpson sought reimbursement from Gaub. In upholding the 
application of equitable subrogation to these facts, we said: 

 
 
[W]e are 
satisfied with the legal propriety of the ruling by the district court, in 
accordance with Wyoming law, that Simpson paid a tax bill, which Gaub owed, in 
order to protect Simpson's property from an IRS lien.  The law justifies this action on the 
part of Simpson; makes Simpson a subrogee to the rights of the IRS; and 
demonstrates that, in pursuing the course he chose, Simpson did not act as a 
volunteer.

 
 

Gaub, 866 P.2d  at 768.  We cited with approval 
the following excerpt from 73 Am. Jur. 2d, Subrogation, § 25, "Persons acting in 
self-protection," p. 614,

 
 
The 
right of subrogation is not necessarily confined to those who are legally bound 
to make the payment, but extends as well to persons who pay the debt in 
self-protection, since they might suffer loss if the obligation is not 
discharged.  A person who has an 
interest to protect by making the payment is not regarded as a volunteer.  * * *   The extent or quantity of the 
subrogee's interest which is in jeopardy is not material.  If he had any palpable interest which 
will be protected by the extinguishment of the debt, he may pay the debt and be 
entitled to hold and enforce it just as the creditor could.  * * *   It would seem that one acting in 
good faith in making his payment, and under a reasonable belief that it is 
necessary to his protection, is entitled to subrogation, even though it turns 
out that he had no interest to protect.

            

Gaub, 866 P.2d  at 768.

 
 
[¶21]  Thus, we have recognized equitable 
subrogation in Wyoming as a creation of courts of equity to 
prevent manifest injustice.  
Wyo. Bldg. & Loan, 269 P.  at 48-49.  We have specifically applied it to 
compel payment of a debt by one who in justice, equity, and good conscience 
ought to pay it and to allow one who pays a superior lien in order to protect 
his own lien to be subrogated to the rights of the superior lien holder.  Id.; Gaub, 866 P.2d  at 768.  We have recognized the appropriateness 
of the doctrine where one pays the debt of another under a reasonable belief 
that such payment is necessary for his own protection.  Id.  We have not, however, applied the 
doctrine of equitable subrogation as set forth in the Restatement to allow a 
refinancing mortgagee to step into the shoes of a prior mortgagee for purposes 
of obtaining lien priority.  

 
 
[¶22]  Having considered our statute and the 
cases from other states in which courts have applied equitable subrogation in 
the context of mortgage re-financing, we decline to adopt the Restatement.  Unlike the trend in other courts, we are 
not persuaded any manifest injustice results from applying the express language 
of § 34-1-121 and adhering to the clear legislative intent that lien priority in 
Wyoming is to 
be determined by the date of recording.  
Here, the AWL mortgage was recorded in 1997, the First National Bank 
mortgage was recorded in 2002 and Countrywide's mortgage was recorded in 2003. 
Countrywide knew of the existence of First National Bank's lien before it 
extended the loan to the Ketchams.  
Thus, Countrywide knew First National Bank had a prior recorded lien on 
the property when it executed the 2003 mortgage.  Countrywide was charged with knowing 
Wyoming is a 
"first in time" jurisdiction.  United Pacific Insurance Co. v. Wyoming Excise Tax Division, Dept. of Revenue and 
Taxation, 713 P.2d 217, 226 (Wyo. 1986).  We are charged with the duty of giving 
effect to the statutes our legislature has enacted.  Where the language of a statute is plain 
and unambiguous and conveys a clear and definite meaning, the court has no right 
to look for and impose another meaning, but has the duty to give full force and 
effect to the legislative product.  
Thomson v. Wyoming In-Stream Flow Comm., 651 P.2d 778 (Wyo. 1982).  Contrary to Countrywide's assertion, it 
had no reason to expect under Wyoming law that its 2003 mortgage would be 
given priority over First National Bank's 2002 mortgage.  Although Countrywide makes the policy 
argument that equitable subrogation will make refinancing more readily available 
to the public and thereby, serves the public interest, those arguments are 
properly directed to the legislature.  
In addition, the primary purpose of our recording statute is to secure 
certainty of title.  Condos v. Trapp, 717 P.2d 827, 832 
(Wyo. 
1986).  This countervailing public 
policy interest in clarity and certainty in matters of land title arguably 
outweighs the interests of private lending institutions which can be protected 
by simple due diligence.  

 
 
[¶23]  As this Court stated in Wyoming Bldg. & Loan Ass'n, 269 P. 
at 48, equitable subrogation is "a creation of the court of equity, and is given 
when otherwise there would be a manifest failure of justice."   "It is a mode which equity adopts 
to compel the ultimate payment of a debt by one who in justice, equity and good 
conscience ought to pay it, though it is not exercised in favor of a mere 
intermeddler."  Id.  These factors, which may compel 
application of the doctrine of equitable subrogation in other contexts, simply 
are not present in the case of a mortgagee who agrees to refinance a prior 
mortgage.  In this context, the 
mortgagee does not pay the debt (or extend the loan) because "in justice, equity 
and good conscience he ought to pay it."  
Nor in the context of mortgage re-financing does the mortgagee pay the 
debt because, as in Gaub, he must do 
so in order to protect his own interest.  
To the contrary, the mortgagee who refinances a prior mortgage more 
closely resembles a volunteer or intermeddler in whose favor courts have not 
been inclined to apply equitable subrogation.  In our view equitable subrogation simply 
has no application where a financial institution extends a loan for the purpose 
of enabling a mortgagor to pay off an existing mortgage, knowing that a 
subordinate lien exists on the real estate.  Other mechanisms are available for a 
re-financing lender to obtain first priority without invoking equity to achieve 
that result.3           

 
 
 
 
Default 
judgment

 
 
[¶24]  MES and the Bank of New York contend the 
district court abused its discretion in denying their motions to set aside the 
entry of default judgment.  The 
procedure for setting aside an entry of default is set forth in W.R.C.P. 
55(c):

 
 
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). 

 
 
 
 
W.R.C.P. 
60(b) provides the procedure for setting aside a default 
judgment:

 
 
On 
motion, and upon such terms as are just, the court may relieve a party or a 
party's legal representative from a final judgment, order, or proceeding for the 
following reasons:  (1) mistake, 
inadvertence, surprise, or excusable neglect;  (2) newly discovered evidence which by 
due diligence could not have been discovered in time to move for a new trial 
under Rule 59(b);  (3) fraud 
(whether heretofore denominated intrinsic or extrinsic), misrepresentation, or 
other misconduct of an adverse party;  
(4) the judgment is void;  
(5) the judgment has been satisfied, released, or discharged, or a prior 
judgment upon which it is based has been reversed or otherwise vacated, or it is 
no longer equitable that the judgment should have prospective application;  or (6) any other reason justifying relief 
from the operation of the judgment.

 
 
[¶25] 
MES asserts the district court should have set aside the default judgment 
because its failure to answer the complaint was attributable to mistake, 
inadvertence and/or excusable neglect.   Specifically, MES contends it 
mistakenly believed Countrywide was protecting its interests by filing an answer 
on its behalf. 

 
 
[¶26] In 
Multiple Resource Ownership Plan, Inc. v. 
Design-Build-Manage, Inc., 2002 WY 67, ¶ 14, 45 P.3d 647, 652 (Wyo. 2002), 
we held the defendant's belief that he had been granted an extension of time in 
which to file an answer did not constitute mistake, inadvertence or excusable 
neglect entitling him to an order setting aside default judgment.  We said it was not reasonable for the 
defendant to assume he had an open extension of time in which to file an answer 
based solely upon a phone conversation with no verbal or written confirmation 
from the plaintiff and in the face of the explicit requirements of the Wyoming 
Rules of Civil Procedure.  We 
said:

 
 
The 
concept of time limitations for filing pleadings with the court is a fairly 
basic one of legal practice.  [The 
defendant]'s reliance on his belief in an open-ended extension was simply not 
reasonable. 

 
 

Id.  

 
 
[¶27]  We similarly find unreasonable MES' 
expectation and belief that Countrywide was representing its interest and filing 
an answer on its behalf.  The only 
factor MES mentioned to support this belief is that the two entities shared 
identity of interests. Although MES claims in its appellate brief that it 
notified Countrywide of the need for Countrywide to defend the case, MES does 
not indicate Countrywide agreed to assume its defense.  Absent Countrywide's express agreement 
to provide a defense for MES, MES' "expectation and belief" that it would do so 
was not reasonable.  Identity of 
interest alone simply did not warrant a reasonable belief that Countrywide was 
protecting MES' interests by filing an answer on its behalf.  The district court did not abuse its 
discretion in denying MES' motion for relief from the default judgment. 

 
 
[¶28]  For its claim of error, the Bank of New 
York asserts its only connection to the subject matter of this action was as 
assignee of the 1997 AWL mortgage, which mortgage was fully released and 
satisfied two and one half months after First National Bank filed its complaint 
for foreclosure.  The Bank of New 
York asserts it had no involvement or interest in the 2002 First National Bank 
mortgage or the 2003 Countrywide mortgage. Because it was not an interested 
party once the 1997 mortgage was released and satisfied, the Bank of New York 
argues, it was entitled to have the default judgment set aside on the grounds 
set forth in Rule 60(b)(6).   
That subsection of the rule allows a district court in its discretion to 
relieve a party from judgment for "any other reason justifying relief from the 
operation of the judgment." 

 
 
[¶29]  The difficulties we have with this 
argument are twofold:  first, 
whether or not the Bank of New York had direct interest or involvement in this 
action, it was named as a defendant, served with the complaint and required to 
answer within the time contemplated by our rules.  The Bank of New York did not answer and 
provides no explanation for why it did not.  Second, the determination whether to 
grant relief from judgment under Rule 60(b) is, as we have said, a discretionary 
one. We reverse discretionary determinations of a district court only for abuse 
of discretion.  We have repeatedly 
said an abuse of discretion occurs when a district court

 
 
[a]cts 
in a manner which exceeds the bounds of reason under the circumstances.  In determining whether there has been an 
abuse of discretion, the ultimate issue is whether or not the court could 
reasonably conclude as it did.  An 
abuse of discretion has been said to mean an error of law committed by the court 
under the circumstances.    

 
 

Hodges, ¶ 12, 
121 P.3d  at 143.  We are aware of no 
authority holding that a district court commits an error of law or exceeds the 
bounds of reason in declining to set aside a default judgment against a 
defendant who failed to answer a properly served complaint.  Even accepting the Bank of New York's 
claim that it had no interest or involvement in the subject matter of this 
foreclosure action, the proper course for it to take was to answer the complaint 
and/or move for dismissal.  In light 
of the Bank of New York's failure to follow elementary legal procedure, we are 
hard pressed to conclude the district court exceeded the bounds of reason in 
denying the motion to set aside default judgment filed months later.   

 
 
 [¶ 30]  Affirmed.                 

 
 
 
 

FOOTNOTES

1As reflected 
in the quote in ¶14 of this opinion, § 34-1-121 provides a recorded mortgage has 
precedence over subsequent "purchasers."  
Section 34-1-101 defines "purchasers" as: "every person to whom any 
estate or interest in real estate shall be conveyed for a valuable 
consideration, and also every assignee of a mortgage or lease, or other 
conditional estate." 

2Other courts 
and the Restatement have suggested the term "legal subrogation" is misleading. 
The term came into common usage because subrogation arises by "operation of law, 
that is to say, it is created by the legal consequences of the acts and 
relationships of the parties." Bank of 
New York v. Nally, 820 N.E.2d 644, 651 
(Ind. 
2005).  We agree that the concept 
discussed in the instant case is more appropriately termed "equitable 
subrogation" because it is subrogation imposed as an equitable remedy. 
Restatement, § 7.6, Comment a, p. 509.  

3The district 
court mentioned a subrogation agreement or an assignment of the AWL mortgage as 
two possibilities for achieving a first priority 
lien.