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

YARLENE J. SALWAY and PATRICIAROESCH, Plaintiffsand Appellants.

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

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

COUNSEL OF RECORD:

ForAppellant: Meloy Law Firm; PeterM. Pleloy,Helena,Montana

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

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

', ., ,.*..' f-;,ij Filed. 

### /Y?j5

ClerkMr. 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 coplaintif

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## , Ma.rleneSalway

## , 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.gcontracts. The casewas tried to the court and jud-gment was rendered on December 23, 1982. Plaintiff Salwayprevailed, butMs. 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 contractbasis until her 1978-1979 contractexpired.. "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 lasthired. "21.. After 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 

### fjled complaintswith Lynda Brown, the defendant's Equa.1Employment OpportunityOfficer, inwhich theyalleged sexual d.iscrimir,ationin the Social Work Department. "24. The defendants did. not retaliate, discha-rge 

### or discriminateagain.stthe plaintiffs because they filed a complaintwith 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, 'underutilizeminority group persons.' "CONCLUSIONS OF LAW 

### -- "8. Thedefendantsdid not unlawfully discriminate against the plaintiff Patricia Roesch on the basis of sex. The plaintiff Roesch has failed tomake a prime facie case for unlawful employment discrimination based on disparate treatment. Specifically, Ms. Roesch failed to prove the position forwhich sheapplied 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

# . , 664P.2d 770. 

### - "9. Thedefendantsdid notunlawfully discriminate against the plaintiff Patricia Roesch because she had sought the assistance of 1,yndaBrown, 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,yndaBrown.'' AppelJ.antcontends 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 SocialWork Departmentat the University and respondent herein, testified.at trial that therewere nofunds available to renew fils. Roesch's contract. Ke is also personall-ynamed 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 thatDr. 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.antls salary. After Dr. Arkava pled guilty to the criminal information, Roesch filed a motion under Rule 60,M.R.Civ.P tovacate the judgment againsther 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 Pilativ. Pilati (1979),181Mont. 182, 592P.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 misrepresentationsat trial of Dr. Arkava whowas an aaent of the University ofMontana. 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 testimonyat trial that fundswere not availablewas false or at least misleading since Dr. Arkava continued to divert funds after appellant's contract lapsed. Appellant contendsthe 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 judgmentwas entered on December 23, 1982; service of notice of entry of judgmentwas made on December 27, 1982. A party is allowed only 60 days after service of notice of entry of judgment to file amotion for relief from judgmentunder Rules 60(b)(I),b(2), orb(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 judgmentbased.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.rredbecause Roesch'smotion was not filed un.tilMarch 22, 1984, more than a year after judgment. Rule 60(b)

### ,M.R.Civ.P. contains a residual clausewhich provides: 

# ".

. . This rule does not limit the power of a court to entertainan independenta-ctionto 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 inherentpower 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 motionwithout requiring a separate action to be filed.. Other grounds for modification of a judgment available under Rule 60 could then be joined inthe same motion. Such a practice would simplify the procedure for obtaining relief under Rule 60 and would be consistent with the mandate of Rule 1, M.R.Civ.P. which states that these rules shall be construed to secure the just, speedy, and inexpensive determination of every action. The residual clause of Rule 60 by its terms sets forth three separate avenues to obtain relief from judgment. Courts of general jurisd-iction have from the beginning possessed the power to entertain equitable actions to set aside judgments. Perhaps the chief, although certainly not the exclusive, basis for the independent action is fraud; though there is some authority that intrinsic fraud will support such an actionthegeneral view ist-hatfraudmust be extrinsic. See 7 Moore's Federal Practice 5 60.33, 60-350. Montana has typically adhered tothe general rule. Lance v. Lance (1981), 195 Mont. 176, 635 P.2d 571; Miller v. Killer (Mont. 1980), 616 P.2d 313, 37 St..Rep. 1523; Selway v. Burns (1967), 150 Mont 1, 429 P.2d 640; Minter v. Minter (1936), 103Mont. 219, 62 P.2d 233. Extrinsic fraud is collateral to the matters tried by the court, and not to fraud in the matters on which the judgment was rendered. Hall v. Hall (1924), 70 Mont. 460, 467, 226 P. 469, 471. Pilati, 181Mont. at188, 592 P.2d at 1377. Extrinsic fraud has also been defined as some intentional actor conduct by which theprevailing party has prevented the unsuccessful party from having a fair submission of the controversy. Pilati, 181Mont. at 193, 592 P.2d at 1380. We think the above criteria are properguidelines to follow in det-erniningwhether an equitable action under Rule 60 to set aside a judgment,proceeding or orderwill 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 inRule 60meaningless. The second ground for relief under the residual clause ariseswhen thedefendanthas not been personally notified as may be required by law. This basis for relief is not relevant to the case atbar. k third and separate ground for relief under the residual clause is the power of a court to set aside a judgment for fraudupon the court. Thepower 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 YellowHair (1973),162Mont. 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 judicialmachinery 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. 7Moore's Federal Practice, 60.33 at 60-360; See Kerwit Medical Products, Inc. v. N & H Instrument, Inc. (5thCir. 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. HazelAtlas 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. (5thCir. 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 independentaction. Moore's, at 60-361-. The overwhelming majority of courts including Montana hold thatperjury 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. Itwas 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~ceedingsinvolving Ms. Roesch. Extrinsic fraud, however, must directly and materially affect the outcome of the case. The fraud practiced by Dr. Arkava is too remote toplaintiff'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 theappellant.'^ teaching contractwas not awarded to anyone else. The fraudulent activitypracticed by Dr. Arkava in misappropriating government funds, although reprehensible, is not the type of fraud that furnishes grounds on which tovacate 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 theMarriage of Woolsey (Mont. 1984), -P.2d

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### ,41 St.Rep. 2349,we reiterated our statement in Lance v. Lance (1981),195 Mont. 176, 635P.2d 571: "Intrinsic fraud upon the court, that is representatious or concealments made during court proceedings assuming they are false or fraud-ulent are neverthelessnot grounds for reopeninga decree of judgment." We find that the allegations of fraud relied upon.by appellant. fall short ofwhat is legally required tovacate a final judgment. Affirmed.We Concur: J 

# /4*7L7X. Chief Justice