NO. 84-141 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1984 

MERLIN L. LORDS and JUDY LORDS, 

Plaintiffs and Respondents, 

JOSEPHINE J. NEWMAN, W.D. WEBB 

and IDA MAY WEBB, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flahtead, 

The Honorable Michael Keedy, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

Murray, Kaufman, Vidal & Gordon, Daniel W. Hileman, 

Kalispell , Montana 

For Respondents: 

Brian J. Smith, Polson, Montana 

Submitted on Briefs: June 28, 1984 

Decided: September 19, 1984 

Filed: L ;1 !984 

Clerk 
Mr. Chief Justice Frank I. Haswell. delivered the Opinion of 

the Court. 

The defendants appeal from a default judgment entered 

by the Flathead County District Court. 

Appellant, Josephine Newman, purchased the San Rose 

Motel. near Kalispell, Montana, from the plaintiffs in April 

1982. Part of the purchase price was a $10,000 promissory 

note executed by Newman and her parents, W. D. Webb and Ida 

May Webb. Newman made one monthly payment on the note. When 

the second payment came due, she deducted the cost of repairing certain items at the motel and sent a check for the 

difference to the sellers. The Lords rejected the payment, 

and the present action for collection was filed in Lake 

County June 15, 1983. 

W. D. Webb was served with a summons and complaint on 

July 15, 1983. Ida Webb and Newman were never served. 

Newman did learn of her father's service a.nd brought his copy 

of the complaint to Lee Simmons, an attorney she had previously consulted concerning the collection dispute. 

At her meeting with Simmons, Newman made it clear that 

neither she nor her mother had been served with process. 

Newman also did not authorize Simmons to represent her in the 

matter. Her request was that Simmons take care of the matter 

for her father. 

Despite the meeting with Newman, Lee Simmons made a 

general appearance on behalf of all! three defendants on 

August 5, 1983, when he filed motions to dismiss and change 

venue. This was the first and final act taken by Simmons in 

the case. Unknown to the defendants, Simmons ceased practici.ng law in August 1983 and essentially disappeared from 

sight. Opposing counsel consented to Simmons' motion to 
change venue to Flathead County. As Simmons could not be 

located, the plaintiffs paid the defendants' filing fee to 

effect the change of venue. Although the action was transferred to Flathead County, the default of Ida Webb was entered in Lake County October 4, 1983. This default was later 

set aside on the parties' stipulation. 

Proceeding in Flathead County, the plaintiffs filed a 

notice of intent to take default on November 30, 1983. This 

notice was mailed to Simmons without response. The defendant 

Newman also attempted to contact Simmons to check on the 

progress of the case. The defendants were unaware that the 

plaintiffs were seeking default. The clerk of the court 

entered default against Newrnan and W. D. Webb on December 6, 

1983. 

The defendants first learned that Simmons had entered 

an appearance on their behalf when a title insurance report 

indicated that a default had been entered against them. On 

December 20, 1983, defendants retained new counsel and filed 

a motion to set aside the entry of default. This motion was 

heard on January 19, 1984, and on January 24, 1984, the court 

denied the motion. Judgment was entered February 2, 1984, 

and the court certified the judgment as a final judgment 

under Rule 54(b), M.R.Civ.P., for purposes of appeal. 

A motion to amend the judgment was made by defendants' 

counsel on February 15, 1984. The court at the January 

hearing expressed a reluctance to set aside the default 

because this action might prejudice a future malpractice 

action against Simmons. The motion to amend was based on the 

defendants ' dj scovery that Simmons carried no malpractice 

insurance, the potential claim was not covered by the client 

security fund and Simmons had no property from which to 
sa.tisfy a judgment. The District Court failed to rule upon 

the motion, and it was deemed denied on March 9, 1.984. On 

March 16, 1984, defenda.nts filed their notice of appeal. 

The primary issue raised by appellants is whether the 

District Court erred in denying the moti.on to set aside the 

entry of default. 

Standard 7 of Review 

Of first importance is determining what standard of 

review should be applied in this case. The task is complicated bv the fact that the parties have cited recent decisions of this Court in which diametricall-y opposed standards 

were applied in similar default situations. 

The appellants assert that "no great abuse" of discretion by the trial court need be found before a decision can 

be reversed. Language from our decisions j.n Kootenai Corp. 

v. Dayton (1979), 184 Mont. 19, 601 P.2d 47, and Little Horn 

State Bank v. Real Bird (1979), 183 Mont. 208, 598 P.2d 1109, 

is cited in support of their proposition. 

The respondents claim that "manifest abuse" must be 

shown before the action of the trial court can be disturbed. 

They cite our decisions of Schmidt v. Jomac, Inc. (Mont. 

1982), 639 P.2d 517, 39 St.Rep. 130, and Purington v. Sound 

West (1977), 1.73 Mont. 106, 566 P.2d 795, and language therein in support of their "manifest abuse" standard. 

Examining the four above-cited cases and their underlying precedent, we discern that the apparent confusion over 

the proper standard of review is not solely a contemporary 

phenomenon. The standard has been variously described over 

the years. However, the sometimes contradictory statements 
in the case law may be reconciled so that a coherent approach 

emerges for the review of default judgments. 

An underlying concern to any review of default is that 

every litigated case should be tried on the merits and that 

judgments by default are not favored. This principle has 

been enunciated in practically all of our decisions addressing the issue and is the cornerstone of appellate review of 

default. 

A second principle that constantly appears in our case 

law is that trial courts are vested with a certain amount of 

discretion when they are considering a motion to set aside a 

default. It has been stated that these matters are within 

the "sound discretion" of the trial court. 

Two harmonious standards of review have emerged from 

this Court's attempt to observe the guiding principles of 

review on motions to set aside a default. Whether one or the 

other standard of review is used depends on what action the 

trial court took with the motion. 

The first standard properly arises in instances when a 

trial court has granted the motion to vacate the default and 

opened up the action for trial on the merits. In these 

circumstances, the public policy considerations of letting 

the parties have their day in court and respecting the trial 

court's sound discretion combine synergistically to ju-stify a 

strict standard of review: the action of the trial court will 

only be set aside upon a showing of manifest abuse. Decisions in our case law representative of this approach are 

Kosonen v. Waara (1930), 87 Mont. 24, 285 P. 668, and Eder v. 

Rereolos (1922), 63 Mont. 363, 207 P. 471. An alternative 

manner of articulating this strict standard has been that an 

order setting aside default will be reversed only in 
exceptional cases. McClurg v. Flathead Cty. Com'rs (Mont. 

1980), 610 P.2d 1153, 37 St-Rep. 801; see also, Kootenai, 

supra; Holen v. Phelps (1957), 131 Mont. 146, 308 P.2d 624. 

The second standard of review arises where a trial 

court has considered but denied a motion to set aside the 

default. In these instances the reviewing court weighs the 

conflicting concerns of respecting the trial court's sound 

discretion while recognizing the policy favoring trial on the 

merits. The resulting standard of review is that no great 

abuse of discretion need be shown to warrant reversal-. Cases 

representative of this standard are Strnod v. Abadie (1962) , 

141 Mont. 224, 376 P.2d 730; Cure v. Southwick (1960), 137 

Mont. 1, 349 P.2d 575; Waggoner v. Glacier Colony of 

Hutterites (1953), 127 Mont. 140, 258 P.2d 1162; Reynolds v. 

Gladys Eelle Oil Co. (1926), 75 Mont. 332, 243 P. 576; and 

Brothers v. Brothers (1924), 71 Mont. 378, 230 P. 60. An 

al-ternative expression of this "no great abuse" standard is 

that only "slight abuse" is sufficient to reverse an order 

refusing to set aside a default. See, Madson v. Petrie 

Tractor & Equipment Co. (1938), 106 Mont. 382, 77 P.2d 1038. 

Finally there are cases that recognize both standards 

of review and simply state that a stronger showing of abuse 

need be made to warrant reversal where a trial court has 

opened a default than where it has refused to do so. See for 

example, Beadle v. Harrison (1920), 58 Mont. 606, 194 P.2d 

134. Other jurisdictions have examined results and noted 

that an appellate court is more likely to affirm a lower 

court ruling setting aside a default judgment than affirm a 

refusal to do so. Franklin v. Bartsas Realty, Inc. (1979) , 

95 Nev. 559, 598 P.2d 1147; Paulsen v. Continental Porsche 

Audi, Inc. (1980), 49 0r.App. 793, 620 P.2d 1384; Griggs v. 
Averbeck Rlty., Inc. (1979), 92 Wash.2d 576, 599 ~.2d 1289. 

One treatise has succinctly stated this observation by 

noting: 

"An appellate court, owing to the remedial character of the statutes and the 

policy of applying them liberally to 

permit an opportunity to present a substantial defense where that right would 

otherwise be lost, listens somewhat more 

readily to an appeal from an order denying relief than to one granting relief. 

While it will usually sustain the action 

of the court below, whether for or 

against the motion--even though upon the 

same state of facts it wou1.d have sustained an opposite conclusion--it is much 

more disposed to affirm an order when the 

result is to compel a trial upon the 

merits than it i.s when the judgment has 

been allowed to stand and it appears that 

a substantial defense could be made. 

This explains what might otherwise seem 

to be a conflict in some of the decisions." 1 Freeman on Judgments (5th ed.), 

S 291 at 579. 

Presently there does appear to be a conflict in some of 

our decisions. The apparent conflicts have stemmed from the 

inadvertent paraphrasing of the two standards of review 

without regard to whether the trial court qranted or denied 

the motion. For example, in Schmidt, supra, the majority 

simply noted: 

". . . A manifest abuse of discretion 

must be shown before this Court will 

interfere with the trial. court's discretion on a motion to set aside a default 

judgment. Purington v. Sound West 

(1977), 173 Mont. 106, 566 P.2d 795; 

Keller v. Ha.nson (1971), 157 Mont. 307, 

485 P.2d. 705; Johnson v. Matelich, supra." 639 P.2d at 520. 

In Schmidt, and the cited cases with the exception of Keller, 

the Supreme Court was not reviewing an action where a trial 

court had granted a motion to set aside a default. 

As 0u.r discussion has ind-icated, there is no one set 

standard of review to be applied. The degree of appellate 
scrutiny depends on whether the trial court set aside the 

default or refused to do so. To the extent that Schmidt, 

Purington, Keller, Johnson and other deqisions indicate that 

the "manifest abuse" standard is to be applied in all cases, 

these decisions must be clarified. Manifest abuse need only 

be shown where the trial court has set aside a defaul-t judgment and the appellant requests that the default be 

reinstated. 

In a case as the present one, where the trial court has 

refused to set aside the default, the proper standard of 

review is that no great abuse of discretion need be shown to 

warrant reversal. Reaching this conclusion, we turn to the 

merits of the appellants' arguments. It is clear that the 

issue of abuse of discretion must be decided on a 

case-by-case basis. Kootenai, supra; Brothers, supra. 

Yeglect - As Grounds For Setting Aside Default 

Appellants argue that the default should be set a.sid.e 

because Newman was not properly served. with process and the 

attorney Simmons neglected his duties. Defective service of 

process in this case is a subsidiary issue to the alleged 

neglect. Due to the nature of our decision, the subissue 

need not he reached. Simmons made a general appearance on 

behalf of all the appellants and the main thrust of their 

argument is the neglect of the case from that day forward. 

Appellants technically are appealing both the refusal 

of the trial court to set aside the entry of default made 

December 6, 1983, and the default judgment filed February 2, 

1984. Rule 55(c), M.R.Civ.P., states 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) . . ." 

Rule 60 (b) , M.R.Civ.P., provides: 

"On motion and upon such terms as are 

just, the court may relieve a party or 

his legal representative from a final 

iudqment, order, or proceeding for the 

following reasons: 

" (1) Mistake, inadvertence, surprise, or 

excusable neglect . . .'I 

Thus, the question before us is whether the District Court 

erred when it found that the neglect of Simmons was not good 

cause or excusable neglect for setting aside the default. 

The general rule followed in Montana and many other 

jurisdictions is that the neglect of an attorney is attributable to the client. The attorney's neglect is imputed to the 

client and is insufficient by itself to set aside a default. 

First State Bank v. Larsen (1925) 72 Monte 4001 233 960- 

Within our case law, however, there are numerous instances where an attorney's neglect has been excused upon the 

proper showing. See for example, Worstell v. Devine (1959), 

Mont. Reynolds, supra; Eder, supra. 

Worstell, this Court thoroughly reviewed neglect cases and 

offered the following explanation for the exceptions: 

"This court has been hesitant to impute 

the neglect of an attorney to his client; 

and has been loathe to permit this neglect to bar a hearing on the merits. 

Whether or not the varying shades of 

excusable neglect previously remarked on 

can be distinguished, we choose to think 

that where reasonable minds might differ 

in their conclusions of excusable neglect, the doubt should be resolved in 

favor of a trial on the merits." 335 

P.2d at 307. 

In the case at bar, Simmons' actions do not constitute 

mere bungling of his duties or ineffective representation. 

Simmons totally abandoned his cl-ients a.nd disappeared from 
sight. To add insult to injury, before disappearing, Simmons 

made a general appearance on behalf of the clients who had 

neither been served with process nor authorized him to so 

act. 

Under these circumstances we find it unconscionable to 

apply the general rule charging the client with the attorney's neglect. Newman in her testimony ind.icates that reasonable attempts were made to check on the progress of the 

case. Where an a.ttorneyls failure to represent a client 

constitutes actual misconduct, the client should he granted 

relief from default. 

Our reasoning here is in tune with several other jurisdictions that have developed. an exception to the general rule 

imputing neglect. For example, Nevada and California both 

recognize the exception. Orange Empire National Bank v. Kirk 

(1968), 259 Cal.App.2d 347, 66 Cal.Rptr. 240; Daley v. County 

of Butte (1964), 227 Cal.App.2d 380, 38 Cal.Rptr. 693; 

Staschel v. Weaver Bros., Ltd. (1982), - Nev. - , 655 P.2d 

518. California has narrowed its exception by requiring a 

showing of positive misconduct by which the client has been 

effectively and unknowingly deprived of representation. 

Carroll v. Abbot Laboratories (1982), 32 Cal.3d 892, 187 

Cal.Rptr. 592, 654 P.2d 775. Nevada recognizes actual misconduct by the attorney as grounds for granting a client's 

motion to vacate default. 

Examining the factual circumstances of this case we 

hold that the total abandonment of the clients' interests by 

a.ttorney Simmons constituted good cause for setting aside the 

entry of default by the District Court on December 6, 1983. 

The record indicates that the appellants acted promptly by 

filing their motion to set aside the default fourteen days 
later on December 20, 1983. The record also discl-oses that 

the defendants may have had a meritorious defense to the 

collection action; certain equipment at the motel that was 

represented as being in good condition by the sellers was 

alleged by the defendants to be in a state of disrepair. 

Finally, the respondents have failed to demonstrate how the 

setting aside of this default would prejudice their cause of 

action. 

The District Court judge in this case was motivated in 

part by his fear that granting the motion to vacate the 

default would compromise a future malpractice action against 

the real culprit in the controversy--the attorney Simmons. 

While such concern is laudable, the adequacy of a malpractice 

remedy in this situation is questionable. Even assuming the 

clients would prevail in such an action, Simmons' lack of 

malpractice insurance and personal assets would make the 

victory a decidedly hollow one. 

Summarizing our analysis, we conclude that the trial 

court abused its discretion by failing to set aside a default 

in a situation where the defendants were completely abandoned 

by their attorney, preceded with diligence to rectify the 

court's action and alleged a potential defense to the action. 

The litigants in this case were blameless and should not be 

penalized for misconduct attributable to a lawyer. 

The default and default judgment are vacated, and the 

case remanded to the District Court for further proceedings. 
We concur: