No. 79-80 

### IN THE SUPREME COURT OF THE STATE OF MONTANA 1980

AUDIT SERVICES, INC., 

### a Montana Corp., Plaintiff and Respondent,

KRAUS CONSTRUCTION, INC., a corp., and JAMES KRAUS, SR., d/b/a KRAUS CONSTRUCTION Defendants and Appellants.

Appeal from: District Court of the Eighth Judicial District, In and for the County of Cascade, The Honorable Joel G. Roth, Judge presiding.

Counsel of Record: For Appellant: Barry T. Olson, Great Falls, Montana For Respondent: Cure and Borer, Great Falls, Montana

Submitted on Briefs: May 27, 1980 Decided: July 22, 1980

Filed: 

## JUL

## 2

## 3 1980Mr. 

### JusticeJohn Conway Harrison delivered the Opinion of the Court. Appellants Kraus Construction, Inc., and James Kraus, Sr., appeal from an entry of 

### a defaultjudgment and an order refusing tovacate the judgment. The order of defaultwas entered by the trial court due to appellants' failure to comply with earlierdiscovery orders. The sole issuebefore thisCourt is

### whether the trialcourt erred infailing to set aside the defaultjudgment entered againstappellants for failure toanswer the interrogatories under the circumstances set forthbelow. Respondent Audit Services, Inc., 

### is a collection agency for a union trustfund. As 

### such, it

### brought this action to enforce appellants' alleged obligation tomake contributions to the trust fund under a collectivebargaining compliance agreement. Although the judgment herewas entered on March 5, 

### 1979, this lawsuit was initiated over three and one-half years earlier inOctober 1975. The factsreveal that this appeal is

### not concerned with the typical 

### "firstappearance" default judgment inwhich a 

### defendant is 

### servedwith summons and a complaintbut failstoappear within twenty days as allowed by law. Rather, here the record initiallypresents

a picture of a vigorously contested lawsuit. The record indicates that appellants

### wererepresented by three consecutive law firms. It 

### furtherreveals that appellants subsequently abandoned their defenses, and only after several unsuccessful attemptsby the DistrictCourt tohave appellants reinvolve themselves did the court finally enter

a default. Now, following the entry of the default by the District

### Court, appellants attack the defaultjudgment essentially on procedural, rather than substantive, grounds.

### In itsoriginal complaint filed October 6, 1975, respondent sought to collect $5,095.03 indelinquent contributions owed by appellant Kraus Construction, Inc., torespondent's assignors, trustees of a certainMontana construction industry employee benefit trustfund, together with reasonable attorney fees. Having been served with process, appellants failed to appear within twenty days of the service. A 

### "firstappearance" defaultjudgment was entered. Execution issued and a judgment was collected by the Cascade County sheriff. The execution by the sheriff on funds of Kraus Construction, Inc., prompted appellants to take action. Appellants moved to set aside the defaultjudgment, and following a hearing on December 11, 

### 1975, the District

### Court granted themotion. On December 16, 1975, appellants filed their answer and added a 

### counterclaim for a refund of $477.09 for alleged overpayments torespondent's assignors. InJanuary 1976 appellantmoved for a return of the funds collectedunder the sheriff's levy. On February 4, 

### 1976, the District

### Court ordered the return of a portion of those funds with the balance being deposited with the clerk of the court. On April 29, 1976, an affidavit of disqualificationwas filedby Pat Kraus. Pat Kraus 

### isthewife of James Kraus, Sr., 

### but the affidavitfailed toallege any relation to the 

### then soledefendant, Kraus ~onstruction, Inc. Pursuant to the affidavit, the districtjudge disqualified himself and the Honorable R. J. 

### Nelson assumed jurisdiction. Discovery was initiatedon June 25, 

### 1976, with appellants' firstinterrogatories and requests for admissions. The balance of 1976 and the firsttenmonths of 1977 were consumed by repeated appearances before the ~istrict Court

### over the sufficiency of respondent's answers to those 

### requests and interrogatories, and by amending and supplementing versions of the interrogatories profounded by appellants and respondent's subsequentresponses to them. During this 

### time, Judge Nelson retired from the bench and was succeeded by the Honorable H. 

### William Coder inJanuary 1977. Because Judge Coder's former law firmwas representing appellants, he disqualified himself, calling i n f i r s tthe Honorable W. W. 

### Lessley and subsequently, the Honorable Joel G. 

### Roth. It



### was not untilNovember 1, 

### 1977, thatappellants had filed and Audit Serviceshad answered four 

### sets of interrogatories. In the interim, there had been two hearings calledby appellants toquestion the sufficiency of those responses. Respondent's discovery began with the deposition of James Kraus, Sr., taken November 17, 1977. He

### was the principal inKraus Construction, Inc., and an originallynamed defendant. (It

### should be noted that the Kraus Construction, Inc., 

### was not organized as a corporation until February 1976, some fivemonths after the lawsuit began.) Also inNovember 1977, a representative of respondent conducted 

### a new auditof appellants' records covering the period of May 1, 

### 1975 toJune 30, 

### 1977. Following the deposition of James Kraus, Sr., respondentmoved toamend its 

### complaint tocombine the amounts claimed inthe originalcomplaintwith the delinquencies revealed by the auditconducted inNovember 1977. The amended complaint also sought tohold James Kraus, Sr., personally liable for the debts of Kraus Construction, Inc. A 

### hearing on the request toamend the complaintwas set 

### forDecember 21, 

### 1977. However, one day before thathearing, appellants' attorneysmoved ex parte towithdraw. Themotion indicated thata copy had been served on appellants. On the same day, the court ordered that the attorneys could withdraw. The court's order stated that a copy was tobe served by the sheriff on James Kraus, Sr., and that appellantswere to appear through new counsel within twenty days. Respondent, inturn, vacated 

### its December 21, 1977, hearing. Appellants failed tocomply with the court's order and did nothing. On January 30, 1978, respondent renoticed 

### its hearing on themotion for leave to amend the complaint. Hearing on themotion was 

### set for February 15, 1978. Since appellants had failed toretain new counsel, a copy of the notice was served upon their former attorneys and upon James Kraus, Sr., personally. On February 15, 1978, appellants retained new counsel and appeared atthe hearing on the motion for leave toamend the complaint. On February 23, 1978, the court granted respondent Services leave tofilea portion of 

### its amended complaint. Appellants filed their answer on March 

### 14, 1978. On April 27, 1978, respondent filed 

### its firstrequests foradmissions. These requests setforthrespondent's theory of 

### itscase, asking Kraus Construction, Inc., to admit that 

### itwas a party tovarious collectivebargaining agreements and trustagreements underlying respondent's 

### claim. Appellants 

### were further asked to admit the accuracy of the audits underlying the dollar amount of the amended complaint. Copies of these audits

### were attached to the exhibits for the requests for admission. Appellants filed a timely response tothe requests. They denied the accuracy of the audits, specifically denying firstthat allof the persons listed 

### inthe audit

### were employees and second, that thepersons listed therein performed work coming under the

### scope of relevant collective bargaining agreements. Based on those denials, respondent filed

### its first interrogatories on June 2, 1978. Those interrogatories sought specific information underlying appellants' denial-- asking which of the persons listed inthe audits of appellants' payroll records 

### were not infact

### its employees, and which of them did notperform work coming within the scope of the collectivebargaining agreements. Appellants failed toanswer those interrogatories or to tender any objections to them. Having received no answers to the interrogatories, on October 3, 1978, respondent moved for an order compelling appellants under Rule 37, M.R.Civ.P. A 

### hearing on this motion was setforOctober 25, 1978. One day before the hearing, on October 24, 

### 1978, appellants' attorneysmade an

exparte application to the District 

### Court towithdraw as counsel. This application was granted, and another of respondent's motions tobring this lawsuit to fruitationhad tobe put off. As

### with thewithdrawal of appellants' first counsel, the District 

### Court ordered a copy of the order allowing the withdrawal of appellants' second counsel and requiring new counsel toappear within twenty days tobe served upon James Kraus, Sr. Once again, appellants failed toobey the court's order. On Jandary,3, 1979, respondent, afterwaiting approximately two months for appellants todo something, renoticed its

### request for a hearing on the 

### long-pending motion to compel answers to the interrogatories submitted some seven months earlier. Hearing was set 

### forJanuary 17, 

### 1979. Once again, a copy was 

### sent toJames Rraus, Sr., and to his former attorneys. The District

### Court on its

### own initiative

### reset the hearing from January 17, 1979 to January 25, 1979, because of a conflict in

### its calendar. An order for the change of this datewas served on James Kraus, Sr., and there 

### isno denial thathe received 

### it. Pursuant to the court's order, 

### a hearing on respondent's motion to compel answers to interrogatories was finallyheld

on January 25, 1979. No appearance 

### wasmade by or on behalf of appellants. However, the relief awarded by the 

### District Court

### was strictly inaccord with thatprovided by Rule 37, M.R.Civ.P. Appellants 

### were given an additional twenty days to answer the interrogatories, or inlieu thereof, their

answer was deemed stricken such that their default could be entered. A copy of this order dated January 29, 1979, was served on James Kraus, Sr., and he does not deny receiving it. Appellants failed to obey the final order of the court by answering the interrogatories, and no new counsel appeared for them regarding this litigation. On February 26, 1979, respondent filed a notice of 

### its intention to apply for 

### a judgment of defaulton March 

### 5, 1979, 

### atthe Cascade County Courthouse. Kraus 

### was served with a copy of thisnotice also, and he does not deny 

### receiving 

### it. The hearing on respondent's application for default judgment was held on March 5, 1979. No one appeared on behalf of appellants. Respondent's attorneys were sworn and testified concerning attorney fees. A judgment inconformance with the default was entered on arch 7, 1979. Notice of its entrywas mailed by the clerk of the court to 

### James Kraus, Sr., and he does not deny receiving it. Following entry of the default, appellants did nothing. On March 8, 1979, on application of respondent, the District

### Court signed an order releasing the funds which had been held by the clerk of the court since their originaldeposit in 1975when the firstdefaultjudgment was setaside. A 

### copy of thatorder was filed on James Kraus, Sr., and he does not deny receiving 

### it. On March 14, 

### 1979, a 

### writof execution was issued, and levy

### was made by the Cascade County sheriff's officeon March 19, 1979, which resulted in securing $2,100 on deposit ina bank account of one of appellants. This execution apparently brought appellants around to doing something, and on the same day James Kraus, Sr., delivered filesto a new attorney. Immediately after and early inApril 1979 a number of pleadings were filedby appellants' new counsel. A 

### notice of appeal was filed and laterwithdrawn. Then 

### a motion for

a new trialwas filed, even though there had never been a 

### trial. Thereafter, appellants filed a motion to set 

### aside the withdrawal of their second counsel along with a 

### motion to setaside the defaultjudgment supported by an affidavit of 

### James Kraus, Sr. Appellants then ex parte sought and obtained a stay of execution. The motion concerning the withdrawal of appellants' second attorneys 

### was heard on April 20, 

### 1978. Based on the affidavit of 

### James Kraus, Sr., and on the factthat the motion of the law firmdid not indicate that appellants had assented toor acknowledged the withdrawal of the firm, the 

### ~istrict Court determined that the order permitting the withdrawal of counsel was improper and 

### set the same aside. The DistrictCourt deferred 

### a hearing on appellants' postjudgment motions pending their decision 

### as towho was going torepresent them thereafter. A 

### proper substitutionof counsel was signed on May 17, 1979, and served on allconcerned

on May 23, 

### 1979.Despite the time 

### limitssetinRule 60, M.R.Civ.P., for the determination of motions to vacate defaultjudgments, appellants did nothing regarding their pending post-judgment motions untilJuly 11, 1979, when they noticed them for hearing on August 9, 1979. Atthat 

### time a hearing 

### was held incourt chambers. No testimony was taken; the hearing consisted solely of appellants' arguments. After hearing the arguments, the DistrictCourt refused togrant any of appellants' motions, and the default judgment was allowed to stand. Appellants thereafter filed this appeal from the DistrictCourt's order of August 9, 1979. The sole issue for review 

### iswhether the trialcourt erred infailing t o s e taside the default judgment and default entered against appellants for failure to answer interrogatories under the circumstances of this case. Appellants make two arguments for setting aside the defaultjudgment. The first

### is that the 

### District Court abused 

### its discretion inimposing such a harsh sanction. Second, appellants contend that the withdrawal of their second counsel retroactively setaside as improper, "tainted" allsubsequent proceedings and, therefore, the default judgment must be 

### set aside. We find neither argument to have merit. Appellants rely strongly on the general rule that defaultjudgments arenot favored and no greatabuse of discretion need be found by this Court to 

### set aside such a judgment. Appellants rely principally on the following

cases: Kootenai Corp. 

### v. Dayton (1979), Mont. I 601 P.2d 47, 36 St.Rep. 1785, 1790-1791; LittleHorn State 

### Bank v. RealBird (1979),

# -Mont. 

# - , 598 P.2d 1109, 36 St.Rep. 1495; Shields v. Pirkle Refrigerated Freightlines,Inc. (1979), 

### -Mont. 

## - , 591 P.2d 1120, 1125, 36 St.Rep. 472. Wehave reviewed these authorities and find them not inpoint with thiscase. Each of them deal with "first appearance" default judgments. Another case cited and relied upon by appellants, Simpkins v. Simpkins (1894), 

### 14 Mont. 386, 36 P. 759, dealswith a default other than the "firstappearance" default. However, Simpkins can easilybe distinguished. There the litigationwas 

### still in

### itspreliminary stages and the defaultentered was solely due to the negligence of an out-of-state attorney. Such 

### isnot the

case here. We can, however, find cases from other jurisdictions analogous to the circumstances of this case, particularly where the appellant deliberately refused toparticipate in discovery or to comply with an order of the court issued pursuant toRule 37 of the Rules of Civil Procedure and whose attorney withdraws during the course of this noncompliance. Most analogous 

### isGallegos v. Franklin (1976), 89 N.M. 118, 547 P.2d 1160, cert. den. 549 P.2d 284. There the appellate court carefullyreviewed the record which indicated that the appellants had failed to answer interrogatoriesor otherwise cooperate with pretrial discovery. 

### In thatcase appellantst attorneys withdrew during the proceedings. Thereafter the plaintiffs served upon the appellants a notice of application for a defaultjudgment. The default

was based on the appellantst noncompliance with the rules of discovery and the explicitauthorization for entry of such a defaultunder Rule 37. In Gallegos the defaultjudgment was allowed to stand, with the court stating as authority language fromH. F. Livermore Corp. v. ~ktiengesellschaft Gebruder Loepfe (D.C. Cir. 1970), 432 F.2d 689, where the court held:"Given this approach, the default judgment must normally be viewed asavailable only when the adversary process has been halted because of an essentiallyunresponsive party. In that instance, the diligentparty must be protected 

### lest he be faced with interminable delay and continued uncertainty 

### as to his rights. The default judgment remedy serves as such a protection. Furthermore, the possibility of a default 

### is a deterrent to those parties who choose delay aspart of their litigative strategy* " 432 F.2d at691. After quotingLivermore, the court inGallegos went on to say: "From January 29, 1974, toNovember 18, 1974, a period of tenmonths, the defendants failed to comply with the Rules of CivilProcedure. A default judgment may be entered. See Rules 55(a) and 37(d) of the Rules of Civil Procedure. "In addition, defendants filed a consent to the withdrawal of attorneys after the defaultjudgment was entered. Defendants, having notice of the motion for withdrawal, failed to obtain other attorneys, failed to appear 

### atthe hearing on the motion for default judgment, and failed to show any cause, oral or written, why the default judgment should not be entered. "To grant the defendants a reversal now means that

### we would give credence toessentially unresponsive parties, and consent that they may halt the adversary process and endlessly delay the rights of plaintiff. The philosophy of the 

### lawof civilprocedure militates against thisprotracted wearisome conduct." Gallegos, 547 P.2d at1164-1165. The same reasoning can be applied to appellants here. See alsoJohnson v. Matelich (1971), 165Mont. 329, 517 P.2d

As to the second part of appellants' argument, inthe affidavit filedwith themotion to 

### set aside the default judgment, James Kraus, Sr., stated thathe thought thathis second counsel was stillrepresenting appellants until January 29, 1979, even though the District Court had permitted their withdrawal on October 24, 1978. Appellants make much of the argument that there

### were no counteraffidavits and so Kraus's affidavitwas the only evidence uponwhich the DistrictCourt should have based 

### its decision. We find this argument without

### merit. As to the firstpoint, the affidavithas to be accepted forwhat it actually is--a self-serving document drawn by appellants1 attorney. The general rule 

### is that affidavits "are commonly regarded asweak evidence, tobe received with caution," and that "they arenot conclusive of the facts stated therein even though not contradicted by counteraffidavits." 32A C.J.S. Evidence 81032 

### at706. See also Lohman v. Lohman (1946), 29 Cal.2d 

### 144, 173P.2d 657, 660. Here the record before the 

### trial court belied the testimony of Krausls affidavit, even though the trial court later nullified the withdrawal order. There 

### isno question that a copy of the'orderallowing the withdrawal of the firm

was served on James Kraus, Sr. A receipt was attached to the order of withdrawal indicating that the Cascade County sheriff served Kraus with 

### a copy of the order permitting withdrawal on October 28, 1978. While appellants 

### claim that they had no "notice" of the October 24 order, they did not counter the fact that itwas served upon Kraus and thathe

was personally served with all the motions, notices and orders subsequently filed. There 

### isno question thatKraus, an experienced, capable businessman, had sufficientnotice toknow what 

### was going on and yet chose to ignore it at considerable risk tohimself and his corporation. In Johnson v. Matelich, supra, inrefusing to 

### set aside

a defaultjudgment againstanother deliberatelyunresponsive litigant, this Court noted: "Defendant has made no showing of why he failed to filean answer within the time granted by the districtcourt. Defendant now 

### asserts that he 

### willbe prejudiced because he has 

### a good defense to the claims and now 

### willbe unable to

### assert the defense. If defendant is in any way prejudiced, the record clearly shows that it is by his own failure and disregard to assert his rights when available to him." 163 Mont. at 335, 517 P.2d at 734. We note particularly the trial court's order of January 29, 1979. Noncompliance with it formed the basis of the default judgmentunder Rule 37. That order required appellants to answer interrogatories served eightmonths earlier

on June 2, 

### 1978. As of the date of respondent's brief before us, some twenty-two months after the interrogatories

were filed, appellantsmade no attempt to answer the interrogatories or conform in the slightestwith the trial court's order. On this record we cannot find an abuse of discretion in the refusal of the trial court to set aside the default judgment. Appellants did not offer proper answers to the interrogatoriesat any time or explain or justify their refusal to comply. Suchmatters, in our opinion,would be

a prerequisite to establishing an abuse of discretion. Given the length of time involved,appellants' default coupled with their ongoing refusal to rectify it, we are convinced that appellants failed to meet a showing required under Rule 60(d), M.R.Civ.P., and the District Court was correct in refusing to set aside its default judgment. The next issue raised was whether the withdrawal of appellants' second set of attorneys voided all subsequent proceedings. Appellants rely upon McPartlin v. Fransen

(1978) 

### -Mont. 

## , 582 P.2d 1255, 35 St.Rep. 1191. In McPartlin this Court ruled under section 93-2104, R.C.M. 1947,now section 37-61-405,MCA, that when an attorney withdraws without consent of his client, the opposing party must "notify" the unrepresented party to have counsel appear before the former may proceed with the action. Appellantsnow claim thatrespondent did not

### meet that requirement. We disagree. InMcPartlin we noted that there was no hard-and-fast rule on how the statutory "notice"must be given to the unrepresented party and stated: "We do not believe actual noticemust be personally served on the unrepresented party opponent. But 

### we do hold the represented party must make 

### a positive showing he has attempted to communicate adequate notice to the unrepresented party. If the represented party can show he made a good-faith effort to notify the unrepresented party and advise him he should substitutecounsel or appear inperson, and the notice also 

### sets forth the date of the next hearing or action inthe matter pending, then the represented party

### willbe deemed to have satisfied the requisites of section 93- 2104, R.C.M. 1947." 582 P.2d 

### at1259. Here, appellants 

### were served with an order of the court requiring them todo what the "notice" asks them todo. In addition, the October 25, 1978 order was personally served

on appellants, even though inMcPartlin this Court deemed such a service not required by the statute. The order of the court exceeds inimpact the "notice" from opposing counsel where both the notice and the order convey the same information. In this

### case, further notice of counsel would have been redundant and serve no useful purpose. In arguing that the court's order of October 25, 1978,

was improperly served so 

### as toretroactivelymake void all intervening proceedings, the affidavitof James Kraus, Sr., filed on January 25, 1979, indicates thathe knew he was not represented by counsel. Here, appellants had fullknowledge

on January 25, 1979. In addition, they had fullnotice of the court's order of thatdate giving them twenty days to fileanswers to the interrogatories. They chose todo nothing. Indeed, they did not even move the court forreconsideration of that order during the twenty days between the service of the order upon them and the service of respondent's application for a defaultjudgment. They chose not to appear atthe 

### time set forhearing the application for default judgment, even though respondent's notice was served upon them seven days before the hearing rather than merely the three days required by Rule 55, M.R.Civ.P. Following that, they did nothing for over thirty days after receipt from the clerk of the court of 

### a notice of entry of judgment, a procedural courtesy not provided inthe case of "first appearance" default. They did nothing following their receipt of the court order allowing the clerk to release their monies torespondent. Under these circumstances, we can see no reason to afford them the relief requested. The DistrictCourt awarded respondent $3,150 for attorney feeswhere the amended complaint only asked for $3,000. This was not objected to atthe District Court level. Now

on appeal, appellants object to the additional $150. Atthe hearing on the application for a default dated March 

### 1, 1979, respondent's attorney offered testimony to indicate that a reasonable attorney feewould be $3,150. Inview of this fact

### we find no reason toreduce the amount awarded as being excessive. The judgment of the District Court 

### is affirmed with the additur of $150 for attorney fees for defending the same.

### We concur:



### Chief Justice 

# PJ~&

Justices