No. 81-331 

81-338 

81-339 

IN THE SUPREm COURT OF THE STATE OF MONTANA 

GREGG SCHMIDT and HOLLY SCHMIDT, 

d/b/a MANZANITA INTERNATIONAL, 

Defendants and Appellants, 

JOMAC, INC., 

Plaintiff and Respondent. 

GREGG SCHMIDT and HOLLY SCHMIDT, 

d/b/a MANZANITA INTERNATIONAL, 

Defendants and Appellants, 

CHAS. W. HOUSE & SONS, 

Plaintiffs and Respondents. 

GREG SCHMIDT and HOLLY SCHMIDT, 

d/b/a MANZANITA INTERNATIONAL, INC., 

Defendants and Appellants, 

WESTERN PAPER CO. , 

Plaintiff and Respondent. 

Appeal from: District Court of the Fourth Judicial District, 

In and for the County of Missoula 

Honorable John S. Henson, Judse a presidins, . Nos. 81-338, -339 

Honorable Jack L. Green, judge presiding, No.81-331 

Counsel of Record: 

For Appellants: 

McClelland Law Offices, Missoula, Montana 

For Respondents: 

Sverdrup & Buyske, Libby, Montana 

Submitted on briefs: October 16, 1981 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This is an appeal from denials to set aside default 

judgments entered in the District Court of the Fourth 

Judicial District of the State of Montana, in and for the 

County of Missoula. 

Appellants, Gregg and Holly Schmidt, were sued by 

each of the three respondents for monetary debts allegedly 

owed. The Schmidts were sued with Manzanita Corporation, as 

defendants in each suit, with a "d/b/aw signification in 

Cause Nos. 81-331 and 81-338, and sued separately in Cause 

No. 81-339. Both Gregg and Holly Schmidt were served 

individually, and no allegations were made in the complaint 

that the Schmidts personally guaranteed any of the debts of 

the Manzanita Corporation. At the time of the commencement 

of the suits, Gregg and Holly Schmidt were officers of 

Manzanita Corporation. 

The Western Paper Company suit was commenced June 18, 

1980, and service was made on Holly Schmidt June 25, 1980, 

on Gregg Schmidt July 8, 1980, and on Manzanita's office 

manager June 24, 1980. The Chas. W. House & Sons suit was 

commenced July 7, 1980, and the Schmidts were served July 8, 

1980. The Jomac, Inc., suit was commenced on September 3, 

1980, and the Schmidts were served September 9, 1980. 

The Schmidts and Manzanita Corporation were represented by the same counsel. Counsel admits that he was 

immediately made aware of the actions brought against the 

Schmidts and Manzanita Corporation when the Schmidts came to 

him for advice concerning the summons. It was determined by 

counsel for the Schmidts that no answer or appearance was 

necessary because the automatic stay provisions of the 
Bankruptcy Code operated as a bar to all three suits. 

Manzanita Corporation filed for bankruptcy on or about 

September 11, 1980. 

Default judgments were entered against Gregg and 

Holly Schmidt on October 14, 1980. At that time, no 

appearance was made by counsel, in any of the three actions, 

for the Schmidts or for Manzanita Corporation. Execution 

was issued against the Schmidts' bank account in May 1981. 

It was not until May 28, 1981, that counsel for the Schmidts 

and Manzanita Corporation contacted counsel for the 

respondents and requested that the default judgments be set 

aside. 

On June 18, 1981, the Honorable Jack L. Green issued 

an order in the Jomac case dismissing the motion to set 

aside the default judgment and vacating the stay of execution. Then, on July 14, 1981, the Honorable John S. Henson 

ruled on the motions made in the Western Paper and Chas. W. 

House & Sons suits. Judge Henson also denied the Schmidts' 

motions to set aside the default judgments and vacated the 

stays of execution. 

Notice of appeal was filed on June 30, 1981, in the 

Jomac case, and on July 16, 1981, in the Western Paper and 

Chas. W. House & Sons cases. The three cases have been 

consolidated for purposes of appeal. 

The issue presented on appeal is whether the trial 

court abused its discretion when it refused to set aside the 

default judgments. 

The appellants contend that the District Court erred 

when it denied their motions to set aside the default judgments. Appellants argue that their motion should have been 
granted pursuant to Rule 60(b)(l) and (6), M.R.Civ.P., which 

reads: 

"On motion and upon such terms as are just, 

the court may relieve a party or his legal 

representative from a final judgment, order 

or proceeding for the following reasons: (1) 

mistake, inadvertence, surprise, or excusable 

-- neglect; ------------------ . . . (6) any ------------- other reason 

justifying relief from the operation of the 

judgment. The motion shall be made within a 

reasonable time, and for reasons (I), (2), 

and (3) when a defendant has been personally 

served, whether in lieu of publication or 

not, not more than sixty days after the 

judgment, order or proceeding was entered or 

taken . . ." 

The interpretation of the rule and the cases cited by the 

appellants do not accurately reflect the state of the law. 

Under the facts of the present case, Rule 60(b)(l) 

does not provide the basis for relief. In Olson v. Olson 

(1977), 175 Mont. 444, 574 P.2d 1004, this Court held: 

"Montana law provides that a party, by 

motion, may seek relief from a judgment by 

having it set aside. A judgment can be set 

aside because of excusable neglect on the 

part of the party seeking relief. Rule 

60(b) (1), M.R.Civ.P. However, Rule 60 (b) , M.R.Civ.P., provides that when the party 

seeking relief was personally served, the 

motion for relief on grounds of excusable 

neglect must be made within sixty days of 

entry of the judgment." 574 P.2d at 1006. 

Here, appellants did not make motions to set aside 

the default judgments until 231 days after entry of the 

judgments. This fact precludes them from utilizing Rule 

6O(b)(l), M.R.Civ.P., as grounds for relief. 

Also, appellants failed to present facts to support 

their contention that there was mistake, inadvertance, 

surprise or excusable neglect as defined by Rule 6O(b)(l), 

M.R.Civ.P. The contention that counsel dj.d not file an 

answer because he mistakenly relied on the automatic stay 

provision of the Bankruptcy Code is insufficient under the 
law. In Uffleman v. Labbit (1968), 152 Mont. 238, 448 P.2d 

690, this Court held that, " [tl he defendant made a mistake 

of law, not a mistake of fact. A mistake of law is not such 

a 'mistake' under the provisions of Rule 60 (b) (1) , 

M.R.Civ.P., as will support vacating a default judgment. 

Rieckhoff v. Woodhull, 106 Mont. 22, 75 P.2d 56." 448 P.2d 

at 693. 

Next, appellants contend that they should be granted 

relief because they received no notice of the default judgments and the circumstances of this case are such that relief should be granted pursuant to Rule 60(b)(6), M.R.Civ.P. 

These contentions are also not supported by the law and 

cannot provide the basis for relief. According to Rules 

55(a) and 77(d), M.R.Civ.P., no notice of entry of a default 

judgment need be sent to the defendant by the clerk of the 

district court. See, Johnson v. Matelich (1973), 163 Mont. 

329, 517 P.2d 731, 733. Further, according to the greatest 

weight of authority, Rule 60(b)(6) does not provide a 

"reason justifying relief from the operation of the judgment." 7 Moore's Federal Practice ql60.27(1); Wright and 

Miller, Federal Practice and Procedure, Civil S2857. 

Appellants cite Klapprott v. United States (1949), 

335 U.S. 601, 69 S.Ct. 384, 93 L.Ed. 266, as authority for 

the application of Rule 60(b)(6) to the circumstances 

presented here. However, an analysis of the various 

authorities that have reviewed Klapprott and Rule 60 (b) (6 ) 

indicates that Klapprott is an example of Rule 60(b) (6) 

taken to the extreme. Wright and Miller, Federal Practice 

and Procedure, Civil SS2857, 2864. Klapprott dealt with a 

default judgment setting aside an order granting citizenship 
to a German sympathizer during the Second World War. The 

facts of Klapprott are unique and differ to such a degree 

from those presented here that the case cannot possibly 

provide the authority for appellants' position. 

Final-ly, in 7 Moore's Federal Practice, 860.27(1) at 

351-352, there is a discussion of Rule 60(b)(6) stating: 

"The motion [60(b) (6)] must be made within a 

reasonable time. A question of power to 

grant the motion is one of law. If however, 

there is power, the grant or denial of the 

motion is addressed to the sound discretion 

of the trial court guided by accepted legal 

principles in light of all the relevant 

circumstances, and the trial court's exercise 

of discretion will not be disturbed on appeal 

except for abuse." (Footnotes omitted.) 

Here, the District Court determined that the motions 

to set aside the default judgments (made some 231 days after 

the judgments were entered) were not made within a reasonable time. We find that by doing so, the court did not 

abuse its discretion. 

Appellants argue that the District Court should have 

granted the motions to set aside the default judgments 

because opposing counsel knew or should have known that 

Manzanita Corporation was going to file for bankruptcy. 

Appellants argue that professional courtesy and the Montana 

Rules of Civil Procedure required opposing counsel to notify 

them of the actions being taken. They contend that this 

Court should not allow this type of behavior for it would be 

detrimental to the entire court system. 

First, there was no finding by the District Court to 

support the appellants' contention that counsel for respondents knew or should have known about the impending bankruptcy. Under the facts as they have been presented, this 

contention is, at best, irrelevant. Second, the Montana 
Rules of Civil Procedure do not require that opposing 

counsel keep each other abreast of all actions taken on 

behalf of their clients. Counsel for appellants admits he 

was aware of the suits but chose to ignore the summons. 

This Court in Johnson v. Matelich (1973), 163 Mont. 329, 517 

P.2d 731, when discussing a similar contention, stated: 

"Defendant has made no showing of why he 

failed to file an answer within the time 

granted by the district court. Defendant now 

asserts that he will be prejudiced because he 

has a good defense to the claims and now will 

be 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." 517 P.2d at 734. 

Appellants have not shown that the trial court abused 

its discretion. 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. Hanson (1971), 157 Mont. 307, 485 P.2d 705; 

Johnson v. Matelich, supra. 

The final contention presented by appellants is that 

the automatic stay provision of the Bankruptcy Code deprived 

the District Court of the jurisdiction to enter the default 

judgments. 

This contention is not supported by the facts or the 

law. Respondents filed their claims against appellants as 

individuals. Appellants failed to answer within the requisite twenty days after the service of summons. Rule 12 (a), 

M.R.Civ.P. As individuals, they had the responsibility to 

answer the summons. They cannot now hide behind the automatic stay provision of the Bankruptcy Code as a possible 

defense to the action. Further, the motions to set aside 
the default judgments on the automatic stay provision of the 

Bankruptcy Code are the only pleadings before the District 

Court; no other possible defenses were asserted. If a 

defense existed, appellants should have answered with it 

during the appropriate time. The failure to do so resulted 

in default judgments that were properly entered. It is 

difficult to make the point clearer. Appellants, no matter 

what the claim made against them, had a legal duty to 

respond. 

Finally, the automatic stay provision in the 

Bankruptcy Code, Section 362, applies to the debtor in bankruptcy. It does not apply to an individual not in bankruptcy 

or to a codebtor not in bankruptcy. In Re Van Shop, Inc. 

(1980), 8 B.R. 73. 

The judgment of the District Court is affirmed. 

p 

dLw 

Justice 

We concur: 

34dd2\%& 

Chief Justice