No. 92-090 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1993 

EMPIRE LATH & PLASTER, INC., 

v. 

AMERICAN 

READING, 

Plaintiff and Respondent, 

CASUALTY COMPANY OF 

PENNSYLVANIA , 

Defendant and Appellant. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Russell K. Fillner, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Richard J. Andriolo, Berg, Lilly, 

Andriolo & Tollefsen, Bozeman, Montana 

For Respondent: 

P. Bruce Harper, Attorney at Law, 

~illings, Montana 

Submitted on Briefs: May 28, 1992 

Decided: February 11, 1993 

Filed: 
Justice Terry N. Trieweiler delivered the opinion of the Court. 

Defendant American Casualty Company of Reading, Pennsylvania 

(American Casualty) , appeals from a default judgment of $58,049.40, 

entered in favor of Empire Lath & Plaster, Inc, (~mpire) on 

November 6, 1991, in the Thirteenth Judicial District Court, 

Yellowstone County. ~merican Casualty's subsequent motion to set 

aside the judgment was deemed denied pursuant to Rule 60(c), 

M.R.Civ.P., when the ~istrict Court failed to rule on the motion 

within 45 days. 

We affirm. 

The sole issue for our consideration is whether the District 

Court abused its discretion when it did not grant American 

Casualtyls motion to set aside the default judgment. 

This litigation arises out of a construction contract 

associated with the building of the Billings Parking Garage and 

City Hall Expansion Project. In April 1990, the City of Billings 

awarded the general contract for the construction project to C & D 

Contractors, Inc. (CD), and CD thereafter subcontracted a portion 

of the project to Empire. In connection with the general contract, 

a bond in excess of $3 million was executed by American Casualty to 

guarantee payment to subcontractors for labor, material, and 

equipment supplied during the construction project. 

~mpire completed its portion of the work on April 16, 1991, 

and submitted its final billing statement to CD which reflected an 

unpaid balance due Empire totalling $47,124.96. In addition to the 

amount owed under the subcontract, Empire had performed a "change 
orderat for the project which had been authorized by CD and approved 

by the project architect, at a cost of $1,200.00. 

At the same time Empire submitted its final statement, CD sent 

a letter to Empire confirming the outstanding balance due under the 

contract, but asserting that ~mpire had failed to 'ldiligently 

pursue its work in a timely manner. CD claimed this failure to 

properly perform under the contract delayed the entire project and 

resulted in significant additional costs to CD. No further facts 

nor specifics were ever provided to ~mpire in regard to the alleged 

contract breach. 

After computing the costs which it alleged were a result of 

Empireas delay, CD determined it would withhold $31,576.00, and 

tendered a check to Empire for $15,548.96. The check contained a 

restrictive endorsement which provided that ~mpire's endorsement 

would acknowledge final and conclusive payment for all work 

performed, and would release CD from any further liability under 

the subcontract. Empire refused to execute the check due to the 

restrictions, and insisted on either full payment, or payment of 

the uncontested sum of $15,548.96, with an understanding that the 

parties would attempt to resolve the dispute over the remaining 

amount. 

Empire received no payments from CD, and on July 2, 1991, 

Empire submitted a notice to the city of Billings, CD, and American 

Casualty (as the surety for the project), stating that it had a 

claim of $47,124.96 against the bond for the work performed under 

the subcontract, and also for the $1,200.00 incurred for the change 
order. Empire received no response from either CD or ~merican 

Casualty regarding the claim notice. 

On August 14, 1991, ~mpire filed a complaint in ~istrict Court 

against American Casualty in order to collect the outstanding 

balance owed to Empire which was guaranteed by the bond. This 

civil action was filed in Yellowstone County as required by 

provisions contained in the bond; CD was not named as a defendant 

in the case because the subcontract between CD and Empire required 

venue in Lewis and Clark county. The summons and complaint were 

served on American Casualtyls legal department on August 23, 1991. 

The Claims Analyst for ~merican Casualty immediately forwarded 

the summons and complaint to CD, along with a letter tendering the 

defense of the action to CD as was apparently standard practice. 

Although American Casualty was in communication with CD on other 

matters, Empire's pending lawsuit was never discussed, and CD 

asserts that it had no knowledge of the action nor ever received 

American Casualty's letter tendering the defense of the action to 

CD. 

The District Court, based on an affidavit from the supervising 

architect of the construction project, found that Empire had fully 

and competently performed the requirements of the subcontract in a 

timely manner, and that there was no basis to withhold full payment 

to Empire. The court concluded that Empire had complied with all 

conditions required by the bond, and was, therefore, entitled to 

recover from American Casualty under the bond. The court entered 

a default judgment against American Casualty on November 6, 1991, 
for $58,049.40, which represented the contract amount due Empire, 

plus interest, the $1,200.00 incident to the change order, and 

attorney fees and costs of $170.39. 

The following day, American Casualty discovered that the 

default judgment had been entered and that no appearance had been 

made by CD on behalf of the surety. On November 14, 1991, American 

Casualty moved to set aside the default judgment, filed its answer 

to the complaint, and requested a trial on the merits. The 

District Court did not rule on the motion within 45 days from the 

time it was filed, and the motion was, therefore, deemed denied 

pursuant to Rule 60(c), M.R.Civ.P. From this denial of the motion 

to set aside the default judgment, American Casualty appeals. 

The issue presented is whether the District Court abused its 

discretion when it did not set aside the default judgment. 

American Casualty argues that the court should have granted relief 

from the judgment under Rule 55(c), M.R.Civ.P., which allows for 

the setting aside of a default judgment: 

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., states in pertinent part: 

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 . . . or (6) any other reason 

justifying relief from the operation of the judgment. 

Where a trial court fails to grant a motion to set aside a 

default judgment, the finding of even a slight abuse of discretion 
is sufficient to justify reversal of such an order. BoardofDirectors 

Edelweks Ownersw Assn. v. Mclntosh (1991), 251 Mont. 144, 822 P.2d 1080. 

In Lorhv.Newman (19841, 212 Mont. 359, 363, 688 P.2d 290, 293, we 

emphasized two basic tenets to be considered in setting aside 

default judgments: (1) every litigated case should be tried on its 

merits and judgments by default are not favored; and (2) trial 

courts have a certain amount of discretion when considering a 

motion to set aside a default judgment. We have also clearly 

stated that the burden of proof rests on the party seeking to set 

aside the default judgment. Siewingv.PearsonCo+ (1987), 226 Mont. 

458, 461, 736 P.2d 120, 122. 

After considering these factors and applying the appropriate 

standard of review to the present case, we conclude that the 

District Court did not abuse its discretion when it failed to grant 

American Casualtyts motion. 

American Casualty contends that the failure to file an answer 

was excusable neglect, and it is, therefore, entitled to relief 

from the judgment pursuant to Rule 6O(b), M.R.Civ.P. However, in 

In re Manicrge of Castor (19911, 249 Mont. 495, 817 P.2d 665, we 

emphasized that "mistake," inadvertence," and Itexcusable neglectw 

generally require some justification for an error beyond mere 

carelessness or ignorance of the law. Castor, 817 P.2d at 667 

(citing Lomas andNertIeton Co. v. Wieiey (7th Cir. 1989), 884 F.2d 965, 

967). In this instance, we conclude that American Casualtyls 
neglect was not justified and that the criteria of Rule 60(b) have 

not been satisfied. 

The bonding company asserts that it was standard practice to 

have CD take over the defense of actions filed against American 

Casualty. American Casualty then maintains that after notifying 

CD, the claims analyst kept the complaint with other active files 

because she was purportedly monitoring negotiations between Empire 

and CD. This resulted in the normal calendaring procedure being 

overlooked and, consequently, American Casualty did not check to 

see that a timely response had been filed. Furthermore, CD claims 

it never received the tender letter, and attributes this to the 

fact that CD was moving its offices and reducing office personnel 

at the time the letter was sent. 

Based on Blume v. Metropolitan Life Insurance Company (19 9 0) , 2 4 2 Mont . 

465, 791 P.2d 784, where this Court found the district court abused 

its discretion when it refused to vacate a default judgment, 

American Casualty suggests the neglect in this situation is also 

inadvertent and excusable. In Blume, certified mail containing a 

summons and complaint was delivered to the defendant company, but 

was apparently lost before anyone in a position of authority saw 

it. After reviewing the record in this case, however, we conclude 

that the neglect demonstrated by both American Casualty and CD is 

not comparable to the inadvertence we excused in Blume. 

Unlike Blume, where the defendant company was unaware that the 

plaintiff was seriously considering filing suit and had no reason 
to suspect that a court appearance was necessary, neither American 

Casualty nor CD can profess ignorance of Empire's intention to 

pursue recovery under the bond. When Empire refused to execute the 

check for $15,548.96 because acceptance of this check would have 

released CD from further liability under the subcontract, CD was 

fully aware that Empire was challenging the unilateral withholding 

of payments. Empire then complied with the required notice 

provisions prior to filing its complaint, thus giving both American 

Casualty and CD written notice of its claim against the bond and 

intent to seek recovery. 

The record shows that American Casualty was put on notice that 

Empire would assert its rights under the bond directly against the 

bonding company a minimum of five times prior to the filing of the 

complaint, and unlike the defendant in Blume, the appropriate 

personnel did receive a copy of the summons and complaint. While 

it may have been reasonable to assign CD the responsibility of 

responding to Empire's complaint, American Casualty cannot justify 

its failure to follow-up on the matter. This is particularly true 

in light of the following statement made in the August 27, 1991 

tender letter: 

Please acknowledge your acceptance of this tender of 

defense prior to the answer date and furnish the 

undersigned with a copy of the answer. 

As the only defendant named in the case, American Casualty had the 

responsibility to follow-up on its own request and insure that CD 

received and accepted the tender, and was preparing an appearance 

on American Casualty's behalf. 
The neglect demonstrated in this case was not like the 

unintentional oversight in Blume, and is, therefore, not excusable. 

In addition to finding excusable neglect, the judgment of a 

district court can be set aside for "any other reason justifying 

relief from the operation of the judgment. It Rule 60 (b) (6) , 

M.R.Civ.P. Generally, relief is afforded under this subsection 

only in extraordinary situations when circumstances go beyond those 

covered specifically in Rule 60 (b) . Castor, 817 P. 2d at 668 ; Fuller 

v. Quire (6th Cir. l990), 916 F.2d 358, 360. After reviewing the 

record, we conclude that American Casualty has failed to establish 

any other reason which would justify relief from the operation of 

the default judgment. 

We hold the District Court did not abuse its discretion when 

it did not grant the motion to set aside the judgment entered 

against American Casualty. 

Af f inned. 

We concur: