No. 86-423 

TN THE SUPREFE COURT OF THE STATE OF MONTANA 

STATE OF MONTANA, DEPARTMENT OF 

REVENUE, 

Pl-aintiff and Appellant, 

-vsKENNETH JOHN FRANK, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Eighth Judicial ~istrict, 

In and for the County of Cascade, 

The Honorable Thomas M. VcKittrick, Judqe presiding. 

COUNSEL OF RECORD: 

For Appellant: 

John D. Koch, Child Enforcement Program, Great Falls, 

Montana 

For Respondent : 

Randall 0. Skorheim, Great Falls, Montana 

Filed : 

Submitted on Briefs: Dec. 18, 1986 

Decided: Anril 2, 1987 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

In this case we uphold the determination of the District 

Court, Eighth Judicial District, Cascade County, that there 

was an accord and satisfaction of the claim of the Department 

of Revenue against Kenneth Frank for recoupment of monies 

paid by the State as Aid to Families of Dependent Children 

(AFDC) . 

We also pass upon the propriety of the proced-ures used 

by the Department in attempting recoupment where there exists 

a District Court order for child support arising out of a 

marital dissolution proceeding. 

The marriage of Judith and Kenneth Frank was dissolved 

in 1979. The District Court decree awarded custody of the 

three minor children to Judith, and Kenneth was ordered to 

pay child support in the amount of $100 per month per child 

until the children reached majority. The children are not of 

the age of majority at the time of this appeal. 

Three months after the dissolution, in November, 1979, 

Judith became a recipient of AFDC funds, and assigned her 

right of child support from Kenneth to the Department of 

Revenue. 

On February 27, 1980, the Department issued a "Notice of 

Support Debt" for $374. The notice, however, was not served 

1 YOU ARE HEREBY notified that the Department of Revenue 

finds that you are in arrears $ 374.00 in the child 

support which you were ordered to pay in Cause No. 

BDR-79-653 , entered in the EIGHTH DISTRICT Court , CASCADE County, State of MONTANA . This Decree 

ordered you to pay $300.00 per w~ek/month/y~ax for the 

support of your minor children 

Bobby, Jimmv and Lori Frank 
on Kenneth until six weeks later, on April 8, 1980. Kenneth 

did not request a hearing on the support debt pursuant to the 

notice. On June 12, 1980, the Department filed in the 

District Court of Cascade County, its warrant of distraint 

for a debt of $1,340 and requested a writ of execution 

directed to the sheriff of Cascade County to attach any 

accounts in which Kenneth might possess an interest. The 

writ of execution was requested by the Department on April 

21, 1981, and was returned without any funds being collected. 

On May 31, 1983, the Department requested a further writ 

of execution, which, issued on June 9, 1983, was returned "no 

accounts." On June 8, 1983, the Department filed an "Amended 

Warrant for Distraint" against Kenneth for a claimed debt of 

$7,040. On June 27, 1984, the Department filed with the 

Clerk of the District Court its "Second Amended Warrant of 

Distraint" against Kenneth, claiming $14,240 of debt due. 

Aside from the original communication to Kenneth from 

the Department specifying a $374 debt, no further "Notice of 

You are required to pay the Department of Revenue this 

$374.00 arrearage debt within 20 days. You are also 

required to make current support payments each w~ek/month to 

the Department of ~evenue-- in the amount of $300.00 . Section 40-5-222, MCA. The Department of Revenue is 

subrogated to or' assigned the right to collect the child 

support payments which you are obligated to pay. 

You are further given notice that should you fail to 

respond to this order for payment within 20 days from the 

date you are served with this Notice, the State of Montana 

may subject your property to distraint, seizure, and sale. 

Any net proceeds will be applied to the satisfaction of your 

support debt. 

THEREFORE, be advised that should you fail to pay your 

support debt within 20 days of receipt of this Notice or 

refusal of Notice, that distraint, seizure, and sale of your 

property will be lawful without further Notice. 

DATED this 27th day of February , 19 80 . Signed: /S/ Clarice Milligan 

Title: Investigator 
Support Debt" was served upon Kenneth with respect to the 

accruing support payments, and the Department further failed 

(with respect to each filing of distraint warrant) to give 

any notice to Kenneth of a right to a hearing on each 

warrant. 

Other events occurred which affected Kenneth's ability 

to make child support payments. He was a painter and. 

suffered an industrial accident in August, 1980, which left 

him totally disabled. He was unable to return to work until 

January, 1985. Until February, 1984, his only income was 

$219 per week from Workers' Compensation benefits. He 

entered into a lump sum settlement with the State Insurance 

Fund on his compensation claim. When Kenneth submitted his 

petition for lump sum settlement, he submitted an affidavit 

in which he indicated he believed $8,500 would be required to 

make up his child support arrearages. At the time, the 

Department had calculated his arrearages to be $7,040. 

Another important event related to Judith. She 

remarried three times while a recipient of AFDC funds without 

notifying the agency of her marriages. Her failure to notify 

the Department is an apparent violation of § 53-4-237, MCA, 

which provides: 

. . . in the administration of this part the 

department may consider the income and resources of 

stepparents and other individuals who reside in the 

home as resources and income available to the 

household. 

Moreover, Judith did not steadily receive AFDC funds. 

She was an AFDC recipient in November and December, 1979, and 

during the years 1980 and 1981. She did not receive any AFDC 

funds during 1982 and most of 1983. She received a $425 
grant in December, 1983, and a $425 grant in January, 1984. 

Over the entire period, the Department retained its assigned 

interest in the support payments, and Kenneth's debt to the 

Department was calculated as accruing in periods when Judith 

was not receiving any AFDC funds. 

A third important event was that in April, 1984, Kenneth 

petitioned for and was granted custody of the minor children. 

Because Judith moved to another state to prevent enforcement 

of the change of custody, Kenneth spent approximately $3,000 

to have the children returned to his care. 

In the fall of 1983, a Department investigator wrote 

Kenneth's attorney informing him that the arrearage had grown 

to $7,040 and indicated an interest in negotiating a 

settlement. In February, 1984, another Department 

investigator wrote Kenneth's attorney informing him that the 

debt had grown to $7,640. According to the Department's 

testimony, this letter indicated that there was a possibility 

that the debt amount might be discounted to encourage 

settlement. A month later, on March 24, 1984, Kenneth's 

attorney sent to the Department a check for $1,000 

accompanied by a letter stating that the check was offered as 

a full and final compromise payment. The Department cashed 

2 March 26, 1984 

Lori Hoard Posey 

Investigator 

Department of Revenue 

Legal Divison/Child Support Enforcement 

503 First Avenue North, Suite 407 

Great Falls, Montana 59401 

Dear Ms. Posey: 

Re: Kenneth J. Frank -Back Child Support 

Enclosed please find a check made out to your office in 

the sum of $1,000.00 as full and final compromise payment of 

the above referenced debt. Negotiation of this check will 
the check and did not communicate further with Kenneth until 

it began garnishing his wages in January, 1985. The 

Department never informed Kenneth, either formally or 

informally, that his letter offer of March 26, 1984 had been 

rejected. 

Kenneth reentered the work force in January, 1985, as a 

painting supervisor. He had remarried and had custody of the 

three minor children of his previous marriage. He was 

earning $336 per week. 

The Department, through its regional supervisor in Great 

Falls, served upon Kenneth's employer a notice of levy which 

commanded the employer to withhold from Kenneth's paycheck 

50% of the net proceeds then and in the future. 

On February 8, 1985, Kenneth, through his attorney, 

moved the District Court for relief from the warrants of 

distraint and for stay of enforcement. The District Court 

granted a temporary stay and set the matter down for hearing. 

The Department filed its motion to dissolve the temporary 

restraining order and further moved that Kenneth be required 

to furnish a bond. The motion to dissolve the temporary 

represent your consent to this matter being fully compromised 

for this amount and for Mr. Frank's no longer owing you 

anything. 

Be advised that, as you well know, Workers' Compensation 

benefits or the proceeds thereof, are not attachable. Mr. 

Frank hasn't worked for three and a half years and is still 

unemployed because of his injuries. This is why we feel that 

the $1,000.00 payment is the best that Mr. Frank can do and 

even that amount will work a hardship on him and his family. 

If you have any questions, please feel free to contact 

me at your convenience. Again, negotiation of this check 

represents full and final compromise settlement of any claims 

you may have against Mr. Frank as of the date of this check. 

Yours truly, 

OVERFELT LAW FIFW 
restraining order and to require a bond were denied. At. a 

hearing held before the District Court on March 28, 1985, the 

motion for permanent injunction was taken under advisement 

and on July 30, 1986, the District Court issued its findings 

of fact, conclusions and the order which is the subject of 

this appeal. 

The Department of Revenue urges five issues on appeal.: 

1. The District Court lost jurisdiction of the cause 

under Rule 60 (c) , M.R.Civ.P. when it issued its findings of 

fact, conclusions of law and order more than 45 days after 

the motion filed on February 8, 1985. 

2. The District Court's determination that Kenneth 

should not receive due process was incorrect. 

3. Neither the fraud of Judith nor the mistake of the 

Department eliminates Kenneth's obligation to make chi1.d 

support payments. 

4. The court erred in determining that there had been 

an accord and satisfaction. 

5. The court erred in determining that Kenneth was 

entitled to attorneys fees and costs. 

JURISDICTION 

The first issue relates to whether the District Court 

had jurisdiction under the time restraints of Rule 60(c), 

M.R.Civ.P. to set aside the judgment effect of the filing of 

a warrant of distraint. Rule 60 (c) , M.R.Civ.P. provides: 

-- Time for determining motions. Motions provided by 

subdivision (b) of this rule shall be determined 

within the times provided by Rule 59 in the case of 

motions for new trials and amendment of judgment 

and if the court shall fail to rule on the motion 

within the 45 day period, the motion shall be 

deemed denied. 

The Department argues that the time elapsing between the 

date of the father's motion for relief from judgment, 
February 8, 1985, and the hearing on the motion, March 28, 

1985 was 48 days, and the order itself did not come down 

until July 30, 1986, and that thereby the District Court lost 

jurisdiction of the cause. 

In cases for collections for delinquent taxes, or the 

recoupment of AFDC payments as here, where the collection is 

based upon warrants of distraint, a judgment as such is not 

actually entered by a District Court. Instead, the 

Department of Revenue files a warrant of distraint with the 

Clerk of the District Court, whose duty is then to file the 

warrant in the judgment docket with the name of the taxpayer 

or parent listed as the judgment debtor. Section 15-1-704, 

MCA. Upon the filing thereof, there is a lien against all 

real and personal property of the delinquent taxpayer or 

nonpaying parent in the county where the warrant is filed. 

Section 15-1-701(2), MCA. Thus, the filing of the warrant by 

the Department with the District Court has the same lien 

effect as a properly docketed judgment and the Department may 

collect delinquent taxes and enforce the tax lien or recoup 

AFDC funds in the same manner as a judgment is enforced. 

Section 15-1-701(2), MCA; 5 40-5-241, MCA. 

In this case, the effect of the motion of Kenneth for 

relief from judgment and a stay of enforcement is the same as 

the situation of a person seeking relief from a judgment of 

the District Court under Rule 60 (b) , M.R.Civ.P. It is, 

however, provided in Rule 60(b) that the rule 

. . . does not limit the power of a court to 

entertain an independent action to relieve a party 

from a judgment, order, or proceeding, or to grant 

relief to a defendant not actually personally 

notified as may be required by law . . . 

The time limitations provided in Rule 60(c) must be read 

in light of the principle set out in Rule 60(b), which 

provides for such an i-ndependent action. The residual power 
of the District Court therein preserved is a complete 

reservation of the District Court's independent power. Its 

purpose is to protect equity by "not enforcing a judgment 

obtained against the public conscience.'' Thomas v. Savage 

(1973) , 161 Mont. 192, 505 P. 2d 118, 120; Elliston Lime 

Company v. Prentice Lumber (1971), 157 Mont. 64, 483 P.2d 

264. The residual power portion of Rule 60 (b) was enacted 

particularly to prevent an injustice. For that reason, we 

hold that Kenneth's motion to set aside enforcement of an 

unserved warrant of distraint was an independent action, and 

thus is not subject to the 45 day time lj-mitation of Rule 

60 (c) , M.R.Civ.P. 

DUE PROCESS 

The District Court concluded that because the defendant 

had never heen personally served with the amended warrants of 

distraint or afforded. an opportunity for a hearing before 

their entry that his right to due process under both federal 

and state constitutions was violated. 

The Department argues that there is no post-judgment 

right to notice of hearing before levy of execution, relying 

on Endicott-Johnson Corporation v. Encyclopedia Press (1924), 

266 U.S. 285, 45 S.Ct. 61, 69 L.Ed.2d 288. It argues that 

under Mathews v. Eldridge (19761, 424 U.S. 319, 96 S.Ct. 893, 

47 L.Ed.2d 18, which concerns administrative procedures, 

there must be a balance of governmental and private interests 

to determine whether they are constitutionally sufficient for 

due process. The Department contends that because it made 

AFDC payments, it was automatically subrogated to the wife's 

right to press for collection of her dissolution decree 

judgment under 5 40-5-222, MCA. It further contends that the 

notice served on Kenneth on April 8, 1980, is a sufficient 

notice of the assignment and all accruing support payments 

thereafter due under the District Court order in the 
dissolution proceedings. The Department also points to the 

case of Duranceau v. Wallace (9th Cir. 1984), 743 F.2d 709, 

holding that the State of Washington's administrative 

procedures for collecting past due child support did not 

violate the due process clause of the United States 

Constitution. 

Montana participates in the use of federal grants and 

other sources to make AFDC payments. The program in our 

statutes for the recoupment of AFDC funds from parents who in 

dissolution proceedings or other custody matters have been 

ordered to make child support payments grows out of the 

necessity to comply with the federal programs. Thus, under 

federal law, a.n applicant for AFDC funds must assign all 

rights to accrued support at the time of payment to the state 

agency. 42-602 (26) (A) U.S.C. The assignment by the 

recipient to the state allows the state to make collections 

which are on behalf of the state and the federal government. 

42-654 (5) U. S.C. The amounts collected thereby are 

distributed to the state and federal agencies until the AFDC 

funds and other costs are recovered, the balance to be 

distributed under certain rules to the family. 42-657(b) 

U.S.C. 

The state has two avenues under its state statutes, to 

gain recoupment of AFDC payments. If there has been no 

District Court order, the Department can proceed under S 

40-5-223, MCA, to serve a notice of liability and undertake 

subsequent recoupment proceedings. If there is a district 

court order, as in this case, the Department proceeds under S 

40-5-222, MCA. Under that statute, the Department is 

empowered to send out a "notice of debt" which includes a 

statement of the support debt accrued or accruing, and which 

informs the del-inquent parent that he is entitled to a fair 

hearing. In this case such a notice of debt was sent out and 
Kenneth did not request any further hearing. When 31 days 

have elapsed after service of the notice of debt, the 

Department may issue a warrant for distraint based on the 

amount of the support debt. Section 40-5-241, MCA. Such a 

warrant, however, is subject to the provisions of S§ 

15-1-701, 15-1-704, 15-1-708, and 15-1-709, MCA. Section 

40-5-241, supra. 

The sections which appear in Title 15, referred to in S 

40-5-241, relate to the collection of delinquent - tax 

payments, which is also a function of the Department of 

Revenue. It is $ 15-1.-701 which provides that a distraint 

warrant, upon filing with the County Clerk and Recorder, 

becomes a lien against real and personal property of the 

delinquent parent. It appears strange that 5 40-5-241, MCA, 

in incorporating for delinquent support payments the 

procedures used to collect delinquent taxes, did not include 

$ 15-1-705, MCA. That section provides that the judgment 

debtor after the filing of a distraint warrant is entitled to 

a hearing. It states: 

The Department must provide notice of the right to 

hearing to the taxpayer. A request for hearing 

must be made in writing within 30 days of the date 

of the notice. This notice may be given prior to 

the notice referred to in 15-1-702 . . . 

In recoupment cases, the judgment that is obtained by 

the Department through the filing of a distraint warrant with 

the Clerk of the District Court is to be distinquished from a 

judgment that is lodged and entered through an order of the 

District Court. In the case of a judgment issued by a 

district court, there is provision made for notice of entry 

of judgment, although it is true that execution may occur 

before the notice of entry of judgment has been served. 

However, a judgment entered by a district court occurs 

presumably after a full. opportunity (unless the judgment 
debtor has defaulted) for notice and hearing on the claim 

which results in the judgment. In the case of a warrant of 

distraint for recoupment, no such opportunity is afforded the 

alleged delinquent parent. This case illustrates the 

necessity of notice of hearing upon the filing of the 

distraint warrant to the parent who thereby becomes a 

judgment debtor. If S 15-1-705, MCA, had also been made part 

of the procedure for recoupment under 40-5-241, Kenneth would 

have been notified with the filing of each distraint warrant 

and given an opportunity to present the arguments that are 

now presented as to why he should not be held liable for 

those payments. Because Kenneth was never given notice of 

the filing of the distraint warrants against him in the 

office of the Clerk of the District Court, and was not given 

any further notice of accruing debt after the first notice 

had been served upon him, we hold that Kenneth was deprived 

of notice and opportunity for hearing which would have 

accorded him due process. We uphold the District Court in 

its conclusion. 

ACCORD AND SATISFACTION 

We skip to the next issue of accord and satisfaction, 

because it is determinative in this case. The Department 

contends that the District Court was in error in finding that 

the debt owing to the State for AFDC payments was fully and 

finally satisfied by accord and satisfaction. The Department 

argues that the debt was liquidated and accordingly 

satisfaction was impossible without the Department's written 

acceptance. Section 28-1-1403, MCA. Because of its claim 

that the indebtedness owed by Kenneth is liquidated, the 

Department relies on Sawyer v. Somrners Lumber Co. (19291, 86 

Mont. 169, 282 P. R52. The statement in -- Sawyer is, of 

course, illuminating: 
An accord and satisfaction is founded upon 

contract, and a consideration therefor is 

necessary. By the great weight of authority, if 

the indebtedness is unliquidated or in dispute, 

payment by the debtor of an amount less than 

claimed by the creditor, and the receipt by the 

latter of such amount under such circumstances that 

he is bound to know that the intention was to make 

the payment in full settlement of the claim, will 

discharge the whole claim, and the creditor may not 

thereafter maintain an action to collect additional 

sums. Under these circumstances there is an 

agreement to compromise the dFfferences between the 

parties, and, there being a dispute, a 

consideration for the agreement exists. (Citing 

authority. ) 

If plaintiff's claim was unliquidated, his 

acceptance of the check under the circumstances 

disclosed by the record constituted an accord and 

satisfaction. If the claim was liquidated, it 

could be discharged only by payment in full or by 

payment of a lesser amount and acceptance thereof 

in writing. (Citing authority.) There was not an 

acceptance in writing. The indorsement of the 

check by plaintiff for the purpose of cashing it is 

not such a writing as is contemplated by [quoting a 

statute] and it follows that the only question for 

determination is: Was the claim liquidated or 

unliquidated? 

A claim is liquidated when the amount due is fixed 

by law or has been ascertained and. agreed upon by 

the parties. (Citing authority.) . . . 

86 Mont. at 177, 282 P. at 854. 

The letter of March 26, 1984, sent by Kenneth's attorney 

to the Department clearly indicated that the $1,000 was 

offered as full settlement. It pointed out that the lump sum 

settlement which Kenneth had received. for his compensation 

claim was not attachable, and the letter was notice given 

separately from the check itself that negotiation of the 

check would represent consent to a full compromise of the 

Department's claim against Kenneth. There was more here to 
the cashing of the check than the mere endorsement by the 

Department. The separate letter was notice that negotiation 

and acceptance of the check constituted an accord and 

satisfaction. Further, although Kenneth's support payments 

were set by a decree of the District Court, and in effect 

were thereby made certain, the question of the right to 

recoupment in this case is not certain. Kenneth would surely 

not be liable to the Department if Judith had obtained 

payments through fraud and it is very uncertain that Judith 

could have enforced the support judgment. A subrogee, if the 

Department is a subrogee, stands in the shoes of the 

subrogor . We determine and agree with the District Court that the 

Department's claim against Kenneth was a disputed and 

unliquidated claim and acceptance by the Department of the 

check, which was accompanied by the letter of March 26, 1984, 

does in fact create an accord and satisfaction. 

ATTORNEY FEES 

The District Court has ordered that Kenneth receive his 

attorney fees and costs, although the amount of attorney fees 

has not yet been decided by the District Court. The 

Department appeals from the award of attorney fees, 

contending that no statute authorizes awarding attorney fees 

to the prevailing party in a Rule 60 (b) motion, that no 

contract exists between the parties under which the 

reciprocal payment of attorney fees would be allowed, and 

because no statutory or contractual authority exists, the 

award of attorney fees should be reversed. State ex rel. 

Foss v. District Court (Mont. 1985), 701 P.2d 342, 42 St.Rep. 

845; In Re Marriage of Canon (Mont. 1985), 697 P.2d 901, 42 

St.Rep. 348. 

Und.er S 25-10-711, MCA, an award of costs, including 

attorney fees, may be granted against governmental entity 
if the person prevails against the governmental entity and 

the court finds the claim or defense of the governmental 

entity frivolous or pursued in bad faith. The court order 

stated: 

4. That, because of the foregoing accord and 

satisfaction, the defendant is awarded costs and 

attorney fees . . . 

The award of the attorney fees by the District Court 

implies that the court found that the state acted in bad 

faith in this matter. After receiving the check and cashing 

the same in an accord and satisfaction, the Department, about 

one year later, levied execution upon the wages of Kenneth 

from his newly-found job. Moreover, although under the 

restraining order of the court, the Department was to hold in 

abeyance any attempts at collection or enforcement of the 

distraint warrant, the Department received, from the Internal 

Revenue Service as a result of action taken by the Department 

prior to the entry of the stay order, $1,593.38 representing 

Kenneth's 1985 income tax refund. Moreover, the Department 

received his state income tax refund of $401.50. The 

Department moved the District Court for an order to pay the 

monies into court, which was granted. As of the date of the 

Department's brief, a total of $3,598.31 has been paid into 

court under the Department's motion to prevent the funds from 

falling into Kenneth's hands. 

In State ex rel. Florence Carlton Consolidated Schools 

District v. District Court (Mont. 1981), 632 P.2d 318, 38 

St.Rep. 1204, we stated that if under all the circumstances 

of a case, justice would require the imposition of costs, 

equity can further provide in extreme cases, to allow 

attorney fees as an element of those costs. We have here a 

case where the Department has lodged judgments against 

Kenneth, which constitute lj-ens on his real and personal 
property. They have garnished his wages and intercepted his 

federal and state income tax refunds. The levy of execution 

applied not only to his accrued wages, at the time of the 

levy, but to any future wages he might receive (a point not 

raised by Kenneth but open to question; ordinarily an 

execution cannot reach future credits, but only accrued 

credits). He has further been forced to this appeal and the 

delay thereby engendered. In all the circumstances, it 

appears that the District Court was correct and that equity 

demands that Kenneth be awarded attorney fees both for the 

proceedings in District Court and for this appeal. Such an 

award is within the sound discretion of the trial court. 

Joseph Russell Realty Co. v. Kenneally (1980), 185 Mont. 496, 

605 P.2d 1107; Foy v. Anderson (1978), 176 Mont. 507, 580 

P.2d 114. 

We need not consider the further issue raised by the 

Department relating to whether Judith acted fraudulently or 

the Department made a mistake. That issue has no bearing on 

the outcome of this appeal. 

Accordingly, we affirm the District Court and remand 

this cause for the determination of costs and attorney fees 

in a-ccordance with this Opinion. See F-ule 33, 

M.R.App.Civ.P., for the collection sts on appeal. 

We Concur: A 
Mr. Justice Fred J. Weber specially concurs as follows: 

I agree with the conclusion of the majority opinion that 

the issue of accord and satisfaction is determinative in this 

case. I further agree with the determination of the majority 

opinion that the claim was a disputed and unliquidated claim 

and that acceptance by the department of the check created an 

accord and satisfaction. In addition I concur with the 

affirmation by the majority of the attorney's fee 

determination by the District Court. As a result, I concur 

in the majority opinion. 

I do not join in the majority conclusion that the motion 

to set aside enforcement was an independent action and not 

subject to the limitations of Rule 60(c) M.R.Civ.P. In 

particular, I do not agree with the majority conclusion that 

the absence of personal service of the amended warrants of 

distraint constituted a violation of the defendant's rights 

to due process. 

Mr. Justice L. C. Gulbrandson 

special concurrence. 

1