No. 05-236 IN THE SUPREME COURT OF THE STATE OF MONTANA 2006 MT 9N

_______________________________________ BOB WILLIAMS, TRISON III, LLC, RICHARD GATES, GAIL JOHNSON, PATRICIA DUTOIT, and STEVE STETNER, Plaintiffs and Respondents,

v. GLOBAL FINANCIAL SERVICES, INC., GLOBAL EXPRESS MARKETING, KINITIC BUSINESS SOLUTIONS, INC., CLYDE AU STIN, CEDRIC NELSON, RODNEY D. BROWN, SR., JOE POTEAT, JAMES ZIMMERMAN, NORTHSTAR, LC, JOHN DOES I-X AND JANE DOES I-X, A&B MANAGEMENT SERVICE, INC., CERTIFIED BOOKKEEPING ACCOUNTING SERVICE, Defendants and Appellants.

______________________________________ APPEAL FROM: District Court of the Fourth Judicial District, In and for the County of Missoula, Cause No. DV 2002-517 The Honorable Edward P. McLean, Judge presiding.

COUNSEL OF RECORD: For Appellants: Sean Morris, Worden, Than e, P.C., Missoula, Montana For Respondents: Samuel M. Warren, St Peter & Warren, P.C., Missoula, Montana

____________________________________ Submitted on Briefs: December 7, 2005 Decided: January 10, 2006 Filed:

______________________________________ Clerk Justice Brian Morris delivered the Opinion of the Court.2 ¶1 Pursuant to Section I, Paragraph 3(c ), Montana Supreme Court 1996 Internal Operating Rules, the following decision shall not be cited as precedent but shall be filed as a public document with the Clerk of the Su preme Court and shall be reported by case title, Supreme Court cause number and result to the State Reporter Publishing Company and to West Group in the quarterly table of noncitable cases issued by this Court. ¶2 Appellants Rodney Brown, Sr. (Brown), Cedric Ne lson (Nelson), A&B Asset Management Services, Inc., and Certified Bookkeeping Accounting Se rvices (hereafter collectively “the Corporations”) appeal from th e denial of their respective motions to set aside the default judgments ente red against them in the Fourth Judicial District, Missoula County, in an action by Bob W illiams, Patricia Dutoit, Gail Jo hnson, and othe r plaintiffs (hereafter collectively “Williams”). We affirm in part and remand in part for further proceedings. ¶3 We review the followi ng issues on appeal: ¶4 Whether the District Court properly denied the motions to se t aside the default judgments entered against Brown, Nelson, and the Corporations. ¶5 Whether the District Court properly awar ded compensatory and treble damages. ¶6 Whether the District Court proper ly awarded punitive damages. PROCEDURAL AND FACTUAL BACKGROUND ¶7 This case arises from a fraudulent invest ment scheme allegedly perpetrated by Brown, Nelson, and the Corporations on a num ber of Montana investors. Brown, Nelson, and the Corporations purportedly induced W illiams to invest a substantial amount of money in a Las Vegas real estate scheme. The investment scheme turned out to be fraudulent and Williams and th e other plaintiffs lost their investments.3 ¶8 Williams filed a complaint against Brown, Nelson, and the Co rporations on May 29, 2002, alleging breach of co ntract, breach of fiduciary duty, misrepresentation, and deceptive and unfair busi ness practices. Serving them proved difficult due to the fact that many lived within gated comm unities in Las Vegas and th e individual defendants required personal service. Williams manage d to serve Nelson personally on October 25, 2002. Williams personally served Brown at his home on Febr uary 13, 2004. Brown and Nelson both failed to provide any re sponse to the complaint. ¶9 The District Court entered default judg ments for Williams against Nelson and Brown on May 24, 2004. The District Court awarded compen satory damages, including treble damages as provided by § 30-14-133(1 ), MCA, interest, and attorney’s fees totaling approximately $2 million. The Distri ct Court also awarded around $1.65 million in punitive damages. ¶10 Williams filed an amended complaint on September 29, 2004, to add the Corporations as defendants. Williams served these new pa rties on or about October 18, 2004, and October 20, 2004. The District Court entered default judgments against the Corporations on December 6, 2004. Brown filed a moti on to set aside the default judgments the next day. Nelson and the Corporations filed se parate motions on December 9, 2004, to se t aside the default judgments against them. ¶11 The District Court held a hearing on Janua ry 27, 2005, on the various motions to set aside the default judgments. Brown, Nelson, and the Corpor ations provided an assortment of justifications for their failure to answer or otherwise en ter an appearance in an action against them that sought millions of dollars in damages. Without exception, all of these rationales placed the blame for their fa ilure squarely on the shoulders of others.4 ¶12 Nelson alleged that his orig inal attorney had lied to hi m about having had the case removed to federal court and then dismissed. Brown contends that after he had been served, Samuel Warren (Warren), counsel fo r Williams, assured him that service had been deficient and he need no t respond. The Corporations claim that a secretary at Warren’s office advised them that service had been the result of a clerical mistake and that the time to respond had been extended. ¶13 Williams argued that the motions to se t aside the default judgments merely represented a delay tactic to allow Brown, Ne lson, and the Corporations sufficient time to divert their assets to avoid co llection on the judgme nt. The District Court issued an order on January 28, 2004, requiring Brown, Nelson, and the Corporations to file a security bond within one week to ensure that they were not mere ly attempting to delay judgment. Brown, Nelson, and the Corpora tions failed to file a security bond. The District Court did not rule on their motions to set aside the default judgmen ts within sixty days. The District Court’s failure to rule on the moti ons within sixty days resulted in them being deemed denied pursuant to Rule 60(c), M.R.Civ.P. ¶14 Brown, Nelson, and the Corporations then filed a motion on Febr uary 8, 2005, to certify the default judgments against them as final, pursuant to Ru le 54(b), M.R.Civ.P., or, alternatively, to stay ex ecution of the default judgment s. They argued that their motion satisfied all of the factors needed to ce rtify a partial judgment as final as set forth in Roy v. Neibauer (1980), 188 Mont. 81, 87, 610 P.2d 1185, 1189. They further contended that Williams’s efforts to execute on the default judgment s in their home state of Nevada supported certification. The District Court agreed and granted final certification for the default judgments on March 14, 2005. The District Court also5 allowed Brown, Nelson, and th e Corporations to postpone further efforts by Williams to execute on the default judgme nts by presenting documentation of sufficient collateral to satisfy the judgments. Th is appeal followed. STANDARD OF REVIEW ¶15 As a general rule, cases should be tried on the me rits and we do not favor judgments by default. Bahm v. Southworth , 2000 MT 244, ¶ 4, 301 Mont. 434, ¶ 4, 10 P.3d 99, ¶ 4. A party needs to show only a slight abuse of discretion to warrant reversal from a denial of a motion to set aside a default judgment. Bahm , ¶ 4. DISCUSSION ¶16 Brown, Nelson, and the Corporations argu e on appeal that no evidence supports the District Court’s award of damages and that the District Court improperly awarded punitive damages. Default Judgments ¶17 The party moving to set aside a default judgment carries the burden of proof. In re Marriage of Winckler , 2000 MT 116, ¶ 10, 29 9 Mont. 428, ¶ 10, 2 P.3d 229, ¶ 10. The moving party first must satisfy the “good ca use” criteria of Rule 55(c), M.R.Civ.P., and then satisfy the more stringent cr iteria of Rule 60(b), M.R.Civ.P. See Winckler , ¶ 17. Our conclusion that Brown, Nelson, and the Corporations do not sa tisfy the requirements of Rule 60(b) forecloses the need to decide whether they could meet the good cause standard of Rule 55(c). ¶18 A party may be relieved fro m a final judgment under Rule 60(b)(1), M.R.Civ.P., for “mistake, inadvertence, surprise, or ex cusable neglect.” Brown, Nelson, and the6 Corporations put forth a variety of excuses on appeal for their failu re to file a timely response similar to those it raised before the District Court. ¶19 Brown contends that the District Court sh ould have granted his motion to set aside the default judgment entered against him due to “mistake” in the form of his misplaced confidence in the advice allegedly provided by telephone to his wife by Williams’s counsel. He contends that his wife’s initial conversation with Warren, Williams’s counsel, led him to believe he had been served improperly. Brown makes no claim that he attempted to seek advice from his own coun sel, as opposed to W illiams’s counsel, as to whether his service had been proper. Brown also makes no claim that he spoke personally with opposing counse l regarding the adequacy of his service. Instead he suggests that his decision to rely on his wife’s alleged conversation with opposing counsel justifies the la ck of any further inquiry on his part. ¶20 Nelson contends that his reliance on his previous counsel’s representations nearly two years before that the ma tter had been removed to fede ral court and then dismissed satisfies the standard of Ru le 60(b), M.R.Civ.P. Nelson urges us to determine his misplaced reliance sufficient to satisfy Rule 60(b) de spite no apparent efforts on his part to obtain confirmation of his original counsel’s representati ons. Nelson apparently never asked his former counsel to provide a copy of the order removing the matter to federal court or a copy of the federal c ourt’s order dismissing the case. ¶21 Brown, Nelson, and the Corporations furt her contend that they all relied on the alleged statements of a secretary at the o ffice of the opposing counsel, Warren, who informed them that Williams w ould agree to set aside the defa ult judgment and to extend the time to file a response to the amended mo tion for default. None of these parties7 apparently deemed this potential multi-m illion dollar liability su fficiently important, however, to speak directly with Warren, ra ther than take the advice of Warren’s secretary. And none of the parties apparently requested that Warren’s secretary at least put her legal advice in writing in the form of a letter confirming that Williams had agreed to set aside the default judg ment and had agreed to exte nd the response time. ¶22 The excuses offered by Brown, Nelson, an d the Corporations for not filing timely responses to the complaints ring hollow. The numerous affidavits filed by Brown, Nelson, representatives of th e Corporations, their counsel, and their counsel’s staff regarding the various efforts th ey allegedly undertook fail to address the basic question of why, when facing a multi-million dollar judgment, they simply did not file an appearance of some sort in district court rather than relying on the alleged re presentations of their former counsel, of opposing counsel, and of opposing counsel’s secretary. In the end, their excuses stretch credulity beyond the breaking po int and fail to persuade us that the District Court abused its discretion, even sl ightly, in denying their motions to set aside the default judgments. Rule 54(b) Certification ¶23 Brown, Nelson, and the Corporations also assert a novel defense based upon Rule 54(b), M.R.Civ.P. As previously discussed, ¶ 13, supra , Brown, Nelson, and the Corporations moved the District Court to ce rtify the default judgments against them as final pursuant to Rule 54(b), M.R.Civ.P. They sought this certification to counteract the efforts by Williams to execute on the default judgments in th eir home state of Nevada. The District Court certified the default judgmen ts as final in an order dated March 14, 2005.8 ¶24 They now contend, however, that the District Court’s entry of default judgments against only four of the six remaining named defendants pr evented the District Court from entering a final order until it had made “a n express determination that there is no just reason for delay and upon an express direction for the entry of judgment.” Rule 54(b), M.R.Civ.P. The District Court’s or der of March 14, 2005, admittedly failed to address all of the criteria appropriate fo r Rule 54(b) certific ation set forth in Kohler v. Croonenberghs , 2003 MT 260, ¶¶ 14-16, 317 Mont . 413, ¶¶ 14-16, 77 P.3d 531, ¶¶ 14- 16. This omission alone norm ally would be sufficient to c onclude that the certificate order does not vest jurisdiction in th is Court to entertain the appeal. Kohler , ¶ 9. ¶25 In this instance, however, judicial estoppel bars any attacks on the adequacy of the District Court’s certification order. Judicial estoppel binds a party to their judicial declarations and precludes a party from taki ng a position “inconsisten t with previously made declarations in a subse quent action or proceeding.” Kauffman-Harmon v. Kauffman , 2001 MT 238, ¶ 15, 307 Mont. 45, ¶ 15, 36 P.3d 408, ¶ 15. Brown, Nelson, and the Corporations previously argued to the District Court that the facts of this case supported Rule 54(b) certification. They cannot be allowed to argue now that the District Court improperly certified their default judg ments as final when they sought the certification in the first instance. Compensatory Damages ¶26 Brown, Nelson, and the Corporations cont end that the District Court’s award of compensatory damages under the default judgments cannot be upheld due to Williams’s failure to present any evid ence supporting the amount. Williams presented detailed9 information in support of their damages, howe ver, in the motions for default judgments. This information supports th e compensatory damages awarde d by the District Court. ¶27 Brown, Nelson, and the Corporations also maintain that the District Court’s award of treble damages pursuant to § 30-14-133 (1), MCA, requires the District Court to provide an analysis that this Court can review to determin e whether the District Court abused its discretion. The Di strict Court’s decision to aw ard treble damages is purely discretionary. Plath v. Schonrock , 2003 MT 21, ¶ 28, 314 Mont. 101, ¶ 28, 64 P.3d 984, ¶ 28. ¶28 Section 30-14-133(1), MCA, allows for a di strict court to award treble damages when a consumer suffers a pec uniary loss due to a practice declared unlawful by § 30-14- 103, MCA. The statute includes no requir ement that the Distri ct Court provide an analysis of its decision to award treble dama ges. Moreover, the failure of Brown, Nelson, and the Corporations to answer the complaint and the District Court’s entry of a default judgment constitutes an admission of the a llegations contained in the complaint. Lane v.
Farmers Union Ins. , 1999 MT 252, ¶ 21, 296 Mont. 267, ¶ 21, 989 P.2d 309, ¶ 21. The complaint alleges a fraudulent real estate scheme perpetuate d by Brown, Nelson, and the Corporations. Such a fraudulent real estate scheme qualifies as a deceptive trade practice under § 30-14-103, MCA. This fact alone w ould support treble damages and the District Court cannot be said to have abused its disc retion in awarding treble damages under these circumstances. Punitive Damages ¶29 Brown, Nelson, and the Corporations also take issue with the District Court’s decision to award punitive damages. A dist rict court may awar d reasonable punitive10 damages when a defendant has been found to have engaged in actual fraud or malice. Section 27-1-221(1), MCA. A district court awarding punitive dama ges pursuant to this statute, “shall state the reasons for making th e award in findings of fact and conclusions of law.” Section 27-1-211(7)(b), MCA. ¶30 The District Court entered default judg ments against Brown, Nelson, and the Corporations for their participa tion in a fraudulent real estate scheme. The District Court did not state the reasons for aw arding punitive damages, howev er, in its findings of fact or conclusions of law as re quired by § 27-1-211(7)(b), MC A. We cannot uphold an award of punitive damages with out such reasons being include d in the findi ngs of fact and conclusions of law. Thus, we deem it appropriate to remand this matter to the District Court for the limited purpose of havi ng the court provide the reasons, if any, for its decision to award punitive damages. ¶31 Affirmed in part and remanded in part for further proceedings.

/S/ BRIAN MORRIS

We Concur: /S/ W. WILLIAM LEAPHART /S/ JOHN WARNER /S/ PATRICIA O. COTTER /S/ JAMES C. NELSON