No. 97-184 IN THE SUPREME COURT OF THE STATE OF MONTANA 1998MT 37N

NORMAN NELSON, Plaintiff 2

v. ndent,

ELNORA A. OLD COYOTE and JOHN WINSTON WRIGHT, Defendants and Appellants

APPEAL FROM: District Court ofthe Eighteenth Judicial District, In and for the County of Gallatin, The Honorable Mike Salvagni, Judge presiding.

COUNSEL OF RECOlUl: For Appellant: Joseph M. Bradley, Bradley Law Office, Laurel, Montana For Kespondent: Carolyn S.Parker, Bowen & Parker, Bozeman, Montana

Filed: Submitted on Briefs: December 18, 1997 Decided: February 24, 1998

I derkJustice James C. Nelson delivered the Opinion of the Court.

71 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 Supreme Court and shallbe 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. 72 This is an appeal fiom the Eighteenth Judicial District Court's Order and Memorandum entered January 28, 1997, denying a motion for relief fiom defaults and default judgment filed 

### by Elnora A. Old Coyote and John Winston Wright (Appellants) pursuant to Rules 55(c), 60(b)(l) and 60(b)(3),M.R.Civ.P. We affirm. Background 73 On April 15, 1996, Norman Nelson (Nelson) filed his complaint in District Court seeking to quiet title to a tract of land in Gallatin County on which he was residing. He pleaded theories of adverse possession, fraud, breach of contract, undue influence, unjust enrichment, deceit,moral obligation and he claimed damages. At the sametime, Nelson also filed his application for apreliminary injunction and for atemporary restraining order. These various pleadings were duly served on the Appellants. The Hon. Larry W. Moran, District Judge, now retired, set a hearing on the application for injunctive relief for April 29, 1996. This date was continued. On May 7, 1996, however, Appellant Old Coyote and Nelson entered into and filed an agreement as to the restraining order. Attorney John Bradley 2appeared for Appellant Old Coyote in conjunction with this agreement and filed an unsupported Rule 12(b)(6),M.R.Civ.P. motion to dismiss Nelson's complaint on May 8, 1996. Attorney Bradley also appeared for Appellant Wright by filing a similar motion to dismiss on June 13, 1996. 

### 74 Judge Moran denied Appellant Old Coyote's motion to dismiss on June 6, 1996, and granted her 20 days in which to further plead. On June 24, 1996, Nelson filed his motion requesting that the court deny Appellants' motions to dismiss noting that they had been grantedtwo extensions oftime in which toplead. Attorney Bradley was servedby mail with this response. Appellants did not respond to this motion. However, the record does not reflect that any "extensions"to plead, other than the two unsupported motions to dismiss, were requested by Appellants or granted by the court. In any event, Wright's motion to dismiss was denied on June 26, 1996. In this order, Judge Moran required that "Defendants shall file

### Answer or otherwiseplead by July 10, 1996." On July 

### 23, 1996, the court entered an amended order forpreliminary injunction. Counsel of record were served by mail. On August 1, 1996,Nelson's counsel filed a 

### lispendens;this document indicatesthat, in addition to the Clerk and Recorder, copies were directed to Appellants. 75 Appellantshaving failed to answer or file any hrther appearances in the lawsuit, on August 8, 1996, Nelson filed his Rule 55(b)(2), M.R.Civ.P. motion for entry of default judgment. This motion was supported by a brief and was served by mail on counsel for Appellants. The motion requested that Nelson be granted ownership of a 180'

### x 180'portionofthe real property describedin the complaint on which his house is located; that he receive

an unencumbered conveyance of 

### such property by valid deed based on a survey which he would obtain; that 

### he be granted his attorney's fees and costs; and that he be granted other relief deemedproper. By minute order datedAugust 14, 1996,the clerk set a hearing on this motion for September9, 1996,at 9:00 am. The record reflects that the clerk mailed a copy ofthis minute orderby certified mail to Attorney Bradley and that the order was received on August 

### 30, 1996. The initials 

### "JMB" appear on the certified-mail receipt card. Appellants did not timely file any written opposition to Nelson's motion for defaultjudgment, nor did they appear either personally orby counsel at the September9, 1996hearing on the motion. 76 At the hearing, Nelson presented sworn testimony in support of his complaint. Following the hearing, Judge Moran granted Nelson's motion and ordered that default judgment be entered againstAppellants grantingand conveying to Netson,by valid deed and following the survey, an unencumbered title to the 180' 

### x 180' parcel. Nelson was also awarded his attorney's fees and costs. Counsel ofrecord were servedby mail with this order. On October 7, 1996,the court entered a decree quieting title, ordered a survey and appointed the clerk 

### ofcourt as a special master to convey the real property to Nelson. Again, counsel of record were served by mail with this document. On November 

### 1, 1996, counsel for Nelson filed a notice to the court indicating that a preliminary survey had been completed and had been presented to the court 

### for approval along with an attached letter 

### from the surveyor. Attorney Bradley was served by mail with a copy of this notice.17 On November 29, 1996, Appellants, by Attorney Bradley, entered their first appearance in the suit since the June motions to dismiss wcrc filed. Appellants filed their motion for relief from defaults and default judgment under Rules 55(c), 60(b)(l) and 60(b)(3),M.R.Civ.P. The motion was supportedby a brief and the affidavits of Appellants and four otherpersons. On December 3, 1996,Nelson's counsel filed notice of entry of the October 

### 7, 1996 decree and a notice to the court and affidavit of fees; she served these documentsby mail on counsel for Appellants. By minute order dated December 9, 1996, the clerk of court set a hearing on Appellants' motion for relief from defaults and default judgment for January 15, 1997, at 9:00 am. Counsel of record were served by mail. Appellants filed objectionsto Nelson's bill of costs and attorney's fees (December 

### 9, 1996); a motion for stay (December 9, 1996);a notice ofhearing (December 13, 1996); and another affidavit (January 14, 1997). On December 11, 1996, Nelson filed his objection to the motions for stay and for relief from defaults and default judgment. Counsel ofrecord served each otherby mail with these various documents. 18 Appellants' motions for relief from defaults and default judgment and for stay were heard on January 15, 1997, by the Hon. Mike Salvagni,Judge Moran's successor in office. Nelson and Old Coyote testified; Wright did not attend the hearing; counsel for theparties offered argument. With leave ofthe court, Nelson filed an amended response to Appellants' motion for relief from defaults and default judgment and a supporting hearing brief on January 21, 1997. Appellants filed two supplemental briefs in support of their motion(January 24 and 27, 1997). The court entered its Order and Memorandum on January 28, 1997, denying Appellants relief. Appellants timcly filcd their notice of appeal from the court's order denying their motion for relief from defaults and default judgment. Issue 79 The sole issue on appeal is whether the District Court abused its discretion in denying Appellants' motion for relief from defaults and from default judgment. We hold that the court committed no abuse of discretion under the facts and procedural background of this

case. Discussion 710 Rule 55(c), M.R.Civ.P., provides in relevant part: 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). Our standard ofreview of a district court's refusal to set aside default is whether there was a slight abuse ofdiscretionby the court. Waldher v. F.D.I.C. (1997),282 Mont. 59,62,935 P.2d 1101, 1103 (citingTwenty-Seventh Street,Inc. v. Johnson (1986),220 Mont. 469,471, 716 P.2d 210,211). In this case, however, Appellants did not file their Rule 55(c) motion until after default judgment had been entered againstthem. As we stated in Karlen v. Evans (1996), 276 Mont. 181,915P.2d 232: As a generalrule, cases aretobe tried on their merits andjudgments by default are not favored. Maulding v. Hardman (1993), 257 Mont. 18, 23, 847 P.2d 292,296 (citing Lords v. Newman (1984),212 Mont. 359,363,688 P.2d 290, 293). If the trial court refused to set aside the judgment, then only a slightabuse ofdiscretion need be shownto warrant reversal. 

### &, 688P.2d at 293. Ifthe trial court has set aside the judgment and the appellant requests that the judgment be reinstated,then a manifest abuse of discretion must be shown to warrant reversal. 

## Lords,688 P.2d at 293. Karlen, 276 Mont. at 185, 915 P.2d at 235. Since, in the instant case, the District Court refused to set aside the default judgment, our discussion will center on whether Appellants have demonstrated a slight abuse of discretion on the part ofthe District Court which would, therefore, warrant reversal. Ill Appellants groundtheirRule 55(c)motion in Rules 6O(b)(l)and 60(b)(3),M.R.Civ.P. Rule 6O(b)(l) allows the court to relieve a party from a final judgment for "mistake, inadvertence, surprise, or excusable neglect." Rule 60(b)(3) allows the court to grant this same relief on the basis of "fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party." A party seeking to set aside a default judgment must show both a good cause for doing sounder Rule 60(b), M.R.Civ.P., and the existence of a meritorious defense. Maulding, 257 Mont. at 23, 847 P.2d at 296 (citing FirstNat. Bank ofCut Bank v. Springs (1987),225 Mont. 62,67,731P.2d 332,335). I12 In ruling on their motion, the District Court consideredAppellants' Rule 55(c)motion first in the context of Rule 60(b)(l) and then, separately, in the context of Rule 60(b)(3). With regard to the former, the court ruled that the Appellants missed three filing deadlines. The court observed that on June 6, 1996, Appellant Old Coyote's motion to dismiss was denied and that shewas given 20 daysto further plead. Shefailed to do so. In the meantime,Appellant Wright filed his motion to dismiss on June 13, 1996, and this motion was denied

on June 26, 1996. Both Appellants were given until July 10, 1996,to further plead and, as the court correctly noted, the Appellants did nothing. 113 The courtnext pointed out that on August 8, 1996, Nelson filed his motion and brief for entry of default judgment. Notice of the September 9, 1996 hearing was served upon Appellants' counsel by certified mail. Appellants did not respond to the motion and did not appear at the hearing. Both the order directing that default judgment be entered against Appellants filed on September 9, 1996, and the decree quieting title to the subject property filed on October 7, 1996, were served by mail upon counsel of record. Once again, Appellants did nothing further. They finally filed their Rule 55(c)motion on November 29, 1996--morethan four and one-half months after the July 10, 1996date on which they were ordered to answer or otherwiseplead. 114 The court noted that in their brief in oppositionto the default judgment, Appellants' counsel advisedthat he was absent from his law office for much 

### ofthe months of July and August 1996 due to illness. Counsel further pointed out that he is a sole practitioner who operates his law officewithout a secretary orreceptionist. Moreover, he claimed that during his illness mail addressed to him was picked up from the post office by other persons, including relatives and friends. Nonetheless, the court found that at the hearing on Appellants' motion to set aside the default judgment, Attorney Bradley did not provide the court with any reasons why his illness was so severe that he could not look at his mail orcalendar hearings for two months. The court noted that Appellants' counsel did not present any medical evidence to substantiatehis illness claim, nor did he request any continuances due to illness during the progress of the case. Moreover, Attorney Bradley made no arrangements with another attorneyto look afterhis cases andhe gave no fhrtherexplanation for missing three important filing deadlines. 115 The District Court cited our decision in Morris v. Frank Transportation Co. (1979), 184 Mont. 74,601P.2d 698, wherein we ruled that the defendant's illness did not constitute excusable neglect for purposes of Rule 60(b)(l). Citing Dudley v. Stiles (1963), 142 Mont. 566,568,386P.2d 342,343, we concluded that a failureto appear due to forgetfulness and the press of other more important business is not sufficientto establish excusable neglect. Even the most liberal approachto this problem cannot save Appellant's case. 

## ".

. . A liberal court cannot find excusable neglect where a defendant has willingly slumbered on his rights and ignored the judicial machinery established by law." 

# w, 184Mont. at 76, 601 P.2d at 699 (quoting Dudley, 142 Mont. at 568, 386 P.2d at

716 We agree with the District Court's analysis. Appellants' attorney argues in his brief on appeal that he was absent a good deal of time from his office during the months of July and August 1996;that he is a solopractitioner and operates without the benefit of a secretary or receptionist; and that due to his illness (severe depression), relatives and friends, none of whom were attorneys, picked up his mail fromthepost office. He contends that his chronic depression, which became severe during the period in question, rendered him unable to 9perform detailed or lengthy mental tasks. Moreover, Appellants' counsel argues that this "information would have been made available to the District Court upon request. Judge Salvagni did not even inquire into the nature of counsel's illness, however." 717 In point of fact, Judge Salvagni did inquire ofAttorney Bradley as to the reason for his failureto timely respond; it was Attorney Bradley who failed to adequately explainto the court the basis for his failureto appear on this clients' behalf. The transcript of the January 15,1997hearing reveals the following exchange: THE COURT: I have a question of you. Why did you not appear at the hearing on the motion for default? MR. BRADLEY: 

### I don't dispute that Mrs. Parkerproperly sent notice to my office ofthat hearing,but I didn't personally see it. That's not necessarily an excuse that's acceptable under law. I was out ofthe office sick. 

### I didn't sign for the letter. I don't have anybody else in my office. I don't have any secretaries or lawyers. I'm the only person in there. And when I was out of the office, two differentpeople were picking up my mail. One is my mother; one is a friend of mine. And they sign "JMB" on those receipts when they pick them up, because the certified letter was not restricted delively. THE COURT: Did you receive a copy ofJudge Moran's order requiring the Defendants to respond by July loth, 

### I believe it was? MR. BRADLEY: That was his motion--that was his order denying our motion to dismiss on behalf ofDefendant Wright, and yes, I did receive that. THE COURT: Why didn't you respond by July loth? 

### MR. BRADLEY: This is a complicated case, your Honor, and, again, 

### I was out ofthe office quite a bit this summer due to illness. Our witnesses are widely scattered. Mr. Wright lives in Texas. A grandson, you have an affidavit from him, he's going to school in Georgia. Mrs. Old Coyote lives in Huntley. Some of the witnesses--and there is one affidavit from a nonrelative that's filed from Mr. Mike Cech. He lives inBozeman. For us to gather the information in that time was very difficult, especially due to my absences. And I would note that accordingto Ms. Parker's affidavit of fees, she started work on this case a good six or eight months before she filed the Complaint, based on what she's charging for there. So they had lots of time. Now, obviously in hindsightit would have been better forme to askthe Court for additional time to answer. 

### I didn't do that because ofmy absences from the office. When we did get the notice--or the order that default had been entered and a decree had been granted, wc timely filed this motion to set that aside within 60 days. So I think we are here in timely fashion. 118 From this colloquy it is apparent that even when given the opportunity to do so, Attorney Bradley did not adequately explain his claim of illness to the court. He did not present any basis on which the court could have concluded that his depression was so severe that it completely incapacitated him and precluded him from appearing on behalf of his clients. Furthermore,Attorney Bradley's explanation rings hollow when one considers that he represented Appellant Old Coyote in connection with the negotiation and drafting of the May 7, 1996 agreement regarding the temporary restraining order; that he filed a motion to dismiss on behalf of Appellant Old Coyote on May 

### 8, 1996; and that he filed a motion to dismiss on behalf of Appellant Wright on June 13, 1996. 119 Attorney Bradley chose to practice law without the benefit of even a sccrctary to receive and open the mail and tend to his office matters in his absence. Indeed, though he apparently knew that he was subjectto bouts of severe depression, he failed to demonstrate that he had established any sort of contingency plan or arrangement with another attorney to monitor him or his practice if he became incapacitated because of his illness. Rather, hechose to rely on non-lawyer friends and relatives to pick up his mail. 720 We conclude that the District Court correctly determined that Appellants failed to meet their burden to demonstrate good-cause grounds for granting relief from default judgment under Rule 60(b)(l), M.R.Civ.P. 721 Similarly, Appellants' argument that the court should have granted their motion for relief under Rule 60(b)(3),M.R.Civ.P., is also withoutmerit. As noted by the District Court, Appellants' motion under Rule 60(b)(3), was based on their allegation that Nelson had committed fraudby misleading the court to award a 180'x 180' lot rather than the 60' x 60' lot evidenced in writing. Appellants contended that the statute of frauds and par01 evidence rule should have prevented the court from considering the larger lot size and, as a corollary tothis argument, that the reliefgranted on default, namely the easement across their property, exceeded the demand for judgment under Rule 54(c), M.R.Civ.P. The court disagreed, concluding that Nelson's testimony indicated that he had been led to believe that he owned the larger lot and that this testimony was supportedby the fact that the residence he built for himself extended beyond the boundaries ofthe 60' x 60' lot. Moreover, the court noted that Nelson's complaint identified the 180'

### x 180'lot as theproperty being soughtin the quiet title action and the adverse possession action. Accordingly, the court concludedthat Appellants' failureto answer and contest Nelson's claim for the 180'

### x 180'lot did not impute fiaud on Nelson's part. 722 Again, we agree with the District Court. Intrinsic fraud consists of false or fraudulentrepresentation or concealment made during court proceedings. Falcon v. Faulkner (1995), 273 Mont. 327,332,903 P.2d 197,200 (citing Lance v. Lancc (1981), 195Mont. 176, 180,

Extrinsic fraud has been defined as some intentional act or conduct by which the prevailing party has prevented the unsuccessful party from having a fair submissionofthe controversy. [Citation omitted.] Extrinsicfraud is collateral to the matters tried by the court, but docs not include fraud in the matters on which the judgment was rendered. In re Marriage ofMiller (1995), 273 Mont. 286,292,902 P.2d 1019, 1022-23 (citing Pilati

v. Pilati (1979), 181Mont. 182, 193, 592 P.2d 1374, 1380; and Salway v. Arkava (1985), 215 Mont. 135, 140,695P.2d 1302, 1306). 123 Our examination of the record in this case does not reveal that Nelson's default judgment was obtained on the basis of either intrinsic or extrinsic fraud as required by Rule 60(b)(3),M.R.Civ.P. Indeed, Appellants' brief on appeal demonstrates little more than that they disagree with the allegations and claims in Nelson's complaint and with his testimony at the default hearing on September 9, 1996. However, a dispute as to the allegations and claims in a complaint and a disagreement as to a witness' testimony at a hearing do not, without more, impute fraud. In point of fact, it 

### is precisely these sorts of disputes and disagreementsthat litigation and the fact-finding process--assuming one participates in it-- are designed to resolve. 124 We conclude that the court correctly found no basis for vacating Nelson's default judgment under Rule 60(b)(3), M.R.Civ.P., on the facts of this case.725 Finally, Appellants contend that we should find a slight abuse of discretionon thepart of the District Court because furtherlitigation will result from the default judgment; because they were prejudiced by a change ofjudgeship during the pendency oftheir motion; because the court's order denying their motion to set aside the defaults and default judgment is not supported by the record; and because they believe that Nelson also committed serious procedural errors. In our view, none of these contentions support a finding of abuse of discretion, slight or otherwise, on the part of the District Court. 726 On the matter of further litigation, Appellants contend that further litigation will be necessary because Nelson does not have access to his newly decreed plot except over Appellants' land. Nelson disputes this allegation contending there is an existing road, built at his expense,which accesses the entire property. Even if, theoretically, some sort ofhrther proceedings are necessary to resolve this access issue, Appellants cite no on-point authority for the proposition that the possibility of future litigation is grounds to set aside Nelson's defaultjudgment. Similarly, Appellants contend that the possibility of the property being encumbered by a prior mortgage and questions regarding the survey and ownership of other improvements on the subject property will require fiu-ther litigation. Again, these sorts of speculative arguments are not grounds to set aside the default judgment. 

### 727 Appellants claim they were prejudiced by the change of judges during the pendency ofthis case. This argument is without merit. While Judge Salvagnidid assume jurisdiction of this case from Judge Moran after Judge Moran's retirement, there is absolutely no proofthat Judge Salvagni was not thoroughly familiarwith the case when he entered his order and memorandum on January 28,1997, denying Appellants' Rule 55(c)motion or that the change ofjudges somehow prejudiced Appellants. We will not speculate,as Appellants do, on what Judge Moran might have done had he remained on the case. If Appellants' case was not adequately presented at the hearing on their motion to set aside the default judgment, that is not the fault of Judge Salvagni, and we will not hold the District Court in error for Appellants' own failure ofproof. 128 Next, Appellants contend that substantialportions ofthe District Court's rationale in denying their motion for relief arenot supportedby the record. Having reviewed the record, we are not persuaded that this argument has any merit. The court's rationale is supported by the record. Similarly, Appellants contend that Nelson committed procedural errors at least

as serious as their own failure to answer. Appellants do not explain how exactly they were prejudiced by these alleged errors or why "equity requires that the entire case be opened on the merits." Accordingly, we reject this argument as well. 129 Finally, Appellants contend that they have meritorious defenses under the statute of frauds and other theories that would be available to defeat the allcgations in Nelson's complaint. The short answer to this contention isthat before the court can grant a motion to set aside a default judgment, the movant must establish not only that he had a meritorious defense but also that there was "good cause" for not answering the complaint or responding or defending in any way in the firstplace. Maulding,257 Mont. at 23,857 P.2d at 296; Rule55(c), M.R.Civ.P. Because, as noted above, Appellants failed in their burden to establish "good cause"--i.e., mistake,inadvertence, surprise, or excusableneglect under Rule 60(b)(l),

or fraud, misrepresentation, or misconduct of an adverse party under Rule 60(b)(3)--the District Court need not address, nor do we need to review, the claim that the defaulted party has meritorious defenses. Svrings, 225 Mont. at 67,731 P.2d at 335. 7/30 In summary, on the record presented on appeal, we find no abuse of discretion, slight

or othenvise,by the DistrictCourt in its denial of Appellants' motion to set aside defaults and defaultjudgment entered in favor ofNelson. 7/31 Affirmed.

We Concur: 

# /'