No. 14486 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979

THE KOOTENAI CORPORATION, a Montana Corporation, Plaintiff and Respondent,

WAYNE L. DAYTON and JEROME F. BORKOSKI, Defendants and Appellants.

Appeal from: District Court of the Fourth Judicial District, Honorable Edward Dussault,Judge presiding. Counsel of Record: ForAppellants: Milodragovich,Dale and Dye,Missoula, Montana Harold Dye argued, Missoula, Montana For Respondent: Robert B. Brown argued, Stevensville,Montana

Submitted: September 18, 1979 Decided:

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# r I979 Filed: ~JCT 

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### Mr. Chief Justice Frank I. Haswell delivered the Opinion of the Court. Defendant, Jerome F. Borkoski, appeals from a denial of a motion to set aside a default judgment. On March 27, 1974,Wayne Dayton agreed to buy from the Kootenai Corporation (Corporation) a certainparcel of real estate in Ravalli County,Montana. The contractprovided that payment for the landwould be made over several years and when the full purchase price was paid title would pass to the buyer. The transfer of thisproperty also included the transfer of an onpremise beer license to the buyer. The agreement provided that in the event of a default by the buyer that all of Buyer's interest in the property would terminate and that the Buyer "shallreassign the beer license." On December 30, 1974,this contractwas assigned by Wayne Dayton to Jerome F. Borkoski. At the bottom of the last page of the assignment of contract is an acceptance of the assignment signed by the President of the Corporation. On October 13, 1977, the defendant Borkoski was served with a notice of default and cancellation of contract. The reason given for the notice was that Borkoski had allowed the on-premises beer license to be revoked. On June 24, 1978,Borkoski was served with a summons and

a complaint. The complaint alleged that the corporation "is the

owner and is entitled to the immediate possession of certain described realproperty 

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# .." It then continued: "That the DefendantWayne L. Dayton surrendered deed to the above-described premises to the plaintiff, which deed, conveying his interest in the premises,was recorded on the 26th day of May, 1978, in Book 147of Deeds at Page 514, Records of Ravalli County,Montana. That the Defendant, Jerome F. Borkoski,prior to the 26th day of May, 1978,entered and took possession of the said premises peacefully,without right to do so, and from and after the 26th day of May, 1978,holds and keepspossession of the same unlawfully and by force,contrary to the form of the statute in such casemade and provided."The complaint further alleged that the plaintiff was "deprived of the rents, issues and profits of said land and premises ever since the 26th day of May, 1978, to its damage in the sum of $20.00 per day 

# ..."and prayed for restitution and treble damages.The summons required that the defendants appear in the District Court on June 30, 1978. The summons also stated that the action was one for forcible detainer of the premises. Borkoski did not appear in court on that date and judgment was entered against him on the same day. On July 14, 1978,Borkoski, through his attorney, filed a motion to set aside judgmentby default. The motion alleged that the failure of Borkoski to appear in court on June 30 was due to excusablemistake, and that the action had not been properly brought under the unlawful detainer statute,because the parties were not landlord and tenant. An affidavit attached to thismotion stated Borkoski had failed to appear in court on June 30 for the following reasons: "[The defendant] was under the impression that it was not necessary for him to go to Court unless the Defendant Wayne L. Daytonwas also served with a Summons ordering him to go to Court at the same time. Your Affiant was told by Mr. Dayton that he had not been served with process ordering him to appear on June 30, 1978,and assumed that it was not necessary for your Affiant to do so. Your Affiant further telephoned the Clerk of Court's office and was informed that the abovementioned matter was not on the calendar for June 30, 1978, and therefore assumed that itwas not necessary for him to appear in Court on that date." The affidavit further stated that Borkoski was "informed and believes that the Plaintiff contends that [Borkoski]has forfeited his rights under the Contract 

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# .because [Borkoski] has allowed a certain 

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# . . liquor license to lapse." On July 28, there was a hearing on the motion. The only person questioned during testimony was Mr. Brown, the attorney for the corporation. During this testimony the original contractfor deed, the assignment of this contract to Borkoski, and the notice of default were all introduced into evidence. At the end of the hearing the district judge denied Borkoski's motion. It is from this denial that defendant appeals. The issues on appeal are as follows: I. Whether the summary proceeding of forceful detainer may be used to recover property sold under contract for deed? 11. Whether the District Court judge abused his discretion in not setting aside the judgment by default? ISSUE 1.~efendant's central contention is that the District Court erred in allowing the plaintiff to bring an action for forcible detainer rather than requiring that the action be one for ejectment. Defendant contends that an action for ejectment would have allowed him twenty days to answer under Rule 12(a), M.R.Civ.P. AS it occurred, the default was entered only six days after the

summonswas served in accordance with the forcible detainer statute. Cited in support of the propo~~tion that the plaintiff is barred frombringing this action under the forcible detainer statute is Kransky v. Hensleigh (1965), 146 Mont. 486, 409 P.2d 537. In Kransky this Court said "Whenever the unlawful detainer statutes, S93-9701, R.C.M. 1947, et seq. [now section 70-27-101,MCA,et seq.], are brought into operation it is the rule that such actionmay only prevail where the relation of landlord-tenantexists." 146 Mont. at 490, 409 P.2d at 539. In the present case it is clear that a landlord-tenant relationship did not exist. The legal relationshipwas contractual. Itmust be noted, however, that Kransky is limited to the unlawful detainer statute, section 70-27-108,MCA, which by its language specificallyprovides that the actionmay only be brought against

a tenant. The present case was brought as a forcible detaineraction under section 70-27-103,MCA. A reading of this statute will reveal that a landlord-tenant relationship is not required in order to bring this action. This section states in part: "Every person is guilty of a forcibledetainer who either: "(1) by force or by menaces and threats of violence unlawfully holds and keeps the possession of any real property or mining claim,whether the same was acquired peaceably or otherwise 

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# .." The Corporation alleged these elements in their complaint. The cases in Montana which construe this statute and its predecessors have not limited its application to landlord-tenant circumstances. In Kennedy v. Dickie (1902),27 Mont. 70, 69 P. 672, the plaintiff was allowed to bring a forcible detainer action against a defendant who had simply ousted the plaintiff from his farm. 27Mont. at 73, 69 P. at 673. For other cases where a forcibledetainer action was brought where there was not a landlord-tenant relationship see,Park Saddle Horse Co. v. Cook (1931), 89 Mont. 414, 300 P. 242; Spellman v. Rhode (1905),33 Mont. 21, 81 P. 395, and McCleary v. Crowley (1899), 22 Mont. 245, 56 P. 227. While these cases do not involve a contractual relationship they certainly indicate that a landlord-tenant relationship is not necessary to bring a forcibledetainer action. For this

reason Kransky does not apply. This is not to say that the plaintiff in the present action would have prevailed at trial under a forcibledetainer action, but there is no indication under Montana law that an ejectment actionmust be brought when the parties have a contractual relation ship. Likewise, there is no indication that where a contractual relationship does exist between the parties that the plaintiff may not bring a forcible detainer action. The District Court did not commit error by allowing the forcibledetainer action in this

case. At this point we feel that it isnecessary to make someobservations concerning the differencesbetween ejectment and forcible detainer actions. The Corporation alleges that the procedures for ejectment are found at sections 70-27-101,MCA, et seq. These sections include the forcible detainer statutes, among other provisions. Case law in Montana indicates that ejectment and forcible detainer are not the same cause of action. In Miner v. Cook

(1930), 87Mont. 500, 288 P. 1016, this Court said: "The vital allegations of this complaint [ejectment] are (a)plaintiff's ownership and right to possession of the tract of land described in the complaint and from which it is alleged he was ejected by defendants, and (b)wrongful and unlawful ouster and ejectment by the defendants. Proof of both of these vital allegations is necessary in order tomake out a case." 87 Mont. at 502-503, 288 P. at 1017. In Kennedy v. ~ickie, supra, this Court said: "If thepurpose of the action is to obtain relief from a forcible detainer,proof must be made under section 2092 [section 70-27-203,MCA] (1)of the forcible detainer as described in section 2081 [section 70-27-103,MCA]; and (2) of the plaintiff's right to the possession at the time of the forcible detainer." 27 Mont. at 75, 69 P. at 674. As can be easily seen the two causes of action are different. In ejectment the question of title is necessary to a resolution of the dispute. In forcible detainer title isnot an issue. Therefore,the summaryprocedures provided for in sections 70-27- 101,MCA et seq., do not apply to ejectment actions. The contract which is at the heart of this action provides that upon default of the agreement by the buyer the seller (Corporation) had the option of terminating the agreement. In other words, the seller is given an election of whether to terminate the agreement or not upon the buyer's default. Obviously, termination of the agreement is not the Corporation's sole remedy in the event of a default. As was said by this Court in White v. Jewett (1938), 106 Mont. 416, 78 P.2d 85:"A partymay pursue any remedy which the law affords in addition tothe remedy provided by the contract, unless it declares the remedy tobe exclusive." 106 Mont. at420, 78 P.2d at 87. In thepresent case the contract did not specifically

name a remedy which was tobe exclusive inthe event of a default, and the law affords tothe Corporation a forcibledetainer action. Finally, the defendant contends that section 70-27-203, MCA, is a statuteof limitationswhich bars plaintiff's action. Defendant did not present thisdefense inDistrictCourt, thereforewe willnot consider thiscontention. ISSUE 11. Section 70-27-117, MCA, states: "If atthe time appointed the defendant does not appear and defend, the court must enter his default and enterjudgment in favor of the plaintiff as prayed for inthe complaint." In this case the defendant did not appear on June 30, 1978, and thejudge had no discretion atthispoint. A defaultjudgment had tobe entered. Montana's Rules of CivilProcedure permit a default judgment tobe set aside for the same reasons a trialcourtmay set aside a judgment following a trialon themerits. Rule 55(c), M.R.Civ.P., says inpart: "For good cause shown the courtmay 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. says: "On motion and upon such terms asare just, the court may relieve a party or his legal representative from a finaljudgment, order orproceeding for the following reasons: 

### "(1)Mistake, inadvertence, surprise, or excusableneglect 

# ..." The standard of review fordefault judgments is stated in Eder v. Bereolos (1922), 63 Mont. 363, 368, 207 P. 471, 472, where thisCourt said:"Inorder to justify the district court in granting themotion, the defendantwas required to show: (a)That he proceeded with diligence; (b)his excusable neglect; (c) that the judgment, if permitted to stand, will affect him injuriously,and that he has a defense to plaintiff's cause of action upon themerits." This standard of review must be applied with the understanding that "Nogreat abuse of discretion by the trial court in refusing to set aside a default need be shown to warrant a reversal, for the courts universally favor a trial on themerits." Brothers

v. Brothers (1924), 71Mont. 378, 383-84, 230 P. 60, 61. In Reynolds

### v. Gladys Belle Oil Co. (1926), 75 Mont. 332, 341, 243 P. 576, 579, this Court said 

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# . .. since 'it is the policy of the law to have every litigated case tried on itsmerits,' judgments by default are not favored." This policy is best stated in Holen v. Phelps (1957), 131Mont. 146, 150, 308 P.2d 624, 627: "In furtheranceof justice, trial courts should, in applying the above statute [sec. 9187,Rev. Codes, 1921,a predecessor of Rule 60(b), M.R. Civ.P.1 to a given case,maintain and exercise that liberal spirit which prompted the Legislature to grant them this discretionarypower, and,while this court will disturb the action of a trial court in opening default only in exceptional cases, 'nogreat abuse of discretion by the trial court in refusing to set aside a default need be shown to warrant a reversal.'" From a reading of the above cited cases it is clear that the issue of abuse of discretion must be made on a case-by-case basis. With this in mind it is helpful to look at the defendant's actions in this case, and apply to them the standard from Eder v. Bereolos, supra, which is set out above. There is no doubt that Borkoski proceeded with diligence. His motion to set aside the default judgmentwas entered only 14 days after the default judgment had been entered. There is also no doubt that the defendant will be injuriously affected by the loss of thisproperty. Defendant has a defense to plaintiff's cause of actionupon themerits. Plaintiff alleged in the complaint that the defendant 

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# . entered and took possession of the said premises peacefully,without right to do so 

# . .. and keeps possession of the same unlawfully 

# .. ." Defendant has alleged that he had the right to enter and take possession of the premises, and he has alleged that his possession continued to be lawful under the terms of the contract which was assigned to him. While

we do not hold that the defendantwould win upon the merits,we find that he has presented a defense of sufficientmerit to meet the criteria of Eder v. Bereolos, supra. The issue comes down to the question of excusableneglect. The following Montana casesprovide us with some guidance on this matter. In Brothersv. Brothers, supra, the only question presented

was the defendant's excusableneglect. This Court held that the defendant's erroneousbelief that her appearancebefore a notary public was the only appearance required of her would not warrant setting aside the default. 71Mont. at 382. 

### his Court went on to hold, however, that these facts coupled with the fact that the defendant had recently spent some time in a state hospital because of her insanity warranted excusableneglect. 71Mont. at 384-85. In Schalk v. Bresnahan (1960), 138Mont. 129, 354 P.2d 735, this Court held that it was not excusable neglect where defendant failed to appear because of forgetfulness. 138 Mont. at 132, 354 P.2d at 736. InWorstell v. DeVine (1959), 135Mont. 1, 335 P.2d 305, this Court had occasion to review the Montana case law on excusable neglect. This Court said: "We observe that since 1922, the caseswe have studied indicate that the decisions turn on promptness and diligence in moving to set aside the default and on whether or not a showing of a meritorious defense ismade." 135Mont. at 6, 335 P.2d at 307. In the present case, the defendant's strongest point is hispromptness inmoving toset aside hisdefault, and we have held that a showing of a meritorious defense has been made. In an affidavit tothe DistrictCourt the defendant stated thathe did not appear on the return datebecause he believed that he didnot have toappear untilWayne Dayton was served. He also stated in the affidavitthat theClerk of Court had said that no hearing date had been set. The defendant only had sixdays from the time of serviceuntil the defaultjudgment was entered. With this in mind the excuse which the defendant offered tothe DistrictCourt constitutes excusable neglect. The District Court abused its discretion innot settingaside the default judgment. The default isvacated and the case remanded tothe DistrictCourt for further proceedings.

Chief Justice