No. 86-198 IN THE SUPREME COURT OF THE STATEOF MONTANA 1986

FIRSTNATIONAL BANK OF CUT BANK, P1ainti.f f and Respondent,

ROBERT C. SPRINGSand JENELLD. SPRINGS, his wife; INTERNALREVENUE SERVICE,UNITED STATES DEPARTMENTOF TREASURY, INDUSTRIAL FINANCIALCORPORATION and SEARSROEBUCK and COMPANY, Defendants and Appellant.

APPEAL FROM: TheDistrict Court of theNinth JudicialDistrict, In and for theCounty of Glacier, The Honorable R.D. McPhillips,Judge presidi-nq.

COIJNSELOF RECORD:

ForAppellant: Cannon & Sheehy;Edmund F. Sheehy,Jr., Helena, Montana

For Respondent: Peterson, Peterson,Burns & Shors;Richard A. ~hors, Cut Bank,Montana

Submitted on Briefs: Oct. 23, 1986 Decided: 

### January 6,1987

- -- ClerkMr. Justice Fred J. Weber delivered the Opinion of the Court.

The District Court of the Ninth Judicial District for the County of Glacier entered a default judgment and a deficiency judgment against Robert Springs in a foreclosure action. Dr. Springs then filed motions to set aside the default judgment and stay the deficiency judgment. The DistrictCourtdenied these motions and Dr. Springs appealed. We affirm. The issue iswhether theDistrict Court erred in denying the motion to set aside the default judgment or erred in denying the motion to stay the deficiency judgment. In early 1985, Dr. Springs was mailed a notice of default, pursuant to a trust indenture agreement, by First National Rank of Cut Bank (Rank) requesting past due house payments. Dr. Springs did not respond or cure the default within the 30 days allowed by the notice, and the Bank filed

a foreclosure action on his home. The Bank's complaint requested a deficiency judgment if the foreclosure sale bid did not cover the Bank's judgment and costs of the sale. Dr. Springswas personally served inGlacier Countywith process, but did not appear in the foreclosure action. A default judgment was entered against Dr. Springs and the District Court ordered foreclosure of the property. A sheriff's salewas held,but the saledid not cover the total debt owed to the bank so the District Court entered a deficiency judgment againstDr. Springs. About five months after the deficiency judgment was entered, Dr. Springs filed motions to set aside the default judgment, to stay execution of the deficiency judgment, and to produce documents. The motion to set aside the defaultjudgment was based on Rules 55(c) and 60(b)(6), M.R.Civ.P. The District Court denied Dr. Springs motions and stated: "Defendant Springs has inexcusably slumbered on his rights and ignored the judicialmachinery establishedby law." Dr. Springs appealed. Did the District Court err in either denying themotion to set aside the default judgment or indenying themotion to stay the deficiency judgment? A court may relieve a party from a final judgment or order pursuant to Rule 60(b)

## , M.R.Civ.P. which provides:

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1)mistake, inadvertence, surprise, or excusable neglect; (2)newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whetherheretofore denominated intrinsic or extrinsic), misrepresentation,or other misconduct of an adverseparty; (4) the judgment isvoid; (5) the judgmenthasbeen satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed. or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (I),(2), and (3)when a defendanthasbeen personally served, whether in lieu of publication or not, not more than 60 days after the judgment, order or proceeding was entered or taken,or, in a case where notice of entry of judgment is required by Rule 77(d), notmore than 60days after service of notice of entry of judgment. When from any cause the summons in an action has notbeen person.- ally served on the defendant, the courtmay allow, on such terms asmay be just, suchdefendant orhis legal representative, at any time within 180 d.ays after the renditionof any judgment in suchaction, to answer to the merits of the original action. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. This 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 togrant relief to a defendantnot actuallypersonally notified asmay be required by law,or to set aside a iudgment for fraud upon the court.This Court has previously stated tha.t:

Amanifest abuse ofdiscretion must be shownbefore this Court will interfere with the trial court's discretion on a motion to set aside a default judgment. (Citationsomitted.) Schmidt v. Jomac, Inc. (1982), 196 Mont. 323, 328, 639 P.2d 517, 520. Therefore, our discussion will center on whether Dr. Springs has shown a manifest abuse of discretion by the DistrictCourt which requiresreversal. Essentially, Dr. Springs argues that the order denying the motion to set aside the judgments should be overturned for four reasons. First, Dr. Springs maintains that he failed tomake a timely appearancebecause he did notbelieve there would be any possibility of a deficiency judgment against him so he did not believe he would have to appear in the foreclosure action. Second, Dr. Springs maintains that if he had.a.nswered the complaint he would have had several meritorious defenses to the complaint. Third, Dr. Springs maintains that even if this Court does not set aside the default judgment,we should set aside thedeficiency judgment because the fairmarket value of the property foreclosedupon is in excess of the amount bid at the foreclosure sale. And fourth,because the DistrictCourt did not have a hearing on the underlyingmotions, it could not have been fully informed.

on the motions it was deciding, so this case should be remanded and a fullhearing required. At the beginning of our discussion of this case, we emphasize thatwe arebound by the record. We may not decide

a case on the basis of unsubstantiated statements in the briefs. Dr. Springs has failed to showby affidavit or other appropriate means a basis formany of the factshe relies on in his brief. Accordingly, some of the arguments concerninghis appeal should be denied summarily. We will consider his arguments based only on the facts supplied in the District Court'sorder and transcript of the proceedingbelow. Although Dr. Springs based his motions to vacate the judgments on Rule 60(b)(6),M.R.Civ.P., we conclude that his motions more properly should have been based upon Rule 60(b)(1)

### , M.R.Civ.P. His reasons cited for his failure to appear clearly fall into the "mistake" and "inadvertence" category. Wright and Miller cite several federal cases construing Federal Rule (60)(b),which is almost identical to theMontana Rule, and state:

These cases certainly seemed to establish that clause (6) and the first five clauses are mutually exclusive and that relief cannot be had under clause (6) if it would have been available under the earlier clauses. This reading seems required alsoby the language of the rule. 11 Wright and Miller, Federal Practice and Procedure,Civil Section 2864,p. 217. We agree with Wright and Miller's interpretation that relief cannotbe obtained under Rule 60(b)(6)

## ,M.R.Civ.P., if that relief is available under Rule 60(b)(1) to 151, M.R.Civ.P. Accordingly,Dr. Springs' motions could have been denied based on his failure to present those motions within the 60 day time limits set out in Rule 60(b), M.R.Ci.v.P. However,wewill addressDr. Springs'arguments. Dr. Springs' first argues that he failed to make a timely appearance because he did not believe a deficiency judgment could be obtained against him. We have addressed similar arguments and concluded:

The contention that counsel did not file an answer because he mistakenly relied on the automatic stay provision of the Bankruptcy Code is insufficient under the law.Schmidt, 639 P.2d at 519. In Schmidt, this Court refused to set aside a default judgment concluding that neither Rule 60(b)(1)or Rule 60(b)(6)

### , M.R.Civ.P., mandated the setting aside of the judgment. The Schmidt's attorney believed that no answer or appearancewas necessary because the automatic stay provisions of the Bankruptcy Code operated as a bar to the lawsuits filed against the Schmidts. Therefore, no appearance was made in the lawsuits by the Schmidts and default judgments were entered against them. Just as in Schmidt,Dr. Springs is not entitled to relief from the default judgment because he reached

an incorrect legal conclusion. Second, Dr. Springs c1aj.m~several defenses which he believes are meritorious in support of his motion to set aside the default judgment. Dr. Springs is correct in stating the rule that the party seeking to set aside an entry of default must establish good cause for his failure to appear and the existence of a meritorious defense to the action. McClurg v. Flathead County Commissioners (19801, 188 Mont. 20, 610 P.2d 1153. Dr. Springs states in his brief that he "reasonably believed that he did not have to appear in this litigation because no personal judgment could he taken againsthim." We note that this belief is not establishedby affidavit. We also point out that amistake as to his necessity to appear does not warrant setting aside the default judgment. The rule enunciated in McClurg states two conditions, both of which must be met to set aside an entry of default. Because Dr. Springs has failed to meet the first condition by establishing a good cause for his failure to appear, we need not rule on the second condition regarding his defenses.Third, Dr. Springs maintains that we should set aside the deficiency judgment because the fair market value of the foreclosedproperty is in excess of the foreclosure salebid. There is nothing in the record which supports Dr. Springs' contention that the fair market value of his house exceeds the foreclosure sale bid. This Court has stated many times that we can only consider evidence in the record. Great Northern Railway Co. v. Hatch (1934), 98Mont. 269, 38 P.2d 976. We conclude that because there is no evidence in the record supportinq Dr. Springs' argument, he is not entitled to reliefbased upon this argument. Last, Dr. Springs argues that the District Court denied the various motions without holding a hearing or reviewing the parties' arguments, thus the District Court's order should be reversed and a hearing ordered. We point out that neither Rule 55(c) nor Rule 60(b), M.R.Civ.P., provides a right to an evidentiary hearing. In addition, Dr. Springs did not request a hearing from the DistrictCourt until after his motion had been denied. As to the reviewing of the parties' arguments, nothing in the record suggests the District Court did not properly receive each parties' motions and briefs before enterino the order denying the motion to set aside the judgments. Dr. Springs filed his motion to set aside the default judgmentand supportingmemorandum on February 13, 1986. The Rank filed their memorandum opposing Dr. Springs' motion on February 19, 1986. The District Court's order denying Dr. Springs' motion was filed February 20, 1986. Dr. Springs then filed his motion to set aside the order on February 26, 1986, and hismemorandum in support of that motion on February 28, 1986. The Rank filed its reply brief on March 4,1986, and the District Court entered the order denying the motion to set aside the orderonMarch 6, 1986. We hold that the record does not demonstrate a lack of review of either party's argumentsby the DistrictCourt. Therefore,we conclude that Dr. Springs has not shown a manifest abuse of discretion by the District Court on any issue and affirm the DistrictCourt in full.

We Concur: