Court Opinion

ID: 8028464
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:55:12.577244+00
Date Added: 2024-06-11T16:36:53.348248
License: Public Domain

JUSTICE HUNT
delivered the Opinion of the Court.
Mark Roberts appeals the order from the Eighteenth Judicial District Court, Gallatin County, setting aside the entry of a default judgment on the issue of liability and the subsequent final judgment on damages against respondent, Empire Fire and Marine Insurance Company.
We reverse.
The issue in this case is:
Did the District Court manifestly abuse its discretion when it issued its order setting aside the default judgments of liability and damages entered against Empire Fire and Marine Insurance Company?
FACTS
In November 1992, Dirk Hinkle and the appellant, Mark Roberts (Roberts) were involved in an accident at an uncontrolled intersection in Bozeman, Montana. Following the accident, Hinkle’s insurer, Empire Fire and Marine Insurance Company (Empire), offered to pay 75% of Roberts’ property damage based upon its opinion that Roberts was contributorily negligent. Roberts rejected Empire’s offer and filed suit against Empire for vehicle damage as well as damages for the inconvenience caused by the loss of use of his vehicle. After Roberts *137filed suit, Empire filed an offer of judgment which Roberts then later accepted.
On March 3,1995, Roberts again filed suit against Empire alleging unfair claims settlement practices. Service of process was made upon the Montana Commissioner of Insurance (MCI) on March 9, 1995. MCI forwarded a cover letter, the Summons, the Complaint and First Discovery Requests to Empire’s corporate office in Nebraska.
Empire’s receptionist received these documents on March 13, 1995. Empire’s mail room log-in sheets reflect that the documents were then routed to Ms. Amy Bones, corporate counsel for Empire. Ms. Bones is designated as receiver for service of process from the State of Montana. Although Ms. Bones contends that she never saw the documents, the record shows that it was normal procedure for Ms. Bones to hand-deliver papers from her office to the claims department.
In any event, the documents did reach Empire’s claims department and from there were hand-delivered to Mr. David Sedlacek. Mr. Sedlacek is responsible for supervising Empire’s claims unit and for assigning new claims. Mr. Sedlacek wrote notes on the documents indicating his awareness of their contents, and intended that they be forwarded to Dennis Magnuson, one of Empire’s “file handlers” and also an attorney.
In Mr. Sedlacek’s affidavit, he stated that in all likelihood he handed the documents to Ms. Heidee Dorr, a claims clerk who at that time had been employed by Empire for only a few days. Ms. Dorr stated in her affidavit that if she was in the claims department at all on March 13, 1995, it would have been her first day there and she would not yet have received any training. Mr. Sedlacek speculated that Ms. Dorr, rather than pulling the 1992 file that had been prepared in the Roberts v. Hinkle case and delivering the file and the documents to Mr. Magnuson, filed the documents in that closed Roberts v. Hinkle file.
Aware of the contents of the documents, Mr. Sedlacek did not “flag” them as important, as was his duty; did not confirm that Mr. Magnuson received the documents; and did not inquire as to the progress being made on the matter. Mr. Sedlacek and Mr. Magnuson work across the hall from one another and often see each other several times daily.
On April 25,1995, the clerk of court entered a default judgment on liability against Empire in Montana’s Eighteenth Judicial District Court. Pursuant to Rule 55(b), M.R.Civ.P., the determination of *138damages was set for a later date. On October 2, 1995, the District Court held an evidentiary hearing. Following this hearing, the court entered a $615,000.00 final judgment against Empire, including $15,000.00 in compensatory damages and $600,000.00 in punitive damages. Roberts then filed this judgment with the District Court in Douglas County, Nebraska, on November 27, 1995.
After learning of the default judgment on December 1, 1995, Empire found Roberts’ complaint inside the closed Roberts v. Hinkle file. Empire then filed a Motion for Relief, citing to Rules 60(b)(1) and 60(b)(6), M.R.Civ.P. This motion was later amended to include Rule 55(c), M.R.Civ.P. Affidavits and depositions were filed with the District Court, and a hearing was held on January 30, 1996. By order dated February 2, 1996, the District Court granted Empire’s Motion to Set Aside the Default Judgment.
On February 5, 1996, Roberts filed an appeal with this Court. On March 28, 1996, Empire filed a motion to dismiss Roberts’ appeal for lack of jurisdiction, claiming that an order granting a motion to vacate a default is nonappealable. Based on the language of Rule 1(b)(2), M.R.App.P., this Court determined that it had jurisdiction over the matter and therefore, Empire’s motion to dismiss was denied. Roberts v. Empire Fire and Marine Insurance Co. (1996), [276 Mont. 519], 915 P.2d 872. This appeal followed.
DISCUSSION
Did the District Court manifestly abuse its discretion when it issued its order setting aside the default judgments of liability and • damages entered against Empire Fire and Marine Insurance Company?
In this matter, the District Court granted Empire’s motion based on Rule 60(b)(1), M.R.Civ.P. This rule provides:
On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect;....
The standard of review used by this Court when reviewing a district court’s decision to grant a motion to set aside a default judgment is whether the court has manifestly abused its discretion. Siewing v. Pearson Co. (1987), 226 Mont. 458, 461, 736 P.2d 120, 122 (citing Lords v. Newman (1984), 212 Mont. 359, 365-66, 688 P.2d 290, 293-94). Therefore, our discussion will center on whether Roberts has shown a manifest abuse of discretion by the District Court which *139would require reversal. First National Bank of Cut Bank v. Springs (1987), 225 Mont. 62, 65, 731 P.2d 332, 334.
It is Roberts’ position on appeal that, although the extent of poor judgment necessary to reflect a “manifest abuse of discretion” has not been clearly defined by this Court, there are previous decisions that have established the standard for setting aside a default. See, e.g., In re Marriage of McDonald (1993), 261 Mont. 466, 468, 863 P.2d 401, 402. And, although no Montana case law clearly establishes the parameters of “manifest abuse of discretion,” Roberts argues that the Ninth Circuit Court of Appeals has recognized that a court may abuse its discretion if it does not apply the law correctly or if it erroneously assesses the facts. United States v. Rahm (9th Cir. 1993), 993 F.2d. 1405, 1410; Northern Alaska Environmental Center v. Lujan (9th Cir. 1992), 961 F.2d 886, 889. Extending this argument to the instant case, Roberts contends that the District Court did not apply the law correctly, and therefore the court manifestly abused its discretion in setting aside the default judgment.
Roberts urges this Court to consider several cases involving instances of neglect or inattentiveness in an office setting in which this Court has affirmed a district court’s refusal to set aside a default. See Siewing, 736 P.2d 120; Myers v. All West Transport (1988), 235 Mont. 233, 766 P.2d 864; Paxson v. Rice (1985), 217 Mont. 521, 706 P.2d 123; Griffin v. Scott (1985), 218 Mont. 410, 710 P.2d 1337.
In Siewing, a company vice-president received a summons and complaint. Shortly thereafter, the vice-president resigned his position with the company and the documents remained undiscovered until a month later. This Court affirmed the district court and held that none of the evidence provided at trial established excusable neglect. Siewing, 736 P.2d at 122. In Myers, this Court affirmed the district court’s conclusion that the defendant’s inattention to mail did not establish excusable neglect. Myers, 766 P.2d at 867 (citing Siewing, 736 P.2d at 122).
In Paxson, an attorney intended to file an answer but postponed its preparation. This Court stated that this was not a factual situation where “reasonable minds might conclude” that the conduct of the attorney was excusable. Paxson, 706 P.2d at 126. Following Paxson, this Court affirmed the district court in Griffin. There, the district court determined that the failure of counsel to read his mail did not establish excusable neglect. Griffin, 710 P.2d at 1338.
Roberts contends it is clear that this Court has consistently held that a party’s inattention or failure to respond to mail does not establish excusable neglect. Therefore, Roberts asserts that Empire’s *140inattention to Roberts’ complaint cannot be excused by setting aside the default judgment. We agree.
This Court is aware of the importance of putting an end to litigation and establishing the respective rights of the parties once and for all, if necessary, through a default judgment. Karlen v. Evans (1996), [276 Mont. 181], 915 P.2d 232, 235. However, Rule 60(b) presents an exception to this doctrine of finality. The policy behind the rule is the preference for cases to be tried on their merits. Judgments by default are not favored. Maulding v. Hardman (1993), 257 Mont. 18, 23, 847 P.2d 292, 296.
In this case, the District Court was presented with an abundance of cases from both sides that discussed “specific reasons why relief should or should not be granted.” The District Court noted that there had been little if any discussion regarding the fundamental purpose of Rule 60(b)(1), M.R.Civ.P. The District Court then stated that in its view:
Rule 60(b)(1) provides a basic correction system for protecting the legal process from errors caused by neglect, inadvertence, and mistake — clearly, improper foundations upon which to base legal judgments.
In its conclusion, the District Court concurred with a statement from a 1978 case in which this Court held:
Each case must be determined upon its own facts; and when the motion is made promptly and is supported by a showing which leaves the court in doubt or upon which reasonable minds might reach different conclusions, the doubt should be resolved in favor of the motion.
Clute v. Concrete (1978), 179 Mont. 475, 479, 587 P.2d 392, 395 (citing Nash v. Treat (1912), 45 Mont. 250, 122 P. 745). The District Court determined that “on the facts of this case,” Empire’s failure to respond to Roberts’ summons and complaint stemmed from the type of “mistake” contemplated by Rule 60(b)(1), M.R.Civ.P.
This Court is aware that default judgments are not favored, but is equally aware of the limited set of factual circumstances in which we have consistently upheld a district court’s order of default. Collectively, the cases embodying these factual circumstances show, as appellant argues, that evidence of office mismanagement, neglect, and inattentiveness on the part of high-level employees can support a default judgment. Individually, each of these cases in which we upheld a default order contain facts establishing careless conduct bordering on willful ignorance. In addition, in McDonald, supra, we stated that pursuant to Rule 55(c), M.R.Civ.P, a default judgment *141may be overturned according to Rule 60(b), M.R.Civ.P, only if certain “good cause” criteria are met by the moving party. McDonald, 863 P.2d at 402 (citing Blume v. Metropolitan Life Insurance Co. (1990), 242 Mont. 465, 791 P.2d 784). In that case, we concluded that the appellant “failed to satisfy the threshold requirement of excusable neglect which would justify setting aside the default decree.” McDonald, 863 P.2d at 403. Citing In re Marriage of Castor (1991), 249 Mont. 495, 817 P.2d 665, we declared that “ ‘mistake’, ‘inadvertence,’ and ‘excusable neglect’ generally require some justification for an error beyond mere carelessness ....” McDonald, 863 P.2d at 403.
Clearly, the facts here establish careless conduct amounting to inexcusable neglect, the type of conduct we have consistently held to support a default. The District Court determined that the facts showed the kind of excusable mistake contemplated by Rule 60(b)(1), M.R.Civ.P, apparently focusing on Ms. Dorr’s misfiling of the documents. While we agree that a low-level employee who misfiled documents on her first day of work committed an excusable mistake, we fail to understand how this mistake could extend to excuse the neglectful and inattentive conduct of management-level employees aware of the importance of the documents from the moment they were received.
Because the law and facts so clearly support a default judgment, we hold that the District Court manifestly abused its discretion in setting the default judgment aside.
We reverse.
JUSTICES NELSON, TRIEWEILER and LEAPHART concur.