Hoff v. Lake County Abstract & Title Co.

• Citation: 255 P.3d 137,360 Mont. 461,2011 MT 118
• Decision Date: 01 June 2011
• Docket Number: No. DA 10–0482.,DA 10–0482.
• Court: Montana Supreme Court
• Parties: Gary HOFF, Plaintiff, Appellee and Cross Appellant,v.LAKE COUNTY ABSTRACT & TITLE COMPANY, a corporation; Defendant and Appellee,andCountrywide Home Loans, Inc., a corporation; Does I through X inclusive, individuals, corporations and partnerships, Defendant and Appellant.

360 Mont. 461

255 P.3d 137

2011 MT 118

Gary HOFF, Plaintiff, Appellee and Cross Appellant,

v.LAKE COUNTY ABSTRACT & TITLE COMPANY, a corporation; Defendant and Appellee,andCountrywide Home Loans, Inc., a corporation; Does I through X inclusive, individuals, corporations and partnerships, Defendant and Appellant.

No. DA 10–0482.

Supreme Court of Montana.

Submitted on Briefs April 13, 2011.Decided June 1, 2011.

For Appellant: Christian T. Nygren, Milodragovich, Dale, Steinbrenner & Nygren, P.C., Missoula, Montana (Countrywide Home Loans, Inc.).For Appellees: Martin S. King, Worden Thane P.C., Missoula, Montana (Gary Hoff), John A. Mercer, Turnage & Mercer, PLLP, Polson, Montana (Lake County Abstract & Title Co.).Justice BRIAN MORRIS delivered the Opinion of the Court.

[360 Mont. 462] ¶ 1 Countrywide Home Loans, Inc. (Countrywide) appeals from an order of the Twentieth Judicial District, Lake County, denying its motion under M.R. Civ. P. 55(c) to set aside an entry of default and its motion under M.R. Civ. P. 60(b) for relief from default judgment. Gary Hoff (Hoff) cross-appeals the court's denial of attorney fees.

¶ 2 Countrywide raises the following two issues on appeal:

¶ 3 Did the District Court slightly abuse its discretion by denying Countrywide's motion to set aside the entry of default pursuant to M.R. Civ. P. 55(c)?

¶ 4 Did the District Court slightly abuse its discretion by denying Countrywide's motion for relief from default judgment under M.R. Civ. P. 60(b)?

¶ 5 Hoff raises two additional issues on cross-appeal:

¶ 6 Did the District Court properly order default judgment against Countrywide?

¶ 7 Did the District Court abuse its discretion when it denied Hoff's motion for the assessment of attorney fees against Countrywide?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 8 Hoff filed a complaint alleging contract and negligence claims against Countrywide and Lake County Abstract & Title Company (Lake County Title) on June 23, 2009. Countrywide failed to appear or answer within the 20 days permitted by M.R. Civ. P. 12(a). Hoff moved for entry of default against Countrywide on August 25, 2009. The clerk of court entered default on August 25, 2009. Countrywide appeared on November 2, 2009, and began its attempt to reverse the default proceedings with a M.R. Civ. P. 55(c) motion and then a M.R. Civ. P. 60(b) motion. The court denied Countrywide's motions and entered default judgment against Countrywide on September 10, 2010. Countrywide appeals.

¶ 9 Hoff executed a buy-sell agreement for the purchase of real property located in Lake County from George Beebe in 2004. The original buy-sell agreement retained a life estate in Beebe. Hoff claims that he and Beebe executed an amendment to the buy-sell agreement that removed Beebe's life estate. Countrywide claims that the parties failed to put the agreement in writing. Hoff has attached to his complaint two written documents, signed by Hoff and Beebe, that amend the buy-sell agreement by removing the Beebe life estate. The final warranty deed that the parties recorded at closing did not include the amendatory documents, however, and retained the life estate in favor of Beebe.

¶ 10 Countrywide, a nationwide lending corporation, had loaned Hoff $207,000 for the purchase of the property. The Countrywide loan documents required that Hoff be vested with title to the real property in fee simple. The documents provided that title defects, like an existent life estate, constituted a default on the loan. Hoff had purchased a policy of title insurance in favor of Countrywide from Lake County Title. Lake County Title issued and delivered the policy to Countrywide shortly after closing. The policy disclosed Beebe's life estate. Countrywide did not notify Hoff of Beebe's life estate or notify Hoff that the life estate adversely affected the loan.

¶ 11 Hoff made regular payments on the Countrywide loan for about five years. Hoff listed the property for sale in June 2007 for $459,000. Three potential buyers showed interest in the property. Hoff learned of the Beebe life estate for the first time in July 2007 while attempting to sell the property. Beebe refused Hoff's request to remove voluntarily the life estate.

¶ 12 Hoff's counsel, Martin King, mailed and e-mailed a letter to Countrywide representative Kimberly Harvey on May 1, 2009. King informed Countrywide of the life estate and requested a modification to the loan's interest rate until the life estate issue could be resolved. King followed up on the request on May 15, 2009. Countrywide responded on May 23, 2009, denying the request to modify the loan's terms.

¶ 13 Hoff filed a complaint on June 23, 2009, in District Court. King e-mailed Harvey on July 8, 2009, and again requested that Countrywide modify the loan agreement. King attached the complaint to this e-mail and asked Harvey whether she was authorized to accept service of the complaint and summons on Countrywide's behalf. Harvey responded in an email later that day that King would have to serve Countrywide's registered agent, CT Corporation Systems. Hoff properly served Countrywide through CT Corporation Systems on July 30, 2009. The summons informed that Hoff might seek a default judgment if Countrywide did not appear or answer within 20 days. Countrywide did not appear or answer within 20 days as required by M.R. Civ. P. 12(a). Hoff moved for an entry of default on August 25, 2009. The clerk of court entered default on August 25, 2009.

¶ 14 Hoff discontinued making payments on the Countrywide loan in the summer of 2009. Countrywide sent Hoff a default notice, accelerated the loan balance, threatened foreclosure, and filed damaging credit reports against Hoff. Attorney Charles Peterson telephoned King on September 15, 2009, and indicated that he represented Countrywide. Peterson asked King to set aside the default voluntarily. King refused to consent to setting aside the default, but remained willing to negotiate a modification to the loan and settlement of the claims. King sent Countrywide a letter on October 6, 2009, with an offer to settle all the claims. Countrywide did not reply.

¶ 15 Countrywide first appeared on November 2, 2009, by filing a motion to set aside the default pursuant to M.R. Civ. P. 55(c). Countrywide's brief asserted that Hoff had failed to comply with the requirements of M.R. Civ. P. 55(a) and that the default should be set aside for good cause. The Court denied Countrywide's motion on December 22, 2009.

¶ 16 Countrywide then filed a M.R. Civ. P. 60(b) motion to set aside the entry of default for mistake or excusable neglect on February 26, 2010. Countrywide argued that the entry of default should be set aside for excusable neglect because its litigation specialist, Michael Parrent, failed to follow company procedures and failed to take action on the complaint. Countrywide later terminated Parrent's employment for his failures. Hoff opposed the M.R. Civ. P. 60(b) motion as an attempt to re-litigate the court's December 22, 2009, denial of Countrywide's motion to set aside the entry of default. The court denied Countrywide's M.R. Civ. P. 60(b) motion on April 13, 2010, without providing any additional reasoning or analysis.

¶ 17 Hoff filed a motion and application for default judgment on March 24, 2010, pursuant to M.R. Civ. P. 55(b)(2). Hoff also requested attorney fees under the Countrywide trust indenture and the statutory reciprocal fees provision at § 28–3–704, MCA. The court denied Hoff's request for costs and fees on July 23, 2010. Hoff cross-appeals the denial of attorney fees. The court awarded Hoff default judgment against Countrywide on September 10, 2010. Countrywide did not seek relief from the court's September 10, 2010, award of default judgment. Hoff raises as an issue on cross-appeal, nonetheless, whether the District Court properly granted him default judgment.

STANDARD OF REVIEW

¶ 18 The party seeking to set aside an entry of default bears the burden of proof. Engelsberger v. Lake Co., 2007 MT 211, ¶ 8, 339 Mont. 22, 167 P.3d 902. When a trial court grants a motion to set aside a default, the court's ruling will only be set aside upon a showing of manifest abuse of discretion. Id. A trial court's denial of a motion to set aside a default will be reviewed according to a slight abuse of discretion standard. Id. We review for correctness a district court's conclusions of law pertaining to the recovery of attorney fees. Chase v. Bearpaw Ranch Assn., 2006 MT 67, ¶ 14, 331 Mont. 421, 133 P.3d 190.

DISCUSSION

¶ 19 Did the District Court slightly abuse its discretion by denying Countrywide's motion to set aside the default judgment under M.R. Civ. P. 55(c)?

¶ 20 M.R. Civ. P. 55(c) provides that “[f]or 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).” To determine the existence of good cause for the purposes of M.R. Civ. P. 55(c), the Court considers (1) whether the default was willful, (2) whether the plaintiff would be prejudiced if the default is set aside, and (3) whether the defendant has presented a meritorious defense to the plaintiff's claim. Cribb v. Matlock Commun., Inc., 236 Mont. 27, 30, 768 P.2d 337, 339 (1989); Engelsberger, ¶ 12. We balance the interests of the defendant in adjudication on the merits with the public's interest in orderly and timely administration of justice. Essex Ins. Co. v. Jaycie, Inc., 2004 MT 278, ¶ 10, 323 Mont. 231, 99 P.3d 651 (citing Cribb, 236 Mont. at 30, 768 P.2d at 339). We apply the M.R. Civ. P. 55(c) good cause standard flexibly and leniently because an entry of default is an interlocutory order that does not determine rights or remedies all by itself. Id.; Engelsberger, ¶ 16.

¶ 21 Countrywide argues that good cause existed because (1) Peterson's communications with King within one month of default shows that its default lacked willfulness, (2) Hoff will...