Karlen v. Evans, 95-166

• Decision Date: 16 April 1996
• Docket Number: No. 95-166,95-166
• Citation: 915 P.2d 232,276 Mont. 181
• Parties: Louis William KARLEN and Betty J. Karlen, Plaintiffs/Respondents, v. Bruce Allen EVANS, Defendant/Appellant.
• Court: Montana Supreme Court

Page 232

915 P.2d 232

276 Mont. 181

Louis William KARLEN and Betty J. Karlen, Plaintiffs/Respondents, v. Bruce Allen EVANS, Defendant/Appellant.

No. 95-166.

Supreme Court of Montana.

Submitted on Briefs Nov. 30, 1995.

Decided April 16, 1996.

Appeal from the District Court of the Eighth Judicial District, in and for the County of Cascade, Honorable Thomas McKittrick, Judge presiding.

Neil E. Ugrin & Roger T. Witt, Ugrin, Alexander, Zadick & Higgins, Great Falls, for Appellant.

Jason G. Dykstra & David A. Hopkins, Marra, Wenz, Johnson & Hopkins, Great Falls, for Respondents.

NELSON, Justice.

Bruce Allen Evans (Evans) filed a Motion to Dismiss for failure to prosecute the complaint filed against him by Louis and Betty Karlen (the Karlens) in the Eighth Judicial District Court, Cascade County. The District Court granted Evans' motion and dismissed the complaint with prejudice. Several months later, upon motion by the Karlens, the District Court ordered the dismissal set aside pursuant to Rule 60(b)(6), M.R.Civ.P. Evans appeals. We affirm.

The issues presented for review are:

1. Did the District Court err in setting aside the prior dismissal of the Karlens' complaint under Rule 60(b)(6), M.R.Civ.P.?

2. Did the District Court err in finding that the Karlens brought their motion for relief within a reasonable time?

Background Facts

On August 13, 1987, Evans' vehicle rear ended the Karlens' vehicle in Cascade County. The Karlens, residents of South Dakota, retained Paul Dold, a South Dakota attorney, to represent them in pursuing a negligence action against Evans. After an unsuccessful attempt to file their claim in federal district court in South Dakota, and with only a few days remaining before the statute of limitations expired, Dold contacted Joe Marra, a Montana attorney, to assist in filing the complaint in Montana. At Dold's request, Marra filed a complaint in the Eight Judicial District Court, Cascade County, on August 10, 1990.

After the complaint was filed, Evans retained Neil Ugrin to represent him in this action. Attorneys Ugrin and Marra discussed the case and Ugrin requested that Marra produce certain documents so that Ugrin could assess the Karlens' claims of liability and damages. Pursuant to this request, Marra sent numerous letters to Dold requesting information. Marra also attempted to contact Dold by phone, but his attempts were unsuccessful.

On November 2, 1993, Evans filed a motion to dismiss the case for failure to prosecute pursuant to Rule 41(b), M.R.Civ.P. The District Court granted the motion on December 23, 1993, and ordered the case dismissed with prejudice.

On January 13, 1995, the Karlens filed a motion to set aside the Order of Dismissal pursuant to Rule 60(b)(6), M.R.Civ.P. The Karlens alleged that they were completely unaware that their case had been dismissed. It was only after they attempted to contact Dold to do some additional work for them that they discovered Dold was incarcerated in the South Dakota State Penitentiary for embezzling from his clients' trust accounts and that he had been disbarred. Due to Dold's incarceration, the Karlens were unable to obtain a copy of their file until the latter part of 1994. After reviewing the file, they learned that Dold had misled them into believing that their case was progressing on schedule when, in actuality, it had been dismissed.

A hearing on the Karlens' motion was held on February 16, 1995. On February 23, 1995, the District Court issued an Order setting aside the earlier Order of Dismissal and allowing the case to proceed to trial on its merits. Evans appeals the District Court's Order.

Issue 1

Did the District Court err in setting aside the prior dismissal of the Karlens' complaint under Rule 60(b)(6), M.R.Civ.P.?

There must be some point at which litigation ends and the respective rights between the parties are forever established. Under ordinary circumstances, once this point is reached a party will not be allowed to disturb a judgment. However, Rule 60(b), M.R.Civ.P., is an exception to the doctrine of finality of judgments. In re Marriage of Waters (1986), 223 Mont. 183, 186, 724 P.2d 726, 729.

Rule 60(b), M.R.Civ.P., provides, in part:

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; ... or (6) any other reason justifying relief from the operation of the judgment.

Rule 60(b) also proscribes limits on the time within which a motion may be made:

The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) when a defendant has been 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), not more than 60 days after service of notice of entry of judgment.

Rule 60(b), M.R.Civ.P.

The Karlens brought their motion for relief from the judgment under Rule 60(b)(6), M.R.Civ.P. Evans argued before the District Court and now on appeal that the misconduct of the Karlens' attorney is not an appropriate basis for relief under subsection (6) of Rule 60(b). Evans contends that, based on prior Montana case law, attorney misconduct is more appropriately addressed under subsection (1) of that rule. Furthermore, Evans argues that since relief under subsection (1) must be sought within 60 days of a judgment, and the Karlens' motion was not filed until nearly 13 months after the motion to dismiss was granted, their Rule 60(b) motion is untimely.

The District Court disagreed with Evans and determined that Dold's conduct toward the Karlens' was much more than the "mistake, inadvertence, surprise, or excusable neglect" set forth in subsection (1) of Rule 60(b). The court found that Dold's conduct more properly falls under the "any other reason" clause of subsection (6) as it constitutes "gross neglect and is inexcusable." Thus the court determined that the motion was not time barred because motions made pursuant to subsection (6) may be made "within a reasonable time."

The degree of appellate scrutiny of a trial court's ruling on a Rule 60(b) motion depends on whether or not the trial court set aside the judgment. As a general rule, cases are to be tried on their merits and judgments 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 slight abuse of discretion need be shown to warrant reversal. Lords, 688 P.2d at 293. If the 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.

Since Evans contends that attorney misconduct falls under subsection (1) of Rule 60(b) and since a party is precluded from relief under subsection (6) when the facts or circumstances would bring the case under one of the first five subsections of Rule 60(b), Maulding, 847 P.2d at 297, we must examine our prior case law to determine which clause of Rule 60(b) properly addresses the factual circumstances of the case before us.

Montana's Rule 60(b) is patterned after Rule 60(b) of the Federal Rules of Civil Procedure. Montana's Rule, however, provides for a 60-day limit on motions made under subsections (1), (2) and (3), while the Federal Rule allows for a 1-year limit.

In 1982, this Court denied an appellant's motion to set aside a default judgment under subsections (1) and (6) of Rule 60(b). Schmidt v. Jomac Inc., (1982), 196 Mont. 323, 639 P.2d 517. In Schmidt, we held that failing to file an answer because counsel mistakenly relied on the automatic stay provision of the Bankruptcy Code was not a reason sufficient to justify relief from the operation of the judgment under either section of Rule 60(b). A mistake of law is not such a mistake as will support vacating a default judgment. Schmidt, 639 P.2d at 519. Moreover, appellants were precluded from using subsection (1) to set aside the judgment because they did not file their motion until 231 days after entry of the judgment.

A few months after the decision in Schmidt, this Court was again confronted with a case involving attorney neglect or misconduct as the basis for a Rule 60(b) motion. In Ring v. Hoselton (1982), 197 Mont. 414, 643 P.2d 1165, counsel was unable to adequately defend the rights of his clients before and during trial because of emotional problems. Affidavits presented to the trial court indicated counsel's failure to introduce factual evidence, to prepare and submit findings and conclusions, and to keep the client apprised of the status of the case. In Ring, we said that

in cases in which a plenary trial was held, but through extraordinary circumstances the movant's claim or defense was not presented, or was presented in such a manner that the judgment entered against him was akin to a default judgment, relief has been granted on motion under Rule 60(b)(6).

Ring, 643 P.2d at 1172 (citing 7 Moore's Federal Practice p 60.27, at 357 (2d ed. 1979)).

In deciding Ring, we relied on opinions from several other jurisdictions, including a case factually similar to the case before us on appeal; L.P. Steuart, Inc. v. Matthews (C.A.D.C.1964), 329 F.2d 234. In Steuart, the court dismissed plaintiff's case for failure to prosecute due to the neglect of counsel. Two years later, plaintiff filed a motion to vacate the judgment. In support of the motion, plaintiff filed an affidavit stating that he had made numerous inquiries of counsel, but that counsel refused to answer these inquiries and continually assured plaintiff that the case was proceeding. The court of appeals held that under the circumstances, ...