Shields v. Pirkle Refrigerated Freightlines, Inc.

• Decision Date: 12 March 1979
• Docket Number: No. 14087,14087
• Citation: 181 Mont. 37,591 P.2d 1120,36 St.Rep. 472
• Parties: Walter E. SHIELDS, Plaintiff and Appellant, v. PIRKLE REFRIGERATED FREIGHTLINES, INC., Western Supply, Inc., and Sherman Arthur Moore, Defendants and Respondents.
• Court: Montana Supreme Court

Page 1120

591 P.2d 1120

181 Mont. 37

Walter E. SHIELDS, Plaintiff and Appellant, v. PIRKLE REFRIGERATED FREIGHTLINES, INC., Western Supply Inc., and Sherman Arthur Moore, Defendants and Respondents.

No. 14087.

Supreme Court of Montana.

Submitted Feb. 5, 1979.

Decided March 12, 1979.

Knight, Dahood, Mackey & McLean, Anaconda, Conde F. Mackay argued, Anaconda, for plaintiff and appellant.

Towe, Ball & Enright, Billings, waived appearance, for defendants and respondents.

HASWELL, Chief Justice.

Plaintiff appeals from an order of the District Court, Gallatin County, granting the motion of defendant Western Supply, Inc. for relief from judgment and setting aside a default judgment entered against Western Supply, Inc. three years previously.

On March 11, 1974, a complaint was filed in the District Court, Gallatin County, alleging that the negligence of Sherman A. Moore, while operating a vehicle in the course of his employment by Pirkle Refrigerated Freight Lines, Inc. or Western Supply, Inc., had caused injuries to plaintiff Walter E. Shields. Subsequently, on April 3, 1974, an affidavit was filed by plaintiff's counsel stating that defendants Western Supply, Inc. and Pirkle Refrigerated Freight Lines "cannot with the exercise of due diligence be found or served personally within Montana", so that service of process would have to be effected by service upon the Secretary of State of Montana pursuant to Rules 4D(2)(f) and 4D(6)(a), M.R.Civ.P. The affidavit was not in strict compliance with Rule 4D in that it did not meet the requirement of listing a last known address for the person to be served, or recite the required statement in lieu thereof that after exercise of reasonable diligence no such address could be found. Further, the language used in the affidavit was different from that which the Rule specified should be recited.

At the time the affidavit was filed, Western Supply, Inc. was a Montana corporation in good standing. A copy of its annual report was on record with the office of the Secretary of State, listing the name and address of its registered agent and various officers.

On April 4, 1974, the summons and complaint were served on the Secretary of State. The Secretary of State's office consulted its files, ascertained that the registered agent of Western Supply, Inc. was Thomas Towe of Billings, and as required under Rule 4D, forwarded the summons and complaint and a copy of plaintiff's affidavit to Towe by certified mail. Towe then mailed the papers to Western Supply, Inc., and enclosed a note stating (on the basis of what he saw as deficiencies in the affidavit) that the Montana law for service of process had not been complied with and such noncompliance raised a question of whether the service would be ineffective to attach jurisdiction. Western Supply, Inc. received the summons and complaint, but on the basis of the assumed jurisdictional defect chose to ignore it. Thereafter, on October 7, 1974, no responsive pleading having been filed by Western Supply, Inc., default judgment was entered against it.

Three years later, on October 6, 1977, Western Supply, Inc. filed a motion for relief from judgment under Rule 60(b)(4), M.R.Civ.P., alleging that it had never been properly served and that therefore the default judgment was void for lack of jurisdiction. The motion also alleged that Western Supply, Inc. had a valid defense to the action in that its only connection to the accident at issue was that it had leased the vehicle involved to the other defendants. There is no explanation anywhere in the record why Western Supply, Inc. waited three years before taking steps to invalidate the default judgment.

Despite the delay, the District Court, after hearing and submission of briefs, granted Western Supply's motion and ordered the default set aside. In a memorandum accompanying the order, Judge W. W. Lessley reasoned that plaintiff had failed to inquire with due diligence as to whom he might serve, that service on the Secretary of State was therefore not effective, and that "proper service, according to the requirements of the rule, is absolutely necessary regardless of any notice actually received."

Plaintiff subsequently moved for reconsideration of the order and submitted an affidavit from his counsel's secretary that she had telephoned the Secretary of State's office and asked for the name of the registered agent of Western Supply, Inc., but was told there was none. Plaintiff's contention that this negated the finding of lack of due diligence was rejected by the court, and the motion for reconsideration was denied. This appeal followed.

Defendant has filed a motion to dismiss the appeal, contending that an order setting aside a default judgment is not appealable.

The issues arising out of this set of circumstances can be framed as follows:

I. Whether an order granting a motion to set aside a default judgment is appealable.

II. Whether it was error, on the circumstances present here, for the District Court to order the setting aside of the default judgment entered against Western Supply, Inc.

This Court has many times in the past entertained appeals from orders granting motions to set aside default judgments. The first such reported case dates back to the mid-nineteenth century. Loeb v. Schmith (1868), 1 Mont. 87. Such an appeal has also been heard as recently as 1973. Sikorski & Sons, Inc. v. Sikorski (1973), 162 Mont. 442, 512 P.2d 1147. In all this long history, the appealability of orders granting motions to set aside default judgments has never been specifically questioned. We find no Montana cases holding that such orders may be appealed from. There is, however, dictum to the effect.

In State ex rel. Deck v. District Court (1922), 64 Mont. 110, 207 P. 1004, a default judgment had been entered but was subsequently vacated. Thereafter, the order vacating the default judgment was set aside. The issue was whether the defendant's remedy was by appeal or by writ of review. Holding that appeal was the proper remedy, the Court said: "An order setting aside or refusing to vacate a default judgment is a special order made after final judgment within the meaning of the statute . . ." (referring to sec. 9732, Rev. Codes 1921, which authorized appeal " 'from any special order made after final judgment' "); "and the same is true of an order made vacating an order setting aside a default judgment, as was done in this case." Deck, 64 Mont. at 112, 207 P. at 1005.

This dictum in Deck embraces what is clearly the minority position. The rule in most jurisdictions is that an order vacating a default judgment merely leaves the parties free to try the case on the merits and is therefore not a final appealable ruling. Annot. 8 A.L.R.3d 1272. Montana law, however, has a feature not found in the forums adopting the majority view which must be taken into consideration.

Rule 1, M.R.App.Civ.P., progeny of the statute construed in Deck, supra, provides in pertinent part that "A party aggrieved may appeal from a judgment or order, except when expressly made final by law, in the following cases: . . . (b) . . . from any special order made after final judgment . . ." Appellant in this case argues that an order setting aside a default judgment falls within the purview of that portion of the Rule. Respondent contends in this regard that Stensvad v. Montana National Bank (1975), 168 Mont. 167, 541 P.2d 768, applies to this case by analogy and is controlling.

In Stensvad we held that only those orders enumerated in Rule 1, M.R.App.Civ.P. were final and appealable and that an appeal from an order vacating a summary judgment therefore was not permitted because not mentioned in the Rule. We did not address in Stensvad the issue of whether an order vacating a summary judgment was a "special order made after final judgment". We have, however, settled that issue in the recent case of Winter v. Rhodes (1979), Mont., 589 P.2d 1021, 36 St.Rep. 217, where we rejected the contention that an order vacating a summary judgment was appealable as a special order made after final judgment.

The upshot of Stensvad and Winter is that unless a judgment or order sought to be appealed from is specifically mentioned in Rule 1, M.R.App.Civ.P., it is not appealable. The analogy drawn by respondent between an order vacating a summary judgment as in Stensvad and the order vacating a default judgment as involved here is persuasive. Further, in the only case from a jurisdiction which has an appellate rule similar to Montana's in this regard where the meaning of the term "special order made after final judgment" has been discussed at any length, it was held that an order vacating a default judgment does not come within the meaning of that term. Farrell v. DeClue (1963 Mo.App.) 365 S.W.2d 68. Accordingly, we hereby repudiate our dictum in Deck and adopt from Montana the rule followed in the majority of jurisdictions that an order granting a motion to vacate a default judgment is nonappealable. As with every general rule, however, there are exceptions. Annot. 8 A.L.R.3d 1272. Such is the case on the circumstances present here.

As previously mentioned, the basis for the holdings that an order setting aside a default judgment is not appealable is that such orders are interlocutory in character, merely leaving the parties in a position to try the case. This underlying rationale does not apply where the order sets aside the default on jurisdictional grounds that do not admit of correction. Such an order, in effect, finally concludes the case and the rights of the parties; that is, it becomes a final judgment. If the District Court here correctly concluded that service was not properly made on Western Supply, Inc. then, stripping form from substance, this case is finally concluded as to that defendant for the reason that Rule 41(e), M.R.Civ.P. provides for dismissal of an action where, as here, no service or return has been made within...