Waldher v. F.D.I.C., 96-461

• Decision Date: 18 March 1997
• Docket Number: No. 96-461,96-461
• Citation: 935 P.2d 1101,282 Mont. 59
• Parties: Kevin L. WALDHER, Plaintiff and Respondent, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Bank of Columbia Falls, Jette Ranch, Inc., Sogelease Corporation, 5 P's Collections, Inc. d/b/a Intermountain Collections, Michael Leahy, and their assigns or successors in interest, and all persons unknown who claim any right, title, estate or interest in or lien or encumbrance upon the real property described in the Complaint, or any part thereof, adverse to Plaintiff's ownership or any claim upon Plaintiff's title thereto, whether such claim or possible claim be present or contingent, including any claim or possible claim of elective share, inchoate or accrued, Defendants and Appellants.
• Court: Montana Supreme Court

Page 1101

935 P.2d 1101

282 Mont. 59

Kevin L. WALDHER, Plaintiff and Respondent, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Bank of Columbia Falls, Jette Ranch, Inc., Sogelease Corporation 5 P's Collections, Inc. d/b/a Intermountain Collections Michael Leahy, and their assigns or successors in interest and all persons unknown who claim any right, title, estate or interest in or lien or encumbrance upon the real property described in the Complaint, or any part thereof, adverse to Plaintiff's ownership or any claim upon Plaintiff's title thereto, whether such claim or possible claim be present or contingent, including any claim or possible claim of elective share, inchoate or accrued, Defendants and Appellants.

No. 96-461.

Supreme Court of Montana.

Submitted on Briefs Jan. 2, 1997.

Decided March 18, 1997.

Ward E. Taleff; Alexander, Baucus, Taleff & Paul, Great Falls, for Defendants and Appellants.

Matthew H. O'Neil; French, Mercer, Grainey & O'Neil, Polson, for Plaintiff and Respondent.

TRIEWEILER, Justice.

Kevin L. Waldher's predecessor in interest filed a quiet title action in the District Court for the Twentieth Judicial District in Lake County, and served defendant Federal Deposit Insurance Corporation (FDIC) with a summons and complaint. The District Court entered FDIC's default based on FDIC's failure to file an answer to the complaint. FDIC moved the District Court to set aside the entry of default. The District Court denied FDIC's motion. FDIC appeals the District Court's order which denied its motion to set aside the default. We reverse the order of the District Court and remand to that court for proceedings consistent with this opinion.

On appeal, we address the issue of whether the District Court abused its discretion when it denied FDIC's motion to set aside the default judgment.

FACTUAL BACKGROUND

On October 12, 1993, Lonna Leahy filed a quiet title action in the Twentieth Judicial District Court. Defendant FDIC was served with a summons and complaint on December 14, 1993. In early February, Leahy orally granted FDIC a thirty-day extension of time in which to file an answer to the complaint. After the informal extension had expired, Leahy notified FDIC's attorney that FDIC was in "technical default." At that time, however, Leahy did not move the District Court for entry of a default, and the parties continued to negotiate Leahy's quiet title claim. On October 6, 1994, FDIC's attorney appealed to Leahy for a response to the negotiations "so that we can either dismiss the action or file an answer."

On May 17, 1995, Leahy moved the District Court for an entry of default against FDIC for its failure to file a timely answer. The District Court granted Leahy's motion on May 24, 1995, and entered default against FDIC. FDIC immediately retained local counsel to continue negotiations with Leahy. On June 13, 1995, after conferring with Leahy, FDIC's local counsel wrote to Leahy:

To confirm our discussion, I informed you of my representation of FDIC. Rather than requiring me to move to set aside the default of FDIC (if you feel you can't stipulate to that result), we agreed to try to cooperate in the next few weeks to see if there is a way to defeat the Sogelease Corporation judgment lien.... If that isn't acceptable, or if you would prefer that I take steps now to set aside the default, please let me know immediately.

On August 23, 1995, Kevin L. Waldher was substituted for Lonna Leahy as party plaintiff in the quiet title action. When FDIC sought to confirm its understanding about the negotiations with Waldher's counsel, it was informed that Waldher would not agree to set aside FDIC's default. Therefore, on February 28, 1996, FDIC filed a motion with the District Court to set aside the default. On July 12, 1996, the court summarily denied FDIC's motion.

DISCUSSION

The issue in this case is whether the District Court abused its discretion when it denied FDIC's motion to set aside the default judgment.

Rule 55(c), M.R.Civ.P., provides that "[f]or good cause shown the court may set aside an entry of default." The policy of law is to favor a trial on the merits. Therefore, no great abuse of discretion need be shown to warrant a reversal of a district court order denying a motion to set aside a default. In re Marriage of Broere (1994), 263 Mont. 207, 209, 867 P.2d 1092, 1093; Hoyt v. Eklund (1991), 249 Mont. 307, 311, 815 P.2d 1140, 1142. Our standard of review of a district court's refusal to set aside a default is whether there was a slight abuse of discretion by the court. Twenty-Seventh Street, Inc. v. Johnson (1986), 220 Mont. 469, 471, 716 P.2d 210, 211.

In Blume v. Metropolitan Life Insurance Co. (1990), 242 Mont. 465, 467, 791 P.2d 784, 786, this Court set forth the factors necessary to establish good cause to set aside a default. We stated that a defendant must show: (1) that he proceeded with diligence; (2) that his neglect was excusable; (3) that the judgment, if permitted to stand, will affect him injuriously; and (4) that he has a defense to plaintiff's cause of action on the merits. Blume, 242 Mont. at 467, 791 P.2d at 786. See also Marriage of Broere, 263 Mont. at 209, 867 P.2d at 1094.

In this case, the evidence presented by FDIC demonstrates that it proceeded with diligence to...