Whitefish Credit Union v. Sherman

• Decision Date: 20 November 2012
• Docket Number: No. DA 12–0053.,DA 12–0053.
• Parties: WHITEFISH CREDIT UNION, Plaintiff and Appellee, v. Russell SHERMAN and Joan Sherman, Defendants and Appellants.
• Court: Montana Supreme Court

367 Mont. 103

289 P.3d 174

2012 MT 267

WHITEFISH CREDIT UNION, Plaintiff and Appellee,

v.Russell SHERMAN and Joan Sherman, Defendants and Appellants.

No. DA 12–0053.

Supreme Court of Montana.

Submitted on Briefs Aug. 29, 2012.

Decided Nov. 20, 2012.

For Appellants: James A. Manley, Joshua C. Morigeau, Manley Law Firm, Polson, Montana.

For Appellee: Sean S. Frampton, Brian M. Joos, Morrison & Frampton, PLLP, Whitefish, Montana, Kevin S. Jones, Christian, Samson, & Jones, PLLC, Missoula, Montana.

Justice JAMES C. NELSON

delivered the Opinion of the Court.

¶ 1 Russell and Joan Sherman ^FN1

appeal from the District Court's December 29, 2011 order denying in part and granting in part their motion to vacate and to set aside the default judgment entered against them on November 2, 2011 (henceforth referred to as the Shermans' Motion).

¶ 2 We address the following, restated issue on appeal, and we affirm: Did the District Court slightly abuse its discretion in denying the Shermans' Motion?

Background

¶ 3 The District Court did not enter any findings of fact, conclusions of law or a rationale in support of its order. Rather, in entering its summary ruling, the court simply stated that it had considered the Shermans' Motion, the briefs, the affidavits, and the pleadings on file. Thus, we are not privy to exactly the District Court's rationale. Yet, in Caplis v. Caplis, 2004 MT 145, ¶ 14, 321 Mont. 450, 91 P.3d 1282,

we proceeded to address the entry of default judgment at issue there, despite the similarly summary nature of the court's order. Accordingly, from our review of the District Court record, we proceed to address the issue on appeal.

¶ 4 The following pertinent facts are established in the record. Between January 2007 and July 2010, Russell, a sophisticated borrower and real estate developer, obtained loans for over $1,594,282 from the Whitefish Credit Union (WCU). This total was comprised of various loans made at different times and for different reasons. Russell defaulted in paying the loans. Unable to resolve the delinquencies satisfactorily through negotiations and exchanges of correspondence between WCU and the Shermans' counsel, WCU gave notice of default by a 10–day demand letter dated February 18, 2011. WCU filed its Complaint for Foreclosure on July 1, 2011, and twice requested the Shermans' counsel to accept service on behalf of his clients. Receiving no response from the Shermans' counsel, WCU waited an additional 30 days and then requested that the sheriff serve the Shermans. According to the sheriff's affidavit, service was effected on the Shermans on September 8, 2011. As it turned out, however, only Russell was, in fact, served; Joan was not personally served with process. Russell failed to enter a timely appearance or answer WCU's complaint. Accordingly, WCU requested entry of default, and the Shermans' default was entered on October 7, 2011. After waiting an additional 20 days, WCU filed its request for entry of a default judgment. The District Court entered default judgment on November 2, 2011.

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¶ 5 The Shermans learned of the court's entry of default judgment on November 5, 2011, and they then filed their motion to vacate and set aside the default judgment on November 16, 2011. As already noted above, on December 29, 2011, the District Court entered its order on the Shermans' Motion. The court summarily denied the motion insofar as it applied to the default judgment entered against Russell, but the court granted the motion insofar as it applied to Joan. Based on WCU's concession that Joan was not properly served by the sheriff, the court ruled that it had no personal jurisdiction over her, and that the default judgment was, as a result, void as to her. There is no argument on appeal that the court's dismissal of the default judgment against Joan was in error. Therefore, we consider only whether the District Court slightly abused its discretion in not vacating and setting aside the default judgment as to Russell.^FN2

¶ 6 We also note that the parties' briefs on appeal refer to a number of other facts, mostly regarding the underlying loan transactions and the demands and negotiations between the Shermans, their counsel, and WCU, that preceded WCU filing its complaint. We do not set out those facts, however, because they are not relevant to the issue we decide here.

Standard of Review

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¶ 7 This Court disfavors default judgments because our policy is that litigated cases are to be decided on the merits. Thus, we review a district court's decision to deny a motion to set aside a default judgment for only a slight abuse of discretion. That said, however, the party seeking to set aside a default judgment has the burden of proof.

Prof. Sports v. Nat'l Indoor Football League, 2008 MT 98, ¶ 21, 342 Mont. 292, 180 P.3d 1142

(citing Caplis, ¶ 16).

Discussion

¶ 8 Did the District Court slightly abuse its discretion in denying the Shermans' Motion?

¶ 9 Russell offers three arguments on appeal: (1) that because Joan was not served with process, the default judgment should have been void in its entirety under M.R. Civ. P. 60(b)(4)

; (2) that the default judgment should have been set aside for “mistake, inadvertence, surprise, or excusable neglect” under M.R. Civ. P. 60(b)(1); and (3) that the default judgment should have been set aside or vacated for “other reasons justifying relief from the operation of the judgment” under M.R. Civ. P. 60(b)(6). Russell also argues that the District Court only considered his argument made under M.R. Civ. P. 60(b)(4), and failed to consider his arguments made under both M.R. Civ. P. 60(b)(6) and 60(b)(1).

¶ 10 In its December 29, 2011 order, the District Court stated that it considered the Shermans' Motion, the briefs, the affidavits, and the pleadings on file in this matter. The court also noted that WCU conceded that Joan was not personally served and that the default judgment was, therefore, void as to her. Finally, the court stated that Russell did not cite legal authority for his argument that voiding the default judgment as to Joan also voided the judgment as to him. In so doing, the court rejected Russell's reliance on Nikolaisen v. Advance Transformer Co., 2007 MT 352, 340 Mont. 332, 174 P.3d 940,

as being not on point.

¶ 11 First, Russell's contention that the District Court failed to consider his arguments made under both M.R. Civ. P. 60(b)(6) and 60(b)(1)

, but only considered his argument made under M.R. Civ. P. 60(b)(4), is not persuasive. Russell's M.R. Civ. P. 60(b)(6) and 60(b)(1) arguments were made in his briefs filed in the trial court. And, as already noted, the District Court stated in its December 29, 2011 order that it considered the Shermans' “[M]otion, the briefs, the affidavits and the pleadings on file.” Indeed, the court's order specifically identifies the Shermans' Motion to vacate or set aside default judgment and brief in support filed November 16, 2011, WCU's response to that motion filed December 1, 2011, and the Shermans' reply filed December 12, 2011. Russell has failed to offer anything but his conclusion to contravene the trial court's statement that it considered the entire record before it. Therefore, we reject Russell's conclusory argument to the contrary.

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¶ 12 Next, as to Russell's contention that the court's voiding the default judgment as to Joan (for lack of personal service) also voided the default judgment as to him, we conclude, as did the District Court, that Russell failed to support this argument with any persuasive legal authority. After arguing that service of process serves (1) to notify a party that litigation is pending, and (2) to vest the trial court with jurisdiction, Russell then jumps to the conclusion that “[i]f a judgment is void it must be void in its entirety.” The only authority which he cites for this conclusion is Fonk v. Ulsher, 260 Mont. 379, 860 P.2d 145 (1993)

, and Nikolaisen.

¶ 13 Fonk

is not on point. The sole issue in that case was whether service of process is valid when the process server leaves process with a family member at the residence of other persons sought to be served. Fonk, 260 Mont. at 381, 860 P.2d at 146. There we held that this sort of service was not effective to accomplish personal service on a member of the family not actually served with the summons and petition. And, while we held that the court's decree as to the member of the family who was not personally served was void, Fonk, 260 Mont. at 384–85, 860 P.2d at 148, we did not have any occasion or reason to rule that the court's decree (or judgment) was void also as to the person who actually was served.

¶ 14 There was only one defendant in Fonk,

and that person was not personally served. Thus, Fonk supports the court's voiding of the default judgment as against Joan since she was not personally served with process. Our decision, however, does not support also voiding the default judgment as against Russell inasmuch as he was personally served with process. Referring to Russell's own argument, since he was personally served, he did have notice of the pending litigation and, as to him, personal service vested the trial court with jurisdiction. Russell cites no authority that, as to him, the default judgment should be voided under such circumstances.

¶ 15 Similarly, Nikolaisen

does not support Russell's argument. As the District Court properly observed, this case is not on point as it discussed only improper service on an out-of-state corporation for failure to follow the required service of process steps outlined in M.R. Civ. P. 4D. Again, there was only one named defendant in that case, and the dispositive issue involved whether service of process was made on that defendant. Nikolaisen, ¶¶ 2, 24. We said nothing about voiding an entire default judgment against two defendants, only one of whom was not properly served with process.

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¶ 16 Accordingly, having provided this Court with no authority to support his argument that...