First Continental Corp. v. Parker ( 1996 )

No. 96-125
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
FIRST CONTINENTAL CORPORATION,
a Montana Corporation,
Plaintiff and Respondent,
JOHN B. PARKER, KOLEEN FELDMAN
PARKER, JULIE L. PARKER and JAMES
0. PARKER,
Defendants and Appellants.
APPEAL FROM: District Court of the Tenth Judicial District,
In and for the County of Ferqus,
The Honorable John Christensen, Judge presiding
COUNSEL OF RECORD:
For Appellants:
Allen Beck, Attorney at Law, Billings, Montana
John B. Parker, Pro Se, Billings, Montana
For Respondent:
Norman L. Newhall; Linnell, Newhall, Martin &
Schulke, Great Falls, Montana
Submitted on Briefs: November 21, 1996
Decided: December 31, 1996
Filed:
Justice W. William Leaphart delivered the Opinion of the Court.
Pursuant to Section I, Paragraph 3 (c), Montana Supreme Court
1995 Internal Operating Rules, the following decision shall not be
cited as precedent and shall be published by its filing as a public
document with the Clerk of the Supreme Court and by a report of its
result to State Reporter Publishing Company and West Publishing
Company.
Appellant John B. Parker, appearing pro se, appeals the
February 1, 1996 Order of the Tenth Judicial ~istrictCourt, Fergus
County, denying his motion for change of venue, Julie L . Parker
appeals the February 1, 1996 Order granting default judgment
against her. Appellants John B. Parker, and James 0. Parker appeal
the February 1, 1996 Order granting First Continental Corporation's
(FCC) motion for summary judgment. We a f f inn. We consider the
following issues on appeal:
1. Did the District Court err when it denied John B.
Parker's motion for change of venue?
2. Did the District Court err when it granted default
judgment against Julie L. Parker?
3. Did the District Court err when it granted summary
judgment against John 3. Parker and James 0 . Parker?
4. Is it proper for this Court to reopen the previous
litigation in this matter on the basis of extrinsic fraud?
Factual and Procedural Historv
This appeal arises from a deficiency judgment in the amount of
$153,632 ordered against the appellants as general partners in
Fergus Farming Partnership (FFP). FCC won a judgment against FFP
which was affirmed by this Court on July 8, 1995. The facts
leading up to that judgment will only be repeated as necessary to
the resolution of the present dispute.
FFP was formed as a general partnership in 1987 to farm real
property located in Fergus County, Montana. The property was being
purchased by FCC pursuant to a Contract For Deed with Fox Grain and
Cattle Co. (Fox). FFP took possession of the property as lessee
and hired Top Gun, Inc., to perform custom farming services. FCC
defaulted on the Contract For Deed and Fox instituted default
proceedings and eventually litigation against FCC, FFP, and other
farming partnerships in the Tenth Judicial District Court, Fergus
County, Montana. The original complaint was filed on July 20,
1988. On January 16, 1990, FCC filed a cross-complaint against FFP
based on an account receivable owed by FFP to Top Gun, Inc., which
Top Gun assigned to FCC. The case was tried before the court on
March 21, 1994 and the court entered its Findings of Fact and
Conclusions of Law on June 21, 1994. After a hearing regarding
attorney's fees, the court entered judgment in favor of FCC and
against FFP on October 14, 1994.
FFP filed post-trial motions which were denied by the District
Court. Thereafter, FFP timely filed an appeal to this Court which
affirmed the District Court. FFP's petition for rehearing was
denied and a Remittitur issued July 27, 1995.
In the meantime, while the appeal to this Court was pending,
FCC issued a Writ of Execution on FFP funds held in trust by the
Fergus County Clerk of Court's office. The Writ was partially
satisfied by payment of $69,190. FCC issued additional Writs of
Execution for the balance of the judgment which were served in
Fergus and Yellowstone Counties. They were returned unsatisfied.
Thereafter, FCC instituted the present action in the Tenth
Judicial District Court filing a complaint on August 17, 1995.
Appellant Julie Parker was originally served on August 27, 1995 and
re-served on October 3, 1995. Appellant John Parker was served on
October 1, 1995 and Appellant James Parker was served on October
18, 1995. All three appellants were served with an Amended
Summons, a copy of the Complaint and the Plaintiff's First
Discovery Requests (including requests for admissions). None of
the appellants responded to the discovery requests.
On October 19, 1995, John Parker, appearing pro se, filed a
Motion to Dismiss without a brief. On November 6, 1995 John Parker
filed his answer and a Motion for Change of Venue.
On November 24, 1995, the Fergus County Clerk of Court entered
the Defaults of Julie Parker and James Parker for failure to
appear. On the same date FCC moved for summary judgment against
John Parker and for entry of a Default Judgment against Julie
Parker and James Parker pursuant to Rule 56, M.R.Civ.P.
On January 12, 1996, James Parker and Julie Parker through
counsel, moved to set aside the default by the Clerk of Court. On
the same date, James Parker and Julie Parker, through counsel, and
John Parker, appearing pro se, filed an additional Answer, Third
Party Complaint and Counterclaim against FCC and against John J.
Greytak individually.
Hearing on all motions was conducted on January 16, 1996. The
court issued its Order on February 1, 1996, and its Memorandum on
February 2, 1996, granting summary judgment to FCC and judgment
against John Parker, James Parker, and Julie Parker.
Standard of Review
Our standard of review of a district court's denial of a
motion to change venue is a legal conclusion which we review to
determine whether the district court correctly applied the law.
Carter v. Nye (1994), 266 Mont. 226, 228, 879 P.2d 729, 730;
Barthule v. K a m a n (1994), 268 Mont. 477, 482, 886 P.2d 971,
974. Our standard of review in appeals from a district court's
denial of a motion to set aside an entry of default is "that no
great abuse of discretion need be shown to warrant reversal."
Lords v. Newman (1984), 212 Mont. 359, 364, 688 P.2d 290, 293.
Our standard of review in appeals from summary judgment
rulings is de novo. Motaire v. Northern Montana Joint Refuse
Disposal Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154, 156; Mead
v. M.S.B., Inc. (1994), 264 Mont. 465, 470, 872 P.2d 782, 785.
When we review a district court's grant of summary judgment, we
apply the same evaluation as the district court based on Rule 56,
M.R.Civ.P. Bruner v. Yellowstone County (1995), 272 Mont. 261,
264, 900 P.2d 901, 903. In Bruner, we set forth our inquiry:
The movant must demonstrate that no genuine issues of
material fact exist. Once this has been accomplished,
the burden then shifts to the non-moving party to prove,
by more than mere denial and speculation, that a genuine
issue does exist. Having determined that genuine issues
of fact do not exist, the court must then determine
whether the moving party is entitled to judgment as a
matter of law. We review the legal determinations made
by a district court as to whether the court erred.
Bruner, 900 P.2d at 903 (citations omitted)
Issues
1. Did the District Court err when it denied John
Parker's motion for change of venue?
John Parker and James Parker filed separate motions for change
of venue. Both motions were denied. Only John Parker appeals from
the denial. On October 19, 1995, John Parker, appearing pro se,
filed a motion to dismiss. On November 6, 1995, John Parker filed
his answer and a motion for change of venue. John Parker alleged
that venue was proper in Yellowstone County, as that was the county
of his residence. He further alleged that, even if the choice of
venue were to be determined based upon the underlying contract,
Yellowstone County, rather than Fergus County, was proper because
Yellowstone County was FFP's principal place of business. Both of
these allegations are incorrect.
FCC objected to the motion on the basis that John Parker did
not move for change of venue in his first pleading pursuant to Rule
12 (b), M.R.Civ.P. A defendant waives the right to change venue
when he fails to raise the issue at the time of his first
appearance. Rule 12 (b), M.R.Civ.P. Hoyt v. Hoyt (l985), 215 Mont.
;
6
449, 456, 698 P.2d 418, 422. An "appearance is the first act of
the defendant in court." Johnson v. Clark (19571, 131 Mont. 454,
459, 311 P.2d 772, 775. John Parker waived his right to change
venue by failing to raise the issue when he first appeared and
moved the court to dismiss the action against him.
Although the District Court could have denied John Parker's
motion for change of venue on this procedural ground alone it chose
to address the merits of the venue issue and denied the motion on
that basis.
The District Court found that Fergus County was the proper
place for venue because, although the service contract with Top
Gun, Inc., was executed in Yellowstone County, Montana, it was to
be performed in Fergus County, Montana.
The general rule governing venue of all civil actions is that
the action shall be tried in the county in which the defendant
resides. Section 25-2-118, MCA. However, 25-2-118, MCA,
provides that the general rule applies only if venue is not
otherwise provided for by statute. Section 25-2-121,MCA, governs
venue in contract actions:
(2) [Ilf . . . a contract belongs to one of the
following classes, the proper county for such a contract
. . . is . . . (b) contracts of employment or for the
performance of services: the county where the labor or
services are to be performed . . . .
The judgment against FFP arose out of an alleged breach of
payment for services rendered by Top Gun, Inc. in Fergus County,
Montana. FCC partially satisfied the judgment out of partnership
assets in Fergus County. Thereafter FCC commenced the above-
entitled action under § 35-10-307, MCA, and § 35-10-312, MCA, to
recover the balance fromthe individual partners. Contrary to John
Parker's argument, FCC's attempt to recover the balance of the
judgment against the individual partners is an ancillary and
incidental action to the original proceeding against the
partnership.
The general rule is that when the determination of a
matter is incident to a principal action, the court
having jurisdiction of the principal action may determine
the ancillary or incidental proceedings, notwithstanding
the venue of an action as to such matter would, under
other circumstances, be in another county.
77 Am.Jur.2d Venue § 27 (1975) (citations omitted). Therefore
venue is proper in Feryus County, the county in which the original
service contract was to be performed.
The District Court's holding as to venue comports with § 25-2-
121, MCA, the statute governing venue in contract actions. The
District Court correctly denied John Parker's motion for change of
venue and we affirm the District Court on that issue.
2. Did the District Court err when it granted default
judgment against Julie Parker?
Julie Parker was originally served with a copy of the Summons,
Complaint and Plaintiff's First Discovery Requests on August 27,
1995. Due to an error in the original Summons, Julie Parker was
re-served with a copy of all the documents on October 3, 1995. The
Default of Julie Parker was entered by the Clerk of the Court on
November 24, 1995. Julie Parker failed to contact an attorney
until just prior to oral arguments on FCC's motion for default
judgment against her on January 16, 1996. Julie Parker's first
8
appearance was through counsel on January 12, 1996. This
appearance was more than 90 days after the second service of the
documents and more than 130 days after original service of the
court documents.
The District Court denied Julie Parker's Rule 55(c! motion to
set aside the entry of default by the clerk and to deny FCC's
motion for default judgment against her. Rule 55(c), M.R.Civ.P.,
provides that:
For 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 6 0 (b).
The District Court found that there was no mistake, inadvertence,
surprise, or excusable neglect which would allow the court to reach
the "good cause" exception and denied the motion to set aside the
entry of default on that basis. We find no abuse of discretion in
the District Court's holding. Furthermore, in her brief to this
Court, Julie Parker has failed to offer any reason why the default
judgment against her should not have been granted. We therefore
affirm the District Court's grant of default motion against Julie
Parker.
3. Did the District Court err when it granted summary
judgment against John Parker and James Parker?
On November 24, 1995, the Fergus County Clerk of Court entered
the default of Julie Parker and James Parker for failure to appear.
On the same date FCC moved for summary judgment against John Parker
and for entry of a default judgment against Julie Parker and James
Parker.
On December 7, 1995, FCC filed an alternative motion for
summary judgment against James Parker pursuant to Rule 56,
James Parker subsequently moved to set aside the default
judgment. The District Court granted James Parker's motion to set
aside the default on the basis of a calendering mistake by counsel
and so that the merits of t - e competing claims could be decided by
li
the court.
FCC's complaint against John Parker and James Parker was filed
pursuant to § 35-10-312, MCA, and was based upon the joint and
several liability of general partners for partnership obligations
under 5 35-10-307,MCA. Section 35-10-312,MCA, reads in pertinent
part :
. . . .
(2) An action may be brought against the
partnership and any or all of the partners who are
personally liable for obligations of the partnership
under 35-10-307 or 35 10-629 in the same action or in
separate actions.
. . . .
(4) A judgment creditor of a partner may not levy
execution against the assets of the partner to satisfy a
judgment based on a claim against the partnership unless:
(a) the partner is personally liable for the
liability of the partnership under 35-10-307 or 35-10-
629; and
(b) one of the following conditions is satisfied:
(i) a judgment based on the same claim has been
obtained against the partnership and a writ of execution
on the judgment has been returned unsatisfied in whole or
in part . . . .
It is undisputed that James and John Parker were general
partners of FFP. James and John Parker were served with requests
for admissions seeking to establish their status as partners in FFP
more than 45 days prior to oral arguments on the summary judgment
motions. Neither James Parker nor John Parker responded to the
requests within 45 days and therefore, under Rule 36, M.R.Civ.P.,
their status as partners is deemed admitted.
FCC first attempted to satisfy its judgment against FFP
through assets owned by FFP. After obtaining partial satisfaction
of the judgment through execution on the Clerk of Court's trust
account in which funds owned by FFP were deposited, FCC issued two
additional writs of execution which were returned unsatisfied.
Thus, FCC has complied with the 5 35-10-312,MCA, prerequisite to
bringing an independent action on the judgment against the
individual partners.
James Parker asserts that because he was not named
individually in the original proceedings that he is not liable for
the debts of the FFP partnership. John Parker asserts that since
he was dismissed from the underlying action as not being a "real
party" in interest he is no longer liable for any judgment arising
from the original action.
Additionally, James and John Parker assert that the nature of
a partner's liability under the applicable 1987 code, § 35-10-307,
MCA, was "joint" liability and not "joint and several" liability
and therefore the individual partners were not "jointly and
severallyN liable with the partnership for the liabilities of the
partnership. FCC correctly points out that in 1987, § 28-1-302,
MCA, rendered all "joint" obligations "joint and several"
obligations. In any case, the partners do not have joint liability
with the partnership. Rather, the partnership has primary
liability for its debts and if the partnership cannot satisfy its
debts the partners become jointly and severally liable with each
other for the unpaid balance of the debt. James and John Parker
misconstrue the nature of partnership liability and ignore the fact
that they are general partners in FFP, a partnership with an
unsatisfied judgment against it.
As general partners in the FFP partnership, John and James
Parker are liable for the partnership debts and therefore the
District Court properly granted summary judgment against them.
4. Is it proper for this Court to reopen the previous
litigation in this matter on the basis of extrinsic fraud?
The Appellants argue that the judgment obtained by FCC should
be set aside because the underlying agreement upon which FCC
obtained the judgment was obtained by fraud of its officer, agent
and shareholder, John Greytak. The allegations of fraud revolve
around Greytak's failure to reveal the true source of funds used to
originally capitalize FFP. Appellants allege that they did not
learn of the fraud until trial of the underlying claim in March
1994.
Even if the Appellants did not or could not have learned of
the fraud until the time of trial they had the opportunity to
cross-examine Greytak and could have made a motion to set aside the
judgment under Rule 60(b) ( 3 ) , M.R.Civ.P. However, no such motion
was made. Rule 60, M.R.Civ.P., provides a procedure by which a
party may seek relief from a judgment. Rule 60 (b), M.R.Civ.P.,
provides that:
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; (2) newly discovered evidence which
by due diligence could not have been discovered in time
to move for a new trial under Rule 59 (b) ; (3) fraud
(whether heretofore denominated intrinsic or extrinsic),
misrepresentation, or other misconduct of an adverse
party . . . .
Having failed to seek relief from a final judgment under the
applicable subsections of Rule 60(b), M.R.Civ.P., the only
remaining avenue to attack the validity of the judgment against FFP
is under the residual clause of Rule 60(b), M.R.Civ.P., which
permits an independent action to void a judgment under "very
limited circumstances." Loney v. Milodragovich, Dale & Dye, P.C.
(l995), 273 Mont. 506, 511, 905 P.2d 158, 162. The residual clause
of Rule 60(b), M.R.Civ.P., provides:
This rule does not limit the power of a court to
entertain an independent action to relieve a party from
a judgment, order or proceeding, or to grant relief to a
defendant not actually personally notified as may be
required by law, or to set aside a judgment for fraud
upon the court.
This residual clause allows for three separate avenues of relief
including: lack of personal notification, fraud upon the court, and
an independent action for extrinsic fraud. See Rule 60(b); In re
Marriage of Miller (1996), 273 Mont. 286, 902 P.2d 1019, 1022
(citing Salway v. Arkava (1985), 215 Mont. 135, 140, 695 P.2d 1302,
Personal notification has not been asserted. Fraud upon the
court embraces only the "most egregious conduct, such as bribery of
a judge or member of the jury. . . . " Marriase of Miller, 902 P.2d
at 1022. This Court has repeatedly held that fraud between the
parties is not fraud upon the court. Marriase of Miller, 902 at
1022 (citation omitted). Appellants allege that Greytak committed
fraud by not revealing to them the source of funding for the
capitalization of FFP. Appellants have not asserted fraud upon the
court.
All that remains, therefore, is an independent action for
"extrinsic fraud." This Court has defined extrinsic fraud as "some
intentional act or conduct by which the prevailing party has
prevented the unsuccessful party from having a fair submission of
the controversy." Marriase of Miller, at 1022 (citations omitted) .
Throughout the underlying litigation, FFP did not depose
Greytak nor did it send interrogatories to Greytak or FCC in order
to determine the source of funds used to capitalize the
partnership. Appellants could have cross-examined Greytak or made
a Rule 60(b)(3), M.R.Civ.P., motion. They chose not to. FCC has
not prevented Appellants from having a fair submission of the
controversy.
All of Appellants' allegations of fraud are based on the facts
underlying the original litigation which was resolved by the
District Court and affirmed by this Court on appeal. As such, the
fraud asserted by the Appellants is intrinsic to the very cause of
action that resulted in the judgment against FFP. Appellants'
allegations of fraud are nothing more than an impermissible
collateral attack on a final judgment. A judgment is not subject
to collateral attack where the court has jurisdiction of the
subject matter and the parties. Swift v. State Dept. Of Natural
Resources & Conservation ( 1 9 8 7 ) , 226 Mont, 439, 442, 736 P.2d 117,
119. Neither the District Court, in the original proceedings, nor
this Court, in its July 8, 1995 decision on the appeal, lacked
subject matter or personal jurisdiction.
The District Court correctly determined that the matters
asserted by the Appellants in their collateral attack on the
judgment against FFP were intrinsic to the merits of the matters
tried in the original proceedings and therefore the judgment should
not be reopened on the basis of extrinsic fraud, or any other
equitable basis.
FCC seeks damages under Rule 32, M.R.App.P., for a frivolous
appeal. If the Supreme Court is satisfied from the record and the
presentation of the appeal in a civil case that the same was taken
without substantial or reasonable grounds, such damages may be
assessed "as the circumstances are deemed proper.'! Rule 32
M.R.App.P. Sorenson v. Massey-Ferguson (Mont. 1996), - P.2d
; I
, 53 St.Rep. 1269, 1270. This Court does not readily impose
sanctions upon parties for filing frivolous appeals. Federated
Mutual Ens. Co. v. Anderson (Mont. 1996), 920 P.2d 97, 102, 53
St .Rep. 618, 621. Under the circumstances presented, we are not
persuaded that this appeal was taken without substantial or
reasonable grounds, thereby justifying the assessment of damages.
The request for damages under Rule 32, M.R.App.P., is denied.
Conclusion
We affirm the District Court's Order denying John Parker's
motion for change of venue, granting FCC's motion for a default
judgment against Julie Parker, and granting summary judgment in
favor of FCC against John and James Parker. Furthermore, there
is no equitable basis for this court to reopen or set aside the
judgment against FFP. Accordingly, we affirm FCC's judgment
against the individual partners of FFP. FCC's motion for damages
under Rule 32, M.R.App.P.,is denied.