Northwest Farm Credit Services v. Lund

No. 92-111
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
NORTHWEST FARM CREDIT SERVICES, ACA,
Successor by Merger to INTERSTATE
PRODUCTION CREDIT ASSOCIATION,
Plaintiff and Respondent,
-vs-
DALE G. LUND and YVONNE LUND,
Defendants and Appellants.
APPEAL FROM: District Court of the 17th Judicial District,
In and for the County of Valley,
The Honorable Leonard H. Langen, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Mary L Zemyan, Attorney at Law, Wolf Point, Montana
.
For Respondent:
A. Lance Tonn, Lucas & Monaghan, Miles City, Montana
For Amicus:
D. Michael Eakin, Montana Legal Services Assn.,
Billings, Montana
Submitted on Briefs: August 27, 1992
NOW 5 - I Decided: November 5, 1992
Filed:
GLE:ZA .SFSUPREME COUR'I
STATE OF MOI'JTAMA
Justice John Conway Harrison delivered the Opinion of the Court.
This is an appeal from the District Court of the Seventeenth
Judicial District, Valley County, the Honorable Leonard H. Langen
presiding. Appellants Dale and Yvonne Lund (the Lunds) appeal from
the Judgment, Decree of Foreclosure and Order of Sale entered
against them by default on February 3, 1992. We affirm.
The issues are:
1. Do the provisions of 5 25-10-404, MCA, impose a duty on
the clerk of court to inform parties that the statute exists?
2. Did the clerk's failure to inform Dale Lund of the
necessity of filing an affidavit in order to proceed in forma
pauperis deny the Lunds their opportunity to defend?
3. Should the default judgment be set aside?
Respondent Northwest Farm Credit Services, ACA, (Northwest) is
a lending corporation organized under the Federal Farm Loan Act.
On April 5, 1990, Northwest loaned $99,923 to the Lunds for
operating capital. This note was due and payable on November 1,
1990. The Lunds executed a promissory note as evidence of this
loan. On March 1, 1991, Northwest loaned $2,500 to the Lunds as
operating capital to plant their crops. This note was due on
demand. The Lunds executed a second promissory note as evidence of
this loan.
A s security for the repayment of these loans and previous
loans, together with interest and any costs and attorney's fees
Northwest might incur, the Lunds executed and delivered a mortgage
on certain lands located in Valley County. The mortgage was dated
October, 12, 1988, but it secured future loans within a five year
period from that date. As further security, the Lunds executed a
security agreement pledging various items of personal property as
collateral.
The Lunds failed to repay the promissory notes according to
their terms, so on October 15, 1991, Northwest filed its Complaint
to Foreclose Real Estate Mortgage and Security Agreement. The
Lunds were served with the complaint on October 21, 1991. Dale
Lund received help from an attorney, Mr. Martell, in drafting an
answer, but Mr. Martell did not sign the answer. He did inform
Dale Lund that he could ask the court to waive the filing fee but
did not explain the procedure.
Dale Lund attempted to file his answer on November 12, 1991.
He did not present the $100 filing fee. As a result, the clerk
date-stamped the answer but did not file it. It is unclear from
the record exactly what exchange occurred between Dale Lund and the
clerk at that time. It appears Mr. Lund neither asked about the
procedure for filing as a pauper under 5 25-10-404, MCA, nor did
the clerk inform him of the procedure. On November 25, 1991, the
clerk returned the answer along with a letter stating, '1 am
'
returning your Answer forthwith, as I have yet to receive $100.00
for filing the same. Upon receiving the fee, I will at that time
file the same.I'
On December 9, 1991, the clerk entered the Lunds' default for
failing to plead, answer, or otherwise defend. On January 15,
1992, Northwest filed its Motion for Entry of Judgment, Decree of
Foreclosure and Order of Sale and for Award of Attorney's Fees.
Northwest also filed its Notice of Hearing and sent a copy of both
documents to the Lunds. Northwest's attorney, A. Lance Tonn, also
enclosed a letter in which he urged the Lunds to seek legal counsel
in this matter. Mr. Tonn also spoke with the Lunds by telephone on
January 30, and once again advised them to seek counsel. He also
told them that he would agree to a continuance if the Lunds hired
an attorney and wished to put some defenses before the court. The
Lunds failed to enlist counsel, however, and the hearing proceeded
on February 3, 1992.
At the hearing, Mr. Tonn offered evidence on the legal fees
incurred by Northwest in prosecuting this action. The court
allowed Mr. Lund to give a statement in which he basically raised
his defenses to the initial complaint, although the court refused
to reopen the case or accept evidence as to those defenses. Those
defenses raised issues as to whether the Lunds had been credited
with all their payments and whether they were authorized by
Northwest to use proceeds from the sale of two items pledged as
security. At best, those defenses, even if valid, would only have
gone to reduce the amount the Lunds owed Northwest. Mr. Tonn
testified, however, that the foreclosure action would still have
proceeded. Even if the statements made by Dale Lund were true, the
Lunds would still have been in default on their loans. At the
close of the hearing, the Judge signed the Judgment, Decree of
Foreclosure and Order of Sale. The court made it clear that Mr.
Lund was to have an opportunity to ensure that his account was
properly credited. Mr. Tonn assured the court that he would
promptly ask that the judgment be amended if there was an error.
Do the provisions of S 25-10-404, MCA, impose a duty on the
clerk of court to inform parties that the statute exists?
The Lunds argue that 5 25-10-404, MCA, imposes a duty on the
clerk of court to disclose its existence. That statute reads:
25-10-404. Poor persons not required to prepay fees.
Any person, who will file an affidavit stating that he
has a good cause of action or defense and that he is
unable to pay the costs or procure security to secure the
same, may commence and prosecute or defend an action in
any of the courts and administrative tribunals of this
state; then it is hereby made the duty of the officers of
the courts and administrative tribunals to issue all
writs and serve the same and perform all services in the
action without demanding or receiving their fees in
advance.
Although Dale Lund was aware that he could file his answer
without paying the fee, it does not appear that he asked Mr.
Martell or the clerk how to do so. The functions performed by the
clerk must be demanded by law. See Platz v. Hamilton (1982), 201
Mont. 184, 653 P.2d 144; Anderson v. Hinman (1960), 138 Mont. 397,
357 P.2d 895. The only express duty found in this statute requires
the clerk to perform all services requested once a party has filed
the proper affidavit. This statute does not expressly impose a
duty upon the clerk to disclose. Nor, as the Lunds admit, does any
other statute impose a duty upon the clerk to disclose the
existence of S 25-10-404, MCA. The legislature has not imposed a
duty upon clerks to disclose. Although we sympathize with the
Lunds and others similarly situated, we are unwilling to impose
such a duty. We hold that g 25-10-404, MCA, does not impose a duty
on the clerk.
II
Did the clerk's failure to inform Dale Lund of the necessity
of filing an affidavit in order to proceed in forma pauperis deny
the Lund's their opportunity to defend?
As we hold that the clerk had no duty to inform Dale Lund of
the necessity of filing an affidavit in order to proceed in forma
pauperis, her actions did not deny the Lunds their opportunity to
defend. The Lunds must bear responsibility for not defending in
this action. In Federal Land Bank of Spokane v. Gallatin County
(1929), 84 Mont. 98, 274 P. 288, this Court held that ignorance of
the law was no justification for relief from a default judgment.
We followed that time-honored principle recently in Donovan v.
Graff (1991), 248 Mont. 21, 808 P.2d 491. In Donovan, this Court
found that the pro se plaintiffs were not entitled to relief from
entry of summary judgment simply because they did not understand
the law regarding the filing of papers in support of their motion
for summary judgment.
Not only is ignorance of the law not an argument for lack of
opportunity to defend, but it was the Lunds' own inaction that
caused them to lose their chance to defend. "Every person is bound
to take care of his own rights, and to vindicate them in due
season, and in proper order. This is a sound and salutary
principle of law." Federal Land Bank at 111, 274 P at 291
.
(quoting Dunne v. Yund (1916), 52 Mont. 24, 33-34, 155 P. 273,
276). We also have a maxim of equity that "the law helps the
vigilant before those who sleep on their rights." Section 1-3-218,
MCA. A review of the facts indicates that, aside from ignorance of
the law, it was the Lunds8 own inaction that caused them to lose
their chance to defend in this action.
As noted above, when the clerk failed to receive the filing
fee from the Lunds, she sent a letter on November 25, 1991,
stating, "I am returning your Answer forthwith, as I have yet to
receive $100.00 for filing the same. Upon receiving the fee, I
will at that time file the same." The Lunds do not deny receiving
the letter. However, they did not respond to the letter or take
any other action. Two weeks later, on December 9, 1991, the clerk
entered their default. The Lunds did nothing in response to the
entry of default. When Mr. Tonn sent a copy of his motion and a
Notice of Hearing to the Lunds on January 14, 1992, he included a
letter in which he urged the Lunds to seek legal advice. Mr. Tonn
stated (capitalized in original):
YOU ARE IN GRAVE JEOPARDY OF A JUDGMENT, DECREE OF
FORECLOSURE AND ORDER OF SALE BEING ENTERED AGAINST YOU.
IF YOU HAVE ANY QUESTIONS ABOUT YOUR LEGAL RIGHTS, YOU
SHOULD IMMEDIATELY CONTACT AN ATTORNEY OF YOUR CHOOSING.
ONCE AGAIN, IF YOU FAIL TO TAKE ANY ACTION, A JUDGMENT,
DECREE OF FORECLOSURE AND ORDER OF SALE WILL BE ENTERED
AGAINST YOU.
Although the Lunds received this letter, they did not respond or
take any action.
Also, Mr. Tonn spoke with Dale Lund on the telephone on
January 30, 1992. During that conversation he encouraged Mr. Lund
at least three times to contact an attorney because he felt the
court would enter the decree. Mr. Tonn offered, however, to
stipulate to a continuance if the Lunds hired an attorney and
wished to put forth some defenses. Mr. Lund did nothing in
response to this offer either. Under these facts, the Lunds were
clearly aware of the realities of the situation and were given an
opportunity to defend should they choose to. The Lunds, not the
clerk, must bear responsibility for losing their opportunity to
defend. We hold the clerk's failure to inform the Lunds was not
error.
I11
Should the default judgment be set aside?
The Lunds neither requested the District Court to set aside
the default under Rule 55(c), M.R.Civ.P., nor made a motion for
relief from the default judgment under Rule 60(b), M.R.Civ.P. We
need only determine whether the District Court acted properly when
it initially entered the default judgment under Rule 55(b). See
Johnson v. Murray (1982), 201 Mont. 495, 656 P.2d 170. Rule 55(b),
M.R.Civ.P. governs the entry of a default judgment by the court.
In pertinent part it reads:
.
Rule 5 5 (b) Judgment. Judgment by default may be entered
as follows:
(2) By the court. In all other cases the party
entitled to a judgment by default shall apply to the
court therefor; ... If the party against whom judgment
by default is sought has appeared in the action, the
party (or, if appearing by representative, the party's
representative) shall be served with written notice of
the application for judgment at least 3 days prior to the
hearing on such application. If, in order to enable the
court to enter judgment or to carry it into effect, it is
necessary to take an account or to determine the amount
of damages or to establish the truth of any averment by
evidence or to make an investigation of any other matter,
the court may conduct such hearings or order such
references as it deems necessary and proper and shall
accord a right of trial by jury to the parties when and
as required by any statute of the state of Montana.
In this case, the clerk entered the Lunds* default on December
9, 1991. On January 15, 1992, Mr. Tonn filed his Motion for Entry
of Judgment, Decree of Foreclosure and Order of Sale and For Award
of Attorney's Fees. At that time he also sent proper notice to the
Lunds that he would bring his motion on February 3, 1992. This is
far more advance notice than the three required days. The court
held a hearing at which it took evidence from Mr. Tonn on the legal
fees incurred by Northwest. It also gave Dale Lund an opportunity
to make a statement. He did not dispute the amount of attorney's
fees and costs testified to by Mr. Tonn.
We note that in order to make a prima facie case for
foreclosure Northwest was required to show three elements: (1) the
debt of the borrowers; (2) nonpayment of the debt; and (3) present
ownership of the debt by the lender. First National Bank of
Albuquerque v. Quinta Land & Cattle Co. (l989), 238 Mont. 335, 339,
779 P.2d 48, 50. In support of its motion, Northwest submitted the
affidavit of Wayne Erlenbush, an authorized agent of Northwest, as
evidence of the foregoing. Based on this and a sufficient showing
of attorney's fees, the District Court entered a Judgment, Decree
of Foreclosure, and Order of Sale in favor of Northwest.
We hold that the District Court properly entered a default
9
judgment a g a i n s t t h e Lunds.
A f f inned.
we concur: iJ
November 5, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent. by United States mail, prepaid, to the following
named:
Mary L. Zemyan
Attorney at Law
P.O. Box 1094
Wolf Point, MT 59201
A. Lance Tonn
LUCAS & MONAGHAN, P.C.
P.O. Box 728
Miles City, MT 59301
D. Michael Eakin
Montana Legal Services
2442 First Ave. No.
Billings, MT 59101
ED SMITH
CLERK OF THE SUPREME COURT
BY qt
STATE OF MONTANA
Deputy \