                                                                                             August 4 2015


                                           DA 13-0577
                                                                                         Case Number: DA 13-0577

                 IN THE SUPREME COURT OF THE STATE OF MONTANA

                                           2015 MT 226


GREGORY S. HALL,

              Plaintiff and Appellee,

         v.

DON HALL d/b/a DON HALL BUILDERS,
DONNA HALL d/b/a/ TOWN & COUNTRY
PROPERTY MANAGEMENT AND REAL
ESTATE, DEBRA CERNICK d/b/a
DEBRA’S MONTANA COUNTY REAL
ESTATE also d/b/a MONTANA COUNTRY
REAL ESTATE and JOHN HEINLEIN,

              Defendants and Appellants.


APPEAL FROM:          District Court of the Nineteenth Judicial District,
                      In and For the County of Lincoln, Cause No. DV-07-67
                      Honorable C.B. McNeil, Presiding Judge


COUNSEL OF RECORD:

               For Appellant:

                      Jeffry M. Foster, Davis, Hatley, Haffeman & Tighe, P.C., Great Falls,
                      Montana

                      Ada C. Montague, Franz & Driscoll, P.L.L.P, Helena, Montana

               For Appellee:

                      Maxwell G. Battle, Jr., Battle & Edenfield, PLLC, Kalispell, Montana


                                                   Submitted on Briefs: June 10, 2014
                                                              Decided: August 4, 2015

Filed:

                      __________________________________________
                                        Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.

¶1     This case arises from a dispute over a home inspection performed by Don Hall of a

home purchased by Gregory S. Hall in 2006. (Don and Gregory are not related.) Gregory

filed a complaint against Don; the seller of the home, John Heinlein; real estate broker

Donna Hall, also Don’s wife; and real estate broker Debra Cernick. Gregory alleged that the

defendants failed to disclose material defects in the property including structural leaks, a

faulty furnace, clogged plumbing, and toxic mold. Defendants Donna Hall, Heinlein, and

Cernick ultimately obtained summary judgment on the grounds that Gregory received a

disclosure statement and had imputed knowledge of the defects. Gregory appealed, and the

judgment was affirmed by this Court. The District Court, determining that Don had not filed

a sufficient answer to the complaint, entered default judgment against Don in the amount of

$206,522.80. After issuance of a writ of execution, Don asked for the default judgment to be

set aside and also sought to claim exemptions. These requests were denied by the District

Court. Don appeals. We reverse.

                 FACTUAL AND PROCEDURAL BACKGROUND

¶2     Don, who represented himself during most of the proceedings, claims little knowledge

of the legal system, and thus the timeline of his participation in this case requires close

examination. Gregory filed his complaint on March 5, 2007, Judge Michael C. Prezeau

presiding. On March 8, 2007, Gregory requested a substitution of judge. Judge C. B.

McNeil assumed jurisdiction on March 20, 2007. A summons was issued to Don on March

5, 2007, naming Judge Prezeau as the presiding judge, and informing Don that he was




                                             2
required to file a response within 20 days or suffer default.1 The return of service indicates

that Don was served with the summons and complaint on March 13, 2007. Don was thus

required to appear or answer on or before April 2, 2007. Don submitted a financial affidavit

and request for waiver of fees, which he signed on March 28, 2007, and which was filed

April 4, 2007. The order waiving fees was signed by Judge McNeil on April 3, 2007, and

also filed April 4, 2007. Don continued to receive service of all filings in the case, and on

May 7, 2007, Don signed and returned a copy of the order calling in Judge McNeil.

¶3     The next filing by Don to appear in the record is a typed letter from Don to Judge

Prezeau, filed in the District Court on September 20, 2007. There is no date reflecting when

Don may have written or mailed the letter. In the letter, Don states that he received the

summons and complaint on March 14, 2007, and would “try to answer this as best as I can,”

although he could not afford an attorney. He admitted that he looked over the house for

structural damage and general appearance in July of 2006 and wrote up a short list of

noticeable defects. He stated that he had retired two years earlier and only looked at the

house as a favor. He stated that he was not paid for the inspection, did not have insurance,

and is not licensed to conduct specialized inspections for issues such as mold. He noted that

the house was older, and therefore likely to have some flaws. Nevertheless, he felt the house

was in good shape. He indicated that he took no part in the buying and selling of the house.

He suggested mediation of the case “between Mr. [Gregory] Hall and Mr. Heinlein [by] a

person agreeable to both.” He also stated, “I really think this should be dismissed and I am


1
  The time for a response under M. R. Civ. P. 12(a) (2007) was 20 days. The time for a response
under current M. R. Civ. P. 12(a) is 21 days.


                                              3
asking for a Dismissal on account of the fraudulent claims by Mr. [Gregory] Hall.” The

letter was copied to Judge McNeil on September 20, 2007, docketed as “Answer of Don

Hall/Motion to Dismiss,” and a page was placed in the record immediately following the

letter indicating that a copy had been mailed to counsel for all parties.

¶4     On October 19, 2007, “[a]ll of the Defendants having filed an answer,” a scheduling

conference was set. On November 30, 2007, Gregory filed a “Motion to Determine

Sufficiency of Writing as an Answer,” attaching a handwritten letter Gregory’s counsel,

Maxwell Battle, had received from Don. Judge McNeil signed an order prepared by Battle

stating “that the writing served upon Plaintiff’s Counsel by Pro Se Defendant DON HALL

does not comply with Rule 8, M. R. Civ. P.” Judge McNeil inserted a handwritten note

adding, “and the letter to Judge Prezeau filed Sept. 20, 2007.” The order, filed November

28, 2007, directed Don to file an answer satisfying the requirements of M. R. Civ. P. 8 within

10 days. No further writings by Don were filed within that time. On February 11, 2008,

Gregory moved for default against Don, which was entered by the District Court on February

20, 2008.

¶5     Defendants Donna Hall, Heinlein, and Cernick moved for summary judgment, which

was granted on February 20, 2009. The District Court concluded that Donna Hall, as

Gregory’s agent for the purchase of the home, was aware of a possible defect in the furnace,

and this knowledge should be imputed to Gregory. Further, the District Court did not find

credible Gregory’s claim that the page from the disclosure form on which the furnace defect

was disclosed was missing. The District Court also noted Donna Hall’s testimony that she

informed Gregory of the furnace defect when he first toured the property and that no pages


                                              4
were missing from the disclosure form she provided to Gregory. The District Court

concluded that other defects alleged by Gregory, such as “toxic mold,” were immaterial due

to Gregory’s concession that “this case would not exist but for his failure to ‘see’ the

allegedly missing page” containing notice of the furnace defect. The determination that

material defects were disclosed to Gregory undermined the factual basis of his claims against

all defendants, including Donald.       Gregory appealed, and this Court affirmed in a

memorandum decision on November 10, 2010. Hall v. Hall, 2010 MT 243N, 359 Mont.

444, 249 P.3d 80.

¶6     On February 16, 2010, after entry of summary judgment in favor of defendants,

Gregory requested “final default judgment” against Don. Gregory stated that default “on the

issue of liability” had been entered against Don, and further stated that it was unknown

whether Don objected to the motion because “[c]ontact with him is impractical and would

serve no purpose under the circumstances of this case.” Gregory requested damages in the

amount of $206,522.80.

¶7     Each of the remaining defendants, Donna Hall, Heinlein, and Cernick, filed responses

or notices of position objecting to the motion for a default judgment against Don. Donna

Hall argued that “Don Hall’s fate should be allowed to rise or fall with the rest of the

Defendants, rather than entering a judgment against him based on claims and theories that

saw no traction in any other capacity in this proceeding.” Heinlein argued that despite the

default, Hall had a right to a hearing on damages, which must be limited to those the plaintiff

could reasonably prove as a matter of law. Cernick similarly argued that, based on the




                                              5
earlier summary judgment ruling, “it appears . . . that a portion of the damages sought by

Plantiff against Don Hall are not recoverable as a matter of fact or law.”

¶8     Gregory moved to strike these responses, arguing that none of the remaining

defendants or their counsel had standing to object on behalf of Don. Gregory provided

correspondence with Tracy Axelberg, counsel for Donna Hall, in which Axelberg

acknowledged that he did not have authority to act on Don’s behalf, but said, “It’s just the

right thing to do, in my view. He did file a response to the complaint, at least in a fashion;

not really responsive, but something as opposed to nothing.” On April 1, 2010, Gregory’s

counsel, Battle, filed notice with the court of a letter received from Don stating, “I feel that

you don’t have a so called Default Judgment of any sorts against me or anyone. . . . I did

answer your letter of Default over 2 years ago.”

¶9     On April 14, 2010, the District Court granted Gregory’s motions to strike and for

default judgment. Judgment was entered against Don in the amount of $206,522.80. The

District Court concluded, “Said Defendant [Don] has filed no appearance in this proceeding

inclusive of consideration of the document filed by Plaintiff April 1, 2010 which attaches an

unsigned letter to Plaintiff’s counsel which does not constitute a response by Defendant Don

Hall to the Motion for Default Judgment as a matter of law.”

¶10    On October 8, 2010, the judgment being unpaid, a writ of execution was issued

directing the sheriff to seize Don’s personal property in order to satisfy the judgment. On

December 14, 2010, Don filed a letter in which he “ma[de] a motion or appearance to have

an unjustified Court Order of Default Judgment set aside and forever stricken . . . .” He

stated that he had “recently found out that I cannot send any papers directly to the Judge,”


                                               6
and thus many of his writings or responses may never have been considered by the court. He

attached a copy of a letter to Judge McNeil, dated December 6, 2007, stating, “I received

your letter Nov 30, 2007 about a hand written letter that I had sent out to Maxwell G. Battle

Jr. some time in the early spring of 2007.” The December 6 letter also stated, “I later wrote a

different letter to Judge Prezeau here in Libby and tried to explain my case a little better and

to also ask for a dismissal of the case. This letter was sent out on March 25, 2007. . . . I feel

I had already answered all that I know how to, and I cannot hire anyone to help in this case.

I still feel it should have been dismissed.” This letter does not appear elsewhere in the

record.

¶11    Gregory moved to strike the December 14 letter, including all attachments, and

sanction Don. On January 5, 2011, the District Court granted the motion, signing an order

that appears to have been drafted by Battle. The District Court concluded that Don’s letter

was untimely as a motion to set aside the default judgment. The District Court further

ordered Don to pay Gregory’s reasonable attorneys’ fees and costs in responding to the

letter. Don did not appeal the District Court’s denial of his request for relief from the

judgment.

¶12    On June 3, 2013, previous attempts at execution having been unsuccessful, Gregory

requested a second writ of execution. The judgment by that time, including interest, totaled

$270,809.48. Gregory also moved the District Court to order the sheriff’s office to assist

him in enforcing the writ. The order of assistance was issued June 7, 2010. A notice of

seizure was filed on June 13, 2013, with an accompanying three-page list of items seized

from Don’s home, including fishing boats, construction tools and equipment, firearms, and


                                               7
two pickup trucks. Don, then represented by counsel, moved for a hearing to assert

exemptions. The District Court denied the motion on July 30, 2013. Don filed a notice of

appeal in this Court on August 26, 2013, and after a financial eligibility screening was

appointed pro bono appellate counsel. Don later filed for bankruptcy under Chapter 7 of the

Bankruptcy Code. Discharge was granted August 12, 2014.

                               STANDARD OF REVIEW

¶13    We view default judgments with disfavor in light of our policy that cases are to be

tried on the merits. Mont. Prof’l Sports, LLC v. Nat’l Indoor Football League, LLC,

2008 MT 98, ¶ 21, 342 Mont. 292, 180 P.3d 1142. We review a district court’s decision to

deny a motion to set aside a default judgment for only a slight abuse of discretion. Mont.

Prof’l Sports, ¶ 21.

                                      DISCUSSION

¶14    We first address whether, in light of the discharge in bankruptcy, this case is moot.

Mootness is a threshold issue we must resolve before addressing the merits of a dispute.

Havre Daily News, LLC v. City of Havre, 2006 MT 215, ¶ 31, 333 Mont. 331, 142 P.3d 864.

A matter is moot when the court can no longer grant effective relief or restore the parties to

their original positions. Serrania v. LPH, Inc., 2015 MT 113, ¶ 14, 379 Mont. 17, 347 P.3d

1237; Havre Daily News, ¶ 31. A discharge in bankruptcy “voids any judgment at any time

obtained, to the extent that such judgment is a determination of the personal liability of the

debtor . . . .” 11 U.S.C. § 524(a)(1) (2012). Further, a creditor may not commence or

continue any action to collect from the debtor after discharge. 11 U.S.C. § 524(a)(2). A

debtor’s appeal from a discharged judgment may be considered moot, because where a


                                              8
judgment is void and cannot be collected, the parties have already effectively been restored

to their original positions and a court can offer no further relief. See Serrania, ¶ 15. Like

Serrania, this case addresses a debtor’s appeal from a judgment discharged in bankruptcy.

In this case, however, the judgment was executed prior to the bankruptcy. There is still relief

to be granted, because Don still has an interest in the return of personal property seized from

his home. While the bankruptcy statutes void the judgment as a determination of Don’s

liability to Gregory and prohibit Gregory from further attempts to collect on that liability,

they are silent on the topic of Don’s present attempt to recover wrongfully seized items from

Gregory. This Court is in a position to restore the parties, insofar as possible, to their

original positions. The case is not moot.

¶15    On appeal, Don argues that the default judgment is void, but acknowledges that

appeal from the order striking his motion to have the default judgment set aside, entered

January 5, 2011, is not timely. Don therefore asks, “Is a pro se defendant entitled to have a

default judgment voided and set aside despite not filing for timely appeal?” We construe this

as a request for an out-of-time appeal, which we may grant “[i]n the infrequent harsh case

and under extraordinary circumstances amounting to a gross miscarriage of justice . . . .”

M. R. App. P. 4(6). The record before us demonstrates that this is such a case. Therefore,

we consider Don’s appeal from the District Court’s order striking his motion to set aside

default judgment.2 In so doing, we look to the Montana Rules of Civil Procedure in effect at


2
   Gregory, on appeal, claims, “As of the present date, Don Hall has never moved to set aside either
the initial default or the final default judgment.” We fail to understand this assertion, as on
December 14, 2010, Don filed with the District Court a document clearly purporting to be a “motion
. . . to have an unjustified Court Order of Default Judgment set aside . . . .”


                                                 9
the time, noting that the rules were substantially revised effective October 1, 2011. Order, In

re Revisions to the Montana Rules of Civil Procedure, No. AF 07-0157 (Mont. Apr. 26,

2011).

¶16      Pursuant to M. R. Civ. P. 55(c) (2009), a district court may set aside an entry of

default for good cause shown, and may set aside a default judgment under M. R. Civ. P.

60(b). That rule provides that the court may relieve a party from a final judgment 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 . . . misrepresentation, or
         other misconduct of an adverse party; (4) the judgment is void; (5) the
         judgment has been satisfied, released, or discharged, or a prior judgment upon
         which it is based has been reversed or otherwise vacated, or it is no longer
         equitable that the judgment should have prospective application; or (6) any
         other reason justifying relief from the operation of the judgment.

M. R. Civ. P. 60(b) (2009). The motion must be made “within a reasonable time.” M. R.

Civ. P. 60(b) (2009). If based on claims of mistake, inadvertence, surprise, excusable

neglect, newly discovered evidence, or fraud, the motion must be made within 60 days.3

M. R. Civ. P. 60(b) (2009).

¶17      Default was entered against Don on February 20, 2008. M. R. Civ. P. 55(c) (2009)

states no specific time limit on a motion to set aside default, providing only that such a

motion may be granted “for good cause.” Default judgment, in the amount of $206,522.80,

was entered April 14, 2010. Don’s motion to have the default judgment set aside was filed

eight months later, on December 14, 2010. The District Court, in its order striking Don’s


3
    The current M. R. Civ. P. 60(c)(1) allows such a motion to be made within one year.


                                                10
motion to set aside default judgment, found the motion untimely because it was not filed

within 60 days after entry of judgment. The 60-day limit, however, applies only to motions

based on claims of mistake, inadvertence, surprise, excusable neglect, newly discovered

evidence, or fraud. A request to set aside default judgment on any other grounds must be

filed only “within a reasonable time.”

¶18    In his motion to set aside default, Don observed that the events alleged by Gregory in

his complaint “already had been found not to be the faults of any of the defendants or even

caused any damages.” Don also refers to the notices of position sent by counsel for each of

the remaining defendants, arguing that entry of default judgment against him was unjust and,

in any case, could not occur without a hearing to establish the amount of damages. Don’s

motion thus raised questions as to whether the judgment was void, whether prospective

application of the judgment would be equitable, or whether he was otherwise entitled to

relief from the judgment. M. R. Civ. P. 60(b) (2009). The District Court, concluding only

that Don made “no showing of mistake, inadvertence, excusable neglect, newly discovered

evidence or fraud,” did not consider other grounds. Under these circumstances, the District

Court erred when it applied the 60-day time limit as a strict bar, failing to consider the basis

for the motion or the reasonableness of its timing.

¶19    Notice of entry of judgment was sent to Don on May 1, 2010. Notice of Gregory’s

appeal of the summary judgment entered in favor of the remaining defendants was sent to

Don on the same day. Don was the first named party in the caption and participated in

telephonic mediation on appeal. He appears not to have understood that entry of default

effectively ended his role in the case. Our Opinion affirming the order of summary judgment


                                              11
was issued November 10, 2010. Considering that Don acted without the assistance of

counsel and did not fully understand his role in the case at that stage, the filing of his motion

to set aside default one month after the conclusion of a pending appeal does not appear

unreasonable.

¶20     We next consider whether Don was entitled to relief from the judgment under M. R.

Civ. P. 60(b) (2009). Our concerns about enforcement of the default judgment in this case

are many. First, default was entered despite the fact that Don made an effort to answer the

complaint. Don claims that his answer, in the form of a letter to Judge Prezeau, was sent

March 25, 2007, within the 20-day period for a response. M. R. Civ. P. 12(a) (2007).

Although the letter was not filed until September 20, 2007, Judge McNeil was nevertheless

aware of the letter and Don’s attempt to answer the complaint by the time he entered default.

Don’s letter responded, in short and plain terms, to the allegations of Gregory’s complaint.

See M. R. Civ. P. 8(b) (2007). Mindful that default judgments are disfavored, Mont. Prof’l

Sports, ¶ 21, and that “pleadings shall be so construed as to do substantial justice,” M. R.

Civ. P. 8(f) (2007), we believe the District Court could reasonably have accepted Don’s

letter as a sufficient answer. Moreover, Don continued to appear and participate in the case

by attending a deposition, a settlement conference, and a telephonic mediation.

¶21    Second, the remaining three defendants in the case were relieved of any liability, and

the legal claims upon which Gregory’s complaint was based were found to be meritless.

Despite the existence of a legal finding, later affirmed by this Court, that Gregory had

established no basis for liability, he went on to seek recovery from the only defendant

without the resources to retain counsel. He did so three years after the initial entry of default


                                               12
and only after losing his claims against the three remaining defendants. All three of

defendants’ counsel objected to this action, calling their opposition “just the right thing to

do” as members of the bar.

¶22    Third, the default judgment—again, in a case in which the defendant appeared on

multiple occasions and all theories of liability were affirmatively rejected by the court—was

entered without a hearing to determine the amount of damages. It is well-established that

this was improper. “In an action for unliquidated damages the default of the defendant

admits the material and traversable allegations of the complaint, but does not admit the

amount of damages.” Lindsey v. Keenan, 118 Mont. 312, 320, 165 P.2d 804, 809 (1946). In

this case, Gregory’s complaint sought damages in an unspecified amount as compensation

for maintenance of the home while unoccupied; repair of the home; insurance and taxes on

the home while unoccupied; loss of value of the home; lost time from his business; mental

pain and anguish; medical treatment resulting from mold exposure; and damage to personal

property stored in the home. An affidavit filed in support of his motion for final default

judgment calculated these losses at $206,522.80, including $50,000 for pain and suffering.

The amount of damages was not fixed by law or agreed upon by the parties, and thus the

damages were unliquidated. Sawyer v. Somers Lumber Co., 86 Mont. 169, 178, 282 P. 852,

854 (1929). Regardless of whether Don was properly deemed to have admitted the

allegations of the complaint, he was entitled to appear at a hearing to determine the amount

of any default judgment. M. R. Civ. P. 55(b) (2009); Paxson v. Rice, 217 Mont. 521, 524,

706 P.2d 123, 125 (1985) (“A defaulting party loses his defenses against the claim, but the




                                             13
claim should only be for the amount of damages actually suffered.”); Lindsey, 118 Mont. at

321, 165 P.2d at 809. No such hearing was ever held.

¶23    Fourth, the record in this case does not adequately or accurately reflect Don’s

attempts to defend his case. There is no record of what happened to Don’s letter to Judge

Prezeau during the six months between March 25, 2007, when Don claims he sent the letter,

and September 20, 2007, when it finally appears in the District Court file. Such an absence

in the record does not aid in facilitating appellate review. See City of Billings v. Peterson,

2004 MT 232, ¶ 20, 322 Mont. 444, 97 P.3d 532. Further, self-represented litigants should

be granted some degree of latitude. Greenup v. Russell, 2000 MT 154, ¶ 15, 300 Mont. 136,

3 P.3d 124. While we recognize that this does not mean self-represented parties are to be

granted exemptions from the rules of procedure governing our system of justice, Greenup, ¶

15, neither are they to be unduly obstructed in their attempts to access that system of justice.

Consistent with this principle, M. R. Civ. P. 5(4)(d) now provides that “[t]he clerk must not

refuse to file a paper solely because it is not in the form prescribed by these rules or by a

local rule or practice.” Finally, we recognize that the letter to Judge Prezeau, because it was

not served on opposing counsel, constituted an ex parte communication. In accordance with

Rule 2.10 of our Rules of Judicial Conduct, however, the proper procedure was not to ignore

the letter for six months under still unknown circumstances, but to give prompt notice of the

letter to counsel for all parties.4



4
   Rule 2.10(B) states: “If a judge receives an ex parte communication having a potentially
significant bearing upon the substance of a matter, the judge shall make provision promptly to notify
the parties of the content of the communication and provide the parties with an opportunity to


                                                 14
¶24    The record presented in support of Don’s December 14, 2010 motion to set aside the

default judgment establishes that, in light of his attempts to appear and defend, and the lack

of any finding of liability against the remaining three defendants, prospective application of

the judgment was not equitable. M. R. Civ. P. 60(b) (2009). Our rules specifically allow

relief to be granted in such circumstances. M. R. Civ. P. 60(b) (2009) (allowing a court to

grant relief from a judgment where “it is no longer equitable that the judgment should have

prospective application” or for “any other reason justifying relief from the operation of the

judgment.”). The rather unique circumstances of this case demonstrated that, in the interests

of justice, Don was entitled to relief from the judgment. M. R. Civ. P. 60(b) (2009).

Saddling a retired contractor with a judgment ultimately totaling $270,000, by sole virtue of

the fact that he was the only defendant without the resources necessary to navigate the

judicial system, ultimately driving him to bankruptcy as a result of a liability that, as a matter

of law, did not exist in the first place, is a harsh result and indeed a miscarriage of justice.

M. R. App. P. 4(6).

                                        CONCLUSION

¶25    We reverse the order of the District Court striking Don’s motion to set aside default

judgment. We remand for entry of an order setting aside the default judgment and directing

Gregory to reimburse Don for amounts recovered thereunder.

¶26    Reversed.

                                                      /S/ LAURIE McKINNON



respond. If such communication is in writing, a copy of it shall be made available to the parties and
retained.”


                                                 15
We Concur:

/S/ MICHAEL E WHEAT
/S/ BETH BAKER
/S/ JAMES JEREMIAH SHEA


Justice Jim Rice, dissenting.

¶27    Although I disagree with the Court’s determination to grant multi-faceted relief to

Don, I believe it is important and would be helpful to the Bar and to litigants in future cases

to highlight the Court’s holdings herein. Further, since the Court’s decision is premised

largely upon a nonspecific “under the circumstances” rationale, it is essential that the factual

and procedural background of this case be set forth completely and accurately so that the

circumstances may be properly analyzed and the Court’s holdings applied appropriately in

future cases.

Factual and Procedural Background

¶28    After Don was served with the summons and complaint in this matter on March 13,

2007, he filed a financial affidavit and request for waiver of fees with the District Court on

April 4, 2007. In his affidavit, Don averred that he owned a home valued at $200,000,

against which was owed $135,000, and that he owned two vehicles, one being a then-late

model 2006 GMC pickup that he valued at $43,000. He also owned a 1996 Jeep. Absent

from his affidavit was information later developed in this litigation that he was an owner of a

business known as Don Hall Builders.1 The assets associated with this business came to

light when Gregory began executing on the default judgment obtained against Don. Those


1
 In his 2/12/08 deposition, Don testified that he had operated as a building contractor for over 20
years, but that he had recently retired.


                                                16
assets included a 5th-wheel travel trailer, generators, compressors, circular saws, band saw,

electric and cordless drills and drill sets, chisel sets, drywall drills, sanders, ladders, table

saws, reciprocating saw, radial arm saw, planer, lathe, scaffolding and platform, framing

nailers, concrete nailers, finish nailers, electric grinders, bench grinder, house heaters, shop

heater and vacuum, super routers, drill presses, ratchet and socket sets, bushing sets,

chainsaw, chain hoist, elevation scale, multi-meter, tap and die sets, tables, buffer/polisher,

tile cutter, paint sprayer, paint mixer, pressure washer, lift jacks, propane weed burner, as

well as grease guns, tool boxes, stand-up tool box, tool accessory kit, staplers, tool sets, and

other power tools. Also executed upon, but omitted from his financial affidavit, was Don’s

assets related to fishing: 19’ Gull boat with inboard/outboard motor, trolling motor and fuel

tank, 12’ Harbor Craft boat, five horse boat motor and tank, marine radio, electric

downrigger, fish finder, raft, boat wench, Minn-kota trolling motor, tackle boxes, tackle,

reels and rods, and boxes of miscellaneous equipment. Don listed his income as “SSI,” but

the record does not indicate how he qualified for Supplemental Security Income while also

owning the indicated assets. The Court holds that Don was “without the resources necessary

to navigate the judicial system.” Opinion, ¶ 24.

¶29    The Court states, as it does in several ways in the opinion, that Don “acted without the

assistance of counsel and did not fully understand his role in the case.” Opinion, ¶ 19. Don

was represented by counsel after this proceeding progressed to the point that Gregory began

executing on the judgment entered against Don. Don was also represented by counsel when

he filed for bankruptcy, in which he obtained a discharge of the judgment that the Court here

has ordered to be set aside.


                                               17
¶30    After being served with process, Don was granted a waiver of filing fees, but he did

not file an answer. Instead, he wrote a letter to Judge Prezeau. In addition to the Court’s

quotes from the letter, Don described Gregory’s claims as “fraudulent” and told Judge

Prezeau that “I can not afford an Attorney and will not.” Don also sent a letter to Gregory’s

counsel, in which he stated:

       As for a attorney or respectful lawyer and or person of this State, and County
       you are a disgrace.

                                           .   .    .

       I really think you were taught wrong, you should go back to school and get a
       education that will help you and others, and not try to bullshit or falsely accuse
       others.

                                           .   .    .

       If there was any thing hid by any one in this house sale it was by the seller
       only, and maybe you.

                                           .   .    .

       I feel I will not or can not answer these bold face lies in any other form.

¶31    The Complaint and Amended Complaint alleged that Don had “inspected the property

prior to closing and advised Plaintiff of certain findings, but did not disclose the material

defects and adverse conditions” in the property. Don, “in the course of his business,

profession, and employment and in connection with the aforesaid transaction in which he had

a pecuniary interest, supplied false information to Plaintiff for Plaintiff’s guidance in the

transaction.” The tort alleged against Don was premised on the Restatement (Second) of

Torts § 552, providing that one who, in the course of his business or profession, supplies

false information for the guidance of others in their business transactions, is liable for


                                               18
pecuniary loss caused to them by their justifiable reliance upon the information if he fails to

exercise reasonable care or competence in communicating the information. See Morrow v.

Abraham, 2014 MT 117, ¶¶ 45-46, 375 Mont. 38, 324 P.3d 1167 (explaining this

Restatement section provides the definition for the tort of negligent misrepresentation).

Gregory contracted with Don to conduct a property inspection and advise him directly about

any defects in the house, and thus made a separate claim against Don under a different theory

of liability than the other Defendants, who were the seller and the real estate agents in the

transaction. The Court quotes from Don’s letter to Judge Prezeau that “the house was older,

and therefore likely to have some flaws,” Opinion, ¶ 3, but Don’s written report submitted to

Gregory prior to the transaction stated just the opposite, that the property was “very nice”

and had “lots of potential.” Don’s report did not say the property was “old” and had “flaws,”

but noted only two negatives—that the window trim needed to be repainted and that the

metal roofing had one hole—and none of the significant defects claimed to be material by

Gregory.2, 3

¶32    In November 2007, as the Court notes, the District Court issued an order holding that

Don’s letters to Judge Prezeau and to Gregory’s counsel failed to comply with the Rules of

Civil Procedure and ordering that “Pro Se Defendant DON HALL shall serve and file an

Answer complying with Rule 8, M.R.Civ.P. within ten (10) days, failing which the Court

2
  The Court also quotes Don’s statement to Judge Prezeau that he had not been paid and had done the
inspection “as a favor,” Opinion, ¶ 3. However, there is evidence that Gregory paid $200 for Don’s
inspection of the property.
3
 The Complaint alleged that the defects included “leaks in the building, leaks in the plumbing, leaks
in the waterline serving water to the Property, inoperability of heating systems, plugged plumbing
and drains, [and] the presence of toxic mold.”


                                                 19
shall enter judgment on the issue of liability against Pro Se Defendant DON HALL . . . .”

Don was served with the order, but consistent with the statement in his letters that he “will

not” respond further, Don did not file an answer, produce any other document, or otherwise

respond to the order.

¶33    Three months later, in February 2008, Gregory moved for a default to be entered

against Don for his failure to file an answer following the District Court’s order. Don was

served, but he did not respond to the motion. Thus, his default was entered.

¶34    The litigation proceeded and a pre-trial order was entered in December 2008. The

parties agreed and the District Court ordered that “[t]he default of Don Hall has been entered.

The only issue pertaining in the litigation regarding Don Hall is the amount of damages

which should be awarded Greg Hall against Don Hall.”4

¶35    In February 2009, the District Court ruled on the Defendants’ motions for summary

judgment. Defendant Heinlein, the seller in the transaction, argued that he had no duty to

disclose any defects to Gregory, but, alternatively, “[i]f Heinlein had a duty to disclose any

potential defects with the real property, [Gregory] contractually waived that duty by hiring a

person to perform a property inspection; and relying upon the property inspection in

purchasing the property to the exclusion of Heinlein’s representations.” Indeed, in the Buy-

Sell Agreement, Gregory waived the home inspection contingency, writing on the document

by hand that “I have had the inspection—I release home inspection.” That inspection

Gregory referred to was, of course, performed by Don.


4
 The pre-trial order was revised by court order in January 2009, but none of the revisions affected
Don’s position in the case.


                                                20
¶36    The District Court entered summary judgment against Gregory and in favor of the

other Defendants, reasoning that “‘means were at hand’ to discover the ‘truth’ and avoid this

transaction altogether. Therefore, armed with this imputed knowledge, Plaintiff Hall cannot

claim reliance” or that the defendants caused him damages. The court determined that

Gregory could not prevail against the other Defendants because knowledge of the conditions

of the house, as noted on the sale documents prepared by the other Defendants, was imputed

to Gregory. However, Don’s liability to Gregory under the tort of professional reliance was

not addressed, having been rendered moot by entry of Don’s default, leaving no liability

issues to be resolved.

¶37    The Court notes that Gregory appealed from the entry of summary judgment against

the other Defendants. Don did not appeal from the entry of judgment against him. However,

in August of 2009, this Court granted a motion to dismiss the appeal filed by the other

Defendants, noting that “[t]he District Court has not yet, however, entered a judgment setting

the amount of damages to be awarded against defendant Don Hall . . . .” We dismissed

without prejudice to permit further proceedings regarding Don Hall so that a final judgment

could be entered.

¶38    After dismissal of the first appeal, Gregory moved for entry of a “final” default

judgment against Don. The Court notes that the motion stated that “[c]ontact with [Don] is

impractical and would serve no purpose” and thus Gregory did not contact Don to determine

his position on the motion. Opinion, ¶ 6. Gregory did serve Don with the motion but Don

did not respond. As the Court notes, the other Defendants responded. Defendants Cernick

and Heinlein argued that “Damages must be reasonable” and that “a closer look” at


                                             21
Gregory’s request for damages “may be warranted.” However, a default judgment in the full

amount of $206,522.80 was entered in April 2010.

¶39    In May 2010, Gregory filed a second notice of appeal from the entry of summary

judgment in favor of the other Defendants. Don did not appeal from the entry of default or

default judgment against him. In October 2010, while Gregory’s appeal was pending, a writ

of execution was issued for seizure of Don’s property. Don followed this action by writing

letters to the District Court, in which he stated that “maybe I could have asked some one for

advice once in awhile and kept the cost very little.” The District Court deemed Don’s letters

to be a motion to set aside the judgment and denied it in January 2011. Don did not appeal

from the court’s denial of his request to set aside the judgment. Our decision on Gregory’s

appeal was rendered in November 2010.

¶40    Two and one-half years later, following a seizure of Don’s property in June 2013,

Don, represented by counsel, moved the District Court for a hearing on exemptions from

execution. The motion was denied, and as the Court notes, was timely appealed by Don.

Thus, the issue properly before the Court, prior to any of the Court’s rulings herein, is the

District Court’s denial of Don’s motion for a hearing on exemptions. Don was granted

discharge of the judgment in bankruptcy in August 2014.

The Court’s Holdings

¶41    Out-of-time appeal. The Court construes Don’s briefing as an out-of-time appeal

from the District Court’s denial of Don’s motion to set aside the default judgment. Opinion,

¶ 15. The timeframe to be noted for this ruling is that Don’s default was entered in February

2008, the “final” default judgment was entered in April 2010, and Don’s motion to set aside


                                             22
the default judgment was denied in January 2011. After he was served, Don did not respond

to Gregory’s motions for either entry of default or default judgment, and he did not appeal

from either the entry of judgment or the denial of his motion to set aside. The Court’s ruling

permits Don to now litigate on appeal the denial of his set-aside motion from four and one-

half years ago, as well as the default stretching back seven and one-half years. The Court’s

reasoning is that, under M. R. App. P. 4(6) (2011), we may grant an out-of-time appeal “in

the infrequent harsh case and under extraordinary circumstances amounting to a gross

miscarriage of justice.”

¶42       The application of M. R. App. P. 4(6)5 to the circumstances here will serve as helpful

precedent for litigants seeking to challenge judgments entered, or to set aside motions

denied, after failing to respond to motions at the time of entry, and after years have passed

following the expiration of the time for appeal. In addition to the timeframe noted above, the

Court found significant that Don was pro se, “claim[ed] little knowledge of the legal

system,” was “without the resources necessary to navigate the judicial system,” and was “the

only defendant without the resources to retain counsel.” Opinion, ¶¶ 2, 24, 21. Thus, pro se

defendants who do not understand the legal system and have resources equal to or less than

Don with which to hire counsel will most readily come within this ruling, which stands in

clear contrast to our earlier rulings. As a recent example, in State v. Osborn, 2015 MT 48,

378 Mont. 244, 343 P.3d 1148, the Defendant challenged his sentence of commitment by

way of a Rule 60(b) motion for relief from judgment instead of appealing to this Court, and

missed the time for appealing. Osborn, ¶¶ 7, 15. The time for appealing expired on March

5
    The same rule and citation as stated in the 2011 version remains in effect.


                                                   23
1, 2014, and Osborn filed a notice of appeal on June 26, 2014. Osborn, ¶ 15. We noted that,

while “Osborn could have challenged the legality of his sentence through a direct appeal to

this Court. . . . a defendant must file notice of appeal within 60 days after entry of judgment.”

Osborn, ¶ 15. We noted that we can grant out-of-time appeals only in the infrequent harsh

case and we did not grant Osborn an out-of-time appeal. Osborn, ¶ 15. Thus, Osborn lost

his opportunity to challenge his sentence on appeal.

¶43    Setting aside default/default judgment. The Court first holds that the District Court

erred by failing to consider “the reasonableness of [the] timing” of Don’s motion to set aside

the judgment. Opinion, ¶ 18. The Court concludes that Don’s filing of the motion “one

month after the conclusion of a pending appeal does not appear unreasonable” when it is

considered that “[h]e appears not to have understood that entry of default effectively ended

his role in the case.” Opinion, ¶ 19. To clarify, Don filed his motion to set aside in

December 2010. This was two years and 10 months after the entry of default in February

2008, which was entered after Don failed to file an answer in response to the District Court’s

order requiring him to do so, and then failed to respond to Gregory’s motion for entry of

default. It was also eight months after entry of the “final” default judgment in April 2010,

which was entered after Don failed to respond to Gregory’s motion for entry of the

judgment, and which proceeded from our dismissal of the first appeal for the specific

purpose of including an assessment of damages against Don in a final judgment. Further, it

was seven months after Gregory filed his second appeal in May 2010, during which time

Don did not appeal from the entry of default judgment against him. Consequently, this

ruling will provide helpful flexibility to pro se litigants with limited resources like Don’s to


                                               24
initiate challenges that are considered timely to defaults and default judgments long after

they have been entered, even though the litigants have failed to avail themselves of the

remedies of responding to motions for such relief, and of subsequent appeal, as long as the

litigants did not understand their role in the case.

¶44    Turning to the merits of the motion, the Court grants relief from the judgment because

it determines that the judgment is not equitable. Opinion, ¶ 24. The Court places heavy

reliance on “the lack of any finding of liability against the remaining three defendants,”

which it believes should also excuse any liability against Don. Opinion, ¶ 24. The Court

believes that the District Court’s “determination that material defects were disclosed to

Gregory undermined the factual basis of his claims against all defendants, including

Donald.” Opinion, ¶ 5. However, as noted, the allegations against Don were that Gregory

had contracted with Don to inspect the property and advise Gregory of any defects in the

property. The other Defendants were dismissed because the District Court concluded that

the sale documents, prepared by the real estate agents, had sufficiently provided “the means”

for Gregory to learn the truth, that knowledge of the defects should be imputed to Gregory,

and, therefore, the other Defendants had satisfied any duty to disclose the defects to Gregory.

However, Gregory had hired Don to perform an independent inspection and advise him of

any defects in the property. This was a separate relationship and a separate theory of liability

under Restatement of Torts (Second) § 552, negligent misrepresentation, that was not

absolved under the “imputation of knowledge” rationale applicable to the other Defendants.

Rather, the tort is committed when:




                                              25
       One who, in the course of his business, profession or employment, or in any
       other transaction in which he has a pecuniary interest, supplies false
       information for the guidance of others in their business transactions, is subject
       to liability for pecuniary loss caused to them by their justifiable reliance upon
       the information, if he fails to exercise reasonable care or competence in
       obtaining or communicating the information.

Restatement (Second) of Torts § 552(1) (1965) (emphasis added).

¶45    The issue concerning Don is not, like the other Defendants, whether Gregory had

imputed knowledge of the defects, but whether Don failed to exercise reasonable care in

obtaining or communicating information about the defects to Gregory. Don was hired to be

a safety net for Gregory, to provide another mechanism of discovering any defects in the

property. There are certainly unresolved factual issues in this regard, such as whether Don

had a pecuniary interest in the transaction, and whether his inspection report was accurate.

However, those issues were never tested—and Gregory had no opportunity to prove them—

because of Don’s default. Bottom line, the dismissal of the other Defendants did not resolve

Gregory’s claim against Don, and the Court’s statements that “all theories of liability were

affirmatively rejected by the court” and that the claim against Don was “meritless” are

simply incorrect. Opinion, ¶¶ 22-21. A viable claim remained against Don, but it remained

untested because of his own default.

¶46    The Court offers statements made by the other Defendants that objected to entry of

judgment against Don as “the right thing to do.” Opinion, ¶¶ 8, 21. It should be borne in

mind that all of these statements were made after these Defendants had prevailed on

summary judgment. Prior to this success, the same Defendants, as quoted above, were

seeking to shift their duty to disclose defects to Don, and were stipulating that Don was in



                                              26
default and that a trial should determine the damages for which he was liable. The thrust of

their in-court statements following the entry of summary judgment was not that Don should

be exonerated, but that the calculation of damages against him should be reasonable.

¶47    Nonetheless, the Court’s determination to set aside the default judgment shows the

elastic nature of the application of equity and of its interpretation of “any other reason

justifying relief” under Rule 60(b). Opinion, ¶ 24. This will provide a much expanded

avenue for arguments from litigants who seek to attack judgments on equitable grounds,

even years after the judgments were entered without response from the litigants.

¶48    Prejudice to represented parties. The Court cites Greenup v. Russell for the rule that

self-represented litigants “should be granted some degree of latitude,” Opinion, ¶ 23, but

does not mention that the “latitude cannot be so wide as to prejudice the other party.” 2000

MT 154, ¶ 15, 300 Mont. 136, 3 P.3d 124. Unfortunately, the Court does not address

whether setting aside the default judgment at this point will cause any prejudice to Gregory,

probably an oversight. Considering that the judgment was obtained years ago by Gregory’s

application to the court after Don had violated the court’s order to file an answer and after

Don had failed to respond to the application for the judgment, that Don failed to appeal the

entry of judgment and the denial of his motion to set aside the judgment, that a writ of

execution was issued and Gregory executed on Don’s property years ago, and that eight

years have passed since Gregory filed his complaint, it may be arguable that Gregory has

been prejudiced by the Court’s accommodations to Don. Regardless, this case will stand for

the proposition that, whatever level of prejudice is necessary to limit a Court’s




                                             27
accommodation of a self-represented party, the bar is relatively high, something that counsel

for former self-represented parties may want to note.

¶49    The final rule provided by the Court is simply a principle that advocates should

always bear in mind. No matter how many years have passed, and no matter how many rules

have been broken, if the Court’s sympathy for a party can be evoked, then the law will stand

as no obstacle to relief.

¶50    I dissent.



                                                  /S/ JIM RICE




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