Hall v. Hall

Hall v. Hall, 2015 MT 226 (Aug. 4, 2015) (McKinnon, J.; Rice. J., dissenting) (4-1, rev’d)

Issue: (1) Whether this Court will grant an out-of-time appeal; and (2) whether the district court erred in granting a default judgment against Don Hall.

Short Answer: (1) Yes, to avoid a gross miscarriage of justice, and (2) yes.

Reversed

Facts: Gregory Hall hired Don Hall (not related) to inspect a home Gregory purchased in 2006. This case arises from a dispute over that inspection.

Gregory filed suit against Don, the home seller John Heinlein, real estate broker Donna Hall (Don’s wife), and real estate broker Debra Cernick. Gregory alleges the defendants failed to disclose material effects in the property.

Gregory filed his complaint on March 5, 2007, and requested substitution of the judge. Judge C.B. McNeil assumed jurisdiction on March 20, 2007. A summons was issued to Don on March 5, 2007 and served on March 13, 2007. Under the 2007 rules, Don had until April 2, 2007 to appear or answer.

Don submitted a financial affidavit and request for waiver of fees signed March 28, 2007, and filed on April 4, 2007. The order waiving fees was signed by Judge McNeil April 3, and filed April 4, 2007. Don continued to receive service of all filings in the case, and on May 7, 2007, signed and returned a copy of the order calling in Judge McNeil.

Don wrote a letter to Judge Prezeau, who was named in the summons as the presiding judge, stating he could not afford an attorney, and thought the case should be dismissed. The letter was filed Sept. 20, 2007, copied to Judge McNeil, docketed as an answer and a motion to dismiss, and served on counsel for all parties.

A scheduling conference was set, and Gregory filed a motion to determine the sufficiency of a handwritten letter from Don to Gregory’s counsel. Judge McNeil signed an order holding the letter did not comply with Rule 8, and added a handwritten note to the order adding, “and the letter to Judge Prezeau filed Sept. 20, 2007.” The order, filed Nov. 28, 2007, directed Don to file an answer within 10 days. On Feb. 11, 208, Gregory moved for default judgment against Don, which was entered on Feb. 20, 2008.

Defendants Donna Hall, Heinlein and Cernick obtained summary judgment on the grounds that Gregory had received a disclosure statement and had imputed knowledge of the defects. The district court noted Donna Hall’s testimony that she informed Gregory of the furnace defect when he first toured the property. Gregory appealed, and that judgment was affirmed by this Court. 2010 MT 243N.

On Feb. 16, 2010, Gregory moved for judgment in the amount of $206,522.80 to be entered against Don, stating default on liability had been entered, and stating it was unknown whether Don would object because “[c]ontact with him is impractical and would serve no purpose under the circumstances of this case.” All of the remaining defendants filed responses or notice of position with respect to the default judgment, and stated in various ways that Don was entitled to a hearing, and not all of the damages sought were recoverable. Gregory moved to strike those responses, arguing the other defendants lacked standing.

The district court granted Gregory’s motion to strike and for default judgment against Don in the amount of $206,522.80. A writ of execution issued in October 2010, directing the sheriff to seize Don’s personal property to satisfy the judgment. Don filed a letter stating he moved to set aside the default judgment, and stated he learned he could not send letters directly to the judge. Gregory moved to strike, and the district court granted the motion. The district court concluded Don’s letter was an untimely motion to set aside the default, and ordered Don to pay Gregory’s reasonable costs and attorneys’ fees in responding. Don did not appeal the denial of his request to set aside the judgment.

Procedural Posture & Holding: In June 2013, Gregory requested a second writ of execution. By that time, the judgment totaled $270,809.48. A notice of seizure was filed June 13, 2013, with a list of items seized. Don, represented by counsel, more for a hearing to assert exemptions. The district court denied the motion, and Don appeals. Don was appointed pro bono appellate counsel, and later filed for Chapter 7 bankruptcy, for which discharge was granted Aug. 12, 2014.

Reasoning: The Court first determines that the case is not moot in spite of Don’s bankruptcy, because Don still has an interest in the personal property that was seized from his home. The Court grants Don’s request for an out-of-time appeal of the judgment, which it grants only in the “infrequent harsh case and under extraordinary circumstances amounting to gross miscarriage of justice.” M.R. App. P. 4(6). It finds such circumstances here, and reviews the default judgment under the 2007 Rules of Civil Procedure. The district court erred when applied the 60-day time limit as a strict bar to Don’s motion to set aside the default judgment. Don participated in the appeal of summary judgment for the other defendants, apparently not understanding his role had ended. He filed the motion to set aside the default one month after this Court issued its opinion in the appeal, which does not appear unreasonable.

The Court has many concerns about the enforcement of the default judgment. First, it as entered despite Don’s effort to answer the complaint. Second, the remaining defendants were relieved of liability and Gregory’s legal claims were found to be meritless. All three of defendants’ counsel objected to this action. Third, the default judgment was entered without a hearing to determine damages. The damages were unliquidated, and Don was entitled to appear at a hearing to determine the precise amount. Fourth, the record in this case does not accurately reflect Don’s attempts to defend. Pro se litigants should be granted some degree of latitude.

“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.” ¶ 24.

Justice Rice’s Dissent: Justice Rice reviews the chronology of the case, summarizes the Court’s holding, and dissents. He notes that the final rule to extract from this case is, “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.” ¶ 49.