The opinion
No. 87-024
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
ANTHONY E. BROWN,
Plaintiff and Appellant,
RICHARD JENSEN , VERLIN L. FOSSUM , STAN
REEP, WILLIAM SEAY, LARRIE SMITH, JAMES
HAUGHEN, WINFIELD OSTWALD, LOYE H. ASHTON,
CARL R. LARSON, GEORGE EVERSON, AND ELDIN
R. JOHNSON, jointly and severally,
Defendants and Respondents.
APPEAL FROM: District Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
The Honorable Arnold H. Olsen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Patrick F. Flaherty, Flaherty, Lord and Winner; Great
Falls, Montana
For Respondent:
Debra D. Parker, Murphy, Robinson, Heckathorn and
Phillips, P.C.; Kalispell, Montana
Fred Rathert, Bjella, Neff, Rathert, Wahl and Eiken, P.C.,
Williston, North Dakota
Submitted on Briefs: February 25, 1988
Decided: April 11, 1988
Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.
Anthony E. Brown (Brown) appeals from the order of the
Lincoln County District Court granting summary judgment to
defendants Jensen et al. (Williston Group) and assessing Rule
11, M.R.Civ.P., sanctions against Brown and his attorney,
Patrick F. Flaherty (Flaherty). We affirm.
Brown brought this action in February of 1986 to have a
partition order in Lincoln County District Court Cause No.
DV-82-94 set aside or declared void. The alleged fraudulent
actions of defendants Jensen et al. in obtaining the order of
partition in Cause No. DV-82-94 was the basis for the relief
sought in Brown's complaint. Jensen et al. reside in
Williston, North Dakota, and are referred to as the
"Williston Group."
Lincoln County District Court Cause No. DV-82-94
involved a partition action brought by the Williston Group
against Brown with regard to approximately eighty-three acres
of land located in Lincoln County and known as "Throops
Lake." Brown had acquired an option to purchase the Throops
Lake property for $15,000, but did not have the money to
purchase the property by the option deadline. On January 31,
1982, Brown conveyed his option on the Throops Lake property
to the Throops Lake Lumber Company of Williston, North
Dakota. Throops Lake Lumber Company's shareholders were the
Williston Group and Brown. The Williston Group then
contributed more than $250,000 toward the purchase of the
Throops Lake property. Shortly after Brown and the Williston
Group acquired Throops Lake, a disagreement between the
parties prompted Brown to deny the Williston Group access to
the property.
On May 27, 1982, the Williston Group instituted the
partition action in Lincoln County District Court. On June
1, 1982, Brown filed a Chapter 11 bankruptcy petition in the
Montana District of the United States Bankruptcy Court. The
bankruptcy court issued a stay of the Montana District Court
proceedings that was later lifted by stipulation of counsel.
Brown originally appeared with the assistance of an
attorney in the partition action and later appeared pro se.
The District Court conducted a hearing, found the parties to
be tenants in common, and on April 5, 1983, ordered that the
"Throops Lake" property be partitioned by sale. Brown did
not file an answer to the Williston Group's complaint until
after the District Court's order of partition. A court
appointed referee sold the "Throops Lake" property on May 17,
1983, at public auction to the Williston Group, they being
the only qualified bidders present at the auction. Brown was
present at the auction and received $15,000 as his share of
the partition sale proceeds. Brown also executed a quit
claim deed in favor of the Williston Group on the day of the
partition sale.
On February 6, 1986, nearly three years after the
District Court's order of partition in Cause No. DV-82-94,
Brown requested that the case be reopened. The District
Court noted that Brown had made no showing of excusable
neglect and refused to reopen the action.
On February 8, 1986, Brown filed this independent
action in Lincoln County District Court to have the judgment
in the partition action vacated on the basis of the Williston
Group's alleged fraud in obtaining the judgment. The
Williston Group moved for summary judgment and requested that
they be awarded attorneys' fees and costs pursuant to Rule
11, M.R.Civ.P. Both parties submitted affidavits and the
District Court conducted a summary judgment hearing on
October 6, 1986. In its order of December 8, 1986, the
District Court found the following to be undisputed facts:
[Brown] stipulated, while Lincoln County
Cause No. DV-82-94 was still pending,
that the automatic stay in bankruptcy be
lifted and the bankruptcy judge so
ordered. After the automatic stay was
lifted the Honorable Robert Holter,
Judge of the District Court, Lincoln
County, Montana, ordered Throops Lake
partitioned and sold. Following the
Court ordered sale of Throops Lake,
[Brown] accepted his share of the sale
proceeds, released the referee
conducting the sale from all liability,
and executed a quit claim deed in favor
of the defendants. [Brown] did not, at
any time, appeal the judgment ordered by
Judge Holter, but rather commenced the
instant action, seeking relief from the
judgment, after more than two years had
elapsed from the date Throops Lake was
sold.
From these undisputed facts, the District Court made the
following conclusions:
Viewing all of the files and affidavits
presented herein in the light most
favorable to [Brown], reasonable minds
could only conclude that no extrinsic
fraud was perpetrated upon the Court so
as to justify relieving the plaintiff
from the judgment rendered in Lincoln
County Cause No. DV-82-94. The Court
accordingly finds that there is no
genuine issue of material fact, and that
[the Williston Group] is entitled to
judgment as a matter of law.
The Court further finds that plaintiff,
Anthony E. Brown, and his attorney,
Patrick Flaherty, knew, or would have
known after reasonable inquiry, that the
complaint in this action was not well
grounded in fact or in law. The Court
has taken judicial notice of other
actions filed by [Brown] against these
same defendants, namely Lincoln County
Cause No. DV-85-23, and United States
District Court Cause No. CV-85-037-MI as
well as [Brown's] attempt to reinstate
Lincoln County Cause No. DV-82-94, which
was denied in February of 1986. The
Court has taken further judicial notice
of Lincoln County Cause No. DV-85-188,
in which Attorney Flaherty is
representing plaintiffs Marc Flora and
Steve Neustrom in an action against most
of the defendants named in this action.
In view of the multiple lawsuits
previously filed against the defendants,
the proceedings held in Lincoln County
Cause No. DV-82-94, wherein [Brown] had
his day in court, reasonable minds could
only conclude that the instant action
was interposed by [Brown] and his
attorney in order to harass the
defendants or to cause unnecessary delay
or needless increase in the cost of
litigation.
The District Court entered summary judgment in favor of the
Williston Group with costs to be taxed against Brown. The
District Court also awarded reasonable expenses of
litigation, including attorneys' fees, as Rule 11,
M.R.Civ.P., sanctions against Brown and Flaherty, jointly and
severally. The Williston Group's total award is $13,746.16.
Brown and Flaherty appeal from the District Court's judgment
and raise the following three issues for our review:
1. Did the District Court err in granting the
Williston Group's motion for summary judgment and
specifically in concluding that no genuine issue of material
fact exists?
2. Did the District Court err in imposing Rule 11,
M.R.Civ.P., sanctions against Brown and his attorney, Patrick
Flaherty?
3. Is the Rule 11, M.R.Civ.P., award of attorneys'
fees and expenses of litigation unreasonable and excessive?
Brown relies on two statutes as authority for setting
aside the judgment in the partition action. The first
statute, 5 26-3-105, MCA, provides as follows:
Any judicial record may be impeached by
evidence of a want of jurisdiction in
the court or judicial officer, of
collusion between the parties, or of
fraud in the party offering the record
in respect to the proceedings.
The Williston Group claims that this statute is a rule of
evidence and merely sets forth the circumstances under which
a judicial record may be impeached. We agree. Section
26-3-105, MCA, does not provide for the remedy Brown seeks
and the statute does not apply to the circumstances of this
case.
Brown also relies on Rule 60(b), M.R.civ.P., as
authority for setting aside the order of partition in the
earlier action. Rule 60(b), in pertinent part, provides the
following:
On motion and upon such terms as are
just, the court may relieve a party or
his legal representative from a final
judgment, order, or proceeding for the
following reasons:
This rule does not limit the power of
the court to entertain an independent
action to relieve a party from 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.
The last sentence of the above statute preserves a district
court's power to entertain a separate equity suit to set
aside a judgment. Selway v. Burns (1967), 150 Mont. 1, 8,
429 P . 2 d 640, 644. This power to grant relief from a
judgment in equity is inherent in the district court and does
not depend upon statute. Bullard v. Zimrnerman (1930), 88
Mont. 271, 277, 292 P. 730, 732. It is this equity power
that Brown seeks to invoke in this action.
The fraud for which relief may be granted in equity
actions such as this is extrinsic, or collateral, fraud
rather than intrinsic fraud. In Re Marriage of Witbart
(Mont. 1985), 701 P.2d 339, 342, 42 St.Rep. 725, 728. It
makes no difference whether such extrinsic fraud is actual or
constructive. Cure v. Southwick (1960), 137 Mont. 1, 8-9,
349 P.2d 575, 579. We have defined extrinsic fraud as that
fraud which effectively prevented the unsuccessful party from
presenting his or her case fully. Pilati v. Pilati (1979),
181 Mont. 182, 189, 592 P.2d 1374, 1378; Minter v. Minter
(1936), 103 Mont. 219, 230, 62 P.2d 233, 236. In Minter,
this Court noted the following with respect to the
distinctions between extrinsic and intrinsic fraud:
The acts for which a judgment or decree
may be set aside or annulled have
reference only to fraud which is
extrinsic or collateral to the matter
tried by the court, and not to fraud in
the matter on which judgment was
rendered.
" [Tlhe acts for which a court of equity
will on account of fraud set aside or
annul a judgment or decree, between the
same parties, rendered by a court of
competent jurisdiction, have relations
to frauds, extrinsic or collateral, to
the matter tried by the first court, and
not to fraud in the matter on which the
decree is rendered. " [Citations
omitted. 1
"Public policy demands that there should
be an end to litigation, and therefore
the courts look with a jealous eye upon
suits which have for their object
setting aside a judgment at law ...
Neither perjured testimony nor false or
fraudulent allegations used in obtaining
a judgment is a ground for equitable
intervention in a suit to attack the
judgment, unless the perjury or fraud
was collateral to the questions examined
and determined in the former
proceeding."
Minter, 62 P.2d at 236.
Brown contends that the distinction between intrinsic
and extrinsic fraud is difficult to ascertain and for that.
reason this Court should reverse the District Court and allow
trial on the merits. While we recognize that allegations of
fraud must be carefully scrutinized on a case-by-case basis,
we do not believe that the distinctions between extrinsic and
intrinsic fraud are so elusive as to warrant trial in every
case.
In his complaint, Brown alleges that the Williston
Group's fraudulent acts and statements "are too voluminous to
set forth in their entirety." Brown then proceeds to list
seven particular allegations which he now contends constitute
extrinsic fraud. Summarized, these allegations are as
follows:
1. The Williston Group represented that
they were tenants in common with Brown
in the partition action when in fact
they were partners and joint venturers.
2. Certain members of the Williston
Group testified in the partition action
that they were only interested in the
Throops Lake property for their personal
recreational purposes and that no other
obligations, rights, contracts,
relationships, or liabilities existed
between the Williston Group and Brown.
3. The above testimony deceived the
judge in the partition action into
entering an order of partition in favor
of the Williston Group.
4. The Williston Group concealed a
contract agreement and withheld
essential information from the judge in
the partition action.
5. The Williston Group's attorney in
the partition action had a conflict of
interest in that his former partner had
once represented Brown. The attorney,
in his capacity as Lincoln County
Attorney, also authorized the Lincoln
County Sheriff's office to transport
members of the Williston Group to the
airport.
6. The Williston Group never had any
intention of performing the contract
with Brown to develop the Throops Lake
property into a resort and in fact
concealed their true motives and
intentions which were to obtain the
property for their personal recreational
use.
7. The Williston Group's attorney
represented to the Williston Group that
he could exert influence on the
bankruptcy judge and trustee, and the
district court judge in the partition
action to obtain "special favors."
We have reviewed the record in this matter with reference to
the above allegations to determine whether there exists a
genuine issue of material fact regarding the existence of
extrinsic fraud as previously defined. As we have stated on
numerous occasions, summary judgment should be granted where
there is no genuine issue of material fact. Rule 56(c),
M.R.Civ.P. Brown must come forward with evidence of a
genuine issue of material fact after the Williston Group met
its initial burden of establishing the lack of same. Pretty
on Top v. Hardin (1979), 182 Mont. 311, 315, 597 P.2d 58, 60.
Brown's first allegation regarding the nature of the
parties' relationship in the property involves a defense that
he should have raised in the partition action. This
allegation would only entitle Brown to relief in this action
if it were shown that he, through no negligence or fault of
his own, was prevented from offering the defense by the
extrinsic fraud of the Williston Group. 49 C.J.S. Judgments
§ 372 at 741-742. Brown has failed to show a genuine issue
of material fact with regard to this allegation. In
addition, our review of the record in this action and the
record of Cause No. DV-82-94 leads us to believe that such a
defense is not meritorious. Brown directs our attention to a
memorandum filed by the Williston Group in the partition
action which he alleges precluded him from presenting his
defenses in that action. We have reviewed the memorandum and
note that nothing contained therein precluded Brown from
advancing available defenses had he chosen to do so.
The remainder of Brown's allegations, if true, are not
properly classified as extrinsic fraud for which relief might
be granted. These allegations of fraud pertain to the very
matters the District Court considered in ordering a partition
of the Throops Lake property. Brown's second, third and
fourth allegations intimate that members of the Williston
Group perjured themselves, falsified pleadings, and generally
withheld the truth from the District Court. The record does
not support these allegations of perjury and concealment nor
do such allegations, if supported by the record, constitute
extrinsic fraud in this case. Moser v. Fuller (1938), 107
Mont. 424, 430, 86 P.2d 1, 3 (citing U.S. v. Throckmorton
(1878), 98 U.S. 61, 25 L.Ed.2d 93) ; Minter, at 236.
Brown contends in his sixth allegation that the
Williston Group concealed their true intentions and that they
never intended to work with Brown on his dream of building a
resort area. However, it is evident from the record in Cause
No. DV-82-94 that the Williston Group made no effort to
conceal their intentions to use the Throops Lake property for
personal recreational purposes and in fact, as early as
February 1, 1982, informed Brown that they would like to buy
his interest in the property for that purpose. The
correspondence upon which Brown relies to substantiate his
seventh allegation does not present any evidence of
wrongdoing on the part of the trustees, judges, or the
Williston Group's attorney in the partition action. Even if
substantiated, the fifth and seventh allegations are not
material to this litigation and do not present any genuine
issue of material fact.
It is evident that Brown fully participated in Cause
No. DV-82-94 and was not prevented from presenting his case
fully by the Williston Group or its attorney. Accordingly,
we hold that the District Court correctly granted the
Williston Group's motion for summary judgment.
We note that the Williston Group plead the defense of
laches in its answer to Brown's complaint and presented this
defense as an independent grounds for a grant of summary
judgment in its favor. The District Court chose not to
address the laches issue and chose instead to address the
factual and legal insufficiencies of Brown's case. On
appeal, the Williston Group reasserts the laches defense and
contends that Brown's allegations are barred by the doctrine
of laches.
An independent action in equity to set aside a judgment
allegedly obtained by fraud is subject to the defense of
laches. Pilati, 592 P.2d at 1376. Brown waited nearly three
years before filing this suit to set aside the order
partitioning the Throops Lake property. While we are
inclined to agree with the Williston Group that Brown's
action is barred by laches, we need not address this issue in
light of our determination that the District Court was
correct in concluding that there exists no genuine issue of
material fact. The Williston Group also asserts two other
grounds (statute of limitations and failure to establish a
meritorious defense to the partition action) for affirming
the District Court which need not be addressed by this Court
for the above-stated reason.
Brown's second issue questions the District Court's
application of Rule 11, M.R.Civ.P., sanctions to the
circumstances of this case. Rule 11, in pertinent part,
provides the following:
Every pleading, motion, or other paper of
a party represented by an attorney shall
be signed by at least one attorney of
record in his individual name, whose
address shall be stated.
The signature of an attorney or party
constitutes a certificate by him that he
has read the pleading, motion, or other
paper; that to the best of his knowledge,
information, and belief formed after
reasonable inquiry it is well grounded in
fact and warranted by existing law or a
good faith argument for the extension,
modification, or reversal of existing
law, and that it is not interposed for
any improper purpose, such as to harass
or to cause unnecessary delay or needless
increase in the cost of litigation.
If a pleading, motion, or other paper is
signed in violation of this rule, the
court, upon motion or upon its own
initiative, shall impose upon the person
who signed it, a represented party, or
both, an appropriate sanction, which may
include an order to pay to the other
party or parties the amount of reasonable
expenses incurred because of the filing
of the pleading, motion, or other paper,
including a reasonable attorney's fee.
Brown contends that the District Court abused its discretion
in awarding Rule 11 sanctions to the Williston Group.
Brown's primary basis for this contention is that the
underlying action was well grounded in fact and law. Our
holding with respect to Brown's first issue in this appeal
suggests otherwise.
We recently set forth the standard of review with
regard to Rule 11 sanctions in the case of Searight v. Cimino
(Mont. 1988), 748 P.2d 948, 45 St.Rep. 46:
The current Rule 11, M.R.Civ.P. is
virtually identical to the federal rule.
Sanctions under this rule have rarely
been imposed in Montana resulting in
little case law. Federal authority
indicates that the duty of the lawyer is
to investigate both as to law and fact
before filing a motion. The standard is
that of reasonableness under the
circumstances. [Citation omitted. I
Because the rule mandates sanctions if
violated, the duty of the appellate court
is to review de novo the legal question
of whether the specific conduct in
question violated the rule. [Citations
omitted. 1
Searight, 748 P.2d at 951-952. We will not reverse an award
of Rule 11 sanctions if such an award is justified under that
rule or under the district court's inherent equity powers.
State ex rel. Sorenson v. Roske (Mont. 1987), 745 P.2d 365,
368, 44 St.Rep. 1854, 1857.
We hold that the award of Rule 11 sanctions was proper
in this case. As the District Court noted, Brown and his
attorney have instituted a plethora of lawsuits aimed
directly or indirectly at the Williston Group with regard to
the Throops Lake property. In one such lawsuit instituted by
Brown in Federal District Court, the Honorable Judge Russell
E. Smith noted the following with regard to the amended
complaint drafted by Flaherty on Brown's behalf:
The amended complaint is the most
irresponsible pleading that I have seen
in my twenty years as a trial judge.
[The amended complaint] names
thirty-three defendants, some of them in
dual capacities. After 24 pages of
allegations, the first amended complaint
contains twenty separate claims for
relief. [Additions ours.]
After dismissing the majority of the claims, Judge Smith
granted Brown leave to file an amended complaint on two
claims and went on to state:
I have heretofore indicated that, in my
opinion, [Brown's] complaint was
recklessly drawn. I have not imposed
[Rule 111 sanctions. I will have them in
mind as I examine any amended pleadings
which are filed and if it would appear
that antitrust claims are made against
any defendant without reasonable cause, I
will not hesitate to impose sanctions.
Plaintiff's lawyers should consult Rule
11 of the Federal Rules of Civil
Procedure. [Additions ours.]
In this case, Brown's complaint is replete with
allegations of fraud, misrepresentation, deceit, bad faith,
malice, concealment, perjury, conspiracy, and collusion.
None of the allegations are grounded in fact nor do the
allegations forward any legal theory upon which relief could
be granted. Brown again argues that the distinctions between
intrinsic and extrinsic fraud are so difficult to ascertain
that he was reasonable and justified in bringing this action.
Again, we disagree. Reasonable inquiry on the part of Brown
and his attorney would have revealed the factual and legal
insufficiencies of this action.
The trustee in Brown's bankruptcy action found Brown's
claims against the Williston Group to be so "burdensome and
of no value to the [bankruptcy] estate" that he abandoned the
claims to Brown. We agree with the District Court that
"reasonable minds could only conclude that the instant action
was interposed by plaintiff and his attorney in order to
harass the [Williston Group] or to cause unnecessary delay or
needless increase in the cost of litigation." Accordingly,
we hold that Rule 11, M.R.Civ.P. sanctions in the form of
reasonable attorneys' fees and costs of litigation were
properly awarded to the Williston Group in this case.
In his final issue, Brown contends that the amount of
attorneys' fees and costs awarded to the Williston Group as
Rule 11 sanctions is unreasonable and excessive. The
District Court conducted a hearing to determine the amount of
the award on August 5, 1987. At that hearing, Robert M.
Carlson, a Montana attorney, testified as to the
reasonableness of the Williston Group's attorneys' fees and
costs. Brown presented no evidence of unreasonableness other
than his attorney's statements that the fees and costs were
excessive. In making the award, the District Court
considered the complexity of the case and the nature and
amount of services rendered. The District Court also noted
that the eleven defendants had "elected to join forces and
retain only two attorneys, rather than each retaining
separate counsel." The amount of the award in this case was
discretionary with the District Court. Shors v. Branch
(Mont. 1986), 720 P.2d 239, 246, 43 St.Rep. 919, 927. We
will not disturb the amount fixed absent a showing that the
District Court "acted arbitrarily or has committed a clear
abuse of discretion." In Re the Marriage of Hall (Mont.
1987), 740 P.2d 684, 686, 44 St.Rep. 1321, 1323. Brown and
Flaherty have failed to carry their burden of showing that
the District Court acted arbitrarily or abused its
discretion. Accordingly, as to all matters presented by this
appeal, the District Court's judgment is affirmed.
Affirmed.
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