Lead Opinion
delivered the Opinion of the Court.
¶1 Thе Plaintiffs, Plentywood Electric and Robert and Judy Nikolaisen (collectively “Plentywood”), seek damages from Advance Transformer Co. (“Advance”) incurred when a fire destroyed Plentywood Electric. The fire was allegedly caused by a defective light ballast manufactured by Advance. The District Court of the Fifteenth Judicial District entered a default judgment in favor of Plentywood. Advanced moved for relief from the judgment. The motion was deemed denied as the District Court did not rule on it within the time provided. Advance now appeals from the denial of its motion to set aside the default judgment.
ISSUES
¶2 Advance raises four issues on appeal. However, we determine that the District Court erred in not granting Advance’s motion to set aside the default judgment pursuant to M. R. Civ. P. 60(b)(4), based on improper service of process. Therefore, we do not fully discuss the other issues Advance raises.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 On November 19, 2002, a fire destroyed Plentywood Electric, owned by the Nikolaisens. The State Fire Marshall investigated the fire the following day and, according to Plentywood, concluded that a ballast manufactured by Advance had caused the fire. Within days, Plentywood notified Advance of the fire.
¶4 Upon notification of the potential claim against it, Advance and its insurer, Travelers Insurance Co. (“Travelers”), retained an investigator to visit the fire scene and inspect the ballast. Plentywood’s insurer, Austin Mutual, also sent an investigator to inspect the scene and the ballast. The two investigators examined the ballast in January 2003 and again in August 2003. Robert Erhardt, the Director of Technical Relations for Advance, attended the August 2003 inspection. In Erhardt’s opinion, Advance had several defenses to liability.
¶5 On November 18, 2004, Austin Mutual, asserting a subrogation claim for payments it had made to Plentywood, filed suit against Advance, but did not serve its complaint. On November 19, 2004, Plentywood filed a complаint against Advance, seeking recovery of the uninsured portion of its alleged loss. Likewise, Plentywood made no attempt at that time to serve its summons and complaint.
¶6 On February 10, 2005, Plentywood’s counsel sent Advance a demand letter for approximately $760,578.00, representing its claimed uninsured loss. The letter was addressed to Advance’s office in Rosemont, Illinois, but was not directed to a particular individual. The letter stated that Plentywood would file a complaint if it did not receive Advance’s reply by March 1,2005.
¶7 On March 4, 2005, Plentywood’s counsel provided the documentation that Travelers had requested. Counsel again indicated his intent to file a complaint against Advance if he did not hear from Travelers or Advance by March 20. On March 25, 2005, Costello contacted Plentywood’s attorney and informed him that, based on Advance’s conclusion that valid defenses to the claim existed, an offer would not be forthcoming. Again, Plentywood’s counsel did not mention that he had already filed a complaint.
¶8 On April 5, 2005, Plentywood’s counsel filed an amended complaint against Advance. Despite knowing Advance’s address, and having had prior contact with both Advance and its insurer Travelers, counsel did not аdvise either that he had filed the amended complaint. Nor did counsel make any attempt to serve Advance directly. Rather, on April 19, counsel for Plentywood filed an affidavit with the District Court for the purpose of having the Montana Secretary of State appointed as Advance’s agent for service of process pursuant to M. R. Civ. P. 4D(2)(f). The Clerk of the District Court appointed the Montana Secretary of State as Advance’s agent for service and on April 20, the Secretary of State was served with the original and the proper number of copies of the summons and the amended complaint, as well as a copy of Plentywood’s counsel’s affidavit. On April 25,2005, the Secretary of State mailed the documents, return receipt requested, to Advance Transformer Co., at its address in Illinois provided by Plentywood’s counsel.
¶9 On May 9, 2005, a courier employed by Advance signed for and accepted the documents. On May 11, 2005, the Secretary of State received the return receipt.
¶10 On June 8, 2005, after receiving no answer to the amended complaint, Plentywood’s counsel requested entry of default against Advance, and the Clerk of District Court entered the default. On July 12, 2005, Plentywood’s counsel movеd for entry of a default judgment in the amount of $1,301,487.19, representing Plentywood’s claimed uninsured loss, Austin Mutual’s loss payments under its policy with Plentywood, and $165.00 in costs. On July 18,2005, the District Court held a hearing on the matter. The record does not indicate that Plentywood’s counsel informed the presiding judge that he had previously been in contact with Advance, that Advance was insured by Travelers, that he had been communicating with Travelers, or that Plentywood’s claim had been denied. The District Court entered default judgment in favor of Plentywood in the amount of $1,301,487.19 together with interest at a rate of 10% until paid in full, pursuant to § 25-9-205(1), MCA.
¶11 On September 19, 2005, just after the 60 day window when Advance could obtain relief from the default judgment under M. R. Civ. P. 60(b)(1), Plentywood’s counsel obtained an authenticated copy of the default judgment. Advance maintains that on September 30, 2005, it first discovered that Plentywood had filed a complaint against it and that a default judgment had been entered in the District Court. Both Costello and Erhardt state that they had no contact with Plentywood or Austin Mutual between March 25 and September 30, 2005.
¶12 Once Advance discovered the default judgment, it immediately retained counsel. On October 11,2005, Advance moved to set aside the default judgment and filed an answer to Plentywood’s amended complaint. Advance argued in its motion that no one “in authority at Advance” ever received the summons and amended complaint; therefore, service was inadequate, the default judgment should be set aside, and it should have the opportunity to defend.
¶13 Plentywood objected to the motion and moved to strike Advance’s answer. The
STANDARDS OF REVIEW
¶14 In reviewing a default judgment, we are guided by the principle that a case should be decided on its merits; judgments by default are not favored. Matthews v. Don K Chevrolet,
DISCUSSION
¶15 Advance argues the District Court abused its discretion when it denied the motion to set aside thе default judgment because Plentywood did not correctly serve Advance as required by M. R. Civ. P. 4D(2), (3).
¶16 A default judgment may be set aside if the judgment is void. M. R. Civ. P. 60(b)(4). If the plaintiff does not properly serve the defendant pursuant to M. R. Civ. P. 4D, the judgment is void because without proper service the district court does not obtain personal jurisdiction over a party. See Ihnot v. Ihnot,
¶17 M. R. Civ. P. 4D outlines the procedure for service of summons upon an out-of-state corporation, such as Advance. Reference to several parts of the Rule is necessary. ¶ 18 Rule 4D(2)(e) provides that service may be had upon a corporation doing business in Montana by delivering a copy of the summons and complaint to an officer, director, manager, or associate for such corporation; or by leaving such copies at the office or place of business of the corporation, with the person in charge of such office. Rule 4D(3) provides that “[w]here service upon any person cannot, with due diligence, be made personally within this state, service of summоns and complaint may be made outside this state in the manner provided for service within this state, with the same force and effect as though service had been made within this state.” Thus, Advance, an out-of-state corporation, is to be served in the same manner as a corporation that is found in Montana.
¶19 Rather than attempt to serve Advance as provided in Rules 4D(2)(e) and 4D(3), Plentywood went straight to the provisions of Rule 4D(2)(f), which is designed to accomplish service on an out-of-state corporation when personal service cannot be accomplished with reasonable diligence. In pertinent part, Rule 4D(2)(f), states:
[If] none of the persons designated in D(2)(e) immediately above [i.e., officer, director, manager ... superintendent or managing or general agent, or partner, or associate for such corporation] can with the exercise of reasonable diligence be found within Montana, the party causing summons to be issued shall exercise reasonable diligence to ascertain the last known address of any such person. If, after exercising reasonable diligence, the party causing summons to be issued is unsuccessful in serving said parties, an affidavit must be filed with the clerk of court in which the claim for relief is pendingreciting that none of the persons designated in D(2)(e) can after due diligence be found within Montana upon whom service of process can be made, and reciting the last known address of any such person ....
M. R. Civ. P. 4D(2)(f) (bracketed material and emphasis added).
¶20 In order to utilize the provisions of Rule 4D(2)(f) and complete service of process by service on the Montana Secretary of State, Plentywood was first required to exercise reasonable diligence to find an officer or other representative of Advance to serve in Mоntana. Since there was no agent for Advance in Montana, Plentywood’s counsel was next required to use reasonable diligence to ascertain Advance’s address. As counsel well knew Advance’s address, the Rule required that Plentywood attempt service at that address. Only when, after the exercise of reasonable diligence, “the party causing the summons to be issued is unsuccessful in serving” the summons and complaint may that party effectively substitute service on Secretary of State. M. R. Civ. P. 4D(2)(f).
¶21 The obvious reason for the procedure allowing service through the Secretary of State is to allow for personal service when a company cannot be otherwise served in the manner provided for in Rule 4D(2)(e) and Rule 4D(3). There is no reason to include in Rule 4D(2)(f) the statement that the party seeking service upon a company which cannot be found in Montana must be “unsuccessful in serving said parties” before filing the affidavit for service on the Secretary of State, if it is not necessary to have first unsuccessfully attempted such service. This interpretation of Rule 4D(2)(f) is also required by its provision concerning service on a corporation by service on the Secretary of State, as follows: “[i]n any action where due diligence has been exercised to locate and serve any of the persons designated in D(2)(e) above, service shall be deemed complete upon said corporation.” M. R. Civ. P. 4D(2)(f) (emphasis added). Again, only after a party has exercised reasonable diligence to personally serve the out-of-state corporation can the Secretary of State be appointed the agent of such corporation for service of process.
¶22 The dissent fails to recognize that the rules for service of process must be strictly followed bеcause notice and opportunity to be heard are of the utmost importance. Thus, strict and literal compliance with the rules is necessary. E.g. Shields,
¶23 As noted by the dissent, Plentywood’s counsel, knowing full well where to send the summons and complaint, did have the option of service by mail. Howevеr, service by mail is not accomplished by simply mailing the summons and complaint, return receipt requested. Service by mail under Rule 4D(l)(b) is completed only when the serving party receives and files a notice and acknowledgement conforming substantially to Form 18-A. This acknowledgment must state that an authorized representative of Advance declared before a notary, under penalty of perjury, that he or she received a copy of the summons and complaint, along with stating the person’s relationship to Advance, as well as his or her authority to receive service of procеss. M. R. Civ. P. 4D(l)(b), Form 18-A. This is in sharp contrast to the return receipt sent to the Secretary of State saying only that a courier had picked up the mail. Clearly, Plentywood did not comply with the applicable Rule for service by mail. The facts illustrate that this is not a case of “no harm no foul,” as the dissent implies.
¶24 Because Plentywood’s counsel did not attempt to directly serve Advance before affecting service through the Secretary of State, service was improper and did not comply with Rule 4D(2), (3). Failure to affect proper service of process deprived the District Court of personаl jurisdiction over Advance, rendering the default judgment void as a matter of law. Ihnot, ¶ 8. The District Court, therefore, erred when it did not set aside the default judgment.
¶25 Reversed and remanded for further proceedings consistent with this Opinion.
Concurrence Opinion
specially concurs.
¶26 In my view, another facet of this case must be mentioned. While there is no record concerning Advance’s motion to set aside the default judgment, we know that Plentywood’s counsel had been in communication with Advance and its insurer Travelers prior to and after filing the first complaint and that he knew Advance intended to defend the claim. Also, Plentywood’s counsel knew Advance’s аddress, yet made no attempt to serve it directly or to inform either Advance or Travelers that Plentywood had filed suit.
¶27 Under similar facts, we have strongly disapproved of the entry of a default judgment. Maulding v. Hardman,
Notes
The term “sandbagged,” in the present context derives from the tactic of a poker player to trap another player by checking a strong hand to induce a bet, and then raising once that bet is made. Webster’s Third New International Dictionary, Unabridged 2009 (Philip Babcock Gove, ed., Merriam-Webster, Inc. 2002). In law it has come to mean, inter alia, the practice of unfairly remaining silent concerning an important point in order to lull another party to inaction. See U.S. v. Pielago,
Dissenting Opinion
dissents.
¶28 I dissent. Because service was properly and actually еffected, I would affirm the judgment of the District Court.
¶29 The Court faults Plentywood for failing to strictly follow the requirements of M. R. Civ. P. 4(D). The Court concludes that Plentywood should not have served Advance through the Secretary of State under Rule 4D(2)(f), but rather should have effected service under M. R. Civ. P. 4(D)(3), the “personal service outside the state” Rule. I disagree with the Court’s analysis.
¶30 The Court relies upon Joseph Russell Rlty. Co. v. Kenneally,
¶31 Plentywood served Advance via the Secretary of State under Rule 4D(2)(f). The relevant portions of 4D(2)(f) provide:
(2) Personal service within the state. The summons and complaint shall be served together. The plaintiff shall furnish the person making service with such copies as are necessary. Service shall be made as follows:
(f) When a claim for relief is pending in any cоurt of this state against a corporation ... organized under the laws of any other state ... which is subject to the jurisdiction of the courts of this state under the provisions of Rule 4B above, ... and none of the persons designated in D(2)(e) immediately above [i.e., officer, director, manager, ... superintendent or managing or general agent, or partner, or associate for such corporation] can with the exercise of reasonable diligence be found within Montana, the party causing summons to be issued shall exercise reasonable diligence to ascertain the last known address of any such person. If, after exercising reasonable diligence, the party causing summons to be issued is unsuccessful in serving said parties, an affidavit must be filed with the clerk of court in which the claim for relief is pending reciting that none of the persons designated in D(2)(e) can after due diligence be found within Montana upon whom service of process can be made, and reciting the last known address of any such person, or reciting that after the exercise of reasonable diligence no such address for any such person could be found.... The clerk of court shall issue an order directing process to bе served upon the secretary of state of the state of Montana.... Such affidavit shall be sufficient evidence of the diligence of inquiry made by affiant, if the affidavit recites that diligent inquiry was made, and the affidavit need not detail the facts constituting such inquiry.... The said clerk of court shall then mail to the secretary of state the original summons, one copy of the summons and one copy of the affidavit for the files of the secretary of state, one copy of the summons attached to a copy of the complaint for each of the defendants to be served by service upon the sеcretary of state, and the fee for service, to the office of the secretary of state. The secretary of state shall mail copy of the summons and complaint by certified or registered mail with a return receipt requested to the last known address of any of the persons designated in D(2)(e) above, if known, or, if none such is known and it is a corporation not organized in Montana, to the secretary of state of the state in which such corporation or limited liability company was originally incorporated, if known; and the secretary of state shall make a return as hereinаfter provided under Rule 4D(6). When service is so made, it shall be deemed personal service on such corporation ... and the said secretary of state ... is hereby appointed agent of such corporation .... In any action where due diligence has been exercised to locate and serve any of the persons designated in D(2)(e) above, service shall be deemed complete upon said corporation ... regardless of the receipt of any return receipt or advice of refusal of the addressee to receive the process mailed, as is hereinafter required by 4D(6); provided, however, that except in those actions where any of the persons designated in D(2)(e) above have been located and served personally as hereinabove provided, then service by publication shall also be made as provided hereafter in 4D(5)(d) and 4D(5)(h)
¶32 Rule 4D(3), upon which the Court relies, provides:
Personal service outside the state. Where service upon any person cannot, with due diligence, be made personally within this state, service of summons and complaint may be made by service outside this state in the manner provided for service within this state, with the same force and effеct as though service had been made within this state....
¶33 Rule 4D(3) speaks in terms of “service upon any person” outside the state.
¶34 The record further establishes and it is undisputed that Advance’s Director of Technical Relations Robert Erhardt, who had investigated the fire on behalf of Advance, had received the previous correspondence from Plentywood, and that he had in turn arranged a prompt response to Plentywood’s letters by one Tim Costello, a representative of its insurer, Traveler’s Insurance Company. The record contains no letters, however, from Erhardt to Plentywood or Plentywood’s insurer, Austin Mutual, nor does the record contain any reference to telephone communications between Erhardt and Plentywood’s representatives. In fact, from the District Court record, the only known contacts Plentywood had with Advance were with its hired investigator and Tim Costello with Travelers, neither of whom was an officer or director of the company and neither of whom could have accepted service of a complaint on behalf of Advance. Therefore, despite “several letters to Advance’s Illinois address,” Plentywood had no personal contact person within Advance. As a result, had Plentywood attempted to effect service under Rule 4D(3), it would have been obliged to pursue the same course-i.e., it would have simply mailed the Summons and Complaint to Advance’s Illinois address, expecting that it would be received as had the previous communications.
¶35 This is exactly the course pursued by the Montana Seсretary of State’s office. While under Rule 4D(2)(f), the Secretary of State could have mailed the Summons and Complaint to the Secretary of State of the state in which Advance was originally incorporated, it sent the documentation directly to Advance’s Illinois office-the same Illinois address where Plentywood had previously and successfully sent its letters-and where it was accepted and signed for by a courier hired by Advance.
¶36 Returning again to Russell Realty, we held that Kenneally’s attempt at service of process upon Russell Realty was inadequate to confer jurisdiction over Russell Realty, explaining that Kenneally had not conducted a diligent search within the State prior to initiating service through the Secretary of State. The Court noted that both Kenneally and his attorney Geagan had previously had direct dealings with Russell Realty representatives in Butte, and that the Secretary of State had the name and address of the company’s agent, who was the same agent Kenneally and Geagan had dealt with in a prior land purchase. In other words, Kenneally, with virtually no diligence required, knew whom to serve.
¶37 Here, Plentywood had no “personal” connection prior to service of the Complaint with any pаrticular person from Advance; in fact, it was Advance’s decision-and not Plentywood’s-to funnel all communications from Plentywood directly to Travelers, instead of identifying for Plentywood a named officer or agent of Advance for contact purposes. Additionally, as noted above, the fact that the correspondence from Plentywood and Austin Mutual to Advance, sent to the corporate office address without designation of an individual recipient, had consistently resulted in prompt responses gave Plentywood confidence that service to the corporate аddress was adequate. Finally, and notably, while Russell Realty never received notice of the suit because the documents were returned undelivered, Advance’s courier accepted service and returned the signed receipt to the Secretary of State.
¶38 As required by Rule 4D(2)(f), Plentywood’s counsel filed an affidavit stating that it had exercised reasonable diligence in
¶39 The Court faults Plentywood for not using a process server, or in the alternative service by mail with a return acknowledgement form enclosed. However, the Court’s reasoning is wholly circular. The method of service that the Court describes at ¶¶ 22-23 is that which is perfected under Rule 4D(l)(b). If service under this Rule can be accomplished, then a party need not resort to 4(D)(2)(f), whiсh is what was required of Plentywood here, for the reasons cited above. It was because Plentywood did not know the identity of an authorized representative or “the person to be served” that it was forced to turn to Rule 4D(2)(f) in the first place.
¶40 The Court wholly fails to take account of the important fact that Advance’s own courier, who had the authority to sign for certified mail, was the person who signed for and received the Summons and Complaint. Thus, service was in fact accomplished here. Though Advance later argued that its courier should not have accepted the Summons and Complaint, the fact is hе was authorized by Advance to do so and did in fact do so. Therefore, unlike the situation in Russell, service here did not fail.
¶41 Finally, the Court takes Plentywood to task for its failure to inform Advance or Travelers that suit had been filed. Opinion, ¶ 23. In so doing, the Court ignores the fact that service was actually accomplished, and the court file reflected that the return receipt was received. It should go without saying that Plentywood was entitled to rely on the signed return receipt in the court file as proof of service. There is no rule requiring a plaintiff to ignore a return receipt and independently verify receipt of the Complaint. Howеver, we come very close to announcing such a new rule here.
¶42 In sum, I would conclude that Plentywood’s service through the Secretary of State was statutorily authorized and successfully executed in accordance with Rule 4. Moreover, service under both Rule 4D(3) and 4D(2)(f) would effect exactly the same result as was accomplished here-service at the company’s last known address. Therefore, I would conclude the District Court obtained jurisdiction and that it did not err in failing to set aside the default judgment under M. R. Civ. P. 60(b)(4), for lack of jurisdiction. Moreover, I would reach the merits of the case and affirm in all particulars. I dissent from our refusal to do so.