Constitutional jurisdictional limitations may justify relief from a judgment under Fed. R. Civ. P. 60 (b).
The Bank of Montreal filed suit on March 2, 1978 against Thorhalur G. Olafsson to recover $34,572 due it through promissory notes and an overdraft. On May 31, 1978, the District Court granted a default judgment. The Bank filed liens on Michigan realty held in the name of Olafsson’s wife, and the property was sold to the Bank in satisfaction of its judgment. On June 7, 1979, Olafsson moved to set aside the judgment on two grounds: (1) because he was never personally served with a copy of the complaint, and (2) because he had filed for bankruptcy in Canada on March 28, 1978, and under Canada law it is illegal to pursue claims while bankruptcy proceedings are pending. In argument on the motion, Olafsson raised the diversity question. The district court rendered its opinion from the bench, finding that the bank was a Canadian corporation and that Olafsson was not a citizen of the United States either. It stated that the Bank knew or should have known of the citizenship of Olafsson. It recognized that the Bank had taken action in reliance on the default but found the policy against granting judgment s in cases in which the court has no jurisdiction overriding. It noted that it had never before addressed the jurisdictional question and concluded that the default judgment should be vacated under Federal Rule of Civil Procedure 60(b)(4) or 60(b)(6) because it was entered “in excess of the power of the court.” The court set aside the default judgment and “all liens, writs of levy and execution, and sheriff’s sales,” and dismissed the suit.
Did the trial court err in setting aside a default judgment it had entered more than a year earlier?
The grant of motions made under Rule 60(b) is a matter of discretion for the district court, and its decision is to be set aside only if it constitutes an abuse of discretion. Given the lack of federal jurisdiction in the case, and considering the equities of the case under Rule 60(b), the court agreed with the district court that the default judgment should be set aside and the case dismissed for lack of subject matter jurisdiction. The dispute between the parties over the promissory notes, overdraft, and liens can be more fairly and completely adjudicated in the Canadian bankruptcy court, in the country where the loan was made, the bank is located, and Olafsson’s bankruptcy is pending.