Eric Krugh and Joseph Krugh, Appellants v. Don Hannah, Lake Ozark Construction Industries, Defendant and Millstone Marina Service, L.L.C., Respondent.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Western District Case Style: Eric Krugh and Joseph Krugh, Appellants v. Don Hannah, Lake Ozark Construction Industries, Defendant and Millstone Marina Service, L.L.C., Respondent. Case Number: WD61035 Handdown Date: 04/22/2003 Appeal From: Circuit Court of Jackson County, Hon. Peggy Stevens McGraw Counsel for Appellant: John E. Turner and Christopher P. Sweeney Counsel for Respondent: Julie Joan Gibson Opinion Summary: Eric and Joseph Krugh appeal from an order setting aside their default judgment against Millstone Marina Service, L.L.C. The Krughs contend the motion court erred in vacating the default judgment pursuant to Rule 74.05(d) because Millstone failed to plead facts constituting a meritorious defense and failed to prove good cause. REVERSED AND REMANDED. Division Three holds: Millstone's motion to set aside default judgment generally denied responsibility for the Krughs' injuries sustained in a boat explosion and stated that Millstone could provide evidence of alternative explanations for the explosion. The motion did not comply with the strict pleading requirements of Rule 74.05(d) because it failed to provide "facts" constituting a meritorious defense. Millstone, therefore, was not entitled to a hearing on the motion, and the court abused its discretion in setting aside the default judgment. The order is reversed, and the cause remanded with instructions to reinstate the default judgment. Citation: Opinion Author: Lisa White Hardwick, Judge Opinion Vote: REVERSED AND REMANDED. Smith, P.J., and Smart, J., concur. Opinion:

Eric and Joseph Krugh appeal from an order setting aside their default judgment against Millstone Marina Service, L.L.C. The Krughs contend the motion court erred in vacating the default judgment pursuant to Rule 74.05(d) because Millstone failed to plead facts constituting a meritorious defense and failed to prove good cause. We reverse and remand. Factual and Procedural History On May 9, 2000, the Krughs filed a Petition for Damages against Millstone in the Circuit Court of Jackson County. The petition alleged Millstone failed to detect a fuel leak while storing and recommissioning a motor boat over the winter months. The leakage subsequently ignited an explosion on the boat, during which Eric Krugh and his son, Joseph, were injured. Millstone's registered agent was served with the petition on May 23, 2000. The Krughs filed a Motion for Default Judgment on February 9, 2001, due to Millstone's failure to file responsive pleadings. The trial court granted the default judgment on April 4, 2001. Total damages were awarded to the Krughs in the amount of $583,596.43. On August 1, 2001, Millstone filed a Motion to Set Aside Default Judgment pursuant to Rule 74.05. The motion alleged good cause existed for failure to file a timely answer because Millstone's registered agent had no recollection of being personally served and because Millstone later assumed its insurer was defending the lawsuit. The motion also alleged Millstone could present a meritorious defense by disputing its responsibility for the boat and offering alternative explanations for the explosion. The Krughs filed Suggestions in Opposition and argued the Motion to Set Aside Default Judgment should be denied, without an evidentiary hearing, because Millstone failed to allege "facts constituting a meritorious defense," ; as required by Rule 74.05(d). The motion court took the argument under advisement and heard evidence on the motion. Following the hearing, the court set aside the default judgment, without expressly ruling on the sufficiency of the facts pled in Millstone's motion. The Krughs appeal. Applicable Law Rule 74.05(d) provides that a default judgment may be set aside "[u]pon motion stating facts constituting a meritorious defense and for good cause shown." A movant is entitled to an evidentiary hearing if the pleading requirements of this rule are met. Bredeman v. Eno , 863 S.W.2d 24, 25 (Mo.App. W.D. 1993) (applying Rule 74.05(c), the predecessor to Rule 74.05(d)). To establish a meritorious defense, the facts must "demonstrate an arguable theory that would defeat the plaintiff's claim." McClelland v. Progressive Cas. Ins. Co., 790 S.W.2d 490, 493 (Mo.App. S.D. 1990) (applying predecessor Rule 74.05(c)). Bare statements amounting to mere speculations or conclusions fail to meet the requirement of pleading facts. Bredeman, 863 S.W.2d at 25. When the defense is factual, the movant must provide a "specific

recitation of particular facts which, if proven, would constitute a meritorious defense." McClelland, 790 S.W.2d at 494. To determine compliance with the pleading requirements of Rule 74.05(d), appellate courts examine the allegations in the motion to set aside, as well as any affidavits, exhibits, or proposed answers filed in conjunction with the motion. Bredeman, 863 S.W.2d at 25. Although the rule states that a default judgment "may" be set aside if facts constituting a meritorious defense and good cause are shown, the motion court's discretion is constrained by the parameters of reasonableness and construed in light of the purposes of the rule. Fuller v. Ross, 68 S.W.3d 497, 500 (Mo.App. W.D. 2001). The discretion not to set aside is a good deal narrower than to set aside. Yerkes v. Asberry, 938 S.W.2d 307, 309 (Mo.App. E.D. 1997). In determining whether there was an abuse of discretion, we consider whether the motion court's ruling was supported by substantial evidence, was against the weight of the evidence, or was an erroneous application of law. Id. Sufficiency of Pleading The Krughs contend the motion court erred in setting aside the default judgment because Millstone's motion failed to allege particular facts in support of a meritorious defense. The motion to set aside contained the following allegations with regard to Millstone's defenses to the Petition of Damages:

1. Millstone Marina Service, if given the opportunity, would present

evidence disputing the allegations in the First Amended Petition regarding its duties and responsibilities of the boat in question during the time period alleged.

1. Upon information and belief, the boat in question was destroyed

by fire, which calls into question the allegations in paragraph 3 of Count IV of the First Amended Petition (FN1) that prior to the fire, the boat was in such condition that the fuel system was capable of leaking.

1. If given the opportunity, Millstone Marina would offer evidence

of several alternative explanations for explosions to occur on boats, other than fuel systems capable of leaking. In an affidavit accompanying the Motion, Carla Blazier, a principal of Millstone, stated:

1. If given the opportunity, Millstone Marina Service would present evidence disputing the allegations in the First

Amended Petition regarding its duties and responsibilities for the boat in question during the time period alleged.

1. If given the opportunity, through our knowledge and experience with the servicing of boats, we can provide

evidence of several alternative explanations for explosions in boats, other than fuel systems capable of leaking, as alleged in the First Amended Petition. These statements in the motion and affidavit are the entirety of Millstone' ;s allegations in support of a meritorious defense. The allegations set forth broad theories of denied responsibility and alternative explanations for the explosion but do not provide particular facts upon which these defenses are based. Millstone failed to provide any information as to why it disputed responsibility for the boat or what other sources might have caused the boat to explode. Given the factual nature of its defense, it was insufficient for Millstone to merely state that it could present evidence to dispute liability. A conclusory statement about the existence of a defense without supporting facts does not present an arguable theory or otherwise satisfy the strict pleading requirements of Rule 74.05(d). Bredeman, 863 S.W.2d at 26. The Krughs briefed and argued the issue of this pleading deficiency well before the court heard evidence on the Motion to Set Aside Default Judgment. Millstone was not entitled to an evidentiary hearing based on its cursory denials of liability. The motion court abused its discretion in granting the Motion to Set Aside Default Judgment because Millstone failed to allege specific facts constituting a meritorious defense. Our holding negates any further need to address the Krugh's additional point regarding insufficient proof of good cause because both elements -- a meritorious defense and good cause -- are necessary to set aside a default judgment under Rule 74.05(d). Brants v. Foster, 926 S.W.2d 534, 535 (Mo.App. W.D. 1996). The motion court's order setting aside the default judgment is reversed, and the cause is remanded for reinstatement of the default judgment. All concur. Footnotes: FN1. Paragraph 3 of Count IV states: Defendant Millstone Marina Service stored the boat in question for Lake Ozark Construction Company in this case. Defendant Millstone Marina agreed to winterize, store and recommissioned (sic) the boat. When Millstone Marina released the boat from its storage, the boat had not been properly recommissioned. The boat was in such a condition that the fuel system was capable of leaking and allowing gasoline and gasoline fumes to get out of the fuel system and into the bilge area. Defendant Millstone Marina was negligent in failing to provide inspection before recommissioning the boat for use. Separate Opinion: None

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.