Randall Brungard, et ux., Appellants v. Risky's Inc., et al., Patti Cakes Baking Company, Inc., Resondents.

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

Case Style: Randall Brungard, et ux., Appellants v. Risky's Inc., et al., Patti Cakes Baking Company, Inc., Resondents. Case Number: SC88654 Handdown Date: 12/18/2007 Appeal From: Circuit Court of Miller County, Hon. Greg Kays Counsel for Appellant: David T. Tunnell, James E. Corbett, Jr., Matthew W. Corbett and Anne H. Rogers Counsel for Respondent: Susan Ford Robertson Opinion Summary: This summary is not part of the opinion of the Court. It has been prepared by the Communications Counsel for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court and should not be quoted or cited. The opinion of the Court, which may be quoted, follows the summary. Overview: This case involves a motion to set aside a default judgment. In a unanimous decision written by Judge Richard B. Teitelman, the Supreme Court holds that the trial court did not abuse its discretion in setting aside the trial court's decision to set aside the default judgment. The affidavit of the defendant's registered agent shows that he did not impede the judicial process recklessly or intentionally but that he failed to file a timely answer because he believed he had forwarded the lawsuit to his insurance carrier. Facts: In January 2004, Cindy and Randall Brungard sued Risky's Inc., alleging that Randall Brungard had slipped and fallen while on property that Risky's owned and controlled. In September 2005, the Brungards amended their petition, adding Patti Cakes Baking Company Inc. as a defendant. In January 2006, the Brungards served James Wedig – one of

Patti Cakes' owners and its registered agent – with process to initiate their suit against Patti Cakes. When Patti Cakes did not file an answer or otherwise defend against the case within 30 days following service, the Brungards moved for a default judgment against Patti Cakes. Following an April 2006 hearing, at which no one appeared on Patti Cakes' behalf, the court entered a default judgment in the Brungards' favor. Less than a month later, Patti Cakes moved to set aside the default judgment, alleging Wedig believed he faxed the summons to his insurance agent and was unaware of the default proceeding against the company. Based on Wedig's affidavit, the court set aside the default judgment. The Brungards appeal. AFFIRMED. Court en banc holds: (1) The proper standard of review here is to determine whether the trial court abused its discretion in setting aside the default judgment. The revision to Rule 74.05(d), effective in January 2007, provides in part that a motion filed under this rule to set aside a default judgment is an independent action and not an authorized after-trial motion subject to provisions of Rule 78. The amendment does not alter precedent that disfavors default judgments and that establishes a strong preference for deciding cases on the merits. (2) The circuit court did not abuse its discretion in crediting Wedig's affidavit and setting aside the default judgment. To prove good cause for setting aside the default judgment under Rule 74.05(d), Patti Cakes must show a mistake or conduct that is not designed intentionally or recklessly to impede the judicial process. Wedig's affidavit provides an adequate basis to support a finding that he did not impede the judicial process intentionally. His attestation that he believed he provided notice by forwarding the lawsuit to his insurance carrier is sufficient to demonstrate that he was neither reckless nor intentionally dilatory in failing to file a timely answer. Citation: Opinion Author: Richard B. Teitelman, Judge Opinion Vote: AFFIRMED. All concur. Opinion:

This slip opinion is subject to modification until the Court has ruled on the parties' motions for rehearing, if any, and will become final only after the Court issues its mandate. To see when the Court issues its mandate, please check the docket entries for the case on Case.net. Randall and Cindy Brungard appeal the judgment of the trial court setting aside a default judgment the Brungards received against Patti Cakes Baking Company, Inc. The judgment is affirmed. FACTS On January 29, 2004, the Brungards filed a petition against "Risky's, Inc." in the Circuit Court of Miller County, Missouri. The petition alleged, inter alia, that Randall Brungard had slipped and fallen while he was on property owned and controlled by Risky's, Inc. The Brungards filed an amended petition on September 15, 2005, adding Patti Cakes Baking Company, Inc., as a defendant. James Wedig is one of the owners of and the registered agent for Patti Cakes Baking Company, Inc. On January 18, 2006, the Brungards served Wedig with process to initiate their suit against Patti Cakes. Patti Cakes did not file an answer or otherwise defend within 30 days following service. On March 27, 2006, the Brungards filed a motion for default judgment against Patti Cakes. The circuit court held a hearing on the motion on April 13, 2006. The Brungards appeared, but no one appeared on behalf of Patti Cakes. The circuit court entered a default judgment in favor of the Brungards. On May 3, 2006, Patti Cakes filed a motion to set aside the default judgment. Patti Cakes asserted that there was a meritorious defense based on the statute of limitations. Patti Cakes supplemented the motion with an affidavit by James Wedig in which Wedig attested as follows: COMES NOW James Wedig, of lawful age, and states the following, all based on his personal knowledge:

1. That the undersigned is the registered agent for Patti Cakes Baking Company, Inc., a Missouri Corporation.
2. That the undersigned believes that he was served with a summons in this matter on or about January 18,

2006.

1. That the undersigned thought that he faxed the same to his insurance agent for delivery to his insurance

carrier.

1. That the undersigned cannot find the summons and is not sure what he did with the same but he did not

intentionally ignore this matter.

1. That the undersigned was unaware that a default was being taken against Patti Cakes Baking Company,

Inc. on or about April 13, 2006 and only learned about the default later at which time he immediately contacted his insurance agent for the matter to be turned over to his insurance carrier and counsel. The circuit court held a hearing on the motion to set aside the judgment but neither party offered live testimony. Based upon Wedig's affidavit, the circuit court sustained Patti Cakes' motion to set aside the default judgment. The Brungards appeal. This Court has jurisdiction. Mo. Const. art. V, sec. 10. ANALYSIS Rule 74.05(d) provides that a default judgment can be set aside "[u]pon motion stating facts constituting a meritorious defense and for good cause shown...." The rule specifies that "[g]ood cause includes a mistake or conduct that is not intentionally or recklessly designed to impede the judicial process." Id. The Brungards contend that the circuit court's decision to set aside the default judgment should be reviewed under the standard of review set forth in Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976), and, furthermore, that such review demonstrates that Patti Cakes has not shown good cause for failing to file an answer within 30 days after service as required by Rule 55.25. I. Standard of Review Missouri appellate courts have traditionally afforded significant deference to the circuit court's decision to set aside a default judgment because of the public policy favoring the resolution of cases on the merits and the "distaste our system holds for default judgments." Continental Basketball Ass'n v. Harrisburg Professional Sports Inc., 947 S.W.2d 471, 473 (Mo. App. 1997), quoting, Gibson by Woodall v. Elley, 778 S.W.2d 851, 854 (Mo. App. 1989). Rather than applying the Murphy standard applied to court-tried cases, appellate courts have generally applied an abuse of discretion standard in determining whether the trial court erred in setting aside a default judgment. Bell v. Bell, 849 S.W.2d 194, 197 (Mo. App. 1993); Klaus v. Shelby, 42 S.W.3d 829, 831 (Mo. App. 2001); CBD Enterprises, Inc. v. Braco Manufacturing, Inc. 181

S.W.3d 129, 131 (Mo. App. 2005). Broad discretion is afforded to trial court decisions granting motions to set aside a default judgment while the trial court has narrowed discretion in decisions denying a motion. Hopkins v. Mills-Kluttz, 77 S.W.3d 624, 626 (Mo. App. 2002). Such deference has been afforded whether the evidence supporting the motion to set aside the default was presented through exhibits and affidavits or through live testimony. See Beckmann v. Miceli Homes, Inc. 45 S.W.3d 533, 542 (Mo. App. 2001)(applying abuse of discretion standard where the motion to set aside a default judgment was supported solely by affidavit). Recently, the issue of the appropriate standard of review has been clouded because Missouri courts have disagreed regarding whether a motion to set aside a default judgment, if filed within 30 days after the default judgment, is an authorized after-trial motion or an independent action. In McElroy v. Eagle Star, Group, Inc., 156 S.W.3d 392, 400 (Mo. App. 2005), the court held that if a motion to set aside a default judgment was filed before the underlying default judgment is final, then the motion is treated as an authorized after-trial motion and appellate review is for abuse of discretion. If the motion was filed after the judgment was final, then the motion is an independent action reviewed under the standards set forth in Murphy. McElroy, 156 S.W.3d at 400-01. In contrast, in In re Marriage of Coonts, 190 S.W.3d 590, 603 (Mo. App. 2006), the court determined that motions to set aside a default judgment are always an independent action and, therefore, that appellate jurisdiction attaches only if the circuit court resolves the motion in an independent judgment. The Coonts court dismissed the appeal in the case and did not determine what standard of review to apply. In order to resolve the issue of whether a default judgment is an independent action, Rule 74.05(d) was revised, effective January 1, 2007, to provide that: (d) When Set Aside. Upon motion stating facts constituting a meritorious defense and for good cause shown, an interlocutory order of default or a default judgment may be set aside. The motion shall be made within a reasonable time not to exceed one year after the entry of the default judgment. "Good cause" includes a mistake or conduct that is not intentionally or recklessly designed to impede the judicial process. An order setting aside an interlocutory order of default or a default judgment may be conditioned on such terms as are just, including a requirement that the party in default pay reasonable

attorney's fees and expenses incurred as a result of the default by the party who requested the default. A motion filed under this Rule 74.05(d), even if filed within 30 days after judgment, is an independent action and not an authorized after-trial motion subject to Rule 78.04 or Rule 78.06. (Emphasis added). The emphasized language in Rule 74.05(d) does nothing more than resolve the confusion regarding whether and when judgments denying or granting motions to set aside default judgments are appealable. Now, pursuant to Rule 74.05(d), a motion to set aside the default judgment is treated as an independent action, and the trial court's decision to grant or deny the motion is treated as an independent judgment. It does not follow, however, that the amended rule alters the abuse of discretion standard of review that is applied to motions to set aside a default judgment. The rule amendment does not alter precedent that disfavors default judgments and establishes a strong preference for deciding cases on the merits. Abuse of discretion is the proper standard of review. II. Good Cause The party moving to set aside the default judgment has the burden to prove good cause for setting aside the judgment. In re Marriage of Pierce, 867 S.W.2d 237, 238 (Mo. App. 1993). "Good cause" is defined under Rule 74.05(d) as including "a mistake or conduct that is not intentionally or recklessly designed to impede the judicial process." Great Southern Savings & Loan Assoc. v. Wilburn, 887 S.W.2d 581 (Mo. banc 1994). The adoption of the good cause standard of Rule 74.05(d) "considerably broadened" the discretion of a trial court to set aside a default judgment where a party mishandles legal documents. CDB Enterprises, Inc. v. Braco Manufacturing, Inc., 181 S.W.3d 129, 32 (Mo. App. 2005). Wedig's affidavit provides an adequate basis to support a finding that he did not intentionally impede the judicial process. Wedig attested that he "thought that he faxed" the summons to his insurance agent for delivery to his insurance carrier. There are a number of cases in which a party has proven by sworn affidavit that the party's conduct was based on a mistake or conduct not intentionally or recklessly designed to impede the judicial process. See Gibson by Woodall v. Elley, 778 S.W.2d 851 (Mo. App. 1989)(papers mishandled by temporary clerks); Billingsley v. Ford Motor Company, 939 S.W.2d 493 (Mo. App. 1997)(lawyer mistakenly failed to file answer); Heintz Elec.Co. v. Tri Lakes Interiors, Inc., 185 S.W.3d 787 (Mo. App. 2006)(defendant's employee inadvertently threw away the suit papers under the mistaken belief that the papers were from another case). Wedig's affidavit stating his belief that he provided notice by appropriately

forwarding the suit papers to his insurance company is sufficient to demonstrate that he was neither reckless nor intentionally dilatory in failing to file a timely answer. The circuit court did not abuse its discretion in crediting Wedig's affidavit and setting aside the default judgment. The judgment is affirmed. All concur. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.