A September 25, 2009 decision of the Missouri Court of Appeals’ Southern District, First Community Bank v Hubbell Power Systems, underscores that the trial judge doesn’t have to set aside a default judgment, even if it’s promptly requested, and even though Missouri’s court rules and case law disfavor default judgments in favor of giving the litigants their days in court.
When a civil lawsuit is filed in a Missouri’s circuit court and the defendant is served with a summons and copy of the plaintiff’s petition, the defendant has 30 days to file a response. If the defendant does not file a response, the plaintiff can ask the court to enter a default judgment. (Please note that associate circuit courts have different rules, and associate circuit courts are where most collection cases and rent and possession cases are filed.) Courts usually do not enter default judgments except on request of the party seeking judgment.
Hubbell was served on February 20 and a default judgment was entered on March 24. On April 2, Hubbell filed a motion asking the judge to set aside the default judgment. Hubbell provided an affidavit from Hubbell’s in-house lawyer which included various emails to show that the in-house lawyer was busy with a larger transaction and was seeking medical help for an attack of shingles. Hubbell’s in-house lawyer also had notified a law firm of the case, but failed to instruct the law firm to file a response.
Missouri’s court rules grant trial judges the discretion to set aside default judgments within one year upon a showing of a meritorious defense and good cause.
Appellate cases indicate that “good cause” can mean just about anything, if the defendant can show that the defendant did not intentionally or recklessly attempt to impede the judicial process, which is a very low standard. A “meritorious defense” is one that could be asserted in good faith, not necessarily one that would be successful.
The trial court and the appellate court looked at the in-house lawyer’s documentation and seemed to have concluded that he wasn’t merely negligent, but recklessly failed to make sure that a response was filed, despite knowing the rules. The result is that Hubbell has to pay First Community Bank the sum of $39,000.
This result isn’t as harsh as it might seem. Hubbell owed the $39,000 to First Community Bank’s customer, who had granted First Community Bank a security interest in its accounts receivable. If Hubbell hadn’t paid $39,000 to First Community Bank, it would have been obligated to pay the money to its creditor.
Sometimes a defendant doesn’t call a lawyer for a couple of weeks after receiving a summons, or the defendant can’t find a lawyer that the defendant is willing or able to pay. Many lawyers will not seek a default judgment for a few weeks after the answer date, because they know from experience that judges will often vacate a judgment readily upon fairly flimsy grounds, if a motion to vacate the default judgment is filed within a few days after entry of the default judgment.
Lawyers also know that it’s good to get along with other lawyers, because the shoe is frequently on the other foot. Most lawyers, after agreeing to take a defendant’s case when answer date is approaching, will call the plaintiff’s lawyer and obtain the plaintiff’s lawyer’s consent to file the answer a few days late. I’ve never had such a request refused, and I’ve never refused such a request, as long as the plaintiff’s lawyer agrees to file an answer, not a motion to dismiss.
The other tactic in such situations is for the defendant’s lawyer to file a motion to dismiss, if the 30-day period has not elapsed. The motion to dismiss is usually pretty skimpy–though the court rules require substance–but buys the defendant another three or four weeks to research the facts and file a proper answer, often with affirmative defenses and counterclaims. Typically, the motion to dismiss is called up for hearing and the defendant agrees to withdraw it if the plaintiff will allow 10 or 20 days to answer.
Federal courts and the courts of many states allow the court clerk to approve a short extension of time for filing a response, usually 20 days, which does away with the incentive to file a bogus motion to dismiss and keeps the cases moving. Missouri’s Supreme Court should adopt such a rule.
Ozarks Law & Economy 