Monday, June 3, 2013

Lame excuse contest - Monday, June 3, 2013

In Kentucky, the general rule to set aside a judgment for default resulting from a failure to defend is that the defaulted party must affirmatively show a "good enough" defense on the merits, among other considerations. In Statewide Environmental Services Inc v. Fifth Third Bank, 352 S.W.3d 927 (Ky. App. 2011), Appellants asked for “an opportunity to defend themselves by conducting discovery and ascertaining whether or not they had counterclaims that could have been asserted.”

Seeing that Appellants' desire to go fishing may have been a tacit admission by them there was no defense on the merits, the Kentucky Court of Appeals decided that a defense of wishful thinking was not "good enough."

Do they really do that? - Striking an answer

In Roman Catholic Diocese of Lexington v. Noble, 92 S.W.3d 724 (Ky. 2002), the court  indicated not only that stricken pleadings have no legal effect,  but that the trial court has the power to physically remove stricken pleadings from the record.

Physically removing a stricken pleading from the record would hamper appellate review of the trial court's decision to strike the pleading, would it not?

It does not strike me as seem to be a good idea.

Sunday, June 2, 2013

Smith v. Flynn - Ky App. 2012

Smith v. Flynn

Kentucky Court of Appeals
Rendered: November 9, 2012

Full opinion here.

No. 2011–CA–002101–MR
Appeal from the Russell County Circuit Court: Cause No. 110-CI-00460

Denial of motion to vacate a default judgment affirmed.

This dispute arose between two adjoining land owners in Russell County, Kentucky, from the unauthorized timber removal by one from the land of the other. Both parties were aware of the situation and they had discussed reparations, but nothing came from these negotiations and a civil complaint for statutory damages was filed and served. The defendant did not offer any defense and judgment by default was entered. Some eight months after the action was commenced, after the plaintiff sought execution of a judgment lien, the defendant was inspired to take action.

Defendant’s excuse for not taking timely action to defend against the claim was that he had recently been diagnosed with Alzheimer's disease and dementia. His two motions to have the default judgment vacated pursuant to Kentucky Rules of Civil Procedure CR 60.02 were denied,

On appeal, defendant Smith argued he was incompetent for purposes of service of process, but he admitted that he has never been adjudicated incompetent by a court.

Claiming he was of “unsound mind,” defendant Smith proposed that CR 17.03 required the trial court to appoint a guardian ad litem on his behalf, which did not happen. The court relied upon the Kentucky Supreme Court case Goff v. Walker, 809 S.W.2d 698 (Ky.1991) which affirmed that the words “unsound mind” as used in CR 17.03 are technical words which mean a person who actually had been adjudicated incompetent pursuant to KRS 387.500.  The opinion in Goff states:
“It is the holding of this Court that the trial judge in a civil case, in the absence of a legal adjudication of incompetency, has no duty to take steps on his own to protect the interests of any defendant other than as provided in existing CR 17.03.”
This is not to suggest a trial court could not accept serious medical or mental problems as a valid excuse for default under CR 60.02, within the legitimate exercise of its sound discretion, but only that it is not required to do so as a matter of law.

The Court of Appeals relied upon Perry v. Central Bank & Trust Co., 812 S.W.2d 166, 170 (Ky.App.1991) for the relevant considerations in deciding whether to set aside a judgment for good cause, which are:

  1. A valid excuse for the default;
  2. some form of a meritorious defense against the claim, and;
  3. absence of prejudice to the other party.

Without specifically stating so, but by implication, the Court of Appeals presented the circumstances of this case as an indication there was no arbitrary abuse of the trial court’s discretion for rejecting the Alzheimer's diagnosis as a valid excuse:
“There is no dispute that he was actually served with notice of the lawsuit. His daughter submitted an affidavit in which she averred that she has designated people who live close to Smith to look after his affairs. As his power of attorney, his daughter could have initiated proceedings to have Smith declared incompetent.”
The court’s opinion also observed that defendant Smith offered no form of defense to the merits of Plaintiff’s claim for damages. Nothing.

I would argue that the Court of Appeals should have stopped here, but it proceeded to make two curious statements:
“The third of the Perry criteria entails the prejudicial impact on the other party. If the default judgment were reversed, Flynn would suffer the loss of his legal expenses in addition to the expense of replacing his fence and the destruction of his trees.”
Any time the court sets aside a default judgment, the opposing party will suffer the results of having to pursue a claim on the merits. Since the Civil Rules specifically authorize setting aside judgments by default under appropriate circumstances, the unavoidable consequences of occasionally setting a default judgment aside cannot by itself be a good reason not to do it.

Finally, the opinion states:
“All three factors for not setting aside the default judgment were satisfied. Therefore, we cannot conclude that the court erred.”
Rather than, “all three factors for not setting aside the default judgment were satisfied,” a better phrase might be, “all three factors for setting aside the default judgment were not satisfied.”

Cases cited:

  1. Straney v. Straney, 481 S.W.2d 292 (Ky.1972)
  2. Dressler v. Barlow, 729 S.W.2d 464 (Ky.App.1987)
  3. Perry v. Central Bank & Trust Co., 812 S.W.2d 166 (Ky.App.1991)
  4. Goff v. Walker, 809 S.W.2d 698 (Ky.1991)
  5. Age v. Age, 340 S.W.3d 88 (Ky.App.2011)

True Gospel Church Ministries, Inc v. Church of God In Christ - Ky. App. 2012 [Unpublished]

True Gospel Church Ministries, Inc v. Church of God In Christ

Kentucky Court of Appeals
Rendered: JULY 6, 2012

Full opinion here.

NO. 2011-CA-000796-MR
Appeal from the Christian County Circuit Court: Cause No. 10-CI-00127

Denial of motion to vacate a default judgment affirmed.

This case involved an ecclesiastical dispute regarding the ownership of real property used by a local congregation as its church facility. The beloved founding minister died and his children and most of the congregation objected to the replacement minister appointed by the national denomination. The deceased minister’s children attempted to transfer the real property from the original church organization to a new spin-off church organization. On January 27, 2010 the national denomination filed suit against the new spin-off church organization and the children individually for rescission of the property transfer. It is assumed that all defendants are properly served.

Nearly ten months elapsed with no appearances or answers from any defendant. On October 6, 2010, Plaintiffs filed a motion for default judgment and/or for summary judgment. The court scheduled the motion for a hearing on October 20, 2010. At the hearing, one of the individual defendants informed the court that counsel had been retained. Thereafter, counsel entered an appearance for the corporate church defendant only and he filed a response in opposition to the plaintiffs’ motion. He did not submit an answer to Plaintiffs’ complaint. The court rescheduled a hearing on Plaintiffs’ motion for January 12, 2011, but counsel for defendant church failed to appear at that hearing. The court re-scheduled the hearing for February 23, 2011 at which time the court took Plaintiffs’ motion under advisement.
“. . . . On March 3, 2011, the court entered a memorandum opinion stating that it was granting the motion for default judgment. In doing so, the court noted that: no one had entered an appearance or filed an answer on behalf of [the individual defendants]; and despite an order to do so, counsel for the True Gospel Ministries had not filed an answer on its behalf. . . . ”
On March 18, 2011, a different attorney entered his appearance on behalf of all the defendants and moved for relief from the default judgment, which the court denied. Defendants appealed the default judgment and the denial of their motion to set the default judgment aside.

Defendants never did tender an answer to the plaintiffs’ complaint, nor did they otherwise articulate any defense to the claim for relief, other than they were opposed to it and to claim they had some facts that were important. The only excuse Defendants offered for not answering the complaint was to blame it on the lawyer.

In its unpublished opinion, the Kentucky Court of Appeals basically agreed with the trial court that shit-canning this action was probably a good idea, but expressed it with greater elegance.

The Court cited the following cases:
  1. Greathouse v.Am. Nat'l Bank & Trust Co., 796 S.W.2d 868, 870 (Ky. App. 1990)
  2. S.R. Blanton Development, Inc. v. Investors Realty and Management Co., Inc., 819 S.W.2d 727 (Ky. App. 1991)
  3. PNC Bank, N.A. v. Citizens Bank of Northern Kentucky, Inc., 139 S.W.3d 527 (Ky. App. 2003)
  4. First Horizon Home Loan Corp. v. Barbanel, 290 S.W.3d 686 (Ky. App. 2009)
C.R. 76.28(4)(c) provides:
“Opinions that are not to be published shall not be cited or used as binding precedent in any other case in any court of this state; however, unpublished Kentucky appellate decisions, rendered after January 1, 2003, may be cited for consideration by the court if there is no published opinion that would adequately address the issue before the court. Opinions cited for consideration by the court shall be set out as an unpublished decision in the filed document and a copy of the entire decision shall be tendered along with the document to the court and all parties to the action.”
There is nothing about the legal issues discussed in this opinion that is unique or particularly useful. The standard on reviewing trial court discretion and what a defendant needs to show in order to justify setting aside a judgment by default is fairly standard stuff.  The usefulness of the case is to demonstrate what is not an abuse of trial court discretion, and to illustrate the extraordinary patience trial judges must frequently exhibit.

If the exact same facts arise again, this case might be used as controlling precedent.

K. R. C. P. 37.02(2)(c) case search

The Kentucky Court of Justice website publishes the opinions of the Kentucky Court of Appeals and the Kentucky Supreme Court in PDF format, with a search engine, here. Using that search feature and searching for "CR 37.02(2)(c)"

The most interesting part of this search result is that of the sixteen cases found, only one is published. Fifteen of the opinions are unpublished.

  1. [U] Godsey v. Holland (Ky. App. 1997) No. 94-CA-0445-MR
  2. [U] Sunset Management, Inc. v. Jackson (Ky. App. 1998) No. 96-CA-2053-MR
  3. [U] Hamilton v. Hamilton (Ky. App. 1998) No. 1997-CA-000720-MR
  4. [U] Smith v. Caligo, Ltd (Ky. App. 1998) No. 1997-CA-002353-MR
  5. [U] Pierce v. Minit Mart Foods (Ky. App. 2000) No. 1999-CA-002387-MR
  6. [U] Adams v. Rudolph (Ky. App. 2001) No.  1999-CA-001968-MR
  7. [U] Christian v. Super Quik, Inc. (Ky. App. 2001) No.  1999-CA-002467-MR
  8. [U] Goff v. Rogers (Ky. App. 2001) No.  2000-CA-000390-MR
  9. [U] Leonard v. City Of Brandenburg, Kentucky (Ky. App. 2004) No.  2003-CA-002238-MR
  10. [U] Deaton v. St. Luke Hospital East (Ky. App. 2004) No.  2003-CA-002405-MR
  11. [U] Leonard v. City Of Lebanon Junction (Ky. App. 2005) No.  2004-CA-000328-MR
  12. [U] Brown v. The Lake Cumberland Area  Drug Task Force (Ky. App. 2007)
    No.  2005-CA-002330-MR
  13. [U] Sunnyside Homes Of Rockledge, Inc. v. Owen (Ky. App. 2007) No. 2006-CA-000432-MR
  14. [U] Crawford v. Pittman (Ky. App. 2007) No.  2006-CA-001604-MR
  15. R.T. Vanderbilt Company, Inc. v. Franklin, 290 S.W.3d 654 (Ky. App. 2009)
    No.  2007-CA-002103-MR
  16. [U] Lanore v. Lanore (Ky. App. 2012) No.  2010-CA-001898-MR

Default Judgments In Kentucky - Introduction

Default Judgments In Kentucky 

 Rules of civil procedure are the boring, but essential, part of our primary method for civil conflict resolution under a system of law. Like any other competitive undertaking that is governed by rules and referees, each participant must play his or her part according to the accepted standards to efficiently move the contest to a final conclusion.

 The main playing field in civil litigation is at the trial court level. That phase of a civil litigation contest is completed with a judgment or final court order. Default judgments happen when one of the parties to a lawsuit fails or refuses to play by the rules. These judgments by default are most frequently imposed when a party simply fails to show up for the contest and forfeits the game, but they can also result when a party willfully defies the rules of discovery and related orders of court.

 The logic of a default judgment resulting form a defendant’s failure to answer a complaint is fairly straightforward. By Kentucky Rules of Civil Procedure CR 8.04, allegations in a complaint are deemed admitted if they are not expressly and timely denied. When a complaint states a cause of action upon which relief can be granted but the liability is admitted by a defendant, there is no dispute and there is no good reason not to enter judgment for the Plaintiff.

 CR 55.01 provides, in part, as follows:
“When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, the party entitled to a judgment by default shall apply to the court therefor. . . .”
It is commonly thought that a judgment by default does not go to the merits of a claim, and that it is a purely procedural undertaking. It could just as easily be thought that a judgment by default arises because the claim is meritorious and not subject to any good faith defense. This thinking holds when a defendant’s non-defense amounts to an intentional waiver. If there is an intentional waiver involved in a choice to not defend against a civil action, there is no conflict in need of a resolution. The debt collection tools provided by law that accompany a judgment are a separate justification for using litigation, wholly apart from deciding the merits of the underlying claim.

 This idea collapses when a failure to defend results from a defendant’s mistake or neglect. This latter category of judgment by default makes it into the appellate case reports when the defaulting party appeals directly from the judgment or seeks to have the trial court vacate the judgment.

 A less common authorization for judgment by default is contained in CR 37.02(2)(c). Default judgment is but one of the many alternate sanctions provided in Rule 37.02, and it is one of the more severe options..  The possibility of this extreme sanction arises when a party fails to provide discovery upon request as Kentucky’s Rules of Civil Procedure specify; or if the court has issued an order compelling discovery under CR 37.01 or an order of examination under CR 53.01 and a party does not comply with the court’s order. Unlike judgment by default for failure to defend pursuant to CR 55.01, which applies to defendants only, the sanctions allowed in CR 37.02(2)(c) include dismissal of all or part of a claim for non-complying plaintiffs.