Grit In My Grits: A Tuesday Complaint About Kentucky Practice

In Kentucky civil procedure there is a general distinction between a default judgment on a claim for liquidated damages and on a claim for indefinite damages.

Kentucky Rules of Civil Procedure, CR 8.04 - Effect of Failure to Deny - provides, in part:

" . . . . Averments in a pleading to which a responsive pleading is required are admitted when not denied  . . . except that the following allegations must be proved:
(a) . . .
(b) . . .
(c) Those concerning value or amount of damages which are not for a sum certain or for a sum which may by computation be made certain." [emphasis added]

K. R. C. P., CR 8.01 - Claims For Relief

"(1) A pleading which sets forth a claim for relief . . . shall contain . . . a demand for judgment for the relief to which he deems himself entitled. . .
(2) In any action for unliquidated damages the prayer for damages in any pleading shall not recite any sum as alleged damages . . . . " [emphasis added]

With a complaint on a credit card debt, for example, simple logic would indicate the amount of damages claimed by the plaintiff is for, "a sum certain or for a sum which may by computation be made certain." which must be specified in the complaint. Yes?

When a defendant is in default for failure to appear and defend in such an action, the allegations in the plaintiff's complaint are not denied and the dollar amount claimed in the complaint is deemed admitted by CR 8.04.

Thus, in an action on a consumer loan transaction, it seems obvious no hearing to determine the amount of damages is required. It's just a simple "computation". But, was life and consumer lending ever really all that simple?

CR 55.01 - Judgment

". . . . If, in order to enable the court to enter [default] judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court, without a jury, shall conduct such hearings or order such references as it deems necessary and proper . . . . " [emphasis added]

With the assignment of consumer loans to junk debt collectors, possibly unwarranted claims for exorbitant prejudgment interest rates and a wide variety of added-on fees and charges, simple computations may turn out to be mind boggling complex.   Clearly a trial judge would be authorized by CR 55.01 to conduct a hearing to establish damages in a consumer loan debt collection action in default for defendant's failure to appear and defend, should he or she feel the urge. However, it is likely unreasonable to require it.

The simplest solution to this problem is probably the best solution. For a consumer debtor being sued who takes the position, "Yep, I owe them something, but not as much as they are asking," the thing to do is to appear and defend the action, and to not allow a default judgment to be entered.

OK. Now I feel better. Thanks for listening.

Kentucky Default Judgments: A Different Breed of Cat

In Cloverleaf Dairy v. Michels, 636 S.W.2d 894 (Ky. App. 1982), the chronology was as follows:

1. On May 26, the trial court entered a final judgment;
2. Within ten days Appellee filed a motion for relief from the judgment;
3. On June 16 the trial court denied this motion;
4. Appellee thereafter filed another motion for relief from the judgment;
5. The trial court granted this second motion, reversed its order of June 16 and modified its May 26 judgment, and;
6. This ruling was appealed.

The Kentucky Court of Appeals reversed the trial court, stating, "We . . . find no authority in the Civil Rules for a party to make more than one motion for reconsideration of a judgment."

In Mingey v. Cline Leasing Service, Inc., 707 S.W.2d 794, 796 (Ky. App.1986), the chronology was as follows:

1. On January 11, the trial court entered a final judgment;
2. Within ten days Appellant filed a motion for relief from the judgment;
3. On February 15, the trial court denied this motion;
4. Appellant thereafter filed another motion for relief from the judgment;
5. The trial court granted this second motion, reversed its order of February 15 and set aside its January 11 judgment;
6. On March 27 Appellee moved to have the January 11 judgment reinstated;
7. Thereafter, on April 18, the trial court granted Appllee's motion and reinstated the prior judgment based upon the holding in Cloverleaf Dairy v. Michels, supra, and;
8. This ruling was appealed.

The Kentucky Court of Appeals reversed the trial court, stating, "Cloverleaf Dairy v. Michels . . . is clearly distinguishable from the instant case . . . . "

The primary difference between  Cloverleaf Dairy and Mingey is simply this: The final judgment in Mingey was a default judgment and in Cloverleaf Dairy, it was not. Different rules apply to Kentucky default judgments, in several respects.

For example, it is a general rule that for a trial error to be subject to appellate review, the alleged error must first be presented at the trial court level and preserved in the record. One exception to this general rule is the direct appeal of a default judgment. As the Court of Appeals stated in Statewide Environmental Services Inc v. Fifth Third Bank, 352 S.W.3d 927 (Ky. App. 2011):

"Of course, an inherent characteristic of a direct appeal from a default judgment is that the appellant has failed to preserve his claim of error. Ordinarily, we review unpreserved claims under the manifest injustice standard established in CR 61.02, the "substantial error" rule. However, the standard of review we apply now became a part of our common law in Rouse v. Craig Realty Co., 203 Ky. 697, 262 S.W. 1083 (1924), before adoption of our current rules of civil procedure. Subsequent to the adoption of the current civil rules, the issue arose again in Mingey v. Cline Leasing Service, Inc., 707 S.W.2d 794 (Ky.App.1986), and we elected to apply the more specific Rouse standard of review despite the availability of CR 61.02. Jeffrey followed Mingey; therefore, we now follow Jeffrey . . .Under Jeffrey v. Jeffrey, [153 S.W.3d 849, 851 (Ky. App. 2004)] , the default judgment itself may be appealed directly without preservation of the error . . . ." [footnotes 6 - 7]

“ 'However, the issue in such an appeal [is] limited to determining whether the pleadings were sufficient to uphold the judgment, or whether the appellant was actually in default.'  Mingey v. Cline Leasing Service, Inc., Ky.App., 707 S.W.2d 794, 796 (1986) citing Rouse v. Craig Realty Co., 203 Ky. 697, 262 S.W. 1083 (1924)", as quoted in Jeffrey.