Sprung v. Negwer Materials, Inc.

775 S.W.2d 97, 1989 WL 86086

• Court: Supreme Court of Missouri
• Decided: September 8, 1989
• Docket: 71368
• Status: Published

Opinions

BILLINGS, Judge.

This is Sprung II — a, petition in equity to set aside a default judgment after remand by this Court in Sprung I. Following an evidentiary hearing the trial court denied relief. The Missouri Court of Appeals, Eastern District, affirmed the order of the lower court but ordered the case transferred to this Court. Affirmed.

The principal opinion of Judge Gary M. Gaertner for the court of appeals, with minor modification, and without quotation marks, is adopted as the opinion of this Court, and is as follows:

Appellant, Negwer Materials, Inc., appeals the order of the trial court overruling appellant’s petition in equity to set aside a default judgment for $1,500,000.00 in favor of respondent, Melvin James Sprung, Jr., and against appellant. On appeal appellant raises four issues: (1) The trial court incorrectly declared and applied the law in determining that appellant did not have good reason or excuse for the default¹; (2) The failure of respondent’s attorney to advise appellant’s attorney that a default judgment had been entered requires the judgment be set aside; (3) Imputing the conduct of appellant’s attorney and insurer to appellant violates due process of law; and (4) Respondent’s petition fails to state a cause of action. Finding appellant’s contentions to be without merit, the judgment is affirmed.

The evidence reveals respondent filed a petition on December 27, 1984, for damages sustained when a cart, which was rented from the appellant, tipped over and threw drywall on the respondent; appellant received personal service on January 11, 1985. Appellant proceeded to deliver the petition to its insurance company which then delivered it to a law firm. On January 31, 1985, an attorney in the firm dictated an entry of appearance and a request for extension of time to plead. Appellant asserts that, upon the documents being signed by the lawyer, a secretary mailed them to the insurance company. Neither the clerk of the circuit court nor respondent’s attorney received appellant’s entry of appearance and request for an extension of time to plead.

The trial court entered an interlocutory judgment of default against appellant on February 28,1985. On March 11,1985, the trial court entered a final judgment by default in the amount of $1,500,000. Further facts will be adduced concerning the circumstances occasioning the default judgment as they become warranted by our discussion of the issues.

On April 22, 1985, respondent’s attorney informed appellant’s attorney that a final judgment had been entered. Appellant filed on May 3, 1985, two motions to set aside the default judgment. The trial court overruled appellant’s motion to set aside the judgment for irregularity and sustained appellant’s motion to set aside the default judgment on equitable grounds pursuant to Rule 75.01. The court of appeals reversed the trial court’s order setting aside the judgment on equitable grounds and affirmed the order denying the motion to set aside the judgment for irregularity.

This Court in Sprung I decided the motion to set aside the judgment for irregularity was properly denied. Further, that the cause should be remanded to the trial court with directions to treat appellant’s motion to set aside the final default judgment as an independent suit in equity. The Court ruled the trial court lacked jurisdiction to set aside the judgment through the exercise of its discretionary powers conferred by Rule 75.01, where the thirty days provided by Rule 75.01 had expired prior to the filing of appellant’s motion; instead, an independent petition in equity was required. Sprung v. Negwer Materials Inc., 727 S.W.2d 883, 886 (Mo. banc 1987). Upon remand, and following the evidentiary hearing, the trial court entered an order in which it overruled appellant’s petition in equity to set aside the judgment. It is from this order that appellant appeals.

At the outset, the Court recognizes the appropriate standard of review. The trial court’s decree is to be sustained unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Further, as noted in Sprung I, that, as appellant’s motion is to be accorded the status of a petition, “[Appellant] is required not only to plead its cause, but also to prove it.” Sprung, 727 S.W.2d at 889.

In its first point, appellant claims the trial court erred in refusing to set aside the default judgment on equitable grounds. In order for one to prevail in setting aside a default judgment on equitable grounds, he must show a meritorious defense, good reason or excuse for the default and that no injustice will accrue to the party who obtained the default judgment as a result of setting aside the judgment. Sprung, 727 S.W.2d at 889.

Appellant’s principal argument is that the trial court used the wrong standard for determining whether appellant had good reason or excuse for the default. Appellant maintains that a party who seeks to set aside a default judgment need only show “reasonable diligence or excuse for the default” citing Whitledge v. Anderson Air Activities, Inc., 276 S.W.2d 114, 116 (Mo.1955). Appellant further notes amended Rule 74.05(c), effective January 1, 1988, which states that “good cause includes a mistake or conduct that is not intentionally or recklessly designed to impede the judicial process.” The Court in Sprung I unequivocally enunciated the criteria, at least in the context of an independent action in equity, for determining “good reason or excuse”. Adopting the language contained in Hamm v. Hamm, 437 S.W.2d 449, 453 (Mo.App.1969), the court declared that “good reason or excuse” exists when the default occurs "by reason of accident, mistake, inadvertence, mischance or unavoidable circumstances unmixed with neglect or inattention_” (emphasis in original). See also Patterson v. Fitzgibbon Discount Corporation, 339 S.W.2d 301, 306 (Mo.App.1960). The opinion in Sprung I specifically defined the issue for the trial court’s determination by stating:

[Appellant] claims that its failure to answer resulted from mistake, inadvertence, mischance, or accident. [Respondent] does not concede that [appellant’s] failure to answer proceeded from ‘accident, mistake, inadvertence, or unavoidable circumstances unmixed with neglect or inattention.’ ... whether [appellant] had a good cause or excuse for its inattention is a factual matter not fully addressed in the proceedings before the trial court. Further proceedings are required.

Sprung, 727 S.W.2d at 890 (emphasis in original).

Thus, the dispositive issue is whether or not there was sufficient evidence for the trial court to conclude that appellant’s conduct, be it considered accident, mistake, inadvertence, or mischance, was not unmixed with neglect or inattention.

Appellant admits that its entry of appearance and proposal for an extension of time to plead were never received by respondent’s attorney or filed with the trial court. Both the original and the copy of the documents were apparently sent to appellant’s insurance company. Appellant’s law firm utilized an internal system to alert an attorney if an order mailed to the court was not granted. A receptionist reviewed the Daily Record each day to determine whether requests by the law firm for extensions of time had been granted; if the Daily Record did not reflect that a request had been granted within a reasonable time, the mechanism called for the attorney to be notified. However, although no entry reflecting the granting of an extension of time ever appeared in the Daily Record, no inquiry was made by the law firm to determine the status of the case, and no further action was taken until approximately forty-nine days after the law firm had prepared the proposed order. In addition to the preceding safeguard, the law firm also had a system whereby a printout of all court actions relating to its cases was placed daily on the desk of each attorney. The judgment in the present case was reflected on the March 15, 1985, printout.

Conduct on the part of the appellant’s insurance company also contributed to the default. Both appellant’s attorney and his secretary testified that copies of court documents requesting time to plead and entries of appearance were not routinely sent to the insurance company. The claims manager at the insurance company, who was charged with monitoring the file in the present case, testified that she had not seen a yellow original court memorandum requesting time to plead before she received the one in the present case. She acknowledged that it would have been apparent from a cursory examination of the documents she received from the law firm that at least some of them were intended for the court. Nonetheless, the claims manager placed the documents in the insurance company’s file and advised no one. These facts indicate that the default judgment was the result of possible neglect and inattention by appellant’s law firm and in particular the insurance company.

Much authority supports the denial of relief when a default judgment is the result of mishandling of documents. In Jones v. Chrysler Corp., 731 S.W.2d 422 (Mo.App.1987), which was decided after Sprung I, the court states, “[Mjisrouting of papers within an organization does not constitute good cause for default nor does it show excusable neglect.” Id. at 427. In Jones, a secretary for the defendant inadvertently delayed sending a letter, timely dictated, to the defendant’s law firm until after a default had been entered; the court refused to set aside the judgment. Id. at 425. Further, where the default is caused by the mishandling of documents by defendant’s legal department, Hughes v. Christian, 586 S.W.2d 788, 792 (Mo.App.1979), or by the defendant’s insurance company, Luce v. Anglin, 535 S.W.2d 504, 507 (Mo.App.1976), the trial court’s denial of relief to the defaulting party has been upheld. As noted in Barney v. Suggs, 688 S.W.2d 356, 362 (Mo. banc 1985) (Welliver, J., dissenting):

Default judgments are the result of either the intentional omission or negligence of clients or the omission or negligence of attorneys, or both.

To this observation, insurance carriers should be added.

The law is well-settled that the neglect of a defendant’s attorney or his insurer which results in a default judgment is imputable to the defendant. Ward v. Cook United, Inc., 521 S.W.2d 461, 472 (Mo.App.1975). See also Luce, 535 S.W.2d at 508. Appellant places much reliance on the decision in Whitledge v. Anderson Air Activities, 276 S.W.2d at 114. The Court in Whitledge reaffirmed the general rule that negligence by an attorney in permitting a default judgment is imputable to the client. Id. at 116. However, the decision states, “[I]t does not necessarily follow that the rule is applicable to a case where defendant has retained counsel, and counsel abandons the defense of the case without notice to his client-defendant....” The holding in Whitledge has been consistently restricted to cases in which an attorney abandons his client. See Rucker v. Thrower, 559 S.W.2d 40, 41-42 (Mo.App.1977). The present case involves no claim or suggestion of abandonment.

A lawyer is charged during the progress of a cause with the duty, and in fact presumed, to know what is going on in his case. Vaughn v. Ripley, 446 S.W.2d 475, 480 (Mo.App.1969). He must vigilantly follow the progress of a case in which he is involved. Id. See also Dodge v. SafeGuard Sales, Inc., 356 S.W.2d 101 (Mo.App.1962). And, although the law favors a trial on the merits, such a generalization must be carefully applied to the facts of each case in the interest of justice; for, the law defends with equal vigor the integrity of the legal process and procedural rules and, thus, does not sanction the disregard thereof. Luce, 535 S.W.2d at 507. This point is denied.²

In its second point, appellant claims the failure of respondent’s attorney to advise appellant’s attorney that a default judgment had been entered until after its entry provides a basis for setting aside the judgment. It is undisputed that respondent’s attorney was unaware that appellant was represented by counsel or intended to defend the claim until fourteen days after final judgment had been entered. The judgment was entered on March 11, 1985. Respondent received appellant’s answer on March 23 or 25, 1985, and requests for discovery on March 29, 1985. Respondent’s attorney did not contact appellant’s attorney until over thirty days after the judgment was entered. There is no contention that the conduct of appellant’s attorney had any bearing on the entry of the default judgment itself.

In rejecting a contention that a plaintiff should notify a defaulting defendant after obtaining an interlocutory judgment of default, this Court in Barney v. Suggs, 688 S.W.2d at 359-60 stated:

The procedure plaintiff utilized followed our rules, the statutes, and deci-sional law....

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... [DJefendant was personally served with summons and petition and was put on notice of every stage of the proceeding (citations omitted).

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In Friedman v. The Caring Group, Inc., 750 S.W.2d 102, 103-04 (Mo.App.1988), the issue of the conduct of a plaintiff’s attorney as to the entry of a default judgment was squarely before the appellate court.³ The court refused to hold that the failure of plaintiff's attorney to notify defendant’s attorney, who had entered his appearance in the case but not filed an answer, that plaintiff’s attorney intended to take a default judgment provided a basis for setting aside the judgment. In the present case, respondent’s attorney did not know that appellant was represented by an attorney until after the default judgment was entered. The Court concludes plaintiff’s attorney had no duty to inform the defendant or its attorney that a judgment had been entered.

In its third point, appellant claims that imputing the conduct of appellant’s attorney and insurer to appellant denied appellant due process of law. The United States Supreme Court holds that it is not unjust for a client to be bound by the acts of his attorney. Link v. Wabash Railroad Co., 370 U.S. 626, 634, 82 S.Ct. 1386, 1390, 8 L.Ed.2d 734 (1962). We discern no rationale for distinguishing between an attorney and an insurance company in this context. This point is denied.

In its fourth point, appellant claims that respondent’s petition does not state a cause of action. In remanding the present case, Sprung I did not direct or suggest that the trial court consider this issue, although the issue was before the court, thus implicitly rejecting the claim. This Court will nonetheless consider whether the petition states a cause of action.

Initially, this Court notes the sufficiency of a petition may be raised at any stage of a proceeding, including on appeal after judgment. Sumpter v. J.E. Sieben Construction Co., 492 S.W.2d 150, 153 (Mo.App.1973).

But when the attack on the sufficiency of the petition is made for the first time on appeal, the pleading will be held good unless it it [sic] wholly fails to state a cause of action, and in this determination, the petition will be given its fullest intendment as a claim for relief. Ellyson et ux v. Missouri Power & Light Co., Mo.App., 59 S.W.2d 714, 717. A petition will be found sufficient after judgment if, after allowing those reasonable inferences and matters necessarily implied from the facts stated, there [are] sufficient [allegations] to advise the defendant with reasonable certainty as to the cause of action it is called upon to meet and bar another action for the same subject-matter. Barber v. Allright Kansas City, Inc., Mo.App., 472 S.W.2d 42, 44.

Sumpter, 492 S.W.2d at 153.

Applying these principles to respondent’s petition, the Court finds that the petition states a valid claim for damages which were the result of appellant's negligence. The petition alleges by clear implication that appellant had a duty to provide a reasonably safe cart. It further states that appellant breached this duty by supplying a cart which was not reasonably safe. Specifically, the petition alleges that the wheels on the cart were in a poor state of repair and not safe when used on uneven ground. The petition further states that the cart, as rented, was not safe for the use intended in that it could not hold a load of drywall without tipping over. The petition concludes that as a proximate result of the breach the respondent was damaged. All the elements of negligence— duty, breach, proximate cause and damage — are sufficiently stated, American Mortgage Investment Co. v. Hardin-Stockton Corp., 671 S.W.2d 283, 292-93 (Mo.App.1984), to advise appellant as to the cause of action and to bar another action on the same subject matter. Sumpter, 492 S.W.2d at 153.

The respondent chose to base his claim against appellant upon a general negligence theory. Appellant’s assertion that the petition states a cause of action for negligently furnishing a dangerous instrumentality is without merit. The term “dangerous” or “dangerous condition” does not appear in the petition. Accordingly, appellant’s reliance on Ridenhour v. Colson Caster Corp., 687 S.W.2d 938 (Mo.App.1985) is misplaced. Ridenhour was a wrongful death action involving a gratuitous bailment; the present action involves a non-gratuitous bailment. This point is denied.

The judgment of the trial court is affirmed.

COVINGTON, J., concurs in separate opinion filed. RENDLEN, J., concurs in separate opinion filed and concurs in separate concurring opinion of COVINGTON, J. HIGGINS, J., concurs and concurs in separate concurring opinion of COVINGTON, J. ROBERTSON, J., dissents in separate opinion filed. BLACKMAR, C.J., dissents in separate opinion filed and concurs in separate dissenting opinion of ROBERTSON, J. WELLIVER, J., dissents in separate opinion filed and concurs in separate dissenting opinions of BLACKMAR, C.J., and ROBERTSON, J.

1 . This Court treats points one and two of appellant's brief as presenting a single issue.

2 . Because appellant has failed to show good cause or excuse for the default, the Court need not decide whether the trial court erred in determining that respondent would sustain no injustice as a result of delay were the judgment to be set aside.

3 . This issue was presented to the court in the briefs filed in that case. See Lemmon v. Continental Casualty Co., 350 Mo. 1107, 169 S.W.2d 920, 926 (Mo.1943) (The Court took judicial notice of its own records in order to set forth facts not contained within opinions of cases to which it looked for guidance.)