Trial Court Did Not Err in Setting Aside Default Judgment

W. Dudley McCarter
Behr, McCarter & Potter
St. Louis

Cindy and Randall Brungard sued Risky’s, alleging that Randall was injured when he slipped and fell on Risky’s property. Later, the Brungards amended their petition and added Patti Cakes Baking Company as a defendant. James Wedig, one of the owners of Patti Cakes and its registered agent, was served with the summons. When Patti Cakes did not file a responsive pleading within 30 days following service, the Brungards moved for a default judgment and, following a hearing, the trial court entered a default judgment in favor of the Brungards. Less than a month later, Patti Cakes filed a motion to set aside the default judgment, along with an affidavit of James Wedig, stating that he believed he faxed the summons to his insurance agent and that he contacted his insurance agent immediately after he learned of the default judgment. Based on Wedig’s affidavit, the trial court sustained Patti Cakes’ motion to set aside the default judgment. The Supreme Court of Missouri affirmed in Brungard v. Risky’s, Inc.¹

“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.’”² “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.”³ “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.”⁴

“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. . . . “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.

“Wedig’s affidavit provides an adequate basis to support a finding that he did not intentionally impede the judicial process. . . . 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.”⁵ “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.”⁶

Property Acquired in Contemplation of Marriage Found to Be Marital Property

Deanna D. Vinson appealed the trial court’s judgment dissolving her marriage to Ray Vinson. The trial court found that the business at which they both worked, American Equity Mortgage (AEM), was marital property. The trial court divided marital property of approximately $73,000,000 in such a manner that Deanna received more than $61,000,000 and Ray received more than $11,000,000. Deanna was awarded the company but was required to pay Ray $16,000,000 over four years. The trial court’s judgment was affirmed in Vinson v. Vinson.⁷

“This dissolution matter, which had no child custody or support issues and no requests for maintenance by either party, consumed eleven days of hearings and over 2,700 pages of transcript. The trial court’s detailed judgment is 54 pages long. The parties relentlessly visited this court during the pendency of the dissolution and can seemingly agree only that the marriage is irretrievably broken. . . .”⁸

Deanna first contends that the trial court erred in finding American Equity Mortgage to be marital property because, under the doctrine of judicial estoppel, Ray was estopped from asserting an interest in the company “because he had earlier disclaimed an interest during his bankruptcy and a 1994 deposition.”⁹ The application of judicial estoppel “to bar a party from asserting an interest in property during division of property in a dissolution proceeding is an issue of first impression. ‘Judicial estoppel applies to prevent litigants from taking a position in one judicial proceeding, thereby obtaining benefits from that position in that instance and later, in a second proceeding, taking a contrary position in order to obtain benefits from such a contrary position at that time.’”¹⁰ “[T]he United States Supreme Court has indicated that whether judicial estoppel applies requires the consideration of three factors:

First, a party’s later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party’s earlier position . . . . A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”¹¹

“The trial court found that the term ‘interest’ [in Ray’s] bankruptcy petition was so vague in meaning that [his]”¹² denial of any interest in American Equity Mortgage was of little significance. The trial court did not err in its finding that the meaning of “interest” was not sufficiently clear to justify the application of judicial estoppel and that Ray’s later position was not clearly inconsistent with his earlier position. The trial court also found that Ray’s statement from a 1994 deposition merely indicated that he did not, at that time, own stock in American Equity Mortgage, which was consistent with his position in the dissolution proceeding.

“’In general, property acquired by a spouse prior to marriage is . . . separate property upon dissolution of marriage, and property acquired during the marriage is marital property subject to division.’”¹³ “However, property acquired in contemplation of marriage that is intended to be marital property has been construed to be marital property.”¹⁴ “[S]ubstantial evidence supports the trial court’s finding that [Deanna and Ray] formed AEM in contemplation of marriage. Ray and Deanna were engaged and living together when AEM was started and they worked together as a team to grow the business. “In addition, evidence regarding the capitalization of AEM [i.e., Ray contributed approximately $7,000 to start the business] supports a finding that AEM was formed in contemplation of marriage.”

In Peronal Injury Suit, Plaintiff May Recover for Future Damages That are Reasonably Certain to Occur

Anna Berthelsen was injured in an accident involving a truck driven by an employee of URS Corporation. Anna sustained severe head trauma and significant brain injuries. The evidence at trial established that Anna would most likely not be able to attend college and, therefore, lose approximately $1.5 million in wages. There was also evidence that she would need care nearly on a daily basis and that this would cost $8 million dollars. The jury returned a verdict for $25 million and the Court of Appeals affirmed in Berthelsen v. URS Corporation.¹⁵

“A plaintiff is entitled to recover for future damages as long as he or she can prove that the damages are reasonably certain to occur.”¹⁶ “’The degree of probability of such damages must be greater than a mere likelihood; it must be reasonably certain to ensue…consequences which are contingent, speculative or merely possible may not be considered.’”¹⁷ “Usually, future damages are a matter of medical opinion that require expert medical testimony.”¹⁸ “URS claims that, because Berthelsen’s own experts could not opine with reasonable certainty that she will develop [any specific medical condition], she did not present sufficient evidence on future damages. Merely because Berthelsen did not present evidence on one particular type of future damages – i.e. future surgeries or future diseases – does not mean, however, that the circuit court erred in submitting the issue of future damages to the jury. The evidence . . . was sufficient to submit the issue to the jury.”¹⁹

URS also contends that the verdict was excessive. “An excessive verdict can arise in two situations: when the jury makes an honest mistake in weighing the evidence as to the nature and extent of the injury and awards a disproportionate amount of damages and when the jury is biased by trial misconduct.”²⁰ “When the jury makes an honest mistake in calculating the damages, remittitur is appropriate without re-trial, but, if the jury is biased by trial misconduct, a new trial is appropriate.”

“URS does not argue that trial misconduct prejudiced the jury and resulted in a grossly excessive verdict. It claims that the jury made an honest mistake in calculating the damages and a remittitur is required. We must exercise caution in interfering with a jury’s award. We review the evidence in a light most favorable to the verdict, and only when a verdict is ‘manifestly unjust’ should we intervene. Id. In evaluating the reasonableness of compensatory awards, courts typically use these factors: (1) loss of present and future income; (2) medical expenses; (3) plaintiff’s age; (4) the nature and extent of plaintiff’s injuries; (5) economic consideration; (6) awards approved in comparable cases; and (7) the trial court’s and jury’s superior opportunity to evaluate plaintiff’s injuries and other damage. Id. at 928. Courts also may consider ‘certain intangibles’ that do not lend themselves to precise calculation, such as past and future pain, suffering, effect on life-style, embarrassment, humiliation and economic loss. Id.

“The jury’s award of $25 million dollars was not excessive and the court did not err in not remitting it. The evidence established that Berthelsen lost income potential of nearly $1.2 million”²¹ and would need support for the rest of her life at a cost of nearly $8 million. “Although Berthelsen’s award is on the high end of the spectrum of cases cited by the parties, we cannot say that the facts of this case do not justify the award.”²²

When Damages Are Capable of Ascertainment is An Objective Standard

Herbert A. Graham filed suit against the Roman Catholic Archdiocese of St. Louis in July of 2003, alleging that he was sexually abused by a Catholic priest between 1983 and 1986, starting when he was 11 and ending when he was 14. Graham admitted that he always had memory of the priest’s conduct, but stated he did not understand that these acts constituted sexual abuse. In 1995 and 1996, he informed his mother, his then-wife, and a friend about the acts of sexual abuse. In 1998, Graham confronted the priest regarding his acts of sexual abuse. The Archdiocese filed a motion for summary judgment contending that the claims were time-barred by the statute of limitations. The trial court granted this motion and the Court of Appeals affirmed in Graham v. McGrath.²³

The finding that plaintiff’s claims were barred by the statute of limitations was not in error under Powell v. Chaminade College Preparatory, Inc.²⁴ “In Powell, the Missouri Supreme Court explained that, in determining when damages are capable of ascertainment, ‘the issue is not when the injury occurred, or when plaintiff subjectively learned of the wrongful conduct and that it caused his or her injury, but when a reasonable person would have been put on notice that an injury and substantial damages may have occurred and would have undertaken to ascertain the extent of the damages.’” “[T]he issue is not when a plaintiff is subjectively aware of his injury; subjective awareness of damages does not resolve the question of when those damages were objectively capable of ascertainment.”²⁵ “Under Powell, damages are capable of ascertainment when ‘the evidence (is) such to place a reasonably prudent person on notice of a potentially actionable injury.’”²⁶

“In 1995 and 1996, plaintiff had memory of the acts constituting sexual abuse, he was beginning to understand that he was a victim of sexual abuse, and he confided in his loved ones about these acts.”²⁷ “[T]he evidence was then sufficient to put a reasonable person on notice that ‘an injury and substantial damages may have occurred,’ therefore, plaintiff’s damages were capable of ascertainment in 1996, at the latest.”²⁸ “Because [p]laintiff filed his suit more than five years later in 2003, his causes of action against the Archdiocese are barred by the statute of limitations.”²⁹

Injured Worker Must Plead and Prove “Something Extra” to Maintain a Negligence Suit Against His Supervisor

James Scherzer brought a negligence suit against his supervisor, Jeffrey Patton, for the personal injuries he sustained while operating a book-trimming machine. Scherzer was injured when he stuck his hand into a chute that was clogged with paper while the book-trimming machine was still operating. Scherzer alleged that his supervisor told him to watch the chute for clogs, but did not instruct him on how to deal with the clogs, nor told that he should shut off the machine before trying to dislodge any blockage. Patton filed a motion to dismiss, raising the defense that Scherzer’s exclusive remedy was under the workers’ compensation law. The trial court denied the motion, but the Court of Appeals made its preliminary writ absolute in State ex rel. Patton v. Grate.³⁰

“The Workers’ Compensation Law is the exclusive remedy for injury”³¹ sustained by an employee from accidents arising out of and in the course of employment. “[I]mmunity from negligence suits is extended to co-employees for failure to maintain a safe work environment.”³² “A fellow employee may be sued, however, for ‘affirmative negligent acts outside the scope of an employer’s responsibility to provide a safe work place.’”³³ “[W]hat constitutes an affirmative negligent act is not ‘susceptible of reliable definition’ and must be determined on a ‘case-by-case basis with close reference to the facts in each individual case.’”³⁴ “[A]n affirmative act is one ‘that creates additional danger beyond that normally faced in the job-specific work environment.’”³⁵

“[F]or a suit to escape the exclusive jurisdiction of the workers’ compensation law, the supervisor must have ‘created a hazardous condition by personally directing the (employee) to engage in conduct’ that resulted in injury or causing the injury.”³⁶ Nowlin ex rel. Carter v. Nichols, 163 S.W.3d 575, 578 (Mo. App. 2005). “‘An affirmative negligent act is not synonymous with any negligent act, as the law requires a purposeful act “directed” at a co-employee.’”³⁷ Here, although the supervisor may have breached a duty to supervise or provide a safe workplace, his actions do not rise to the level of an affirmative, negligent act resulting in the employee’s injury. Scherzer’s petition fails to allege the “something more” that would permit him to seek a remedy outside the exclusive jurisdiction of the Workers’ Compensation law.

Ordinance Regulating Junkyards Was Valid Exercise of Police Power and Protected Public Health, Safety and Welfare

St. Charles County filed suit against St. Charles Sign & Electric, Inc., requesting an injunction and payment of fines. In its suit, the county alleged that St. Charles Sign did not have fencing, in violation of the county’s ordinance requiring it for businesses that store inventory outdoors consisting of reclaimed, junked, salvaged, scrapped or otherwise previously used inventory. The trial court entered judgment in favor of St. Charles Sign, but the Court of Appeals reversed in St. Charles County v. St. Charles Sign & Electric, Inc.³⁸

“[T]he ordinance at issue here was enacted pursuant to the police power of St. Charles County.”³⁹ “‘The purpose of police power is to promote the public health, safety and welfare.’”⁴⁰ “While police power is not unlimited, it is very broad. To determine whether or not an ordinance is enacted pursuant to a legitimate exercise of police power, the court considers whether the requirements of the ordinance have a substantial and rational relationship to the health, safety, peace, comfort and general welfare of the inhabitants of the municipality. If an ordinance is enacted pursuant to valid police power under this test, the ordinance is presumed valid. The party challenging the ordinance must negate every potential basis that might support it.”⁴¹ “‘If reasonable minds might differ as to whether a particular ordinance has a substantial relationship to the protection of the general health, safety or welfare of the public, then the issue must be decided in favor of the ordinance.’”⁴²

Here, “St. Charles County sought to regulate the outdoor storage of essentially scrap or junk items by businesses, and as in the regulation of junkyard storage of such items, sought to regulate potential nuisances for health and safety reasons.”⁴³ “The ordinance requires that essentially junk or scrap inventory stored outdoors must be enclosed by a fence.”⁴⁴ “[T]he ordinance . . . protects against ‘unsightliness,’ as well as any potential safety hazard to the public.”⁴⁵ “[T]he requirement that particular inventory stored outdoors must be enclosed by a fence bears a substantial and rational relationship to the health, safety, peace and general welfare of the public, and the ordinance is a proper use of St. Charles County’s police powers.”⁴⁶

Moreover, “the ordinance at issue [here] was not a zoning ordinance;”⁴⁷ therefore, St. Charles Sign is not relieved from complying with the ordinance as a nonconforming use. Also, because the regulation at issue here was a valid exercise of St. Charles County’s police power, no regulatory taking occurred. “The ordinance in question expressly defines the specific inventory subject to the fencing requirement. . . . There is statutory and common law authority supporting the enactment of the ordinance pursuant to St. Charles County’s police powers.”⁴⁸

Jury Verdict for Actual Damages Based on Wrongful Employment Termination Upheld, But Remanded for Reconsideration of Punitive Damages

Kyle Kelly worked as a loss prevention agent for Bass Pro Outdoor World. Several Bass Pro employees observed a car on the Bass Pro parking lot that appeared to be abandoned. One of the employees used a “slim jim” to open a door of the vehicle and then searched through it in an effort to find ownership information. This entry was recorded by a security camera. Kelly learned of this entry into the vehicle, and believing a crime had been committed by the employee who did it, reported the incident to management. Kelly was instructed to not talk to anyone else about it, but Kelly did discuss it with another employee. Kelly was then terminated for disobeying the order that he refrain from discussing the incident with anyone else. Kelly filed a wrongful termination suit against Bass Pro, alleging that he was a “whistle blower” and terminated in violation of the public policy exception to Missouri’s employment-at-will doctrine. The jury found in Kelly’s favor, awarding him $4,300 in actual damages and $2.8 million in punitive damages. The Court of Appeals affirmed the verdict for actual damages, but remanded the punitive damages award in Kelly v. Bass Pro Outdoor World, LLC.⁴⁹

“The employment-at-will doctrine provides that an employer can discharge an at-will employee at any time for cause or without cause.”⁵⁰ “One public policy exception to the at-will employment doctrine ‘provides that an at-will employee who has been discharged by an employer in violation of a clear mandate of public policy has a cause of action against the employer for wrongful discharge.’”⁵¹ “In Dunn v. Enterprise Rent-A-Car, 170 S.W.3d 1 (Mo. App. E.D. 2005), this Court held it was unnecessary for an employee to ‘allege or prove conclusively the law has been violated in order to state a cause of action,’ when the employee held a reasonable belief that illegal conduct or conduct against a clear mandate of public policy has occurred.”⁵² “Moreover, public policy encourages an ‘employee to report suspected wrongdoing by co-workers,’ which he or she reasonably believes to have occurred.”⁵³ Here, “we believe Kelly made a submissible case for wrongful termination based upon his reasonable belief that [another employee] committed a crime by entering [into the] vehicle”⁵⁴ parked on the parking lot, without the owner’s consent. “Moreover, there was ample evidence presented that linked Kelly’s termination with the reporting of the incident.”⁵⁵

“‘A submissible case [for punitive damages] is made if the evidence and the inferences drawn therefrom are sufficient to permit a reasonable juror to conclude that the plaintiff established with convincing clarity – that is, that it was highly probable – that the defendant’s conduct was outrageous because of evil motive or reckless indifference.’”⁵⁶ Kelly presented sufficient evidence to submit the issue of punitive damages to the jury. “As a general matter, the assessment of punitive damages is a function left primarily for the jury.”⁵⁷ “‘[F]ew awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.’”⁵⁸ “Moreover, ‘an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.’”⁵⁹ “Further, [the court] ‘must ensure the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered.’”⁶⁰

“In this case, Kelly was awarded $4,300.00 in compensatory damages . . . and $2.8 million in punitive damages. This resulted in a ratio of 651 to 1. This ratio raises a presumption of unconstitutionality [under] Campbell.”⁶¹ “Upon examining whether the punitive damages award was reasonable and proportionate to the harm Kelly suffered by being terminated and unemployed for a relatively brief time, we must find the award is excessive and disproportionate.”⁶² The punitive damage award is reversed and remanded to the trial court for reconsideration consistent with this opinion.

Footnotes

¹ No. SC 88654 (Mo. banc 2007).

² Brungard, quoting Continental Basketball Ass’n. v. Harrisburg Professional Sports, Inc., 947 S.W.2d 471, 473 (Mo. App. E.D. 1997).

³ Brungard, citing Hopkins v. Mills-Kluttz, 77 S.W.3d 624, 626 (Mo. App. E.D. 2002).

⁴ Brungard, citing Beckmann v. Miceli Homes, Inc., 45 S.W.3d 533, 542 (Mo. App. E.D. 2001).

⁵ Brungard, citing Gibson by Woodall v. Elley, 778 S.W.2d 851 (Mo. App. W.D. 1989).

⁶ Brungard.

⁷ No. E.D. 88701 (Mo. App. E.D. 2007).

⁸ Id.

⁹ Id.

¹⁰ Id., quoting Besand v. Gibbar, 982 S.W.2d 808, 810 (Mo. App. E.D. 1998).

¹¹ Id., quoting Zedner v. United States, 126 S.Ct. 1976 (2006).

¹² Id.

¹³ Id., quoting James v. James, 108 S.W.3d 1, 4 (Mo. App. S.D. 2002).

¹⁴ Id., citing Selby v. Selby, 149 S.W.3d 472, 489-490 (Mo. App. W.D. 2004).

¹⁵ No. W.D. 66837 (Mo. App. W.D. 2007).

¹⁶ Id., citing Swartz v. Gale Webb Transportation Corp., 215 S.W.3d 127, 130 (Mo. banc 2007).

¹⁷ Id., quoting McKersie v. Barnes Hospital, 912 S.W.2d 562, 566 (Mo. App. E.D. 1995).

¹⁸ Id.

¹⁹ Id.

²⁰ Id., citing Knifong v. Caterpillar, Inc., 199 S.W.3d 922, 927 (Mo. App. W.D. 2006).

²¹ Id.

²² Id.

²³ No. E.D. 89168 (Mo. App. E.D. 2007).

²⁴ 197 S.W.3d 576 (Mo. banc 2006).

²⁵ Id., citing Powell v. Chaminade College Prepatory, Inc., 197 S.W.3d 576 (Mo. banc 2006).

²⁶ Id. at 583.

²⁷ Id.

²⁸ Id., quoting Powell, 197 S.W.3d at 584.

²⁹ Id., citing § 516.120(4), RSMo.

³⁰ No. WD 67622 (Mo. App. W.D. 2007).

³¹ Id.

³² Id., citing State ex rel. Taylor v. Wallace, 73 S.W.3d 620, 621 (Mo. banc 2002).

³³ Id., quoting State ex rel. Taylor v. Wallace.

³⁴ Id. at 622.

³⁵ Id., quoting Burns v. Smith, 214 S.W.3d 335, 338 (Mo. banc 2007).

³⁶ Id. quoting Nowlin ex rel. Carter v. Nichols, 163 S.W.3d 575, 578 (Mo. App. W.D. 2005).

³⁷ Id. at 579.

³⁸ No. ED 89506 (Mo. App. E.D. 2007).

³⁹ Id., citing City of Green Ridge v. Kreisel, 25 S.W.3d 559 (Mo. App. W.D. 2000).

⁴⁰ Id., quoting Bezayiff v. City of St. Louis, 963 S.W.2d 225, 229 (Mo. App. E.D. 1997).

⁴¹ Id., citing Bezayiff.

⁴² Id., quoting Bezayiff.

⁴³ Id.

⁴⁴ Id.

⁴⁵ Id.

⁴⁶ Id.

⁴⁷ Id.

⁴⁸ Id.

⁴⁹ No. ED 88392 (Mo. App. E.D. 2007).

⁵⁰ Id., citing Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 870-71 (Mo. App. W.D. 1985).

⁵¹ Id., quoting Williams v. Thomas, 961 S.W.2d 869, 873 (Mo. App. S.D. 1998).

⁵² Id.

⁵³ Id., citing Dunn v. Enterprise Rent-A-Car, 170 S.W.3d at 10 (Mo. App. E.D. 2005).

⁵⁴ Id.

⁵⁵ Id., citing Dunn, 170 S.W.3d at 9.

⁵⁶ Id., quoting Brady v. Curators of the University of Missouri, 213 S.W.3d 101, 109 (Mo. App. E.D. 2006).

⁵⁷ Id., citing Miller v. Levering Regional Healthcare Center, 202 S.W.d 2d 614, 618 (Mo. App. E.D. 2006).

⁵⁸ Id., quoting State Farm Mut. Ins. v. Campbell, 538 U.S. 408, 424, 123 S. Ct. 1513 (2003).

⁵⁹ Id.

⁶⁰ Id. at 426.

⁶¹ Id.

⁶² Id.