La Casa I, LLC v. Gottfried
| Decision Date | 18 October 2022 |
| Docket Number | 2021-CA-00347-COA |
| Parties | LA CASA I, LLC AND EDEN HASEN KERNS APPELLANTS v. TERRI D. GOTTFRIED AND ROBERT J. GOTTFRIED APPELLEES |
| Court | Mississippi Court of Appeals |
BEFORE WILSON, P.J., McDONALD AND SMITH, JJ.
¶1. Terri and Robert Gottfried filed a complaint in May 2017 against La Casa I, LLC and Eden Hasen Kerns for breach of contract and fraud in the inducement. La Casa and Eden failed to timely respond to the complaint, and the Gottfrieds successfully applied for the clerk's entry of default in July 2017. La Casa and Eden subsequently filed separate answers and a joint motion to set aside the clerk's entry of default in August 2017. The Harrison County Circuit Court denied the motion to set aside the entry of default in June 2018. La Casa and Eden filed a joint motion to reconsider in July 2018, and the trial court denied the motion in September 2018. The trial court held a hearing on the Gottfrieds' claims for damages and subsequently entered final judgment with damages ordered solely against La Casa, not Eden. Aggrieved, La Casa and Eden appeal from the judgment in favor of the Gottfrieds based the trial court's denial of their motion to set aside the entry of default and the trial court's denial of their motion to reconsider. Finding sufficient evidence supported the trial court's denying the requested relief of setting aside the entry of default, we affirm the trial court's final judgment in part as to La Casa. Because the judgment was not made final against Eden, we dismiss the appeal in part as to her.
¶2. Eden Hasen Kerns (Eden)[1] purchased residential property located at 13249 Paradise Lane, Biloxi, Mississippi (the "property"), on January 23, 2015. On November 23 2016, Terri and Robert Gottfried signed and submitted an offer seeking to purchase the property and residence. Provision 7(B) of the offer stipulated that a "Property Condition Disclosure Statement" (PCDS) was required to be delivered to the Gottfrieds after they submitted their offer in accordance with Mississippi Code Annotated sections 89-1-501 to 89-1-527 (Rev. 2021).
¶3. The PCDS for the property was completed and dated November 25, 2016, and listed the "SELLER(S)" as "La Casa I LLC". Pursuant to the terms of the offer, the PCDS was delivered to, and receipt was acknowledged by, the Gottfrieds on November 26, 2016. Thereafter, upon seemingly accepting the Gottfrieds' offer, Eden signed the offer contract and thereby executed a "Contract for the Sale and Purchase of Real Estate" (the "sale contract") with the Gottfrieds on November 29, 2016.[2]
¶4. The Gottfrieds closed the sale transaction and purchased the property from La Casa on December 30, 2016. As part of the closing documents, the Gottfrieds signed a "Declaration of Acceptance" in which the Gottfrieds agreed to the following statements: all terms of the contract had been complied with to their satisfaction; they accepted the property in the condition it was in; the consideration they paid was fair, reasonable, and acceptable; and they understood that by accepting the deed, the seller would have no further responsibility or liability for any repairs and would be held harmless for any representations in the contract or other form.
¶5. The Gottfrieds moved into the residence on the property in January 2017, and shortly after allegedly began having problems with the septic system and with flooding in the garage. On May 10, 2017, the Gottfrieds filed a complaint against La Casa, Eden, and Alain Harpin.[3]The complaint included claims for breach of contract and fraud in the inducement and sought damages of $150,000 for breach of contract and $150,000 for fraud. Additionally, the Gottfrieds claimed they were entitled to punitive damages in the amount of $150,000, as well as attorney's fees.
¶6. Summonses were issued for La Casa and Eden on May 10, 2017. La Casa was incorporated in Nevada and was not registered to do business in Mississippi at the time. Because La Casa was not registered in Mississippi, on May 23, 2017, the Gottfrieds served process on La Casa by serving the Mississippi Secretary of State pursuant to Mississippi Code section 79-29-1013(4) (Rev. 2013). On May 30, 2017, the Secretary of State, in turn, mailed a copy of the service of process by way of certified mail with a return-receipt-requested envelope to La Casa's registered agent, Mark Sherman, in Las Vegas, Nevada. A copy of the Secretary of State's letter and the delivery receipt were filed in the record, showing that Tiffany Mitchell, one of Sherman's employees, received the envelope and signed the mailing receipt on June 2, 2017.
¶7. Eden's address of record was in Las Vegas, Nevada, as found in the property deeds.[4]Since Eden was not a resident of Mississippi, the Gottfrieds served process on her through certified mail. The certified mail envelope submitted as evidence in the record shows it was sent to Eden at "106 English Oak Str." The envelope indicates it was marked "Return to Sender Not Deliverable As Addressed Unable to Forward." However, the address appears to have been corrected at some point by someone who crossed out "106" and wrote "1604" to the side. The face of the envelope shows the word "REFUSED" written on the front, along with a red ink-stamped box that provided lines related to "notice" and seemingly contained the date "6-1" added by hand.
¶8. La Casa and Eden failed to answer the Gottfrieds' complaint within the required time. See M.R.C.P. 12(a). Consequently, the Gottfrieds filed their application to the clerk for entry of default against La Casa and against Eden on July 24, 2017. The clerk filed an entry of default as to both La Casa and Eden that same day (July 24, 2017). Then, on July 25, 2017, the Gottfrieds filed a notice of hearing informing the parties of record that the Gottfrieds set a court date of August 24, 2017, for a hearing on their complaint, motion for default judgment, and assessment of damages.
¶9. On August 13, 2017, before the Gottfrieds' scheduled hearing, La Casa and Eden each filed a separate answer to the complaint. La Casa and Eden subsequently filed a joint motion to set aside the clerk's entry of default on August 18, 2017.[5] They also filed a joint motion seeking leave to file a third-party complaint on August 18, 2017. The circuit court held a hearing on August 24, 2017, to allow La Casa and Eden to present the motion to set aside the clerk's entry of default.
¶10. About ten months after the hearing, having not yet received a ruling from the court, the Gottfrieds filed a notice on June 13, 2018, informing the parties that they had set a status conference with the court for June 28, 2018. But on June 27, 2018, the circuit court entered its order denying La Casa's and Eden's motion to set aside the clerk's entry of default. In reaching its conclusion, the court addressed whether La Casa and Eden had shown good cause for setting aside the entry of default, considering the legitimacy of the reason for default, the existence of a colorable defense, and the extent of prejudice to the Gottfrieds. The court determined that service of process was proper as to both La Casa and Eden and that the affidavits submitted in support of their motion did not sufficiently refute that service was proper or explain why they did not timely answer the complaint. The court further held that the defense that was offered, placing blame on the subcontractor, was not a sufficient colorable defense. Lastly, the court found that the Gottfrieds would not suffer immediate prejudice in the pursuit of the asserted claims if the entry of default were set aside, but the court did specifically acknowledge the continued damage the Gottfrieds endured due to raw sewage in their backyard.
¶11. On July 6, 2018, La Casa and Eden filed a motion to reconsider pursuant to Mississippi Rule of Civil Procedure 59(e).[6] La Casa and Eden requested the trial court to reconsider its June 27, 2018 order denying their motion to set aside the clerk's entry of default in order to correct an error of law. They argued that the court failed to take into consideration the other defenses they asserted besides the alleged third-party liability of the subcontractor. According to La Casa and Eden, when considered in conjunction with the court's finding of no prejudice, the defenses asserted should have been sufficient to meet the requisite standard under the law. Specifically, La Casa and Eden stated that they asserted the additional defenses of the Gottfrieds' failure to inspect the plumbing as conditioned in the contract and that La Casa and Eden were unaware of problems with the property because the subcontractor had represented that all issues were repaired. The trial court held a hearing on the motion to reconsider and denied the motion on September 17, 2018.
¶12. The following year, in November 2019, the Gottfrieds set a court date regarding the assessment of damages. The trial was held as scheduled on December 19, 2019, during which testimony was elicited from both Robert Gottfried and Terri Gottfried, as well as from a designated expert witness in septic systems.
¶13. At the conclusion of the trial, the court took the matter under consideration. On February 24, 2021, the trial court entered its judgment against La Casa for damages on the Gottfrieds' claims for breach of contract and fraud in the inducement. The trial court specifically provided the following language in the judgment:
The Plaintiffs submitted proof ....
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