Everest Reinsurance Co. v. Kerr

• Decision Date: 20 May 2008
• Docket Number: No. WD 68417.,WD 68417.
• Citation: 253 S.W.3d 100
• Parties: EVEREST REINSURANCE COMPANY, Respondent, v. Sharon KERR, Defendant, David Kerr, Appellant.
• Court: Missouri Court of Appeals

253 S.W.3d 100

EVEREST REINSURANCE COMPANY, Respondent, v. Sharon KERR, Defendant, David Kerr, Appellant.

No. WD 68417.

Missouri Court of Appeals, Western District.

May 20, 2008.

Emily Wiggins Little, Columbia, MO, for respondent.

Keith Joseph Schieber, St. Joseph, MO, for appellant.

Before JOSEPH M. ELLIS, Presiding Judge, LISA WHITE HARDWICK, Judge and JOSEPH P. DANDURAND, Judge.

JOSEPH M. ELLIS, Judge.

David Kerr appeals from a default judgment entered against him in favor of Respondent Everest Reinsurance Company.

On February 5, 2007, Respondent filed a petition for conversion or, in the alternative, unjust enrichment against Appellant and his wife, Sharon Kerr,¹ in the Circuit Court of Holt County. The petition alleged that Mrs. Kerr came into possession of an allegedly counterfeit check drawn on Respondent's bank account. The check was made payable to Mrs. Kerr alone; Appellant's name did not appear on the check. The petition further alleged that Mrs. Kerr knowingly and fraudulently deposited the check in an account in her name alone, that she thereafter withdrew the funds from that account, and that she and Appellant benefited from the funds.

At all times relevant to these proceedings, Appellant lived in Stafford, Texas, and Mrs. Kerr resided in Holt County, Missouri. Appellant was served at his residence on February 20, 2007. In response, Appellant sent a letter dated March 3, 2007, addressed to the Circuit Clerk of Division 1, which stated as follows:

RE: Case Number 07HO-CV00008 Subject: Answer to Petition Dear [Circuit Clerk]:

This letter is in response to the Summons to appear in circuit court served upon me on February 20, 2007, regarding the referenced case number.

Because the petition attached to the Summons contained many false statements and false accusations, the plea from me in this matter is NOT GUILTY.

A like response has been sent to the Plaintiff's attorney as requested by the Summons.

The letter was file-stamped March 9, 2007, within thirty days from when Appellant was served,² and the docket sheet contains a corresponding entry of "Answer to Petition — David Kerr." On March 26, 2007, Respondent filed a motion for default judgment alleging that Appellant's letter was not sufficient to constitute an answer under Rules 55.01, 55.07, 55.09, and 55.11. The court set the motion for a hearing.

At the default hearing, Appellant and Mrs. Kerr both appeared pro se and Respondent appeared by counsel. Appellant and Mrs. Kerr both made statements on the record, although it does not appear that they were ever placed under oath. Appellant argued that he was not in default because he answered the petition in accordance with the summons, explaining:

[The summons] had no direction how it was to be answered, just to be answered. I learned later, well, there's rules. Well, I sought counsel in Texas and they were not able to help me on how to respond to this, but you have to respond to it. So I drafted a letter, signed it, sent it to the court, and a copy to the attorney, and gave a copy to my wife so she could sign it and send it in. As far as I'm concerned, we had answered that petition. So we were not in default.

Appellant later asked the court for leave to amend his answer if necessary, stating, "Your Honor, I know this is within your own discretion, but if that answer is not acceptable to the court I would like to submit that I would like to do a supplemental pleading in accordance with 55.33(d), delta." The court made no reply to this request.

Appellant also responded to the allegations in the petition at the default hearing. He stated that he had no knowledge of the transactions at issue other than what his wife told him. He explained that the check was given to Mrs. Kerr while he was in Texas and that she told him she contacted Respondent upon receipt of the check to ask about the validity of the check, Respondent indicated it was a "good check," and Mrs. Kerr deposited the check "thinking that it was a good check." Appellant argued that Respondent could not prove that he or Mrs. Kerr knowingly did anything wrong concerning the check, especially since he was in Texas at the time and the check took five weeks to clear the bank. Appellant admitted that "they received the funds and [Mrs. Kerr] shouldn't have been entitled to them" but stated that he "can't admit to all the other stuff that is in this petition."

Mrs. Kerr then told the court that "everything that [Appellant] had said is true" and Appellant "did not have anything to do with this check," explaining that she and Appellant were separated when she received the check. Mrs. Kerr stated that she contacted Respondent and talked to Kevin Helewa when she received the check and that she told him she had received the check; gave him the amount, routing number, account number, and check number; and asked if Respondent was aware that she had received the check. She stated that Mr. Helewa said he was not aware of the check but that that was not unusual, so she asked if it was a "good check" and what she should "do with it," and Mr. Helewa told her to "[d]o whatever you want with it" and that she could deposit the check. She insisted that she did not know the check was counterfeit.

At the conclusion of the hearing, the court indicated that it would be entering judgment in favor of Respondent in the principal amount of $154,881.54. The court explained that Appellant would be included in the judgment because "the petition pleads that he received benefits of these funds and demand has been made from him and the funds were retained." The court subsequently entered a default judgment dated April 16, 2007, in favor of Respondent and against Appellant and Mrs. Kerr, jointly and severally, for $154,881.45 plus costs.³

Appellant hired an attorney shortly thereafter and, on May 3, 2007, filed multiple motions, including a motion for leave to file an amended answer under Rule 55.33(a), a motion for new trial under Rule 78.01, and a motion to set aside the default judgment under Rule 74.05(d). In the motion for new trial, Appellant contended that the judgment was improper because a pleading denominated an "answer" had been filed and entered by the circuit clerk and no motion to strike had been filed. In the motion to set aside, Appellant asserted that he had a meritorious defense because the check was not made payable to him, he did not sign the check, the funds were not deposited into a joint checking account, and he had no involvement in creating or depositing the check. He argued that there was good cause to set aside the judgment because his conduct amounted to good faith mistakes and was not intentionally or recklessly designed to impede the judicial process. Appellant further asserted that, at a minimum, his actions in sending the letter and appearing at the hearing on the motion were attempts to "otherwise defend" against the petition and should preclude entry of a default judgment under Rule 74.05(a).

Respondent opposed the motions, arguing that Appellant's letter to the court failed to meet the pleading requirements for an answer and that Appellant failed to show good cause and a meritorious defense because his conduct in failing to hire an attorney amounted to recklessness and he did not dispute the allegation that he had received and benefited from a portion of the funds from the counterfeit check.

The court held a hearing on Appellant's motions on May 15, 2007; Appellant appeared in person and with counsel and Respondent appeared by counsel. Appellant did not testify, but his counsel introduced an affidavit signed by Appellant that recited the facts alleged in the motion to set aside the judgment to show good cause and a meritorious defense. In addition to the arguments set forth in the motions, Appellant's counsel argued that Appellant should not be liable under an unjust enrichment claim for the full amount of the judgment because he only received approximately $15,000 from his wife after the check had cleared. The court denied all of Appellant's motions and subsequently entered its judgment to that effect. This appeal follows.⁴

In his first point, Appellant contends that the trial court erred in granting a default judgment on the grounds that an answer had not been filed because he filed a sufficient answer within thirty days of being served. He relies on Amon v. Bailey, 13 S.W.3d 305 (Mo.App. E.D.2000), for the proposition that entry of a default judgment when there is an answer on file is improper and warrants setting aside the judgment. He further relies on Taylor v. Taylor, 742 S.W.2d 630 (Mo.App. E.D. 1988), and Svejda v. Svejda, 156 S.W.3d 837 (Mo.App. W.D.2005), in support of his contention that his letter to the court constituted a valid answer. Appellant challenges the court's denial of his motion to set aside the judgment in Point II, with the same arguments as before the trial court.

Respondent counters that the court did not err in entering the default judgment because Appellant's letter did not constitute a valid answer, attempting to distinguish Taylor and Svejda. Specifically, it argues that the letter is not in "technical compliance" with the rules and does not specifically respond to the issues raised in the petition. Alternatively, Respondent contends that, if Appellant's letter did constitute a valid answer, then the judgment was not a true default judgment but a judgment on the merits and Appellant fails to show that the judgment should be reversed on the merits, relying on Svejda. Concerning the motion to set aside, Respondent argues as it did before the trial court.

Rule 74.05(a) provides, in pertinent part, that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, upon proof of damages or entitlement to other relief, a judgment may be entered against the defaulting party." "Rule 74.05 relates to...