McClelland v. Progressive Cas. Ins. Co., 16508

• Court: Missouri Court of Appeals
• Writing for the Court: HOGAN; FLANIGAN, P.J., and MAUS; SHRUM
• Citation: McClelland v. Progressive Cas. Ins. Co., 790 S.W.2d 490 (Mo. App. 1990)
• Decision Date: 29 May 1990
• Docket Number: No. 16508,16508
• Parties: Karen McCLELLAND, Respondent, v. PROGRESSIVE CASUALTY INSURANCE COMPANY, Appellant.

Page 490

790 S.W.2d 490

Karen McCLELLAND, Respondent, v. PROGRESSIVE CASUALTY INSURANCE COMPANY, Appellant.

No. 16508.

Missouri Court of Appeals,

Southern District,

Division Two.

May 29, 1990.

David C. Ruyle, Ruyle & Sims, Neosho, for appellant.

Robert W. Evenson, Evenson, Carlin & LePage, Pineville, for respondent.

HOGAN, Judge.

Progressive Casualty Insurance Company, a foreign insurer, appeals from an order denying its motion to set aside a default judgment pursuant to Rule 74.05(c). ¹ We affirm.

By policy issued on or about November 4, 1988, Progressive insured a 1981 Ford Bronco against loss or damage by fire. Plaintiff Karen McClelland was the named insured. On April 13, 1989, while the policy was in effect, the vehicle was consumed by fire. On June 7, 1989, Karen McClelland brought an action on the policy in the Associate Division of the Circuit Court of Newton County. A summons with a copy of the petition attached was issued June 7, 1989, commanding Progressive to appear at 1:00 P.M. on July 7, 1989, all in accordance with § 517.041.1. Service was had on the Acting Director of the Department of Insurance on June 16, 1989, in the manner prescribed by Rule 54.15 and 4 CSR 190-10.070. The service of process is not questioned in this court. On July 7, 1989, the court entered a default judgment in favor of the insured and against the insurer in the amount of $6,500 together with interest in the amount of $88. On July 17, 1989, Progressive filed a Motion to Set Aside Default Judgment under Rule 74.05(c), which reads:

"(c) When Set Aside. Upon motion stating facts constituting a meritorious defense and for good cause shown, an interlocutory order of default or a default judgment may be set aside. The motion shall be made within a reasonable time not to exceed one year after entry of the default judgment. Good cause includes a mistake or conduct that is not intentionally or recklessly designed to impede the judicial process. An order setting aside an interlocutory order of default or a default judgment may be conditioned on such terms as are just, including a requirement that the party in default pay reasonable attorney's fees and expenses incurred as a result of the default by the party who requested the default." (Emphasis added.)

The motion itself states in conclusional terms that Progressive failed to appear because of mistake or conduct that was not intentionally or recklessly designed to impede the judicial process. An affidavit in support of this allegation was attached to the motion as an exhibit. It was further pleaded, again in conclusional terms, that Progressive had a meritorious defense to plaintiff's petition. In support of this allegation, an Offense Report from the Newton County Sheriff's Office was incorporated as an exhibit as permitted by Rule 55.12.

In State ex rel. King v. Huesemann, 776 S.W.2d 488, 491 (Mo.App.1989), this court held that a proceeding under Rule 74.05(c) is a "civil action" within the meaning of Rule 51.05(a). The court held that a movant seeking to set aside a default judgment must (1) file a motion satisfying the pleading requirements of Rule 74.05(c), and (2) establish good cause for setting the judgment aside, at an evidentiary hearing. The court further held that: (3) the person who obtained the default judgment is entitled to reasonable notice and an opportunity to be heard on the issues raised by the motion. The procedure outlined in Huesemann, 776 S.W.2d at 491, was followed in this case. Though the motion on its face is conclusional, an affidavit and another document were attached thereto and became a part of the pleading for all purposes. Rule 55.12; City of Joplin v. Village of Shoal Creek Drive, 434 S.W.2d 25, 31 (Mo.App.1968). A hearing was held so the movant could establish good cause to set the judgment aside, and there is no question that the plaintiff had notice and an opportunity to be heard.

The hearing was informal, more nearly an exchange of remarks than a formal hearing. Progressive presented the affidavit attached to its motion as evidence of good cause to set the judgment aside. Inasmuch as the affidavit was uncontroverted, it was properly received as evidence of the facts stated therein. Rule 55.28; Ray v. Lake Chevrolet-Oldsmobile, Inc., 714 S.W.2d 928, 931 (Mo.App.1986). The affidavit was executed in Ohio by Andrew H. Isakoff, an attorney employed by Progressive. Mr. Isakoff stated that after the petition and summons were served on the Missouri Division of Insurance, the Division sent those papers to Jodi Lash, at Progressive's Central Division. Lash accepted service and referred the petition and summons to Jeff Haniewich, also employed by Progressive's Central Division. Haniewich was on vacation when the petition and summons were sent to him. The summons was reviewed by a staff member who noted that the date of service on the Division of Insurance was June 16, 1989. By oversight and mistake it was not noted that the case had been set for hearing on July 7, 1989. Further, it was inadvertently and mistakenly thought that Progressive had 30 days from the date of service on the Division of Insurance in which to file an answer.

Continuing, the affiant stated that the petition and summons were placed on Mr. Haniewich's desk and were not reviewed by him until he returned from his vacation. The petition and summons were then brought to the attention of the legal department of the Central Division and it was realized that the case had been set for hearing on July 7, 1989. By this time, the hearing had already been had.

Such is the substance of the proof of good cause. The court was, of course, free to believe or disbelieve the statements made in the affidavits, Ray v. Lake Chevrolet-Oldsmobile, Inc., 714 S.W.2d at 931; Flegel v. Holmes, 614 S.W.2d 779, 780 (Mo.App.1981), but the trial court appears to have accepted the affiant's statements as true with some reservation whether the affidavit established "good cause" within the meaning of Rule 74.05(c).

Rule 74.05 is relatively new, and in the course of a reasonable research, we have been unable to discover the source of the phrase "mistake or conduct that is not intentionally or recklessly designed to impede the judicial process." Whatever the concept embraced in that phrase, it is clear that the trial court's discretion to forgive the mishandling of legal documents has been considerably broadened. See Gibson By Woodall v. Elley, 778 S.W.2d 851 (Mo.App.1989). There is some degree of analogy between Rule 74.05(c) and the first clause of Fed.R.Civ.P. 55(c), which authorizes relief from a default entry. Relief from a default entry has been granted by the federal courts when the default was due to a mistake by counsel as to the applicable procedural rules. 10 C. Wright, A. Miller and M. Kane, Federal Practice and Procedure § 2696, p. 515 (1983). In this case, one could easily believe that counsel might not understand that the form of summons authorized in cases commenced in the Associate Division of the Circuit Court differs from the summons issued in civil actions filed in the Circuit Court, which allows 30 days to respond. Our courts have not been inclined to grant relief from default judgments which result from the mishandling of documents, Sprung v. Negwer Materials, Inc., 775 S.W.2d 97, 100 (Mo. banc 1989), but as we have said, the language of Rule 74.05(c) is obviously intended to broaden the definition of "good cause" considerably and we cannot say the trial court erred in holding that good cause for setting aside the default judgment was shown.

In order to set aside a default judgment, of course, a movant must not only show good cause for being in default but must also plead facts constituting a meritorious defense. There is no requirement that the movant present his defense in detail, but he must demonstrate an arguable theory that would defeat the plaintiff's claim. See Robson v. Willers, 784 S.W.2d 893, 895 (Mo.App.1990).

Progressive attached an exhibit--a police report dated April 13, 1989--to its motion in order to plead facts constituting a meritorious defense, specifically, arson. The police report was not verified, and even if it had been received as a business record, it contains matters of opinion which might not have been competent...