Traders Bank of Kansas City v. Cherokee Inv. Co., Inc.

• Decision Date: 12 October 1982
• Docket Number: No. WD,WD
• Parties: TRADERS BANK OF KANSAS CITY, Plaintiff-Respondent, v. CHEROKEE INVESTMENT CO., INC., Defendants-Appellants. 32976.
• Court: Missouri Court of Appeals

Page 122

642 S.W.2d 122

TRADERS BANK OF KANSAS CITY, Plaintiff-Respondent, v. CHEROKEE INVESTMENT CO., INC., Defendants-Appellants.

No. WD 32976.

Missouri Court of Appeals,

Western District.

Oct. 12, 1982.

As Modified Nov. 9, 1982.

William J. Fleischaker, Joplin, for defendants-appellants.

Stephen G. Scholl, Michael D. Strohbehn, Kansas City, for plaintiff-respondent.

Before MANFORD, P.J., and WASSERSTROM and KENNEDY, JJ.

WASSERSTROM, Judge.

Plaintiff Bank sues on a $900,000 promissory note executed by defendant Cherokee Investment Co., Inc. and guaranteed by thirteen of its shareholders who were originally also defendants in this lawsuit. A judgment by default was entered against Cherokee. It filed a motion to set aside the default judgment, and, when the motion was overruled, took this appeal. We reverse.

On January 14, 1981, the Bank filed its petition in this case in Jackson County against Cherokee and the thirteen individual stockholders. Some of the individual defendants filed timely motions challenging jurisdiction and venue, and others of those individual defendants asked legislative continuances. Roberts and Fleischaker, a law firm located in Joplin, Missouri, filed such motions on behalf of its clients Patterson, Mr. and Mrs. Burrows, Mr. and Mrs. Bazzano and Mr. and Mrs. Derfelt. No pleading was filed on behalf of Cherokee.

On March 24, 1981, the Bank dismissed voluntarily as to all individual defendants. As a matter of course, notice of that dismissal was received by Roberts and Fleischaker in their capacity as attorneys for the individual defendants named above. Promptly thereafter, on March 26, 1982, Roberts and Fleischaker filed by mail on behalf of Cherokee a motion for enlargement of time within which to plead and also at the same time filed a motion to dismiss on behalf of Cherokee based on jurisdictional and venue grounds. On March 30, 1981, the Bank filed a motion to strike the Cherokee motions on the ground that those motions did not comply with the rules of the 16th Judicial Circuit in that the Cherokee motions were not accompanied by written suggestions in support.

The next thing that happened procedurally was the entry of judgment on April 3, 1981, in favor of the Bank and against Cherokee in the amount of $800,000 representing the alleged principal balance remaining unpaid on the note, $66,965.56 interest, and $5,000 for attorneys' fees. Roberts and Fleischaker did not learn of that entry of judgment until May 6, 1981, when they received from the court clerk a statement for costs. Roberts and Fleischaker then obtained a copy of the judgment through a local law firm in Kansas City, and on June 2, 1981, they filed a motion on behalf of Cherokee to set aside the April default judgment. The petition was based on the theory of a writ of error corum nobis and also upon the theory of procedural irregularities. ¹ The motion was accompanied by suggestions and also an affidavit in which Mr. Jack Fleischaker explained how it came about that no pleading had been timely filed on behalf of Cherokee. His affidavit explains that on February 17, 1981, a meeting occurred between the various defense counsel, and Mr. Fleischaker left that meeting with the opinion that another lawyer, Mr. Charles Buchanan, would file a pleading on behalf of Cherokee. After receiving the dismissal by the Bank against the individual defendants, Fleischaker immediately inquired of Buchanan as to whether or not he had filed a pleading for Cherokee and received a negative answer. After verifying that no one had filed any pleading on behalf of Cherokee, Fleischaker then proceeded to prepare motions for Cherokee which were filed as aforesaid on March 26, 1981.

A hearing was held by the trial court on the motion to set aside the judgment, and the court thereafter overruled the motion.

On this appeal from the order last mentioned, Cherokee contends that the trial court erred in refusing to set aside the default because: (1) the court had jurisdiction to do so; (2) the judgment was entered pursuant to procedural irregularities; and (3) the circuit clerk failed to give notice of the default judgment within 30 days after entry as required by Rule 74.78. As to Cherokee's last point just mentioned, the Bank argues that Cherokee suffered no prejudice from lack of prompt notice of the entry of default judgment, and therefore that procedural defect should be disregarded pursuant to Rule 74.30. We agree with the Bank in this respect, and no reliance will be made on that particular defect in our reversal of the trial court's declination to set aside the default judgment.

I. Jurisdiction to Set Aside the Default

It is true, as the Bank continually stresses, that the trial court generally retains jurisdiction to change its judgment for a period of only 30 days. Rule 75.01. However there are a number of exceptions to this general rule. Kranz v. Centropolis Crusher, Inc., 630 S.W.2d 136 (Mo.App.1982) and cases there cited. One of these exceptions permits the trial court to set aside a judgment for procedural irregularities at any time within three years. Rule 74.32.

The Bank contends that this exception should not apply because Cherokee discovered that the default judgment had been entered within 40 days thereafter, and it therefore had ample time within which to have filed an appeal from the granting of the default judgment. This argument by the Bank has been answered squarely by Blackmore v. Blackmore, 639 S.W.2d 268, decided by the Missouri Court of Appeals, Eastern District, on August 31, 1982. In Blackmore, a defendant attempted to appeal directly from a default judgment. The appeal was dismissed on the ground that the defendant was required to first file a motion to set aside or vacate the default judgment: "The general rule is that an appeal may not be taken from a default judgment unless there was a prior motion in the trial court. [citing authority]. The reason for the rule is to allow the trial court an opportunity to pass on a ground which it may not have previously considered. [citing]." ²

II. Procedural Irregularities

The classic definition of what constitutes an irregularity sufficient to warrant setting aside a judgment has been repeated most recently in State ex rel. Div. of Family Serv. v. Oatsvall, 612 S.W.2d 447 (Mo.App.1981) which states that relief is available for irregularities patent on the records of the underlying proceedings which "go to lack of adherence to some prescribed rule or mode of proceeding and consists either in omitting to do something that is necessary for due and orderly conduct of the suit or doing it at an unreasonable time or in an improper manner." The record in this case clearly shows procedural irregularities within that definition.

First and foremost among the irregularities here was the failure of the trial court to dispose of the motions still pending at the time the default judgment was entered on April 3, 1981. Cherokee had filed a motion for enlargement of time and also a motion to dismiss the petition. The Bank had responded with a motion to strike Cherokee's two motions. No action was taken by the court with respect to any of those three motions, and all of them remained pending and undisposed of on April 3, 1981. Not only was no such action taken then, but none has ever been taken since that date.

A number of Missouri cases hold that it is improper to enter a default judgment at a time when one or more motions remain undisposed of. Thus in Anspach v. Jansen, 229 Mo.App. 321, 78 S.W.2d 137 (1935), the defendant's lawyer filed an answer and a motion for security of costs, but then died. The case was listed for trial on December 11. The defendant spoke to another lawyer about representation but failed to hire that lawyer. On the trial date the plaintiff appeared, offered evidence and took judgment. Thereafter defendant moved to set aside the judgment. Following Steamboat Osprey v. Upton Jenkins, 9 Mo. 643 (1845), the appellate court held that the effect of the motion for security for costs was to suspend all further proceeding until the motion was disposed of by the trial court and that therefore the default judgment should be set aside.

Similarly, in Carpenter v. Alton R. Co., 148 S.W.2d 68 (Mo.App.1941) the case was at issue and docketed for trial on November 6. Defendant on November 6 filed a motion for change of venue in open court. The case was then continued until November 8. On the latter date, the defendant did not appear and judgment was entered by default, no ruling being made on the motion for change of venue. The appellate court held this to be reversible error:

"We do not intend herein to determine the question of whether or not the application for change of venue should have been granted. As we view the record, that question is not before us. The trial court did not grant the change, nor did he refuse it. We think the record discloses that he failed to consider it. At any rate, the application was not disposed of. What we have said in preceding paragraphs has been said merely to demonstrate that the application for change of venue was properly before the court for its judicial consideration and disposition.

....

In this case the court should have ruled the application before proceeding to hear the case.

The court erred in rendering final judgment against defendant at a time when there was pending, undisposed of, an application for change of venue. It follows that the defendant's motion to set aside the default judgment should have been sustained."

The ruling in Carpenter was carried a step further in Cannon v. Nikles, 235 Mo.App. 1094, 151 S.W.2d 472 (1941). In Cannon, the case was at issue and set for trial on the week of March 11. On March 13 defendant filed a motion for change of venue. The case remained on the active trial docket until April 1, when evidence was heard and a default judgment entered. Although there was no showing that the trial...