Rainbow Mountain, Inc. v. Terry Begeman ( 2019 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
RAINBOW MOUNTAIN, INC., a )
Delaware corporation, )
)
Plaintiff/Counterclaim )
Defendant, )
)
v. )
) C.A. No. 2018-0403-TMR
TERRY BEGEMAN, )
)
Defendant/Counterclaim Plaintiff )
and Third Party Plaintiff, )
)
v. )
)
JEFFREY BEGEMAN, SUSAN )
BEGEMAN, MYSTIE BEGEMAN, )
LAURIE LARIMAR, JASON )
BEGEMAN, MELANIE KETCHUM, )
TODD BEGEMAN, BONNIE )
BEGEMAN, JUSTIN BEGEMAN, )
COREY BEGEMAN, EMILY )
MCGEE, CINDY DALLWIG, )
ROGER DALLWIG, JENNIFER )
RAY, JEREMY NICHILO, CARLY )
NICHILO, JOSHUA NICHILO, and )
MARK BEGEMAN, )
)
Third-Party Defendants. )
ORDER DENYING IN PART AND GRANTING IN PART
MOTION FOR DEFAULT JUDGMENT
WHEREAS, on June 4, 2018, Plaintiff Rainbow Mountain, Inc. (“RMI”) filed
a Complaint for Declaratory Relief (the “Complaint”);
WHEREAS, on November 9, 2018, Defendant Terry Begeman (“Terry”)1
filed Defendant’s Verified Answer and Consolidated Affirmative Defense (the
“Answer”) and Defendant’s Verified Counterclaim for Declaratory Judgment (the
“Counterclaim”) against RMI and eighteen family members as Third-Party
Defendants;
WHEREAS, on January 25, 2019, RMI filed its Answer to the Counterclaim;
WHEREAS, on January 30, 2019, Terry filed Defendant Terry Begeman’s
Reply to Plaintiff Counsel’s Motion to Withdraw and to Plaintiff’s Motion to Stay,
a portion of which appears to request default judgment against RMI and sixteen of
the eighteen Third-Party Defendants (the “Motion for Default Judgment”);
WHEREAS, from February 7, 2019, to August 6, 2019, five of the Third-
Party Defendants Jeffrey, Susan, Mystie, Jason, and Laurie (together the “Answering
Third-Party Defendants”) filed answers to the Counterclaim;
WHEREAS, on February 13, 2019, Terry filed Defendant Terry Begeman’s
Motion to Correct the Court of Chancery Record and Motion for an Additional
1
This order refers to the relevant individuals by first name because many of them
share the same last names. I intend no familiarity or disrespect.
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Default Judgment, a portion of which requests a default judgment against the
seventeenth out of eighteen Third-Party Defendants (the “Motion to Correct”);
WHEREAS, on August 30, 2019, RMI opposed the Motion for Default
Judgment;
WHEREAS, on September 16, 2019, Terry filed Defendant Terry Begeman’s
Consolidated Reply Brief to Plaintiff Rainbow Mountain’s Aug. 30, 2019
Opposition (the “Reply”), a portion of which seeks default judgment against RMI
and all eighteen2 Third-Party Defendants;
WHEREAS, on October 15, 2019, the Court heard argument on the motions;
NOW, THEREFORE, THE COURT HEREBY FINDS AND ORDERS AS
FOLLOWS:
1. Terry’s motion for default judgment against RMI is DENIED; Terry’s
motion for default judgment against the Answering Third-Party Defendants is
DENIED; and Terry’s motion for default judgment against Melanie, Todd, Bonnie,
Justin, Corey, Emily, Cindy, Roger, Jennifer, Jeremy, Carly, Joshua, and Mark
(together the “Non-Answering Third-Party Defendants”) is GRANTED.
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Terry originally moved for a mental examination of Mystie to determine if a
guardian is appropriate. It seems Terry has abandoned this motion because in his
Reply he “moves the Court to enter a default judgment against all pro se Answering
Third-Party Defendants.”
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2. This action represents the latest battle in a family feud between six
siblings who are members of RMI, a Delaware nonstock corporation. Plaintiff RMI
seeks a declaratory judgment that the board of directors terminated pro se Defendant
Terry’s membership in RMI. Terry countersued RMI and eighteen immediate and
extended family members. He seeks a declaratory judgment determining RMI’s
board of directors (the “Board”) and the membership status of multiple relatives.
RMI filed its Answer on January 25, 2019. From February 7, 2019, to August 6,
2019, the Answering Third-Party Defendants filed answers. The Non-Answering
Third-Party Defendants neither filed any answers, nor filed any responses to the
Motion for Default Judgment.
3. In multiple filings, Terry moves for default judgment against RMI and
the Third-Party Defendants for failure to file timely answers to his Counterclaim.
Terry argues that under Court of Chancery Rule 12(a), RMI and the Third-Party
Defendants had twenty days after receipt of service to file their answers.
4. Court of Chancery Rule 55(b) provides,
When a party against whom a judgment for affirmative
relief is sought, has failed to appear, plead or otherwise
defend as provided by these Rules, and that fact is made to
appear, judgment by default may be entered as follows:
The party entitled to a judgment by default shall apply to
the Court therefor; but no judgment by default shall be
entered against an infant or incompetent person unless
represented in the action by a guardian, trustee or other
representative. If the party against whom judgment by
default is sought has appeared in the action, the party (or,
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if appearing by representative, the party’s representative)
shall be served with written notice of the application for
judgment at least 3 days prior to the hearing on such
application. If such party has not appeared written notice
shall be served if the Court so directs. If, in order to enable
the Court to enter judgment or to carry it into effect, it is
necessary to take an account or to determine the amount
of damages or to establish the truth of any averment by
evidence or to make an investigation of any other matter,
the Court may conduct such hearings or order such
references as it deems necessary and proper.
5. The Court has discretion when deciding whether to enter a Default
Judgment. In re 53.1 Acres of Land in Mispillion Hundred, 2002 WL 31820972, at
*2 (Del. Ch. Nov. 27, 2002). The Court may “give great weight to the policy of
deciding claims based on their merits. This Court employs the ultimate sanction of
default judgment only under extraordinary circumstances.” Dority v. vanSweden,
1995 WL 1791080, at *1 (Del. Ch. Jan. 17, 1995). Further, “Delaware Courts
generally deny motions for default judgment if a party cures its error after receiving
notice of a motion for default judgment.” Id.
6. On November 5, 2018, RMI received service of process. Therefore,
RMI had until November 26, 2018, to reply to the Counterclaim under Rule 12(a).
RMI filed its Answer on January 25, 2019, and on August 30, 2019, RMI opposed
the Motion for Default Judgment. Although untimely, RMI filed its Answer before
Terry filed his Motion for Default Judgment. Moreover, RMI has opposed the
Motion for Default Judgment, and RMI appeared with new counsel for the hearing
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on these motions. While this Court strongly encourages compliance with its Rules,
public policy favors proceeding to the merits. “The policy of deciding cases on the
merits outweighs any harm to [Terry] caused by [RMI’s delay].” Id. Under my
permitted discretion, I DENY the Motion for Default Judgment.
7. On January 1, 2019, Jeffrey, Susan, Mystie, and Laurie received service
of process. Thus, Jeffrey, Susan, Mystie and Laurie had until January 22, 2019 to
reply to the Counterclaim under Rule 12(a). On February 7, 2019, Susan filed her
Answer; on February 27, 2019, Jeffrey filed his Answer; on March 20, 2019, Mystie
filed her Answer; and on August 6, 2019 Laurie filed her Answer. Terry tried on at
least two occasions to serve Jason. Despite never signing for service of process,
Jason filed an answer on February 20, 2019. Terry contends that Jason, “too must
have received a copy of service of process from his Third Party Parents upon Jan 02,
2019, or thereabouts, whereby also extending himself beyond the Jan 22, 2019, or
thereabouts, thus beyond the 20 days in Ch. Ct. [sic] R. 12(a) . . . .” Mot. to Correct 7.
8. As with RMI, public policy favors resolving disputes on the merits.
Further, Terry was not harmed by the delay. Thus, I DENY the Motion for Default
Judgment against the Answering Third-Party Defendants.
9. By January 30, 2018, at the latest, the Non-Answering Third-Party
Defendants received service of process. The Non-Answering Third-Party
Defendants did not respond to Terry’s Counterclaim or Motion for Default
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Judgment, and the Non-Answering Third-Party Defendants did not appear and
object at the October 15, 2019 hearing on the motion. Under my permitted
discretion, the Motion for Default Judgment against the Non-Answering Third-Party
Defendants is GRANTED. As discussed at the hearing, the granting of this motion
will have no binding or preclusive effect on the litigation between RMI, Terry, and
the Answering Third-Party Defendants.
/s/ Tamika Montgomery-Reeves
Vice Chancellor
Dated: December 5, 2019
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