Kansas City Live LLC v. Virginia Bukovac , 2016 Mo. App. LEXIS 455 ( 2016 )

In the
Missouri Court of Appeals
Western District
KANSAS CITY LIVE LLC, )
)
Appellant, ) WD78882
)
v. ) OPINION FILED: May 3, 2016
)
VIRGINIA BUKOVAC, )
)
Respondent. )
Appeal from the Circuit Court of Jackson County, Missouri
The Honorable David M. Byrn, Judge
Before Division Three: Gary D. Witt, Presiding Judge, James E. Welsh, Judge and
Anthony Rex Gabbert, Judge
Appellant Kansas City Live LLC ("KC Live") appeals the denial by the Circuit
Court of Jackson County of its Motion to Set Aside Interlocutory Order of Default
("Motion to Set Aside"). The Order of Default was entered against KC Live in a lawsuit
filed by the Respondent/Plaintiff Virginia Bukovac ("Bukovac") against defendants KC
Live and the City of Kansas City, Missouri, in which Bukovac alleged that she was
injured when she tripped and fell on an uneven sidewalk in downtown Kansas City due to
the defendants' combined negligence. KC Live failed to respond to Bukovac's amended
petition, and Bukovac was granted an interlocutory judgment of default against KC Live.
KC Live sought to have that interlocutory order of default set aside. The trial court, in
denying the Motion to Set Aside, found that KC Live had failed to meet the requirements
of Rule 74.05(d)1 in that KC Live (1) failed to prove it had a meritorious defense and (2)
failed to show good cause to set aside the default. KC Live now appeals both of these
findings. We affirm.
Factual Background
In April of 2014, Bukovac filed a petition against the City of Kansas City,
Missouri in which she alleged that she sustained an injury when she tripped and fell on an
uneven sidewalk in or near what is commonly referred to as the Power and Light District
in Kansas City. She claimed that the city was negligent in failing to maintain and warn of
the unsafe condition of the sidewalk. In August of 2014, Bukovac amended her petition
and added KC Live as a defendant, alleging that KC Live had a contractual duty to
maintain and clean the sidewalk where she fell. She alleged KC Live was negligent in its
maintenance of the sidewalk and in its failure to warn of and remedy the unsafe
condition.
KC Live was served with Bukovac's amended petition through its registered agent,
CSC-Lawyers Inc. Service Company ("CSC"), on August 19, 2014. CSC, pursuant to
KC Live's instructions, emailed the summons and amended petition to three attorneys, all
of whom work for KC Live. KC Live failed to timely answer the amended petition.
On October 23, 2014, Bukovac moved for an interlocutory judgment of default
pursuant to Rule 74.05, solely as to KC Live. In that motion, Bukovac further requested
1
All rule references are to Missouri Supreme Court Rules (2016).
2
that a hearing be set to determine appropriate damages. On October 27, 2014, the trial
court granted Bukovac's motion and entered an interlocutory judgment of default in favor
of Bukovac against KC Live.
Michael Stoltz ("Stoltz"), KC Live's Associate General Counsel, discovered on
January 13, 2015 that he had received Bukovac's amended petition in his email, but had
failed to forward the suit papers to KC Live's insurance carrier, which was his standard
practice. Stoltz admits to opening and moving the email into a different email folder that
he used for storing emails dealing with the service of suits at the time he received the
amended petition in August of 2014. However, he alleged that he made a mistake and
inadvertently failed to appropriately respond to the amended petition and summons or
forward it to the company's insurance carrier. There is no dispute that the email indicated
that KC Live was the entity being served with the petition. Upon learning of his mistake,
Stoltz proceeded to forward the paperwork to KC Live's insurance carrier.
On January 15, 2015, KC Live filed its unverified Motion to Set Aside. In the
Motion to Set Aside, KC Live argued there was good cause to set aside the judgment of
default because the service papers were inadvertently overlooked with no intent or
interest in impeding the judicial process. KC Live also submitted an affidavit from Stoltz
to support the motion. The affidavit solely addressed the facts regarding Stoltz's
receiving and handling of the service email.
Regarding its meritorious defenses, KC Live stated in its Motion to Set Aside that
KC Live "does not believe it owned or controlled the area of the sidewalk where Plaintiff
fell" as the sidewalk was property of the City of Kansas City. KC Live also alleged that
3
"the alleged dangerous condition of the sidewalk was open and obvious," and Bukovac
failed to maintain a proper lookout. No affidavit or other sworn statements or testimony
were submitted to support the facts giving rise to KC Live's alleged meritorious defenses.
Stoltz was deposed by Bukovac regarding KC Live's failure to respond to the
amended petition and the facts regarding his handling of the email sent to him by CSC.
CSC was the registered agent of KC Live, and KC Live had established a policy that
when CSC received service on KC Live's behalf, CSC was to email the documents it
received to three attorneys at KC Live, including Stoltz. CSC followed this policy in this
case. Even though three attorneys for KC Live received the service email from CSC,
Stoltz testified in his deposition that the suit in this case was his responsibility. He could
offer no explanation for his failure to forward the amended petition to KC Live's
insurance carrier other than that he had made a mistake in either overlooking the email or
in not comprehending its contents. Stoltz also testified that KC Live has no written
policies or procedures for how to respond when KC Live is served with a complaint or
summons.
Following oral argument on KC Live's Motion to Set Aside, the trial court denied
the motion. Upon request by KC Live, the court entered its Judgment/Amended Order,
denying KC Live's Motion to Set Aside. First, the trial court found that KC Live failed to
meets its burden under Rule 74.05(d) to show it has a meritorious defense. The trial court
noted that no sworn testimony or affidavits were submitted to support or establish the
factual basis for KC Live's arguments regarding its meritorious defenses. The trial court
also found that KC Live failed to demonstrate good cause to set aside the interlocutory
4
judgment of default as KC Live's actions in this case regarding its handling of the service
email were reckless.
KC Live now appeals.
Standard of Review
Pursuant to Rule 74.05(d), a motion to set aside a default judgment is an
"independent action," and, as such, a judgment granting or denying such a motion is a
final judgment eligible for immediate appellate review. Saturn of Tiffany Springs v.
McDaris, 331 S.W.3d 704, 708-09 (Mo. App. W.D. 2011). We review the trial court's
denial of a motion to set aside a default judgment under an abuse of discretion standard.
Brungard v. Risky's Inc., 240 S.W.3d 685, 686 (Mo. banc 2007). While the trial court has
broad discretion in deciding to set aside a default judgment, its discretion to deny such a
motion is "narrowed" because public policy favors cases be decided on the merits. Coble
v. NCI Bldg. Sys., Inc., 378 S.W.3d 443, 447 (Mo. App. W.D. 2012) (citing Brungard,
240 S.W.3d at 686-87). "The trial court abuses its discretion when its ruling is clearly
against the logic of the circumstances then before the trial court and is so unreasonable
and arbitrary that the ruling shocks the sense of justice and indicates a lack of careful
deliberate consideration." McDaris, 331 S.W.3d at 709 (quoting Peters v. Gen. Motors
Corp., 200 S.W.3d 1, 23 (Mo. App. W.D. 2006)).
Analysis
In its first point on appeal, KC Live argues that the trial court erred in denying its
Motion to Set Aside because it set forth allegations which, if supported by evidence,
would defeat or adversely affect Bukovac's claims in that KC Live relied on Bukovac's
5
factual averments from her petition and amended petition and further made specific
factual allegations identifying its defenses that it did not own or control the property
where Bukovac fell and that she was at fault for her own injuries.
Rule 74.05(d) provides that "[u]pon 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." (emphasis added). "The movant in a motion to set aside [a]
default judgment bears the evidentiary burden of proving entitlement to the relief
requested. Failure to establish either the 'meritorious defense' element or the 'good cause'
element of a motion pursuant to Rule 74.05(d) is fatal to the motion." McDaris, 331
S.W.3d at 709 (quoting Agnello v. Walker, 306 S.W.3d 666, 673 (Mo. App. W.D. 2010)).
In order to satisfy the meritorious defense requirement of Rule 74.05(d), the
movant "must set forth sufficient facts to establish an arguable theory of defense." Id. at
710. An arguable defense constitutes any defense which is likely to have a "material
effect on the substantive result of the case." Id. The defense does not need to be
conclusively proven, but the motion must contain allegations that "if supported by
evidence found credible by the fact-finder, would defeat the plaintiff's claim." Id.; see
also Snelling v. Reliance Auto., Inc., 144 S.W.3d 915, 918 (Mo. App. E.D. 2004).
In addition, although not expressly stated in Rule 74.05(d), Missouri courts have
consistently held that motions to set aside are not self-proving and must be verified or
otherwise supported by affidavit or sworn testimony. See McDaris, 331 S.W.3d at 712-
13; Agnello, 306 S.W.3d at 673; First Cmty. Bank v. Hubbell Power Sys., Inc., 298
S.W.3d 534, 540 (Mo. App. S.D. 2009). The most recent pronouncement on the subject
6
by the Missouri Supreme Court has reaffirmed this principle. See In re Marriage of
Callahan, 277 S.W.3d 643, 644 (Mo. banc 2009) ("A motion to set aside a default
judgment does not prove itself and must be supported by affidavits or sworn testimony").
Also, "bare statements amounting to mere speculation or conclusions fail to meet the
pleading requirement." Ben F. Blanton Constr., Inc. v. Castle Hill Holdings XI, L.L.C.,
109 S.W.3d 693, 695 (Mo. App. E.D. 2003) (citing Tinsley v. B&B Engines, Inc., 27
S.W.3d 859, 861 (Mo. App. E.D. 2000)).
KC Live argues on appeal that while there is authority that good cause must be
supported by affidavit or other sworn testimony, there is no such requirement regarding
meritorious defenses. Contrary to KC Live's argument, there is no authority for the
proposition that only the good cause element must be supported by affidavit or other
sworn testimony. Motions under Rule 74.05 are not self-proving and must be supported
by some form of sworn evidence. See In re Marriage of Callahan, 277 S.W.3d at 644;
McDaris, 331 S.W.3d at 713. Indeed, the genesis of this principle comes from Gorzel v.
Orlamander, 352 S.W.2d 675, 678 (Mo. 1961), in which the Missouri Supreme Court
held that:
[N]o proof was offered to support any of the allegations in the motion. The
motion did not prove itself. It was not verified, no affidavits in support
thereof were filed, and no testimony was offered at the hearing of the
motion. As a prerequisite to obtaining the relief prayed for it was
incumbent upon defendants to prove in some manner that (1) they had good
reason or excuse for the default, and (2) that they had a meritorious defense
to the action.
Gorzel made no distinction between the type of proof required for the "good cause" and
the "meritorious defense" elements. As explained in McDaris, even though Gorzel
7
preceded the adoption of Rule 74.05, the principle set out therein has since been
reaffirmed. See McDaris, 331 S.W.3d at 712-13. Even though the hurdle is not high,
there must be some affidavit or other sworn testimony underlying the facts alleged in
support of a meritorious defense.
KC Live's Motion to Set Aside set forth two alleged meritorious defenses. First,
KC Live alleged, "[b]ased on the information known to Kansas City Live about the
location of Plaintiff's fall, Kansas City Live does not believe it owned or controlled the
area of the sidewalk where Plaintiff fell. Rather, the sidewalk was City property, and the
City was responsible for its maintenance and repair." Second, KC Live alleged that "the
alleged dangerous condition of the sidewalk was open and obvious, and Plaintiff tripped
because she failed to keep a proper look out for his [sic] own safety." The Motion to Set
Aside was not verified. The only affidavit in support of the Motion to Set Aside was
submitted by Stoltz and did not address KC Live's alleged meritorious defenses. Stoltz's
deposition did not address the alleged meritorious defenses but just the circumstances
surrounding KC Live's failure to timely respond to the amended petition. At oral
argument on the Motion to Set Aside, no sworn testimony was submitted. When asked
by the trial court whether the only evidence in support of the Motion to Set Aside was
Stoltz's affidavit, counsel for KC Live acknowledged that was correct.2
We agree with the trial court that KC Live has failed to meet its burden to show
that it has a meritorious defense to Bukovac's claims in her amended petition. Regarding
2
The trial court in its Judgment/Amended Order denying the Motion to Set Aside also considered the
deposition testimony of Stoltz.
8
KC Live's claim that it did not own or control the area where Bukovac's injury occurred,
KC Live has presented no evidence, supported by any sworn testimony or affidavit, that it
did not own or control the area in question. In its motion, KC Live stated it "does not
believe it owned or controlled the area of the sidewalk where Plaintiff fell. Rather the
sidewalk was City property, and the City was responsible for its maintenance and repair."
(emphasis added). Belief is not sufficient to justify the finding of a meritorious defense.
See Bredeman v. Eno, 863 S.W.2d 24, 26 (Mo. App. W.D. 1993) ("A belief about the
existence of a meritorious defense without supporting facts fails to satisfy the pleading
requirements of Rule 74.05(c)"). Disregarding that KC Live only presented its "belief"
rather than knowledge regarding ownership or control, as explained above, there must be
some sworn evidence to support KC Live's allegation. Without such a requirement,
parties could completely fabricate defenses that have no basis in reality but, if proven,
could theoretically be a meritorious defense. Missouri case law has repeatedly held that
motions to set aside are not self-proving and must have a basis in fact - some sworn
testimony or affidavit must support the movant's assertion that it has a meritorious
defense. See McDaris, 331 S.W.3d at 712-13. No such sworn evidentiary support is
present here.
KC Live acknowledges that it provided no affidavit or other sworn testimony in
support of its alleged defenses, but argues instead that it can rely solely on the factual
averments in Bukovac's amended petition. In support of its argument, KC Live relies
upon Yerkes v. Asberry, 938 S.W.2d 307, 308-09 (Mo. App. E.D. 1997), which
considered whether the movant had sufficiently pled the meritorious defense that a defect
9
in the notarization of certain documents was not the proximate cause of harm to plaintiff.
The court in Yerkes looked at the factual averments in the petition, which admitted that
the plaintiff had signed the relevant documents, and the defendant argued that those
admissions would help prove that the defect in the notarization of the documents was not
the proximate cause of plaintiff's damages. Id. at 310. The Yerkes court also considered
the defendant's proposed answer to determine whether it had established a meritorious
defense. Id. The opinion is silent as to whether the movant's motion to set aside was
verified. Id. In considering a motion to set aside and whether the pleading requirements
have been met, Yerkes stated the common proposition that courts "look to the allegations
in the defaulting party's motion, and such other documents as affidavits, exhibits, and
proposed answers." Id. at 309; see also Wanda Myers Living Tr. v. Nea Lg Le, 459
S.W.3d 517, 522 (Mo. App. W.D. 2015) (same); Ben F. Blanton Constr., Inc., 109
S.W.3d at 695 (same).
While it is correct that Bukovac's amended petition may be considered to provide
context and define her claims, we need not decide whether KC Live could rely solely on
the averments in the amended petition, because it cannot save KC Live in this case from
the complete lack of any sworn evidentiary support in the record for its alleged defenses.
Bukovac alleges in her petition that, while the sidewalk is the property of the City of
Kansas City, KC Live was contractually obligated to maintain it. Even if KC Live could
rely solely on the averments in the amended petition, the averment that the sidewalk was
owned by the City of Kansas City alone does not constitute a meritorious defense to
10
Bukovac's claim that KC Live was contractually responsible for the sidewalk's
maintenance and, therefore, liable for its negligence.
KC Live protests that it has not had a chance to conduct discovery to determine
whether it actually owns the property, so it is unreasonable to expect such support in a
motion to set aside a default judgment. First, at this stage, the burden has shifted to KC
Live to prove it has meritorious defenses because it is at fault for failing to timely
respond to Bukovac's amended petition. See McDaris, 331 S.W.3d at 709. Second, the
argument rings particularly hollow here where KC Live is in the position to know
whether it controlled or was contractually responsible for maintenance of the sidewalk at
the location provided in the amended petition at 13th and Main Street in Kansas City,
Missouri. If facts were presented to the trial court, supported by sworn testimony or
affidavit, that KC Live was not responsible for the sidewalk at 13th and Main in Kansas
City, Missouri, that may have been sufficient to support a showing of a meritorious
defense. However, no such effort was even attempted here.
Similarly, KC Live's statement that the uneven sidewalk was "open and obvious"
and that Bukovac failed to keep a proper lookout are merely conclusory statements
unsupported by any facts whatsoever. Conclusory statements and speculation are
insufficient to merit the finding of a meritorious defense. See Ben F. Blanton Const.,
Inc., 109 S.W.3d at 695. KC Live assumes that because Bukovac alleges the sidewalk
was uneven that it was also open and obvious. It is not the law that every potential
hazard that is theoretically visible is therefore open and obvious. See, e.g., Lacy v.
Wright, 199 S.W.3d 780, 783-84 (Mo. App. E.D. 2006) (trial court erred in granting
11
summary judgment because the court cannot say as a matter of law that a bumper in a
parking lot was so open and obvious that it constituted a dangerous condition of which
the plaintiff should have known); see also Smith v. The Callaway Bank, 359 S.W.3d 545,
548-49 (Mo. App. W.D. 2012) (discussing cases in which courts found, as a matter of
law, conditions were "open and obvious" involve the natural or regular condition of land
and/or a large physical structure). The mere fact that a hazard may be visible is
insufficient to meet KC Live's burden of showing it has a meritorious defense. KC Live
offers no explanation of how it knows, as alleged in their motion to set aside, that
Bukovac failed to keep a proper lookout. As no facts were presented to support the
allegation, it does not rise above pure speculation.
Accordingly, we find that the trial court did not abuse its discretion in denying KC
Live's Motion to Set Aside, as KC Live failed to meet its burden to show it has a
meritorious defense to Bukovac's claims. Because we have found KC Live failed to meet
this burden, it is unnecessary for this Court to decide whether the trial court abused its
discretion in finding that KC Live also failed to show good cause why the Motion to Set
Aside should have been granted. See Bredeman, 863 S.W.2d at 26 ("Our finding of
insufficient facts to constitute a meritorious defense dispels any need to determine the
pleading of good cause").
Points One and Two are denied.
12
Conclusion
The judgment of the trial court is affirmed and the cause is remanded to the trial
court for further proceedings regarding damages and the additional claims against the
City of Kansas City.
__________________________________
Gary D. Witt, Judge
All concur
13