Lacking explanation for delay, default judgment can’t be set aside

Summary

• Missouri appeals court ruled defendants failed to justify a 365-day delay in seeking to set aside a default judgment.
• The case involved a tax sale property dispute between Mad Tax LLC and the Robinson trust beneficiaries.
• The court held that filing within one year alone does not satisfy Rule 74.05(d)‘s “reasonable time” requirement.
• The decision reinforces the enforceability of default judgments and provides guidance for title companies and litigants.

Where the defendants failed to provide an explanation why they took 365 days to file a motion to set aside a default judgment, the circuit court’s reversal of the judgment was in error, the Missouri Court of Appeals Southern District ruled on April 24.

Mad Tax, LLC filed a verified petition seeking to determine and quiet title to certain real estate located in Steelville. The petition alleged that James Robinson and the beneficiaries of the J. Winfred Robinson and Barbara A. Robinson Revocable Trust lost all right, title and interest in the property following purchase by the LLC at a tax auction.

The defendants failed to timely plead or otherwise respond to the petition. Following a hearing at which the defendants did not appear in person or by counsel, the circuit court entered a default judgment granting the LLC the relief sought.

Exactly 365 days later, the defendants filed a motion to set that judgment aside. The circuit court allowed the parties to submit evidence.

In an affidavit on behalf of the LLC, an attorney affiliated with a title company stated that following the entry of the circuit court’s default judgment, the property was sold to another party.

The defendants also provided an affidavit. Upon service of the summons, the trust sought to negotiate with the LLC to redeem the property, according to the statement, and “[t]here was no intent to delay or impede the judicial process by not authorizing the attorney for the Trust to file a responsive pleading in this matter; we were simply trying to avoid unnecessary expenses while negotiations were ongoing.”

The circuit court set aside the default judgment, and the LLC appealed.

In an opinion authored by Judge Becky J. West and joined by Judges Matthew P. Hamner and Bryan E. Nickell, the court reversed.

Rule 74.05(d) authorizes the circuit court to set aside a default judgment if the moving party establishes: (1) a meritorious defense to the suit; (2) good cause for failing to respond to the petition; and (3) the motion was filed within a reasonable time not to exceed one year.

The court agreed with the LLC’s argument that setting aside the default judgment was erroneous because the defendants did not present sufficient evidence that they filed their motion to set the judgment aside “within a reasonable time.”

While the defendants filed their motion on the 365th day after the circuit court’s entry of a default judgment, the court refused to conflate the phrases “within a reasonable time” and “not to exceed one year” in Rule 74.05(d).

“Therefore, ‘[d]etermining that the motion was filed within one year is merely the first step of the inquiry,’” the court wrote. “It follows that the second step … ‘tasks the reviewing court with determining whether, based on the explanation provided in the motion filings, the time in which the party filed its motion to set aside was ‘reasonable.’”

To determine whether the motion to set aside the default judgment was filed within a reasonable time, the court examined the circumstances surrounding the delay.

Considering the sworn statements in the defendants’ affidavit, the court highlighted references to “negotiate” and “negotiations” in multiple paragraphs.

“Inconsistent with [the defendants’] assertion, however, those paragraphs (and the preceding paragraphs) do not address the 365-day period following the circuit court’s default judgment,” the court said. “Rather, the affiant admits the receipt of a summons on Oct. 31, 2023, and states that upon said receipt, the Trust sought to negotiate and it was the understanding of the affiant that the LLC would not take any adverse action.”

But this was an account of the circumstances preceding the issuing of the default judgment, the court pointed out.

“Such circumstances that delay the filing of a responsive pleading to the petition are certainly relevant to the good cause requirement of the setting-aside-a-default-judgment analysis,” the court explained. “However … ‘[w]ithout assessing the merits of [the defendants’] explanation of good cause, the record is clear that [the defendants] offered no account of any circumstances that followed the entry of the default judgment and caused a [365]-day delay in filing their motion to set aside said judgment.’”

The defendants provided no explanation why they took 365 days to respond to the adverse action, during which time the LLC allegedly sold the property to a bona fide purchaser.

“‘The law is clear that [the defendants] were obligated to demonstrate to the circuit court that they met all three rule requirements set forth in Rule 74.05(d), including that their motion was filed within a reasonable time not to exceed one year,’” the court wrote. “Because [the defendants] fail to explain why they took 365 days to act, ‘[t]he record is thus devoid of evidence on which we can rely to affirm the judgment.’”

Reversing judgment of the circuit court, the court remanded with instructions to reinstate the default judgment.

James A. Beckemeier of Beckemeier LeMoine Law in St. Louis, who represented the defendants, said he was disappointed by the decision.

“I’ve always been of the understanding that if you have a credible defense and there were not intentional acts to delay or defraud the court, as long as you filed your motion within one year, it met the standard,” he said. “The simple takeaway if that you should file a motion to set aside a default judgment sooner rather than later.”

Olivette attorney Matthew J. Floyd, who represented the LLC, said he was pleased the court addressed the issue of “reasonable time” to make it clear that “you can’t simply wait until the last minute to file your motion and expect the court to give you a pass without any explanation.”

“The Court of Appeals made it abundantly clear that a default judgment can’t just be wiped away because a party wakes up at some point and tries to dispute it,” he said. “Practitioners need to realize that they have to satisfy all three prongs of the statute and not just file it within one year. The court is going to actually look for evidence to determine whether this was a reasonable time to wait, and if you waited 365 days, you better have a very good reason.”

According to Floyd, the decision is also important because it gives weight to the enforcement of default judgments.

“Default judgments should be enforceable from the day they are issued, and title companies should feel comfortable with a sale,” he said. “It actually takes a lot to get a default judgment, and it would be a concerning situation if properties are being sold and a year later, the parties now have to step backward and deal with a mess from a title perspective.”

The case is Mad Tax LLC v. Robinson, No. SD39093.