Thursday, September 27, 2012

Default Judgment Upheld by Court of Appeals

Default Judgment Upheld by Court of Appeals

      The Court of Appeals, in a July decision, has upheld a default judgment entered against a combination of entity and individual defendants where, it appears, no responsive pleadings were ever filed.  True Gospel Church Ministries, Inc. v. Church of God in Christ, No. 2011-CA-000796-MR, 2012 WL 2604268 (Ky. App. 2012).
      Cloesey Henderson established, in the early 1980s, the True Gospel Church of God in Christ (the “TGC”), which in turn affiliated with the National Church of God in Christ (the “National Church”), being then assigned to its Kentucky first jurisdiction.  TGC thereafter obtained two pieces of real property upon which it constructed a church.  In 2008, Cloesey died, leaving as survivors his widow, Carthel, a son, David, and a daughter, Shirley.  Thereafter, the National Church appointed a replacement pastor for TGC.  Cloesey’s heirs were dissatisfied with that appointment and, in concert with some or all of the congregation, formed the True Gospel Church Ministries, Inc. (“TGCMI”).  Then, purportedly as representatives of TGC, David, Shirley and Carthel transferred the real property to TGCMI.  TGCMI then affiliated with the Church of God in Christ International (the “International Church”).

      The National Church instituted suit against TGCMI and each of David, Shirley and Carthel on the basis that the real property belonged to the National Church and that they had no authority to transfer it to TGCMI.  A bishop of the International Church filed a document designated as a response to the complaint, ostensibly on behalf of TGCMI.  However, as this bishop was not an attorney, this document was not treated as a responsive pleading.
      More than eight months after the filing of the complaint, the plaintiffs moved for a default judgment or a summary judgment.  On the date scheduled for the hearing on the motion for default or summary judgment, it was represented to the court that counsel had been hired on behalf of TGCMI and possibly the individual defendants whereupon the court directed the attorney to enter an appearance and file an answer.  He, in turn, filed that appearance but only on behalf of TGCMI, and on its behalf filed a response in opposition to the motion for default/summary judgment.  No answer was filed on behalf of the individual defendants or TGCMI.
      A hearing was scheduled on the motion for default/summary judgment, but TGCMI’s counsel failed to appear thereat.  The hearing was re-scheduled, and TGCMI’s counsel again failed to appear.  Taking the matter under advisement, the court then granted the motion for a default judgment.  In doing so, the court noted that no appearance or answer had been entered on behalf of any of the individual defendants, and no answer had been filed on behalf of TGCMI.
      Just over two weeks after the entry of that default judgment, new counsel entered an appearance on behalf of all of the defendants and filed a motion for leave to file an answer and as well a motion to alter, vacate or amend the grant of the default judgment.  Still, the default judgment was entered, and appeal was taken to the Court of Appeals.
      Reciting that the question is one of the trial court’s abuse of discretion, the Court of Appeals reviewed the factual posture of the case below.  The appellants, the defendants below, argued that it was an abuse of discretion to enter a default judgment “because the responsibility for not filing an answer properly belong[ed]” to their attorney and not to themselves.  Rejecting that argument, it was noted that a default judgment may be entered when no defense is entered.  While an entry of appearance was made on behalf of TGCMI, nothing precluded the individual defendants from representing themselves.  Further, while that counsel “might be at fault for failing to file an answer on behalf of [TGCMI], he cannot be at fault for failing to file an answer on behalf of [the individual defendants] because he did not represent them.”
      In response to the argument that the trial court should have vacated its default judgment pursuant to CR 55.2 for good cause shown, such was rejected in that “[c]arelessness by a party or his attorney is not reason enough to set an entry aside,” citing S.R. Blanton Dev. Inc. v. Investors Realty and Management Co., Inc., 819 S.W.2d 727, 729 (Ky. App. 1991).

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