DATE RENDERED: 09/28/2007

Plaintiff filed suit for various causes of action, and Defendant’s attorney filed an answer. Trial court (TC) entered an order setting a trial date for 11/15/05. On 06/17/05, defense counsel moved to reassign the trial date. On 06/28/05, two new attorneys filed a motion to enter appearance as counsel in substitution of previous defense counsel. None of the three defense attorneys appeared at motion hour on this motion, and the TC remanded it due to counsels’ non-appearance. On 11/2/05 and 11/8/05, Plaintiff filed his witness list and proposed jury instructions, but he did not effectuate service on any of the three attorneys or on the Defendant. On 11/15/05 the case was called for trial, and the TC noted that neither the Defendant nor any of his counsel appeared. Upon Plaintiff’s motion, the TC struck the Defendant’s answer, granted a default issue on liability and allowed Plaintiff to present evidence as to damages. Three months later, the TC entered a written judgment in favor of the Plaintiff for some $62K. The second defense counsel moved to set aside the default judgment under CR 55.01, and the TC denied it on the basis of CR 37.02(2)(c). Defense counsel moved to alter, amend or vacate the denial, which was again denied, and this appeal followed.

Three errors alleged:

1. TC erred in awarding default judgment in contravention of CR 55.01, making judgment void ab initio. CA noted the standard of review on default judgments is abuse of discretion, but that where sanctions are imposed, as here, the discretion of TC is not unlimited. It must be supported by a finding of bad faith or willfulness on the part of the party being sanctioned. In the CAs review of a TC’s imposition of sanctions, it must consider (a) whether the opponent was prejudiced by dismissed party’s actions; (b) whether dismissed party was given a warning that dismissal could result from failure to cooperate and (c) whether other, less drastic sanctions had previously been imposed or considered prior to dismissal. Greathouse v. American Nat’l Bank & Trust Co., 796 S.W.2d 868 (Ky. App., 1990). The CAs found that the record had no evidence of any such findings; CA finds the TC abused its discretion in granting the default. CAs also noted that the TC’s reliance on CR 37.02(2)(c) as grounds for granting default, was misplaced, as that rule relates to sanctions available only when a party fails to obey an order tor provide or permit discovery. The rule does not indicate sanctions are available to a party who otherwise violates orders of the Court. CAs agreed with defense counsel that CR 55.01 applies to this situation.

CR 55.01 mandates tat notice of application for a default judgment must be given to alleged defaulting party at least 3 days prior to the heraing on the applciation if the alleged defaulting party has appeared in the action. There was no doubt that the Defendant did appear on this action earlier in its history, and CA held Defendant was therefore entitled to notice of application for default judgment. There being no such notice, the CA vacated it.

Though this holding was sufficient to vacate the default, the CAs discussed the remaining arguments.

2. CA noted that in TC’s denial of post-judgment motions for relief, it indicated Defendant had failed to show presence of meritorious defense or good casue sufficient to satisfy the requirements set forth in CR 55.02 to set aside default judgment. However, CA held that as mandatory requirements of CR 55.01 were not present, the presence or absence of a meritorious defense is immaterial. Also, as default judgment was void as a matter of law, the TC had not discretion to exercise when ruling on motion to set aside judgment.

3. CA agreed with defense counsel that TC erred in holding damages hearing without first giving notice of same. In cases involving unliquidated damages where a party has made an appearance, the defaulting party admits liability but not amount of damages. As such, a separate hearing is required, and fundamental fairness requires the defaulting party be given notice of a damage assessment hearing before such is held. Because the Defendant had made an appearance, she was entitled to notice of the damages hearing, and the CAs held that even if it were not vacating the underlying default judgment, it woudl have been required to reverse the damages award for want of notice.

Digested by Cherry Guanieri

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