The Missouri Court of Appeals, Eastern District recently addressed the issue of whether a default judgment could be set aside due to an allegedly deficient return of service and/or return of service. Xtra Lease, LLC v. Pigeon Freight Services, Inc., Cause No.: ED110391 (Mo. App. E.D. Feb. 7, 2023). The decision in Xtra Lease, LLC demonstrates some of the pit-falls with respect to challenging and setting aside default judgements. A major takeaway from the decision is that a defendant who is found in default should always seek to set aside a default judgment on the basis of good cause and a meritorious defense. Without making such a claim, a defaulting defendant may need to rely on a challenge to the method of service—a troublesome proposition for any party when the plaintiff has fully complied with the Missouri Rules of Civil Procedure.
In Xtra Lease, the plaintiff sued the defendant for breach of contract and action on account. Id. at ¶ 1. The plaintiff utilized a special process server appointed by the circuit court to serve the summons and petition on the defendant at its office in Lansing, Illinois. Id. at ¶ 2. The process server executed an affidavit stating that he served copies of both documents by leaving them at the defendant’s Lansing, Illinois office with a person named “Sam” who accepted service and identified himself as the general manager. Id.
After service, the president of the defendant e-mailed counsel for the plaintiff to acknowledge receipt of the summons and ask for information regarding settlement. Id. Over the next several weeks, the plaintiff and the defendant attempted to negotiate a settlement. Id. The plaintiff filed the return of service with the special process server’s affidavit with the circuit court. Id.
Settlement negotiations fell apart and the plaintiff decided to move forward with the case. Id. The defendant never filed a responsive pleading or requested an extension to do so. Id. The plaintiff eventually filed a motion for default judgment. Id. The defendant did not response or appear at the hearing. Id. The circuit court entered a default judgment against the defendant for $99,899.97, plus interest. Id.
Following the default judgment, the defendant filed a motion to vacate the default judgment alleging that the circuit court lacked jurisdiction because of improper service. Id. Following an evidentiary hearing, the circuit court found that the plaintiff effectuated proper service by delivering a copy of the summons and petition to the defendant’s Lansing, Illinois business office to “Sam” who, as an “independent contractor” was in fact the “person in charge” of the office. Id. at ¶¶ 2–3. At the hearing, the plaintiff introduced evidence showing that the defendant maintained offices in Lansing, Illinois, that the president of the defendant received service, and that “Sam” was authorized to accept service on behalf of the defendant. Id.
On appeal, the defendant argued that the trial court abused its discretion by denying the motion to vacate because (1) it was timely filed, based on good cause, and raised a meritorious defense; (2) the return of service was facially deficient, rendering the judgment void; and (3) the proof of service was deficient because the plaintiff offered no evidence showing “Sam” was in charge of its Lansing, Illinois office or that it maintained an office there. Id. at ¶ 3.
The Court noted that it generally reviewed a denial of a motion to set aside a default judgment for abuse of discretion. Id. (citing Jones v. Riley, 560 S.W.3d 540, 544 (Mo. App. E.D. 2018)). “However, we review de novo whether a judgment should be vacated because it was void.” Id. (citing Morris v. Wallach, 440 S.W.3d 571, 575 (Mo. App. E.D. 2014)).
With respect to the abuse of discretion standard for the denial of a motion to set aside default judgment, the Court noted that because a decision on the merits is favored, the circuit court is afforded “narrowed discretion” to deny a motion to set aside a default judgment. Id. at ¶ 4 (citing Brungard v. Risky’s Inc., 240 S.W.3d 685, 687–88 (Mo. banc 2007)). “The general policy favoring disposition on the merits, however, ‘must be carefully applied to the facts of each case in the interest of justice; for, the law defends with equal vigor the integrity of the legal process and procedural rules and, thus, does not sanction the disregard thereof.’” Id. (quoting Sprung v. Negwer Materials, Inc., 775 S.W.2d 97, 100 (Mo. banc 1989)).
In its review of the defendant’s first claim of error, the Court found that the defendant did not raise any argument that its motion to vacate was timely filed, based on good cause, and raised at least an arguably meritorious defense. Id. The failure to raise these points did not preserve anything for appellate review. Id. The Court noted that Rule 74.05(d) permits a circuit court to set aside a default judgment upon motion stating facts showing good cause and a meritorious defense. Id. (“The pleading requirements of Rule 74.05(d) are further informed by Rule 55.26(a), which generally provides a motion ‘shall state with particularity the grounds therefor[.]”) Compliance with Rule 74.05(d) is determined by examining “the allegations in the defaulting party’s motion, and such other matters as affidavits, exhibits, and proposed answers.” Id. at ¶¶ 4–5 (citing Capital One Bank (USA) NA v. Largent, 314 S.W.3d 364, 366–67 (Mo. App. E.D. 2010)).
The Court noted that the defendant’s motion to vacate, unlike its argument on appeal, included no allegations claiming confusion about the status of the litigation. Id. at ¶ 5. Instead, the defendant specifically alleged that the motion to set aside the default judgment was based on “defective service of process.” Id. (“There is no allegation of good cause based on confusion or any related issue like negligence or a good faith mistake.”) Similarly, the affidavits, exhibits, and proposed answer did not assert there was good cause for the default due to confusion about the status of the litigation. Id. Instead, the affidavits and exhibits related solely to the defendant’s allegations that it did not maintain an office in Lansing, Illinois and that “Sam” was not authorized to accept service. Id. Finally, the proposed answer to the plaintiff’s petition did not include an assertion regarding good cause due to confusion. Id.
“Our Court will not consider an argument that was not presented to the trial court and made for the first time on appeal.” Id. at ¶¶ 5–6 (citing Solomon v. St. Louis Cir. Att’y, 640 S.W.3d 462, 472 (Mo. App. E.D. 2022)). “Simply put, a party cannot rely on one theory to set aside a judgment before the trial court then, when unsuccessful, rely upon a different theory on appeal.” Id. at ¶ 6 (quoting McGee ex rel. Mcgee v. City of Pine Lawn, 405 S.W.3d 582, 587 (Mo. App. E.D. 2013)).
Due to the lack of preservation of the issue, the Court held that the defendant could not argue that it showed good cause due to confusion regarding the status of the litigation. Id.
In its second claim of error, the defendant argued that the return of service was facially deficient because the return incorrectly stated that “Sam” was the defendant’s general manager and fails to identify “Sam” as a person qualified to accept service. Id. at ¶¶ 6–7.
The Court noted that proper service is a “prerequisite to personal jurisdiction.” Id. at ¶ 7 (quoting Scott by & Through Scott v. Borden, 648 S.W.3d 68, 73 (Mo. App. W.D. 2022)). “When the requirements for manner of service are not met, a court lacks power to adjudicate.” Id. (quoting Worley v. Worley, 19 S.W.3d 127, 129 (Mo. banc 2000)). “Actual notice is insufficient.” Id.
The Court noted that Rule 54.14 provides for personal service outside the state if the same is made upon a party as provided in Rule 54.13(b)(3). Id. Rule 54.13(b)(3) provides that service upon a foreign corporation shall be made by delivering a copy of the summons and petition to an officer, partner, or managing or general agent, or by leaving the copies at any business office of the defendant with the person having charge thereof or by delivering copies to its registered agent or to any other agent authorized by appointment or required by law to receive service of process. Id.
The Court noted that while Rule 54.13 sets forth the procedure for service, Rule 54.20 sets forth the requirements for providing “proper service.” Id. Furthermore, when a party utilizes a special process server, Rule 54.20(b)(2) provides that such person shall file an affidavit stating the time, place, and manner of such service.” Id. “Unlike a sheriff’s return, a special process server’s return is not presumed conclusive.” Id. (quoting Morris, 440 S.W.3d at 577). “Thus, the proof of service, ‘must show on its fact that every requisite of the rule has been complied with and may not be aided by intendments or presumptions.’” Id.
The Court found that the affidavit executed by the special process server stated it was made upon the defendant in Lansing, Illinois by leaving a copy of the process with “Sam” who was the “General Manager, a person authorized to accept service.” Id. Because the affidavit stated the time, place, and manner of service, the affidavit facially satisfies the proof of service demanded by Rule 54.20(b)(2). Id. at ¶¶ 7–8.
The defendant attempted to analogize to Marti v. Concrete Coring Co. of N. Am., where the process server’s affidavit identified the person who accepted service but did not list that individual’s position at the company. Id. at ¶ 8 (citing 630 S.W.3d 920, 923 (Mo. App. E.D. 2021)). In Marti, that section was “left blank” on the return. Id. (citing 630 S.W.3d at 923 n.4). On that basis, the return of service was considered facially deficient. Id. “Here, unlike Marti, the return of service sets forth the time, place, and manner of service as required by Rule 54.20(b)(2).” Id. Accordingly, the Court found that the affidavit and proof of service were not facially deficient. Id.
In its third and final claim of error, the defendant argued that the plaintiff failed to prove service was valid pursuant to Rule 54.13(b)(3) because it offered no evidence showing that “Sam” was the person in charge of its Lansing, Illinois office. Id.
The Court noted that the return of service shall be considered “prima facie evidence” of the facts recited therein. Id. (citing Rule 54.22(a)). Because the affidavit stated the time, place, and manner of service as required by Rule 54.20, the return created a presumption of proper service “that can be impeached only be clear and convincing evidence that a party was not served.” Id. (citing Morris, 440 S.W.3d at 578).
The Court found that the defendant did not meets it burden to produce “clear and convincing evidence” that it was not properly served. Id. at ¶¶ 8–9. At the evidentiary hearing before the circuit court, the president of the defendant testified that “Sam” was an independent contractor with no managerial authority. Id. at ¶ 9. However, on cross-examination, “Sam” conceded that he identified himself to the process server as the general manager of the Lansing, Illinois office. Id. The circuit court found that “Sam” while being an independent contractor, was in fact the “person in charge” of the Lansing, Illinois office. Id. “This Court defers to the circuit court’s determinations regarding credibility and the weight given to the evidence.” Id. (citing Yee v. Choi, 641 S.W.3d 272, 279 (Mo. App. W.D. 2021)). Accordingly, the circuit court was permitted to disbelieve the testimony that disputed the authority of “Sam” and to credit the evidence that showed he was in charge of the Lansing, Illinois office. Id. (citing Morris, 440 S.W.3d at 578). “The record supports the circuit court’s finding that [the plaintiff] properly served [the defendant] pursuant to Rule 54.13(b)(3) by delivering a copy of the summons and petition at [the defendant’s] business office to the person in charge of that office.” Id.
The defendant argued that the circuit court’s finding that “Sam” was an independent contractor precluded the conclusion that he was authorized to accept service. Id. The Court disagreed and found that the plain language of Rule 54.13(b) contained no such limitation. Id. “The rule does not require the person in charge of the office to be an employee.” Id. “Moreover, a person may be in charge of an office without also being an officer, partner, or agent.” Id. (citing State ex rel. Bunting v. Koehr, 865 S.W.2d 351, 355 (Mo. banc 1993)).
Accordingly, the Court found that the circuit court’s conclusion that “Sam” was an independent contractor did not negate the finding that he was also the person in charge of the defendant’s business office when service was made. Id. at ¶ 10 (citing Morrow v. Caloric Appliance Corp., 372 S.W.2d 41, 47 (Mo. banc 1963)). Because the circuit court concluded that “Sam” was “the person in charge” of the defendant’s office, the circuit court’s judgment was consistent with the service requirements of Rule 54.13(b)(3). Id.
In sum, the Court found that the defendant failed to present clear and convincing evidence showing it was not properly served. Id.
After finding against all three points on appeal raised by the defendant, the Court affirmed the judgment of the circuit court and declined to reverse the decision to deny the defendant’s motion to vacate the default judgment. Id.