ROTH (BRIAN S.) VS. LAWRENCE (WILLIAM W.), ET AL.
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RENDERED: AUGUST 21, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-000868-MR
BRIAN S. ROTH, D.C.
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
ACTION NO. 05-CI-000663
WILLIAM W. LAWRENCE, TRUSTEE,
UNCLE PAUL CHIROPRACTIC BUSINESS
TRAINING, LLC, AND PAUL HOLLERN, D.C.
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: NICKELL AND VANMETER, JUDGES; GRAVES,1 SENIOR
JUDGE.
NICKELL, JUDGE: Dr. Brian S. Roth, D.C. (Roth), appeals from an April 4,
2008, final order of the Jefferson Circuit Court denying his motion to set aside a
default judgment entered against him on December 18, 2006, in the amount of
1
Senior Judge J. William Graves sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.
$371,242.60. Concluding the trial court properly denied Roth’s motion to set aside
the default judgment entered against him based on his failure to show good cause,
and determining the court was correct in refusing to consider Roth’s allegedly
meritorious defenses, we affirm.
This appeal stems from a Purchase and Management Agreement
executed on or about June 30, 1999, between Roth and Dr. Paul Hollern, D.C.
(Hollern), who apparently operated a chiropractic practice and professional
consulting business with a mailing address in Jefferson County, Kentucky. Roth
agreed2 to purchase a chiropractic practice owned or to be established by Hollern in
Norristown, Pennsylvania, together with Hollern’s management and consulting
support, for the sum of $375,000.00.3 The parties further agreed their contract
would be construed and governed by the laws of the Commonwealth of Kentucky
and all legal issues would be resolved by the civil courts of Jefferson County,
Kentucky. In addition to helping Roth establish the chiropractic practice and
providing management and consulting support, Hollern advanced Roth
$110,978.00 in cash, amounting to a total debt owed of $485,978.00. Roth made
payments on this debt from March 15, 2001, through January 21, 2004, when he
ceased making payments to Hollern without notice. As of October 16, 2004, Roth
still owed Hollern $371,242.60.
2
Roth consulted with his attorney before signing the agreement. Both Roth and his attorney
signed the agreement.
3
The record does not specify any services Hollern was to provide under the agreement.
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In October 2004, Hollern mailed a certified letter to Roth, in
Pennsylvania, indicating he would pursue litigation if the delinquent payments
were not made. Hollern received no payments4 after mailing the certified letter to
Roth. One year after receiving Roth’s last payment, Hollern filed a complaint
against Roth in the Jefferson Circuit Court. A copy of the complaint was sent by
certified mail to Roth’s office in Norristown, Pennsylvania. A return receipt,
erroneously dated “1/3/05”,5 was allegedly signed by Roth. The Jefferson Circuit
Court Clerk received notice and proof of service and the certified mail receipt
bearing what appeared to be Roth’s signature from the Kentucky Secretary of
State6 on February 7, 2005. Roth filed no answer or responsive pleading.
Over three years after the complaint was filed, Hollern petitioned for
protection under the United States Bankruptcy Code7 in October 2008. All of his
assets, including the debt owed to him by Roth, were transferred to the bankruptcy
trustee, William W. Lawrence (Lawrence). On June 19, 2008, Lawrence filed an
amended complaint setting out his rights as trustee to the litigation and mailed a
copy to Roth. Roth still did nothing.
Citing Roth’s inaction, Lawrence moved for a default judgment on
September 25, 2006. On December 18, 2006, the circuit court entered a default
4
The record does not indicate whether Roth corresponded with Hollern after January 2004.
5
The correct date is presumed to be February 3, 2005, because the complaint was not filed until
January 21, 2005.
6
Service was effectuated through the Secretary of State pursuant to KRS 454.210 as Roth was a
resident of Pennsylvania.
7
11 U.S.C. § 101 et seq.
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judgment against Roth in the amount of $371,242.60, and mailed a copy to Roth at
the same address as the notice of complaint was sent on December 27, 2006. The
default judgment was registered8 in Roth’s place of residence, Montgomery
County, Pennsylvania, on August 17, 2007.
In December 2007, Roth filed his first pleading in the Jefferson Circuit
Court, a motion to set aside the default judgment that had been entered against him
a year earlier. Roth argued the default judgment was void because he had a
meritorious defense9 and he was never served with process. Roth claims the notice
of the default judgment being registered in Pennsylvania was the first notice he
received.
In an order entered April 9, 2008, the circuit court found striking
similarities between the four signatures Roth admitted were his and the signed
return receipt he claimed was a forgery. As a result, the court concluded Roth, or
someone who had practiced Roth’s signature, had signed the return receipt
indicating acceptance of the original complaint. Finding Roth could not show
good cause for his failure to respond to the complaint, the court found it
8
Pursuant to Article IV, Section 1 of the United States Constitution, states are required to give
full faith and credit to the judicial proceedings from every other state. To aid in the enforcement
of judgments, a majority of states, including Kentucky and Pennsylvania, have adopted the
Uniform Enforcement of Foreign Judgments Act, codified in Kentucky at KRS 426.950 et seq.
Consistent with the Act, notice of the judgment was filed with the Jefferson Circuit Court Clerk
and mailed by the clerk to Pennsylvania. A Pennsylvania clerk then mailed notice to Roth at the
address provided by the Kentucky court clerk.
9
Roth argued the contract was illegal because it did not conform to the requirements of
Kentucky’s Sale of Business Opportunities statutes codified at KRS 367.801, et seq.
-4-
unnecessary to discuss Roth’s contention that he had a meritorious defense to
Lawrence’s claim. Thereafter, the Court denied Roth’s motion to set aside the
default judgment. This appeal followed.
Neither party’s brief mentions whether the alleged trial errors were
preserved for our review. CR10 76.12(4)(c)(v) requires that the ARGUMENT in
the appellant’s brief begin with “a statement with reference to the record showing
whether the issue was properly preserved for review and, if so, in what manner.”
Roth’s brief does not comply with this rule and Lawrence does not comment on the
lack of a statement of preservation, nor does he request sanctions due to the
deficiency.
Additionally, CR 76.12(4)(c)(iv) requires that the STATEMENT OF
THE CASE contain “ample references to the specific pages of the record, or tape
and digital counter number [for] untranscribed videotape or audiotape
recordings[.]” For a recording to be included in the record on appeal, parties must
designate such recording within ten days of filing a notice of appeal. CR 75.01.
Furthermore, in making his arguments, Roth’s brief fails to refer to specific pages
in the record. He also relies heavily upon a hearing held on February 29, 2008, but
neither a video recording nor a transcribed copy of that hearing was designated as
part of the record for our review. Failure to cite to the record authorizes this Court
to strike the party’s brief, or to rely only on the contents of the briefs filed by both
parties. Robbins v. Robbins, 849 S.W.2d 571, 572 (Ky. App. 1993). Roth’s brief
10
Kentucky Rules of Civil Procedure (CR).
-5-
falls short of compliance with CR 76.12(4)(c)(vi) and with CR 76.12(6) in that it
fails to set forth the specific relief sought from this Court, and does not contain a
certificate of service on the cover of the brief. Because Roth’s argument fails on
the merits, we will not strike his brief, though we would be well within our
authority to do so. Elwell v. Stone, 799 S.W.2d 46, 48 (Ky. App. 1990).
Trial courts are vested with broad discretion in ruling on motions to
set aside default judgments. Howard v. Fountain, 749 S.W. 2d 690, 692 (Ky. App.
1988). In light of that discretion, a trial court’s decision will not be disturbed
absent abuse. Id. “The test for an abuse of discretion is whether the trial judge’s
decision was arbitrary, unreasonable, unfair, or unsupported by sound legal
principles.” Sexton v. Sexton, 125 S.W.3d 258, 272 (Ky. 2004). Abuse of
discretion exists where there is a capricious disposition under the circumstances, or
“at least an unreasonable and unfair decision.” Id.
Under CR 55.02, if a party is able to show good cause, a trial court
may set aside a default judgment if such cause meets the requirements of CR
60.02. Though a trial court has broad discretion, a default judgment may be set
aside only if the moving party can show three factors: (1) a valid excuse for his
default, (2) a meritorious defense, and (3) the absence of prejudice to the nondefaulting party. Perry v. Central Bank & Trust Co., 812 S.W.2d 166, 170 (Ky.
App. 1991) (citing 7 W. Bertelsman and K. Philipps, Kentucky Practice, CR 55.02,
comment 2 (4th ed. 1984)). “All three elements must be present to set aside a
default judgment.” S.R. Blanton Development, Inc. v. Investors Realty and
-6-
Management, 819 S.W.2d 727, 729 (Ky. App. 1991). The moving party must
demonstrate that he is not himself guilty of unreasonable delay in showing good
cause. Terrafirma, Inc. v. Krogdahl, 380 S.W.2d 86, 87 (Ky. App. 1964). Absent
a timely showing, a court cannot be held to have abused its discretion. Jacobs v.
Bell, 441 S.W.2d 448, 449 (Ky. App. 1969).
Roth argues he did not receive a copy of the summons and complaint
from the Kentucky Secretary of State and that the return receipt bearing his
purported signature is a forgery. Roth states he does not recall receipt of the
complaint or subsequent mailings, and claims he did not receive any notice of the
action being filed against him until the default judgment was domesticated in
Pennsylvania in August 2007.11 Roth argues these circumstances constituted good
cause for his delay in responding to the complaints of Hollern and later Lawrence.
As a reviewing Court, we set aside default judgments with extreme
caution, and then under only the most unusual circumstances. Cawood v. Cawood,
329 S.W.2d 569, 571 (Ky. App. 1959). Roth’s excuse for waiting four months to
show good cause in his motion to set aside the judgment is that he had trouble
acquiring adequate legal representation. This does not constitute an unusual
circumstance because most parties to litigation are faced with the task of choosing
counsel. In Terrafirma, the Court held that waiting just sixty days before filing a
defense was unreasonable. In the case sub judice, the trial court’s finding that
Roth did not show good cause for his three-year delay (January 2004 – December
11
However, upon receiving effective service in August 2007, Roth waited four months to file a
motion to set aside the judgment.
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2007) was not unfair or arbitrary, and was based on sound legal principles.
Therefore, there was no abuse of discretion. Jacobs.
As stated earlier, the test for whether a default judgment may be set
aside is threefold. A showing of good cause for the delay must be timely made, a
party must assert a meritorious defense, and the absence of prejudice to the other
party must be demonstrated. Even if the circuit court had determined Roth had a
meritorious defense, his failure to satisfy the good cause requirement would have
been fatal to his defense. Thus, the trial court did not err in refusing to address
Roth’s alleged meritorious defense and we will not discuss it further. In addition,
Roth presented no evidence whatsoever regarding the absence of prejudice to
Hollern if the judgment were to be set aside. Such failure is likewise fatal to his
argument. S.R. Blanton Development, Inc., 819 S.W.2d at 729. The trial court did
not err.
For the foregoing reasons, the judgment of the Jefferson Circuit Court
is affirmed.
VANMETER, JUDGE, CONCURS.
GRAVES, SENIOR JUDGE, DISSENTS.
GRAVES, SENIOR JUDGE, DISSENTING: Respectfully, I dissent.
The trial court has merely recited the evidence and indicated the facts
elicited by the testimony given at the hearing. The record lacks findings of
ultimate or conclusionary facts needed for appellate review.
-8-
This matter should be remanded to the trial court with direction to
make specific findings of fact sufficient to justify the credibility judgment and
inference that service of process was legally efficacious. It appears the appellee
has overstated a biased impression of the facts. This matter should be resolved on
the merits.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Charles M. Friedman
Louisville, Kentucky
Samuel B. Carl
Louisville, Kentucky
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