The Delaware Supreme Court recently analyzed the standard of excusable neglect sufficient to vacate a default judgment. In the case of Christiana Mall, LLC v. Emory Hill and Company (opinion here), Christiana Mall sought to overturn the Superior Court’s finding that it could not vacate a default judgment entered against it. The judgment was the result of a mechanic’s lien claim brought by Emory Hill against the mall and one of its tenants, MrFruz. MrFruz was obligated to defend and indemnify Christiana Mall in the action pursuant to the terms of the lease between the parties.
After the complaint was filed, McFruz advised Christiana Mall that it was attempting to resolve the claim and that it had secured an extension of time for it and the Mall to answer the Complaint. In fact, MrFruz never obtained an extension for the Mall. Moreover, Emory Hill had advised MrFruz that it did not believe MrFruz was negotiating in good faith and therefore it and the Mall must answer the complaint to avoid a default. Following the deadline to answer the complaint, Emory Hill filed a direction for entry of default against MrFruz and Christiana Mall. Thereafter, the Mall sought to vacate the default—MrFruz filed for bankruptcy protection.
The Superior Court denied Christiana Mall’s motion to vacate the default. The Court found that there was excusable neglect, however it denied Christiana’s motion to vacate on the basis that granting such relief would substantially prejudice Emory Hill. On appeal, the Supreme Court affirmed the Superior Court judgment, however it found that Christiana Mall’s conduct was not excusable neglect.
Christiana’s conduct demonstrated indifference to the Superior Court proceedings …. Christiana did not engage or consult with its own counsel upon receipt of the Complaint because it relied on the representations of the attorney for Mrfruz, based on Mrfruz’s obligation to defend and indemnify Christiana. [The mall] believed, based on that obligation and [MrFruz’s] November 27, 2012 email, that Mrfruz was engaged in good faith negotiations with Emory Hill and that both Christiana and Mrfruz had an extension of time to answer.
We hold that it is not excusable neglect for a party, relying on a codefendant to defend and indemnify it, to disregard its obligations to the court, fail to monitor the docket in the proceedings, fail to verify extensions of time, and fail to ensure that its own interests were being properly represented and protected. In this case, Christiana did all of these things. Therefore, Christiana failed to demonstrate that its neglect was excusable. For that reason, its motion to set aside the default judgment was without merit and should have been denied on that basis.
This opinion provides important guidance to commercial property owners who should be advised that it is not sufficient to rely upon the representations of their tenants. For more on mechanic’s liens in Delaware, please review my Guide to Mechanic’s Lien.
Seth Niederman is a partner with the law firm Fox Rothschild LLP. Seth practices in Fox Rothschild’s Wilmington, Delaware office. You can reach Seth at 302-622-4238, or email@example.com.