Carmon v. Rose ( 2011 )

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2011 S.D. 18IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
GREGORY CARMON, Plaintiff and Appellee,
v.
BRIAN ROSE, Defendant and Appellant,
and
ENTERRA ENERGY, LLC an Oklahoma
limited liability company; ENTERRA
ENERGY, LLC, a Wyoming limited liability
company; ENTERRA ENERGY, LLC, an inactive
Florida limited liability company; DAVID
ROSE; MICHAEL WOOD; MATTHEW
SHERMAN; BRENT LOVEALL; GARY
TARBIS; DENNIS WILKINS; BERKSHIRE
RESOURCES, LLC, a Wyoming limited
liability company; JASON ROSE; JUPITER
ENERGY, LLC, an Oklahoma limited
liability company; STAN BILLUE; P-87
SOUTH, LLP, a Wyoming limited liability
partnership or an Oklahoma limited liability
partnership; ENTERRA 2005-7, LLP, an Oklahoma
limited liability partnership; DRILLING DEEP IN
THE WATER, LLP, an Oklahoma limited
liability partnership; KEN-TEX, LLP, an
Oklahoma limited liability partnership;
and DOE DEFENDANTS 1 THROUGH 20, Defendants.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
MINNEHAHA COUNTY, SOUTH DAKOTA
* * * *
HONORABLE PATRICIA C. RIEPEL
Judge
* * * *
CONSIDERED ON BRIEFS
ON MARCH 21, 2011
OPINION FILED 04/27/11
* * * *
VINCE M. ROCHE of
Davenport, Evans, Hurwitz & Smith, PC Attorneys for plaintiff
Sioux Falls, South Dakota and appellee.
JOHN C. SOGN
ERIKA L. STOESER of
Lynn, Jackson, Shultz & Lebrun, PC Attorneys for defendant
Rapid City, South Dakota and appellant.
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MEIERHENRY, Justice
[¶1.] In this case we are asked to decide whether substitute service of
process was valid. Gregory Carmon filed suit against Brian Rose in Minnehaha
County, South Dakota, alleging conspiracy to defraud. Carmon’s suit claimed that
Rose and several other defendants defrauded him in an oil and gas investment
scheme. The summons and complaint were served by substitute service under
SDCL 15-6-4(e) on Rose’s wife at 2504 Little Hills Lane, Louisville, Kentucky, on
December 3, 2009. When no responsive pleadings were filed, Carmon moved for a
default judgment, which was granted. Rose subsequently filed a motion to set aside
the default judgment. He claimed that the substitute service was invalid because
he had not lived at 2504 Little Hills Lane, Louisville, Kentucky, since separating
from his wife in November 2008. The trial court denied his motion concluding that
2504 Little Hills Lane was Rose’s dwelling house for purposes of substitute service
and that the default judgment should not be set aside. Rose appeals, claiming that
(1) substitute service was invalid, or alternatively, (2) if service was valid, he was
entitled to have the default judgment set aside. We affirm the trial court.
Analysis
[¶2.] “If the defendant cannot be found conveniently,” the law authorizes
substitute personal service “by leaving a copy [of the summons] at his dwelling
house in the presence of a member of his family over the age of fourteen years. . . .”
SDCL 15-6-4(e). Because “the validity of service of process is a question of law,” our
review is de novo. Lekanidis v. Bendetti, 2000 S.D. 86, ¶ 15, 613 N.W.2d 542, 545
(citing Yankton Ethanol, Inc. v. Vironment, Inc., 1999 S.D. 42, ¶ 6, 592 N.W.2d 596,
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598 (citations omitted)). Further, “substitute service must be made in strict
compliance with the [authorizing] statute to ensure that the defendant will receive
notice of the action.” Id. ¶ 24. Strict compliance is required for substitute service to
reduce the inherent risk that a defendant not receive notice of the lawsuit. Edsill v.
Schultz, 2002 S.D. 44, ¶ 9, 643 N.W.2d 760, 763; Lekanidis, 2000 S.D. 86, ¶ 24, 613
N.W.2d at 547. Furthermore, “[w]ithout valid service of process[,] the trial court
has no jurisdiction to act.” Lekanidis, 2000 S.D. 86, ¶ 33, 613 N.W.2d at 549(quotations and citations omitted). The trial court’s decision to deny Rose’s motion
to vacate and stay execution of the default judgment is reviewed for an abuse of
discretion. Peters v. Barker & Little, Inc., 2009 S.D. 82, ¶ 5, 772 N.W.2d 657, 659.
Validity of Substitute Service
[¶3.] When service of process is challenged, the party who commences an
action using substitute service must demonstrate that the service is valid. “The
great weight of the case law is to the effect that the party on whose behalf service
has been made has the burden of establishing its validity.” Grajczyk v. Tasca, 2006
S.D. 55, ¶ 22, 717 N.W.2d 624, 631 (quoting 5B Wright & Miller, Federal Practice
and Procedure § 1353, at 342). A valid return of service establishes a prima facie
showing of proper service. Id.
[¶4.] Here, the process server’s affidavit established that the statutory
requirements for substitute service were met. The process server left a copy of the
summons and complaint with Rose’s wife at 2504 Little Hills Lane, Louisville,
Kentucky. The process server submitted proof of service with an affidavit that
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stated “the time, place, and manner of such service” as required by SDCL 15-6-
4(g)(2). See Grajczyk, 2006 S.D. 55, ¶ 26, 717 N.W.2d at 632.
[¶5.] Rose claims that the substitute service was invalid because he and his
wife had separated and he was not living at that address when service was made.
His affidavit stated in part:
4. A default judgment in the amount of $343,658 was
apparently entered against me and other defendants in
February 2010. The Default Judgment and Order is dated
February 10, 2010, and was filed February 17, 2010.
5. I knew nothing of this lawsuit or the default judgment
against me until June of 2010, when I was in the process
of purchasing property in Kentucky and a credit check by
the mortgage company revealed the lien from this lawsuit.
...
7. I have been separated from my wife, Mary Rose, since
approximately November 2008 and I have not lived at
2504 Little Hills Lane, Louisville, Kentucky since on or
about November 2008.
8. Since approximately September 2009, my residence has
been 15326 Royal Troon Drive, Louisville, Kentucky,
40245.
9. The process server’s Affidavit [ ] states that the Summons
and Complaint was served at 2504 Little Hills Lane,
Louisville, Kentucky, 40223, by serving my wife, Mary
Rose, on December 3, 2009. As stated above, I was
separated from my wife, Mary Rose, and no longer lived at
that residence.
10. Mary Rose did not tell me about this lawsuit or provide
copies of the Summons and Complaint to me.
Rose’s sworn affidavit sufficiently refuted Carmon’s prima facie evidence that
service was proper, in that it created a disputed fact of whether 2504 Little Hills
Lane was his dwelling house at the time of service. As a result, Carmon had to
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prove that the substitute service was valid. See id. ¶ 22. Because substitute service
must be left at a party’s dwelling house to be valid, failure to do so would render the
substitute service invalid.
[¶6.] To meet his burden that substitute service was made, Carmon
presented additional evidence. This evidence indicated that Rose continued to use
the 2504 Little Hills Lane address to conduct business after he allegedly separated
from his wife in 2008. He used this address for a new business venture in 2009. He
also received a bank document at this address indicating that he and his wife had
satisfied a mortgage in September 2009. A vehicle registered to Rose was
photographed parked at this address in 2010. Additionally, Carmon’s investigation
into Rose’s residence turned up no evidence linking Rose to 15326 Royal Troon
Drive. And notably, Rose’s estranged wife, who accepted the substitute service at
2504 Little Hills Lane, gave no indication that Rose lived elsewhere. See generally
Johnson v. Bruflat, 45 S.D. 200, 186 N.W. 877, 879 (1922) (concluding that
substitute service was improper after the defendant’s wife told the process server
that her husband had abandoned her and no longer resided at the dwelling house
where service was made).
[¶7.] Although the evidence was submitted to the trial court by affidavit, the
weight of the evidence supports the court’s conclusion that substitute service was
valid. The evidence sufficiently demonstrates that 2504 Little Hills Lane was
Rose’s dwelling house and that SDCL 15-6-4(e)’s requirements for substitute service
were met. Therefore we hold that substitute service was valid and that the trial
court had jurisdiction to enter default judgment against Rose.
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Rose’s Motion to Set Aside the Default Judgment
[¶8.] Rose next argues that the trial court erred by not granting his motion
to set aside the default judgment. Rose asserts that because he did not have “actual
knowledge of the lawsuit or the Default Judgment and he has a good faith
meritorious defense to this suit, the trial court should have set aside the Default
Judgment.” This Court reviews the “grant or denial of relief from a default
judgment under the abuse of discretion standard of review.” Upper Plains
Contracting Inc. v. Pepsi Americas, 2003 S.D. 3, ¶ 11, 656 N.W.2d 323, 327. The
party seeking to have a default judgment set aside must establish “good cause.”
SDCL 15-6-55(c); SDCL 15-6-60(b). “Doubts should ordinarily be resolved in favor
of setting aside a judgment by default so that the case can be tried on the merits. In
the end, however, granting or denying relief from a default judgment rests in the
discretion of the trial court and we will not disturb that decision absent an abuse of
discretion.” Strutton v. SDG Macerich Props. LP, 2005 S.D. 44, ¶ 9, 695 N.W.2d
242, 244 (citations omitted).
[¶9.] Rose’s only evidence of “good cause” to set aside the judgment was his
two affidavits. In the first, he claimed that he did not receive notice, and, in the
second, he generally asserted that he had a meritorious defense. Based on this
meager showing, the trial court did not abuse its discretion in denying his motion.
[¶10.] Affirmed.
[¶11.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and
SEVERSON, Justices, concur.
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