Amneh Khatib v. Autotrakk, LLC

RENDERED: APRIL 23, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0123-MR
AMNEH KHATIB AND THE UNITED
GROUP, INC., DBA AUTO PLAZA APPELLANTS
USA
APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE ERNESTO M. SCORSONE, JUDGE
ACTION NO. 19-CI-02652
AUTOTRAKK, LLC1 APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; DIXON AND MAZE, JUDGES.
DIXON, JUDGE: Amneh Khatib and The United Group, Inc., dba Auto Plaza
USA (“Auto Plaza”) appeal from the order denying their motion to set aside
default judgment and quash garnishment entered by the Fayette Circuit Court on
December 16, 2019.
1
This is the spelling used in the notice of appeal.
FACTS AND PROCEDURAL BACKGROUND
On April 27, 2017, Auto Plaza and Auto Trakk, LLC, (“Auto Trakk”)2
entered into a dealer agreement (“Agreement”) in which Auto Trakk was to lease
automobiles to Auto Plaza as the dealer. The Agreement was signed by Auto
Trakk’s CEO and Auto Plaza’s President, Khatib. The Agreement listed 2000
Vince Road, Nicholasville, Kentucky, as Auto Plaza’s address. On the same date,
Khatib entered into a personal and continuing guarantee (“Guarantee”) to
accompany the Agreement, wherein Khatib’s address was listed as 2120 Shelton
Road, Lexington, Kentucky.
On December 23, 2017, Auto Plaza leased one of the automobiles
provided to it under the Agreement to Jeffrey and Taryn Hill. However, the Hills
defaulted on their lease prior to their fourth payment. Under section nine of the
Agreement, this triggered an obligation for Auto Plaza to repurchase the lease and
related vehicle. Section nine of the Agreement also provided:
Auto Trakk shall not be obligated to first repossess the
Vehicle or otherwise exhaust its recourse against a
Lessee. Dealer’s obligation to repurchase, and the
Repurchase Price will not be affected by: (i) inability of
Auto Trakk or Dealer to obtain possession of the Vehicle
or the physical condition of the Vehicle; or (ii) inability
of Auto Trakk or Dealer to collect amounts due under the
Lease, including without limitation, by virtue of a
2
This is the spelling used in the Agreement. Although, the spelling of Auto Trakk’s name
varies throughout the Pennsylvania and Kentucky proceedings, we chose to use this spelling in
our Opinion.
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bankruptcy involving a Lessee. This Section shall
survive the execution, delivery, expiration or termination
of this Agreement.
The Agreement also contained a choice of laws and forum selection clause in
Sections 28 and 31, respectively. Section 28 states the Agreement “shall be
governed by the Laws of the State of Pennsylvania[.]” Section 31 provides “any
dispute arising under or related to this Agreement shall be adjudicated in the State
of Pennsylvania. Dealer consents to personal jurisdiction in the State of
Pennsylvania for any such dispute.”
On January 25, 2018, Auto Trakk made a demand for repurchase.
Neither Auto Plaza nor Khatib repurchased the lease or the vehicle. Consequently,
on July 23, 2018, Auto Trakk sued Auto Plaza and Khatib in the Court of Common
Pleas of Lycoming County, Pennsylvania, for breach of contract under the
Agreement. The complaint claimed that as of May 7, 2018, the amount Auto Plaza
and Khatib owed Auto Trakk was $12,201.07, plus costs, attorney’s fees and
expenses.
Auto Trakk attempted service by registered mail on Auto Plaza and
Khatib at the addresses listed on the Agreement and Guarantee without success.
As a result, Auto Trakk moved the Pennsylvania court for alternative service as
permitted by Pa.R.C.P.3 430. Its motion was granted by order dated December 19,
3
Pennsylvania Rules of Civil Procedure.
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2018, authorizing service on Auto Plaza and Khatib via certified mail, no signature
required, and first-class mail, postage prepaid “with said service being valid and
complete upon such mailing in accordance with Pa.R.C.P. 430.”
On January 8, 2019, Auto Trakk served copies of its complaint to
Auto Plaza and Khatib via certified mail, no signature required. The certified mail
receipt for Khatib indicated delivery on January 10, 2019, with “Notice Left (No
Authorized Recipient Available)[.]” The certified mail receipt for Auto Plaza
indicated delivery on January 10, 2019, stating, “Your item was delivered to an
individual at the address[.]” On January 9, 2019, Auto Trakk served copies of its
complaint upon Auto Plaza and Khatib via first-class mail. Proof of service was
filed with the court on January 24, 2019. Auto Trakk sent notices of default to
Auto Plaza and Khatib on January 30, 2019. Default judgment was entered by the
Pennsylvania court on February 22, 2019, for $12,201.07, plus attorneys’ fees and
costs.
On July 22, 2019, Auto Trakk filed its notice and affidavit of foreign
judgment registration with the Fayette Circuit Court in Kentucky to domesticate
the February 22, 2019, Pennsylvania default judgment.4 On September 16, 2019,
Auto Trakk gave notice of its intent to depose Khatib via subpoena. On September
4
Due to a typographical error, Auto Plaza was not initially served in this action—the street
address was listed as 200 Vince Road rather than 2000 Vince Road.
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24, 2019, Khatib was successfully personally served with the subpoena to give
deposition by a deputy constable at the home address listed on the Guarantee—the
same address to which mail was sent throughout both the Pennsylvania and
Kentucky actions. On October 16, 2019, Auto Trakk filed an affidavit for writ of
non-wage garnishment.
On November 5, 2019, Auto Plaza and Khatib finally entered an
appearance though their motion to set aside default judgment and quash
garnishment. They claimed the Pennsylvania default judgment was entered
without providing them notice and is, therefore, void. Khatib filed an affidavit
contemporaneous with the motion, claiming “[n]either Auto Plaza nor I were ever
served with any papers” in the Pennsylvania action. Khatib further swore:
I first learned of the existence of the Pennsylvania Action
when the Plaintiff filed this action seeking to enforce a
Default Judgment entered in the Pennsylvania Action, a
default Judgment which entered judgment by default
against Auto Plaza and myself on a Complaint I had
never seen, no one at Auto Plaza had ever seen, and
which was never served upon Auto Plaza nor myself.
The substance of the motion to set aside the default judgment was:
Here, the excuse for the default is simple: Neither Ms.
Khatib nor Auto Plaza received notice of the default, nor
of the Motion for Default Judgment in the Pennsylvania
Action. The meritorious defense is that neither Ms.
Khatib nor Auto Plaza have defaulted under the
Agreement attached to the Complaint in the Pennsylvania
Action, and there is no prejudice to the Plaintiff: This is
a simple collection case, which was not served properly
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on the Defendants, and no prejudice will result from
giving the Defendants their day in Court.
After the matter was fully briefed and arguments heard, the trial court entered its
order denying Auto Plaza’s and Khatib’s motion. This appeal followed.
STANDARD OF REVIEW
Kentucky Rules of Civil Procedure (CR) 55.02 states that “[f]or good
cause shown the court may set aside a judgment by default in accordance with
Rule 60.02.” Whether a CR 60.02 motion should be granted is left to the sound
discretion of the trial court. Because the law favors finality, relief should only be
granted “with extreme caution and only under the most unusual and compelling
circumstances.” Age v. Age, 340 S.W.3d 88, 94 (Ky. App. 2011). We, therefore,
review for whether the trial court abused its discretion. Id. “The test for abuse of
discretion is whether the trial [court’s] decision was arbitrary, unreasonable, unfair,
or unsupported by sound legal principles.” Commonwealth v. English, 993 S.W.2d
941, 945 (Ky. 1999) (citations omitted). Further, “[i]t is axiomatic that default
judgments are not favored in the law. They are to be scrutinized carefully pursuant
to three criteria: 1) valid excuse for default, 2) meritorious defense, and 3) the
absence of prejudice to the other party.” Smith v. Flynn, 390 S.W.3d 157, 159 (Ky.
App. 2012) (citations omitted).
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ANALYSIS
Kentucky Revised Statutes (KRS) 426.955 allows a foreign judgment
filed within a Kentucky court to have “the same effect and is subject to the same
procedures, defenses and proceedings for reopening, vacating, or staying as a
judgment of a court of this state and may be enforced or satisfied in like manner.”
On appeal, Auto Plaza and Khatib argue the Pennsylvania judgment should be set
aside as void or voidable under CR 60.02 “due to a complete lack of actual
service.” However, contrary to their argument, “actual notice of the lawsuit is not
required to effectuate service as long as it is done in compliance with the
applicable statute.” HP Hotel Mgmt., Inc. v. Layne, 536 S.W.3d 208, 214 (Ky.
App. 2017) (citing Cox v. Rueff Lighting Co., 589 S.W.2d 606, 607 (Ky. App.
1979)). It is important to note, nevertheless, that a showing of no actual notice
may constitute good cause sufficient to warrant setting aside a default judgment. It
is imperative that “[t]he facts and circumstances of each individual case should be
weighed” in making such a determination. Id. at 215 (citation omitted).
It is well-established:
According to CR 55.02, if a defaulting party
demonstrates good cause, a trial court may set aside a
default judgment providing said good cause meets the
requirements set forth in CR 60.02. To show good cause,
and thereby justify vacating a default judgment, the
defaulting party must: (1) provide the trial court with a
valid excuse for the default; (2) demonstrate a
meritorious defense; and (3) show the absence of
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prejudice to the non-defaulting party. “All three
elements must be present to set aside a default
judgment.”
First Horizon Home Loan Corp. v. Barbanel, 290 S.W.3d 686, 688-89 (Ky. App.
2009) (footnotes and citations omitted). To succeed in a motion to set aside a
judgment, Appellants are required to show good cause, as well as a valid excuse, a
meritorious defense, and the absence of prejudice to the nonmoving party.
Herein, Appellants claim there is no evidence in the record that they
were actually served with the complaint in the Pennsylvania action. This is simply
not borne out by the record. First and foremost, “[t]here is always a presumption
that a communication that was properly stamped, addressed and deposited in the
mail was received by the addressee. Once the fact of address, stamp and deposit is
proven, the burden shifts to the addressee to prove that he has never received the
letter.” Haven Point Enters., Inc. v. United Kentucky Bank, Inc., 690 S.W.2d 393,
395 (Ky. 1985) (citation omitted). Secondly, Khatib’s self-serving affidavit is
undercut by the proof of service to an individual at Auto Plaza on January 10,
2019. Last, but not least, Khatib was later personally served in the Kentucky
action at the same address to which the mail was addressed in the Pennsylvania
action.
Undaunted by the facts of the records, Appellants discuss Kentucky’s
rules of service. However, our courts have pointed out that our rules concerning
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service are not the standard by which to measure foreign judgments. They must be
measured by the laws of that state. Here, we must look at whether service was in
compliance with Pennsylvania rules. See Waddell v. Commonwealth, 893 S.W.2d
376, 379 (Ky. App. 1995) (“To succeed in this collateral attack, Waddell must
show that the judgment is void under Indiana law. Thus, his discussion regarding
our CR 4.05-4.07 and the procedure outlined therein for a warning order are
completely irrelevant.”).
Appellants next attack Auto Trakk’s compliance with Pennsylvania’s
rules concerning service. They claim this issue was preserved in their motion to
set aside default judgment; however, no mention of the rules was made therein.
Appellants have made no request for our review for palpable error, and we are not
permitted to review an argument for the first time on appeal. We have said
repeatedly,
we will not allow appellants, under the guise of
“developing” an argument raised in the trial court, to feed
one can of worms to the trial judge and another to the
appellate court.
Grundy v. Commonwealth, 25 S.W.3d 76, 84 (Ky. 2000) (internal quotation marks
and footnote omitted). Even so, Auto Trakk filed proof of its compliance with the
Pennsylvania court’s order permitting alternative service pursuant to Pa.R.C.P.
430. Thus, we ascertain no error.
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Because Appellants have failed to demonstrate good cause or a valid
excuse why the Pennsylvania default judgment should be set aside, we need not
address whether Auto Plaza and Khatib have a meritorious defense or whether
setting aside the judgment would prejudice Auto Trakk. We do note, however, that
Auto Plaza and Khatib have failed to demonstrate either. Auto Plaza and Khatib
made only general denials of default, which do not equate to the meritorious
defense contemplated in our case law. Tennill v. Talai, 277 S.W.3d 248, 250 (Ky.
2009) (“The subsequent motion to set aside the default attached a tendered answer
with a general denial, but no meritorious defense. Under these circumstances, the
trial court did not abuse its discretion in not setting aside the default.”).
Appellants later alleged that “Auto Trakk has failed to return, or
locate, the vehicle, after the alleged default.” Yet, section nine of the parties’
Agreement provides that Auto Trakk need not do either of these; thus, that attempt
at pleading a defense fails as well. Auto Plaza and Khatib also failed to show how
setting aside the judgement would not prejudice Auto Trakk. S.R. Blanton Dev.,
Inc. v. Inv’rs Realty & Mgmt. Co., Inc., 819 S.W.2d 727, 729-30 (Ky. App. 1991)
(“We also agree with the trial court that the idea of fairness must be viewed from
both sides. [The nonmovant] argues that if this judgment were set aside, the
additional costs it had incurred in defending foreclosure actions as a result of its
judgment lien would be ‘money down the drain.’”). Failure to put forth evidence
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of a meritorious defense demonstrates the high likelihood of simply postponing the
inevitable with unjustifiable increased fees, costs, and delay. As such, we cannot
say the trial court erred or abused its discretion in denying Auto Plaza’s and
Khatib’s motion to set aside default judgment and quash garnishment.
CONCLUSION
Therefore, and for the foregoing reasons, the order of the Fayette
Circuit Court is AFFIRMED.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE:
Andre F. Regard Amanda P. Thompson
Ivey L. Workman Sarah E. Boggs
Lexington, Kentucky Lexington, Kentucky
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