Nathan Lockard v. American Botanicals, LLC

RENDERED: FEBRUARY 3, 2023; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0298-MR
NATHAN LOCKARD AND
MOUNTAIN NATURAL PRODUCTS,
LLC APPELLANTS
APPEAL FROM PIKE CIRCUIT COURT
v. HONORABLE HOWARD KEITH HALL, JUDGE
ACTION NO. 20-CI-01642
AMERICAN BOTANICALS, LLC APPELLEE
OPINION
AFFIRMING
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BEFORE: THOMPSON, CHIEF JUDGE; DIXON AND GOODWINE, JUDGES.
DIXON, JUDGE: Nathan Lockard and Mountain Natural Products, LLC (MNP)
appeal from the orders of the Pike Circuit Court denying their motion to stay
enforcement of a foreign judgment and their motions to alter, amend, or vacate
same, entered on October 19, 2021, and February 28, 2022, respectively. After
careful review of the record, briefs, and applicable law, we affirm.
FACTS AND PROCEDURAL BACKGROUND
MNP is a Kentucky limited liability company (LLC) managed by
Nathan Lockard, a Kentucky resident. Lockard and MNP conducted business with
American Botanicals, LLC, (“American Botanicals”) – a Missouri LLC –
beginning in 2014. On January 5, 2015, American Botanicals and MNP entered
into a cash advance agreement (“Agreement”) signed by Lockard.
American Botanicals later brought a breach of contract action in
Missouri against MNP and Lockard for their failure to comply with the Agreement.
MNP was served through its registered agent, Nathan Lockard, and Lockard by a
process server leaving a copy of the summons and petition with his wife, Brandy,
at their residence.
Neither Lockard nor MNP responded or appeared in the Missouri
action, and a default judgment was entered against them. On August 24, 2020, the
Missouri court entered a final order and judgment against Lockard and MNP,
jointly and severally for damages totaling $44,472.65.
On December 28, 2020, American Botanicals filed its notice and
affidavit of foreign judgment registration in Kentucky’s Pike Circuit Court and
served Lockard and MNP at the same address used in the Missouri action.
Lockard and MNP moved the court to stay enforcement of the foreign judgment.
After the matter was fully briefed and heard, the trial court denied the motion.
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Lockard and MNP then moved the trial court to alter, amend, or vacate its order.
Following a full briefing and hearing, the court denied the 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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LEGAL 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.”
Appellants argue the Missouri judgment is unenforceable for three reasons: (1) the
court lacked in personam jurisdiction over them, (2) Lockard is not personally
liable under the contract, and (3) they were not properly served in the Missouri
action. We will address each of these arguments, in turn.
First, Appellants claim the Missouri court lacked in personam – or
personal – jurisdiction over them. However, Missouri’s long-arm statute clearly
provides:
1. Any person or firm, whether or not a citizen or resident
of this state, or any corporation, who in person or through
an agent does any of the acts enumerated in this section,
thereby submits such person, firm, or corporation, and, if
an individual, his personal representative, to the
jurisdiction of the courts of this state as to any cause of
action arising from the doing of any of such acts:
(1) The transaction of any business within this
state;
(2) The making of any contract within this state[.]
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Missouri Annotated Statute (Mo. Ann. Stat.) 506.500. American Botanicals’
Missouri petition averred that both Lockard and MNP transacted business within
Missouri – including making and entering the Agreement, which is a contract –
sufficient to provide personal jurisdiction over them through Missouri’s long-arm
statute. Yet, despite having been served with a summons and petition, neither
Appellant challenged the Missouri court’s exercise of personal jurisdiction over
them in that action.
Furthermore, and contrary to their arguments, the Missouri court’s
exercise of personal jurisdiction over Appellants did not offend “traditional notions
of fair play and substantial justice” in violation of their due process rights. Int’l
Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S.
310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945) (citations omitted). It is well
established that “to the extent that a [person or] corporation exercises the privilege
of conducting activities within a state, it enjoys the benefits and protection of the
laws of that state.” Id. at 319, 66 S. Ct. at 160. Therefore, the “privilege may give
rise to obligations; and, so far as those obligations arise out of or are connected
with the activities within the state, a procedure which requires the corporation to
respond to a suit brought to enforce them can, in most instances, hardly be said to
be undue.” Id. The three-pronged test for minimum contacts, “requires that: (1)
defendant has purposely availed itself of the privilege of acting within the state; (2)
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the cause of action must arise from defendant’s activities; and (3) enough
connections to the state must exist so that jurisdiction would be reasonable.”
Sunrise Turquoise, Inc. v. Chem. Design Co., Inc., 899 S.W.2d 856, 858 (Ky. App.
1995).
American Botanicals produced affidavits from its president and
accounting supervisor that Lockard traveled to their Missouri facility “on
numerous occasions to discuss transacting business,” including the date the
Agreement was entered. An email from Lockard stated he was transporting
product to American Botanicals in Missouri which was “to be applied to my
advance.” Another email from Lockard confirmed he: (1) met with American
Botanicals’ president and accounting supervisor in Missouri, (2) delivered a
shipment of product to them in Missouri, and (3) received wires totaling
$30,000.00. Lockard also inquired if the consignment material from 2014 would
be applied to “my” account. Thus, under Missouri law and consistent with due
process considerations, Missouri indeed had personal jurisdiction over Appellants.
Second, Lockard claims he is not personally liable under the contract.
Once again, American Botanicals averred in its Missouri petition that MNP and
Lockard jointly entered into the Agreement. Although Lockard was served with a
summons and petition, he failed to contest that he jointly and personally entered
the contract in the Missouri action. This failure to raise required affirmative
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defenses constitutes waiver. Just as the Supreme Court of Kentucky held in
Sunrise Turquoise, Inc., 899 S.W.2d at 859, that “Sunrise cannot now raise matters
which should have been presented to the trial court in Florida[,]” Appellants in the
case herein cannot now be heard to complain of matters which should have been
presented to the trial court in Missouri.
Third, Appellants claim they were not properly served in the Missouri
action. Yet, “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)). While 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.
The law is clear:
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
prejudice to the non-defaulting party. “All three
elements must be present to set aside a default
judgment.”
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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 properly served with the complaint in the Missouri action. This is simply not
borne out by the record. Lockard’s self-serving affidavits are undercut by the
proof of service to Brandy Lockard on October 12, 2019.
Undaunted by the facts in the record, Appellants discuss Kentucky’s
rules of service. However, our courts have pointed out that our rules concerning
service are not the standard by which to measure foreign judgments; they must be
measured by the laws of that state. Here, we must review whether service
followed Missouri 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.”).
Consequently, Appellants next attack American Botanicals’
compliance with Missouri’s rules concerning service. American Botanicals filed
proof of its compliance with Missouri’s rules of service. Pursuant to Mo. Ann.
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Stat. 506.100(2), “service may be made . . . (3) Upon a party, by leaving a copy at
his usual place of abode with some person of his family over the age of fifteen
years.” This was done by leaving a copy of the summons and petition with Brandy
Lockard at “their dwelling place.” MNP was served through Lockard – its
registered agent – in the same fashion. Thus, we ascertain no error.
Because they have failed to demonstrate good cause or a valid excuse
why the Missouri default judgment should be set aside, we need not address
whether Appellants have a meritorious defense or whether setting aside the
judgment would prejudice American Botanicals. We do note, however, that
Appellants have failed to demonstrate either. Failure to put forth evidence of a
meritorious defense demonstrates the high likelihood of simply postponing the
inevitable with unjustifiable increased fees, costs, and delay. Appellants also
failed to show how setting aside the judgment would not prejudice American
Botanicals. “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.’” S.R. Blanton Dev.,
Inc. v. Invs. Realty & Mgmt. Co., Inc., 819 S.W.2d 727, 729-30 (Ky. App. 1991).
Thus, we cannot say the trial court erred or abused its discretion in denying
Lockard’s and MNP’s motion to stay enforcement of the foreign judgment.
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CONCLUSION
Therefore, and for the foregoing reasons, the orders of the Pike Circuit
Court are AFFIRMED.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE:
Donald H. Combs C. Tom Anderson
Pikeville, Kentucky Pikeville, Kentucky
Ryan D. Mosley
Hazard, Kentucky
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