Opinion
No. 1 CA-CV 12-0652
05-16-2013
HILLCREST BANK, N.A., fka Hillcrest Bank, Plaintiff/Appellee, v. RICHARD J. SODJA, Defendant/Appellant.
White Berberian, PLC By Steven M. White Attorneys for Plaintiff/Appellee Baird, Williams & Greer, LLP By Craig M. LaChance Attorneys for Defendant/Appellant
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure
Appeal from the Superior Court in Maricopa County
Cause No. CV2012-091567
The Honorable Michael Herzog, Judge Pro Tem
The Honorable Bernard C. Owens, Judge Pro Tem
REVERSED AND REMANDED
White Berberian, PLC
By Steven M. White
Attorneys for Plaintiff/Appellee
Tempe Baird, Williams & Greer, LLP
By Craig M. LaChance
Attorneys for Defendant/Appellant
Phoenix DOWNIE, Judge ¶1 Appellant Richard J. Sodja appeals an order of the superior court denying his motion to vacate a Texas default judgment that appellee Hillcrest Bank, N.A. ("the Bank") sought to domesticate in Arizona. For the following reasons, we vacate the domestication order and remand to the superior court with instructions to grant Sodja's motion to vacate.
FACTS AND PROCEDURAL HISTORY
¶2 The Bank sued Sodja in Harris County, Texas, alleging breach of three guaranty agreements. Because Sodja was not a Texas resident, the Bank relied on the Texas long arm statute to effectuate substituted service of process on the Texas Secretary of State. The Secretary of State forwarded the petition (the equivalent of a complaint in Arizona) and citation (akin to a summons) by certified mail to the Phoenix address for Sodja listed in the Bank's petition. Sodja did not answer or otherwise defend. A default judgment was entered against him in August 2011. ¶3 In February 2012, the Bank filed a "Notice of Filing a Foreign Judgment" in Maricopa County Superior Court pursuant to Arizona's Uniform Enforcement of Foreign Judgments Act -- Arizona Revised Statutes ("A.R.S.") §§ 12-1701 through -1708. Sodja moved to vacate the Texas judgment under Arizona Rule of Civil Procedure 60(c)(4), arguing it was void under Texas law. Specifically, Sodja claimed the Texas court never acquired jurisdiction over him because the Bank did not comply with the Texas long arm statute. The Bank opposed the motion, arguing Sodja must assert his challenge in Texas and, alternatively, that service of process had been properly effectuated under Texas law. ¶4 Applying Arizona law, the superior court ruled that the Texas judgment was not void. It denied Sodja's motion to vacate and ordered the Texas judgment domesticated. Sodja timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(2) (special order made after final judgment). See M & M Auto Storage Pool, Inc. v. Chem. Waste Mgmt., Inc., 164 Ariz. 139, 141, 791 P.2d 665, 667 (App. 1990) (citations omitted).
DISCUSSION
¶5 Whether a foreign judgment is entitled to full faith and credit is a question of law that we review de novo. Grynberg v. Shaffer, 216 Ariz. 256, 257, ¶ 5, 165 P.3d 234, 235 (App. 2007) (citations omitted). The Full Faith and Credit Clause of the United States Constitution requires Arizona courts "to respect and enforce judgments rendered in the courts of their sister states." Oyakawa v. Gillett, 175 Ariz. 226, 228, 854 P.2d 1212, 1214 (App. 1993); see also U.S. Const. art. IV, § 1 ("Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State."); 28 U.S.C. § 1738 (authenticated judgments "shall have the same full faith and credit in every court within the United States . . . as they have by law or usage in the courts of such State . . . from which they are taken"). ¶6 Arizona courts, though, need not "give effect to a judgment that was rendered without jurisdiction over the defendant." Giehrl v. Royal Aloha Vacation Club, Inc., 188 Ariz. 456, 457, 937 P.2d 378, 379 (App. 1997); see also Phares v. Nutter, 125 Ariz. 291, 293-94, 609 P.2d 561, 563-64 (1980) (Full Faith and Credit Clause does not prevent judgment debtor from collaterally attacking foreign judgment based on lack of jurisdiction). "A defendant served with a lawsuit in another state may litigate that state's jurisdiction in that suit, or may let the suit go to judgment by default and collaterally attack the jurisdiction when the plaintiff attempts to enforce the judgment elsewhere." Giehrl, 188 Ariz. at 458, 937 P.2d at 380; see also A.R.S. § 12-1702 (foreign judgment filed in Arizona "has the same effect and is subject to the same procedures, defenses and proceedings for reopening, vacating, or staying as a judgment of a superior court of this state"). ¶7 The superior court erred by relying on Arizona law in assessing the Texas judgment's validity. The validity of a foreign judgment "is tested by whether it would be effective in the rendering state." Oyakawa, 175 Ariz. at 232, 854 P.2d at 1218; see also Ibach v. Ibach, 123 Ariz. 507, 510-11, 600 P.2d 1370, 1373-74 (1979) ("The validity of a foreign judgment must be determined from the laws of the state where the judgment was rendered."); Day v. Wiswall, 11 Ariz. App. 306, 313, 464 P.2d 626, 633 (1970) ("In an action on a foreign judgment its validity and finality are to be tested by the law of the jurisdiction where such judgment was rendered."). ¶8 A Texas court acquires personal jurisdiction over a non-resident defendant through compliance with that state's long arm statute. Verges v. Lomas & Nettleton Fin. Corp., 642 S.W.2d 820, 820-21 (Tex. App. 1982) (citations omitted). A judgment rendered without personal jurisdiction over a defendant is void. See Colson v. Thunderbird Bldg. Materials, 589 S.W.2d 836, 839 (Tex. Civ. App. 1979). "[A]ctual notice of a pending lawsuit cannot substitute for proper service of process." Mobilevision Imaging Servs., L.L.C. v. LifeCare Hosp.s of N. Tex., 260 S.W.3d 561, 565 (Tex. App. 2008). ¶9 The Texas Secretary of State is the designated agent for service of process on a nonresident who engages in business in Texas but does not maintain a regular place of business in that state or a designated agent for service of process. Tex. Civ. Prac. & Rem. Code Ann. § 17.044(b). Section 17.045(a) dictates specific requirements for documents served on the Secretary of State pursuant to the long arm statute:
If the secretary of state is served with duplicate copies of process for a nonresident, the documents shall contain a statement of the name and address of the nonresident's home or home office and the secretary of state shall immediately mail a copy of the process to the nonresident at the address provided.(Emphasis added.) ¶10 Sodja contends the judgment is void because the Bank did not strictly comply with the requirements of the long arm statute. Specifically, he argues "no statement appears on the record indicating that service was made upon him at his home or home office." Instead, the petition simply states: "Mr. Sodja may be served with service of process by serving him at the following address: 3131 E. Camelback Road, Suite 105, Phoenix, Arizona 85016." ¶11 Texas courts apply the long arm statute's requirements with "reasonable strictness," for reasons explained in Colson:
[W]hen a procedure for giving notice and obtaining jurisdiction is statutorily established, that method is generally exclusive and the form prescribed must be followed with reasonable strictness. This is particularly true when dealing with long arm statutes because they exist on the outer fringes of permissible constitutional acquisition of personal jurisdiction. Thus, when there is a specific statute that sets out the steps that must be taken, the inquiry is not whether the defendant had589 S.W.2d at 840 (internal citations omitted). ¶12 In Verges -- a case with facts similar to those of the case at bar -- Lomas & Nettleton sued Verges as guarantor of a promissory note. 642 S.W.2d at 820. The petition provided a last known address for Verges in New Orleans. Id. at 821. Substituted service was made on the Texas Secretary of State, who forwarded the petition to the New Orleans address. Id. Verges failed to appear, and a default judgment was entered against him. Id. Verges subsequently challenged the judgment, arguing, inter alia, that the plaintiff failed to comply with the Texas long arm statute because the petition did not include "a statement of the name and address of the home or home office." Id. at 820-21. The appellate court agreed, commenting on the strict compliance standard applicable to substituted service under Texas' long arm statute:
actual knowledge of the proceeding against him; rather, the question is whether that knowledge was conveyed to him in the manner required by the statute.
Our courts have consistently held that since substituted service is in derogation of common law, the statute authorizing substituted service must be followed with strict compliance. Strict compliance with long-arm statutes is particularly necessary because they extend to the limit of permissible constitutional acquisition of personal jurisdiction.Id. at 821-22 (internal citations omitted). "Strict construction," the court held, means enforcing the statute "according to its letter, which recognizes nothing that is not expressed, takes the language used in its exact and technical meaning, and admits no equitable consideration or implication." Id. at 822. The court rejected the notion that "last known address" is the functional equivalent of "home or home office address" because such an interpretation would "violate the strict construction standard to which we are held and would approve service in a manner not authorized by the statute." Id. at 822-23 ("[I]nferences may not be indulged to determine whether jurisdictional facts have been sufficiently alleged."). Because service of process was not properly effectuated under the long arm statute, the trial court never acquired jurisdiction over Verges, and the default judgment against him was vacated. ¶13 Numerous Texas appellate decisions have reached the same conclusion. See, e.g., Mobilevision, 260 S.W.3d at 565 ("We and other courts of appeals have often reversed default judgments when the plaintiff did not include specific allegations in the petition that satisfied" the Texas long arm statute); World Dist., Inc. v. Knox, 968 S.W.2d 474 (Tex. App. 1998) (reversing default judgment because plaintiff did not allege in petition or citation that listed Illinois address was defendant's home or home office); Whiskeman v. Lama, 847 S.W.2d 327, 329 (Tex. App. 1993) ("The majority of Texas courts hold . . . that where the record fails to affirmatively show that plaintiff provided the Secretary of State with defendant's 'home or home office,' service is invalid and a default judgment obtained as a result is void."); Boreham v. Hartsell, 826 S.W.2d 193 (Tex. App. 1992) (failure to allege California address listed for substituted service was defendant's "home or home office" rendered default judgment void). ¶14 The Bank relies on Mahon v. Caldwell, Haddad, Skaggs, Inc., 783 S.W.2d 769 (Tex. App. 1990), for the proposition that Texas courts take a flexible approach to compliance with the long arm statute. Mahon held that a petition containing the defendant's "business address" in New Jersey was sufficient. Id. at 771. But Mahon's suggestion that the court may scour the record to ascertain whether a listed address is the non-resident defendant's home or home office, id. at 771, is inconsistent with the vast majority of reported decisions in Texas and has been frequently criticized. See, e.g., Whiskeman, 847 S.W.2d at 329 (declining to follow Mahon because "the strict compliance standard does not brook a review of the whole record, nor any inference in favor of personal jurisdiction"); Boreham, 826 S.W.2d at 196 (criticizing Mahon analysis and labeling its interpretation of the long arm statute "too broad"). As a practical matter, though, even applying the flexible approach suggested in Mahon, the record in the case at bar includes only an Arizona address for Sodja that has never been identified as his home, home office, or business address. ¶15 We disagree with the Bank's contention that the Texas Supreme Court endorsed Mahon's "flexible" approach to the long arm statute in Wachovia Bank of Delaware v. Gilliam, 215 S.W.3d 848 (Tex. 2007). Wachovia vacated a default judgment because the petition and related documents stated that the non-resident bank could be served at a specific address in Delaware, but did not recite that the listed address was the defendant's home or home office. Id. at 850-51. Noting that "there are no presumptions in favor of valid service" in an appeal from a default judgment, id. at 848, the court held:
If nothing on the face of the record shows the forwarding address was the defendant's "home or home office," the courts of appeals are unanimous that a default judgment cannot survive a restricted appeal. The same has been the case with other substituted service statutes-the face of the record must show that the forwarding address is the one required by statute.Id. at 849-50. Wachovia does not stand for the proposition that an address located somewhere in the record, without any description of its status as home, home office, or business address, is sufficient under the Texas long arm statute. It instead reiterates the requirement that plaintiffs affirmatively allege on "the face of the record" that the address provided is in fact the defendant's home or home office.
Because Sodja is entitled to challenge the Texas court's jurisdiction in the Arizona domestication proceeding, we need not determine his rights under Texas' bill of review procedure.
We concur with the Whiskeman court's observation that "this strict rule sometimes leads the courts to rather weird conclusions, preventing us from making even the most obvious and rational inferences." 847 S.W.2d at 329 n.1. See also Louis S. Muldrow & Kendall M. Gray, Treading the Mine Field: Suing and Defending Non-Residents in Texas State Courts, 46 Baylor L. Rev. 581, 591 (1994) ("[E]ven in a day of liberal pleading, pleading errors which seem inconsequential on their face can scuttle what appears to be a valid, final judgment by default.").
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CONCLUSION
¶16 For the reasons stated, we vacate the domestication order and remand to the superior court with instructions to grant Sodja's motion to vacate. We deny the Bank's request for attorneys' fees because it is not the successful party. In his opening brief, Sodja requested an award of fees under A.R.S. § 12-341.01. In the exercise of our discretion, we deny that request. In his reply brief, Sodja stated it is "not clear" that a fee provision in the underlying guaranty agreements would entitle him to a fee award. Because he has provided no legal authority or argument to support such an award, we decline to award fees on that basis. See Cullum v. Cullum, 215 Ariz. 352, 355 n.5, ¶ 14, 160 P.3d 231, 234 n.5 (App. 2007) (appellate courts "will not consider argument posited without authority"). However, Sodja is entitled to recover his appellate costs upon compliance with ARCAP 21.
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MARGARET H. DOWNIE, Judge
CONCURRING: __________
ANDREW W. GOULD, Presiding Judge
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PATRICIA A. OROZCO, Judge