Nathan Lockard v. American Botanicals, LLC

• Court: Court of Appeals of Kentucky
• Decided: February 2, 2023
• Docket: 2022 CA 000298
• Status: Unknown

Opinion

RENDERED: FEBRUARY 3, 2023; 10:00 A.M. NOT TO BE PUBLISHED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.

-2- 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).

-3- 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[.]

-4- 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)

-5- 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

-6- 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.”

-7- 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.

-8- 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.

-9- 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

-10-