"R" Best Produce, Inc. v. Disapio

• Decision Date: 26 August 2008
• Docket Number: Docket No. 07-0954-cv.
• Citation: 540 F.3d 115
• Court: U.S. Court of Appeals — Second Circuit
• Parties: "R" BEST PRODUCE, INC., Plaintiff-Appellee, v. Carmine DiSAPIO, Sr. and Carmine DiSapio, Jr., Defendants-Appellants.

540 F.3d 115

"R" BEST PRODUCE, INC., Plaintiff-Appellee, v. Carmine DiSAPIO, Sr. and Carmine DiSapio, Jr., Defendants-Appellants.

Docket No. 07-0954-cv.

United States Court of Appeals, Second Circuit.

Heard: July 17, 2008.

Decided: August 26, 2008.

Thomas J. Romans, Hackensack, N.J., for Defendants-Appellants.

Ralph Wood, White Plains, N.Y., for Plaintiff-Appellee.

Before NEWMAN, CALABRESI, and B.D. PARKER, Circuit Judges.

JON O. NEWMAN, Circuit Judge.

A $28,000 sale of fruit and vegetables has led to an appeal that raises a host of issues concerning appellate jurisdiction, default judgments, personal jurisdiction, and the Perishable Agricultural Commodities Act of 1930, 7 U.S.C. § 499e(c)(5) ("PACA"). These issues arise on an appeal by Defendant-Appellant Carmine DiSapio, Jr., from the February 15, 2007, Order of the District Court for the Southern District of New York (Loretta A. Preska, District Judge), denying his motion for reconsideration of an Order denying his motion to vacate a default judgment for lack of personal jurisdiction.

We conclude that the Appellant's claim that the default judgment should have been vacated for lack of personal jurisdiction raises unresolved factual issues. We therefore vacate the Order denying reconsideration and remand for further proceedings.

Background

The Plaintiff-Appellee "R" Best Produce, Inc. sold fruits and vegetables to Pat's Market Place of Bristol, Inc., and Pat's Supermarket, Inc. (collectively "the corporations"), which owned and operated supermarkets in Connecticut. The Defendant-Appellant Carmine DiSapio, Jr., ("the son") is the son of Carmine DiSapio, Sr., ("the father") and his wife Denise DiSapio, who were the sole shareholders of the corporations. The relationship of the son to the corporations is in dispute. He contends that at the relevant times he was only a salaried employee. The Plaintiff-Appellee contends that he was an officer and director of the corporations and a "dealer" and "commission merchant" within the meaning of the PACA, see 7 U.S.C. § 499a(b)(5), (6).

In July 2003, the Plaintiff filed a complaint in the District Court against the corporations, the father, and the son seeking recovery of the unpaid balance for produce delivered to the corporations, plus interest and attorney's fees. An amended complaint, served by mail, alleged the unpaid balance to be $28,445.99. Like the original complaint, the amended complaint included counts alleging breach of the statutory trust imposed by the PACA on the proceeds of perishable produce, see id. § 499e(c)(2), breach of contract, and other common law causes of action. Subject matter jurisdiction was based both on the PACA and diversity of citizenship.

Although personal jurisdiction was not explicitly alleged in the amended complaint, the Plaintiff subsequently relied on a provision of its standard sales terms, which were set forth on the back of each sales receipt alleged to have remained unpaid. That provision stated that all actions for breach of the sales agreement shall be brought only in the District Court for the Southern District of New York or any other New York State court in New York County or, at the seller's option, in the county of the seller's principal place of business in New York. Especially pertinent to this appeal, the provision also stated: "Each party consents to the jurisdiction and venue of said Courts." Each sales receipt for unpaid produce bore the signature of an employee of the corporations, often that of the son, above a printed legend stating "RECEIVED IN GOOD ORDER."

All Defendants were personally served with a summons and the complaint. None of the Defendants entered an appearance. Just before the complaint was filed, the corporations filed for bankruptcy under Chapter 11, proceedings later converted to Chapter 7. The Plaintiff sought and was granted a voluntary dismissal of its claims against the corporations.

In January 2005, the Plaintiff filed an affidavit of its counsel alleging that the individual Defendants were in default and that the Plaintiff was entitled to the unpaid balance of $28,445.99 plus prejudgment interest of $7,253.73 (through December 21, 2004) and attorney's fees of $7,111.50, for a total of $42,811.22. The affidavit, captioned "AFFIDAVIT FOR JUDGMENT BY DEFAULT," requested "the entry of Default and the issuance by the Clerk of this Court of a Clerk's Certificate." Although there is no indication that a default was entered, see Fed.R.Civ.P. 55(a), on February 1, 2005, the District Court entered a default judgment, see Fed.R.Civ.P. 55(b)(2), against the father and the son in the amount of $42,811.22, plus $509.12, representing interest from December 21, 2004, to the date of the judgment.

On July 31, 2006, the father and the son filed a motion to vacate the default judgment under Rules 60(b)(4) and 60(b)(6) of the Federal Rules of Civil Procedure. Since the father later filed an individual bankruptcy petition under Chapter 7, received a discharge as to the Plaintiff's judgment against him, and withdrew his appeal in this Court, only the son's challenge to the default judgment remains relevant to this appeal, and the remainder of this opinion will refer to procedural steps taken, and contentions made, only by the son (except when reciting the District Court's rulings, which referred to both Defendants).

The son's motion to vacate the default judgment was resolved on the basis of affidavits. His initial affidavit alleged the following. At all relevant times he was a salaried employee of the corporations, earning $900 a week. He was never an officer, director, or stockholder of the corporations, did not sign checks for the corporations, and never undertook to be personally responsible to pay the invoices of the Plaintiff or any other supplier.

When he was served with the summons and complaint, he turned them over to his father, who assured him that the matter would be handled by the father's attorneys. The son first learned of the judgment against him in May 2005 from a notice of judgment lien filed against his residence and an investment property, both located in Connecticut.

An opposing affidavit of Lee Pakulsky, the Plaintiff's controller, alleged that the son continued to order produce for the corporations, knowing that they were not paying for past due invoices, and that he assured the Plaintiff that it would be paid.

The son's reply affidavit denied ever speaking to Pakulsky about payment or financial issues, denied giving assurance that the Plaintiff would be paid, and stated that in signing the receipts he acknowledged only that the items were received in good order.

On August 31, 2006, the District Court orally denied the motion to vacate the default judgment. Concerning the claim under Fed.R.Civ.P. 60(b)(4) that the default judgment was void for lack of personal jurisdiction, Judge Preska stated:

[B]oth defendants have admitted to signing certain receipts which contained a consent to jurisdiction in this court. As we all know, PACA makes individuals liable for payment for produce under certain terms and conditions, which are present here. As we also know, the entry of a default judgment means that the allegations in the complaint are deemed admitted.

Taking all those facts together, the defendants are subject to jurisdiction in this court and are liable for the breach of trust in not ensuring the payment for the produce under the statute.

With respect to the claim under Fed. R.Civ.P. 60(b)(6), the District Court stated that the Defendants had not acted to vacate the default judgment within a reasonable time, having waited some fourteen months after entry of the judgment. Finally, the Court noted that the motion was denied for the additional reason that the Defendants had not shown a meritorious defense to the charges of nonpayment.

The record does not reflect any written order denying the motion to vacate or endorsement on the motion itself. The transcript containing the District Court's oral ruling was entered on the docket on September 11, 2006. On the same day, the son filed a motion for reconsideration. The District Court denied that motion in a brief written order dated February 8, 2007, and entered February 15, 2007.

On March 7, 2007, the son filed a notice of appeal. The notice identified the order appealed from as "an order dated February 8, 2007 denying defendants' motion for reconsideration of the District Court's denial of defendants' motion to vacate the default judgment entered against defendants in this action."

Discussion

I. Appellate Jurisdiction

The initial issue is whether we have appellate jurisdiction to review the District Court's denial of the motion to vacate the default judgment in view of the fact that the notice of appeal referred only to the District Court's denial of the motion to reconsider the denial of the motion to vacate. "The notice of appeal must ... designate the judgment, order, or part thereof being appealed." Fed. R.App. P. 3(c)(1)(B). The Supreme Court has treated an appeal from a denial of a motion to vacate, which was deemed to have been filed under Fed.R.Civ.P. 59(e), as "an effective, although inept, attempt to appeal from the judgment sought to be vacated." Foman v. Davis, 371 U.S. 178, 181, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).¹ The Court reasoned that the appellant's intention to appeal both the denial of the motion to vacate and the underlying judgment "was manifest." Id. Foman was a strong case for divining such intention because the appellant had also filed a notice of appeal from the underlying judgment, a notice deemed premature and dismissed by the court of appeals. See id. at 180, 83 S.Ct. 227. However, the Court did not display similar generosity in Torres v. Oakland Scavenger Co., 487 U.S. 312, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988), when it later confronted the requirement that a notice of appeal must "specify the party or parties taking the appeal." Fed....