Hoffman v. National Equipment Rental, Ltd.

• Decision Date: 18 February 1981
• Docket Number: No. 79-1743,79-1743
• Citation: 643 F.2d 987
• Parties: Arnold HOFFMAN and Mary Hoffman, Appellees, v. NATIONAL EQUIPMENT RENTAL, LTD., a corporation, Appellant, and Advanced Leasing Services, Inc., a corporation; and Eagle Mortgage Co., a corporation; and Dairy Farm Leasing Co., a corporation, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 987

643 F.2d 987

Arnold HOFFMAN and Mary Hoffman, Appellees, v. NATIONAL EQUIPMENT RENTAL, LTD., a corporation, Appellant and Advanced Leasing Services, Inc., a corporation; and Eagle Mortgage Co., a corporation; and Dairy Farm Leasing Co., a corporation, Defendants.

No. 79-1743.

United States Court of Appeals Fourth Circuit.

Argued Oct. 6, 1980.

Decided Jan. 12, 1981.

Rehearing Denied Feb. 18, 1981.

Lawrence J. Lewis, Huntington, W. Va. (Vinson, Meek, Lewis, Peoples & Pettit, Huntington, W. Va., Charles Jacobson, Dorfman & Jacobson, Jeriche, N.Y., on brief) for appellant.

William D. Levine, Huntington, W. Va. (Marshall & St. Clair, Huntington, W. Va., on brief) for appellee.

Before BRYAN, Senior Circuit Judge, and RUSSELL and WIDENER, Circuit Judges.

ALBERT V. BRYAN, Senior Circuit Judge:

This appeal evolves from an action begun on August 6, 1975 in the Federal Court for the Southern District of West Virginia by Arnold F. Hoffman, a citizen dairy farmer in that State, and his wife, Mary, against National Equipment Rental, Ltd. (NER), a Delaware corporation. As ultimately tried, their complaint alleged breach of warranty and usury under a lease of 21 dairy cows by NER's assignor. ¹

NER not only denied liability of any kind, but counterclaimed on the basis of a judgment entered July 11, 1975, by the Supreme Court of the State of New York, County of Nassau, awarding NER the sum of $36,458.68 as the amount due by the Hoffmans under the lease. The District Court on cross-motions for summary judgment refused to accord full faith and credit to the New York judgment. Instead, it submitted the claims of both parties to a jury for special findings and, on May 15, 1979, accepted a verdict awarding to the plaintiffs $72,266.00 and to NER $30,654.22. The Court then gave judgment to the Hoffmans for the net difference of $41,611.78.

We reverse the trial court for error in the rejection of the New York judgment which, we hold, concludes adversely all of the Hoffmans' claims.

I.

Under the lease and guarantee signed by them on July 24, 1974 the Hoffmans covenanted to make 50 monthly rental payments of $693.00 with the proviso that two payments be made in advance. After the final payment they were to be entitled to buy the cows for one dollar. The Hoffmans made no payments after May 1975, due to their dissatisfaction with the cows. They charged that the animals did not produce the quantity of milk promised before the lease was closed, that their health was impaired, and that some had died soon after delivery; they maintained that these complaints went unanswered.

NER commenced its New York action to recover the unpaid lease moneys in May 1975. The Hoffmans failed to appear, and the judgment noted above was obtained by default. The lease, signed in New York by NER's assignor after it had been executed by the Hoffmans in West Virginia, specified the method and mechanics of execution and embodied the parties' agreement as to the governing law, service of process, and choice of jurisdiction. It provided as follows:

24. EXECUTION: LAWS GOVERNING: SERVICES: This lease shall only be binding when accepted by Lessor at its New York, N. Y. office and shall be deemed to have been made in New York County, New York and shall be governed by the laws of the State of New York except for local recording statutes. As part of the consideration for the Lessor's executing this Lease, Lessee agrees that all actions or proceedings arising directly or indirectly from this Lease shall be litigated only in courts having situs within the State of New York and the Lessee hereby consents to the jurisdiction of any local, state or federal court located within the State of New York and waives personal services of any and all process upon the Lessee herein, and consents that all such service or process shall be made by certified mail, return receipt requested, directed to the Lessee at the address hereinabove stated; and service so made shall be complete two (2) days after the same shall have been posted as aforesaid.

The guarantee executed by Mary Hoffman contained a nearly identical provision.

When NER sought enforcement of its New York judgment, the District Court, following the reasoning of Leasewell, Ltd. v. Jake Shelton Ford, Inc., 423 F.Supp. 1011 (S.D.W.Va.1976), considered that its task was to determine the enforceability of the quoted provision under West Virginia law. This was error. If the New York court entering judgment had jurisdiction under New York law and the United States Constitution, then its judgment was entitled to full faith and credit. U.S.Const. art. IV § 1. We disapprove of Leasewell to the extent that it holds otherwise.

Contracts designating a particular forum for litigation, and agreements specifying a particular mode of service of process, have been approved by both Federal and New York State courts. ² Thus, there is no inherent infirmity in the choice-of-forum and service-of-process provisions, under either New York or Federal law, sufficient to justify the denial of full faith and credit to NER's New York judgment.

However, the Hoffmans question the New York judgment on the ground that they received no service of process or other notice of the institution of the action. Squarely decisive here is the contractual language already quoted. Particularly apposite is the following:

(T)he Lessee hereby ... waives personal services of any and all process upon the Lessee herein, and consents that all such service or process shall be made by certified mail, return receipt requested, directed to the Lessee at the address hereinabove stated; and service so made shall be complete two (2) days after the same shall have been posted as aforesaid.

In view of the broad power of the contracting parties "to permit notice to be served by the opposing party, or even to waive notice altogether," National Equipment Rental, Ltd. v. Szukhent, 375 U.S. at 316, 84 S.Ct. at 414, NER's implementation of the agreed-upon service mechanism would appear to provide "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action." Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). The Hoffmans consented to, and NER invoked, an arrangement "reasonably certain to inform those affected," id. at 315, 70 S.Ct. at 657, and the jurisdiction obtained pursuant to that arrangement is not vulnerable.

Further, the evidence confirms the actuality of notice to the Hoffmans. Throughout the period of this controversy, they resided at the address stipulated by the contract for service of process. It is undisputed that envelopes correctly addressed and with requisite postage were seasonably sent via certified mail, return receipt requested, containing summons and complaint in the action leading to the judgment against them. These envelopes were returned to NER bearing the notation "refused."

There is no basis for any supposition that the postal service did not tender the certified mail. The only fair and reasonable explanation is that the postal authorities wrote "refused" with the meaning that it was refused by the Hoffmans. Certainly the letter carrier had no reason to reject the mail. Grannis v. Ordean, 234 U.S. 385, 34 S.Ct. 779, 58 L.Ed. 1363 (1914), establishes that, even with measures less painstaking and certain than those employed by NER, the presumption is "clear and strong" that notice-bearing letters reach their intended addressees. Id. at 397-98, 34 S.Ct. at 784. See Comprehensive Merchandising Catalogs, Inc. v. Madison Sales Corp., 521 F.2d 1210, 1212 (7th Cir. 1975) (service by certified mail upheld when letter returned to plaintiff marked "refused").

It follows that the New York judgment irrevocably bound the Hoffmans to its adjudication of their indebtedness and foreclosed their claims of usury and breach of implied warranty of merchantability.

II.

Since the New York judgment is also attacked by challenge to the validity of the contract, we emphasize that no hint of vitiating duress, mistake,...