AKESOGENX Corp. v. Zavala, No. 116,896

CourtCourt of Appeals of Kansas
Writing for the CourtGreen, J.
Citation55 Kan.App.2d 22,407 P.3d 246
Decision Date09 November 2017
Docket NumberNo. 116,896
Parties AKESOGENX CORP., Appellee, v. Robert ZAVALA, Appellant.

55 Kan.App.2d 22
407 P.3d 246

AKESOGENX CORP., Appellee,
v.
Robert ZAVALA, Appellant.

No. 116,896

Court of Appeals of Kansas.

Opinion filed November 9, 2017


Robert J. Bjerg, of Colantuono Bjerg Guinn, LLC, of Overland Park, for appellant.

Christopher K. Snow and J. Michael Grier, of Warden Grier LLP, of Kansas City, Missouri, and Michael P. Whalen, of Wichita, for appellee.

Before Arnold-Burger, C.J., Pierron and Green, JJ.

Green, J.:

55 Kan.App.2d 23

AKESOGENX Corp. (AKG) sued Robert Zavala, its former Chief Executive Officer (CEO), in the Johnson County District Court for breach of fiduciary duty and conversion. Eventually, the district court entered default judgment against Zavala in favor of AKG. It also ordered that Zavala pay AKG damages in the amount of $500,400.35. Over a month later, Zavala moved to set aside the default judgment, arguing that AKG had failed to properly obtain residential service of process on him, that the district court had violated a procedural rule regarding default judgment, and alternatively, that his lack of prior involvement in the case had resulted from excusable neglect. The district court rejected these arguments, but Zavala moved the district court to reconsider. In his motion to reconsider, Zavala raised a new argument. He asserted that the district court lacked subject matter jurisdiction to enter the default judgment against him because AKG had an exclusive forum selection clause within its certificate of incorporation which required AKG to sue him in the state of Delaware. The district court rejected this argument as well. Zavala now appeals the district court rulings, arguing that each was in error.

For reasons set forth below, we reject Zavala's arguments. Accordingly, we affirm.

AKG was a Delaware corporation involved in cancer research, which "use[d] radio waves to heat up and kill cancer cells while preserving the normal tissue, ... reducing the side effects associated with traditional chemical therapy regimens or invasive surgery." Although AKG was a Delaware corporation, its principal place of business was in Leawood,

407 P.3d 250

Kansas, a city within Johnson County, Kansas. During its first two years of business, AKG received nearly $2 million in capital investment for its cancer research.

55 Kan.App.2d 24

Shortly after it was incorporated in 2013, Mary Kunkle began acting as AKG's Secretary and Treasurer. Through her role as AKG's Treasurer, Kunkle had access to AKG's finances. Kunkle was in a romantic relationship with AKG's CEO, Zavala. Through his role as CEO, Zavala also had access to AKG's finances. The AKG Board of Directors (Board) terminated both Kunkle and Zavala during their special Board meeting on May 16, 2014.

On March 2, 2015, AKG sued Kunkle in the Johnson County District Court alleging breach of fiduciary duty and conversion of corporate assets. AKG explained that for nearly a year, it had asked Kunkle to explain why money was missing from its accounts. AKG explained that Kunkle had failed to respond to its requests. AKG alleged that through its independent review of Kunkle's accounting from its "QuickBooks" and available banking records, Kunkle had converted $174,905.59. AKG alleged that Kunkle had converted company money from AKG the entire time she worked for it.

On August 19, 2015, AKG filed its first amended petition with the Johnson County District Court. In this amended petition, AKG reiterated its claims of breach of fiduciary duty and conversion of corporate assets. It, however, added Zavala as a party defendant. AKG asserted that in addition to the $174,905.59 it believed Kunkle had converted, it believed Zavala had converted about $195,341. AKG explained that its Board had asked Zavala to turn over certain financial documents—financial statements and tax related documents—in early 2014, but Zavala had refused the Board's requests. This resulted in the Board's termination of Zavala as AKG's CEO on May 16, 2014. AKG alleged that because Zavala had refused to turn over the financial documents it needed, it went to the Bryan Cave law firm—a firm it had previously retained—to see if the firm had the financial documents it needed. When AKG spoke with a representative of Bryan Cave, it learned that Zavala had visited the firm's office just two days before he was terminated, removing all documents pertaining to AKG from the firm. AKG explained that it calculated the missing $195,341 sum from its "QuickBooks" and available banking records.

In its first amended petition, AKG also stated that it intended to serve Zavala "at his current residence address," which had yet to be

55 Kan.App.2d 25

determined. On November 23, 2015, AKG filed a notice of service with the Johnson County District Court that it had served process on Zavala in three ways, each occurring on November 10, 2015. First, AKG asserted that it had rendered personal service on Zavala in Alamo, Texas. AKG also asserted that it had rendered residential service at Zavala's residence in Alamo, Texas. Last, AKG asserted that it had rendered residential service at Zavala's residence in Walnut Creek, California.

The sworn statement of Antonio Huizar, the process server from Alamo, Texas, was attached to AKG's filing. In Huizar's statement, Huizar explained that when he went to the house he believed to be Zavala's, a female, who identified herself as Zavala's mother, told him that Zavala was not currently at home but would return home later. He explained that a few minutes after he gave Zavala's mother his contact information, a man, who identified himself as Zavala, phoned him. Huizar asserted that he told Zavala that he had a package for him, but Zavala told him to leave it with his mother because he was not available; Zavala then hung up. Huizar explained he called Zavala back and offered to deliver the package to him personally, but Zavala told him to deliver the package to his mother because he was not available. According to Huizar, he then went back to the place he believed to be Zavala's house and confirmed with Zavala's mother that Zavala "did in fact currently live at the residence." Huizar stated that once he confirmed Zavala was residing in the house, the "service documentation was handed to [Zavala's mother]." Significantly, the process server from Contra Costa, California, maintained that he rendered residential service by leaving service documentation with a woman who claimed to be Zavala's mother as well.

407 P.3d 251

On December 21, 2015, the district court entered a default judgment against Zavala. The district court's judgment, in substantive part, was as follows:

"On December 3, 2015, the Court conducted a scheduling conference. Plaintiff appeared by and thru its counsel Christopher K. Snow. Defendant Mary Kunkle appeared pro se and participated telephonically. Defendant Robert Zavala did not appear despite due notice of the scheduling conference, and likewise did not timely file a responsive pleading to Plaintiff's First Amended Petition. Accordingly the Court hereby enters judgment by default against Defendant Zavala with
55 Kan.App.2d 26
respect to Plaintiff's claims, [and] further sets a hearing on damages with respect to Plaintiff's claims against Defendant Zavala for January 4, 2016 ...."

On January 4, 2016, even though he had been served notice, Zavala did not appear at the damages hearing. The only evidence at the hearing came from Christopher Stevens, who served as interim CEO following Zavala's termination. Stevens testified that based upon his review of the QuickBooks and bank statements, he determined that Zavala had used a total of $500,400.35 of AKG funds for noncorporate purposes while CEO. Thus, Stevens requested that AKG be reimbursed this money. Stevens also requested that Zavala lose his 1.6% stock interest in AKG. At the end of the hearing, the district court granted Stevens' request.

Over a month later, on February 19, 2016, Zavala moved to set aside default judgment and to file a responsive pleading out of time. In this motion, Zavala argued that he had never been served with AKG's first amended petition. Zavala complained about how he was served process in Texas, making no mention of how he was served process in California. He asserted that assuming he was served on November 10, 2014, the default judgment against him was void because it was prematurely entered in violation of K.S.A. 2016 Supp. 60-308(a). Under K.S.A. 2016 Supp. 60-308(a), defendants who are served out of state have 30 days to respond to a petition. Zavala argued that because the district court's December 21, 2015, default judgment order stated that he failed to appear at the December 3, 2015, scheduling conference, the district court actually entered its default judgment against him on December 3, 2015, which was only 23 days after he had been served. He also asserted that the default judgment should be set aside based upon excusable neglect. Last, Zavala complained that AKG was not entitled to any stock he may own through the default judgment.

In support of his arguments, Zavala...

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11 practice notes
  • Bicknell v. Kan. Dep't of Revenue, No. 120,935
    • United States
    • Court of Appeals of Kansas
    • March 12, 2021
    ...the appellant has the duty to provide the appellate court with a record showing the district court's error. Akesogenx Corp. v. Zavala , 55 Kan. App. 2d 22, 42, 407 P.3d 246 (2017) (holding that appellant failed to meet his burden of submitting a record establishing error by failing to inclu......
  • Bicknell v. Kan. Dep't of Revenue, 120,935
    • United States
    • United States State Supreme Court of Kansas
    • May 20, 2022
    ...transcripts from the motion hearing are required for meaningful review. The Bicknells liken this case to AkesoGenX Corp. v. Zavala , 55 Kan. App. 2d 22, 407 P.3d 246 (2017). There, defendant moved to set aside a default judgment. After conducting a hearing, the district court denied the mot......
  • Bank of N.Y. Mellon v. Luna, 123,524
    • United States
    • Court of Appeals of Kansas
    • November 19, 2021
    ...party, or by the court on its own motion. KNEA v. State , 305 Kan. 739, 743, 387 P.3d 795 (2017) ; see also Akesogenx Corp. v. Zavala , 55 Kan. App. 2d 22, 37, 407 P.3d 246 (2017) (stating that unlike subject matter jurisdiction, complaints about venue may be waived since K.S.A. 60-212 list......
  • Mid Kan. Agri Co. v. Pawnee Cnty. Coop. Ass'n, 122
    • United States
    • Court of Appeals of Kansas
    • February 25, 2022
    ...have found that most venue challenges are waived if they are not asserted at the outset of litigation. See Akesogenx Corp. v. Zavala, 55 Kan.App.2d 22, 37, 407 P.3d 246 (2017). And a district court likewise has broad discretion to grant or deny a party's request for a change of venue. Herna......
  • Request a trial to view additional results
10 cases
  • Bicknell v. Kan. Dep't of Revenue, No. 120,935
    • United States
    • Court of Appeals of Kansas
    • March 12, 2021
    ...the appellant has the duty to provide the appellate court with a record showing the district court's error. Akesogenx Corp. v. Zavala , 55 Kan. App. 2d 22, 42, 407 P.3d 246 (2017) (holding that appellant failed to meet his burden of submitting a record establishing error by failing to inclu......
  • Bicknell v. Kan. Dep't of Revenue, 120,935
    • United States
    • United States State Supreme Court of Kansas
    • May 20, 2022
    ...transcripts from the motion hearing are required for meaningful review. The Bicknells liken this case to AkesoGenX Corp. v. Zavala , 55 Kan. App. 2d 22, 407 P.3d 246 (2017). There, defendant moved to set aside a default judgment. After conducting a hearing, the district court denied the mot......
  • Bank of N.Y. Mellon v. Luna, 123,524
    • United States
    • Court of Appeals of Kansas
    • November 19, 2021
    ...party, or by the court on its own motion. KNEA v. State , 305 Kan. 739, 743, 387 P.3d 795 (2017) ; see also Akesogenx Corp. v. Zavala , 55 Kan. App. 2d 22, 37, 407 P.3d 246 (2017) (stating that unlike subject matter jurisdiction, complaints about venue may be waived since K.S.A. 60-212 list......
  • Mid Kan. Agri Co. v. Pawnee Cnty. Coop. Ass'n, 122
    • United States
    • Court of Appeals of Kansas
    • February 25, 2022
    ...have found that most venue challenges are waived if they are not asserted at the outset of litigation. See Akesogenx Corp. v. Zavala, 55 Kan.App.2d 22, 37, 407 P.3d 246 (2017). And a district court likewise has broad discretion to grant or deny a party's request for a change of venue. Herna......
  • Request a trial to view additional results

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