Bank v. Frazee

• Decision Date: 31 August 2010
• Docket Number: No. SC 90536.,SC 90536.
• Parties: PEOPLES BANK, Appellant,v.Stephen M. FRAZEE and Jennifer Frazee, Defendants,andH.L. Frazee, Respondent.
• Court: Missouri Supreme Court

318 S.W.3d 121

PEOPLES BANK, Appellant,v. Stephen M. FRAZEE and Jennifer Frazee, Defendants,andH.L. Frazee, Respondent.

No. SC 90536.

Supreme Court of Missouri En Banc.

Aug. 31, 2010.

COPYRIGHT MATERIAL OMITTED

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Michael J. King, Winters & King Inc., Tulsa, OK, and Richard L. Rollings Jr., Camdenton, for appellant.

Richard L. Schnake and Brian K. Asberry, Neale & Newman LLP, Springfield, for defendants.

PATRICIA BRECKENRIDGE, Judge.

A Missouri circuit court quashed registration of a foreign judgment Peoples Bank obtained in an Oklahoma district court against Missouri resident, H.L. Frazee. The Missouri court found that the Oklahoma court lacked personal jurisdiction over Mr. Frazee. Peoples Bank appeals. It challenges the circuit court's assignment of the burden of proof to Peoples Bank to establish that the Oklahoma court's jurisdiction was proper. Peoples Bank also challenges the Missouri court's finding that the Oklahoma court lacked personal jurisdiction over Mr. Frazee because he had insufficient minimum contacts with Oklahoma.

In a proceeding to register a foreign judgment, there is the strong presumption that the rendering court had jurisdiction and entered a valid judgment, and the party asserting the invalidity of the foreign judgment, here, Mr. Frazee, has the burden of overcoming the presumption of jurisdiction and validity. Because the facts and circumstances before the Court demonstrate that Mr. Frazee established minimum contacts with Oklahoma when he guaranteed a promissory note, the Oklahoma court's assertion of personal jurisdiction over Mr. Frazee comports with Oklahoma's long-arm statute and the Due Process Clause of the Fourteenth Amendment of the United States Constitution. The circuit court's judgment is reversed, and the case is remanded.

Factual and Procedural Background

Peoples Bank is an Oklahoma banking corporation located in Tulsa. Stephen M. Frazee and Jennifer Frazee, a married couple who reside in Tulsa, borrowed money from Peoples Bank and executed a promissory note to the bank for repayment of the loan. When Stephen and Jennifer defaulted on the loan, Bill Burnett, executive vice president of Peoples Bank, met with Stephen and informed him that Peoples Bank was calling the promissory note due to the default. Stephen told Mr. Burnett that he believed his grandfather, H.L. Frazee, would help him.¹

At Stephen's suggestion, Mr. Burnett telephoned Mr. Frazee, a Missouri resident who never has lived or owned property in Oklahoma, to discuss the situation.² Mr. Burnett informed Mr. Frazee that Stephen and Jennifer's note was in default, and they discussed what the bank would require. Mr. Frazee said that he wanted to talk to Stephen and Jennifer. Subsequently, Mr. Frazee called Mr. Burnett at the bank in Oklahoma and agreed to sign a guaranty of Stephen and Jennifer's promissory note. After their conversation, Mr. Burnett prepared and mailed the guaranty to Mr. Frazee at his Missouri address. Mr. Frazee signed the guaranty and mailed it back to Peoples Bank at its Tulsa address. Mr. Frazee was aware he was doing business with an Oklahoma bank on behalf of Stephen, who lived in Oklahoma. On April 26, 2006, simultaneously with Mr. Frazee's execution and delivery of the guaranty, Stephen and Jennifer executed a new promissory note.

Stephen and Jennifer defaulted on the new promissory note. Although demand for payment was made of Stephen, Jennifer and Mr. Frazee, the note was not paid. Peoples Bank filed a petition in the district court of Tulsa County, Oklahoma, against Stephen and Jennifer for breach of promissory note and against Mr. Frazee for breach of obligation upon guaranty. The court clerk mailed a summons to Mr. Frazee by certified mail to addressee only, but Mr. Frazee refused service.³ None of the defendants filed answers in the Oklahoma action, and the Tulsa County district court entered a default judgment on July 13, 2007. The default judgment was in favor of Peoples Bank, finding Stephen, Jennifer, and Mr. Frazee jointly and severally liable for $72,520.84 plus interest, reasonable attorney fees, and costs.

Peoples Bank then filed the current action for registration of its foreign judgment in the circuit court of Wright County, Missouri. Mr. Frazee filed a limited entry of appearance and a motion to quash registration of the foreign judgment on the grounds that the judgment was void due to lack of personal jurisdiction over him by the Oklahoma court. After Peoples Bank filed suggestions in opposition to the motion, Mr. Frazee filed suggestions in support of his motion to quash registration and his affidavit. Peoples Bank filed its response to Mr. Frazee's suggestions. In Peoples Bank's response, it included the affidavit of Mr. Burnett. After a hearing at which no evidence was presented, the Missouri circuit court determined that the Oklahoma court did not have personal jurisdiction over Mr. Frazee and sustained his motion to quash the foreign judgment. In doing so, the circuit court placed the burden of proof to establish personal jurisdiction on Peoples Bank.

Peoples Bank appeals. Peoples Bank asserts that the circuit court erred in placing the burden on it to prove that the Oklahoma district court had personal jurisdiction over Mr. Frazee, a Missouri resident. Peoples Bank also claims that the circuit court erred in finding that the Oklahoma district court lacked personal jurisdiction over Mr. Frazee and argues that he had sufficient minimum contacts with Oklahoma so that maintenance of the lawsuit did not offend traditional notions of fair play and substantial justice. After an opinion by the court of appeals, this Court granted transfer. Mo. Const. art. V, sec. 10.

Burden of Proof

Peoples Bank claims that the circuit court erred in finding that Peoples Bank had the burden of proof to establish that the Oklahoma court had personal jurisdiction over Mr. Frazee. Generally, when personal jurisdiction is contested by the filing of a motion to dismiss a Missouri action, the plaintiff bears the burden of establishing that the defendant's contacts with the forum state were sufficient. State ex rel. Ranni Assocs., Inc. v. Hartenbach, 742 S.W.2d 134, 137 (Mo. banc 1987). When the challenge to personal jurisdiction arises in the context of a motion to register a foreign judgment, however, the strong presumption of the validity of a foreign judgment that is regular on its face makes the general rule inapplicable.

Under article IV, section 1 of the United States Constitution, this Court must give full faith and credit to the valid judgment of a sister state unless there is (1) a lack of subject matter jurisdiction, (2) a lack of personal jurisdiction, or (3) fraud in the procurement of the judgment.⁴Phillips v. Fallen, 6 S.W.3d 862, 864 (Mo. banc 1999). “[A] foreign judgment, regular on its face, ... is entitled to a strong presumption that the foreign court had jurisdiction both over the parties and the subject matter and the court followed its laws and entered a valid judgment.” Id. at 868. The burden to overcome the presumption of validity and jurisdiction must be met with “the clearest and most satisfactory evidence,” and this burden lies with the party asserting the invalidity of the foreign judgment. Id.

In this case, Mr. Frazee defaulted in the Oklahoma action, and judgment was entered against him. He contested the Oklahoma district court's personal jurisdiction over him for the first time in the Missouri circuit court. Because the issue was not litigated in the foreign state, Mr. Frazee had the right to attack the judgment for lack of personal jurisdiction in the Missouri circuit court. Miller v. Dean, 289 S.W.3d 620, 624 (Mo.App.2009). The Oklahoma judgment Mr. Frazee was contesting is regular on its face, so the judgment was subject to the strong presumption that the Oklahoma court had jurisdiction. As the party asserting invalidity of the foreign judgment, Mr. Frazee bore the burden of establishing that the Oklahoma court lacked personal jurisdiction. The circuit court erred in placing the burden on Peoples Bank.

The circuit court's error does not entitle Peoples Bank to relief, however. A circuit court's decision regarding whether a foreign judgment should be registered is a legal conclusion. Big Tex Trailer Mfg., Inc. v. Duff Motor Co., 275 S.W.3d 384, 386 (Mo.App.2009). Likewise, a circuit court's determination of personal jurisdiction is a legal conclusion. Bryant v. Smith Interior Design Group, Inc., 310 S.W.3d 227, 231 (Mo. banc 2010). The circuit courts' legal conclusions are subject to a de novo review on appeal. Miller, 289 S.W.3d at 624. Therefore, when a defendant appeals a circuit court's decision regarding a claim of lack of personal jurisdiction in a registration-of-foreign-judgment proceeding, the appellate court reviews the legal conclusions de novo and determines whether the foreign court had personal jurisdiction over the defendant and whether the judgment should be registered. Id. This Court's de novo review eliminates any prejudice to Peoples Bank from the circuit court's erroneous assignment of the burden of proof to Peoples Bank.

Personal Jurisdiction over Defendant

In its second claim of error, Peoples Bank argues that the circuit court erred in determining that the Oklahoma district court lacked personal jurisdiction over Mr. Frazee. Peoples Bank contends he had sufficient minimum contacts with Oklahoma so that maintenance of the lawsuit did not offend traditional notions of fair play and substantial justice. This Court must determine whether Mr. Frazee's actions surrounding the execution of the guaranty constitute sufficient minimum contacts with the forum that Oklahoma's exercise of personal jurisdiction over him was reasonable.

Because this jurisdictional challenge arises in the context of a motion to register a foreign judgment, this Court must look to the rendering state's law- that is, Oklahoma's substantive...