Federal Deposit Ins. Corp. v. Schaffer

• Citation: 731 F.2d 1134
• Decision Date: 17 April 1984
• Docket Number: No. 83-1482,83-1482
• Parties: 15 Fed. R. Evid. Serv. 809 FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. Michael A. SCHAFFER; Leonard Malin, Appellants, and Spartan Mining Co., Inc., a corporation, LMC Enterprises, Inc., a corporation, Hamilton Associates, Inc., a corporation, and Charles Nagy, Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1134

731 F.2d 1134

15 Fed. R. Evid. Serv. 809

FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. Michael A. SCHAFFER; Leonard Malin, Appellants and Spartan Mining Co., Inc., a corporation, LMC Enterprises Inc., a corporation, Hamilton Associates, Inc., a corporation, and Charles Nagy, Defendants.

No. 83-1482.

United States Court of Appeals Fourth Circuit.

Argued Jan. 10, 1984.

Decided April 17, 1984.

Richard E. Rowe, Charleston, W.Va. (Lucinda C. Masterton, Goodwin & Goodwin, Charleston, W.Va., on brief), for appellants.

Carl L. Fletcher, Charleston, W.Va. (Marshall C. Spradling, Joseph J. Miller, Spilman, Thomas, Battle & Klostermeyer, Charleston, W.Va., on brief), for appellee.

Before WIDENER and CHAPMAN, Circuit Judges, and MAX ROSENN, Senior Circuit Judge for the United States Court of Appeals for the Third Circuit, sitting by designation.

ROSENN, Senior Circuit Judge:

Michael Schaffer and Leonard Malin appeal from a decision of the United States District Court for the Southern District of West Virginia denying their motion to vacate a default judgment entered against them. The sole issue is whether effective notice was provided to the individual defendants so as to perfect substituted service upon the secretary of state in accordance with the pertinent West Virginia long arm statute. The district court held that the service of process and notice were sufficient to confer jurisdiction. The court, therefore, refused to set aside the default judgment. We affirm.

I.

Spartan Mining Co., Inc., borrowed money from the First National Bank of South Charleston (Bank). It gave the Bank collateral for the loan. In addition, Schaffer and Malin guaranteed the loan both personally and in their capacities as officers of two corporations. When Spartan Mining defaulted, the Bank ¹ sold the collateral and instituted a diversity action in federal court for the balance owed against Schaffer, Malin, the corporate guarantors, Spartan Mining, and Spartan Mining's president, Charles Nagy. The Bank served process on Schaffer, Malin, and the corporations pursuant to W.Va.Code Sec. 56-3-33 (Cum.Supp.1983), a West Virginia statute authorizing service on nonresidents. Under the statute, substituted service for nonresident defendants is made on the secretary of state, and notice is accomplished through the sending of a copy of the summons and complaint by registered or certified mail. The Bank served the summons and complaint on the secretary of state and copies were mailed to the defendants. Signed receipts were returned.

Schaffer and Malin did not respond to the summons and complaint. The district court entered a default judgment against them. Many months later, ² Schaffer and Malin moved to set aside the court's judgment. The claim made by Schaffer and Malin in the district court and on appeal is that the secretary of state did not comply with West Virginia's statutory notice provisions and that therefore the service of process was ineffective. Absent effective service of process, a court is without jurisdiction to render a personal judgment against a defendant. Hutchinson v. United States, 677 F.2d 1322, 1328 (9th Cir.1982). A judgment entered against a party over whom a court lacks personal jurisdiction is void and furnishes a ground for relief under Fed.R.Civ.P. 60(b)(4). In re Penco Corp., 465 F.2d 693, 694 n. 1 (4th Cir.1972).

In the district court, Schaffer and Malin submitted affidavits in support of their motion to set aside the default judgment stating that they did not sign the return receipts for the court papers mailed to them. Schaffer's receipt was signed by "M. Lipton." Schaffer's affidavit suggested that "M. Lipton" was his elderly mother-in-law who resided at his home. He claimed that his mother-in-law never delivered the papers to him. As for Malin's receipt, Malin denied signing it, although it contained the signature "Malin." He averred in his affidavit that he was not "told by anyone that they accepted a summons and complaint" for him.

To ascertain the proper method of service, a federal court exercising diversity jurisdiction applies federal law. See National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964). Fed.R.Civ.P. 4 enumerates acceptable methods of service. In addition to providing for exclusively federal methods of service, Fed.R.Civ.P. 4 permits a district court to exercise jurisdiction over a defendant who is served pursuant to the service of process rules of the state in which the court sits. In this case, an attempt was made to follow West Virginia's method of service on nonresident defendants. To determine whether process was served properly, we must examine both federal and West Virginia law. "[I]f service of process is made pursuant to state law, the federal court must apply both federal and state law--federal law to determine the constitutional validity of service and state law to see if the procedures set out in the applicable state statute or rule have been followed." 4 C. Wright & A. Miller, Federal Practice & Procedure Sec. 1075 (1969).

Schaffer and Malin do not contend that the West Virginia statute is unconstitutional. They admit that the service of process in this case met the constitutional requirements and could have been effective if performed under another statute. The defendants correctly maintain, however, that to be effective, service of process must comply not only with constitutional requirements, but also with the provisions of the state statute. This court will respect a state legislature's decision to enact service of process requirements more stringent than those mandated by the constitution. ³

W.Va.Code Sec. 56-3-33(c) ⁴ (Cum.Supp.1983) provides for service of process on nonresident defendants. Schaffer and Malin maintain that "[s]ervice by this method is sufficient only if the return receipt is attached to the summons and complaint, showing (1) the defendant signed for service- ; or (2) the defendant's agent signed for service; or (3) service was refused." They contend that none of these conditions were met because service was accepted by someone other than the appellants or their agents. ⁵ They argue that the statute requires not only notice and service, but also "notice of service." The district court, however, ruled:

On the face of the return of service record these provisions were complied with inasmuch as a copy of the summons and complaint was sent to each of these defendants at their respective addresses and both receipt cards were returned signed--with what appeared to be addressee's signature in Malin's case and what could be presumed to be a "duly authorized agent" in Schaffer's case. West Virginia does not require actual notice for service of process to be valid where the statutory requirements for notification have been met.

FDIC v. Spartan Mining Co., 96 F.R.D. 677, 682 (S.D.W.Va.1983).

The Bank and the secretary of state made a good faith attempt to follow West Virginia's service procedures. The Bank served process on the secretary of state, who sent copies of the summons and complaint by certified mail to the respective homes of Schaffer and Malin. Receipts that appeared to be signed by Malin and by Schaffer's agent were returned and properly filed. There were no other reasonable steps that the plaintiff or secretary of state were required to take to effect proper service. The court then acted on the reasonable assumption that service was effective and that it had personal jurisdiction. Central Operating Co. v. Utility Workers of America, 491 F.2d 245 (4th Cir.1974), relied on by the defendants, is inapposite for in that case the plaintiff failed to serve the state auditor general as required by the pertinent West Virginia statute to achieve substituted service.

The...