Hamilton v. Newbury

• Decision Date: 03 February 1967
• Docket Number: No. 16852,16852
• Citation: 412 S.W.2d 801
• Parties: Ralph F. HAMILTON, Appellant, v. George NEWBURY, Appellee. . Dallas
• Court: Texas Court of Appeals

Page 801

412 S.W.2d 801

Ralph F. HAMILTON, Appellant, v. George NEWBURY, Appellee.

No. 16852.

Court of Civil Appeals of Texas.

Dallas.

Feb. 3, 1967.

Rehearing Denied March 3, 1967.

C. Sidney McClain, Dallas, for appellant.

Edward V. Smith, III, of Golden, Croley, Howell, Johnson & Mizell, Dallas, Eugene A. Lalonde, Sidney, Mont., for appellee.

CLAUDE WILLIAMS, Justice.

The primary question presented by this appeal is whether a Montana court had jurisdiction to render an in personam judgment against a defaulting defendant, a Texas resident. George Newbury brought suit in the Seventh Judicial District Court of Richland County, Montana on May 22, 1964 against Ralph F. Hamilton in which he sought judgment upon a promissory note executed by Hamilton in the principal sum of $36,160, together with interest and costs. Personal service in said cause was had upon Hamilton, a resident of Texas, in Texas, on June 1, 1964. Defendant did not file an answer or make any appearance in the Montana court and thereafter on July 3, 1964 judgment by default was rendered in favor of plaintiff for the sum of $47,115.05, representing principal and interest on the note sued upon, together with costs.

This action was instituted in the district court of Dallas County, Texas by Newbury against Hamilton based upon the Montana default judgment. Defendant answered and contended, inter alia, that the Montana judgment was void and of no force and effect since the Montana court rendering such judgment had never acquired jurisdiction over him. The case proceeded to trial before the court, without the intervention of a jury, and a judgment was rendered for plaintiff in the sum of $47,115.05, together with interest and costs.

The trial court filed findings of fact summarized as follows: Prior to the execution of the note which was the basis of the Montana action, and at all times thereafter, defendant Hamilton was a nonresident of the State of Montana and at all material times plaintiff Newbury was a resident of Montana. For a period of approximately ten years prior to the execution of the note sued upon, dated May 29, 1954, plaintiff had engaged in numerous business transactions with the defendant within the State of Montana. In some of these plaintiff participated as a principal, advancing money to defendant to cover plaintiff's participation, and in others plaintiff lent money to defendant. The Montana was on a promissory note dated May 29, 1954, executed by defendant Hamilton payable to the order of plaintiff Newbury, in the principal sum of $36,710, bearing interest at 3 per cent per annum, and payable two years after date, and on which a total of $550 had been paid and credited prior to the institution of suit. The note sued upon in the Montana action was silent as to place of payment, but 'the parties understood that it was to be repaid at Poplar, Montana, the residence of the plaintiff.' The note of May 29, 1954 was given in renewal of a promissory note dated November 12, 1953, executed by defendant in favor of plaintiff, in the principal amount of $27,710, and further in consideration of an additional loan of $9,000 made to the defendant by the plaintiff in the spring of 1954. The note dated November 12, 1953 was executed in consideration of various loans made to defendant prior to November 12, 1953. The funds for each of the loans evidenced by the note dated November 12, 1953, were withdrawn by plaintiff in person a Poplar, Montana, from his checking account at the Trader's State Bank in Poplar, Montana, and were sent by wire from said town to defendant outside of Montana. On November 24, 1953 the defendant pled guilty to fraudulent use of the mail and fraud in the sale of securities in the Federal District Court in Billings, Montana, arising out of the sale to Montana investors of oil and gas rights in property located in Petroleum and Teton Counties in the State of Montana. The court deferred the imposition of the sentence conditioned upon the defendant making restitution to the Montana investors in the amount of approximately $30,000 then owing. During the years of 1953 and 1954 the defendant, in Montana, made restitution to the Montana investors in the sum of approximately $61,000. Part of the funds used in making restitution to the Montana investors came from the loans made by plaintiff to the defendant, which loans were evidenced by the note on which suit was brought in the Montana action. That defendant Hamilton was personally served in the Montana action in Dallas, Texas on June 1, 1964. Such service was in compliance with the applicable Montana statutes governing service of process on nonresident defendants and was the only service had on defendant in said cause. On July 3, 1964 plaintiff recovered judgment by default against Hamilton in the Montana action and that such judgment is a final, valid and subsisting judgment which has not been vacated or set aside in the State of Montana.

In his conclusions of law the trial court found: That the Montana judgment was valid and is entitled to full faith and credit by the courts of Texas under the Constitution and laws of the United States of America and the State of Texas; that the Seventh Judicial District Court of the State of Montana in rendering judgment against Hamilton had jurisdiction over the subject matter of the controversy and of the person of Hamilton. That the applicable statutes of the State of Montana pursuant to which Hamilton was served in Texas on the Montana suit are constitutional and that acquiring jurisdiction over him in the manner provided by said statutes did not deprive Hamilton of due process and equal protection of the law. That defendant Hamilton had such contacts within the State of Montana 'in connection with said note' as to constitute a proper basis for the assertion of jurisdiction over the person of defendant based upon personal service outside of the State of Montana and that the maintenance of the suit on said note under the circumstances 'does not offend traditional notions of fair play and substantial justice.' That the note sued upon in the Montana action had a substantial connection with the State of Montana.

Appellant assails the trial court's findings and conclusions, and the judgment rendered thereon, in thirty-five points of error, but concedes that the central question is that of jurisdiction vel non of the Montana court in rendering the judgment sued upon in Texas.

Basic and well established principles of law guide us in our resolution of the question thus presented.

Art. IV, Sec. 1, Constitution of the United States, provides that full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state. The Congress of the United States has prescribed the manner in which such judgments may be proved and the effect thereof in 28 U.S.C.A. § 1738. When a plaintiff sues upon a judgment of a sister state in Texas and introduces his judgment, authenticated as provided by 28 U .S.C.A. § 1738, he thereby establishes a prima facie case and it is not incumbent upon him to show any action by way of enforcement of the foreign judgment. Gard v. Gard, 244 S.W.2d 884, Tex.Civ.App.; Houston v. Dunn, 13 Tex. 476; Ryan v. City Nat'l Bank & Trust Co., Tex.Civ.App., 186 S.W.2d 747.

The burden of attacking the judgment and establishing reasons why it should not be given full faith and credit, such as lack of jurisdiction of the person of the defendant, shift to the defendant. Mendlovitz v. Samuels Shoe Co., Tex.Civ.App., 5 S.W.2d 559; Russell v. Butler, Tex.Civ.App., 47 S.W. 406.

The landmark case on the question of exercise of jurisdiction over a nonresident in an in personam judgment, is Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, decided in 1877, in which the Supreme Court of the United States said:

'Since the adoption of the Fourteenth Amendment to the Federal Constitution, the validity of such (sister state) judgments may be directly questioned, and their enforcement in the State resisted, on the ground that proceedings in a court of justice to determine the personal rights and obligations of parties over whom that court has no jurisdiction do not constitute due process of law.'

The Supreme Court then laid down two cardinal principles: (1) A personal judgment is void if it is rendered by a court which has no jurisdiction over the defendant; and (2) if a court has no jurisdiction over a nonresident defendant, it cannot acquire jurisdiction merely by serving process upon him outside the forum.

This continued to be the law for many years but then, due to changing times and conditions, the courts in a series of decisions, have diluted the Pennoyer doctrine to some extent. In 1945 the Supreme Court of the United States in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057, said:

'Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v. Neff, 95 U.S. 714, 733, 24 L.Ed. 565. But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice."

In 1957 the Supreme Court of the United States continued the erosion of the Pennoyer doctrine in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, saying:

'Since Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, this Court has held that the Due Process Clause of the Fourteenth Amendment places some limit on...