Hankin v. Graphic Technology, Inc.
| Decision Date | 08 January 2010 |
| Docket Number | No. 100,838.,100,838. |
| Citation | 222 P.3d 523 |
| Parties | Mark HANKIN, Appellant, v. GRAPHIC TECHNOLOGY, INC., Appellee. |
| Court | Kansas Court of Appeals |
L.L.P., of Kansas City, Missouri, for appellant.
Mark A. Ferguson and Jehan Kamil of Lathrop & Gage LLP, of Overland Park, for appellee.
Before RULON, C.J., GREENE, J., and LARSON, S.J.
This appeal involves the complexity that arises between the state courts of Pennsylvania and Kansas in dealing with a Pennsylvania judgment registered in Kansas under the Full Faith and Credit Clause of the United States Constitution, U.S. Const. art. IV, § 1, and utilizing the Uniform Enforcement of Foreign Judgment Act (KUEFJA), enacted in Kansas at K.S.A. 60-3001 et seq.
Mark Hankin utilized the KUEFJA to register a judgment in Johnson County District Court that he obtained against Graphic Technology, Inc. (GTI), in the Montgomery County, Pennsylvania, Court of Common Pleas in the amount of $184,433.88, plus interest and costs.
The Pennsylvania judgment was based on a "cognovit clause" in a real estate lease, a contractual provision by which a debtor agrees to the jurisdiction of certain courts, waives notice requirements, and authorizes the entry of an adverse judgment in the event of a default or breach.
Several weeks after registering the judgment in Kansas, Hankin garnished U.S. Bank which filed an answer admitting it had possession of funds belonging to GTI in the amount of the judgment. GTI opposed the Kansas garnishment, and at an earlier time in Pennsylvania, sought to strike or open the Pennsylvania judgment. The Kansas district court initially gave full faith and credit to the Pennsylvania judgment, stayed the Kansas action pending further proceedings in Pennsylvania, and ordered the garnished funds to be held in trust by the Clerk of the Johnson County District Court.
Some 6 months later, the Pennsylvania court "opened" the Pennsylvania judgment. Subsequently, based on GTI's motion in Kansas, the Johnson County District Court issued orders which appear to have applied Kansas law to the Pennsylvania judgment, vacated its registration in Kansas, and ordered the garnished funds to be released to GTI. After Hankin moved to reconsider, the district court modified its order requiring the funds to be held for 1 year pending appeal and required Hankin to post a cash bond of $60,000. The Johnson County District Court also refused to grant Hankin any relief under an appealed and stayed Pennsylvania order issued at the same time the Kansas motions were being considered.
Hankin now appeals the Johnson County District Court orders.
With events taking place in both Pennsylvania and Kansas, a time line will be utilized to summarize the facts and actions taken in the various legal proceedings.
In 1998, Hankin leased commercial real estate to GTI in the City of Hatboro, Pennsylvania. GTI is a Missouri corporation that conducted business at 301 Gardner Drive, New Century, Kansas.
November 2004—Vestcom New Century LLC (Vestcom) purchased the assets of GTI. Hankin as lessor, GTI as lessee/assignor, and Vestcom as assignee, entered into an assignment and assumption agreement of the real estate lease. The agreement contained a cognovit clause, and GTI remained legally responsible for performance under the lease.
April 2006—Vestcom notified Hankin it was vacating the property and prematurely terminating the lease as of October 31, 2006. On July 19, 2006, GTI ceased doing business in Pennsylvania.
December 13, 2006—Hankin filed a complaint on confession of judgment against GTI in Montgomery County, Pennsylvania, Court of Common Pleas with an affidavit of default and notice to be mailed to GTI. Two days later on December 15, 2006, judgment was granted to Hankin against GTI by confession for damages of $184,433.88, plus interest.
January 22, 2007—GTI filed a petition to strike or open the confessed judgment in the Pennsylvania court. On February 12, 2007, Hankin filed a response.
May 25, 2007—An affidavit with attached Pennsylvania judgment was filed in Johnson County District Court. On June 6, 2007, Johnson County Clerk sent notice to GTI of registration, with notice being sent to the business address which was the last recorded address at the Pennsylvania Secretary of State. On June 7, 2007, the Pennsylvania judgment was registered in Kansas as a judgment.
June 26, 2007—Hankin issued a request for garnishment to U.S. Bank in Overland Park, Kansas, for any funds held by the bank for GTI up to $184,443.88. The order of garnishment was served on June 27, 2007. The same day, U.S. Bank signed an answer of garnishee admitting it held $184,433.88 of GTI funds. The answer was filed July 2, 2007.
July 5, 2007—The Pennsylvania court granted GTI's petition to stay execution of any pending or future executions on the confessed judgment pending further order of the court.
July 10, 2007, a hearing was held in Johnson County District Court on GTI's challenge to registration of the Pennsylvania judgment. The court ruled: (1) The court will enforce judgment from Pennsylvania; (2) the stay of execution will not be lifted until further order of the court; and (3) the money garnished is to be paid in to the clerk's office. The next hearing was August 17, 2007.
July 19, 2007—GTI filed a memorandum of law in support of the defendant's petition to strike or in the alternative, to open the confessed judgment in the Pennsylvania court. This document was attached as Exhibit C to an August 17, 2007, motion GTI filed in Johnson County District Court.
July 27, 2007—The journal entry on the July 10, 2007, hearing was filed. The court denied the request to vacate the foreign judgment finding it was properly registered as a foreign judgment and is entitled to full faith and credit. The court noted the Pennsylvania order dated July 5, 2007, staying all execution proceedings pending further order of the court. The court, pursuant to K.S.A. 60-3004(a) stayed the execution of the Kansas judgment pending further order of the court. The court ordered U.S. Bank, as garnishee, to immediately pay the proceeds of $184,443.88 to the Office of the Johnson County District Court Clerk where it was to be held in trust.
August 17, 2007, a status conference hearing was held. GTI filed a motion in Johnson County District Court requesting immediate release of the funds, discharge of the garnishment, and vacation of the foreign judgment. GTI's motion was denied at this time. On November 5, 2007, the Kansas court ordered the stay to be continued pending resolution of the appeal in Pennsylvania.
January 8, 2008—The Pennsylvania trial court ordered that GTI's motion to strike, or in the alternative, to open the confessed judgment was granted, holding: "The confessed judgment is opened."
March 26, 2008—GTI filed a second motion to strike and vacate the foreign judgment and for release of the garnished funds citing the January 8, 2008, Pennsylvania order to open the confessed judgment, contending this effectively nullified the Pennsylvania judgment and arguing it was no longer entitled to full faith and credit in Kansas. On April 7, 2008, Hankin responded and opposed GTI's Kansas motion to strike, pointing out the difference under Pennsylvania law between opening a confessed Pennsylvania judgment and striking a Pennsylvania judgment. A hearing was held on GTI's motion to strike and vacate the judgment on April 25, 2008. The court's ruling was set forth in a journal entry.
April 30, 2008—The Montgomery County, Pennsylvania, Court of Common Pleas issued an order directing GTI to take all necessary action to get the Johnson County District Court to transfer $184,443.88 to the Pennsylvania court and if it failed to comply with the order, a final judgment was to be entered against GTI. On May 2, 2008, GTI filed a notice of appeal in Pennsylvania from this decision.
May 2, 2008—A hearing was held to settle the journal entry on the Kansas April 25, 2008, hearing. The Johnson County District Court was presented with a copy of the Pennsylvania court order dated April 30, 2008, directing GTI to take the necessary steps to transfer the funds held in Kansas to Pennsylvania.
May 5, 2008—The Pennsylvania Superior Court (its intermediate appellate court) issued an immediate and then indefinite stay of the lower court's April 30, 2008, order.
May 6, 2008—Hankin filed a motion requesting the court reconsider its order to release and pay out funds. GTI responded on May 7, 2008.
May 7, 2008—The motion to reconsider was argued. The court approved the journal entry from the April 25, 2008, hearing on GTI's motion to strike. The journal entry on the court's April 25, 2008, hearing, stated that based on the Pennsylvania January 8, 2008, order opening the judgment there is no longer a Pennsylvania judgment which is entitled to full faith and credit in Kansas. The court further found that the Pennsylvania statutory provision (Pa. Cons.Stat. Ann. tit. 42 § 2959[f] [Purdon 2002]) which permitted a lien of attachment or any execution issued on it by a judgment creditor to be maintained after a judgment had been opened, constituted a prejudgment attachment not in compliance with K.S.A. 60-701 et seq. The journal entry of judgment further specifically stated:
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