Hope's Windows, Inc. v. McClain

• Decision Date: 19 March 2013
• Docket Number: No. WD 75137.,WD 75137.
• Citation: 394 S.W.3d 478
• Parties: HOPE'S WINDOWS, INC., Appellant, v. Kenneth McCLAIN, Respondent.
• Court: Missouri Court of Appeals

394 S.W.3d 478

HOPE'S WINDOWS, INC., Appellant,

v.Kenneth McCLAIN, Respondent.

No. WD 75137.

Missouri Court of Appeals, Western District.

March 19, 2013.

Sean Santoro, Bonner Springs, KS, attorney for appellant.

Gregory Leyh, Gladstone, MO, attorney for respondent.

Before Division Two: KAREN KING MITCHELL, Presiding Judge, and THOMAS H. NEWTON and LISA WHITE HARDWICK, Judges.

KAREN KING MITCHELL, Presiding Judge.

Hope's Windows, Inc., appeals the circuit court's order denying Hope's Windows's Petition to Register the New York Judgment and granting Kenneth McClain's Motion to Vacate Petition for Registration of Foreign Judgment. Hope's Windows raises five points on appeal, arguing that the circuit court erred for various reasons in finding that the New York court lacked personal jurisdiction over McClain. We reverse the judgment and remand to the circuit court.

Factual and Procedural Background ¹

Hope's Windows is a New York corporation, with its principal place of business in Jamestown, New York. McClain is a resident of Independence, Missouri. In March 2007, McClain entered into a contract with Hope's Windows for the purchase and installation of windows, doors, doorframes, and hardware for his property in Missouri.² The contract, signed by McClain and executed in Missouri, contained a choice-of-law and forum-selection clause that provided, in pertinent part:

Any dispute arising under this agreement shall be under the jurisdiction and governed by the laws of the State of New York. The venue for any litigation under this agreement, if commenced by SELLER or BUYER, shall be in a court of competent jurisdiction in Chautauqua County in the State of New York.

On or about March 26, 2007, McClain mailed a personal check in the amount of $66,195.00 to the office of Hope's Windows in Jamestown, New York, as a down payment for the project. McClain never personally visited New York, and all of the work was performed in Missouri. After a dispute arose between the parties, McClain refused to make any further paymentsto Hope's Windows on the remaining balance for the project.

Hope's Windows filed a lawsuit on November 6, 2009, in Chautauqua County, New York, against McClain, seeking payment of the remaining balance ($66,195.00), a service charge, and attorney's fees. Despite having been properly served and notified of the lawsuit, McClain did not respond, and a default judgment, ordering McClain to pay a total of $85,243.95 to Hope's Windows, was entered against him on March 29, 2010. Hope's Windows then filed a Petition for Registration of Foreign Judgment in Jackson County, Missouri. In response, McClain filed a Motion to Vacate Petition for Registration of Foreign Judgment, alleging, inter alia, that New York did not have personal jurisdiction over him, and, therefore, the default judgment should never have been entered.

The circuit court heard oral argument on the parties' claims and then entered judgment denying Hope's Windows's Petition for Registration of Foreign Judgment and granting McClain's Motion to Vacate Petition for Registration of Foreign Judgment. The judgment was limited to a discussion of the New York court's personal jurisdiction over McClain. Hope's Windows filed a Motion for Vacation and Amendment of Judgment and Alternative Motion for a New Trial. The motion was denied, and this appeal follows.

Standard of Review

The determination of personal jurisdiction and a decision regarding registration of a foreign judgment are legal conclusions, and, as such, they are subject to de novo review. Peoples Bank v. Frazee, 318 S.W.3d 121, 127 (Mo. banc 2010). We defer to the circuit court's factual findings and will reverse the judgment only if it is not supported by substantial evidence, is against the weight of the evidence, or erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

Analysis

McClain was served with the New York lawsuit, and, upon his failure to file any responsive pleadings with the New York court, a default judgment was entered against him. Because the issue of personal jurisdiction was neither contested nor litigated in New York, McClain properly asserted his challenge for the first time in the Missouri court. Peoples Bank, 318 S.W.3d at 127.

Hope's Windows raises five points on appeal. First, it argues the circuit court misapplied the law in holding that the choice-of-law provision was “merely relevant,” because such a provision is a “significant factor” in personal jurisdiction analysis under New York law. Second, it argues that the circuit court erred in using a subjective standard to determine that McClain could not have reasonably anticipated being hauled into a New York court in that “courts hold sophisticated parties to objective terms of their contracts,” and, therefore, McClain, by agreeing to the choice-of-law provision and forum-selection clause, could have objectively—and reasonably—anticipated being hauled into a New York court. Third, it argues that the circuit court misinterpreted and misapplied the law in finding that McClain did not transact business in New York. Fourth, it argues the circuit court erred in shifting the burden of proof from McClain to Hope's Windows. And finally, it argues that the circuit court erred in holding that New York's exercise of personal jurisdiction over McClain violated due process. For the ease of discussion, we will consolidate Hope's Windows's points on appeal.

I. The Jurisdictional Standard

The crux of Hope's Windows's points on appeal is that the circuit court erred in finding that the New York court lacked personal jurisdiction over McClain.

As a general rule, a plaintiff bears the burden to prove personal jurisdiction exists when it is challenged by a defendant in a pending lawsuit. Peoples Bank, 318 S.W.3d at 126. But “[w]hen the challenge to personal jurisdiction arises in the context of a motion to register a foreign judgment, ... the strong presumption of the validity of a foreign judgment that is regular on its face makes the general rule inapplicable.” Id. “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. at 127 (quoting Phillips v. Fallen, 6 S.W.3d 862, 868 (Mo. banc 1999)). The New York judgment is regular on its face, and is, therefore, subject to a strong presumption of validity. See id. at 126.

Where a challenge to jurisdiction “arises in the context of a motion to register a foreign judgment, this Court must look to the rendering state's law—that is, [New York's] substantive law—to determine whether the [New York] court had personal jurisdiction over [McClain].” Id. at 127–28. A court considering registration of a foreign judgment may also consider federal law for the purpose of deciding whether the foreign state's exercise of personal jurisdiction contravenes the constitutional guarantee of due process. See id. at 128–29;see also Aquiline Capital Partners LLC v. Finarch LLC, 861 F.Supp.2d 378, 390–91 (S.D.N.Y.2012).³

While federal and New York law control as to the substantive issue of personal jurisdiction, the civil procedure rules of Missouri govern both the circuit court's proceeding and our review of the circuit court's judgment. Peoples Bank, 318 S.W.3d at 128. Under Missouri's procedural rules, the parties to an action seeking to register a foreign judgment “may present affidavits to supplement the pleadings ‘or the court may direct that the matter be heard wholly or partly on oral testimony or deposition.’ ” Id. (quoting Chromalloy Am. Corp. v. Elyria Foundry Co., 955 S.W.2d 1, 4 (Mo. banc 1997)). In the present case, the evidence consisted of affidavits only; there was no oral testimony or depositions provided to the court. In our review, we look to the facts and circumstances found by the court addressing registration of the foreign judgment, rather than those found by the court that rendered the foreign judgment. Id. We do not defer to any jurisdictional facts found in the foreign judgment.⁴Id. The circuit court below was free to believe or disbelieve any statement in the affidavits provided by the parties, and “factual determinations are within the sole discretion of the circuit court”; therefore, we defer to the circuit court's factual findings. Id. As this motion was heard by the circuit court, we consider all factual issues upon which no specific findings were made to be found in accordance with the circuit court's judgment. SeeRule 73.01(c); see also, e.g., In re Marriage of Lathem, 642 S.W.2d 694, 697 (Mo.App. S.D.1982) (finding that Rule 73.01(c) governs the review of a judgment following a hearing on a motion to revive a judgment).

After considering the record and competing affidavits presented by the parties, the circuit court found that McClain signed a contract, containing a New York choice-of-law and forum-selection clause, with Hope's Windows, in which Hope's Windows agreed to supply products for installation in McClain's Missouri property, and that McClain sent to Hope's Windows, at its New York address, a check for partial payment under the terms of that contract. The circuit court found that the contract was negotiated and executed in Missouri, that McClain never visited New York to meet with Hope's Windows, and that he did not have an ongoing contractual relationship with Hope's Windows. Using these facts, found by the circuit court, we will evaluate whether the New York court had personal jurisdiction over McClain.

II. Effect of the Forum–Selection Clause

At the outset, we note that, although the circuit court found the contractual provision at issue to be a forum-selection clause, the court evaluated its effect on New York's personal jurisdiction over McClain according only to case law interpreting the effect of choice-of-law clauses. Thus, a brief discussion of the...