Lakeside Equipment Corp. v. Town of Chester

• Decision Date: 15 February 2002
• Docket Number: No. 00-575.,00-575.
• Citation: 795 A.2d 1174
• Parties: LAKESIDE EQUIPMENT CORP. v. TOWN OF CHESTER
• Court: Vermont Supreme Court

795 A.2d 1174

LAKESIDE EQUIPMENT CORP. v. TOWN OF CHESTER

No. 00-575.

Supreme Court of Vermont.

February 15, 2002.

Patrick M. Ankuda of Parker & Ankuda, P.C., Springfield, for Plaintiff-Appellee.

Thomas S. Durkin of Kramer & Durkin, P.C., West Dover, for Defendant-Appellant.

Present: AMESTOY, C.J., DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

DOOLEY, J.

Defendant Town of Chester appeals the superior court's summary judgment determination that plaintiff Lakeside Equipment Corporation is entitled to enforcement of an Illinois judgment requiring the Town to pay Lakeside for equipment specially manufactured for the Town's waste water treatment facility. The Town contends that the Illinois judgment is unenforceable because its plant operator was not authorized to order the equipment, and thus there was no basis for exercising personal jurisdiction over it. We conclude that the record is insufficient to determine whether the judgment was jurisdictionally sound; accordingly, we reverse the superior court's decision and remand the matter for further proceedings.

The material facts alleged for purposes of summary judgment are undisputed. Lakeside is a Delaware corporation with a principal place of business in Bartlett, Illinois. On April 15, 1996, David Duquette, the plant operator for the Town's waste water treatment facility, contacted Lakeside and placed a verbal order to purchase replacement clarifiers for the plant. One week later, Lakeside acknowledged the order in a letter that itemized the cost of the equipment, which totaled approximately $40,000. Attached to the letter were the conditions of the sale, including a provision scheduling delivery of the equipment for June 1996. In response to the letter, Duquette sent Lakeside the Town's purchase order number. Lakeside designed and specially manufactured the equipment, and delivered it to the Town on June 24, 1996. Duquette received and accepted the equipment three days later.

On July 24, 1996, a Lakeside employee contacted Susan Spaulding, the Chester Town Manager, to determine why the Town had not paid for the equipment. Spaulding told the Lakeside employee that payment would be made within the week. The Town paid nothing, however, and later informed Lakeside that it would not pay for the equipment. After making formal demands for payment in September and October 1996, Lakeside submitted a demand for arbitration to the American Arbitration Association pursuant to the contract.

The Association acknowledged receipt of the demand for arbitration and informed the Town of the requested hearing locale in Chicago, Illinois. The Town neither responded to the letter nor participated in the June 24, 1997 hearing held before the arbitrator in Chicago, although it did pay $1000 in arbitration fees. In July 1997, the arbitrator asked the parties to submit briefs regarding jurisdiction and the authority of the Association to conduct the arbitration. Lakeside submitted a brief, but the Town did not respond. On August 25, 1997, the arbitrator entered an award in favor of Lakeside for approximately $51,000. Later, Lakeside petitioned for confirmation of the judgment in the Illinois circuit court. The Town neither responded to Lakeside's petition nor appeared in the Illinois court proceedings. On March 3, 1998, the Illinois circuit court confirmed the arbitration award against the Town and entered a judgment of approximately $53,000.

On March 31, 1998, Lakeside commenced the present action by filing a complaint in the Windsor Superior Court to domesticate the Illinois judgment. The Town appeared, filed an answer, and asserted a counterclaim challenging the validity of the underlying contract and the jurisdiction of the Illinois courts over the Town. The superior court initially denied Lakeside's motion to dismiss the Town's counterclaim, but later, in its November 3, 2000 decision, granted summary judgment to Lakeside. The court determined that it was required to give full faith and credit to the Illinois judgment because the evidence demonstrated that the Town's contacts with Illinois were sufficient for the courts of that state to assume personal jurisdiction over the Town with respect to the matter at issue. The court also concluded that, to the extent that the Town had valid objections concerning the scope of Duquette's authority to enter into the contract with Lakeside, the Town waived those objections by failing to raise them in the Illinois proceedings.

On appeal, the Town argues that (1) Duquette was without actual or apparent authority to bind the Town to the contract with Lakeside; (2) Lakeside had a duty to confirm the scope of Duquette's authority to bind the Town to the contract; (3) Illinois lacked personal jurisdiction to enter a judgment against a Vermont town based upon a contract entered into by an unauthorized agent; (4) the superior court erred by granting Lakeside's motion for summary judgment after it had denied Lakeside's motion to dismiss the Town's counterclaim; and (5) the superior court failed to give the Town sufficient time to object to the judgment order submitted to the court by Lakeside following the court's decision in favor of Lakeside. We apply the same two-part test as that applied by the trial court: we examine whether there are genuine issues of material fact in dispute, and whether the moving party is entitled to judgment as a matter of law. See Northern Aircraft, Inc. v. Reed, 154 Vt. 36, 44, 572 A.2d 1382, 1387 (1990).

A sister-state judgment is normally "entitled to full faith and credit in the absence of a showing that [the] court lacked jurisdiction or acted to deprive defendant of a reasonable opportunity to be heard." Wursthaus, Inc. v. Cerreta, 149 Vt. 54, 58, 539 A.2d 534, 537 (1987); see Cook v. Cook, 342 U.S. 126, 128, 72 S.Ct. 157, 96 L.Ed. 146 (1951) (burden of undermining decree of sister state rests heavily upon assailant); Hall v. McCormick, 154 Vt. 592, 595, 580 A.2d 968, 970 (1990) (defendant has "heavy burden" of undermining foreign judgment, which is presumptively valid). Here, the Town contends that it did not have the minimum contacts for the Illinois courts to extend personal jurisdiction over it. In addition to disputing this contention, Lakeside argues that the Town waived its jurisdictional challenge by failing to raise it in the arbitration proceeding, when it had an opportunity to do so.

As a preliminary matter, we reject Lakeside's argument that the Town waived its right to raise the jurisdictional issue in this proceeding to domesticate the Illinois judgment. When a defendant fails to appear after having been served with a complaint in a state and a default judgment is entered, the defendant may defeat enforcement of that judgment in another forum by showing that the judgment was issued by a court lacking personal jurisdiction. See 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4430, at 292 (1981) ("a defendant who makes no appearance whatever remains free to challenge a default judgment for want of personal jurisdiction"); Hicks v. Evans, 230 Ga.App. 114, 495 S.E.2d 588, 590 (1998) (accord); Video Prods. Distribs. v. Kilsey, 682 A.2d 1381, 1382 (R.I.1996) (per curiam) (accord); cf. Driver v. Driver, 148 Vt. 560, 562, 536 A.2d 557, 558 (1987) ("the jurisdiction of [a] Massachusetts court may be subject to collateral attack in Vermont if jurisdiction had not been contested and determined by the Massachusetts court").

Although the burden of overcoming the default judgment rests with the party attacking it, see Kilsey, 682 A.2d at 1382, where the issue of personal jurisdiction is resolved on summary judgment, the moving party retains the burden of establishing the absence of a genuine issue of material fact and entitlement to prevail as a matter of law. Hudson Drydocks Inc. v. Wyatt Yachts Inc., 760 F.2d 1144, 1146 (11th Cir.1985). If the defendant in the action to domesticate the foreign default judgment ultimately fails to meet its burden of demonstrating that the judgment is jurisdictionally defective, any challenge on the merits of the lawsuit is foreclosed. See 18 C. Wright, A. Miller & E. Cooper, supra, at 291 ("Objections to personal jurisdiction remain open to the defendant who remains entirely aloof from the original proceeding, but if it is later concluded that personal jurisdiction existed the merits of the action are foreclosed unless relief can be had from the default judgment.").

Here, the Town chose not to participate in the Illinois proceedings based on its position that its agent had acted outside the scope of his authority, and thus the agent's contacts with Lakeside could not be imputed to it. Hence, the Town is not precluded from raising a jurisdictional challenge in the instant proceeding. Lakeside's arguments concerning the arbitration and forum-selection provisions contained in the "conditions of sale" attached to the letter sent in response to the plant operator's verbal order are unavailing in that they beg the question at hand — whether the contacts made by the plant operator can be attributed to the Town so as to impose personal jurisdiction over the Town and otherwise bind the Town.

"In determining jurisdiction, the foreign State's law, as limited by due process, controls." Pavey Envelope & Tag Corp. v. Diamond Envelope Corp., 271 Ill. App.3d 808, 208 Ill.Dec. 193, 648 N.E.2d 1115, 1117 (1995). Under the Illinois longarm statute, Illinois courts may extend jurisdiction over any person who, in person or through an agent, transacts business within the state or makes or performs a contract substantially connected with the state. See 735 Ill. Comp. Stat. 5/2-209(a)(1), (7) (1992). The statute also provides that an Illinois court may exercise jurisdiction on any other basis permitted under the constitutions of Illinois and the United States. Id. 5/2-209, 208 Ill.Dec. 193, 648 N.E.2d 1115(c). If a basis for jurisdiction exists under the Illinois...