Mid-Continent Wood Products, Inc. v. Harris

• Decision Date: 13 September 1991
• Docket Number: MID-CONTINENT,No. 89-3571,89-3571
• Citation: 936 F.2d 297
• Parties: , 19 Fed.R.Serv.3d 1406 WOOD PRODUCTS, INC., Plaintiff-Appellee, v. Lawrence A. HARRIS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 297

936 F.2d 297

60 USLW 2052, 19 Fed.R.Serv.3d 1406

MID-CONTINENT WOOD PRODUCTS, INC., Plaintiff-Appellee, v. Lawrence A. HARRIS, Defendant-Appellant.

No. 89-3571.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 13, 1990.

Decided July 3, 1991.

Rehearing and Rehearing In Banc

Denied Sept. 13, 1991.

Roger Pascal, Michael L. Brody, Patricia J. Thompson, Schiff, Hardin & Waite, Chicago, Ill., for plaintiff-appellee.

Sean M. Sullivan, Arthur F. Radke, Ross & Hardies, Chicago, Ill., for defendant-appellant.

Before COFFEY, RIPPLE, and KANNE, Circuit Judges.

COFFEY, Circuit Judge.

Lawrence A. Harris appeals the district court's order denying his Rule 60(b)(4) motion to vacate and dismiss a default judgment on the grounds of improper service of process. We reverse.

I. FACTS AND DISPOSITION BELOW

Harris Plywood, Inc. ("Harris Plywood") purchased lumber from the plaintiff, Mid-Continent Wood Products, Inc. ("Mid-Continent") on three separate occasions between May and August of 1980. When Harris Plywood failed to make any payments on the three shipments, the parties entered into negotiations in October 1980 and Harris agreed that the amount due would bear interest at the rate of fourteen percent per annum and that payments would commence within a few weeks. After Harris Plywood failed to make any payments, Mid-Continent filed suit in April 1981 for breach of contract. The parties entered into negotiations for a second time and after these discussions proved fruitless, Mid-Continent filed a motion for a default judgment. On October 28, 1981, the district court granted Mid-Continent's motion for a default judgment in Mid-Continent Wood Products, Inc. v. Harris Plywood, Inc. in the amount of $28,544.75. ¹ Instead of executing on the default judgment, Mid-Continent accepted a promissory note for the judgment amount from the defendant Lawrence Harris, President of Harris Plywood, in December of 1981. When Harris failed to pay the amount due, Mid-Continent filed this action to collect on Harris' promissory note.

Mid-Continent makes clear that (to state it mildly) it had a rather difficult time locating Harris and serving him with the complaint and summons. Initially, Mid-Continent attempted to serve Harris personally through a U.S. Marshal in December 1982. One month later on January 5, 1983, the marshal again attempted service by certified mail at Harris' place of employment, Superb Realty Corporation. ² Harris denied receipt of this mailing.

Mid-Continent states it next attempted service in May 1983 through a private process server at what was thought to be Harris' residence at 13 Secor Drive, Port Washington, New York. On two separate occasions the server attempted personal service but found no one at the address. On the third attempt, the server left the complaint and summons attached to the door of the residence, and followed this up by mailing another copy addressed to Harris at the same address.

At the request of the district court, Mid-Continent's attorney sent a letter on June 3, 1983, to the residence at 13 Secor Drive in order to notify Harris of an upcoming status hearing. A copy of this letter was also sent to Harris' counsel of record in the previous lawsuit, Samuel Panzer. Neither the letter to Harris nor the copy sent to Harris' attorney included copies of the complaint and summons. Harris' attorney contacted Mid-Continent on June 9, 1983 and proposed a settlement in which Harris would pay the entire amount due on the note in monthly installments. Mid-Continent's attorney rejected the offer and stated instead that if the full amount was not received, Mid-Continent would seek a judgment order against Harris. Nevertheless, Harris' attorney confirmed in writing Harris' intention of forwarding a check and promissory notes in partial satisfaction of the amount due under Harris' guaranty. As promised by Harris' attorney, a mailing arrived from Superb Realty, Harris' place of business, containing a check for $1,000.00 signed on behalf of Superb Realty and three notes for $1,000.00 each, also signed by agents acting on behalf of Superb Realty. On June 16, 1983, Mid-Continent's attorney again informed Harris' attorney that no settlement for less than the full amount would suffice and that if full payment was not received before the next status hearing on June 28, 1983, Mid-Continent would seek a default judgment against Harris. When no further payments were made, Mid-Continent obtained a default judgment against Harris on July 20, 1983, in the amount of $24,549.92.

After securing the judgment, Mid-Continent alleges that it attempted but was unable to locate Harris' assets for some time for purposes of executing on the judgment. Six years later, in June of 1989, Mid-Continent located certain assets of Harris' in Massachusetts and attempted to execute upon the 1983 judgment. However, on August 31, 1989, Harris filed a motion for relief in the district court pursuant to Rule 60(b)(4) of the Federal Rules of Civil Procedure ³ claiming that because service on him did not properly comply with Rule 4 of the Federal Rules of Civil Procedure, the district court lacked personal jurisdiction over him at the time of the entry of judgment in 1983 and further that he never received a copy of the complaint and summons in this action. In support of his motion, Harris offered exhibits and affidavits stating that he never resided at 13 Secor Drive, Port Washington, New York, but stated that he lived at 15 Secor Drive, Port Washington, New York in 1983. He further stated that no one at 13 Secor Drive ever brought any documents pertaining to the case to his house at 15 Secor Drive. The district court issued an opinion denying Harris' motion to vacate and dismiss the default judgment on the grounds of improper service of process on November 1, 1989. While the district court acknowledged in its opinion that service upon Harris did not strictly comply with Rule 4, it nonetheless determined that strict compliance was unnecessary because of: 1) Harris' "actual knowledge of the lawsuit" based on Harris' former attorney's negotiations with Mid-Continent; 2) Mid-Continent's diligent efforts "to obtain technically proper service upon Harris"; and 3) Harris' evasive conduct in responding to the attempts at service of process.

II. ISSUE FOR REVIEW

The issue before us is whether a district court may formulate its own test to determine whether to assert personal jurisdiction over a defendant in the absence of service of the complaint and summons in accordance with Rule 4 of the Federal Rules of Civil Procedure.

III. DISCUSSION

We review a district court's application of a legal standard de novo. Forum Corporation of North America v. Forum, Ltd., 903 F.2d 434, 438 (7th Cir.1990).

The district court found that Mid-Continent's attempted service of process on Harris did not comply with Rule 4. ⁴ The district court then proceeded to devise a three-part test and fashioned an exception to the usual requirements of strict compliance with Rule 4:

"When the cases are examined, three requirements present themselves as requisite to finding an exception to strict compliance. First, it is imperative to upholding faulty service that the defendant actually know of a lawsuit.... Second, the server must show that he duly tried to serve the defendant properly; in other words, show that more than a minimum effort was made and that the service actually made on the defendant came reasonably close to satisfying the requirements. This is often stated in terms of the plaintiff having 'substantially complied' with Rule 4's mandate.... Third, the equities of the situation must warrant an exception from the usual strict compliance requirement. Specifically, the focus here is on the conduct of the defendant in responding to the situation."

The district court determined that these three factors "point clearly toward an exception from strict compliance in this case."

Rule 4(d)(1) provides that the complaint and summons shall, with respect to an individual defendant who is not an infant or incompetent, be made:

"by delivering a copy of the summons and of the complaint to the individual personally or by leaving copies thereof at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein or by delivering a copy of the summons and of the complaint to an agent authorized by appointment or by law to receive service of process."

The Supreme Court recently addressed the issue of judicially created rules authorizing the service of process:

"We would consider it unwise for a court to make its own rule authorizing service of summons. It seems likely that Congress has been acting on the assumption that federal courts cannot add to the scope of service of summons Congress has authorized.... The strength of this long-standing assumption, and the network of statutory enactments and judicial decisions tied to it, argue strongly against devising commonlaw service of process provisions at this late date for at least two reasons. First, since Congress concededly has the power to limit service of process, circumspection is called for in going beyond what Congress has authorized. Second, as statutes and rules have always provided the measures for service, courts are inappropriate forums for deciding whether to extend them." Omni Capital International v. Rudolf Wolff & Company, Ltd., 484 U.S. 97, 108 S.Ct. 404, 412-413, 98 L.Ed.2d 415 (1987) (citations and footnotes omitted.)

This court has previously stated that a liberal construction of the rules of service of process "cannot be utilized as a substitute for the plain legal requirement as to the manner in which service of process may be had." United States v. Mollenhauer Laboratories, Inc., 267 F.2d 260, 262 (7th Cir.1959).

The district court has not cited, nor have we discovered, any cases in support of a judicially created three-part...