Myers v. Brown
| Decision Date | 07 June 1983 |
| Docket Number | No. 548-81,548-81 |
| Citation | 143 Vt. 159,465 A.2d 254 |
| Court | Vermont Supreme Court |
| Parties | Rodney E. MYERS and Corrine V. Myers v. Leon H. BROWN and Beverly J. Brown and Auto-Tune, Inc. |
Robert W. Eastman and Neil D. Wheelwright of Latham, Eastman, Schweyer & Tetzlaff, Burlington, for plaintiffs-appellees.
Perry & Schmucker, South Burlington, for defendant-appellant Auto-Tune, Inc.
Before BILLINGS, C.J., and HILL, UNDERWOOD, PECK and GIBSON, JJ.
This is an appeal by defendant, Auto-Tune, Inc., from a denial of a motion for relief from default judgment, pursuant to V.R.C.P. 60(b)(6). The issue presented is whether a party who has actual knowledge of a lawsuit against him, but who has been improperly served with process, may take no action in defense of the lawsuit, allow a default judgment to be entered against him, and then seek to have that judgment set aside by bringing a motion for relief under V.R.C.P. 60(b)(6). Defendant argues that, in refusing to disturb the default judgment, the trial court either withheld its discretion or exercised it unreasonably, and thus seeks our reversal. Miller v. Ladd, 140 Vt. 293, 297-98, 437 A.2d 1105, 1108 (1981).
After a full evidentiary hearing on the defendant's Rule 60(b) motion, the trial court found the following facts. On July 2, 1976, Rodney and Corrine Myers, plaintiffs-appellees, leased commercial property at 4 Main Street, Winooski, Vermont, to Leon and Beverly Brown, defendants below, who ran an auto repair business on the premises. The lease was drafted by Russell F. Niquette, Jr., Esquire, and although the Browns maintain that Attorney Niquette acted at all times as their lawyer in this matter, the evidence indicates that the plaintiffs were frequently under the impression that Attorney Niquette was representing them as well. The lease was for a term of five years, and contained a purchase option. The lease further prohibited subletting or assignment without the prior written consent of the lessors, with the following exception:
[T]he Lessees shall have the right to assign this lease without the written consent of the Lessors at any time during the term hereof to a corporation formed by the Lessees, and with at least one Lessee as an officer for the purpose of doing the business engaged in by the Lessees, except that the within Lessees shall remain at all times individually responsible for all payments in default of said assignee.
On August 20, 1979, the Browns executed an Assignment of Lease to Auto-Tune, Inc., a Vermont corporation which they had formed a short time prior to this assignment. In the Articles of Incorporation filed with the Secretary of State's Office in August of 1979, Attorney Niquette was listed as the corporation's registered agent, and Mr. and Mrs. Brown as president and vice president, its only officers. On behalf of the Browns, Attorney Niquette sent a copy of this assignment to plaintiffs in early September, 1979. Mr. Myers replied to Attorney Niquette as follows: "As per our phone conversation this day I will take your word as my attorney--this transaction does not alter my original lease with Mr. Brown. / s/ Rod."
Shortly thereafter, on October 1, 1979, Mr. and Mrs. Brown resigned as officers of Auto-Tune, Inc., and sold all corporate stock to Attorney Niquette and his brother, who took over as sole officers and directors. From conflicting evidence, the trial court found that plaintiffs received no written notice from defendants concerning this change in ownership, and that the corporation filed no papers with the Secretary of State's Office reflecting the change. At all relevant times, however, Attorney Niquette remained listed as the corporation's registered agent.
On February 28, 1980, an attorney newly retained to represent plaintiffs mailed a letter addressed separately to Auto-Tune, Inc., Leon H. and Beverly J. Brown, and Russell Niquette, Jr., Esq., notifying them on behalf of plaintiffs to vacate the leased Winooski premises. The letter cited four breaches of the lease: nonpayment of rent; nonpayment of taxes as required by the lease; property damage; and failure to maintain the premises. On March 12, 1980, Attorney Niquette responded by letter stating, inter alia, "that the corporation denies all averments and expects the Myers to continue to honor their commitments under the lease." This letter, written on Attorney Niquette's law office stationery, was signed simply "Russell F. Niquette, Jr."
On March 18, 1980, Attorney Niquette wrote Mr. Myers as follows:
Dear Rod:
Please be advised that the listing agreement dated December 5, 1979, wherein authority to sell the stock of Auto-Tune Inc., is hereby withdrawn and cancelled. Randy and I plan on retaining ownership of the stock in the Corporation.
/s/Russell F. Niquette, Jr.
Attorney Niquette testified that this letter followed several months of discussion, first regarding the sale of Auto-Tune stock by the Browns to the Niquettes, and then of a potential further sale of the stock by the Niquettes. Thus, he argues this letter sufficiently indicates the Myers' awareness of the change in ownership and control of the corporation. However, according to Myers' testimony, he believed Attorney Niquette was negotiating the stock sale on behalf of the Browns, and maintained that plaintiffs had neither actual nor constructive notice that Attorney Niquette had purchased the corporation.
On June 11, 1980, plaintiffs instituted an eviction action against the Browns and Auto-Tune, Inc. On June 30, 1980, service was made upon the Browns individually, and upon Mr. Brown as president of Auto-Tune, Inc. Attorney Niquette was not served, nor was any other officer, director or agent of the corporation. Both parties agree that within a few days of accepting such service, Brown called Attorney Niquette and informed him that he, his wife, and the corporation had been served with an eviction complaint. No appearances, motions, answers or other responsive pleadings were filed by any of the defendants within the time permitted by V.R.C.P. 12, and default judgments were entered against all defendants in September of 1980.
Attorney Niquette testified at the hearing on the Rule 60 motion as a witness for the corporation. An excerpt of his direct examination indicates why the corporation waited until after judgment to raise any jurisdictional objections:
In December of that year Attorney Niquette was served, on behalf of the corporation, with a writ of possession and ejectment arising out of the default. At that point he timely filed a motion on behalf of Auto-Tune, Inc., seeking relief from judgment pursuant to V.R.C.P. 60(b)(6), and alleging that service upon the corporation had not been made in accordance with V.R.C.P. 4(d)(7). The court denied the motion, concluding that under the circumstances service upon Brown as prior corporate president, combined with Attorney Niquette's actual knowledge of such service as present owner, officer, director and registered agent, was sufficient to bestow jurisdiction over the corporation.
On appeal, defendant argues that V.R.C.P. 4(d)(7) sets out very specifically how service of process is to be made upon a domestic corporation, to wit: "by delivering a copy of the summons and of the complaint to an officer, a director, a managing or general agent, a superintendent, or to any other agent authorized by appointment or by law to receive service of process ...." Moreover, he urges, a corporation "is entitled to insist that actions against it in our courts be instituted according to the prescriptions of the applicable statute ...." Berry v. Arnoldware-Rogers, Inc., 127 Vt. 188, 191, 243 A.2d 781, 783 (1968). Thus, he concludes, since no service was made upon a present officer, director or other agent authorized to receive process, the trial court never acquired jurisdiction over the defendant corporation; as such, its default judgment against Auto-Tune, Inc., must be declared void as a matter of law.
We agree that since Brown was no longer an officer or director of Auto-Tune, Inc., service upon him was insufficient to bind...
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