Nielsen v. Knight Indus.

• Docket Number: 23-AP-202
• Decision Date: 15 December 2023
• Parties: Heather Nielsen* & Nicholas Nielsen* v. Knight Industries, Inc.
• Court: Vermont Supreme Court

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Heather Nielsen^* & Nicholas Nielsen^*
v.
Knight Industries, Inc.

No. 23-AP-202

Supreme Court of Vermont

December 15, 2023

In the case title, an asterisk (*) indicates an appellant and a double asterisk (**) indicates a cross-appellant. Decisions of a three-justice panel are not to be considered as precedent before any tribunal.

APPEALED FROM: Superior Court, Rutland Unit, Civil Division CASE NO. 21-CV-03322 Trial Judge: Megan J. Shafritz

ENTRY ORDER

PAUL L. REIBER, CHIEF JUSTICE

In the above-entitled cause, the Clerk will enter:

Plaintiffs appeal from the trial court's summary-judgment decision in defendant's favor. They argue that a dispute of material fact exists as to whether defendant was properly served with plaintiffs' original summons and complaint. We affirm.

Plaintiffs, who live in New York, entered into a contract for kitchen cabinets with defendant, a Vermont company. Plaintiffs obtained a default judgment against "Knight Kitchens, Inc." in New York State in June 2020. They then sought to domesticate their judgment in Vermont against "Knight Industries, Inc." Both parties moved for summary judgment and the court granted defendant's request.

The trial court recognized that "[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." Lakeside Equip. Corp, v. Town of Chester, 173 Vt. 317, 321 (2002) (quotation omitted). A "defendant has the heavy burden of undermining" another state's judgment, which is presumptively valid. Hall v. McCormick, 154 Vt. 592, 595 (1990). A defendant may defeat enforcement of default judgment "in another forum by showing that the judgment was issued by a court lacking personal jurisdiction," and "(i]n determining jurisdiction, the foreign State's law, as limited by due process, controls." Lakeside Equip. Corp,, 173 Vt. at 321-22 (quotation omitted).

Defendant argued that the New York court lacked personal jurisdiction over it because it was not properly served with the original summons and complaint under New York law. It

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maintained that the defective service rendered the default judgment void. Plaintiffs asserted that service had been properly made.

The trial court explained that, under New York law, "[p]ersonal service upon a [domestic or foreign] corporation . . . shall be made by delivering the summons ... to an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service." N.Y. C.P.L.R. § 311(a)(1) (McKinney 2023). The commentary to the rule explains that "the general rule ... is that the process server must tender process directly to an authorized corporate representative," and "[d]elivery to an unauthorized person who later hands the process to an officer, managing agent, or some other qualified representative is ineffective." Vincent C. Alexander, Supplemental Pract. Commentaries, N.Y. C.P.L.R. § 311, at C31L1 (McKinney 2013). New York courts require more than actual or constructive notice of a lawsuit for service to be effective. See, e.g., Macchia v. Russo, 496 N.E.2d 680, 682 (N.Y. 1986) ("Notice received by means other than those authorized by statute does not bring a defendant within the jurisdiction of the court."); DeZego v. Bruhn, 472 N.Y.S.2d 414, 416 (App. Div. 1984) ("Although appellant clearly received actual notice of the suit, such notice does not cure defective service since notice received by means other than those authorized by statute cannot serve to bring a defendant within the jurisdiction of the court." (quotation omitted)).

Defendant maintained that the undisputed facts showed that it was not served in compliance with N.Y. C.P.L.R. § 311(a)(1) because the summons and complaint were delivered to a salesperson, Steve Bankert, rather than to defendant's executives or agents, and Mr. Bankert was not authorized to receive service on behalf of the corporation. Defendant submitted a statement from Mr. Bankert in support of its motion. Plaintiffs argued that Mr. Bankert was defendant's agent and authorized to accept service and that defendant's controller acknowledged having received the complaint shortly after it was provided to Mr. Bankert.

The court agreed with defendant that service was defective and that the New York court therefore lacked jurisdiction over defendant at the time of its judgment order. It found that plaintiffs failed to present any admissible evidence to challenge defendant's version of events. Defendant presented evidence to show that in October 2018, a deputy sheriff from the Rutland County Sheriffs Department served a summons and complaint on Mr. Bankert at defendant's office in North Clarendon, Vermont. Mr. Bankert was the only person at the office that day. The deputy sheriff handed Mr. Bankert a package containing the summons and complaint but did not tell Mr. Bankert what was in the package. The deputy did not ask Mr. Bankert if he was authorized to accept service on defendant's behalf nor did she ask who at the company was authorized to accept service. Mr. Bankert did not tell the deputy that he could accept service or tell her whom to serve. Mr. Bankert did not know what was inside the package and did not...