Richards v. First Union Securities, Inc., 2004AP1877.

• Decision Date: 01 June 2005
• Docket Number: No. 2004AP1877.,2004AP1877.
• Citation: 702 N.W.2d 45,2005 WI App 164,284 Wis.2d 530
• Parties: Gary RICHARDS, Plaintiff-Respondent, v. FIRST UNION SECURITIES, INC., Defendant-Appellant.
• Court: Wisconsin Court of Appeals

284 Wis.2d 530

2005 WI App 164

702 N.W.2d 45

Gary RICHARDS, Plaintiff-Respondent,¹ v. FIRST UNION SECURITIES, INC., Defendant-Appellant.

No. 2004AP1877.

Court of Appeals of Wisconsin.

Submitted on briefs April 14, 2005.

Decided June 1, 2005.

On behalf of the defendant-appellant, the cause was submitted on the briefs of Michael H. Schaalman and Robert J. Pluta of Quarles & Brady LLP, Milwaukee.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of James Bolt, New Berlin.

Before Anderson, P.J., Brown and Snyder, JJ.

¶ 1. ANDERSON, P.J.

First Union Securities, Inc.² appeals from a circuit court order denying its motion to reopen a default judgment entered in favor of Gary Richards. First Union contends that the circuit court's determination that it waived its jurisdictional defense of insufficient service of process was in error. First Union then argues that the service of process upon it was improper because Richards did not serve one of its officers, directors or managing agents nor did he serve the person in charge of the office of one of its officers, directors or managing agents. According to First Union, because service was defective, the circuit court lacked personal jurisdiction over it in the first instance and the default judgment was void. We agree with First Union and reverse the order of the circuit court.

I. Facts

¶ 2. On July 23, 2002, Richards filed an action against First Union in part to recover investment losses as the result of alleged violations of the anti-fraud sections of the Wisconsin Uniform Securities Law. The affidavit of service indicates that on July 24 the process server served First Union at its office in Brookfield. According to a subsequent affidavit of the process server, "[w]hen serving legal process on a corporate defendant it is always my practice to state the purpose of my appearance and to ask the office personnel to identify and to direct me to the individual authorized to accept service for the company ... and to confirm that individual's authority to accept service." In this case, Kim Wisniewski, a First Union employee at the Brookfield office, accepted service.

¶ 3. In September, First Union contacted Richards to inform him that there was a written agreement which required him to arbitrate his disputes. Richards consented to arbitration and First Union agreed to pay the arbitration filing fee. In addition, Richards agreed to an extension of time for First Union to answer or otherwise respond to the complaint. First Union failed to tender the arbitration filing fee or to file an answer. On October 29, Richards sent a letter to First Union stating that the court had issued a notice of dismissal and that if the arbitration fee was not paid by November 5, the offer to arbitrate would be withdrawn and the lawsuit would proceed. On November 12, Richards filed a motion for default judgment for failure to answer. The court entered default judgment against First Union.

¶ 4. One year later, on November 13, 2003, Richards sent a letter demanding payment of the judgment. When First Union failed to pay the amount owed, Richards began garnishment proceedings. First Union filed an answer to the garnishment on February 9, 2004, and a motion to reopen the default judgment on February 25 based in part on its claim of insufficient service of process.

¶ 5. After submitting its motion, First Union filed the affidavits of Wisniewski, the employee who accepted service, and Ronald McGrath, the branch manager of the Brookfield office. In her affidavit, Wisniewski stated that she was in charge of the back office operations in the Brookfield office. She explained that this meant she was "responsible for making sure that the brokers in the Brookfield office properly fill out the forms to complete transactions for their customers in compliance with the rules and policies of the firm." She further averred that she was not an officer, director or managing agent of First Union; she was not in charge of the Brookfield office and had never told anyone that she was in charge; and she was not authorized to accept complaints filed against the brokers of the firm. McGrath stated that while he was the branch manager of the Brookfield office, he was not an officer, director or managing agent of First Union. He stated that there are no officers, directors or managing agents of First Union in Wisconsin and that there are no employees otherwise authorized to accept service of process in the state. He explained that First Union is a Delaware corporation having its principal place of business in Virginia and its registered agent in the state is CSC-Layers Incorporating Service Company in Madison. He further averred that he was the person in charge of the Brookfield office.

¶ 6. The circuit court heard arguments on First Union's motion in April 2004. In a written decision, the circuit court denied the motion. The court wrote "the record clearly reflects that defects in personal service were waived."

II. Standard of Review

¶ 7. Granting, and granting relief from, a default judgment rests within the circuit court's discretion. Split Rock Hardwoods, Inc. v. Lumber Liquidators, Inc., 2002 WI 66, ¶ 63, 253 Wis. 2d 238, 646 N.W.2d 19; Holman v. Family Health Plan, 227 Wis. 2d 478, 483, 596 N.W.2d 358 (1999). "A circuit court properly exercises its discretion when it considers the relevant facts, applies the correct law, and articulates a reasonable basis for its decision." National Auto Truckstops, Inc. v. DOT, 2003 WI 95, ¶ 12, 263 Wis. 2d 649, 665 N.W.2d 198. If the circuit court decision involves a question of law, "we review the question of law de novo and reverse if the exercise of discretion is based on an error of law." Paige K.B. v. Steven G.B., 226 Wis. 2d 210, 225, 594 N.W.2d 370 (1999) (citations omitted).

¶ 8. "The service of a summons in a manner prescribed by statute is a condition precedent to a valid exercise of personal jurisdiction ...." Danielson v. Brody Seating Co., 71 Wis. 2d 424, 429, 238 N.W.2d 531 (1976). "Whether service of a summons is sufficient to obtain personal jurisdiction over a defendant involves the interpretation and application of a statute to undisputed facts and is reviewed as a question of law." Useni v. Boudron, 2003 WI App 98, ¶ 8, 264 Wis. 2d 783, 662 N.W.2d 672. The party seeking to vacate judgment has the burden of proving lack of effective service. Haselow v. Gauthier, 212 Wis. 2d 580, 587, 569 N.W.2d 97 (Ct. App. 1997).

III. Discussion

¶ 9. First Union maintains that the circuit court's refusal to vacate the default judgment and dismiss Richards' action was in error. As a preliminary matter, First Union challenges the circuit court's determination that it waived its defense of lack of personal jurisdiction. First Union then argues that based on the facts of record, Richards' service of process upon it was not in compliance with the statutory rules governing service on a foreign corporation. Thus, according to First Union, the circuit court lacked personal jurisdiction over it and the default judgment was void.

A. Waiver

¶ 10. The circuit court concluded that First Union waived the right to object to a lack of personal jurisdiction for want of proper service of process. It is difficult to discern from the record why the circuit court came to this conclusion and Richards does not argue this point on appeal.

¶ 11. As explained, proper service of a summons and complaint is required to confer personal jurisdiction on the court over the person served. Useni, 264 Wis. 2d 783, ¶ 12. Personal jurisdiction and a party's waiver of jurisdictional defenses are controlled by statute. Sacotte v. Ideal-Werk Krug & Priester Machinen-Fabrik, 119 Wis. 2d 14, 16, 349 N.W.2d 701 (Ct. App. 1984),aff'd,121 Wis. 2d 401, 359 N.W.2d 393 (1984); see also WIS. STAT. §§ 801.11 and 802.06(8) (2003-04).³ Section 802.06(8) provides that objections to personal jurisdiction are waived only if omitted from § 802.06 motions or the responsive pleadings. Sec. 802.06(8); see also Honeycrest Farms, Inc. v. A.O. Smith Corp., 169 Wis. 2d 596, 601-02, 486 N.W.2d 539 (Ct. App. 1992). Here, First Union did not file any motions or answers prior to the entry of the default judgment. Thus, in its motion to vacate the default judgment, its first action before the court in this case, First Union properly raised its jurisdictional defense. See Useni, 264 Wis. 2d 783, ¶ 12 (holding that a defendant who raised the issue of lack of personal jurisdiction for insufficient service of process in a motion submitted after default judgment was entered did not waive the right to object to lack of personal jurisdiction). Accordingly, we refuse to base our decision on any purported waiver of objections to personal jurisdiction.

B. Sufficiency of Service of Process

¶ 12. WISCONSIN STAT. §§ 180.0504(1) and 801.11(5)(a) specify, respectively, that a plaintiff may invoke personal jurisdiction over a foreign corporation by serving the corporation's registered agent or

[b]y personally serving the summons upon an officer, director or managing agent of the corporation or limited liability company either within or without this state. In lieu of delivering the copy of the summons to the officer specified, the copy may be left in the office of such officer, director or managing agent with the person who is apparently in charge of the office.

Richards did not exercise the option of serving First Union's registered agent. The dispute in this case is whether Richards' presentation of the summons and complaint to Wisniewski complied with either the direct personal delivery service option or the alternative service option.⁴

1. Personal Delivery Service Option

¶ 13. First Union argued before the circuit court, as it does here, that Wisniewski was not an officer, director or managing agent of First Union and therefore Richards' presentation of the summons and complaint to her failed the direct...