Sit v. Engines

• Decision Date: 10 October 2013
• Docket Number: Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.,No. 110740.,110740.
• Citation: 313 P.3d 1035
• Parties: SIT, SL, Plaintiff/Appellee, v. TULSA TURBINE ENGINES AND AIRCRAFT, LLC, Gary C. Sherrill and Tracey G. Sherrill, Defendants/Appellants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

313 P.3d 1035

SIT, SL, Plaintiff/Appellee,

v.TULSA TURBINE ENGINES AND AIRCRAFT, LLC, Gary C. Sherrill and Tracey G. Sherrill, Defendants/Appellants.

No. 110740.Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.

Court of Civil Appeals of Oklahoma, Division No. 2.

Oct. 10, 2013.

Appeal from the District Court of Tulsa County, Oklahoma; Honorable Mary F. Fitzgerald, Trial Judge.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED FOR FURTHER PROCEEDINGS.

Eric R. Schelin, Frederic Dorwart, Lawyers, Tulsa, Oklahoma, for Plaintiff/Appellee.

John M. Dunn, The Law Offices of John M. Dunn, PLLC, Tulsa, Oklahoma, for Defendants/Appellants.

JANE P. WISEMAN, Judge.

¶ 1 In this action seeking recovery for breach of contract and for tortious conduct arising from the asserted breach, Defendants Tulsa Turbine Engines and Aircraft, LLC, (TTEA) and Gary and Tracey Sherrill seek review of the trial court's denial of their motion to vacate a default judgment entered against them. After review of the record and applicable law, we affirm in part and reverse in part and remand for further proceedings.

BACKGROUND

¶ 2 Plaintiff SIT, SL brought suit against Defendants on November 4, 2011, alleging that pursuant to a contract with TTEA, SIT had purchased two aircraft engines from TTEA which turned out to be “worthless.” SIT sought damages against TTEA for breach of contract in the amount of $177,855 to repair the two engines plus damages for “lost business opportunities, consequential damages and damage to goodwill.” SIT also asserted claims against TTEA for “breach of fiduciary duty,” “fraudulent inducement of contract and/or fraudulent representation,” “negligen[t] performance of contract,” “tortious breach of contract,” and “tortious interference with contract and/or prospective pecuniary advantage.” SIT sought recovery against Gary and Tracey Sherrill individually based on the theory of “alter ego” and further sought attorney fees and punitive damages against all three Defendants.

¶ 3 Service of summons was issued by certified mail to Defendants—to the Oklahoma Secretary of State as service agent for TTEA, and to the Sherrills individually at an address on South 73rd East Avenue in Tulsa. “Amy Bruce” signed for the TTEA summons, and the two certified mail letters to the Sherrills were returned marked “unclaimed unable to forward” by the U.S. Postal Service. “Jennifer Boomer,” presumably an employee in the office of SIT's counsel, mailed the certified letters and stated in her certificate on the returns of summons for the Sherrills filed on December 20, 2011, that the certified mail to them was “refused.” Docket sheet entries reflect that the summons by certified mail to Gary Sherrill was not served but was marked “return to sender, unclaimed,” and, mistakenly, that the summons by certified mail to Tracey Sherrill was not served but was “refused.”

¶ 4 On March 16, 2012, counsel for SIT mailed by regular mail to each Defendant a “Notice of Taking Default Judgment” in which SIT asserts that Defendants were each “properly served by certified mail” and had failed to answer or otherwise plead, entitling SIT to a default judgment.¹

¶ 5 Defendants retained counsel on March 26, 2012, who telephoned SIT's counsel that day to inform him that he was now representing Defendants in the case. A “limited entry of appearance” was filed by counsel for Defendants the next day, March 27, 2012. Later that day, default judgment against Defendants was entered for damages of $177,853.87 ² “related to the [e]ngines,” damages of $113,094.19 for “loss of business opportunity, consequential damages, and loss to Goodwill [ sic ],” plus attorney fees of $6,975 and costs of $255.70 accrued through January 2012, “future attorneys' fees and costs incurred ... after January 2012,” and post-judgment interest.

¶ 6 On April 3, 2012, Defendants filed a motion to vacate the default judgment, and SIT responded on April 19, 2012. On May 2, 2012, the trial court denied the motion to vacate, and Defendants appeal.

STANDARD OF REVIEW

¶ 7 We review a trial court's decision that vacates or refuses to vacate a judgment for an abuse of discretion. Ferguson Enters., Inc. v. H. Webb Enters., Inc., 2000 OK 78, ¶ 5, 13 P.3d 480, 482. “[W]hen the decision is based on an erroneous interpretation of the law, on factual findings that are unsupported by proof, or represents an unreasonable judgment in weighing relevant factors,” an abuse of discretion has occurred. Oklahoma City Zoological Trust v. State ex rel. Pub. Emps. Relations Bd., 2007 OK 21, ¶ 5, 158 P.3d 461, 464.

ANALYSIS

¶ 8 Defendants seek to vacate the default judgment pursuant to 12 O.S.2011 § 1031.1, and it is not disputed that the motion to vacate was filed within the 30–day period provided by that section. Section 1031.1(B) provides in part: “On motion of a party made not later than thirty (30) days after a judgment, decree, or appealable order prepared in conformance with Section 696.3 of this title has been filed with the court clerk, the court may correct, open, modify, or vacate the judgment, decree, or appealable order.” ³ A trial court addressing a timely motion to vacate a default judgment pursuant to this section has “very wide and extended discretion that is almost unlimited” to vacate such a judgment. Neumann v. Arrowsmith, 2007 OK 10, ¶ 9, 164 P.3d 116, 119.

¶ 9 In reviewing an order which refuses to vacate a final judgment, “the appellate court's inquiry does not focus on the underlying judgment, but rather on the correctness of the trial court's response to the motion to vacate.” Central Plastics Co. v. Barton Indus., Inc., 1991 OK 103, ¶ 2, 818 P.2d 900, 900. If it is “based on an erroneous interpretation of the law” or on factual findings unsupported by proof, the decision constitutes an abuse of discretion requiring reversal. Oklahoma City Zoological Trust, 2007 OK 21 at ¶ 5, 158 P.3d at 464. In upholding the judgment, the trial court found that the service in question “was sufficient.”

Service on the Sherrills

¶ 10 We conclude that the default judgment entered against the Sherrills is void and must be vacated for lack of valid service of process. Title 12 O.S. Supp.2008 § 2004(C)(2) provides in part: “Service by mail shall be effective on the date of receipt or if refused, on the date of refusal of the summons and petition by the defendant.” 12 O.S. Supp.2008 § 2004(C)(2)(a). It further provides: “Service by mail shall not be the basis for the entry of a default or a judgment by default unless the record contains a return receipt showing acceptance by the defendant or a returned envelope showing refusal of the process by the defendant.” 12 O.S. Supp.2008 § 2004(C)(2)(c). The certified mail envelopes to the Sherrills show they were not refused—they were returned by the U.S. Postal Service marked “unclaimed unable to forward.” Failing the statutory test mandated by § 2004(C)(2), any judgment based on this purported service is clearly invalid.

¶ 11 This point was addressed in Genoff Farms, Inc. v. Seven Oaks South, LLC, 2011 OK CIV APP 29, 249 P.3d 526, as SIT acknowledged in both its brief to the trial court in response to the motion to vacate and in its appellate brief. As stated in Genoff, “[t]hese returned envelopes marked ‘unclaimed’ do not meet the service of process requirements specified in 12 O.S. Supp. 2008 § 2004.” Id. at ¶ 22, 249 P.3d at 532. SIT tries to circumnavigate this holding by arguing that SIT “attempted to serve[ ] [the Sherrills] by mail in a manner that was reasonably calculated to reach [the Sherrills] when sent” by subsequently sending them a summons and petition by regular mail and sending them notice of intent to take default judgment, also by regular mail. As we similarly held in Genoff, we further conclude that SIT “failed to take other available reasonable steps to give notice to [the Sherrills] when the mailed notices were returned unclaimed.” Id. at ¶ 23, 249 P.3d at 532. Other than regular mail, SIT does not describe any other attempts to obtain valid service on the Sherrills, such as personal service by the Tulsa County Sheriff, by a licensed process server, or by a person specially appointed for that purpose, as contemplated by the Legislature in 12 O.S. Supp.2008 § 2004(C)(1)(a). Although SIT argues that the Sherrills “knowingly ... attempt[ed] to evade service,” nothing in the record supports this contention.

¶ 12 SIT cites Shamblin v. Beasley, 1998 OK 88, 967 P.2d 1200, for the proposition that service is not invalidated by any departure from the method of service prescribed by statute. The Supreme Court was very clear in Shamblin in its discussion of the due process standard applicable to service of process:

Service is not subject to invalidation for any departure from the mode prescribed by statute. When it is alleged that there was want of strict compliance with statutory requirements for service, the court must in every case determine whether the found departure offends the standards of due process and thus may be deemed to have deprived a party of its fundamental right to notice. Notice is a jurisdictional requirement and a sine qua non element of due process. The latter notion requires notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and to afford them an opportunity to present their objections. As the Constitution inexorably commands, no one's rights may be adversely affected in the absence of due and timely notice that affords a full and fair opportunity to defend.

Id. at ¶ 12, 967 P.2d at 1209.

¶ 13 We do not view rejection of service by unclaimed certified mail and subsequent regular mail as a “technical infirmity.” Attempting to satisfy fundamental due process requirements by regular mail without any other reasonable steps to obtain service by basic statutorily authorized means is not sufficient. We continue to follow the reasoning...