Tareco Properties, Inc. v. Morriss, No. M2002-02950-COA-R3-CV (TN 11/18/2004)
| Decision Date | 18 November 2004 |
| Docket Number | No. M2002-02950-COA-R3-CV.,M2002-02950-COA-R3-CV. |
| Parties | TARECO PROPERTIES, INC. v. STEVE MORRISS. |
| Court | Tennessee Supreme Court |
Appeal from the Chancery Court for Williamson County; No. I-26593; R. E. Lee Davies, Chancellor.
Judgment of the Chancery Court Reversed in Part and Vacated in Part.
Jeffrey A. Greene, Daniel W. Small, Nashville, Tennessee, for the appellant, Tareco Properties, Inc.
John Konvalinka, Chattanooga, Tennessee; Roger Reid Street, Jr., Franklin, Tennessee, for the appellee, Steve Morriss.
Patricia J. Cottrell, J., delivered the opinion of the court, in which William C. Koch, JR., P.J., M.S., and Frank G. Clement, JR., J., joined.
The assignee of a judgment rendered by a federal district court in Texas attempted to enforce that judgment in Tennessee. The trial court entered an order granting summary judgment to the plaintiff and enforcing the judgment. The defendant subsequently filed a Tenn. R. Civ. P. 60 motion for relief, arguing that the judgment of the federal court was void. The trial court agreed and set aside its previous order. After the Texas federal court that had rendered the original judgment reached the opposite conclusion, the plaintiff filed a Tenn. R. Civ. P. 60 motion asking the trial court to set aside its earlier order setting aside the summary judgment enforcing the Texas judgment. The trial court denied this motion. By final order, the trial court dismissed the plaintiff's action to enforce the Texas judgment. We reverse the trial court on this issue and also vacate the order of expungement granted to Mr. Morriss related to a holding of criminal contempt.
This case began with a complaint filed in 1987 by the Tesoro Savings & Loan Association in state court in Webb County, Texas. The defendants were a real estate partnership named Gold Park Development Partnership and fifteen named individuals who were all general partners in the Gold Park entity. Steve Morriss was both a general partner and the managing partner of Gold Park.
The complaint arose from a loan that the Tesoro Bank had made to Gold Park. Mr. Morriss and the other general partners had guaranteed the loan, but had failed to repay it. The bank subsequently went into receivership, and the Federal Deposit Insurance Corporation (FDIC) took over its assets. The case was eventually restyled with the FDIC as plaintiff.
On January 17, 1992, the FDIC filed a notice of removal of the case from state court to federal court.1 On May 28, 1993, the United States District Court for the Southern District of Texas granted summary judgment to the FDIC and entered a final judgment against Gold Park and the six remaining individual defendants, holding them jointly and severally liable on the debt in the amount of $1,939,051.36 plus prejudgment interest and postjudgment interest at the rate of 3.54% per annum.
In 1999 the FDIC assigned the judgment ("1993 Texas judgment") by sale to another entity and, after other transfers, it was sold to the plaintiff in the case before us, Tareco Properties, Inc, ("Tareco") a California corporation.
Other judgments had been entered by Texas courts against Mr. Morriss stemming from failed real estate development projects. In the early 1990s, Mr. Morriss was living in California. In 1990 he met Mr. Corliss, a neighbor who was an attorney. He stated in sworn filings that in 1993,2 he hired the California law firm of his neighbor, Corliss & Geringer, to attempt to settle, resolve, or "workout" debts and several judgments that existed against Mr. Morriss, specifically including the one that is the basis of the action before us.
Mr. Morriss moved to Middle Tennessee. He became involved in a number of real estate development projects in this state and elsewhere. In a number of those projects, Mr. Geringer and Mr. Corliss, the attorneys in California, and another Californian, Mr. Pressman, among others, were also involved as investors, partners, or principals.
Problems arose in these development projects. In 1999 Mr. Morriss and others, including various entities he had created, sued Mr. Corliss, Mr. Geringer, Mr. Pressman, and others over these business enterprises in the Chancery Court of Williamson County. Other suits between these groups of parties followed, both in state and federal court. With this backdrop of litigation, the case now under appeal was begun.
In October of 1999, Tareco began collection activities against Mr. Morriss in both state and federal courts in Tennessee.3 The present complaint was filed in the Chancery Court of Williamson County and named Mr. Morriss as the sole defendant. Tareco asked the court to enforce the 1993 Texas judgment and to enjoin Mr. Morriss from transferring any property that might be available to satisfy that judgment to a third party for less than full consideration. Tareco furnished the court with a list of entities owned or controlled by Mr. Morriss, including thirteen in Texas and fifteen in Tennessee.4 The court granted Tareco the temporary restraining order it sought, followed in short order by a preliminary injunction.
Mr. Morriss responded to the complaint with motions for a protective order to prevent his deposition and for relief from judgment under Tenn. R. Civ. P. 60.02. He also answered and asserted a counterclaim against Tareco and six other parties. He asserted that the conduct of Tareco was illegal and that Tareco should be estopped from pursuing the relief it sought. He also asked the court to enjoin various parties from pursuing any of three different Texas judgments that had been rendered against him, including the one placed in issue by Tareco's complaint herein. Mr. Morriss argued that the trial court should deny full faith and credit to the 1993 Texas judgment and declare that judgment void, "at least in the hands of Tareco." The gist of all these filings was that Tareco and other parties, principally those who were involved in the pending litigation over business ventures, were conspiring to perpetrate a fraud on the court and to deprive Mr. Morriss of the financial ability to pursue his legal remedies.5 This "web of deceit," including his former lawyer's alleged use of confidential information to Mr. Morriss's detriment, formed the basis of Mr. Morriss's claim of misconduct and fraud — not any fraud in the FDIC's initial securing of the 1993 Texas judgment.
In response to a motion by Tareco and after a hearing, the trial court dismissed Mr. Morriss's motion for relief from judgment and his counterclaim. Later, on January 4, 2001, the court granted Tareco summary judgment on its request to enforce the 1993 Texas judgment. Specifically, the court held, "there is no basis in the record to support defendant's assertion that Tareco does not own the rights to the F.D.I.C. judgment on which this action is based." The court entered judgment against Mr. Morriss in favor of Tareco for $2,712,582.78.
Meanwhile, on May 8, 2000, Tareco had filed a motion for civil and/or criminal contempt. Tareco alleged that, among other violations of the court's injunction, Mr. Morriss had transferred $350,000 from a company that he controlled to a bank account in the name of his daughter, Amy Morriss.
Although the court continued the contempt hearing to give the defendant's appointed counsel time to prepare, it found that, given the nature of the case as an action on a foreign judgment, there was no just reason for delay of entry of a final judgment, notwithstanding the contempt proceedings or other collection actions. See Tenn. R. Civ. P. 54.02. Mr. Morriss did not appeal this final judgment.
The court ultimately found Mr. Morriss to be in contempt, sentenced him to ten days in jail (eight suspended), and ordered him to pay Tareco $8,400 for the fees and expenses incurred as a result of the contempt hearing. He served the two days, but the monetary penalty was apparently never paid.
Abandoning his conspiracy defense, and with new counsel,6 on June 19, 2001, Mr. Morriss filed a motion under Tenn. R. Civ. P. 60.02 to set aside the trial court's judgment of January 4, 2001. Although Mr. Morriss moved to set aside the trial court's January 4, 2001 order granting judgment on the 1993 Texas judgment, his request for relief was based on his argument that the 1993 Texas judgment was itself void.
Mr. Morriss claimed that the 1993 Texas judgment was void because he was never served with any papers in the federal litigation and, consequently, the federal court did not have personal jurisdiction over him. This was clarified to explain that he had been served with process when the suit was originally filed in state court and had filed an answer. The FDIC intervened in the state court action and removed it to federal court. Mr. Morriss claimed he was not served with any of the papers filed in federal court, including the January 17, 1992 notice of removal and the FDIC's motion for summary judgment on which the final judgment was based, and that the record did not show service on him.7
The trial court reviewed the record in the underlying federal action,8 as well as affidavits filed in support of and opposition to Mr. Morriss's motion to set aside, and found that Mr. Morriss was not represented by counsel during the relevant time period and ". . . Steve Morriss was not served with either the removal petition or motion for summary judgment and thus did not have notice of these proceedings." The court further held (1) Tennessee courts will refuse to give full faith and credit to a foreign judgment if the court entering it had no personal jurisdiction, (2) under federal law, failure to give notice of removal divests the federal court of jurisdiction, and (3) the requirements for notice of the filing of a motion for summary judgment...
To continue reading
Request your trial