United Nat. Bank v. Searles

• Decision Date: 25 March 1982
• Docket Number: No. 13503,13503
• Citation: 331 N.W.2d 288
• Parties: UNITED NATIONAL BANK, Viborg, South Dakota, A National Banking Corporation, Plaintiff and Appellee, v. Jeff SEARLES, Defendant and Appellant. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 288

331 N.W.2d 288

UNITED NATIONAL BANK, Viborg, South Dakota, A National Banking Corporation, Plaintiff and Appellee, v. Jeff SEARLES, Defendant and Appellant.

No. 13503.

Supreme Court of South Dakota.

Considered on Briefs March 25, 1982.

Decided March 23, 1983.

Charles D. Gullickson of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for plaintiff and appellee; Sara Richardson, Davenport, Evans, Hurwitz & Smith, Sioux Falls, on the brief.

Kathleen J. Armstrong of Marmet & Armstrong, Centerville, for defendant and appellant.

HENDERSON, Justice.

ACTION

Appellee, by its complaint, sought an in personam judgment of $26,461.61, possession of secured personal property, foreclosure of liens, sale of personal property, a deficiency judgment and costs. From a default judgment in the amount of $10,405.86 entered in favor of appellee, appellant motioned to vacate this judgment which motion was denied. Appellant takes this appeal attacking the jurisdiction of the trial court to enter the deficiency judgment. Finding his appeal meritorious, we reverse and remand.

FACTS

Appellee, United National Bank, on March 26, 1979, commenced an action against appellant, Jeff Searles, to recover on two defaulted promissory notes and to foreclose the security interests on appellant's truck and backhoe which secured the notes. Appellant's truck was titled in South Dakota, and appellant had stated in one of the security agreements that the backhoe was to be kept in South Dakota. Summons was issued; however, the Turner County Sheriff was unable to find appellant and make service. While attempting to discover appellant's whereabouts, the Sheriff obtained information that appellant had moved to Missouri.

Appellee's attorney thereupon requested service on appellant by publication. As part of appellee's request, an affidavit of the Sheriff was included which set forth that after due diligence, appellant could not be located. On April 16, 1979, the circuit court ordered that service by publication be made and that copies of the summons and complaint be mailed to appellant in care of appellant's father, who resided in South Dakota.

Service by publication began on April 26, 1979, and ran until May 17, 1979. Approximately two weeks within securing an Order For Publication, and at the approximate time of the first publication, appellee discovered appellant's Missouri address. Appellee then repossessed the backhoe and truck in Missouri and thereafter sold them. However, the proceeds did not cover the amount due on the notes. Appellant did not pursue the deficiency judgment request until one year after the sale of this property. Default judgment for the deficiency was entered by the trial court on November 17, 1980. Appellee never pursued its remedies of foreclosure under its complaint.

On the 23rd of February, 1981, appellant specially appeared to vacate the default judgment. A hearing was had on March 23, 1981, and on May 6, 1981, the trial court entered an order denying appellant's motion.

CONTROLLING ISSUE

Although the parties hereto treat five separate, identical issues in their briefs, there is but one controlling issue. A ruling thereon is dispositive of this appeal. Upon the facts herein, was the default judgment properly entered based upon constructive service of process? We hold that it was not.

DECISION

This action pertains to the question of whether a defendant domiciled in another state may be subject to the in personam jurisdiction of the State of South Dakota. Essentially, there are two aspects to this question. The first aspect is the out-of-state defendant's amenability to suit. This is a jurisdictional question that deals with the power of a South Dakota court to exercise in personam jurisdiction over an out-of-state defendant. Critical to the resolution of jurisdictional matters is an inquiry into the applicability of South Dakota's long-arm statute, SDCL 15-7-2, and South Dakota's service of process statutes, SDCL ch. 15-9.

The second aspect of this question deals with procedural due process. The focus here is on the manner of service of process. Dispositive of the due process issue is a determination of whether or not the service of process was reasonably calculated under the circumstances to apprise interested parties of the pendency of an action against them. Mullane v. Central Hanover Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865, 873 (1950); Milliken v. Meyer, 311 U.S. 457, 61 S.Ct. 339, 85 L.Ed. 278 (1940); Grannis v. Ordean, 234 U.S. 385, 34 S.Ct. 779, 58 L.Ed. 1363 (1914); Priest v. Las Vegas, 232 U.S. 604, 34 S.Ct. 443, 58 L.Ed. 751 (1914); Roller v. Holly, 176 U.S. 398, 20 S.Ct. 410, 44 L.Ed. 520 (1900); Ventling v. Kraft, 83 S.D. 465, 466, 161 N.W.2d 29, 29 (1968) (wherein the Court held: "The single question to be decided is whether the asserted personal jurisdiction over the defendant violated the due process clause ...."); Uhlich v. Hilton Mobile Homes, 80 S.D. 478, 126 N.W.2d 813 (1964).

Appellant, in his brief, admits that he is not challenging the application of South Dakota's long-arm statute. Rather, appellant attacks the service of process and asserts a lack of due process. As such, we shall forego an examination of this state's long-arm statute, and direct our attention to the service of process issue and procedural due process.

SDCL 15-9-7 ¹ provides for constructive service by publication when a defendant cannot be found within South Dakota. Appellant questions the applicability of SDCL 15-9-7 to in personam actions against nonresidents. At the outset, it is to be noted that the use of constructive servie for in personam actions is not a per se violation of due process under the Fourteenth Amendment. Mullane, 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865. In South Dakota, constructive service by publication on a resident corporation that cannot be located within the State, has long been held to provide in personam jurisdiction. Straub v. Lyman Land & Inv. Co., 31 S.D. 571, 141 N.W. 979 (1913); see also, 62 Am.Jur.2d Process Sec. 69 (1972); Annot., 126 A.L.R. 1475 (1940).

Additionally, our statutes specifically provide that a nonresident who is involved in an automobile collision in South Dakota is subject to in personam jurisdiction and constructive service of process. SDCL 15-7-6. Likewise, nonresident hunters, SDCL 15-7-13; aircraft operators, SDCL 15-7-9; divorce litigants, SDCL 15-9-8; and absconding debtors, SDCL 15-9-13 are subject to in personam South Dakota jurisdiction and constructive service of process. This is a significant expansion over the language contained in Cone v. Ballard, 68 S.D. 593, 5 N.W.2d 46 (1942), which was a non-in personam setting.

Unfortunately for appellee, appellant does not fit within any of the above-listed categories or the provisions of SDCL 15-9-8 to 15-9-15. Therefore, South Dakota's in personam jurisdiction did not properly attach to appellant and the default judgment is void. Even if appellant did meet the technical service of process criteria, appellee's actions would offend due process safeguards. Appellee discovered appellant's address during the pendency of the service by publication. Armed with the necessary information to obtain personal service of process on appellant in Missouri, appellee chose not to and thereby obtained a default judgment against appellant.

Conduct such as appellee's was addressed cogently in Schroeder v. City of New York, 371 U.S. 208, 212-13, 83 S.Ct. 279, 282, 9 L.Ed.2d 255, 259 (1962):

As was emphasized in Mullane, the requirement that parties be notified of proceedings affecting their legally protected interests is obviously a vital corollary to one of the most fundamental requisites of due process--the right to be heard. "This right ... has little reality or worth unless one is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest." 339 U.S., at 314

The general rule that emerges from the Mullane case is that notice by publication is not enough with respect to a person whose name and address are known or very easily ascertainable and whose legally protected interests are directly affected by the proceedings in question.

In light of the clear directives from Mullane and Schroeder, when a party litigant discovers the address of an out-of-state defendant before or during the pendency of service by publication of notice, that party litigant must then attempt to obtain personal service of process to secure in personam jurisdiction over defendant.

As we held in Ryken v. State, 305 N.W.2d 393 (S.D.1981), before service by publication under SDCL 15-9-7 may be ordered, the party instituting the litigation must exhaust all reasonable means available in an effort to locate interested parties to the litigation. Clearly, a legally sufficient, due diligent search should have the purpose of generating information. If some of that information is developed and bears fruit only after service by publication has been initiated, party litigants are not free to seek haven under or within the framework of a former state of facts.

Appellee's duty to apprise appellant, the interested party, did not evaporate once it had conducted a search which comported with the "due diligence" standards in light of its discovery as to the actual whereabouts of appellant. Appellee owed a duty to put this additional information to use, rather than restricting its view to hopes of obtaining a default judgment by publication.

Therefore, we reverse and remand the decision of the lower court with directions to vacate the default judgment entered below, appellant to recover costs herein.

Reversed and remanded.

DUNN and MORGAN, JJ., concur.

FOSHEIM, C.J., and WOLLMAN, J., concur in result.

FOSHEIM, Chief Justice, concurring in result.

It appears undisputed that this is an action in personam. Appellant resides in Missouri. Service was had on appellant by publication in a...