Washington Mut. Bank v. Farhat Enterprises, 97,364.

• Decision Date: 22 August 2003
• Docket Number: No. 97,364.,97,364.
• Citation: 77 P.3d 1103,2003 OK CIV APP 78
• Parties: WASHINGTON MUTUAL BANK FA, successor by merger to Bank United, Plaintiff/Appellee, v. FARHAT ENTERPRISES, INC., an Oklahoma corporation and Mumtaz H. Abbasi, individually, and Amna Paryani, Defendants/Appellants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

77 P.3d 1103

2003 OK CIV APP 78

WASHINGTON MUTUAL BANK FA, successor by merger to Bank United, Plaintiff/Appellee, v. FARHAT ENTERPRISES, INC., an Oklahoma corporation and Mumtaz H. Abbasi, individually, and Amna Paryani, Defendants/Appellants.

No. 97,364.

Court of Civil Appeals of Oklahoma, Division No. 1.

August 22, 2003.

Mitchell D. Blackburn, Conner & Winters, P.C., Oklahoma City, OK, for Plaintiff/Appellee.

Jon Epstein, Susanna G. Voegeli, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, OK, for Defendants/Appellants.

Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.

Opinion by BAY MITCHELL, Presiding Judge.

¶ 1 Plaintiff/Appellee Washington Mutual Bank FA ("WMB"), successor by merger to Bank United, loaned $1,265,000 to Defendant/Appellant Farhat Enterprises, Inc. ("Farhat") in April 2000, for the purchase of two convenience stores. As part of the transaction, the parties executed a note, mortgage, and security agreement with power of sale. Defendants/Appellants Mumtaz H. Abbasi and Amna Paryani personally guaranteed payment of the debt. After Appellants defaulted on the note and guarantees, WMB purchased the property for $540,000 pursuant to the terms of the power of sale.

¶ 2 On June 7, 2001, WMB filed a petition seeking a deficiency judgment against Farhat alleging it defaulted on its promissory note, and against Abbasi and Paryani alleging they defaulted on their guarantees to pay the debt. On June 11, 2001, the petition and summonses arrived by certified mail, return receipt requested, at Paryani's accounting firm in Irving, Texas. WMB did not restrict delivery to the addressees as required by law. Paryani and Abbasi do not reside at Paryani's accounting firm, and it is neither Farhat's registered office nor its principal place of business. At the time of the June delivery, Paryani was not at her office but in Pakistan, where she remained throughout the summer. The receptionist/secretary at Paryani's office, who is not a Farhat employee, signed each of the three return receipts.¹ Counsel for WMB mailed courtesy copies of the petition and summonses to Appellants' attorney in Dallas, Texas.²

¶ 3 After the July 2, 2001, answer deadline passed without Appellants having filed a response, the trial court entered default judgment against Appellants on July 13, 2001, in the amount of $821,262.32 plus interest. Appellants were not aware of the action against them until sometime after the trial court entered the default judgment.

¶ 4 On August 6, 2001, Appellants' first Oklahoma counsel³ entered an appearance and simultaneously filed a "Motion to Set Aside Judgment and Request for Time to Plead or Answer." In this one-sentence motion, filed without supporting brief, Appellants requested the trial court set aside the default judgment pursuant to 12 Okla. Stat. 2001 § 1031.1 and grant them twenty days to plead or answer. In their motion to set aside, Appellants did not allege defective service of process or lack of personal jurisdiction, nor did they assert any defenses to the action, not even a general denial, nor advance any counter-claims against WMB.⁴

¶ 5 At a September 14, 2001 hearing on the motion, at which the parties appeared through their respective attorneys, Appellants' counsel stated that although he personally had neither spoken to nor had any contact with either Paryani or Abbasi, Appellants' Dallas counsel had informed him they were out of the country on an emergency basis due to family problems, unable to assist counsel, and that this was the reason they had failed to respond to the petition. Appellants' counsel maintained that his lack of personal knowledge as to Paryani's and Abbasi's whereabouts prevented him from including such information in the motion to set aside judgment. He further argued while vacating the default judgment and allowing Appellants their day in court would not result in serious injustice to WMB, leaving the $821,262.32 award in place would mean certain financial ruin for Appellants. The trial court declined to vacate the default judgment nonetheless, concluding Appellants had failed to show sufficient cause to disturb it.

¶ 6 On October 3, 2001, Appellants filed a motion for new trial under 12 O.S. § 651(1), (8), and (9), in which they directly alleged for the first time the default judgment was void due to improper service and lack of personal jurisdiction. Appellants further stated Paryani had returned from Pakistan and all Appellants were ready to defend the lawsuit and assert valid defenses thereto.⁵ In response, WMB argued that through the entry of appearance by Appellants' counsel, their motion to set aside judgment, and Appellants' appearance (via their attorney) at the September 14th hearing on that motion, Appellants had made a general appearance and thus waived any purported defects in service. On January 17, 2002, after a hearing and a supplemental briefing cycle, the trial court denied Appellants' motion for new trial. This appeal of the trial court's denial of Appellants' motions to set aside judgment and for new trial ensued.

¶ 7 We review for abuse of discretion a trial court's refusal to grant both a motion to vacate default judgment and a motion for new trial. Ferguson Enterprises, Inc. v. H. Webb Enterprises, Inc., 2000 OK 78, ¶ 5, 13 P.3d 480, 482; Mooney v. Mooney, 2003 OK 51, ¶ 50, 70 P.3d 872, 881. "What constitutes abuse of discretion on the part of the trial court in refusing to set aside a default judgment is dependent upon the facts and circumstances surrounding each individual case." Wade v. Padberg, 1955 OK 116, ¶ 7, 283 P.2d 201, 203, citing Shuler v. Viger, 1924 OK 647, 229 P. 280. Because it is the policy of the law to afford every party to an action a fair opportunity to present his side of a cause, a much stronger showing of abuse of discretion must be made where a judgment has been set aside than where it has been refused, as is the case at bar. Midkiff v. Luckey, 1966 OK 49, ¶¶ 7-9, 412 P.2d 175, 177 (affirming trial court's order vacating default judgment where defendant misplaced or lost the summons and was unaware of judgment until contacted by plaintiff's attorney one month later). The trial court should always exercise its discretion so as to promote the ends of justice. Id., ¶ 6, 412 P.2d at 176, citing State Life Ins. Co. v. Liddell, 1936 OK 662, 61 P.2d 1075; see also Ferguson, ¶ 5, 13 P.3d at 482. In addition, the trial court must consider "whether substantial hardship would result from granting or refusing to grant the motion to vacate." Ferguson, ¶ 5, 13 P.3d at 482.

¶ 8 In Bailey v. Campbell, 1991 OK 67, 862 P.2d 461, the Supreme Court held:

Notice is a jurisdictional requirement and a fundamental element of due process. Due process requires adequate notice, a realistic opportunity to appear and the right to participate in a meaningful manner. The right to be heard is of little value unless a party is apprised of rights which may be affected by judicial process. Due process is violated by the mere act of exercising judicial power upon process not reasonably calculated to apprise interested parties of the pendency of an action. Lack of notice constitutes a judicial infirmity.

Id., ¶ 16, 862 P.2d at 469; see also Nelson v. Nelson, 1998 OK 10, ¶ 21, 954 P.2d 1219, 1227

. "Because litigants are entitled to a fair day in court, policy encourages actions being tried on the merits. Default judgments are not favored." Nelson, ¶ 23, 954 P.2d at 1228; see also Girkin v. Cook, 1973 OK 118, ¶ 17, 518 P.2d 45, 49; Singleton v. LePak, 1967 OK 37, ¶ 10, 425 P.2d 974, 977; Cox v. Williams, 1954 OK 269, ¶ 6, 275 P.2d 248, 249.

¶ 9 We must first consider whether WMB's attempted service on the three Appellants was defective. "Service by mail shall be accomplished by mailing a copy of the summons and petition by certified mail, return receipt requested and delivery restricted to the addressee." 12 Okla. Stat.2001 § 2004(C)(2)(b) (emphasis added). "[T]he Oklahoma Pleading Code requires substantial compliance in order for the trial court to have jurisdiction over the person of the defendant." See Graff, ¶ 20, 814 P.2d at 495. Accordingly, service by mail shall not be the basis for the entry of a default judgment unless the record contains a return receipt showing acceptance or refusal by the defendant. 12 Okla. Stat.2001 § 2004(C)(2)(c) (emphasis added).

¶ 10 In the case of a domestic corporation such as Farhat, acceptance "by any officer or by any employee of the registered office or principal place of business who is authorized to or who regularly receives certified mail" constitutes acceptance by the party addressed. 12 Okla. Stat.2001 § 2004(C)(2)(c). Although "[a] return receipt signed at such registered office or principal place of business shall be presumed to have been signed by an employee authorized to receive certified mail," if a defendant demonstrates to the trial court that the person signed the return receipt was actually unauthorized, the trial court shall set aside any default judgment against it. Id.

¶ 11 It is undisputed that Paryani's accounting firm was not Farhat's principal place of business. The secretary/receptionist was not a Farhat employee, and thus not authorized to receive certified mail on behalf of Farhat. Given that neither Paryani nor Abbasi used Paryani's accounting firm as their "dwelling house or usual place of abode," WMB's focus on the fact that the receptionist/secretary was "an adult" is misplaced. 12 Okla. Stat.2001 § 2004(C)(2)(c); see Graff, ¶ 12, 814 P.2d at 493 (holding "[a] defendant's regular place of business is not the same as his dwelling house or usual place of residence" and that service of process by personal delivery to the receptionist of defendant's place of business was wholly insufficient to confer jurisdiction over the defendant). Moreover, WMB failed to restrict delivery to the addressees as...