First Management v. Topeka Investment Group

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No. 106,178

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

FIRST MANAGEMENT, INC.,
Appellee,

v.

TOPEKA INVESTMENT GROUP, LLC,
Appellant.


SYLLABUS BY THE COURT

1.
The interpretation of a statute is a question of law over which this court has
unlimited review.

2.
When interpreting a statute, this court must ascertain the legislature's intent
through the statutory language, giving ordinary words their ordinary meaning. The
fundamental rule of statutory construction is that the intent of the legislature governs if
that intent can be ascertained. When a statute is plain and unambiguous, the court will not
read into the statute something not readily found in it.

3.
Service of process is the method of formally commencing an action by giving the
defendant notice of the action in the manner prescribed by statute. The defendant
normally does not become a party to the action until served with the summons.



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4.
Procedural due process requires notice and an opportunity to be heard at a
meaningful time and in a meaningful manner.

5.
Both personal and subject matter jurisdiction are required to establish jurisdiction.

6.
If a district court lacks jurisdiction in a case, an appellate court does not acquire
jurisdiction on appeal.

7.
Without jurisdiction, a default judgment is void. A void judgment may be vacated
at any time.

8.
K.S.A. 2010 Supp. 60-304(e) provides that service of process may be
accomplished on a domestic limited liability company by: (1) serving an officer,
manager, partner, or a resident, managing or general agent; (2) leaving a copy of the
summons and petition or other document at any of its business offices with the person
having charge thereof; or (3) serving any agent authorized by appointment or by law to
receive service of process, and if the agent is one authorized by statute to receive service
and the statute so requires, by also mailing a copy to the defendant.

9.
When an employee of a limited liability company is in charge of one of its
business offices at the time of the service of process, even if not an officer of that
company, personal service on that employee is effective under K.S.A. 2010 Supp. 60-
304(e)(2).
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10.
A decision to set aside a default judgment rests within the discretion of the trial
court. This decision is subject to review under an abuse of discretion standard. Judicial
discretion is abused when no reasonable person would agree with the decision of the trial
court.

11.
A motion to set aside a default judgment will only be granted if the movant has
proven by clear and convincing evidence that (1) the nondefaulting party will not be
prejudiced by the reopening, (2) the defaulting party has a meritorious defense, and (3)
the default was not the result of inexcusable neglect or a willful act.

Appeal from Shawnee District Court; CHARLES E. ANDREWS, JR., judge. Opinion filed March 30,
2012. Affirmed.

Brenda L. Head and Randall J. Forbes, of Frieden, Unrein & Forbes, LLP, of Topeka, for
appellant.

Heather F. Shore, of Brown & Ruprecht, PC, of Kansas City, Missouri, for appellee.

Before GREENE, C.J., PIERRON and MARQUARDT, JJ.

MARQUARDT, J.: Topeka Investment Group, LLC, appeals the judgment granted to
First Management, Inc. for plumbing services First Management provided on a Holiday
Inn Express owned by Topeka Investment. We affirm.

First Management substantially completed plumbing related work at a Holiday Inn
Express for Topeka Investment on June 14, 2010. On September 23, 2010, First
Management demanded payment from Topeka Investment. Topeka Investment then
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requested some minor "punch list" work. First Management completed the "punch list"
work and again demanded payment on October 13, 2010. Topeka Investment refused to
pay First Management.

On December 6, 2010, First Management filed a petition against Topeka
Investment for "$22,583.67 together with pre- and postjudgment interest, costs; and for
such further additional relief as the Court deems just and proper," claiming unjust
enrichment and promissory estoppel. A process server appointed by the district court
served the desk clerk at the Holiday Inn Express with the summons and petition on
December 11, 2010. Topeka Investment did not file an answer to the petition, and on
January 7, 2011, First Management filed a motion for default judgment. A copy of the
motion was mailed to Topeka Investment's registered agent, Madan Rattan, at the
Holiday Inn Express address of 601 NW Highway 24, Topeka, Kansas, 66608.

On February 9, 2011, the district court granted judgment to First Management for
the principal amount requested of $22,583.67, plus $319.38 prejudgment interest.

On March 15, 2011, Topeka Investment filed a motion to set aside the judgment,
claiming that the service of process was not proper, and thus, the district court did not
have jurisdiction to enter a judgment against it. The district court denied the motion,
determining that service was proper. Topeka Investment timely appeals.

SERVICE OF PROCESS

Topeka Investment argues the district court erred when it determined that service
was proper under K.S.A. 2010 Supp. 60-304(e). The interpretation of a statute is a
question of law over which this court has unlimited review. Owen Lumber Co. v.
Chartrand, 283 Kan. 911, 915, 157 P.3d 1109 (2007).

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When interpreting a statute, this court must "ascertain the legislature's intent
through the statutory language it employs, giving ordinary words their ordinary
meaning." State v. Stallings, 284 Kan. 741, 742, 163 P.3d 1232 (2007). The fundamental
rule of statutory construction is that the intent of the legislature governs if that intent can
be ascertained. Bergstrom v. Spears Manufacturing Co., 289 Kan. 605, 607, 214 P.3d 676
(2009). When a statute is plain and unambiguous, the court will not read into the statute
something not readily found in it. Double M Constr. v. Kansas Corporation Comm'n, 288
Kan. 268, 271, 202 P.3d 7 (2009).

Proper service of process is an essential before a court may exert personal
jurisdiction over a litigant in a lawsuit. In re Estate of Pritchard, 37 Kan. App. 2d 260,
270, 154 P.3d 24 (2007). "Service of process is a method of formally commencing an
action by giving the defendant notice of the action. The person named as defendant
normally does not become a party to the action until served with the summons. . . . The
court obtains jurisdiction of the defendant through service of process." In re Marriage of
Welliver, 254 Kan. 801, 803, 869 P.2d 653 (1994).

Service of process provides notice of the lawsuit. Notice satisfies the constitutional
considerations of due process. Procedural due process requires "notice and an opportunity
to be heard at a meaningful time and in a meaningful manner." Alliance Mortgage Co. v.
Pastine, 281 Kan. 1266, 1275, 136 P.3d 457 (2006).

Jurisdiction over the defendant is acquired by issuance and service of process in
the manner prescribed by statute. Kansas Bd. of Regents v. Skinner, 267 Kan. 808, 812,
987 P.2d 1096 (1999). Both personal and subject matter jurisdiction must be present to
establish jurisdiction. Davila v. Vanderberg, 4 Kan. App. 2d 586, 588, 608 P.2d 1388
(1980).

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If a district court lacks jurisdiction, an appellate court does not acquire jurisdiction
on appeal. Harsch v. Miller, 288 Kan. 280, 200 P.3d 467 (2009). Without jurisdiction, a
default judgment is void. "A void judgment is one rendered by a court which lacked
personal or subject matter jurisdiction or acted in a manner inconsistent with due process.
[Citations omitted.] . . . A void judgment is a nullity and may be vacated at any time.
[Citation omitted.]." In re Marriage of Hampshire, 261 Kan. 854, 862, 934 P.2d 58
(1997).

Under K.S.A. 2010 Supp. 60-304(e), services of process on a domestic limited
liability company, like Topeka Investment, can be made by:

"(1) Serving an officer, manager, partner or a resident, managing or general
agent;
"(2) leaving a copy of the summons and petition or other document at any of its
business offices with the person having charge thereof; or
"(3) serving any agent authorized by appointment or by law to receive service of
process, and if the agent is one authorized by statute to receive service and the statute so
requires, by also mailing a copy to the defendant." (Emphasis added.)

"Substantial compliance with any method of serving process effects valid service
of process if the court finds that, notwithstanding some irregularity or omission, the party
served was made aware that an action or proceeding was pending in a specified court that
might affect the party or the party's status or property." K.S.A. 2010 Supp. 60-204.

A panel of this court has held that substantial compliance means compliance with
respect to the essential matters necessary to assure every reasonable objective of the
statute. Fisher v. DeCarvalho, 45 Kan. App. 2d 1133, 1147, 260 P.3d 1218 (2011). Under
Kansas law, both substantial compliance with the statutory requirements of service and
awareness of the pending action are all that is required. Sellens v. Telephone Credit
Union, 189 F.R.D. 461, 464 (D. Kan. 1999).
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On appeal, Topeka Investment argues that First Management did not properly
serve it with the summons and petition. First Management argues, and the district court
agreed, that Topeka Investment was properly served through K.S.A. 2010 Supp. 60-
304(e)(2), by leaving a copy at any of Topeka Investment's business offices "with the
person having charge thereof."

On December 11, 2010, First Management, through Hatfield Process Service,
served the petition and summons on Laura Petrie, front desk clerk at the Holiday Inn
Express at 601 NW Highway 24, Topeka, Kansas, 66608. Holiday Inn Express is located
at this address; its business is legally classified as "Topeka Investment Group, LLC,
doing business as Holiday Inn Express & Suites." Topeka Investment owns the real
property and the Holiday Inn Express franchise license for the hotel operating at this
address. In Rattan's supplemental affidavit, he states: "The correct legal classification of
the Holiday Inn Express located at 601 NW Hwy. 24, Topeka, Kansas 66608 is 'Topeka
Investment Group, LLC, doing business as Holiday Inn Express & Suites.'"

According to Rattan, Mycose Entrepreneur, Inc., and ARK Partners, LLC, share
ownership of Topeka Investment, but Mycose manages the Holiday Inn. Because Mycose
manages the Holiday Inn, Topeka Investment argues that First Management served an
employee of Mycose, not of Topeka Investment.

Topeka Investment admits that "it is clear that where a corporate employee is
personally served and it appears that the corporate employee is in charge of the business
office, service is sufficient under K.S.A. [] 60-304(e)(2)." While this issue has not been
raised in our courts, federal courts have applied the statute. In Sellens, a secretary was
served at the front desk of the office. Even though she was not in charge of the building,
she signed for the service. The service was in substantial compliance with K.S.A. 60-
304(e). 189 F.R.D. at 465. The court determined that where a corporate employee is in
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charge of an office at the time of the service, even if not a manager or officer, personal
service can be proper. We find that this also applies to a limited liability company.

Here, Petrie was in charge of the Holiday Inn front desk on December 11, 2010, at
7:03 a.m. when the process server served the petition and summons on Topeka
Investment. Topeka Investment claims that Petrie was not authorized to receive service of
process on its behalf. However, this is not necessary for effective service of process. See
Sellens, 189 F.R.D. at 465. Petrie was the person in charge of the front desk at the
Holiday Inn at the time. First Management complied with K.S.A. 2010 Supp. 60-
304(e)(2).

Also, Topeka Investment was mailed a copy of the motion for default judgment on
January 7, 2011, in care of Rattan at the Holiday Inn address. That motion was never
returned to First Management, yet Topeka Investment claims that it did not learn of the
lawsuit until March 9, 2011, when Kaw Valley Bank notified it of the request for
garnishment. Topeka Investment took no action in response to the petition or motion for
default judgment. It further claims that "[t]he only logical conclusion to draw from this
fact is either: (1) Topeka Investment Group had no knowledge that a lawsuit was
pending against it, or (2) Topeka Investment Group chose to ignore the lawsuit."

Although Petrie remembered working at the time when the process server served
the petition and summons, she did not "personally remember being served" or "what
happened to the documents." This does not lead us to the conclusion that Topeka
Investment was not aware of the pending litigation as it claims. We find that where an
employee of a limited liability company is in charge of one of its business offices at the
time of the service of process, even if not an officer of that company, personal service on
that employee is effective under K.S.A. 2010 Supp. 60-304(e)(2); therefore, service on
Topeka Investment was effected by serving Petrie at the Holiday Inn.

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DEFAULT JUDGMENT

A decision to set aside a default judgment rests within the discretion of the district
court. This decision is subject to review under an abuse of discretion standard. See
K.S.A. 2010 Supp. 60-255(b); First Nat'l Bank v. Sankey Motors, Inc., 41 Kan. App. 2d
629, 634, 204 P.3d 1167 (2009). "Generally, the trial court's decision is protected if
reasonable persons could differ upon the propriety of the decision as long as the
discretionary decision is made within and takes into account the applicable legal
standards." State v. Edgar, 281 Kan. 30, 38, 127 P.3d 986 (2006). Judicial discretion is
abused when no reasonable person would agree with the decision of the trial court.
Hoffman v. Haug, 242 Kan. 867, 873, 752 P.2d 124 (1988).

Default judgments are not favored by the law but are necessary when the inaction
of one party frustrates the administration of justice. Jenkins v. Arnold, 223 Kan. 298, 299,
573 P.2d 1013 (1978). The court may set aside a default judgment for good cause.
Reliance Insurance Companies v. Thompson-Hayward Chemical Co., 214 Kan. 110, 116,
519 P.2d 730 (1974). A motion to set aside a default judgment will only be granted if the
movant has proven by clear and convincing evidence "(1) that the nondefaulting party
will not be prejudiced by the reopening, (2) that the defaulting party has a meritorious
defense, and (3) that the default was not the result of inexcusable neglect or a willful act."
Montez v. Tonkawa Village Apartments, 215 Kan. 59, 64, 523 P.2d 351 (1974).

On appeal, Topeka Investment argues that First Management will not be harmed
by reopening this suit because First Management will merely have to prove its case. This
general statement, however, does not prove any lack of prejudice by clear and convincing
evidence. See Montez, 215 Kan. at 64.

Next, to show that it has a meritorious defense, Topeka Investment restates the
argument that the district court abused its discretion in failing to set aside the default
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judgment because it was not properly served. However, as previously discussed, First
Management properly served Topeka Investment. "[W]hen a defaulting party has shown
no meritorious defense, a trial court is precluded from granting relief." Midland Bank of
Overland Park v. Rieke, 18 Kan. App. 2d 830, 835, 861 P.2d 129 (1993).

Topeka Investment concludes by arguing that its lack of response to the lawsuit
was excusable. Generally, "a litigant should not be unnecessarily penalized for the simple
neglect of [its] agent." Montez, 215 Kan. at 64. The burden to show excusable neglect is
on the party seeking an extension of the time limitation. Excusable neglect has no clear
definition and must be determined on a case by case basis. Jenkins, 223 Kan. at 299.

Topeka Investment argues that this case "mirrors the facts in Montez," where an
apartment manager misplaced the petition and did not notify the owners. Here, Topeka
Investment ignored First Management's multiple demands for payment. First
Management properly served Topeka Investment as required by K.S.A. 2010 Supp. 60-
304(e)(2). First Management further notified Topeka Investment of the motion for default
judgment. These facts do not illustrate excusable neglect. Further, this case is unlike
Montez, where our Supreme Court readily found the other elements in favor of setting
aside a default judgment. 215 Kan. at 65-66.

Even if Topeka Investment was able to prove by clear and convincing evidence
that its failure to respond was based on excusable neglect, it has not set forth any factual
basis regarding the first two Montez requirements. Topeka Investment alleged at oral
argument that it claimed a meritorious defense to the lawsuit in its motion to set aside the
default judgment; however, the motion only stated that it "has a meritorious defense."
Notwithstanding Topeka Investment's attorney's assertion, it provided no facts to support
its broad allegation. In order to prevail, it must prove all three elements for this court to
reverse the district court's denial of the motion to set aside the default judgment. We find
no merit in Topeka Investment's appeal.
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Affirmed.