Leedo Cabinetry v. James Sales & Distribution, Inc.

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 97-20820
Summary Calendar

LEEDO CABINETRY,

Plaintiff-Appellee,

VERSUS

JAMES SALES & DISTRIBUTION, INC., ET AL
Defendants,

AMERICAN KITCHEN & BATH INC. AND JAMES LANGE, Individually,

Defendants-Appellants.

Appeals from the United States District Court
for the Southern District of Texas

October 19, 1998
Before DAVIS, BENAVIDES, and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Appellants American Kitchen & Bath (AKB) and James Lange

appeal from an entry of default judgment and order denying a motion

to vacate default judgment. We affirm in part, vacate in part, and

remand.
 BACKGROUND

Leedo Cabinetry (“Leedo”) sold cabinets to James Sales &

Distribution, Inc., (“James Sales”), a wholesale distributor of

cabinets and other items. James Sales sold cabinetry to AKB, a

retailer with multiple retail outlets in Chicago and surrounding

areas. James Lange is the Chief Executive Officer of James Sales

and AKB. AKB’s home office and principal place of business is

located at 2211 North Elston, Chicago, Illinois.

Leedo sold cabinets to James Sales and shipped them to James

Sales’ warehouse at 15535 South Lathrop, Harvey, Illinois 60426,

but was never paid. On July 21, 1997, Leedo filed suit against

AKB, Lange, and James Sales seeking preliminary and permanent

injunctive relief and a writ of sequestration. On July 29, 1997,

James Sales filed for bankruptcy. Through the bankruptcy

proceedings, Southwest Financial Bank & Trust Co. obtained

possession of the cabinets as collateral for a loan to James

Sales. Thus, Leedo abandoned its attempt to sequester the

cabinets from James Sales.

Leedo served process on AKB and Lange by serving the Texas

Secretary of State under the Texas Long Arm Statute. The address

given by Leedo for AKB was for one of the satellite retail

locations at 2450 Sibley Blvd., Posen, Illinois 60469. Lange was

listed with the Illinois Secretary of State as being the

registered agent for service of process for AKB at the Sibley

Blvd, Posen address. However, AKB claims that Leedo knew that

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AKB’s home office was at the North Elston, Chicago address.

The Texas Secretary of State issued a certification of

service which indicated that return receipt was received by

“Addressee’s Agent”; nothing in the record showed that Lange was

served with process. Lange filed a sworn affidavit stating that

he never received service on behalf of AKB.

Leedo attempted service upon Lange, individually, by

requesting the Texas Secretary of State to forward process to the

James Sales location on North Lathrop in Harvey, Illinois. As a

result of the James Sales bankruptcy, the Harvey location was

vacated and locked before July 24, 1997. Thus, the Secretary of

State’s certification for Lange reflected the return receipt as

having the notation, “Forwarding Order Expired.” Lange’s home

address during this entire period of time was 17809 Park,

Lansing, Illinois 60438. Lange was never served at his home

address.

Leedo obtained a default judgment against AKB and Lange,

individually. Without conducting an evidentiary hearing, the

district court awarded Leedo $171,713.49. AKB and Lange moved to

set aside the default on the grounds that Leedo failed to perfect

service of process and challenging the amount awarded without the

court holding an evidentiary hearing. The district court denied

the motion to vacate default judgment in a one-sentence order.

AKB and Lange timely appeal.

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 ANALYSIS

I. Denial of Motion to Set Aside Default

The district court denied AKB and Lange’s motion to set

aside the default judgment under Federal Rule of Civil Procedure

60(b). We will not disturb a district court’s decision to deny

relief under Rule 60(b) “unless the denial is so unwarranted as

to constitute an abuse of discretion.” Bludworth Bond Shipyard,

Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir. 1988).

However, when a district court lacks jurisdiction over a

defendant because of lack of service of process, the default

judgment is void and must be set aside under Rule 60(b)(4). Id.

AKB and Lange argue that Leedo failed to comply with the

Texas Long Arm Statute which provides in pertinent part:

§ 17.045. Notice to Nonresident

(a) If the secretary of state is served with duplicate
copies of process for a nonresident, he shall require a
statement of the name and address of the nonresident’s
home or home office and shall immediately mail a copy
of the process to the nonresident.

Tex. Civ. Prac. & Rem. Code § 17.045(a).

A. American Kitchen & Bath

Under the Texas Long Arm Statute, Leedo had to provide the

Secretary of State the home office address of AKB. AKB maintains

that its home office is located at 2211 North Elston, Chicago,

Illinois, and that Leedo was aware of this address due to prior

dealings between Leedo’s representatives and Lange. However,

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Leedo provided the Texas Secretary of State with one of AKB’s

satellite retail locations address at Sibley Blvd., Posen,

Illinois. Leedo chose this address because AKB listed the Sibley

Blvd-Posen address with the Illinois Secretary of State as the

correct address for service of process. Additionally, the sales

agreement between Leedo and James Sales and AKB had the Sibley

Blvd-Posen address. See Plaintiff’s Original Petition, Exhibit

A. Regarding service on AKB, the Texas Secretary of State’s

certificate reflected that the certified mail return receipt bore

the signature of “Addressee’s Agent” at the Sibley Blvd-Posen

address.

The Texas Long Arm Statute provides no definition for “home”

or “home office.” See Tex. Civ. Prac. & Rem. Code §§ 17.044,

17.045 (Vernon 1997). See also Mahon v. Caldwell, Haddad,

Skaggs, Inc., 783 S.W.2d 769 (Tex. App. - Fort Worth 1990, no

writ). Although no Texas case addresses the precise issue before

the court, Mahon1 offers some guidance. In Mahon, the court held

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The Mahon court has been criticized by other Texas appellate
courts for only giving lip service to the requirement of strict
compliance with the long arm statute. See Whiskeman v. Lama, 847
S.W.2d 327 (Tex. App. - El Paso 1993, no writ); Boreham v.
Hartsell, 826 S.W.2d 193 (Tex. App. - Dallas 1992, no writ). This
is because in serving Mahon, the plaintiff alleged in its petition
that Mahon could be served “at his place of business” instead of at
his “home or home office” as required by the Texas Long Arm
statute. Despite the requirement in the statute, the Mahon court
concluded that the plaintiff need not allege that the address
provided to the Secretary of State is the “home or home office” as
long as that address is in fact the home office. See Mahon, 783
S.W.2d at 771. This aspect of the Mahon ruling is contrary to most

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inter alia that “where only one address is given in a contract as

the business address it is the `home office’ of the party using

such address.” Id. at 771. The actual address of the home

office was much clearer in Mahon as that address was the only

address to appear in all documents in the record. In this case,

the Sibley Blvd-Posen address appears in the sales contract, the

Harvey, Illinois address appears in various invoices throughout

the record as the cabinets were shipped to that address, and two

Leedo representatives met Lange at the actual home office (the

North Elston-Chicago address). Nonetheless, the Mahon court

singled out the only address given in the contract as being the

“home office” for purposes of the Long Arm Statute.

In this case, we need not rely solely on the argument that

the Sibley Blvd-Posen address was the only address to appear in

the sales agreement, because it also was the address provided by

AKB to the Illinois Secretary of State as the correct address for

service of process. We conclude that Leedo provided AKB’s home

office address for purposes of the Long Arm Statute. Even if the

Sibley Blvd-Posen address was not in fact the home office of AKB,

AKB held out the Sibley Blvd-Posen address as its home office by

registering that address with the Illinois Secretary of State and

of the case law in Texas, and does not serve as the basis for this
court’s conclusion because AKB’s challenge on appeal is not to the
allegations on the face of the complaint, but instead is to whether
the Sibley Blvd-Posen address is in fact the home office for
purposes of the long arm statute.

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by placing it as the only address in the sales agreement. We

find it disingenuous for AKB to argue otherwise. The objective

of the Texas Long Arm Statute is to provide reasonable notice of

the suit and an opportunity to be heard. See Barnes v. Frost

National Bank, 840 S.W.2d 747, 750 (Tex. App. - San Antonio 1992,

no writ). That objective has been satisfied.

Alternatively, AKB argues that this court should set aside

the default judgment under Fed. R. Civ. P. 60(b) for good cause.

See CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60 (5th

Cir. 1992). AKB maintains that good cause exists because it did

not expect that Leedo had a viable claim against it and upon

receipt of the Original Petition, Lange could have been confused

as to which company was alleged to be liable on the debt for

cabinets in the possession of James Sales. We fail to see how

this establishes good cause. Finally, AKB argues that it has a

meritorious defense because the documents appended to the

Original Petition fall short of even raising an inference that a

debt was owed to Leedo by AKB. We disagree. AKB signed the

Security Agreement. Further, AKB failed to cite any authority on

appeal or below to support the argument that it had a meritorious

defense. We find that the district court did not abuse its

discretion.

Accordingly, the denial of the motion to set aside default

judgment against AKB is affirmed.

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 B. James Lange

Under the Texas Long Arm Statute, Leedo had to provide the

Secretary of State with Lange’s home address which was 17809

Park, Lansing, Illinois 60438. Lange was never served at this

address. Leedo attempted service upon Lange, individually, by

requesting the Texas Secretary of State to forward process to the

James Sales location on North Lathrop in Harvey, Illinois. As a

result of the James Sales bankruptcy, the Harvey location was

vacated; thus, the Secretary of State’s certification for Lange

reflected the return receipt as having the notation, “Forwarding

Order Expired.”

The law makes no presumptions in favor of valid issuance,

service, and return of citation in a default judgment case. See

Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884,

885 (Tex. 1985). Here, Leedo clearly failed to comply with the

provisions of the long arm statute. The statute requires that

Lange be served at his home address in Lansing, Illinois. Leedo

admits it provided the Secretary of State with the Havey,

Illinois address to serve Lange in his individual capacity.

Unlike AKB’s “home office” address, there is no question in the

record as to Lange’s “home” address throughout this period.

Interestingly enough, attached as Exhibit E to Leedo’s Response

to the Motion to Vacate Default Judgment is a copy of the

Illinois Secretary of State record obtained by Leedo’s counsel

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prior to filing suit which was used by Leedo to show that AKB’s

address for service of process was the Sibley Blvd-Posen address.

James Lange’s home address also appears on that same document.

There appears to be no reason why Lange should have been served

at any address other than his home address in Lansing, Illinois.

Alternatively, Leedo argues that service on Lange was

effective because it complied with Tex. R. Civ. P. 108 and

106(a)(2). Assuming compliance with these rules, Leedo fails to

cite any case to support the proposition that a party’s

compliance with Texas Rules of Civil Procedure obviates the need

to comply with the long arm statute’s requirement to serve and

provide to the Secretary of State the nonresident defendant’s

home address. Moreover, Leedo’s argument is foreclosed by World

Distributors, Inc. v. Knox, 968 S.W.2d 474, 479 (Tex. App. - El

Paso 1998, no writ)(holding that Rule 108 authorizes service by

any disinterested person competent to make oath of the fact, but

that the Secretary of State is not authorized by law to serve

process).

Under the Texas Long Arm Statute, process had to be

forwarded by the Secretary of State to Lange’s home address.

Leedo failed to provide Lange’s home address to the Texas

Secretary of State, the return receipt had the notation

“Forwarding Order Expired,” and Lange provided an affidavit

attesting that he never personally received service. Under these

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circumstances, personal service cannot possibly have been

effected. Accordingly, default judgment against Lange is

reversed for failure to effect service of process, and the

judgment with respect to Lange is vacated and the case is

remanded to the district court.

II. Necessity of an Evidentiary Hearing

This court reviews a district court’s determination of

damages pursuant to a default judgment without the benefit of an

evidentiary hearing for abuse of discretion. See James v. Frame,

6 F.3d 307, 309-10 (5th Cir. 1993). In light of the foregoing,

we only address this argument with respect to the default

judgment entered against AKB.

In determining whether the district court abused its

discretion in awarding damages without benefit of an evidentiary

hearing, we received no assistance from the district court which

entered its ruling denying the motion to vacate default judgment

without explanation. To further frustrate this situation, the

appellee failed to address this point on appeal in its Appellate

Brief. Nonetheless, we cannot ignore our own case law on this

issue. We previously have explained that although the general

rule is unliquidated damages normally are not awarded without an

evidentiary hearing, that rule is subject to an exception ”where

the amount claimed is a liquidated sum or one capable of

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mathematical calculation.” Id. at 310. Here, Leedo submitted by

affidavit and supporting documents that the debt owed was in the

amount of $171,713.49. This amount was capable of mathematical

calculation. We find no abuse of discretion in the district

court’s decision to award damages without an evidentiary hearing.

AKB next challenges the amount of damages awarded by arguing

that as a matter of law it cannot be held liable for James Sales’

debt based on the documents in the record. The default judgment

conclusively established AKB’s liability. See United States v.

Shipco General, 814 F.2d 1011, 1014 (5th Cir. 1987) (holding that

a default judgment is a judgment on the merits conclusively

establishing a defendant’s liability). This is merely a back-

door attempt to challenge liability. If AKB wanted to argue

about liability it should have answered the lawsuit. The damages

award against AKB is affirmed.

AFFIRMED IN PART; VACATED IN PART; REMANDED.

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