Bank of Mississippi v. Knight (In Re Knight)

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________

No. 98-60523

_______________________

In The Matter Of: FREDERICK D. KNIGHT; POSIE C. KNIGHT,

Debtors,
____________________

BANK OF MISSISSIPPI,

Appellant,

versus

FREDERICK D. KNIGHT; POSIE C. KNIGHT; MALACO INCORPORATED; COUCH &
MADISON,

Appellees.

_________________________________________________________________

Appeal from the United States District Court
for the Southern District of Mississippi
_________________________________________________________________

April 13, 2000

Before KING, Chief Judge, and JONES and STEWART, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The Bank of Mississippi appeals a judgment of the

bankruptcy court, affirmed by the district court, which invalidated

the judgment lien that the Bank sought to enforce against the

debtor and two garnishees. The lower courts held that as the

Bank’s original 1988 judgment against the debtor, Frederick D.

Knight, was void for insufficient service of process, the Bank’s
1995 judgment on a suit to renew the 1988 judgment must also be

void. We disagree with the bankruptcy and district courts’

interpretation of Mississippi law and accordingly reverse and

remand.

The background facts are undisputed. In 1988, the Bank

filed suit against Knight in a Mississippi county court to recover

amounts he owed on a promissory note. At that time, Knight lived

in Alabama. The Bank served process on Mr. Knight by mail pursuant

to Mississippi Rule of Civil Procedure 4(c)(5), which requires

“restricted delivery” service.

The Bank mailed the summons and complaint to Knight’s

address in Birmingham by certified mail, return receipt requested.

Marked for “restricted delivery”, the notice was delivered to

Knight’s home but Mrs. Knight received the mail and signed the

return receipt card. Knight did not answer the complaint, and the

Bank took a default judgment on July 6, 1988.

In 1995, the Bank filed suit against Knight to renew the

1988 judgment within the period prescribed by state law. Miss.

Code Ann. § 89-5-19. Since Knight did not answer the second suit

to renew the 1988 judgment, although he was properly served, the

Bank took another default judgment against him on August 22, 1995.

Mr. and Mrs. Knight filed for bankruptcy on January 13,

1997. The Bank attempted to enforce its 1995 judgment lien, filing

an adversary proceeding for a declaration that its 1995 judgment

2
was valid and enforceable against Knight and two parties the Bank

had unsuccessfully attempted to garnish. From adverse judgments,

the Bank has appealed.

DISCUSSION

The Bank does not contest the invalidity of the 1988

judgment in this court. Instead, the Bank asserts that the 1995

judgment was valid and enforceable under Mississippi law

notwithstanding that the 1988 judgment may have been void for

insufficient service of process. We review the lower courts’

resolution of this question of law under a de novo standard.

Matter of Midland Industrial S’vces., 35 F.3d 164 (5th Cir. 1994).

Knight persuaded the bankruptcy and district courts that

the 1995 judgment must have no effect because it is based on the

void 1988 judgment, and a void judgment is a nullity which “can

furnish no basis for any subsequent action.” Southern Trucking

Service, Inc. v. Miss. Sand and Gravel, Inc., 483 So.2d 321, ____

(Miss. 1986). As an Erie-bound court, we cannot argue with

Mississippi’s law concerning the impact in its courts of void

judgments. But this does not mean that we must accept Knight’s

reading of Mississippi law. The statement in Southern Trucking,

elaborated by an earlier Mississippi Supreme Court case,1 is the

1
In Bryant v. Lovett, 97 So.2d 730, 731-32 (Miss. 1957),
the court stated,

“It was not possible, by subsequent recitals, to reaffirm the

3
core of Knight’s defense. His argument oversimplifies Mississippi

law by ignoring the state’s rules for orderly procedure.

The present case differs procedurally from Southern

Trucking and Bryant because Knight never mounted a defense to the

suit to renew the judgment. In 1995, the Bank filed a simple state

court lawsuit predicated on the 1988 judgment, pleading that the

judgment had never been paid, discharged or satisfied, and

attaching a copy of the judgment. Knight was properly made a party

to the 1995 lawsuit. Knight could have raised the alleged

invalidity of the 1988 judgment as an affirmative defense, but he

chose neither to appear nor to defend. Mississippi procedure did

not, however, afford him the luxury of inaction.

In Hertz Commercial Leasing v. Morrison, 567 So.2d 832

(Miss. 1990), the state Supreme Court held that the contractual

defense of illegality is an affirmative defense which must be pled

under the state’s procedural Rule 8(c) or it is waived. The court

then enforced a judgment founded on an illegal contractual penalty

provision precisely because the defendant had not affirmatively

pled the defense. The court’s dissenters emphasized the

significance of Hertz in terms applicable to this case:

But surely, Rule 8(c) does not obligate a court to
enforce a contract which the unfettered proof at trial
shows is against public policy and therefore void simply

validity of the final judgment. Subsequent proceedings cannot
breathe life into the prior dead [void] judgment.”

4
 because a party has failed to affirmatively plead it.
567 So.2d at 837 (Hawkins, J., dissenting).

Not only did Hertz espouse the interpretation of Rule 8(c) feared

by the dissent, but the majority also explained that, even where

illegal contracts are, like gambling contracts, void ab initio,

they are subject to the affirmative defense pleading requirement

embodied in Rule 8(c). 567 So.2d at 834-35.

Hertz also notes that Rule 8(c) expressly covers “any

other matter constituting an avoidance or affirmative defense.”

Referring to a defendant’s pleading, the court defines an

“avoidance or affirmative defense” as a response that “assumes the

plaintiff proves everything he alleges and asserts, even so, the

defendant wins.” 567 So.2d at 835.

From Hertz, two conclusions are inescapable. First, the

alleged voidness of the 1988 judgment constituted an avoidance or

affirmative defense that Knight was required to raise in defense of

the 1995 lawsuit to avoid its waiver. Second, if Knight’s position

were correct, and he need not have even responded to the second

lawsuit (after valid service), he would be in a better position

than the party who responded but failed to affirmatively plead the

void judgment; yet no reason has been advanced why Mississippi

courts would countenance this strange result, or why a defense

based on a prior void judgment should be more compelling than any

other affirmative defense, including illegality.

5
 The cases declaring a void judgment a “nullity” are

neither inconsistent with Hertz nor undermine its applicability

here. In both Bryant and Southern Trucking, the first judgment was

declared void during post-judgment collection and enforcement

proceedings in which the judgment debtor appeared to defend

himself. Although caught off guard by or not a party to errors

made in the initial lawsuit, neither defendant sat by when

collection efforts were pursued in court. As these cases do not

address what should happen when the debtor wholly fails to respond

in a subsequent suit based on the enforceability of the first

judgment, they offer no support for Knight’s attempt to ignore the

second service of summons and avoid his obligation to plead his

affirmative defense.

For the foregoing reasons, we conclude that the Bank’s

1995 judgment was valid and subsisting when Knight filed bankruptcy

and the Bank sought to enforce a judgment lien. Even if the 1988

judgment was flawed, Knight could not fail to defend himself in the

1995 lawsuit and decline to raise an affirmative defense. The

judgments of the bankruptcy and district courts that held to the

contrary are REVERSED and this case is REMANDED for further

proceedings.

6