PNC BANK, N.A., F/K/A PNC BANK OF NORTHERN KENTUCKY, N.A. v. CITIZENS BANK OF NORTHERN KENTUCKY, INC.; JAMES C. BENNETT; BARBARA S. BENNETT; AND BEXAR, IV, LLC
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RENDERED:
DECEMBER 19, 2003; 2:00 p.m.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-002500-MR
PNC BANK, N.A., F/K/A
PNC BANK OF NORTHERN KENTUCKY, N.A.
v.
APPELLANT
APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE LEONARD L. KOPOWSKI, JUDGE
ACTION NO. 02-CI-00707
CITIZENS BANK OF NORTHERN
KENTUCKY, INC.; JAMES C. BENNETT;
BARBARA S. BENNETT; AND
BEXAR, IV, LLC1
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
EMBERTON, CHIEF JUDGE; JOHNSON AND KNOPF, JUDGES.
JOHNSON, JUDGE:
PNC Bank, N.A. has appealed from an order of
the Campbell Circuit Court entered on October 30, 2002, which
denied PNC Bank’s motion to vacate the default judgment and
order of sale entered against it on July 29, 2002.
1
The notice of appeal lists this company’s name as “Vexar”.
that the correct spelling of the company’s name is “Bexar”.
Having
However, we note
concluded that the trial court did not abuse its discretion in
denying PNC Bank’s motion to vacate, we affirm.
On March 26, 1993, James C. Bennett and his wife,
Barbara S. Bennett, executed a promissory note in favor of “PNC
Bank, Northern Kentucky, National Association” in the principal
amount of $62,850.00.
On the same day and in a separate
instrument, the Bennetts mortgaged certain real property owned
by them in Campbell County, Kentucky to “PNC Bank, Northern
Kentucky, National Association,” as security for the note.
The
mortgage was duly recorded in the Campbell County Clerk’s office
on April 1, 1993.
On May 27, 1995, PNC Bank, Northern Kentucky,
N.A. merged into PNC Bank, Ohio, N.A.
On December 31, 1997, PNC
Bank, Ohio, N.A. merged into PNC Bank, N.A., the appellant
herein.
PNC Bank has its national headquarters in Pittsburgh,
Pennsylvania.
On June 27, 2001, Discovery Quality Engraving, Inc.
executed a promissory note in favor of Citizens Bank of Campbell
County, Inc., n/k/a Citizens Bank of Northern Kentucky, Inc. in
the principal amount of $52,152.00.
note on behalf of Discovery.
Barbara Bennett signed this
Both of the Bennetts also signed
individual commercial guaranties to secure this note.
In
addition, the Bennetts executed a mortgage in favor of Citizens
Bank on the same real property to which PNC Bank was also a
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mortgagee.
This mortgage was duly recorded in the Campbell
County Clerk’s office on July 11, 2001.
On or around December 27, 2001, Discovery defaulted
when it stopped making payments on the note executed in favor of
Citizens Bank.2
Approximately three months later, on or around
March 15, 2002, the Bennetts filed for Chapter 7 Bankruptcy in
the United States Bankruptcy Court for the Eastern District of
Kentucky.
On May 2, 2002, the Bankruptcy Court entered an order
terminating the stay against Citizens Bank, which termination
allowed Citizens Bank to pursue a foreclosure action on the
Bennetts’ mortgaged property.
In preparation for commencing the foreclosure action
that is the subject of this appeal, Citizens Bank conducted a
title examination and discovered the mortgage executed on March
26, 1993, in favor of “PNC Bank, Northern Kentucky, National
Association.”
On May 31, 2002, Citizens Bank filed a complaint
in Campbell Circuit Court seeking to foreclose on the mortgaged
property.
Both of the Bennetts, Discovery, and “PNC Bank of
Northern Kentucky, N.A.” were named as defendants in the
complaint.
Citizens Bank named “PNC Bank of Northern Kentucky,
N.A.” in the complaint pursuant to KRS3 426.006, which requires a
2
At some point, the Bennetts, in their individual capacities, refused to pay
on the commercial guaranties signed approximately six months earlier.
3
Kentucky Revised Statutes.
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party seeking to foreclose on property to name all other parties
holding a lien on the same property.4
The court record shows that on June 4, 2002, a civil
summons and a copy of Citizens Bank’s complaint were served on
Dorothy Sawicki, the branch manager of PNC Bank’s main Northern
Kentucky branch in Fort Mitchell, Kentucky.
However, PNC Bank
failed to file an answer within 20 days of the service of the
complaint on Sawicki as required by CR5 12.01.
Hence, on July
23, 2002, Citizens Bank filed a motion for a default judgment
and order of sale against PNC Bank.
On July 29, 2002, the trial
court entered a default judgment against PNC Bank, declaring its
lien on the property “null and void.”
The trial court also
ordered the mortgaged property to be sold to satisfy the lien
held by Citizens Bank.
On August 29, 2002, the mortgaged
property was sold by the Master Commissioner of the Campbell
Circuit Court to Bexar, LLC, for $72,500.00.6
Approximately one month later, on September 25, 2002,
PNC Bank filed a motion to vacate both the default judgment
4
KRS 426.006 requires that “[t]he plaintiff in an action for enforcing a lien
on property shall state in his petition the liens held thereon by others,
making them defendants; and may ask for and obtain a judgment for a sale of
the property to satisfy all of said liens which are shown to exist, though
the defendants fail to assert their claims. Such defendants shall not,
however, be allowed to withdraw or receive any of the proceeds of such sale,
until they have shown their right thereto by answer and cross claim, which
shall be asserted as provided in the Rules of Civil Procedure.”
5
Kentucky Rules of Civil Procedure.
6
According to the record, Citizens Bank received $58,175.45 from the proceeds
of the sale.
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entered against it and the order of sale.
On October 30, 2002,
the trial court denied PNC Bank’s motion, after finding that it
had been properly served and that it was the proper party before
the court when the default judgment against it was entered.
This appeal followed.
PNC Bank has raised two claims of error in this
appeal.
First, PNC Bank claims that the trial court erred by
finding that it had been properly served in accordance with CR
4.04(5).
In particular, PNC argues that Sawicki, a local branch
manager of PNC Bank, was not a “managing agent” within the
meaning of CR 4.04(5).7
Thus, PNC Bank argues that it was not
given proper notice that Citizens Bank had commenced a
foreclosure action and that PNC Bank had been named as a
defendant in Citizens Bank’s complaint.
We disagree.
The civil rules require that service on a corporation be made on
a representative who is so integrated with the corporation that
it is reasonable to presume that the representative will know
what to do with the legal papers served on him.8
In Red Bush
7
CR 4.04(5) states that “[s]ervice shall be made upon a corporation by
serving an officer or managing agent thereof, or the chief agent in the
county wherein the action is brought, or any other agent authorized by
appointment or by law to receive service on its behalf.”
8
6 Philipps, Kentucky Practice, Rules of Civil Procedure Annotated, p. 43
(1995). See also Montclair Electronics, Inc. v. Electra/Midland Corp., 326
F.Supp. 839, 842 (D.C.N.Y. 1971) (discussing the federal counterpart to CR
4.04(5) and stating “[t]he primary purpose of the federal process rule is to
provide the defendant with notice that an action has been filed against it.
Service therefore ‘should be made upon a representative so integrated with
the organization that he will know what to do with the papers. Generally,
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Production Co. v. Hayes,9 the former Court of Appeals held that
the service of a summons on the manager of a gas pumping
facility in Johnson County, Kentucky, was sufficient service
upon the company whose headquarters were in Ashland, Kentucky.10
When asked what his duties were, the manager stated that he
“‘look[ed] after the whole thing out there; pipe line, station-anything they say for me to do.’”11
The facts of the case sub judice present an analogous
situation.
PNC Bank has conceded that “Sawicki was charged with
managing a local branch of PNC Bank, N.A.”
Hence, as was the
case in Red Bush Production Co., the service of the summons on
Sawicki was sufficient service upon PNC Bank.
It was reasonable
to presume that Sawicki, a manager of one of PNC Bank’s
branches, would know what to do with a civil summons served upon
her as bank manager.
Accordingly, PNC Bank’s argument that it
was not properly served with notice of Citizens Bank’s
foreclosure action is without merit.
service is sufficient when made upon an individual who stands in such a
position as to render it fair, reasonable and just to imply the authority on
his part to receive service’”)(quoting American Football League v. National
Football League, 27 F.R.D. 264, 269 (D.Md. 1961)).
9
277 Ky. 284, 126 S.W.2d 453 (1939).
10
Id. at 454-55.
11
Id. at 455.
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Next, PNC Bank argues that the trial court erred by
finding it was a proper party before the court.
Specifically,
PNC Bank argues:
The trial court erred by refusing to
recognize a distinction between two entirely
separate legal entities, PNC Bank, N.A., and
the now-defunct PNC Bank, Northern Kentucky,
N.A. Citizens Bank’s failure to properly
name PNC Bank, N.A., as a party defendant in
this action is reversible error, and the
[j]udgment, [o]rder of [s]ale, and [s]ale
must be set aside pursuant to [CR] 55.02 and
60.02(e).
According to PNC Bank, since PNC Bank, Northern Kentucky, N.A.
had merged into PNC Bank, N.A. between the time of the execution
of the Bennetts’ first mortgage on March 26, 1993, and the
filing of Citizens Bank’s complaint on May 31, 2002, PNC Bank
was not properly before the trial court.
PNC Bank therefore
argues that the default judgment and order of sale should have
been set aside.
Once again, we disagree with PNC Bank’s
argument.
Although default judgments are not favored, a trial
court is vested with broad discretion when considering motions
to set them aside, and an appellate court will not overturn the
trial court’s decision absent a showing that the trial court
abused its discretion.12
A party seeking to have a default
12
Howard v. Fountain, Ky.App., 749 S.W.2d 690, 692 (1988)(holding that
“[a]lthough default judgments are not favored, trial courts possess broad
discretion in considering motions to set them aside and [appellate courts]
will not disturb the exercise of that discretion absent abuse”).
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judgment set aside must show good cause; i.e., the moving party
must show “(1) a valid excuse for the default; (2) a meritorious
defense to the claim; and (3) absence of prejudice to the nondefaulting party.”13
In the case sub judice, we conclude that
the trial court did not abuse its discretion in denying PNC
Bank’s motion to set aside the default judgment entered against
it.
In Carnation Co. v. Devore,14 the former Court of
Appeals stated:
“[A] mere misnomer of a corporation
defendant in words and syllables is
immaterial, and a judgment in the action
will bind it if it is duly served with
process or appears and does not plead the
misnomer in abatement or file a plea of nul
tiel corporation, or raises the objection by
answer. The objection cannot be raised
under the general issue. It is too late to
plead misnomer of defendant corporation
after the cause has been referred, after
defendant makes default, or after
judgment.”15
In the case at bar, although Citizens Bank referred to PNC Bank
in its complaint as “PNC Bank of Northern Kentucky, N.A.”
instead of “PNC Bank, N.A.,” this minor error is insufficient
grounds for PNC Bank to avoid being bound by the default
13
Sunrise Turquoise, Inc. v. Chemical Design Co., Inc., Ky.App., 899 S.W.2d
856, 859 (1995).
14
Ky., 252 S.W.2d 860, 862 (1952)(quoting 19 C.J.S. Corporations § 1328(c)).
15
See also 62B Am.Jur.2d Process § 85 (2003) (stating that “if the defendant
has been actually served with the summons in an action, a default judgment
against him is valid although in the summons he is misnamed”).
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judgment.
As we discussed previously, PNC Bank was properly
served in accordance with CR 4.04(5).
Therefore, it was on
notice that Citizens Bank had commenced a foreclosure action on
the property in question.
Since this technical misnomer does
not constitute “a valid excuse,” PNC Bank has failed to show
“good cause” in support of its argument that the default
judgment should have been set aside.
Accordingly, we find no
abuse of discretion by the trial court in denying PNC Bank’s
motion to vacate the default judgment and order of sale.
Based on the foregoing, the order of the Campbell
Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Brian E. Chapman
Cincinnati, Ohio
John E. Lange IV
Newport, Kentucky
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