HIGH DESERT LIVESTOCK SUPPLY AND RICHARD HIGHT v. WALTERS GATE COMPANY, INC.
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RENDERED:
AUGUST 11, 2006; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-001080-MR
And
NO. 2005-CA-001528-MR
HIGH DESERT LIVESTOCK SUPPLY
AND RICHARD HIGHT
v.
APPELLANTS
APPEALS FROM RUSSELL CIRCUIT COURT
HONORABLE VERNON MINIARD, JR., JUDGE
ACTION NO. 04-CI-00297
WALTERS GATE COMPANY, INC.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: HENRY AND SCHRODER, JUDGES; EMBERTON,1 SENIOR JUDGE.
EMBERTON, SENIOR JUDGE:
A default judgment in the amount of
$34,530.50 was entered against appellant High Desert Livestock
Supply, a Nevada company, and its owner, Richard Hight, stemming
from the failure to pay for custom metal products manufactured
in Kentucky and delivered to appellants in Nevada.
Appellants
argue that the trial court erred in failing to quash service of
1
Senior Judge Thomas D. Emberton sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution
and KRS 21.580.
process and to dismiss the complaint for lack of personal
jurisdiction over either defendant and in refusing to set aside
the default judgment entered upon appellee’s claim.
We disagree
and affirm.
Service of process was accomplished under KRS 454.210,
the Kentucky long-arm statute.
In support of their contention
that the minimum contacts requirement of that enactment had not
been satisfied, appellants rely on the following version of the
business relationship between the parties:
During a chance
meeting in Nevada, Richie Walters, owner of Walters Gate, became
acquainted with Richard Hight.
In the course of a discussion
about their respective businesses, Walters suggested the
possibility of supplying products to High Desert.
Hight
subsequently contacted Walters by telephone to discuss the
specifics of the initial order.
After engaging in one or two
additional telephone conversations, High Desert placed an order
which included feed panels, horse shelters, gates and other
livestock products.
At all times during these telephone
conversations, Hight remained in the state of Nevada.
Thereafter Walters Gate filled High Desert’s order, shipping the
requested items from Kentucky to High Desert’s business location
in Nevada.
Additional orders for similar goods were placed by
Hight, again by placing calls from Nevada to Walters Gate in
Kentucky.
Hight accepted Walters Gate’s terms on all these
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orders without negotiation and without executing written
contracts.
There appears to be no dispute that Richard Hight
ultimately visited Walters Gate’s facility in Kentucky to
determine whether Walters Gate had the capacity to manufacture
specially designed gates for High Desert.
After a verbal
agreement was reached, Walters Gate manufactured and shipped the
gates to High Desert in Nevada.
Between April 2003 and February
2004, eleven semi-truck loads of gates were shipped.
Hight paid
in full for the first nine of these shipments, invoices totaling
$163,606.
When the tenth shipment was received, Hight made a
payment of $1,500, leaving a balance due of $16,012.
No payment
was made on the invoice price of $18,518.50 on the eleventh
shipment.
In December 2004, Walters Gate instituted this action
to recover the sum of $34,530.50, the amount owing from these
two shipments.
Service of process was accomplished on High Desert and
Richard Hight on January 4 and January 10, 2005, respectively.
On February 22, 2005, before any other steps had been taken in
the case, but well after the expiration of the 20-day time limit
for answering set out in CR 12, High Desert and Hight filed
motions to quash service and to dismiss the complaint for lack
of personal jurisdiction.
After hearings, the trial judge
denied appellants’ motions and entered default judgment for
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Walters Gate, precipitating the first of these appeals.
The
second appeal stems from the trial judge’s refusal to set aside
the judgment of default.
Citing International Shoe Company v. Washington2 and
Tube Turns Division of Chemetron Corp v. Patterson Co., Inc.,3
appellants argue that subjecting them to the jurisdiction of
this Commonwealth for merely placing an order offends
“traditional notions of fair play and substantial justice”4
They
liken their situation to the that of the non-resident buyer in
Tube Turns, whose single telephone order was determined
insufficient to establish the requisite minimum contacts for
personal jurisdiction.
We are convinced, however, that the undisputed facts
of this case place it squarely within the rationale set out in
First National Bank of Louisville v. Shore Tire Co., Inc.,5 in
which this Court distinguished the situation of an isolated
purchaser from that of an out-of-state buyer who establishes a
significant on-going business relationship with an in-state
seller:
These cases do not involve an isolated
transaction as was the case in Tube Turns,
2
326 U.S. 310, 66 S.Ct. 154, 90 L.Ed.95 (1945).
3
562 S.W.2d 99 (Ky.App. 1978).
4
International Shoe, 326 U.S. at 316.
5
651 S.W.2d 472 (Ky.App. 1982).
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supra. The factual situation here is also
altogether different from that of an
individual who makes occasional purchases
from a mail order supplier. Here, we have
an on-going business relationship between
business entities doing a considerable
volume of business.
* * *
When a resident and a non-resident
business entity engage in interstate
business transactions with each other in
which the non-resident places orders with
the resident and the resident manufactures
the product and ships it to the nonresident, it is our view that each of them
have transacted business in both states.
The fact that this relationship has
continued over an extended period of time
and has involved substantial amounts of
money will, in itself, satisfy the minimum
contacts test established by International
Shoe Co. v. Washington Case, supra, unless
there is a showing of other factors which
would affect the balancing of equities and
make the exercise of jurisdiction over the
non-resident fundamentally unfair. There is
no showing of such other factors in this
record.
There seems to be no question here that
each of the appellees intentionally and
purposely availed themselves of the
opportunity and privilege of placing
business orders in Kentucky and thereby
causing a consequence in this state; the
cause of action here arises out of the
placing of those orders and the extended
business relationship and considerable
volume of business transacted provides a
substantial enough connection with this
state to make the exercise of jurisdiction
reasonable under these circumstances.
Despite appellants’ attempt to characterize the orders
placed with Walters Gate as isolated purchases, it is clear to
us that an on-going business relationship transacting a
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“considerable volume of business” had been established between
the parties.
Hight even made a trip to Kentucky to insure that
Walters Gate was capable of manufacturing certain products to
its specifications, resulting in the shipment of goods in excess
of $163,000.
We are thus convinced that appellants’ act of
“intentionally and purposely” placing significant business
orders which “caused a consequence” within this state was
sufficient to satisfy minimum contacts requirements.
On the
undisputed facts of this case, there is nothing unjust or unfair
in subjecting them to the jurisdiction of this Commonwealth to
answer litigation arising from those transactions.
Since their motions to quash service and to dismiss
were pending, appellants also argue that the trial court erred
in entering default judgment.
They cite the tolling provisions
of CR 12 as extending the time for them to answer until 10 days
after the denial of their motions, as well as local court rules
concerning the timing of hearings on motions.
The basic fallacy
in their argument lies in the fact that the motions to dismiss
for lack of personal jurisdiction and to quash service of
process were not timely filed.
In order to avail themselves of
the additional ten days for answering after the denial of their
CR 12 motions, appellants were required to file those motions
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within the time provided for responsive pleadings.6
Having
failed to do so, we find no error in the trial court’s decision
to consider the various motions filed by both sides at
approximately the same time.
Nor do we find any error in the trial judge’s refusal
to grant appellants’ motion to set aside the default judgment.
In Perry v. Central Bank & Trust Co.,7 this Court reiterated the
well-established criteria for setting aside a judgment of
default:
CR 55.02 provides that a court may set aside
a default judgment in accordance with CR
60.02 for good cause shown. Factors to
consider in deciding whether to set aside a
judgment are: (1) valid excuse for default,
(2) meritorious defense, and (3) absence of
prejudice to the other party. 7 W.
Bertelsman and K. Philipps, Kentucky
Practice,CR 55.02, comment 2 (4th ed.1984)
[hereinafter “ Ky.Prac.”].
Rather than addressing these factors, the motion to set aside
the default judgment focuses solely upon the timeliness of the
motion for default judgment.
Under these circumstances, we find
no error in the trial court’s refusal to set the default
judgment aside.
In their brief to this Court, appellants seek to
excuse their failure to timely respond by pointing solely to the
fact that they are out of state and needed additional time to
6
CR 12.01.
7
812 S.W.2d 166, 170 (Ky.App. 1991).
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obtain local counsel.
Their only attempt at advancing a
meritorious defense is the belated assertion that the quality of
the unpaid shipments was inferior.
Neither of these arguments
is persuasive.
Lack of diligence in obtaining local counsel does not
amount to good cause.
Other than stating that they reside out
of state, appellants offer absolutely no explanation as to why
this fact precluded them from obtaining counsel in a timely
manner.
Furthermore, considering the fact that they voiced no
objection to the quality of the goods received in the last two
shipments of a multi-shipment order until after the institution
of this action, their defective product complaint appears to be
less than meritorious.8
Accordingly, because we find no error in the refusal
to set aside the default judgment or in the rulings on the
motions to quash service and to dismiss the complaint, the
judgment of the Russell Circuit Court is affirmed.
ALL CONCUR.
8
See Perry, supra.
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BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Matthew B. Leveridge
Jamestown, Kentucky
David F. Smith
Russell Springs, Kentucky
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