Diadan Holdings, Ltd v. Shawn A. Driscoll ( 2021 )

RENDERED: FEBRUARY 5, 2021; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0664-MR
DIADAN HOLDINGS, LTD APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
ACTION NO. 19-CI-002769
SHAWN A. DRISCOLL APPELLEE
OPINION
AFFIRMING
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BEFORE: CALDWELL, COMBS, AND L. THOMPSON, JUDGES.
THOMPSON, L., JUDGE: DiaDan Holdings, Ltd appeals from an order of the
Jefferson Circuit Court which denied its motion seeking summary judgment and
confirmation of a foreign judgment. Finding no error, we affirm.
FACTS AND PROCEDURAL BACKGROUND
On September 24, 2009, Appellant issued a promissory note to
Appellee Shawn A. Driscoll. The note stated that Appellee promised to pay
Appellant $10,000, plus interest. The note also stated that payments were to be
made at Appellant’s office in Halifax, Nova Scotia. Further, the note stated that it
“shall be construed in accordance with the laws of the Province of Nova Scotia and
shall be treated in all respects as a Nova Scotia contract.” Finally, the note ended
the following way: “DATED at Halifax, Nova Scotia, this 24th day of September,
2009.” On September 5, 2012, Appellant issued another promissory note to
Appellee. This one was for $38,220, plus interest. This note also stated that
payments were to be made at Appellant’s office in Nova Scotia, that it was to be a
Nova Scotia contract, and that it was to be construed pursuant to Nova Scotia laws.
It too stated that it was “DATED at Halifax, Nova Scotia.” Both notes were signed
by Appellee. Appellee claims in an affidavit contained in the record that he has
never been to Nova Scotia. He also claims that he signed the first note in
Louisville, Kentucky and the second note in Los Angeles, California. Appellee is
currently a resident of Jefferson County, Kentucky. 1
1
At the time the notes were executed, Appellee was friends with the owner of Appellant. It is
not clear from the record what kind of business Appellant is, nor is it clear that Appellant loans
people money as a regular part of its business.
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Appellee received the funds contemplated by the notes, but he made
no payments on either note. On October 18, 2016, Appellant instituted a collection
action in Nova Scotia against Appellee. Appellee accepted service of the Nova
Scotia complaint in January of 2017.2 Despite being aware of the action, Appellee
ignored it and made no appearance in the Nova Scotia action. On April 21, 2017,
Nova Scotia’s Supreme Court entered an order granting default judgment to
Appellant in the amount of $61,377.39.3
On May 6, 2019, Appellant filed a Complaint to Domesticate Foreign
Judgment in the Jefferson Circuit Court. Appellant requested that the court deem
the Nova Scotia judgment valid and enforce it against Appellee. Appellee filed an
answer in which he raised multiple defenses, including that the default judgment is
void because the Nova Scotia court lacked personal jurisdiction.
On February 14, 2020, Appellant filed a motion for summary
judgment and confirmation of the foreign judgment. Appellee responded to the
motion and again raised the issue of lack of personal jurisdiction. On May 8, 2020,
the trial court entered an order denying the motion. The court held that the Nova
2
Appellee was somewhere in the United States when he accepted service of process, but the
record is not clear as to where he was specifically.
3
This amount included the principal amount of the notes and the interest that had accrued.
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Scotia court did not have personal jurisdiction over Appellee. This appeal
followed.4
ANALYSIS
The standard of review on appeal of a summary
judgment is whether the trial court correctly found that
there were no genuine issues as to any material fact and
that the moving party was entitled to judgment as a
matter of law. . . . “The record must be viewed in a light
most favorable to the party opposing the motion for
summary judgment and all doubts are to be resolved in
his favor.” Summary “judgment is only proper where the
movant shows that the adverse party could not prevail
under any circumstances.” Consequently, summary
judgment must be granted “[o]nly when it appears
impossible for the nonmoving party to produce evidence
at trial warranting a judgment in his favor[.]”
Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996) (citations omitted). In
addition, “[t]he question of jurisdiction is ordinarily one of law, meaning that the
standard of review to be applied is [de novo].” Appalachian Regional Healthcare,
Inc. v. Coleman, 239 S.W.3d 49, 53-54 (Ky. 2007) (citations omitted).
Before we examine Appellant’s argument on appeal, we will first
discuss how a foreign judgment is enforced in Kentucky.
A copy of any foreign judgment authenticated in
accordance with the Act of Congress or the statutes of
4
Generally, an order denying a motion for summary judgment is interlocutory and not
appealable. Ford Motor Credit Co. v. Hall, 879 S.W.2d 487, 489 (Ky. App. 1994).
The exception to this rule is when the order adjudicated the issues on the merits as a matter of
law. Id. That exception applies here. The order denying Appellant’s motion for summary
judgment denied Appellant the opportunity to enforce the foreign judgment and essentially
dismissed its complaint.
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this state may be filed in the office of the clerk of any
court of competent jurisdiction of this state. The clerk
shall treat the foreign judgment in the same manner as a
judgment of any court of this state. A judgment so filed
has the same effect and is subject to the same procedures,
defenses and proceedings for reopening, vacating, or
staying as a judgment of a court of this state and may be
enforced or satisfied in like manner.
Kentucky Revised Statutes (KRS) 426.955. “In KRS 426.950 to 426.975 ‘foreign
judgment’ means any judgment, decree, or order of a court of the United States or
of any other court which is entitled to full faith and credit in this Commonwealth.”
KRS 426.950. “The law in Kentucky is that a sister state’s judgment is entitled to
full faith and credit and to registration if the judgment is valid under that state’s
own laws.” Sunrise Turquoise, Inc. v. Chemical Design Co., Inc., 899 S.W.2d 856,
857-58 (Ky. App. 1995) (citation omitted). There is no argument here that the
Canadian judgment cannot be enforced in Kentucky, and the parties agree that the
above laws regarding foreign judgments apply. To summarize, the Nova Scotia
judgment can be enforced against Appellee in Kentucky if it was valid under Nova
Scotia’s laws.
Appellant’s argument on appeal is that the trial court applied the
incorrect analysis when determining the Nova Scotia judgment was invalid for lack
of personal jurisdiction. The trial court discussed how personal jurisdiction is
obtained in Canada by citing to Morguard Investments Ltd. v. De Savoye, [1990] 3
S.C.R. 1077 (Can.), and Harbert Distressed Investment Master Fund Ltd. v.
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Calpine Canada Energy Finance II ULC, (2005) 235 N.S.R. 2d 297 (Can. N.S.
S.C.). The court then discussed Kentucky’s long-arm statute and the personal
jurisdiction rules required by the Due Process Clause of the Fourteenth
Amendment. Appellant claims that Morguard and Harbert are outdated and the
rule in Van Breda v. Village Resorts Ltd., [2012] 1 S.C.R. 572 (Can.), should be
followed. Appellant also argues that there were sufficient contacts with Nova
Scotia to satisfy due process. We disagree with Appellant and believe the trial
court made no error.
A brief history of Canada’s personal jurisdiction jurisprudence is
required. In Morguard, 3 S.C.R 1077 at ¶ 51, the Supreme Court of Canada held
that personal jurisdiction of a foreign defendant is allowed if that defendant has a
“real and substantial connection” to the jurisdiction where the case was filed. The
“real and substantial connection” test was then expanded upon by courts in Canada
and a set of factors was developed to help a court decide if there were real and
substantial connections to a jurisdiction. In Harbert, 235 N.S.R. 2d at 297 ¶ 82,
the Nova Scotia Supreme Court listed the following factors to consider when
determining real and substantial connections:
(1) The connection between the forum and the plaintiff’s
claim;
(2) The connection between the forum and the defendant;
(3) Unfairness to the defendant in assuming jurisdiction;
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(4) Unfairness to the plaintiff in not assuming
jurisdiction;
(5) The involvement of other parties to the suit;
(6) The Court’s willingness to recognize and enforce an
extra-provincial judgment rendered on the same
jurisdictional basis;
(7) Whether the case is interprovincial or international in
nature; and
(8) Comity and the standards of jurisdiction, recognition
and enforcement prevailing elsewhere.
Additionally, “none of the above factors are [sic] determinative and [] all relative
factors should be considered and weighed together.” Id. at ¶ 83.
Van Breda, supra, which Appellant argues should have been used to
make a determination, was then rendered in 2012. There, the Supreme Court of
Canada held that when considering tort actions, there are four presumptive factors
showing a connection to the jurisdiction.
[I]n a case concerning a tort, the following factors are
presumptive connecting factors that, prima facie, entitle a
court to assume jurisdiction over a dispute:
(a) the defendant is domiciled or resident in the province;
(b) the defendant carries on business in the province;
(c) the tort was committed in the province; and
(d) a contract connected with the dispute was made in the
province.
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Van Breda, supra at ¶ 90.
The presumption of jurisdiction that arises where a
recognized connecting factor . . . applies is not
irrebuttable. The burden of rebutting the presumption of
jurisdiction rests, of course, on the party challenging the
assumption of jurisdiction. That party must establish
facts which demonstrate that the presumptive connecting
factor does not point to any real relationship between the
subject matter of the litigation and the forum or points
only to a weak relationship between them.
Id. at ¶ 95.
We will begin with Appellant’s interpretation of Canadian personal
jurisdiction law. As stated above, Appellant argues that the trial court should have
used the Van Breda factors instead of the Harbert factors. This argument was not
raised before the trial court. Appellant did not mention Van Breda in any
pleadings before the Jefferson Circuit Court. In fact, Appellant relied solely on
Morguard and Harbert when making its argument for summary judgment. As this
issue was not raised below, it is not preserved for our review. “The Court of
Appeals is without authority to review issues not raised in or decided by the trial
court.” Regional Jail Authority v. Tackett, 770 S.W.2d 225, 228 (Ky. 1989)
(citations omitted); see also Shelton v. Commonwealth, 928 S.W.2d 817, 818 (Ky.
App. 1996). “[E]rrors to be considered for appellate review must be precisely
preserved and identified in the lower court.” Skaggs v. Assad, by and through
Assad, 712 S.W.2d 947, 950 (Ky. 1986) (citation omitted).
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Arguendo, even if this argument had been preserved, we find it
unpersuasive. Van Breda indicated that the four new real and substantial
connecting factors were only to be considered for tort cases. Van Breda, 1 S.C.R.
572 at ¶ 90. Appellant cites to no cases from Nova Scotia or the Supreme Court of
Canada showing that the Van Breda factors are to be used for contractual issues.
This Court’s own research into this issue also found no case law to support
Appellant’s position. We therefore conclude that the trial court’s utilization of the
Harbert factors was appropriate.
We will now apply the Harbert factors to this case. The first factor is
the connection between the forum and the plaintiff’s claim. Here, the notes state
that they are to be interpreted as Nova Scotia contracts and shall be interpreted
according to Nova Scotia law. They further provide the payments were to be made
in Nova Scotia. The notes also seem to indicate that they were executed in Nova
Scotia by the “Dated at Halifax, Nova Scotia” language. Appellant also claims that
the money came from a Nova Scotia bank, but there is no evidence in the record to
support that claim.
Next, we look at the connection between the forum and the defendant.
Appellee is a resident of Jefferson County, Kentucky, and he stated via affidavit
that he has never been to Nova Scotia. Appellee also stated via affidavit that the
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notes were executed in the United States. There is also no evidence in the record
that Appellee has ever conducted any business in Canada.
As for the third factor, the unfairness to the defendant in assuming
jurisdiction, Nova Scotia is far away from his residence, over 1,500 miles.
Additionally, the notes were executed in the United States, the money was received
in the United States, and all evidence regarding their execution would seem to be
in this country.
As for the unfairness to the plaintiff in not assuming jurisdiction, the
notes clearly contemplated any action seeking recovery would occur in Nova
Scotia.
The fifth factor, the involvement of other parties to the suit, does not
apply in this case.
As for the sixth factor, the Canadian court’s willingness to recognize
and enforce an extra-provincial judgment rendered on the same jurisdictional basis,
it is likely, based on the discussion of Canadian jurisdictional case law above, that
a Nova Scotia court would not enforce a judgment that was based on similar facts
as we have here: a contract executed outside of the jurisdiction of the enforcing
court, a defendant who has never been to the enforcing court’s jurisdiction, and a
defendant who has never conducted business in the enforcing court’s jurisdiction.
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The seventh factor, whether the case is interprovincial or
international, would weigh in Appellee’s favor as it would be very inconvenient for
Appellee to travel internationally and most of the evidence regarding these
transactions would be in the United States.
As for the eighth factor, the standards of jurisdiction, recognition, and
enforcement prevailing elsewhere, we will have to examine jurisdictional
requirements of Kentucky. In Kentucky
the proper analysis of long-arm jurisdiction over a
nonresident defendant consists of a two-step process.
First, review must proceed under KRS 454.210 to
determine if the cause of action arises from conduct or
activity of the defendant that fits into one of the statute’s
enumerated categories. If not, then in personam
jurisdiction may not be exercised. When that initial step
results in a determination that the statute is applicable, a
second step of analysis must be taken to determine if
exercising personal jurisdiction over the non-resident
defendant offends his federal due process rights.
Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 57 (Ky. 2011).
KRS 454.210, Kentucky’s long-arm jurisdiction statute, states in
pertinent part:
(2) (a) A court may exercise personal jurisdiction over a
person who acts directly or by an agent, as to a claim
arising from the person’s:
1. Transacting any business in this Commonwealth;
2. Contracting to supply services or goods in this
Commonwealth;
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3. Causing tortious injury by an act or omission in this
Commonwealth;
4. Causing tortious injury in this Commonwealth by an
act or omission outside this Commonwealth if he
regularly does or solicits business, or engages in any
other persistent course of conduct, or derives substantial
revenue from goods used or consumed or services
rendered in this Commonwealth, provided that the
tortious injury occurring in this Commonwealth arises
out of the doing or soliciting of business or a persistent
course of conduct or derivation of substantial revenue
within the Commonwealth;
5. Causing injury in this Commonwealth to any person
by breach of warranty expressly or impliedly made in the
sale of goods outside this Commonwealth when the seller
knew such person would use, consume, or be affected by,
the goods in this Commonwealth, if he also regularly
does or solicits business, or engages in any other
persistent course of conduct, or derives substantial
revenue from goods used or consumed or services
rendered in this Commonwealth;
6. Having an interest in, using, or possessing real
property in this Commonwealth, providing the claim
arises from the interest in, use of, or possession of the
real property, provided, however, that such in personam
jurisdiction shall not be imposed on a nonresident who
did not himself voluntarily institute the relationship, and
did not knowingly perform, or fail to perform, the act or
acts upon which jurisdiction is predicated;
7. Contracting to insure any person, property, or risk
located within this Commonwealth at the time of
contracting;
8. Committing sexual intercourse in this state which
intercourse causes the birth of a child when:
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a. The father or mother or both are
domiciled in this state;
b. There is a repeated pattern of intercourse
between the father and mother in this state;
or
c. Said intercourse is a tort or a crime in this
state; or
9. Making a telephone solicitation, as defined in KRS
367.46951, or a charitable solicitation as defined in KRS
367.650 via telecommunication, into the Commonwealth.
As for federal due process, in order for a court to have personal
jurisdiction over a defendant, that defendant must have minimum contacts with the
jurisdiction sufficient enough that “the maintenance of the suit does not offend
‘traditional notions of fair play and substantial justice.’” International Shoe Co. v.
State of Washington, Office of Unemployment Compensation and Placement, 326
U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945) (citations omitted).
The three-pronged test for minimum contacts . . .
requires that: (1) defendant has purposely availed itself
of the privilege of acting within the state; (2) the cause of
action must arise from defendant’s activities; and (3)
enough connections to the state must exist so that
jurisdiction would be reasonable. In terms of a due
process analysis, the defendant’s connection must be
such “that he should reasonably anticipate being haled
into court there.”
Sunrise Turquoise, 899 S.W.2d at 858 (citations omitted).
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Here, if Appellant were a resident of Kentucky and the notes had been
executed by Appellee in Nova Scotia, Appellant could not bring suit in Kentucky
against Appellee because none of the KRS 454.210 factors applies. Furthermore,
while the notes state that the contract should be construed as a Nova Scotia
contract, we do not believe that alone is sufficient to satisfy the minimum contacts
requirement of federal due process.
CONCLUSION
After examining the eight Harbert factors, Kentucky’s long-arm
statute, and federal due process, we conclude that the trial court correctly denied
Appellant’s motion for summary judgment and confirmation of the foreign
judgment. The Harbert factors determining personal jurisdiction in Nova Scotia
weigh more heavily in favor of Appellee. The only fact in Appellant’s favor is that
the notes state they are to be construed as Nova Scotia contracts. Appellee
executed the notes in the United States, has never set foot in Nova Scotia, does not
do business in Nova Scotia, and any evidence regarding the execution of the notes
would seem to be in the United States. There is no evidence in the record
regarding who drafted the notes, how Appellee acquired the notes, whether the
money was solicited by Appellee or offered by Appellant, or where the money
given to Appellee came from. Based on the foregoing, we affirm the judgment of
the Jefferson Circuit Court.
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ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Matthew F. Coogle T. Morgan Ward, Jr.
Patrick T. Eavenson Bethany A. Breetz
Louisville, Kentucky Louisville, Kentucky
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