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In re Proceeding to Enforce Judgment Against National Partitions, Inc.

Court of Appeals of Tennessee, Knoxville

March 27, 2017

In re PROCEEDING TO ENFORCE JUDGMENT AGAINST NATIONAL PARTITIONS, INC.

          Session October 19, 2016

         Appeal from the Chancery Court for Knox County No. 187666-3 Michael W. Moyers, Chancellor

         American Plastics Technologies, Inc. (APT) and RAO Design, International, Inc. (RDI) (collectively the Plaintiffs) brought this action in the trial court seeking to enroll an Illinois judgment against National Partitions (NP). The judgment had been awarded by the Circuit Court of Cook County, Illinois. NP filed an answer questioning the jurisdiction of the Illinois court. NP coupled its answer with a counterclaim asserting that the Plaintiffs had been guilty of the initial breach of the contract. Following a hearing, the trial court decreed registration of the Illinois judgment and ultimately dismissed NP's counterclaim. NP appeals. We affirm.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

          Frederick L. Conrad, Jr., Knoxville, Tennessee, for the appellant, National Partitions, Inc.

          Bradley Block, Northbrook, Illinois, and Garrett P. Swartwood, Knoxville, Tennessee, for the appellees, American Plastics Technologies, Inc. and RAO Design International, Inc.

          Charles D. Susano, Jr., J., delivered the opinion of the court, in which D. Michael Swiney, C.J., and John W. McClarty, J., joined.

          OPINION

          CHARLES D. SUSANO, JR., JUDGE

         I.

         APT and RDI are both corporations organized under the laws of the State of Illinois, and each has its principal place of business in Illinois. According to APT, it is involved

in the business of, among other things, manufacturing equipment used to create IV bags and bottles containing sterile, pure saline and medicinal solutions. On occasion, [it] also helps customers design and/or construct either all or a portion of their factories, and supplies components for those factories.

         APT and RDI are affiliates. NP is a corporation organized under the laws of the State of Tennessee and has its principal place of business in Tennessee. The Plaintiffs assert that "[NP] supplies components used to build clean rooms - interior rooms which have minimal airborne contaminants and which are frequently used in the manufacture of sterile, pure saline and medicinal solutions."

         In June 2011, the parties entered into a contract for NP to supply the Plaintiffs with components for and assembly of a clean room and assemble the clean room in Nigeria, Africa. The terms of the contract provide the following payment terms: "Deposits per policy. Balance due at shipment." As agreed by the parties, APT paid a $60, 000 deposit to NP.

         In August 2013, after APT's project was delayed and because NP was having production problems, the parties modified the contract. The modification affected the price and delivery date of the components and the price of the installation. At some point after the modification of the contract and prior to the shipment of the components, NP demanded that APT pay the balance due immediately. APT, however, refused to pay, relying upon the terms of the contract, which recite that payment of the balance is not required until NP ships the components. Because NP refused to ship the components before the Plaintiffs paid the balance, the Plaintiffs sought the return of their $60, 000 deposit due to NP's refusal to and failure to perform.

         On September 23, 2013, because NP failed to perform under the contract or return the deposit, the Plaintiffs filed a complaint against NP for breach of contract and unjust enrichment in the Circuit Court of Cook County, Illinois. NP did not file an answer or make an appearance in that case. Accordingly, the Plaintiffs filed a motion for default judgment. On November 21, 2013, after NP failed to appear at the default hearing, the circuit court entered a judgment in favor of the Plaintiffs, awarding them $60, 000 in damages and $590.14 in costs.

          On July 11, 2014, the Plaintiffs sought to enroll their Illinois judgment in Tennessee. NP timely filed an answer objecting to enrollment of the judgment. NP attacked the judgment on the grounds that neither jurisdiction nor venue was proper in the Circuit Court of Cook County, Illinois. NP also asserted a counterclaim against the Plaintiffs, alleging that the Plaintiffs were the ones who, in fact, breached the contract and that it, NP, had suffered damages in the amount of $77, 361.31. Its claim of damages included the unpaid balance, storage fees, administrative costs, crating and uncrating fees, and lost profits.

         When the Plaintiffs did not file an answer to the counterclaim, NP filed a motion for default judgment. NP also filed a motion for summary judgment asking the court to deny entry of the Illinois judgment. It stated the following in its motion for summary judgment:

[NP] did not appear in the . . . case . . . and, therefore, has not submitted to the jurisdiction of the Circuit Court for Cook County, Illinois.
Neither jurisdiction nor venue was appropriate in the [Illinois court].
[NP] does not have an office in Illinois . . . and its main office is located [in] Tennessee.
[NP] was contacted in Tennessee by [APT] to initiate the contract underlying this litigation. . . .
The materials underlying the litigation shipped from Knox County, Tennessee. . . .
The materials were to be paid by [APT] to initiate shipment with said payment to be made at the offices of [NP] in Knox County, Tennessee.
The materials underlying this litigation were to be shipped to Nigeria.

(Paragraph numbering in original omitted.)

         Plaintiffs then filed a motion to dismiss NP's counterclaim on the basis of res judicata. In their motion to dismiss, they asserted the following:

The allegations of the [c]ounterclaim concern the same contract and the same set of operative facts as the allegations in the [c]omplaint in the Illinois [a]ction. . . . [I]n a proceeding to register and enforce a foreign judgment, "issues of fact underlying a foreign judgment may not form the basis for attacking the validity of a foreign judgment." . . . " . . . Foreign judgments are treated in the same manner as the judgment of a court of record of this state." Even a judgment this [c]ourt believes is incorrect is still entitled to full faith and credit.
[NP] may only challenge the Judgment on the same basis that it could vacate the Judgment under Tennessee Rule of Civil Procedure 60. The only such ground that [NP] has asserted is its . . . claim that the Illinois Court did not have personal jurisdiction over it. [NP] cannot contest the merits of the parties' claims in a motion made pursuant to Rule 60, and cannot do so here.
The second reason for dismissing the [c]ounterclaim is because the Uniform Enforcement of Foreign Judgments Act describes the procedure for registration of a foreign judgment; it does not provide for counterclaims whereby parties can litigate issues other than the validity of the foreign judgment. . . . [T]here is no procedure for the filing of a counterclaim at this time in this proceeding.

(Internal citations and paragraph numbering in original omitted.)

         In addition to its initial attack on the personal jurisdiction and venue of the Illinois court, NP later attacked the court's subject matter jurisdiction. It asserted that this action is transitory in nature and that only Knox County, Tennessee has jurisdiction over the cause of action. The Plaintiffs argued that, because the transaction originated in and took place in Tennessee, the cause of action in no way took place in Illinois to give it jurisdiction over the matter. Additionally, NP argued that APT's notice of its motion for default judgment was insufficient under Tennessee law, arguing that the notice was not served five days before the hearing on November 21, 2013 as required by Tennessee's Rules of Civil Procedure.

         [NP] filed a motion for summary judgment seeking to deny entry of the Illinois judgment. The court denied the motion. Subsequently, the Plaintiffs filed a motion for summary judgment asking the court to ...


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