Court Opinion

ID: 9379401
Source: CourtListenerOpinion
Date Created: 2023-03-15 16:06:47.557416+00
Date Added: 2024-06-11T17:15:59.138601
License: Public Domain

J-A28019-22

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

 CONTINENTAL MACHINERY                  :    IN THE SUPERIOR COURT OF
 COMPANY, INC.                          :         PENNSYLVANIA
                                        :
                                        :
              v.                        :
                                        :
                                        :
 SCOTT H. KORN                          :
                                        :    No. 1490 EDA 2022
                   Appellant            :

               Appeal from the Order Entered May 10, 2022
   In the Court of Common Pleas of Montgomery County Civil Division at
                           No(s): 2021-17235

BEFORE: PANELLA, P.J., LAZARUS, J., and SULLIVAN, J.

MEMORANDUM BY LAZARUS, J.:                         FILED MARCH 15, 2023

     Scott H. Korn appeals from the order, entered in the Court of Common

Pleas of Montgomery County, denying his motion to vacate a foreign

judgment. After careful review, we affirm.

     The trial court summarized the factual and procedural history as follows:

     [Korn] is the President and Chairman of the Board of Directors of
     Bengal Paper and Converting, a Pennsylvania corporation, which
     has its principal place of business in Linfield, Montgomery County,
     Pennsylvania.      On November 1, 2016, Bengal [Paper and
     Converting] entered into a Service Agreement with [Continental
     Machinery Company, Inc. (Continental)] for remediation work
     performed at the facilities in Linfield. The parties to the Service
     Agreement were [Korn,] Continental[,] and Bengal Paper and
     Converting.

     As part of the Service Agreement, the parties agreed that the laws
     of the State of Texas would control, and that venue would be
     “Dallas County Courthouse, Dallas, Texas.” [Service Agreement,
     11/16/16, at 1.] Korn signed the Service Agreement as Chairman
     of Bengal Paper and Converting, although he “did not read the
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     [Service] Agreement carefully before he signed it because . . . he
     wanted the work to begin immediately.”

     Continental was not paid for the work it performed pursuant to
     the Service Agreement. Continental initially filed, then withdrew,
     a writ of summons in Montgomery County, Pennsylvania[,]
     against Korn individually[,] and Bengal Converting[,] LLC.
     Continental then filed a similar suit in Dallas County, Texas[,]
     seeking to recover $346,155.39 plus interest. Thereafter, Korn
     removed the case to the United States District Court, Northern
     District of Texas, Dallas Division[,] on the basis of diversity
     jurisdiction.

     After removal to federal court, Korn filed three [m]otions to
     [d]ismiss alleging insufficient service of process, lack of personal
     jurisdiction[,] and failure to state a cause of action. He also filed
     a [m]otion to [t]ransfer [v]enue. The [m]otions were referred to
     the United States Magistrate Judge for findings and
     recommendations.

     Korn argued through counsel that although he signed the Service
     Agreement as the Chairman of Bengal Paper and Converting,
     [which was] a fictitious company name, he was “acting in a
     representative capacity for the true principal[].     Thus[,] he
     contend[ed] that he cannot be sued in his individual capacity for
     violation of the Service Agreement.” Additionally, Korn sought a
     forum non conveniens transfer of the matter to Pennsylvania.
     Continental responded that Korn waived his right to remove the
     case to federal court when he agreed to the Service Agreement’s
     forum selection clause[,] which selected the forum to be Dallas,
     Texas.

     The United States Magistrate Judge first addressed Texas’
     personal jurisdiction [over] Korn. Finding that Texas’ long-arm
     statute “extends as far as constitutional due process allows,” the
     [c]ourt examined whether Texas’ exercise of jurisdiction is
     consistent with due process under the United States Constitution.
     Korn argued that the Texas Courts lacked personal jurisdiction
     because:

        1. Korn signed the Service Agreement as an agent and not
        in his individual capacity; and,

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         2. Korn has not had the requisite minimum contacts with
         the State of Texas necessary to find that the exercise of
         personal jurisdiction over him would comport with the
         traditional notions of fair play and substantial justice.

      [Continental Machinery Company, Inc. v. Korn, Case No.
      3:19-CV-769-L, “Findings, Conclusions, and Recommendation of
      the United States Magistrate Judge and Order Denying Motion to
      Transfer Venue,” 1/16/20, at 9; see also Continental
      Machinery Company, Inc. v. Korn, Case No. 3:19-CV-769-L,
      Memorandum Order, 1/31/20, at 1 (adopting Magistrate’s
      Findings, Conclusions and Recommendation, 1/16/20).]

      The [Magistrate] determined that Bengal Paper and Converting
      was not registered as a fictitious name, trade name, or legal name
      with the Pennsylvania Bureau of Corporations, despite the
      requirement to do so pursuant to the Pennsylvania Fictitious Name
      Act (54 Pa.C.S.A. § 303(b)(1)). Further, the Magistrate []
      determined that[,] pursuant to the choice-of-law provision of the
      Service Agreement, disputes . . . under the Service Agreement
      were to be governed by Texas law. Texas law requires that an
      agent, to avoid personal liability, disclose not only the fact that he
      is acting in a representative capacity, but also the identity of his
      true principal. The [Magistrate] determined that Korn failed to
      disclose that he was acting in a representative capacity for [Bengal
      Paper and Converting] and that he failed to disclose the identity
      of the true principal. Thus, the [Magistrate] determined that Korn
      was personally liable for disputes arising under the Service
      Agreement.

      The [c]ourt also held that Korn “submitted to jurisdiction in Texas
      under the Service Agreement’s forum selection clause.” The
      [c]ourt found Korn did not meet “his substantial burden of
      rebutting the presumptive validity of the forum selection
      clause[,]” and by signing the Service Agreement[,] he “consented
      to jurisdiction in Texas or waived the requirements for personal
      jurisdiction in Texas.” The federal Magistrate [] determined that
      Texas had personal jurisdiction over Korn.

Trial Court Opinion, 7/18/22, at 1-4 (italics added).

      Ultimately, the Magistrate determined that the case was appropriate for

remand to the Texas courts. On January 31, 2020, the United States District

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Court for the Northern District of Texas, Dallas Division, adopted the

Magistrate’s findings.   See Continental Machinery Company, Inc., v.

Korn, Case No. 3:19-CV-769-L, Memorandum Order, 1/31/20, at 1. Korn

appealed to the United States Court of Appeals for the Fifth Circuit. The Fifth

Circuit dismissed the appeal and made final the district court’s order on

January 31, 2020. Continental Machinery Company, Inc., v. Korn, Case

No. 20-10154, Order Dismissing Appeal, 6/29/20, at 1.          The matter was

remanded to the 162nd District Court of the State of Texas, Dallas County. On

February 12, 2021, a final default judgment was entered against Korn in the

amount of $705,319.12, plus attorney fees.

      On September 15, 2021, Korn filed a motion for an order vacating the

foreign judgment in Montgomery County, Pennsylvania. On October 18, 2021,

Continental filed a response. On May 10, 2022, the trial court issued an order

denying Korn’s motion to vacate the foreign judgment.

      Korn filed a timely notice of appeal to this Court, and both Korn and the

trial court complied with Pa.R.A.P. 1925. Korn now raises the following claims

on appeal:

      [1.] Did the trial court commit an error of law by determining that
      Texas had personal jurisdiction over [] Korn solely on the basis
      that a Texas court ruled on the merits, without analyzing whether
      the Texas court’s determination as to personal jurisdiction was
      correct?

      [2.] Did the trial court commit an error of law by denying [] Korn’s
      [m]otion to [v]acate the [f]oreign [j]udgment when the foreign
      judgment was entered against [] Korn personally, [] Korn
      undisputedly lacked minimum contacts with Texas, and the

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      contract giving rise to Texas jurisdiction was signed by [] Korn in
      a representative capacity only?

      [3.] In the event this Court cannot determine that the Texas
      [j]udgment was rendered in error, did the trial court commit an
      error of law by ruling on the [m]otion to [v]acate the [f]oreign
      [j]udgment without developing a factual record as to whether []
      Korn consented to personal jurisdiction in Texas?

Brief for Appellant, at 4.

      We review the denial of a motion to vacate a foreign judgment for an

abuse of discretion or error of law. Olympus Corp. v. Canady, 962 A.2d

671, 673-74 (Pa. Super. 2008). The United States Constitution requires that

“Full Faith and Credit shall be given in each State to the public Acts, Records,

and judicial Proceedings of every other State.”      U.S. Const. art. IV, § 1.

Congress codified the full faith and credit clause by enacting the Full Faith and

Credit Act, 28 U.S.C. § 1738 (2014) (enacted June 24, 1948), which provides

that judgments “shall have the same full faith and credit in every court within

the United States and its Territories and Possessions as they have by law or

usage in the courts of such State, Territory[,] or Possession from which they

are taken.” Id.

      As explained by the United States Supreme Court,

      [t]he very purpose of the full-faith and credit clause was to alter
      the status of the several states as independent foreign
      sovereignties, each free to ignore obligations created under the
      laws or by the judicial proceedings of the others, and to make
      them integral parts of a single nation throughout which a remedy
      upon a just obligation might be demanded as of right, irrespective
      of the state of its origin.

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Milwaukee Cnty. v. M.E. White Co., 296 U.S. 268, 276-77 (1935). Thus,

the Full Faith and Credit Act mandates that “all courts . . . treat a state court

judgment with the same respect that it would receive in the courts of the

rendering state.” Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367,

373 (1996).

      “When a judgment of one of the United States is transferred to another

state, the full faith and credit clause prevents courts of the transferee state

from addressing the merits of the decision that forms the basis of the

judgment.” Capstone Cap. Grp., LLC v. Alexander Perry, Inc., 263 A.3d

1178, 1182 (Pa. Super. 2021). Judgments of our sister states are “entitled to

full faith and credit in Pennsylvania so long as there was jurisdiction by the

court [that] originally awarded the judgment and the defendant had the

opportunity to appear and defend.”      Noetzel v. Glasgow, Inc., 487 A.2d

1372, 1375 (Pa. Super. 1985) (internal citations omitted).

      “A judgment is not valid and enforceable, however, unless the sister

state court that entered the judgment had personal jurisdiction over the

defendant and afforded him or her due process of law.” Frontier Leasing

Corp. v. Shah, 931 A.2d 676, 679 (Pa. Super. 2007) (citations omitted).

“Personal jurisdiction can be established by consent of the parties; when such

consent is established, the famous [‘]minimum contacts[’] framework

developed by the United States Supreme Court in International Shoe Co. v.

Washington, 326 U.S. 310 (1945), is inapplicable.” Frontier Leasing, 931

A.2d at 680.

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      Predictably, all three of Korn’s claims address personal jurisdiction, the

crux of this matter. Consequently, we address all of them together. Korn

contends that the trial court erred in “simply deferring to the ruling of the

Texas Federal Court.” Brief for Appellant, at 21. In particular, Korn argues

that the Texas judgment must be vacated because Texas lacked personal

jurisdiction over him because Korn signed the Agreement in a purely

representative capacity. See id. at 22-28. Additionally, Korn asserts that the

“incorrect entity” listed in the Agreement has no bearing on the jurisdictional

analysis. Id. at 28-31. Further, Korn argues that the trial court erred by not

engaging in fact-finding prior to denying his motion to vacate the foreign

judgment. Id. at 32. Korn essentially contends that, under Pennsylvania law,

our trial courts are required to revisit the issue of personal jurisdiction in every

case where a prevailing party seeks to enforce a foreign judgment.              We

disagree.

      In addressing these claims, the trial court stated:

      In his [m]otion for an [o]rder to [v]acate the [f]oreign
      [j]udgment, Korn did not allege any irregularities in the
      proceeding before the federal court or upon remand to the 162nd
      Judicial District, Dallas County, Texas. Rather, he argued that the
      domesticated Texas judgment should be vacated because the
      Texas state court lacked personal jurisdiction over him. The
      procedural history of the case demonstrates that Korn’s due
      process rights were not violated and that the determination of the
      issue of Texas’ personal jurisdiction was made on the merits.
      Upon remand to the Texas state court, a [f]inal [j]udgment was
      entered in the matter. No irregularities of either proceeding were
      alleged and[,] therefore, this [c]ourt must give full faith and credit
      to the Texas judgment.

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     As previously noted, Korn removed the underlying matter to
     federal court[,] where he was represented by counsel[,] and
     presented his arguments as to Texas’[s] lack of personal
     jurisdiction to the United States Magistrate Judge in the Northern
     District of Texas.      The Magistrate Judge considered Korn’s
     arguments and evidence (and those of Continental regarding the
     appropriateness of personal jurisdiction), and recommended to
     the U[.]S[.] District Court that Texas had personal jurisdiction
     over Korn pursuant to Texas’[s] long-arm statute where[:] (1)
     Korn failed to disclose that he was acting in a representative
     capacity for [Bengal Paper and Converting], an unregistered
     fictitious name[;] and (2) where he failed to disclose the identity
     of the true principal. Korn failed to perfect his appeal before the
     United States Fifth Circuit regarding the District Court’s adoption
     of the Magistrate Judge’s recommendations, rendering the
     January 31, 2020 [o]rder a final order.

     Korn had a full and fair opportunity to litigate the issue of personal
     jurisdiction in Texas before the Magistrate Judge, and later had
     the opportunity to appeal adoption of the recommendations by the
     U[.]S[.] District Court to the United States Fifth Circuit Court of
     Appeals. Korn’s appeal was abandoned, and the determination of
     personal jurisdiction and the ensuing remand to the Texas state
     court [became] final.

     On remand, the 162nd District Court of the State of Texas, Dallas
     County, entered a final judgment against Korn. Thereafter,
     Continental domesticated the judgment on August 16, 2021, in
     Montgomery County, Pennsylvania.

     Korn has failed to meet his burden challenging the judgment. His
     claimed error [] that Texas did not have personal jurisdiction over
     him was decided against him by the federal courts. The matter
     was fully litigated and Korn’s due process rights were protected.

Trial Court Opinion, 7/18/22, at 8-10.

     After review, we agree with the sound reasoning of the trial court as set

forth above and affirm on that basis. See id. Moreover, we note that it has

been long settled in this country that, as Korn did here, an individual can

consent to personal jurisdiction in another state.     See Frontier Leasing,

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supra (compiling cases). It is clear that Korn has already litigated the issue

of personal jurisdiction and that his claim was found to be meritless. See

Continental Machinery Company, Inc., v. Korn, Case No. 3:19-CV-769-L,

Memorandum Order, 1/31/20, at 1.        Accordingly, we discern no abuse of

discretion or error of law, and we affirm the trial court’s order denying Korn’s

motion to vacate the foreign judgment. Olympus Corp., supra.

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/15/2023

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