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Mainland Investment Group, LLC v. Smith

Court of Appeals of Kansas

August 4, 2017

Mainland Investment Group, LLC, d/b/a Texaco Food Mart, Appellee,
v.
Tonya Smith a/k/a Tonya M. Smith, Defendant, and Diversicare of Sedgwick, Appellant.

          SYLLABUS BY THE COURT

         A default judgment obtained pursuant to K.S.A. 61-3514 requires that at the time the default judgment is entered, a valid order of garnishment is in effect and the garnishee against whom the default judgment is directed has not been released pursuant to K.S.A. 2016 Supp. 61-3507(a).

         Appeal from Lyon District Court; Douglas P. Jones, judge.

          Jeffrey T. Donoho and Roger W. Slead, of Horn Aylward & Bandy, LLC, of Kansas City, Missouri, for appellant.

          Wm. Scott Hesse, of Newman, Hesse & Associates, P.A., of Topeka, for appellee.

          Before Arnold-Burger, C.J., Standridge and Schroeder, JJ.

          Arnold-Burger, C.J.

         Mainland Investment Group (Mainland) obtained a default judgment against Tonya Smith. After failing to collect on its judgment, Mainland obtained an order of garnishment. Mainland then served this order on Smith's alleged employer, Diversicare of Sedgwick (Diversicare)-the garnishee. Diversicare failed to timely answer the order of garnishment, and Mainland filed a motion for judgment against Diversicare as provided under K.S.A. 61-3514. But before a final decision was made on the motion, Mainland released Diversicare from the order of garnishment. Despite this, the district court imposed the penalties provided in K.S.A. 61-3514 for failing to answer, including costs and attorney fees. Because we find that the district court lacked jurisdiction to enter default judgment and assess fees when the order of garnishment had been released, we reverse and vacate the judgment against Diversicare.

         Factual and Procedural History

         In 2005, Mainland filed a petition against Smith regarding a worthless check in the amount of $51.13 that Smith wrote to Texaco Food Mart in 2002. Smith did not respond to this petition, and in 2006, Mainland obtained a default judgment from the district court in the amount of $490.52.

         For nearly 10 years, Mainland failed to collect the judgment amount from Smith and, apparently, could not locate her. Finally, in late 2015, Mainland requested-and the district court issued-an order of garnishment for the unpaid judgment amount of $1, 159. Mainland served Smith's alleged employer, Diversicare, with the garnishment order via first class mail on December 16, 2015. Diversicare failed to answer the order of garnishment, and, on May 25, 2016, Mainland filed a motion for judgment against Diversicare for failure to comply with K.S.A. 2015 Supp. 61-3510. Mainland served Diversicare with notice of the motion hearing scheduled for July 11, 2016.

         Diversicare filed a response to Mainland's motion for judgment against garnishee and appeared at the hearing. In its response, Diversicare asserted that it had never received the order of garnishment and stated that Smith never worked for the company. The district court continued the motion hearing to August 15, 2016.

         Later, on August 1, 2016, Diversicare filed a motion to file an out-of-time answer to the order of garnishment. In that motion, Diversicare argued it had excusably neglected to timely answer the order of garnishment and reiterated that it never employed Smith.

         On August 8, 2016, Mainland filed a release of garnishment with the district court in which it released Diversicare from the order of garnishment. Importantly, the register of actions for August 8, 2016, indicated the hearing scheduled for August 15 was cancelled. Counsel for Diversicare sent a letter to the district magistrate judge advising him of the release of the garnishment and stating Diversicare's position that all motions were moot. Diversicare also indicated, apparently because of the release, that Diversicare would not appear on August 15. A copy was sent to counsel for Mainland. However, counsel for Mainland appeared before the district court on August 15 and, citing Diversicare's absence from the hearing, moved for a default judgment against Diversicare. The district court initially noted the case "wasn't on the docket" but granted Mainland's motion for default judgment. Curiously, the district magistrate judge ...


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