Bank of America v. Jennett, C029754.

• Decision Date: 22 December 1999
• Docket Number: No. C029754.,C029754.
• Citation: 91 Cal.Rptr.2d 359,77 Cal.App.4th 104
• Court: California Court of Appeals Court of Appeals
• Parties: BANK OF AMERICA National Trust and Savings Association, Plaintiff and Respondent, v. Rene JENNETT, Defendant and Appellant.

91 Cal.Rptr.2d 359

77 Cal.App.4th 104

BANK OF AMERICA National Trust and Savings Association, Plaintiff and Respondent, v. Rene JENNETT, Defendant and Appellant.

No. C029754.

Court of Appeal, Third District.

December 22, 1999.

Review Denied April 12, 2000.^*

Law Office of Martin Glickfeld, Martin Glickfeld, San Francisco, for Defendant and Appellant.

Sawamura Nishimi & Chu, Lyle R. Nishimi, Office of General Counsel Bank of America N.T. & S.A., Linda B. Reed, Ullar Vitsut, John M. Redmond, Los Angeles, for Plaintiff and Respondent.

KOLKEY, J.

This is an appeal from an order denying a motion to vacate a California judgment based on a sister state money judgment in favor of plaintiff, Bank of America National Trust and Savings Association (the Bank), and against defendant Rene Jennett (Jennett).

Jennett's sole contention on appeal is that the sister state judgment—a deficiency judgment resulting from a foreclosure action in Hawaii—cannot be enforced against him because the judgment was taken by default following service by publication pursuant to Hawaii Revised Statutes section 634-23, subdivision (4). He argues that that particular statutory subdivision precludes the imposition of a deficiency judgment against a nonresident served by publication. The Bank contends, on the other hand, that the Hawaii action is not governed by that statute, but instead by Hawaii Revised Statutes sections 634-35 and 634-36, which do not impose any such limitation.

As we shall explain, because the Hawaii court had jurisdiction over the subject matter and the parties in the underlying action, the Full Faith and Credit Clause of the United States Constitution (U.S. Const., Art. IV, § 1) does not allow us—a California court—to enter into the quagmire of a sister state's statutory construction to determine that which the sister state's courts are more competent to decide. As long as a sister state court has jurisdiction over the subject matter and the parties, a sister state default judgment, purportedly based on a misapprehension of law, is entitled to full faith and credit. Accordingly, we shall affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

The Hawaii Action

Jennett is—and at all material times was—a California resident. Prior to the events giving rise to this proceeding, he owned a parcel of real property in Kailua-Kona, Hawaii (the property), which had a coffee processing facility on it.

In March 1989, Jennett refinanced the property pursuant to a loan that he had obtained from the Bank's predecessor-ininterest, HonFed Bank, in the principal amount of $300,000. The loan was intended to raise capital for the company which leased the property (and of which Jennett was the principal). As security for the loan, Jennett executed a mortgage on the property, which provided that in the event Jennett failed to repay the loan, the Bank could sell the property, and if the sale proceeds proved insufficient to cover the indebtedness, the Bank could seek a judgment against Jennett for the deficiency.

Jennett subsequently defaulted on his loan obligations. In October 1993, the Bank filed a complaint against Jennett in the Hawaii First Circuit Court for foreclosure on the property (the Hawaii action).

After two unsuccessful attempts to serve Jennett with the complaint and summons, the Bank moved for an order for service by publication pursuant to Hawaii Revised Statutes sections 634-35¹ and 634-36.² The Bank's motion was supported by an affidavit stating that the Bank had mailed a copy of the complaint and summons to Jennett by certified mail to his address in Millbrae, California—the address to which the mortgage directed all notices—and to a forwarding address in Burlingame, California. According to the affidavit, both mailings were returned unclaimed, postal authorities in Burlingame did not have a forwarding address for Jennett, and calls to directory assistance in Millbrae and Burlingame revealed no listings for Jennett. Service by publication was ordered.³

Jennett made no appearance in the Hawaii action, and the Hawaii court entered his default. The Bank obtained a decree of foreclosure, and in January 1995, it obtained a deficiency judgment against Jennett in the amount of $148,182.12.

The Instant Action

In June 1996, the Bank filed an application in the Butte County Superior Court for entry of judgment on a sister state judgment pursuant to Code of Civil Procedure section 1710.15. The judgment was entered on June 10, 1996, in the amount of $172,330.22⁴ (the California judgment). Jennett was served with the notice of entry of the California judgment at his Oroville residence two months later.

Jennett took two actions in response. In the Hawaii action, he moved to vacate the deficiency judgment on the ground that there was no foundation for the order permitting service by publication.

At the same time, Jennett sought to vacate and stay enforcement of the California judgment (Code Civ. Proc, §§ 1710.40, 1710.50) on the grounds that (1) he had not received notice of the Hawaii action and thus did not have a full and fair opportunity to defend himself there, and (2) the deficiency judgment in the Hawaii action was not yet final, in light of his pending motion to set it aside. The California trial court granted Jennett's request for a stay of enforcement pending completion of the proceedings in the Hawaii action. Ultimately, however, the Hawaii First Circuit Court denied his motion to set aside the deficiency judgment, and the Hawaii Supreme Court summarily affirmed the denial.

After the Hawaii Supreme Court affirmed the denial, the Bank moved in the instant action to vacate the stay of enforcement.

Jennett opposed the Bank's motion on the ground that the Hawaii court had failed to establish the requisite personal jurisdiction over him before entering the deficiency judgment. He also moved to vacate the California judgment on the ground he raises on appeal: that Hawaii Revised Statutes section 634-23, subdivision (4) precluded the imposition of a deficiency judgment against a nonresident "served by publication pursuant to [that] section."

The trial court found that the deficiency judgment was legally authorized, reasoning that service in the Hawaii action was not made pursuant to section 634-23 since the Bank's application for the order permitting service by publication was made pursuant to Hawaii Revised Statutes sections 634-35 and 634-36. Finding that Jennett "ha[d] not shown that the Hawaii court acted without fundamental jurisdiction or in excess of jurisdiction," the court denied his motion to vacate the California judgment.

DISCUSSION

Citing Hawaii Revised Statutes section 634-23, Jennett's sole contention on appeal is that Hawaii law does not "permit a deficiency judgment in a foreclosure action against a non-resident who is served by publication and does not appear and defend on the merits."

Hawaii Revised Statutes section 634-23, subdivision (4) provides in its relevant part that "[a]ny adjudication shall, as regards a defendant served by publication pursuant to this section ..., affect only the property, status or res which is the subject of the action, unless (A) the defendant appears in the action and defends on the merits, in which case the defendant shall be liable to a personal judgment ... including in the case of a foreclosure action a deficiency judgment, or (B) the service is authorized by section 634-25 or other provision of law, in which case the defendant shall be liable to any judgment authorized by such law."⁵

The Bank responds that the trial court correctly found that service by publication in the Hawaii action was not accomplished under Hawaii Revised Statutes section 634-23, but instead pursuant to Hawaii's long-arm statute, Hawaii Revised Statutes section 634-35⁶, and its related statute regarding the manner of service, section 634-36.⁷ Neither of those statutes limits the court's right to enter a deficiency judgment, although they cannot be easily reconciled with section 634-23. However, the Bank argues that the restriction on the right to deficiency judgments under section 634-23, subdivision (4) makes an exception for actions where service is authorized by "other provision of law."

As we shall explain, the limited nature of our review from the denial of a motion to vacate a judgment based on a sister state judgment does not permit us to determine which of the two competing Hawaii statutory provisions governs. As long as the sister state court had jurisdiction over the subject matter and the parties, it would offend the Full Faith and Credit Clause (U.S. Const., Art. IV, supra) for a California court to trespass into the brier patch of a sister state's statutory construction to determine whether its court entered a deficiency judgment on the basis of a proper reading of its own law. Instead, our inquiry is limited to whether the sister state's court had jurisdiction over the parties and the subject matter. Since we conclude that it did, we must give full faith and credit to the sister state judgment.

The Full Faith and Credit Clause

Article IV, section 1 of the United States Constitution, in its pertinent part, provides that "[fjull faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other State."

The purpose of the 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." (Milwaukee County v. M E White Co. (1935) 296 U.S. 268, 277, 56 S.Ct. 229, 80 L.Ed. 220, 228.)

By reason of the clause, "[a] final judgment in one State, if rendered by a court with adjudicatory authority over the subject matter and persons governed...