Bankers Trust Co. v. Braten

• Decision Date: 12 January 1995
• Docket Number: No. 2300,2300
• Citation: 317 S.C. 547,455 S.E.2d 199
• Court: South Carolina Court of Appeals
• Parties: BANKERS TRUST COMPANY, Respondent, v. Milton BRATEN, Appellant. . Heard

Page 199

455 S.E.2d 199

317 S.C. 547

BANKERS TRUST COMPANY, Respondent, v. Milton BRATEN, Appellant.

No. 2300.

Court of Appeals of South Carolina.

Heard Jan. 12, 1995.

Decided Feb. 13, 1995.

Karl L. Kenyon and Robert P. Lusk, both of Kenyon & Lusk, Anderson, for appellant.

James M. Brailsford, III, and William F. Halligan, both of Robinson, McFadden & Moore, Columbia, for respondent.

HOWARD, Judge:

This is an action for domestication of a New York judgment obtained by Bankers Trust Company (Bankers) against Milton Braten, a South Carolina resident in the sum of $3,808,198.70. The trial court granted Bankers' motion for summary judgment, from which Braten now appeals. We affirm.

In 1971, Braten executed a personal guaranty of the obligations of Braten Apparel Company (BAC) to Bankers. In 1974, BAC filed a Chapter XI bankruptcy in the Southern District of New York. After confirmation of a plan of reorganization in 1976, the Bankruptcy Court revoked confirmation in 1982 because it found, after trial, that BAC (through Braten and others) fraudulently concealed ownership of a substantial asset. In re Braten Apparel Corp., 21 B.R. 239 (Bankr.S.D.N.Y.1982), aff'd, 26 B.R. 1009 (S.D.N.Y.), aff'd, 742 F.2d 1435 (2d Cir.1983). In 1987, after an eight day hearing, the Bankruptcy Court determined Bankers was entitled to a claim of $2,136,446.43 against BAC. In re Braten Apparel Corp., 68 B.R. 955 (Bankr.S.D.N.Y.1987) (the 1987 Order). Eventually, the Bankruptcy Court approved a stipulation and Order between the bankruptcy trustee for BAC and Bankers which dismissed with prejudice appeal from the 1987 Order.

Based on its judgment against BAC, Bankers sought to recover from Braten on his personal guaranty. The Supreme Court of New York granted partial summary judgment to Bankers against Braten, totalling $3,808,198.70 including costs and interest. Braten appealed this New York judgment, which was affirmed and is final. Bankers Trust Co. v. Braten, 184 A.D.2d 239, 586 N.Y.S.2d 749 (1992), appeal denied, 81 N.Y.2d 702, 594 N.Y.S.2d 716, 610 N.E.2d 389 (N.Y.1993). In June of 1993, Bankers instituted this action seeking domestication of the final New York judgment in South Carolina. Braten answered Bankers' complaint asserting several defenses, offsets, and counterclaims, including allegations that Bankers procured the New York judgment by making fraudulent representations to New York courts. Bankers filed a reply to Braten's answer and moved for summary judgment, alleging, among other things, that the Full Faith and Credit Clause mandates domestication of the New York judgment despite Braten's allegations of fraud. The trial court granted Bankers' summary judgment motion.

The Full Faith and Credit Clause provides, in part, that "Full Faith and Credit shall be given in each State to the ... judicial proceedings of every other State." U.S. Const. art. IV, § 1. That is to say, " 'the judgment of a state court should have the same credit, validity and effect, in every other court of the United States, which it had in the state where it was pronounced.' " Alladin Plastics, Inc. v. Wintenna, Inc., 301 S.C. 90, 91, 390 S.E.2d 370, 371 (Ct.App.1990) (quoting Hampton v. McConnel, 16 U.S. (3 Wheat) 234, 235, 4 L.Ed. 378 (1818)). Thus, a foreign judgment which is regular on its face generally may not be collaterally attacked. Wold v. Funderburg, 250 S.C. 205, 157 S.E.2d 180 (1967). This general rule does not apply, however, where extrinsic fraud has been practiced to procure the judgment. Id.; Bryan v. Bryan, 220 S.C. 164, 66 S.E.2d 609 (1951).

Extrinsic fraud is that species of fraud which induces a party to default or to consent to judgment against him. Restatement (Second) of Judgments § 70 cmt. c. Extrinsic fraud is "collateral or external to the matter tried such as misleading acts which prevent the movant from presenting all of his case." Evans v. Gunter, 294 S.C 525, 529, 366 S.E.2d 44, 46 (Ct.App.1988). It deprives the complainant of an opportunity to present adequately his claim or defense. Restatement (Second) Conflict of Laws § 115 cmt. d; see Bryan, 220 S.C. at 168, 66 S.E.2d at 610 (Extrinsic fraud prevents "a party from fully exhibiting and trying his case." (citation omitted)).

Intrinsic fraud, on the other hand, is defined as "knowing use of perjured testimony or otherwise fabricated evidence." Restatement (Second) of Judgments § 70 cmt. c. It "misleads a court in determining issues and induces the court to find for the party perpetrating the fraud." Hilton Head Ctr. of S.C., Inc. v. Public Serv. Comm'n, 294 S.C. 9, 11, 362 S.E.2d 176, 177 (1987). Intrinsic fraud is not sufficient to obtain equitable relief from the judgment "on the theory that an issue which has been tried and passed upon in the original action should not be retried in an action for equitable relief against the judgment, and that otherwise litigation would be interminable." 31 Am.Jur. Judgments § 655, quoted in Bryan, 220 S.C. at 168, 66 S.E.2d at 610.

Here, Braten asserts Bankers' New York counsel fraudulently misrepresented during the course of the New York action and BAC's bankruptcy that all of Braten's and BAC's causes of action against Bankers had been dismissed with prejudice, when in fact their claims were still pending. Braten argues that these representations by counsel constitute extrinsic fraud. We disagree.

In reviewing a grant of summary judgment, the facts and all reasonable inferences must be viewed in a light most favorable to the non-moving party. Cafe Assocs., Ltd. v. Gerngross, 305 S.C. 6, 406 S.E.2d 162 (1991); Standard Fire Ins. Co. v. Marine Contracting & Towing Co., 301 S.C. 418, 392 S.E.2d 460 (1990). Therefore, we assume for purposes of this appeal that all of Braten's allegations of fraud are true. Even so, we hold any fraudulent representations allegedly made to the New York court by Bankers' counsel were intrinsic to the New York action. Therefore, Braten is not entitled to equitable relief from the New York judgment.

The Bryan court referred to and adopted perjured testimony as the "classic" example of intrinsic fraud because " 'the materiality of the testimony, and opportunity to attack it, was open at trial.' " 220 S.C. at 169, 66 S.E.2d at 611 (citation omitted). We find the fraud allegedly perpetrated by Bankers' counsel to be analogous to this situation. The record clearly shows both BAC and Braten were represented by counsel in the New York action and had ample opportunity to bring to the attention of the New York court any misstatements or fraudulent representations made by...