CIBC Mellon Co. v. Mora Hotel

• Decision Date: 08 May 2003
• Citation: 792 N.E.2d 155,100 N.Y.2d 215,762 N.Y.S.2d 5
• Parties: CIBC MELLON TRUST COMPANY, as Trustee of CHRYSLER CANADA, LTD.'S BENEFITS PLAN AND OTHERS, et al., Respondents, v. MORA HOTEL CORPORATION N.V. et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

100 N.Y.2d 215

792 N.E.2d 155

762 N.Y.S.2d 5

CIBC MELLON TRUST COMPANY, as Trustee of CHRYSLER CANADA, LTD.'S BENEFITS PLAN AND OTHERS, et al., Respondents, v. MORA HOTEL CORPORATION N.V. et al., Appellants.

Court of Appeals of the State of New York.

Argued April 1, 2003.

Decided May 8, 2003.

Pryor Cashman Sherman & Flynn LLP, New York City (Gideon Cashman, Jamie M. Brickell, Lisa M. Buckley and Benjamin K. Semel of counsel), for appellants.

Proskauer Rose LLP, New York City (Leon P. Gold, Karen E. Clarke, Karen D. Coombs and Bart Schectman of counsel), for respondents.

Judges SMITH, CIPARICK, WESLEY, ROSENBLATT and GRAFFEO concur; Chief Judge KAYE taking no part.

OPINION OF THE COURT

READ, J.

Defendants here appeal from an order of the Appellate Division, which, among other things, affirmed Supreme Court's order and judgment recognizing and docketing certain judgments entered against them by the English High Court of Justice, Chancery Division, pursuant to New York's version of the Uniform Foreign Country Money-Judgments Recognition Act (CPLR art 53). For the reasons that follow, we conclude that the English judgments at issue satisfy the statutory prerequisites for recognition.

I.

In 1992, Castor Holdings Ltd., a Canadian real estate and financial investment company, declared bankruptcy. Plaintiffs CIBC Mellon Trust Company, as trustee of several pension and other benefit funds, and DaimlerChrysler Canada, Inc. had lost millions of dollars in investments in Castor. In May 1996, plaintiffs commenced legal proceedings in England in the High Court, alleging that they had been duped into making these investments by what amounted to a massive, multinational fraud. The suit named Wolfgang Otto Stolzenberg, the president, CEO and chairman of Castor, as the primary defendant accused of masterminding the fraud.

Marco Gambazzi, a Swiss attorney, was also individually named as a defendant. Gambazzi owned, in whole or in part, and controlled Mora Hotel Corporation N.V. and Chascona N.V.,¹ which were among the numerous corporations eventually named as defendants in the English proceedings. Plaintiffs initially asserted only a "tracing" claim against Mora for receipt of funds for no consideration, which were traceable to the alleged fraud. When plaintiffs added a claim of conspiracy against Mora in January 1999, they joined Chascona as a coconspirator.

Mora is the ground lessee and operator of the Gorham Hotel, located in midtown Manhattan, and Chascona is the fee owner of the property. They are both Netherlands Antilles corporations authorized to do business in New York. The Gorham Hotel is apparently their sole asset.

Plaintiffs made two kinds of ex parte applications to the High Court. The first sought leave to serve various nonresident defendants, including Mora (and later, Chascona), as "necessary or proper" parties. This rule (see UK Civ Pro Rules [1998] SI 1998/3132, part 6 [III], rules 6.20, 6.21) allows out-of-the-jurisdiction service on such a party when the liability of the defendants, either jointly or individually, depends upon a single investigation (see Massey v Heynes & Co., 21 QBD 330 [Ct App 1888]). In order for the High Court to exercise such "necessary or proper" jurisdiction, however, at least one defendant—in this instance, Stolzenberg—must be an English domiciliary and serve as the base or anchor defendant (see rules 6.20, 6.21). The second kind of ex parte application sought Mareva injunctions or orders (see Mareva Cia. Naviera S.A. v International Bulkcarriers S.A., 2 Lloyd's Rep 509 [1975]) to freeze defendants' assets on a world-wide basis during the pendency of the English proceedings and to direct certain discovery. The initial Mareva order required Mora to provide information and documents relating to the tracing claim and its assets as well as copies of any documents relevant to the proceedings. In support of this application, plaintiffs submitted attorney affidavits and voluminous supporting documentation. After reviewing these materials over nine days, the High Court determined that plaintiffs had made the requisite showing; namely, a "good arguable case."

In March 1997, plaintiffs served Mora in New York with a writ of summons and the Mareva order. Mora appeared in the English proceedings for the limited purpose of contesting the High Court's jurisdiction over Stolzenberg, the anchor defendant, on the grounds that he was not domiciled in England at the time that Mora argued was critical (i.e., when the writ of summons for Stolzenberg was served rather than when it was issued). In May 1997, the High Court rejected Mora's argument and dismissed its application to set aside service of the writ on it; and the Court of Appeal dismissed Mora's appeal in October 1997. Finally, in October 2000, the House of Lords dismissed Mora's appeal from the Court of Appeal. Chascona abandoned its identical jurisdictional challenge following the House of Lords' dismissal of Mora's appeal.

While disputing the High Court's jurisdiction, Mora elected not to comply with the Mareva order relating to the tracing claim and several subsequent orders to secure compliance with it. Some of these orders were "unless" orders, which explicitly warned Mora that continued recalcitrance would lead to its debarment or preclusion from defending against the tracing claim and permit plaintiffs to obtain judgment. When Mora failed to take heed, a default judgment was entered against it for roughly $600,000 (U.S.) in February 1999, following a damages assessment hearing.

In July 1999, plaintiffs applied ex parte to increase to $420 million (Can.) the value of Mora's assets covered by the Mareva order, and to grant the same freezing relief with respect to Chascona on account of the conspiracy claims pending against them both. Once again, before granting plaintiffs' applications, the High Court examined the evidence to determine whether plaintiffs had established the requisite "good arguable case."

Thereafter, as a result of their failure to comply with the new Mareva and concomitant "unless" orders, both Mora and Chascona were debarred from defending against the main fraudulent conspiracy claims. Plaintiffs applied to the High Court for an assessment of damages, and a hearing was held. In December 1999, default judgments of roughly $330 million (U.S.) were entered in England against both Mora and Chascona on the conspiracy claims.

In May 2000, plaintiffs commenced an action in Supreme Court, seeking recognition of the English judgments pursuant to the Uniform Foreign Country Money-Judgments Recognition Act (CPLR art 53) and New York common law, as well as an attachment of the Gorham Hotel, reportedly worth approximately $30 million. On January 16, 2001, Supreme Court granted plaintiffs summary judgment recognizing and docketing the English judgments; confirmed the attachment; appointed a postjudgment receiver to manage and sell the Gorham Hotel in satisfaction of the English judgments; and denied defendants' cross motion to dismiss the complaint.

The Appellate Division affirmed Supreme Court's order and judgment on May 28, 2002 (296 AD2d 81 [2002]). This appeal pursuant to CPLR 5601 (b) (1) followed. The constitutional issues asserted as a basis for our jurisdiction on the appeal are, broadly stated, whether the courts below violated defendants' due process rights by (1) determining that the English courts properly exercised personal jurisdiction over them; and (2) recognizing foreign judgments that were entered on default following defendants' failure to comply with a provisional remedy (the Mareva orders) not available in New York. Subsequent to Supreme Court's decision and order, defendants in 2001 and 2002 applied to the High Court to set aside the default judgments entered against them because of their failure to comply with the "unless" orders, and to allow them to defend the tracing and conspiracy claims on the merits. After a six-day hearing, which took place from December 9-16, 2002, the High Court dismissed defendants' applications on February 3, 2003. Plaintiffs then moved to dismiss this appeal, arguing that defendants' applications to the High Court mooted the asserted constitutional bases. We withheld decision and entertained oral argument on both the motion and the appeal.

II.

New York has traditionally been a generous forum in which to enforce judgments for money damages rendered by foreign courts (see e.g. Lazier v Westcott, 26 NY 146 [1862]; Dunstan v Higgins, 138 NY 70 [1893]; Cowans v Ticonderoga Pulp & Paper Co., 246 NY 603 [1927]; see also Greschler v Greschler, 51 NY2d 368, 376 [1980]

; Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5301:1, at 540); and in 1970, New York adopted the Uniform Foreign Money-Judgments Recognition Act (see Uniform Foreign Money-Judgments Recognition Act §§ 1-9, 13 ULA [part II] 43-80; L 1970, ch 981, §§ 1-2)² as CPLR article 53. Article 53 was designed to codify and clarify existing case law on the subject and, more importantly, to promote the efficient enforcement of New York judgments abroad by assuring foreign jurisdictions that their judgments would receive streamlined enforcement here (see Judicial Conference Mem in Support, Bill Jacket, L 1970, ch 981, at 4; Kulzer, The Uniform Foreign Money-Judgments Recognition Act, reprinted in 13th Ann Report of NY Jud Conf 194, 195-196, 226 [1968]).³

Article 53 applies to "any foreign country judgment which is final, conclusive and enforceable where rendered even though an appeal therefrom is pending or it is subject to appeal" (CPLR 5302). Simply put, a foreign country judgment is considered "conclusive between the parties to the extent that it grants or denies recovery of a sum of money" (CPLR 5303) unless

"1. the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law; [or]

"2. the

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