Covington Industries, Inc. v. Resintex A. G.

• Decision Date: 23 June 1980
• Docket Number: D,No. 585,585
• Citation: 629 F.2d 730
• Parties: COVINGTON INDUSTRIES, INC., Plaintiff-Appellant, v. RESINTEX A. G. and Horst Susskind, Defendants-Appellees. ocket 79-7596.
• Court: U.S. Court of Appeals — Second Circuit

Page 730

629 F.2d 730

COVINGTON INDUSTRIES, INC., Plaintiff-Appellant, v. RESINTEX A. G. and Horst Susskind, Defendants-Appellees.

No. 585, Docket 79-7596.

United States Court of Appeals Second Circuit.

Argued Jan. 10, 1980.

Decided June 23, 1980.

F. T. Davis, Jr., Atlanta, Ga. (Stephen J. Smirti, Jr., Colleran, O'Hara & Kennedy, P.C., Garden City, N. Y., of counsel), for plaintiff-appellant.

William W. Esseks, Riverhead, N. Y. (W. Stanley Blackburn, Atlanta, Ga., Tooker, Esseks, Hefter, Cuddy & Angel, Riverhead, N. Y., of counsel), for defendants-appellees.

Before LUMBARD, MOORE and MESKILL, Circuit Judges.

MESKILL, Circuit Judge:

In 1977, the United States District Court for the Northern District of Georgia ("the Georgia court") entered a judgment on default of appearance against appellees. Appellants, seeking enforcement, subsequently registered that judgment in the United States District Court for the Eastern District of New York ("the New York court"). Alleging that the Georgia court had never obtained in personam jurisdiction over them, appellees moved under Rule 60(b), Fed.R.Civ.P., requesting the New York court to vacate and set aside the default judgment. After determining that it had jurisdiction to grant the motion to vacate the judgment of a sister court, the New York district court held that the Georgia court lacked in personam jurisdiction over the appellees and that the judgment was therefore void. We conclude that the court below did not err either in granting relief from the judgment of a foreign court of coordinate jurisdiction or in measuring the reach of Georgia's long-arm statute, and consequently, we affirm.

Background

Appellant Covington Industries, Inc. is a Georgia corporation with its principal place of business in Atlanta. Haitex Apparel, S.A., a subsidiary of Covington, is a Haitian corporation. Covington and Haitex are engaged in the textile and apparel industry. Resintex A.G., a Swiss corporation, acts as a manufacturer's agent in purchasing and selling textiles in Europe and the Far East.

In 1976, Eric Henderson, president of both Covington and Haitex, traveled to the Switzerland office of Resintex and met its manager, appellee Horst Susskind. At this meeting and apparently later in Haiti, Henderson and Susskind negotiated an agreement for purchase through Resintex of denim material from the Hong Kong market. As Judge Pratt found below, ¹ the parties entered into this agreement on behalf of Haitex and provided that Haitex would establish letters of credit in favor of Resintex in payment for the purchases. It appears, however, that Haitex had difficulty arranging for these letters of credit. After several telex messages passed between Henderson and Resintex, Covington established alternate letters of credit in Resintex's favor at Covington's Atlanta bank. After the denim had been delivered to Haitex, Resintex submitted invoices and bills of lading at a Swiss bank and drew on the letters of credit. The documents were forwarded through banking channels to the Atlanta bank, where Covington's account was charged with the amount of the letters of credit.

Alleging breach of contract and fraudulent misrepresentation, Covington filed suit in the United States District Court for the Northern District of Georgia, claiming that the denim material did not meet the contract specifications and that the invoices and bills of lading were therefore false. Although process was served pursuant to court order, neither Resintex nor Susskind entered an appearance in the action. After receiving evidence on damages, the Georgia court entered a default judgment.

Covington subsequently registered the default judgment in the United States District Court for the Eastern District of New York ² and instituted garnishment proceedings against Susskind's New York assets, including a bank account. After receiving notice that a restraining order had been issued in regard to this account, appellees moved in the New York court, pursuant to Rule 60(b)(4), Fed.R.Civ.P., for an order declaring the foreign default judgment void on the ground that appellees had not been subject to the personal jurisdiction of the Georgia court. The court below granted the motion, and vacated the default judgment. Covington subsequently brought this appeal.

I. Power Of The New York Court To Determine The Validity Of The Judgment Of The Georgia Court.

Before discussing the jurisdiction of the Georgia court, we must first consider the power of the district court for the Eastern District of New York to pass upon the validity of a sister court's judgment, and more particularly, the propriety of attacking that judgment in the court of registration by way of a motion under Rule 60(b)(4).

A judgment entered against parties not subject to the personal jurisdiction of the rendering court is a nullity. When, in an enforcement proceeding, the validity of the judgment is questioned on this ground, the enforcing court has the inherent power to void the judgment, whether the judgment was issued by a tribunal within the enforcing court's domain or by a court of a foreign jurisdiction, unless inquiry into the matter is barred by the principles of res judicata. Baldwin v. Iowa State Traveling Men's Assoc., 283 U.S. 522, 525, 51 S.Ct. 517, 518, 75 L.Ed. 1244 (1931). While the original court's jurisdiction is presumptively valid, if the issue of jurisdiction has not previously been litigated it may be raised in the enforcing court. Adam v. Saenger, 303 U.S. 59, 62, 58 S.Ct. 454, 456, 82 L.Ed. 649 (1938).

Such collateral attacks go by different names, depending upon the precise circumstances in which they arise. When purely defensive in nature and invoked in opposition to enforcement proceedings the collateral attack may be given no name at all. See, e. g., Hazen Research, Inc. v. Omega Minerals, Inc., 497 F.2d 151, 154 (5th Cir. 1974) ("the defendant may defeat subsequent enforcement in another forum by demonstrating that the judgment issued from a court lacking personal jurisdiction."); see also Radiation Technology, Inc. v. Southern Rad, Inc., 68 F.R.D. 296 (N.D.Ga.1975). In other situations, relief from a foreign judgment, allegedly invalid for lack of personal jurisdiction may be offensively pursued, either by way of an independent equitable action, Hadden v. Rumsey Products, Inc., 196 F.2d 92 (2d Cir. 1952); Pardo v. Wilson Line of Washington, Inc., 414 F.2d 1145 (D.C. Cir. 1969), or through a suit for declaratory relief.

Because the court below had the power to entertain appellees' motion and to grant the relief requested, the outcome of the appeal before us will not be governed by the label placed upon appellees' manner of proceeding. Adjudication by nomenclature is a relic of ancient practice, contrary to both the letter and spirit of the Federal Rules of Civil Procedure. As we noted in Hadden v. Rumsey Products, Inc., supra at 95, "(I)t would be quite out of harmony with the spirit of Rule 1 (Fed.R.Civ.P.) to hold the appellees bound by the labels placed on the papers submitted to the district court." See also Comprehensive Merchandising Catalogs, Inc. v. Madison Sales Corp., 521 F.2d 1210, 1211 n.1 (7th Cir. 1975) (Relief from enforcement of purportedly invalid foreign judgment will not be defeated because party may have improperly designated application as motion under Rule 60(b), Fed.R.Civ.P.).

In this case, appellees have termed their application as a motion for relief from judgment under Rule 60(b), which in pertinent part provides:

On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment . . . for the following reasons . . . (4) the judgment is void. ³

Appellants do not question the suitability of Rule 60(b)(4) as a vehicle for attacking a judgment, in the court of rendition, as having been issued without personal jurisdiction over the defendants. Appellants do question, however, whether Rule 60(b)(4) may be invoked to obtain the same relief in the court of registration.

Although Rule 60(b) does not specify the correct forum for presenting a motion for relief from judgment, the motion is generally brought in the district court rendering judgment. 7 Moore's Federal Practice P 60.28(1) (2d ed. 1979). In the usual case, the court of rendition will be more familiar with the facts than the court of registration and perhaps more conversant with the applicable law. Where the 60(b) motion is for relief from a default judgment, however, the assumptions about a rendering court's qualifications no longer apply. Where the defendant does not appear to contest jurisdiction and the court does not receive evidence or make findings in the matter except on the issue of damages, the court of rendition is no more familiar with the factual situation than is the court of registration. Under these circumstances, the court of registration therefore seems as qualified to determine the jurisdiction of the rendering court, particularly when the latter is a federal court of coordinate authority.

Recognizing the power in a different court to determine the jurisdiction of the rendering court is particularly appropriate when the party who obtained the default judgment is attempting to enforce it in another court. As Professor Moore notes since by registering the judgment in a particular forum the creditor seeks to utilize the enforcement machinery of that district court it is not unreasonable to hold that the latter court has the power to determine whether relief should be granted the judgment debtor under 60(b).

7 Moore's Federal Practice P 60.28(1) at 391-92 (2d ed. 1979), citing Hadden v. Rumsey Products, Inc., supra. Hadden concerned an attempt to enforce a judgment entered by the District Court for the Northern District of Ohio and registered in the District Court for the Western District of New York. The debtor sought relief from the judgment on the ground of fraud. Noting that the question...