Imperial Hotel, Inc. v. Bell Atlantic Tri-Con Leasing Corp.

• Decision Date: 01 September 1991
• Docket Number: TRI-CON,No. 977,977
• Citation: 91 Md.App. 266,603 A.2d 1371
• Parties: IMPERIAL HOTEL, INC., et al. v. BELL ATLANTICLEASING CORPORATION. ,
• Court: Court of Special Appeals of Maryland

Page 266

91 Md.App. 266

603 A.2d 1371

IMPERIAL HOTEL, INC., et al. v. BELL ATLANTIC TRI-CON LEASING CORPORATION.

No. 977, Sept. Term, 1991.

Court of Special Appeals of Maryland.

April 9, 1992.

R. Stewart Barroll (Hoon & Barroll, on the brief), Chestertown, for appellants.

Douglas A. Rubel (Jordan M. Spivok and Protas & Spivok, Chartered, on the brief), Bethesda, for appellee.

Argued before MOYLAN, FISCHER and HARRELL, JJ.

HARRELL, Judge.

On or about 11 July 1990, Bell Atlantic Tri-Con Leasing Corporation (hereinafter Bell Atlantic) obtained a default judgment in the Superior Court for Bergen County, New Jersey, against appellants, Imperial Hotel, Inc., George W. Dean, and Jane Dean. On 11 February 1991, Bell Atlantic filed a motion in the Circuit Court for Kent County, Maryland, seeking to register and enforce the New Jersey judgment.

Appellants filed an omnibus motion which basically sought to deny recognition, registration, and enforcement of the New Jersey judgment on the ground that the New Jersey court lacked personal jurisdiction over appellants. Ultimately, the circuit court denied all relief requested by the appellants, with the exception of their request to stay enforcement of the foreign judgment. The circuit court concluded that it would stay enforcement of the New Jersey judgment if, prior to 15 July 1991, appellants posted a $30,000 bond with the circuit court and provided proof that they had moved, in the New Jersey court, to set aside the New Jersey judgment. The circuit court ruled that if appellants failed to comply with these conditions, the motion to stay would be denied.

On 13 June 1991 appellants noted this appeal. The sole issue presented for our consideration is whether the circuit court erred in requiring the appellants to litigate in New Jersey the issue of personal jurisdiction.

Facts

Appellant Imperial Hotel, Inc. (hereinafter Imperial Hotel) is a Maryland corporation that was created in 1985 by appellants George and Jane Dean, when they purchased a 12-room hotel on High Street in Chestertown, Maryland. All of the stock of the corporation belongs to Mr. and Mrs. Dean. Appellee, Bell Atlantic, is a Delaware corporation with an office located in Bergen County, New Jersey. It is engaged in the business of leasing office equipment.

In 1985 the parties executed two leases relating to a telephone system installed by Bell Atlantic in the Imperial Hotel. Various problems arose regarding the operation of the telephone system and, eventually, appellants ceased making the lease payments to Bell Atlantic. On 31 October 1989, Bell Atlantic filed a civil action in the Superior Court of Bergen County, New Jersey for sums allegedly due by appellants under the lease agreements and the Deans' personal guarantees.

Proof of personal service of the summons and complaint on appellants by a deputy sheriff for Kent County, Maryland was filed in the New Jersey action. On 9 February 1990, when appellants failed to answer or otherwise defend against the action, Bell Atlantic, pursuant to New Jersey rules of civil procedure, requested the clerk of the New Jersey court to enter an order of default. On 11 July 1990, a final default judgment was entered by the clerk against appellants in the amount of $29,502.10.

On 11 February 1991, Bell Atlantic filed an action in the Circuit Court for Kent County seeking to enforce the New Jersey judgment. Appellants responded with a very broad and general motion titled "Motion to Stay Enforcement of Foreign Judgment and Other Relief." In describing this motion at the hearing, appellants' counsel stated that "[w]hat I did in [an] abundance of caution was ask for everything including the kitchen sink." The motion contained a request for the court to (1) grant the motion; (2) stay enforcement of the New Jersey judgment pursuant to Md.Cts. & Jud.Proc.Code Ann. § 11-804(b); (3) vacate the New Jersey judgment; (4) dismiss the action; and (5) grant such other relief as the court deemed appropriate. Notwithstanding the various forms of relief requested, the sole argument underlying appellants' motion was that "the New Jersey court lacked jurisdiction to entertain the suit."

Discussion

Appellants argue that the circuit court erred in requiring them to litigate in New Jersey the issue of personal jurisdiction. They maintain that the circuit court should have decided whether the New Jersey judgment was entitled to enforcement under the Uniform Enforcement of Foreign Judgments Act, Md.Cts. & Jud.Proc.Code Ann. § 11-801 et seq. ("the Act"). We agree and explain.

Article IV, section 1 of the United States Constitution provides, in relevant part, that "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State." The Supreme Court has consistently recognized that, in order to fulfill this constitutional mandate, "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." Underwriters National Assurance Co. v. North Carolina Life and Accident and Health Ins. Guaranty Assoc. et al., 455 U.S. 691, 704, 102 S.Ct. 1357, 1365, 71 L.Ed.2d 558 (1982) (citations omitted).

Obviously, the basic structure of our Nation as a union of States dictates some limitations on the Constitution's full-faith-and-credit principles. "Chief among these limitations is the caveat, ... that a 'judgment of a court in one State is conclusive upon the merits in a court in another State only if the court in the first State had power to pass on the merits--had jurisdiction, that is, to render the judgment.' " Id. quoting Durfee v. Duke, 375 U.S. 106, 110, 84 S.Ct. 242, 244, 11 L.Ed.2d 186 (1963). In a suit to enforce the judgment of another state the jurisdiction of the foreign court is open to judicial inquiry. See generally Renwick v. Renwick, 24 Md.App. 277, 330 A.2d 488 (1975); Van Wagenberg v. Van Wagenberg, 241 Md. 154, 215 A.2d 812 (1966). When "the matter of fact or law on which jurisdiction depends was not litigated in the original suit it is a matter to be adjudicated in the suit founded upon the judgment." Adam v. Saenger, 303 U.S. 59, 62, 58 S.Ct. 454, 456, 82 L.Ed. 649 (1938) (emphasis supplied). Accordingly, before one state court is bound by a judgment rendered by a court in another state, it may inquire into the propriety of a foreign court's exercise of jurisdiction. If the foreign court did not have jurisdiction, full faith and credit need not be given.

In the instant case, the trial judge did not believe that he had the authority to inquire into the propriety of the New Jersey court's exercise of jurisdiction over the appellants. At the hearing on appellants' motion the trial judge stated:

The first thing as far as this validity [of the judgment] is concerned is to me the question of where its validity should be determined and at what point. Obviously, the first opportunity to have done so and for the defendants to say, 'Well, you don't have any jurisdiction over me and I don't have anything to do with the State of New Jersey.' would have been up there and they could have hired counsel to enter a limited appearance for the purpose of, of raising that question. It may or may not be that New Jersey did have jurisdiction over them and that they had minimal or minimum contacts sufficient to satisfy New Jersey. Now, one thing I am certain of though is that, as a matter of comity and deference, New Jersey should be given the first opportunity to pass upon that and not some sister state.

* * * * * *

To be blunt and turning the situation around, if this same thing had happened here, and we sent a judgment to New Jersey, I wouldn't be too happy with some judge up there sitting up there and saying, 'Well, those people down in Kent County don't know what they were doing.' I think it is rather arrogant and presumptuous of me to presume that Burgen [sic] County and the State of New Jersey didn't know what they were doing and that they didn't comply with their own laws and rules. I have to, I think the concept of the Constitution is to say that presumptively they did.

The trial judge failed to apply the proper law in this case. In Maryland, an authenticated copy of a record is prima facie evidence of jurisdiction and the judgment or decree must be presumed valid until it is declared invalid by a competent court. Brewster v. Brewster, 204 Md. 501, 505, 105 A.2d 232 (1968). The courts of this State are not bound, however, by determinations of jurisdiction made by courts of other states. Staley v. Staley, 251 Md. 701, 705, 248 A.2d 655 (1968); Roach v. Jurchak, 182 Md. 646, 649-59, 35 A.2d 817 (1944). Rather, they may make their own independent examination. Staley, 251 Md. at 705, 248 A.2d 655; Renwick, 24 Md.App. at 287, 330 A.2d 488. The...