New Central Jute Mills Co. v. City Trade and Industries, Limited

• Decision Date: 02 February 1971
• Court: New York Supreme Court
• Parties: NEW CENTRAL JUTE MILLS CO., Ltd., Plaintiff, v. CITY TRADE & INDUSTRIES, LTD., Defendant.

Page 980

318 N.Y.S.2d 980

65 Misc.2d 653

NEW CENTRAL JUTE MILLS CO., Ltd., Plaintiff, v. CITY TRADE & INDUSTRIES, LTD., Defendant.

Supreme Court, Special Term, New York County, Part I.

Feb. 2, 1971.

Mervin C. Pollak, New York City, for plaintiff.

Weil, Gotshal & Manges, New York City, for defendant.

EDWARD J. GREENFIELD, Justice.

Plaintiff, New Central Jute Mills Co., Ltd., moves for summary judgment in lieu of complaint pursuant to CPLR 3213 for the sum of $505,074.73 with interest. The motion raises certain basic questions under the newly effective 'Uniform Foreign Court Money Judgments Recognition Act', CPLR, Article 53 (L.1970, c. 981, effective September 1, 1970).

The motion is based upon two judgments obtained against defendant City Trade & Industries, Ltd., in the High Court of Calcutta, India. Those judgments confirmed two arbitration awards obtained by plaintiff against defendant before an Indian Arbitration Panel. The awards, which were obtained by default, were based upon 18 unpaid bills of exchange drawn on the defendant in connection with its purchase of jute carpet backing cloth under a contract entered into between the parties at Calcutta, India, on the 21st day of November, 1959.

Paragraph 25 of the agreement provided:

'THAT in the event of any dispute or difference arising between the parties hereto in respect to this agreement, unless resolved amicably, the same shall be referred by either party for arbitration in India * * * arbitration award of the aforesaid would be fully binding on both the parties, and the provisions of the Indian Arbitration Act shall apply.'

The defendant CTI commenced an accounting action against New Central in the New York Surpeme Court for the sum of $3,447,393.43, in September 1965, claiming it was entitled to credits against its drafts because New Central was obliged to buy back unsold jute. Plaintiff New Central instituted arbitration proceedings in India in July 1966 with respect to 18 of the bills of exchange and in September 1966 with respect to 14 of the bills of exchange. During late 1966 and early 1967 New Central pressed for the arbitration in India, while the New York accounting action remained quiescent.

On August 3, 1966, defendant CTI's attorneys wrote to New Central announcing that they were refusing to participate in arbitration proceedings. There followed numerous communications, advising defendant of New Central's intention to proceed with arbitration and announcing that their failure to participate would be at their own risk. The Indian Arbitration Tribunal noted defendant's default and wrote it, giving it additional time; and calling its attention to the consequences of continued default.

While this was going on, on April 21, 1967, New Central moved in New York to stay CTI's accounting action and to compel it to arbitrate its accounting claims in India. This court, by order of Mr. Justice Sarafite, directed a preliminary trial of the issues as to the legality and the validity of the agreement. Mr. Justice Rosenberg found after trial that the contract was not illegal and that the arbitration provisions were enforceable. That decision was affirmed by the Appellate Division, First Department in City Trade and Industries, Ltd. v. New Central Jute Mills Co. Ltd., 30 A.D.2d 513, 290 N.Y.S.2d 108, and was affirmed by the Court of Appeals at 25 N.Y.2d 49, 302 N.Y.S.2d 557.

While the trial on the validity of the agreement was proceeding in New York, CTI was notified of all adjourned hearing dates in the Indian arbitration and was informed that the arbitration would proceed Ex parte if CTI did not attend. CTI did not, and the arbitrators made their awards in November 1967, forwarding certified copies of the awards to CTI.

After the preliminary trial and decision in this court finding the underlying contract valid and enforceable, the parties entered into a stipulation on January 30, 1968, which provided for a stay of the enforcement of this court's order directing arbitration of the issues in the accounting action pending the determination of the appeal. After the Appellate Division's affirmance, a further stipulation was made, extending the stay until after the determination of the appeal by the Court of Appeals. That final affirmance was not until July 1969.

While the appeals were pending, New Central proceeded to file its arbitration awards in the High Court at Calcutta, on February 2, 1968, pursuant to the Indian Arbitration Act. Although CTI was notified that judgment would be entered on those awards on April 22, 1968, it took no steps in India to forestall the entry of judgment on that date.

Plaintiff New Gentral now urges that the judgments on the arbitration awards entered in the High Court at Calcutta are fully enforceable in New York. Defendant CTI, on the other hand, contends that the judgments were obtained contrary to the stipulation staying arbitration proceedings, and should not be given effect here.

This court, under well-grounded rules of comity, will recognize and give effect to a foreign judgment if the foreign court had jurisdiction over the parties, the judgment was not obtained by fraud, and that judgment does not contravene the public policy of this State. See Dunstan v. Higgins, 138 N.Y. 70, 75, 33 N.E. 729, 730:

'Where a party is sued in a foreign country upon a contract made there, he is subject to the procedure of the court in which the action is pending, and must resort to it for the purpose of his defense, if he has any, and any error committed must be reviewed or corrected in the usual way.'

Recognition is accorded to the foreign judgment whether entered after an adversary proceeding or upon default. As stated by Mr. Justice Brandeis in Riehle v. Margolies, 279 U.S. 218, 225, 49 S.Ct. 310, 313, 73 L.Ed. 669.

'A judgment of a court having jurisdiction of the parties and of the subject-matter operates as res judicata, in the absence of fraud or collusion, even if obtained upon a default.'

Hence, once parties have agreed to submit their controversy to a foreign arbitrator, and to be bound by foreign law, they cannot relitigate their claims or defenses in domestic litigation. See von Engelbrechten v. Galvanoni & Nevy Bros., Inc., 59 Misc.2d 721, 300 N.Y.S.2d 239 (per Stecher, J.) and Plugmay, Ltd. v. National Dynamics Corp., 48 Misc.2d 913, 266 N.Y.S.2d 240 (per Shalleck, J.).

The rules of Comity have been developed and enunciated in the decisional law...