Orix Financial Services, Inc. v. Murphy

• Decision Date: 26 November 2008
• Docket Number: 1070996.
• Citation: 9 So.3d 1241
• Parties: ORIX FINANCIAL SERVICES, INC. v. John Allen MURPHY.
• Court: Alabama Supreme Court

9 So.3d 1241

ORIX FINANCIAL SERVICES, INC. v. John Allen MURPHY.

1070996.

Supreme Court of Alabama.

November 26, 2008.

Romaine S. Scott III of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellant.

Charles M. Ingrum, Jr., of Ingrum, Rice & Parr, Opelika, for appellee.

STUART, Justice.

Orix Financial Services, Inc., appeals the order of the Lee Circuit Court holding the default judgment Orix obtained against Opelika resident John Allen Murphy in a New York court void. We reverse and remand.

I.

On February 7, 1998, Murphy executed a promissory note pursuant to which he agreed to pay Orix $67,048.¹ That promissory note contained the following clause:

"As part of the consideration for making the advance represented by this promissory note, [Orix], maker(s), and any endorser(s) hereby designate and appoint Edwin M. Baum, Esq., and C-A Credit Corp., both of New York, or either of them, as their true and lawful attorney-in-fact and agent for them and in their name, place and stead to accept service of any process within the State of New York, the party causing such process to be served agreeing to notify the other party(ies) at their address indicated above, or at their last known address, certified mail, within three days of such service having been effected. [Orix], maker(s) and any endorser(s) hereby agree to the EXCLUSIVE VENUE AND JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE AND COUNTY OF NEW YORK for all actions, proceedings, claims, counterclaims or crossclaims arising directly or indirectly in connection with, out of, or in any way related to this promissory note, whether based in contract or in tort or at law or in equity, with the sole exceptions that an action to obtain possession of all or part of the collateral or any other assets of the maker(s) or endorser(s) however denominated and equitable proceedings to enforce the terms of this promissory note, may, in the sole discretion of [Orix], be brought in a state or federal court having jurisdiction over the collateral, and/or any other assets of the maker(s) or endorser(s) may be located."

(Capitalization in original.)

Murphy thereafter defaulted on the promissory note when he failed to make the scheduled payments. On December 19, 2006, Orix sued Murphy in the Supreme Court of the State of New York, New York County. On January 23, 2007, pursuant to the relevant clause in the promissory note, Orix served the summons and complaint upon Murphy's designated agent, C-A Credit Corp., and also mailed copies to Murphy's address in Opelika, which was the address shown on the promissory note. C-A Credit maintains that it also forwarded the summons and complaint it received to Murphy the same day it received them. Murphy denies receiving any of these mailings.

On May 7, 2007, after failing to receive a response from Murphy, the New York court entered a default judgment against Murphy for $31,857. On August 15, 2007, Orix filed a copy of the default judgment with the Lee Circuit Court pursuant to the Alabama Uniform Enforcement of Foreign Judgments Act, § 6-9-230 et seq., Ala. Code 1975. On August 17, 2007, Murphy filed a motion to stay the domestication of that judgment, arguing that he had not been properly served with the complaint and that he had had no knowledge of the New York action or opportunity to defend himself. After a hearing and further briefing, the trial court, on January 29, 2008, entered an order making the following findings:

"1. The note provided by [Orix] for [Murphy] to sign already contained the name of the designated agent for [Orix] to serve in the event of default and was not a matter negotiated by [Murphy].

"2. Under the New York law, i.e., N.Y. C.P.L.R. §§ 308 and 318 (2007), the effectiveness of the designated agent expires three (3) years after the date of the signing of the note, and therefore the time for the effectiveness of the designation of the agent expired prior to the filing of the lawsuit.

"3. [Murphy] did not receive any actual notice that the suit was being filed in New York.

"4. The `forum selection clause' was not negotiated by [Murphy].

"5. The distance between the states of New York and Alabama was too great to be convenient for [Murphy] to defend the matter and was not fair to [Murphy].

"6. [Murphy] had insufficient contacts with the State of New York.

"7. Enforcement of the New York default judgment in the courts of Alabama through the domestication process under all of the circumstances would be unfair to [Murphy] and create an injustice."

The trial court concluded by declaring the default judgment entered by the New York court void for lack of personal service. After the trial court denied Orix's subsequent motion to alter, amend, or vacate its judgment, Orix filed its notice of appeal to this Court.

II.

Murphy's motion to stay the domestication of the default judgment entered against him by the New York court was the equivalent of a postjudgment motion made pursuant to Rule 60(b)(4), Ala. R. Civ. P., challenging a judgment as void. See Ex parte Trinity Auto. Servs., Ltd., 974 So.2d 1005, 1009 (Ala.Civ.App.2006) ("Both our Supreme Court and this court have held that the appropriate procedural mechanism by which to collaterally attack a foreign judgment on the basis that the judgment is void for lack of jurisdiction is by a motion filed pursuant to Rule 60(b)(4)."). In Insurance Management & Administration, Inc. v. Palomar Insurance Corp., 590 So.2d 209, 212 (Ala.1991), we explained that we review de novo a trial court's ruling on such a motion:

"The standard of review on appeal from the denial [or granting] of relief under Rule 60(b)(4) is not whether there has been an abuse of discretion. When the grant or denial of relief turns on the validity of the judgment, as under Rule 60(b)(4), discretion has no place. If the judgment is valid, it must stand; if it is void, it must be set aside. A judgment is void only if the court rendering it lacked jurisdiction of the subject matter or of the parties, or if it acted in a manner inconsistent with due process. Satterfield v. Winston Industries, Inc., 553 So.2d 61 (Ala.1989)."

Additionally, we note that "[t]he validity and effect of a foreign judgment, of course, are to be determined by the law of the state in which it was rendered." Morse v. Morse, 394 So.2d 950, 951 (Ala.1981) (citing Forbes v. Davis, 187 Ala. 71, 65 So. 516 (1914)).

III.

The trial court held the default judgment entered by the New York court void for essentially two reasons — a perceived lack of due process in the service of process and its belief that the forum-selection clause in the promissory note was unenforceable. A review of the relevant New York law, however, reveals that Murphy was lawfully served and that he submitted to the jurisdiction of the New York court by signing a promissory note containing a clause designating New York as the venue for any and all legal disputes related to that note. In regard to whether the service of process provided Murphy complied with due-process requirements, we agree with the rationale of the United States District Court for the Southern District of New York, which decided a similar dispute involving Orix in Orix Financial Services, Inc. v. Kielbasa, (No. 01 Civ. 1789, Dec. 3, 2007) (S.D.N.Y.2007) (not published in F.Supp.2d):

"Service in New York¹ is governed by N.Y. C.P.L.R. § 308(3) (2007), which provides, in relevant part, that service of process may be made upon an individual `by delivering the summons within the state to the agent for service of the person to be served as designated under N.Y. C.P.L.R. § 318 (2007).'²

"[The defendant] contends that Orix did not fulfill the requirements of sections 308(3) and 318 of the C.P.L.R. Specifically, [the defendant] argues that the guaranty, as the writing that designated C-A Credit as [the defendant's] agent, did not contain C-A Credit's signed endorsement; that there is no proof that the guaranty was filed in the county clerk's office; and that the guaranty was dated November 1995, more than three years prior to service of the complaint, and the designation of an agent remains in effect for only three years after the execution of the writing that designates the agent.

"C-A Credit was a valid agent for acceptance of service of process on [the defendant's] behalf, despite non-compliance with the provisions of the C.P.L.R. `It is well settled that parties to a contract "may agree to service upon a third person with respect to litigation arising from the contract, even where that person is not an agent authorized under ... C.P.L.R. § 318."' Orix Financial Services, Inc. v. First Choice Freight Sys., Inc., No. 03 Civ. 9296(RMB) ... [not reported in F.Supp.2d] (S.D.N.Y. Aug. 1, 2006) (quoting Orix Financial Services, Inc. v. Baker, 1 Misc.3d 288, 291, 768 N.Y.S.2d 780 (N.Y.Sup.Ct. 2003)); see also National Equip. Rental v. Szukhent, 375 U.S. 311, 84 S.Ct. 411, 11 L.Ed.2d 354 (1963). Here, it is undisputed that the guaranty expressly designated C-A Credit as [the defendant's] agent for acceptance of service of process in New York. Thus, C-A Credit was a valid agent, despite C-A Credit's non-compliance with technical provisions of C.P.L.R. section 318.

¹ "The guaranty provides, and the parties agree, that this case is governed by New York law.

² "Section 318, in turn, states: `A person may be designated by a natural person, corporation or partnership as an agent for service in a writing, executed and acknowledged in the same manner as a deed, with the consent of the agent endorsed thereon. The writing shall be filed in the office of the clerk of the county in which the principal to be served resides or has its principal office. The designation shall remain in effect for three years from such filing unless it has been revoked by the filing of a revocation, or by the death, judicial declaration of incompetency or legal termination of the agent or principal.'"

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