Overseas Development Bank in Liquidation v. Nothmann

• Decision Date: 22 October 1984
• Parties: OVERSEAS DEVELOPMENT BANK IN LIQUIDATION, Respondent, v. Naftali Chaim NOTHMANN, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 735

480 N.Y.S.2d 735

103 A.D.2d 534

OVERSEAS DEVELOPMENT BANK IN LIQUIDATION, Respondent, v. Naftali Chaim NOTHMANN, et al., Appellants.

Supreme Court, Appellate Division,

Second Department.

Oct. 22, 1984.

David S.J. Neufeld, Huntington, for appellants.

Cadwalader, Wickersham & Taft, New York City (Terence F. Gilheany, Peter G. Bergmann and Joseph J. Schiavone, New York City, of counsel), for respondent.

BROWN, Justice.

The issue on these appeals is whether two English money judgments may be enforced in New York in pursuance of the provisions of article 53 of the CPLR. We conclude that at the time plaintiff commenced this action to enforce the judgments against the defendants, those judgments were not enforceable under English law and therefore, as a matter of law, were not entitled to recognition in New York under article 53.

It appears from the record herein that from the mid-1960's until the early 1970's defendants, through several corporations, operated two rare book stores and a literary press in London. During that period the defendants executed a series of personal guarantee demand notes securing loans made to the corporations by plaintiff's predecessor, the Overseas Development Bank. In or about June, 1974, when the corporations and defendants failed to pay the notes, a receiver was appointed under English law to take over the daily operation and management of the corporation. Plaintiff claims that shortly after the appointment of the receiver, the defendants removed a significant portion of the bookstores' inventories of rare books from England and left the country. Plaintiff thereupon commenced an action against defendants in the High Court of Justice, Queens Bench Division, to enforce the loan guarantees. Sometime in November, 1974, plaintiff discovered that the defendants were living in Dublin and obtained leave of the English court to effect substituted service of the summons upon them in Ireland. Thereafter, an English law firm entered a memorandum of appearance in the action on behalf of defendants and, after a hearing on the matter, the High Court of Justice, on April 25, 1975, rendered a judgment in favor of plaintiff in the sum of 125,000 pounds sterling. Thereafter, on June 17, 1975, a further judgment was rendered in favor of plaintiff against the defendants in the sum of 95,516.50 pounds sterling. By the time the second of the two judgments had been rendered, plaintiffs became aware that defendants had left Ireland for the United States.

Apparently no further legal steps were taken by plaintiff to enforce the judgments until nearly seven years later when plaintiff moved at Special Term, Nassau County, for an ex parte order of attachment against the property of defendants pursuant to sections 6201 and 6211 of the CPLR on the ground that its cause of action was based upon two judgments entitled to recognition under article 53 of the CPLR (CPLR 6201, subd. 4), or alternatively, on the ground that defendants had disposed of or secreted assets in an attempt to frustrate the enforcement of the judgments (CPLR 6201, subd. 3). Plaintiff's motion was granted and an ex parte order of attachment was entered by Special Term, on April 22, 1982. Subsequently, by order dated August 16, 1982, Special Term, confirmed the order of attachment.

On or about May 2, 1982, shortly after the entry of the order of attachment, plaintiff commenced an action to enforce the judgments upon which the attachment was based in the Supreme Court, Suffolk County, by service of a summons and a notice of motion for summary judgment in lieu of a complaint. In support of its application for summary judgment in its favor, plaintiff alleged, inter alia, that the judgments in question were "final, conclusive and enforceable" in England, within the meaning of section 5302 of the CPLR, and that the English court rendering the judgments had personal jurisdiction over defendants. Accordingly, plaintiff argued, under article 53 of the CPLR, it was entitled to summary judgment in its favor.

Defendants opposed the motion for summary judgment on a number of grounds including, inter alia, claims that the court issuing the English judgments lacked personal jurisdiction over them, that they had never appeared in the original action to recover on the notes and that they had not been afforded an adequate opportunity to do so. They claimed that the personal guarantee notes that they had executed were limited to an amount not to exceed 15,000 pounds sterling; and further that the receiver who had been appointed to manage the book stores had sold the inventory for an exceedingly low price. In addition, they argued that the English judgments were not presently enforceable in England in view of the fact that more than six years had elapsed since the judgments had been rendered and under English law an action to enforce those judgments in England was time barred. Defendants also advised the court that an application to vacate the judgments was pending in England and requested that all further proceedings be stayed pending resolution of that application. It appears, also, that defendants had obtained a temporary ex parte stay of execution of the judgments in England. That stay was, however, vacated on June 28, 1982, and apparently the application to vacate the judgments was thereafter withdrawn.

Special Term, rejected defendants' arguments as to why the English judgments should not be accorded recognition and granted summary judgment in favor of plaintiff in the principal sum of $916,566.40. In its memorandum decision the court addressed the question of the purported time bar to enforcement of the judgments in England as follows:

"The plaintiff contends that the judgments are enforceable by writ of execution (referred to as fieri facias). It is conceded by both sides after six years from the date of judgment such writs to enforce judgments cannot be employed without obtaining leave of Court. The plaintiff has submitted proof by experts on the laws of the United Kingdom that applications for such writs are routinely granted and would certainly be permitted in view of the facts surrounding these judgments and their attempted enforcement. The defendants submit proof of similar experts who reach a contrary opinion. The defendants' experts maintain that an application for a writ of execution would not be granted in a factual situation similar to the one now present.

"Thus, the defendants' claim that this Court must determine if the judgments in question are enforceable under the laws of the United Kingdom. However, the Court is spared this task by virtue of the actions taken by the courts in the United Kingdom. For it is undisputed that the defendant Naftali Nothmann, appearing by his sister obtained ex parte from a British Court a stay of both judgments. That stay was later vacated upon a contested hearing at which time defendants were represented by competent counsel. The stay was vacated and in passing the Master remarked that the issue was 'otiose,' the precise meaning and context of which is not readily apparent. That determination vacating the stay was appealed and on appeal affirmed and an application for a further stay was denied. Thus, the Courts in the United Kingdom have failed to date, to vacate the judgments or to declare said judgments unenforceable, or to stay the enforcement of these judgments. Thus, the clear inference is that the Courts of the United Kingdom have treated the judgments as capable of enforcement provided plaintiff seeks prior leave of an English Court for the issue of a Writ of Execution."

Article 53 of the CPLR (Uniform Foreign Country Money-Judgments Recognition Act), which governs the recognition of foreign country money judgments in New York, represents a partial codification of the common-law rules regarding recognition of foreign country judgments. The purpose behind the adoption of the uniform act was not so much to aid in the recognition of foreign judgments in this State--which had a well-established body of case law in this area according conclusive effect to most final foreign judgments--as it was to broaden the prospects for enforcement of New York judgments abroad. Notwithstanding New York's extensive case law, many foreign countries with strict reciprocity requirements regarding enforcement of foreign judgments had refused to accord recognition to New York judgments absent some statutory manifestation that their own judgments would be entitled to enforcement in New York (see Thirteenth Ann Report of NY Judicial Conference, 1968, p 195). The scope of article 53 is broad and basically encompasses judgments from those foreign jurisdictions which are not entitled to recognition under the full faith and credit clause of section 1 of article IV of the United States Constitution (CPLR 5301). There is no dispute that the English judgments at bar fall within the scope of the article.

It should be noted that the application of article 53 is specifically limited to money judgments. Thus, for purposes of the article, the term "foreign country judgment" is defined as "any judgment of a foreign state granting or denying recovery of a sum of money, other than a judgment for taxes, a fine or other penalty, or a judgment for support in matrimonial or family matters" (CPLR 5301, subd. ). That is not to say, however, that other types of foreign judgments will be denied enforcement in New York. Rather, enforcement in those situations is governed instead by common-law principles and existing case law which, as noted above, were well established and afforded a framework for according recognition to most foreign country judgments. It is clear that in enacting article 53 the Legislature did not intend to pre-empt this body of law. Indeed, it was specifically provided that "article does not prevent the recognition of a foreign country judgment in situations not covered by this article" (CPLR 5307; see, also, ...