Royal Bank of Canada v. Trentham Corp.

Decision Date02 June 1980
Docket NumberCiv. A. No. H-79-318.
CourtU.S. District Court — Southern District of Texas

Kelley, Ryan & Merrill, Houston, Tex. (Joseph W. Ryan), Houston, Tex., for plaintiff.

Jon Mercer, Houston, Tex., for defendant.


STERLING, District Judge.

Pending before the Court is Plaintiff's motion for summary judgment. The Royal Bank of Canada brings this suit for recognition and enforcement of a judgment entered by default in the Court of the Trial Division of the Supreme Court of Alberta, Judicial District of Calgary, on October 11, 1978. On that date a judgment in the amount of $250,000.00 plus interest and costs was entered against Trentham Corporation of Texas. The basis for that lawsuit was a contract of guaranty by which the Defendant agreed to guarantee payment of all liabilities up to $250,000.00 owed by Trentham Canada to the Plaintiff. Defendant resists enforcement of the Canadian judgment based on its contentions that the Canadian court did not have personal jurisdiction over it and that it was improperly served. This Court is of the opinion that there is no genuine issue as to any material issue and that the Royal Bank is entitled to judgment as a matter of law pursuant to Rule 56, Fed.R.Civ.P.

Although the issue has not been resolved by the Supreme Court, most courts have assumed that in cases founded upon diversity jurisdiction between citizens of a state and a foreign country, the rule of Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), applies and state law governs. Compare Aetna Life Insurance Co. v. Tremblay, 223 U.S. 185, 32 S.Ct. 309, 56 L.Ed. 398 (1912), Somportex, Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435 (3rd Cir. 1971), cert. denied, 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479 (1972), Toronto-Dominion Bank v. Hall, 367 F.Supp. 1009 (E.D.Ark.1973), and Compania Mexicana Rediodifusora Franteriza v. Spann, 41 F.Supp. 907 (N.D.Tex.1941), aff'd 131 F.2d 609 (5th Cir. 1942) with Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964), Her Majesty the Queen in Right of the Province of British Columbia v. Gilbertson, 597 F.2d 1161 (9th Cir. 1979) and John Sanderson & Co. (Wool) Pty. Ltd. v. Ludlow Jute Co., Ltd., 569 F.2d 696 (1st Cir. 1978).

Under Texas law, as well as that of all the other states, a judgment rendered in a foreign country is not entitled to the full faith and credit accorded the judgments of the courts of the sister states. See, Dunn v. Tiernan, 284 S.W.2d 754 (Tex.Civ. App.-El Paso, 1955, writ ref'd n. r. e.). The extent to which a judicial decree of one nation will be allowed to operate within the dominion of another nation depends upon the concept of the "comity of nations." Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95 (1895). "Comity" has been described as more than mere courtesy and accommodation, but not achieving the force of an imperative. "Rather, it is a nation's expression of understanding which demonstrates due regard both to international duty and convenience and to the rights of persons protected by its own laws." Somportex, supra, 453 F.2d at 440. Generally, Texas courts will recognize such a decree where the foreign court is a competent one having jurisdiction over the parties and the subject matter where there was an opportunity for a full and fair hearing before an unbiased tribunal, and where there was no fraud in the procurement of the judgment or any other special reason for dishonoring it. See, Mpiliris v. Hellenic Lines, Ltd., 323 F.Supp. 865 (S.D.Tex.1969), aff'd 440 F.2d 1163 (5th Cir. 1971), Compania Mexicana, supra, and Banco Minero v. Ross, 138 S.W. 224 (Tex.Civ.App.-San Antonio, 1911), aff'd 106 Tex. 522, 172 S.W. 711 (1915).

Defendant contends that this is a proper case for nonrecognition because the Canadian court did not have personal jurisdiction over it and, therefore, the resulting judgment entered as a result of Defendant's default is void. Since the Defendant did not enter an appearance in the Alberta court it is entitled to raise its jurisdictional defense in this proceeding. See, Baldwin v. Iowa State Traveling Men's Association, 283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244 (1931), and Sprague & Rhodes Commodity Corp. v. Instituto Mexicano Del Cafe, 566 F.2d 861 (2d Cir. 1977).

In analyzing whether a court of a foreign country has acquired jurisdiction over the person of a nonresident defendant, courts of this country have applied the traditional American formulations of the due process tests by which a court's exercise of personal jurisdiction over a nonresident defendant is limited by the Fourteenth Amendment. See, Banco Minero, 172 S.W. at 714 (following the then current Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1878)), and Bank of Montreal v. Kough, 612 F.2d 467, 471 (9th Cir. 1980), Somportex, supra, at 443-444, and Cherun v. Frishman, 236 F.Supp. 292, 296 (D.D.C.1964), (all applying the "minimum contacts" test set out in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

Due process, as articulated in International Shoe requires that before a court may exercise personal jurisdiction over a nonresident defendant, there must exist sufficient "minimum contacts" between the defendant and the forum. In World-Wide Volkswagen Corp. v. Woodson, ___ U.S. ___, ___, 100 S.Ct. 559, 563, 62 L.Ed.2d 490 (1980), the Supreme Court explained that the concept of minimum contacts performs two functions. First, it protects a defendant from the burden of defending in a forum which is unreasonable because the defendant has had little or no contact with it and second, it acts to ensure that the states do not overreach the limits imposed upon them by their status as coequal sovereigns within the federal system. Of course, a forum does not become an unreasonable one only because the defendant resides a long way from it. That burden is balanced against "the forum state's interest in adjudicating the dispute citation omitted, the plaintiff's interest in obtaining convenient and effective relief citation omitted, .. the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several states in furthering fundamental substantive policies." Id., at ___, 100 S.Ct. at 564. Many of these same concerns are present with regard to foreign judgments and relations among nations. As the Supreme Court stated in Hilton v. Guyot, comity, with respect to the enforcement of foreign judgments, "contributes so largely to promote justice between individuals, and to produce a friendly intercourse between the sovereignties to which they belong, that courts of justice have continually acted upon it, as a part of the voluntary law of nations." 159 U.S. at 165, 16 S.Ct. at 144 (quoting from Bank v. Earle, 13 Pet. 519, 589, 10 L.Ed. 274 (1839)). A foreign country's assertion of personal jurisdiction over a nonresident defendant still may be subjected to closer examination than that of our sister states, if only because the burdens placed on the defendant may be far greater there because of possibly greater distances and language differences.

An analysis of Defendant's contacts with Alberta, Canada, makes it abundantly clear that those contacts are substantial and that it would not be unfair or unreasonable to require the Defendant to answer on its contract of guaranty in Canada. The substantiality of a nonresident defendant's contacts with the forum has never depended upon the number of contacts. In McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), the Supreme Court approved the exercise of jurisdiction over a nonresident defendant which had one contact with the forum, the mailing of an offer of reinsurance to a resident in the forum. The Canadian court's exercise of personal jurisdiction over the Defendant is similarly proper in this case.

In McGee, the Supreme Court noted that for due process purposes it is sufficient that the suit be based "on a contract which had substantial connection with that State." 355 U.S. at 223, 78 S.Ct. at 201. There the contract was delivered to California, the premiums mailed from there, and the insured was a California resident when the obligations of the insurance company became due. The Supreme Court also noted that California has a manifest interest in providing a means of effective redress for its residents when their insurers refuse to pay claims. In this case, Defendant delivered two contracts of guaranty to Plaintiff in Calgary, Alberta, Canada. The first contract of guaranty, with a $50,000 limitation, was mailed by Mr. Graham, Defendant's vice-president, with a letter of corporate undertaking and the certified corporate resolution. Later, the $250,000 contract of guaranty was executed and delivered to Plaintiff. These guaranties contemplated that the Royal Bank would lend money to Trentham Canada, in Canada, and that Trentham Texas would answer for those loans in the event that the Canadian corporation defaulted. In U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760 (Tex.1977), the Texas Supreme Court sanctioned the exercise of personal jurisdiction over a nonresident defendant in a case similar to the one presented here by citing with approval the case of National Truckers Service, Inc. v. Aero Systems, Inc., 480 S.W.2d 455 (Tex. Civ.App.-Ft. Worth 1972, writ ref'd n. r. e.). In that case the Defendant Aero, a Florida corporation, had been doing business in Texas through a subsidiary which became delinquent on its accounts. Aero then agreed to guarantee the subsidiary's debts, executed a guaranty, and mailed it to the plaintiff in Ft. Worth. The guaranty was made performable in Ft. Worth. Relying on the guaranty, the plaintiff continued to extend credit to the subsidiary. The Supreme...

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