Toronto-Dominion Bank v. Hall

• Decision Date: 17 December 1973
• Docket Number: No. LR-72-C-174.,LR-72-C-174.
• Citation: 367 F. Supp. 1009
• Parties: The TORONTO-DOMINION BANK, Plaintiff, v. John W. HALL, Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

367 F. Supp. 1009

The TORONTO-DOMINION BANK, Plaintiff, v. John W. HALL, Defendant.

No. LR-72-C-174.

United States District Court, E. D. Arkansas, W. D.

December 17, 1973.

William R. Wilson, Jr., Wilson & Hodge, Little Rock, Ark., Herrington & Tait, Kingston, Ontario, Canada, for plaintiff.

Robert D. Ross, Pope, Pratt, Shamburger, Buffalo & Ross, Little Rock, Ark., for defendant.

Memorandum Opinion

HENLEY, Chief Judge.

This is an action brought by plaintiff, The Toronto-Dominion Bank, a Canadian banking institution, against John W. Hall, an individual citizen of Arkansas, on a judgment rendered in favor of the Bank and against Hall on June 2, 1970, by the Supreme Court of the Province of Ontario in the Dominion of Canada. The amount of the judgment is $31,831.36. Federal jurisdiction, which is not questioned, is based upon 28 U.S.C.A., section 1332(a)(2).

The cause is now before the Court on the motion of plaintiff for summary judgment, which motion has been submitted on the pleadings, the motion as amended, defendant's response to the motion, documentary exhibits, defendant's affidavit, and memorandum briefs.

It appears from the record that in 1967 the defendant engaged in certain business transactions in Canada which resulted ultimately in his executing a contract guaranteeing payment to the Bank of a number of promissory notes secured by liens on automobiles which were being used in the prosecution of the business of an automobile rental service in which defendant was interested. The notes were not paid by the makers, and the Bank brought its suit against the defendant on his contract of guaranty.

The defendant was served personally in Arkansas under an Ontario Rule of Practice similar to the Arkansas "long arm" statute, Ark.Stats.Ann., Cum. Supp., § 27-2501 et seq. The defendant retained Canadian counsel and defended the case on its merits. The Canadian court resolved the issues against the defendant and rendered the judgment on which this suit is brought.

In support of its motion the Bank urges that on principles of comity and res judicata this Court should enforce the Canadian judgment as such and should not undertake to relitigate issues that were raised or could have been raised in the Canadian litigation.

The position of the defendant is that he has a meritorious defense or defenses to the underlying claim of the Bank, and he urges that this Court should not uncritically enforce the judgment of the Canadian court. Defendant contends that no satisfactory showing has been made that a court sitting in Ontario would so enforce an Arkansas judgment, and he contends further that to enforce the Canadian judgment in this case would be contrary to the public policy of Arkansas.

Since the suit is based on a judgment rendered by a court of a foreign nation, the full faith and credit clause of the Constitution of the United States has no application here, and it does not appear that the matter is governed by any federal statute or by any treaty between the United States and Canada. Thus the question must be decided on the basis of the common law, including common law rules with respect to the enforcement in the courts of this country of judgments rendered by the courts of foreign nations.

The overall question is discussed in some detail in Leflar, American Conflicts Law, section 74; it is dealt with by the proposed Uniform Foreign Money — Judgments Recognition Act, which was proposed by the Commissioners on Uniform State Laws in 1962, and by section 98 of Restatement 2d, Conflicts of Laws. The question is rather extensively annotated in 13 A.L.R.Fed. 208, following the text of the opinion in the case of Somportex v. Philadelphia Chewing Gum Corporation, 3 Cir., 1971, 453 F.2d 435, 13 A.L.R.Fed. 194.

I.

The jurisdiction of the Court is based on diversity of citizenship, and the question at once arises as to whether the rights of the parties are governed by Arkansas State law, including the Arkansas law of conflicts of laws, under Erie Railroad Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, or whether they are governed by "federal common law." It is observed that suits of this kind necessarily involve to some extent the relations between the United States and foreign governments and for that reason perhaps should be governed by a single uniform rule. Cf. Banco Nacional de Cuba v. Sabbatino, 1964, 376 U.S. 398, 421-427, 84 S.Ct. 923, 11 L.Ed.2d 804.

While it can be argued that the enforceability of a foreign judgment in the courts of one of the United States should be determined by reference to a general rule of federal law,¹ and while Professor Leflar suggests that such an approach to the problem might be taken,² it appears to the Court that as the law stands today, Erie v. Tompkins, supra, is applicable and that in this case the governing law is that of Arkansas. Somportex Ltd. v. Philadelphia Chewing Gum Corporation, supra; Svenska Handelsbanken v. Carlson, D.C.Mass., 1966, 258 F.Supp. 448; Leflar, op. cit., p. 172.

The question is a novel one in Arkansas, and it therefore becomes the duty of the Court to predict as best it can how the Supreme Court of Arkansas would answer the question were it presented to that Court. Clements Auto Co. v. Service Bureau Corporation, 8 Cir., 1971, 444 F.2d 169; Village of Brooten v. Cudahy Packing Co., 8 Cir., 1961, 291 F.2d 284; National Bank of Eastern Arkansas v. General Mills, Inc., 8 Cir., 1960, 283 F.2d 574.

II.

Regardless of whether State law or federal law is to be applied in a case like this the point of departure for discussion is obviously the decision of the Supreme Court of the United States in the leading case of Hilton v. Guyot, 1895, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95. In that case suit was brought in federal court in New York on a judgment rendered against an American citizen by a French court of competent jurisdiction; the French court had jurisdiction of the person of the defendant, and the case was tried on the merits. The lower courts gave conclusive effect to the judgment of the French court, and the decision was reviewed by the Supreme Court.

The general rule laid down by the Supreme Court, which rule has never been questioned, is as follows (pp. 205-206 of 159 U.S., pp. 159-160 of 16 S.Ct.):

"When an action is brought in a court of this country, by a citizen of a foreign country against one of our own citizens, to recover a sum of money adjudged by a court of that country to be due from the defendant to the plaintiff, and the foreign judgment appears to have been rendered by a competent court, having jurisdiction of the cause and of the parties, and upon due allegations and proofs, and opportunity to defend against them, and its proceedings are according to the course of a civilized jurisprudence, and are stated in a clear and formal record, the judgment is prima facie evidence, at least, of the truth of the matter adjudged; and it should be held conclusive upon the merits tried in the foreign court, unless some special ground is shown for impeaching the judgment, as by showing that it was affected by fraud or prejudice, or that, by the principles of international law, and by the comity of our own country, it should not be given full credit and effect."

A majority of the Court then went on to hold that a foreign judgment would not be given conclusive effect unless the courts of the rendering country would give the same effect to a comparable judgment of an American court. 159 U.S. at 210, 16 S.Ct. 139. And the majority held that since the French courts would not give conclusive effect to a similar American judgment, such effect could not be given to the French judgment in suit. The judgment of the lower court was reversed. A strong dissenting opinion was filed by Chief Justice Fuller, and Justices Harlan, Brewer, and Jackson joined in the dissent.

Hilton was decided on June 3, 1895, and on the same day the Court decided Ritchie v. McMullen, 1895, 159 U.S. 235, 16 S.Ct. 171, 40 L.Ed. 133, and gave conclusive effect to an in personam judgment rendered against an American citizen by a Canadian court sitting in Ontario. The Court said (p. 242 of 159 U.S., p. 174 of 16 S.Ct.): "By the law of England, prevailing in Canada, a judgment rendered by an American court under like circumstances would be allowed full and conclusive effect."

While the majority of the Court in Hilton expressly denied that its reciprocity requirement was based upon any theory of retaliation, 159 U.S. at 228, 16 S.Ct. 139, Dr. Leflar has referred to the majority holding as a "doctrine of retaliation," Leflar, op. cit., p. 171, and has been sharply critical of it. He has this to say (Leflar, op. cit., pp. 171-172):

". . . The doctrine has received scant approval from commentators and is not binding on state courts. It punishes a private party for an assumed fault in the law of a foreign national and can have no appreciable tendency to induce a change in the foreign nation's law. Many state courts have refused to follow the Supreme Court doctrine of retaliation, while others have sought to limit it narrowly to its own facts by applying it only when judgment in the first case was for the plaintiff, so that a later action is barred if the prior foreign suit went in favor of the defendant therein. Such a distinction whereby application of the principle of res judicata is made to depend on who won the earlier case seems utterly artificial and wholly without regard for the reasons underlying the principle. It represents merely an effort to escape bad doctrine without rejecting it flatly, as when a Delaware court avoided the rule by holding that it did not apply when the foreign judgment was against someone who was not a citizen of the United States. Today, Hilton v. Guyot is not followed even in a majority of federal courts, since cases involving its problem usually arise in situations in which the Erie rule compels federal courts to follow

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