Case Title: Orix Financial Services, Inc. v. John Allen Murphy

Citation: 

Docket Number: 1070996

State: alabama

Court: Alabama Supreme Court

Date: 2008-11-26T00:00:00Z

Document:
REL: 11/26/2008
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2008-2009
____________________
1070996
____________________
Orix Financial Services, Inc.
v.
John Allen Murphy
Appeal from Lee Circuit Court 
(CV-07-417)
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.
1070996
When Murphy entered into this transaction, the name of
1
the other party to the note was Orix Credit Alliance, Inc.  On
September 26, 2000, Orix Credit Alliance formally changed its
name to Orix Financial Services, Inc.  For convenience, the
entity is referred to simply as "Orix" throughout this
opinion.
2
I.
On February 7, 1998, Murphy executed a promissory note
pursuant to which he agreed to pay Orix $67,048.   That
1
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
1070996
3
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
1070996
4
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."
1070996
5
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
1070996
6
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
1070996
7
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 York  is governed by N.Y. C.P.L.R. §
1
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
1070996
8
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.
________________
" The guaranty provides, and the parties agree, that
1
this case is governed by New York law.
" Section 318, in turn, states:  'A person may be
2
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.'"
(Emphasis added.)  See Orix Fin. Servs., Inc. v. Baker, 1
Misc. 3d 288, 291, 768 N.Y.S.2d 780 (N.Y. Sup. Ct.
2003)(recognizing that New York courts have held that service
upon a designated agent agreed upon by the parties for the
purpose of litigation arising from a contract dispute is
1070996
9
acceptable); and National Equip. Rental, Ltd. v. Szukhent, 375
U.S. 311 (1963)(recognizing the validity of a provision in a
contract creating agency for service of process in litigation
in New York).  Thus, New York law provides for the designation
of an agent for the receipt of process in an action related to
a contract dispute pursuant to the procedure set forth in N.Y.
C.P.L.R. §§ 308 and 318 or within the contract itself.  See
also Fashion Page, Ltd. v. Zurich Ins. Co., 50 N.Y.2d 265,
272, 406 N.E.2d 747, 751, 428 N.Y.S.2d 890, 893 (1980) ("A
corporation may appoint an agent to accept service without
observing the formalities necessary to 'designate' an agent
pursuant to C.P.L.R. § 318.  Designation is merely a type of
appointment which might, under certain circumstances, offer
special benefits to the corporation or principal. ...  In any
event the designation procedure is optional.  It is not the
only way of appointing an agent for receipt of process ....").
It is undisputed that the promissory note provided that C-A
Credit could accept service on behalf of Murphy and that C-A
Credit did in fact do so; therefore, service in this case was
proper.  
1070996
10
Moreover, Orix submitted evidence to the trial court,
both documentary and in the form of affidavits from personnel
at Orix and C-A Credit, indicating that both it and C-A Credit
sent notice of the action to Murphy's correct address.
Murphy's argument that the otherwise proper service effected
on C-A Credit somehow became improper because he did not
receive notice of the action is not supported by New York law.
See Beckman v. Greentree Sec., Inc., 87 N.Y.2d 566, 570, 663
N.E.2d 886, 888 (1996) ("Due process does not require actual
receipt of notice before a person's liberty or property
interests may be adjudicated; it is sufficient that the means
selected for providing notice was 'reasonably calculated,
under all the circumstances, to apprise interested parties of
the pendency of the action and afford them an opportunity to
present their objections,' (Mullane v. Central Hanover Bank &
Trust Co., 339 U.S. 306, 314 [(1950)]).").
We 
further 
note 
that 
although 
the 
trial 
court
specifically found that Orix had selected C-A Credit as
Murphy's agent and that Murphy had not negotiated that aspect
of the promissory note, Murphy has wisely chosen not to argue
to this Court that the clause appointing C-A Credit as
1070996
11
Murphy's agent was unconscionable for that reason.  We are
aware of no New York caselaw that would support that argument,
and caselaw from the Supreme Court of the United States would
appear to weigh against it.  See National Equipment Rental,
Ltd. v. Szukhent, 375 U.S. at 317-18 ("It is argued, finally,
that the agency sought to be created in this case was invalid
because [the designated agent] may have had a conflict of
interest.  This argument is based upon the fact that she was
not personally known to the respondents at the time of her
appointment and upon a suggestion in the record that she may
be related to an officer of the petitioner corporation.  But
such a contention ignores the narrowly limited nature of the
agency here involved.  [The designated agent] was appointed
the respondents' agent for the single purpose of receiving
service of process.  An agent with authority so limited can in
no meaningful sense be deemed to have had an interest
antagonistic to the respondents, since both the petitioner and
the respondents had an equal interest in assuring that, in the
event of litigation, the latter be given that adequate and
timely notice which is a prerequisite to a valid judgment.").
1070996
12
Having established that Murphy was properly served via
his designated agent C-A Credit, we now turn to the forum-
selection clause and the issue whether Murphy submitted to the
jurisdiction of the New York court when he signed the
promissory note containing the forum-selection clause.  New
York courts generally enforce a forum-selection clause unless
it is shown to be unreasonable.  See, e.g., Brooke Group Ltd.
v. JCH Syndicate 488, 87 N.Y.2d 530, 534, 663 N.E.2d 635, 637,
640 N.Y.S.2d 479, 481 (1996) ("Although once disfavored by the
courts, it is now recognized that parties to a contract may
freely select a forum which will resolve any disputes over the
interpretation or performance of the contract.  Such clauses
are prima facie valid and enforceable unless shown by the
resisting party to be unreasonable.").  Our Court of Civil
Appeals specifically recognized this fact in a similar case
when it stated:
"Specifically, New York courts will enforce an
otherwise valid forum-selection clause as a basis
for 
personal 
jurisdiction 
over 
a 
nonresident
defendant unless enforcement of the clause would be
"'unreasonable, 
unjust, 
in 
contravention 
of
public policy, invalid due to fraud or
overreaching, or it is shown that a trial
in the selected forum would be so gravely
difficult that the challenging party would,
1070996
13
for all practical purposes, be deprived of
its day in court.'
"Premium Risk Group, Inc. [v. Legion Ins. Co.], 294
A.D.2d [345,] 346, 741 N.Y.S.2d [563,] 564 [(2002)].
Under New York law, a defendant challenging the
enforcement of a forum-selection clause bears the
burden of proving a basis for nonenforcement of the
clause.  Id."
Ex parte Trinity Auto. Servs., Ltd., 974 So. 2d at 1010-11.
In the present case, Murphy successfully argued to the trial
court that the clause was unreasonable, and therefore
unenforceable, because: (1) he did not negotiate it; (2) it
would be highly inconvenient for him to defend an action in
New York because of the distance between New York and Alabama;
and (3) he had insufficient contacts with New York to warrant
being subject to suit there.  The trial court erred, however,
because, under the relevant law, none of these reasons is
sufficient to merit the invalidation of the forum-selection
clause.  
Although Murphy did not negotiate the forum-selection
clause in the promissory note, he nevertheless signed the note
and is therefore subject to its terms.  As the United States
District Court for the Southern District of New York has
stated:
1070996
14
"A forum selection clause can bind contracting
parties even when the contract in question is a form
contract and not subject to negotiation.  See
Carnival Cruise [Lines, Inc. v. Shute], 499 U.S.
[585,] 593, 111 S.Ct. 1522 [(1991)] (enforcing a
forum selection clause written on the backs of
passenger ship tickets, despite the passengers'
objection that they had not been able to bargain
over the tickets' conditions); Design Strategy Corp.
[v. Nghiem], 14 F.Supp.2d [298,] 301, [(S.D.N.Y.
1998)] (refusing to set aside a forum selection
clause contained in a standard employment contract).
By 
signing 
the 
Purchase 
Order 
Form, 
[the
plaintiff's] officers accepted the prerequisites of
doing business with [the defendant], and [the
plaintiff's] complaint that it did not fully
negotiate these conditions is unavailing.  'The
forum selection clause was part of the bargain into
which [the plaintiff] freely entered,' Bense [v.
Interstate Battery Sys. of America, Inc.], 683 F.2d
[718,] 722 [(2d Cir. 1982)], and [the plaintiff] can
not now escape its terms."
Strategic Marketing & Commc'ns, Inc. v. Kmart Corp., 41 F.
Supp. 2d 268, 272 (S.D.N.Y. 1998).
Similarly, our Court of Civil Appeals has previously
reviewed New York law and addressed the arguments that the
distance between Alabama and New York makes defending an
action in New York so inconvenient as to make it unreasonable
to defend one's self in a New York court, and that an Alabama
defendant must have some level of minimum contacts with New
York, even in the presence of a forum-selection clause
identifying New York as the forum for a dispute, to be subject
1070996
Under New York law, a party seeking the invalidation of
2
a forum-selection clause must do more than merely establish
that it would be expensive, time-consuming, and inconvenient
to defend a claim in a New York court.  Rather, the party must
show that such a trial "'would be so gravely difficult and
inconvenient that the challenging party would, for all
practical purposes, be deprived of his or her day in court.'"
Bell Constructors, Inc. v. Evergreen Caissons, Inc., 236
A.D.2d 859, 860, 654 N.Y.S.2d. 80, 81 (N.Y. App. Div. 1997)
(quoting Price v. Brown Grocery, Inc., 206 A.D.2d 195, 198,
619 N.Y.S.2d 414, 416 (N.Y. App. Div. 1994)).
15
to suit there and found those arguments to be lacking.  In Ex
parte Trinity Automotive Services, Ltd., the Court of Civil
Appeals specifically stated:
"[U]nder New York law, the distance between Alabama
and New York is not sufficient to hold that the
forum-selection clause in the present case is
unenforceable in the absence of any evidence that
[the defendant] was unable to travel to New York for
the purpose of defending itself against [the
plaintiff's] claim."
974 So. 2d at 1013.  Similarly, Murphy has presented no
evidence in the present case indicating that he would be
utterly unable to travel to New York to defend himself in an
action in that forum.   In that same case, the Court of Civil
2
Appeals stated:
"[A] forum-selection clause can be sufficient under
federal and New York law, without more, to vest a
New York court with jurisdiction over a nonresident
defendant, notwithstanding the defendant's lack of
sufficient contacts with the State of New York or an
independent jurisdictional basis under the New York
1070996
16
long-arm statute.  See Burger King Corp. [v,
Rudzewicz], 471 U.S. [462,] 472 n. 14, 105 S.Ct.
2174[, 2182 n. 14 (1982)]." 
Ex parte Trinity Auto. Servs., Ltd., 974 So. 2d at 1011 n. 4.
Thus, whether Murphy had some other level of contact with New
York is ultimately irrelevant to a determination of whether
the forum-selection clause should be enforced.
IV.
The trial court held that the default judgment entered
against Murphy by a New York court was void because Murphy had
not been served and because that court did not have personal
jurisdiction over Murphy.  However, because the agent Murphy
designated in the promissory note to receive service on his
behalf was properly served and because the promissory note
contained a valid forum-selection clause designating New  York
as the appropriate venue for any disputes related to the
promissory note, the trial court's judgment was erroneous.
The default judgment entered against Murphy in New York is
valid and Orix has established that it is now entitled to
domestication of that judgment in Alabama.  Accordingly, the
judgment entered by the trial court is hereby reversed and the
1070996
17
case is remanded for further proceedings consistent with this
opinion.
REVERSED AND REMANDED.
Cobb, C.J., and See, Lyons, Woodall, Smith, Bolin, and
Parker, JJ., concur.
Murdock, J., concurs specially.
1070996
18
MURDOCK, Justice (concurring specially).
I concur in the main opinion.  I write separately to
comment briefly upon the standard of review and to explain my
understanding of the Court's holding today regarding service
of process. 
First, I agree with the proposition that appellate review
in this case is de novo, as it typically is in appeals from
the denial of a motion filed under Rule 60(b)(4), Ala. R. Civ.
P.  This case, like most such cases, does not involve factual
findings by the trial court based on live testimony of
witnesses that could implicate the ore tenus rule and thereby
require some deference by this Court to the findings of the
trial court.  The factual findings of the trial court in this
case were based upon affidavits and documentary evidence,
evidence which this Court is as competent to assess as was the
trial court.
As for the merits of this case, the main opinion states
that "the promissory note provided that C-A Credit could
accept service on behalf of Murphy and that C-A Credit did in
fact do so; therefore, service in this case was proper."  ___
So. 2d at ___ (emphasis added).  That statement is correct so
far as it goes, but it should not in my opinion be read to
1070996
As the main opinion goes on to note, due process, and not
3
just New York law alone, "'does not require actual receipt of
notice before a person's liberty or property may be
adjudicated; it is sufficient that the means selected for
providing notice was "reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency
of the action and afford them an opportunity to present their
objections."'"  ___ So. 2d at ___ (quoting Beckman v.
19
mean that service on C-A Credit alone is all that was required
to make "service in this case ... proper."  It is important to
note that the same contractual provision by which Murphy
authorized Orix to deliver process to C-A Credit, instead of
directly to Murphy, coupled that authorization with a
requirement that Orix contemporaneously (within three days)
mail notice of any legal action in a prescribed manner
directly to Murphy.  In the present case, however, the record
indicates that this mailing requirement was met.
The main opinion goes on to state (1) that Orix submitted
evidence "both documentary and in the form of affidavits from
personnel at Orix and C-A Credit" indicating that they each
had mailed notice of the lawsuit to Murphy, and (2) that
Murphy's argument that service upon him was "somehow ...
improper because he did not receive [the mailed notices] is
not supported by New York law." ___ So. 2d at ___ (emphasis
added).   In the context of the particular contractual
3
1070996
Greentree Sec., Inc., 87 N.Y.2d 566, 570, 663 N.E.2d 886, 888
(1996)) (emphasis added). 
20
provisions of the promissory note at issue in this case, I
agree that actual receipt by Murphy is not the condition to
which he and Orix agreed.  The provision in the promissory
note for notice to be addressed either to the address shown on
the note or to Murphy's "last known address," and posted via
"certified mail" (with no requirement for a signed, returned
receipt), is more consistent with a contractual obligation by
the plaintiff to mail the notification in a certain manner
than with a contractual condition that the defendant actually
receive that mailing.  Having agreed to this method of
notification as a supplement to the formal service of process
upon C-A Credit, Murphy in essence took the risk that it would
be effective.  See Beckman v. Greentree Sec., Inc., 87 N.Y.2d
566, 570, 663 N.E.2d 886, 888 (1996)  ("The notice procedure
chosen need not eliminate all risk that notice might not
actually reach the affected party."); see also note 3, supra.
I do not read the main opinion as saying that it would
make no difference if the record before us indicated that Orix
and 
C-A 
Credit 
did 
not 
actually 
mail 
the 
required
notifications to Murphy in the agreed-upon manner.  In such an
1070996
21
event, the contractually agreed-upon method of service, formal
service upon a specially designated New York-based agent
coupled with a supplemental notification by mail, would not
have been fully satisfied.  Cf.  National Equip. Rental, Ltd.
v Szukhent , 375 U.S. 311, 318 (1964) ("A different case would
be presented if [the designated agent] had not given prompt
notice to the respondents, for then the claim might well be
made that her failure to do so had operated to invalidate the
agency.") (quoted with approval in Orix Fin. Servs., Inc. v.
Baker, 1 Misc.3d 288, 290, 768 N.Y.S.2d 780, 782 (2003)). 
But that is not the case before us.  In the case before
us, affidavits from both Orix and C-A Credit evidence the
actual mailing of the notifications to Murphy.  Furthermore,
the record contains a copy of a certified-mail receipt
evidencing the mailing by Orix to the required address.  In
response, Murphy's affidavit essentially is limited to an
averment that he did not receive these mailings.  I also note
that he did not assert that the address to which Orix and C-A
Credit  averred that they mailed the required notices was not
his correct address.  Based on this evidence and the above-
described law, I agree that the New York judgment in favor of
Orix should be domesticated.