Title: Society of Lloyd's v. Baker

State: maine

Issuer: Maine Supreme Court

Document:

Decided April 9, 1996. *1337 Barbara A. Cardone (orally), Rudman & Winchell, Bangor, for Plaintiff. Thad B. Zmistowski (orally), Bernard J. Kubetz, Eaton, Peabody, Bradford & Veague, Bangor, for Defendant. Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, DANA, and LIPEZ, JJ. LIPEZ, Justice. Defendant Alan Louis Baker appeals from a summary judgment entered in the Superior Court (Penobscot County, Alexander, J.) in favor of plaintiff Society of Lloyd's on its complaint seeking enforcement of a foreign judgment. Baker contends that the court's grant of a summary judgement was in error because the foreign court's jurisdiction over him was fraudulently induced and, therefore, the court should not have recognized the foreign court's judgment. Alan Baker became a "Name" in the Society of Lloyd's (Lloyd's) in 1979.[1] In the latter part of 1986, after receiving assurances concerning the stability of his investments, *1338 Baker signed a new General Undertaking agreement with Lloyd's that reaffirmed his underwriting arrangement with Lloyd's and contained an explicit jurisdictional consent and exclusivity provision making England the exclusive forum for adjudication of any disputes between the parties. Baker read and understood this jurisdictional provision and signed the agreement. The new General Undertaking was to take effect on January 1, 1987. During this same time period, Baker also decided to increase his investment and to switch management of his investment to another member agent. By September 1989 the syndicates that Baker had invested in began to suffer repeated losses and Baker relinquished his position as a Name. In August 1990 Lloyd's directed that Baker pay £ 32,041 pursuant to the provisions of section 10-A(2) of Lloyd's Central Fund Bylaw.[2] In breach of the contract, Baker refused to pay the amount specified and Lloyd's subsequently served notice on Baker of the commencement of a civil action in England's High Court of Justice, Queen's Bench Division, demanding payment of the £ 32,041. After Baker failed to appear to defend, the High Court of Justice, Queen's Bench Division, Commercial Court, entered a default judgment against Baker in the amount of £ 32,041 and £ 208 in costs. In November 1993 Lloyd's filed a complaint in the Superior Court seeking enforcement of the English judgment. Lloyd's later moved for a summary judgment on the ground that the court should enforce the English Court's judgment. Baker opposed the summary judgment and moved to stay the proceeding and to add the affirmative defense of claim preclusion to his responsive pleadings. The court entered a summary judgment for Lloyd's, concluding that Baker's allegations of fraud provided no basis for collaterally attacking the English judgment, and denied Baker's motions to stay the proceedings and amend his answer. We affirm the summary judgment. Comity Although a judgment obtained in a foreign country does not conclusively establish a party's liability, the foreign court's judgment is prima facia evidence of the party's liability. Tremblay v. Aetna Life Ins. Co., 97 Me. 547, 554, 55 A. 509, 512 (1903); Rankin v. Goddard, 54 Me. 28, 33 (1866). Thus, the question presented to the court was whether to apply the doctrine of comity to the English judgment. Comity is a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another. It is not a rule of law, but one of practice, convenience and expediency. Although more than mere courtesy and accommodation, comity does not achieve the force of imperative or obligation. Rather, it is a nation's expression of understanding which demonstrates due regard both to international duty and convenience and to rights of persons protected by its own laws. Comity should be withheld only when its acceptance would be contrary or prejudicial to the interest of the nation called upon to give it effect. Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3rd Cir.1971), cert. denied, 405 U.S. 1017, 92 S. Ct. 1294, 31 L. Ed. 2d 479 (1972) (citations omitted). The application of the doctrine of comity depends upon fixed and well understood principles. 16 AM.JUR.2D Conflict of Laws § 11 (1979). That application is a question of law that may be resolved by the court on a motion for a summary judgment. See Tondreau v. Sherwin-Williams Co., 638 A.2d 728 , 730 (Me. 1994) (court may enter summary judgment when dispute exists only as to legal conclusion to be drawn from facts); Tisei v. Town of Ogunquit, 491 A.2d 564 , 568 (Me.1984) (summary judgment proceedings address questions of law). Relying on section 68 of the RESTATEMENT (SECOND) OF JUDGMENTS, Baker contends that the default judgment rendered by the English Court against him should not have been recognized by the Superior Court *1339 because the English Court's jurisdiction over him was induced by fraud. In essence, Baker argues that he continued as a "Name" in reliance on misrepresentations made by Lloyd's representatives about the nature and stability of his investment, and he was thereby fraudulently induced to sign the 1987 General Undertaking that contained the jurisdictional consent and exclusivity provision. Baker misconstrues the scope and rationale of section 68 of the Restatement. Section 68 states in pertinent part that [A] judgment by default may be avoided if the judgment; (1) Resulted from the defaulting party's being induced by fraud or duress to submit to the jurisdiction of the court or to refrain from contesting the action. RESTATEMENT (SECOND) OF JUDGMENTS § 68 (1982). Application of this section is limited to those instances when the defaulting party's "failure to appear is attributable to a fraudulent act of the party procuring the judgment. The fraud may inhere in the process of establishing jurisdiction or giving notice or in inducing the defendant not to appear after he was given notice." RESTATEMENT (SECOND) OF JUDGMENTS § 68 cmt. b (1982). As explained by one commentator, permitting a party to avoid a default judgment induced by fraud was one of the ameliorating doctrines developed to avoid injustice in the days when the power theory of the nature of jurisdiction held sway. When physical presence of the defendant within the territory of the forum was considered constitutionally sufficient for personal jurisdiction, plaintiffs sometimes sought to exploit that principle by luring the defendant into the territory by fraud or trickery ... To remove the incentive for such conduct on the part of plaintiffs, courts developed a doctrine of avoiding jurisdiction when personal service on the defendant was obtained by force or fraud. ROBERT C. CASAD, JURISDICTION AND FORUM SELECTION § 7:12 (1994). Thus, courts have generally applied the principle of law reported in section 68 to those limited instances when the prevailing party's fraud was designed to and actually causes the defaulting party to suffer the default judgment. See James O. Pearson, Jr., Annotation, Fraud in Obtaining or Maintaining Default Judgment as Ground for Vacating or Setting Aside in State Courts, 78 A.L.R.3d 150, 157 (1977). Although Baker correctly asserts that, pursuant to the Restatement, the labels of "extrinsic" or "intrinsic" fraud no longer determine which circumstances justify overcoming the conclusiveness of a judgment,[3] the Restatement also recognizes that the case law analysis justifying relief from a judgment still "roughly corresponds to the *1340 distinction formerly drawn between `extrinsic' and `intrinsic' fraud." RESTATEMENT (SECOND) OF JUDGMENTS § 68 cmt. a (1982). Thus, courts generally continue to permit relief only when the alleged fraud is of the type formerly denominated as "extrinsic" fraud, i.e. when the aggrieved party alleges that the prevailing party's fraudulent conduct (to use the classic term) "prevented" the defaulting party from contesting the action or having knowledge of the pending suit. See 47 AM.JUR.2D Judgments § 832 (1995) ("Courts in a number of jurisdictions provide relief from judgment on the basis that it was obtained through extrinsic fraud.").[4] Baker does not allege that Lloyd's deceived him about the meaning or purpose of the forum selection clause, nor that it was surreptitiously added to the 1987 General Undertaking. Indeed, he admits in his affidavit that before signing the 1987 General Undertaking he "noted" the forum selection clause and signed despite its presence. Moreover, Baker concedes that the entry of a default judgment against him was not the result of any chicanery on the part of Lloyd's, but rather was the result of his decision not to defend in order to conserve his resources. Thus, Baker failed to make any showing that the English judgment was the product of fraud or deception designed to prevent him from fully litigating a suit brought pursuant to the forum selection clause, or that there was fraud in the process by which jurisdiction was established. In contrast, Baker does allege that Lloyd's representatives fraudulently represented to him at the time of his initial investment, and prior to his decision in late 1986 to remain a Name, both the nature and the extent of the risk to which he was exposed. Baker states in his affidavit that he invested with Lloyd's because Lloyd's represented such an investment as a "stable," "conservative," "low risk," "can't miss retirement policy," and that he would not have made his initial investment or increased his investment with Lloyd's if he had known it to be otherwise. Baker's allegations of fraud relate to the business deal that he made, not to an issue of jurisdiction or the obtaining of the default judgment. The question of whether Baker may disaffirm the entire contract based on his allegations of fraud is one that he must raise and litigate in the English Court. The Superior Court properly recognized that court's judgment. Refusal to Stay the Proceedings We also reject Baker's contention that the court abused its discretion when it refused to stay the proceedings in the enforcement action pending the outcome of proceedings occurring in England, the successful prosecution of which may permit Baker to avoid the English judgment as a matter of law.[5] "A stay of proceedings ... is not a matter of right but a matter of grace. The grant or denial of the stay rests in the sound discretion of the court. It will only be granted when the court is satisfied that justice will thereby be promoted." Cutler Associates, Inc. v. Merrill Trust Co., 395 A.2d 453 , 456 (Me.1978) (citations omitted). Baker has not yet attempted to avoid the English judgment by directly or collaterally attacking it in the English Court. He has not demonstrated how a stay would serve any purpose other *1341 than delay. The court did not abuse its discretion in denying his motion for a stay. Denial of Motion for Leave to Amend Finally, we reject Baker's contention that the court abused its discretion in denying his motion for leave to amend his answer to include the affirmative defense of nonmutual offensive collateral estoppel. A motion for leave to amend an answer is addressed to the discretion of the trial court, and "[t]o overturn a denial of leave to amend one `must demonstrate a clear and manifest abuse of that discretion and must demonstrate granting such motion is necessary to prevent injustice.'" Miller v. Szelenyi, 546 A.2d 1013 , 1022 (Me.1988) (quoting Poulette v. Herbert C. Haynes, Inc., 347 A.2d 596 , 598 (Me.1975)). Given the court's decision to recognize the English Court's judgment as a final and valid judgment, and the inapplicability of the doctrine asserted in the denied amendment,[6] there was no error in the court's denial of Baker's motion to amend. The entry is: Judgment affirmed. All concurring.