Court Opinion

ID: 157451
Source: CourtListenerOpinion
Date Created: 2010-08-14 05:00:36+00
Date Added: 2024-06-11T15:13:53.149701
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                         JAN 29 1999
                                   TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

 MICHAEL PAUL SMITH,
 individually and as Trustee of the
 Mark David Smith Foundation; THE
 GAVIN MICHAEL SMITH TRUST;
 THE MARK DAVID SMITH TRUST;
 THE PRIVATE TRUST,

          Plaintiffs-Appellants,

               v.                                      No. 98-4008
                                                   (D.C. No. 96-CV-263)
 THE TORONTO-DOMINION BANK,                              (D. Utah)
 a Chartered Bank of the Dominion of
 Canada,

          Defendant-Appellee.

                             ORDER AND JUDGMENT *

Before BRISCOE, BARRETT, and MURPHY, Circuit Judges.

      Plaintiffs Michael Paul Smith, the Mark David Smith Foundation, the

Gavin Michael Smith Trust, the Mark David Smith Trust, and the Private Trust

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
appeal the district court’s dismissal of their wrongful foreclosure action against

defendant Toronto-Dominion Bank. In this diversity action appeal, we exercise

jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

                                          I.

      Smith, who is trustee, established the Foundation and Trusts on behalf of

his sons, Gavin Michael Smith and Mark David Smith. Smith is also manager of

First Heritage Financial Corporation, whose stock is owned entirely by the

Foundation and Trusts.

      Smith formerly owned two pieces of Canadian real estate that are relevant

here: a house (Maple Street property) used as his personal residence until at least

April 1995 1; and a condominium rental unit (Front Street property) used by Smith

as an investment. Both properties were mortgaged to defendant, a federally

chartered bank of the Dominion of Canada.

      Defendant filed suit against Smith in the Ontario Court of Justice on

December 14, 1994, for delinquent payments on the mortgage on the Front Street

property. Smith did not answer and default judgment was entered against him.

Smith moved to set aside the default judgment, but the motion was denied.

      1
         The complaint alleged the Maple Street property was owned by the
Foundation and Trusts through First Heritage. In granting summary judgment in
favor of defendant, the district court concluded the evidence was uncontroverted
that the property was titled in Smith’s name alone. We have reviewed the record
on appeal and agree with the district court.

                                         -2-
      Defendant filed suit against Smith in the Ontario Court of Justice on May

23, 1995, for delinquent payments on the mortgage on the Maple Street property.

Smith filed a statement of defense and counterclaim. Summary judgment was

granted in favor of defendant and Smith’s counterclaim was dismissed. The court

subsequently denied Smith’s motion to set aside the summary judgment, holding

such a motion was not permitted and Smith had failed to appeal within the

appropriate time limit.

      Smith filed this diversity action on behalf of himself and the Foundation

and Trusts on March 22, 1996. Smith alleged he was “a citizen of the state of

Utah, residing in Salt Lake City, Utah.” App. at 2. He alleged various causes of

action (e.g., negligence, breach of contract, breach of fiduciary duty, “slander of

credit”) arising from what he described as defendant’s wrongful foreclosure of the

mortgages on the Front Street and Maple Street properties.

      Defendant moved to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) “based on

the doctrines of res judicata and collateral estoppel in prior proceedings arising

out of the same transactions and occurrences.”   Id. at 17. More specifically,

defendant contended the foreclosure judgments precluded plaintiffs from asserting

their causes of action, all of which could have been asserted as defenses or

counterclaims in the Canadian proceedings. The district court heard arguments on

the motion and notified the parties the motion would be treated as a motion for

                                           -3-
summary judgment. The parties were given three months to conduct discovery

and were directed to file supplemental briefs addressing whether Smith received a

full and fair opportunity to be heard in the two Canadian foreclosure proceedings.

In granting summary judgment in favor of defendant, the district court held “that

Mr. Smith was given a full and fair opportunity to participate in both the Front

Street property and the Maple Street property suits,” and that “[a]pplication of the

doctrines of res judicata and collateral estoppel [wa]s appropriate.”     Id. at 719.

Plaintiffs’ motion to alter or amend judgment was denied.

                                             II.

       Before addressing the specific issues raised by plaintiff, we begin with the

more general question of whether any Canadian judgment would be entitled to

extraterritorial effect in this action. In a federal diversity action, the law of the

state in which the district court sits, rather than federal law, “‘governs the effect

to be given foreign judgments.’”    Phillips USA, Inc. v. Allflex USA, Inc.   , 77 F.3d

354, 359 (10th Cir. 1996) (quoting Robert Casad,       Issue Preclusion and Foreign

Country Judgments: Whose Law? , 70 Iowa L. Rev. 53, 78 (1984)). Thus, the

question here is whether Utah law would recognize a judgment rendered by a

Canadian court.

       To date, no Utah court has been called upon to recognize a Canadian

judgment; nor has the Utah legislature adopted the Uniform Foreign Money

                                            -4-
Judgments Recognition Act.       See generally Phillips , 77 F.3d at 359. However, the

Utah Supreme Court has indicated that, absent a controlling statute or treaty,

foreign country judgments can be enforced in the Utah courts “under principles of

comity.” Mori v. Mori , 931 P.2d 854, 856 (Utah 1997) (citing        Hilton v. Guyot ,

159 U.S. 113 (1895)). The principles of comity require recognition of a foreign

judgment if

       there has been opportunity for a full and fair trial abroad before a
       court of competent jurisdiction, conducting the trial upon regular
       proceedings, after due citation or voluntary appearance of the
       defendant, and under a system of jurisprudence likely to secure an
       impartial administration of justice between the citizens of its own
       country and those of other countries, and there is nothing to show
       either prejudice in the court, or in the system of laws under which it
       was sitting, or fraud in procuring the judgment.

Hilton , 159 U.S. at 202.

       Given the Utah Supreme Court’s statements in         Mori , as well as the long

history of other courts recognizing Canadian judgments under principles of

comity, see , e.g. , Ritchie v. McMullen , 159 U.S. 235, 240-43 (1895) (Canadian

judgment enforced in federal diversity action filed in Illinois);     Clarkson Co. v.

Shaheen , 544 F.2d 624, 630 (2d Cir. 1976) (Canadian judgment recognized as one

from “a sister common law jurisdiction with procedures akin to our own”);

Harrison v. Triplex Gold Mines     , 33 F.2d 667, 672-73 (1st Cir. 1929) (affirming

dismissal of action seeking to enjoin defendants from enforcing a Canadian

judgment), we find it reasonable to believe the Utah courts would likewise

                                             -5-
recognize a Canadian judgment if that judgment satisfied the requirements

outlined in Hilton and otherwise comported with Canadian law.     2
                                                                      See generally

Phillips , 77 F.3d at 350 (predicting Kansas courts would recognize valid

Australian judgment).

                                         III.

      Plaintiffs contend the district court erred in recognizing the two Canadian

judgments for collateral estoppel purposes because plaintiffs did not have a full

and fair opportunity to contest either of the underlying foreclosure actions. With

respect to the Front Street property, plaintiffs argue the court erred in concluding

defendant made a bona fide attempt to effect personal service of the action upon

Smith. With respect to the Maple Street property, plaintiffs argue Smith did not

receive adequate notice of the summary judgment hearing.

      The only Hilton requirement challenged by plaintiffs was whether Smith

received adequate notice and an opportunity to defend in each of the Canadian

foreclosure proceedings. Accordingly, we proceed to review that narrow issue in

the context of each foreclosure proceeding. To satisfy the due process clause of

      2
          Generally speaking, Utah law provides that questions regarding the
validity of a foreign judgment “should be tested by the law of the jurisdiction
where the judgment was rendered.”       Rocky Mtn. Claim Staking v. Frandsen , 884
P.2d 1299, 1300-01 (Utah App. 1994). If a judgment does not comport with the
laws of the foreign jurisdiction where it was rendered, it will not be considered
valid for purposes of recognition under Utah law.     See Matter of Estate of Jones ,
858 P.2d 983, 985 (Utah 1993).

                                         -6-
the Constitution,   3
                        “notice [must be] 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). When the name and

address of an interested party are reasonably ascertainable, due process requires

that the party be given “[n]otice by mail or other means as certain to ensure actual

notice.” Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 800 (1983). “Due

process does not require, however, that the interested party actually receive

notice.” United States v. 51 Pieces of Real Property, 17 F.3d 1306, 1316 (10th

Cir. 1994). As long as the party attempting service “‘acted reasonably in

selecting means likely to inform [the] persons affected, . . . then it has discharged

its burden.’” Id. (quoting Weigner v. City of New York, 852 F.2d 646, 649 (2d

Cir. 1988)).

       We review de novo due process issues that call for legal conclusions. See

       3
         We agree with the district court that the     Hilton requirements are properly
assessed in light of our own constitutional notions of due process.       See , e.g. ,
Koster v. Automark Indus., Inc. , 640 F.2d 77, 79 (7th Cir. 1981) (Dutch default
judgment could not be enforced in federal district court because defendant’s
business contacts with the Netherlands were insufficient to reach minimal level
needed to satisfy constitutional due process requirements);       Bank of Montreal v.
Kough , 430 F. Supp. 1243, 1247 (N.D. Cal. 1977) (Canadian court’s personal
jurisdiction over defendant must have been, “at a minimum, in compliance with
the requirements of traditional notions of fair play and substantial justice under
the due process clause of the United States Constitution”),      aff’d, 612 F.2d 467
(9th Cir. 1980).

                                              -7-
United States v. Clark, 84 F.3d 378, 381 (10th Cir. 1996). Whether the means

used to give notice were reasonably calculated to provide actual notice is a factual

determination typically reviewed by this court for clear error. See id. However,

because the district court’s rulings in this case occurred in the context of granting

defendant’s motion for summary judgment, we must examine the factual record

and reasonable inferences therefrom in the light most favorable to plaintiffs, who

were opposing the motion for summary judgment. Kaul v. Stephan, 83 F.3d 1208,

1212 (10th Cir. 1996). Summary judgment is appropriate if there is no genuine

issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).

Front Street property

      Approximately two weeks after defendant filed suit against Smith in the

Ontario Court of Justice for delinquent payments on the Front Street property

mortgage, Smith filed a pro se action against the tenants of the property, claiming

they were in arrears on rental payments. On his notice of application and

affidavit of service, Smith indicated his address for return service was “P.O. Box

203, Rosseau.” App. at 471, 473. On March 3, 1995, defendant, through process

server Paul William Comission, attempted to personally serve its Statement of

Claim on Smith at his residence at the Maple Street property. The process server

                                          -8-
was informed that Smith did not reside there and had not resided there in the past.

On March 10, 1995, defendant, again through the process server, attempted,

without success, to personally serve Smith at a job site. According to the process

server, he had previously attempted to serve Smith with a construction lien at the

job site address.

      Having failed to personally serve Smith, defendant moved the Ontario

Court of Justice to have Smith served by substituted service in accordance with

Rule 16.04 of the Rules of Civil Procedure for Ontario. See App. at 459

(outlining purpose of Rule 16.04). In support of its motion, the Bank submitted

the affidavit of the process server, as well as an affidavit from one of defendant’s

attorneys, indicating Smith had listed his address as P.O. Box 203, Rosseau, in his

action against his tenants. The court granted the motion and ordered that service

upon Smith be accomplished by mailing the Statement of Claim, along with a

copy of the court’s order granting substituted service, by prepaid registered mail

and prepaid first class mail to Smith at P.O. Box 203, Rosseau, Ontario.

Defendant complied with the court’s order regarding substituted service.

Notwithstanding the attempt at substituted service, Smith failed to answer and

default judgment was entered against him.

      According to Smith, he “never received the substituted service by

registered mail.” App. at 153 (he alleges that copy was returned to defendant in

                                         -9-
May 1995). However, he does not deny he used P.O. Box 203 as a mailing

address, nor does he deny receiving the copy of the Statement of Claim sent by

first class mail.

       Given these uncontroverted facts, we conclude defendant’s efforts at

substituted service were sufficient to satisfy the requirements of constitutional

due process. 4 Indeed, mailing the Statement of Claim to Smith at his post office

box was an entirely reasonable step in light of his absence from his Maple Street

residence (which he has admitted) and his use of the post office box for purposes

of service in his ongoing case against the tenants of the Front Street Property.

See Tulsa Prof’l Collection Servs., Inc. v. Pope, 485 U.S. 478, 490 (1988)

(generally, mailing notice to a party’s last known address is “reasonably

calculated” to provide actual notice); Campbell v. Bartlett, 975 F.2d 1569, 1575

(10th Cir. 1992) (posting substituted service at out-of-state truck driver’s sister’s

house satisfied requirements of due process).

       Plaintiffs ask us to conclude substituted service was not warranted due to

what is described as the process server’s incompetence in effecting personal

service on Smith. This argument misses the point. We are not here to review the

       4
         The fact the judgment was entered by default does not prevent us from
recognizing it. See , e.g. , Canadian Imperial Bank of Commerce v. Saxony
Carpets Co. , 899 F.Supp. 1248, 1254 (S.D.N.Y. 1995) (“Absent a clear showing
of fraud, a foreign default judgment is as conclusive an adjudication as a
contested judgment.”), aff’d , 104 F.3d 352 (2d Cir. 1996).

                                         -10-
propriety of the Canadian court’s decision to allow substituted service. Rather, as

outlined above, our narrow task is to determine whether the service that actually

occurred was constitutionally sufficient to render the resulting judgment valid for

purposes of recognition in this case.

Maple Street property

      In the action against Smith for delinquent payments on the Maple Street

property mortgage, Smith was personally served with a copy of the Statement of

Claim on June 20, 1995. On July 20, 1995, he filed a statement of defense and

counterclaim. The statement of defense indicated Smith was not represented by

counsel and stated his address was P.O. Box 203, Rosseau (the same address

where copies of the Front Street Property complaint were sent). In accordance

with Rule 16.01(4) of the Ontario Rules of Civil Procedure, defendant mailed

copies of its subsequent pleadings, including its motion for summary judgment, to

Smith at his P.O. Box 203 address. Defendant’s motion for summary judgment

was initially heard by the Ontario Court of Justice on October 16, 1995, and a

supplemental hearing was held on October 30, 1995. Although the court

concluded Smith had been properly served with notice of the hearings, he failed

to appear. On October 30, 1995, the court granted summary judgment in favor of

the Bank. Although Smith, through counsel, subsequently moved to have the

                                        -11-
judgment set aside, that motion was denied, and Smith apparently chose not to

appeal the court’s decision.

      Plaintiffs now contend the judgment entered against Smith in the Maple

Street property proceeding should not be recognized because he was not given

proper notice of the summary judgment hearing. We reject this contention as

meritless. Smith presented this precise lack of notice argument to the Canadian

court that rendered the judgment against him, and that court found he was

properly served with notice of the summary judgment hearing. Plaintiffs have

cited no cases, and we have found none, that would allow them to now challenge

that factual conclusion (and thereby effectively obtain collateral review of the

Canadian ruling). In any event, we are not convinced that lack of notice of a

motion hearing is a sufficient basis for refusing to recognize a foreign judgment,

where, as here, the party against whom the judgment was entered otherwise had

notice of the suit and an opportunity to defend.

                                         IV.

      Plaintiffs offer no reason why the two Canadian judgments, which decided

the parties’ rights concerning the two underlying mortgages, should be denied

recognition in this case. Further, although there is a limited discussion in

plaintiffs’ opening appellate brief concerning collateral estoppel, plaintiffs have

not specifically challenged the fact that the Canadian judgments, if properly

                                         -12-
recognized in this court, collaterally stop Smith from asserting his claims against

defendant. 5

      As a final matter, we note plaintiffs failed to produce any evidence

indicating the Foundation and Trusts had any interest in the Maple Street property

mortgage. Thus, to the extent the complaint asserted claims on behalf of the

Foundation and Trusts arising out of the foreclosure of that mortgage, those

claims were properly dismissed.

      The judgment of the district court is AFFIRMED.

                                         Entered for the Court

                                         Mary Beck Briscoe
                                         Circuit Judge

      5
         It is unclear whether the preclusive effect of the Canadian judgments is to
be determined by Utah law or Canadian law.          See Casad, supra , at 56-57 (noting
some courts have determined the preclusive effect of a foreign judgment by
reference to standards of rendering country, while others have concluded such
judgments should be accorded the same res judicata effects as domestic
judgments). Ultimately, we find it unnecessary to decide which applies because
both result in preclusion of the claims asserted by Smith.      See In re T.J. , 945 P.2d
158, 162 (Utah App. 1997) (outlining three elements necessary for application of
claim preclusion); Robertson v. Gamble , 1997 Ont.C.J. Lexis 759 at *10 (1997)
(“Cause of action estoppel applies not only to points on which the court has
pronounced but to every point which properly belonged to the subject of the
litigation.”).

                                          -13-