New York Law Review

Tag: CIBC Mellon Trust Co. v. Mora Hotel Corp.

  • CIBC Mellon Trust Co. v. Mora Hotel Corp., 100 N.Y.2d 215 (2003): Enforcing Foreign Judgments and Voluntary Appearance

    CIBC Mellon Trust Co. v. Mora Hotel Corp., 100 N.Y.2d 215 (2003)

    A defendant who appears in a foreign court to argue the merits of a case, after unsuccessfully contesting jurisdiction, makes a voluntary appearance and waives the right to challenge the foreign court’s jurisdiction in a subsequent enforcement action in New York.

    Summary

    CIBC Mellon Trust sought to enforce English judgments against Mora Hotel and Chascona in New York. The defendants had previously contested jurisdiction in the English courts but later defaulted by failing to comply with discovery orders. They then applied to the English High Court to set aside the default judgments and defend on the merits. The New York Court of Appeals held that by arguing the merits in the English court, the defendants made a voluntary appearance, precluding them from challenging the English court’s jurisdiction when CIBC Mellon sought to enforce the judgments in New York. The court emphasized that CPLR 5305(a)(2) retains the distinction between general and special appearances for recognition actions.

    Facts

    CIBC Mellon Trust and DaimlerChrysler Canada lost millions in investments due to fraud allegedly perpetrated by Wolfgang Stolzenberg. They sued Stolzenberg and others, including Mora Hotel and Chascona, in England. Mora and Chascona were Netherlands Antilles corporations that owned and operated the Gorham Hotel in New York. CIBC Mellon obtained Mareva orders (asset-freezing injunctions) against Mora and Chascona. The High Court granted these after finding CIBC had a “good arguable case.” Mora contested the English court’s jurisdiction over Stolzenberg, but this challenge was ultimately unsuccessful. Mora and Chascona failed to comply with the Mareva orders, leading to default judgments against them in England.

    Procedural History

    CIBC Mellon sued in New York to recognize and enforce the English judgments. Supreme Court granted summary judgment to CIBC Mellon, recognizing the judgments and ordering the sale of the Gorham Hotel. The Appellate Division affirmed. Mora and Chascona then unsuccessfully sought to set aside the default judgments in the English High Court before appealing the New York judgment to the Court of Appeals. The Court of Appeals initially withheld decision pending the outcome of the High Court application.

    Issue(s)

    Whether defendants, by applying to the English High Court to set aside the default judgments and to defend the case on its merits, made a voluntary appearance in the English proceedings, thus precluding them from challenging the English court’s jurisdiction in a subsequent New York action to enforce the judgments under CPLR 5305(a)(2)?

    Holding

    Yes, because by arguing the merits of the case in their application to the English High Court, the defendants did more than was necessary to preserve a jurisdictional objection, thereby making a voluntary appearance and waiving their right to challenge jurisdiction in New York.

    Court’s Reasoning

    The Court of Appeals noted New York’s tradition of enforcing foreign judgments, codified in CPLR Article 53. CPLR 5305(a)(2) states a foreign judgment shall not be refused recognition for lack of personal jurisdiction if the defendant voluntarily appeared, unless solely to protect seized property or contest jurisdiction. The court emphasized that by arguing the merits of the conspiracy claims in their application to set aside the English judgments, the defendants did more than was necessary to preserve their jurisdictional objection, which was already foreclosed. The court cited the Restatement (Second) of Conflict of Laws, stating that a defendant may submit to a court’s jurisdiction by taking steps in the action after judgment. The court reasoned that CPLR 5305(a)(2) retains the traditional distinction between general and special appearances for recognition purposes, even though New York no longer formally distinguishes them. Because the defendants sought affirmative relief by asking the High Court to adjudicate the case on its merits, they made a voluntary appearance, preventing them from later challenging the English court’s jurisdiction in New York. The Court also addressed the use of Mareva orders, stating that, while potentially disruptive, their use does not inherently render the English legal system incompatible with due process.