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Docketing of a Judgment in New Jersey Courts Based on Another States Judgment

New Jerseys version of the UEFJA is this states selected mechanism for discharging its Full Faith and Credit obligations under U.S. Const. art. IV, 1. Singh v. Sidana, 387 N.J. Super. 380, 382 (App. Div. 2006), certif. denied, 189 N.J. 428 (2007). As we held in Sonntag Reporting Serv. Ltd. v. Ciccarelli, 374 N.J. Super. 533, 540 (App. Div. 2005), [t]he focus of the UEFJ is the enforcement of judgments. The statute was designed merely as a facilitating device and was not intended to alter any substantive rights of the parties in an action for enforcement of a foreign judgment. Id. at 539. Therefore, merit or substantive defenses, which could have been raised in the foreign state, must be raised in that states proceedings and cannot be used to collaterally attack the domesticated New Jersey judgment. Id. at 540.

However, the Constitutional requirements of the Full Faith and Credit Clause are predicated upon the judgment debtor having been accorded due process in the forum state. Id. at 538. A denial of due process occurs when the rendering state 1) lacked personal jurisdiction over the judgment debtor, 2) lacked subject matter jurisdiction, [or] 3) failed to provide the judgment debtor adequate notice and an opportunity to be heard. Ibid. (quoting Choi v. Kim, 50 F.3d 244, 248 (3d Cir. 1995)). Thus, the judgment debtor may raise due process defenses in any enforcement action in New Jersey under the UEFJA. Sonntag, supra, 374 N.J. Super. at 540. This is consistent with our jurisprudence that pre-dates the 1997 passage of the UEFJA. See James v. Francesco, 61 N.J. 480, 485 (1972) (Full Faith and Credit Clause only applies to foreign judgment grounded upon proper jurisdiction over the debtor).

N.J.S.A. 2A:49A-26 defines a foreign judgment as any judgment, decree, or order of a court of the United States or of any other court which is entitled to full faith and credit in this State. (Emphasis added). Defendant argues since Maines judgments were obtained without the required personal jurisdiction over SeKap, they are not entitled to full faith and credit in New Jersey, and, hence, are not foreign judgments for purposes of N.J.S.A. 2A:49A-29(a) or (b). We reject this circular argument.

No reported New Jersey case has considered the stay provisions contained in N.J.S.A. 2A:49A-29. However, a number of other jurisdictions have considered the equivalent statutory language found in their versions of the UEFJA in circumstances similar to those presented here. Almost uniformly, these other jurisdictions have required the judgment debtor to post adequate security in order to stay execution of any judgment domesticated in those states.

In Jackson v. Alexander, 706 So.2d 364, 365 (Fla. App. 1998), the Florida appellate court interpreted that states version of the UEFJA which specifically provided for a stay of enforcement of a domesticated foreign judgment in two circumstances:

(1) If, within 30 days after the date the foreign judgment is recorded, the judgment debtor files an action contesting the jurisdiction of the court which entered the foreign judgment or the validity of the foreign judgment and records a lis pendens directed toward the foreign judgment, the court shall stay enforcement of the foreign judgment and the judgment lien upon the filing of the action by the judgment debtor.

(2) If the judgment debtor shows . . . any ground upon which enforcement of a judgment of any . . . court of this state would be stayed, the court shall stay enforcement of the foreign judgment for an appropriate period, upon requiring the same security for satisfaction of the judgment which is required in this state.

[Fla. Stat. 55.509(1) and (2).]

Thus, under subsection (1), the judgment debtor could specifically attack the forum states lack of jurisdiction. Nevertheless, despite the omission of any security requirement in subsection (1), the Florida court, reading the statute in pari materia, concluded the debtor was required to post a bond before the action challenging jurisdiction and staying execution could proceed. Ibid.; accord Expedia Inc. v. McKenneys Inc., 611 So.2d 98, 100 (Fla. App. 1992) (interplay of two subsections of Fla. Stat. 55.509 requires posting of security before stay of alleged invalid foreign judgment); SCG Travel v. Westminster Financial, 583 So.2d 723, 726 (Fla. App.), app. dismissed, 591 So.2d 185 (Fla. 1991).

In Segal v. Segal, 823 A.2d 1208 (Conn. 2003), the debtor sought a stay of enforcement of a domesticated Nevada judgment pending final decision of his appeal in Nevada. Id. at 1209. He argued that a judgment under appeal was not a judgment entitled to full faith and credit under the Constitution and, thus, not a foreign judgment under the UEFJA. Id. at 1213-14. The lower court agreed, and determined that the Nevada judgment was not enforceable as a final judgment entitled to full faith and credit until the appeal was decided. Id. at 1210. The Connecticut Supreme Court rejected this argument and concluded that without posting adequate security, the debtor was not entitled to stay enforcement of the domesticated judgment. It reasoned that any other interpretation of the statute would nullify the express provisions of the UEFJA which required the posting of adequate security pending direct appeal. Id. at 1214.

In Ex Parte Lyon Financial Servs., Inc., 775 So.2d 181 (Ala. 2000), the Alabama Supreme Court reversed the trial courts stay of enforcement of a Minnesota judgment against an Alabama debtor. Id. at 182. The debtor sought the stay based upon a third-party claim, initially brought in Minnesota, but dismissed by that court. Ibid. The debtor argued that it should be allowed to continue its litigation against the third-party in Alabama, and that all enforcement actions based upon the domesticated Minnesota judgment should be stayed pending the resolution of its suit. Ibid. Interpreting Alabamas version of N.J.S.A. 2A:49A-29(b), the court concluded that the debtor was not entitled to the stay because 1) the third-party claim would not properly result in a stay under Alabama law and 2) the debtor had not posted the required security. Id. at 184. Accord Hinkle, Cox, Eaton, Coffield & Hensley v. The Cadle Co., 676 N.E.2d 1256, 1257 (Ohio App.) (holding debtor must post security to obtain a stay under Ohios equivalent of N.J.S.A. 2A:49A-29(b)), discretionary appeal not allowed, 673 N.E.2d 143 (Ohio 1996).

In Dependable Ins. Co. v. Automobile Warranty Corp., 797 P.2d 1308 (Colo. App. 1990), the court interpreted Colorados stay provisions which are identical to N.J.S.A. 2A:49A-29. Id. at 1309-10. In that case, defendant debtor filed a direct appeal of the Florida judgment in Florida and then sought a stay of execution on its assets in Colorado based upon the domesticated Colorado judgment. Id. at 1309. Noting the important purpose of a supersedeas bond is to protect the non-appealing partys rights during an appeal, the court concluded that despite the pending direct appeal in Florida, the debtor was required to post a bond to secure a stay of execution in Colorado. Id. at 1310. Otherwise, the statutes purpose would be negated. Ibid. It then considered the debtors second argument under Colorados equivalent to N.J.S.A. 2A:49A-29(b). Ibid. The court concluded that since Colorado law required the posting of security to obtain a stay, defendants failure to post security required denial of the stay. Ibid. But see Pickwick Intern. v. Tomato Music Co., Ltd., 462 N.Y.S.2d 781, 784 (Sup. Ct. Spec. Term 1983) (holding under New Yorks equivalent of N.J.S.A. 2A:49A-29(b), court may, in its discretion, stay execution without posting of security because New York law permitted a stay under such circumstances).

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4284-05T24284-05T2

STATE OF MAINE,

Plaintiff-Respondent,

v.

SEKAP, S.A. GREEK COOPERATIVE

CIGARETTE MANUFACTURING

COMPANY, S.A.,

Defendant-Appellant.

________________________________________________________________

Argued January 24, 2007 - Decided April 17, 2007

Before Judges Wefing, Parker and Messano.

In this appeal, we are required to interpret provisions of New Jerseys version of the Uniform Enforcement of Foreign Judgments Act (the UEFJA), N.J.S.A. 2A:49A-25 to -33, and in particular, N.J.S.A. 2A:49A-29 which sets forth the procedure to stay execution of a foreign judgment domesticated in New Jersey. Defendant, SeKap, S.A. Greek Cooperative Cigarette Manufacturing Company, S.A. (SeKap), appeals the motion judges orders vacating a stay of execution previously entered in its favor, and denying its cross-motion for summary judgment. We affirm the judges decision, but remand the matter for further proceedings consistent with our opinion.

I.

In August, 2002, the state of Maine filed suit in Maine seeking to compel SeKap to deposit $312,945.38 into an escrow account. SeKap did not join in the 1998 national Master Settlement Agreement (MSA) wherein a number of states settled litigation against numerous cigarette manufacturers. After the settlement was reached, several states, including Maine, adopted model legislation which compelled non-settling cigarette manufacturers to establish escrow accounts in those various states and deposit monies in the accounts based upon the volume of cigarette sales in that particular state. These escrow accounts were designed to offset any competitive advantages non-settling manufacturers might otherwise gain by not participating in the MSA, and the monies in the escrow accounts were to be used to satisfy any judgments or settlements each state might obtain against the non-settling manufacturers. Maines version of the model escrow statue is codified at 22 M.R.S.A. 1580-I. Those manufacturers that do not establish and fund the mandatory escrow accounts are subject to monetary penalties pursuant to the statute.

Maines complaint alleged that SeKap had not established or funded the required escrow account for its cigarette sales in Maine under the brand names, Marathon or GR, during 2001. The complaint sought judgment requiring SeKap to post the required amount, as well as a statutory penalty in the amount of $938,836.14. Maine alleged it had personal jurisdiction over SeKap because the company transact[ed] business within . . . Maine by supplying tobacco products, either directly or through a distributor . . . within . . . Maine, to consumers within. . . Maine.

Maine served its complaint through the Hague Convention and SeKap does not challenge the sufficiency of service. When SeKap failed to answer or appear, Maine successfully moved for default. In September, 2003, the Maine court entered judgment against SeKap for $1,251,781.50 and enjoined the sales of its cigarettes in Maine. This procedure was repeated with the filing of a second complaint in Maine in July, 2003 seeking additional monies and penalties for SeKaps alleged 2002 tobacco sales. Once again, SeKap failed to appear, and a second judgment was entered against it in December, 2004, in the amount of $1,128,646.50 along with similar injunctive relief.

Utilizing the procedure set forth in N.J.S.A. 2A:49A-27 and -28, Maine applied to the Superior Court in New Jersey and docketed the two foreign judgments in March, 2005. In April, the New Jersey court entered writs of execution for both judgments which were served upon Wachovia Bank in Morristown. In May, SeKap moved via an order to show cause to temporarily restrain any execution on the account, to vacate the writs of execution and to vacate the docketed judgments, alleging Maine lacked personal jurisdiction over it. The motion judge granted the order to show cause, entered temporary restraints and set the matter down for a further hearing.

After a hearing held on July 1, 2005, a second motion judge denied Maines request to dissolve the temporary restraints, and entered an order that provided

Defendant shall have sixty days in which to seek relief from judgment in Maine pursuant to N.J.S.A. 2A:49A-29(a) and (b). Upon proof of compliance with section (a) and the posting of security to satisfy the judgment, enforcement shall be stayed. Otherwise, enforcement shall take effect on September 6, 2005. Thereafter, plaintiff may move before the court to dissolve the restraints.

Sekap did not file an appeal in Maine, nor post security, within the sixty day period.

In December, Maine moved to dissolve the restraints; SeKap cross-moved for summary judgment seeking to vacate the writs of execution and the docketed New Jersey judgments. In support of its cross-motion, SeKap argued that it need not post any security in order to stay execution of the writs and challenge the New Jersey judgment because the Maine judgment was void for lack of personal jurisdiction. It supplied the certification of its Director, Yiannis Bitos, that contained the following facts: SeKap was organized as a Greek co-operative under Greek law; it has no offices, branches, employees or agents in any state in the United States; it does not maintain an agent for service of process in the United States; it owns no property in, has no assets in, and has never contracted with anyone in Maine; no officer, agent or director of SeKap has physically been present in Maine; and, SeKap has never solicited or advertised its products in Maine. The certification explained that SeKap contracted with a Cypriot corporation, Denova, Serives, Ltd. (Denova), for the distribution of tobacco products in North America. SeKap has no control or ownership interests in Denova, nor does it control the marketing, pricing or sales of its products in the United States. Lastly, Bitos certified that SeKap did not dictate, require or request that [its] product be sold in Maine.

On February 6, 2006, a third judge heard the motion and cross-motion. He noted that SeKap had not complied with the prior order of the court since it had not filed an appeal in Maine challenging jurisdiction. He further found that defendant had not complied with N.J.S.A. 2A:49A-29(a) or (b) which sets forth the applicable procedures for appealing the enforcement of domesticated judgments. He dissolved the restraints. Turning to SeKaps cross-motion, he concluded

[T]here has been no showing that the defendant ever sought any relief from the judgment in the State of Maine and, basically, Im denying the cross-motion because defendant counsel failed to provide the Court with any evidence that Maine lacked jurisdiction over the defendant. Thats an issue that they should be taking up in the court in Maine, not here.

(Emphasis added.)

The cross-motion was denied.

Sekap moved for reconsideration. In part, defense counsel requested the court to reconsider the Bitos certification which was apparently unsigned when it accompanied the original motion papers. He advised the court that a signed, notarized certification had indeed been faxed to the court prior to the original motion being heard. Once again the motion judge concluded that SeKap had not pa[id] the judgment, or deposit[ed] the security to stay the judgment pending resolution of the jurisdictional issue in the State of Maine. He found no basis for reconsideration and denied Sekaps motion. This appeal ensued.

II.

We begin by By asserting Maine lacked personal jurisdiction over the company, SeKap raised a due process defense. It contends that until New Jersey courts decide the jurisdictional question, it is entitled to a stay of execution on any New Jersey assets if the writ of execution is based upon the challenged judgment. On this point, we disagree.

N.J.S.A. 2A:49A-29, entitled Appeal, stay of execution, enforcement, provides

a. If the judgment debtor shows the Superior Court that an appeal from the foreign judgment is pending or will be taken, or that a stay of execution has been granted, the court shall stay enforcement of the foreign judgment until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon proof that the judgment debtor has furnished security for the satisfaction of the judgment required by the state in which it was rendered.

b. If the judgment debtor shows the Superior Court any ground upon which enforcement of a judgment of the Superior Court would be stayed, the Superior Court shall stay enforcement of the foreign judgment for an appropriate period, upon requiring the same security for satisfaction of the judgment which is required in this State.

SeKap argues that N.J.S.A. 2A:49A-29 only applies to valid foreign judgments -- judgments predicated upon proper due process guarantees -- and not to domesticated foreign judgments founded upon an improper extension of personal jurisdiction in the forum state. It contends that the UEFJAs definition of the term foreign judgment supports this interpretation.

SeKap has not brought to our attention any authority to the contrary. Our Legislature specifically provided that the UEFJA shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it. N.J.S.A. 2A:49A-33. We have looked to the decisional law of sister states in interpreting other provisions of the UEFJA. Sonntag, supra, 374 N.J. Super. at 540-41. Moreover, in other circumstances where the Legislature has spoken so clearly, we have held that sister-states interpretations of uniform legislation are persuasive authority. New Jersey Lawyers Fund for Client Protection v. Pace, 374 N.J. Super. 57, 64 (App. Div. 2005), (noting out-of-state decisions are persuasive given requirement that the UCC be construed uniformly), affd 186 N.J. 123 (2006).

Returning to the issue presented in this case, SeKap failed to demonstrate an appeal from the foreign judgment [was] pending or [would] be taken, or that a stay of execution [had] been granted in Maine. Thus, separate and apart from the posting of any security, SeKap was not entitled to a stay of execution of Maines domesticated judgments pursuant to N.J.S.A. 2A:49A-29(a).

Additionally, SeKap was not entitled to a stay of execution pursuant to N.J.S.A. 2A:49A-29(b). Although it may have show[n] the Superior Court a[] ground upon which enforcement of a judgment of the Superior Court would be stayed - Maines lack of personal jurisdiction - it failed to post the same security for satisfaction of the judgment which is required in this State. Although not specifically advanced as one of defendants contentions, we note that N.J.S.A. 2A:49A-27 provides that a properly domesticated foreign judgment has the same effect and is subject to the same procedures, defenses and proceedings for reopening, vacating, or staying as a judgment of a Superior Court of this State and may be enforced in the same manner.

Thus, a judgment debtor might argue that the obligation to post security required by N.J.S.A. 2A:49A-29(b) is subject to the same procedures . . . and proceedings for . . . staying [] a judgment in New Jersey.

We recognize that SeKaps challenge to Maines jurisdiction must be initially brought in the Law Division. As we noted in Sonntag,Trial courts of sister states may inquire into defenses of lack of jurisdiction in the foreign court or fraud in procurement of the judgment, provided that those issues have not been litigated in the forum court.

[Sonntag, supra, 374 N.J. Super. at 538.]

Therefore, our standard governing the granting of a stay of enforcement of a money judgment on appeal is not applicable. See R. 2:9-5(a) (while the court may exercise its discretion to consider each request on its facts, absent a showing of good cause, the posting of a bond or cash is required); Pressler, Current N.J. Court Rules, comment 1 on R. 2:9-5(a) (2007).

R. 4:50-1 allows for the granting of relief from a judgment or order upon such terms as are just. In the context of an application to vacate a default judgment, the courts discretion must be liberally exercised. Housing Authority of the Town of Morristown v. Little, 135 N.J. 274, 283-84 (1994). We have held that absent extraordinary circumstances, a court should not condition the vacation of a default judgment upon the debtors posting of a bond. Regional Const. Corp. v. Ray, 364 N.J. Super. 534, 544 (App. Div. 2003). Rather, a less burdensome alternative -- permitting the judgment to remain in place while execution is stayed -- should be employed. Ibid.

We have once before, however, limited the scope of R. 4:50-1 in the context of its application to the UEFJA. In Sonntag, we concluded that despite the language of N.J.S.A. 2A:49A-27, relief under the rule was limited to New Jersey judgments. Sonntag, supra, 374 N.J. Super. at 539; Pressler, supra, comment 1 on R. 4:50-1 (2007). Since the UEFJA . . . was not intended to alter any substantive rights of the parties, we construed N.J.S.A. 2A:49A-27 and R. 4:50-1(f) to permit a collateral challenge in New Jersey to a domesticated foreign judgment only on due process grounds. Sonntag, supra, 374 N.J. Super. at 539. Such a narrow construction was necessary to harmonize the UEFJA with the Full Faith and Credit Clause. Id. at 539-40.

We now hold that in order to stay execution of a foreign judgment pursuant to the UEFJA, a judgment debtor must strictly comply with the statutes provisions and post security for satisfaction of the judgment before a stay is issued. Any other interpretation would lead to the anomalous result that a judgment debtor would be required to post security or obtain a stay from the rendering state while directly appealing the judgment in that state, N.J.S.A. 2A:49A-29(a), but not be required to post security to obtain a stay while it raised an identical due process defense in New Jersey. Such a result would give the debtor more rights here . . . than the rendering state gives him there. SCG Travel, supra, 583 So.2d 726. We are satisfied that the Legislature never intended such a result since it would fail to effectuate [the UEFJAs] general purpose to make uniform the law of those states which enact it. N.J.S.A. 2A:49A-33. Furthermore, construing N.J.S.A. 2A:49A-27 and 29(b) in this manner assures the constitutional right of a judgment creditor to enforcement of the judgment in a sister state . . . is not curtailed. Sonntag, supra, 374 N.J. Super. at 539.

III.

Although we conclude that SeKap was not entitled to stay the enforcement of Maines judgments because it failed to comply with N.J.S.A. 2A:49A-29(a) or (b), we nonetheless remand the question of whether the judgments are void for lack of personal jurisdiction to the trial court. In this regard, the motion judge did not consider the Bitos certification at the first hearing. On the motion for reconsideration, he may have considered the certification, but he mistakenly applied the wrong standard to this aspect of SeKaps cross-motion for summary judgment. He concluded that SeKap could not raise the jurisdictional argument until it pa[id] the judgment, or deposit[ed] the security to stay the judgment pending resolution of the jurisdictional issue in the State of Maine. As noted above, consistent with Constitutional mandates and the UEFJA, the judgment debtor may challenge jurisdiction collaterally in New Jersey by raising a due process defense. Sonntag, supra, 374 N.J. Super. at 540.

The motion judge mistakenly applied the requirements of N.J.S.A. 2A:49A-29 to deny all the relief sought by SeKap, including the underlying challenge it made to the validity of the foreign judgments. The UEFJA requires neither the direct appeal of the default judgments in Maine, nor the posting of adequate security in New Jersey, before Sekap may assert a due process challenge to the domesticated judgments. By its express terms, the requirements of N.J.S.A. 2A:49A-29 only apply to the debtors request of a stay of execution.

Therefore, on remand, the judge must decide SeKaps jurisdictional challenge to Maines judgments and determine whether Maine possessed adequate personal jurisdiction over SeKap. A remand is required because we cannot resolve the issue on the current record.

In opposing the jurisdictional argument made in SeKaps cross-motion for summary judgment, and its motion for reconsideration, Maine provided little by way of factual proofs that demonstrated its basis for asserting personal jurisdiction over the company. Attached to counsels certification were two unreported decisions, one from a court in Maine, and one from a court in Ohio, neither of which involved SeKap as a party. Counsel also submitted a copy of a contract between SeKap and ITW Manufacturing, dated December 14, 2000, in which SeKap agreed to manufacture Marathon brand cigarettes for the United States market.

When a defendant asserts lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the defendants contacts with the forum state are sufficient to confer personal jurisdiction on the court. Jacobs v. Walt Disney World, 309 N.J. Super. 443, 454 (App. Div. 1998) (quoting Giangola v. Walt Disney World Co., 753 F. Supp. 148, 154 (D.N.J. 1990). As we noted in Jacobs, In the early stages of a proceeding where the factual record consists of only pleadings and affidavits, plaintiffs burden is satisfied by establishing a prima facie case of jurisdiction. Jacobs, supra, 309 N.J. Super. at 454 (quoting Cresswell v. Walt Disney Prod., 677 F. Supp. 284, 286 (M.D.Pa. 1987)). While determination of the issue may be made upon affidavits, our Court Rules specifically allow for oral testimony, depositions and cross-examination when affidavits do not suffice. R. 1:6-6; see also Jacobs, supra, 309 N.J. Super. at 454. In short, further discovery is permitted and may be necessary to resolve the jurisdictional issues. Id. at 462; see also Makopoulos v. Walt Disney World, Inc., 221 N.J. Super. 513, 518 (App. Div. 1987) (remand for further discovery required to determine whether solicitation provided basis for personal jurisdiction), certif. denied, 117 N.J. 661 (1989). Maine authority recognizes that an evidentiary hearing may be necessary when written submissions raise disputed issues of fact as to personal jurisdiction. Dorf v. Complastik, Corp., 735 A.2d 984, 989 (Me. 1999).

Discovery may be particularly useful when the relationship between a party and an affiliate must be explored. Jacobs, supra, 309 N.J. Super. at 456. Here, the relationship between SeKap and Denova might properly be the subject of [a]dditional discovery [that] may establish by competent evidence the mechanics of the arrangement. Id. at 457. Likewise, SeKap should be entitled to challenge Maines conclusory statements that SeKap transacted business in the State of Maine because it contracted to manufacture cigarettes for the United States market.

IV.

In summary, we hold that the motion judge properly concluded that SeKap was not entitled to any stay of execution because it failed to post the security required by N.J.S.A. 2A:49A-29. We also conclude that on the record presented, SeKaps cross-motion for summary judgment was properly denied. We hold that the assertion of a due process defense to the domesticated judgment may be properly raised without the posting of any security and we remand the matter to the motion judge to consider SeKaps jurisdictional challenge. In remanding the matter to the trial court, we do not imply any particular resolution of the jurisdictional issue. We only hold that the current record makes resolution of the issue impossible. The parties shall advise the motion judge whether they wish to engage in jurisdictional discovery, or otherwise supplement the record on the issue. We leave to the sound discretion of the judge control over the nature and scope of any discovery requested.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

   
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