Appendix — Mora Hotel Corp. N. V. v. CIBC Mellon Trust Co.
Supreme Court brief2003
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APPENDIX A — OPINION OF THE COURT OF
APPEALS OF NEW YORK DATED MAY 8, 2003
COURT OF APPEALS OF NEW YORK
CIBC MELLON TRUST COMPANY, as Trustee of
Chrysler Canada, Ltd.’s Benefits Plan and Others, et al.,
Respondents,
V.
MORA HOTEL CORPORATION N.V. et al.,
Appellants.
May 8, 2003
READ, J.
Defendants iiere appeal from an order of the Appellate
Division, which, among other things, affirmed Supreme
Court’s order and judgment recognizing and docketing certain
judgments entered against them by the English High Court
of Justice, Chancery Division, pursuant to New York’s
version of the Uniform Foreign Country Money-Judgments
Recognition Act (CPLR Article 53). For the reasons that
follow, we conclude that the English judgments at issue
satisfy the statutory prerequisites for recognition.
2a
Appendix A
I.
In 1992, Castor Holdings Ltd., a Canadian real estate
and financial investment company, declared bankruptcy.
Plaintiffs CIBC Mellon Trust Company, as trustee of several
pension and other benefit funds, and Daimler Chrysler
Canada, Inc. had lost millions of dollars in investments in
Castor. In May 1996, plaintiffs commenced legal proceedings -
in England in the High Court, alleging that they had been
duped into making these investments by what amounted to a
massive, multinational fraud. The suit named Wolfgang Otto
Stolzenberg, the president, CEO and chairman of Castor, as
the primary defendant accused of masterminding the fraud.
Marco Gambazzi, a Swiss attorney, was also individually
named as a defendant. Gambazzi owned, in whole or in part,
and controlled Mora Hotel Corporation N.V. and Chascona
N.V.,! which were among the numerous corporations
eventually named as defendants in the English proceedings.
Plaintiffs initially asserted only a “tracing” claim against
Mora for receipt of funds for no consideration, which were
traceable to the alleged fraud. When plaintiffs added a claim
of conspiracy against Mora in January 1999, they joined
Chascona as a coconspirator.
Mora is the ground lessee and operator of the Gorham
Hotel, located in midtown Manhattan, and Chascona is the
fee owner of the property. They are both Netherlands Antilles
corporations authorized to do business in New York. The
Gorham Hotel is apparently their sole asset.
1. Gambazzi had also served as a director of Castor, a managing
director of Castor’s principal lending subsidiaries and an officer or
director of a number of other Castor subsidiaries.
3a
Appendix A
Plaintiffs made two kinds of ex parte applications to
the High Court. The first sought leave to serve various
nonresident defendants, including Mora (and later,
Chascona), as “necessary or proper” parties. This rule
(see Rules 6.20; 6.21 of Civil Procedure Rules [of England])
allows out-of-the-jurisdiction service on such a party when
the liability of the defendants, either jointly or individually,
depends upon a single investigation (see Massey v Heynes,
21 Q.B.D. 330 [CA 1888]). In order for the High Court to
exercise such “necessary or proper” jurisdiction, however,
at least one defendant — in this instance, Stolzenberg —
must be an English domiciliary and serve as the base or
anchor defendant (see Rules 6.20; 6.21). The second kind of
ex parte application sought Mareva injunctions or orders
(see Mareva Compania Naviera S.A. v International
Bulkcarriers S.A., 2 Lloyd’s Rep 509 [1975]) to freeze
defendants’ assets on a world-wide basis during the pendency
of the English proceedings and to direct certain discovery.
The initial Mareva order required Mora to provide
information and documents relating to the tracing claim and
its assets as well as copies of any documents relevant to the
proceedings. In support of this application, plaintiffs
submitted attorney affidavits and voluminous supporting
documentation. After reviewing these materials over nine
days, the High Court determined that plaintiffs had made
the requisite showing; namely, a “good arguable case.”
In March 1997, plaintiffs served Mora in New York with
a writ of summons and the Mareva order. Mora appeared in
the English proceedings for the limited purpose of contesting
the High Court’s jurisdiction over Stolzenberg, the anchor
defendant, on the grounds that he was not domiciled in
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Appendix A
England at the time that Mora argued was critical (i.e., when
the writ of summons for Stolzenberg was served rather than
when it was issued). In May 1997, the High Court rejected
Mora’s argument and dismissed its application to set aside
service of the writ on it; and the Court of Appeal dismissed
Mora’s appeal in October 1997. Finally, in October 2000,
the House of Lords dismissed Mora’s appeal from the Court
of Appeal. Chascona abandoned its identical jurisdictional
challenge following the House of Lords’ dismissal of Mora’s
appeal.
While disputing the High Court’s jurisdiction, Mora
elected not to comply with the Mareva order relating to the
tracing claim and several subsequent orders to secure
compliance with it. Some of these orders were “unless”
orders, which explicitly warned Mora that continued
recalcitrance would lead to its debarment or preclusion from
defending against the tracing claim and permit plaintiffs to
obtain judgment. When Mora failed to take heed, a default
judgment was entered against it for roughly $600,000 (U.S.)
in February 1999, following a damages assessment hearing.
In July 1999, plaintiffs applied ex parte to increase to
$420 million (Can.) the value of Mora’s assets covered by
the Mareva order, and to grant the same freezing relief with I
respect to Chascona on account of the conspiracy claims |
pending against them both. Once again, before granting
plaintiffs’ applications, the High Court examined the
evidence to determine whether plaintiffs had established the
requisite “good, arguable case.”
Sa
Appendix A
Thereafter, as a result of their failure to comply with
the new Mareva and concomitant “unless” orders, both Mora
and Chascona were debarred from defending against the main
fraudulent conspiracy claims. Plaintiffs applied to the High
Court for an assessment of damages, and a hearing was held.
In December 1999, default judgments of roughly $330
million (U.S.) were entered in England against both Mora
and Chascona on the conspiracy claims.
In May 2000, plaintiffs commenced an action in Supreme
Court, seeking recognition of the English judgments pursuant
to the Uniform Foreign Country Money-Judgments
Recognition Act (CPLR article 53) and New York common
law, as well as an attachment of the Gorham Hotel, reportedly
worth approximately $30 million. On January 16, 2001,
Supreme Court granted plaintiffs summary judgment
recognizing and docketing the English judgments; confirmed
the attachment; appointed a post-judgment receiver to
manage and sell the Gorham Hotel in satisfaction of the
English judgments; and denied defendants’ cross motion to
dismiss the complaint.
The Appellate Division affirmed Supreme Court’s order
and judgment on May 28, 2002 (296 AD2d 81 [2002]). This
appeal pursuant to CPLR 5601(b)(1) followed. The
constitutional issues asserted as a basis for our jurisdiction
on the appeal are, broadly stated, whether the courts below
violated defendants’ due process rights by (1) determining
that the English courts properly exercised personal
jurisdiction over them; and (2) recognizing foreign judgments
that were entered on default following defendants’ failure to
comply with a provisional remedy (the Mareva orders) not
available in New York.
6a
Appendix A
Subsequent to Supreme Court’s decision and order,
defendants in 2001 and 2002 applied to the High Court to
set aside the default judgments entered against them because
of their failure to comply with the “unless” orders, and to
allow them to defend the tracing and conspiracy claims on
the merits. After a six-day hearing, which took place from
December 9-16, 2002, the High Court dismissed defendants’
applications on February 3, 2003. Plaintiffs then moved to
dismiss this appeal, arguing that defendants’ applications to
the High Court mooted the asserted constitutional bases.
We withheld decision and entertained oral argument on both-
the motion and the appeal.
II.
New York has traditionally been a generous forum in
which to enforce judgments for money damages rendered by
foreign courts (see e.g. Lazier v Westcott, 26 NY 146 [1862];
Dunstan v Higgins, 138 N.Y. 70 [1893]; Cowans v
Ticonderoga Pulp & Paper Co., 246 NY 603 [1927]; see also
Greschler v Greschler, 51 NY2d 368, 376 [1980]; Siegel,
Practice Commentaries, McKinney’s Cons Laws of NY, Book
7B, CPLR C5301:1, at 540); and in 1970, New York adopted
the Unif. Foreign Money-Judgments Recognition Act
(see Uniform Foreign Money-Judgments Recognition Act
§§ 1-9, 13 ULA 43-80; L 1970, ch 981, §§ 1-2)? as CPLR
article 53. Article 53 was designed to codify and clarify
existing case law on the subject and, more importantly,
to promote the efficient enforcement of New York judgments
abroad by assuring foreign jurisdictions that their judgments
2. Twenty-nine other states and the District of Columbia have
adopted variations of the Uniform Act.
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Appendix A
would receive streamlined enforcement here (see Judicial
Conference Mem in Support, Bill Jacket, L 1970, ch 981, at 4
[reference to pagination of document]; Kulzer, The Uniform
Foreign Money-Judgments Recognition Act, 13" Ann Jud
Conf Rep, 194, 195-196, 226 [1968]).°
Article 53 applies to “any foreign country judgment
which is final, conclusive and enforceable where rendered
even though an appeal therefrom is pending or it is subject
to appeal” (CPLR 5302). Simply put, a foreign country
judgment is considered “‘conclusive between tie parties to
the extent that it grants or denies recovery of asum of money”
(CPLR 5303) unless
1. the judgment was rendered under a system which
does not provide impartial tribunals or procedures
compatible with the requirements of due process of law;
[or]
2. the foreign court did not have personal jurisdiction
over the defendant (CPLR 5304[a][1], [2]).
Moreover, “[i]n proceeding under article 53, the judgment
creditor does not seek any new relief against the judgment
debtor, but instead merely asks the court to perform its
ministerial function of recognizing the foreign country money
judgment and converting it into a New York judgment”
(Lenchyshyn v Pelko Elec., 281 AD2d 42, 49 [4" Dept 2001]).
3. See also Kulzer, Recognition of Foreign Country Judgments
in New York: The Uniform Foreign Money-Judgment Act, 18 Buf L
Rev 1 (1968).
——
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Appendix A
On this appeal, defendants direct their principal fire
related to CPLR 5304(a)(1) at the High Court’s use of Mareva
orders. While we have expressed concern regarding the power
and potential commercial disruption of Mareva orders
(see Credit Agricole Indosuez v Rossiyskiy Kredit Bank,
94 NY2d 541, 550-551 [2000]), the use of this device,
standing alone, does not render the English system as a whole
incompatible with our notions of due process (see, e.g.
Guinness PLC v Ward, 955 F2d 875, 900 [4" Cir 1992]}).
In short, CPLR 5304(a)(1) does not demand that the foreign
tribunal’s procedures exactly match those of New York.
Rather, the statute is satisfied if the foreign court’s procedures
are “compatible with the requirements of due process of law”
(id. at 882). Moreover, “TcjJonsidering that our own
jurisprudence is based on England’s, a defendant sued on an
English judgment will rarely be in aposition to defeat it with
such a showing” (Siegel, Supp Practice Commentaries,
McKinney’s Cons Laws of NY, Book 7B, CPLR C5304:1,
2003 Supp Pamph, at 65; see also Society of Lloyds v
Ashenden, 233 F3d 473, 476 [7" Cir 2000] [“Any suggestion
that [England’s] system of courts “does not provide impartial
tribunals or procedures compatible with the requirements of
due process of law’ borders on the risible’’}).
In summary, the relevant inquiry under CPLR 5304(a)(1)
is the overall fairness of England’s legal “‘system,” which is
beyond dispute (see Society of Lloyd's v Grace, 278 AD2d
169 [1% Dept 2000]; Society of Lloyd's v Ashenden, supra;
compare Bridgeway Corp. v Citibank, 201 F3d 134 [2d Cir
2000] [fairness of Liberian courts). Indeed, defendants were
given ample notice and numerous opportunities to present
their defense in England; they simply elected to forego these
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Appendix A
opportunities (apparently against the advice of their English
attorneys) for strategic reasons.
Turning next to CPLR 5304(a)(2), the question is
whether the English courts had jurisdiction over defendants.
Before reaching this question, however, we must consider
the merits of plaintiffs’ motion to dismiss. Plaintiffs argue
that when defendants applied to the High Court, seeking relief
from the English judgments and the opportunity to defend
on the merits, they “voluntarily appeared in the proceedings”
within the meaning of CPLR 5305(a)(2), thus mooting this
appeal. While such a voluntary appearance would not, in our
view, moot the appeal, it would abrogate the reviewability
of defendants’ argument that the English judgments are
unenforceable in New York because the English courts lacked
jurisdiction over them.
Section 5305(a)(2) provides in relevant part that a foreign
judgment shall not be denied recognition for lack of personal
jurisdiction if “the defendant voluntarily appeared in the
proceedings, other than for the purpose of protecting property
: seized or threatened with seizure * * * or of contesting the
jurisdiction of the court over him” (CPLR 5305{[a][2]).
Plaintiffs contend that defendants’ application to the High
Court does not fall within either exception, particularly the
second; i.e., it was not an appearance “for the purpose * * *
of contesting * * * jurisdiction * * * over [them].”
The commentary for CPLR 5305(a)(2) explains that this
second exception is restricted to an
“appearance * * * solely to protest jurisdiction,
what New York used to call and some places still
ee
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Appendix A
call a “special appearance”. [f the judgment debtor
did any more than she had to do, however, to
preserve her jurisdictional objection in the foreign
court, she would thereby have submitted voluntarily
to its jurisdiction and forfeited the right to claim an
exception for herself under this paragraph” (Siegel,
Practice Commentaries, McKinney’s Cons Laws of
NY, Book 7B, CPLR 5305:1, at 555-556 [emphasis
supplied]).
Federal courts applying New York law have, in fact,
interpreted CPLR 5305(a)(2) to foreclose a defendant from
contesting a foreign judgment for lack of personal jurisdiction
once the defendant has done anything more than it had to do to
preserve its jurisdictional objection (see S.C. Chimexim S.A. v
Velco Enters., Ltd., 36 F Supp 2d 206, 215 [SDNY 1999];
Nippon Emo-Trans Co. Ltd. v Emo-Trans Inc., 744 F Supp.
1215, 1222-1226 [EDNY 1990] ).
In S.C. Chimexim S.A., a Romanian plaintiff sued an
American corporate defendant with its principal place of
business in New York for an alleged breach of contract in
Romania. The defendant failed to appear and the Romanian
tribunal, thereafter, entered judgment for approximately
$200,000. The defendant appealed from the Romanian
judgment, raising multiple grounds going to both the merits
and personal jurisdiction. In the federal action to enforce the
Romanian judgment, the court held that the defendant had made
a voluntary appearance pursuant to CPLR 5305(a)(2) and
was, thus, precluded from contesting personal jurisdiction
(S.C. Chimexim S.A. at 215).
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Appendix A
In Nippon Emo-Trans Co., Ltd., a Japanese judgment
creditor sought an order confirming attachment of a New York
company’s assets in order to satisfy the judgment it had obtained
against the company in Japan. The court determined that the
New York company’s appearance in the Japanese action to
defend on the merits after losing its jurisdictional challenge was
a voluntary appearance within the meaning of CPLR 5305(a)(2)
(Nippon Emo-Trans Co. Ltd. at 1222-1226).
The Nippon court reasoned that the traditional conceptual
differences between “general” and “special” appearances
prevailing at the time CPLR article 53 was adopted formed the
“conceptual underpinnings” of section 5305(a)(2) (id. at 1224-
1225). The court also relied upon a section of the Restatement
of the Conflict of Laws, which states that “[a] general appearance
is one where the defendant either enters an appearance in an
action without limiting the purpose for which he appears or
where he asks for relief which the court may give only if it has
jurisdiction over him” (id. quoting Restatement [Second] of
Conflict of Laws § 33, Comment d). Included in this category
are those instances where a defendant “makes a motion raising
a question as to the merits of the plaintiff’s claim even though
the defendant shows that he does not intend thereby to submit
himself to the jurisdiction of the court” (id.).
While New York no longer distinguishes between a general
and special appearance (see CPLR 320), we agree with the
Nippon court that the language and structure of CPLR 5305(a)(2)
have retained the traditional distinction for purposes of
recognition actions. Accordingly, the pertinent question here is
whether defendants’ applications to the High Court amounted
to a voluntary appearance within the meaning of CPLR
5305(a)(2).
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Appendix A
The “skeletal argument” submitted by defendants on their
applications to set aside the English judgments and the High
Court’s decision leave no room for doubt that defendants were
arguing the merits of the conspiracy claims in the English
proceedings. They made arguments and presented proof in an
attempt to persuade the High Court that their reasons for
disobeying the Mareva and “unless” orders were reasonable.
Significantly, “[c]onsiderable time was spent, on the hearing of
the Applications, on the issue of the legal merits of the claims
against Mora and Chascona” (C/JBC Mellon Trust Co. v
Stolzenberg, 2003 WL 117093 at 4 46). Exploration of the legal
merits of the conspiracy claims in particular “took up much of
the hearing” (id. at § 66).‘ Defendants did not preserve any
objection to the High Court’s jurisdiction over them for purposes
of this recognition proceeding. Indeed, they went so far at oral
argument as to suggest that if they had successfully vacated the
English judgments and unsuccessfully defended on the merits,
they still could have contested personal jurisdiction in a future
New York recognition proceeding. , }
We disagree. When defendants applied to the High Court
to set aside the English judgments and to defend on the merits,
they did more than they had to do to preserve a jurisdictional
objection — which was, in any event, foreclosed to them in
4. The High Court Judge, The Honourable Mr. Justice Etherton,
remarked on both the volume of materials submitted and the length
of the proceedings: “There were more than sixty lever-arch files
[binders] placed before me, for the purposes of the Applications.
The hearing before me lasted six days, and undoubtedly would have
lasted considerably longer” had defendants’ counsel not had another
engagement and if the court had allowed plaintiffs to continue in
proving the merits of their conspiracy claims (CJBC Mellon Trust
Co. v Stolzenberg, supra at J 79).
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Appendix A
England by the House of Lords’ decision — and so they
voluntarily appeared in the foreign proceeding within the
meaning of CPLR 5305(a)(2).
We note that CPLR 5305(a)(2) does not on its face
distinguish between voluntary appearances taking place in the
foreign proceeding before or after judgment; and the two Federal
cases discussed above each involved post-judgment appearances
by the judgment-debtors. The Restatement of the Conflict
of Laws likewise makes no pre- or post-judgment distinction,
stating that a defendant may be deemed to have made an
appearance in an action and, therefore, to have submitted to a
court’s jurisdiction, by, among other things, “taking steps in the
action after judgment either in the trial court or in an appellate
court” (Restatement [Second] of Conflict of Laws, § 33,
Comment b [emphasis supplied]; see Restatement [Third] of
Foreign Relations Law, § 421[3] [stating that “[a] defense of
lack of jurisdiction is generally waived by any appearance * * *
if the appearance is for a purpose that does not include a
challenge to the exercise of jurisdiction”’}).
Accordingly, the order of the Appellate Division should be
affirmed, with costs.
* * *x
Order affirmed, with costs. Opinion by Judge Read. Judges
Smith, Ciparick, Wesley, Rosenblatt and Graffeo concur. Chief
Judge Kaye took no part.
Decided May 8, 2003
l4a
APPENDIX B — DECISION AND ORDER OF THE
SUPREME COURT, APPELLATE DIVISION,
FIRST DEPARTMENT DATED MAY 28, 2002
SUPREME COURT, APPELLATE DIVISION,
FIRST DEPARTMENT, NEW YORK
CIBC MELLON TRUST COMPANY, etc., et al.,
Plaintiffs-Respondents,
v.
MORA HOTEL CORPORATION N.V., et al.,
Defendants-Appellants.
May 28, 2002.
SAXE, J.
This appeal requires this Court to consider what
circumstances are sufficient to grant recognition and
enforcement of a money judgment issued by an English court,
where the defendants are Netherlands corporations doing
business in New York that maintained no presence in England
and appeared only for the purpose of contesting personal
jurisdiction. :
FACTS
The legal claims that form the basis tor the judgments at
issue here relate to the financial collapse of Castor Holdings
Ltd., a Canadian real estate and financial investment company
15a
Appendix B
that declared bankruptcy in 1992. Plaintiff CIBC Mellon
Trust Company, acting as the trustee of several trust funds,
and plaintiff DaimlerChrysler Canada Inc. both invested, and
lost, millions of dollars in Castor Holdings investments. They
commenced legal proceedings in the English High Court of
Justice, Chancery Division, alleging that they had been
defrauded into these investments in what amounted to a
massive, multinational fraud. Named as primary defendant
in the English proceeding was Wolfgang Otto Stolzenberg,
the president, chief executive officer and chairman of Castor
Holdings, who is alleged to have orchestrated the fraud.!
In addition to three other individual defendants named
in the English proceeding, plaintiffs ultimately named 47
corporate defendants, including the two defendants in the
present proceeding, Mora Hotel Corporation N.V. (“Mora”)
and Chascona N.V. (“Chascona’”’). Mora is the ground lessee
and operator of the Hotel Gorham, located at 136 West 55th
Street in Manhattan, and Chascona is the fee owner of the
property; they are both Netherlands Antilles corporations
authorized to do business in New York. One of the named
individual defendants in the English action, Marco Gambazzi,
is a Swiss attorney who owns and controls defendants
Chascona and Mora Hotel Corporation; he also served as a
director of Castor Holdings and managing director of Castor’s
principal lending subsidiaries, CH International Finance NV,
as well as serving as officer or director of a number of other
Castor subsidiaries.
1. Indeed, in April 2000, Stolzenberg was indicted in Canada
for 41 counts of fraud relating to Castor’s collapse.
l6a
Appendix B
When the action was commenced in England in 1996,
the claims were initially made against a total of 37 defendants,
including defendant Mora Hotel Corporation. However, while
the claims against Stolzenberg, Gambazzi, the other two
individual defendants, and Castor Holdings and its
subsidiaries were, from the outset, based upon a claim of a
fraudulent conspiracy, the claim as against Mora Hotel was
initially much more limited. Plaintiffs merely interposed a
“tracing” claim, analogous to a claim for a constructive trust,
in which they alleged that Mora had received funds for no
consideration that could be traced to investments made
by plaintiffs based upon the alleged fraud by Castor,
which claims amounted to (Can.) $195,653, (Can.) $151,610
and (US) $51,662.
When plaintiffs amended their claim in 1999, following
receipt of certain discovery, defendant Chascona N.V. was
added as a defendant, and the claims agajnst it as well as
new claims against Mora encompassed the overall fraud as
well as tracing claims. The damages then sought against them,
like those against Stolzenberg and the other defendants, were
over $300 million.
English Court Procedures
To commence the English proceeding, plaintiffs made
two ex parte applications to the English High Court in June
of 1996. One sought leave to serve various non-resident
defendants, some of whom, including Mora, were sought as
“
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Appendix B
necessary or proper parties,’ some as citizens of signatories
to the Lugano Convention.’ The second application sought
ex parte injunctive relief, termed a “Mareva” injunction, by
which the defendants’ assets would be frozen during the
pendency of the proceedings and certain discovery directed.
The basis of the assertion of jurisdiction by the English
High Court over Mora, and later over Chascona, namely, that
they were “necessary or proper parties,” is founded upon an
English practice rule (see, Rules of the Supreme Court of
England Order 11 Rule 1[1][c]). This rule permits the court
to grant a plaintiff leave to serve process on out-of-
jurisdiction defendants in a multi-defendant case as long as
one “base” or “anchor” defendant is a domiciliary of England,
and the out-of-jurisdiction defendants are either necessary
or proper parties. A “proper” party is one who, had he been
in the country, could have been joined as a proper party to
the proceeding (see, Dicey & Morris, The Conflict of Laws
[13th ed.], at 316); a “necessary” party is “any person ...
whose presence before the Court is necessary to ensure that
all matters in dispute in the cause or matter may be effectually
and completely determined and adjudicated upon” (see, RSC
2. The decision of the motion court referred to the Lugano
Convention instead of “necessary or proper party” jurisdiction as
the basis of the English court’s assertion of jurisdiction over these
defendants; we discuss the basis upon which the English court
actually asserted jurisdiction.
3. The Lugano Convention provides for the enforcement of
judgments between member states of the European Economic
Community and the European Free Trade Association, the latter of
which includes Austria, Finland, Iceland, Norway, Sweden and
Switzerland.
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Appendix B
Order 15 rule 6[2]; Barings PLC [in Administration] v
Coopers & Lybrand, English High Court of Justice, Chancery
Division, August 2, 1996, Chadwick, J. [unreported}).
In support of their two ex parte applications, plaintiffs
submitted attorney affidavits and voluminous supporting
documentation, which the court reviewed over a period of
nine days. The court determined that plaintiffs had made
the requisite showing, namely, a “sood, arguable case” for
the claims against the defendants.
A Writ of Summons was initially issued August 1, 1996,
and leave of court to make Mora a defendant was granted on
February 26, 1997. In March of 1997, Mora was served in
New York with the Writ and a Mareva order, restraining it
from transferring assets and directing certain disclosure.
Mora and its owner, Gambazzi, thereupon retained English
counsel and appeared for the limited purpose of disputing
the court’s exercise of personal jurisdiction over them.
In an effort to protect their rights to subsequently
challenge the English court’s exercise of jurisdiction over
them, defendants avoided raising issues that would address
the merits of the substantive claims against them, and so did
not challenge the determination of the English court that they
were necessary or proper parties. Rather, their jurisdictional
challenge was limited to the propriety of the assertion of
jurisdiction over the base defendant, Stolzenberg, on the
ground that he was no longer domiciled in England at the
time plaintiffs attempted to serve him with the Writ of
Summons.
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19a
Appendix B
Their jurisdictional challenge to the propriety of service
was denied in the English High Court. In its ruling, the court
acknowledged that although there was evidence that
Stolzenberg was domiciled at a London address when the
writ was issued on August 1, 1996, he sold that property on
August 19, 1996, prior to delivery of process to that location.
Nevertheless, it concluded that jurisdiction over the moving
defendants was proper. In October of 1997, defendants
challenge to this order was rejected, and the order affirmed,
in a 48-page opinion. Another appeal ensued, and on October
12, 2000, the House of Lords unanimously affirmed the lower
courts, reasoning that jurisdiction over the anchor defendant
was proper even if service could not be effectuated on the
base defendant until a later date, as long as that defendant
was domiciled in England on the date of issuance of the writ.
It rejected the suggestion that “necessary or proper party”
jurisdiction over out-of-jurisdiction defendants is only
permitted if the base defendant was domiciled in England
on the date of service of process.
Meanwhile, on the advice of counsel, Mora had declined
to comply with the Mareva order, and as a result Mora was
“debarred”* from defending on the tracing claim. Following
a damages assessment hearing, plaintiff obtained judgments
against Mora totaling close to $600,000.
In January 1999, plaintiffs applied to the English High
Court to include Mora in the conspiracy claim previously
asserted against the other defendants, and to add Chascona
4. Black’s Law Dictionary, 7th ed., defines debarment as “the
act of precluding someone from having or doing something.”
a
20a
Appendix B
as a defendant on the conspiracy claim, pursuant to an
Amended Statement of Claim. Once again, the English court
was required to examine the evidentiary showing submitted
by plaintiffs and determine that a “good arguable case”
existed regarding the claims of conspiracy against Mora and
Chascona. Upon such conclusion, the court granted leave to
add Chascona as a necessary or proper party and to amend
the claim against Mora. The order explained that the prior
debarment of Mora did not apply to the new conspiracy claim.
Chascona interposed the same jurisdictional defense as
that made by Mora, but adjourned it pending the House of
Lords ruling on Mora’s challenge.
In July 1999, plaintiffs applied ex parte for an order
increasing the amount of the restrained assets under the
Mareva order against Mora to $420,000,000 (Can.), and
extending the same order to Chascona. On this application,
too, the English High Court examined the presented evidence
to determine whether plaintiffs had established the requisite
“good arguable case.” Following its review of the plaintiffs’
showing, on July 23, 1999, the court granted this application.
Thereafter, as a result of their failure to comply with the
new Mareva order, both Mora and Chascona were debarred
from defending against the conspiracy claims. In November
1999, plaintiffs applied to the court, on notice to defendants,
for an assessment of damages, and a hearing was held.
In December 1999, judgments of about $330 million (US)
were entered against both Mora and Chascona.
2la
Appendix B
The New York Proceedings
Plaintiffs, in an effort to recover under the English
judgments, undertook to seize defendants’ property in
New York, which is worth some $30 million. Accordingly,
in May of 2000, they commenced the underlying action,
asserting a cause of action for recognition and enforcement
of the judgments entered in their favor in the English High
Court, and seeking in addition a protective attachment.
Plaintiffs thereafter requested, and were granted, a temporary
fiscal monitor to review the accounts of the Hotel Gorham
to ensure that there was no dissipation of assets. They then
moved for an order to confirm the attachment, as well as for
summary judgment recognizing and docketing as fully
enforceable the English court judgments, while defendants
cross-moved for dismissal.
Plaintiffs’ motions were granted and defendants’ request
for dismissal denied.
DISCUSSION
The primary focus of defendants’ argument on appeal is
that the money judgments were obtained in the absence of
both personal jurisdiction and due process, and therefore
should not be permitted enforcement here. Specifically,
defendants assert that neither Mora nor Chascona have or
had any contacts with England, and therefore the English
court’s assertion of personal jurisdiction is incompatible with
fundamental principles of our law. They also contend that
Mora and Chascona were denied due process of law in the
English proceedings, emphasizing the ex parte aspect of the
22a
Appendix B
English procedures to suggest that it was not compatible with
basic due process rights.
Determination of the jurisdiction issue turns on
the application of Article 53 of the CPLR, New York’s
enactment of the Uniform Foreign Country Money-
Judgments Recognition Act (see, CPLR 5309), which
concerns the recognition and enforcement of money
judgments issued by the courts of foreign countries. Under
Article 53, a money judgment issued by the court of a foreign
country will be recognized and enforceable in New York
State, unless it fits within one of the specific statutory
exceptions set forth in CPLR Article 53 (see, CPLR 5303,
5304; Watary Servs. vy Law Kin Wah, 247 AD2d 281, 282).
The two grounds for mandatory non-recognition of
foreign money judgments, set forth in 5304(a), are that the
foreign judgment was
(1) * * * rendered under a system which does not
provide impartial tribunals or procedures
compatible with the requirements of due process
of law; [or]
(2) the foreign court did not have personal
jurisdiction over the defendant.
Defendants rely upon both subsections as grounds for denying
enforcement here.
23a
Appendix B
Due Process
There are few cases in which recognition of a foreign
money judgment is denied for lack of due process under the
CPLR 5304(a)(1); review of them illustrates the type of
circumstances necessary to successfully establish that a
judicial system failed to provide procedures compatible with
due process of law. In Bank Melli Iran v Pahlavi, (58 F3d
1406, 1411-1412, cert denied 516 US 989), there was
evidence that Iranian trials were highly politicized, that the
government did not believe in an independent judiciary, that
the judiciary was biased, and that the defendant, the sister of
the deposed Shah, could not possibly have gotten a fair trial
in Iran. In Bridgeway Corp. v Citibank (45 F Supp 2d 276,
287, affd 201 F3d 134), there was a showing that the Liberian
Constitution had been suspended, that corruption and
incompetence in handling of legal cases was prevalent, and
that litigants’ due process rights were frequently ignored
(see also, Choi v Kim, 50 F3d 244, 249-250; Banco Minero
v Ross, 106 Tex 522, 172 SW 711, 715).
In contrast, in S.C. Chimexim S.A. v Velco Enter.,
(36 F Supp 2d 206), the court concluded that the requirements
of due process were satisfied by the Romanian judicial system
that was newly reformed in 1992, following the country’s
adoption of a new Constitution in 1991 after the overthrow
of the former Communist regime in 1989. Despite studies
indicating that Romania’s new judicial system was still not
strictly following the procedures necessary to implement
the basic due process guarantees contained in the new
Constitution, and that it “lag[ ged] badly behind many of its
neighbors in clearly breaking away from the Communist past”
24a
Appendix B
(id. at 213 n.6, 214), the court concluded that the evidence
regarding Romania’s current judicial system sufficiently
demonstrated that it is an independent system containing
due process guarantees and providing impartial tribunals
(id. at 214).
The English system of law cannot reasonably be
compared with the type of system that fails to provide due
process (see, Society of Lloyd's v Ashenden, 233 F3d 473,
476, and authorities cited therein; Dynamic Cassette Inter.
Ltd. v Mike Lopez & Assocs., 923 F Supp 8). Recognizing
this, defendants, rather than contending that the English
judicial system in general fails to protect litigants’ due process
rights, take issue with particular aspects of this particular
English proceeding, particularly the English court’s use of
the “Mareva” injunction.
However, since the subsection refers to “a system which
does not provide impartial tribunals or procedures compatible
with the requirements of due process of law” (CPLR
5304[a][1]), it cannot be relied upon to challenge the legal
processes employed in a particular litigation on due process
grounds. As the Seventh Circuit Court of Appeals explained,
discussing the same provision from Illinois’ enactment of
the Uniform Foreign Money-Judgments Recognition Act,
The statute, with its reference to ‘system,’ does
not support such a retail approach, which would
moreover be inconsistent with providing a
streamlined, expeditious method for collecting
money judgments rendered by courts in other
jurisdictions—which would in effect give the
25a
Appendix B
judgment creditor a further appeal on the merits.
(Society of Lloyd's v Ashenden, 233 F3d 473, 477, supra. )
a
Moreover, it is important to recall that the Mareva order
is simply a provisional remedy; it does not remove from a
defendant title or the power to conduct its ordinary business.
Indeed, it bears some similarity to the grant of the provisional
remedy of an order of attachment against an out-of-
jurisdiction defendant (see, CPLR 6201[1]).
Defendants assert that the Mareva injunction has been
criticized by the United States Supreme Court, which quoted
commentators who characterized the injunction as
“the “nuclear weapon of the law’ ” (see, Grupo Mexicano de
Desarrollo v Alliance Bond Fund, 527 US 308, 329, quoting
Ough & Flenley, The Mareva Injunction and Anton Piller
Order: Practice and Precedents xi [2d ed. 1993] ). However,
while the Court in Grupo Mexicano declined to permit
injunctive relief as broad as the English Court permits with
the Mareva injunction, it never suggested that such a
practice would be violative of the due process protections of
the Constitution; rather, it merely suggested that such a
change in the law’s protection for debtors was best left to
Congress (id.).
Additionally, since defendants exercised their right to
seek to vary or discharge the Mareva orders without
submitting to jurisdiction, the suggestion that procedures
. regarding such orders were completely ex parte is inaccurate.
Furthermore, imposition of a money judgment following
the taking of a default against a defendant based upon the
26a
Appendix B
defendant’s failure to comply with discovery is an accepted
procedure in this state, even where the defendant interposed
(and lost) a jurisdictional challenge (see, Reynolds Sec., Inc.
v Underwriters Bank & Trust Co., 44 NY2d 568, 571-72). A
defendant in a New York action who failed to comply with
interim court orders may properly be subject to a judgment
in the full amount sought in the complaint.
Nor have defendants established that any court
proceedings took place that were prohibited by a Stay.
While the appellate court extended Mora’s time to respond
to the Writ until 14 days after the House of Lords’ decision
on the appeal of the personal jurisdiction issue, it did not
stay all proceedings. Specifically, that extension of Mora’s
time to respond to the Writ had no effect on the issuance of
the Mareva injunction and plaintiffs’ right to take action to
enforce Mora’s obligation to comply with it. Indeed, Mora
was debarred, and defaults taken, based not upon a failure to
answer the summons, but upon the failure to comply with
the Mareva order requiring disclosure prior to the running
of Mora’s time to respond. The issuance of orders punishing
a party for failure te comply with injunctive relief or
disclosure orders, even before defendant’s time to serve its
answer has run, or before it has been determined whether
they are amenable to personal jurisdiction (see, Peterson v
Spartan Indus., Inc., 33 NY2d 463, 465), is a procedure
sometimes employed in the courts of this state as well
(see, CPLR 6301, 6311[1], 3106[a]; Halitzer v Ginsberg, 80
AD2d 771, 772).
Moreover, the House of Lords’ decision was issued on
October 12, 2000, causing Mora’s time to respond to expire
27a
Appendix B
on October 26, 2000. Mora did nothing within that time
period to respond to the summons, nor did it take any action
to challenge the ruling that it was in contempt of the Mareva
order.
In any event, defendants received the basic requisites of
notice and the opportunity to be heard (see, Society of Lloyd's
v Grace, 278 AD2d 169). Their decision not to participate in
litigating the merits of the proceeding, in an effort
to protect their rights to interpose a collateral challenge
to enforcement of a final judgment, cannot form the basis of
a Claimed denial of due process (see, Ocean Warehousing
B.V. v Baron Metals & Alloys, Inc., 157 F Supp 2d 245,
251-252).
We perceive no valid due process complaint here based
upon the procedures followed.
Personal Jurisdiction
A foreign money judgment may not be granted
recognition and enforcement when “the foreign court
did not have personal jurisdiction over the defendant”
(CPLR 5304{a][2]).
The determination of whether the English court lacked
personal jurisdiction over Mora and Chascona involves
several interrelated issues.
Initially, before considering the substantive merits of the
personal jurisdiction issue, we must first address plaintiffs’
contention that inasmuch as defendants actively litigated the
28a
Appendix B
issue of personal jurisdiction in England, the determination
by the English court on that issue must be given res judicata
effect, precluding its further consideration here. The threshold
question is, therefore, whether defendants have the right to
de novo review by this Court of the propriety of the English
court’s assertion of personal jurisdiction.
Res Judicata
In arguing that res judicata must be applied to the English
court’s determination that personal jurisdiction was proper,
plaintiffs rely primarily on cases involving money judgments
of sister States rather than cases involving judgments
of foreign countries. As to judgments of sister States, the
rule is well settled: a defendant who has made a special
appearance to challenge the jurisdiction of the sister State’s
courts, and whose position has been considered and rejected
by that court, may not be heard to raise the jurisdictional
challenge anew when the plaintiff seeks to enforce the
judgment in a second State (see, Baldwin v Iowa State
Traveling Men’s Assn., 283 US 522).
However, the same rule does not automatically apply to
the judgments of foreign countries. As one Federal District
Court has noted, “New York courts have consistently
distinguished between judgments of sister states, which must
be accorded full faith and credit as a matter of constitutional
law, and judgments of foreign countries, for which full faith
and credit is not constitutionally mandated” (Nippon Emo-
Trans Co. v Emo-Trans, Inc., 744 F Supp 1215, 1229, citing
Schoenbrod v Siegler, 20 NY2d 403, 409 n.3).
ee a Scr ee
29a
Appendix B
Indeed, the Federal District Court in Nippon held that
“[a] defendant who appears solely for purposes of contesting
jurisdiction will not, by such appearance, waive any
jurisdictional objection in a subsequent suit to enforce the
foreign judgment” (Nippon Emo-Trans Co. v Emo-Trans,
Inc., 744 F Supp 1215, 1221). While acknowledging the
complicated nature of this issue, that Court went on to state
that “As a general rule, any appearance in which a defendant
merely challenges the jurisdiction of the foreign court should
qualify under the exception found in Section 5305(a)(2),
regardless of the basis on which the foreign court upholds
its jurisdiction” (id. at 1222).
Plaintiffs concede that had defendants defaulted
completely rather than appearing before the English court
for the limited purpose of challenging its jurisdiction over
them, defendants would now have the right to ask this court
to examine whether a proper basis existed for the English
court’s assertion of jurisdiction (see, e.g., Boorman v
Deutsch, 152 AD2d 48, 54, lv dismissed 76 NY2d 889;
Insurance Corp. of Ireland v Compagnie des Bauxites de
Guinee, 456 US 694, 706). However, other than the Nippon
case, there is no established case law as to whether, where a
defendant interposed a limited appearance in the foreign court
for the sole purpose of challenging the foreign court’s
jurisdiction, and loses on that issue, res judicata effect must
be given to the foreign court’s determination that the exercise
of personal jurisdiction is proper.
Review of the bare language of CPLR 5305(a)(2) seems
to support the suggestion that a New York court may,
following a limited, special appearance, review the issue of
30a
Appendix B
whether the foreign court had personal jurisdiction over a
defendant. Since the statute provides that recognition is not
required where a defendant appeared in the proceedings
solely for the purpose of contesting the jurisdiction of the
court over him, logic informs us that the propriety of the
personal jurisdiction exercised by the foreign court is not
absolutely established as a fact following that appearance
and unsuccessful challenge.
If the contrary were true, then any time a defendant
appeared in a foreign jurisdiction for the limited purpose of
challenging jurisdiction, once the foreign court rejected
that challenge and issued a money judgment, no further
challenge here would be permissible. Since a foreign court’s
determination that it has personal jurisdiction does not
necessarily comport with the prerequisites of this country’s
Constitution for such a finding, an assertion of jurisdiction
by a foreign court should not preclude a challenge here. Such
a challenge is not, in fact, a second bite of the apple on the
jurisdiction issue.
The discussion contained in the Restatement (Third) of
Foreign Relations Law provides a proposed framework for
considering this point:
Even if the rendering court had jurisdiction under
the laws of its own state, a court in the United
States asked to recognize a foreign judgment
should scrutinize the basis for asserting
jurisdiction in the light of international concepts
of jurisdiction to adjudicate.
- - -
3la
Appendix B
If the defendant appeared in the foreign court
to challenge the jurisdiction of the court and
failed to prevail, it is not clear whether such
determination will be considered res judicata by
a court in the United States asked to recognize
the resulting judgment.
(§ 482, comment c). The comment goes on to suggest
different appropriate degrees of inquiry, depending upon
the foreign court’s basis for its assertion of jurisdiction.
For instance, if the foreign court relied upon a finding of
fact that would support an assertion of personal jurisdiction
here, that court’s determination should be respected, while
if the foreign court depended solely upon a legal analysis,
we should scrutinize the analysis to determine if the
jurisdictional determination accords with our principles
(see, id. at 607).
Plaintiffs point out that in the case of Fairchild, Arabatzis
& Smith, Inc. v Prometco (Produce & Metals) Co., the
Southern District Court remarked that “by litigating and
losing the issue of personal jurisdiction in Britain, [the
defendant] has no right to contest the jurisdiction of that court
in a collateral action” (470 F Supp 610, 615). However, in
that case the defendant had entered what amounted to a
voluntary general appearance. Indeed, the Court took
particular note that the defendant could have appeared solely
for the purpose of challenging jurisdiction without entering
an unconditional appearance as it did (see, id., at n.5).
Upon consideration of the foregoing, we hold initially
that, in this instance, res judicata effect should not be given
32a
Appendix B
to the English court’s rejection of defendants’ jurisdictional
challenge, except to the extent the English court made a
factual finding as to how service had been made upon
Stolzenberg, and its conclusion that by such service it
obtained jurisdiction over the action. Defendants were unable
to raise the assertion there that they had no contacts with
England, because addressing the merits of whether they were
co-conspirators would arguably constitute a defense on the
merits of the substantive claim against them, which indeed
could have led to the application of CPLR 5305(2) to prevent
them from contesting jurisdiction here (see, S.C. Chimexim
S.A. v Velco Ents. Ltd., 36 F Supp 2d 206). Consequently,
the merits of that court’s exercise of personal jurisdiction
over Mora and Chascona should be addressed here.
Necessary Proof on the Issue of Personal Jurisdiction
While CPLR Article 53 attempts to avoid the need for
extensive analysis by clearly establishing the circumstances
under which our courts will and will not recognize and
enforce money judgments issued by the courts of foreign
countries, the circumstances of this case are not clearly
covered by the provisions of that statute.
Specifically, the statute provides that a money judgment
issued by a court of a foreign country will not be recognized
if the foreign court “did not have personal jurisdiction over
the defendant” (CPLR 5304[a][2] ). However, although
CPLR 5305(a) goes on to list six specific circumstances
in which a foreign money judgment “shall not be refused
recognition for lack of personal jurisdiction,” none of those
33a
Appendix B
specifics apply directly to this case. The complete section
provides as follows:
(a) Bases of jurisdiction. The foreign country
judgment shall not be refused recognition for lack
of personal jurisdiction if:
1. the defendant was served personally in the
foreign state;
2. the defendant voluntarily appeared in the
proceedings, other than for the purpose of
protecting property seized or threatened with
seizure in the proceedings or of contesting the
jurisdiction of the court over him;
3. the defendant prior to the commencement
of the proceedings had agreed to submit to the
jurisdiction of the foreign court with respect to
the subject matter involved;
4. the defendant was domiciled in the foreign
state when the proceedings were instituted, or,
being a body corporate had its principal place of
business, was incorporated, or had otherwise
acquired corporate status, in the foreign state;
5. the defendant had a business office in the
foreign state and the proceedings in the foreign
cour: involved a cause of action arising out of
business done by the defendant through that office
in the foreign state; or
34a
Appendix B
6. the defendant operated a motor vehicle or
airplane in the foreign state and the proceedings
involved a cause of action rising out of such
operation.
(b) Other bases of jurisdiction. The courts of this
state may recognize other bases of jurisdiction.
None of the six bases for jurisdiction specified in 5305(a)
apply here. Indeed, these circumstances fall within the
exception contemplated by subdivision (a)(2), specifically,
its exception from the jurisdictional predicate based upon a
personal appearance in the foreign court, where:
“2. the defendant voluntarily appeared in the
[foreign] proceedings ... other than for the
purpose of ... contesting the jurisdiction of the
court over him” [emphasis added].
Although application of this exception does not establish
the converse, namely, that personal jurisdiction must be
lacking where a defendant appeared only for the purpose of
contesting jurisdiction, it does mean that defendants’ limited
appearance in the English court may not in itself suffice to
establish personal jurisdiction under 5305(a).
Plaintiffs therefore rely upon the catch-all provision of
CPLR 5305(b), which broadly provides that “(t]he courts of
this state may recognize other bases of jurisdiction.”
Plaintiffs suggest that the English law’s concept of “necessary
or proper party” jurisdiction should be viewed to constitute
such an “other basis of jurisdiction” as is covered by
35a
Appendix B
CPLR 5305(b). We are unwilling to accept so broad a
proposition.* The question is not whether the foreign court
properly exercised jurisdiction under its own laws. The use
of the term “personal jurisdiction” in CPLR 5305 necessarily
contemplates the definition of that term as understood in our
jurisprudence.
As Professor Siegel explains in his commentary to CPLR
5305, “New York is free, under subdivision (b), to recognize
in respect of the foreign judgment any other jurisdictional
basis that New York law finds congenial to its notions of
comity. ... It would seem appropriate for New York to
recognize for a foreign judgment, under subdivision (b) of
CPLR 5305, any jurisdictional basis it recognizes in its
internal law” (see, Siegel, Practice Commentaries,
McKinney’s Cons. Laws of N.Y., Book 7B, CPLR 5305, at
556 [emphasis added] ). That position was adopted by the
Fourth Department in Porisini v Petricca, (90 AD2d 949,
supra), where an English money judgment obtained in
England against a New York domiciliary was held to be
enforceable here based upon the evidentiary submissions
before the English court tending to show that the defendant,
along with two others, had rented and occupied an apartment
in London, but had failed to pay the agreed rent. Since long-
arm jurisdiction would have been proper under CPLR
302(a)(4), a “jurisdictional basis .. . recognize[d] in [our]
internal law” existed, making the English court’s exercise of
personal jurisdiction over the defendant proper (90 AD2d at
5. Notably, both parties agree that an English court may exercise
“necessary or proper party” jurisdiction over someone outside
England regardless of whether that party, or even that cause of action,
has any connection to England.
36a
Appendix B
950, supra [emphasis added], citing Siegel, Practice
Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B,
CPLR 5305). Similarly, in Canadian Imperial Bank of
Commerce v Saxony Carpet Co. (899 F Supp 1248, affd. 104
F3d 352), the assertion of personal jurisdiction by a Canadian
court in a collection action on an account receivable was
held to have been proper where a New York business had
ordered carpets from a Canadian manufacturer. Although
the underlying negotiations and transactions took place in
New York, the court held that long-arm jurisdiction would
have been proper under CPLR 302(a)(1), because a “clear
nexus existed between business transacted by the defendant
and the cause of action” where the court specified that
“[t]o be subject to in personam jurisdiction in a foreign court,
a defendant must have had certain ‘minimum contacts’ with
the forum state” (id. at 1252-1253, citing Ackermann v
Levine, 788 F2d 830, 838; see also, Soloman Ltd. v
Biederman & Co., 177 AD2d 350, 351).
Therefore, in order to recogn:ze and enforce the money
judgments issued by the English High Court against
defendants, plaintiffs had to show that based upon the
evidentiary materials presented tc the English court, the law
of this State would permit the exercise of personal jurisdiction
over defendants (see, CPLR 302 Jnternational Shoe Co. v
Washington, 326 US 310, 316). We turn to the submissions
contained in the record to evaluaie this issue.
First, however, it must be established which party has
the burden of proof, and what that burden is. Plaintiffs assert
that it is defendants’ burden to demonstrate that the foreign
court lacked jurisdiction; they rey upon Browne v Prentice
37a
Appendix B
Dry Goods, Inc., (1986 WL 6496, 1986 US Dist LEXIS 24632
[S.D.N.Y. 1986]). However, in that ruling, the District Court
relied upon Overmyer v Eliot Realty (83 Misc 2d 694), which
concerned a judgment of a sister State—which is entitled to
full faith and credit—rather than that of a foreign court, which
is not.
The weight of case law supports defendants’ contention
that in order to obtain recognition and enforcement of a
foreign country’s judgment, its proponent must initially make
a prima facie showing of
(1) a final judgment, conclusive and enforceable
where rendered; (2) subject matter jurisdiction;
(3) jurisdiction over the parties or the res; and (4)
regular proceedings conducted under a system that
provides impartial tribunals and procedures
compatible with due process
(see, Ackermann vy Levine, 788 F2d 830, 842 n12,
citing Hilton v Guyot, 159 US 113 and Bishop & Burnette,
United States Practice Concerning the Recognition of
Foreign Judgments, 16 Intl L 425, 429-432: see also, Allstate
Ins. Co. v Administratia Asigurarilor De Stat, 962
F Supp 420, 425; Bridgeway Corp. v Citibank, 45 F Supp 2d
276, 286, affd 201 F3d 134; Dresdner Bank AG yv Haque,
259, 262-263). We concur with the analysis of these cases.
Review of the record reflects that plaintiffs successfully
made the necessary showing, that defendants’ conduct, as
set forth in materials submitted in the English action,
provided the necessary predicate for England’s exercise of
38a
Appendix B
personal jurisdiction over them under our Constitutional
standards (see, /nternational Shoe Co. v Washington, 326
US 310, 316).
“Regarding the New York standards pertaining to in
personam jurisdiction, no simple test exists to determine the
propriety of jurisdiction,” and “ ‘proof of one transaction in
New York is sufficient to confer jurisdiction [over a
nonresident] as long as the activities of the defendant in
question were purposeful and there is a substantial
relationship between the transaction and the claim asserted’ ”
[cite omitted] (Canadian Imperial Bank of Commerce v
Saxony Carpet Co., supra, at 1253).
Plaintiffs rely upon the concept of co-conspirator
jurisdiction to provide the basis for England’s exercise of
personal jurisdiction. Application of this concept requires a
showing that defendants were part of a conspiracy, at least
part of which took place within the jurisdiction (see, Cleft of
the Rock Found. v Wilson, 992 F Supp 574, 581-582; Dixon
v Mack, 507 F Supp 345, 352).
To illustrate: in Dixon v Mack, supra, Mitchell Dixon,
an adherent of the Unification Church, brought an action in
the Southern District of New York, alleging that a conspiracy
had deprived him of his civil rights by forcibly abducting
him from New York City and driving him to out-of-State
locations, first in New Jersey, then in Pennsylvania, where
certain of the defendants attempted to “deprogram” him.
Defendant William Rick was a Pennsylvania psychiatrist
hired by one of the other defendants, after the abduction, to
examine Dixon, following which Rick wrote a report
39a
Appendix B
asserting that in his professional opinion, Dixon was
“unbalanced” (id. at 347). Rick, in moving to dismiss the
complaint against him for lack of personal jurisdiction,
asserted that his practice was in Pennsylvania and he had no
connection to New York, and indeed, that his only act was to
examine Dixon, in Pennsylvania, after Dixon’s abduction
(id.). However, the court noted that the allegations of the
complaint and some evidentiary materials gave rise to
reasonable inferences not only that Rick knew he was
participating in an effort to “reprogram” Dixon, but that in
the process of joining the conspiracy he subsequently ratified
Dixon’s abduction (id. at 348-349). Consequently, his alleged
participation in the conspiracy, including his ratification of
an act that took place in New York, was sufficient for a prima
facie showing that New York could properly exercise
jurisdiction over Rick, although the denial of his motion was
without prejudice to renewal at trial (id.). .
The affidavits and supporting materials provided to the
English court were sufficient to have demonstrated, prima
facie, that Mora and Chascona, through their owner, Marco
Gambazzi, were active participants in the conspiracy alleged
in the present case, which conspiracy included acts which
took place in England.
Specifically, plaintiffs submitted affidavits explaining
that to accomplish the complained-of fraud, the four
individual defendants named in the English action, Wolfgang
Stolzenberg, Marco Gambazzi, Edwin Banzi ger, and Karsten
Bodo Von Wersebe, misrepresented Castor Holdings to
investors as a bona fide investment company in a healthy
financial position, while knowingly manipulating Castor’s
40a
Appendix B
business and financial accounts so as to avoid disclosing the
true facts. These four individuals, it was explained, used their
positions in both Castor subsidiaries and in the companies
to which Castor made loans, so as to disguise the actual flow
of funds between Castor Holdings and related borrowers,
lenders and developers. While Castor’s accounts made it
appear to investors as an active, growing business consisting
of performing loans, new loans and reasonable returns, these
individuals disguised the true nature and value of the projects
to which loans were made, the purpose for which the funds
would be used, and the extent of returns Castor received on
the loans.
Plaintiffs’ showing tends to support not only the
proposition that Gambazzi individually played a significant
role in the alleged conspiracy, but also that Gambazzi acted
on behalf of Mora and Chascona as well.
There was evidence that both Mora and Chascona were
controlled, as well as owned in whole or in part, by individual
defendant Marco Gambazzi. In official filings in New York
State, Gambazzi described himself as Mora’s Chief Executive
Officer. He was at least a part-owner of Chascona, and
regularly acted on its behalf during the pertinent time period.
There was also evidence that on defendants’ behalf,
Gambazzi retained Wolfgang Stolzengerg, the asserted
ringleader of the Castor Holdings fraud scheme, as a
management consultant for Mora, Chascona, and the Gorham
Hotel, in 1989.
Mora and Chascona, the documents explain, were among
the companies that received loans from and gave mortgages
to various Castor-related entities. While the financial
4la
Appendix B
arrangements set out in plaintiffs’ submissions are too
elaborate to discuss in this context, the loans Stolzenberg
and/or Gambazzi arranged for Mora and Chascona to receive
from Castor fall within the pattern of Castor’s typical scheme.
For example, on one Castor loan, an arrangement was made
for partial refinancing on terms that left Castor unsecured as
to a balance of over $2 million. Additionally, interest on loans
made to Mora and Chascona was capitalized without the
capitalization of interest revealed in Castor’s financial
Statements. By the time of Castor’s collapse, a total of
approximately $21.35 million was owed by Mora and
Chascona en loans from Castor.
Sufficient information was submitted to the English High
Court to make a prima facie showing that Gambazzi and/or
Stolzenberg, acting on behalf of Mora and Chascona as well
as individually, knowingly caused the Castor Group to make
loans to Mora and Chascona under the foregoing terms as
part of a fraudulent scheme, using funds procured from
investors through the use of misrepresentations.
Furthermore, the asserted conspiracy, as it was set forth
in the documents plaintiff submitted to the English High
Court, had sufficient connection to England to permit a proper
exercise of jurisdiction over any knowing co-conspirator, and
Mora and Chascona, due to the knowledge they possessed
through Gambazzi, were properly included as such.
Inasmuch as plaintiffs made a prima facie showing that
defendant corporations, through Marco Gambazzi, were
active participants in the conspiracy asserted in the English
action, it must be concluded that the English court’s exercise
42a
Appendix B
of personal jurisdiction over Mora and Chascona was
presumptively proper, unless evidence presented by
defendarits successfully demonstrated that plaintiffs’ prima
facie showing was false.
It has all along been defendants’ position that (1) the
Castor Holdings fraud was perpetrated solely by Siolzenberg,
and Gambazzi was merely an outside director who also
invested his own and his corporations’ money and was
therefore as much an innocent victim as Castor’s other
investors; (2) Mora and Chascona were unconnected with
the fraud, having merely received (and largely repaid) a loan
from a Castor subsidiary; (3) the fraud took place solely in
Canada and the United States. However, their affidavits in
support do not succeed in demonstrating that the English
court lacked a basis to exercise personal jurisdiction over
them (see, Porisini v Petricca, supra). Accordingly, their
challenge to the judgments under CPLR 5404(a) must fail.
Other Grounds for Non-Recogniiion of Foreign Judgments
Defendants raise, for the first time on appeal, several
other grounds for declining to enforce the English judgments,
derived from subdivision (b) of CPLR 5304, which identifies
seven additional grounds upon which to deny recognition of
judgments issued by the courts of foreign countries.
Defendants contend (1) that the English judgments are
“repugnant to the public policy of this state” (CPLR
5304[b][4]) because the Mareva order is incompatible with
the American approach to the judiciary’s equitable powers;
(2) that “the judgment conflicts with another final and
conclusive judgment” (CPLR 5304[b][5]), since the public
43a
Appendix B
prosecutor of the Canton of Ticino, Switzerland, after
conducting an investigation of a complaint by one of the
plaintiffs against Gambazzi and other individuals, decided
not to prosecute; (3) that the amounts of the judgments are
unconscionable; and (4) that England was a seriously
inconvenient forum (CPLR 5304[b][7]). It is undisputed that
defendants bear the burden of proving these discretionary
grounds for non-recognition.
Defendants’ failure to raise these contentions before the
motion court constitutes a waiver of them. Moreover, were
we to address these contentions on their merits, we would
reject them. The exercise of discretion by a Swiss prosecutor
in dismissing a charge brought against Marco Gambazzi
simply does not constitute the sort of “final and conclusive”
judgment contemplated by CPLR 5304(b)(5). Defendants’
assertion of inconvenient forum is inapplicable, since CPLR
5304(b)(7) applies to circumstances where “jurisdiction [is]
based only on personal service, [and] the foreign court was a
seriously inconvenient forum for the trial of the action,”
because here the English court’s jurisdiction over defendants
was not based solely upon personal service. Finally, we do
not find plaintiffs’ recovery of losses from defendants arising
out of the asserted fraudulent conspiracy to be in any way
repugnant to the public policy of New York.
The motion court’s appointment of a temporary fiscal
monitor in the context of the interim application was proper,
inasmuch as the monitor’s duties were limited to review of
the Hotel’s accounts to ensure its assets were not dissipated
or mishandled, and no affirmative control was taken over
defendant’s assets prior to final judgment.
—
44a
Appendix B
Accordingly, the order and judgment (one paper) of the
Supreme Court, New York County (Ira Gammerman, J.),
entered January 16, 2001, which, inter alia, granted plaintiffs’
motion for summary judgment recognizing and docketing
certain judgments entered in their favor in the High Court of
Justice, Chancery Division, London, England, should be
affirmed, with costs.
All concur.
ENTERED: MAY 28, 2002
s/ Catherine O’Hague Wolfe
CLERK
45a
APPENDIX C — JUDGMENT AND ORDER OF THE
SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK DATED JANUARY 5, 2001
AND FILED JANUARY 16, 2001
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
Index No. 00/602149
IAS Part 27 Case No. 15979
Gammerman, J.
CIBC MELLON TRUST COMPANY, in its capacity as
Trustee of the Chrysler Canada Ltd.’s Benefits Plan, the
Chrysler Canada Ltd. Master Trust Fund, the Chrysler Canada
Ltd. Non-Canadian Master Trust Fund, the Holmes Foundry
Division Master Trust Fund, and the Chrysler Canada Ltd.
Supplemental Unemployment Benefit Plans,
and DAIMLERCHRYSLER CANADA INC.,
Plaintiffs,
- against -
MORA HOTEL CORPORATION N.V. and
CHASCONAN.V.,
Defendants.
46a
Appendix C
JUDGMENT AND ORDER
Plaintiffs, CIBC MELLON TRUST COMPANY and
DAIMLERCHRYSLER CANADA INC. (“Plaintiffs”),
having commenced this action against defendants, MORA
HOTEL CORPORATION N.V. and CHASCONA N.V.
(‘Defendants’), by Summons and Complaint dated May 18,
2000, seeking recognition, pursuant to the Uniform Foreign
Country Money-Judgments Recognition Act [CPLR Article
53] and the common law of the State of New York, of
judgments entered in the High Court of Justice, Chancery
Division, London, England on February 4, 1999, October
21, 1999 and December 7, 1999 in favor of Plaintiffs and
against Defendants (the “English Judgments”); and
Plaintiffs having on May 25, 2000 applied for and this
Court on May 25, 2000 having made an “Ex Parte Order of
Attachment,” entered on May 30, 2000, against the New York
property of the Defendants (the “Order of Attachment”),
including, inter alia, land and buildings in the County of
New York known as the Hotel Gorham and the proceeds
therefrom (the “Hotel”); and the Sheriff of the City of New
York, in the County of New York, having levied upon the
Hotel on June 7, 2000 by filing the Order of Attachment with
the County Clerk and serving it upon the Defendants; and
Plaintiffs having moved on notice to Defendants, by “Order
to Show Cause to Confirm Order of Attachment” signed on
June 9, 2000 (with supporting papers), for an order
confirming the Order of Attachment (the “Motion to
Confirm”); and
47a
Appendix C
Plaintiffs having on May 25, 2000 applied ex parte for
an order temporarily restraining Defendants and their agents
from transferring, encumbering or impairing Defendants’
interests in any New York property, including the Hotel, and
temporarily appointing a special fiscal monitor to oversee
the finances of the Hotel; and this Court having on May 25,
2000 granted Plaintiffs’ application and signed an “Order to
Show Cause, Temporary Restraining Order and Temporary
Appointment of Special Fiscal Monitor” (the “Monitor
Order”), (A) bringing on Plaintiffs’ motion for (1) a
preliminary injunction restraining Defendants and their
agents from transferring, encumbering or impairing
Defendants’ interests in-any New York property and
(ii) the appointment of a special fiscal monitor to oversee
the finances of the Hotel (the “Monitoring Motion”),
(B) restraining Defendants and their agents from transferring,
encumbering or impairing Defendants’ interests in any New
York property, and (C) appointing The Honorable Burton S.
Sherman to serve as a temporary special fiscal monitor
(the “Special Monitor”) to oversee the finances of the Hotel;
and
Defendants having opposed the Motion to Confirm and
the Monitoring Motion; and
This Court having on September 12, 2000 orally
continued the Monitor Order; and this Court having by order
dated November 8, 2000 further continued the Monitor Order
through and after final judgment and enjoined Defendants
from making any transfers or payments excepting those to
be made in the ordinary course of the Hotel’s business; and
48a
Appendix C
While the Motion to Confirm and the Monitoring Motion
were pending, Plaintiffs having moved, by Order to Show
cause signed on November 8, 2000 (with supporting papers),
(A) pursuant to CPLR 3212, for a summary judgment
recognizing and docketing the English Judgments as fully
enforceable judgments of this Court, (B) pursuant to CPLR
§ 5228, for the appointment of a receiver over Defendants’
property, and (C) pursuant to CPLR § 5225, for an order
directing Defendants to turn over their assets, including the
Hotel, to said receiver (the “Summary Judgment, Receiver-
ship and Turnover Motion”); and
Defendants having opposed the Summary Judgment
Motion and having cross-moved for a summary judgment
dismissing the Complaint (the “Motion to Dismiss”); and
This Court having read and filed the following papers:
Plaintiffs’ Summons and Complaint (with exhibits), dated
May 18, 2000; Order to Show Cause, Temporary Restraining
Order and Temporary Appointment of Special Fiscal Monitor,
signed May 25, 2000; Ex Parte Order of Attachment,
signed May 25, 2000; Sealing Order, signed May 22, 2000;
Affidavit of James Irvine (with exhibits), sworn to May 17,.
2000; Compendium of Exhibits to the James Irvine
Affidavit; Affirmation of Leon P. Gold, Esq. (with exhibits),
dated May 18, 2000; Affidavit of Thomas P. McConnell (with
exhibit, sworn to May 15, 2000; Memorandum of Law in
Support of Plaintiffs’ Application for an Ex Parte Order of
Attachment, and Order to Show Cause for a Preliminary
Injunction, with Temporary Restraining Order, and the
Appointment of a Special Fiscal Monitor, dated May 18,
2000; Undertaking on Attachment, dated May 24, 2000;
49a
Appendix C
Undertaking dated June 5, 2000; Order to Show Cause to
Confirm Order of Attachment, signed June 9, 2000; Affidavit
of David A. Picon, Esq. in Support of Motion by Order to
Show Cause for an Order Confirming Order of Attachment
(with exhibits), sworn to June 9, 2000; Affidavit of Charles —
A. Pugh (with exhibits), sworn to September 6, 2000;
Compendium of Exhibits to the Charles Pugh Affidavit (two
volumes); Reply Affidavit of Mortimer G Freiheit, Esq. (with
exhibits), sworn to September 7, 2000; Reply Affirmation
of Bart Schectman, Esq., dated September 11, 2000;
Plaintiffs’ Reply Memorandum in Further Support of their
Motions for a Preliminary Injunction and to Confirm the
Attachment and the Appointment of a Special Fiscal Monitor,
dated September 11, 2000; Order to Show Cause signed
November 8, 2000; Affidavit of Charles A. Pugh (with
exhibit), sworn to November 3, 2000; Affirmation of Bart
Schectman, Esq. (with exhibits), dated November 6, 2000;
Plaintiffs’ Memorandum of Law in Support of Their Motions
for Summary Judgment and Appointment of a Receiver to
Enforce The English Judgments, dated November 6, 2000;
Plaintiffs’ Reply Memorandum in Further Support of their
Motion for Summary Judgment and in Opposition to
Defendants’ Cross-Motion (with attachments), dated
December 1, 2000; Defendants’ Answer to the Complaint,
dated August 18, 2000; Defendants’ Memorandum of Law
in Opposition to Plaintiffs’ Motions for Preliminary
Injunction, Appointment of a Special Fiscal Monitor and to
Confirm the Order of Attachment (undated); submitted
August 18, 2000; Affidavit of Charles E. Flam, Esq. (with
exhibits), sworn to August 16, 2000; Affidavit of David A.
Sabo, Esq., sworn to August 18, 2000; Affidavit of Lawrence
O. Kamin, Esq. (with exhibits) sworn to August 18, 2000;
50a
Appendix C
Defendants’ Sur-Reply Memorandum of Law in Opposition
to Plaintiffs’ Motions for a Preliminary Inunction,
Appointment of a Special Fiscal Monitor and to Confirm
the Ex Parte Order of Attachment (undated), submitted
September 28, 2000; Second Affidavit of David A.
Sabo, Esq., sworn to September 28, 2000; Defendants’
Memorandum of Law in Opposition to Plaintiffs’ Motion for
Summary Judgment and In Support of Defendants’
Cross-Motion for Summary Judgment (undated), submitted
November 28, 2000; Second Affidavit of Lawrence O.
Kamin, Esq. (with exhibits), sworn to November 28, 2000;
and Affidavit of lain H. Mackie, sworn to November 28,
2000; and
This Court, having considered all of the parties’ proofs
and the arguments of counsel, finds that there exists no
genuine issue of material fact precluding the disposition of
the pending motions as a matter of law.
The Order of Attachment was duly issued, levied
and served. Grounds for the attachment exist pursuant to
CPLR § 6201(5) because plaintiffs’ cause of action is based
on a foreign judgment, and the attachment should be
confirmed pursuant to CPLR § 6212(a) because plaintiffs
demonstrated that they were likely to succeed on the merits
of their cause of action based on the English Judgments
which, as-detailed below, qualify for recognition under
Article 53 of the CPLR, and the amount of the English
Judgments against the Defendants exceeds all known
counterclaims.
The Court further finds that Plaintiffs are entitled to the
requested preliminary injunction because they have
Sia
Appendix C
demonstrated a likelihood of success on the merits of their
cause of action for recognition of the English Judgments and
a risk of irreparable harm absent the injunction in view of
Defendants’ demonstrated participation in a fraudulent
scheme to hide assets from creditors (see CPLR § 6301).
The Court further finds that Plaintiffs are entitled to
appointment of a receiver pending any appeal herein and until
further order of this Court, pursuant to CPLR § 6401.
The Court further finds that the English Judgments meet
the standards for recognition set forth in Article 53 of the
New York Civil Practice Law and Rules and under the
common law of the State of New York in that the English
Judgments grant Plaintiffs recovery of sums of money (other
than for taxes, a fine or other penalty, or for support in a
matrimonial or family matter) and are final, conclusive
between the parties and fully enforceable in England
(see CPLR §§ 5301, 5302, 5303); that the English courts
provide impartial tribunals with procedures compatible with
American requirements of due process of law (see CPLR
§ 5304(a)(1)); that Defendants have failed to present evidence
sufficient to create a genuine issue of fact in relation to their
contention that the English legal system failed to afford them
procedures compatible with the requirements of due process
of law (see id.); that the English courts in fact afforded the
Defendants protections compatible with the fundamental
American notions of due process of law; that the English
courts had personal jurisdiction over the Defendants
(see CPLR § 5304(a)(2)), as fully litigated before and
adjudicated by the English trial and appellate courts
(including England’s highest court, the House of Lords),
52a
Appendix C
pursuant to an application of England’s rule of “necessary or
proper party” jurisdiction; that as applied with respect to these
Defendants, said rule is compatible with New York law
regarding personal jurisdiction over non-resident
co-conspirators and thus provides no basis for rejecting
the English courts’ determination of jurisdiction (see CPLR
§§ 5304(a)(2), 5305(b)); that the English courts provided
Defendants with ample opportunity to research and produce
whatever evidence they wished in respect of the issue of
personal jurisdiction and fully considered the plaintiffs’ and
the defendants’ evidence concerning the residence of the
anchor defendant (see CPLR § 5304(b)(3)); that the English
trial court did not enter the judgments until after it determined
the issue of personal jurisdiction; that the English trial court
expressly provided Defendants with ample opportunities to
respond to the merits of Plaintiffs’ $300 million claims
alleging a massive, multinational fraudulent conspiracy
notwithstanding Defendants’ repeated elections not to avail
themselves of numerous opportunities to purge themselves
of their contempts of the English court’s orders; that
Defendants had ample notice of and opportunity to be heard
in all proceedings before the English courts relating to entry -
of the judgments in question (see CPLR § 5304(b)(2)); that
the Defendants ultimately elected to take default judgments,
resting upon their rejected objections to the English courts’
jurisdiction over them; and that Defendants have failed to
present evidence sufficient to create a genuine issue of
material fact in support of any of their CPLR § 5304 defenses
to the conclusiveness or recognition of the English
Judgments. Each of the issues raised by the Defendants in
respect of the English proceedings was either adjudicated
therein or waived by the Defendants.
53a ms
Appendix C
NOW, THEREFORE, after due deliberation, and upon
motion of Proskauer Rose LLP, attorneys for the Plaintiffs,
it 1s
ORDERED that Plaintiffs’ Motion to Confirm the Order
of Attachment is GRANTED in its entirety; and it is further
ORDERED that the Ex Parte Order of Attachment herein
signed on May 25, 2000 and entered on May 30, 2000 be,
and the same hereby is, confirmed; and it is further
ORDERED that Plaintiffs’ Monitoring Motion is
GRANTED in its entirety; and it is further
ORDERED that, pursuant to CPLR §§ 6301 and 6311,
Defendants and each of their officers, directors, employees,
agents, representatives, successors and assigns, and all other
persons acting under their direction or control or in active
concert or participation with them, be, and hereby are,
ENJOINED AND RESTRAINED from selling, assigning,
transferring, encurnbering, mortgaging, pledging, disposing
of, or otherwise relinquishing to any persons) or entity(ies)
ownership, possession, custody or control of (i) their
respective interests in the Hotel Gorham or any assets thereof
or proceeds therefrom or (ii) their respective interests in any
other property, real or personal, tangible or intangible, located
within the State of New York, up to the extent of THREE
HUNDRED AND THIRTY MILLION DOLLARS
(U.S.$330,000,000.00); and it is further
ORDERED that, pursuant to CPLR § 6401(a), this
Court’s May 25, 2000 temporary appointment of the Special
54a
Appendix C
Monitor to oversee the finances of the Hotel be, and hereby
is, confirmed and continued until such time as Defendants
turn over the Hotel and all of its assets and accounts to Judge
Sherman in capacity as a post judgment receiver pursuant to
the provisions of this Judgment and Order; and it is further
ORDERED that Plaintiffs’ Summary Judgment,
Receivership and Turnover Motion is GRANTED in its
entirety; and it is further
ORDERED that Defendants’ Motion to Dismiss is
DENIED in its entirety; and, accordingly, it is further
ORDERED AND ADJUDGED that, in accordance with
Article 53 of the New York Civil Practice Law and Rules
and the common law of the State of New York, the English
Judgments be, and hereby are, recognized and docketed as
final, conclusive and fully enforceable money judgments of
this Court in favor of Plaintiffs, CIBC MELLON TRUST
COMPANY, a Canadian corporation with its principal place
of business located at 320 Bay Street, Toronto, Ontario,
Canada, and DAIMLERCHRYSLER CANADA INC.,
a Canadian corporation with its principal place of business
located at 2450 Chrysler Centre, Windsor, Ontario, Canada,
and against Defendants, MORA HOTEL CORPORATION
N.V. and CHASCONA N.V., each being a Netherlands
Antilles corporation with its principal place of business
located at 136-138 West 55th Street in the City, County and
State of New York, in the following amounts:
As against MORA HOTEL CORPORATION N.V., in the
principal amounts of
55a
Appendix C
(U.S.) $238,360.77, (Can.) $357,738.21 plus
(U.S.) $386,687.95 plus (U.S.) $163,710,894.59,
(Can.) $245,701,477.70 plus (U.S.) $134,315,511.10;
interest in the sum of $29,945,035.62, and costs
and disbursements in the sum of $260, and total
sum of $328,596,750.23:
As against CHASCONA N.V., in the principal
amounts of (U.S.) $163,964,876.36, (Can.)
$246,082,660.00 plus (U.S.) $134,727,530.30;
plus interest in the sum of $29,901,975.08, costs
and disbursements in the sum of $260.00, and total
sum of $328,594,651.74;
and that Plaintiffs have execution for said amount plus
interest thereon at the New York statutory rate of nine percent
(9%) per annum from and after the dates thereof plus such
costs and disbursements as herein may be taxed by the Clerk;
and it is further
ORDERED AND ADJUDGED that Plaintiffs’ interest
in Defendants’ property secured by this judgment relates back
in time to June 7, 2000, the date of the abovementioned
sheriff s levy on Defendants’ property pursuant to the Order
of Attachment; and it is further
ORDERED that, pursuant to CPLR §§ 5228 and 5225:
(A) The Honorable Burton S. Sherman be, and hereby
is, appointed as receiver (the “Receiver”) of all real and
personal property situate in the State of New York in which
Defendants have an interest (the “Property”), including (but
not limited to):
56a
Appendix C
(i) the land and buildings commonly known as
136-138 West 55th Street in the City, County, and State of
New York, Section 4, Block 1007, Lot 49, including (but not
limited to) the Hotel Gorham, and
(ii) all the assets of the Hotel Gorham and all
proceeds therefrom, including (but not limited to) all of the
Hotel’s and/or the Defendants’ bank, brokerage and money
market accounts (including but not limited to Chase
Manhattan Bank accounts numbered 0131-124489,
013-1-270415, 013-1-276099, 013-1-276107, 013-5-055342
and 777-117711 and Vista money market accounts numbered
677-50026096, 677-50026214 and 677-50027253), and
all receivables and claims of any kind, liquidated or
unliquidated, direct or derivative; and
(B) Upon the docketing herein of the English Judgments
as judgments of this Court, Defendants (and their agents and
representatives) forthwith shali turn over to the Receiver title,
possession, custody and control of the Property and execute
such documents as the Receiver may ceem necessary to effect
such turnover, including but not limited to a deed or deeds
and assignments with respect to any lease or leases; and
(C) the Receiver shall take title, possession, custody and
control of the Defendants’ Property and, incident thereto,
shall, among other things:
(i) pending a sale of Hotel Gorham, take control of
the management and operation of said Hotel and all proceeds
therefrom and all receivables and other claims thereof,
including but not limited to having sole and exclusive
57a
Appendix C
signature authority over all of the Hotel’s and/or the
Defendants’ bank, brokerage and money market accounts,
and
(ii) preserve, either in an interest-bearing escrow
account or by prudent investment, the excess cash flow,
profits and/or retained earnings of the Hotel (the “Preserved
Profits”) pending a sale of the Hotel; and
(iii)- market, prepare for and consummate in due
course a commercially reasonable sale of the Hotel in an
arm’s-length private market transaction; and
(iv) remit to the Plaintiffs the net proceeds of said
sale of the Hotel, together with all Preserved Profits, less
such commission or compensation as may be due and payable
to the Receiver and approved by the Court; and
(v) reimburse Plaintiffs for all fees and expenses
paid and to be paid to the Hon. Burton S. Sherman as special
fiscal monitor appointed pursuant to this Court’s order dated
May 25, 2000, and his lawyers and accountants retained in
connection with this matter, and
(vi) remit to Defendants attorneys of record, Willkie
Farr & Gallagher (“Willkie F arr’), funds from Defendants’
bank and brokerage accounts in such amount as in
the Receiver’s judgment is reasonable and sufficient to
compensate Willkie Farr for the billed but unpaid-for legal
services it has rendered to Defendants herein through and
including the date of entry of this Judgment and Order,
provided, however, that the Receiver shall not make any
EEE
58a
Appendix C
payment to Willkie Farr in respect of any services rendered
in anticipation of or in relation to any appeal from this
Judgment and Order or-in anticipation of or in relation to
any motion to stay enforcement or execution of any portion
of this Judgment and Order; and
(vii) continue to make all payments for obligations
incurred in the ordinary course of business of the hotel includ-
ing ordinary and necessary vendor and payroll expenses.
(D) the Receiver, subject to such further approval of the
Court as the Receiver deems appropriate after consultation
with Plaintiffs, shall:
(i) make all decisions concerning the management
and operation of the Hotel, including but not limited to
decisions concerning the hiring and firing of Hotel officers
and employees and the marketing and sale.of the Hotel; and
(ii) retain such hotel property management
consultant(s); hotel operator or hetel operating company,
real estate broker(s), market consultant(s), lawyer(s),
accountant(s) and/or other specialized assistance as in the
Receiver’s judgment is necessary and appropriate to assist
the Receiver in carrying out his duties; and
(iii) pay from the assets of the Hotel the fees and
expenses of the Receiver and any parties retained by him
pursuant to the immediately preceding subdivision (D)(ii);
and
eyes
59a
Appendix C
(iv) pending a sale of the Hotel, retain all Profits
and cash balances except for the payment of such expenses
as provided for in this Order until such time as Defendants
have exhausted all available appeals or until the hotel is sold,
and
(E) Pursuant to CPLR 6403, the receiver within 10
business days of the date of this Order shall file an
undertaking in the amount of $500,000 and upon such filing,
such undertaking shall supercede any undertaking furnished
by said receiver in his former capacity as paid fiscal monitor.
ENTER:
Dated: January __, 2001 s/ 1. Norman Goodman
Ja.
Clerk
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