National Asset Loan v. McCann, J. ( 2015 )

J-A16043-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
NATIONAL ASSET LOAN MANAGEMENT IN THE SUPERIOR COURT OF
LIMITED PENNSYLVANIA
Appellee
v.
JOHN MCCANN
Appellant No. 3309 EDA 2014
Appeal from the Order October 30, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): January Term, 2014, No. 003130
*****
NATIONAL ASSET LOAN MANAGEMENT IN THE SUPERIOR COURT OF
LIMITED PENNSYLVANIA
Appellee
v.
JOHN MCCANN
Appellant No. 3312 EDA 2014
Appeal from the Order October 21, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): January Term, 2014, No. 003130
BEFORE: LAZARUS, J., OLSON, J., and PLATT, J.*
MEMORANDUM BY LAZARUS, J.: FILED SEPTEMBER 03, 2015
____________________________________________
*
Retired Senior Judge assigned to the Superior Court.
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John McCann appeals from the orders of the Court of Common Pleas of
Philadelphia County, entered in favor of National Asset Loan Management
Limited (“NALM”) imposing a charging order1 (the “Charging Order”) and
appointing a financial monitor2 (the “Monitor Order”). Upon careful review,
we affirm in part and quash in part.
NALM began these proceedings on January 28, 2014, by filing a
praecipe to record a foreign-nation default judgment against McCann. The
Commercial Division of the High Court of the Republic of Ireland had
previously entered this judgment.3
The civil action in Ireland was commenced by way of summary
summons issued on March 4, 2013. McCann resides outside of the Republic
of Ireland, in Northern Ireland, so it was necessary to attempt to effect
service via the courts in Northern Ireland. The process server in Northern
Ireland was unable to serve the summary summons on McCann, so NALM
sought permission from the Irish court to use substituted service. The Irish
court entered an order directing service of the summary summons be made
by means of substituted service upon Esther McGahon McGuiness & Co.,
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1
Trial Court Order, 10/21/14, at 1.
2
Trial Court Order, 10/30/14, at 1.
3
The Irish judgment was based on McCann’s failure to make payments as
guarantor of certain defaulted loans that had been extended to companies in
which McCann has ownership interests.
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legal solicitors representing McCann with respect to assets located in the
Republic of Ireland. The summary summons was served on August 13,
2013.
McCann appeared in the Irish action and filed a motion to set aside the
substituted service order, which the Irish court denied. McCann then failed
to appear at a scheduled hearing before the Irish court and the court
entered judgment by default in favor of NALM on November 15, 2013.
Thereafter, McCann filed a motion to set aside the default judgment
that had been entered against him. That motion was denied on January 23,
2014. McCann filed a notice of appeal with respect to the Irish default
judgment on February 12, 2014. That appeal is currently pending.
On September 5, 2014, NALM filed a motion in the Court of Common
Pleas of Philadelphia County seeking the issuance of the Charging Order with
respect to McCann’s partnership and membership interests in Walnut
Rittenhouse GP, LLC, Walnut Rittenhouse Associates, L.P., Castleway
Properties, LLC, and Castleway Management Services, LLC (collectively, the
“McCann Entities”), which the court granted. NALM also filed a petition
seeking appointment of a financial monitor to obtain certain financial
information regarding the McCann Entities and McCann’s interests therein,
which the trial court granted.
On November 17, 2014, McCann filed a timely notice of appeal to this
Court, in which he raises the following claims:
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I. Should the Charging Order and Monitor Order both be
reversed because NALM failed to meet its burden to have
the underlying Irish default judgment against McCann
recognized in accordance with applicable law?
II. Even if one assumes that NALM used proper procedures to
seek recognition of its default judgment, should the
Charging Order and the Monitor Order both be reversed
because NALM failed to demonstrate that the Irish court
that entered the default judgment had personal jurisdiction
over McCann?
III. Even if one assumes that the Irish default judgment
against McCann has been properly recognized, should the
Charging Order and the Monitor Order be reversed because
NALM utilized incorrect execution procedures?
Brief of Appellant, at 5-6.
McCann first claims that both orders should be reversed because NALM
failed to meet the burden of having the underlying Irish default judgment
against McCann recognized in accordance with applicable law. McCann
argues that NALM was required to initiate a civil action by complaint to
comply with principles of comity. Instead, NALM filed a praecipe to enter its
foreign-nation default judgment, under the Uniform Foreign Money
Judgment Recognition Act (the “Recognition Act”), 42 P.S. §§ 22001-22009,
in order to have it recognized and enforced through the Enforcement of
Foreign Judgments Act (the “Enforcement Act”), 42 Pa.C.S. § 4306. McCann
claims that the Recognition Act did not disturb the common law principles of
comity and that a complaint must still be filed in order for the foreign nation
judgment to be recognized. McCann argues that since NALM failed to do so,
the judgment is void and therefore the Charging Order and Monitor Order
have no legal basis and should be reversed.
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McCann’s argument requires this Court to engage in statutory
interpretation of the Recognition Act. “Statutory interpretation is a question
of law, and therefore our scope of review is plenary, and our standard of
review is de novo.” Commonwealth v. Giulian, 111 A.3d 201, 203 (Pa.
Super. 2015).
When interpreting a statute:
[W]e look to ascertain and effectuate the intention of the
General Assembly. Additionally, we must give effect to all of the
law[’]s provision[s] and are not to render language superfluous
or assume language to be mere surplusage. If the text of the
statute is clear and free from all ambiguity, the letter of it is not
to be disregarded under the pretext of pursuing its spirit.
In re T.P., 78 A.3d 1166, 1174 (Pa. Super. 2013) (citations and quotation
marks omitted).
We now turn to the applicable statute, section 22003 of the
Recognition Act, which provides:
Except as provided in sections 4 and 5, a foreign judgment
meeting the requirements of section 9 is conclusive between the
parties to the extent that it grants or denies recovery of a sum of
money. The foreign judgment is enforceable in the same
manner as the judgment of another state which is entitled to full
faith and credit.
42 P.S. § 22003.
In Pennsylvania, the enforceability of the judgment of another state is
controlled by the Enforcement Act, which provides, in relevant part, as
follows:
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§ 4306. Enforcement of foreign judgments.
***
(b) Filing and status of foreign judgments. — A copy of any
foreign judgment including the docket entries incidental thereto
authenticated in accordance with an act of Congress or this title
may be filed in the office of the clerk of any court of common
pleas of this Commonwealth. The clerk shall treat the foreign
judgment in the same manner as a judgment of any court of
common pleas of this Commonwealth.
42 Pa.C.S. § 4306.
Historically, foreign judgments were not judgments, but rights of
action, and one must have commenced a civil action in order to have it
recognized and enforced. Morrissey v. Morrissey, 713 A.2d 614, 616 (Pa.
1998). However, in Morrissey, which both parties cite for support, the
Pennsylvania Supreme Court held that “in enacting the various statutes
providing for registration of foreign judgments, the legislature implemented
streamlined procedures for domesticating foreign judgments, establishing
registration as an alternative to the commencement of a civil action.” Id. at
617 (emphasis added). The Court held that through the applicable statute,
RURESA,4 a Texas child support order became immediately enforceable in
Pennsylvania upon its registration. Id.
In Louis Dreyfus Commodities Suisse SA v. Fin. Software Sys.,
99 A.3d 79 (Pa. Super. 2014), this Court held that “because foreign nation
judgments are not entitled to full faith and credit, but rather are subject to
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4
Revised Uniform Reciprocal Enforcement of Support Act (RURESA), 23 Pa.
Cons. Stat. §§ 4501-4540 (repealed).
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the principles of comity, a foreign nation judgment cannot be enforced in the
Commonwealth pursuant to the Enforcement Act unless it is recognized as
valid pursuant to the Recognition Act.” Id. at 84. The plaintiff in Louis
Dreyfus erred by filing a praecipe to transfer a foreign money judgment
while citing to the Enforcement Act rather than the Recognition Act as the
basis for the court’s authority to enter the judgment. Id. at 85-86.
Therefore, this Court held that the plaintiff’s praecipe to enter the foreign
money judgment was fatally flawed and void on its face. Id. at 86.
In Olympus Corp. & Keymed (Med. & Indus. Equip.) Ltd. v.
Canady, 962 A.2d 671 (Pa. Super. 2008), the plaintiff filed a praecipe in the
Allegheny County Court of Common Pleas to enter a foreign judgment from
the United Kingdom. This Court held that the use of a praecipe was
sufficient to enter an order enforcing the foreign judgment. This Court
stated that the Recognition Act “makes clear, a foreign judgment is
enforceable in the same manner as the judgment of another state which is
entitled to full faith and credit." Id. at 673 (citing 42 P.S. § 22003) (internal
quotations removed).
Here, NALM filed a praecipe to enter a foreign money judgment that
expressly invoked the Recognition Act. See Praecipe to Enter Foreign Money
Judgment, 1/28/14, at 1. According to Louis Dreyfus, invocation of the
Recognition Act is required for the foreign nation judgment to be enforced
pursuant to the Enforcement Act. The text of the Recognition Act is clear
that the foreign judgment is enforceable in the same manner as the
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judgment of another state, which is controlled by the Enforcement Act. The
Enforcement Act allows the enforcement of a foreign judgment if a copy of
that judgment is filed with the clerk of the court of common pleas of the
relevant county, which NALM did.
As in Morrissey, the relevant statute here, the Recognition Act, was
implemented to streamline procedures for domesticating foreign nation
judgments, and established registration as an alternative to the
commencement of a civil action. Morrissey, supra. NALM, like the plaintiff
in Olympus, filed a praecipe invoking the Recognition Act to record a foreign
judgment. Accordingly, NALM’s praecipe was procedurally sufficient for the
trial court to recognize the foreign judgment.
McCann next argues that even if NALM used proper procedures to seek
recognition of its default judgment, the Charging Order and the Monitor
Order should both be reversed because NALM failed to demonstrate that the
Irish court that entered the default judgment had personal jurisdiction over
McCann. McCann claims that the lack of personal jurisdiction by the Irish
court means that the foreign judgment is not conclusive and should not be
enforced. Because there were issues with serving McCann his summary
summons, McCann claims that there was not a full and fair trial abroad and
that he was denied due process.
As noted in section 22003 of the Recognition Act, there are exceptions
to the rule that foreign judgments are entitled to the same full faith and
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credit as those of another state. The relevant exceptions are provided as
follows:
§ 22004. Grounds for nonrecognition
A foreign judgment need not be recognized if:
(1) the defendant in the proceedings in the foreign court did not
receive notice of the proceedings in sufficient time to enable him
to defend[.]
42 P.S. § 22004.
§ 22005. Nonconclusive judgments
A foreign judgment is not conclusive if:
***
(2) the foreign court did not have personal jurisdiction over the
defendant[.]
42 P.S. § 22005.
Section 22006 of the Recognition Act lists factors that satisfy the
requirements for personal jurisdiction and are, in relevant part, as follows:
§ 22006. Personal jurisdiction
The foreign 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.
42 P.S. § 22006.
We will first examine the notice served upon McCann. Due process
requires notice “reasonably calculated, under all the circumstances, to
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apprise interested parties of the pendency of the action and afford them an
opportunity to present their objections.” Mullane v. Central Hanover
Bank & Trust Co., 339 U.S. 306 (1950). In United Student Aid Funds,
Inc. v. Espinosa, 559 U.S. 260 (2010), the defendant received actual
notice of the filing and the United States Supreme Court held that this more
than satisfied the defendant’s due process rights. The Court further held
that the failure to serve a summons and complaint did not entitle the
defendant to relief as he received actual notice.
Here, McCann received actual notice of the summons; this was
evidenced by his appearances and motions filed in the Irish court such as
the affidavit accompanying his motion to set aside the substituted service
order. Affidavit of John McCann, 9/12/13, at 1. This is also supported by
his supplemental affidavit, which stated, in relevant part:
I say that I take no issue with [NALM’s] claim that service was
effected on me and as previously stated to this Honorable Court,
I withdrew any challenge to service at the earliest opportunity
having taken legal advice.
Supplemental Affidavit of John McCann, 12/23/13, at 1-2. In addition, the
substituted service upon a company McCann had previously done business
with, Esther McGahon McGuiness & Co., was reasonably calculated, after
repeated failures to serve him personally in Northern Ireland, to apprise him
of the pendency of the action. Mullane, supra.
Section 22006 of the Recognition Act governs the manner in which the
personal jurisdiction requirement may be satisfied. As demonstrated by
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certain pleadings he filed with the Irish court, McCann voluntarily appeared
in the proceedings not only to contest jurisdiction, but also to move to set
aside the judgment. Notice of Motion by McCann, 12/9/13, at 1. This
appearance, along with the actual service upon McCann, satisfies the
personal jurisdiction requirement of the Recognition Act under section
22006. Accordingly, the Irish judgment is final, conclusive, and enforceable
under the Recognition Act and the Enforcement Act, and McCann’s claim that
the Irish court did not have personal jurisdiction over him fails.
McCann next argues that NALM has used the incorrect procedure to
secure the Charging Order and the Monitor Order. McCann claims that NALM
should have proceeded by filing and serving appropriate writs of execution
rather than filing motions seeking mandatory relief. Because the wrong
procedures were utilized, McCann alleges that the four McCann Entities that
are sought to be charged are not parties to this proceeding and are being
forced to pay a third party. McCann also argues that even if the Charging
Order were appropriate, NALM is not entitled to any information from the
McCann Entities sought to be monitored, as three of the four entities are
limited liability companies. Additionally, McCann alleges that the Monitor
Order should be reversed because McCann is not a resident or domiciliary of
this Commonwealth.
Of the four McCann Entities involved, one is a limited partnership and
three are limited liability companies. Regarding the limited partnership
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entity, the Pennsylvania Limited Partnership Act, 15 Pa.C.S. § 8501, governs
and provides, in respect to the judgment creditors of a partner, as follows:
On application to a court of competent jurisdiction by any
judgment creditor of a partner, the court may charge the
partnership interest of the partner with payment of the
unsatisfied amount of the judgment with interest. To the extent
so charged, the judgment creditor has only the rights of an
assignee of the partnership interest.
15 Pa.C.S. § 8563.
For the three limited liability companies, the Pennsylvania statute on
the limited transferability of membership interest provides, in relevant part,
as follows:
The interest of a member in a limited liability company
constitutes the personal estate of the member and may be
transferred or assigned as provided in writing in the operating
agreement. Unless otherwise provided in writing in the
operating agreement, if all of the other members of the company
other than the member proposing to dispose of his interest do
not approve of the proposed transfer or assignment by
unanimous vote or written consent, which approval may be
unreasonably withheld by any of the other members, the
transferee of the interest of the member shall have no right to
participate in the management of the business and affairs of the
company or to become a member. The transferee shall only be
entitled to receive the distributions and the return of
contributions to which that member would otherwise be entitled.
15 Pa.C.S. § 8924 (emphasis added).
In Zokaites v. Pittsburgh Ir. Pubs, LLC, 962 A.2d 1220 (Pa. Super.
2008), this Court held that a judgment creditor is “entitled to the debtor-
member’s economic rights to satisfy the member’s indebtedness by seeking
an order of court for the distributions and the return of contributions which
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[the judgment debtor] is entitled to from his limited liability companies.” Id.
at 1226.
Here, the Charging Order only attaches to McCann’s individual
partnership and membership economic interests, and does not include any
right to participate in the management of the business or to become a
member. Accordingly, NALM, as a judgment creditor, followed the proper
procedure in seeking a charging order for the partnership interest and
membership economic interests in the McCann Entities.
McCann also asserts that the McCann Entities are wrongfully being
coerced by the court to pay NALM because they were not properly served
with process and should be parties to this proceeding.
The Pennsylvania Limited Partnership Act provides, with respect to the
limited partnership entity, that the judgment creditor only possesses the
rights of an assignee of the partnership interest for the payment of the
unsatisfied amount of the judgment. 15 Pa.C.S. § 8563. Regarding the
three limited liability companies, the Pennsylvania Limited Liability Company
Law of 1994 provides, in relevant part, that the “interest of a member in a
limited liability company constitutes the personal estate of the member and
may be transferred or assigned as provided in writing in the operating
agreement.” 15 Pa.C.S. § 8924.
Here, the interests sought in the charging order only impact the
economic interests of the member or partner, McCann. The McCann Entities
themselves are not directly affected by this order. The entities are merely
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making the same payments, but to a different party, NALM, rather than
McCann. Accordingly, the McCann entities were not necessary and
indispensable parties to this order and were not required to be parties to the
proceeding.
McCann’s next two claims are arguments against the Monitor Order.
However, NALM claims that the Monitor Order is not appealable and should
be quashed. McCann argues that the Monitor Order is appealable for three
reasons: it provides for injunctive relief;5 it will affect the possession or
6
control of property; and it will finally and incurably dispose of valuable
property rights.7
McCann claims that the Monitor Order is appealable as an injunction
under Pa.R.A.P. 311(a)(4) because he is required to cooperate with and
provide information to the appointed financial monitor. Specifically, McCann
must provide the financial monitor with access to persons, places, and
information as requested.
Appellate courts have generally been reluctant to extend the right to
appeal an injunction under Rule 311(a)(4) to other types of orders that are
similar to injunctions, but which do not involve formal injunctive relief. See
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5
Pa.R.A.P. 311(a)(4).
6
Pa.R.A.P. 311(a)(2).
7
Pa.R.A.P. 341.
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Ronald Darlington, Pa. Appellate Practice, § 311:47 (2014-15). In fact,
this Court has denied many orders that impose significant obligations, but
were held not to be appealable as injunctive relief. See Beckman v.
Abramovitz, 496 A.2d 53 (Pa. Super. 1985) (orders requiring corporate
assets to be frozen pending settlement agreement); Valley Coal Co. v.
Int’l Union, United Mine Workers, 586 A.2d 436 (Pa. Super. 1991)
(orders directing parties to mediate their differences under supervision).
Here, the Monitor Order is even more limited than the orders in
Beckman and Valley Coal and only requires McCann to cooperate with a
financial monitor. The Monitor Order is not an order for formal injunctive
relief and this Court will not extend the right of appeal under Rule 311(a)(4).
McCann also argues that the Monitor Order will result in the loss of
valuable property rights and is therefore akin to an order affecting the
possession or control of property under Pa.R.A.P. 311(a)(2). McCann does
not further this argument in his brief and did not preserve it at trial. We can
infer, however, that McCann claims that the Monitor Order requires the
disclosure of confidential information and trade secrets.
As a general rule, issues that are not raised in the lower court are
waived and cannot be raised for the first time on appeal. Pa. R.A.P. 302(a).
Even if an appellant had preserved his right to appeal, a claim would be
“waived by his failure to provide proper argument in the brief that he filed
with this Court.” Kraus v. Taylor, 710 A.2d 1142, 1146 n.3 (Pa. Super.
1998).
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Here, McCann did not preserve his “trade secret” argument and did not
provide a proper argument in his brief on this subject. Accordingly, this
argument is waived for purposes of appeal.
Lastly, McCann argues that the Monitor Order is appealable as of right
because it will finally and incurably dispose of valuable property rights
under Pa R.A.P. 341. This argument is waived as well. McCann did not raise
this issue in his response to NALM’s petition for appointment of a financial
monitor, or at the hearing on that motion. Further, McCann does not
provide proper argument on this issue. Kraus, supra. Moreover, the
Monitor Order does not finally dispose of any valuable property rights; it
merely requires disclosure of information. Therefore, this argument is
waived for purposes of appeal. Accordingly, McCann’s appeal from the
Monitor Order is quashed.
The order of October 21, 2014 imposing a Charging Order is hereby
affirmed; the appeal from the October 30, 2014 Monitor Order is hereby
quashed.
Affirmed in part; quashed in part.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/3/2015
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