Elmer O. Adriano, Irma S. De Adriano, Edgar Hugo Adriano and Maria Guadalupe S. De Adriano v. Finova Capital Corporation--Appeal from 341st Judicial District Court of Webb County

MEMORANDUM OPINION
No. 04-02-00796-CV

Elmer O. ADRIANO, Irma S. De Adriano, Edgar Hugo Adriano,

and Maria Guadalupe S. De Adriano,

Appellants
v.
FINOVA CAPITAL CORPORATION,
Appellee
From the 341st Judicial District Court, Webb County, Texas
Trial Court No. 2002 CVQ 001011 D3
Honorable Elma T. Salinas Ender, Judge Presiding

Opinion by: Karen Angelini, Justice

Sitting: Alma L. L pez, Chief Justice

Karen Angelini, Justice

Phylis J. Speedlin, Justice

Delivered and Filed: July 23, 2003

AFFIRMED

This case involves a suit to enforce a foreign judgment. Elmer O. Adriano, Irma S. De Adriano, Edgar Hugo Adriano, and Maria Guadalupe S. De Adriano appeal, arguing that the foreign judgment should be set aside because they were deprived of due process. We affirm.

Background

Restaurant Solutions, Inc., a corporation of which the Adrianos were shareholders, owned a Golden Corral franchise. In connection with that franchise, Appellee Finova Capital Corporation ("Finova") made a loan to Restaurant Solutions, Inc. for which the Adrianos each executed a personal guaranty. When Restaurant Solutions, Inc. allegedly defaulted under the terms of the financing agreements, Finova demanded the Adrianos pay the amount disputed pursuant to their personal guaranty agreements. According to Finova, the Adrianos failed to honor their personal guaranty agreements. Thus, Finova filed suit in the United States District Court for the District of Arizona against Restaurant Solutions and the Adrianos, individually.

Finova filed a motion for sanctions against the Adrianos. On November 15, 1999, the federal district court granted Finova's motion and finding that the Adrianos repeatedly abused the discovery process, failed to pay previous court-ordered sanctions, and failed to participate in case management conferences, entered final judgment against the Adrianos. In its judgment, the federal district court ordered the Adrianos to pay Finova the sum of $4,138,430.74, plus interest and costs.

The Adrianos appealed the federal district court's judgment to United States Court of Appeals for the Ninth Circuit. The Ninth Circuit issued a memorandum opinion affirming the trial court's judgment:

Because the record demonstrates that the district court considered the availability of lesser sanctions, that [the Adrianos'] failure to participate in case management conferences and comply with a prior sanctions order prejudiced Finova, and that [the Adrianos'] misconduct was willful, the district court did not abuse its discretion... Finova's notice to [the Adrianos] of the impending default judgment was constitutionally adequate.

Finova Capital Corp. v. Adriano, No. 00-15121, 2001 WL 68483, at *1 (9th Cir. 2001) (not designated for publication).

Finova domesticated the judgment by filing it in the 341st Judicial District Court of Webb County, Texas. In response, the Adrianos filed a motion for new trial, arguing that they never knew that their counsel of record had withdrawn from the case, and after their counsel withdrew, they did not receive any notices regarding the case and were, as such, deprived of due process of law. The Adrianos' motion for new trial was overruled by operation of law. They now appeal to this court.

Discussion

The Adrianos argue that the trial court erred in not granting their motion for new trial because they were denied due process of law in violation of the United States Constitution. (1) In In re Jackson Person & Associates, Inc., 94 S.W.3d 815, 817 (Tex. App.--San Antonio 2002, orig. proceeding), we explained that when a collateral attack is made on a duly authenticated foreign judgment filed in Texas, the trial court has only two alternatives: it can enforce the judgment or, if proper evidence is before it, it can declare the judgment void for want of jurisdiction. The Texas trial court, however, does not have the discretion to grant a new trial and place the parties back where they were before the trial in the foreign jurisdiction. Id. We will, therefore, not decide whether the trial court should have granted the Adrianos' motion for new trial, but instead will decide whether the foreign judgment is enforceable in Texas.

The United States Constitution requires each state to give full faith and credit to the public acts, records, and judicial proceedings of every other state. See U.S. Const. art. IV, 1. In Texas, the enforcement of foreign judgments is governed by the Texas version of the Uniform Enforcement of Foreign Judgments Act. See Tex. Civ. Prac. & Rem. Code Ann. 35.001-.008 (Vernon 1997). According to the Act, once an authenticated copy of the foreign judgment is filed in the office of the clerk of any Texas court of competent jurisdiction, see id. 35.003(a), the clerk "shall treat the foreign judgment in the same manner as a judgment of the court in which the foreign judgment is filed." Id. 35.003(b). And, a "filed foreign judgment has the same effect and is subject to the same procedures, defenses, and proceedings for reopening, vacating, staying, enforcing, or satisfying a judgment as a judgment of the court in which it is filed." Id. 35.003(c).

The party seeking to enforce a foreign judgment has the initial burden to present a judgment that appears on its face to be a final, valid, and subsisting judgment. Russo v. Dear, 105 S.W.3d 43, 46 (Tex. App.--Dallas 2003, no pet.). The defendant then has the burden of collaterally attacking the judgment by establishing a recognized exception to the full faith and credit requirements: (1) the judgment is interlocutory; (2) the judgment is subject to modification under the law of the rendering state; (3) the rendering state lacked jurisdiction; (4) the judgment was procured by extrinsic fraud; and (5) pursuant to section 35.003(c) of the Texas Civil Practice and Remedies Code, the period of time to file the foreign judgment had expired. Mindis Metals, Inc. v. Oilfield Motor & Control, Inc., Nos. 14-02-01040-CV & 14-02-01050-CV, 2003 WL 1886852, at *6 (Tex. App.--Houston [14th Dist.] Apr. 17, 2003, no pet. h.); Russo, 105 S.W.3d at 46; Reading & Bates Constr. Co. v. Baker Energy Res. Corp., 976 S.W.2d 702, 712 (Tex. App.--Houston [1st Dist.] 1998, pet. denied). The Adrianos complain that they were given no notice of their attorney's motion to withdraw nor of the trial court's order of September 30, 1999 directing them "to participate in case management and pay sanctions to Finova by October 14, 1999." According to the Adrianos, if they had had notice, they would have taken steps to contest the case before the trial court entered judgment against them. The Adrianos' complaint does not appear to fall within the recognized exceptions to the full faith and credit requirements. The Adrianos claim that a foreign judgment may be collaterally attacked on the grounds that the exercise of jurisdiction by the court rendering the original judgment offends due process of law and that service of process was inadequate. For support, they cite Markham v. Diversified Land & Exploration Co., 973 S.W.2d 437, 439 (Tex. Ap.--Austin 1998, pet. denied) and Cash Register Sales & Services of Houston, Inc. v. Copelco Capital, Inc., 62 S.W.3d 278, 281 (Tex. App.--Houston [1st Dist.] 2001, no pet.). However, those cases do not stand for the proposition that a defendant may collaterally attack a foreign judgment anytime his due process rights are violated; those cases stand for the proposition that a defendant may collaterally attack a foreign judgment by challenging the jurisdiction of the sister state to render the judgment. A defendant may make such a challenge by showing either that the service of the lawsuit on the defendant violated the rules of the sister state or that the sister state's exercise of personal jurisdiction over the defendant offends due process of law. Cash Register, 62 S.W.3d at 281; Markham, 973 S.W.2d at 439. The Adrianos do not challenge the federal court's jurisdiction; they only contend that they did not receive proper notice of their attorney's motion to withdraw and the federal court's order of September 30, 1999. Because the Adrianos have not met their burden of showing an exception to the full faith and credit requirements, we overrule this issue.

Even if the Adrianos' issue did fall within the recognized exceptions to the full faith and credit requirements, their issue has already been fully litigated before the Ninth Circuit. See Finova Capital Corp. v. Adriano, No. 00-15121, 2001 WL 68483 (9th Cir. 2001) (not designated for publication). In a collateral attack on a sister state's judgment, the defendant may not bring a defense that goes to the merits of the original controversy. Mindis, 2003 WL 1886852, at *6; Russo, 105 S.W.3d at 46; Cash Register, 62 S.W.3d at 281. This is true even as to questions of jurisdiction if those questions had been fully and fairly litigated and finally decided in the sister court. Mayhew v. Caprito, 794 S.W.2d 1, 2 (Tex. 1990) (citing Durfee v. Duke, 375 U.S. 106 (1963)).

Conclusion

As the Adrianos have failed in their burden, we affirm the judgment of the trial court.

Karen Angelini, Justice

1. The Adrianos also complain that they were deprived of due course of law under the Texas Constitution. The Adrianos have not, however, explained how their constitutional rights under the Texas Constitution would differ from their rights under the United States Constitution. Indeed, the Adrianos concede that Texas courts "have regarded due process and due course of law as having no meaningful distinction." As the Adrianos have provided no reason for why the Texas Constitution would give them more protection than the United States Constitution, we will only consider their rights under the United States Constitution. See Tex. R. App. P. 38.1(h).