Mike Smith Pontiac, GMC, Inc. v. Mercedes-Benz of North America, Inc.

RODOWSKY, Judge. This case involves a judgment creditor’s claim for post-judgment interest on a judgment recorded in Maryland based on the judgment of a federal court in Florida. The Florida judgment has been satisfied by payment that includes post-judgment interest at the nationwide federal rate. The judgment creditor claims that the Maryland judgment is not thereby satisfied unless payment of post-judgment interest at the higher Maryland rate has been paid.

In the 1980s the petitioner, Mike Smith Pontiac, GMC, Inc. (Smith), and the respondent, Mercedes-Benz of North America, Inc. (M-B), became involved in a dispute over the transfer of a M-B franchise dealership in Florida. Smith filed suit in federal court; after a jury trial, on July 24, 1992, the United States District Court for the Middle District of Florida, Orlando Division (the Florida District) entered a “final judgment on jury verdict” in Smith’s favor in the amount of $1,600,000. Both Smith and M-B appealed to the United States Court of Appeals for the Eleventh Circuit, see Mike Smith Pontiac, GMC, Inc. v. Mercedes-Benz of N. Am., Inc., 32 F.3d 528 (11th Cir.1994), cert. denied, 516 U.S. 1044 , 116 S.Ct. 702 , 133 L.Ed.2d 659 (1996), which affirmed in part, reversed in part ⁵⁴⁶ and remanded. The Florida District entered a “final judgment on remand” in favor of Smith on February 29, 1996, in the amount of $7,530,660.26 “together with postjudgment interest accruing on all of the foregoing sums from July 24,1992 at the rate provided by law, for which amount let execution issue.” A few days later, on March 4, 1996, Smith filed the federal judgment in the Circuit Court for Harford County, pursuant to the Uniform Enforcement of Foreign Judgments Act (UEFJA), Maryland Code (1974, 1998 Repl.Vol.), §§ 11-801 through 11-807 of the Courts and Judicial Proceedings Article (CJ).

The judgment in the record of the circuit court reads as follows: “July 24, 1992 Judgment entered in favor of the plaintiff, [Smith] and against the defendant [M-B], in the amount of seven million five hundred thirty thousand six hundred sixty and 26/100 dollars ($7,530,660.26), together with costs and attorneys’ fees the amount of which is yet to be determined by the court, and together with postjudgment interest accruing on all of the foregoing sums from July 24,1992 at the rate provided by law, for which amount let execution issue.” 1 On March 7, 1996, seven days after the Florida District judgment was entered, M-B paid this judgment, with federal post-judgment interest (at that time) of 3.51%, for the period from July 24, 1992, to March 7, 1996, by total payment of $8,534,112.01. 2 On March 11, 1996, Smith signed a “Satisfac ⁵⁴⁷ tion of Judgment” acknowledging this payment; the satisfaction reads as follows: “We, [SMITH] ... do hereby acknowledge full payment and satisfaction thereof of those judgments rendered on July 24, 1992 and February 29, 1996 ... to the extent said judgments provide for the payment of SEVEN MILLION FIVE HUNDRED THIRTY THOUSAND SIX HUNDRED SIXTY AND 26/00 ($7,530,660.26) DOLLARS together with interest at the rate of 3.51%, compounded annually, from July 24,1992 only, in the amount of $8,534,112.01.” M-B filed this satisfaction in the Florida District on March 22, 1996. On March 4, 1997, approximately one year after M-B paid the Florida District judgment, and approximately three months after M-B paid the attorneys’ fees and costs, Smith filed a “Request for Writ of Execution” in the Circuit Court for Harford County. Two days later, that court issued the writ, which a sheriff posted upon real property owned by M-B in Harford County. Smith claimed that the domesticated Maryland judgment, filed in Harford County on March 4, 1996, pursuant to the UEFJA, was governed by Maryland’s statutory post-judgment interest rate of 10%, 3 and that interest accrued from the date the Florida District judgment was entered (July 24, 1992), so that M-B owed Smith an additional $1,732,344.28.

Smith calculated this amount as follows: “$7,530,660.26 Principal Amount of Maryland Judgment “Plus $2,735,796.03 Post-judgment interest at Maryland’s statutory rate at 10% from 07/24/92 through 03/11/96 [the signing and filing date of the first satisfaction] “Less $8,534,112.01 Amount Paid by [M-B] “Remaining Balance Due $1,732,344.28.” ⁵⁴⁸ In the Florida District, on March 21, 1997, M-B filed an “Emergency Rule 60(b)(5) Motion to Relieve [M-B] of Judgments Which Have Been Fully Satisfied and to Sanction [Smith].” 4 A magistrate judge reported that “there is no dispute that the Judgment has been satisfied by full payment. The present controversy is the effect of that satisfaction on Plaintiffs claim to additional interest under Maryland law. While this Court has serious doubts about Plaintiffs entitlement to additional interest under federal law or state law, it need not reach that question. At argument, Defendant asked only for an order declaring the Judgment to be satisfied and discharged of record.

As this is clearly appropriate, it is respectfully recommended that the Court declare the Judgment satisfied in full and order the Clerk of Court to discharge same accordingly.” Adopting this report, the Florida District granted M-B’s motion on May 8,1997. Also, in Maryland, M-B had filed a motion for an order to have the Maryland judgment marked “satisfied” pursuant to Maryland Rule 2-626(b), for an order releasing M-B’s Maryland property from levy pursuant to Maryland Rule 2-643(c)(1), and for costs and attorneys’ fees. The circuit court granted M-B’s motion with respect to the order of satisfaction and release of property. Smith appealed, and M-B cross-appealed the denial of costs and attorneys’ fees, to the Court of Special Appeals.

Mike Smith Pontiac, GMC, Inc. v. Mercedes-Benz of N. Am., Inc., 123 Md.App. 498 , 719 A.2d 993 (1998). Smith presented three questions to the court. “1. Whether the lower court erred in ruling that filing a foreign judgment in the Circuit Court in full compliance with the Maryland UEFJA did not create a ⁵⁴⁹ separate, valid Maryland judgment with independent legal effect subject to Maryland law and Maryland’s post-judgment interest rate. “2. Whether the lower court erred in ruling that a Maryland judgment properly filed and recorded under the Maryland UEFJA and subject to Maryland’s 10% post-judgment interest statute can be collaterally attacked by reason of the debtor’s subsequent payment of only the lesser amount on the underlying foreign judgment. “3.

Whether the lower court erred in ruling that a form of limited satisfaction of judgment, which acknowledged only receipt of the amount due on the Florida federal court judgment, was equivalent to an accord and satisfaction or complete release of all amounts due on the Maryland judgment properly filed under the UEFJA.” Id. at 500 , 719 A.2d at 994 . The Court of Special Appeals affirmed on the following rationale: “It is appellant’s position that a foreign judgment filed in Maryland becomes a Maryland judgment. Appellant is wrong. As the Weiner [v. Blue Cross of Maryland, Inc., 730 F.Supp. 674, 677 (D.Md.1990), aff'd, 925 F.2d 81 (4th Cir.), cert. denied, 502 U.S. 816 , 112 S.Ct. 69 , 116 L.Ed.2d 43 (1991) ] court put it, the UEFJA alters no substantive rights or defenses otherwise available to the judgment creditor or judgment debtor.

In other words, the Weiner court recognized the UEFJA as merely a device to facilitate the enforcement of foreign judgments. Because the Florida judgment filed in Maryland is subject to the defense of satisfaction, Weiner [’s characterization of a foreign judgment recorded under the UEFJA as an independent judgment] is of no avail to appellant.” Id. at 505-06, 719 A.2d at 997 (citations and footnote omitted). This quoted passage implicitly disposed of Smith’s second question, because the court’s conclusion that the UEFJA alters no substantive defenses, combined with the court’s treatment of the UEFJA as a facilitating device, meant that ⁵⁵⁰ the enforcement of the domesticated judgment could be subsequently challenged by means of the defense of satisfaction. With respect to Smith’s third question, which characterized the payment of the Florida District judgment as “a form of limited satisfaction,” the court simply noted that “the Florida judgment filed in Maryland had been fully satisfied.” Id. at 505 , 719 A.2d at 997 .

This position is supported by the judgment of the Florida District, which found on May 8, 1997, that its judgment had been “satisfied in full.” 5 On December 15, 1998, Smith filed a petition for a writ of certiorari in this Court. Smith presented the following questions for review: “1. In ruling that a judgment properly recorded under Maryland’s UEFJA does not create a Maryland judgment subject to Maryland law, did the Maryland CSA violate the U.S. Constitution, reverse the prior decision of the Court of Appeals, violate Maryland law governing interpretation of Uniform Laws and render Maryland’s UEFJA unconstitutional? “2. Did the Maryland CSA err in ruling that a domesticated foreign judgment which is greater in amount than the original foreign judgment, is satisfied by the judgment debtor’s subsequent payment of the lesser original foreign judgment because all defenses available to the judgment debtor in the foreign jurisdiction under foreign law, are equally available in Maryland against the domesticated Maryland foreign judgment? “3.

If the Maryland CSA ruled incorrectly as to Questions 1 and 2, the remaining issue is whether Maryland’s postjudgment interest rate applies from the date of entry of ⁵⁵¹ the original foreign judgment or from its date of recording in Maryland.” 6 Smith essentially makes the following argument. Under the Full Faith and Credit clause, a foreign judgment cannot be enforced directly in a sister state, but must be made a separate and independent judgment in the enforcement state. The UEFJA simply provides an expedited procedure for doing this. By filing its Florida judgment under Maryland’s UEF-JA, Smith obtained an independent judgment subject to Maryland law.

Under Beilman v. Poe, 138 Md. 482, 487 , 114 A. 568, 570 (1921), Maryland law applies the lex fori rule of conflict of laws. According to this rule, post-judgment interest is a procedural matter governed by the law of the enforcing state, so that Maryland’s 10% statutory post-judgment interest rate governs. Thus, Smith asserts the existence of an independent Maryland judgment, subject to 10% post-judgment interest, which, having been obtained prior to the payment of the original Florida District judgment, cannot be satisfied by the payment of a lesser amount under the 3.51% interest rate carried by that judgment. To hold otherwise, the argument goes, would violate the United States Constitution and Maryland precedent.

M-B submits that satisfaction of a judgment in the rendering jurisdiction satisfies the judgment in any jurisdiction in which it has been domesticated for enforcement purposes. M-B considers that the foregoing proposition is but a particular application of a more general principle under which events affecting a foreign judgment equally affect the judgment in any jurisdiction in which it has been domesticated for enforcement purposes. I. Full Faith and Credit and the UEFJA The Full Faith and Credit clause of the United States Constitution provides that ⁵⁵² “Pull Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.” U.S. Const. art.

IV, § 1. Congress prescribed the manner of according full faith and credit by the Act of May 26, 1790, 1 Stat. 122 (1790), codified at 28 U.S.C. § 1738 (1994). Historically, the party seeking to enforce a judgment in a sister state had to bring a separate court action in that state. See Weiner v. Blue Cross of Maryland, Inc., 730 F.Supp. 674, 676 (D.Md.1990) (noting that “[ujnder the common law, the procedure to enforce the judgment of one jurisdiction in another required the filing of a new suit in the second jurisdiction to enforce the judgment of the first,” and that “[t]he suit on the judgment was an independent action”), aff'd, 925 F.2d 81 (4th Cir.), cert. denied, 502 U.S. 816 , 112 S.Ct. 69 , 116 L.Ed.2d 43 (1991).

As the United States Supreme Court stated long ago, “[b]y the law of the 26th of May, 1790, the judgment is made a debt of record, not examinable upon its merits; but it does not carry with it, into another state, the efficacy of a judgment upon property or persons, to be enforced by execution. To give it the force of a judgment in another state, it must be made a judgment there; and can only be executed in the latter as its laws may permit.” M’Elmoyle v. Cohen, 38 U.S. (13 Pet.) 312, 325 , 10 L.Ed. 177, 183 (1839). Similarly, in Bauernschmidt v. Safe Deposit & Trust Co., 176 Md. 351 , 4 A.2d 712 (1939), this Court refused to attach a husband’s spendthrift trust, located in Maryland, to satisfy a California court’s decree for separate maintenance on the ground that, under Maryland law, the income of such a trust was not attachable, and “[w]hen the enforcement of a foreign judgment or decree is sought in this state, it can only be done in accordance with the provisions of the law applicable to local judgments and decrees. ‘To give it the force of judgment in another State, ⁵⁵³ it must be made a judgment there, and can only be executed in the latter as its laws may permit.’ ” Id. at 355 , 4 A.2d at 713 (citations omitted) (quoting M’Elmoyle, 38 U.S. (13 Pet.) at 325 , 10 L.Ed. at 183 ). In order to facilitate the enforcement of judgments, in 1948 the National Conference of Commissioners on Uniform State Laws, and the American Bar Association, proposed the Uniform Enforcement of Foreign Judgments Act (UEFJA), which would permit the registration of foreign judgments.

See 13 U.L.A. 181 (1986) (including the 1948 version of the Act). In their Prefatory Note, the Commissioners stated: “The mobility, today, of both persons and property is such that existing procedure for the enforcement of judgments in those cases where the judgment debtor has removed himself and his property from the state in which the judgment was rendered, is inadequate. By this act procedure is made available under which the judgment creditor can effectively obtain relief....” Id. Section 15 of the 1948 UEFJA provided that “[s]atisfaction, either partial or complete, of the original judgment or of a judgment entered thereupon in any other state shall operate to the same extent as satisfaction of the judgment in this state, except as to costs authorized by section 14.” Id. at 204.

The latter section provided that “[w]hen a registered foreign judgment becomes a final judgment of this state, the court shall include as part of the judgment interest payable on the foreign judgment under the law of the state in which it was rendered.... ” Id. at 203. In 1964, the National Commissioners amended the UEFJA, eliminating the sections noted above, as well as the right of the judgment debtor to raise “substantive” defenses, such as counter-claim or set-off, to the foreign judgment, and otherwise streamlining the Act’s procedures. The Prefatory Note stated: “This 1964 revision ... adopts the practice which, in substance, is used in Federal courts [under 28 U.S.C. § 1963 ]. It provides the enacting state with a speedy and economical ⁵⁵⁴ method of doing that which it is required to do by the Constitution of the United States.

It also relieves creditors and debtors of the additional cost and harassment of further litigation which would otherwise be incident to the enforcement of the foreign judgment.” Id. at 150 . Maryland adopted the 1964 version of the UEFJA in 1987. See Chapter 497 of the Acts of 1987. In Weiner , then district judge Paul Niemeyer discussed Maryland’s UEFJA in deciding whether a judgment originally entered in the state courts of Florida, and subsequently filed in Maryland under the UEFJA, was removable from the Circuit Court for Baltimore County to the United States District Court for the District of Maryland, where the judgment debtor intended collaterally to attack the judgment on federal preemption grounds.

Weiner, 730 F.Supp. at 675-76 . Noting that under common law a suit filed to enforce the judgment of a sister state was an “independent action, and thus was removable,” and that the UEFJA was not intended to alter the substantive rights of parties, Judge Niemeyer concluded that the UEFJA did not alter the removability of a cause of action, and denied the judgment creditor’s motion to remand. He stated: “When the Uniform Enforcement Act was revised in 1964, the procedure was modified to parallel that established by 28 U.S.C. § 1963 , which allows a prevailing party to enforce a federal district court judgment by registering it in another federal district. Registration pursuant to 28 U.S.C. § 1963 is considered ‘the equivalent of a new judgment of the registration court.’ See Stanford v. Utley, 341 F.2d 265, 268 (8th Cir.1965). “While the Uniform Enforcement Act eliminates the need for filing of a complaint and following other procedures, it does not purport to alter any substantive rights or defenses that otherwise would be available either to the judgment creditor or the judgment debtor if suit were filed to enforce that foreign judgment.

Since the judgment debtor would be ⁵⁵⁵ entitled to remove to federal court an independent action to enforce a judgment that satisfied the provisions of 28 U.S.C. § 1441 , the adoption by a state of an act merely to streamline the procedure should not alter the right of removal which was created by Congress.” Id. at 677 (citation omitted). The principle to be drawn from this decision is that because the UEFJA is intended “merely to streamline the procedure” of filing a new suit, and not to alter substantive rights, whatever rights or defenses a party may have had with respect to an independent action in the enforcement state, that party also has with respect to the judgment filed under the UEFJA. See also Guinness PLC v. Ward, 955 F.2d 875, 891, 892 (4th Cir.1992) (adopting the construction of the UEFJA in Weiner and noting further that “the Act was designed merely as a facilitating device and was not intended to alter any substantive rights or defenses which would otherwise be available to a judgment creditor or judgment debtor in an action for an enforcement of a foreign judgment”). In view of this, the assertion by the Court of Special Appeals that “[Smith’s] position that a foreign judgment filed in Maryland becomes a Maryland judgment ... is wrong” is an overstatement. 7 See Mike Smith Pontiac, 123 Md.App. at ⁵⁵⁶ 505, 719 A.2d at 997 .

Precisely because the UEFJA is merely a “facilitating device,” the filing of a foreign judgment under the UEFJA indeed does result in a Maryland judgment, just as if the filing party had chosen to enforce the foreign judgment by initiating a separate action in this state. It does not follow, however, that the domesticated judgment can have no reference to the original judgment, as we shall explain in Parts III, IV, and V, infra.

II

Rate of Post-Judgment Interest in Maryland The Maryland rule of conflict of laws is that the rate of post-judgment interest on a foreign judgment enforced here in a separate action is determined by the law of the forum (lex fori), i.e., by the Maryland rate, and not by the rate of the judgment rendering state (lex loci). See Picking v. Local Loan Co., 185 Md. 253 , 44 A.2d 462 (1945). That ease was a proceeding in Maryland to enforce a confessed judgment obtained in Illinois. The Court found that the transcript of the Illinois judgment offered by the plaintiff was insufficient evidence of the foreign judgment, and remanded the ease in order to permit the plaintiff to amend its pleadings.

Id. at 264 , 44 A.2d at 468 . Offering guidance for the proceedings on remand, the Court stated: ⁵⁵⁷ “The defendant complains that the lower court in its judgment allowed interest on the Illinois judgment from the date the Maryland suit was entered. In this she was not injured. There was, of course, no proof of the legal rate of interest in Illinois, but interest was allowed at the legal rate in Maryland ....

The allowance [of interest] is governed by the law of the forum. Beilman v. Poe, 138 Md. 482, 487 [, 114 A. 568 ].” Id. at 265, 44 A.2d at 469 . Beilman , relied upon by the Court in Picking, involved a claim, based upon a New York state court judgment, filed in a Maryland state court receivership. The claimant-judgment creditor complained that it had not been allowed accrued post-judgment interest under New York law and contended that this violated the full faith and credit clause.

This Court said that that clause “has reference to the fact and validity only of judgments and not to the effect or the manner of their enforcement. That is governed and controlled by the iex fon.” 138 Md. at 486 , 114 A. at 570 . Under Maryland law the receivership court was “authorized to disregard interest in distributing the assets of insolvents.” Id. at 487 , 114 A. at 570 . Speaking more generally, the Court said that “[i]t has been held in quite a number of jurisdictions in this country and elsewhere that the allowance of interest on foreign judgments is determined by the lex fori.” Id. 8 See also Bauernschmidt, 176 Md. at 355 , 4 A.2d at 713 (“When the enforcement of a foreign judgment or decree is ⁵⁵⁸ sought in this state, it can only be done in accordance with the provisions of the law applicable to local judgments and decrees.”); Hospe lhorn v. General Motors Corp., 169 Md. 564, 577 , 182 A. 442, 447 (1936) (“No execution can be issued upon such [sister state] judgments without a new suit in the tribunals of other states; and they enjoy, not the right of priority or privilege or lien which they have in the state where they are pronounced, but that only which the lex fori gives to them, by its own laws, in their character of foreign judgments.” (internal quotation marks omitted) (quoting Cole v. Cunningham, 133 U.S. 107, 112 , 10 S.Ct. 269, 270 , 33 L.Ed. 538, 541 (1890))).

Moreover, Maryland’s conflict of law rule has not been changed by the UEFJA. CJ § ll-802(b) in relevant part provides that “[a] filed foreign judgment has the same effect ... as a judgment of the court in which it is filed.” III. Maryland Defenses to Enforcement Whether Smith’s Maryland judgment results from a separate suit on the foreign judgment in this state, or a filing under Maryland’s UEFJA, it is appropriate for this Court to examine whether the Florida District judgment has been satisfied. The Fourth Circuit did just this in Guinness PLC v. Ward, 955 F.2d 875 (4th Cir.1992), a case heard under diversity jurisdiction.

Although this case concerned an English judgment filed pursuant to the Maryland Uniform Foreign Money-Judgments Recognition Act (UFMJRA), CJ §§ 10-701 through 10-709, the Fourth Circuit described the UFMJRA and the UEFJA as “complementary,” discussed the Weiner account of the UEFJA, and emphasized the language of CJ § 10-703, which makes the “foreign [nation] judgment ... enforceable in the same manner as the judgment of a sister state which is entitled to full faith and credit.” Id. at 889-91. Guinness PLC involved a money judgment entered by the High Court of Justice in London, England (the High Court) against Ward. Ward appealed, but meanwhile Guinness initi ⁵⁵⁹ ated a suit in the District of Columbia involving an attorney’s lien that Ward had asserted against Guinness. During the pendencies of this suit and of the appeal in England, Ward entered into negotiations for a settlement with Guinness of all claims; this resulted in a preliminary letter agreement in 1987 which provided that Guinness would render the High Court judgment against Ward unenforceable.

In 1988, Guinness sued in the United States District Court for the District of Maryland to enforce its High Court judgment under Maryland’s UFMJRA. Guinness contended that it never finally approved the settlement, while Ward contended that Guinness simply had breached it. The district court granted Guinness’s motion for summary judgment in part because it concluded that a post-judgment settlement, or accord and satisfaction, was not a basis for refusing to recognize a foreign money judgment under the UFMJRA. Id. at 877-81 .

On appeal, the Fourth Circuit opined that “the Maryland Court of Appeals would hold that it was not the intent of the Maryland legislature in enacting the [UFMJRA] to totally prohibit a foreign judgment debtor from raising a post judgment settlement as a defense to a recognition and enforcement action brought by the judgment creditor.” Id. at 886 . Specifically, the court found that CJ § 10-702 (requiring the foreign judgment to be “enforceable where rendered”) allowed Ward to raise the defense that the post-judgment settlement extinguished the High Court judgment by operation of law, and stressed that “the ‘where rendered’ language of this provision would appear to require a recognition court to focus on the law of the rendering country in making such determination.” Id. at 889. The court also found, under the language of CJ § 10-703 quoted above, that “a