Case of the Day: Shanghai Commercial Bank v. Chang
Posted on September 23, 2016
The case of the day is Shanghai Commercial Bank Ltd. v. Chang (Wash. Ct. App. 2016). The bank had a Hong Kong judgment against Chang on account of an unpaid debt. The bank sought recognition and enforcement of the Hong Kong judgment in Washington, where Chang and his wife, Chen, had lived for many years. They were married long before Chang incurred the debt to the bank, though Chen herself had not incurred the debt and didn’t know about it at the time. The trial court held previously held that the Hong Kong judgment was entitled to recognition, and in today’s case it held that the judgment could be enforced against the marital property of Chang and Chen (Washington is a community property state). Chang appealed.
Under the UFCMJRA, the Hong Kong judgment that has been recognized can be enforced just like a Washington judgment. And a Washington judgment based on a debt incurred outside the state can be enforced against the non-debtor spouse if the law determined using the “most significant relationship” test of the Restatement (Second) of Conflict of Laws permits such a recovery. Here, the court held that Hong Kong had the most significant relationship to the underlying judgment, for somewhat obvious reasons. And Hong Kong law (according to the bank, and with no opposition from Chang) would permit the Bank to look to the marital assets.
I wonder whether the result would be the same in a state that applies the common law system of marital property, where there is no such thing as marital community property. In Massachusetts, for example, while I don’t know of a similar case, I imagine the analysis would be somewhat different. A foreign judgment that has been recognized is entitled to recognition on the same basis as a Massachusetts judgment. But I think the Massachusetts courts would be loath to look to the substantive law of the foreign state to determine whether the judgment creditor could reach the assets of the non-debtor spouse, which are not community property. Wouldn’t enforcement against the non-debtor spouse be a deprivation of property without due process of law? In short, I think the concept of a conflict of laws analysis to decide this issue only works in a community property state, since in a common law state, I don’t see that it’s ever permissible (absent a fraudulent transfer, a claim for necessaries, or whatever) to take the property of the non-debtor to satisfy the judgment debt, where the non-debtor was not a party to the underlying case.