Shanghai Commercial Bank Ltd. v. Kung Da Chang

'Ch,LO I 1 ; 1

2015SEP 12 filial

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

SHANGHAI COMMERCIAL BANK No. 73956-5-1
LIMITED, a banking corporation
organized and existing under the DIVISION ONE
Laws of Hong Kong Special
Administrative Region, the People's
Republic of China, PUBLISHED OPINION

Respondents,

v.

KUNG DA CHANG and "JANE DOE"
CHANG, husband and wife, and
the marital community comprised
thereof,

Appellants. FILED: September 12, 2016

Leach, J. — Kung Da Chang and Michelle Chen appeal a trial court order

allowing Shanghai Commercial Bank (Bank) to enforce a Hong Kong trial court

judgment against their marital community. By statute, the Hong Kong judgment

can be enforced to the same extent as a judgment rendered in Washington.1

Thus, we apply the same conflict of laws principles used by Washington courts to

determine the reach of a Washington judgment based on a debt one spouse

incurred outside the state. Because Hong Kong has the most significant

RCW6.40A.020(1).
No. 73956-5-1/2

relationship with the underlying transaction, we apply Hong Kong law, which

allows the Bank to collect its judgment from Chang and Chen's marital property.

Therefore, we affirm.

FACTS

This is the second appeal arising from the trial court's recognition of a

Hong Kong trial court judgment against Chang. This court recounted the facts

underlying the Hong Kong action in an unpublished opinion in the first appeal.2

The only facts relevant here are those bearing on the choice-of-law issue.

Chang signed five documents with Shanghai Commercial Bank in March

and April 2008. Those documents together created a credit agreement allowing

Chang and his father to borrow money from the Bank. The Bank sent the

documents to Chang at his father's Shanghai address. Chang's father mailed

them to Chang in Seattle. Chang then signed the documents and returned them

to his father in Shanghai.

In Hong Kong Action 806, the Bank obtained a money judgment against

Chang for his unpaid debt under the credit agreement.3

2 Shanghai Commercial Bank Ltd. v. Chang, noted at 183 Wn. App. 1007,
2014 WL 4198391, at *1-2 (2014), cert, denied. 135 S. Ct. 2847 (2015).
3 The judgment is a combination of United States dollars, Hong Kong
dollars, Japanese yen, interest on those amounts, and costs. Chang states the
amount as $9 million.
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Chang and Chen have resided in Washington since before they married in

1994. Chen did not sign any of the five documents and was not aware Chang

made the credit agreement. She was not a party to the Hong Kong lawsuit.

In June 2012, the Bank filed a petition under Washington's Uniform

Foreign-Country Money Judgments Recognition Act4 (Uniform Act) asking the

King County Superior Court to recognize and enforce the Hong Kong judgment.5

The trial court granted partial summary judgment recognizing the Hong Kong

judgment, and this court affirmed.6

In August 2015, the trial court granted the Bank summary judgment on the

rest of its request. It determined that Hong Kong law applied and thus allowed

the Bank to collect its judgment from Chang and Chen's marital property. It later

denied Chang's motion for reconsideration. Chang appeals.7

STANDARD OF REVIEW

We review the trial court's summary judgment decision de novo.8

Summary judgment is proper if the pleadings, affidavits, depositions, and

admissions on file demonstrate that there is no genuine issue of material fact and

4 Ch. 6.40A RCW.
5 See RCW 6.40A.050.
6 Shanghai Commercial Bank. 2014 WL 4198391, at *4.
7 For clarity, we refer to Chang and Chen, in their capacity as appellants,
as Chang. We intend no disrespect.
8 Lakev v. Puget Sound Energy, Inc., 176 Wn.2d 909, 922, 296 P.3d 860
(2013).
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that the moving party is entitled to summary judgment as a matter of law.9 We

must draw all reasonable inferences from the evidence in favor of the nonmoving

party.10 We review the denial of a motion for reconsideration for abuse of

discretion.11 Statutory interpretation is a question of law that we review de

novo.12

ANALYSIS

When one spouse, acting alone, incurs a debt, collection presents two

distinct questions: What is the character of the debt, separate or community, and

what property is available to satisfy it?13 A debt characterized as separate can

nonetheless be enforced against community property in some circumstances.14

9 Lakev. 176 Wn.2d at 922.
10 Lakev, 176 Wn.2d at 922.
11 Rivers v. Wash. State Conference of Mason Contractors, 145 Wn.2d
674,685,41 P.3d 1175(2002).
12 U.S. Tobacco Sales & Mktg. Co. v. Dep't of Revenue, 96 Wn. App. 932,
938, 982 P.2d 652 (1999).
13 Haley v.Highland. 142 Wn.2d 135, 147, 12 P.3d 119 (2000).
14 See Pac. Gamble Robinson Co. v. Lapp, 95 Wn.2d 341, 349-50, 622
P.2d 850 (1980) (separate contract debt enforceable against community where
law of state with most significant relationship to transaction would allow
enforcement against that particular property); deElche v. Jacobsen, 95 Wn.2d
237, 246, 622 P.2d 835 (1980) (separate tort debt enforceable against
community where separate property is insufficient); Komm v. Dep't of Soc. &
Health Servs.. 23 Wn. App. 593, 599, 597 P.2d 1372 (1979) (judgment against
mother for child support enforceable against marital community). But see
Colorado Nat'l Bank of Denver v. Merlino, 35 Wn. App. 610, 617, 668 P.2d 1304
(1983) (separate debt in real property transaction not enforceable against
community).
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This appeal turns on whether the Hong Kong judgment against Chang presents

one of those circumstances.

Washington has adopted the Uniform Act. The act provides that

Washington courts "shall recognize a foreign-country judgment" for money

damages that is "final, conclusive, and enforceable" where rendered, unless one

or more of the mandatory or discretionary grounds for nonrecognition applies.15

This court held in the first appeal that the Hong Kong judgment is recognizable

and enforceable in Washington.16

Under the Uniform Act, Chang may assert any defenses against

enforcement of the Hong Kong judgment that he could assert against a

Washington judgment. RCW 6.40A.060(2) provides that a recognized "foreign-

country judgment is . . . [enforceable in the same manner and to the same extent

as a judgment rendered in this state." The legislature included RCW

6.40A.060(2) in the 2009 legislation adopting the updated Uniform Act. The

drafters of that model legislation explained in their comments that, "once

recognized, the foreign-country judgment has the same effect and is subject to

the same procedures, defenses and proceedings ... of a comparable court in

15RCW6.40A.020(1), .030.
16 Shanghai Commercial Bank. 2014 WL 4198391, at *4.
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the forum state, and can be enforced or satisfied in the same manner as such a

judgment of the forum state."17

When a spouse is not a party in a Washington lawsuit, that spouse can

choose to wait and intervene at the time of execution to prove that the judgment

cannot be collected from the marital community.18 When this happens, the court

looks to the facts supporting the judgment to determine its reach.19 For this

reason, we reject Chang's claim that the facts supporting the Hong Kong

judgment merged in the judgment and cannot be considered when deciding if it

can be collected from the marital community.

To decide the reach of the Hong Kong judgment, we must examine the

underlying facts, as we would for a judgment rendered in Washington. Here,

Chang claims that because he did not incur the debt for the benefit of his marital

community, the Bank cannot enforce that debt against the community's assets.20

But Chang skips a step in the correct analysis. When a Washington court bases

its judgment on a debt one spouse incurred outside the state, Washington courts

17 Unif. Foreign-Country Money Judgments Recognition Act § 7 cmt.
3, 13 pt. 2 U.L.A. 39 (Supp. 2016). This court views official comments on uniform
laws as persuasive authority. See Townsend v. Quadrant Corp., 153 Wn. App.
870, 879, 224 P.3d 818 (2009), aff'd on other grounds, 173 Wn.2d 451, 268 P.3d
917(2012).
18 Komm, 23 Wn. App. at 599.
19 Komm, 23 Wn. App. at 599-600; see also Merritt v. Newkirk, 155 Wash.
517, 523-24, 285 P. 442 (1930).
20 See Oil Heat Co. of Port Angeles. Inc. v. Sweeney. 26 Wn. App. 351,
355, 613 P.2d 169 (1980).
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No. 73956-5-1/7

use a conflict of laws analysis to decide what law to apply to decide if the

judgment can be collected from that spouse's marital community.21 As required

by RCW 6.40A.060(2), we use the same conflict of laws analysis to decide

whether the Hong Kong judgment can be enforced against his and Chen's

marital community.

Our conflict of laws analysis asks which jurisdiction "has the most

significant relationship to the transaction and the parties under" seven

principles:22
(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the
relative interests of those states in the determination of the
particular issue,

(d) the protection of justified expectations,

21 See Pac. Gamble, 95 Wn.2d at 344; Pac. States Cut Stone Co. v.
Goble, 70 Wn.2d 907, 908-09, 425 P.2d 631 (1967); Potlatch No. 1 Fed. Credit
Union v. Kennedy, 76 Wn.2d 806, 808, 459 P.2d 32 (1969) (all applying conflict
of laws analysis to determine whether to enforce a Washington judgment against
community property); see also Colorado Nat'l Bank of Denver, 35 Wn. App. at
617 (indicating that if liability incurred in Colorado were for unsecured promissory
note instead of real property agreement, it would be presumptively enforceable
against the Washington community).
22 Restatement (Second) of Conflict of Laws § 188(1) (Am. Law Inst.
1971), guoted in Mulcahv v. Farmers Ins. Co. of Wash., 152 Wn.2d 92, 100, 95
P.3d 313 (2004); Pac. States, 70 Wn.2d at 909; Potlatch, 76 Wn.2d at 813. This
analysis applies both when determining whether the judgment is enforceable,
which has already been decided in this case, and in deciding what property is
available to satisfy the judgment, as we do here. Writing in dissent in Pacific
Gamble, Justice Horowitz drew a distinction between these questions, but our
courts' decisions have not. 95 Wn.2d at 351 (Horowitz, J., dissenting).
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(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be
applied.[23]

When applying these principles, Washington courts consider five types of

contact: the places of contracting, negotiation, and performance; the location of

the subject matter of the contract; and "the domicil, residence, nationality, place

of incorporation and place of business of the parties."24 We evaluate these

contacts "according to their relative importance with respect to the particular

issue."25

Here, weighing these factors "according to their relative importance with

respect to the particular issue"26 of what property is available to pay the Bank's

judgment, we find that Hong Kong law has the most significant relationship to the

enforcement of the Hong Kong judgment.

We look to the underlying transaction in performing this analysis.27 The

places of contracting, negotiation, and performance and the location of the

23 Restatement § 6(2). This test applies equally to the laws of a foreign
country as to the laws of another state. Untersteiner v. Untersteiner, 32 Wn.
App. 859, 862, 650 P.2d 256 (1982).
24 Restatement § 188(2), guoted in Mulcahv, 152 Wn.2d at 101.
25 Restatement § 188(2), guoted in Mulcahv. 152 Wn.2d at 101.
26 Restatement § 188(2). guoted in Mulcahv, 152 Wn.2d at 101.
27 See Pac. Gamble, 95 Wn.2d at 346 ("'[TJhese contacts are guidelines
indicating where the interests of particular states may touch the transaction.'"
(quoting Potlatch, 76 Wn.2d at 810)).
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No. 73956-5-1/9

subject matter of the contract all favor Hong Kong.28 And in light of these

contacts, the justified expectations of the parties and the policies of Hong Kong

and Washington indicate that Hong Kong has the most significant relationship to

the issue here.

The parties' reasonable expectations favor Hong Kong law. Chang

asserts that Washington residents have a reasonable expectation that

Washington law will apply to enforcement of contracts they sign. But Chang

knew he was dealing with a Bank in Shanghai and that the documents included

Hong Kong choice-of-law provisions. Conversely, the record contains no

indication that the Bank knew it was dealing with Washington residents; the

documents Chang signed were all addressed to his father's residence in

Shanghai and he returned them to his father, not the Bank, after signing.

Chang's father and his advisors used the borrowed money in Hong Kong to pay

debt incurred there and having no connection to Washington.

The relative interests and policies of Washington and Hong Kong also

favor Hong Kong. Chang asserts that Washington's policy is to shield community

property from collection for a judgment arising from one spouse's debt
obligations. "Washington has a general interest in protection of marital
communities from the entirely separate debts of one spouse."29 But the Supreme

28 As the Bank concedes, the residence of the parties "is a wash."
29 Pac. Gamble, 95 Wn.2d at 347.
No. 73956-5-1/10

Court identified limitations of that interest. In Pacific Gamble Robinson Co. v.

Lapp,30 the court noted that the "state has no policy interest in" being "a

sanctuary for fleeing debtors." Washington thus lacks a strong public policy of

protecting marital communities from the separate debts of one spouse. Although

Chang and Chen are not "fleeing debtors," the Supreme Court's observation

applies similarly when a debtor spouse lacks separate property and seeks to

avoid all liability for a foreign debt by using this state's community property law.31

On the other hand, Hong Kong, like Colorado in Pacific Gamble, has

interests in "ensur[ing] the predictability of business relations" and preventing

debtors from avoiding liability with the protection of foreign laws—at least when

their foreign residency is unknown to the other party and the agreement requires

the application of Hong Kong law.32 We note that Washington also has a strong

economic interest in preserving foreign trade relations,33 an area where the

enforcement of foreign-made contracts necessarily plays a substantial role.

30 95 Wn.2d 341, 347, 622 P.2d 850 (1980).
31 See Pac. Gamble, 95 Wn.2d at 347; see also deElche, 95 Wn.2d at 246
(community liable for separate tort debts where separate property is insufficient).
32 Pac. Gamble, 95 Wn.2d at 347; see also Potlatch, 76 Wn.2d at 813.
33 See Jon Talton, State Would Lose If We Turn Against Trade, Seattle
Times, June 11, 2016, http://www.seattletimes.com/business/state-would-lose-if-
we-turn-against-trade/ [https://perma.cc/K8WQ-454M] ("Washington is the
nation's highest exporter per capita and one in three jobs are directly or indirectly
tied to trade.").
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Weighing the competing policies of Washington and Hong Kong, the

justified expectations of Chang, Chen, and the Bank, and the five types of

contacts, we conclude that Hong Kong has the most significant relationship to the

issue here.

Hong Kong law about the scope of collection presents an issue of "fact"

that the trial court decided.34 The Bank introduced expert testimony that Hong

Kong law allows the judgment to be collected from property that, in Washington,

would belong to Chang and Chen's community. Chang did not introduce

contrary evidence and does not contest that his and Chen's community property

would be subject to the judgment if Hong Kong law applies.

Applying Hong Kong law, then, we find that the same property that would

be subject to payment of the judgment in Hong Kong, including Chang and

Chen's community property, is subject to payment of the debt in Washington to

the same extent, even if the property is characterized as "community" under

Washington law.35 Summary judgment for the Bank was therefore appropriate.

We affirm.

Because we affirm the trial court judgment by applying Washington conflict

of law principles, we do not decide if Chang, through the credit agreement's

34 See Bvrne v. Cooper, 11 Wn. App. 549, 553-54, 523 P.2d 1216(1974).
35 See Pac. Gamble, 95 Wn.2d at 349-50.
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choice-of-law provision, could bind Chen to Hong Kong law without her

knowledge.

CONCLUSION

Because Hong Kong law has the most significant relationship to Chang's

agreement with the Bank, and Hong Kong law allows collection of the judgment

from property that, in Washington, belongs to Chang and Chen's marital

community, we affirm.

WE CONCUR:

AJ Mr

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