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Judge Erred in Not Honoring Interest Rate on Judgments Set by Foreign Nation—C.A.
South Korea’s 20 Percent Rate Was Deemed in 2015 Decision As Not Conflicting With State’s Public Policy; Opinion Rejects Judge’s View That the Holding Does Not Pertain Where Foreign Government Is Plaintiff
By a MetNews Staff Writer
Div. Four of the Court of Appeal for this district has held that a Los Angeles Superior Court judge was unjustified in declining to honor a foreign nation’s 20 percent annual interest rate on judgments in the face of Div. Five’s 2015 determination that the rate does not offend California’s public policy, rejecting that judge’s view that because the plaintiff is a government, interest, to the extent it exceeds 10 percent, is a penalty.
Justice Nora M. Manella wrote the opinion, filed Monday and not certified for publication. It vacates a judgment by Los Angeles Superior Court Judge John J. Kralik and provides directions to grant a new judgment under the state’s Uniform Foreign-Country Money Judgments Recognition Act, this time utilizing the 20 percent interest rate provided for by the law of the Republic of Korea (“ROK”), also known as South Korea.
Two judgments, totaling more than $2 million, had been obtained in South Korean courts by the ROK, in contract cases, against California businessman John Ahn. In 2016, it brought an action here seeking recognition of those judgments, as well as institution of remedies in light of what it alleged were fraudulent transfers of the judgment debtor’s assets to avoid collection efforts.
Then-Los Angeles Superior Court Judge Benny Osorio granted summary adjudication, ordering recognition of the foreign judgments; he retired; the case was shifted to Kralik; in 2019, Kralik found that there had indeed been fraudulent transfers of assets, authorizing the ROK to seize those assets, and enjoining any further transfers until the judgment is satisfied.
Additionally, Kralik set the interest rate at 10 percent, the limit under the California Constitution. He indicated that he disagrees with Div. Five’s 2015 decision in Hyundai Securities Co., Ltd. v. Lee in which it was held that application of ROK’s interest rate is not repugnant to California’s public policy, but acknowledged that he is bound by that decision, yet said there is a salient factual distinction: ROK is “a government” and applying the nation’s post-judgment interest rate where it is the plaintiff is “akin to a penalty or a tax.”
Justice Richard Mosk (now deceased) had said in Hyundai:
“It is true that the California Constitution limits the postjudgment interest rate to 10 percent. But the concept of a higher rate presented by a foreign law does not fit within the stringent test set forth by the uniform law for a public policy violation. It is not clear if the trial court exercised discretion in applying the postjudgment interest rate. But Lee has not argued that the trial court failed to exercise its discretion or abused its discretion. Instead, he argued that the trial court was legally compelled to reduce the postjudgment interest rate to 10 percent. We reject this contention.”
Mosk said there is a “stringent test for finding a public policy violation,” as would justify declining to honor a provision of a foreign judgment, but declared that “a usurious postjudgment interest rate does not fit this description of a law repugnant to the public policy of this state.”
Kralik took the position that Hyundai recognizes the existence of trial court discretion; that Code of Civil Procedure §1716(c)(1)(C) provides that a foreign judgment should not be recognized if it is “repugnant to the public policy of California”; and that in light of the feature of the case before him distinguishing it from the situation in Hyundai where a private party was the plaintiff, he was at liberty to disregard Korean law on interest.
Manella’s Opinion
“We agree with Hyundai that the Korean 20 percent post-judgment interest rate is not ‘repugnant to public policy,” Manella said, finding that conclusion to be determinative.
She pointed out that “the ROK obtained the Korean judgments against Ahn as a party to a contract, not as a sovereign, and received the same post-judgment interest rate to which a private plaintiff would have been entitled—indeed, the same rate the plaintiff company in Hyundai received.”
Manella said in a footnote:
“In light of our conclusion, we need not address the ROK’s argument that Judge Kralik was bound by Judge Osorio’s summary-adjudication ruling.”
Osorio had accepted the validity of the foreign judgments, in toto.
Manella added, however, “that under the general rule,” one Superior Court judge can’t overrule the decision of another judge of the same court.
Kralik noted “certain inequitable aspects” of the ROK’s initial, and by far larger, judgment against Ahn (roughly $1.7 million as modified on appeal, plus interest), noting, in particular, that Ahn was obliged to make payment for damages to the plaintiff based on delivery by a company he controlled, for which he acted as surety, of defective goods, even if it did not return the goods.
The Seoul High Court held in 2013 that return of those goods to the company would be of insignificant value to it.
‘Mere Disagreement’
Manella wrote that the “purportedly inequitable aspects of the first Korean judgment” did not require a rejection of the South Korean post-judgment interest rate, saying that Krolik’s “analysis amounts to mere disagreement with the Korean courts’ rulings.”
She declared:
“Whether right or wrong in a California court’s view, foreign judgments are entitled to recognition unless they meet a statutory ground for non-recognition.”
Ahn contended that because the judgment, with the interest set by Kralik, has now been paid in full, the issue on appeal is dead. Manella said:
“The ROK accepted sums to which it was indisputably entitled under the trial court’s judgment, and the relief it seeks on appeal—application of the Korean judgments’ post-judgment interest rate—does not jeopardize those sums. Thus, the ROK’s acceptance of Ahn’s payment does not imply a waiver of its right to appeal.”
The case is Republic of Korea v. Ahn, B302454.
John J. Shaeffer and Rom Bar-Nissim of the Century City firm of Fox Rothschild represented the Republic of Korea. Raines Feldman, Howard K. Alperin and Robert M. Shore acted for Ahn.
Copyright 2021, Metropolitan News Company