Defendant-Appellant, Reginaldo Ramn, appeals the district court's grant of summary judgment in favor of Plaintiffs-Appellees, Southwest Livestock & Trucking Co., Inc., Darrel Hargrove and Mary Jane Hargrove. Ramn contends that the district court erred by not recognizing a Mexican judgment, that if recognized would preclude summary judgment against him. We vacate the district court's summary judgment and remand.

* Darrel and Mary Jane Hargrove (the "Hargroves") are citizens of the United States and officers of Southwest Livestock & Trucking Co., Inc. ("Southwest Livestock"), a Texas corporation involved in the buying and selling of livestock. In 1990, Southwest Livestock entered into a loan arrangement with Reginaldo Ramn ("Ramn"), a citizen of the Republic of Mexico. Southwest Livestock borrowed $400,000 from Ramn. To accomplish the loan, Southwest Livestock executed a "pagare"--a Mexican promissory note--payable to Ramn with interest within thirty days. Each month, Southwest Livestock executed a new pagare to cover the outstanding principal and paid the accrued interest. Over a period of four years, Southwest Livestock made payments towards the principal, but also borrowed additional money from Ramn. In October of 1994, Southwest Livestock defaulted on the loan. With the exception of the last pagare executed by Southwest Livestock, none of the pagares contained a stated interest rate. Ramn, however, charged Southwest Livestock interest at a rate of approximately fifty-two percent. The last pagare stated an interest rate of forty-eight percent, and under its terms, interest continues to accrue until Southwest Livestock pays the outstanding balance in full.

After Southwest Livestock defaulted, Ramn filed a lawsuit in Mexico to collect on the last pagare. The Mexican court granted judgment in favor of Ramn, and ordered Southwest Livestock to satisfy its debt and to pay interest at forty-eight percent. Southwest Livestock appealed, claiming that Ramn had failed to effect proper service of process, and therefore, the Mexican court lacked personal jurisdiction. The Mexican appellate court rejected this argument and affirmed the judgment in favor of Ramn.

After Ramn filed suit in Mexico, but prior to the entry of the Mexican judgment, Southwest Livestock brought suit in United States District Court, alleging that the loan arrangement violated Texas usury laws.1 Southwest Livestock then filed a motion for partial summary judgment, claiming that the undisputed facts established that Ramn charged, received and collected usurious interest in violation of Texas law. Ramn also filed a motion for summary judgment. By then the Mexican court had entered its judgment, and Ramn sought recognition of that judgment. He claimed that, under principles of collateral estoppel and res judicata, the Mexican judgment barred Southwest Livestock's suit. The district court judge referred both motions to a magistrate judge. See 28 U.S.C. § 636(b)(1).

The magistrate judge recommended that the district court grant Southwest Livestock's motion for summary judgment as to liability under Texas usury law, and recommended that it hold a trial to determine damages. In reaching her decision, the magistrate judge first addressed whether the Texas Uniform Foreign Country Money-Judgment Recognition Act (the "Texas Recognition Act") required the district court to recognize the Mexican judgment. See TEX. CIV. PRAC. & REM.CODE ANN. § 36.001 et seq. (West 1998). As the magistrate judge observed, a judgment "that is not refused recognition ... is conclusive between the parties to the extent that it grants or denies recovery of a sum of money." TEX. CIV. PRAC. & REM.CODE ANN. § 36.004 (West 1998). The magistrate judge concluded that, contrary to Southwest Livestock's position, the Mexican court properly acquired personal jurisdiction over Southwest Livestock, and therefore, lack of jurisdiction could not constitute a basis for nonrecognition. Nonetheless, according to the magistrate judge, "the district court would be well within its discretion in not recognizing the Mexican judgment on the grounds that it violates the public policy of the state of Texas." Thus, the magistrate judge decided that the Mexican judgment did not bar Southwest Livestock's suit. The magistrate judge then addressed whether the district court should apply Texas or Mexican law to its resolution of Southwest Livestock's usury claim. The magistrate judge concluded that, under Texas choice of law rules, the district court should apply Texas law. Under Texas law, Ramn undisputably charged usurious interest.

The district court adopted the magistrate judge's recommendation, granting Southwest Livestock's motion for summary judgment as to liability under Texas usury law, and denying Ramn's motion for summary judgment. The district court agreed that the Mexican judgment violated Texas public policy, and that Texas law applied. The district court then heard evidence on the question of damages and granted $5,766,356.93 to Southwest Livestock. The district court also ordered that amount to "increase by $1,677.00 for every day after November 17, 1997, until the date this Judgment is signed," and awarded Southwest Livestock post-judgment interest and attorneys' fees. Ramn appealed.

Ramn asks us to reverse the district court's grant of summary judgment in favor of Southwest Livestock. He contends that the district court erred by failing to recognize the Mexican judgment. He also argues that the district court erred by applying Texas law. According to Ramn, the district court should have applied Mexican law because the pagares executed by Southwest Livestock designated Mexico as the place of payment, and Mexico has the most significant relationship to the loan transaction. Ramn also objects to the district court's continuing charge for usury. Finally, Ramn contends that the district court erred by using a Texas, rather than federal, post-judgment interest rate.

Southwest Livestock asks us to affirm the district court. It concedes that the district court should have used a federal post-judgment interest rate, but refutes Ramn's other arguments. It contends that the district court properly withheld recognition of the Mexican judgment and properly applied Texas law. Additionally, as an alternative ground for upholding the district court's decision not to recognize the Mexican judgment, Southwest Livestock argues that Ramn failed to serve it with proper service of process, and therefore, the Mexican court lacked personal jurisdiction.

We must determine first whether the district court properly refused to recognize the Mexican judgment. Our jurisdiction is based on diversity of citizenship. Hence, we must apply Texas law regarding the recognition of foreign country money-judgments. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938) (holding that in a diversity action, a federal court must apply the law of the forum state); Success Motivation Institute of Japan, Ltd. v. Success Motivation Institute Inc., 966 F.2d 1007, 1009-10 (5th Cir.1992) ("Erie applies even though some courts have found that these suits necessarily involve relations between the U.S. and foreign governments, and even though some commentators have argued that the enforceability of these judgments in the courts of the United States should be governed by reference to a general rule of federal law.").

Under the Texas Recognition Act, a court must recognize a foreign country judgment assessing money damages unless the judgment debtor establishes one of ten specific grounds for nonrecognition. See TEX. CIV. PRAC. & REM.CODE ANN. § 36.005 (West 1998);2 Dart v. Balaam, 953 S.W.2d 478, 480 (Tex.App.--Fort Worth 1997, no writ) (noting that "[t]he party seeking to avoid recognition has the burden of proving a ground for nonrecognition"). Southwest Livestock contends that it established a ground for nonrecognition. It notes that the Texas Constitution places a six percent interest rate limit on contracts that do not contain a stated interest rate. See TEX. CONST. art. XVI, § 11. It also points to a Texas statute that states that usury is against Texas public policy. See VERNON'S TEX. CIV. STAT., art. 5069-1C.001 ("All contracts for usury are contrary to public policy"). Thus, according to Southwest Livestock, the Mexican judgment violates Texas public policy, and the district court properly withheld recognition of the judgment. See TEX. CIV. PRAC. & REM.CODE ANN. § 36.005(b)(3) (West 1998).

We review the district court's grant of summary judgment de novo. See Ginsberg 1985 Real Estate Partnership v. Cadle Co., 39 F.3d 528, 531 (5th Cir.1994).3 In reviewing the district court's decision, we note that the level of contravention of Texas law has "to be high before recognition [can] be denied on public policy grounds." Hunt v. BP Exploration Co. (Libya) Ltd., 492 F. Supp. 885, 900 (N.D.Tex.1980). The narrowness of the public policy exception reflects a compromise between two axioms--res judicata and fairness to litigants--that underlie our law of recognition of foreign country judgments. See Ackermann, 788 F.2d at 842 (noting that "the public policy exception indicates a jurisprudential compromise").

To decide whether the district court erred in refusing to recognize the Mexican judgment on public policy grounds, we consider the plain language of the Texas Recognition Act. See Schwenke v. State, 960 S.W.2d 227, 230 (Tex.App.--Corpus Christi 1997, writ denied) ("When interpreting the intent and meaning of a statute, the court focuses on, and will follow, the plain language of the statute unless doing so leads to absurd and unintended consequences."). Section 36.005(b)(3) of the Texas Recognition Act permits the district court not to recognize a foreign country judgment if "the cause of action on which the judgment is based is repugnant to the public policy" of Texas. TEX. CIV. PRAC. & REM.CODE ANN. § 36.005(b)(3) (West 1998) (emphasis added). This subsection of the Texas Recognition Act does not refer to the judgment itself, but specifically to the "cause of action on which the judgment is based." Thus, the fact that a judgment offends Texas public policy does not, in and of itself, permit the district court to refuse recognition of that judgment. See Norkan Lodge Co. Ltd. v. Gillum, 587 F. Supp. 1457, 1461 (N.D.Tex.1984) (noting that a "judgment may only be attacked in the event that 'the cause of action [on] which the judgment is based is repugnant to the public policy of this state,' not the judgment itself").

In this case, the Mexican judgment was based on an action for collection of a promissory note. This cause of action is not repugnant to Texas public policy. See, e.g., Akin v. Dahl, 661 S.W.2d 914 (Tex.1983) (enforcing a suit for the collection of a promissory note). Under the Texas Recognition Act, it is irrelevant that the Mexican judgment itself contravened Texas's public policy against usury. Thus, the plain language of the Texas Recognition Act suggests that the district court erred in refusing to recognize the Mexican judgment.

Southwest Livestock, however, argues that we should not interpret the Texas Recognition Act according to its plain language. Southwest Livestock contends that Texas courts will not enforce rights existing under laws of other jurisdictions when to do so would violate Texas public policy. See, e.g., Larchmont Farms, Inc. v. Parra, 941 S.W.2d 93, 95 (Tex.1997) (noting that "the basic rule is that a court need not enforce a foreign law if enforcement would be contrary to Texas public policy"). It believes that the reasoning of the Texas Supreme Court in DeSantis v. Wackenhut Corp., 793 S.W.2d 670 (Tex.1990), requires us to affirm the district court's decision not to recognize the Mexican judgment. In DeSantis, the Court refused to apply Florida law to enforce a noncompetition agreement, even though the agreement contained an express choice of Florida law provision, and Florida had a substantial interest in the transaction. The Court concluded that "the law governing enforcement of noncompetition agreements is fundamental policy in Texas, and that to apply the law of another state to determine the enforceability of such an agreement in the circumstances of a case like this would be contrary to that policy." Id. at 681. Southwest Livestock argues similarly that the law governing usury constitutes a fundamental policy in Texas, and that to recognize the Mexican judgment would transgress that policy.

We find that, contrary to Southwest Livestock's argument, DeSantis does not support the district court's grant of summary judgment. First, in DeSantis the Court refused to enforce an agreement violative of Texas public policy; it did not refuse to recognize a foreign judgment. Recognition and enforcement of a judgment involve separate and distinct inquiries. See Guinness v. Ward, 955 F.2d 875, 889 (4th Cir.1992) (noting the difference between recognizing and enforcing a foreign judgment); see also RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAWW § 481 cmt. b (1986) (distinguishing between the recognition and enforcement of judgments). Second, unlike in DeSantis, where the plaintiff sought to use foreign law offensively to enforce the noncompetition agreement, in this case, Ramn seeks recognition of the Mexican judgment as an affirmative defense to Southwest Livestock's usury claim. Different considerations apply when a party seeks recognition of a foreign judgment for defensive purposes. As Justice Brandeis once stated:

[T]he company is in a position different from that of a plaintiff who seeks to enforce a cause of action conferred by the laws of another state. The right which it claims should be given effect is set up by way of defense to an asserted liability; and to a defense different considerations apply. A state may, on occasion, decline to enforce a foreign cause of action. In so doing, it merely denies a remedy leaving unimpaired the plaintiff's substantive right, so that he is free to enforce it elsewhere. But to refuse to give effect to a substantive defense under the applicable law of another state, as under the circumstances here presented, subjects the defendant to irremediable liability. This may not be done.

Bradford Elec. Light Co. v. Clapper, 286 U.S. 145, 160, 52 S. Ct. 571, 576, 76 L. Ed. 1026 (1932); cf. Resource Sav. Assoc. v. Neary, 782 S.W.2d 897, 900 (Tex.App.--Dallas 1989, writ denied) (noting that because a party sought recognition of a foreign judgment for defensive purposes different considerations applied, but refusing to recognize the foreign judgment nonetheless). Third, DeSantis involved a noncompetition agreement, and as we have explained elsewhere, "noncompetition agreements implicate an arguably stronger Texas public policy than usurious contracts." Admiral Ins. Co. v. Brinkcraft Dev., 921 F.2d 591, 594 (5th Cir.1991).

We find our decision in Woods-Tucker Leasing Corp. v. Hutcheson-Ingram Development Co., 642 F.2d 744 (5th Cir.1981), more helpful than DeSantis.4 In Woods-Tucker, we considered "whether a bankruptcy court sitting in Texas should honor a party contractual choice of Mississippi law in determining whether to apply the Texas or Mississippi usury statute to a transaction ... between a Texas partnership and a Mississippi-headquartered corporate subsidiary of a Georgia corporation." Id. at 745. In deciding to honor the parties' choice of Mississippi law, we noted that applying Mississippi law did not offend any Texas fundamental public policy:To be sure, it is the underlying policy of each state's usury laws to protect necessitous borrowers within its borders. Yet, as we have noted, we have found no Texas cases that have invalidated a party choice of law on grounds that the application of a foreign usury statute would violate public policy.

Id. at 753 n. 13. We also relied on the Supreme Court's decision in Seeman v. Philadelphia Warehouse Co., 274 U.S. 403, 47 S. Ct. 626, 71 L. Ed. 1123 (1927). In Seeman, the Supreme Court emphasized its policy of "upholding contractual obligations assumed in good faith." It stated that, although parties may not willfully evade otherwise applicable usury laws by "entering into [a] contract ... [that] has no normal relation to the transaction," if the rate of interest "allowed by the laws of the place of performance is higher than that permitted at the place of the contract," the parties may contract for a higher rate of interest without incurring the penalties of usury. Id. at 407-08, 47 S. Ct. 626; see also Admiral Ins., 921 F.2d at 593-94 (analyzing Woods-Tucker and Seeman ). Woods-Tucker, and its reliance on Seeman, indicates that, although Texas has a strong public policy against usury, this policy is not inviolable.

We are especially reluctant to conclude that recognizing the Mexican judgment offends Texas public policy under the circumstances of this case. The purpose behind Texas usury laws is to protect unsophisticated borrowers from unscrupulous lenders. See Woods-Tucker, 642 F.2d at 753 n. 13 ("[I]t is the underlying policy of each state's usury laws to protect necessitous borrowers within its borders"); see also Moore v. Lambert, 272 Ark. 324, 614 S.W.2d 230 (1981) ("As far as we know, usury laws exist in all states. Such laws are based upon a universally recognized public policy that protects necessitous borrowers from the exaction of exorbitant interest from unscrupulous lenders."). This case, however, does not involve the victimizing of a naive consumer. Southwest Livestock is managed by sophisticated and knowledgeable people with experience in business. Additionally, the evidence in the record does not suggest that Ramn misled or deceived Southwest Livestock. Southwest Livestock and Ramn negotiated the loan in good faith and at arms length. In short, both parties fully appreciated the nature of the loan transaction and their respective contractual obligations.

Accordingly, in light of the plain language of the Texas Recognition Act, and after consideration of our decision in Woods-Tucker and the purpose behind Texas public policy against usury, we hold that Texas's public policy does not justify withholding recognition of the Mexican judgment. The district court erred in deciding otherwise.5

For the foregoing reasons, we VACATE the district court's summary judgment, and REMAND for further proceedings.