MADSEN, J.
¶ 1 The present iteration of this case concerns whether a Hong Kong judgment is enforceable against marital community property in Washington State. At issue is the efficacy of a choice of law contractual provision in a Hong Kong contract along with application of the "most significant relationship" test for determining conflict of law issues and, ultimately, whether Hong Kong law should be applied to reach the community assets in Washington to satisfy a valid and enforceable foreign judgment. We hold that under the facts of this case, the debtor's community property may be reached to satisfy the Hong Kong judgment.
¶ 2 The facts relevant to the present matter, which concerns Shanghai Commercial Bank's (SCB's) second motion for summary judgment in this case,
¶ 4 During exchange of the documentation that forms the parties' agreement, SCB delivered the papers for Chang's signature to an address in Shanghai that was actually Clark's residence. Clark sent the documents to his son in Seattle,
¶ 5 Chang ultimately defaulted on the debt obligation, the parties litigated the matter in Hong Kong in high court action no. 806/2009 (HCA 806), and SCB prevailed and secured a $9 million dollar judgment. Id. at 290. It is undisputed that the HCA 806 judgment under Hong Kong law encompasses what Washington considers Chang and his wife's marital community, as Hong Kong law exempts solely separate property of a spouse, not community property, from judgments entered against one spouse (Chang).
¶ 6 Following SCB's successful (first) summary judgment motion, which established that HCA 806 is enforceable in Washington,
¶ 7 This court reviews the trial court's summary judgment decision de novo.
¶ 8 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. RCW 6.40A.030(1),.020(1)(b). As noted, SBC's previous summary judgment motion established that the Hong Kong judgment is valid and enforceable in Washington. Shanghai Commercial Bank Ltd. v. Chang, No. 70526-1-1, at 1 (Wash. Ct. App. Aug. 25, 2014) (unpublished), http://www.courts.wa.gov/opinions/, review denied, 182 Wn.2d 1006, 342 P.3d 327 (2015), cert denied, ___ U.S. ___, 135 S.Ct. 2847, 192 L.Ed.2d 877 (2015). A recognized "foreign-country judgment is ... [enforceable in the same manner and to the same extent as a judgment rendered in this state]." RCW 6.40A.060(2).
¶ 9 The first appeal having resolved that the Hong Kong judgment, HCA 806, is enforceable in Washington, this court is now asked to decide whether the judgment debtor's community property may be reached to satisfy the Hong Kong judgment. In deciding that issue, we must address the efficacy of the parties' express choice of law provision in their governing agreement. Our decision in Erwin directs that such inquiry be undertaken and provides the appropriate analysis.
¶ 10 In Erwin, we explained that in resolving disputes concerning choice of law the court need decide (1) whether there is an actual conflict of laws and, if so, (2) whether the parties' agreement's choice of law provision is effective. 161 Wash.2d at 692, 167 P.3d 1112. "`When parties dispute choice of law, there must be an actual conflict between the laws or interests of Washington and the laws or interests of another state before Washington courts will engage in a conflict of laws analysis.'" Id. (quoting Seizer, 132 Wash.2d at 648, 940 P.2d 261). "If the result for a particular issue `is different under the law of the two states, there is a "real" conflict.'" Id. (quoting Seizer, 132 Wash.2d at 648, 940 P.2d 261 (citing Pac. Gamble Robinson Co. v. Lapp, 95 Wn.2d 341, 344-45, 622 P.2d 850 (1980), overruling on other grounds as recognized by Haley v. Highland, 142 Wn.2d 135, 12 P.3d 119 (2000))). "`[W]here laws or interests of concerned states do not conflict,' the situation presents `a false conflict' and `the presumptive local law is applied.'" Id. (internal quotation marks omitted) (quoting Seizer, 132 Wash.2d at 648-49, 940 P.2d 261).
¶ 11 Here, there is an actual conflict between Hong Kong law and Washington law on the issue of whether Chang and his wife's community property is reachable for satisfaction of the HCA 806 judgment. As noted, evidence in the record regarding Hong Kong law states in relevant part that "Hong Kong is a separate property jurisdiction, and there is no community property concept/principle." CP at 76. Accordingly, "[t]he judgment in... HCA 806 ... against KD Chang is enforceable in Hong Kong against all of KD Chang's assets, ... include[ing] those assets that would be considered `community property' in Washington." Id.
¶ 12 Washington law yields a different result. Similar to this case, in Potlatch No. 1 Federal Credit Union v. Kennedy, 76 Wn.2d 806, 459 P.2d 32 (1969), the husband (a Washington resident) undertook a loan obligation (as cosigner) with a lender in Idaho, a noncommunity property state. Upon default, the foreign creditor sought relief
¶ 13 As discussed in Potlatch, this is an actual conflict. See also Erwin, 161 Wash.2d at 692, 167 P.3d 1112 (if the result for a particular issue is different under the law of the two states, there is a "real" conflict).
¶ 14 Given an actual conflict, the analysis turns to whether the parties' contractual choice of law is effective. Id. at 693, 167 P.3d 1112. In Erwin, this court adopted Restatement section 187 as "the law of Washington when resolving conflict of laws issues in which the parties have made an express contractual choice of law to govern their contractual rights and duties." Id. at 694, 167 P.3d 1112. This court explained that "[s]ince 1967, Washington has followed the most significant relationship test ... [of] the Restatement [section 188] when resolving contractual choice-of-law problems in which the parties did not make an express choice of law." Id. at 693-94, 167 P.3d 1112 (citing Mulcahy v. Farmers Ins. Co. of Wash., 152 Wn.2d 92, 100, 95 P.3d 313 (2004)); see also id. at 696, 167 P.3d 1112. "Section 187 of the Restatement provides the rule for conflict of laws problems in which the parties have made an express contractual choice of law." Id. at 694, 167 P.3d 1112.
Id. at 694-95, 167 P.3d 1112 (quoting O'Brien v. Shearson Hayden Stone, Inc., 90 Wn.2d 680, 685, 586 P.2d 830 (1978) (quoting Restatement § 187)).
¶ 15 Here, subsection (1) applies. The parties could have (and did) expressly provide in their agreement that "[t]he validity, construction, interpretation and enforcement" of their agreement "shall be governed by [Hong Kong law]." CP at 172 (emphasis added). The specific inclusion of enforcement in context fulfills the specificity requirement of subsection (1), encompassing the enforcement action here and thereby making the parties' choice of law selection effective under subsection (1).
¶ 16 Further, even if the language of the choice of law provision were deemed to be too general to comply with subsection (1), or the nature of the subsection (1) requirement could not otherwise be met here, subsection (2)(b) would apply to the circumstance presented in this case.
¶ 17 Turning to Restatement section 188, as we have noted, Washington courts have applied the most significant relationship test to contract choice of law issues for half a century. See Mulcahy, 152 Wash.2d at 100, 95 P.3d 313 (citing Baffin Land Corp. v. Monticello Motor Inn, Inc., 70 Wn.2d 893, 425 P.2d 623 (1967)). "In the absence of an effective choice of law by the parties, the validity and effect of a contract are governed by the law of the state having the most significant relationship with the contract." Pac. Gamble Robinson Co. v. Lapp, 95 Wn.2d 341, 343, 622 P.2d 850 (1980). Restatement section 188 provides a summary of the test to be applied:
Id. at 346, 622 P.2d 850 (quoting Restatement section 188). "Additionally, the expectations of the parties to the contract may significantly tip the scales in favor of one jurisdiction's laws being applied over another's." Mulcahy, 152 Wash.2d at 101, 95 P.3d 313; see also Pac. Gamble, 95 Wash.2d at 346, 622 P.2d 850; Potlatch, 76 Wash.2d at 810, 459 P.2d 32.
¶ 18 In Pacific Gamble, this court addressed the issue of whether a creditor on an obligation incurred by one spouse in a foreign, noncommunity property state, where both spouses were previously domiciled, was restricted in its recovery to the separate property of the obligor spouse after the couple moved to Washington. 95 Wash.2d at 343, 622 P.2d 850. In Pacific Gamble, the husband, a Colorado resident and business owner, signed a note to secure a loan for his Colorado business. His wife did not sign the note. Under Colorado law, only the husband's earnings and property were subject to the debt. The husband defaulted, he and his wife moved to Washington, and the creditor sued in Washington, seeking to recover the balance due on the note from both the husband and the marital community. Id. at 342-43, 622 P.2d 850.
¶ 19 Applying Restatement section 188, this court noted that Colorado had numerous governmental interests in the note transaction. The transaction occurred in Colorado, the husband was doing business in Colorado, and he and his wife were domiciled in Colorado at the time of the execution of the note, which was signed in Colorado by the husband individually and on behalf of his Colorado corporation. Both parties apparently contemplated that all performance was to be in Colorado. Id. at 346-47, 622 P.2d 850. This court assumed that Colorado's interests included ensuring the predictability of business relations and to prevent the flight of debtors to other states to avoid payment of otherwise legitimate debts. Id.
¶ 20 This court acknowledged that while Washington has a general interest in protection of marital communities from the entirely separate debts of one spouse, see RCW 26.16.010, .020, nevertheless, "neither this court nor the legislature currently adheres to the rule that the marital property, including the wages of a debtor spouse, are under all circumstances to be insulated from the claims of a creditor on a separate debt." Pac. Gamble, 95 Wash.2d at 347 n.2, 622 P.2d 850. Moreover, Washington had no connection with the transaction until the husband and wife established their domicile here a few months after the note went into default. Id. at 347, 622 P.2d 850. The court noted, "[T]his state has no policy interest in maintaining within its borders a sanctuary for fleeing debtors." Id.
¶ 21 As to the parties' expectations, the court held that all parties would assume that Colorado law applied. The creditor had willingly subjected itself to Colorado law by doing business in Colorado and contracting with a Colorado resident, and the creditor "could justifiably assume that the Colorado law would likewise apply to [the creditor's] business debtor." Id. at 348, 622 P.2d 850. The husband and wife could reasonably expect at the time the note was executed that the transaction would be governed by Colorado law since they had long been domiciled in Colorado, and remained there for a time after the note was signed; "they could not justifiably believe that the obligation could be fairly avoided by ... [moving] to a state where a husband's wages would not be subject to the debt." Id. This court held that the numerous contacts, competing policies, and justifiable expectations of the parties show Colorado's interest in the contract to be far more significant than Washington's and accordingly applied Colorado law, thereby subjecting all of the husband's wages and acquisitions available for payment of the debt, "notwithstanding such property is characterized as `community' under Washington law." Id. at 349-50, 622 P.2d 850.
¶ 23 Applying the Restatement section 188 factors, Pacific Gamble, and Potlatch to the facts of this case yields the result that Hong Kong law has the most significant relationship to the present matter concerning enforcement of the Hong Kong judgment. The places of contracting, negotiation, and performance and the location of the subject matter of the contract favor Hong Kong. Given 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. Less than a week before the Facility Letter and other documents were prepared by SCB for Chang's signature, Chang was in Hong Kong with Clark, meeting with a bank executive and investment adviser about moving millions of dollars of investment accounts to SCB. Chang clearly knew that he was dealing with a bank in Hong Kong and that the agreement with SCB expressly included Hong Kong choice-of-law provisions. Conversely, the record contains no indication that SCB knew it was dealing with a Washington resident; the documents Chang signed were all addressed to his father's (Clark's) residence in Shanghai and Chang returned them to Clark, not to SCB, after signing. Clark and his advisors used the borrowed money in Hong Kong to pay investment debt incurred there that had no connection to Washington.
¶ 24 The relative interests and policies of Washington and Hong Kong also favor Hong Kong. Like Colorado, Hong Kong has an interest in ensuring the predictability of business relations, including the payment of debt obligations. See Pac. Gamble, 95 Wash.2d at 346-47, 622 P.2d 850. And while Washington has an interest in generally protecting the welfare of community property interests of its residents, it would not serve those interests to permit debtors to hide behind or misuse community property status as a blanket protection of assets from legitimate foreign debt collection in all circumstances.
¶ 25 In sum, weighing the competing policies of Washington and Hong Kong and the justified expectations of Chang, Chen, and SCB, and considering Chang's contacts with Hong Kong, we conclude that Hong Kong has the most significant relationship to the issue here. For all the reasons discussed above, we affirm the trial court's grant of summary judgment.
¶ 26 Finally, relying on Caine & Weiner v. Barker, 42 Wn.App. 835, 837, 713 P.2d 1133 (1986), which addresses the "merger doctrine," Chang argues that the present enforcement action should be considered without any reference to the underlying agreement, breach, or contacts as discussed above. He contends that "[t]he underlying claim is irrelevant to an inquiry into enforceability." Pet. for Review at 15. But Chang's reliance on the merger doctrine is misplaced in the present context. In Caine, Division One observed that the merger rule "applies generally to a judgment for a plaintiff in an action to recover money." 42 Wash.App. at 837, 713 P.2d 1133. "As a general rule, when a valid final judgment for the payment of money is rendered, the original claim is extinguished, and a new cause of action on the judgment is substituted for it. Thereafter, the plaintiff cannot maintain an action on the original claim or any part thereof." Id. (citations
Id. (emphasis added) (citations omitted). Here, application of the merger doctrine is not warranted or appropriate. The present case does not involve vexatious relitigation; SCB merely seeks enforcement of a valid judgment. Further, application of the doctrine as Chang advocates would require the court to ignore the parties' express expectation (evidenced by the choice of law provision) that Hong Kong law is to be applied comprehensively to all aspects of the agreement, including enforcement. Accordingly, because application of the doctrine as Chang advocates would be contrary to the rule's parameters as noted in Caine, we decline to apply the merger doctrine here.
¶ 27 The trial court correctly granted SCB's second summary judgment motion because the express choice of law provision contained in the agreement between SCB and Chang is effective under Restatement section 187 and Erwin. Further, if there were no express choice of law provision in this case, Hong Kong law would apply in any event under Restatement section 188's most significant relationship test. Accordingly, Hong Kong law applies in this enforcement action, making all of Chang's assets, including community property in Washington, available for payment of the debt, but Chang's wife's separate assets are not available. We reiterate that the appropriate analytical framework for conflict of law analysis, where there is a choice of law by the parties, is application of Restatement 187 as directed in Erwin. For the reasons discussed above, we affirm the trial court's grant of summary judgment.
WE CONCUR:
Fairhurst, C.J.
Johnson, J.
Owens, J.
Stephens, J.
Wiggins, J.
González, J.
Gordon McCloud, J.
Yu, J.
CP at 76-77 (Decl. of Donny Chiu in Supp. of Pet'r's Second Mot. for Summ. J.). As the Court of Appeals correctly noted, "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." Shanghai Commercial Bank Ltd. v. Kung Da Chang, 195 Wn.App. 896, 906, 381 P.3d 212 (2016). Nor does Chang offer a contrary view of Hong Kong law in his briefing to this court.
