J. Robert Foster, Rusconi, Foster & Thomas, Morgan Hill, Cal., on brief; Dr. Jack Kough, pro se, for defendant/appellant.

Arthur A. Park, Jr., Cooley, Godward, Castro, Huddleson & Tatum, San Francisco, Cal., on brief; Frank D. Tatum, Jr., San Francisco, Cal., for plaintiff/appellee.

Appeal from the United States District Court for the Northern District of California.

Before BROWNING and GOODWIN, Circuit Judges, and BARTELS,* District Judge.

Jack Kough ("Kough") appeals from a judgment of the United States District Court for the Northern District of California, Renfrew, J., recognizing and enforcing a money judgment obtained against him by default in British Columbia by the Bank of Montreal (the "Bank"), and dismissing his counterclaims as Res judicata. He contends that the District Court erred in: (1) determining that the personal jurisdiction requirements of California Code of Civil Procedure ("CCP") §§ 1713 Et seq. for the enforcement of a foreign money judgment were satisfied by his contacts with British Columbia; and (2) dismissing his counterclaims as Res judicata. We affirm.

* Kough was a minority shareholder (49%) of Arvee Cedar Mills, Ltd. ("Arvee"), a British Columbia corporation situated and doing business in that province. He was also an officer and member of the Board of Directors of Arvee, which did business with the Bank of Montreal, a foreign corporation. On August 8, 1973, Kough, with one Merlin William Thompson entered into a guarantee agreement, executed in British Columbia after several meetings of negotiation in the province, whereby he and Thompson agreed to guarantee the payment of all present and future debts of Arvee to the extent of $718,000 plus interest from date of demand for payment, in consideration of the Bank's agreement to continue to do business with Arvee. Arvee defaulted and Kough defaulted.

Accordingly, the Bank, on August 14, 1975, brought an action against Kough in the Supreme Court of British Columbia for breach of contract, alleging that there was due and owing $769,000 from Arvee, and that defendant Kough, as well as Thompson, as signatories to the guarantee contract, were jointly and severally liable for $842,000. Kough was personally served on November 23, 1975 in Morgan Hill, California with a Summons and Notice of Concurrent Writ of Summons from the Supreme Court of British Columbia, informing him of the claims against him and instructing him to enter an appearance within 21 days or face a possible default judgment. Kough did not appear in the British Columbia action and a default judgment was entered against him on January 16, 1976, in the amount of $842,278.75.

Thereafter, the Bank commenced an action for a foreign money judgment against Kough in the United States District Court for the Northern District of California, seeking the full amount of the British Columbia judgment plus 5% Interest from the date of the judgment. On July 30, 1976, Kough filed an answer in which he denied that the Canadian judgment was duly rendered, claiming that he neither appeared nor was served with the original process or summons in British Columbia. He also alleged that the complaint failed to state a claim upon which relief could be granted and raised a number of affirmative defenses going to the merits of the underlying default judgment.1

To his defenses, appellant added four counterclaims: the first two alleged misrepresentation as to the nature of the guarantee and fraud in its inducement; the third alleged intentional interference with an existing contractual relationship and prospective economic advantage of Arvee by the Bank, resulting in Arvee's default and Kough's consequent liability on his guarantee; and the fourth claimed an offset of the value of some 1200 shares of IBM stock pledged by appellant to the Bank as security for the guarantee.2

Recognition and enforcement of the British Columbia judgment in this case depends upon the proper construction of the Uniform Foreign Money Judgments Recognition Act (the "Uniform Act" or the "Act"), adopted by California as California Code of Civil Procedure ("CCP") §§ 1713 Et seq.3 According to the provisions of that Act, unless one of the grounds for non-recognition listed in § 1713.4 is present, a foreign judgment which is final where rendered is conclusive between the parties to the extent that it grants a recovery of a sum of money, and is enforceable in the same manner as the judgment of a sister state, if that judgment is entitled to full faith and credit. One of the grounds for non-recognition listed in § 1713.4, and the only one in issue here, is the lack of personal jurisdiction over the defendant in the foreign forum. But subsection (a) of § 1713.5 lists six bases of personal jurisdiction over the defendant which will suffice for purposes of recognition of the foreign judgment in California. None of these provisions specifically addresses the situation in this case, in which personal jurisdiction over the defendant in the foreign forum was premised upon what we refer to as long-arm jurisdiction principles. A catch-all provision is provided, however, in subsection (b) of § 1713.5, which reads: "The courts of this state may recognize Other bases of jurisdiction." (Emphasis supplied.) It was on this latter provision that the district court relied in extending recognition to the foreign judgment against Kough, thus deciding an issue that had not heretofore been presented to a California court.

The district court held that, in the absence of any of the other grounds for non-recognition listed in § 1713.4, the British Columbia judgment would be recognized pursuant to the "other bases of jurisdiction" category set forth in § 1713.5(b) as long as American due process standards were not offended by the Canadian court's assertion of personal jurisdiction over Kough. The issues raised on this appeal, therefore, are: first, whether the British Columbia court's assertion of jurisdiction over Kough was in fact consistent with due process; and second, whether compliance with American due process standards is the only criterion in this case for recognition of the foreign judgment under the "other bases of jurisdiction" category of § 1713.5(b).

The Supreme Court has repeatedly recognized that a constitutionally valid judgment which is entitled to full faith and credit in sister states may be entered by a state court as long as there is "a sufficient connection between the defendant and the forum state as to make it fair to require defense of the action in the forum," and provided that the defendant has received "reasonable notice" of the proceedings against him. Kulko v. Superior Court of California, 436 U.S. 84, 91-92, 98 S. Ct. 1690, 1696-97, 56 L. Ed. 132 (1978), and cases cited therein.

This appeal involves the recognition by California of the judgment of a Canadian province, not that of a sister state, but the language of § 1713.5(b), authorizing recognition of foreign judgments predicated upon "other bases of jurisdiction," seems to us intended to leave the door open for the recognition by California courts of foreign judgments rendered in accordance with American principles of jurisdictional due process.4

With respect to both minimum contacts with the forum state and adequate notice, those principles were satisfied in this case. Kough did have substantial contacts with British Columbia not only by means of the execution and breach of the guarantee there, but also by prior negotiations there involving the guarantee and by other promissory notes to the Bank previously executed. Since Kough was served at his California residence, no question can be seriously raised as to the adequacy of the personal service. See McGee v. International Life Insurance Co., 355 U.S. 220, 223, 78 S. Ct. 199, 201, 2 L. Ed. 2d 233 (1957); Forsythe v. Overmyer, 576 F.2d 779, 783 (9th Cir. 1978).

We find no merit in Kough's contention that the district court should have conducted an evidentiary hearing on the nature of his contacts with British Columbia before ruling that the provincial court had personal jurisdiction over him, because the facts are undisputed, and his real objection is to the application of the law to those facts.

Kough also invokes the doctrine of reciprocity to defeat the recognition of the Canadian judgment. He predicates this argument upon his contention that British Columbia would refuse to recognize a default judgment rendered against one of its citizens in the United States under similar circumstances, citing Wedlay v. Quist, 4 D.L.R. 620 (Alberta S.Ct. 1953); Webster v. Connors Bros., 2 D.L.R. 483 (New Brunswick S.Ct. 1935); Castel, Canadian Conflicts of Laws 426 (1975).5

The difficulty with appellant's argument is that the section of the Uniform Act specifically dealing with the circumstances where recognition should or may be denied, CCP § 1713.4, makes no mention of reciprocity, and we find nothing in the Act which authorizes us to read such a prerequisite into the statutory scheme by implication.

Indeed, Professor Willis Reese of Columbia Law School and Professor Kurt Nadelmann of Harvard Law School, the draftsmen of the Uniform Act, upon which CCP §§ 1713 Et seq. are framed, consciously rejected reciprocity as a factor to be considered in recognition of foreign money judgments, apparently on the ground that the due process concepts embodied in the Act were an adequate safeguard for the rights of citizens sued on judgments obtained abroad. Transcript, "Proceedings in Committee of the Whole, Uniform Recognition of Foreign-Money Judgments Act," August 5, 1961, at 8-9.6

The parties have not cited, and our research has not disclosed any California cases citing reciprocity as a criterion for the recognition of foreign judgments. But it is to be noted that in diversity cases, as to a matter of local law that has not been decided by the highest state court, the opinion of the district judge, as a member of the state bar, will be given great weight, Bernhardt v. Polygraphic Company of America, 350 U.S. 198, 204, 76 S. Ct. 273, 277, 100 L. Ed. 199 (1956); Insurance Company of North America v. Thompson, 381 F.2d 677, 681 (9th Cir. 1967); Owens v. White, 380 F.2d 310, 315 (9th Cir. 1967), and will not be overruled unless "clearly wrong." Hurst v. Dare to be Great, Inc., 474 F.2d 483, 484 (9th Cir. 1973); Owens v. White, 380 F.2d at 315.7 The district judge found no basis in the Act for barring recognition of the Canadian judgment for lack of reciprocity, and we agree.

We turn now to Kough's contention that his counterclaims were improperly dismissed under the doctrine of Res judicata. In arriving at its decision the district court applied the English authority of Henderson v. Henderson, 3 Hare 100 (1843), which holds that

(t)he plea of Res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of the litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.

3 Hare at 115. Henderson is also an authority in British Columbia. Winter v. Dewar & Co., 4 D.L.R. 389, 392 (B.C.Ct.App.1929). According to the trial judge's analysis, which we adopt, all of appellant's counterclaims were so intimately intertwined with plaintiff's cause of action on the guarantee agreement that they fell within Henderson and were Res judicata. Compare Fed.R.Civ.P. 13(a) as to compulsory counterclaims. Kough advances two arguments against the dismissal of his counterclaims on Res judicata grounds.

First, he maintains that in British Columbia practice a defendant can elect to treat a defense as a counterclaim and that if he does so, it will not be Res judicata in the disposition of the plaintiff's case against him. As authority for this proposition, he quotes the opinion of a British Columbia law expert, Jacob Kowarsky, and cites the case of Victoria and Saanich Motor Transportation Co. v. Wood Motor Co., 21 B.C.Rep. 515 (Court of Appeals 1915). However, when read in context, Kowarsky's opinion does not support Kough's position. Nor does Victoria and Saanich Motor Transportation Co. v. Wood Motor Co. support his claim. It holds that a party's labelling of his pleadings will be followed For purposes of assessing costs, but this is not a case of assessing costs. In order, however, to ascertain the true nature of a case, Canadian as well as United States courts consistently ignore the labelling of the pleadings. Dominion Trust Company v. Brydges, 2 W.W.R. 952 (S.Ct.1920); Girardot v. Whelton, 19 O.P.R. 162 (1900).

Second, Kough claims that Henderson's broad Res judicata effect does not follow a default judgment, because such judgments should be limited to the issues actually and necessarily adjudicated, citing Kok Hoong v. Leong Cheong Mines, Ltd., 1 All E.R. 300 (P.C.1963) (Malaya); New Brunswick Rail Co. v. British and French Trust Corporation, 4 All E.R. 747 (H.L.1938). However, in both of these cases a plaintiff who had prevailed in one action sought an additional recovery in a subsequent proceeding and attempted to use collateral estoppel to preclude the defendant from asserting certain defenses in the second action. Kough's position has no resemblance to these factual contexts because in this case the Bank is not attempting to rely for its recovery on collateral estoppel of another judgment, but is relying on the same and only judgment it obtained in British Columbia. To allow the defenses that Kough now seeks to raise in the guise of counterclaims would undercut the validity of the judgment against him, and permit him to relitigate the case De novo. Therefore the counterclaims were properly dismissed.

The decision of the district court is in all respects AFFIRMED.