


Opinion issued February 21, 2008 













In The
Court of Appeals
For The
First District of Texas



NO. 01-04-01111-CV
  __________

ENVIROPOWER, L.L.C., Appellant

V.

BEAR, STEARNS & CO., INC., Appellee



On Appeal from the 164th District Court
Harris County, Texas
Trial Court Cause No. 2004-37741



O P I N I O N
 We withdraw our opinion and judgment of May 17, 2007 and issue this one in
its stead.
 In this action to enforce a New York judgment, EnviroPower, L.L.C., appellant,
complains of the trial court's orders denying its motion for new trial, motion to
vacate, and motion to stay enforcement of the judgment.  In three issues, EnviroPower
contends that (1) it is entitled to a stay of enforcement because the New York
judgment against it is subject to modification on appeal by the New York appellate
court, (2) a foreign default judgment based on "death penalty" sanctions is "penal"
in nature and excepted from enforcement in Texas under the Full Faith and Credit
Clause of the United States Constitution, (1) and (3) the trial court erred in ordering it
to post a $200,000 supersedeas bond. (2)
	 In this case of first impression, we affirm.  	
Background

	Bear, Stearns & Co., Inc., appellee, sued EnviroPower in New York state court
for breach of contract and quantum meruit alleging that EnviroPower failed to pay
Bear, Stearns for services performed and expenses incurred.  The New York court,
sua sponte, found that, during discovery, EnviroPower intentionally withheld
documents, and it struck EnviroPower's answer.  After an evidentiary hearing, the
New York court entered a total judgment for Bear, Stearns in the amount of
	 $1,309,880, which included the appropriate interest, costs, and disbursements. 	Bear, Stearns domesticated its foreign judgment in the 164th District Court of
Harris County, Texas.  See Tex. Civ. Prac. & Rem. Code Ann.§§ 35.003, 35.004,
35.005 (Vernon 1997).  EnviroPower filed a Motion to Vacate Foreign Judgment,
Motion for New Trial, and Motion to Stay Enforcement of Judgment in Response to
"Judgment Creditor's Action for Enforcement of Foreign Judgment."  After an
evidentiary hearing, the trial court denied the motions and ordered EnviroPower to
post a supersedeas bond in the amount of $200,000 to provide security for Bear,
Stearns during the appeal of the trial court's order denying its motions to vacate the
New York judgment or to stay its enforcement.
Stay of Enforcement

	In issues two and three, EnviroPower argues that it is entitled to a stay of
enforcement while the New York judgment against it is subject to modification on
appeal by the New York appellate court.  After EnviroPower filed its briefing in this
case, the New York Court of Appeals, sua sponte, dismissed EnviroPower's appeal
"upon the ground that no substantial constitutional question is directly involved."  No
further appeal of the judgment is pending in New York.  Accordingly, the issue of a
stay pending litigation in New York is moot and need not be addressed.  See Tex.
Civ. Prac. & Rem. Code Ann. § 35.006(a), (b) (Vernon Supp. 2007). (3)
The Enforcement of a Foreign Judgment

 In issue one, EnviroPower argues that the trial court erred in denying its
motions to vacate and for a new trial because a foreign default judgment based on
"death penalty" sanctions is "penal" in nature and excepted from enforcement in
Texas under the Full Faith and Credit Clause.  We disagree.
Standard of Review
	A court's ruling on a motion to vacate, like a ruling on a motion for new trial, 
is reviewed under the abuse of discretion standard.  Champion Int'l Corp. v. Twelfth
Court of Appeals, 762 S.W.2d 898, 899 (Tex. 1988) (trial court has wide discretion
in denying motion for new trial; its action will not be disturbed on appeal absent
showing of abuse of discretion).  Although the determination of whether EnviroPower
established an exception to full faith and credit generally involves a factual inquiry,
not the resolution of a question of law, the trial court has no discretion in applying the
law to the established facts.  See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992);
Reading & Bates Const. Co. v. Baker Energy Res. Corp., 976 S.W.2d 702, 713 (Tex.
App.--Houston [1st Dist.] 1998, pet. denied).  Texas law requires a trial court to give
full faith and credit to a foreign judgment of a sister state unless an exception is
established.  Walker, 827 S.W.2d at 840.  Therefore, we will review the record to
determine whether the trial court misapplied the law to the established facts in
concluding that EnviroPower had not established an exception to full faith and credit. 
Full Faith and Credit
	Under the Full Faith and Credit Clause, a state must give the same force and
effect to a judgment of a sister state that it would give to its own judgments.  See U.S.
Const. art.  IV, § 1.  When a judgment creditor files an authenticated copy of a
foreign judgment, it satisfies its burden to present a prima facie case for enforcement
of the judgment.  Reading & Bates Constr. Co., 976 S.W.2d at 712.  This is true even
if the foreign judgment is taken by default.  Cash Register Sales and Servs. of
Houston, Inc. v. Copelco Capital, Inc., 62 S.W.3d 278, 280-81 (Tex. App.--Houston
[1st Dist.] 2001, no pet.).  The burden then shifts to the judgment debtor to prove why
the sister state's judgment should not be given full faith and credit.  Id.   
	To overcome this burden, the judgment debtor must collaterally attack the
foreign judgment by establishing one of the following recognized exceptions to the
mandates of the Full Faith and Credit Clause: (1) the judgment is interlocutory, (2)
the judgment is subject to modification under the law of the rendering state, (3) the
rendering state lacked jurisdiction, (4) the judgment was procured by fraud or is penal
in nature, or (5) limitations has expired under Texas Civil Practice and Remedies
Code section 16.066.  See Russo v. Dear, 105 S.W.3d 43, 46 (Tex. App.--Dallas
2003, pet. denied); Reading & Bates Contr., 976 S.W.2d at 712; see also Tex. Civ.
Prac. & Rem. Code Ann. 16.066 (Vernon 1997).  The judgment debtor may
overcome the presumption of the validity of the foreign judgment only with clear and
convincing evidence.  Russo, 105 S.W.3d. at 46.  In a collateral attack, no defense
that goes to the merits of the original controversy shall be recognized.  Id. 
 In this case, when it filed an authenticated copy of the New York judgment,
Bear, Stearns presented a prima facie case for its enforcement in Texas.  The burden
then shifted to EnviroPower to prove by clear and convincing evidence why it should
not be given full faith and credit. 
Penal in Nature

	EnviroPower argues that, because they are penal in nature, death penalty
sanctions are not enforceable in a foreign jurisdiction.  We find the United States
Supreme Court's opinion in Huntington v. Attrill, 146 U.S. 657, 13 S. Ct. 224 (1892)
to be instructive when considering the penal classification of death penalty sanctions. 
Huntington defines the limits of penal statutes not entitled to sister state enforcement. 
The Supreme Court held,
	The question whether a statute of one state, which in some aspects may
be called penal, is a penal law, in the international sense, so that it
cannot be enforced in the courts of another state, depends upon the
question whether its purpose is to punish an offense against the public
justice of the state, or to afford a private remedy to a person injured by
the wrongful act.

146 U.S. at 674, 13 S. Ct. at 230; Williams v. State of Washington, 581 S.W.2d 494, 

495 (Tex. Civ. App.--Dallas 1979, writ ref'd n.r.e.).  In Huntington, the Supreme
Court instructed that, in making this determination, we should also consider whether
the wrong to be discouraged by the statute is a wrong to the public or a wrong to the
individual.  The Supreme Court explained, 
	The test whether a law is penal, in the strict and primary sense, is
whether the wrong sought to be redressed is a wrong to the public or a
wrong to the individual, according to the familiar classification of
Blackstone: "Wrongs are divisible into two sorts of species: private
wrongs and public wrongs.  The former are an infringement or privation
of the private or civil rights belonging to individuals, considered as
individuals, and are thereupon frequently termed 'civil injuries'; the
latter are a breach and violation of public rights and duties, which affect
the whole community, considered as a community, and are distinguished
by the harsher appellation of 'crimes and misdemeanors.'"  
 
Huntington, 146 U.S. at 668-69, 13 S. Ct. at 228 (quoting 3 Bl. Com. 2).  The
Supreme Court went on to say that criminal or quasi-criminal statutes are the only
types of penal statutes that fall under the exception to the Full Faith and Credit
Clause.  It is in this context that the "death penalty" sanctions must be evaluated.  The
central consideration is whether the judgment relates to punishment for, or deterrence
of, a wrong against the state or society, as opposed to a wrong exclusively against the
opposing party to the litigation.
	Death penalty sanctions serve as a remedy for parties harmed by another party's
wrongful actions during litigation.  We agree with the Supreme Court, which, in
1892, warned that "there is danger of being misled by the different shapes of meaning
allowed to the word 'penal' in our language," but that it is possible to distinguish, on
the one hand, sanctions which adjudicate private rights and also deter future abuses,
and on the other, crimes against the public.  Huntington, 146 U.S. at 666, 13 S. Ct.
at 227.  As such, death penalty sanctions are designed, under the court's rules of
procedure, as punishment for the litigant and deterrence of future wrongs and not as
punishment for a breach of public duties.  See id. at 668-69, 13 S. Ct. at 228.  Texas
courts have long recognized that discovery sanctions--particularly the rendition of
a default judgment following the striking of pleadings--are designed to punish the
alleged wrongdoer as well as to deter parties from abusing discovery procedures
during litigation.  See TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913,
918 (Tex. 1991) (legitimate purpose of sanctions are "punishment and deterrence");
Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985)
(purpose of sanction is to "deter").  Rule 37 of the Federal Rules of Civil Procedure
also permits the striking of pleadings and other sanctions resulting from civil
discovery violations.  In 535 Broadway Associates v. Commercial Corporation of
America, 159 B.R. 403 (S.D.N.Y. 1993), the court held,
	Sanctions imposed under Rule 37 have the immediate effect of insuring
compliance with court orders in the particular case.  The Rule also
serves to "penalize those whose conduct . . . warrant such a sanction,"
by ensuring that the recalcitrant party will not enjoy the fruits of its own
non-compliance.  Finally, the Rule has the statutory effect of "deter(ing)
those who might be tempted to such conduct in the absence of such a 
deterrent."

Id. at 406-07 (internal citations omitted).  "Rule 37 Sanctions must be applied
diligently both 'to penalize those whose conduct may be deemed to warrant such a
sanction, [and] to deter those who might be tempted to such conduct in the absence
of such deterrent.'"  Roadway Express, Inc. v. Piper, 447 U.S. 752, 763-64, 100 S.
Ct. 2455, 2462-63 (1980) (citing Nat'l Hockey League v. Metro. Hockey Club, 427
U.S. 639, 643, 96 S. Ct. 2778, 2781 (1976)).  Thus, while death penalty sanctions
serve a public purpose of deterrence, they are not, therefore, "penal" in nature
because they do not punish "a breach and violation of public rights and duties." 
Huntington, 146 U.S. at 668-69, 13 S. Ct. at  228. 
	Accordingly, we conclude that death penalty sanctions are not excepted from
enforcement in Texas under the Full Faith and Credit Clause, and we hold that the
trial court did not misapply the law to the facts in concluding that EnviroPower had
not established an exception to full faith and credit. (4)
	We overrule issue one.
 Conclusion

	We affirm the trial court's judgment. 

 
							George C. Hanks, Jr.
							Justice

Panel consists of Justices Taft, Keyes, and Hanks.

1. 	U.S. Const. art. IV, § 1.
2. 	In its third issue and by motion filed pursuant to Texas Rule of Appellate Procedure
24.4, EnviroPower contested the supersedeas bond set by the trial court.  Tex. R. App.
P. 24.4.  The Court addresses the bond set by the trial court in an opinion on en banc
order issued herewith.  Justices Taft, Nuchia, and Hanks dissent from the en banc
order and opinion on en banc order.
3.  Bear, Stearns argues that, "because the New York Court of Appeals disposed of all
issues made the basis of this appeal," the entire appeal before us should likewise be
dismissed.  However, the New York Court of Appeals' disposition does not affect
EnviroPower's argument in issue one that "death penalty" sanctions are penal and
thus not subject to full faith and credit.  We address this issue below.
4. 	EnviroPower also argues that, because the New York judgment was not rendered on
the merits but as the result of death penalty sanctions, enforcement of the judgment
in Texas would not advance the purpose of the Full Faith and Credit Clause--to
preserve and permit enforcement of a sister state's legal adjudication of the merits of
a dispute. However, contrary to EnviroPower's arguments, judgments not rendered
on the merits are entitled to full faith and credit.  See, e.g., Cash Register Sales Servs.
of Houston, Inc. v. Copelco Capital, Inc., 62 S.W.3d 278, 280-81 (Tex.
App.--Houston [1st Dist.] 2001, no pet.) (holding that default judgment was subject
to full faith and credit enforcement in Texas).  Furthermore, this argument is not a
recognized exception to the mandates of the Full Faith and Credit Clause.

