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Paine, Webber, Jackson & Curtis v. Rongren





Appeal from the Circuit Court of Cook County; the Hon. Alfred B. Teton, Judge, presiding.


Defendant investor appeals from the trial court's entry of a foreign judgment in the amount of $1,790.63, plus interest and costs, in favor of plaintiff investment firm based on an award by the arbitration board of the New York Stock Exchange arising from defendant's breach of a margin contract. The claim was arbitrated pursuant to a predispute arbitration provision in the customer's agreement.

On appeal, defendant alleges he was denied due process and that the New York court lacked personal jurisdiction over him and subject matter jurisdiction over the claim, which he asserts arises under the Federal securities laws.

We affirm the decision of the trial court.


In 1972, defendant investor, Eric Rongren, entered into a customer's agreement with plaintiff investment firm, Paine, Webber, Jackson & Curtis, Inc. (Paine Webber), for the opening of a securities trading account. The margin contract contained a predispute arbitration provision which provided, under paragraph 14, that:

"Any controversy between us arising out of, or relating to this contract or the breach thereof, shall be settled by arbitration, in accordance with the rules, then obtaining, of either the American Arbitration Association, or the New York Stock Exchange, as I may elect. I authorize you, if I do not make such election by registered mail addressed to you at your main office within fifteen (15) days after receipt of notification from you requesting such election, to make such election in my behalf. Any arbitration hereunder shall be before at least three (3) arbitrators or a majority of them, shall be final, and judgment upon the award rendered may be entered in any court, state or federal, having jurisdiction."

In December 1978, defendant placed an order with plaintiff's broker agent, to sell short a security. Defendant later claimed he was induced to effect this sale by plaintiff's broker having misrepresented certain investment stop figures that appeared in plaintiff's published advisory letter. Defendant informed plaintiff in a letter sent to the operations manager at Paine Webber that no sale order would have been "solicited successfully had the correct information been supplied." In consequence of this transaction, a dispute arose between the parties, and in a letter dated March 27, 1979, plaintiff notified defendant that it sought arbitration of the dispute pursuant to paragraph 14 of the customer's agreement. Plaintiff explained its request for arbitration as follows:

"Your statement that our Chicago office willfully violated Illinois law is the matter of dispute here and the reason for my request for arbitration to resolve this matter."

Defendant failed to elect a forum, and, pursuant to paragraph 14 of the customer's agreement, plaintiff initiated arbitration proceedings before the arbitration board of the New York Stock Exchange. Defendant did not participate in the arbitration nor did he at any time apply for a stay of arbitration in accordance with the appropriate provisions of the New York Arbitration Act.

In January 1980, plaintiff won an arbitration award in the sum of $1,790.63. Defendant did not move to vacate the award, and thereafter plaintiff applied to the New York Supreme Court for an order confirming the award of the arbitrators. In its order dated August 8, 1980, the New York Supreme Court, noting proof of due service and defendant's failure to answer or appear in opposition thereto, confirmed the arbitration award and ordered judgment in favor of plaintiff for the sum of $1,882.33, the sum of the award plus interest and costs.

On July 9, 1981, Paine Webber filed a petition for registration of foreign judgment (Ill. Rev. Stat. 1981, ch. 110, par. 12-602) in the circuit court of Cook County, Illinois. A certified copy of the petition together with a summons was served on defendant. Defendant filed an appearance, answer, and jury demand in the Cook County proceedings in August 1981. In his answer, defendant stated that he had made protest to Paine Webber concerning the "misrepresentations made by broker" that induced him to enter the December 18, 1978, short sale order. Defendant raised as his defense the Illinois Statute of Frauds (Ill. Rev. Stat. 1981, ch. 26, par. 8-319), claiming that the "contract was not enforceable" due to lack of a written confirmation of sale. At a hearing held in October 1981, defendant's jury demand was denied.

Thereafter, pursuant to sections 12-606 and 12-607 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, pars. 12-606, 12-607), a levy was made on defendant's residence for satisfaction of the judgment, and plaintiff arranged for a sheriff's sale of defendant's home. Prior to the date fixed for the sale, defendant moved to stay execution. A hearing was held on his motion in July 1983, before the Honorable Alfred Teton. At this hearing, defendant raised two issues. He protested that no hearing had been held on his opposition to the registration of the foreign judgment. He also asserted that the New York court did not have jurisdiction to confirm the arbitration award. The trial court, finding that a proper hearing on the petition and defendant's opposition thereto had not been held, granted defendant's motion for a stay of the sale, granted defendant leave to file an amended answer to the petition to register the foreign judgment, and set the matter for hearing.

Hearings were held on August 23 and September 19, 1984. The reports of these proceedings were not made part of the record on appeal. Based on these hearings, the trial court entered an order finding that (1) defendant had failed to introduce any evidence that would indicate that the arbitration clause contained within the customer agreement was void, and (2) defendant had failed to present any evidence indicating that the New York judgment confirming the arbitration award was void for lack of personal or subject matter jurisdiction. So finding, the trial court ordered that the judgment ...

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