Hentsch Henchoz & Cie v. Philippe D. David Gubbay

2004 UT 64
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Hentsch Henchoz & Cie,
Plaintiff and Appellee,
v.
Philippe D. David Gubbay; Capital Suisse, S.A.;
Capital Suisse
Securities, Inc.; Capital Suisse,Inc.; Zooley
Services Limited;
Zooley of Utah, Inc.; FernlandLimited; Douglas P.
Hoyt; and
John Does 1-10,
Defendants and Appellants.
No. 20020683
F I L E D
August 6, 2004

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Third District, Salt Lake
The Honorable Ronald E. Nehring
Attorneys: Neil A. Kaplan, Perrin R. Love, Walter
A. Romney, Jr., Salt Lake City, for plaintiff
Brent O. Hatch, Mark H. Richards, Salt Lake City,
for defendants
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DURRANT, Justice:
¶1 Appellants contest the district court's
denial of their motion to dismiss, arguing that
venue is not proper in Utah due to a forum
selection clause that provides for all actions to
be brought in the British Virgin Islands. In
light of appellants' wilful defiance of the
district court's orders below, we refuse to
consider the merits of the appeal at this time.
Instead, we will stay the appeal in order to
allow appellants time in which to comply with our
instructions as outlined in this opinion. If
appellants fail to comply, the appeal will be
dismissed.
BACKGROUND
¶2 The events giving rise to this litigation
began in late 2000 when appellee Hentsch Henchoz
& Cie ("HH&C"), a Swiss banking institution with
offices around the world, was approached about a
purported investment opportunity. HH&C was

contacted by Philippe D. David Gubbay ("Gubbay"),
the "Managing Director, CEO and President" of the
"Capital Suisse Group of Companies," an
organization that allegedly operated a highly
successful "Mutual Fund for the Professional
Investor."
¶3 The Capital Suisse Group of Companies,
purportedly "a worldwide financial services
corporation," included the following entities:
Capital Suisse, S.A. ("the Fund"), which was
incorporated in the British Virgin Islands and
had offices in Marbella, Spain; Capital Suisse,
Inc., a Utah corporation, which had its principal
place of business in Salt Lake City and was the
purported administrator and registrar of the
Fund; Capital Suisse Securities, Inc., the
principal custodian of the Fund with its
principal place of business in San Rafael,
California; Zooley Services Ltd., a West Indies
corporation and professed investment adviser for
the Fund; Zooley of Utah, Inc., a Utah
corporation that allegedly provided financial
services for Zooley Services; and Fernland Ltd.,
a West Indies corporation and, ostensibly, the
sole director of the Fund. Gubbay corresponded on
behalf of the Fund as a director of Fernland.
(Gubbay and the Capital Suisse Group of Companies
will be collectively referred to herein as
"Capital Suisse.") Capital Suisse, Inc., and
Zooley of Utah, Inc. maintained bank accounts at
Wells Fargo Bank and Zions First National Bank in
Salt Lake City, Utah.
¶4 In November of 2000, Gubbay provided HH&C
with a confidential prospectus along with other

materials that portrayed the Fund as being very
successful and highly profitable. Relying on
these and other representations, HH&C wired a
total of nearly $25 million to Capital Suisse.
Each of HH&C's seven wire transfers was
accompanied by a "Subscription Agreement" that
purported to set forth the number of shares
purchased by HH&C. In addition, each Subscription
Agreement contained a forum selection clause,
providing that any legal proceedings against the
Fund would be brought only in the British Virgin
Islands.
¶5 Throughout the first quarter of 2001, the
Capital Suisse website represented that the Fund
was steadily gaining in value. However, after a
routine internal review, HH&C became suspicious.
Beginning in April 2001, HH&C began a series of
attempts to redeem its shares. In the course of
these unsuccessful attempts, HH&C discovered that
Gubbay was a convicted embezzler and had been
sentenced to a term of imprisonment and to
deportation from Switzerland for seven years.
HH&C also learned of, and subsequently
participated in, an ongoing criminal proceeding
against Capital Suisse brought by another
defrauded investor in Marbella, Spain. In
defending against HH&C's claims before the
Spanish court, Capital Suisse asserted that
jurisdiction was not proper in Spain because HH&C
did not have commercial relations with Capital
Suisse in Spain, but only with Capital Suisse,
Inc., located in Salt Lake City, Utah. At the
conclusion of the Spanish proceeding, the Spanish
Criminal Court issued an order freezing the
Capital Suisse accounts at Wells Fargo Bank and

Zions First National Bank in Salt Lake City, Utah
(the "Spanish Order").
¶6 On June 21, 2001, HH&C filed a petition in
Utah's Third District Court to enforce the
Spanish Order. The district court scheduled an
evidentiary hearing, and HH&C began serving
subpoenas on the banks. Capital Suisse moved to
quash the subpoenas or, alternatively, for a
protective order preventing disclosure to third
parties of any information gained from the bank
accounts. Capital Suisse also filed a motion in
limine, seeking to exclude any evidence relating
to the bank records at the scheduled evidentiary
hearing. On July 27, 2001, in its order on the
motion to quash, the district court determined
that HH&C was entitled to review the bank account
balances for the dates of June 26th and July 25th
pending the evidentiary hearing. Upon reviewing
the account balances pursuant to the district
court's order, HH&C learned that the accounts had
been severely depleted.(1)
¶7 In the face of the dissipation of the bank
accounts, and Capital Suisse's refusal to comply
with HH&C's document requests, HH&C filed a
verified complaint in the district court on
August 2, 2001, asserting claims for fraud, civil
conspiracy, breach of fiduciary duty, breach of
contract, and conversion.(2) At that time, HH&C
also filed a motion seeking a temporary
restraining order and prejudgment writ of
attachment of the bank accounts, in addition to a
motion for expedited discovery with
interrogatories and document requests to Capital
Suisse and subpoenas to Zions and Wells Fargo. At

a hearing on the motions, the district court
questioned counsel for Capital Suisse as to the
marked depletion in the bank accounts. Finding
counsel's answers unsatisfactory, the court
ordered counsel to be prepared the following week
to disclose what had happened to the funds.(3) The
court then granted HH&C's motions and entered a
temporary restraining order freezing the Zions
and Wells Fargo accounts.
¶8 On August 15, 2001, Capital Suisse
requested a stay pending interlocutory appeal of
the order granting expedited discovery.(4) Capital
Suisse also filed a motion to dismiss based on
lack of jurisdiction and improper venue due, in
part, to the existence of the forum selection
clause contained in the Subscription Agreements.
In a minute entry dated October 11, 2001, the
district court denied Capital Suisse's motion to
dismiss. The court determined that, since the
forum selection clause was unfair and the entire
agreement was pervaded by fraud, the forum
selection clause could be disregarded. It is this
ruling that is the subject of this appeal.
¶9 The district court denied Capital Suisse's
subsequent motion to stay the litigation pending
interlocutory appeal of the denial of the motion
to dismiss(5) and ordered Capital Suisse to comply
with HH&C's outstanding discovery requests, which
it noted had been outstanding for "some time." In
response, Capital Suisse invoked the Fifth
Amendment privilege against self-incrimination
and otherwise refused to answer. Capital Suisse's
privilege claim was also denied by the district

court, and the court again ordered Capital Suisse
to answer the interrogatories and ordered all of
the Capital Suisse defendants to answer the
complaint. Capital Suisse filed an answer to the
verified complaint on February 28, 2002.
¶10 At some point during the course of this
litigation, in defiance of the district court's
orders requiring Capital Suisse to comply with
HH&C's discovery requests, Capital Suisse shipped
all of its documents, records, and computer hard
drives from Utah to Spain. Upon discovering that
the documents and other items were no longer in
Utah, the district court ordered their return.
Soon thereafter on April 1, 2002, Capital Suisse
filed a notice of withdrawal of answer, stating
that it "refuse[d] to acknowledge [the]
litigation any further" because, pursuant to the
forum selection clause in the parties' agreement,
jurisdiction was only proper in the British
Virgin Islands. Capital Suisse's counsel also
filed a motion to withdraw, indicating that
Capital Suisse "do[es] not recognize the
jurisdiction of the United States over the
dispute." Counsel also stated that "as officers
of the [c]ourt" they had been placed in a
"conflict of interest situation" in light of the
outstanding orders of the district court and
Capital Suisse's "refus[al] to comply or
otherwise participate any further in th[e]
action."
¶11 HH&C then moved for summary judgment on
three of its claims, which was unopposed by
Capital Suisse. The district court granted the
motion, concluding that Capital Suisse had

defrauded HH&C "by acting in concert to create
the appearance of a legitimate investment
opportunity" that was "nothing more than a ruse
to defraud innocent investors." The court entered
judgment against Capital Suisse in the amount of
$24,730,000 plus interest. Capital Suisse filed
this appeal on August 15, 2002, contesting only
the district court's denial of its motion to
dismiss based on the forum selection clause. We
have jurisdiction pursuant to Utah Code section
78-2-2(3)(j) (2002).
ANALYSIS
¶12 In its argument on appeal, HH&C urges this
court to dismiss Capital Suisse's appeal without
considering the merits because Capital Suisse has
"repeatedly and willfully disobeyed [the district
court's] orders . . . , destroyed evidence, and
refused to recognize the jurisdiction of the Utah
courts." To date, this court has not addressed
whether it may dismiss a civil appeal when the
appellant disobeys the orders of the district
court in the same action. The Utah Court of
Appeals, however, has discussed its authority to
dismiss appeals from contemptuous appellants on
several occasions. In D'Aston v. D'Aston, 790
P.2d 590 (Utah Ct. App. 1990), the first Utah
case to address the issue, the appellant
challenged a divorce decree entered by the trial
court. Id. at 591. The court of appeals
determined that it could dismiss the appeal
because the appellant had failed to pay the
amount due her former husband, had failed to post
an ordered supersedeas bond, and had been
adjudged in contempt by the trial court after

"purposefully hiding herself from the
jurisdiction of the [c]ourt and from service."
Id. at 592-93.
¶13 In examining the procedures for dismissal
followed by other jurisdictions, the court of
appeals noted that there are at least three ways
that an appellate court can deal with a
contumacious party: (1) the court can dismiss the
appeal without allowing the party an opportunity
to bring itself into compliance with the trial
court's order; (2) the court can allow the party
a fixed time to comply with the trial court's
order before dismissing the appeal; or (3) the
court may, in its discretion, fashion a remedy
that is appropriate to the facts and
circumstances of the particular case. Id. at 593-
94 (listing cases); see also Von Hake v. Thomas,
881 P.2d 895, 897-98 (Utah Ct. App. 1994) ("Von
Hake II") (discussing D'Aston). In deciding to
allow the appellant in D'Aston thirty days to
"bring herself within the process of the trial
court" before her appeal would be dismissed, the
court of appeals emphasized that its approach did
not deny the appellant her constitutional right
to appeal under article VIII, section 5 of the
Utah Constitution. Id. at 594-95. Rather, the
court merely "insist[ed] [that] she . . . submit
herself to the jurisdiction of the trial court
and satisfy that court's concerns before she
[would be allowed to] exercise that right." Id.
¶14 Similarly, in Von Hake v. Thomas, 858 P.2d
193 (Utah Ct. App. 1993) ("Von Hake I"), the
court of appeals dismissed the appeal of a
litigant who had been adjudged in contempt by the

trial court for failure to comply with discovery
orders and the use of "improper and dilatory
tactics to frustrate [trial court] orders and to
avoid appearing in court." Id. at 193-94. The
court determined that because the appellant was
currently serving a five-year term of
imprisonment in California for tax fraud, "a
provisional dismissal, conditioned upon [his]
failure to physically present himself to the
trial court within thirty days, would be an
exercise in futility." Id. at 197. Therefore, the
court "dispense[d] with the formality of a
thirty-day grace period" and dismissed the appeal
outright. Id.
¶15 On remand from this court, the court of
appeals revisited the necessity of a grace period
and concluded that D'Aston did not require a
mandatory grace period before dismissal, but
rather that "D'Aston affirm[ed] the court's
discretionary authority to dismiss the appeals of
contumacious litigants under terms which are fair
and just given the circumstances of a particular
case." Von Hake II, 881 P.2d at 897-98.
Therefore, the court again held that the appeal
should be dismissed outright, but noted that the
dismissal was "without prejudice, subject to
reinstatement on reasonable terms and conditions"
specified by the court. Id. at 898; see also
Cummings v. Cummings, 1999 UT App 356, ¶ 11, 993
P.2d 248 (holding that because appellant had been
adjudged in contempt and his defiance of court
orders had led to the dissipation of the marital
assets, the court could, in its discretion,
dismiss the appeal and "condition reinstatement
of th[e] appeal upon appellant's submission to

th[e] court of proof that he ha[d] satisfied the
judgments held by appellee").
¶16 In light of these cases and myriad
authorities from other jurisdictions,(6) we
conclude that this court, in its discretion, may
dismiss the appeals of appellants who have
wilfully disobeyed an order of a lower court in
the same action. We agree with the approach
adopted by the court of appeals that allows the
reviewing appellate court to exercise its
discretionary authority by fashioning a remedy
that is fair and just under the circumstances,
taking into account the facts of the particular
case. Such authority is indispensable since it
would "violate[] the principles of justice to
allow a party who flaunts the orders of the
courts to seek judicial assistance" on appeal.
D'Aston, 790 P.2d at 593 (citing Stewart v.
Stewart, 372 P.2d 697, 700 (Ariz. 1962); Rude v.
Rude, 314 P.2d 226, 230 (Cal. Ct. App. 1957);
Greenwood v. Greenwood, 464 A.2d 771, 773 (Conn.
1983); Strange v. Strange, 464 S.W.2d 216, 219
(Tex. Civ. App. 1970) (per curiam)).
¶17 Additionally, although in the court of
appeals' cases discussed above the appellants had
been formally cited for contempt, we conclude
that dismissal of appeals from disobedient
parties does not require a formal finding of
contempt. In so concluding, we join with those
jurisdictions that maintain that "[t]he principle
permitting [a] court to stay or dismiss an appeal
does not require a formal judgment of civil
contempt. It is based upon fundamental equity and
is not to be frustrated by technicalities, such

as the absence of a formal citation and judgment
of contempt." Alioto Fish Co., Ltd. v. Alioto, 34
Cal. Rptr. 2d 244, 251 (Ct. App. 1994)
(quotations omitted) (finding that appellant's
"wilful disobedience [and] obstructive tactics"
were sufficient to warrant dismissal of the
appeal (quotations omitted)); see also Stewart,
372 P.2d at 699-700 (noting that a number of
jurisdictions allow appellate discretion to
dismiss for violations of trial court orders
"whether or not the disobedient appellants have
been formally adjudicated in contempt of court");
Keidaish v. Smith, 400 So. 2d 90, 91 (Fla. Dist.
Ct. App. 1981) (dismissing appeal even where
there was no formal finding of contempt because
appellant had violated temporary injunction by
transferring valuable property and money to
various parties and had fled the jurisdiction).
¶18 In the present case, Capital Suisse's
defiance of district court orders is clearly
sufficient to warrant dismissal of the appeal.
Though not formally adjudged in contempt, Capital
Suisse's wilful disobedience would certainly have
been adequate to support an order of contempt had
Capital Suisse not absented itself from the
litigation. Capital Suisse repeatedly refused to
comply with discovery requests from HH&C and went
to extreme lengths to prevent access to the Zions
and Wells Fargo bank accounts. Upon being ordered
by the district court to comply with discovery,
Capital Suisse shipped all of its documents,
records, and computer hard drives from Utah to
Spain. On the heels of this insubordination, upon
being ordered to return the awol documents and
other evidence, Capital Suisse abruptly withdrew

from the litigation, claiming that the district
court had no jurisdiction over it.
¶19 Capital Suisse argues that it did not
wilfully disobey court orders, but that it
"simply declined to participate substantively in
the proceedings" after the district court denied
its motion to dismiss for lack of venue, at which
point it was "convinced that the [district] court
had abused its discretion by wrongly concluding
that venue was proper in Utah." We emphasize,
however, that "[t]he processes of the appellate
court are [only] available to one who recognizes
his responsibility to obey court orders while
they remain in effect," and "a litigant is not
free to determine to what extent he will comply
with the law." Schmidt v. Schmidt, 610 A.2d 1374,
1377 (Del. 1992).
¶20 Further, we observe that Capital Suisse
does not contend on appeal that the district
court lacked jurisdiction or otherwise lacked
authority to enter orders in this case. Rather,
Capital Suisse argues only that venue is improper
in Utah due to the contractual forum selection
clause. Early case law from this court confirms
that when a court "has legally acquired
jurisdiction of subject-matter and of the
parties, [its] jurisdiction . . . is not affected
every time [it] thereafter misconstrues,
misconceives, or misapplies a statute not
involving subject-matter, jurisdiction, or
parties, but mere procedure." State v. Morgan, 44
Utah 224, 230, 140 P. 218, 221 (1914). Error with
regard to a determination of proper venue is
"simply [an] error[] of law" and does not oust

the jurisdiction of a court that has properly
acquired jurisdiction over the subject matter and
the parties to an action. Morgan, 44 Utah at 229,
140 P. at 220. While a court's judgment in this
regard may be voidable, the error does not go "to
the power of the court itself," and "its judgment
is not void." Id. (internal quotations omitted);
see also Floor v. Mitchell, 86 Utah 203, 212, 41
P.2d 281, 284-85 (1935) ("The court had
jurisdiction of subject-matter. It also by
process served had jurisdiction of the person of
the defendants. The action here, thus, was not a
question of jurisdiction either of subject-matter
or of person. It was one merely of venue.").
¶21 It is clear that the district court in
this case had both subject-matter jurisdiction
over the case and personal jurisdiction over the
defendants. If the presence of Capital Suisse
subsidiaries and bank accounts in Utah alone were
not enough to grant personal jurisdiction, then
certainly Capital Suisse's prolonged
participation in the litigation prior to
withdrawal would have been sufficient. Therefore,
even if we were to assume that the district
court's determination with respect to venue was
in error, the district court nevertheless had the
authority to enter valid and enforceable orders
in this case, and Capital Suisse was obliged to
comply.
¶22 Furthermore, while a party may permissibly
withdraw from litigation and allow a default or
summary judgment to be entered against it, a
party may not wilfully engage in affirmative acts
that frustrate district court orders. Contrary to

Capital Suisse's assertions, Capital Suisse did
not "simply decline[] to participate
substantively in the proceedings" in this case.
Rather, Capital Suisse defied district court
orders by shipping its documents out of state,
thwarting HH&C's efforts to trace its assets, and
deliberately frustrating the litigation.
Moreover, the orders of the district court were
both received and violated by Capital Suisse
while Capital Suisse was still meaningfully
participating in the litigation.
¶23 Capital Suisse also argues that it has a
"substantive right to appeal" the district
court's denial of its motion to dismiss for
improper venue and that it has "'a legal right to
insist that the action proceed in the proper
venue.'" See State v. Sosa, 598 P.2d 342, 344
(Utah 1979) (further quotations omitted). We
agree that "[t]he right to appeal is a valuable
and constitutional right and ought not to be
denied except where it is clear the right has
been lost or abandoned." Adamson v. Brockbank,
112 Utah 52, 60, 185 P.2d 264, 268 (1947); see
also Utah Const. art. VIII, § 5. However, the
right to appeal is not absolute and the right may
be forfeited, or a valid appeal may be dismissed,
due to the acts or omissions of the appellant,
including, for example, infractions of the rules
of appellate procedure. See, e.g., Utah R. App.
P. 3(a) ("Failure of an appellant to take any
step . . . is ground . . . for such action as the
appellate court deems appropriate, which may
include dismissal of the appeal . . . ."); State
v. S.H., 2002 UT 118, ¶ 23, 62 P.3d 444 ("Failure
to timely file an appeal pursuant to

rule 4 constitutes a waiver of the right to
appeal. Additionally, failure to timely file
deprives an appellate court of jurisdiction over
the appeal."). In addition, the United States
Supreme Court has held that dismissing the appeal
of an appellant who wilfully defies court orders
does not violate due process, but rather, may be
a "reasonable means of safeguarding the
collectibility of [a] judgment." Nat'l Union of
Marine Cooks & Stewards v. Arnold, 348 U.S. 37,
41, 43-44 (1954) ("While a statutory review is
important and must be exercised without
discrimination, such a review is not a
requirement of due process.").
¶24 As previously explained, in exercising our
authority to dismiss the appeals of contumacious
appellants, we have discretion to fashion a
remedy that is fair and just under the facts and
circumstances of the particular case.
Accordingly, we hereby stay this appeal to allow
Capital Suisse time to comply with the following
conditions, which must be fulfilled before we
will entertain the appeal on the merits. First,
Capital Suisse must, within thirty days from the
date of this decision, bring itself into
compliance with the orders of the district court
in this matter, including those orders requiring
Capital Suisse to comply with discovery and to
return all of the requested documents and
evidence to Utah. Second, inasmuch as we are
concerned that any continued delay will lead to
the further dissipation of Capital Suisse's
assets, we also require Capital Suisse to post
bond with the district court in the amount of any

unsatisfied portion of the judgment that has been
entered against it.
¶25 We therefore remand this matter to the
district court to make the following
determinations: (1) whether Capital Suisse has
adequately complied with the orders of the
district court within thirty days from the
issuance of this decision; (2) the amount of the
unsatisfied portion of the district court
judgment; and (3) whether Capital Suisse has
posted an adequate bond in that amount.
¶26 In light of the various determinations
that must be made by the district court on
remand, we will allow Capital Suisse ninety days
from the date of this decision in which to comply
with the conditions specified above. Accordingly,
Capital Suisse must, within ninety days, provide
this court with notice that it has complied with
these conditions, including the relevant orders
of the district court regarding whether Capital
Suisse has fulfilled the court's discovery orders
within the allotted thirty-day time period and
posted bond in the appropriate amount. If, at the
end of ninety days, Capital Suisse has failed to
comply with each of these requirements, or
continues to resort to evasive or dilatory
tactics, the appeal will be dismissed without
further notice or argument.
CONCLUSION
¶27 Due to appellants' wilful disobedience and
defiance of district court orders, we refuse to
reach the merits of this appeal. Instead, we stay

the appeal and remand to the district court to
make the determinations described herein.
Appellants' failure to comply with any of the
conditions outlined in this opinion will result
in dismissal of the appeal.
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¶28 Chief Justice Durham, Associate Chief
Justice Wilkins,
Judge Orme, and Judge Beacham concur in Justice
Durrant's opinion.
¶29 Having disqualified themselves, Justice
Parrish and Justice Nehring do not participate
herein; Court of Appeals Judge Gregory K. Orme
and District Judge Rand G. Beacham sat.
1. For instance, the Zions account had gone from
a balance of $2,207,006.94 on June 26th to a
balance of $804,468.31 on July 25th.
2. This action was later consolidated with the
original petition to enforce the Spanish Order.
3. Although counsel agreed to do so, it does not
appear that Capital Suisse ever complied with
this request.
4. Specifically, Capital Suisse sought to stay
any discovery of the bank accounts prior to
"dispositive motions to dismiss being heard in
[the] matter." We denied Capital Suisse's
petition for interlocutory appeal on this matter
on October 2, 2001.

5. This court denied interlocutory review by an
order dated January 3, 2002.
6. See, e.g., Stewart v. Stewart, 372 P.2d 697
(Ariz. 1962); Alioto Fish Co., Ltd. v. Alioto, 34
Cal. Rptr. 2d 244 (Ct. App. 1994); Tobin v.
Casaus, 275 P.2d 792 (Cal. Ct. App. 1954);
Schmidt v. Schmidt, 610 A.2d 1374 (Del. 1992);
Keidaish v. Smith, 400 So. 2d 90 (Fla. Dist. Ct.
App. 1981); Prevenas v. Prevenas, 227 N.W.2d 29
(Neb. 1975); DeMauro v. DeMauro, 794 A.2d 112
(N.H. 2002); Hopp v. James, 470 S.W.2d 716 (Tex.
Civ. App. 1971).