The collection of accounts receivable is a crucial aspect of the operation of any business. Of course, when normal collection procedures fail the matter often results in litigation. This may require a decision regarding where to pursue the litigation, the creditor’s home state or that of the debtor. There are a number of advantages for the commercial creditor litigating in its home state, but there may be obstacles to enforcement of such a judgment as well, such as when the debtor’s attachable assets are located in another jurisdiction. Fortunately, the risks associated with such a decision can be mitigated through the Uniform Enforcements of Foreign Judgments Act (the “Act”), which permits the enforcement of a judgment obtained in one state in another state by filing the judgment with a clerk of court in the second state pursuant to the procedures set forth in the Act.
In this article we will examine the Act in the context of commercial transactions, but it should be noted that the Act applies to other judgments as well, including divorce proceedings and child support. In examining the Act, we will address how a judgment is transferred from one state to another, potential debtor defenses, and stays of execution.
By way of background, the Act was first propagated by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) in 1948. It was a response to the problem of courts having to give debtors who had already had a trial in the origin state a second full-scale trial in the execution state.1 This was causing congestion in the courts.2 The 1948 Act provided a summary judgment procedure for actions on foreign judgments.3
The current, revised Act was released in 1964, modeled on 28 U.S.C. §1963, the procedure used in the Federal courts for inter-district enforcement of judgments.4 It provides a swift and economical method of enforcing foreign judgments without the cost of further litigation in the execution state.5
The Act has been enacted by all states with the exception of California and Vermont, plus the District of Columbia, U.S. Virgin Islands, and Puerto Rico.6 If you have obtained a judgment in your state and you have decided that you wish to transfer the judgment to another state for purposes, for example, of execution on the debtor’s assets in the other state, you would go to the clerk of the court in your state in which your judgment is registered. At that point, you would request an authenticated copy of your judgment so that you can transfer it to a foreign jurisdiction, i.e., another state.
Once you have obtained the authenticated judgment, it would then be filed with the clerk of the appropriate court of the state in which you want the judgment registered.
At the time of the filing of your judgment, the Act requires that either you as the judgment creditor or your lawyer file with the clerk of the court to which you have transferred your judgment an affidavit setting forth the name and last known post office address of the judgment debtor and your name and post office address.
Upon filing of your judgment and the affidavit, the clerk of the court of the state to which you transferred your judgment will mail a notice of the filing to the judgment debtor and make a note of the mailing in the docket. In addition, you or your attorney may mail a notice of the filing of the judgment to the judgment debtor and file a proof of mailing with the clerk.
Once your judgment is transferred under the Act, it is entitled to be given full faith and credit. The Act does not entitle the judgment debtor to raise any and all defenses which would destroy the full faith and credit of your judgment. This means that your judgment must be given the same recognition and effect as a judgment would receive in the courts of the state to which you transferred your judgment. Lack of jurisdiction on the part of the court in your own state, where the judgment was originally awarded, or lack of due process are generally the only reasons why the principle of full faith and credit would be denied and your judgment stricken.
Once the judgment is transferred, the judgment debtor may obtain a stay of the enforcement of the judgment if the judgment debtor can show that an appeal is pending or will be taken or that a stay of execution has already been granted. A court will then stay the judgment until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated. A stay may also be granted where the judgment debtor shows that there is any ground upon which the enforcement of the judgment would be stayed in the state of recording. However, the granting of a stay is not a relitigation of the action upon which your judgment was originally entered.
The advantage of the Act is that you as the creditor do not have to go to the state of the judgment debtor to sue. You can sue in your own state and have the judgment obtained therein transferred to another state for recording and then execution. As long as your state had jurisdiction and due process requirements were followed, your judgment is entitled to full faith and credit in the state to which your judgment is transferred. You do not have to sue again on your claim. The Act simplifies the process and greatly reduces the cost.
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1Revised UNIF. ENFORCEMENT OF FOREIGN JUDGMENTS ACT Prefaratory Note (1964).