So, now you have your judgment entered after trial or perhaps a default hearing and California has issued you a piece of paper that says X Company owes you fifty thousand dollars. California law grants to you a plethora of tools to enforce that judgment if the judgment debtor does not voluntarily pay and you are aware that you can attach and sell assets, real property, even wages or income of X. Meanwhile, under California law, your judgment increases at ten percent per year, not a bad return on your money.
Then you discover that all the bank accounts have been emptied, the debtor has moved his operations out of state, and there are no assets left in California to attach. All those powerful tools are useless since the jurisdiction of the California courts stops at the border.
Is your judgment now useless? No, but you now have to enter your judgment in the state in which the assets are located. Under the United States Constitution “full faith and credit” clause, each state is required to enforce the judgments of a sister state, but the process is not necessarily quick and easy. Each state has their own procedures for entering (“domesticating”) a foreign state judgment and it is necessary for the judgment creditor to adhere to those procedures to finally collect. Different procedures exist for each state but all have essentially similar basics.
This article shall use Maryland as an example of the typical process necessary to enforce a judgment in a sister state, then discuss in general terms the practical issues facing the judgment creditor…or, if you are a judgment debtor, what you can expect to transpire if the creditor does not give up the quest to collect.
The reader should first review the article on American Litigation before reading further.
The Maryland Example:
When a judgment has been rendered by a California court, it is enforceable only against assets located in California. If the Judgment Debtor has assets in another state, the Judgment Creditor must convert the judgment to obtain jurisdiction over the assets located in the “foreign” state. This process is known as domesticating the judgment. The Judgment Creditor uses the California judgment to apply for a judgment issued by the sister state which is then enforceable against the foreign assets.
Those states which have adopted the Uniform Enforcement of Foreign Judgments Act (UEFJA) follow an expedited procedure to domesticate a foreign judgment. Maryland is a state which has adopted the UEFJA.
Appropriate Jurisdiction
Legal authority to domesticate a foreign judgment in Maryland is found in title 11 of the Annotated Code of Maryland (“MD. CODE ANN.”), subtitle 8. The face amount of the judgment and the nature of the case determine which Maryland state court (District Court or Circuit Court) has proper jurisdiction. MD. CODE ANN. §11-802(a). For example, the District Court has exclusive original civil jurisdiction in an action involving landlord and tenant, distraint, or wrongful detainer, regardless of the amount involved. MD. CODE ANN. §4-401(4).
Filing the Foreign Judgment
The Judgment Creditor will need an authenticated copy of the California judgment. The clerk of the court in which judgment was rendered must sign the certificate declaring the copy to be a true copy of the original judgment on file in the court.
Along with the authenticated copy, the Judgment Creditor must also file an affidavit showing the name and last known mailing address of both the Judgment Creditor and Judgment Debtor. MD. CODE ANN. 11-803(a). One should then contact the Maryland court in which judgment will be filed to determine the filing fee and correct number of forms and attachments.
The Judgment Debtor must be provided with copies of all papers filed. Although the Maryland District Court clerk may mail notice of the filing and lodge a proof of mailing (proof of service) in the docket (MD. CODE ANN. §11-803(b)(1)-(2)), the Judgment Creditor may also serve the papers directly (MD. CODE ANN. §11-803(b)(3)-(4)). The better practice is for the Judgment Creditor to serve copies of all papers on the Judgment Debtor, and include a proof of service with filings with the court.
The California judgment is now domesticated and enforceable in accordance with the laws of the sister state.
Retention of Local Counsel to Enforce or Admission Pro Hac Vice
The foreign attorney may sign the required affidavit and file the foreign judgment, but must be admitted pro hac vice or have a Maryland attorney take over in order to take enforcement actions. (Letter of Advice from the Office of the Attorney General (Maryland) to All Clerks of the Circuit Courts, dated July 16, 1990.)
For admission pro hac vice, an attorney admitted to the State Bar of Maryland makes a motion for the foreign attorney to be admitted for the limited purpose of appearing and participating in the action as co-counsel. The specially admitted attorney may then participate in the action only when accompanied by the Maryland attorney, unless the latter's presence is waived by the judge presiding over the action. Any out-of-state attorney so admitted is subject to the Maryland Lawyers’ Rules of Professional Conduct. Rules Governing Admission to the Bar of Maryland, Rule 14; MD. BUS. OCC. & PROF. CODE ANN. § 10-215.
Stay of Enforcement
The Judgment Debtor may request a stay of enforcement by showing that, in California, an appeal is pending or will be taken or that a stay has been granted, and that an appropriate bond has been posted by the Judgment Debtor for the California appeal. MD. CODE ANN. §11-804(a). The Maryland court will then stay enforcement until an appeal is concluded, or the time for appeal expires, or the stay of execution expires or is vacated. Id.
The Judgment Debtor may also request a stay in accordance with Maryland law. The Maryland District Court may require a bond be posted by the Judgment Creditor before execution can be granted. MD. CODE ANN. §11-804(b).
Execution
Presuming no bar to enforcement, the Judgment Creditor then applies to the Maryland District Court Clerk to issue a Writ of attachment. Maryland Rules provide for two main ways to collect judgment: a Writ of Execution (for Real or Personal Property) and a Writ of Garnishment (for Wages or Bank Accounts).
To pursue judgment against a corporation, the Judgment Creditor will want a Writ of Garnishment of Property other than Wages, and possibly a Writ of Execution for Real Property and/or Personal Property.
The following are step-by-step instructions from the District Court of Maryland.
Writ of Garnishment
The first step in garnishing a bank account is completing the Request for Garnishment of Property Other Than Wages (form DC/CV 60). The form must be completed with the name and address of the defendant’s financial institution, as well as the amount of the judgment and any additional money owed (such as court costs and post-judgment interest).
Next, the clerk will issue a Writ of Garnishment. The defendant’s financial institution (known as the “garnishee”) will be served with the writ, as well as a Garnishee’s Confession of Assets of Property Other Than Wages (form DC/CV 61). The garnishee has 30 days from the date of service to file the Confession of Assets with the court. The Judgment Creditor will receive a copy of the completed form, which lists any assets belonging to the defendant that the bank holds.
Once 30 days have passed since the original Request for Garnishment of Property Other Than Wages is served and the garnishee has filed an answer to the request, Judgment Creditor can file the Request for Judgment Garnishment (form DC/CV 62). Before filing the form, a copy of the request must be mailed to the garnishee and the defendant.
If the judge enters judgment in the Judgment Creditor’s favor, the garnishee will be ordered to turn over the money withheld from the defendant’s bank account. Except in certain limited circumstances, funds from a jointly held account cannot be garnished unless the judgment was against both owners. Retirement or escrow accounts cannot be garnished. Financial Institutions must comply with the requirements, prohibitions, and limitations of Federal Regulation 31 C.F.R. Part 212 and Maryland Rule 3-645.1, which prohibit a financial institution from holding a "protected amount" under 31 C.F.R. Part 212. Protected amounts may consist of the following Federal benefit payments: Social Security, Veteran's Administration, Railroad Retirement Board, and Office of Personnel Management.
Writ of Execution
To seize the Judgment Creditor’s personal property or real estate, a Request for Writ of Execution (form DC/CV 40) should be filed. There are steps which may be required first before filing the request for a writ. If Judgment Creditor intends to seize real property, the judgment must be recorded in the circuit court for the county in which the property is located, with the exception of Baltimore City. (In Baltimore City, the judgment is automatically recorded in the District Court as a lien on the property in Baltimore City.) If the judgment was entered in any other county, file the Request to File Notice of Lien (form DC/CV 35). Further detail on how to fill out this form is available from the website for the District Court of Maryland.
The court will provide notice once judgment has been recorded properly. At this point, file the Request for Writ of Execution (form DC/CV 40) in the county in which the property is located. In most counties, the sheriff’s office is responsible for levying or seizing property. In Baltimore County, constables perform these duties.
To seize the defendant’s real estate, a copy of the deed is necessary. Deeds are public record that can be found at the circuit court for the county in which the real property is located. When completing the Request for Writ of Execution, the description provided for the property must be the legal description found on the deed.
With regard to personal property, after it is seized, the sheriff will need to know what to do with it. The options are:
1. Leave the property where found. The sheriff will post a notice alerting the defendant that the property has been levied. To sell the property, it must be seized.
2. Exclude others from access to it or use of it. The sheriff will still leave the property but render it inaccessible. For instance, the defendant can be barred from using his or her car. A bond, posted with the sheriff, may be required.
3. Remove it from the premises. The sheriff will remove the property. This option requires a bond, in an amount to be determined by the sheriff. The sheriff’s office uses the bond to meet its costs; any unused portion is returned.
There is a 30-day waiting period before property can be sold. The waiting period allows the Judgment Debtor the opportunity to file a motion to request that the property be exempted.
After 30 days have passed, the sheriff can sell the property to pay the Judgment Creditor. The sheriff will not automatically sell the property; the Judgment Creditor must contact the sheriff to request the sale, again, after 30 days have elapsed. If this is not done, the property may be released to the Judgment Debtor after 120 days.
When Judgment is Satisfied
After payment is received, the Judgment Creditor is required to document the payment with both the Judgment Debtor and any garnishees. A Judgment Creditor’s Monthly Report must be provided to the defendant and any garnishees within 15 days after the end of each calendar month in which payment is received. This report is not required to be filed with the District Court.
Renewing Judgment
In Maryland, a judgment is only valid for 12 years. If judgment is not collected within that time, a Notice to Renew Judgment (form DC/CV 23) must be filed with the court while the judgment is still valid.
Order of Satisfaction
Once judgment has been paid in full, the Judgment Creditor must file with the court an Order of Satisfaction (form DC/CV 31). After the clerk processes the order, each of the courts in which the judgment was recorded will be notified that the judgment has been paid in full.
If the Judgment Creditor fails to file this form and the Judgment Debtor files a Motion for Order Declaring the Judgment Satisfied, the court can order the Judgment Creditor to reimburse the defendant for any costs incurred.
Practical Considerations:
In these days of the internet and on line banking, it is quite easy for a potential debtor to rapidly and effectively transfer assets out of state. Indeed, operations can easily be retained in the home state while monetary assets are located in another state. In determining the cost benefit aspects of any litigation, the possible transfer of assets out of state must be considered in developing appropriate tactics. That said, it is not particularly burdensome to enter the judgment in another state, merely another step that an aggressive creditor must take to achieve actual collection.
And if the underlying contractual documents provide for attorney fees being awarded to the prevailing party, the additional costs and fees incurred in seeking the out of state enforcement may eventually be added to the judgment. See our article on Recovering Fees and Court Costs. If the creditor is determined and there are assets to attach, recovery can be achieved though it may be necessary to chase the debtor through various states.
International enforcement of judgment is quite similar but in many jurisdictions the United States judgment is reduced to a foreign judgment by actually filing suit in the foreign locale and proving the case via the American judgment. Some jurisdictions, such as Iran and North Korea, will not enforce United States judgments, and other jurisdictions, such as Nigeria or Burma, have such corrupt systems that the judgment will have little practical effect. It is essential when seeking to enforce a judgment abroad to perform a rigid cost benefit analysis with experienced counsel.
Nevertheless, it is possible in many foreign jurisdictions to not only enforce the judgment, but to achieve results that would be difficult to accomplish in the United States. This office had the federal police in Spain raid a warehouse to seize counterfeit goods without warning to the judgment debtor who had counterfeited the products, something highly unlikely to occur without a full prehearing process in the United States. As our client told us, “I wish all my judgments were in Spain.”
Do not give up when you discover the assets are out of state…but do assume that the transfer of assets is an issue requiring carefully thought out and effective tactics to enforce.