Collecting Against Prior Owners

Don’t Be Afraid To Recover Across State Lines

By Austin B. Baillio, Esq.

During the market crash of 2008 and the aftermath that followed, many associations obtained money judgments against owners who stopped paying their assessments knowing the foreclosure of their home by the first mortgage was imminent.

Many times, once the foreclosures were processed, those former owners left California looking to rebuild their lives elsewhere. Sometimes, those former owners already lived out of state and had invested in California properties within your associations.

Either way, with the former owners now out of state, associations holding money judgments against them could believe that the judgments are uncollectible. After all, foreclosing the assessment lien isn’t an option because they don’t own the property anymore, and the former owners are out of state beyond the association’s reach. Time to let the judgments die, right?

Not necessarily. Don’t give up hope yet. If you know where your former owners moved to, you may breathe some life back into those money judgments through a process called domestication. Never heard of domestication before? Well, it goes something like this:

The Constitution of the United States requires a state to enforce a valid judgment for the payment of money if it was rendered in another state. Once a valid judgment has been rendered, it must be accorded full faith and credit by every other court within the United States.

So, under the Full Faith and Credit Clause of the United States Constitution, if you can transfer your California judgment to a different state, that “sister state” must treat your California judgment as if it were entered in that state. This transfer process is commonly referred to as domestication.

The California legislature adopted the Sister State Money Judgments Act, found in California Code of Civil Procedure §1710.010, et seq., for this exact purpose—to allow for the recognition and enforcement of money judgments from other states in the state of California.

The Judicial Branch of California has also adopted several forms and templates that correspond with the Sister State Money Judgments Act to make the domestication process easier. If you fill out the documents correctly and file them in the proper county, the California court will enter a judgment based on the judgment from a sister state.

Like California, most states have adopted a similar statutory system for recognizing and enforcing money judgments from other states. Because each state has adopted its own set of rules to facilitate the domestication process, it is important to employ legal counsel who is properly licensed in the state where you are seeking to domesticate your California judgment. Once domesticated, your legal counsel will also need to be licensed in the sister state to pursue the collection of your judgment.

Because many former owners moved from California to the states closest to ours, we will look

If you know where your former owners moved to, you may breathe some life back into those money judgments through a process called domestication.

briefly at the domestication processes in Arizona and Nevada. In Arizona, the legislature adopted the Revised Uniform Enforcement of Foreign Judgments Act found in A.R.S. §12-1701, et seq. Pursuant to A.R.S. §12-1702, an authenticated copy of a California judgment can be filed in any superior court of the state of Arizona.

Once filed, the clerk treats the California judgment in the same manner as a judgment of the superior court of the state of Arizona. A notice of filing a foreign judgment and an affidavit substantiating the foreign judgment will also need to be filed simultaneously with the authenticated copy of the California judgment.

Once the court files the foreign judgment, you must promptly mail the notice of filing a foreign judgment on the former owner and wait twenty days after mailing, before any collection activity can begin.

In Nevada, the legislature adopted a very similar framework called the Enforcement of Foreign Judgments (Uniform Act), found in N.R.S. §17.330, et seq. Pursuant to N.R.S. §17.350, an exemplified copy of the California judgment is required for filing in the district courts in Nevada.

Accompanying the exemplified judgment should be an application of foreign judgment and an affidavit of judgment creditor. Once entered by the Nevada district court, a notice of filing of application and affidavit must be mailed to the former owner and their attorney of record (if known) at their last known address via certified mail, return receipt requested. No collection activity may begin until thirty days after the date of mailing.

Once entered in the foreign jurisdiction, your California judgment is enforceable in the same manner as a judgment of that sister state. That means you can utilize the enforcement tools of the new jurisdiction to collect on your judgment.

If your former owner is employed in the new state, you can potentially pursue a wage garnishment in the sister state. You can also likely record the sister state judgment in the county where your former owner now resides so that it creates a lien on any real property owned by the former owner in that county.

Using these tools, you can breathe new life into your old judgments and begin collecting from former owners who have moved out of state. So, before you write off those old judgments for good, consider domesticating them to another state.

Austin B. Baillio, Esq.

Austin B. Baillio, Esq., of Maxwell & Morgan, LLP specializes in community association law and has been in the industry for six years.