Registration of Judgment

A judgment is only meaningful if it meets the requirements of proper notice to the defendant.

By Harold Stotland, JD

In one of my prior columns, I discussed the advantages and disadvantages of choosing among states where the creditor would file a lawsuit. Now, let us discuss how to enforce a judgment a creditor wins in its home state against a debtor from another state. What is the creditor's remedy if the debtor ignores it?

The U.S. Constitution says each state should give "full faith and credit" to the judicial decisions of each sister state. For the creditor, a judgment valid in Illinois is valid in California and must be recognized by the California court without the necessity of re-litigation. The creditor with the judgment either can sue on the judgment in California, or, if California has adopted the Uniform Registration of Foreign Judgments Act (URFJA), the creditor can have the Illinois judgment registered in any California court. That judgment would then be subject to immediate execution.

I live by the rule, “all default judgments are suspect,” so how does this adage relate to the concept of registering a foreign judgment? Our office registers many judgments in Illinois from other states each year. Before we file the registration, we always check to see if the underlying judgment meets the requisites of due process. We examine the record to see that the judgment debtor was properly served with a summons, and, hopefully, defended the lawsuit.

The registration can be denied if the summons wasn’t properly served, but if the debtor participated in the original case and lost, the defendant waives that defense.

Recently, I received a judgment entered in Michigan against an Illinois corporation, rising out of a wrongful termination of employment. No appearance was filed in the Michigan proceeding. The judgment debtor in this case was a limited liability corporation, and this kind of company only could be served through its registered agent. Instead of serving the registered agent, the Michigan attorney served the defendant at his place of business by serving an employee who was not the registered agent. While there was a judgment of record entered, it was void and could not be the basis for registration and enforcement in Illinois. The creditor had to vacate the judgment in Michigan and re-serve summons in accord with the Michigan statutes.

Knowing the problems associated with registration of judgment goes hand in hand with where to most advantageously file a lawsuit. That’s because all judgments are created equal – no matter what the context of the underlying lawsuit is. It could be a personal injury or a contract action. When registering a judgment, in addition to examining whether a defendant was properly served with summons, the enforcing attorney also must believe that the original state had sufficient contact with the parties or claim to hear the case in the first place. Usually, these suits are based on a forum selection clause wherein the parties have consented to a specific state as the place for litigation.

We recently had a judgment for registration that we refused to handle. There was no nexus or connection between the defendant in the original state – in this case, Michigan – other than the plaintiff had its headquarters in that state. The defendant never came to Michigan, and payment was actually due elsewhere. The defendant never signed his consent to being sued in Michigan, causing this judgment to be no better than the one with improper service of summons.

So, any time we are registering a judgment entered in another state, it always is necessary for the enforcing attorney to examine the record to see that the original state had the right to hear the case and that the judgment debtors were properly notified of the litigation.

ABOUT THE AUTHOR

Harold Stotland is a principal with Teller, Levit & Silvertrust, P.C. in Chicago, Ill., where he directs and supervises the firm's Commercial Collection Division. Contact him at hstotland@tellerlevit.com.