Arizona

Arizona's Foreign Judgment Dilemma

Know the steps to domesticate an old foreign judgment

By Jay Winston, Winston and Winston P.C.

FACTS PATTERN: A debtor calls your office, wanting to payoff an old debt so that he can refinance his home. The debtor is offering a 30% settlement. Having reviewed your computer records, you determine that debtor has assets and that a judgment was entered against the debtor in Massachusetts six years ago. You demand the full amount. The debtor hangs up. After reactivating the file, you determine that the debtor lives in Arizona. You send the case to your Arizona Attorney to docket and enforce the Judgment. However, s/he tells you that the statute of limitations for foreign judgments is only four(4) years. Don't worry, there is a method to revive your judgment so that you can docket and enforce the judgment in Arizona.

While Arizona has adopted the Uniform Foreign Judgment Act, and judgments based on either the merits or default may be docketed, the Arizona legislature has imposed a time limitation on accepting foreign judgments. Arizona Revised Statutes (A.R.S.) Section 12-544 places a four(4) year time limit, from the date of entry of the judgment, on docketing a foreign judgment in Arizona.

This four year limitation has been upheld by the Arizona Appeals Court in Citibank (South Dakota), N.A. v. Phifer, 887 P.2d 5 (App. 1994). . This statute applies to judgments obtained in both Federal and State court. Obtaining a new exemplified copy of the judgment is not sufficient to overcome this time bar and does not renew the judgment.

There are two legislative exceptions to this rule. First, A.R.S. Section12-507 provides that if the debtor has recently moved to the state and has resided for less than a one year period, the judgment may still be executed. However, determining when the one year period began may be difficult to determine or establish to the satisfaction of an Arizona court. Second, a judgment for support is not covered by this statute.

There is one judicially approved solution to this problem. The Arizona courts will permit a creditor to revive the foreign judgment in the state in which it was obtained. This action seems to make no sense, because the judgment is still valid in the state of origin, and appears to be a redundant action. For example, in the fact pattern, the creditor's original attorney would petition the court for an order confirming that the old judgment amount is still valid. In some states, the term used is to reassess the judgment.

Another possible approach to bypass this rule is to docket the judgment in another state. Then forward the second judgment to be docketed in Arizona. I am not aware of any situations in which this approach was tried. However, it is possible this solution may not be acceptable to an Arizona court.

Another approach is to sue on the underlying debt if the statute of limitations has not expired. For example, in the fact pattern discussed above, if the underlying debt was a secured home equity loan executed under seal in Massachusetts, the statute of limitations for the underlying debt is 20 years. The Creditor could sue on the underlying debt and use the timed barred foreign judgment as an admission of liability and damages. The amount of the new Arizona Judgment should be the same as the foreign judgment to avoid exposing yourself to potential liability under a vague consumer protection statute.

It is recommended that you check with your local counsel to determine what options are available and whether their state's local courts would permit the renewal of a judgment. If such relief would not be granted, the creditor should consider either accepting the low settlement offer or hope that the debtor relocates to another state. Remember, the foreign judgment is not invalid. It just cannot be docketed or enforced in Arizona. If the debtor owns assets in another state, these assets may be subject to seizure depending on state law.

CREDIT AND COLLECTION TIP: If you become aware of the fact that a debtor moves to Arizona, docket the judgment within one year from the date that the debtor relocated or else face the challenge of overcoming Arizona's four statute of limitations on foreign judgments.

I want to thank WAMN attorneys Dean Sipe of the Law offices Dean Sipe , and Ken Seidberg of the Seidberg Law for their assistance in preparing this article.