New Davidson County Chancery Court Ruling: Certified Copies are Good Enough to Support a Foreign Judgment Domestication

Last October, I talked about how failure to get a properly “authenticated” copy of a judgment would be fatal to a creditor’s action under the Uniform Foreign Judgment Enforcement Act.

So, here I am, in March, and I’m writing about how a Davidson County Chancery Court has now ruled that a simple “certified copy” of the judgment would suffice. Five months is a pretty quick turnaround, even by my standards.

The reasoning of the Chancellor is this:

  • The purpose of the Full Faith and Credit Clause was to make it easy to enroll and domesticate judgments granted in other jurisdictions;
  • As you know, the requirements for filing a foreign judgment in Tennessee are “few and straightforward.” See Boardwalk Regency Corp. v. Patterson, No. M1999-02805-COA-R3-CV, 2001 WL 1613892, at * 4 (Tenn. Ct. App. Dec. 18, 2001).
  • As I’ve written about before, there are essentially three “defenses” to a filing under the Act.  Those are: (1) if the judgment is “void due to a lack of personal or subject matter jurisdiction;” (2) if it was “based upon fraud;” or (3) where its enforcement “would violate public policy of the forum state.”  Guseinov v. Synergy Ventures, Inc., 467 S.W.3d 920, 924 (Tenn. Ct. App. 2014).
  • Per Guseinov, a party seeking to prevent the enrollment of a foreign judgment carries “a stern and heavy burden” in Tennessee.
  • So, if the only defense is that the judgment wasn’t authenticated consistent with the Acts of Congress/triple certification process/exemplified, the creditor hasn’t met a “stern and heavy burden.”
  • If there is no indication or argument that the simple certification on the certified judgment is invalid or not the Clerk’s signature, then a certified copy will suffice.

Today isn’t the day that I argue against the ruling; instead, this is just me, warning you.

But, this hasn’t always been the practice in Tennessee or other jurisdictions interpreting the Foreign Judgment domestication Act, so, if you want to be 100% safe, go with the authenticated copy.

Tune back in 4 months to see if I have reversed course again.

 

Sure, the Debtor is Foreign, but Is his Bank?

I’ve talked about the process of domestication of judgments, which is basically the process by which you make a judgment from one state enforceable in another state. You see, a judgment awarded in Tennessee can only reach a debtor’s assets located inside the State of Tennessee. So, if you have a judgment against somebody who lives in Texas, you may have to file a second lawsuit in Texas to attach his assets.

But don’t go buy a pair of cowboy boots just yet.

I mean, sure, if he owns land in Texas,  owns a car that’s registered in Texas, or has a million dollars in cash under his Texas bed, then your Tennessee judgment is not going to be effective to execute on those assets. To get those things that are actually in Texas, you need to go through the domestication process, which results in your out of state judgment being recognized by that foreign state as a valid judgment for enforcement in that state.

But, here’s a trick: What if the debtor has all his assets in that foreign state, but he banks at a national bank with offices all over the country? And what if that bank has a branch in Tennessee? The answer is that you can levy on that bank account.

So, debtors with accounts at Wells Fargo Bank, National Association and Bank of America, watch out.

The Law is All Paperwork: An Improperly Authenticated Judgment may Result in Dismissal of Foreign Judgment Action

On my Facebook page, I describe myself as “The Garth Brooks of Paperwork.” Which is a way of poking fun at lots of things about me and my job.

But, law students, please know that success as a lawyer is basically 65% being really good at paperwork.

Thankfully, for the other 35% of us, you can generally amend pleadings to correct mistakes or errors. I’ve recently found a situation where you can’t amend a court filing, such that the entire case might be dismissed.

It’s when there’s an error in your initial filing of a Notice of a Foreign Judgment under the the Uniform Enforcement of Foreign Judgments Act (the “Act”), found in Tennessee at Tenn. Code Ann. § 26-6-101 et.seq.

If a judgment creditor fails to attach a proper exhibit, i.e. a properly authenticated copy of the out-of-state judgment to be enforced, there is a line of cases in Tennessee that say the entire lawsuit is defective because the failure to follow the statutory procedure for authenticating a foreign judgment is fatal as a matter of law.

What’s scary about this line of cases is that there appears to be no ability to file a Motion to Amend Pleadings under Rule 15. Those types of requests are generally granted and would usually allow the plaintiff to correct the error and move on.

Not in proceedings under the Act, Tennessee Courts have said. A recent trial court decision found that a Notice of Filing was not one of the expressly provided list of “pleadings” in Rule 7.01 and, therefore, not subject to amendment under Rule 15.01.

Tenn. R. Civ. P. 15.01 allows parties to amend their pleadings, and leave to amend pleadings is freely granted by the courts when justice demands. Tenn. Rule 7.01 defines “pleading” as a complaint, answer, counter-complaint, answer to a cross-claim, a third-party complaint and third-party answer and states that “no other pleading shall be allowed.’ The Notice of Filing required by Tenn. Code Ann. § 26-6-104 is not one of the pleadings listed in Rule 7.01.

Apparently, then, the judgment creditor’s only recourse when the foreign judgment notice is defective is to dismiss the domestication action, and then re-file a corrected, new proceeding. Yikes.

New Opinion Analyzes Common Defenses to Domestication of Foreign Judgments in Tennessee

A good rule of thumb in Tennessee is that a valid foreign judgment will be enforceable here, provided the plaintiffs comply with the procedural requirements of Tennessee Code Annotated § 26-6-101, et seq.

A new Tennessee Court of Appeals opinion, in Bancorpsouth Bank v. David J. Johnson, et. al. (July 16, 2013), examined both the general law, as well as the potential defenses to domestication. This is a good case to know, since it reviews all aspects of the foreign judgment enrollment process.

First, it presents the three “standard” defenses to domestication:

a forum state may decline to accord full faith and credit to the judgment or public act of another state if it is (1) void due to a lack of personal or subject matter jurisdiction, (2) based upon fraud, or (3) “where enforcement of the judgment would violate the public policy of the forum state.” …  Tennessee courts have recognized and adopted all three of these exceptions. … (citations omitted)

These defenses aren’t easy to establish, and the Court notes  “a party who seeks to show that a foreign judgment should not be enforced in Tennessee must meet a ‘stern and heavy‘ burden.”

Most attacks on a foreign judgment are under Defense No. 1 (that the judgment is void); this new case is interesting in that is that the Court provides a good analysis of Defense Nos. 2 and 3 (which no other case that I’ve seen has done).

Defense No. 2, Fraud:  “[T]o deny full faith and credit on the basis of fraud, there must be allegations of extrinsic fraud, that is, fraud that is collateral to questions which were either determined or which could have been determined in the underlying action. Extrinsic fraud is contrasted with intrinsic fraud, which pertains to an issue involved in the underlying action or where the acts allegedly constituting fraud were or could have been litigated…”

“‘[E]xtrinsic fraud ‘consists of conduct that is extrinsic or collateral to the issues examined and determined in the action,’. . . while intrinsic fraud is fraud within the subject matter of the litigation, such as forged  documents produced at trial or perjury by a witness.”

An example of extrinsic fraud is a party lying to the other party about the court date or committing some fraud regarding the litigation (something beyond the allegations of the lawsuit). Intrinsic fraud would be some fraud related to or contained in the allegations of the lawsuit, such as a fraudulent signature on the note at issue.

Defense No. 3, Public Policy:  “Under the public-policy exception to full faith and credit, “Tennessee courts are not obligated to give full faith and credit to any judgment of a state which we hold to be violative of Tennessee’s public policy or the Federal Constitution.”

This is rare, however: “The principle of giving full faith and credit to the judgments of sister states will “almost invariably” outweigh the interest of an individual state; the public-policy exception to full faith and credit is applied only on ‘extremely rare occasions.'”

While the Court doesn’t provide examples, the Defendants’ argument is illustrative. Here, they argued that the foreclosure that resulted in the deficiency balance at issue in the lawsuit was improper, and it was an issue that Tennessee has a defense for, under Tenn. Code Ann. § 35-5-118.

The Court saw this as an improper attempt to re-litigate potential defenses under the underlying judgment, not some public policy that rendered the out-of-state judgment unenforceable.

Most cases cite the three major defenses, and this new opinion is significant because it provides helpful analysis of what constitutes those defenses.