Friday, July 5, 2013

Jane, Get Me Off This Crazy Thing

Ayers v. Hemmingway, 2013 VT 37

Let us, for once cut to the chase of the case.  The central issue before the SCOV today concerns the life of a judgment. 

What, you say.  Judgments have life spans?  A judgment can die?  I thought a judgment was the end.  You know, the judge bangs the gavel, orders defendant to pay.  Defense counsel hangs her head low, and that’s it.

Come on you didn’t think it would be that easy.  A judgment, despite what television teaches us, is just a piece of paper.  Mind you, it is a piece of paper that carries the force of law behind it, but like all paper, it is not self-actualizing.  It still requires the holder to seek what the paper says is owed.

Moreover, a judgment is only good for eight years.  That means once you obtain a judgment, you have eight years to seek your post-judgment remedies or the judgment ends, along with your claim. 

Sit down.  There is a good reason for all of this.  A judgment is simply a legal determination rendered by a judge or judge and jury that you, the claimant, have a right as a matter of law or equity from the defendant. That is it.  A judgment is a decision, nothing more. 

Now, do not dismiss the power of a judgment.  It is final and binding on the issues that the parties litigated, and it carries the weight and force of the law.  Like a promissory note, it is an obligation that will follow the defendant and can only be cured by payment.   Failure to pay carries penalties and post-judgment interest.  Most defendants recognize this power and all that it entails and pay their judgments.

But occasionally, defendants do not pay their judgment.  That forces the plaintiff to seek post-judgment remedies.  These range from wage garnishment to attaching property to judgment liens.  Plaintiff may take advantage of these remedies 30 days after a judgment becomes final or even sooner if it looks like the defendant is unlikely to pay or abscond with her assets. 

A lot of people make the mistake of thinking that a judgment automatically entitles them to post-judgment relief.  (On that note, a lot of defendants probably do too, which no doubt motivates them to pay quicker than they might otherwise.)  But the two are separate because they ask different questions.  A judgment has nothing to do with ability to pay, and a post-judgment cannot re-open the merits of the underlying judgment.  The latter is simply a question of ability to pay and availability of the asset. 

So if a plaintiff finds herself with a judgment in her favor and a recalcitrant defendant, she has a whole slate of remedies at her disposal.  The only limitation is defendant’s ability to pay and plaintiff’s will to attach it. 

Plaintiff has eight years to pursue these remedies, but once those eight years are over, the law decrees finality.  This limitation rests on the idea that if a plaintiff cannot obtain satisfaction of a judgment within eight years, one or more of the following is true:

  • The judgment has been settled;
  • defendant cannot pay or her assets are exempt from attachment; or
  • plaintiff has sat on her rights and now they are at an end. 

Of course there is an out.  Plaintiff, by bringing an independent action, may renew the judgment at any time, and by bringing such renewals periodically, may keep a judgment alive indefinitely.

This is what the Plaintiffs in today’s case thought they had done.

In 2001, Plaintiffs obtained a judgment against defendant Contractor.  Following this judgment, Contractor—who did not even show up to contest the claim—did not pay, and Plaintiffs obtained a non-possessory writ of attachment on Contractor’s non-exempt goods and estate.  In 2004, Plaintiffs filed for a possessory writ of attachment. 

The difference between these two writs lies in their names.  In the first instance, the writ gave notice (non-possessory) to others that Plaintiffs were judgment creditors and had a right to payment.  Such a writ does not give Plaintiffs the right to foreclose, but it does effectively put a lien on the property and makes sure that the asset is not sold without the creditor’s knowledge.  The second, “possessory writ,” transforms that first writ into a security interest akin to a mortgage with a right of foreclosure. 

Contractor disputed this second writ and alleged that he had made some payments but stopped when Plaintiffs forged larger amounts from his checks.  Plaintiffs denied this.  The matter ended in a stipulated amended and “updated” judgment that consolidated the amount Contractor still owed, including the post-judgment interest of 12% per year that Plaintiffs were entitled to collect.  As part of this order, Contractor agreed to a payment plan with a reduced interest rate. 

Following this judgment, Plaintiffs filed, in 2008, a notice of judgment lien against Contractor’s real estate in the land records.

In 2010, Defendant 2 sued Contractor on an unrelated claim.  Contractor conveyed two parcels to Defendant 2 to settle the claim, and the Court approved a stipulated order granting Defendant 2 a judgment equal to the outstanding balance owed to Plaintiffs, pending Contractor’s remaining payments to Plaintiffs. 

When Contractor ceased payments the next year, Plaintiffs moved to foreclose on the property and brought the present action against both Contractor and Defendant 2 (who now owned the properties in question).

If you were paying attention above, you know what comes next.  Defendant 2 filed a motion to dismiss the foreclosure action noting that the original judgment was over 10 years old and had not been renewed.  Plaintiffs were trying to enforce a stale judgment and could not foreclose.  The trial court agreed and Plaintiff appealed.

The main argument on appeal is whether the 2006 action effectively renewed the judgment.  There is some debate as to whether the 2008 notice of judgment lien referred to the 2001 judgment or the 2006 modification, but the import of this appears to be largely evidence for the eye of the beholder.

For the SCOV majority, the issue is one of procedure.  The SCOV notes that it recently ruled on the limitation of judgments and the process necessary to renew unsatisfied judgments.  Plaintiffs did not follow this procedure, and the 2006 “update” judgment was insufficient. 

The problem, which Justice Robinson picks up on in her lone dissent, is less procedural than practical.  In 2006, Plaintiffs were attempting to obtain a security interest on the judgment and transform it into something more permanent, and they secured a “new amended judgment” in the case.  What more could they have received?  The new judgment that Plaintiffs received should have re-set the clocks.  The dissent looks to the plain meaning of the word judgment to show that there is no special magic in the rules that requires Plaintiffs to enter a whole new judgment action when they and the court have essentially done this work by entering a new judgment.  Particularly in this case it would seem difficult to obtain such relief since the trial court and Contractor had stipulated to what everyone likely understood was the functional equivalent.

The dissent’s underlying point is one of practicality.  The limitation on judgment exists to prevent never-ending collections or sudden post-judgment actions on ancient claims.  It prevents Plaintiffs from sitting on their hands, but in this case, Plaintiffs were anything but reticent.  They actively sought to collect from Contractor and launched at least three separate filings or motions in pursuit. 

But none of those actions were specifically addressed to renewing the judgment, as the majority points out.  Without a clear renewal, the SCOV is unwilling to look into the equities or even the nuances that the dissent raises.  The line has been drawn in the sand and the rest of the cases will be judged accordingly.

This means Plaintiffs lose their foreclosure action, and their judgment is not worth the paper it is printed on.  The SCOV helpfully points out that Plaintiffs may have new causes of action against the Contractor and Defendant 2, but that will meaning starting over with a new claim for injury and damages—that is a case on the merits.

The majority’s suggestion is meant as one of hope, but Plaintiffs no doubt are left at the end feeling a bit like George Jetson on the treadmill. 

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