Motion to Vacate Sister-State Judgment Denied by California Superior Court

November 8, 2022

Venue: San Diego County, California

Decided: January, 2022

Yes, it’s true, we love doing sister-state judgment enforcements, because debtors often have assets in other parts of the country. A good judgment enforcement specialist will know the collection procedures in multiple states and will be equipped with the resources and knowledge required to handle them. By domesticating a money judgment to California, a judgment collection professional can utilize the local laws and enforcement procedures in California against a debtor and their assets. A common tactic debtors will employ, to defeat judgment recovery efforts, is a Motion to Vacate Sister-State Judgment. This boils down to “California should not enforce this judgment from XYZ state, because it is void or otherwise invalid, and should not be given full faith and credit.” A seasoned judgment recovery firm will know how to successfully overcome a motion to vacate if one is filed by the judgment debtor (as they often are). That’s where this story begins, and we begin with a little background:

An Ohio Court entered a judgment against a resident of San Diego, California. After taking assignment of the Ohio money judgment, we filed the appropriate domestication paperwork to enforce the sister-state judgment in the San Diego County Superior Court in California. The Judgment Debtor quickly retained a local San Diego attorney to attempt to vacate the judgment. Under the California Sister State and Foreign Money-Judgments Act, the party moving to vacate a sister state judgment has the burden to show by a preponderance of the evidence why it is entitled to relief. Wells Fargo Bank, N.A. v. Baker (App. 4 Dist. 2012) 204 Cal.App.4th 1063, 1068, rehearing denied. In this case, our debtor made two arguments:  (1) Debtor attempted to dispute the merits of the underlying Ohio Action, and (2) debtor claimed the judgment was void for lack of personal jurisdiction and for improper service on him.

Starting with the first argument, the debtor’s argument was essentially “I didn’t do it and you have no evidence I did it, so this is an invalid judgment”. Debtor claimed he was just the agent for service of process for a corporation, and said he wasn’t a corporate officer responsible for committing the underlying violations for which suit was brought. He argued there was insufficient evidence to support liability against him as an individual debtor. This argument bordered on frivolous - the doctrine of res judicata precludes re-litigation of the merits of the underlying action. Mycogen Corp. v. Monsanto Co., 28 Cal. 4th 888, 896 (2002). Put simply, a California Court cannot second-guess the findings of an Ohio Court. The Debtor made the mistake of failing to appear and assert his defenses. The California Court ruled:

“The problem is that this issue was never raised by [Judgment Debtor] at the court – as res judicata precludes a contrary finding now. Plaintiff’s Complaint alleged that Debtor is president and owner, that he controls Reliable Doc Prep’s marketing program, and has knowledge of the company’s violations.”

So now we get to an immutable principal of law: an admission to a factual allegation in a pleading is equivalent to proof of the fact admitted, so the plaintiff does not have to prove that allegation with evidence. Simple enough, right? If you ignore a lawsuit, everything in the Plaintiff’s Complaint will be taken as true and the Court will usually award the relief requested. The California Court applied this principal, finding that the Defendant’s failure to respond to the Ohio lawsuit resulted all of Plaintiff’s factual allegations against Defendants being deemed admitted by the Ohio Court, and Plaintiff did not need to provide any evidence in support of the factual allegations. So the Debtor’s arguments of “I didn’t do it” were flatly rejected by the California Court as meaningless.

Turning next to the Debtor’s argument of invalid service, the Court examined the underlying record in the Ohio action. Our debtor argued he wasn’t properly served with the Summons and Complaint in the Ohio action, submitting a declaration that he did not accept service by certified mail and was not served. A side note: we respectfully believe that certified mail isn’t the best method of service of process. We believe it is always better to utilize a private process server or Sheriff to personally serve the Defendant, to avoid the whole “I had no idea I was being sued!” argument debtors always raise. Here, the Debtor claimed he didn’t sign for the certified mail sent to his address listed on the California Secretary of State. But under Ohio Supreme Court precedent, certified mail does not require actual service on the defendant, but is effective upon a "certified delivery” at the defendant’s address. Castellano v. Koysdar (1975), 42 Ohio St.2d 107, 110, certiorari denied, 423 U.S. 932. Even if someone else signed for the certified mail, service was still technically and procedurally valid.

Additionally, the Debtor argued the signature on the certified mail green card wasn’t legible and was not signed by him. The Court sided with us and ruled that service was still proper, because an illegible signature does not destroy the notice requirement proscribed in the Rules of Civil Procedure, and the Debtor’s self-serving statement (with no additional supporting facts attached) did not rebut the presumption of proper service. Since service on Debtor was made at the same address Debtor listed as his address on the California Secretary of State less than three (3) months prior to service, it was “reasonably calculated, under all the circumstances, to apprise defendant of the pendency of the action and afford him an opportunity to present his objections.” See Mullane v. Central Hanover Bank Trust Co. (1950), 339 U.S. 306. Finally, the Court found:

“[D]ebtor did not assert that he was unaware of the pendency of the Ohio Action or the entry of the Ohio Judgment... He never states he did not have actual notice.”

Ouch!! If you’re trying to convince the Court you were not properly served, a good start might be “I didn’t know about the lawsuit, Your Honor!!” Instead of evading payment, our debtor was stuck with the judgment.

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