State Where Collection Takes Place Governs Collection Law and Procedure

A civil judgment rendered in one state is enforceable in any other state under the concept of “full faith and credit.” The U.S. Constitution provides that each state must give full faith and credit to a civil order issued in another state’s court. For example, a money judgment issued in a Georgia court can be domesticated in Florida and collected as if it were a Florida court judgment. In this example, Georgia is referred to as the issuing state and Florida, where the creditor seeks to enforce the domesticated judgment, is referred to as the forum state.

There can be a conflict of law issue concerning methods of enforcing and collecting a money judgment after domestication in the new forum state. The issue actually arose in a South Dakota case that was decided by the S.D. Supreme Court. A plaintiff obtained a child support order in California. The defendant was the beneficiary of a spendthrift protected trust in South Dakota. California law stated that child support orders supersede spendthrift trust protection, and that a child support judgment may be collected by garnishment of distributions payable to a defendant from a third-party spendthrift trust. South Dakota law, contrarily, is that spendthrift trust interests and distributions are protected against all civil judgments including child support obligations.

The plaintiff in this case argued that since the judgment for child support was entered in California that South Dakota law must give full faith and credit to the judgment including the right of the judgment creditor to levy upon the debtor’s spendthrift trust beneficial interest. The debtor argued that collection or enforcement of the judgment is distinct from the judgment itself, and that South Dakota courts apply laws from the collection forum, South Dakota, regarding judgment collection.

The South Dakota Supreme Court held that the applicable laws of forum state where collection takes place determines the rules and exemptions of judgment enforcement. The ruling cited U.S. Supreme Court law that applied full faith and credit theory to the recognition of a foreign judgment but not to the enforcement of the judgment.

About the Author

Jon Alper is an expert in asset protection planning for individuals and small businesses.

Jon Alper

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