American Standard Life and Acc. Ins. Co. v. Speros, 920240

Citation494 N.W.2d 599
Decision Date06 January 1993
Docket NumberNo. 920240,920240
PartiesAMERICAN STANDARD LIFE AND ACCIDENT INSURANCE COMPANY, Plaintiff and Appellee, v. Charles J. SPEROS, Defendant, Ralph W. Thomas and Gateway Chevrolet, Inc., Defendants and Appellants. Civ.
CourtUnited States State Supreme Court of North Dakota

Patrick B. Kenney of Miller, Norman & Kenney, Moorhead, MN, for plaintiff and appellee.

Steven A. Johnson (argued), and H. Patrick Weir of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for defendants and appellants.


Ralph W. Thomas and Gateway Chevrolet, Inc. appealed from a district court judgment which granted American Standard Life & Accident Insurance Company's [American Standard] motion for summary judgment. The judgment ordered that American Standard, the garnishor, recover from Gateway Chevrolet, Inc. [Gateway], the garnishee, $138,443.90, plus interest and costs as the result of an Arizona judgment against defendant Thomas, an employee and major shareholder of Gateway. We affirm.

American Standard obtained a judgment against Thomas on October 2, 1991, in Maricopa County, Arizona. The judgment arose from an agreement in which Thomas guaranteed a loan extended by American Standard. The guarantee agreement specified it was to be governed by Arizona law. After the loan was in default, American Standard commenced a proceeding in Arizona to sell the real estate which secured the loan. The real estate was sold but the proceeds did not satisfy the claim, and American Standard successfully sued Thomas for the deficiency. Under Arizona law, the judgment against Thomas for the deficiency was limited to his "sole and separate property."

An authenticated copy of that judgment was filed in Cass County, North Dakota, on January 14, 1992, pursuant to Chapter 28-20.1, NDCC, North Dakota's codification of the Uniform Enforcement of Foreign Judgments Act. Since then, several garnishee summons have been served, most notably against Gateway. The bases for the garnishee summons upon Gateway are that it pays Thomas a monthly salary and pays a rental on land which is leased from Thomas and owned in joint tenancy by Thomas and his wife.

After initially denying holding any money that was the "sole and separate property" of Thomas, Gateway made two garnishment disclosures, and the deposition of Bruce A. Nelson, Office Manager of Gateway, was taken. The disclosures and deposition revealed that Thomas's monthly salary from Gateway was $5,149.00. They also revealed that Gateway entered into a written lease with Thomas, individually, whereby Gateway pays him, individually, $26,500.00 per month for property in Cass County which is owned in joint tenancy by Thomas and his wife. Although acknowledging service of the Garnishment Summons, Gateway has continued to issue salary and lease checks to Thomas and has neither applied nor set off any monthly salary payments or lease payments to Thomas against the amount claimed in American Standard's garnishee summons.

Because of Gateway's failure to apply or set off any money owed to Thomas, American Standard brought a motion for summary judgment for the entire amount claimed in the garnishee summons. See NDCC Sec. 32-09.1-15. The district court granted the motion. The issue before us on appeal is whether North Dakota or Arizona law applies to the wages and lease payments received by Thomas as a result of the Arizona judgment transferred to North Dakota through Chapter 28-20.1, NDCC.

In 1969, North Dakota adopted the 1964 Revised Act of the Uniform Enforcement of Foreign Judgments Act as approved by the National Conference of Commissioners on Uniform State Laws and the American Bar Association. Chapter 28-20.1 provides a summary procedure for actions on foreign judgments by providing the enacting state with a speedy and economical method of doing what it is required to do by the Constitution of the United States, that is, to provide full faith and credit to the judgments of courts of other states. NDCC Secs. 28-20.1 et seq.; Unif. Enforcement of Foreign Judgments Act (1964) Prefatory Note, 13 U.L.A. 150 (1986).

The Full Faith and Credit Clause of the United States Constitution asserts:

"Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws proscribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof."

U.S. Const. art. IV, Sec. 1. In applying the Uniform Enforcement of Foreign Judgments Act, constitutional full faith and credit is afforded to foreign judgments even though a similar judgment could not be obtained in the forum state as a matter of law, Matson v. Matson, 333 N.W.2d 862 (Minn.1983) 1, or though the judgment could not be obtained in the forum state as a matter of strong public policy. Hamilton v. SCM Corp., 334 N.W.2d 688 (Wis.Ct.App.1983); Medina & Medina, Inc. v. Gurrentz Int'l, 304 Pa.Super. 76, 450 A.2d 108 (1982).

When a properly authenticated foreign judgment is filed with the clerk of any district or county court in North Dakota and notice is properly given to all parties, Beck v. Smith, 296 N.W.2d 886 (N.D.1980), the clerk treats the foreign judgment in the same manner as a judgment of a district or county court of this state. NDCC Sec. 28-20.1-02. "A judgment so filed has the same effect and is subject to the same procedures, defenses, and proceedings for reopening, vacating, or staying as a judgment of a district court or county court of any county of this state and may be enforced or satisfied in like manner." Id. The local law of the forum determines the methods by which a judgment of another state is enforced. United Bank of Skyline v. Fales, 395 N.W.2d 131, 133 (Minn.Ct.App.1986) citing Jones v. Roach, 118 Ariz. 146, 150, 575 P.2d 345, 349 (Ct.App.1977) ["[P]rocedurally a foreign judgment is subject to the same procedure as a final judgment of this state."]; First of Denver Mortg. Investors v. Riggs, 692 P.2d 1358 (Okla.1984); Restatement (Second) Conflicts of Laws Sec. 99 (1969).

Appellants contend that, because American Standard and Thomas agreed that the guarantee be construed according to the laws of Arizona, Arizona law should be applied to the enforcement of the judgment in North Dakota. Matters of procedure and remedial rights are governed by the law of the forum where relief is sought. Dixon's Extrs. v. Ramsay's Extrs., 7 U.S. (3 Cranch.) 319, 2 L.Ed. 453 (1805). Thus the remedies and procedures to enforce a contract made in another state are the remedies and procedures of the enforcing state. The same reasons to look to the intent of the parties in the case of the substance of the contract do not apply in the case of matters pertaining to the remedy, as the parties presumably do not necessarily consider the remedy when they enter into the contract. They bind themselves to do what the law they live under requires, but since they bind themselves generally, it is as if they had contemplated the possibility of enforcement in another jurisdiction. While the obligation of a contract is always protected by the state and federal constitutions, that which is purely a matter of process or remedy is governed and regulated by the laws of the place where the remedy is sought. The inhibition of the constitution will not be held to apply where there is a change in the form of the remedy, or a modification of it, provided no substantial right secured by the contract is thereby impaired. 16 Am.Jur.2d Conflicts of Laws Sec. 118 (1979).

Although we are bound to give full faith and credit to the substance of foreign state judgments, procedure and remedies are different from substance; and what is procedure and what is substance is determined by the forum. Anderson v. State Farm Mut. Auto. Ins. Co., 222 Minn. 428, 24 N.W.2d 836 (1946). The substance of the contract has already been determined by the Arizona court. The only inquiry we make is how to enforce it, and for this we rely upon North Dakota law.

Here, applying Arizona law which the parties agreed controlled the guarantee agreement, the Arizona court held that American Standard recover from Thomas as to his sole and separate property, a fixed sum plus costs and interest. Relying upon North Dakota law for the methods and procedure of enforcement of its judgment, American Standard initiated garnishment proceedings against Thomas and Gateway to execute upon two sources of income--Thomas's salary and Thomas's rental income. North Dakota law therefore governs the enforcement of the Arizona order in North Dakota.

Chapter 32-09.1, NDCC, provides a method by which a judgment creditor may proceed by garnishing property, real or personal, belonging to the creditor's debtor which would satisfy the judgment creditor's claim. NDCC Sec. 32-09.1-02. A garnishment action is the exclusive procedure which may be used to execute on earnings of a debtor while those earnings are held by a third party employer. Id. We have long held that fundamental in any garnishment procedure, only the actual interest of the defendant can be reached by garnishment proceedings, and the creditor cannot obtain any more than actually belongs to the debtor:

"The rights of the debtor are the source of the creditor's rights. The stream cannot rise higher than its source.... Under no circumstances can the plaintiff be placed in a more favorable, or the garnishee in a worse, position than if the defendant was himself enforcing his claim. For the plaintiff cannot, by garnishment, place himself in a superior position, as regards a recovery, than is occupied by the principal defendant."

Hatcher v. Plumley, 38 N.D. 147, 164 N.W. 698, 700 (1917) [citations omitted]. The procedural law of North Dakota in enforcing a valid judgment by garnishment thereby allows the garnishor to reach only the property in which the defendant has an interest, and only to the extent of that interest. See NDCC Sec....

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