Expert: Regan Shinski - 9/28/2009

Question
QUESTION: In 2000, a company I owned and still own entered into a contract for demolition and trash hauling. there was a dispute as to the total amount owed. The original contract was for $3500, additional services were requested that brought the total to $4500 (approx amounts) which was paid. there was a demand for an additional $1000. the demand was made against me personally although the owner of the property where the service ocurred was a LP. the dispute was not resolved. the contractor filed a collection action against me personally through a collections lawyer. at the small claims hearing, the judge did not allow me to put on my case, most of which related to the fact that even if the debt was valid (which I disputed) the defendant was the wrong party. I lost and appealed. I lost the appeal because of a total failure to appear in court on 9/12/01 for the hearing as I had a personal matter related to 911 that distracted me from this spurious suit. A judgment was entered for $1000. I am in the process of transacting on a piece of real estate where this will need to be resolved. I do not believe that the Plaintiff/judgment creditor is still (and possibly never was) a legal entity. The law firm handling this probably is entitled to 1/3 of the proceeds. They say that they are empowered to collect it all. I question whether their is any obligation on the part of the collection attorney to prove the continued valid existence of the judgment creditor (which was a corporation of unknown state location). the collection attorney has stated that they will accept $1000 and waive the 8 years of interest. this is the only judgment that I have ever had in 35 years of real estate transactions. My banks see it on my credit report and dont care as the amount is so small relative to my net worth. is there any simple solution here?

ANSWER: Dear Richard:

Short of trying to re-open it and fight it again - sounds like that is not what you want to do - you still have a few options.

You can take your chances and pay the attorney.  Make the payment to the legal entity as written on the judgement.  The risk is if the attorney is dishonest or cannot collect for the legal entity.  Therefore they cannot/will not satisfy the judgement.

Some courts allow you to satisfy judgements by making the payments at or TO the court.  That is obviously a bit more secure.

You can pursue through the court to have the judgement vacated on the grounds the legal entity no longer exists.  If this is truly the case, I think that is a valid option.  However, if the business was sold in any way, the assets and liabilities go with it.  You should be able to get the history of the corporation from the department that governs and licenses corporations in your state.  At the very least a call to the courthouse seeking clarification should be placed.  What has the attorney office said about the legal entity status?

I'm not sure which one of the above options is the most "simple" solution.  Of course, in all cases get proof of your payment.  If you just pay, you can probably speed up the process by bringing the proof of the payment to the courthouse to get it updated as satisfied.

I'm guessing it is, but are you absolutely sure the judgement is formally still in place or did you just see it on your credit reports?  In many states the plaintiff has to reaffirm the judgement after so many years.  Did they do this if required?  The courthouse should be able to help.  If they had to reaffirm and did not, it may still show up on your credit report but is no longer your obligation.

If you pay and the issue is credit, it will likely not formally show up as satisfied for 30-90 days.  You can dispute directly with the credit reporting agencies to speed that up.  However, you need to know that a satisfied judgement can still stay on your reports for several years after satisfaction, it depends on the state in some cases.  Therefore trying to get the judgement vacated is the best option.  Sounds like you just need to show this as paid for a real estate transaction.  In that case, a receipt is likely good enough.  However you need to know that once it is paid it is much more difficult to get it vacated or removed from your credit reports.

Again, I personally think you should file a motion to dismiss the judgement if the business is clearly dissolved.  If you need to show it paid for your real estate transaction, then I guess you can pay it, live with the consequences, and try and iron it out later.  BTW, an attorney can draw up a quick motion to dismiss, the court can often help you, or there is a sample one here:

http://www.creditinfocenter.com/forms/sampleletter16.shtml

Good luck in whatever decision you make.  I'm sorry I could not provide a real simple answer.  It's a complicated matter.

Regan




---------- FOLLOW-UP ----------

QUESTION: This is an extremely well thought out response and validates and expands on my thinking. Here are some of the other facts which may allow you to give a more targeted answer:
The judgment is still of record and lasts for 12 years where it is entered. The arrangement that I have with the title company who needs this judgment clear in order to issue a title insurance policy w/o exception is for them to pay the lawyer who obtained the judgment $1000 (the original principal)and to obtain a release and record this release. the lawyer who obtained the judgment has agreed to this. Judgments from this county only show on credit reports for 7 years and this judgment no longer shows. I am going to ask the title company to obtain some statement from the lawyer indicating that the judgment creditor is still a valid corporation or otherwise make an affirmative statement as to their status. If the corporation no longer exists, I may then request of the court by motion that the attorney be required to disgorge the funds received as there will be no valid recipient of these funds. Perhaps the attorney is entitled to his 1/3, but he should not be able to unduly enrich himself if his client no longer is in existence.

Answer
Richard:

Thank you for the kind words in feedback.  You are exactly right and on top of this.  Specifically the last sentence regarding if the corporation no longer exists.  The words "unduly enrich" or "unjustly enrich" are specifically written in case law.  

If you don't want to go the route of the court (which I do think is best), you can start just by making a simple demand letter.  Then file complaints with the Bar Association, Attorney General, Better Business Bureau, and any other professional associations they belong to.  This may spur a settlement/refund without having to go the route of the court.  You sound like you are willing and able to go to court, just offering an option.  Also, trying to resolve it BEFORE going to court may win you favor WITH the court when you need it.

Good luck, let me know how it turns out by dropping another "question."

Regan