Judgment Collection

Collection of a judgment can sometimes be more difficult and expensive than obtaining it in the first place.

Once you have endured the lawsuit process and have obtained a judgment, the next step is collection. One powerful collection tool is to record the judgment. A.R.S. §33-961 (A) provides that the recording of a judgment creates a judgment lien against any real property either currently owned or subsequently acquired by the judgment debtor in the County where recorded. In practice, a judgment lien will usually be paid if the real property is sold or refinanced. But not always. Beware of A.R.S. §33-961 (C) which requires that a judgment information statement be attached to the judgment.

A recent Arizona case pointed out the problem created by forgetting to record a judgment information statement. In Lewis v. Dehord a judgment was duly recorded against a parcel of real estate but no information statement had been recorded. The property was sold and the judgment creditor wanted to be paid under his judgment lien. The court agreed that the judgment had been properly recorded but still ruled that the judgment creditor could not collect. The reason why is found in A.R.S. §33-967 (D).
A.R.S. §33-967 (D) provides that a judgment lien does not have priority until a judgment information statement is attached to the judgment and recorded. Because of this, the Lewis Court found that the purchaser, who obtained his interest in the real estate after the judgment was recorded but before the information statement was attached and recorded, had priority over the judgment lien.

This result appears overly technical and seems to nullify the purpose for which A.R.S. §33-961 was created. Nevertheless, one court has so ruled and the statutory language supports the ruling.

The lesson to be learned from this is to take care to attach the required information statement whenever recording a judgment. Collection of any judgment is tough enough without self-inflicted sabotage.