By: Ben Reeves
It appears that 2014 was a banner year for Arizona law on judgment liens. Indeed, we recently posted about the Lewis v. DeBord decision, which invalidates judgment liens vis-à-vis third-party purchasers if the judgment creditor fails to record an “information statement” with the judgment. The Court of Appeals has again tackled the question of judgment liens under Arizona law.
In Sysco Arizona, Inc. v. Hoskins, the Court of Appeals held that a recorded unsigned minute entry (which awarded judgment in the amount of $395,598.00) did not create a judgment lien. The reason for this ruling is simple – under Arizona law, an unsigned minute entry (even if it awards a money judgment) is not a formal “judgment” and the statutes require the recordation of a formal “judgment” to create a “judgment lien”. No recorded “judgment” means no “judgment lien” as a matter of fact or law. This is a pretty straightforward, unobjectionable holding.
In Sysco, a trustee’s sale of real property yielded an excess of $286,177.44 in proceeds (a definite sign that Arizona’s real estate market is improving). Pursuant to A.R.S. § 33-812(C) and (D), the trustee deposited the excess proceeds with the county treasurer, and filed a complaint informing all the junior lienholders (in this case, four judgment creditors) of the excess proceeds.
Sysco argued that its judgment lien had priority because it recorded its unsigned minute entry before any of the other judgment creditors recorded their judgments. The trial court determined that the unsigned minute entry could not create a judgment lien under Arizona law, and therefore put Sysco in the fourth position behind the three other judgment creditors. Sysco, therefore, received none of the proceeds from the sale.
Sysco appealed, but the Court of Appeals affirmed – holding (once again) that since judgment liens are a creature of statute, strict compliance with the statutes is required to perfect a valid judgment lien. Since the judgment lien statutes specifically require the recordation of a certified “judgment”, the unsigned minute entry could not create a judgment lien.
As the facts of Sysco show, judgment liens can provide significant recovery to judgment creditors. However, as both Sysco and Lewis demonstrate – a judgment creditor’s failure to comply with the judgment lien statutes can prove costly.