Companies that hope to enforce their out-of-state judgments against Arizona firms have to follow the procedures to the letter of the law, the Arizona Court of Appeals has ruled.
The judges threw out the bid by Hillcrest Bank to enforce a default judgment obtained in a Texas court against Richard J. Sodja.
In their unanimous decision, the appellate judges acknowledged there are ways for out-of-state companies to sue Arizonans in their own state courts. And some states -- in this case Texas -- do have applicable "long arm'' statutes.
But Judge Margaret Downie, writing for the court, said Arizona courts will honor those out-of-state judgments only when they are in strict compliance with the applicable laws of the other state. And in this case, she said, the decision to Sodja's office address for service did not meet the requirements of Texas law.
Court records here show the bank sued Sodja in Harris County, Texas, alleging breach nof three guaranty agreements.
Because Sodja was not a Texas resident, the bank relied on the Texas "long arm'' statute to serve him with the papers. That involves serving the Texas secretary of state.
That office forwarded the petition and citation -- the equivalent of a complaint and a summons -- to the Phoenix address for Sodja listed in the banks petition. When Sodja did not respond or otherwise mount a defense, a default judgment was entered against him.
The bank eventually filed a notice in Maricopa County Superior Court to enforce the Texas judgment. A trial judge here rejected Sodja's bid to void that judgment, resulting in the appeal.
"The Full Faith and Credit Clause of the United States Constitution requires Arizona courts to respect and enforce judgments rendered in the courts of their sister states,'' wrote Downie. But she said Arizona courts are not required to enforce judgments that were rendered if the originating court did not have jurisdiction over the defendant.
That, she said, requires an examination of whether the judgment would be valid against Sodja's in Texas.
Looking at the laws there, Downie said there needs to be proper service of a claim against a defendant.
Downie acknowledged that the procedure in Texas is that the secretary of state is the designated agent for purposes of serving a lawsuit on a nonresident who engages in business in Texas. But she said Texas law has "specific requirements'' for what those documents must contain.
And one of those requirements includes "a statement of the name and address of the nonresident's home or home office.''
In this case, Downie noted, there was nothing in the record indicating Sodja had been served at his home or home office. Instead, the bank's petition states that Sodja can be served at a business address on Camelback Road.
Attorneys for the bank argued that Texas courts take a "flexible approach'' to compliance with the state's long arm statutes.
But Downie cited a series of cases where she said Texas courts apply the requirements of the law with "reasonable strictness.'' And she said the failure of the bank to meet those requirements means the Arizona court judgment against Sodja must be vacated.