Can a Judgment Holder Assign a Judgment Several Years After the Corporation Was Dissolved?

September 20, 2014

In Maryland, a judgment is valid for 12 years, and may be renewed at any point within those twelve years.  In Maryland right now, there has been a rash of new debt buyers garnishing people’s wages by claiming to be the assignee of judgments that are as old as 10 years, and which were obtained by prior debt buyers which have long since filed articles of corporate dissolution. [1] In several active cases, the original judgment creditor was Platinum Financial Services Corporation (which filed Articles of Dissolution with the State of Maryland on March 25, 2009), and the new purported Assignee is Palisades Acquisitions XVI, LLC.  The validity of those assignments depends on whether a corporation that has been dissolved can legally later assign judgments 3, 4, 5 or more years after the corporation filed its articles of dissolution.

A Corporation May Wind Up its Affairs, Generally Within One Year

Upon dissolution, a corporation may only conduct certain enumerated actions, including the distribution of the assets, during its “wind-up” period.  Corps. & Assn’s §3-410.[2]  While Maryland law has not set a durational limit to the corporate wind-up period, only those actions bearing a “rational relationship” to winding up the corporation’s affairs are valid.  See Patten v. Bd. of Liquor License Comm’rs, 107 Md. App. 224, 234, (1995).   Moreover, while there is no doubt that the Maryland statute provides a dissolved corporation with an opportunity to distribute its assets when winding-up its affairs, the Court of Special Appeals decision in Patten recognizes that there is a temporal component to those powers enumerated in Corps. & Assn’s §3-410.  As the time between corporation dissolution and a specific action taken by the dissolved corporation grows, the likelihood that the corporation’s actions will bear a rational relationship with the administrative nature of the wind-up period diminishes.  Patten held that a corporation that had been dissolved for four years could not cast a protest vote in a liquor license dispute as part of its winding up duties because of the time elapsed since the corporation forfeited its charter.  The court reasoned:

Arguendo, even if the vote . . . was consistent with “winding up” duties, the length of time between the forfeiture of the charter and the casting of the vote raises an unexplained, perhaps unexplainable, doubt as to there being any logical association between these two actions.

It may be reasonable to allow a corporation four years’ time to “wind up” its corporate affairs, but this is a determination that needs to be examined on a case by case basis. Doetsch was not finalizing a contract or selling off corporate assets. He cast a vote for a corporation that had no legal existence, in a matter that had very little, if any, relationship to the “winding up” duties listed in section 3-515. In the case sub judice, the facts dictate that it was not appropriate to allow World Cars to have a one-half protest vote.

Id. at 224.[3]

Bolstering this conclusion is the fact that in Maryland, the State provides form Articles of Dissolution which state that the dissolved corporation’s resident agent “shall serve for one year after dissolution and until the affairs of the corporation are wound up.”  Thus, any activity past the one-year mark should be circumspect.

Assignment Must be Signed by Original Judgment Creditor

There is often no assignment from the original judgment creditor.  Instead, there is a document titled purporting to be an assignment which is signed by an entity that is not even a party to the action.

Pursuant to Md. Code Ann. Corps. & Assn’s § 3-410(a), “the business and affairs of the [dissolved] corporation shall be managed under the direction of the board of directors.”  Corps. & Assn’s § 3-410(a) (emphasis added).   The Plaintiff has never filed an Assignment from the original judgment creditor.  Without an assignment signed by or under the direction of the Board of Directors of the dissolved corporation, there is no evidence that the board of directors of the original judgment creditor had any involvement or even awareness of an alleged assignment of the judgment.

[1] Maryland Rule 3-624 states in pertinent part that “[w]hen an assignment is filed, the judgment may thereafter be enforced in the name of the assignee to the extent of the assigned interest.

[2] The statute says in pertinent part:

(a) When a Maryland corporation is voluntarily dissolved, until a court appoints a receiver, the business and affairs of the corporation shall be managed under the direction of the board of directors solely for the purpose set forth in § 3-408(b) of this subtitle.

. . .

(c) The directors may:

(2) Sell all or any part of the assets of the corporation at public or private sale;

. . .

Corps. & Assn’s § 3-410

[3]Courts in other jurisdictions have been similarly skeptical of such after-the-fact assignments.  In Centurion Capital Corp. v. Guarino, the Civil Court of the City of New York, Richmond County stated:

As noted previously how is it possible for Centurion Capital Corporation which ceased to exist as of March 25, 2009, to have executed an assignment of judgment three years later? One explanation might be an undelivered sack of mail was found in an abandoned Baltimore & Ohio Railroad box car, being used as a hot dog stand at Camden Yards. Another would be that Centurion Capital Corporation is a charter member of the “Procrastinators Society.” perhaps they had to wait until “the moon was in the seventh house and Jupiter aligned with Mars.” Somehow none of these are satisfactory, especially because Centurion Capital Corporation alleged in an Alabama case in May 2009 that under Maryland law it no longer exists as a corporation [Meredith v. Unifund CCR Partners 2009 WL 151 3361 (M.D. Ala 2009)].

2012 WL 1543286 (N.Y. City Civ. Ct.).