Understanding Full Faith and Credit

Sometimes the legal game is like a football game with two undefeated teams in the final contest. No matter how much you calculate the advantages and disadvantages, you may be wrong in your prediction. This is why asset protection should not be played like a game of predictions; it should be a strategic plan of techniques crafted within the boundaries of the laws, all laws including state and federal.

This is where asset planners need to understand Full Faith and Credit. Before we give you the legal definition, we will give you the basic idea. Courts, attorneys and asset protection planners admit it is confusing at times. Every state must honor, if demanded, the orders of another state and execute those orders in the enforcement of the judgment. Thus, a judgment in one state may be recognized or rendered in another state.

A state may reach into another state by using its “long arm” to enforce the judgment.

When you hear that, you wonder why we even have state laws and the only way to answer any questions about this is to find a professional practitioner in the field who understands the ramifications of the affect of state and federal law on their subject areas of practice.

Full Faith and Credit is found in the provision in Article IV, Section 1 of the U. S. Constitution, which states, "Full faith and credit shall be given in each State to the public acts, records and judicial proceedings of every other state."

Section 1. Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state and the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.

Article IV was written to promote uniformity of decisions, support local and state policy and to improve communities.

Section 2. The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.

In state or federal law the US Constitution reads, a person charged in any state with treason, felony, or other crime, who shall flee from justice, and be found in another state, shall on demand of the executive authority of the state from which he fled, be delivered up, to be removed to the state having jurisdiction of the crime.

The Constitution also specifically states, that no person held to service or labor by one state may escape to another state to avoid any consequence of the law, or any claim made by the service of another state.

“ No person held to service or labor in one state, under the laws thereof, escaping into another, shall, in consequence of any law or regulation therein, be discharged from such service or labor, but shall be delivered up on claim of the party to whom such service or labor may be due. ”

It is clear-cut that a debtor cannot escape any judgments by taking solstice in another state

There have never been more convoluted cases and arguments among the states and the courts in the history of the US then in the interpretation of Full Faith and Credit. Perhaps this short history will shed some light as to why Full Faith and Credit is an important issue in liability.

The first case to take note of in the Supreme Court of the US was the case of Clappers Widow, as it is now known (1920's). Mr. Clapper lived and worked in Vermont and was killed (negligently) in an accident in New Hampshire. New Hampshire claimed that they did not have to pay any workers compensation to Mrs. Clapper and that the state of Vermont (where the contract was created) had full responsibility. The court said it was irrelevant as to where the contract was created, that the state of New Hampshire had to honor the state-rights under the Full Faith and Credit Act.

Consequently, after this, there was a significant surge of cases that argued that the full enforcement of Full Faith and Credit should be routinely recognized.

As if that wasn't confusing enough, along came automobiles, insurance, estate planning and other individuals' rights for compensation, putting new slants on the cases.

In Caroll v Lanza (1955) the court said that the place of injury could apply its own law instead of the state of injury changing the case of Clapper's Widow.

In The Court in Nevada v Hall (1979) an employee of the University of Nevada driving a state automobile, on official state business, severely injured a California resident, on a California highway. The Nevada Court argued that accordingly the Nevada sovereignty clause protected Nevada from the California Court, as Nevada was capped at an award of $25,000 for damages and that the Full Faith and Credit Clause should honor this cap. However, the Supreme Court of the US rejected the Nevada contention and their policy and held the award of the California Court at $1,150,000 for the plaintiff.

We think it is fair to say that Full Faith and Credit could have an affect on anyone's case in so many fields of law, estate planning, family law, employment law, insurance law; you name it!

Does Full Faith and Credit, as it applies to states, apply to federal law?

From the beginning of US history the courts have interpreted Article IV to require that the judgments of federal courts sitting in a state be accorded, in state courts, the same effect that would be accorded to a judgment of a state court of equal authority. Hancock Nat'l Bank v. Farnum, 176 U.S. 640, 645 (1900); Pendleton v. Russell, 144 U.S. 640, 644 (1892).

The Conclusion on Full Faith and Credit -

The history of Full Faith and Credit is convincing enough to make the point that asset protection plans are prudent tools used to protect assets from unforeseen circumstances and the decisions of courts anywhere in the United States, which are not necessarily unfair to one party but not necessarily just too both parties.

There is another aspect that is clearly defined in the United States Constitution in the Full Faith and Credit Clause. The forefathers of this country intended that no person shall be able to dodge their obligations in the United States by just moving to another jurisdiction within the United States.

If you doubt that, the forefathers had insight into these issues in the Untied States Constitution, such as the Full Faith and Credit Clause. Read this excerpt from Thomas Jefferson in a letter to Samual Kercheval dated July 12, 1816.

Some men look at constitutions with sanctimonious reverence and deem them like the ark-of-the-covenant, too sacred to be touched. They ascribe to the men that preceded them a wisdom more than human, and, suppose what they did to be beyond amendment�I am certainly not an advocate for frequent and untried changes in laws and constitutions. I think modern imperfections had better be borne with; because, when once known, we accommodate ourselves to them and find practical means of correcting their ill effects. �

We have practical means of correcting the ill effects that Thomas Jefferson predicted, specifically an over litigious society, courts that are overburdened, and a legal system based heavily on deep pockets. You have the right to predict that someone may sue you, just or unjustly, you still have the power to make it right within your means. Let us help you keep this decision power over your assets.