Editor’s Note.

Session Laws 2013-91, s. 5, made the amendment to subdivision (a)(9) by Session Laws 2013-91, s. 3(a), applicable to all inherited individual retirement accounts without regard to the date an account was created.

Effect of Amendments.

Session Laws 2009-417, s. 1, effective December 1, 2009, in subdivision (a)(1), substituted “thirty five thousand dollars ($35,000)” for “eighteen thousand five hundred dollars ($18,500)” near the beginning, and “sixty thousand dollars ($60,000)” for “thirty-seven thousand dollars ($37,000)” near the end.

Session Laws 2013-91, s. 3(a), effective June 12, 2013, added the last sentence to subdivision (a)(9). For applicability, see editor’s note.

Legal Periodicals.

For note on the nonpurchase security agreement as a relinquishment of the personal property exemption, see 15 Wake Forest L. Rev. 708 (1979).

For article on North Carolina’s new Exemption Act, see 17 Wake Forest L. Rev. 865 (1981).

For article analyzing North Carolina’s tenancy by the entirety reform legislation of 1982, see 5 Campbell L. Rev. 1 (1982).

For article analyzing North Carolina’s exemptions law, see 18 Wake Forest L. Rev. 1025 (1982).

CASE NOTES

Subsection (c) Unconstitutional. —

Subsection (c) of this section and G.S. 1C-1603(e)(2), as they attempt to limit the claiming of constitutional exemptions to 20 days after notice to designate is served, are unconstitutional. HFC v. Ellis, 107 N.C. App. 262, 419 S.E.2d 592, 1992 N.C. App. LEXIS 683 (1992), aff'd, 333 N.C. 785 , 429 S.E.2d 716, 1993 N.C. LEXIS 234 (1993).

Legislative Intent. —

There is no clear indication in G.S. 1C-1601 through 1C-1604 that the General Assembly intended to repeal any statutes other than G.S. 1-369 through 1-392. Therefore, to find that G.S. 1C-1601 through 1C-1604 precludes the exemption granted by G.S. 135-9 would be to determine that G.S. 135-9 has been repealed by implication. Repeal by implication is not favored in North Carolina. In re Hare, 32 B.R. 16, 1983 Bankr. LEXIS 5820 (Bankr. E.D.N.C. 1983).

North Carolina General Assembly’s purpose in enacting G.S. 1C-1601(a)(9) was to protect a debtor’s right to receive retirement benefits and not to limit the exemption to a specific class of retirement plans or trusts. Rather than give a blanket exemption to all “retirement” plans, the General Assembly limited the exemption to any retirement tool that was treated in the same manner as an individual retirement plan under the Internal Revenue Code. In re Grubbs, 325 B.R. 151, 2005 Bankr. LEXIS 1101 (Bankr. M.D.N.C. 2005).

Construction of Section. —

The general rule is that North Carolina’s exemption laws are to be liberally construed in favor of the exemption. In re Laues, 90 B.R. 158, 1988 Bankr. LEXIS 1468 (Bankr. E.D.N.C. 1988).

Since the primary purpose of a bond is to provide a source of funds to be applied to the satisfaction of a valid judgment, as a matter of public policy, a party is not permitted to post a cash bond to stay execution of a money judgment and then avoid forfeiture of the bond after default by claiming debtor’s exemptions. Barrett v. Barrett, 122 N.C. App. 264, 468 S.E.2d 264 (1996).

Because G.S. 1C-1601(a)(9) only references the Internal Revenue Code to clarify what retirement accounts are covered by the creditor exemption, North Carolina law governs the resolution of this issue. Kinlaw v. Harris, 201 N.C. App. 252, 689 S.E.2d 428, 2009 N.C. App. LEXIS 2213 (2009), aff'd in part and rev'd in part, 364 N.C. 528 , 702 S.E.2d 294, 2010 N.C. LEXIS 924 (2010).

G.S. 1C-1601(a)(9) does not contain any language evincing an intent on the part of the General Assembly to treat withdrawals from Individual Retirement Accounts (IRA) differently than funds held within IRAs because the plain language of G.S. 1C-1601(a)(9) states that IRAs are exempt from judgment; not only are the IRAs themselves exempt, but a defendant’s legal use of the IRAs, in the same manner as if there were no judgment against him or her, is also exempt. Kinlaw v. Harris, 201 N.C. App. 252, 689 S.E.2d 428, 2009 N.C. App. LEXIS 2213 (2009), aff'd in part and rev'd in part, 364 N.C. 528 , 702 S.E.2d 294, 2010 N.C. LEXIS 924 (2010).

It is instructive that G.S. 1C-1601 does not reference any party that was not compensated for personal injury; to be sure, the statute only contemplates the recipient of the personal injury compensation. The General Assembly’s use of the word “retain” demonstrates that the exemption is only applicable to the injured party who received the compensation. In re Latell, 2019 Bankr. LEXIS 3659 (Bankr. W.D.N.C. Nov. 26, 2019).

Personal injury compensation exemption listed in G.S. 1C-1601(a)(8) does not extend to property purchased with that compensation, and the male debtor was not entitled to the exemption in the real property. In re Latell, 2019 Bankr. LEXIS 3659 (Bankr. W.D.N.C. Nov. 26, 2019).

Construction with G.S. 1-362 . —

G.S. 1-362 does not incorporate the exemptions of G.S. 1C-1601 by reference. Kroh v. Kroh, 154 N.C. App. 198, 571 S.E.2d 643, 2002 N.C. App. LEXIS 1404 (2002).

Denying a judgment creditor’s motion to appoint a receiver over a judgment debtor’s unliquidated claims erred because (1) the claims were not exempt under the receivership statute, (2) the creditor completely exhausted the ordinary process of execution, (3) circumstances indicated the creditor had a potential cause of action against an insurer and law firm, which the debtor refused to pursue, and (4) it was for a receiver to decide the claims’ merits. Haarhuis v. Cheek, 261 N.C. App. 358, 820 S.E.2d 844, 2018 N.C. App. LEXIS 947 (2018).

Construction with 11 U.S.C.S. § 363(h). —

On complaint seeking authorization to sell interests of estate and co-owners in condominium, trustee met initial burden of showing some benefit to estate from sale where, even under valuation relied on by co-owners, there was some equity in property despite debtor’s purported exemption under North Carolina law, which was erroneously based on his having one-third interest in property, not one-half. Co-owners failed to show sentimental detriment, as they had never lived in unit; nor would sale cause financial detriment, as they were incurring net loss each month from renting out unit. Ivey v. Whitestone, 2013 Bankr. LEXIS 2905 (Bankr. M.D.N.C. July 17, 2013).

Construction with 11 U.S.C.S. § 522(f). —

Implication in G.S. 1C-1601(c) that exemptions can be waived by conveyance of the property must not be applied in preference to the avoidance power of 11 U.S.C.S. § 522(f). In re Bowes, 2005 Bankr. LEXIS 1089 (Bankr. M.D.N.C. Feb. 11, 2005).

Chapter 7 debtor’s motion to avoid judicial lien under 11 U.S.C.S. § 522(f) was granted even though she and her non-debtor spouse owned the property as tenants by the entirety under G.S. 39-13.6(a), as the debtor’s interest in the entireties property was property of her estate under 11 U.S.C.S. § 541(a), the creditor’s judgment was against the debtor and her non-debtor spouse, and a trustee would be entitled to sell the entireties property, as there were joint creditors. However, 11 U.S.C.S. § 522(f) had to be applied after the debtor’s interest was determined by subtracting the total of two deeds of trust from the value of the property, and then dividing that amount in half to arrive at the value of the debtor’s interest in the property; as her exemption (under G.S. 1C-1601(a)(1)) plus the amount of the judgment lien exceeded the value of her interest by more than the amount of the judgment, she was entitled to avoid the entire judgment lien. In re Staples, 2000 Bankr. LEXIS 2204 (Bankr. M.D.N.C. June 7, 2000).

Bankruptcy court cancelled a judicial lien in the amount of $17,377 which an LLC placed on a residence a Chapter 7 debtor owned as a tenant by the entirety with her non-debtor spouse, but only to the extent the lien impaired the debtor’s interest in the property. The debtor was allowed to avoid the LLC’s lien under 11 U.S.C.S. § 522(f) because the value of all liens against the property and an exemption the debtor could have claimed under G.S. 1C-1601(a)(1) exceeded the value of the LLC’s lien and the LLC’s lien impaired the debtor’s right to claim the exemption; the debtor’s interest in the property was part of her bankruptcy estate under 11 U.S.C.S. § 544(a). In re Alexander, 2012 Bankr. LEXIS 2656 (Bankr. E.D.N.C. June 12, 2012).

Chapter 13 debtor was entitled under 11 U.S.C.S. § 522 to avoid a judgment lien an LLC placed on his residence because the residence was worth less than the amount of senior liens that were held by a bank and the U.S. Department of Housing and Urban Development and impaired his right to claim a homestead exemption under G.S. 1C-1601 ; however, the LLC was entitled to recover $2,434.50 in attorney’s fees and costs it incurred when it attempted to execute its lien in state court after the debtor did not avoid the lien in a prior Chapter 13 bankruptcy he filed, and to defend the debtor’s motion to avoid the lien, because it would not have incurred those costs if the debtor had moved to avoid the lien in his first bankruptcy case. In re Abuharb, 2016 Bankr. LEXIS 2272 (Bankr. E.D.N.C. June 8, 2016).

Homestead Exemption Claimed Under State and Federal Law. —

Widowed debtor was 72 years old, and the property was previously owned by the debtor and the debtor’s deceased spouse as tenants by the entireties. Therefore, the debtor could exempt an aggregate interest in the property to the requested amount of $55,000; the debtor properly claimed the homestead exemption under G.S. 1C-1601(a)(1) and 11 U.S.C.S. § 522(b). In re Parker, 610 B.R. 535, 2019 Bankr. LEXIS 3787 (Bankr. E.D.N.C. 2019).

North Carolina, by this section, “opted out” of the federal exemptions in bankruptcy pursuant to 11 U.S.C. § 522(b)(1). In re Banks, 22 Bankr. 891 (Bankr. W.D.N.C. 1982). In accord with the main volume. See In re Laues, 90 B.R. 158, 1988 Bankr. LEXIS 1468 (Bankr. E.D.N.C. 1988).

North Carolina has opted-out of the § 522(d) exemptions of the Bankruptcy Code and has instead created its own. In re McQueen, 196 B.R. 31, 1995 U.S. Dist. LEXIS 20917 (E.D.N.C. 1995).

North Carolina has opted out of the exemption scheme provided by the U.S. Bankruptcy Code, so bankruptcy debtors in North Carolina depend on state law both for substance and for procedure. G.S. 1C-1601(f) . In re McRae, 282 B.R. 704, 2002 Bankr. LEXIS 957 (Bankr. N.D. Fla. 2002), rev'd, 308 B.R. 572, 2003 U.S. Dist. LEXIS 25244 (N.D. Fla. 2003).

Relationship to Federal Exemptions. —

Bankruptcy trustee’s objection to wildcard exemption was overruled and motion to require turnover of excess exemptions was denied; debtor had filed Chapter 7 bankruptcy and his spouse had filed Chapter 13 bankruptcy (thus, each debtor was entitled to exempt property held as tenants by entirety and to take advantage of wild card), court found no cause to substantively consolidate cases, and there was no authority to change 11 U.S.C.S. § 522 exemptions to North Carolina exemptions. In re Mikles, 2004 Bankr. LEXIS 2702 (Bankr. M.D.N.C. Jan. 13, 2004).

Debtor was not entitled to confirmation of his Chapter 13 Plan because the sum of the liens against the subject property exceeded the asserted value of the property, the debtor did not exempt the property in its entirety, but rather, exempted his interest in the property, and thereby did not remove the property from the bankruptcy estate, the Nonstandard Provision in the debtor’s plan was at odds with both federal and state codes 11 U.S.C.S. § 522(b), and the Plan was not proposed in good faith, as it sought impermissibly to deem property fully exempt from the debtor’s bankruptcy estate through the use of the Nonstandard Provision. In re Pulliam, 2020 Bankr. LEXIS 1027 (Bankr. E.D.N.C. Apr. 13, 2020).

The provisions of G.S. 1C-1601 to G.S. 1C-1604 govern the federal government’s efforts to execute a judgment. United States v. Scott, 45 B.R. 318, 1984 U.S. Dist. LEXIS 19275 (M.D.N.C. 1984), disapproved, Dominion Bank of Cumberlands, NA v. Nuckolls, 780 F.2d 408, 1985 U.S. App. LEXIS 25728 (4th Cir. 1985).

As to consumer loan contract divesting debtor of personal property otherwise exempt, see Montford v. Grohman, 36 N.C. App. 733, 245 S.E.2d 219, 1978 N.C. App. LEXIS 2617 (1978) (decided under former Article 32 of Chapter 1).

Exemption for Tenancies by the Entireties Not Eliminated by Section. —

The legislature, by the passage of this section, did not alter or eliminate the exemption from North Carolina process of tenancy by the entireties. The legislative history reflects that the General Assembly considered eliminating, altering, and limiting tenancy by the entirety. However, the statute which was enacted does not mention tenancy by the entirety in any way. Thus, the General Assembly did not intend to alter the common law doctrine of tenancy by the entirety but to leave it in full force and effect. In re Banks, 22 B.R. 891, 1982 Bankr. LEXIS 3402 (Bankr. W.D.N.C. 1982).

The purpose of the exemption under subdivision (a)(1) of this section is to permit the debtor some flexibility in determining which of his assets should be sheltered from creditors’ claims. There is no reason to treat motor vehicles differently from other forms of property in according protection to this legislative goal. Avco Fin. Servs. v. Isbell, 67 N.C. App. 341, 312 S.E.2d 707, 1984 N.C. App. LEXIS 3055 (1984).

Where the debtor’s homestead exemption under G.S. 1C-1601(a)(1) applied, she was allowed to avoid the judgment lien of creditor city, although the lien was of record under G.S. 1-234 . 11 U.S.C.S. § 522(f)(1) permitted the debtor to avoid the fixing of the judicial lien. In re Moore-Brown, 2009 Bankr. LEXIS 2581 (Bankr. E.D.N.C. Sept. 1, 2009).

The residential exemption of subdivision (a)(1) is conditional; property allocated to the debtor as a residence is free from the enforcement of creditors’ claims only so long as the debtor or dependent for the debtor uses the property as a residence. Once the debtor ceases to so use the exempt property as a residence, the prohibition on the creditor’s enforcement of his judgment ceases. In re Love, 42 B.R. 317, 1984 Bankr. LEXIS 4982 (Bankr. E.D.N.C. 1984), aff'd, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985).

The North Carolina residential exemption is conditioned upon continued ownership of the property by the debtor. In re Love, 42 B.R. 317, 1984 Bankr. LEXIS 4982 (Bankr. E.D.N.C. 1984), aff'd, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985).

The North Carolina residential exemption was enacted in 1983 as a part of the legislation which included the “opt out” of the federal bankruptcy exemptions of 11 U.S.C. § 522(d), and an overhaul of many of North Carolina’s exemptions. The concept of the conditional residential exemption is entirely consistent with a long line of North Carolina cases holding that the homestead exemption in North Carolina is conditioned on continued use as a residence and continued ownership. In re Love, 42 B.R. 317, 1984 Bankr. LEXIS 4982 (Bankr. E.D.N.C. 1984), aff'd, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985).

North Carolina law clearly provides for a residential exemption which is conditioned upon continued use as a residence and continued ownership. If the exempt residence ceases to be used as a residence or ceases to be owned by the debtor (or a dependent) the property is no longer exempt. In that event, a judgment creditor can enforce the judgment lien. If the judgment lien is unconditionally cancelled the judgment creditor would lose the right to pursue the property in the future should the use or ownership of the property change. In re Love, 42 B.R. 317, 1984 Bankr. LEXIS 4982 (Bankr. E.D.N.C. 1984), aff'd, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985).

Chapter 7 debtor was entitled to a residential exemption under G.S. 1C-1601(a)(1) for tracts of land because the parcels were linked to the support, existence, or enhancement of the residential property, especially in the rural setting in which the property was acquired. The lots contained a vegetable garden, fruit trees, grapevines, storage sheds, and a driveway, all of which were used by the debtor. In re Stox, 2011 Bankr. LEXIS 4637 (Bankr. E.D.N.C. May 27, 2011).

Chapter 7 debtor was not entitled to claim a homestead exemption under North Carolina law where the property at issue was a vacation condominium owned by debtor, his parents, and his sister that debtor had never used as anything but a vacation home for one month a year and where he had no present intention of relocating there. The exemption was conditioned upon continued use as a residence and continued ownership. In re McLamb, 2009 Bankr. LEXIS 5735 (Bankr. E.D.N.C. Jan. 23, 2009).

Bankruptcy court denied a debtor’s homestead claim to properly jointly owned with his ex-wife because, while the ex-wife was defined in the separation agreement as a dependent spouse, neither the debtor nor an actual dependent of the debtor resided at the subject property inasmuch as the ex-wife was not actually substantially dependent on the debtor, and the policy behind the homestead exemption would not be realized if the court were bound by findings of dependency made for different purposes at times other than the petition date. In re Suggs, 2019 Bankr. LEXIS 2304 (Bankr. E.D.N.C. July 25, 2019).

There is no requirement in G.S. 1C-1601(a)(1), (2) that the fair market value of a debtor’s interest in real property be greater than the total of valid liens superior to the judgment lien sought to be enforced in order for the debtor to be entitled to an exemption; what is exempted is the debtor’s aggregate interest in the property sought to be exempted, the existence of an interest in the property does not depend upon whether the market value of the debtor’s interest exceeds the amount of the liens on the property, and “aggregate interest” has a broad meaning that is not limited to a debtor’s equity in the sense of value over liens. In re Smith, 2009 Bankr. LEXIS 2336 (Bankr. M.D.N.C. July 27, 2009).

No Equity in Residential Property to Claim as Exempt. —

Chapter 7 debtor’s claim of a residential exemption under G.S. 1C-1601(a)(1) was disallowed because according to the debtor’s own schedules, the debt that encumbered the property was in excess of her claimed value of the property and thus, there was no equity in the property to claim as exempt. Although the debtor undervalued her property, good faith was required to amend a schedule under Fed. R. Bankr. P. 1009, and the court found that the debtor had not acted in good faith in filing her schedules and claim of exemptions and had not cooperated with the Chapter 7 trustee and therefore, based upon her own claimed value of the property, no exemption was allowed. In re Richey, 2010 Bankr. LEXIS 2713 (Bankr. E.D.N.C. Aug. 12, 2010).

Net Value of Residence Listed as Zero for Homestead Exemption. —

When a debtor in bankruptcy claimed a homestead exemption of $30,000 under G.S. 1C-1601(a)(1) but listed the residence’s net value as zero, the court overruled the trustee’s objection to the exemption. The market might change that value as the case was administered, and the debtor had to assert the exemption in order to protect his right to it. In re Rudd, 2013 Bankr. LEXIS 2387 (Bankr. E.D.N.C. June 12, 2013).

Involuntary Absence Did Not Constitute Abandonment of Residence. —

Claimed homestead exemption was allowed, pursuant to G.S. 1C-1601(a)(1), over a trustee’s objection because the debtor was forced to vacate and did not voluntarily abandon her damaged home as a result of hurricanes and she paid property taxes, stored personalty there, lived in temporary housing, and intended to use the home as a residence as soon as repairs were practicable. In re Foster, 348 B.R. 58, 2006 Bankr. LEXIS 1833 (Bankr. E.D.N.C. 2006).

Where debtor was forced to move out of her home due to declining health and move closer to her son, she was allowed to claim the homestead exemption in the home because she was compelled by reasons beyond her control and against her wishes to live apart from her homestead. In re Brock, 2004 Bankr. LEXIS 2731 (Bankr. E.D.N.C. Oct. 8, 2004).

North Carolina law clearly requires individual to retain both ownership and use of residence if that person is to retain a homestead exemption. North Carolina’s courts have failed to draw a distinction between bankruptcy debtors and civil judgment debtors when interpreting the statutory provision creating the homestead exemption. In re Love, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985), aff'd, 829 F.2d 1120, 1987 U.S. App. LEXIS 12374 (4th Cir. 1987).

Property Was Debtors’ Residence. —

Debtors were entitled to exempt property as their residence under G.S. 1C-1601(a)(1). Their mobile home was a residence under 11 U.S.C.S. § 101(13A), and although they were not living in the home when they filed their petition, they had resided on the property for a number of years prior to filing their petition and had the intent to return when there was a home suitable for the husband to receive dialysis treatments. In re Voliva, 2011 Bankr. LEXIS 4897 (Bankr. E.D.N.C. Dec. 16, 2011).

Debtors’ claimed exemption in the Real Property was allowed pursuant to G.S. 1C-1601(a)(1) where: (i) the female debtor stated it was her intent to reside in the Real Property, (ii) she testified that she ensured it had utilities and running water, (iii) she had a television with a converter box and antennae in the Real Property, (iv) she kept much of her personalty in the Real Property, including her bed, and (v) she maintained the property taxes and intended to make payments on the Real Property through the Chapter 13 plan. Accordingly, she used the Real Property as her residence. In re Whitney, 2014 Bankr. LEXIS 162 (Bankr. E.D.N.C. Jan. 15, 2014).

Husband and wife who declared Chapter 13 bankruptcy were allowed to claim a homestead exemption under G.S. 1C-1601 in a lot where their home was located and an adjoining lot they received as a gift from the wife’s mother ten years after they purchased their home because they used both lots as their homestead and the adjoining lot was necessary for the support, existence, or enhancement of the residential property; however, the debtors had to amend their schedules because the husband exceeded the $35,000 cap for all exemptions when he claimed a $35,000 exemption in his homestead and attempted to claim an additional $5,000 in wild card exemptions divided between real property he inherited and an automobile he owned. In re Regenhardt, 2017 Bankr. LEXIS 2393 (Bankr. E.D.N.C. Aug. 24, 2017).

Exemption Not Available for Rental Property. —

Debtor’s proposed residential exemption under G.S. 1C-1601(a)(1) was denied to the extent that she sought to exempt equity in a townhouse because, on the date of bankruptcy, the debtor was renting out the townhouse and, as a rental property, the townhouse was ineligible for exemption under G.S. 1C-1601(a)(1). In addition, the debtor’s estranged husband could not be considered her “dependent” on the filing date as he was clearly subsisting without the debtor’s support at the petition date and she was keeping her money out of joint bank accounts so that he could not access any supportive monies. In re Preston, 428 B.R. 340, 2009 Bankr. LEXIS 3107 (Bankr. W.D.N.C. 2009).

Chapter 13 debtor was not allowed to claim a homestead exemption under G.S. 1C-1601 in real property that was adjacent to property she used as her residence because the adjacent parcel was not her residence and did not sufficiently conform with the definition of “incidental property,” as that term was defined in 11 U.S.C.S. § 101; although both parcels were undivided when they were owned by the debtor’s parents, the debtor divided the parcels after inheriting them from her parents, renovated a building on the adjacent parcel so it could be occupied as a house, and rented the adjacent parcel to a person who was not a member of her family. In re Rogers, 2016 Bankr. LEXIS 3614 (Bankr. E.D.N.C. Oct. 3, 2016).

If jewelry is acquired and kept as an investment rather than as an item of ornamental apparel, then it is not wearing apparel. In re Mims, 49 B.R. 283, 1985 Bankr. LEXIS 6130 (Bankr. E.D.N.C. 1985).

“Wearing apparel” exemption provided in this section may include a diamond engagement ring. In re Mims, 49 B.R. 283, 1985 Bankr. LEXIS 6130 (Bankr. E.D.N.C. 1985).

Where the court found that the debtor had worn her diamond engagement ring as part of her daily attire since she received it from her ex-husband, the ring was not held as an investment, and the engagement ring was part of the debtor’s daily wearing apparel. In re Mims, 49 B.R. 283, 1985 Bankr. LEXIS 6130 (Bankr. E.D.N.C. 1985).

Subdivision (a)(2) of this section is known as the “wild card” exemption and allows the debtor to exempt his or her aggregate interest in any property, not to exceed $2,500 (now $3,500) in value less any amount of the exemption used under subdivision (a)(1). In re Laues, 90 B.R. 158, 1988 Bankr. LEXIS 1468 (Bankr. E.D.N.C. 1988).

Chapter 7 debtors were required to turn over the amount of their tax refund in excess of the scheduled anticipated amount because good faith required them to amend their schedules under Fed. R. Bankr. P. 1009 and the exemption taken under G.S. 1C-1601(a)(2) when they discovered the material difference. If the Chapter 13 trustee had known about the excess refund, the nonexempt portion of the tax refunds would have been used to determine if the debtors’ plan complied with the liquidation test under 11 U.S.C.S. § 1325(a)(4). In re Shepard, 2008 Bankr. LEXIS 2661 (Bankr. E.D.N.C. Aug. 25, 2008).

Although a Chapter 7 debtor’s residential exemption was disallowed due to her lack of equity in the property, she was entitled to exempt $5,000 of her equity in a timeshare under G.S. 1C-1601(a)(2); however, her proposed exemption as to any interest in shares of corporate stock was disallowed, as the value of the stock exceed the $5,000 cap under the wild card exemption in G.S. 1C-1601(a)(2). In addition, she was entitled to an exemption in her motor vehicle under G.S. 1C-1601(a)(3) and to an exemption in the amount of $400 for her earnings from the past 60 days under G.S. 1-362 . In re Richey, 2010 Bankr. LEXIS 2713 (Bankr. E.D.N.C. Aug. 12, 2010).

Where Chapter 7 debtors exempted their 2008 refund under G.S. 1C-1601(a)(2) and received refunds that exceeded the amount claimed, which they failed to report and spent, a trustee’s objection to their request to amend their exemptions under Fed. R. Bankr. P. 1009(a) to instead exempt their 2009 refund was sustained, as the request was in bad faith and amendment would prejudice unsecured creditors. In re Greene, 2011 Bankr. LEXIS 162 (Bankr. M.D.N.C. Jan. 18, 2011).

Because a Chapter 7 debtor’s claim of a residential exemption was used in the fully allowed amount, his claim of a full wildcard exemption under G.S. 1C-1601(a)(2) was not allowed. In re Stox, 2011 Bankr. LEXIS 4637 (Bankr. E.D.N.C. May 27, 2011).

Bankruptcy court sustained the trustee’s objection to the claimed exemptions under G.S. 1C-1601(a)(2) to the extent that the schedules said that the debtor was trying to claim as exempt the full market value of his ownership in three business entities. The debtor was limited to claiming only the dollar values of the ownership interests in the business entities that he had indicated on his schedules. In re Rudd, 2013 Bankr. LEXIS 2387 (Bankr. E.D.N.C. June 12, 2013).

The language of subdivision (a)(2) of this section is clear and free from ambiguity. Avco Fin. Servs. v. Isbell, 67 N.C. App. 341, 312 S.E.2d 707, 1984 N.C. App. LEXIS 3055 (1984).

Under subdivision (a)(2) a debtor may use the exemption to shelter any property except that described in the residence exemption, whether it be motor vehicles, other personal property, tools of the trade, or property not qualifying for any other exemption. Avco Fin. Servs. v. Isbell, 67 N.C. App. 341, 312 S.E.2d 707, 1984 N.C. App. LEXIS 3055 (1984).

Debtors were entitled to claim an exemption in their residence, which they owned as tenants by the entirety, pursuant to 11 U.S.C.S. § 522(b)(2)(B), and each was entitled to take a wild card exemption under G.S. 1C-1601(a)(2). In re Payne, 2004 Bankr. LEXIS 2694 (Bankr. M.D.N.C. Nov. 10, 2004).

Exemption Limited to Extent of Ownership. —

In a joint Chapter 7 case filed by husband and wife debtors, the wife could not claim 100% of jointly held personal property as exempt under the “wildcard” exemption of G.S. 1C-1601(a)(2). The wife owned only a 50% interest in the property and could claim an exemption only in the portion that she owned. In re Evans, 2009 Bankr. LEXIS 3268 (Bankr. M.D.N.C. Oct. 8, 2009).

Chapter 7 female debtor was not entitled to exemptions under G.S. 1C-1601(a)(3) and G.S. 1C-1601(a)(2) for a vehicle that was titled solely in the name of the male co-debtor; G.S. 20-72 equated a transfer of title with the transfer of ownership, and thus she had no legal interest the in vehicle and the Trustee had superior lien rights under 11 U.S.C.S. § 544(a)(1). In re Thams, 2011 Bankr. LEXIS 939 (Bankr. W.D.N.C. Mar. 10, 2011).

The limits contained in subdivision (a)(3) of this section apply only to exemptions claimed under that subsection, and have no application to exemptions claimed under subdivision (a)(2) of this section. Avco Fin. Servs. v. Isbell, 67 N.C. App. 341, 312 S.E.2d 707, 1984 N.C. App. LEXIS 3055 (1984).

Subdivision (a)(8) of this section was intended to afford protection to those debtors who receive personal injury compensation and to those creditors who have certain kinds of claims for services rendered specifically related to the personal injury. Professional Health Servs., Inc. v. Brank, 67 B.R. 1005, 1986 U.S. Dist. LEXIS 16068 (W.D.N.C. 1986), aff'd, 826 F.2d 1059, 1987 U.S. App. LEXIS 10529 (4th Cir. 1987).

The policy behind the exception to the exemption in subdivision (a)(8) is to protect those persons who helped the debtor receive personal injury compensation in the first place or rendered services for the personal injury. Professional Health Servs., Inc. v. Brank, 67 B.R. 1005, 1986 U.S. Dist. LEXIS 16068 (W.D.N.C. 1986), aff'd, 826 F.2d 1059, 1987 U.S. App. LEXIS 10529 (4th Cir. 1987).

Gross Amount of Compensation Not Subject to All Claims. —

Under subdivision (a)(8) of this section, the gross amount of the personal injury compensation subject to claims for legal or medical charges is not subject to claims for all debts by all creditors, regardless of whether they have claims for legal or medical charges. Professional Health Servs., Inc. v. Brank, 67 B.R. 1005, 1986 U.S. Dist. LEXIS 16068 (W.D.N.C. 1986), aff'd, 826 F.2d 1059, 1987 U.S. App. LEXIS 10529 (4th Cir. 1987).

Portion of Compensation Not Exempt. —

Although a general creditor is prevented from reaching any part of personal injury compensation which the debtor claims is exempt, a creditor having one of the claims enumerated in subdivision (a)(8) of this section is entitled to reach that portion of the compensation attributable to his services related to the injury. Professional Health Servs., Inc. v. Brank, 67 B.R. 1005, 1986 U.S. Dist. LEXIS 16068 (W.D.N.C. 1986), aff'd, 826 F.2d 1059, 1987 U.S. App. LEXIS 10529 (4th Cir. 1987).

The court looked beyond the language of a Settlement Agreement and Release and determined that, in accord with the subject employment contract and complaint, while at least $11,725.56 of the bankrupt’s $50,000 settlement represented income loss and was, therefore, not exempt under this section, the remainder received for mental anguish was exempt. In re LoCurto, 239 B.R. 314, 1999 Bankr. LEXIS 1235 (Bankr. E.D.N.C. 1999).

The “compensation” exemption provided in subdivision (a)(8) of this section does not include life insurance proceeds. In re Ragan, 64 B.R. 384, 1986 Bankr. LEXIS 5410 (Bankr. E.D.N.C. 1986).

Retirement Account Exemption Does Not Apply to Shield a Debtor’s Claim to Someone Else’s Retirement Account. —

Former husband was allowed pursuant to G.S. 1-362 to satisfy a tort judgment against his former wife by executing on her future interest in an equitable distribution award of his 401(k) retirement accounts, as the exemption for individual retirement plans in G.S 1C-1601(a)(9) did not shield from execution the wife’s mere expectancy in an equitable distribution claim against the husband’s retirement accounts. Kroh v. Kroh, 154 N.C. App. 198, 571 S.E.2d 643, 2002 N.C. App. LEXIS 1404 (2002).

Individual Retirement Account. —

Trial court erred in requiring a judgment debtor to place any funds withdrawn in the future from his Individual Retirement Accounts (IRA) into escrow or trust pending a determination as to whether those funds retained their exempt status because G.S. 1C-1601(a)(9) exempted the debtor’s IRAs and the debtor’s legal use of funds contained within those IRAs from the creditor’s judgment; not only were the IRAs themselves exempt, but the debtor’s legal use of the IRAs, in the same manner as if there were no judgment against him, was also exempt. Kinlaw v. Harris, 201 N.C. App. 252, 689 S.E.2d 428, 2009 N.C. App. LEXIS 2213 (2009), aff'd in part and rev'd in part, 364 N.C. 528 , 702 S.E.2d 294, 2010 N.C. LEXIS 924 (2010).

Court of appeals did not err in affirming trial court’s order vacating plaintiff’s writ of execution because the trial court properly applied G.S. 1C-1601(a)(9) in declaring the corpus of defendant’s IRAs to be exempt from execution; trial court properly determined that the corpus of each of defendant’s IRAs continued to maintain its exempt status. Kinlaw v. Harris, 364 N.C. 528 , 702 S.E.2d 294, 2010 N.C. LEXIS 924 (2010).

Court of appeals erred in vacating trial court’s order requiring defendant to place funds withdrawn from his IRAs in an escrow or other trust account for a determination of the funds’ exempt status because the trial court acted correctly in fashioning an equitable mechanism to determine the exempt status of future withdrawals from defendant’s IRAs, and both parties consented to the escrow arrangement the trial court ordered; given the text of G.S. 1C-1601(a)(9), which focuses its protection on “retirement plans,” there may be some circumstances under which withdrawn funds are no longer exempt from execution. Kinlaw v. Harris, 364 N.C. 528 , 702 S.E.2d 294, 2010 N.C. LEXIS 924 (2010).

Debtor’s individual retirement account qualified as tax-exempt under 26 U.S.C.S. § 408 and thus was exempt under G.S. 1C-1601(a)(9). The fact that funds were transferred to the debtor to pay his debts did not mean that he was a disqualified person under 26 U.S.C.S. § 4975, as he had no control over the investment of the funds and thus was not a fiduciary. In re Goldstein, 2011 Bankr. LEXIS 4594 (Bankr. E.D.N.C. Sept. 23, 2011).

Trustee did not meet its Fed. R. Bankr. P. 4003(c) burden of proving the Individual Retirement Account (IRA) was not qualified for exemption from the bankruptcy estate under G.S. 1C-1601(a)(9) under circumstances where, inter alia, there was no evidence that the funds in the IRA did not come from the 401(k) Plan and there was no evidence that the funds came from elsewhere. In re Clifton, 2012 Bankr. LEXIS 1341 (Bankr. E.D.N.C. Mar. 26, 2012).

11 U.S.C.S. § 522 and 11 U.S.C.S. § 408(d)(3) specifically allow owners to withdraw funds from their individual retirement accounts (IRAs) without losing the exempt status, provided funds are redeposited within sixty days. Thus, a debtor’s entire IRA was exempt under G.S. 1C-1601(a)(9). In re Rudd, 2013 Bankr. LEXIS 2387 (Bankr. E.D.N.C. June 12, 2013).

Applicability to Tax-Sheltered Annuities. —

Given the close similarity between the tax treatment of tax-sheltered annuities and individual retirement plans and the common purpose of both types of plans, the United States Bankruptcy Court for the Middle District of North Carolina, Greensboro Division, is convinced that the Supreme Court of North Carolina Court would conclude that 26 U.S.C.S. § 403(b) tax-sheltered annuities are “treated in the same manner as” individual retirement plans and therefore would construe G.S. 1C-1601(a)(9) as encompassing such tax-sheltered annuities as property that may be exempted under that statute. Accordingly, the debtor was allowed to claim an exemption in this type of retirement plan. In re Garner, 2005 Bankr. LEXIS 1118 (Bankr. M.D.N.C. Apr. 29, 2005).

Applicability to Alimony. —

Since G.S. 1C-1601(e)(9) did not apply to claims for alimony, the trial court properly denied the ex-husband’s motion to exempt his retirement account. Rhew v. Felton, 178 N.C. App. 475, 631 S.E.2d 859, 2006 N.C. App. LEXIS 1560 (2006).

Subsection (c) of this section does not preclude the use of G.S. 135-9 by a bankruptcy debtor to claim an exemption in state employee retirement benefits. In re Hare, 32 B.R. 16, 1983 Bankr. LEXIS 5820 (Bankr. E.D.N.C. 1983).

For interpretation of subsection (d) of this section, see In re Hallman, 26 B.R. 34, 1982 Bankr. LEXIS 5380 (Bankr. W.D.N.C. 1982).

Purpose of Subsection (d). —

The obvious purpose of subsection (d) of this section is to prevent pre-petition planning whereby a debtor uses nonexempt property to purchase exempt personal property, or purchases exempt personal property with the proceeds of a dischargeable loan obligation. In re Ellis, 33 B.R. 16, 1983 Bankr. LEXIS 5562 (Bankr. E.D.N.C. 1983).

Applicability of Subsection (e) to Court Appointed Counsel Fees. —

The State assumes the status of a judgment lien creditor against the assets of an indigent defendant who has accepted court-appointed counsel and been found guilty of the offense. The lien is not valid unless the indigent defendant was given both notice of the state claim and the opportunity to resist its perfection in a hearing before the trial court. Alexander v. Johnson, 742 F.2d 117, 1984 U.S. App. LEXIS 19436 (4th Cir. 1984).

North Carolina is not barred from structuring a program to collect the amount it is owed from a financially-able defendant through reasonable and fairly administered procedures. The State’s initiatives in this area naturally must be narrowly drawn to avoid either chilling the indigent’s exercise of the right to counsel, or creating discriminating terms of repayment based solely on the defendant’s poverty. Beyond these threshold requirements, however, the State has wide latitude to shape its attorneys’ fees recoupment or restitution program along the lines it deems most appropriate for achieving lawful state objectives. Alexander v. Johnson, 742 F.2d 117, 1984 U.S. App. LEXIS 19436 (4th Cir. 1984).

Compensation for Personal Injury Includes Attorney Fees. —

Law in the Fourth Circuit was quite clear that the attorney fees paid to a debtor’s personal injury attorneys as part of the settlement of her personal injury case were exempt under G.S. 1C-1601(a)(8); therefore, there was no legal basis for the Chapter 7 trustee’s motion to determine that they were part of the debtor’s bankruptcy estate. In re Simmons, 2006 Bankr. LEXIS 3280 (Bankr. M.D.N.C. Nov. 22, 2006).

Mere Stress and Inconvenience Do Not Qualify as Personal Injuries. —

Definition of personal injury is not limited to a physical bodily injury under North Carolina law; however, in order to fall under the exemption, the injury leading to the compensation should rise to a level of severe emotional distress. In other words, mere stress and inconvenience, while certainly a basis for sanctions or damages, do not qualify as personal injuries. Brantley v. CitiFinancial, Inc., 2015 Bankr. LEXIS 129 (Bankr. E.D.N.C. Jan. 15, 2015).

Term “purchase” does not encompass every means of acquiring property, and should be defined in the context of subsection (d) of this section so as not to include an acquisition of exemptable personal property where there is no new interest in property obtained, but merely a transfer of equity from the property given to the property received. This definition allows the statute to accomplish its purpose of denying debtors the benefit of certain prebankruptcy petition planning, but will not unnecessarily hinder an honest debtor who trades certain property which could be claimed as exempt for other property of like kind a short time before seeking a fresh start. In re Ellis, 33 B.R. 16, 1983 Bankr. LEXIS 5562 (Bankr. E.D.N.C. 1983).

Trial Court’s Findings As to Value of Stock Unsupported by Evidence. —

In a G.S. 1C-1603(e) proceeding on an objection to a debtor’s claimed exemption, a trial court failed to make sufficient findings as to how or by what methodology it concluded that the value of the debtor’s stock in a development company was zero; there was no evidence supporting the trial court’s finding that, purely as a result of pending litigation, the company had no value, and no authority permitted the trial court to base its allowance of a party’s claim of exemption on the court’s assessment of the equities between the parties rather than on the actual value of the property. Susi v. Aubin, 173 N.C. App. 608, 620 S.E.2d 682, 2005 N.C. App. LEXIS 2093 (2005).

This section expresses interest in ensuring that a bankruptcy debtor retain sufficient possessions for a fresh start. In re Ellis, 33 B.R. 16, 1983 Bankr. LEXIS 5562 (Bankr. E.D.N.C. 1983).

Amendment of Exemptions Not Allowed Under Totality of Circumstances. —

Chapter 7 trustee’s objection to a debtor’s second amended claim of exemptions under Fed. R. Bankr. P. 1009 was sustained where, under the totality of the circumstances, the debtor’s failure to earlier disclose a personal injury cause of action that he sought to exempt under G.S. 1C-1601(a)(8) involved deception and bad faith; debtor’s pattern of conduct from the outset of the case reflected his bad faith, including not only the failure to disclose the personal injury claim, but also an earlier failure to disclose his receipt of settlement funds even though both were property of the estate that should have been listed on his Schedule B. In re Agee, 456 B.R. 740, 2011 Bankr. LEXIS 438 (Bankr. M.D.N.C. 2011).

Court denied Chapter 7 debtors’ request for permission to amend their bankruptcy schedules so the male debtor could claim an exemption under G.S. 1C-1601 in real property he failed to list in his schedules and move for avoidance of a judicial lien; the debtors had an obligation under 11 U.S.C.S. § 521 to list all their interests in property at the time they declared bankruptcy, and although they had the right to amend their schedules and the court was allowed to extend the period of time in which debtors could file amendments in cases where mistakes or omissions were due to excusable neglect, the evidence did not support the debtors’ claim that their failure to list the property in question was due to excusable neglect. In re Libbus, 2018 Bankr. LEXIS 857 (Bankr. E.D.N.C. Mar. 23, 2018).

State Exemptions Apply in Bankrutpcy Proceeding. —

Where a bankruptcy trustee objected to the use by a wife of her wild card exemption for property owned by her husband, pursuant to G.S. 1C-1601(f) , the state exemptions applied to North Carolina residents in bankruptcy actions. In re Horstman, 276 B.R. 80, 2002 Bankr. LEXIS 379 (Bankr. E.D.N.C. 2002).

Trustee could exercise his strong arm powers under 11 U.S.C.S. § 544(a)(3) to include the property, which a debtor held in a resulting trust for her sister, and its equity in the bankruptcy estate, after applying the wildcard exemption in G.S. 1C-1601(a)(2); therefore, the trustee’s objection that the Chapter 13 plan, which proposed to pay unsecured creditors one percent, did not comply with 11 U.S.C.S. § 1325(a)(4) was sustained and confirmation denied. In re Alston, 355 B.R. 529, 2006 Bankr. LEXIS 2968 (Bankr. M.D.N.C. 2006).

Two joint Chapter 13 debtors were permitted to claim a $20,000 exemption in their real property under G.S. 1C-1601(a)(1) several years after their Chapter 13 plan was confirmed; the debtors had successfully moved to reopen their case to assert the exemption, and caselaw from the Eastern District of North Carolina District court provided that debtors could avoid a judicial lien against their residence under 11 U.S.C.S. § 522(f)(1) and claim an exemption under G.S. 1C-1601(a)(1), even though they did not have any equity in the real property at issue. In re Male, 362 B.R. 238, 2007 Bankr. LEXIS 583 (Bankr. E.D.N.C. 2007).

Chapter 13 debtors were allowed to amend their schedules after the court approved an order allowing them to sell real property so the male debtor could claim a homestead exemption under G.S. 1C-1601(a)(1) in one of two tracts of land they sold. The debtors had a permissive right under Fed. R. Bankr. P. 1009(a) to amend their schedules at any time before their case was closed, and there was no evidence that the debtors acted in bad faith. In re Mills, 2012 Bankr. LEXIS 1772 (Bankr. W.D.N.C. Apr. 20, 2012).

Female debtor was entitled to claim automobile and wildcard exemptions pursuant to G.S. 1C-1601(a)(3) and (a)(2), where, although title to a vehicle was solely in the male debtor’s name, the presumption of ownership was rebutted by testimony showing that the vehicle was purchased with funds from an equity line belonging to both debtors, that the certificate of title was issued to the male debtor for logistical purposes only, and that the female debtor primarily drove that vehicle, while the other vehicle was purchased primarily for the male debtor. Further, both debtors explicitly claimed an equitable interest in the vehicle on Schedule B. In re Jourdan, 2013 Bankr. LEXIS 863 (Bankr. E.D.N.C. Mar. 8, 2013).

Trustee’s motion for turnover of a vehicle was granted because the vehicle at issue was entirely non-exempt and the vehicle would be turned over to the trustee and sold since the debtors agreed to accept an offer to keep another vehicle under G.S. 1C-1601(a)(3). In re Thrower, 2014 Bankr. LEXIS 2059 (Bankr. W.D.N.C. May 8, 2014).

What Property Exempt in Bankruptcy. —

An individual debtor in this State may, pursuant to 11 U.S.C. § 522(b)(2)(A), claim as exempt property under subsection (a) of this section and may, pursuant to 11 U.S.C. § 522(b)-(2)(B), claim as exempt property under the North Carolina common law doctrine of tenancy by the entireties. In re Banks, 22 B.R. 891, 1982 Bankr. LEXIS 3402 (Bankr. W.D.N.C. 1982).

The legislature exercised its right to “opt out” of the federal bankruptcy exemptions law by adopting a statute which provides North Carolina citizens with a list of exemptions available to them, and precludes a debtor’s use of the federal “laundry list” by expressly not authorizing its use. Thus the exemptions available to a North Carolina debtor in bankruptcy are those prescribed by G.S. 1C-1601 , 1C-1602 and the exemptions, other than those in 11 U.S.C. § 522(d), afforded by federal law. Berry v. First-Citizens Bank & Trust Co., 33 B.R. 351, 1983 Bankr. LEXIS 5317 (Bankr. W.D.N.C. 1983).

Under G.S. 1C-1601(a)(8), where all claims against a debtor for services related to her personal injury had been paid, the Chapter 7 Trustee could not use any remaining funds from the debtor’s personal injury settlement to pay general creditors; G.S. 1C-1601(a)(8) prevented a general creditor from reaching any part of personal injury compensation, but such compensation was not exempt from claims for services related to the personal injury: funeral, legal, medical, dental, hospital, and health care charges. In re Thompson, 313 B.R. 683, 2004 Bankr. LEXIS 1693 (Bankr. M.D.N.C. 2004).

In North Carolina, compensatory damages for purposes of a personal injury settlement included lost wages, and these compensatory damages were “compensation for the personal injury” and, therefore, exempt pursuant to G.S. 1C-1601(a)(8); accordingly, a Chapter 7 Trustee could not recover the lost wages portion from a debtor’s personal injury settlement as this amount was exempt. In re Thompson, 313 B.R. 683, 2004 Bankr. LEXIS 1693 (Bankr. M.D.N.C. 2004).

Where North Carolina, pursuant to G.S. 1C-1601(f) , opted out of 11 U.S.C.S. § 522, any bankruptcy property exemptions were controlled by state law; thus, a North Carolina debtor could not use § 522 to exempt disability insurance policy payments from his bankruptcy estate and the payments were not exempt under G.S. 1-362 because such payments were not earnings for performance of personal services but resulted from nonperformance. In re Dillon, 2005 Bankr. LEXIS 1314 (Bankr. M.D.N.C. July 8, 2005).

Chapter 7 debtors could be subject to sanctions, pursuant to Fed. R. Bankr. P. 9011, if they persisted in attempting to notice claims of full value in exemptions that were subject to limitations under G.S. 1C-1601(a)(1), (2), (3), (4), (5) and (10) in the amount that debtors could claim. In re Gregory, 487 B.R. 444, 2013 Bankr. LEXIS 851 (Bankr. E.D.N.C. 2013).

Bankruptcy court denied a trustee’s motion to dismiss a Chapter 13 bankruptcy case because the trustee did not file a timely objection under 11 U.S.C.S. § 522(l) and Fed. R. Bankr. P. 4003(b)(1) to the debtors’ claim that a personal injury settlement in the amount of $10,379 the male debtor received was exempt property. The debtors amended their schedules shortly after they received the settlement proceeds to claim that the proceeds were exempt from creditors’ claims under G.S. 1C-1601(a)(8), and the trustee did not file an objection to that claim within the 30-day period allowed by Rule 4003(b)(1); neither the trustee’s demand that the debtors amend their plan nor the trustee’s motion to dismiss was an objection to the debtors’ claim, and the debtors were not required to increase the dividend they paid to unsecured creditors to comply with 11 U.S.C.S. § 1325(a)(4) because their unsecured creditors would still receive at least as much or more than they would have received in a case under Chapter 7 of the Bankruptcy Code. In re Daniels, 2013 Bankr. LEXIS 351 (Bankr. E.D.N.C. Jan. 29, 2013).

Chapter 7 debtor was allowed to claim a homestead exemption in the amount of $31,796 under G.S. 1C-1601 in real property she owned in Mexico, even though she resided in real property she owned in North Carolina at the time she declared bankruptcy; the debtor lost her job in North Carolina the month after she declared bankruptcy, left North Carolina before the court held a hearing on the Chapter 7 trustee’s objection to her claim, and she filed a statement with her bankruptcy petition which indicated that she intended to surrender her North Carolina property and reside in the property she owned in Mexico. . In re Davila, 2014 Bankr. LEXIS 393 (Bankr. E.D.N.C. Jan. 30, 2014).

Debtor’s proposed residential exemption of property under North Carolina law was allowed because trustee did not meet heightened burden of proving debtor fraudulently claimed his homestead exemption as debtor’s decision to change his mailing address to post office box was not, on its own, sufficient to prove debtor did not use property as his residence for purposes of North Carolina homestead exemption, and trustee’s definition of “lived” that he provided to debtor meeting did not directly align with meaning of residence for purposes of North Carolina homestead exemption; even if debtor’s homestead exemption was improperly claimed, evidence did not prove debtor fraudulently claimed that exemption. In re McLain, 2022 Bankr. LEXIS 825 (Bankr. M.D.N.C. Feb. 9, 2022).

Exemptions Under 11 U.S.C. § 522(d) Compared. —

Many of the new North Carolina exemptions were borrowed from the 11 U.S.C. § 522(d) bankruptcy exemptions. In fact, while the amounts are different, the categories of personal property which may be exempt under subdivision (a)(4) of this section are identical to the categories which are exemptable under 11 U.S.C. § 522(d)(3). In re Mims, 49 B.R. 283, 1985 Bankr. LEXIS 6130 (Bankr. E.D.N.C. 1985).

Controlling Effect of 11 U.S.C. § 522(f). —

There may be an inconsistency in the operation of the state exemption statute and the Bankruptcy Code due to the conditional nature of North Carolina exemptions. To the extent that there is any conflict between the operation of 11 U.S.C. § 522(f) and the state statute, the federal provision controls. In re Jackson, 55 B.R. 343, 1985 Bankr. LEXIS 4868 (Bankr. M.D.N.C. 1985).

State May Not “Opt-Out” of 11 U.S.C. § 522(f). —

While a state may “opt-out” of the federal exemptions listed in 11 U.S.C. § 522(d), a state may not “opt-out” of 11 U.S.C. § 522(f). In re Jackson, 55 B.R. 343, 1985 Bankr. LEXIS 4868 (Bankr. M.D.N.C. 1985) (granting debtors’ motion to avoid nonpossessory, nonpurchase money security interest in debtors’ household personal property, which impaired the total value of the property as exempt) .

A debtor’s failure to properly preserve his exemptions by not complying with the requirements of exemption laws in a prior state regulated proceeding will be fatal to the debtor’s later claim of exemptions in bankruptcy. In re Laughinghouse, 44 B.R. 789, 1984 Bankr. LEXIS 4529 (Bankr. E.D.N.C. 1984).

Once a debtor validly waives his exemptions by failure to act after being given both notice and an opportunity to claim them as required by state law, the exemptions cannot be revived merely by filing a bankruptcy petition. In re Laughinghouse, 44 B.R. 789, 1984 Bankr. LEXIS 4529 (Bankr. E.D.N.C. 1984).

Delay in Claiming Exemption Prejudiced Trustee. —

Trustee’s objection to a debtor’s claimed exemption under G.S. 1C-1601(a)(2) regarding an annuity account was sustained because, while the debtor timely disclosed her interest in her deceased mother’s annuity at the creditor’s meeting, she waited nearly four months to file amended schedules under Fed. R. Bankr. P. 1009, which was prejudicial to the trustee in the diligent administration of the estate. In re Karhu, 2012 Bankr. LEXIS 3516 (Bankr. E.D.N.C. July 24, 2012).

Debtor’s Intent in Determining Homestead Exemption. —

Debtor’s intent must be the focus in determining whether an involuntary absence constitutes abandonment for the purposes of G.S. 1C-1601(a)(1); a narrow interpretation of the statute would be contrary to the North Carolina Supreme Court’s prior decisions regarding state law exemptions and a liberal construction is consistent with the Court’s efforts to embrace all persons fairly within the exemptions statutes. In re Foster, 348 B.R. 58, 2006 Bankr. LEXIS 1833 (Bankr. E.D.N.C. 2006).

Conveyance of Part of Homestead Did Not Bar Lien Avoidance Action. —

Debtors’ conveyance of part of their homestead to their daughter, post-petition, did not impair their homestead exemption, bar them from seeking relief under 11 U.S.C.S. § 522(f), or bar them from claiming the conveyed property as exempt pursuant to G.S. 1C-1601(c) . They did not have to have an interest in the property when they filed their motion to avoid creditor’s judicial lien against the property, and the implication in G.S. 1C-1601(c) that exemptions could be waived by conveyance of the property could not be applied in preference to the avoidance power of 11 U.S.C.S. § 522(f). In re Bowes, 2005 Bankr. LEXIS 1089 (Bankr. M.D.N.C. Feb. 11, 2005).

Relief from Waiver of Exemption in Bankruptcy. —

Debtor who had waived his property exemption by failing to have his exempt property designated by motion within 20 days as required by G.S. 1C-1603 was entitled to relief from such waiver under 11 U.S.C. § 522, which provides no specific time limit for filing exemption. North Carolina Baptist Hosps. v. Howell, 51 B.R. 1015, 1985 U.S. Dist. LEXIS 17252 (M.D.N.C. 1985).

Where credit union contended that it had a valid security interest in debtors’ account by virtue of broad language in loan documents by which the debtors pledged to the credit union all deposits in their checking account with the credit union as security for an automobile loan, and the debtors filed a Chapter 7 bankruptcy action, the language of the loan documents did not constitute a waiver of debtors’ right to exempt the account balance under either G.S. 1C-1601 or G.S. 1-362 . In re Laues, 90 B.R. 158, 1988 Bankr. LEXIS 1468 (Bankr. E.D.N.C. 1988).

Debtors may not claim exemption rights in bankruptcy which they would not be entitled to under state law due to their failure to comply with procedural requirements, i.e., failing to respond to the notice of right to have exemptions designated. In re McLamb, 93 B.R. 72, 1988 Bankr. LEXIS 1988 (Bankr. E.D.N.C. 1988).

Testimony that debtor turned all documents he received in relation to Land Bank and Protection Credit Association judgments over to his attorney was insufficient to establish grounds for relief from the procedural waiver; under North Carolina law a waiver of exemption by failure to act may be relieved because of mistake, surprise or excusable neglect, and bankruptcy court has authority to grant such relief. In re McLamb, 93 B.R. 72, 1988 Bankr. LEXIS 1988 (Bankr. E.D.N.C. 1988).

Exemption Laws Construed in Favor of Debtor. —

The State recognizes that the waiver of exemptions may result in harsh consequences to debtors, and the waiver issue is not one to be taken lightly. The courts have held that the exemption laws must be liberally construed in favor of the debtor. In re Laughinghouse, 44 B.R. 789, 1984 Bankr. LEXIS 4529 (Bankr. E.D.N.C. 1984).

Right to Claim Exemptions Under State Law Where Debtor Has Acted In Bad Faith. —

Bankruptcy court was required under the U.S. Supreme Court’s holding in Law v. Siegel, — U.S. —, 134 S. Ct. 1188, 188 L. Ed. 2d 146 (2014), to allow a Chapter 7 debtor to amend her schedules to claim an exemption in the amount of $4980 under G.S. 1C-1601 , even though it appeared that the debtor misled her creditors, the bankruptcy trustee, and the court, converted estate property, and abused the bankruptcy system when she failed to accurately report the amount of money she received from her deceased father’s estate; however, the court’s ruling did not preclude the trustee from seeking an order under 11 U.S.C.S. § 727 which revoked the debtor’s discharge or prosecution under 18 U.S.C.S. § 152 for bankruptcy fraud. In re Caillaud, 2014 Bankr. LEXIS 4527 (Bankr. W.D.N.C. Oct. 21, 2014).

Exemption Not Available for Lost Wages Settlement. —

Where the settlement of debtor’s EEOC charge, alleging harassment and wrongful termination, had two components, a $7,500 payment for emotional distress and a $7,500 payment for lost wages, debtor could not claim the lost wages payment as compensation for personal injury under G.S. 1C-1601(a)(8) because debtor’s lost wages were not linked or attributable to debtor’s emotional distress. In re Butler, 2021 Bankr. LEXIS 2115 (Bankr. M.D.N.C. July 20, 2021).

Excusable Neglect. —

In considering granting relief from a court order finding the waiver of exemptions by failure to act, the court must focus on the litigant’s excusable neglect, not the attorney’s. The negligence of the attorney, in attending to his clients’ case, although inexcusable, may still be cause for relief. In re Laughinghouse, 44 B.R. 789, 1984 Bankr. LEXIS 4529 (Bankr. E.D.N.C. 1984).

After a Chapter 7 trustee learned that a debtor was entitled to a personal injury settlement from a mass tort pharmaceutical product litigation suit and then moved to reopen the debtor’s case, the debtor was permitted to amend his claim of exemptions pursuant to Fed. R. Bankr. P. 1009(a) and 9006(b)(1) to include a personal injury settlement as an exemption under G.S. 1C-1601(a)(8), as his failure to schedule the pending litigation resulted from excusable neglect and was not the result of any fraudulent agenda. While it was unclear whether either of the debtor’s bankruptcy attorneys was informed of the pending litigation, the ineptitude of his substitute counsel, taken in combination with the mental infirmity caused by the debtor’s various afflictions and prescription medications, suggested that the omission was an oversight rather than the result of any fraudulent agenda. In re Dunn, 2010 Bankr. LEXIS 2204 (Bankr. E.D.N.C. July 7, 2010).

Chapter 7 debtor was not prohibited by Fed. R. Bankr. P. 1009 from amending his Schedule C-1 after his case was reopened to claim a homestead exemption under G.S. 1C-1601 in real property the trustee abandoned before the case was closed; although courts were split on how to apply Rule 1009 to bankruptcy cases that were reopened, courts in the Fourth Circuit used the “middle approach” which applied Fed. R. Bankr. P. 9006 and allowed debtors to amend their schedules upon proving that the failure to do so before case closure was due to excusable neglect, and the debtor’s reliance on a bank’s erroneous representation that it had a lien on the property constituted excusable neglect. In re McCowan, 2018 Bankr. LEXIS 2512 (Bankr. E.D.N.C. Aug. 22, 2018).

Surplus Funds Arising From Foreclosure Sale. —

A debtor has a property interest in surplus funds arising from a foreclosure sale; consequently, the interest becomes property of the estate upon filing of a petition for bankruptcy and the debtor may claim exemption in it to the extent permitted by law. In re Harris, 139 B.R. 386, 1992 Bankr. LEXIS 626 (Bankr. E.D.N.C. 1992).

Life Insurance Policy. —

Upon filing a bankruptcy petition, a debtor can claim as exempt the value of her life insurance policy. There is no provision, however, that extends the protection of the life insurance exemption to the beneficiary of the policy once the proceeds are in the beneficiary’s hands. The proceeds are treated like any other asset of the beneficiary and are available to his creditors, except to the extent an exemption or other protection is available to the beneficiary in his own right under applicable law. The result is no different where the beneficiary is the codebtor of the insured in a joint bankruptcy case. Butler v. Sharik, 41 B.R. 388, 1984 Bankr. LEXIS 5186 (Bankr. E.D.N.C. 1984).

Life insurance policies were not exempt under G.S. 1C-1601(a)(6) and N.C. Const. art. X, § 5, because the trust that was the beneficiary of the policies authorized the trustee to make payments to the unsecured creditors of the decedent from the insurance proceeds. In re Foster, 2011 Bankr. LEXIS 4523 (Bankr. E.D.N.C. Nov. 1, 2011).

Cash surrender value of a whole life insurance policy a debtor owned at the time he declared Chapter 7 bankruptcy was not exempt from creditors’ claims under N.C. Const. art. X, § 5 and G.S. 1C-1601 because the debtor’s ex-wife was named as one of the beneficiaries; although the policy also named three of the debtor’s children as beneficiaries, N.C. Const. art. X, § 5 treated the policy as a whole unit, and the debtor was not allowed under § 5 to claim that seventy-five percent of the cash surrender value was exempt from creditors’ claim because § 5 protected his children’s interests. In re Forgione, 2014 Bankr. LEXIS 3889 (Bankr. M.D.N.C. Sept. 12, 2014).

Debtors could exempt the cash value in their life insurance policies as the beneficiaries were testamentary trusts in favor of the other spouse (S) and then their son and the testamentary trustees’ (TT) abilities to compromise claims, to use trust funds to make loans to and buy property from S’s executors or trustees and to pay agents and professionals was restricted to the sole use and benefit of S and the son and did not allow the TTs to compromise claims against the insureds; the wills directed the TTs to expend income and principal for the health, maintenance and support of S and then to their son, which was close enough to restricting the TTs’ abilities to apply the insurance funds to the sole use and benefit of the beneficiaries. In re Foley, 2016 Bankr. LEXIS 3267 (Bankr. W.D.N.C. Sept. 7, 2016).

CASE NOTES

Exemptions Available in Bankruptcy. —

The legislature exercised its right to “opt out” of the federal bankruptcy exemptions law by adopting a statute which provides North Carolina citizens with a list of exemptions available to them, and precludes a debtor’s use of the federal “laundry list” by expressly not authorizing its use. Thus the exemptions available to a North Carolina debtor in bankruptcy are those prescribed by G.S. 1C-1601 , 1C-1602 and the exemptions, other than those in 11 U.S.C. § 522(d), afforded by federal law. Berry v. First-Citizens Bank & Trust Co., 33 B.R. 351, 1983 Bankr. LEXIS 5317 (Bankr. W.D.N.C. 1983).

Pursuant to G.S. 1C-1602(a)(7), the debtor was able to claim as an exemption the value of improvements made to her condominium that were necessary to meet the debtor’s medical needs, and the cost of such health aids were exempt in addition to the $18,500 homestead exemption allowed by G.S. 1C-1602(a)(1). In re Man, 428 B.R. 644, 2010 Bankr. LEXIS 1213 (Bankr. M.D.N.C. 2010).

Editor’s Note.

Session Laws 2021-47, s. 3(b), made the amendments to subdivisions (a)(4), (b)(1), (b)(2), and (e)(2), by Session Laws 2021-47, s. 3(a), effective June 18, 2021, and applicable to motions and petitions filed on or after that date.

Session Laws 2021-47, s. 18, is a severability clause.

Effect of Amendments.

Session Laws 2011-326, s. 1, effective June 27, 2011, in the form of subsection (a), in paragraph 8., substituted “$35,000” for “$18,500” and “$60,000” for “$37,000,” and in paragraph 15., substituted “$35,000” for “$18,500” throughout, and substituted “$34,000” for “$17,500” and “$30,000” for “$18,500.”

Session Laws 2014-107, s. 3.1, rewrote the section. See Editor’s note for effective date and applicability.

Session Laws 2021-47, s. 3(a), added the second sentence in subdivision (a)(4); deleted “and in Sections 1 and 2 of Article X of the North Carolina Constitution” following “Article” in subdivision (e)(2); and made stylistic changes in subdivisions (b)(1) and (b)(2). For effective date and applicability, see editor’s note.

Legal Periodicals.

For note on the nonpurchase security agreement as a relinquishment of the personal property exemption, see 15 Wake Forest L. Rev. 708 (1979).

For article analyzing North Carolina’s exemptions law, see 18 Wake Forest L. Rev. 1025 (1982).

CASE NOTES

Subdivision (e)(2) Unconstitutional. —

Subsection (c) of G.S. 1C-1601 and subdivision (e)(2) of this section, as they attempt to limit the claiming of constitutional exemptions to 20 days after notice to designate is served, are unconstitutional. HFC v. Ellis, 107 N.C. App. 262, 419 S.E.2d 592, 1992 N.C. App. LEXIS 683 (1992), aff'd, 333 N.C. 785 , 429 S.E.2d 716, 1993 N.C. LEXIS 234 (1993).

Failure to Comply with Procedural Requirements. —

Debtors may not claim exemption rights in bankruptcy which they would not be entitled to under state law due to their failure to comply with state law procedural requirements, such as by failing to respond to the notice of right to have exemptions designated. In re McLamb, 93 B.R. 72, 1988 Bankr. LEXIS 1988 (Bankr. E.D.N.C. 1988).

Court clerk’s error in not filing an order to set aside exempt property before issuing a writ of execution against a bankruptcy debtor’s property as required by G.S. 1C-1603(e)(6) did not invalidate the execution sale, since the error did not have a material effect on the sale of the property or prejudice the debtor or creditors with a judgment lien against the property; the debtor was aware at all times of the steps being taken to execute against the property, the property was not included in the debtor’s claim of exempt property, the creditors had actual notice of the purchaser’s intention to file repeated upset bids to raise the sale price, and the fact that the property was likely sold significantly below market value did not establish materiality of the clerk’s error. In re Dowdy, 2009 Bankr. LEXIS 3235 (Bankr. E.D.N.C. Oct. 14, 2009).

Requirement of Notice. —

Notice is required before each execution. A single notice before the first execution is not sufficient. HFC v. Ellis, 107 N.C. App. 262, 419 S.E.2d 592, 1992 N.C. App. LEXIS 683 (1992), aff'd, 333 N.C. 785 , 429 S.E.2d 716, 1993 N.C. LEXIS 234 (1993).

Failure to Give Notice or Opportunity to Be Heard. —

Defendant who defaulted on original complaint which alleged that she was a resident of this State was entitled to notice of plaintiff’s subsequent motion to declare that none of her property was exempt by virtue of nonresidency, and an opportunity to contest the factual allegations as to her nonresidency. Where she was given neither notice nor an opportunity to be heard, in violation of statutory and constitutional provisions, the order declaring that her property was not exempt was invalid, and she was entitled to relief therefrom pursuant to G.S. 1A-1 , Rule 60(b)(4). First Union Nat'l Bank v. Rolfe, 83 N.C. App. 625, 351 S.E.2d 117, 1986 N.C. App. LEXIS 2752 (1986).

Exemptions Available in Bankruptcy. —

The legislature exercised its right to “opt out” of the federal bankruptcy exemptions law by adopting a statute which provides North Carolina citizens with a list of exemptions available to them, and precludes a debtor’s use of the federal “laundry list” by expressly not authorizing its use. Thus the exemptions available to a North Carolina debtor in bankruptcy are those prescribed by G.S. 1C-1601 , G.S. 1C-1602 and the exemptions, other than those in 11 U.S.C. § 522(d), afforded by federal law. Berry v. First-Citizens Bank & Trust Co., 33 B.R. 351, 1983 Bankr. LEXIS 5317 (Bankr. W.D.N.C. 1983).

Execution and Waiver. —

This statute requires that no execution be issued until a Notice to Designate Exemptions has been served and any waiver applies only to the particular execution issued. HFC v. Ellis, 107 N.C. App. 262, 419 S.E.2d 592, 1992 N.C. App. LEXIS 683 (1992), aff'd, 333 N.C. 785 , 429 S.E.2d 716, 1993 N.C. LEXIS 234 (1993).

Relief from Waiver of Exemption in Bankruptcy. —

Debtor who had waived his property exemption by failing to have his exempt property designated by motion within 20 days, as required by this section, was entitled to relief from such waiver under 11 U.S.C. § 522, which provides no specific time limit for filing exemption. North Carolina Baptist Hosps. v. Howell, 51 B.R. 1015, 1985 U.S. Dist. LEXIS 17252 (M.D.N.C. 1985).

Conflicts Between 11 U.S.C. § 522(l) and Time Limits Under State Law. —

G.S. 1C-1601(c) and G.S. 1C-1603(e) severely undermine the effectiveness and limit the application of the federal bankruptcy provisions. The federal provision, 11 U.S.C. § 522(l), must be read independent of the state provision in order to resolve the inherent conflict between the two. There is no question that when a state law conflicts with a federal law, the former is preempted by the latter. The inconsistencies which exist between federal and state law should undoubtedly be resolved in favor of federal law. Thus, where a time limitation or a lack of time limitation in a federal provision is different from a provision in state legislation, the federal legislation controls. To hold otherwise, especially in the context of bankruptcy, would frustrate Congress’ policy of giving debtors a new start. North Carolina Baptist Hosps. v. Howell, 51 B.R. 1015, 1985 U.S. Dist. LEXIS 17252 (M.D.N.C. 1985).

North Carolina law clearly requires individual to retain both ownership and use of residence if that person is to retain a homestead exemption. North Carolina’s courts have failed to draw a distinction between bankruptcy debtors and civil judgment debtors when interpreting the statutory provision creating the homestead exemption. In re Love, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985), aff'd, 829 F.2d 1120, 1987 U.S. App. LEXIS 12374 (4th Cir. 1987).

Interest of Creditor in Goods of Debtor Who Failed to Elect Exemption. —

When debtor failed to make an election for an exemption under G.S. 1C-1601 , allowing debtor to retain $2,500 (now $3,500) worth of household goods and furnishings free from judgment, there was no unfair or deceptive practice on the part of a creditor who took a nonpossessory, nonpurchase money security interest in debtor’s household goods and furnishings, even if creditor failed to inform debtor that such an exemption was available. See Ken-Mar Fin. v. Harvey, 90 N.C. App. 362, 368 S.E.2d 646, 1988 N.C. App. LEXIS 530 (1988).

Manner of Allotment. —

Where the debtor requested that the allotment of his homestead begin at a point at the front door of his dwelling, with the result that the entire area allotted was located in the hallway adjacent to the front door of the house, the fact that the allotment was useless to the debtor and impaired the value of the remaining property available for satisfaction of the creditor’s judgment did not entitle the debtor to claim his exemption in the entire dwelling. Seeman Printery, Inc. v. Schinhan, 34 N.C. App. 637, 239 S.E.2d 744, 1977 N.C. App. LEXIS 1786 (1977) (decided under former Article 32 of Chapter 1).

Surplus Funds Arising From Foreclosure Sale. —

A debtor has a property interest in surplus funds arising from a foreclosure sale; consequently, the interest becomes property of the estate upon filing of a petition for bankruptcy and the debtor may claim exemption in it to the extent permitted by law. In re Harris, 139 B.R. 386, 1992 Bankr. LEXIS 626 (Bankr. E.D.N.C. 1992).

As to consumer loan contract divesting debtor of property otherwise exempt, see Montford v. Grohman, 36 N.C. App. 733, 245 S.E.2d 219, 1978 N.C. App. LEXIS 2617 (1978) (decided under former Article 32 of Chapter 1).

Authority of District Court. —

Although no specific statute grants a district court authority, when a matter relating to exemptions is transferred, pursuant to subsection (e)(7), from the clerk to the district court, the district court must be given the same general authority granted to a superior court pursuant to G.S. 1-276. Bromhal v. Stott, 119 N.C. App. 428, 458 S.E.2d 724, 1995 N.C. App. LEXIS 479 (1995).

Jurisdiction of District Court. —

Once the issue of exemptions is properly before the district court, that court has jurisdiction to order the sale of exempt property having excess value, unless it would be more efficient to remand this issue to the clerk. Bromhal v. Stott, 119 N.C. App. 428, 458 S.E.2d 724, 1995 N.C. App. LEXIS 479 (1995).

Where debtors’ interest in two adjacent lots exceeded the amount of the available exemption debtors could not protect their entire interest in both lots; because they exhibited no intention to protect one lot at the expense of losing the lot on which their house rested and, without sacrificing the lot with their home, could not have exempted the other lot from sale, they had no standing to challenge the sale of the other lot. Hollar v. United States, 188 B.R. 539, 1995 U.S. Dist. LEXIS 13748 (M.D.N.C. 1995), aff'd, 92 F.3d 1179, 1996 U.S. App. LEXIS 25617 (4th Cir. 1996).

Findings As to Value of Stock Unsupported by Evidence. —

In a G.S. 1C-1603(e) proceeding on an objection to a debtor’s claimed exemption, a trial court failed to make sufficient findings as to how or by what methodology it concluded that the value of the debtor’s stock in a development company was zero; there was no evidence supporting the trial court’s finding that, purely as a result of pending litigation, the company had no value, and no authority permitted the trial court to base its allowance of a party’s claim of exemption on the court’s assessment of the equities between the parties rather than on the actual value of the property. Susi v. Aubin, 173 N.C. App. 608, 620 S.E.2d 682, 2005 N.C. App. LEXIS 2093 (2005).

CASE NOTES

North Carolina law clearly requires individual to retain both ownership and use of residence if that person is to retain a homestead exemption. North Carolina’s courts have failed to draw a distinction between bankruptcy debtors and civil judgment debtors when interpreting the statutory provision creating the homestead exemption. In re Love, 54 B.R. 947, 1985 U.S. Dist. LEXIS 14492 (E.D.N.C. 1985), aff'd, 829 F.2d 1120, 1987 U.S. App. LEXIS 12374 (4th Cir. 1987).

Ownership Interest Required. —

Under North Carolina law, an individual must have an ownership interest in residential property in order to claim a homestead exemption in the property. Hollar v. United States, 184 B.R. 25, 1995 Bankr. LEXIS 1185 (Bankr. M.D.N.C.), aff'd, 188 B.R. 539, 1995 U.S. Dist. LEXIS 13748 (M.D.N.C. 1995).

Controlling Effect of 11 U.S.C. § 522(f). —

There may be an inconsistency in the operation of the state exemption statute and the Bankruptcy Code due to the conditional nature of North Carolina exemptions. To the extent that there is any conflict between the operation of 11 U.S.C. § 522(f) and the state statute, the federal provision controls. In re Jackson, 55 B.R. 343, 1985 Bankr. LEXIS 4868 (Bankr. M.D.N.C. 1985).

The provision of subsection (a) of this section limiting the homestead exemption to the duration of the debtor’s actual residence in that place must not be applied in preference to the avoidance power of § 522(f) of the Bankruptcy Code. Wachovia Bank & Trust Co. v. Opperman, 943 F.2d 441, 1991 U.S. App. LEXIS 19455 (4th Cir. 1991).

CASE NOTES

Construction. —

Uniform Enforcement of Foreign Judgment Act, G.S. 1C-1701 , is not on a parity with the Full Faith and Credit Clause. DocRx, Inc. v. EMI Servs. of N.C. 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 , cert. denied, 574 U.S. 1012, 135 S. Ct. 678, 190 L. Ed. 2d 390, 2014 U.S. LEXIS 7682 (2014).

Applicability. —

Uniform Enforcement of Foreign Judgments Act, G.S. 1C-1701 et seq., did not apply to a North Carolina court giving full faith and credit to a Kentucky judgment, as action on the judgment was not being sought in North Carolina, but the judgment was being relied on as a bar to an insured’s claim against an insurer. Freeman v. Pac. Life Ins. Co., 156 N.C. App. 583, 577 S.E.2d 184, 2003 N.C. App. LEXIS 190 (2003).

Trial court erred in granting a seller’s motion for relief against a foreign judgment because the judgment was valid and enforceable in North Carolina since a Nebraska trial court properly exercised personal jurisdiction over the seller; because the seller contracted with the buyer, a Nebraska resident, to sell a car and have the car shipped to the buyer’s residence in Nebraska, the seller should not have been surprised to be haled into a Nebraska court, and the seller’s constitutional right to due process was not violated. Meyer v. Race City Classics, LLC, 235 N.C. App. 111, 761 S.E.2d 196, 2014 N.C. App. LEXIS 810 (2014).

Authenticated Foreign Judgment. —

In an action to enforce a foreign judgment under this Article of the General Statutes, in the absence of any evidence from the judgment debtor, the introduction of a properly authenticated foreign judgment is entitled the foreign judgment to full faith and credit. Lust v. Fountain of Life, Inc., 110 N.C. App. 298, 429 S.E.2d 435, 1993 N.C. App. LEXIS 456 (1993).

Presumption of Validity. —

Once a judgment creditor was entitled to a presumption that an out of state judgment was entitled to full faith and credit, the plaintiff was not required, as the defendants suggested, to bring forth evidence that none of the defenses available to defendants were valid; rather the defendants were required to bring forth evidence to rebut the presumption of validity, and, as the defendants offered no such evidence, the trial court correctly ordered that the plaintiff’s motion to enforce the judgment be allowed and ordered that the out of state judgment be given full faith and credit. Lust v. Fountain of Life, Inc., 110 N.C. App. 298, 429 S.E.2d 435, 1993 N.C. App. LEXIS 456 (1993).

Full Faith And Credit Dependent on Personal Jurisdiction. —

An Alabama default judgment was not entitled to full faith and credit because the Alabama court which entered it lacked personal jurisdiction; the plaintiffs had failed to argue in the North Carolina trial court that the service by mail was adequate, and personal service on defendants’s attorney was inadequate because it was not in writing and signed by the defendant and a credible witness. Moss v. Improved Benevolent & Practice Order of Elks of the World, 139 N.C. App. 172, 532 S.E.2d 825, 2000 N.C. App. LEXIS 810 (2000).

Grounds for Attacking Foreign Judgment. —

North Carolina court erred by denying plaintiff’s motion to enforce an Alabama judgment pursuant to the Uniform Enforcement of Foreign Judgments Act, G.S. 1C-1701 to 1C-1708, on the grounds of intrinsic fraud, misrepresentation and misconduct, because these grounds were not sufficient under the Full Faith and Credit Clause of the United States Constitution to deny enforcement of a foreign judgment; in North Carolina, the remedies available under G.S. 1A-1 , N.C. R. Civ. P. 60(b) are limited by the Full Faith and Credit Clause of the United States Constitution when a foreign judgment is at issue. Postjudgment relief from foreign judgments under Rule 60(b) is limited to the following grounds: (1) the judgment is based upon extrinsic fraud; (2) the judgment is void; or (3) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application. DOCRX, Inc. v. EMI Servs. of NC, LLC, 225 N.C. App. 7, 738 S.E.2d 199, 2013 N.C. App. LEXIS 52 (2013), aff'd on other grounds, 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 (2014).

It was error to give a judgment from the Virgin Islands Superior Court’s small claims division full faith and credit because the judgment violated a litigant’s due process rights, as the litigant had no meaningful opportunity to be heard, since the litigant was not allowed to be represented by counsel during the critical fact-finding portion of the proceeding, as the litigant was not allowed to either (1) opt out of the small claims court entirely by removing the case to a trial court that permitted representation by counsel or (2) appeal from a small claims court judgment for a trial de novo in a court that allowed representation by counsel, as the only appeal allowed did not permit taking or considering additional evidence. Tropic Leisure Corp. v. Hailey, 251 N.C. App. 915, 796 S.E.2d 129, 2017 N.C. App. LEXIS 39 , cert. denied, 138 S. Ct. 505, 199 L. Ed. 2d 385, 2017 U.S. LEXIS 7305 (2017).

North Carolina Uniform Enforcement of Foreign Judgments Act Was Satisfied. —

Law firm complied with the North Carolina Uniform Enforcement of Foreign Judgments Act, G.S. 1C-1701 et seq., in seeking to enforce a Canadian judgment as: (1) a client resided in the county where the action was filed; (2) an authenticated foreign judgment was properly filed; (3) an affidavit was filed stating that the judgment was final and unsatisfied, the amount owed, and that notice was served; and (4) the firm was not required to prove that none of the client’s defenses were valid. Maxwell Schuman & Co. v. Edwards, 191 N.C. App. 356, 663 S.E.2d 329, 2008 N.C. App. LEXIS 1310 (2008).

Defenses Preserved Under Act. —

Defenses preserved under North Carolina’s Uniform Enforcement of Foreign Judgments Act are limited by the Full Faith and Credit Clause of the United States to those defenses directed to the validity and enforcement of a foreign judgment. DocRx, Inc. v. EMI Servs. of N.C. 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 , cert. denied, 574 U.S. 1012, 135 S. Ct. 678, 190 L. Ed. 2d 390, 2014 U.S. LEXIS 7682 (2014).

CASE NOTES

“Foreign Judgment.” —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

CASE NOTES

This section specifically sets out how and where the judgment must be filed, and the specific documents which must be served on the defendant, in G.S. 1C-1704(a) . Sun Bank/South Fla. v. Tracy, 104 N.C. App. 608, 410 S.E.2d 509, 1991 N.C. App. LEXIS 1094 (1991).

This Act’s 30 day limitation is a “waiting period”—a restriction on when plaintiff creditors may act and not on when defendant debtors may not; the 30 day limitation period is not one barring a defendant debtor’s response but instead the limitation period is specifically set to bar a plaintiff creditor from obtaining a foreign judgment against one of our state’s citizens and then immediately (within 30 days) being able to enforce it without that defendant debtor being afforded the notice required by due process. Security Credit Leasing, Inc. v. D.J.'s of Salisbury, Inc., 140 N.C. App. 521, 537 S.E.2d 227, 2000 N.C. App. LEXIS 1212 (2000).

Authenticated Foreign Judgment. —

In an action to enforce a foreign judgment under this Article of the General Statutes, in the absence of any evidence from the judgment debtor, the introduction of a properly authenticated foreign judgment entitled the foreign judgment to full faith and credit. Lust v. Fountain of Life, Inc., 110 N.C. App. 298, 429 S.E.2d 435, 1993 N.C. App. LEXIS 456 (1993).

Enforcement of Foreign Judgments. —

Foreign judgment that the judgment creditor obtained in New York was entitled to a presumption that the judgment was entitled to full faith and credit, as the judgment creditor met its burden of showing that entitlement by filing a properly authenticated judgment; however, the general contractor timely moved for relief from the foreign judgment by raising the defense that the New York trial court that entered it did not have personal jurisdiction over the general contractor, and because the trial court did not make any findings of fact or conclusions of law regarding the motion to enforce the judgment, the conclusion that the foreign judgment was enforceable in North Carolina was not supported by competent evidence and the case had to be remanded to the trial court for further proceedings. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

North Carolina court erred by denying plaintiff’s motion to enforce an Alabama judgment on the grounds of intrinsic fraud, misrepresentation and misconduct, because these grounds were not sufficient under the Full Faith and Credit Clause of the United States Constitution to deny enforcement of a foreign judgment; the trial court erred by determining that G.S. 1C-1703(c) entitled defendant to raise against enforcement of the Alabama judgment the same defenses as a judgment of North Carolina, because the remedies available under G.S. 1A-1 , N.C. R. Civ. P. 60(b) were limited by the Full Faith and Credit Clause. Plaintiff’s motion to enforce the foreign judgment should have been denied only if (1) the judgment was based upon extrinsic fraud; (2) it was void; (3) had been satisfied or prospective enforcement was no longer equitable. DOCRX, Inc. v. EMI Servs. of NC, LLC, 225 N.C. App. 7, 738 S.E.2d 199, 2013 N.C. App. LEXIS 52 (2013), aff'd on other grounds, 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 (2014).

Alabama judgment was final and enforceable in Alabama when it was filed in North Carolina, plaintiff’s claim had been conclusively determined in Alabama, and the Alabama judgment was entitled to the same credit in North Carolina that it would have been accorded in Alabama. DocRx, Inc. v. EMI Servs. of N.C. 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 , cert. denied, 574 U.S. 1012, 135 S. Ct. 678, 190 L. Ed. 2d 390, 2014 U.S. LEXIS 7682 (2014).

Trial court erred in granting a seller’s motion for relief against foreign judgment because the judgment was valid and enforceable in North Carolina since a Nebraska trial court properly exercised personal jurisdiction over the seller; because the seller contracted with the buyer, a Nebraska resident, to sell a car and have the car shipped to the buyer’s residence in Nebraska, the seller should not have been surprised to be haled into a Nebraska court, and the seller’s constitutional right to due process was not violated. Meyer v. Race City Classics, LLC, 235 N.C. App. 111, 761 S.E.2d 196, 2014 N.C. App. LEXIS 810 (2014).

Pennsylvania judgment was entitled to full faith and credit because a properly authenticated copy of the judgment was filed with the Clerk of Superior Court of Dare County, thereby causing a presumption of validity to be raised; the debtor failed to present any evidence, either through a properly and timely filed sworn affidavit, or through evidence or testimony under oath at the hearing, to overcome the presumption. Counsel’s argument that the Pennsylvania court allegedly lacked personal jurisdiction over the debtor was not evidence. Rossi v. Spoloric, 244 N.C. App. 648, 781 S.E.2d 648, 2016 N.C. App. LEXIS 48 (2016).

It was error to give a judgment from the Virgin Islands Superior Court’s small claims division full faith and credit because the judgment violated a litigant’s due process rights, as the litigant had no meaningful opportunity to be heard, since the litigant was not allowed to be represented by counsel during the critical fact-finding portion of the proceeding, as the litigant was not allowed to either (1) opt out of the small claims court entirely by removing the case to a trial court that permitted representation by counsel or (2) appeal from a small claims court judgment for a trial de novo in a court that allowed representation by counsel, as the only appeal allowed did not permit taking or considering additional evidence. Tropic Leisure Corp. v. Hailey, 251 N.C. App. 915, 796 S.E.2d 129, 2017 N.C. App. LEXIS 39 , cert. denied, 138 S. Ct. 505, 199 L. Ed. 2d 385, 2017 U.S. LEXIS 7305 (2017).

Tribal court order finding children were tribal court wards and the children’s aunt was the children’s Indian custodian was not entitled to full faith and credit because (1) the order was not authenticated and filed with a superior court clerk with an affidavit attesting the order was final and unsatisfied in whole or in part, under the Uniform Enforcement of Foreign Judgments Act, and (2) the order’s entry violated due process, as neither the children’s custodians nor the children had notice or an opportunity to be heard in the tribal court. In re Adoption of K.L.J., 266 N.C. App. 289, 831 S.E.2d 114, 2019 N.C. App. LEXIS 604 (2019).

When a foreign money judgment is filed in compliance with G.S. 1C-1703 and G.S. 1C-1704 , this created a new judgment, subject to 10-year enforcement period as well as the running of any statute of limitations to enforce the new judgment, which each begin to run upon the filing of the foreign judgment in North Carolina. Trial court properly concluded the enforcement period began to run on the day the foreign judgments were properly filed and they remained enforceable. Nielson v. Schmoke, 2021-NCCOA-400, 278 N.C. App. 656, 863 S.E.2d 652, 2021- NCCOA-400, 2021 N.C. App. LEXIS 409 (2021).

Defenses Under Act. —

Language that a foreign judgment has the same effect and is subject to the same defenses as a judgment of the state and shall be enforced or satisfied in like manner does not refer to defenses on the merits but rather refers to defenses directed at the enforcement of a foreign judgment. DocRx, Inc. v. EMI Servs. of N.C. 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 , cert. denied, 574 U.S. 1012, 135 S. Ct. 678, 190 L. Ed. 2d 390, 2014 U.S. LEXIS 7682 (2014).

CASE NOTES

Service and proof of service of the notice may be made in any manner provided for in Rule 4(j) of the Rules of Civil Procedure. Sun Bank/South Fla. v. Tracy, 104 N.C. App. 608, 410 S.E.2d 509, 1991 N.C. App. LEXIS 1094 (1991).

Enforcement of Foreign Judgments. —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

When a foreign money judgment is filed in compliance with G.S. 1C-1703 and G.S. 1C-1704 , this created a new judgment, subject to 10-year enforcement period as well as the running of any statute of limitations to enforce the new judgment, which each begin to run upon the filing of the foreign judgment in North Carolina. Trial court properly concluded the enforcement period began to run on the day the foreign judgments were properly filed and they remained enforceable. Nielson v. Schmoke, 2021-NCCOA-400, 278 N.C. App. 656, 863 S.E.2d 652, 2021- NCCOA-400, 2021 N.C. App. LEXIS 409 (2021).

When a foreign money judgment is filed in compliance with G.S. 1C-1703 and G.S. 1C-1704 , this created a new judgment, subject to 10-year enforcement period as well as the running of any statute of limitations to enforce the new judgment, which each begin to run upon the filing of the foreign judgment in North Carolina. Trial court properly concluded the enforcement period began to run on the day the foreign judgments were properly filed and they remained enforceable. Nielson v. Schmoke, 2021-NCCOA-400, 278 N.C. App. 656, 863 S.E.2d 652, 2021- NCCOA-400, 2021 N.C. App. LEXIS 409 (2021).

This Act’s 30 day limitation is a “waiting period”—a restriction on when plaintiff creditors may act and not on when defendant debtors may not; the 30 day limitation period is not one barring a defendant debtor’s response but instead the limitation period is specifically set to bar a plaintiff creditor from obtaining a foreign judgment against one of our state’s citizens and then immediately (within 30 days) being able to enforce it without that defendant debtor being afforded the notice required by due process. Security Credit Leasing, Inc. v. D.J.'s of Salisbury, Inc., 140 N.C. App. 521, 537 S.E.2d 227, 2000 N.C. App. LEXIS 1212 (2000).

CASE NOTES

Grounds for Attacking Foreign Judgment. —

A judgment of another state may be attacked in this state only on grounds of fraud, public policy, or lack of jurisdiction. Reinwand v. Swiggett, 107 N.C. App. 590, 421 S.E.2d 367, 1992 N.C. App. LEXIS 763 (1992).

Once a creditor establishes, under G.S. 1C-1705(b) , that a foreign judgment is entitled to full faith and credit, the judgment may only be attacked on the grounds of fraud, public policy, or lack of jurisdiction; no authority permitted a district court to base its allowance of a party’s claim of exemption on the court’s assessment of the equities between the parties rather than on the actual value of the property. Susi v. Aubin, 173 N.C. App. 608, 620 S.E.2d 682, 2005 N.C. App. LEXIS 2093 (2005).

North Carolina court erred by denying plaintiff’s motion to enforce an Alabama judgment under G.S. 1C-1705(a) on the grounds of intrinsic fraud, misrepresentation and misconduct, because these grounds were not sufficient under the Full Faith and Credit Clause of the United States Constitution to deny enforcement of a foreign judgment; in North Carolina, the remedies available under G.S. 1A-1 , N.C. R. Civ. P. 60(b) are limited by the Full Faith and Credit Clause of the United States Constitution when a foreign judgment is at issue. Postjudgment relief from foreign judgments under Rule 60(b) is limited to the following grounds: (1) the judgment is based upon extrinsic fraud; (2) the judgment is void; or (3) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application. DOCRX, Inc. v. EMI Servs. of NC, LLC, 225 N.C. App. 7, 738 S.E.2d 199, 2013 N.C. App. LEXIS 52 (2013), aff'd on other grounds, 367 N.C. 371 , 758 S.E.2d 390, 2014 N.C. LEXIS 407 (2014).

Judicial Review of Foreign Judgment. —

Review of the jurisdiction of a court rendering a judgment is limited to determining if the issues were indeed fully and fairly litigated. Reinwand v. Swiggett, 107 N.C. App. 590, 421 S.E.2d 367, 1992 N.C. App. LEXIS 763 (1992).

Enforcement of Foreign Judgments. —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

Illinois judgment was enforceable in North Carolina, because plaintiff met its burden of proving that the foreign judgment was entitled to full faith and credit by attaching an authenticated copy of the Illinois judgment to its notice of filing foreign judgment and defendant failed to rebut that presumption. Seal Polymer Industries-Bhd v. Med-Express, Inc., USA, 218 N.C. App. 447, 725 S.E.2d 5, 2012 N.C. App. LEXIS 202 (2012).

Trial court lacked authority under the Uniform Enforcement of Foreign Judgments Act to award a judgment creditor damages in excess of the amount in a consent judgment from a Michigan bankruptcy court, as a stipulation between the parties that indicated that the amount could be modified was not made part of the judgment. Lumbermans Fin., LLC v. Poccia, 228 N.C. App. 67, 743 S.E.2d 677, 2013 N.C. App. LEXIS 678 (2013).

It was error to give a judgment from the Virgin Islands Superior Court’s small claims division full faith and credit because the judgment violated a litigant’s due process rights, as the litigant had no meaningful opportunity to be heard, since the litigant was not allowed to be represented by counsel during the critical fact-finding portion of the proceeding, as the litigant was not allowed to either (1) opt out of the small claims court entirely by removing the case to a trial court that permitted representation by counsel or (2) appeal from a small claims court judgment for a trial de novo in a court that allowed representation by counsel, as the only appeal allowed did not permit taking or considering additional evidence. Tropic Leisure Corp. v. Hailey, 251 N.C. App. 915, 796 S.E.2d 129, 2017 N.C. App. LEXIS 39 , cert. denied, 138 S. Ct. 505, 199 L. Ed. 2d 385, 2017 U.S. LEXIS 7305 (2017).

Contesting Jurisdictional Issues. —

For full faith and credit purposes, appearing specially to contest jurisdictional issues constitutes litigation of those issues. Reinwand v. Swiggett, 107 N.C. App. 590, 421 S.E.2d 367, 1992 N.C. App. LEXIS 763 (1992).

Foreign judgment that the judgment creditor obtained in New York was entitled to a presumption that the judgment was entitled to full faith and credit, as the judgment creditor met its burden of showing that entitlement by filing a properly authenticated judgment; however, the general contractor timely moved for relief from the foreign judgment by raising the defense that the New York trial court that entered it did not have personal jurisdiction over the general contractor, and because the trial court did not make any findings of fact or conclusions of law regarding the motion to enforce the judgment, the conclusion that the foreign judgment was enforceable in North Carolina was not supported by competent evidence and the case had to be remanded to the trial court for further proceedings. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).

Superior court properly determined that a New York judgment was not enforceable against a debtor because of a lack of personal jurisdiction over the debtor, and a creditor failed to challenge this conclusion of law. Hence, the superior court properly determined that the debtor rebutted the presumption that the North Carolina Courts should grant full faith and credit to the New York judgment. Orix Fin. Servs. v. Raspberry Logging, Inc., 190 N.C. App. 657, 660 S.E.2d 609, 2008 N.C. App. LEXIS 1012 (2008).

Contractual Provisions Prevented Surety from Claiming Lack of Personal Jurisdiction. —

The Virginia court had personal jurisdiction over the defendant/surety who executed a contract guaranteeing immediate payment if the corporation failed to satisfy the debt owed the plaintiff and affirming the plaintiff’s forum clause. United Leasing Corp. v. Plumides, 138 N.C. App. 696, 531 S.E.2d 891, 2000 N.C. App. LEXIS 793 (2000).

Where Jurisdiction Fully and Fairly Litigated. —

Upon a finding that the issue of jurisdiction was fully and fairly litigated, constitutional federal principles preclude their relitigation elsewhere. Reinwand v. Swiggett, 107 N.C. App. 590, 421 S.E.2d 367, 1992 N.C. App. LEXIS 763 (1992).

Where the issue of personal jurisdiction was fully and fairly litigated in the Alaska court, defendant was precluded from relitigating the issue in the courts of North Carolina. Reinwand v. Swiggett, 107 N.C. App. 590, 421 S.E.2d 367, 1992 N.C. App. LEXIS 763 (1992).

Alaska Judgment. —

For a case holding that plaintiff met his burden of proving that a judgment of the state courts of Alaska was entitled to full faith and credit, see Reinwand v. Swiggett, 107 N.C. App. 590, 421 S.E.2d 367, 1992 N.C. App. LEXIS 763 (1992).

Florida Judgment. —

Creditor’s 2006 motion under the Uniform Enforcement of Foreign Judgments Act (UEFJA) to register a 2005 Florida judgment against the debtors in North Carolina was timely filed within the 10-year period under G.S. 1-47 because the creditor timely filed a new action in Florida in 2005 in accordance with the 20-year period under Fla. Stat. § 95.11(1) to start the limitation period anew, the creditor’s 1990 judgment was extinguished by the 2005 judgment, and the UEFJA action was based on the 2005 judgment and not the 1990 judgment. Palm Coast Recovery Corp. v. Moore, 184 N.C. App. 550, 646 S.E.2d 438, 2007 N.C. App. LEXIS 1466 (2007).

Texas Judgment. —

Trial court properly granted motion to enforce Texas judgment as a North Carolina judgment where the Texas judgment was well within the time limitation for enforcement of foreign judgments and the Texas judgment merely apportioned damages between parties and was not a separate action for contribution. In re Aerial Devices, Inc., 126 N.C. App. 709, 486 S.E.2d 463, 1997 N.C. App. LEXIS 602 (1997).

Trial court’s factual findings on judgment debtor’s claim that judgment debtor did not sign an agreed judgment which a corporation filed in Texas and sought to enforce in North Carolina were insufficient and the appellate court vacated the trial court’s judgment in favor of the judgment debtor and remanded the case for further proceedings. HCA Health Servs. of Tex., Inc. v. Reddix, 151 N.C. App. 659, 566 S.E.2d 754, 2002 N.C. App. LEXIS 876 (2002).

Defendants Not Entitled to Stay to Enforce Texas Judgment. —

Under G.S. 1C-1705(a) , in order to stay North Carolina proceedings to enforce a Texas judgment, defendants had to show that a Texas court had stayed the judgment, or that an appeal was pending in the Texas court and defendants had posted a bond in North Carolina. As defendants did none of these things, they were not entitled to a stay. Mineola Cmty. Bank, S.S.B. v. Everson, 186 N.C. App. 668, 652 S.E.2d 369, 2007 N.C. App. LEXIS 2306 (2007).

CASE NOTES

Foreign Judgment Registered in Federal Court. —

Registering a foreign federal judgment in federal court in North Carolina did not overrule the prior determination of the North Carolina courts that the judgment which awarded punitive damages in excess of the amount permitted by North Carolina law was unenforceable in North Carolina courts as violative of public policy. Anderson v. Wade, 2008 U.S. Dist. LEXIS 28537 (W.D.N.C. Mar. 27, 2008), aff'd in part, vacated in part, 322 Fed. Appx. 270, 2008 U.S. App. LEXIS 24772 (4th Cir. 2008).

Official Comment

1. “Action.” A suit or arbitration may be legal or equitable in nature, but it must be based on a pecuniary claim.
2. “Bank-offered spot rate” is the rate at which a bank will sell the requisite amount of foreign money for immediate or nearly immediate use by the buyer.
3. “Conversion date.” Exchange rates may fluctuate from day to day. A date must be picked for calculating the value of foreign money in terms of United States dollars. As used in the Act, “conversion date” means the day before a foreign-money claim is paid or set-off. The day refers to the time period of the place of the payor, not necessarily that of the recipient. The exchange rate prevailing at or near the close of business on the banking day before the day payment is made will be well known at the time of payment. See Comment 2 to Section 7.
4. “Distribution proceeding.” In keeping with the concept underlying Section 2, the coverage of this statute is limited to judicial actions and nonjudicial proceedings which involve the creation of a fund from which pro-rata distributions are made to claimants. As provided in Section 8, a different conversion date is required where either input to or outgo from a fund involves two or more different moneys. Thus, the term includes a mortgage foreclosure proceeding, judicial or under a trust deed, distribution of property in divorce and child support proceedings, distributions in the administration of a trust or a decedent’s estate, an assignment for the benefit of creditors, an equity receivership, a liquidation by a statutory successor, a voluntary dissolution of a business or a nonprofit enterprise or the like when in each case a fund must be shared among claimants and where, usually, the fund will not satisfy all claimants of the same class. An asset or a liability of the fund must also involve one or more foreign-money claims, but not all of the claims can be in the same money.
5. “Foreign money.” Since only the federal government has the power to coin money and regulate the value thereof, the term “foreign” means a government other than that of the United States of America. Special Drawing Rights of the International Monetary Fund are foreign money even though the United States is a member of the Fund. Foreign governments included are all those whose moneys are, in the currency markets of the world, exchangeable for the money of other currencies even though the government is not recognized by the United States.
6. “Foreign-money claim.” The term “claim” is not limited to any one party to an action or a distribution proceeding and may be asserted by a plaintiff or a defendant or by a party to an arbitration or distribution proceeding. It may be based on a foreign judgment, or sound in contract, quasi-contract, or tort.
7. “Money.” The definition includes composite currencies such as European Currency Units created by agreement of the governments that are members of the European Monetary System or the Special Drawing Rights created under the auspices of the International Money Fund. These are “stores of value” used to determine the quantity of payment in some international transactions.
8. “Money of the claim.” See Section 4 and the Comment thereto.
9. “Party.” This combines the Uniform Commercial Code’s definitions of “person” and “organization,” but is limited to those who are parties to transactions or involved in events which could give rise to a foreign-money claim.
10. “Rate of Exchange.” A free market rate is to be used rather than an official rate if both exist. Some countries have transactional differences in exchange rates with slightly different rates; for example, in Belgium one rate prevails for commercial and another for financial transactions. Both rates are recognized in money market transactions. The last sentence of the definition indicates that the rate appropriate to the transaction is the rate to be used.
11. “Spot rate” is the term used in the financial markets of the United States for the rate of exchange for immediate or nearly immediate transfers from one money to another, as distinguished from the rates for future options or future deliveries.
12. “State.” The definition, as in other Uniform Laws, is extended to include areas given the same, or nearly the same, treatment in law as the states.

In the foreign exchange markets, as in the stock markets, quotations are either “bid” or “ask,” and the spread between is where the dealer makes a profit. An “offered spot rate” is the rate at which the offeror will sell the particular money. It is, of course, higher than the rate at which that person will buy the same money. “Spot” refers to the time the trade is made, not the time for settlement, which in spot transactions is often two days after the date of the trade.

Official Comment

Under the rules of the conflict of laws, the determination of when a foreign money is converted to United States dollars is generally considered a procedural matter for the law of the forum. Subsection (b) removes any doubt.

Official Comment

1. A basic policy of the Act is to preserve freedom of contract and to permit parties to resolve disputed matters by contract at any time, even as to choice of law problems. The parties may agree upon the date and time for conversion. After entry of judgment the parties may agree upon how the judgment is to be satisfied.
2. Subsection (b) covers cases where, for example, claims for petroleum may be settled in United States dollars but settlement for joint costs of exploration may be in pounds sterling. The parties also may agree on the money to be used for damages. The second sentence recognizes that a price stated in a particular money does not indicate, without more evidence, an intent that all damages from breach are to be in the same money. The principle of freedom of contract allows the parties to allocate the risks of currency fluctuations between foreign moneys as they desire. Sections 4 and 5 provide rules in the absence of special agreements by the parties for determining the money to be used. Parties may by agreement select a particular market or foreign exchange dealer to be used for exchange purposes.

Official Comment

1. Subsection (a) uses “payment” in a broad sense not related to just the price, but to any obligation arising out of a contract to transfer money. See also Section 3(b).
2. Subsection (b) states rules to fill gaps in the agreement of the parties with rules as to the allocation of risks of fluctuations in exchange rates. The three rules will normally apply in the order stated. Prior dealings may indicate the desired money. If there are none, it is appropriate to use the money indicated by trade usage or custom for transactions of like kind. The final rule of subsection (a) is one established in English cases. See The Despina R and the Folias (1979) A.C. 685. An example is the use of an operating account in United States dollars by a French company to buy Japanese yen for ship repairs; the loss is felt in the depletion of the dollar bank account. Appropriateness of a rule is to be determined by the judge from the facts of the case. See Section 6(d).

Official Comment

1. Subsections (a) and (b) cover different interpretation problems. One arises where the amount of the money to be paid is measured by another money, one of which is foreign. An example is “pay 5,000 Swiss francs in pounds sterling.” The issue is the time at which the rate of exchange into pounds sterling is to be applied. Subsection (a) says in a “measured by” situation with no rate specified, the rate of exchange that controls is the one prevailing at or near the close of business on the day before the day of payment. See Section 1(2), the definition of “conversion date.”
2. Another problem arises when an exchange rate in effect before a default is used, as in “pay on November 30, 1989, 5,000 Swiss francs in pounds sterling at the exchange rate prevailing on June 30, 1989.” In this case, the issue is how long does the specified exchange rate control in the absence of a clear expression of intent?
3. The most common application of subsection (c) will be found in international loan transactions. For example, a loan by a Japanese bank to an American company could be made with dollars purchased by yen for the purpose. The loan agreement could provide for repayment in dollars of an amount which, when received by the lender, would repurchase the amount of yen used to acquire the dollars advanced.

Inclusion of a fixed rate as of a date before default, under subsection (b), remains effective only if payment is made within a reasonable time after default, not to exceed 30 days. The 30-day limitation accords usually with the expectation of the parties. Parties may agree to a longer time.

An exemption is needed from the application of usury laws that may be interpreted to hold that the indexing of the principal amount creates additional interest. See Aztec Properties, Inc. v. Union Planters National Bank , 530 S.W.2d 756 (Tenn. Sup. Ct. 1975). The subsection removes all doubts as to the legal enforceability of such agreements under theories such as usury, merger in a judgment, unconscionability, or the like.

Official Comment

1. Subsection (a) covers not only the claim of a plaintiff but also the assertion by a defendant of a defense, set-off, or counterclaim. Subsection (b) provides that the money asserted as the money of its defenses by the defendant need not be the same as that of the plaintiff.
2. The money to be used as the money of the claim is a threshold issue to be determined, if contested, by the court after any factual issues as to expenditures, custom, usage, or course of dealing are decided. See subsection (b). If a payment is made or a debt incurred in a money other than that in which the loss was felt, the party asserting the foreign-money claim should establish the amount of the money of the claim used to procure the money of expenditure and the applicable exchange rate used.
3. Judgments may be entered in more than one money when dealings impact on more than one area. An inn-keeper in Mexico, for example, in taking in customers from many countries, should be held to foresee that treatment for injuries at the inn would occur not only in Mexico, but also in the native land of the injured party or in a third country.

Official Comment

1. Subsection (a) changes a number of statutes in the states which can be construed to require all values in legal proceedings to be expressed in United States dollars. Professor Brand, in his article in the Yale Journal of International Law, Vol. 11:139 at page 169, identified 18 states having statutes which could require all judgments to be entered in dollars. They are Arkansas, California, Idaho, Iowa, Louisiana, Maryland, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin. Brand, ibid. fn. 166. Hence, direct statutory authority must be given the courts in those states, and will be helpful in other states. In some states other statutes may need amendments. See, e.g., Wisc. Stats. §§ 138.01, 138.02, 138.03, and 779.05.
2. Subsection (d) gives defendants the option of paying in dollars which are, at the payment date, practically the economic equivalent of the foreign money awarded. The judgment creditor should be indifferent to whether the debtor exercises the right to pay in dollars as the only difference is a small bank charge for exchanging the dollars for the foreign money. The concept of the rate of the banking day next before the payment day is taken from Section 131 of the Province of Ontario, Canada, Courts of Justice Act (Ch. 11 Ont. Stats. (1984) as recently amended). It gives the defendant and the sheriff conducting the sale the necessary conversion rate comfortably ahead of its use. Newspaper quotations are usually said to be ‘at or near the close of business’ on the stated date, so that phrase is used in this Act.
3. Subsection (e) provides for netting the affirmative recoveries of a defendant and plaintiff, whether in the same money or in different moneys, but preserving the quantum of each for appellate purposes. The theory is that when claims are reduced to money, they become mutual debts and should be set-off, so that a person’s exchange rate fluctuation risk continues only for the surplus in its money of the claim. The set-off is made by the judge or arbitrator.
4. The form of judgment in subsection (f) should be varied appropriately where the money to be paid is measured by a foreign money. See Section 5.

Official Comment

All claims must be in the same money when determining aliquot shares in a distribution proceeding. The Act requires use of the date the proceeding was initiated for applying the exchange rate to convert foreign-money claims into United States dollars. See Re Lines Bros. Ltd. , (1982) 2 All E.R. 99. A claim may be amended to show the proper conversion rate and the proper amount of United States dollars.

Official Comment

1. As to pre-judgment interest, the Act adopts the majority rule in the United States that pre-judgment interest follows the substantive law of the case under conflict of laws rules, both as to the right to recover and the rate. English courts use a different rule, i.e., the borrowing rate used by plaintiff or prevailing in the country issuing the money of the judgment. See Helmsing Schiffarts G.M.B.H. v. Malta Drydock Corp. (1977) 2 Lloyd’s Rep. 44 (Maltese money but borrowed in West Germany; German rate); Miliangos v. George Frank (Textiles) Ltd. (No. 2) (1976) 1 QB 487 at 489 (Swiss money, Swiss interest rate). Although pre-judgment interest is one form of damages, provision for pre- judgment interest is not to be taken as indicating that no other damages for delay in payment can be awarded under the substantive law applicable to the determination of damages. Cf. Isaac Naylor & Sons, Ltd. v. New Zealand Co-operative Wool Marketing Association, Ltd. (1981) 1 N.Z.L.R. 361 (exchange loss due to delay as additional damages).
2. Allowances of pre-judgment interest in some states depend upon a party’s conduct with respect to settlement or delay of the proceeding. Subsection (b) treats these state laws as either procedural in nature or expressions of a significant policy, in either case to be governed by the law of the forum state.
3. Interest on a judgment is considered to be procedural and also goes by the law of the forum. There is a problem here in that there is great discrepancy among the states in the rates for judgment interest. When a judgment is in a foreign money, United States interest rates may result in some overcompensation or undercompensation as compared to what would be awarded in the jurisdiction issuing the foreign money. But in both the United States and in foreign countries, most jurisdictions have fixed statutory rates that do not readily respond to the inflation or deflation of the value of their money in the world market. Hence it was decided to apply the usual rules of the conflict of laws.

Official Comment

1. Some states have special acts that simply cover the recognition, entry, and enforcement of foreign judgments. Common law enforcement is by action. Subsection (a) refers to the common law method; it is subject to subsection (b) which refers to statutory procedures. Subsection (c) applies to both procedures.
2. Subsection (d) avoids constitutional issues under the full faith and credit clause by requiring that judgments of sister states be enforced as entered in the sister state.

Editor’s Note.

The subsection references in the Official Comments no longer correspond to provisions in this section following the redesignation of the former subsections as the present subdivisions by Session Laws 2020-69, s. 1.

Effect of Amendments.

Session Laws 2020-69, s. 1, effective July 1, 2020, substituted “20” for “18” in the introductory language, and redesignated former subsections (a) through (d) as subdivisions (1) through (4).

Official Comment

This section protects those who must determine how much should be held subject to a levy or other collection process or what the dollar amount of a supersedeas or other surety bond should be. If the judgment debtor is damaged by a gross overstatement of the dollar amount in the affidavit or certificate of counsel for the judgment creditor or the bank officer, recovery should be against that person.

Official Comment

1. Subsection (a) refers to situations in which a country authorizes the issue of a new money to take the place of the old money at a stated ratio. An example is Brazil’s recent abolition of cruzieros for cruzados. The subsection mandates that foreign money claims should be subjected to the same ratio.
2. The Act takes no position on the effect of money repudiations or revalorizations so drastic as to be, in effect, confiscations. Remedy, if any, for these is usually found through diplomatic channels. Equally, the Act takes no position on the effect of exchange control laws. The effect, if any, on obligations to pay is left to other law.

Official Comment

The section is taken from Section 1-103 of the Uniform Commercial Code.

Official Comment

Source: This section is an updated version of Section 9 of the Uniform Foreign Money-Judgments Recognition Act of 1962.

North Carolina Comment

This Article is based on the Uniform Foreign-Country Money Judgments Recognition Act (hereinafter “the Uniform Act”) as approved in 2005 by the National Conference of Commissioners on Uniform State Laws. The General Statutes Commission inserted “North Carolina” in the title and short title of the Article because of variations made to the text of the Uniform Act.

Two types of comments appear. The Comments prepared by the Uniform Law Commissioners appear under the designation “Official Comment.” Under the designation “North Carolina Comment” are the comments of the General Statutes Commission, which adapted the Uniform Act for enactment in North Carolina. The North Carolina Comments are designed primarily to note deviations from the Uniform Act.

Editor’s Note.

Session Laws 2009-325, s. 4, made this Article effective October 1, 2009, and applicable to all actions commenced on or after that date in which the issue of recognition of a foreign-country judgment is raised.

Session Laws 2009-325, s. 3, provides: “The Revisor of Statutes shall cause to be printed along with this act all relevant portions of the official comments to the Uniform Foreign-Country Money Judgments Recognition Act and all explanatory comments of the drafters of this act as the Revisor deems appropriate.”

Official comments, copyright 2005 are reprinted with permission granted by the National Conference of Commissioners on Uniform State Laws. It is believed that the Official Comments will prove of value to the practitioner in understanding and applying the text of this Chapter.

Official Comment

Source: This section is derived from Section 1 of the Uniform Foreign Money-Judgments Recognition Act of 1962.

1. The defined terms “foreign state” and “foreign judgment” in the 1962 Act have been changed to “foreign country” and “foreign-country judgment” in order to make it clear that the Act does not apply to recognition of sister-state judgments. Some courts have noted that the “foreign state” and “foreign judgment” definitions of the 1962 Act have caused confusion as to whether the Act should apply to sister-state judgments because “foreign state” and “foreign judgment” are terms of art generally used in connection with recognition and enforcement of sister-state judgments. See, e.g., Eagle Leasing v. Amandus, 476 N.W.2d 35 (S.Ct. Iowa 1991) (reversing lower court’s application of UFMJRA to a sister-state judgment, but noting lower court’s confusion was understandable as “foreign judgment” is term of art normally applied to sister-state judgments). See also, Uniform Enforcement of Foreign Judgments Act § 1 (defining “foreign judgment” as the judgment of a sister state or federal court).
2. The definition of “foreign-country judgment” in this Act differs significantly from the 1962 Act’s definition of “foreign judgment.” The 1962 Act’s definition served in large part as a scope provision for the Act. The part of the definition defining the scope of the Act has been moved to section 3, which is the scope section.
3. The definition of “foreign-country judgment” in this Act refers to “a judgment” of “a court” of the foreign country. The foreign-country judgment need not take a particular form — any order or decree that meets the requirements of this section and comes within the scope of the Act under Section 3 is subject to the Act. Similarly, any competent government tribunal that issues such a “judgment” comes within the term “court” for purposes of this Act. The judgment, however, must be a judgment of an adjudicative body of the foreign country, and not the result of an alternative dispute mechanism chosen by the parties. Thus, foreign arbitral awards and agreements to arbitrate are not covered by this Act. They are governed instead by federal law, Chapter 2 of the U.S. Arbitration Act, 9 U.S.C. §§ 201-208, implementing the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Chapter 3 of the U.S. Arbitration Act, 9 U.S.C. §§ 301-307, implementing the Inter-American Convention on International Commercial Arbitration. A judgment of a foreign court confirming or setting aside an arbitral award, however, would be covered by this Act.
4. The definition of “foreign-country judgment” does not limit foreign-country judgments to those rendered in litigation between private parties. Judgments in which a governmental entity is a party also are included, and are subject to this Act if they meet the requirements of this section and are within the scope of the Act under Section 3.

The 1962 Act defines a “foreign state” as “any governmental unit other than the United States, or any state, district, commonwealth, territory, insular possession thereof, or the Panama Canal Zone, the Trust Territory of the Pacific Islands, or the Ryuku Islands.” Rather than simply updating the list in the 1962 Act’s definition of “foreign state,” the new definition of “foreign country” in this Act combines the “listing” approach of the 1962 Act’s “foreign state” definition with a provision that defines “foreign country” in terms of whether the judgments of the particular government’s courts are initially subject to the Full Faith and Credit Clause standards for determining whether those judgments will be recognized. Under this new definition, a governmental unit is a “foreign country” if it is (1) not the United States or a state, district, commonwealth, territory or insular possession of the United States; and (2) its judgments are not initially subject to Full Faith and Credit Clause standards.

The Full Faith and Credit Clause, Art. IV, section 1, provides that “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.” Whether the judgments of a governmental unit are subject to the Full Faith and Credit Clause may be determined by judicial interpretation of the Full Faith and Credit Clause or by statute, or by a combination of these two sources. For example, pursuant to the authority granted by the second sentence of the Full Faith and Credit Clause, Congress has passed 28 U.S.C.A. § 1738, which provides inter alia that court records from “any State, Territory, or Possession of the United States” are entitled to full faith and credit under the Full Faith and Credit Clause. In Stoll v. Gottlieb , 305 U.S. 165, 170 (1938), the United States Supreme Court held that this statute also requires that full faith and credit be given to judgments of federal courts. States also have made determinations as to whether certain types of judgments are subject to the Full Faith and Credit Clause. E.g. Day v. Montana Dept. Of Social & Rehab. Servs., 900 P.2d 296 (Mont. 1995) (tribal court judgment not subject to Full Faith and Credit, and should be treated with same deference shown foreign-country judgments). Under the definition of “foreign country” in this Act, the determination as to whether a governmental unit’s judgments are subject to full faith and credit standards should be made by reference to any relevant law, whether statutory or decisional, that is applicable “in this state.”

The definition of “foreign country” in terms of those judgments not subject to Full Faith and Credit standards also has the advantage of more effectively coordinating the Act with the Uniform Enforcement of Foreign Judgments Act. That Act, which establishes a registration procedure for the enforcement of sister state and equivalent judgments, defines a “foreign judgment” as “any judgment, decree, or order of a court of the United States or of any other court which is entitled to full faith and credit in this state.” Uniform Enforcement of Foreign Judgments Act, § 1 (1964). By defining “foreign country” in the Recognition Act in terms of those judgments not subject to full faith and credit standards, this Act makes it clear that the Enforcement Act and the Recognition Act are mutually exclusive — if a foreign money judgment is subject to full faith and credit standards, then the Enforcement Act’s registration procedure is available with regard to its enforcement; if the foreign money judgment is not subject to full faith and credit standards, then the foreign money judgment may not be enforced until recognition of it has been obtained in accordance with the provisions of the Recognition Act.

North Carolina Comment

This section is identical to Section 2 of the Uniform Act. In the definition of “foreign country,” no substantive change is intended by using the term “government” in place of the term “governmental unit” used in former G.S. 1C-1801.

CASE NOTES

Editor’s Note. —

The cases cited below were decided under the former North Carolina Foreign Money Judgments Recognition Act, G.S. 1C-1800 through G.S. 1C-1808.

“Foreign Judgment.” —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

Official Comment

Source: This section is based on Section 2 of the 1962 Act. Subsection (b) contains material that was included as part of the definition of “foreign judgment” in Section 1(2) of the 1962 Act. Subsection (c) is new.

1. Like the 1962 Act, this Act sets out in subsection 3(a) two basic requirements that a foreign-country judgment must meet before it comes within the scope of this Act — the foreign-country judgment must (1) grant or deny recovery of a sum of money and (2) be final, conclusive and enforceable under the law of the foreign country where it was rendered. Subsection 3(b) then sets out three types of foreign-country judgments that are excluded from the coverage of this Act, even though they meet the criteria of subsection 3(a) — judgments for taxes, judgments constituting fines and other penalties, and judgments in domestic relations matters. These exclusions are comparable to those contained in Section 1(2) of the 1962 Act.
2. This Act applies to a foreign-country judgment only to the extent the foreign-country judgment grants or denies recovery of a sum of money. If a foreign-country judgment both grants or denies recovery of a sum money and provides for some other form of relief, this Act would apply to the portion of the judgment that grants or denies monetary relief, but not to the portion that provides for some other form of relief. The U.S. court, however, would be left free to decide to recognize and enforce the non-monetary portion of the judgment under principles of comity or other applicable law. See Section 11.
3. In order to come within the scope of this Act, a foreign-country judgment must be final, conclusive, and enforceable under the law of the foreign country in which it was rendered. This requirement contains three distinct, although inter-related concepts. A judgment is final when it is not subject to additional proceedings in the rendering court other than execution. A judgment is conclusive when it is given effect between the parties as a determination of their legal rights and obligations. A judgment is enforceable when the legal procedures of the state to ensure that the judgment debtor complies with the judgment are available to the judgment creditor to assist in collection of the judgment.
4. Subsection 3(b) follows the 1962 Act by excluding three categories of foreign-country money judgments from the scope of the Act — judgments for taxes, judgments that constitute fines and penalties, and judgments in domestic relations matters. The domestic relations exclusion has been redrafted to make it clear that all judgments in domestic relations matters are excluded from the Act, not just judgments “for support” as provided in the 1962 Act. This is consistent with interpretation of the 1962 Act by the courts, which extended the “support” exclusion in the 1962 Act beyond its literal wording to exclude other money judgments in connection with domestic matters. E.g., Wolff v. Wolff, 389 A.2d 413 (My. App. 1978) (“support” includes alimony).
5. Under subsection 3(b), a foreign-country money judgment is not within the scope of this Act “to the extent” that it comes within one of the excluded categories. Therefore, if a foreign-country money judgment is only partially within one of the excluded categories, the non-excluded portion will be subject to this Act.
6. Subsection 3(c) is new. The 1962 Act does not expressly allocate the burden of proof with regard to establishing whether a foreign-country judgment is within the scope of the Act. Courts applying the 1962 Act generally have held that the burden of proof is on the person seeking recognition to establish that the judgment is final, conclusive and enforceable where rendered. E.g., Mayekawa Mfg. Co. Ltd. v. Sasaki, 888 P.2d 183, 189 (Wash. App. 1995) (burden of proof on creditor to establish judgment is final, conclusive, and enforceable where rendered); Bridgeway Corp. v. Citibank, 45 F. Supp.2d 276, 285 (S.D.N.Y. 1999) (party seeking recognition must establish that there is a final judgment, conclusive and enforceable where rendered); S.C.Chimexim S.A. v. Velco Enterprises, Ltd., 36 F. Supp.2d 206, 212 (S.D.N.Y. 1999) (Plaintiff has the burden of establishing conclusive effect). Subsection (3)(c) places the burden of proof to establish whether a foreign-country judgment is within the scope of the Act on the party seeking recognition of the foreign-country judgment with regard to both subsection (a) and subsection (b).

While the first two of these requirements — finality and conclusiveness — will apply with regard to every foreign-country money judgment, the requirement of enforceability is only relevant when the judgment is one granting recovery of a sum of money. A judgment denying a sum of money obviously is not subject to enforcement procedures, as there is no monetary award to enforce. This Act, however, covers both judgments granting and those denying recovery of a sum of money. Thus, the fact that a foreign-country judgment denying recovery of a sum of money is not enforceable does not mean that such judgments are not within the scope of the Act. Instead, the requirement that the judgment be enforceable should be read to mean that, if the foreign-country judgment grants recovery of a sum of money, it must be enforceable in the foreign country in order to be within the scope of the Act.

Like the 1962 Act, subsection 3(b) requires that the determinations as to finality, conclusiveness and enforceability be made using the law of the foreign country in which the judgment was rendered. Unless the foreign-country judgment is final, conclusive, and (to the extent it grants recovery of a sum of money) enforceable in the foreign country where it was rendered, it will not be within the scope of this Act.

Recognition and enforcement of domestic relations judgments traditionally has been treated differently from recognition and enforcement of other judgments. The considerations with regard to those judgments, particularly with regard to jurisdiction and finality, differ from those with regard to other money judgments. Further, national laws with regard to domestic relations vary widely, and recognition and enforcement of such judgments thus is more appropriately handled through comity than through use of this uniform Act. Finally, other statutes, such as the Uniform Interstate Family Support Act and the federal International Child Support Enforcement Act, 42 U.S.C. § 659a (1996), address various aspects of the recognition and enforcement of domestic relations awards. Under Section 11 of this Act, courts are free to recognize money judgments in domestic relations matters under principles of comity or otherwise, and U.S. courts routinely enforce money judgments in domestic relations matters under comity principles.

Foreign-country judgments for taxes and judgments that constitute fines or penalties traditionally have not been recognized and enforced in U.S. courts. See, e.g. , Restatement Third of the Foreign Relations Law of the United States § 483 (1986). Both the “revenue rule,” under which the courts of one country will not enforce the revenue laws of another country, and the prohibition on enforcement of penal judgments seem to be grounded in the idea that one country does not enforce the public laws of another. See id. Reporters’ Note 2. The exclusion of tax judgments and judgments constituting fines or penalties from the scope of the Act reflects this tradition. Under Section 11, however, courts remain free to consider whether such judgments should be recognized and enforced under comity or other principles.

A judgment for taxes is a judgment in favor of a foreign country or one of its subdivisions based on a claim for an assessment of a tax. Thus, a judgment awarding a plaintiff restitution of the purchase price paid for an item would not be considered in any part a judgment for taxes, even though one element of the recovery was the sales tax paid by the plaintiff at the time of purchase. Such a judgment would not be one designed to enforce the revenue laws of the foreign country, but rather one designed to compensate the plaintiff. Courts generally hold that the test for whether a judgment is a fine or penalty is determined by whether its purpose is remedial in nature, with its benefits accruing to private individuals, or it is penal in nature, punishing an offense against public justice. E.g. , Chase Manhattan Bank, N.A. v. Hoffman, 665 F.Supp 73 (D. Mass. 1987) (finding that Belgium judgment was not penal even though the proceeding forming the basis of the suit was primarily criminal where Belgium court considered damage petition a civil remedy, the judgment did not constitute punishment for an offense against public justice of Belgium, and benefit of the judgment accrued to private judgment creditor, not Belgium). Thus, a judgment that awards compensation or restitution for the benefit of private individuals should not automatically be considered penal in nature and therefore outside the scope of the Act simply because the action is brought on behalf of the private individuals by a government entity. Cf. U.S.-Australia Free Trade Agreement, art.14.7.2, U.S.-Austl., May 18, 2004 (providing that when government agency obtains a civil monetary judgment for purpose of providing restitution to consumers, investors, or customers who suffered economic harm due to fraud, judgment generally should not be denied recognition and enforcement on ground that it is penal or revenue in nature, or based on other foreign public law).

North Carolina Comment

In subdivision (b)(3), the General Statutes Commission substituted “alimony, support, or maintenance in matrimonial or family matters” for the Uniform Act language “divorce, support, or maintenance, or other judgment rendered in connection with domestic relations.” The change was due to concern that the Uniform Act’s language could prevent recognition of an award based on a claim that was brought as part of a divorce action, for example, a tort action against one spouse for damage to the individual property of the other spouse.

Subsection (d) corresponds to Section 11 of the Uniform Act (“Saving Clause”) with a modification. The Commission substituted “to which this Article does not apply” for the Uniform Act language “not within the scope of this act.” The Commission also added “saving clause” to this section’s catchline.

CASE NOTES

Editor’s Note. —

The cases cited below were decided under the former North Carolina Foreign Money Judgments Recognition Act, G.S. 1C-1800 through G.S. 1C-1808.

Enforcement of Foreign Judgments. —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

Scottish judgment was properly recognized because G.S. 1C-1852(b)(3) did not bar recognition as the judgment was not for alimony, support, or maintenance but was for attorney’s fees and costs, even though the judgment was entered in an unsuccessful suit for maintenance. Savage v. Zelent, 243 N.C. App. 535, 777 S.E.2d 801, 2015 N.C. App. LEXIS 869 (2015).

Scottish judgment for attorney’s fees in an unsuccessful suit for maintenance was properly recognized because the North Carolina General Assembly, in adopting the Uniform Foreign-Country Money Judgments Recognition Act, replaced the language “divorce, support, or maintenance, or other judgment rendered in connection with domestic relations” with “alimony, support, or maintenance in matrimonial or family matters,” when defining the family law exception to the recognition of foreign judgments. Savage v. Zelent, 243 N.C. App. 535, 777 S.E.2d 801, 2015 N.C. App. LEXIS 869 (2015).

Scottish judgment for attorney’s fees against a girlfriend in the girlfriend’s unsuccessful suit against a boyfriend for maintenance was properly recognized because nothing showed the Scottish judgment could constitute an award of support for the boyfriend since the boyfriend did not initiate the action seeking support from the girlfriend. Savage v. Zelent, 243 N.C. App. 535, 777 S.E.2d 801, 2015 N.C. App. LEXIS 869 (2015).

Official Comment

Source: This section is based on Section 4 of the 1962 Act.

1. This Section provides the standards for recognition of a foreign-country money judgment. Section 7 sets out the effect of recognition of a foreign-country money judgment under this Act.
2. Recognition of a judgment means that the forum court accepts the determination of legal rights and obligations made by the rendering court in the foreign country. See, e.g., Restatement (Second) of Conflicts of Laws, Ch. 5, Topic 3, Introductory Note (recognition of foreign judgment occurs to the extent the forum court gives the judgment “the same effect with respect to the parties, the subject matter of the action and the issues involved that it has in the state where it was rendered.”) Recognition of a foreign-country judgment must be distinguished from enforcement of that judgment. Enforcement of the foreign-country judgment involves the application of the legal procedures of the state to ensure that the judgment debtor obeys the foreign-country judgment. Recognition of a foreign-country money judgment often is associated with enforcement of the judgment, as the judgment creditor usually seeks recognition of the foreign-country judgment primarily for the purpose of invoking the enforcement procedures of the forum state to assist the judgment creditor’s collection of the judgment from the judgment debtor. Because the forum court cannot enforce the foreign-country judgment until it has determined that the judgment will be given effect, recognition is a prerequisite to enforcement of the foreign-country judgment. Recognition, however, also has significance outside the enforcement context because a foreign-country judgment also must be recognized before it can be given preclusive effect under res judicata and collateral estoppel principles. The issue of whether a foreign-country judgment will be recognized is distinct from both the issue of whether the judgment will be enforced, and the issue of the extent to which it will be given preclusive effect.
3. Subsection 4(a) places an affirmative duty on the forum court to recognize a foreign-country money judgment unless one of the grounds for nonrecognition stated in subsection (b) or (c) applies. Subsection (b) states three mandatory grounds for denying recognition to a foreign-country money judgment. If the forum court finds that one of the grounds listed in subsection (b) exists, then it must deny recognition to the foreign-country money judgment. Subsection (c) states eight nonmandatory grounds for denying recognition. The forum court has discretion to decide whether or not to refuse recognition based on one of these grounds. Subsection (d) places the burden of proof on the party resisting recognition of the foreign-country judgment to establish that one of the grounds for nonrecognition exists.
4. The mandatory grounds for nonrecognition stated in subsection (b) are identical to the mandatory grounds stated in Section 4 of the 1962 Act. The discretionary grounds stated in subsection 4(c)(1) through (6) are based on subsection 4(b)(1) through (6) of the 1962 Act. The discretionary grounds stated in subsection 4(c)(7) and (8) are new.
5. Under subsection (b)(1), the forum court must deny recognition to the foreign-country money judgment if that judgment was “rendered under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The standard for this ground for nonrecognition “has been stated authoritatively by the Supreme Court of the United States in Hilton v. Guyot, 159 U.S.113, 205 (1895). As indicated in that decision, a mere difference in the procedural system is not a sufficient basis for nonrecognition. A case of serious injustice must be involved.” Cmt § 4, Uniform Foreign Money-Judgment Recognition Act (1962). The focus of inquiry is not whether the procedure in the rendering country is similar to U.S. procedure, but rather on the basic fairness of the foreign-country procedure. Kam-Tech Systems, Ltd. V. Yardeni, 74 A.2d 644, 649 (N.J. App. 2001) (interpreting the comparable provision in the 1962 Act); accord, Society of Lloyd’s v. Ashenden, 233 F.3d 473 (7th Cir. 2000) (procedures need not meet all the intricacies of the complex concept of due process that has emerged from U.S. case law, but rather must be fair in the broader international sense) (interpreting comparable provision in the 1962 Act). Procedural differences, such as absence of jury trial or different evidentiary rules are not sufficient to justify denying recognition under subsection (b)(1), so long as the essential elements of impartial administration and basic procedural fairness have been provided in the foreign proceeding. As the U.S. Supreme Court stated in Hilton:
6. Under section 4(b)(2), the forum court must deny recognition to the foreign-country judgment if the foreign court did not have personal jurisdiction over the defendant. Section 5(a) lists six bases for personal jurisdiction that are adequate as a matter of law to establish that the foreign court had personal jurisdiction. Section 5(b) makes clear that other grounds for personal jurisdiction may be found sufficient.
7. Subsection 4(c)(2) limits the type of fraud that will serve as a ground for denying recognition to extrinsic fraud. This provision is consistent with the interpretation of the comparable provision in subsection 4(b)(2) of the 1962 Act by the courts, which have found that only extrinsic fraud — conduct of the prevailing party that deprived the losing party of an adequate opportunity to present its case — is sufficient under the 1962 Act. Examples of extrinsic fraud would be when the plaintiff deliberately had the initiating process served on the defendant at the wrong address, deliberately gave the defendant wrong information as to the time and place of the hearing, or obtained a default judgment against the defendant based on a forged confession of judgment. When this type of fraudulent action by the plaintiff deprives the defendant of an adequate opportunity to present its case, then it provides grounds for denying recognition of the foreign-country judgment. Extrinsic fraud should be distinguished from intrinsic fraud, such as false testimony of a witness or admission of a forged document into evidence during the foreign proceeding. Intrinsic fraud does not provide a basis for denying recognition under subsection 4(c)(2), as the assertion that intrinsic fraud has occurred should be raised and dealt with in the rendering court.
8. The public policy exception in subsection 4(c)(3) is based on the public policy exception in subsection 4(b)(3) of the 1962 Act, with one difference. The public policy exception in the 1962 Act states that the relevant inquiry is whether “the [cause of action] [claim for relief] on which the judgment is based” is repugnant to public policy. Based on this “cause of action” language, some courts interpreting the 1962 Act have refused to find that a public policy challenge based on something other than repugnancy of the foreign cause of action comes within this exception. E.g., Southwest Livestock & Trucking Co., Inc. v. Ramon, 169 F.3d 317 (5th Cir. 1999) (refusing to deny recognition to Mexican judgment on promissory note with interest rate of 48% because cause of action to collect on promissory note does not violate public policy ); Guinness PLC v. Ward, 955 F.2d 875 (4th Cir. 1992) (challenge to recognition based on post-judgment settlement could not be asserted under public policy exception); The Society of Lloyd’s v. Turner, 303 F.3d 325 (5th Cir. 2002) (rejecting argument legal standards applied to establish elements of breach of contract violated public policy because cause of action for breach of contract itself is not contrary to state public policy); cf. Bachchan v. India Abroad Publications, Inc., 585 N.Y.S.2d 661 (N.Y. Sup. Ct. 1992) (judgment creditor argued British libel judgment should be recognized despite argument it violated First Amendment because New York recognizes a cause of action for libel). Subsection 4(c)(3) rejects this narrow focus by providing that the forum court may deny recognition if either the cause of action or the judgment itself violates public policy. Cf. Restatement (Third) of the Foreign Relations Law of the United States, § 482(2)(d) (1986) (containing a similarly-worded public policy exception to recognition).
9. Subsection 4(c)(5) allows the forum court to refuse recognition of a foreign-country judgment when the parties had a valid agreement, such as a valid forum selection clause or agreement to arbitrate, providing that the relevant dispute would be resolved in a forum other than the forum issuing the foreign-country judgment. Under this provision, the forum court must find both the existence of a valid agreement and that the agreement covered the subject matter involved in the foreign litigation resulting in the foreign-country judgment.
10. Subsection 4(c)(6) authorizes the forum court to refuse recognition of a foreign-country judgment that was rendered in the foreign country solely on the basis of personal service when the forum court believes the original action should have been dismissed by the court in the foreign country on grounds of forum non conveniens.
11. Subsection 4(c)(7) is new. Under this subsection, the forum court may deny recognition to a foreign-country judgment if there are circumstances that raise substantial doubt about the integrity of the rendering court with respect to that judgment. It requires a showing of corruption in the particular case that had an impact on the judgment that was rendered. This provision may be contrasted with subsection 4(b)(1), which requires that the forum court refuse recognition to the foreign-country judgment if it was rendered under a judicial system that does not provide impartial tribunals. Like the comparable provision in subsection 4(a)(1) of the 1962 Act, subsection 4(b)(1) focuses on the judicial system of the foreign country as a whole, rather than on whether the particular judicial proceeding leading to the foreign-country judgment was impartial and fair. See, e.g., The Society of Lloyd’s v. Turner, 303 F.3d 325, 330 (5th Cir. 2002) (interpreting the 1962 Act); CIBC Mellon Trust Co. v. Mora Hotel Corp,. N.V., 743 N.Y.S.2d 408, 415 (N.Y. App. 2002) (interpreting the 1962 Act); Society of Lloyd’s v. Ashenden, 233 F.3d 473, 477 (7th Cir. 2000) (interpreting the 1962 Act). On the other hand, subsection 4(c)(7) allows the court to deny recognition to the foreign-country judgment if it finds a lack of impartiality and fairness of the tribunal in the individual proceeding leading to the foreign- country judgment. Thus, the difference is that between showing, for example, that corruption and bribery is so prevalent throughout the judicial system of the foreign country as to make that entire judicial system one that does not provide impartial tribunals versus showing that bribery of the judge in the proceeding that resulted in the particular foreign-country judgment under consideration had a sufficient impact on the ultimate judgment as to call it into question.
12. Subsection 4(c)(8) also is new. It allows the forum court to deny recognition to the foreign-country judgment if the court finds that the specific proceeding in the foreign court was not compatible with the requirements of fundamental fairness. Like subsection 4(c)(7), it can be contrasted with subsection 4(b)(1), which requires the forum court to deny recognition to the foreign-country judgment if the forum court finds that the entire judicial system in the foreign country where the foreign-country judgment was rendered does not provide procedures compatible with the requirements of fundamental fairness. While the focus of subsection 4(b)(1) is on the foreign country’s judicial system as a whole, the focus of subsection 4(c)(8) is on the particular proceeding that resulted in the specific foreign-country judgment under consideration. Thus, the difference is that between showing, for example, that there has been such a breakdown of law and order in the particular foreign country that judgments are rendered on the basis of political decisions rather than the rule of law throughout the judicial system versus a showing that for political reasons the particular party against whom the foreign-country judgment was entered was denied fundamental fairness in the particular proceedings leading to the foreign-country judgment.
13. Under subsection 4(d), the party opposing recognition of the foreign-country judgment has the burden of establishing that one of the grounds for nonrecognition set out in subsection 4(b) or (c) applies. The 1962 Act was silent as to who had the burden of proof to establish a ground for nonrecognition and courts applying the 1962 Act took different positions on the issue. Compare Bridgeway Corp. v. Citibank, 45 F. Supp. 2d 276, 285 (S.D.N.Y. 1999) (plaintiff has burden to show no mandatory basis under 4(a) for nonrecognition exists; defendant has burden regarding discretionary bases) with The Courage Co. LLC v. The ChemShare Corp., 93 S.W.3d 323, 331 (Tex. App. 2002) (party seeking to avoid recognition has burden to prove ground for nonrecognition). Because the grounds for nonrecognition in Section 4 are in the nature of defenses to recognition, the burden of proof is most appropriately allocated to the party opposing recognition of the foreign-country judgment.

Where there has been opportunity for a full and fair trial abroad before a court of competent jurisdiction conducting the trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries, and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or any other special reason why the comity of this nation should not allow it full effect then a foreign-country judgment should be recognized. Hilton , 159 U.S. at 202.

Although subsection 4(c)(3) of this Act rejects the narrow focus on the cause of action under the 1962 Act, it retains the stringent test for finding a public policy violation applied by courts interpreting the 1962 Act. Under that test, a difference in law, even a marked one, is not sufficient to raise a public policy issue. Nor is it relevant that the foreign law allows a recovery that the forum state would not allow. Public policy is violated only if recognition or enforcement of the foreign-country judgment would tend clearly to injure the public health, the public morals, or the public confidence in the administration of law, or would undermine “that sense of security for individual rights, whether of personal liberty or of private property, which any citizen ought to feel.” Hunt v. BP Exploration Co. (Libya) Ltd., 492 F. Supp. 885, 901 (N.D. Tex. 1980).

The language “or of the United States” in subsection 4(c)(3), which does not appear in the 1962 Act provision, makes it clear that the relevant public policy is that of both the State in which recognition is sought and that of the United States. This is the position taken by the vast majority of cases interpreting the 1962 public policy provision. E.g. , Bachchan v. India Abroad Publications, Inc., 585 N.Y.S.2d 661 (Sup.Ct. N.Y. 1992) (British libel judgment denied recognition because it violates First Amendment).

Subsections 4(c)(7) and (8) both are discretionary grounds for denying recognition, while subsection 4(b)(1) is mandatory. Obviously, if the entire judicial system in the foreign country fails to satisfy the requirements of impartiality and fundamental fairness, a judgment rendered in that foreign country would be so compromised that the forum court should refuse to recognize it as a matter of course. On the other hand, if the problem is evidence of a lack of integrity or fundamental fairness with regard to the particular proceeding leading to the foreign-country judgment, then there may or may not be other factors in the particular case that would cause the forum court to decide to recognize the foreign-country judgment. For example, a forum court might decide not to exercise its discretion to deny recognition despite evidence of corruption or procedural unfairness in a particular case because the party resisting recognition failed to raise the issue on appeal from the foreign-country judgment in the foreign country, and the evidence establishes that, if the party had done so, appeal would have been an adequate mechanism for correcting the transgressions of the lower court.

North Carolina Comment

In subsection (a), the General Statutes Commission substituted “Except as otherwise provided in this section” for the Uniform Act language “Except as otherwise provided in subsections (b) and (c).”

The Commission substituted “shall not” for “may not” in the introductory language of subsection (b) to conform to the drafting style used in this State for prohibitions. In subdivision (b)(1), the Commission inserted “taken as a whole” to make it clear that the subdivision is intended to require the forum court to view the judicial system in the foreign country as a whole in deciding whether the system provides “impartial tribunals or procedures compatible with the requirements of due process of law.” See Cmt § 4, Uniform Foreign-Country Money Judgments Recognition Act (2005).

In subsection (c), the Commission revised the Uniform Act’s introductory language to make it clear that, under normal circumstances, a court will deny recognition of a foreign-country money judgment if it finds the existence of any of the grounds for nonrecognition stated in the subsection. Under subsection 4(c) of the Uniform Act, whether to deny recognition when one of these grounds has been established is discretionary. The Commission concluded that the revision will provide a greater level of predictability in the outcome of recognition actions. As a result of this modification, the Uniform Act’s Official Comment on subsection (c) should be disregarded.

Subdivision (c)(3) uses the terms “cause of action” and “claim for relief” because, while “claim for relief” is used in the North Carolina Rules of Civil Procedure, both terms are used in the North Carolina General Statutes. No substantive change is intended by the use of both terms.

The substance of subdivision (c)(4) in the Uniform Act, which allows the forum court to deny recognition of a foreign-country judgment if the court finds that the judgment conflicts with another final and conclusive judgment, is covered by subsections (d) and (e).

In subdivision (c)(8), the Commission substituted “fundamentally unfair” for “not compatible with the requirements of due process of law” to conform the statutory text to language in the Official Comment to Section 4 of the Uniform Act.

Subsections (d) and (e) are not part of the Uniform Act. These subsections adopt a modified last-in-time rule for recognition of conflicting foreign-country judgments. For an illustration of a case in which application of the last-in-time rule to a foreign judgment was denied, see Byblos Bank Europe, S.A. v. Sekerbank Turk Anonym Syrketi , 12 Misc. 3d 792, 819 N.Y.S.2d 412 (2006), affirmed in part and modified in part, 40 A.D.3d 497, 837 N.Y.S.2d 54 (1st Dept. 2007).

Subsection (f) is subsection (d) in the Uniform Act, limited in application to establishing a ground of nonrecognition under subsection (b).

Subsections (g) and (h) are not part of the Uniform Act. They were added to allocate the burden of proof under subsections (c), (d), and (e).

Subsection (i) has no counterpart in the Uniform Act. When the court is the trier of fact, the facts will be stated in the findings of fact. When the court is ruling on a motion to dismiss, where the nonmovant’s factual allegations are treated as true, or a motion for summary judgment, where there is no issue of material fact, the court will need to state those facts upon which it relied.

Editor’s Note.

Session Laws 2015-107, s. 3, made subdivisions (b)(4) and (c)(9) and subsection (j) of this section, as added by Session Laws 2015-107, s. 1, effective June 24, 2015, and applicable to recognition of foreign-country judgments on or after that date, regardless of when the judgment was entered.

Effect of Amendments.

Session Laws 2015-107, s. 1, effective June 24, 2015, added subdivisions (b)(4) and (c)(9) and subsection (j), and made related changes. For applicability, see editor’s note.

Session Laws 2015-264, s. 32, effective October 1, 2015, substituted “subdivisions (3) and (8) of subsection (c) of this section” for “G.S. 1C-1853(c)(3) and (5)” at the end of subsection (j).

CASE NOTES

Editor’s Note. —

The cases cited below were decided under the former North Carolina Foreign Money Judgments Recognition Act, G.S. 1C-1800 through G.S. 1C-1808.

Application of Act. —

Defendant’s contention, that the North Carolina Foreign Money Judgments Recognition Act had nothing to do with the facts of the case because defendant was not seeking to enforce his Honduran judgment in North Carolina, was unavailing; the Act does not govern the enforcement of foreign judgments, but pertains only to whether a court should recognize the judgment. Pursuant to former G.S. 1C-1804(b)(5), the court did not need to recognize the Honduran judgments. VF Jeanswear Ltd. P'ship v. Molina, 320 F. Supp. 2d 412, 2004 U.S. Dist. LEXIS 10810 (M.D.N.C. 2004).

Enforcement of Foreign Judgments. —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

Once a foreign judgment is recognized, a plaintiff must still satisfy the North Carolina Uniform Enforcement of Foreign Judgments Act (Enforcement Act), G.S. 1C-1701 et seq., because the North Carolina Uniform Foreign-Country Money Judgments Recognition Act, G.S. 1C-1850 et seq., does not govern the enforcement of foreign judgments. Instead, it pertains only to whether a court should recognize the judgment. Jenner v. Ecoplus, Inc., 224 N.C. App. 275, 737 S.E.2d 121, 2012 N.C. App. LEXIS 1443 (2012).

Challenge to Foreign Judgment. —

Wisconsin corporation with its principal place of business in North Carolina was not entitled to relief under G.S. 1C-1853(c)(8) because the corporation did not appeal from the default judgment entered by an English court, the simple and entirely adequate mechanism for correcting the purported error of a premature default judgment in the English court which the corporation alleged. Jenner v. Ecoplus, Inc., 224 N.C. App. 275, 737 S.E.2d 121, 2012 N.C. App. LEXIS 1443 (2012).

Factual Findings by Trial Court; Insufficient. —

Trial court’s factual findings on judgment debtor’s claim that judgment debtor did not sign an agreed judgment which a corporation filed in Texas and sought to enforce in North Carolina, pursuant to North Carolina’s Uniform Enforcement of Foreign Judgments Act, G.S. 1C-1701 to 1C-1708 (2001), were insufficient. HCA Health Servs. of Tex., Inc. v. Reddix, 151 N.C. App. 659, 566 S.E.2d 754, 2002 N.C. App. LEXIS 876 (2002).

Foreign judgment that the judgment creditor obtained in New York was entitled to a presumption that the judgment was entitled to full faith and credit, as the judgment creditor met its burden of showing that entitlement by filing a properly authenticated judgment; however, the general contractor timely moved for relief from the foreign judgment by raising the defense that the New York trial court that entered it did not have personal jurisdiction over the general contractor, and because the trial court did not make any findings of fact or conclusions of law regarding the motion to enforce the judgment, the conclusion that the foreign judgment was enforceable in North Carolina was not supported by competent evidence and the case had to be remanded to the trial court for further proceedings. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).

Portion of Foreign Judgment Void As Against Public Policy. —

Canadian judgment could not be recognized under former G.S. 1C-1804(b)(3) and (7) as to that portion that concerned an initial appeal in Canada as it was an impermissible contingency fee arrangement that violated North Carolina’s public policy since a law firm told a client that if an initial appeal of a custody ruling was unsuccessful, the firm would waive the firm’s attorneys fees; however, the fees and expenses associated with the action in the Canadian trial court, the fees and expenses associated with an appeal to Canada’s highest court, and the expenses associated with prosecuting the initial appeal were not void on public policy grounds. Maxwell Schuman & Co. v. Edwards, 191 N.C. App. 356, 663 S.E.2d 329, 2008 N.C. App. LEXIS 1310 (2008).

Foreign Judgment Recognized. —

Two English citizens were entitled to have a foreign judgment recognized, pursuant to the North Carolina Uniform Foreign-Country Money Judgments Recognition Act, G.S. 1C-1850 et seq., because the citizens’ motion was properly before the trial court, as the Act did not require that the opposing party was to be given an opportunity to file an answer before the court could hold a hearing in the matter and the opposing party did not offer evidence or argument to satisfy its burden of proof in opposing recognition. Jenner v. Ecoplus, Inc., 224 N.C. App. 275, 737 S.E.2d 121, 2012 N.C. App. LEXIS 1443 (2012).

Scottish judgment for attorney’s fees against a girlfriend in the girlfriend’s unsuccessful suit against a boyfriend for maintenance was properly recognized because the girlfriend did not show the Scottish proceeding was fundamentally unfair or repugnant to North Carolina public policy as (1) the girlfriend invoked the court’s jurisdiction and did not appeal the judgment or participate in proceedings leading to the judgment, (2) nor was corruption required to deny recognition shown, and (3) differing Scottish and North Carolina attorney’s fee law raised no public policy issue. Savage v. Zelent, 243 N.C. App. 535, 777 S.E.2d 801, 2015 N.C. App. LEXIS 869 (2015).

Official Comment

Source: This provision is based on Section 5 of the 1962 Act. Its substance is the same as that of Section 5 of the 1962 Act, except as noted in Comment 2 below with regard to subsection 5(a)(4).

1. Under section 4(b)(2), the forum court must deny recognition to the foreign-country judgment if the foreign court did not have personal jurisdiction over the defendant. Section 5(a) lists six bases for personal jurisdiction that are adequate as a matter of law to establish that the foreign court had personal jurisdiction. Section 5(b) makes it clear that these bases of personal jurisdiction are not exclusive. The forum court may find that the foreign court had personal jurisdiction over the defendant on some other basis.
2. Subsection 5(a)(4) of the 1962 Act provides that the foreign court had personal jurisdiction over the defendant if the defendant was “a body corporate” that “had its principal place of business, was incorporated, or had otherwise acquired corporate status, in the foreign state.” Subsection 5(a)(4) of this Act extends that concept to forms of business organization other than corporations.
3. Subsection 5(a)(3) provides that the foreign court has personal jurisdiction over the defendant if the defendant agreed before commencement of the proceeding leading to the foreign-country judgment to submit to the jurisdiction of the foreign court with regard to the subject matter involved. Under this provision, the forum court must find both the existence of a valid agreement to submit to the foreign court’s jurisdiction and that the agreement covered the subject matter involved in the foreign litigation resulting in the foreign-country judgment.

North Carolina Comment

In subsection (a), the General Statutes Commission substituted “shall not” for “may not” in the introductory language to conform to the drafting style used in this State for prohibitions.

In subdivisions (a)(5) and (a)(6), the Uniform Act indicates that states should choose either “cause of action” or “claim for relief,” depending on usage in that state. The Commission decided to use both terms because both are used in the North Carolina General Statutes.

Subdivision (a)(7) has no counterpart in the Uniform Act.

In subsection (b), the Commission inserted “reasonable.” As amended, subsection (b) permits the courts of this State to recognize bases of personal jurisdiction other than those listed in subsection (a) as sufficient to support a foreign-country money judgment. Although these may not necessarily comply in every detail with the requirements for personal jurisdiction that have evolved under the Due Process Clause, they must be reasonable. As an example, some countries allow the exercise of jurisdiction over a subsidiary if there is jurisdiction over the parent. Such an exercise of jurisdiction would be reasonable.

CASE NOTES

Editor’s Note. —

The cases cited below were decided under the former North Carolina Foreign Money Judgments Recognition Act, G.S. 1C-1800 through G.S. 1C-1808.

Consent to Personal Jurisdiction. —

Foreign judgment that the judgment creditor obtained in New York was entitled to a presumption that the judgment was entitled to full faith and credit, as the judgment creditor met its burden of showing that entitlement by filing a properly authenticated judgment; however, the general contractor timely moved for relief from the foreign judgment by raising the defense that the New York trial court that entered it did not have personal jurisdiction over the general contractor, and because the trial court did not make any findings of fact or conclusions of law regarding the motion to enforce the judgment, the conclusion that the foreign judgment was enforceable in North Carolina was not supported by competent evidence and the case had to be remanded to the trial court for further proceedings. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).

Foreign Judgment Supported by Contractual Agreement to Submit to Jurisdiction. —

The Virginia court had personal jurisdiction over the defendant/surety who executed a contract guaranteeing immediate payment if the corporation failed to satisfy the debt owed the plaintiff and affirming the plaintiff’s forum clause. United Leasing Corp. v. Plumides, 138 N.C. App. 696, 531 S.E.2d 891, 2000 N.C. App. LEXIS 793 (2000).

Official Comment

Source: This section is new.

1. Unlike the 1962 Act, which was silent as to the proper procedure for seeking recognition of a foreign-country judgment, Section 6 of this Act expressly sets out the ways in which the issue of recognition may be raised. Under section 6, the issue of recognition always must be raised in a court proceeding. Thus, section 6 rejects decisions under the 1962 Act holding that the registration procedure found in the Uniform Enforcement of Foreign Judgments Act could be utilized with regard to recognition of a foreign-country judgment. E.g. Society of Lloyd’s v. Ashenden, 233 F.3d 473 (7th Cir. 2000). The Enforcement Act deals solely with the enforcement of sister-state judgments and other judgments entitled to full faith and credit, not with the recognition of foreign-country judgments.
2. This Section contemplates that the issue of recognition may be raised either as an original matter or in the context of a pending proceeding. Subsection 6(a) provides that in order to raise the issue of recognition of a foreign-country judgment as an initial matter, the party seeking recognition must file an action for recognition of the foreign-country judgment. Subsection 6(b) provides that when the recognition issue is raised in a pending proceeding, it may be raised by counterclaim, cross-claim or affirmative defense, depending on the context in which it is raised. These rules are consistent with the way the issue of recognition most often was raised in most states under the 1962 Act.
3. An action seeking recognition of a foreign-country judgment under this Section is an action on the foreign-country judgment itself, not an action on the underlying cause of action that gave rise to that judgment. The parties to an action under Section 6 may not relitigate the merits of the underlying dispute that gave rise to the foreign-country judgment.
4. While this Section sets out the ways in which the issue of recognition of a foreign-country judgment may be raised, it is not intended to create any new procedure not currently existing in the state or to otherwise effect existing state procedural requirements. The parties to an action in which recognition of a foreign-country judgment is sought under Section 6 must comply with all state procedural rules with regard to that type of action. Nor does this Act address the question of what constitutes a sufficient basis for jurisdiction to adjudicate with regard to an action under Section 6. Courts have split over the issue of whether the presence of assets of the debtor in a state is a sufficient basis for jurisdiction in light of footnote 36 of the U.S. Supreme Court decision in Shaffer v. Heitner, 433 U.S. 186, 210 n.36 (1977). This Act takes no position on that issue.
5. In states that have adopted the Uniform Foreign-Money Claims Act, that Act will apply to the determination of the amount of a money judgment recognized under this Act.

More broadly, section 6 rejects the use of any registration procedure in the context of the foreign-country judgments covered by this Act. A registration procedure represents a balance between the interest of the judgment creditor in obtaining quick and efficient recognition and enforcement of a judgment when the judgment debtor has already been provided with an opportunity to litigate the underlying issues, and the interest of the judgment debtor in being provided an adequate opportunity to raise and litigate issues regarding whether the foreign-country judgment should be recognized. In the context of sister-state judgments, this balance favors use of a truncated procedure such as that found in the Enforcement Act. Recognition of sister-state judgments normally is mandated by the Full Faith and Credit Clause. Courts recognize only a very limited number of grounds for denying full faith and credit to a sister-state judgment — that the rendering court lacked jurisdiction, that the judgment was procured by fraud, that the judgment has been satisfied, or that the limitations period has expired. Thus, the judgment debtor with regard to a sister-state judgment normally does not have any grounds for opposing recognition and enforcement of the judgment. The extremely limited grounds for denying full faith and credit to a sister-state judgment reflect the fact such judgments will have been rendered by a court that is subject to the same due process limitations and the same overlap of federal statutory and constitutional law as the forum state’s courts, and, to a large extent, the same body of court precedent and socio-economic ideas as those shaping the law of the forum state. Therefore, there is a strong presumption of fairness and competence attached to a sister-state judgment that justifies use of a registration procedure.

The balance between the benefits and costs of a registration procedure is significantly different, however, in the context of recognition and enforcement of foreign-country judgments. Unlike the limited grounds for denying full faith and credit to a sister-state judgment, this Act provides a number of grounds upon which recognition of a foreign-country judgment may be denied. Determination of whether these grounds apply requires the forum court to look behind the foreign-country judgment to evaluate the law and the judicial system under which the foreign-country judgment was rendered. The existence of these grounds for nonrecognition reflects the fact there is less expectation that foreign-country courts will follow procedures comporting with U.S. notions of fundamental fairness and jurisdiction or that those courts will apply laws viewed as substantively tolerable by U.S. standards than there is with regard to sister-state courts. In some situations, there also may be suspicions of corruption or fraud in the foreign-country proceedings. These differences between sister-state judgments and foreign-country judgments provide a justification for requiring judicial involvement in the decision whether to recognize a foreign- country judgment in all cases in which that issue is raised. Although the threshold for establishing that a foreign-country judgment is not entitled to recognition under Section 4 is high, there is a sufficiently greater likelihood that significant recognition issues will be raised so as to require a judicial proceeding.

North Carolina Comment

The General Statutes Commission inserted “and nonrecognition” in the catchline to this section and “or nonrecognition” in subsection (b) to cover an action in which the issue of nonrecognition is raised by a party against whom a foreign-country money judgment has been entered.

In addition, in subsection (b), the Commission replaced “a pending action” with “some other action” and inserted “complaint” in the list of ways to raise the issue of recognition to cover the situation where an action is filed for some relief other than recognition of a foreign-country money judgment, but the recognition is a necessary step in the process.

CASE NOTES

Editor’s Note. —

The cases cited below were decided under the former North Carolina Foreign Money Judgments Recognition Act, G.S. 1C-1800 through G.S. 1C-1808.

Application of Act. —

Defendant’s contention, that the North Carolina Foreign Money Judgments Recognition Act had nothing to do with the facts of the case because defendant was not seeking to enforce his Honduran judgment in North Carolina, was unavailing; the Act does not govern the enforcement of foreign judgments, but pertains only to whether a court should recognize the judgment. Pursuant to former G.S. 1C-1804(b)(5), the court did not need to recognize the Honduran judgments. VF Jeanswear Ltd. P'ship v. Molina, 320 F. Supp. 2d 412, 2004 U.S. Dist. LEXIS 10810 (M.D.N.C. 2004).

Enforcement of Foreign Judgments. —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

Proceedings in North Carolina Court. —

English citizens motion for recognition of a foreign judgment was properly before the trial court because the North Carolina Uniform Foreign-Country Money Judgments Recognition Act, G.S. 1C-1850 et seq., did not require that the corporation was to be given an opportunity to file an answer before the court could hold a hearing in the matter. Jenner v. Ecoplus, Inc., 224 N.C. App. 275, 737 S.E.2d 121, 2012 N.C. App. LEXIS 1443 (2012).

Factual Findings by Trial Court; Insufficient. —

Trial court’s factual findings on judgment debtor’s claim that judgment debtor did not sign an agreed judgment which a corporation filed in Texas and sought to enforce in North Carolina, pursuant to North Carolina’s Uniform Enforcement of Foreign Judgments Act, G.S. 1C-1701 to 1C-1708 (2001), were insufficient. HCA Health Servs. of Tex., Inc. v. Reddix, 151 N.C. App. 659, 566 S.E.2d 754, 2002 N.C. App. LEXIS 876 (2002).

Foreign judgment that the judgment creditor obtained in New York was entitled to a presumption that the judgment was entitled to full faith and credit, as the judgment creditor met its burden of showing that entitlement by filing a properly authenticated judgment; however, the general contractor timely moved for relief from the foreign judgment by raising the defense that the New York trial court that entered it did not have personal jurisdiction over the general contractor, and because the trial court did not make any findings of fact or conclusions of law regarding the motion to enforce the judgment, the conclusion that the foreign judgment was enforceable in North Carolina was not supported by competent evidence and the case had to be remanded to the trial court for further proceedings. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).

Portion of Foreign Judgment Void As Against Public Policy. —

Canadian judgment could not be recognized under former G.S. 1C-1804(b)(3) and (7) as to that portion that concerned an initial appeal in Canada as it was an impermissible contingency fee arrangement that violated North Carolina’s public policy since a law firm told a client that if an initial appeal of a custody ruling was unsuccessful, the firm would waive the firm’s attorneys fees; however, the fees and expenses associated with the action in the Canadian trial court, the fees and expenses associated with an appeal to Canada’s highest court, and the expenses associated with prosecuting the initial appeal were not void on public policy grounds. Maxwell Schuman & Co. v. Edwards, 191 N.C. App. 356, 663 S.E.2d 329, 2008 N.C. App. LEXIS 1310 (2008).

Official Comment

Source: The substance of subsection 7(1) is based on Section 3 of the 1962 Act. Subsection 7(2) is new.

1. Section 5 of this Act sets out the standards for the recognition of foreign-country judgments within the scope of this Act, and places an affirmative duty on the forum court to recognize any foreign-country judgment that meets those standards. Section 6 of this Act sets out the procedures by which the issue of recognition may be raised. This Section sets out the consequences of the decision by the forum court that the foreign-country judgment is entitled to recognition.
2. Under subsection 7(1), the first consequence of recognition of a foreign-country judgment is that it is treated as conclusive between the parties in the forum state. Section 7(1) does not attempt to establish directly the extent of that conclusiveness. Instead, it provides that the foreign-country judgment is treated as conclusive to the same extent that a judgment of a sister state that had been determined to be entitled to full faith and credit would be conclusive. This means that the foreign-country judgment generally will be given the same effect in the forum state that it has in the foreign country where it was rendered. Subsection 7(1), however, sets out the minimum effect that must be given to the foreign-country judgment once recognized. The forum court remains free to give the foreign-country judgment a greater preclusive effect in the forum state than the judgment would have in the foreign country where it was rendered. Cf. Restatement (Third) of the Foreign Relations Law of the United States, § 481 cmt c (1986).
3. Under subsection 7(2), the second consequence of recognition of a foreign-country judgment is that, to the extent it grants a sum of money, it is enforceable in the forum state in accordance with the procedures for enforcement in the forum state and to the same extent that a judgment of the forum state would be enforceable. Cf. Restatement (Third) of the Foreign Relations Law of the United States § 481 (1986) (judgment entitled to recognition is enforceable in accordance with the procedure for enforcement of judgments applicable where enforcement is sought). Thus, under subsection 7(2), once recognized, the foreign-country judgment has the same effect and is subject to the same procedures, defenses and proceedings for reopening, vacating, or staying a judgment of a comparable court in the forum state, and can be enforced or satisfied in the same manner as such a judgment of the forum state.

North Carolina Comment

The General Statutes Commission added subsection (b) to make it clear that Article 17 of Chapter 1C of the General Statutes, the Uniform Enforcement of Foreign Judgments Act, does not apply to the enforcement of foreign-country money judgments recognized under the North Carolina Uniform Foreign-Country Money Judgments Recognition Act.

CASE NOTES

Editor’s Note. —

The cases cited below were decided under the former North Carolina Foreign Money Judgments Recognition Act, G.S. 1C-1800 through G.S. 1C-1808.

Application of Act. —

Defendant’s contention, that the North Carolina Foreign Money Judgments Recognition Act had nothing to do with the facts of the case because defendant was not seeking to enforce his Honduran judgment in North Carolina, was unavailing; the Act does not govern the enforcement of foreign judgments, but pertains only to whether a court should recognize the judgment. Pursuant to former G.S. 1C-1804(b)(5), the court did not need to recognize the Honduran judgments. VF Jeanswear Ltd. P'ship v. Molina, 320 F. Supp. 2d 412, 2004 U.S. Dist. LEXIS 10810 (M.D.N.C. 2004).

Enforcement of Foreign Judgments. —

Although the Israeli order in the husband and wife’s divorce case was not a “foreign judgment” under the Uniform Enforcement of Foreign Judgments Act (UEFJA) because the order was not the order of a United States court or a state court, the trial court did not err in granting summary judgment to the wife and in recognizing that the husband owed a certain sum to the wife under the Israeli order; the wife made it clear in the wife’s complaint that the wife was proceeding under the North Carolina Foreign Money-Judgments Recognition Act (NCFMJRA), which included in its definition of foreign state any governmental unit other than the United States, and thus the trial court could recognize the wife’s rights under the NCFMJRA that would allow the wife to later pursue enforcement of the Israeli order under the UEFJA. Cotter v. Cotter, 185 N.C. App. 511, 648 S.E.2d 552, 2007 N.C. App. LEXIS 1809 (2007).

Factual Findings by Trial Court; Insufficient. —

Trial court’s factual findings on judgment debtor’s claim that judgment debtor did not sign an agreed judgment which a corporation filed in Texas and sought to enforce in North Carolina, pursuant to North Carolina’s Uniform Enforcement of Foreign Judgments Act, G.S. 1C-1701 to 1C-1708 (2001), were insufficient. HCA Health Servs. of Tex., Inc. v. Reddix, 151 N.C. App. 659, 566 S.E.2d 754, 2002 N.C. App. LEXIS 876 (2002).

Foreign judgment that the judgment creditor obtained in New York was entitled to a presumption that the judgment was entitled to full faith and credit, as the judgment creditor met its burden of showing that entitlement by filing a properly authenticated judgment; however, the general contractor timely moved for relief from the foreign judgment by raising the defense that the New York trial court that entered it did not have personal jurisdiction over the general contractor, and because the trial court did not make any findings of fact or conclusions of law regarding the motion to enforce the judgment, the conclusion that the foreign judgment was enforceable in North Carolina was not supported by competent evidence and the case had to be remanded to the trial court for further proceedings. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).

Portion of Foreign Judgment Void As Against Public Policy. —

Canadian judgment could not be recognized under former G.S. 1C-1804(b)(3) and (7) as to that portion that concerned an initial appeal in Canada as it was an impermissible contingency fee arrangement that violated North Carolina’s public policy since a law firm told a client that if an initial appeal of a custody ruling was unsuccessful, the firm would waive the firm’s attorneys fees; however, the fees and expenses associated with the action in the Canadian trial court, the fees and expenses associated with an appeal to Canada’s highest court, and the expenses associated with prosecuting the initial appeal were not void on public policy grounds. Maxwell Schuman & Co. v. Edwards, 191 N.C. App. 356, 663 S.E.2d 329, 2008 N.C. App. LEXIS 1310 (2008).

Official Comment

Source: This section is the same substantively as section 6 of the 1962 Act, except that it adds as an additional measure for the duration of the stay “the time for appeal expires.”

1. Under Section 3 of this Act, a foreign-country judgment is not within the scope of this Act unless it is conclusive and enforceable where rendered. Thus, if the effect of appeal under the law of the foreign country in which the judgment was rendered is to prevent it from being conclusive or enforceable between the parties, the existence of a pending appeal in the foreign country would prevent the application of this Act. Section 8 addresses a different situation. It deals with the situation in which either (1) the party seeking a stay has demonstrated that it intends to file an appeal in the foreign country, although the appeal has not yet been filed or (2) an appeal has been filed in the foreign country, but under the law of the foreign country filing of an appeal does not affect the conclusiveness or enforceability of the judgment. Section 8 allows the forum court in those situations to determine in its discretion that a stay of proceedings is appropriate.

North Carolina Comment

The General Statutes Commission inserted “without an appeal being taken” for clarity.

Official Comment

Source: This Section is new. The 1962 Act did not contain a statute of limitations. Some courts applying the 1962 Act have used the state’s general statute of limitations, e.g. , Vrozos v. Sarantopoulos, 552 N.E.2d 1053 (Ill. App. 1990) (as Recognition Act contains no statute of limitations, general five-year statute of limitations applies), while others have used the statute of limitations applicable with regard to enforcement of a domestic judgment, e.g. , La Societe Anonyme Goro v. Conveyor Accessories, Inc., 677 N.E. 2d 30 (Ill. App. 1997).

1. Under Section 3 of this Act, this Act only applies to foreign-country judgments that are conclusive, and if the judgment grants recovery of a sum of money, enforceable where rendered. Thus, if the period of effectiveness of the foreign-country judgment has expired in the foreign country where the judgment was rendered, the foreign-country judgment would not be subject to this Act. This means that the period of time during which a foreign-country judgment may be recognized under this Act normally is measured by the period of time during which that judgment is effective (that is, conclusive and, if applicable, enforceable) in the foreign country that rendered the judgment. If, however, the foreign-country judgment remains effective for more than fifteen years after the date on which it became effective in the foreign country, Section 9 places an additional time limit on recognition of a foreign-country judgment. It provides that, if the foreign-country judgment remains effective between the parties for more than fifteen years, then an action to recognize the foreign-country judgment under this Act must be commenced within that fifteen year period.
2. Section 9 does not address the issue of whether a foreign-country judgment that can no longer be the basis of a recognition action under this Act because of the application of the fifteen-year limitations period in Section 9 may be used for other purposes. For example, a common rule with regard to judgments barred by a statute of limitations is that they still may be used defensively for purposes of offset and for their preclusive effect. The extent to which a foreign-country judgment with regard to which a recognition action is barred by Section 9 may be used for these or other purposes is left to the other law of the forum state.

North Carolina Comment

The General Statutes Commission reduced from “15 years” to “10 years” the statute of limitations for commencing an action under the Uniform Act to recognize a foreign-country money judgment that is effective in the foreign country that rendered the judgment. The 10-year statute of limitations corresponds with the 10-year statute of limitations under G.S. 1-47 for commencing an action to recognize a sister-state judgment.

Official Comment

Source: This Section is substantively the same as Section 8 of the 1962 Act. The section has been rewritten to reflect current NCCUSL practice.

North Carolina Comment

The General Statutes Commission made stylistic changes to the Uniform Act’s language in this section and made the section permissive.

Editor’s Note.

Session Laws 2015-107, s. 3, made this section effective June 24, 2015, and applicable to recognition of foreign-country judgments on or after that date regardless of when the judgment was entered.