CASE NOTES

Section Gives Ancillary Remedy. —

This section, giving to laborers of insolvent corporations a specific lien upon the assets of the company for two months’ wages at least, was not intended to militate against rights that they might otherwise have under the existing law for debts due them, but gives them a special lien for certain wages. Union Trust Co. v. Southern Sawmills & Lumber Co., 166 F. 193, 1908 U.S. App. LEXIS 4856 (4th Cir. 1908), cert. denied, 215 U.S. 596, 30 S. Ct. 398, 54 L. Ed. 342, 1909 U.S. LEXIS 1978 (1909).

The creditors favored by this section are laborers and workers and all persons doing labor or service of whatever character in the regular employment of certain corporations. Phoenix Iron Co. v. Roanoke Bridge Co., 169 N.C. 512 , 86 S.E. 184, 1915 N.C. LEXIS 251 (1915).

This section grants a priority lien for the wages paid regular employees. First Citizens Bank & Trust Co. v. Academic Archives, Inc., 15 N.C. App. 186, 189 S.E.2d 551, 1972 N.C. App. LEXIS 1857 (1972).

Priority does not extend to those who are independent contractors and not regular employees. First Citizens Bank & Trust Co. v. Academic Archives, Inc., 15 N.C. App. 186, 189 S.E.2d 551, 1972 N.C. App. LEXIS 1857 (1972).

A contractor, who furnishes his own teams, labor, etc., in hauling materials for the building of a bridge by a corporation within the two months next preceding the date of the institution of proceedings in insolvency is not engaged in doing labor or performing “service of whatever character” within the meaning of this section. Phoenix Iron Co. v. Roanoke Bridge Co., 169 N.C. 512 , 86 S.E. 184, 1915 N.C. LEXIS 251 (1915).

Independent Contractor Defined. —

An independent contractor is one who (1) is engaged in an independent business, calling or occupation; (2) is to have the independent use of his special skill, knowledge, or training in the execution of the work; (3) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis; (4) is not subject to discharge because he adopts one method of doing the work rather than another; (5) is not in the regular employ of the other contracting party; (6) is free to use such assistants as he may think proper; (7) has full control over such assistants; and, (8) selects his own time. First Citizens Bank & Trust Co. v. Academic Archives, Inc., 15 N.C. App. 186, 189 S.E.2d 551, 1972 N.C. App. LEXIS 1857 (1972).

Test of Employee Status. —

The vital test of who are regular employees and who are independent contractors is to be found in whether the employer has or has not retained the right of control or superintendence over the contractor or employee as to details. First Citizens Bank & Trust Co. v. Academic Archives, Inc., 15 N.C. App. 186, 189 S.E.2d 551, 1972 N.C. App. LEXIS 1857 (1972).

A practicing attorney rendering professional services to a client is an independent contractor, and his claim is not entitled to a priority under this section. First Citizens Bank & Trust Co. v. Academic Archives, Inc., 15 N.C. App. 186, 189 S.E.2d 551, 1972 N.C. App. LEXIS 1857 (1972).

Agent with Authority to Deduct Salary from Collections. —

Under this section, an agent with authority to make collections and to deduct his salary and expenses from the sums collected has no lien for claims for salary earned and expenses incurred before his appointment to the position and more than two months before the appointment of a receiver. Cummer Lumber Co. v. Seminole Phosphate Co., 189 N.C. 206 , 126 S.E. 511, 1925 N.C. LEXIS 281 (1925).

Claim Based on Contracts for Single Piece of Work. —

The claim of an independent company which repaired machinery belonging to the insolvent partnership on a single occasion at a contract price fixed by mutual agreement could not constitute a preferred claim under this section, since the claim was for the unpaid contract price, and not wages. Moreover, the claim was based on a single piece of work. The company was not hired to do permanent or steady work in the usual course of the occupation of another, and this being true, it did not render the service in the regular employment of another. National Sur. Corp. v. Sharpe, 236 N.C. 35 , 72 S.E.2d 109, 1952 N.C. LEXIS 499 (1952).

Work Done for Receiver. —

Claims of laborers for wages due them for work done for the receiver of an insolvent partnership during the receivership cannot qualify for a preferred status under this section. National Sur. Corp. v. Sharpe, 236 N.C. 35 , 72 S.E.2d 109, 1952 N.C. LEXIS 499 (1952).

This section does not apply to any wages except those due “for labor, work, and services rendered within,” i.e., inside the limits of, “two months next preceding the date when proceedings in insolvency were actually instituted and begun.” National Sur. Corp. v. Sharpe, 236 N.C. 35 , 57, 72 S.E.2d 109 (1952), disapproving the suggestion contained in Walker v. Linden Lumber Co., 170 N.C. 460 , 87 S.E. 331 (1915), that the word “within” meant “subsequent,” and that the statute, therefore, gave laborers “a first lien” for all their wages accruing “after 60 days prior to the insolvency,” notwithstanding the supervening receivership.

Severance Pay Is Not Wages Earned. —

Employees under a contract providing for severance pay are not entitled to a lien for such pay against the receiver, since severance pay is not wages earned. In re Port Publishing Co., 231 N.C. 395 , 57 S.E.2d 366, 1950 N.C. LEXIS 456 (1950).

Employees under a contract providing for paid vacations have a lien against the receiver of the employer for one-sixth of their vacation pay, since this amount was earned during the two months next preceding the institution of insolvency proceedings. In re Port Publishing Co., 231 N.C. 395 , 57 S.E.2d 366, 1950 N.C. LEXIS 456 (1950).

When Lien Arises. —

The lien of the employees arises upon the sequestration of the property of the insolvent for the purpose of liquidation, or rather the institution of a proceeding for that purpose. The lien does not exist so long as the property remains in the hands of the insolvent. It arises when the property is taken in custodia legis for the purpose of distribution among the creditors. Leggett v. Southeastern People's College, 234 N.C. 595 , 68 S.E.2d 263, 1951 N.C. LEXIS 522 (1951) (commented on in 30 N.C.L. Rev. 442 (1952)) .

Prior Lienholders Protected. —

Property acquired by a private corporation subject to a valid and registered mortgage does not become an asset of the corporation except as subject to the prior lien; and the lien given to laborers on the assets of an insolvent corporation for work done under the conditions stated in this section cannot affect the vested rights obtained by the prior lienholders. Roberts v. Bowen Mfg. Co., 169 N.C. 27 , 85 S.E. 45, 1915 N.C. LEXIS 139 (1915).

Lienholder Taking Mortgage on Corporate Property Not Protected. —

One who takes a mortgage upon corporation property for money loaned to operate it or to secure other debts does so with the knowledge that the lien of his mortgage is subject to be displaced in favor of laborers’ liens in case of insolvency. Humphrey Bros. v. Buell-Crocker Lumber Co., 174 N.C. 514 , 93 S.E. 971, 1917 N.C. LEXIS 132 (1917).

Account as Asset of Bank upon Exercise of Offset. —

Where insolvent corporate defendant had $2,568.55 balance with bank, where corporate defendant owed bank on note past due, and where bank was attached as debtor of corporate defendant, order of attachment against bank could not be sustained on basis that twenty-one employees of depositor (i.e., corporate defendant) whose checks were outstanding had lien upon company’s assets superior to all other liens under provisions of this section; lien that employees had was against assets of their employer and did not attach to assets of others, and checking account balance became asset of bank upon right of offset being asserted. Killette v. Raemell's Sewing Apparel, Inc., 93 N.C. App. 162, 377 S.E.2d 73, 1989 N.C. App. LEXIS 130 (1989).

Priority of Claims of Federal Government. —

While this section creates what is denominated a lien, in practical effect it grants to the employees of the insolvent a right of payment of the designated wages prior to the payment of any other claim, secured or unsecured. This preference is subordinate to the right of the United States under the provisions of 31 U.S.C. § 191, giving priority to debts due the United States. Leggett v. Southeastern People's College, 234 N.C. 595 , 68 S.E.2d 263, 1951 N.C. LEXIS 522 (1951) (commented on in 30 N.C.L. Rev. 442 (1952)) .

The lien of the employees under this section is not specific or preferred in the sense necessary to give it precedence over the claim of the federal government for taxes under the provisions of 26 U.S.C. § 3672. Leggett v. Southeastern People's College, 234 N.C. 595 , 68 S.E.2d 263, 1951 N.C. LEXIS 522 (1951) (commented on in 30 N.C.L. Rev. 442 (1952)) .

Notice Need Not Be Filed. —

Under this section, the laborer is not required to file a notice of his claim. Walker v. Linden Lumber Co., 170 N.C. 460 , 87 S.E. 331, 1915 N.C. LEXIS 428 (1915).

CASE NOTES

The purpose of filing claims for liens under this section is to give the public notice of the claims, the amount, the material supplied or the labor done, and when done, on what property, specified with such details as will give reasonable notice to all persons of the character of the claims and the property on which the lien attached. Cook v. Cobb, 101 N.C. 68 , 7 S.E. 700, 1888 N.C. LEXIS 15 (1888); Fulp & Linville v. Kernersville Light & Power Co., 157 N.C. 157 , 72 S.E. 867, 1911 N.C. LEXIS 25 (1911).

Necessity of Compliance. —

Compliance with this section is necessary to perfect lien. Equitable Life Assurance Soc'y v. Basnight, 234 N.C. 347 , 67 S.E.2d 390, 1951 N.C. LEXIS 487 (1951).

The claimant must comply strictly, certainly substantially, in all material respects, with the requirements of the statute, and it is but reasonable and just that he should do so. Cook v. Cobb, 101 N.C. 68 , 7 S.E. 700, 1888 N.C. LEXIS 15 (1888) (holding claim of lien insufficient for failure to comply with statutory requirements) .

Compliance with this section was not required to perfect lien under former G.S. 44-2 . Barbre-Askew Fin., Inc. v. Thompson, 247 N.C. 143 , 100 S.E.2d 381, 1957 N.C. LEXIS 660 (1957).

What “Filing” Imports. —

The filing of a lien for labor or materials imports more than mere delivery of the written claim to the clerk’s office, and requires the transcribing of the notice of lien in the lien docket in the clerk’s office and the indexing of same in the name of the claimant; but, as distinguished from liens required by statute to be registered in the office of the register of deeds, it does not require cross-indexing. Saunders v. Woodhouse, 243 N.C. 608 , 91 S.E.2d 701, 1956 N.C. LEXIS 594 (1956).

Place of Filing. —

As to place of filing under former law, see Chadbourn v. Williams, 71 N.C. 444 , 1874 N.C. LEXIS 125 (1874).

A lien for material and labor was properly filed where the clerk after delivery attached it in its original form to specified page in a book labeled “Lien Docket,” where the book without question was the book intended as the lien docket contemplated by former G.S. 2-42 (now G.S. 7A-109 ), even though the book was also used for the filing of liens for old age assistance, since former G.S. 108-30.1 provided that such liens should be filed in the regular lien docket. Saunders v. Woodhouse, 243 N.C. 608 , 91 S.E.2d 701, 1956 N.C. LEXIS 594 (1956).

Stipulation that notice was filed with defendant landlord does not comply with this section requiring notice to be filed in the office of the superior court clerk. Eason v. Dew, 244 N.C. 571 , 94 S.E.2d 603, 1956 N.C. LEXIS 478 (1956).

Particularity Required. —

A claim of lien filed under the provisions of this section must comply with the requirements of the statute. Therefore, when the plaintiff’s claim failed to specify in detail the material furnished and the labor performed, or the time when the material was furnished and the labor was performed, it was irregular and void. Wray v. Harris, 77 N.C. 77 , 1877 N.C. LEXIS 25 (1877).

While a substantial compliance with this section is necessary to the validity of a lien filed for material, etc., furnished in the erection of a building, it is not required that the claimant file his itemized statement of the material used in a building which he had contracted to complete for the owner for one sum; but the time of the completion of the work must be stated. Jefferson & Bros. v. Bryant, 161 N.C. 404 , 77 S.E. 341, 1913 N.C. LEXIS 247 (1913).

This section does not require a listing of material item by item, or the labor hour by hour. Yet it demands more than a mere summary statement. It requires a statement in sufficient detail to put parties who are or may become interested in the premises on notice as to the labor performed and material furnished, the time when the labor was performed and the material was furnished, the amount due therefor, and the property upon which it was employed. Lowery v. Haithcock, 239 N.C. 67 , 79 S.E.2d 204, 1953 N.C. LEXIS 629 (1953).

Statements Held Sufficient. —

When a lienor’s schedule for material contains a full itemized statement in detail of the material furnished, and the clerk has entered on his docket the names of the lienor and lienee, the amount claimed by each lienor, a description of the property by metes and bounds, and the dates between which the materials were furnished, referring to the schedule of prices and materials attached to the notice, and asking that it “be taken as a part of the notice of lien,” compliance with this section was sufficient. Fulp & Linville v. Kernersville Light & Power Co., 157 N.C. 157 , 72 S.E. 867, 1911 N.C. LEXIS 25 (1911).

Claim for a laborer’s lien before a justice of the peace, which read, “J.S.C., owner and possessor, to D.A.C., 22 October, 1894. To 1221/2 days of labor as sawyer at his sawmill, on Jumping Run Creek, from 1 October, 1893, to 31 August, 1894, $127.24. (Signed) D.A.C., claimant,” and was sworn to was a reasonable and substantial compliance with the statute. Cameron v. Consolidated Lumber Co., 118 N.C. 266 , 24 S.E. 7, 1896 N.C. LEXIS 43 (1896). See also, Lowery v. Haithcock, 239 N.C. 67 , 79 S.E.2d 204, 1953 N.C. LEXIS 629 (1953).

Lien for Building Materials. —

The lien of a plaintiff who furnished materials for a building was not avoided because in the notice thereof that was filed with the clerk the lien was made to attach on two distinct lots separated by a street. Chadbourn v. Williams, 71 N.C. 444 , 1874 N.C. LEXIS 125 (1874).

Defect When Lien Is Filed. —

The claim of lien is the foundation of the action to enforce the lien, and if such lien is defective when filed, it is no lien. Mebane Lumber Co. v. Avery & Bullock Bldrs., Inc., 270 N.C. 337 , 154 S.E.2d 665, 1967 N.C. LEXIS 1354 (1967).

Defects Not Cured by Amendment or Pleadings. —

Where a laborer’s claim of lien as filed was defective in failing to specify the time of his labor and that it was done on a particular crop, these defects were not cured by alleging the necessary facts in the pleadings in action to enforce the lien. Cook v. Cobb, 101 N.C. 68 , 7 S.E. 700, 1888 N.C. LEXIS 15 (1888).

Where suit was brought by a contractor to enforce a lien on a building which was to have been paid for in a single sum, and the claim as filed with the clerk was defective in not stating the time the house was completed, as required by this section, it could not be cured by amendment allowed in the superior court at the trial. Jefferson & Bros. v. Bryant, 161 N.C. 404 , 77 S.E. 341, 1913 N.C. LEXIS 247 (1913).

A defect in a lien cannot be cured by amendment after the filing period has expired, nor by alleging the necessary facts in the pleadings in an action to enforce the lien. Mebane Lumber Co. v. Avery & Bullock Bldrs., Inc., 270 N.C. 337 , 154 S.E.2d 665, 1967 N.C. LEXIS 1354 (1967).

Admiralty Proceedings. —

The provisions of this section and former G.S. 44-39 are not binding on an admiralty court in a proceeding to establish a lien for labor and materials furnished in the repair of a vessel, but the limitations which they prescribe can be considered by the admiralty court in applying the doctrine of laches. Phelps v. The Cecelia Ann, 199 F.2d 627, 1952 U.S. App. LEXIS 3975 (4th Cir. 1952).

While state statutory provisions of limitation do not bind a federal court in admiralty proceedings, it is proper to consider them in applying the principle of laches. Thus a proceeding to enforce a maritime lien for supplies and materials furnished to a vessel and its owner was barred by laches, in view of this section and former G.S. 44-39 , where the libel was not instituted until 21 months after the claim became due. Davis v. The Nola Dare, 157 F. Supp. 420, 1957 U.S. Dist. LEXIS 2522 (D.N.C. 1957).

As to a contract negotiated by husband for drilling of well on wife’s property, see Lowery v. Haithcock, 239 N.C. 67 , 79 S.E.2d 204, 1953 N.C. LEXIS 629 (1953).

CASE NOTES

Failure to Enforce as Discharge. —

Failure of claimant to enforce his lien within six months as prescribed by former G.S. 44-43 operated as a discharge of the lien. Norfleet v. Tarboro Cotton Factory, 172 N.C. 833 , 89 S.E. 785, 1916 N.C. LEXIS 411 (1916).

Editor’s Note.

Session Laws 2018-52 provides in its preamble: “Whereas, the employee benefit programs operated by the Department of State Treasurer are an intergenerational partnership between public employees and taxpayers of the State, it is incumbent upon the administrators of those programs to provide for Financial Accountability, Integrity, and Recovery of assets (FAIRness); and

“Whereas, taxpayers should expect FAIRness in these employee benefit programs, and the Department of State Treasurer should be provided all tools necessary to promote that goal; and

“Whereas, public employees who are participants in these employee benefit programs by virtue of deductions from compensation should also expect FAIRness as a baseline in the operation of these programs; and

“Whereas, future generations of North Carolinians benefit from fiscally responsible management provided by FAIRness of these employee benefit programs by the current generation; Now, therefore,”

Session Laws 2018-52, s. 1, provides: “This act shall be known and cited as the ‘Financial Accountability, Integrity, and Recovery Act of 2018’ .”

Session Laws 2018-52, s. 5(e), provides, in part: “Priority of the State Health Plan for Teachers and State Employees’ lien over nongovernmental liens and rights created under this section shall apply only to nongovernmental liens and rights that have attached to the applicable property on or after the effective date of this act.” Session Laws 2018-52, s. 5(b), added the last sentence in subsection (a).

Effect of Amendments.

Session Laws 2018-52, s. 5(b), effective June 25, 2018, added the last sentence in subsection (a). For applicability, see editor’s note.

Legal Periodicals.

For discussion of amendment, see 25 N.C.L. Rev. 450 (1947).

For article concerning liens on personal property not governed by the Uniform Commercial Code, see 44 N.C.L. Rev. 322 (1966).

For comment on new North Carolina wrongful death statute, see 48 N.C.L. Rev. 594 (1970).

CASE NOTES

Strict Construction. —

This section and G.S. 44-50 provide rather extraordinary remedies in derogation of the common law and must be strictly construed. Ellington v. Bradford, 242 N.C. 159 , 86 S.E.2d 925, 1955 N.C. LEXIS 474 (1955).

G.S. 44-50 must be read in conjunction with this section. Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co., 340 N.C. 88 , 455 S.E.2d 655, 1995 N.C. LEXIS 150 (1995).

Violation of Statute. —

Trial court did not err in granting a hospital summary judgment because a settlement between an insurer and a patient resulted in insufficient funds to cover the hospital’s liens; by issuing a multi-party check for the settlement amount rather than a check solely payable to the hospital, the insurer violated the requirement that the retention of funds be sufficient to satisfy the lien, for which the insurer had proper notice. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Insurance company’s failure to retain, for payment directly to medical lienholders, their share of proceeds from a settlement with a pro se claimant violates the statute. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

The lien of this section attaches to the recovery, if any, and is not a general lien against the assets of the alleged debtor. Gordon v. Forsyth County Hosp. Auth., 409 F. Supp. 708, 1975 U.S. Dist. LEXIS 16247 (M.D.N.C. 1975), aff'd in part, vacated in part, 544 F.2d 748, 1976 U.S. App. LEXIS 6194 (4th Cir. 1976).

This section and G.S. 44-50 make any plaintiff’s unpaid medical expenses a lien upon his recovery in a personal injury action. Travelers Ins. Co. v. Keith, 283 N.C. 577 , 196 S.E.2d 731, 1973 N.C. LEXIS 1008 (1973).

This section and G.S. 44-50 impose no obligation with reference to such expenses upon the defendant against whom judgment has been rendered. Travelers Ins. Co. v. Keith, 283 N.C. 577 , 196 S.E.2d 731, 1973 N.C. LEXIS 1008 (1973).

The lien provided for by this section is created only where the beneficiary may be indebted for the expenses incurred. Ellington v. Bradford, 242 N.C. 159 , 86 S.E.2d 925, 1955 N.C. LEXIS 474 (1955).

Lien Should Attach Before Payment by Insurance Company. —

If a plaintiff under G.S. 44-50 is to have a lien such as is provided for in this section, the lien should attach before the insurance company makes its payments and when the parties agree upon a settlement; this being so, the plaintiff may enforce the lien against the money which is payable for the personal injury. Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co., 340 N.C. 88 , 455 S.E.2d 655, 1995 N.C. LEXIS 150 (1995).

Failure to Timely Bill Insurer. —

Patient’s evidence of a hospital’s lien was admissible because, when the hospital chose to rely on the hospital’s lien on the patient’s expected judgment against an alleged tortfeasor instead of timely billing the patient’s health insurer, the hospital did not abandon the lien as (1) applicable statutes permitted this choice, and (2) a contrary interpretation frustrated the fair medical billing statute, which did not intend to force hospitals to bill insurers when other payment sources were available, so the patient remained indebted to the hospital under the medical lien statute. Sykes v. Vixamar, 266 N.C. App. 130, 830 S.E.2d 669, 2019 N.C. App. LEXIS 544 (2019).

Minor Cannot Recover for Medical Expenses. —

This section does not change the common-law rule so as to permit the recovery of expenses for medical treatment as a part of a minor’s cause of action for injuries. Ellington v. Bradford, 242 N.C. 159 , 86 S.E.2d 925, 1955 N.C. LEXIS 474 (1955); Price v. Seaboard Air Line R.R., 274 N.C. 32 , 161 S.E.2d 590, 1968 N.C. LEXIS 732 (1968).

Disbursement. —

Insurer lost control over funds, as evidenced by its need to retrieve the multi-party check it issued to a patient prior to re-disbursing funds directly to a hospital, at the time it issued the check to the patient; the insurer’s effective loss of control over the funds amounted to a disbursement because the risks that the patient would simply not seek to negotiate the check were the consequences beyond the control of a settlement payor that the medical lien statutes were intended to avoid. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Damages. —

Trial court’s calculation of damages awarded to a hospital was in error because when trebled based on the trial court’s judgment that an insurer engaged in an unfair or deceptive trade practice, the total damages to which the hospital was entitled was $ 971; a pro rata distribution to lienholders is required in the event that fifty percent of a judgment or settlement amount was insufficient to satisfy all valid medical liens. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

No Provision for Lien Where Patient Settles with Wrongdoer. —

While this section creates a lien in favor of any person, corporation or governmental body which has provided medical care upon personal injury damages recovered in civil actions by patients who have received medical treatment, there is no provision for creation of a lien where the patient settles with the wrongdoer instead of filing a civil action. Johnston County v. McCormick, 65 N.C. App. 63, 308 S.E.2d 872, 1983 N.C. App. LEXIS 3404 (1983).

Pro Rata Distribution of Funds Not Required. —

G.S. 44-49 and G.S. 44-50 do not require a pro rata distribution of funds among valid lien holders where there are insufficient funds to compensate all of the holders; thus, an attorney was properly granted summary judgment in a hospital’s action alleging violation of G.S. 44-49 and G.S. 44-50 . N.C. Baptist Hosps., Inc. v. Crowson, 155 N.C. App. 746, 573 S.E.2d 922, 2003 N.C. App. LEXIS 4 , aff'd, 357 N.C. 499 , 586 S.E.2d 90, 2003 N.C. LEXIS 1098 (2003).

Unfair And Deceptive Trade Practices. —

Hospital was in privity with an insurer and was permitted to assert a claim for unfair or deceptive trade practices because the insurer was on notice of its duty to settle valid liens before disbursing funds directly to a pro se claimant, and the hospital provided the insurer with the required documentation. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

As to the right of a hospital receiving funds under the Hill Burton Act, 42 U.S.C. § 291 et seq., to file lien under this section, see Gordon v. Forsyth County Hosp. Auth., 409 F. Supp. 708, 1975 U.S. Dist. LEXIS 16247 (M.D.N.C. 1975), aff'd in part, vacated in part, 544 F.2d 748, 1976 U.S. App. LEXIS 6194 (4th Cir. 1976).

Hospital acted to assert and preserve its unsecured claim for the full balance owing. Since the settlement proceeds were sufficient to satisfy the hospital’s claim and those proceeds were exempt from the claims of all other creditors in the bankruptcy, the hospital was entitled to recover its fees from the settlement proceeds. Omar v. Metrolina Orthopaedic & Sports Medicine Clinic, P.A., 2008 U.S. Dist. LEXIS 121206 (W.D.N.C. Mar. 26, 2008).

Plaintiffs Held Not Entitled to Lien. —

Where action for child’s damages was instituted in the Edgecombe County Superior Court and plaintiffs did not file a claim for their lien with the clerk of that court within the time designated by this section, they were not entitled to a lien under its provisions. Duke Univ. Medical Ctr., Private Diagnostic Clinic v. Hardy, 89 N.C. App. 719, 367 S.E.2d 6, 1988 N.C. App. LEXIS 347 (1988).

Editor’s Note.

Session Laws 2018-52 provides in its preamble: “Whereas, the employee benefit programs operated by the Department of State Treasurer are an intergenerational partnership between public employees and taxpayers of the State, it is incumbent upon the administrators of those programs to provide for Financial Accountability, Integrity, and Recovery of assets (FAIRness); and

“Whereas, taxpayers should expect FAIRness in these employee benefit programs, and the Department of State Treasurer should be provided all tools necessary to promote that goal; and

“Whereas, public employees who are participants in these employee benefit programs by virtue of deductions from compensation should also expect FAIRness as a baseline in the operation of these programs; and

“Whereas, future generations of North Carolinians benefit from fiscally responsible management provided by FAIRness of these employee benefit programs by the current generation; Now, therefore,”

Session Laws 2018-52, s. 1, provides: “This act shall be known and cited as the ‘Financial Accountability, Integrity, and Recovery Act of 2018’ .”

Session Laws 2018-52, s. 5(e), provides, in part: “Priority of the State Health Plan for Teachers and State Employees’ lien over nongovernmental liens and rights created under this section shall apply only to nongovernmental liens and rights that have attached to the applicable property on or after the effective date of this act.” Session Laws 2018-52, s. 5(c), inserted the fifth sentence.

Effect of Amendments.

Session Laws 2018-52, s. 5(c), effective June 25, 2018, inserted the fifth sentence. For applicability, see editor’s note.

CASE NOTES

Legislative Intent. —

By directing third parties as to how to disburse funds received for personal injury claims and limiting percentage of balance of recovery, after deducting attorneys’ fees, to be paid to those benefitted by statute, legislature intended that such third parties pay no more than 50% of any such balance to service providers. North Carolina Baptist Hosps. v. Mitchell, 323 N.C. 528 , 374 S.E.2d 844, 1988 N.C. LEXIS 695 (1988).

Insurer’s actual notice of the medical expenses incurred by an injured party created a lien against future settlement proceeds, where such notice was provided to the insurer by the pro se injured party rather than by the medical provider or the injured party’s attorney, thus triggering the obligations under G.S. 44-50 ; the intent of the statute was to ensure that medical service providers were paid when injured parties later received compensation for their injuries. Smith v. State Farm Mut. Auto. Ins. Co., 157 N.C. App. 596, 580 S.E.2d 46, 2003 N.C. App. LEXIS 933 (2003), rev'd, 358 N.C. 725 , 599 S.E.2d 905, 2004 N.C. LEXIS 913 (2004).

The Employee Retirement Income Security Act preempts this section, the North Carolina apportionment statute. Hampton Indus., Inc. v. Sparrow, 981 F.2d 726, 1992 U.S. App. LEXIS 33223 (4th Cir. 1992).

Strict Construction. —

This section and G.S. 44-49 provide rather extraordinary remedies in derogation of the common law and must be strictly construed. Ellington v. Bradford, 242 N.C. 159 , 86 S.E.2d 925, 1955 N.C. LEXIS 474 (1955).

This section must be read in conjunction with G.S. 44-49 . Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co., 340 N.C. 88 , 455 S.E.2d 655, 1995 N.C. LEXIS 150 (1995).

Literal Interpretation Was Improper. —

Plaintiff’s argument that plain language of this section did not prevent assignment of proceeds of personal injury claim received by third party failed, because strictly literal interpretation would have contravened intent of legislature, which was, in part, to provide that injured party receive some part of amount recovered for his injury by requiring third parties, receiving funds paid for personal injury claim, to pay no more than 50% of amount recovered, exclusive of attorneys’ fees, to service providers. North Carolina Baptist Hosps. v. Mitchell, 323 N.C. 528 , 374 S.E.2d 844, 1988 N.C. LEXIS 695 (1988).

Failure to Retain Payment for Medical Lienholders. —

Insurance company’s failure to retain, for payment directly to medical lienholders, their share of proceeds from a settlement with a pro se claimant violates the statute. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Trial court did not err in granting a hospital summary judgment because a settlement between an insurer and a patient resulted in insufficient funds to cover the hospital’s liens; by issuing a multi-party check for the settlement amount rather than a check solely payable to the hospital, the insurer violated the provision requiring the retention of funds sufficient to satisfy the lien, for which the insurer had proper notice. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

This section and G.S. 44-49 make plaintiff’s unpaid medical expenses a lien upon his recovery in a personal injury action. Travelers Ins. Co. v. Keith, 283 N.C. 577 , 196 S.E.2d 731, 1973 N.C. LEXIS 1008 (1973).

Insurer’s actual notice of the medical expenses incurred by an injured party created a lien against future settlement proceeds, where such notice was provided to the insurer by the pro se injured party rather than by the medical provider or the injured party’s attorney, thus triggering the obligations under G.S. 44-50 ; the intent of the statute was to ensure that medical service providers were paid when injured parties later received compensation for their injuries. Smith v. State Farm Mut. Auto. Ins. Co., 157 N.C. App. 596, 580 S.E.2d 46, 2003 N.C. App. LEXIS 933 (2003), rev'd, 358 N.C. 725 , 599 S.E.2d 905, 2004 N.C. LEXIS 913 (2004).

But they impose no obligation with reference to such expenses upon the defendant against whom judgment has been rendered. Travelers Ins. Co. v. Keith, 283 N.C. 577 , 196 S.E.2d 731, 1973 N.C. LEXIS 1008 (1973).

Lien Should Attach Before Payment by Insurance Company. —

If a plaintiff under this section is to have a lien such as is provided for in G.S. 44-49 , the lien should attach before the insurance company makes its payments and when the parties agree upon a settlement; this being so, the plaintiff may enforce the lien against the money which is payable for the personal injury. Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co., 340 N.C. 88 , 455 S.E.2d 655, 1995 N.C. LEXIS 150 (1995).

Disbursement. —

Insurer lost control over funds, as evidenced by its need to retrieve the multi-party check it issued to a patient prior to re-disbursing funds directly to a hospital, at the time it issued the check to the patient; the insurer’s effective loss of control over the funds amounted to a disbursement because the risks that the patient would simply not seek to negotiate the check were the consequences beyond the control of a settlement payor that the medical lien statutes were intended to avoid. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Recovery Against Attorney. —

Plain language of former G.S. 135-45.15, now codified at G.S. 135-48.37 , similarly to G.S. 44-50 , places a duty upon an injured party’s attorney to direct settlement funds recovered by an injured State Health Plan for Teachers and State Employees (State Health Plan) member to the State Health Plan in satisfaction of its statutory lien; by establishing this duty, the statute necessarily also creates a cause of action by which the State Health Plan may enforce its lien under the statute against an attorney who violates its requirements by failing to disburse his client’s settlement proceeds in accordance with the statute. State Health Plan for Teachers & State Emples. v. Ellison, 227 N.C. App. 114, 744 S.E.2d 473, 2013 N.C. App. LEXIS 468 (2013).

The doctrine of election of remedies did not bar plaintiff chiropractor’s recovery from defendant attorney where the attorney’s clients were liable to plaintiff for having received services for which they had not paid and the defendant was liable to plaintiff pursuant to this section; the separate actions by plaintiff against either its patients or their attorney were not inconsistent and did not seek any additional or alternative forms of relief and there was no threat of double recovery, as the defendants in each action could claim contribution for payments made by the other, both in defense of the suit and in defense of any proceedings to collect a judgment. Triangle Park Chiropractic v. Battaglia, 139 N.C. App. 201, 532 S.E.2d 833, 2000 N.C. App. LEXIS 814 (2000).

Unfair And Deceptive Trade Practices. —

Trial court properly granted a hospital summary judgment because an insurer’s unfair and deceptive conduct arose out of its violation of G.S. 44-50 and G.S. 44-50 .1 and its repeated failure to settle a medical provider’s valid lien upon request; the insurer’s failure to notify the medical lienholders of its settlement, and its direction of the hospital for months to seek its recovery from a patient were not only unfair but deceptive. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Trial court did not err in concluding that an insurer committed an unfair trade practice because its failure to withhold funds subject to valid medical liens, including a hospital’s lien, prior to its disbursement of funds to a patient resulted in an actual injury to the hospital; the insurer’s failure to retain funds delayed the hospital’s recovery of funds to which it was legally entitled, and that delay constituted injury. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Insurer’s violation of G.S. 44-49 and 44-50 and refusal to pay a hospital’s lien before disbursing settlement funds to a pro se claimant amounted to an unfair or deceptive act because the insurer repeatedly refused to reissue a check payable solely to the hospital; the hospital presented letters it sent to the insurer requesting payment of the lien, admissions by the insurer of receipt of those letters, and its admission of its failure to respond to the hospital’s requests. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Hospital was in privity with an insurer and was permitted to assert a claim for unfair or deceptive trade practices because the insurer was on notice of its duty to settle valid liens before disbursing funds directly to a pro se claimant, and the hospital provided the insurer with the required documentation. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Distribution of Proceeds Held Proper. —

Action of defendant attorney in receiving $25,000.00 in settlement proceeds, deducting her fee of 25%, and then dividing the balance equally between injured party and medical providers was in direct accord with this section. North Carolina Baptist Hosps. v. Mitchell, 88 N.C. App. 263, 362 S.E.2d 841, 1987 N.C. App. LEXIS 3466 (1987), aff'd, 323 N.C. 528 , 374 S.E.2d 844, 1988 N.C. LEXIS 695 (1988).

Attorney who followed disbursement provisions of this section when disbursing client’s funds from personal injury settlement was not held liable for client’s unpaid debt to medical service provider whom attorney knew had obtained client’s assignment of all such funds up to full amount of client’s debt for medical services. North Carolina Baptist Hosps. v. Mitchell, 323 N.C. 528 , 374 S.E.2d 844, 1988 N.C. LEXIS 695 (1988).

G.S. 44-49 and G.S. 44-50 do not require a pro rata distribution of funds among valid lien holders where there are insufficient funds to compensate all of the holders; thus, an attorney was properly granted summary judgment in a hospital’s action alleging violation of G.S. 44-49 and G.S. 44-50 . N.C. Baptist Hosps., Inc. v. Crowson, 155 N.C. App. 746, 573 S.E.2d 922, 2003 N.C. App. LEXIS 4 , aff'd, 357 N.C. 499 , 586 S.E.2d 90, 2003 N.C. LEXIS 1098 (2003).

CASE NOTES

Unfair And Deceptive Trade Practices. —

Trial court properly granted a hospital summary judgment because an insurer’s unfair and deceptive conduct arose out of its violation of G.S. 44-50 and G.S. 44-50 .1 and its repeated failure to settle a medical provider’s valid lien upon request; the insurer’s failure to notify the medical lienholders of its settlement, and its direction of the hospital for months to seek its recovery from a patient were not only unfair but deceptive. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Insurer’s violation of G.S. 44-49 and G.S. 44-50 and refusal to pay a hospital’s lien before disbursing settlement funds to a pro se claimant amounted to an unfair or deceptive act because the insurer repeatedly refused to reissue a check payable solely to the hospital; the hospital presented letters it sent to the insurer requesting payment of the lien, admissions by the insurer of receipt of those letters, and its admission of its failure to respond to the hospital’s requests. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Trial court did not err in concluding that an insurer committed an unfair trade practice because its failure to withhold funds subject to valid medical liens, including a hospital’s lien, prior to its disbursement of funds to a patient resulted in an actual injury to the hospital; the insurer’s failure to retain funds delayed the hospital’s recovery of funds to which it was legally entitled, and that delay constituted injury. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Violation of Statute. —

Trial court did not err in granting a hospital summary judgment because a settlement between an insurer and a patient resulted in insufficient funds to cover the hospital’s liens; by issuing a multi-party check for the settlement amount rather than a check solely payable to the hospital, the insurer violated the provision requiring the retention of funds sufficient to satisfy the lien, for which the insurer had proper notice. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Damages. —

Trial court’s calculation of damages awarded to a hospital was in error because when trebled based on the trial court’s judgment that an insurer engaged in an unfair or deceptive trade practice, the total damages to which the hospital was entitled was $ 971; the statute requires a pro rata distribution to lienholders in the event that fifty percent of a judgment or settlement amount was insufficient to satisfy all valid medical liens. Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co., 254 N.C. App. 726, 803 S.E.2d 256, 2017 N.C. App. LEXIS 620 (2017).

Editor’s Note.

Session Laws 2018-52 provides in its preamble: “Whereas, the employee benefit programs operated by the Department of State Treasurer are an intergenerational partnership between public employees and taxpayers of the State, it is incumbent upon the administrators of those programs to provide for Financial Accountability, Integrity, and Recovery of assets (FAIRness); and

“Whereas, taxpayers should expect FAIRness in these employee benefit programs, and the Department of State Treasurer should be provided all tools necessary to promote that goal; and

“Whereas, public employees who are participants in these employee benefit programs by virtue of deductions from compensation should also expect FAIRness as a baseline in the operation of these programs; and

“Whereas, future generations of North Carolinians benefit from fiscally responsible management provided by FAIRness of these employee benefit programs by the current generation; Now, therefore,”

Session Laws 2018-52, s. 1, provides: “This act shall be known and cited as the ‘Financial Accountability, Integrity, and Recovery Act of 2018’ .”

Session Laws 2018-52, s. 5(e), provides, in part: “Priority of the State Health Plan for Teachers and State Employees’ lien over nongovernmental liens and rights created under this section shall apply only to nongovernmental liens and rights that have attached to the applicable property on or after the effective date of this act.” Session Laws 2018-52, s. 5(d), added subsection (b).

Effect of Amendments.

Session Laws 2018-52, s. 5(d), effective June 25, 2018, added subsection (b). For applicability, see editor’s note.

Editor’s Note.

Session Laws 1989 (Reg. Sess., 1990), c. 1047 repealed Article 11 of this Chapter, the Uniform Federal Tax Lien Registration Act, and enacted in its place this Article, the Uniform Federal Lien Registration Act. Where appropriate, the historical citations to sections of former Article 11 have been added to the sections of this Article.

Editor’s Note.

The phrase “(reference previous federal tax lien registration act)” in subsection (d) is language from the uniform act that would normally be considered directory. References to former Article 11 should have been inserted in the place of this language.

CASE NOTES

Recovery on Federal Loan Program. —

While an action brought by the United States to recover damages for conversion of property is governed by the six-year statute of limitations contained in 28 U.S.C. § 2415(b), and not by similar statutes provided by state law, this section specifically controls the legal duration of an agricultural lien upon soybeans under state substantive law and is not a statute of limitations. Actions to recover on federal loan programs are controlled by federal common law and state law is adopted as the federal common law unless it is found to be discriminatory. In this regard, this section is far from discriminatory and provides an effective mechanism for resolution of disputes concerning perishable, agricultural commodities. United States v. Bailey Feed Mill, Inc., 592 F. Supp. 844, 1984 U.S. Dist. LEXIS 24799 (E.D.N.C. 1984).