Got any old judgments you were hoping to collect? If so, you may want to take a hard look at pursuing collection in North Carolina. An August 3 ruling from the North Carolina Court of Appeals regarding out of state judgments filed in North Carolina just made it much easier for creditors to collect on judgments many years after they were entered.
Back in December 2003, a woman obtained a monetary divorce judgment from a Michigan trial court against her ex-spouse. Six years later, she obtained a supplemental judgment against him from the same Michigan court. The ex-spouse then moved to North Carolina and got remarried. In 2013, the ex-wife filed the Michigan judgments in North Carolina pursuant to the Uniform Enforcement of Foreign Judgments Act and sought to collect on the judgments. The debtor refused to pay and challenged her efforts, so in October 2019, she served discovery requests on her ex and his new spouse in an attempt to find assets to pay her $1.3+ million judgment. Her ex objected and claimed that collection was time-barred by North Carolina’s 10 year statute of limitations, which he argued began to run in either 2003 or 2009. The North Carolina trial court and the Court of Appeals disagreed and held that the statute of limitations only started to run in 2013 when the foreign judgment was domesticated in North Carolina. Thus, the 2019 collection efforts were timely and the judgment debtor was required to answer the asset discovery requests.
When it comes to judgment collection, timing is often critical. If state law cuts off the time to collect a judgment, creditors can only watch in anguish if their debtor suddenly wins the lottery or inherits a large fortune. So for a judgment creditor, more time for collection is always better.
There is great variation in state laws regarding the amount of time that a creditor can try to collect on a judgment. Some states, like South Carolina, provide for a 10-year period of collection and the judgment cannot be renewed. Others, like North Carolina, provide for an initial 10-year period of collection but provide that the judgment can be renewed once. Still others allow a judgment to be renewed multiple times.
If the ex-wife’s 2003 judgment had been entered by a North Carolina court, it would have been valid for collection for 10 years without renewal. But since it was entered in Michigan and then domesticated in North Carolina under the Uniform Enforcement of Foreign Judgments Act in 2013, the judgment got a brand new life of 10 years starting with the date of domestication. That’s because the statute provides that a foreign judgment domesticated to North Carolina “has the same effect . . . as a judgment of this State and shall be enforced or satisfied in like manner.” The North Carolina Court of Appeals interpreted this language to give the judgment a brand new life of 10 years, regardless of what statute of limitations may have applied in the state where the judgment was entered.
Between 2019 and 2020, North Carolina saw the fourth largest population gain among states. That’s a lot of people moving to the state, and a percentage of those people have active money judgments entered against them in other states. The Court of Appeals decision makes it more likely that creditors will have an opportunity to try to collect on those judgments. This is especially true in the case of judgments entered in states like South Carolina where the judgment would otherwise expire after 10 years with no opportunity for renewal. By domesticating the judgment in North Carolina, a creditor may be able to continue to pursue collection on the “new” judgment long after the underlying judgment has expired in South Carolina.
There’s that memorable moment in Monty Python and the Holy Grail in which a man goes through a village loudly calling out, “Bring out your dead.” So come bring your old foreign judgments to North Carolina for collection. As long as creditors domesticate their judgments in North Carolina within 10 years from entry of the original judgment, they should be able to proclaim (to paraphrase the Holy Grail again), “We’re not dead yet!”
For more information, please contact me or your regular Parker Poe contact.