North Carolina Judgment Enforcement and Collection Attorney Thomas Kerner

Collecting a Judgment in North Carolina? Beware of Potential Liability

Did you know that under North Carolina law, even if you have already served a Writ of Execution and successfully collected part of a judgment, you could still be liable for damages to the judgment debtor if they later file a successful Rule 60 motion to set aside the judgment? N.C.G.S. § 1-108 provides that if a judgment is set aside pursuant to Rule 60(b) or (c) of the Rules of Civil Procedure and the judgment or any part thereof has been collected or otherwise enforced, restitution to the judgment debtor may be compelled.

If property is sold following a writ of execution, title to the property is not affected, and the buyer of the property (as, for example, at an auction) cannot be liable to the judgment debtor. Instead, restitution may be ordered against the judgment creditor and/or the creditor's personal representatives.  Something to keep in mind when setting out to collect on a judgment.

Rule 60 Motions to Set Aside a Judgment in North Carolina

Even after a judgment has been rendered by a court, then entered by the clerk of court, the judgment debtor still has options for getting it nullified. Most people are aware that an appeal can be taken directly to the Court of Appeals.  This generally must be done within 30 days of entry of the judgment.

What is less well-known, however, is that the debtor also has the option of filing a motion in the trial court to have the judgment set aside. This is done under Rule 60 of the North Carolina Rules of Civil Procedure.  (There are other post judgment motions under the Rules, but Rule 60 is the one most likely to come up during the execution phase). 

The thing to watch out for is: unlike an appeal,which has to be filed within 30 days or the right to appeal is lost, the right to file a Rule 60 motion lasts for “a reasonable time.”

The Rule goes on to provide, in part, that the "reasonable time" it refers to (depending on which subsection of Rule 60 the debtor is invoking) may not exceed a full year. When collecting a judgment, therefore, the first thing to do is determine whether the judgment debtor is still eligible to file a Rule 60 motion.

You might think that all that needs to happen is to look at the date of the judgment (which is measured from the date the clerk stamped or "clocked in" the order), but that is not all there is to it.

Despite the one year time limit under Rule 60, there have been cases where Rule 60 motions have been held to have been timely filed, even when they were filed well after one year. For example, in the recently decided case of Sharyn's Jewelers, LLC v IPayment, Inc., et al., 674 S.E. 2d 732 (April 2009), the North Carolina Court of Appeals found "extraordinary circumstances" to justify allowing one of the Defendants to have its Rule 60 motion considered even though the motion had not been filed until 17 months after the judgment had been entered. The circumstances were that the appealing defendant (Vericomm) had not received notice of the judgment against it for 17 months, and that the judgment awarded relief to the Plaintiff that exceeded what was sought in the Plaintiff's complaint. Specifically, the trial court had erroneously entered judgments against Vericomm on causes of action that had been pled only against the other defendants, but not Vericomm. As such, the judgment was "irregular" and could therefore be vacated in part, to the extent of the irregularities.

Renewing a Judgment in North Carolina

A judgment may be  "renewed" so to speak, by filing a Complaint prior to the expiration of the 10 year effect of the original judgment.  That Complaint must be filed and served on the Defendant(s)/judgment debtor(s) in the same manner as the original Complaint in the case.  Technically, it does not "renew" the old judgment.  Rather, it is a new judgment based upon the existing liability that extends from the original judgment. This procedure can only be done once.  See N.C.G.S. s 1-47(1).

Collecting a Judgment in North Carolina, The Basics: Part I

The primary ways to obtain a judgment in North Carolina are as follows: (1) a jury verdict, (2) a judge's order following a bench trial, (3) a default judgment (which is also entered by a judge's order), (4) a Confession of Judgment, or (5) a Consent Judgment. There are also motions to confirm arbitration awards (giving the same force and effect to an arbitration award as a judgment entered originally in a court).

Once a judgment is entered by the Clerk of Court, the party owing the money is called the "Judgment Debtor." The winning party - the one to whom the money is owed, is called the "Judgment Creditor."  Once entered, a judgment creates a lien on the real property of the debtor in any county in which it is docketed, for a period of ten years.  Also, at any time during that ten year period, an execution may be issued by the clerk of court, ordering the seizure and sale of the judgment debtor's personal property.

Judgment creditors are entitled to initiate a variety of procedures in order to collect on their judgments. The most basic of these is the Writ of Execution. The Writ of Execution is issued by the Clerk of Court.

If the Judgment Debtor is an individual person, that person must first be served with a Notice of Right to Have Exemptions Designated (form AOC-CV-406), and a Motion to Claim Exemptions. There are two AOC forms for these (AOC-CV-407 and AOC-CV-415), and their use is determined by the age of the judgment.

For corporate defendants, no such notice is required.

If the judgment is against an individual, and arises out of a "personal, family or household" debt, then the provisions of the federal Fair Debt Collection Practices will still apply, as well as those of the more restrictive North Carolina Debt Collection Ac.