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Civil Practice – Judgments – Unsuccessful Execution – Receivership – Unpursued Claims

Where (1) defendant drove drunk and killed plaintiff’s decedent, (2) plaintiff obtained a judgment of $4,295,000 against defendant, (3) attempts to execute on the judgment were unsuccessful, and (4) defendant has not pursued potential claims against her insurance company and its attorneys for failing to settle plaintiff’s lawsuit against her, the trial court should have granted plaintiff’s motion for appointment of a receiver over defendant’s unliquidated legal claims against third parties.

We reverse the trial court’s denial of plaintiff’s motion for appointment of a receiver.

Initially, we note that the trial court erred in allowing counsel for the insurance company and its attorneys to participate in the hearing on plaintiff’s motion for appointment of a receiver. The debtor of a judgment-debtor lacks standing to object to the appointment of a receiver, as the debtor is not the “party aggrieved” in the underlying action.

G.S. § 1-363 contemplates appointment of a receiver to facilitate prosecution of an unliquidated legal claim that a judgment-debtor might have against a third party. Both statute and case law enable a receiver to sue those who owe the judgment debtor.

Defendant argues that the causes of action plaintiff wants the receiver to pursue are not assignable. However, receivership is distinct from assignment. A claim being placed in receivership is, at most, analogous to an assignment of the proceeds of the claim, which are assignable.

Defendant also notes that “compensation for personal injury” is exempt from enforcement of certain claims by creditors pursuant to G.S. § 1C-1601(a)(8). However, the General Assembly included only two § 1C-1601(a) exemptions in § 1-363: the homestead and personal property exemptions. Our General Assembly has therefore sanctioned – via supplemental receivership proceedings – the application of personal injury proceeds toward the satisfaction of a judgment-creditor’s outstanding judgment. Such a prerogative is immune from our tampering.

A trial court’s decision whether to appoint a receiver is ordinarily reviewed under an abuse of discretion standard. But where a receivership is otherwise permitted by law, whether one ought to be appointed must be adjudged according to the equities of the particular case at hand. That equitable determination does not rest solely in the discretion of the trial court but is instead fully reviewable by this court upon appeal.

In this case, the circumstances indicate that defendant has potential causes of action against her insurer and its attorneys. We need not express opinion as to the merits of those claims – that is for the receiver to decide.

It is alleged that defendant’s insurance company and its attorneys are indebted to defendant as a result of acts in connection with the underlying litigation, and that the proceeds of the claims could be used to satisfy plaintiff’s judgment if defendant were to pursue them. Nevertheless, defendant refuses to do so, despite the fact that pursuit of the claims could benefit both parties. Moreover, any judgment obtained against the insurer or its attorneys would be compensation merely for a monetary loss suffered by defendant incident to the underlying action, rather than for an unrelated injury purely “personal” to her so as to render its transfer inequitable despite statutory authorization.

The outstanding judgment that defendant owes to plaintiff is significant, and there are no other apparent means by which defendant could satisfy the judgment.

In light of the circumstances at issue, it was error for the trial court to deny plaintiff’s motion for appointment of receiver.

Reversed.

Concurrence

(Dietz, J.) The appellees argue, compellingly, that it is bad policy to permit a receiver to take a debtor’s personal injury claim against a third party, prosecute it, and give the proceeds to creditors. The most common beneficiaries of this statute are not sympathetic individuals like Mr. Haarhuis, who lost his wife in a tragic accident— they are banks, debt collectors, and other businesses that frequently seek to enforce money judgments against low-income debtors who have no other assets besides their personal injury claim against a third party.

The General Assembly could have limited the types of claims subject to post-judgment receivership, but it chose not to. We must honor that policy decision by the legislative branch.

Haarhuis v. Cheek (Lawyers Weekly No. 011-282-18, 21 pp.) (Valerie Zachary, J.) (Richard Dietz, J., concurring) Appealed from Chatham County Superior Court (Elaine O’Neal, J.) Leto Copeley and Drew Culler for plaintiff; Walter Burton, Stephanie Anderson and Charles Ivey for defendant; John Barringer and Jeffrey Kuykendal for Universal Insurance Co.; Cynthia Van Horne for Burton, Sue & Anderson, LLP. N.C. App.

 

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