Radiance Capital Receivables Twenty One

Citation: Not availableDocket: 22-146

Court: Court of Appeals of North Carolina; December 5, 2022; North Carolina; State Appellate Court

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A default judgment was entered against Timothy E. Lancsek on January 18, 2012, in favor of First Bank for debts secured by a deed of trust in Dare County, North Carolina. The judgment was assigned to Radiance Capital Receivables Twenty One, LLC on June 13, 2017, and filed with the court on March 18, 2020. The parties dispute the start of collection efforts; the defendant claims they began in November 2020, while the plaintiff asserts they began in the summer of 2020 with settlement solicitations. After failed settlement discussions, the plaintiff obtained a Notice of Right to Claim Exempt Property on September 28, 2020, but service attempts via certified and First Class mail were unsuccessful. An affidavit of service was filed, and a writ of execution was issued on December 31, 2020. The plaintiff's counsel requested the writ be sent to his office for further action.

On January 12, 2021, the plaintiff filed an Ex Parte Motion for an Order in Aid of Execution, which was granted on January 25, 2021, allowing the Sheriff to levy on the defendant's assets. This order required local financial institutions to freeze the defendant’s accounts up to the judgment amount. The Sheriff served the writ and order to the defendant on February 1, 2021, and seized funds from his joint Wells Fargo account on February 4, 2021, transferring $153,805.24 to the Sheriff’s Office. Subsequent discussions between the parties regarding the ownership of the joint account and the levy amount failed, leading the plaintiff to file a Motion for Document Production on March 12, 2021, to clarify ownership and a request for an additional hearing on the funds subject to levy.

On March 26, 2021, the trial court issued an Additional Order in Aid of Execution and Order for Production of Documents, granting the plaintiff's request for document production and requiring the Dare County Sheriff to retain levied funds until issues regarding these funds were resolved. An evidentiary hearing was mandated after the document exchange. The defendant provided the requested documents, and on June 14, 2021, the plaintiff submitted an affidavit that summarized bank statements and the contributions to a joint account by the defendant and his wife. 

A subsequent hearing on June 21, 2021, aimed to determine ownership of the joint account, the legitimacy of the fund levies, and any exemptions for the defendant. During this hearing, the defendant's counsel claimed procedural errors regarding the service of the Notice of Right, asserting that the writ of execution was issued prematurely. However, when questioned by Judge Tillet, defense counsel admitted they did not act on the writ due to a belief that the joint account was exempt from execution.

On July 2, 2021, Judge Tillet communicated his findings, and on September 9, 2021, issued a Second Additional Order in Aid of Execution. The trial court determined that approximately 82% of the joint account's deposits were from the defendant, with only about 38% remaining after levy. The court also concluded that the defendant failed to demonstrate equitable reasons for exempting the seized funds or that they were necessary for family purposes under Section 1-362. Ultimately, the trial court found the defendant guilty of laches for delaying the protection of his rights.

The defendant appealed the Second Additional Order, raising issues regarding the validity of the writ of execution due to alleged improper service, the court's authority to issue the Ex Parte Order for the joint account, and whether he met the burden of proof for income exemption. The appellate review affirmed the trial court's decisions, noting that subject matter jurisdiction can be challenged at any point, and that such challenges are evaluated de novo.

The court addressed the trial court's jurisdiction to conduct supplemental proceedings under Section 1-352 before issuing a writ of execution, concluding that such authority is lacking. The court emphasized that Section 1-352 explicitly requires the issuance of a writ of execution and its return unsatisfied, a condition not applicable to Sections 1-358 and 1-360, which allow proceedings without this requirement. Section 1-358 permits the court to prohibit the transfer or interference with the judgment debtor's non-exempt property, while supplemental proceedings generally follow an attempt to satisfy an execution that returns unsatisfied.

The court noted that in Milone, MacBroom, Inc., the supplemental proceedings were aimed at the judgment debtor to uncover their property. In contrast, the current case involves supplemental proceedings under Sections 1-358 and 1-360, targeting third parties holding the judgment debtor's property. The Ex Parte Order in the present case sought to prevent a third-party financial institution from transferring the defendant’s property or funds, illustrating a procedural mechanism designed to facilitate the enforcement of the writ of execution against assets held by non-parties.

The Ex Parte Order was issued under Sections 1-358 and 1-360 to prevent third parties from disposing of property, distinguishing it from the Milone, MacBroom case where the trial court lacked subject matter jurisdiction. A writ of execution was issued on December 31, 2021, and the plaintiff filed for the Ex Parte Order on January 12, 2021, which was granted on January 25, 2021. The court affirmed its jurisdiction to grant the Ex Parte Order since it was supplemental to the previously issued writ. The defendant contested the writ's validity, asserting procedural errors regarding the service of the Notice of Right, but failed to preserve this issue for appellate review according to North Carolina Rules of Appellate Procedure 10(a). The requirements for preserving an issue include timely objections and a ruling from the trial court, neither of which were satisfied by the defendant. The defendant’s claims regarding inadequate service were not raised until an equitable hearing in June 2021, and there was no record of objections or motions concerning the writ or Ex Parte Order prior to that. Therefore, the court will not consider the unpreserved issues on appeal.

Defendant contests the trial court's ruling that he did not meet the burden of proof necessary to claim an exemption for his earnings related to family support in the sixty days preceding the levy. The court emphasizes that supplemental proceedings serve to provide creditors with equitable remedies to enforce judgments. The standard of review for non-jury trials involves assessing whether competent evidence supports the court's findings and whether those findings justify the legal conclusions and judgment. The court's review is limited to identifying any abuse of discretion, defined as decisions lacking reasonable support or being arbitrarily made.

According to N.C. Gen. Stat. § 1-362, a debtor may be exempt from execution or garnishment of earnings if they can demonstrate through affidavit that those earnings are necessary for a family supported wholly or partly by the debtor's labor. The statute should be interpreted liberally in favor of the exemption, as established in prior case law. The trial court found that the defendant did not prove that the seized funds were necessary for family support, noting that his financial documentation did not sufficiently separate business from family expenses and included claims that contradicted testimony regarding monthly expenditures. The trial judge provided a detailed letter outlining these findings, indicating that mixed use of funds and the lack of clarity in expense categorization undermined the defendant's position. The court upheld the finding that the defendant failed to meet the burden of proof for exemption under the statute and found no abuse of discretion in this determination.

Defendant contends that the trial court erred in determining he was guilty of laches due to his failure to timely protect his rights. The doctrine of laches requires two elements: (1) the party charged negligently failed to assert an enforceable right within a reasonable time, and (2) the party invoking laches suffered prejudice from the delay. The determination of laches is case-specific, as established in *Capps v. City of Raleigh*, where a delay of nearly six years was deemed unreasonable. Although mere passage of time does not suffice for laches, unreasonable delay that disadvantages the invoking party can support a finding of laches. The defendant's argument relied on statutory rights from N.C. Gen. Stat. 1C-1603 but misrepresented the timeline of events, claiming post-judgment enforcement began in February 2021, despite earlier communications with the plaintiff in summer 2020. The record contradicts the defendant’s assertions, and he did not act upon receiving the writ of execution due to unfamiliarity with the enforcement processes. The trial court’s decision that the defendant was guilty of laches was supported by competent evidence. Additionally, the court had subject matter jurisdiction to enforce the judgment, and the defendant's procedural error claims were not preserved for appeal. The trial court's findings that the defendant failed to meet his burden to exempt seized funds and was guilty of laches were affirmed. Judges TYSON and INMAN concurred.