Haarhuis v. Cheek
Haarhuis v. Cheek
Opinion of the Court
*847*359Plaintiff Joris Haarhuis, as administrator of the estate of Julie Haarhuis, appeals from the trial court's order denying his Motion for Appointment of Receiver over defendant's unliquidated legal claims against third-parties. We reverse.
Background
Defendant Emily Cheek was driving while impaired in July 2013 when she hit and killed pedestrian Julie Haarhuis. Ms. Haarhuis's husband, Joris Haarhuis, qualified as administrator of his wife's estate.
At the time of the crash, Universal Insurance Company insured defendant's vehicle. Universal determined that the value of plaintiff's claim exceeded the limits of defendant's $50,000 policy. On 2 September 2014, pursuant to Universal's offer, plaintiff agreed to release its claims against defendant in exchange for payment of the $50,000 policy limit, on the condition that payment be made within ten days. Universal received plaintiff's acceptance that same day. Two days later, Universal retained an attorney from Burton, Sue & Anderson, LLP ("Burton") to represent defendant to the extent of the policy limits. Universal forwarded plaintiff's settlement demand to the attorney. However, by the time plaintiff's settlement offer expired on 12 September 2014, plaintiff had not received *360a response from Universal or Burton. Plaintiff filed suit the next week, on 19 September 2014.
As the litigation proceeded, plaintiff again offered to settle, this time in exchange for a $2 million consent judgment, but plaintiff required Universal's approval. One week later, the attorney representing defendant on her exposure in excess of the policy limits wrote to Universal on defendant's behalf and demanded that it agree to settle the claims against her. This settlement would have permitted defendant to seek relief in bankruptcy. However, roughly one month later, plaintiff was informed that Universal would not approve the $2 million consent judgment. Plaintiff posits that Universal preferred that defendant not seek relief in bankruptcy, for fear that the bankruptcy trustee would pursue litigation on defendant's behalf against Universal for its failure to settle the case initially for $50,000. The case then went to trial, and on 28 April 2017 the jury entered a verdict against defendant for $4.25 million in compensatory damages and $45,000 in punitive damages. However, the Chatham County Sheriff's Office returned the writ of execution unsatisfied, as the deputy "did not locate property on which to levy" and "[d]efendant refused to pay."
One year later, with the judgment still unsatisfied, plaintiff filed a Motion for Appointment of Receiver pursuant to
According to plaintiff,
[t]he potential choses in action described above must be sued upon promptly or the applicable statute of limitations may bar an *848action. Defendant is wasting valuable time by her failure to take prompt legal action to recover money for the choses in action. Defendant, by her delay in pursuing the choses in action, is in the process of causing irreparable harm to Plaintiff, as Defendant has no other apparent means of satisfying the judgment against her.
Plaintiff therefore sought to have a receiver appointed of defendant's choses in action against Universal and Burton.
*361The trial court heard plaintiff's Motion for Appointment of Receiver on 5 June 2017. Plaintiff's and defendant's counsel appeared at the hearing; however, counsel for Universal and Burton appeared as well. Plaintiff objected to the appearances of Universal and Burton for lack of standing as potential debtors of defendant, but the trial court nevertheless permitted Universal and Burton to argue against the appointment of a receiver. Following the hearing, the trial court entered an order containing the following findings and conclusions:
19. Defendant does not wish to have a receiver appointed for any purpose.
...
1.N.C. Gen. Stat. § 1-502 specifies when a receiver may be appointed. The circumstances of this case do not apply as the appointment of a receiver in this case would not "carry the judgment into effect," it would not "dispose of the property according to the judgment," it would not "preserve [the property] during the pendency of an appeal" and this is not a case in which the "judgment debtor refuses to apply his property in satisfaction of the judgment." SeeN.C. Gen. Stat. § 1-502 (2) & (3).
2. The appointment of a receiver is within the discretion of the Court. See Barnes v. Kochhar ,178 N.C. App. 489 , 500,633 S.E.2d 474 , 481 (2006).
3. The appointment of a receiver is an equitable remedy. See Jones v. Jones ,187 N.C. 589 , 592,122 S.E. 370 , 371 (1924) ("[t]he appointment of a receiver is equitable in its nature and based on the idea that there is no adequate remedy at law, and is intended to prevent injury to the thing in controversy").
4. The court finds that the defendant has asserted that she has no property that, to a reasonable degree, could be subject to execution.
The trial court thereafter denied plaintiff's Motion for Appointment of Receiver. Plaintiff timely appealed.
Discussion
On appeal, plaintiff presents the following questions to this Court: (1) "Where a judgment creditor shows the court that a judgment debtor *362has unliquidated legal claims that she refuses to pursue, may the trial court refuse to appoint a receiver?" and (2) "Did the trial court properly allow non-party debtors of Defendant-Appellee judgment debtor to oppose appointment of a receiver?" We first consider plaintiff's argument concerning standing.
A. Standing
Plaintiff argues that the trial court erred when it heard and considered the arguments of Universal and Burton at the receivership hearing because "debtors of a judgment debtor have no standing to object to the appointment of a receiver in aid of execution[.]" We agree.
It is well settled that 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. Lone Star Industries, Inc. v. Ready Mixed Concrete of Wilmington, Inc. ,
That [the shareholder-debtors] are opposed to the defendant debtor receiving *849the benefit of that property is understandable; but that they were able to assert their opposition in this case for so long under the circumstances is not. The [shareholder-debtors] have no standing in this Court and should have had none in the court below. They are not parties to the case, and, even if they were, their interests are entirely antagonistic to the debtor corporation, whose own interests clearly require that any sums that are owed it by others be promptly applied to its debts.
The same is true in the instant case. Universal and Burton were not, and are not, parties to the action between plaintiff and defendant, and their interests are "entirely antagonistic" to those of defendant, being that they are her potential debtors. Nor would Universal or Burton be *363legally aggrieved in the instant case by the appointment of a receiver. Accordingly, because Universal and Burton do not have standing to challenge the appointment of a receiver in the instant case, they were not properly before the trial court, and they are not properly before this Court. We do not consider their arguments, and the trial court erred in doing so.
B. Receivership
Next, plaintiff argues that the trial court erred when it denied plaintiff's Motion for Appointment of Receiver. According to plaintiff, the particular circumstances at issue in the instant case entitled plaintiff to have a receiver appointed in order for the receiver to investigate prosecution of defendant's unliquidated legal claims against Universal and Burton so that those funds can be applied in satisfaction of the underlying judgment. Defendant, however, argues that North Carolina law "does not mandate appointment of a receiver[,]" and that the trial court did not abuse its discretion when it declined to do so in the instant case. (emphasis added). Specifically, defendant maintains that plaintiff's motion was properly denied first, because the causes of action that plaintiff wants placed in receivership are unassignable under North Carolina law, and second, because those claims are merely "potential or speculative." For the reasons explained below, we find plaintiff's arguments persuasive.
I.
Civil judgments for money damages are typically enforced through the process of execution.
The court or judge having jurisdiction over the appointment of receivers may also by order in like manner, and with like authority, appoint a receiver ... of the property of the judgment debtor, whether subject or not to be sold under execution, except the homestead and personal property exemptions.
*364
Section 1-363 exempts only two classes of property from the scope of receivership: "the homestead and personal property exemptions" provided in N.C. Gen. Stat. § 1C-1601(a). Otherwise, Section 1-363 contemplates that a receiver may be appointed in order to facilitate prosecution of an unliquidated legal claim that a judgment-debtor might have against a third party. See e.g. ,
If it appears that a person ... alleged to have property of the judgment debtor, or indebted to him, claims an interest in the property adverse to him, or denies the debt, such interest or debt is recoverable only in an action against such person ... by the receiver[.]
*365The authority of a receiver to pursue a judgment-debtor's legal claims is not limited solely to those claims that are otherwise assignable. It is important to note that receivership is distinct from assignment. "The assignment of a claim gives the assignee control of the claim and promotes champerty[,]" and is therefore void as against public policy. Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co. ,
Moreover, "many exceptions to the principles of champerty ... have been recognized and ... it has come to be generally accepted that an agreement will not be held to be within the condemnation of the principle[ ] unless the interference is clearly officious and for the purpose of stirring up strife and continuing litigation." Wright v. Commercial Union Ins. Co. ,
Likewise, defendant also notes that "compensation for personal injury" is exempt from enforcement of certain claims by creditors pursuant to N.C. Gen. Stat. § 1C-1601(a)(8) (2017). As discussed supra , however, the General Assembly included only two Section 1C-1601(a) exemptions into Section 1-363 : "the homestead and personal property exemptions."
The limits on the scope of property that may be placed within the control of receivership in the event that execution is returned unsatisfied are found within the receivership statutes themselves. Quite plainly, no law in North Carolina provides that a receiver may only transfer a judgment-debtor's recovery so long as the underlying claim would have been assignable, and so long as the underlying claim is not a personal injury claim. In fact, the law in this State is precisely to the contrary. The *367supplemental receivership proceeding operates to allow an otherwise helpless judgment-creditor to reach the judgment-debtor's property that cannot "be successfully reached by the ordinary process of execution[.]" Coates Bros. , 92 N.C. at 379.
In determining whether a judgment-creditor is entitled to have a receiver of this form appointed, the trial court need not be convinced that the defendant will prevail on her legal claim. "To warrant the appointment of a receiver, it need not appear, certainly or conclusively, that the defendant has property that he ought to apply to the judgment[.]" Id . at 384. Rather, equity authorizes the appointment of a receiver so long as the party seeking the same "establishes an apparent right to property[.]" Neighbors v. Evans ,
The judgment debtor cannot complain at the appointment of a receiver. If [she] has *852property subject to the payment of [her] debt, it ought to be applied to it; if [she] has not such property, this fact ought to appear, with reasonable certainty, to the satisfaction of the creditor. The receiver proceeds to do this, not at the peril of the debtor, but at his own peril, as to costs, if he fails in his action. The purpose of the law in such proceedings is to afford the largest and most thorough means of scrutiny, legal and equitable in their character, in reaching such property as the debtor has, that ought justly go to the discharge of the debt his creditor has against him.
It thus appears that supplementary proceedings are incident to the action, equitable in their nature, and that ... a receiver may be appointed as occasion may require.
Id . at 381.
II.
That appointing a receiver of defendant's unliquidated causes of action against Universal and Burton was a potential remedy available to plaintiff as a judgment-creditor did not, as defendant puts it, mandate that plaintiff had an "absolute right to the appointment of a receiver"
*368in the instant case. Indeed, a trial court's decision whether to appoint a receiver is ordinarily reviewed under an abuse of discretion standard. Williams v. Liggett ,
For instance, while the compensation for personal injury exemption and the prohibition against claim assignment do not serve as a direct bar to the types of property over which a receiver may be appointed, that is not to say that the public policies underlying those rules would be wholly immaterial to the determination of whether it is equitable to appoint a receiver over a legal claim in any given case. Indeed, the purpose of receivership " 'is to afford the largest and most thorough means of scrutiny, legal and equitable in their character, in reaching such property as the debtor has, that ought justly to go to the discharge of the debt his creditor has against him.' " Massey ,
Turning to that analysis in the instant case, we agree with plaintiff that the circumstances are such that equity calls to error the trial court's refusal to appoint a receiver.
*369As discussed supra , upon plaintiff's Motion for Appointment of Receiver after having completely "exhausted his remedy at law by the ordinary process of execution," Coates Bros. , 92 N.C. at 379, the relevant inquiry for the court became whether it appears that defendant might indeed be entitled to such unliquidated property, and if so, then whether the circumstances at issue are such that equity would warrant that the unliquidated claims and resulting judgments remain *853solely within defendant's control. Neighbors ,
In the case at bar, it is sufficient that the circumstances are such so as to indicate that plaintiff has potential causes of action against Universal and Burton. We need not express opinion as to the merits of those claims-that is for the receiver to decide. Id. at 381. Nor does the record reveal any equitable grounds on which the decision whether to pursue defendant's apparent claims against Universal and Burton ought to remain within her sole control. It is alleged that Universal and Burton are indebted to defendant as a result of acts in connection with the underlying litigation in the instant case, and that the proceeds of the claims could be used to satisfy plaintiff's injuries if defendant were to pursue them. Nevertheless, defendant refuses to do so, despite the fact that pursuit of the claims could benefit both parties. E.g. Hurwitz ,
The confluence of these distinct factors "comes directly within the equitable principle[s] ... which justif[y] and call[ ] for the appointment of a receiver" for the purpose of determining whether the merits of defendant's claims against Universal and Burton are worth pursuing and, if so, prosecuting the same. People's Nat'l Bank v. Waggoner ,
Conclusion
For the reasons set forth herein, the trial court's order denying plaintiff's Motion for Appointment of Receiver is
REVERSED.
Judge DIETZ concurs by separate opinion.
Judge HUNTER, JR. concurs.
Concurring Opinion
*854The Court's holding in this case is compelled by the plain language of the applicable receivership statute enacted by our General Assembly.
*371The outcome, as the appellees point out in their briefs, is at odds with common law principles that prohibit the assignment or transfer of personal injury claims. See Investors Title Ins. Co. v. Herzig ,
The appellees also 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. But this Court is "an error-correcting body, not a policy-making or law-making one." Fagundes v. Ammons Dev. Grp., Inc. , --- N.C. App. ----, ----,
Case-law data current through December 31, 2025. Source: CourtListener bulk data.