Tropic Leisure Corp. v. Hailey , 249 N.C. App. 198 ( 2016 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-1254
Filed: 16 August 2016
Wake County, No. 15 CVD 2244
TROPIC LEISURE CORP., MAGEN POINT, INC. d/b/a MAGENS POINT RESORT,
Plaintiffs,
v.
JERRY A. HAILEY, Defendant.
Appeal by defendant from order entered 10 September 2015 by Judge Debra
Sasser in Wake County District Court. Heard in the Court of Appeals 25 May 2016.
The Armstrong Law Firm, P.A., by L. Lamar Armstrong, Jr. and Daniel K.
Keeney, for defendant-appellant.
Warren, Shackleford & Thomas, P.L.L.C., by R. Keith Shackleford, for
plaintiffs-appellees.
DAVIS, Judge.
Jerry A. Hailey (“Defendant”) appeals from an order denying his motion for
relief from a foreign judgment that Tropic Leisure Corp. and Magens1 Point, Inc.,
d/b/a Magens Point Resort (collectively “Plaintiffs”) sought to enforce in North
Carolina. On appeal, Defendant argues that the foreign judgment should not be
enforced because it was rendered in violation of his due process rights. After careful
review, we affirm.
Factual Background
1While this entity’s name appears as “Magen Point, Inc.” in the trial court’s order, it is referred
to elsewhere in the record as “Magens Point, Inc.”
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
On 2 April 2014, Plaintiffs, who are corporations organized under the laws of
the United States Virgin Islands (the “Virgin Islands”), obtained a default judgment
(the “Judgment”) in the small claims division of the Virgin Islands Superior Court
against Defendant, who is a resident of North Carolina, in the amount of $5,764.00
plus interest and costs. Defendant did not appeal the default judgment. On 17
February 2015, Plaintiffs filed a Notice of Filing Foreign Judgment in Wake County
District Court along with a copy of the Judgment and a supporting affidavit.
Defendant filed a motion for relief from foreign judgment on 6 April 2015 in
which he argued that the Judgment was not entitled to full faith and credit in North
Carolina because it was obtained in violation of his constitutional rights and was
against North Carolina public policy. Plaintiffs subsequently filed a motion to enforce
the foreign judgment.
The parties’ motions were heard before the Honorable Debra Sasser on 30 July
2015. On 10 September 2015, the trial court entered an order denying Defendant’s
motion for relief and concluding that Plaintiffs were entitled to enforcement of the
Judgment under the Full Faith and Credit Clause of the United States Constitution,
U.S. Const. art. IV, § 1, and North Carolina’s Uniform Enforcement of Foreign
Judgments Act (“UEFJA”), N.C. Gen. Stat. §§ 1C-1701 et seq. Defendant filed a
timely notice of appeal.
Analysis
-2-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
On appeal, Defendant argues that the trial court erred in extending full faith
and credit to the Judgment. This issue involves a question of law, which we review
de novo. See DOCRX, Inc. v. EMI Servs. of N.C., LLC, 367 N.C. 371, 375, 758 S.E.2d
390, 393 (applying de novo review to whether Full Faith and Credit Clause required
North Carolina to enforce foreign judgment), cert. denied, __ U.S. __, 135 S. Ct. 678,
190 L. Ed. 2d 390 (2014).
The Full Faith and Credit Clause “requires that the judgment of the court of
one state must be given the same effect in a sister state that it has in the state where
it was rendered.”2 State of New York v. Paugh, 135 N.C. App. 434, 439, 521 S.E.2d
475, 478 (1999) (citation omitted). “[B]ecause a foreign state’s judgment is entitled
to only the same validity and effect in a sister state as it had in the rendering state,
the foreign judgment must satisfy the requisites of a valid judgment under the laws
of the rendering state before it will be afforded full faith and credit.” Bell Atl. Tricon
Leasing Corp. v. Johnnie’s Garbage Serv., Inc., 113 N.C. App. 476, 478-79, 439 S.E.2d
221, 223, disc review denied, 336 N.C. 314, 445 S.E.2d 392 (1994).
The UEFJA “governs the enforcement of foreign judgments that are entitled to
full faith and credit in North Carolina.” Lumbermans Fin., LLC v. Poccia, 228 N.C.
2 The Full Faith and Credit Clause applies to the Virgin Islands because it is a territory of the
United States. See 48 U.S.C. § 1541 (designating the Virgin Islands as a territory); 28 U.S.C. § 1738
(applying Full Faith and Credit Clause to judgments filed “in every court within the United States
and its Territories and Possessions”); see also Bergen v. Bergen, 439 F.2d 1008, 1013 (3rd Cir. 1971)
(holding that the Full Faith and Credit Clause “is applicable to judgments of the Territory of the Virgin
Islands”).
-3-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
App. 67, 70, 743 S.E.2d 677, 679 (2013) (citation and quotation marks omitted). In
order to domesticate a foreign judgment under the UEFJA, a party must file a
properly authenticated foreign judgment with the office of the clerk of superior court
in any North Carolina county along with an affidavit attesting to the fact that the
foreign judgment is both final and unsatisfied in whole or in part and setting forth
the amount remaining to be paid on the judgment. See N.C. Gen. Stat. § 1C-1703(a)
(2015).
The introduction into evidence of these materials “establishes a presumption
that the judgment is entitled to full faith and credit.” Meyer v. Race City Classics,
LLC, 235 N.C. App. 111, 114, 761 S.E.2d 196, 200, disc. review denied, 367 N.C. 796,
766 S.E.2d 624 (2014). The party seeking to defeat enforcement of the foreign
judgment must “present evidence to rebut the presumption that the judgment is
enforceable . . . .” Rossi v. Spoloric, __ N.C. App. __, __, 781 S.E.2d 648, 654 (2016).
A properly filed foreign judgment “has the same effect and is subject to the same
defenses as a judgment of this State and shall be enforced or satisfied in like
manner[.]” N.C. Gen. Stat. § 1C-1703(c). Thus, a judgment debtor may file a motion
for relief from the foreign judgment on any “ground for which relief from a judgment
of this State would be allowed.” N.C. Gen. Stat. § 1C-1705(a) (2015).
Our Supreme Court has held that “the defenses preserved under North
Carolina’s UEFJA are limited by the Full Faith and Credit Clause to those defenses
-4-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
which are directed to the validity and enforcement of a foreign judgment.” DOCRX,
367 N.C. at 382, 758 S.E.2d at 397. In DOCRX, the Court provided the following
examples of potential defenses to enforcement of a foreign judgment:
that the judgment creditor committed extrinsic fraud, that
the rendering state lacked personal or subject matter
jurisdiction, that the judgment has been paid, that the
parties have entered into an accord and satisfaction, that
the judgment debtor’s property is exempt from execution,
that the judgment is subject to continued modification, or
that the judgment debtor’s due process rights have been
violated.
Id. In the present case, Defendant argues that he was denied due process during the
Virgin Islands proceeding because the rules governing small claims cases in that
jurisdiction do not (1) permit parties to be represented by counsel; or (2) allow for trial
by jury.
Some understanding of the structure of the Virgin Islands court system is
necessary to our analysis. Congress has created the District Court of the Virgin
Islands, which possesses jurisdiction equivalent to that of a United States district
court. See 48 U.S.C. § 1611; Edwards v. HOVENSA, LLC, 497 F.3d 355, 358 (3rd Cir.
2007). In addition, the legislature of the Virgin Islands has established (1) the Virgin
Islands Supreme Court, a court of last resort; and (2) the Superior Court of the Virgin
Islands, a trial court of local jurisdiction. V.I. Code Ann. tit. 4, § 2.
The Virgin Islands Superior Court contains a small claims division “in which
the procedure shall be as informal and summary as is consistent with justice.” V.I.
-5-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
Code Ann. tit. 4, § 111. The small claims division has jurisdiction over all civil actions
where the amount in controversy does not exceed $10,000.00. V.I. Code Ann. tit. 4, §
112(a). Neither party in a proceeding before the small claims court may appear
through an attorney. V.I. Code Ann. tit. 4, § 112(d). Parties must appear in person,
although a party who is not a natural person may send a personal representative. Id.
In addition, small claims cases are heard before a magistrate without a jury. See V.I.
Super. Ct. R. 64.
A party may appeal a judgment of the small claims division to the Appellate
Division of the Superior Court. See H & H Avionics, Inc. v. V.I. Port Auth., 52 V.I.
458, 462-63 (2009); V.I. Super. Ct. R. 322.1(a). No additional evidence may be taken
in the Appellate Division. V.I. Super. Ct. R. 322.3(a). If a party does not agree with
the decision of the Appellate Division, it may then appeal to the Virgin Islands
Supreme Court. See V.I. Code Ann. tit. 4, § 32; H & H Avionics, 52 V.I. at 462-63.
Parties are permitted to be represented by counsel on appeal to the Virgin Islands
Supreme Court.3 See V.I. Sup. Ct. R. 4(d).
In the present case, Defendant’s failure to appear in the Virgin Islands small
claims court to contest Plaintiffs’ lawsuit against him resulted in a default judgment.
Defendant did not appeal that judgment.
3 It is unclear whether parties may appear through counsel in the Appellate Division of the
Superior Court. See Wild Orchid Floral & Event Design v. Banco Popular de Puerto Rico, 62 V.I. 240,
249 (V.I. Super. Ct. 2015).
-6-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
Defendant does not dispute the fact that Plaintiffs complied with the UEFJA
by filing a properly authenticated copy of the Judgment and an accompanying
affidavit in a North Carolina court. Accordingly, Plaintiffs are entitled to a
“presumption that the judgment is entitled to full faith and credit.” Meyer, 235 N.C.
App. at 114, 761 S.E.2d at 200.
We also note that Defendant does not argue that the Virgin Islands small
claims court lacked subject matter jurisdiction or personal jurisdiction in the
underlying action. Rather, Defendant’s sole argument in this Court is that the
Judgment is not entitled to full faith and credit because he was deprived of his right
to due process by the rules of the rendering jurisdiction’s small claims court, which
did not allow the parties to appear through counsel or provide for trial by jury.4
However, Defendant failed to raise these due process concerns in the Virgin
Islands proceedings, and he has not demonstrated that he was in any way prevented
from doing so. In fact, caselaw from the Virgin Islands establishes that courts in that
jurisdiction are authorized to adjudicate due process challenges concerning matters
arising in small claims court. See, e.g., Gore v. Tilden, 50 V.I. 233, 239-40 (2008) (due
process challenge to adequacy of notice in connection with small claims court default
4 The Fourteenth Amendment to the United States Constitution provides, in pertinent part,
that no state may “deprive any person of life, liberty, or property, without due process of law[.]” U.S.
Const. amend. XIV, §1. Congress has applied this rule to the Virgin Islands by statute. See 48 U.S.C.
§ 1561 (“No law shall be enacted in the Virgin Islands which shall deprive any person of life, liberty,
or property without due process of law . . . .”).
-7-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
judgment); Moore v. Walters, No. SX-09-SM-203, 2013 V.I. LEXIS 73, at *7, 2013 WL
9570350, at *3 (V.I. Super. Ct. Sept. 25, 2013) (due process challenge to small claims
court evidentiary matter), aff’d, 61 V.I. 502 (2014).
We hold that the UEFJA does not permit Defendant to mount a collateral
attack on a foreign judgment based on an argument that he could have raised in the
rendering jurisdiction but instead chose to forego until Plaintiffs sought enforcement
of the judgment in North Carolina. Allowing Defendant to raise in the present action
an issue “that could have and should have been litigated in the rendering court is
inconsistent with decisions of the United States Supreme Court holding that
judgments that are valid and final in the rendering state are entitled to enforcement
in the forum state under the Full Faith and Credit Clause.” DOCRX, 367 N.C. at
382, 758 S.E.2d at 397.
This principle has been recognized by numerous courts. See, e.g., Wilson v.
Wilson, 667 F.2d 497, 498 (5th Cir.) (Full Faith and Credit Clause and doctrine of res
judicata required enforcement of out-of-state judgment because party seeking to
defeat enforcement “could have appealed or raised the points he now makes” yet
failed to do so in the rendering jurisdiction), cert denied, 458 U.S. 1107, 73 L. Ed. 2d
1368 (1982); Dawson v. Duncan, 144 Ill. App. 3d 532, 537, 494 N.E.2d 900, 903 (1986)
(under Uniform Enforcement of Foreign Judgments Act, a “judgment debtor may
defend against a foreign judgment sought to be enforced in this State, but not on
-8-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
grounds which could have been presented to the foreign court in which the judgment
was rendered”); Osteoimplant Tech., Inc. v. Rathe Prods., Inc., 107 Md. App. 114, 118,
666 A.2d 1310, 1311-12 (1995) (“To permit appellant to reopen litigation in Maryland
and address issues that were or could have been addressed in the previous forum
would effectively subject appellee to trying its case over again.”); Duncan v. Seay, 553
P.2d 492, 494 (Okla. 1976) (because litigant seeking to defeat enforcement of out-of-
state custody judgment “could have litigated [service and personal jurisdiction]
questions there, but he did not choose to do so . . . [h]e should not be rewarded for
fleeing the jurisdiction instead of remaining and contesting the issues in a manner
provided by law”).
Here, Defendant did not appear in the Virgin Islands small claims court at all
— either to defend Plaintiffs’ claims against him on the merits or to assert a due
process challenge to the rules prohibiting him from being represented by counsel or
having a trial by jury. Nor did he raise his due process argument in appeals to the
Appellate Division of the Superior Court or to the Virgin Islands Supreme Court.
Accordingly, he is foreclosed from raising such an argument for the first time here as
a defense under the UEFJA.
Conclusion
For the reasons stated above, we affirm the trial court’s 10 September 2015
order.
-9-
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
AFFIRMED.
Judges ELMORE and DIETZ concur.
- 10 -