Patel v. Patel

904 S.E.2d 566

Dhirajlal C. PATEL, Plaintiff,

v.Kiran S. PATEL, Sandip Patel, and Shiv Investments, Inc., Defendants.

No. COA23-924

Court of Appeals of North Carolina.

Filed July 16, 2024

Appeal by Defendants from order entered 11 May 2023 by Judge Eric Morgan in Forsyth County Superior Court. Heard in the Court of Appeals 20 February 2024. Forsyth County, No. 21 CVS 5644

James, McElroy & Diehl, P.A., by Alexandra B. Bachman, Preston O. Odom, III, Charlotte, and J. Alexander Heroy, for the Plaintiff-Appellee.

Bennett Guthrie PLLC, by Joshua H. Bennett, Winston-Salem, and Mitchell H. Blankenship, for the Defendants-Appellants.

GRIFFIN, Judge.

Defendants Kiran S. Patel, Sandip Patel, and Shiv Investments, Inc., appeal from the trial court’s order granting judgment on the pleadings to Plaintiff Dhirajlal C. Patel in his action to renew a prior judgment for collection of debts owed by Plaintiff and Defendants on a commercial loan. Defendants contend the trial court erred because Plaintiff was a co-debtor who owed the same judgment he was seeking to collect and was therefore barred from collecting on the judgment. We hold the facts undisputably show Plaintiff is equitably barred from enforcing the judgment, and therefore reverse the trial court’s order.

I. Factual and Procedural Background

In 2011, Bank of the Carolinas (the "Bank") filed a complaint against Plaintiff and Defendants alleging that they had all committed breach of contract, as obligors or guarantors, with respect to defaulted payments owed for two commercial loans. On 18 September 2012, the trial court granted summary judgment in favor of the Bank and against both Plaintiff and Defendants (the "2012 Bank Judgment").

On 22 July 2013, the Bank assigned its right to enforce the 2012 Bank Judgment to Plaintiff in exchange for consideration less than the total value of the judgment, even though he was a debtor to the debt owed therein, and expressed at that time that "no part of the [2012 Bank Judgment] has been previously paid, assigned, or transferred." Between July 2013 and November 2021, Plaintiff acted on his position as assignee and owner of the 2012 Bank Judgment and collected varying payments on it from Defendants.

On 9 November 2021, Plaintiff filed a complaint initiating the present action against Defendants, seeking to renew and enforce the 2012 Bank Judgment. All Defendants filed answers to Plaintiff’s complaint. On 23 February 2023, Plaintiff filed a motion for judgment on the pleadings or, alternatively, summary judgment. On 27 March 2023, Defendants also filed a motion for judgment on the pleadings, as well as a motion to compel.

On 10 April 2023, the trial court held a virtual hearing on Plaintiff and Defendant’s motions over WebEx. On 11 May 2023, the trial court entered a written order granting Plaintiff’s motion for judgment on the pleadings. Defendants timely appeal.

II. Analysis

[1] Defendants contend the trial court erred by granting Plaintiff’s motion for judgment on the pleadings in his action to renew the 2012 Bank Judgment, and by denying their motion for the same, because its decision turns on an error of law. Defendants argue judgment on the pleadings for Plaintiff was improper because Plaintiff is a co-debtor under the judgment, rendering it unenforceable. Plaintiff refutes Defendants’ contention, and also asserts that Defendants wage an untimely collateral attack on the 2012 Bank Judgment’s enforceability.

[2–4] "We review de novo the trial court’s order granting judgment on the pleadings." Old Republic Nat’l Title Ins. Co. v. Hartford Fire Ins. Co., 369 N.C. 500, 507, 797 S.E.2d 264, 269 (2017) (citation omitted). "In deciding whether to grant or deny a motion for judgment on the pleadings, the trial court is required to view the facts and permissible inferences in the light most favorable to the nonmoving party, with all well pleaded factual allegations in the nonmoving party’s pleadings being taken as true and all contravening assertions in the movant’s pleadings being taken as false." Anderson Creek Partners, L.P. v. Cnty. of Harnett, 382 N.C. 1, 12, 876 S.E.2d 476, 485 (cleaned up), reh’g denied, — N.C. —, 878 S.E.2d 145 (2022). "A party seeking judgment on the pleadings must show that the complaint fails to allege facts sufficient to state a cause of action or admits facts which constitute a complete legal bar thereto." DiCesare v. Charlotte-Mecklenburg Hosp. Auth., 376 N.C. 63, 70, 852 S.E.2d 146, 151 (2020) (cleaned up).

[5] To renew the enforceability of a prior judgment, the owner of the judgment may bring an independent action alleging "[1] the existence of a prior judgment against the defendant; [2] the fact that full payment on the judgment has not been made; and [3] an accounting of the unpaid balance due and any applicable interest." Unifund CCR Partners v. Young, 282 N.C. App. 381, 386, 871 S.E.2d 347, 351 (2022). Defendants do not challenge Plaintiff’s assertions that the 2012 Bank Judgment was never fully paid, or the amount of the alleged unpaid balance. Defendants argue only that, even considering the pleadings in the light most favorable to Plaintiff, Plaintiff cannot successfully show the existence of a prior judgment.

In their efforts to guide our resolution of this issue, Plaintiff and Defendants each assert that one of two cases of North Carolina precedent should control: Hoft v. Mohn, 215 N.C. 397, 2 S.E.2d 23 (1939), and Unifund CCR Partners v. Hoke, 273 N.C. App. 401, 848 S.E.2d 508 (2020).

Plaintiff relies on Unifund CCR Partners v. Hoke. The trial court specifically cited Hoke in its order granting Plaintiff’s motion for judgment on the pleadings. In Hoke, the plaintiff purchased a credit account including debts owed by the defendant, then obtained a judgment against the defendant to collect those debts. Ten years later, the plaintiff sought to renew its judgment against the defendant. Hoke, 273 N.C. App. at 402, 848 S.E.2d at 509. The defendant argued that the plaintiff, in bringing its renewal action, failed to satisfy heightened pleading requirements associated with its status as a "debt buyer." Id. at 403, 848 S.E.2d at 509. The court disagreed with the defendant’s argument and otherwise held no genuine issues of material fact existed because the defendant did "not challenge the existence or validity of the judgment, nor the validity of the underlying debt." Id. at 406, 848 S.E.2d at 511. In reaching its holding that the plaintiff was not a "debt buyer," the court clarified that, "[b]e- cause a claim was already filed and a judgment was rendered, the action [then] before this Court involve[d] that judgment and not the underlying debt claim." Id. at 405, 848 S.E.2d at 511. Therefore, the only evidence of the defendant’s debt, which was material to the renewal action, was the judgment being renewed. Id. at 405, 848 S.E.2d at 511.

We hold Hoke to have limited application to the present case. Here, Defendants do challenge the existence of the 2012 Bank Judgment and do not make any assertions that Plaintiff failed to comply with statutorily heightened pleading requirements. However, Hoke is instructive as to what evidence is material in an action to renew a judgment: the existence of that judgment, notwithstanding any issues of fact or law corresponding to the underlying debt claims. Id. at 406, 848 S.E.2d at 511. Defendants do not contest the legal foundations of the 2012 Bank Judgment or seek to present evidence concerning the legality or accuracy of the debts supporting it. Rather, they contend that Plaintiff’s possession of the judgment is what renders an otherwise valid judgment unenforceable.

Defendants direct this Court to Hoft v. Mohn, a 1939 case where the North Carolina Supreme Court affirmed the lower court’s refusal to enforce a judgment because the plaintiff stood in the position of one of the judgment co-debtors. Hoft, 215 N.C. at 400, 2 S.E.2d at 26. Though the plaintiff was not an original debtor on the judgment, his possession of the judgment was the result of a series of transfers from an original judgment co-debtor. Id. at 398, 2 S.E.2d at 24. The plaintiff sought to recover the remaining balance of the judgment from the other judgment co-debtors because the full value of the judgment had never been paid. Id. Our Supreme Court explained that, "[s]ince remote days of the common law, it has been held that payment by one or more of those jointly and severally liable on a judgment is an extinguishment of the judgment, and that an assignment of the judgment to such person or persons will not serve to keep it alive against the others." Id. (citations omitted). The Court in Hoft held that the judgment could not be enforced by the plaintiff because he "must be held to represent the [judgment co-debtor] to whose rights and privileges he has succeeded and which he exercises," and law and equity prevented the judgment co-debtor from recovering the balance of the judgment from the non-paying co-debtors. Id. at 400, 2 S.E.2d at 25-26.

[6] Though the facts of Hoft appear to involve a judgment co-debtor’s attempt to enforce the remaining debt owed on a judgment following its partial satisfaction, the rules of law cited and followed by the Hoft Court arose from well-established jurisprudence, which traditionally applies when one judgment co-debtor pays off the entirety of the judgment and attempts to receive an assignment of the judgment in exchange. In such case, the paying judgment debtor has no right to subrogation of the whole debt from their fellow co-debtors:

The Court is not aware of any principle, on which, after the satisfaction of a judgment for a partnership debt by one of the partners sued, equity ought to extend or preserve the vitality of the legal security, under the guise of an assignment, so as to charge the bail of the other partner.

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Upon the whole, the Court is of opinion, clearly, that the doctrine of subrogation cannot be applied between partners and joint principals, so

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