DocRx, Inc. v. Emi Services of North Carolina, LLC , 367 N.C. 371 ( 2014 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 75PA13
FILED 12 JUNE 2014
DOCRX, INC.
v.
EMI SERVICES OF NORTH CAROLINA, LLC
On discretionary review pursuant to N.C.G.S. ' 7A-31 of a unanimous
decision of the Court of Appeals, ___ N.C. App. ___, 738 S.E.2d 199 (2013), vacating
an order entered on 6 February 2012 by Judge W. David Lee in Superior Court,
Stanly County, and remanding for further proceedings. Heard in the Supreme
Court on 7 January 2014.
Henson & Talley, LLP, by Karen Strom Talley and Perry C. Henson, Jr., for
plaintiff-appellee.
Chapman Law Group, PLC, by Avery S. Chapman, pro hac vice; and Tin,
Fulton, Walker & Owen, PLLC, by Sam McGee, for defendant-appellant.
PARKER, Chief Justice.
The issue in this case is whether the Court of Appeals erred by holding that
the Full Faith and Credit Clause precludes the use of intrinsic fraud to defeat a
foreign monetary judgment pursuant to North Carolina’s Uniform Enforcement of
Foreign Judgment Act and N.C.G.S. § 1A-1, Rule 60(b)(3). For the reasons stated
herein, we modify and affirm the decision of the Court of Appeals.
DocRx, Inc. (plaintiff), an Alabama corporation, filed a breach of contract
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action against EMI Services of North Carolina, LLC (defendant) in Mobile County,
Alabama on 6 August 2010. The complaint alleged that defendant failed to pay
plaintiff the agreed upon commission from defendant’s pharmaceutical sales under
a contract the parties entered on 28 June 2010. Specifically, the complaint alleged
that defendant failed to pay plaintiff “25% of all net profits of [defendant’s] sales
made of products supplied . . . by [an intermediate company]” located by plaintiff.
The complaint sought, inter alia, “compensatory damages, plus interest and costs”
but did not allege a specific monetary amount of damages. Defendant did not
respond to the complaint, and an initial default judgment was entered on 24
September 2010.
During the default proceedings in Alabama, Brian Ward (Ward), the
President and CEO of plaintiff corporation, filed an affidavit with the court in which
he stated that defendant sold 3,504 units “for $500 per unit, for a total profit of $475
per unit.” Plaintiff’s counsel filed a Motion To Enter Default Judgment Amount
adopting Ward’s statement. Plaintiff’s counsel calculated that defendant’s total net
profits for the sale of the units was $1,664,400 and that plaintiff was entitled to a
commission payment of $416,100, which represented 25% of defendant’s total net
profits. Plaintiff’s counsel also alleged that plaintiff was entitled to recover
reasonable attorneys’ fees in the amount of $12,587.14 and interest on the breach of
contract claim in the amount of $24,996. On 1 April 2011, the Circuit Court of
Mobile County, Alabama entered a second default judgment against defendant for
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$453,683.14 (the Alabama judgment).
On 2 August 2011, plaintiff filed a Request To File Foreign Judgment in the
Superior Court in Stanly County, North Carolina. Plaintiff presented a certified
copy of the Alabama judgment. On 25 August 2011, defendant filed a Motion For
Relief From And Notice Of Defense To Foreign Judgment. Defendant argued, inter
alia, that the Alabama judgment was obtained by extrinsic fraud. On 2 December
2011, plaintiff filed a Motion To Dismiss Defendant’s Defense Of Extrinsic Fraud
Pursuant To Rule 12(b)(6) Of The North Carolina Rules Of Civil Procedure and a
Motion To Enforce Foreign Judgment As A North Carolina Judgment.
Defendant filed an Amended Motion For Relief From And Notice Of Defense
To Foreign Judgment on 17 January 2012 in which it added defense based on fraud,
pursuant to N.C.G.S. § 1A-1, Rule 60(b). Defendant argued that Ward and
plaintiff’s counsel falsely inflated the amount of damages owed plaintiff in their
respective filings in Alabama. In support of its motion, defendant submitted an
affidavit of Douglas R. Smith, Jr. (Smith), a representative of defendant. In his
affidavit Smith stated that Ward and plaintiff’s counsel knew their statements
regarding the amount of damages were false because of emails Ward sent
defendant. Smith alleged that on 18 June 2010, Ward sent two emails to defendant
wherein he acknowledged that the selling price per unit was $67, not $500 as
alleged by Ward and plaintiff’s counsel. Smith further alleged that Ward and
plaintiff’s counsel knew that their statements were false because on 12 July 2010,
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Ward sent an email to defendant wherein he acknowledged the selling price per
unit to pharmacies and wholesalers was $45. Ward’s emails were attached as
exhibits to Smith’s affidavit.
On 30 January 2012, Ward and plaintiff’s counsel both filed affidavits in
opposition to defendant’s Amended Motion For Relief From And Notice Of Defense
To Foreign Judgment. In his affidavit Ward stated that the emails dated 18 June
2010 predated the contract between plaintiff and defendant and referred to
pharmaceutical sales that took place prior to the execution of the Agreement. Ward
further alleged that the email dated 12 July 2010 referred to a rate that was
established for plaintiff’s clients during the initial business relationship between
the parties.
The trial court heard the matter on 30 January 2012 and entered an order
denying plaintiff’s motion to enforce the Alabama judgment as a judgment of the
State of North Carolina on 6 February 2012. In its order the trial court first
determined that the affidavits and exhibits submitted by defendant supported
defendant’s argument that plaintiff obtained the Alabama judgment as a result of
fraud. The trial court then stated that under N.C.G.S. § 1C-1703(c), a provision of
North Carolina’s Uniform Enforcement of Foreign Judgments Act (UEFJA), the
Alabama judgment was “ ‘subject to the same defenses as a judgment of this State.’
” The trial court explained that under Rule 60(b)(3) of the North Carolina Rules of
Civil Procedure, relief from enforcement of a judgment was available if the trial
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court determined “that there was ‘fraud (whether heretofore denominated intrinsic
or extrinsic), misrepresentation, or other misconduct of an adverse party.’ ” Finally,
the trial court concluded that “in accordance with NCRCP 60(b)(3) the intrinsic
fraud, misrepresentation and misconduct of the plaintiff in obtaining the underlying
Alabama judgment precludes enforcement of the Alabama judgment as a judgment
of this State.” Plaintiff gave timely notice of appeal to the Court of Appeals.
On appeal plaintiff argued that the trial court erred in denying its motion to
enforce the Alabama judgment as a judgment of the State of North Carolina,
contending that under the Full Faith and Credit Clause of the United States
Constitution a state may only deny enforcement of a sister state’s judgment for
extrinsic fraud, not intrinsic fraud.
The Court of Appeals vacated the trial court’s order denying enforcement of
the Alabama judgment and remanded for further proceedings. DocRx, Inc. v. EMI
Servs. of N.C., LLC, ___ N.C. App. ___, ___, 738 S.E.2d 199, 204 (2013). The court
below recognized that the interplay among the Full Faith and Credit Clause,
N.C.G.S. § 1A-1, Rule 60(b), and our UEFJA is an issue of first impression in this
State. Id. at ___, 738 S.E.2d at 201-02. The Court of Appeals noted that
“[t]raditionally, foreign judgments have been subject to attacks on limited grounds,”
requiring a showing “that the court lacked jurisdiction, or that the judgment was
procured through fraud.” Id. at ___, 738 S.E.2d at 201 (emphasis and quotation
marks omitted) (citing Thomas v. Frosty Morn Meats, Inc., 266 N.C. 523, 146 S.E.2d
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397 (1966)). The court also recognized that the UEFJA, enacted in 1989, states, in
pertinent part, that a 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[.]’ ” Id. at ___, 738 S.E.2d at 202 (brackets in original) (quoting N.C.G.S. §
1C-1703(c) (2011)). The Court of Appeals acknowledged that the plain language of
the UEFJA would seem to allow a foreign judgment debtor to utilize any defense
applicable to a domestic judgment, such as Rule 60(b). Id. at ___, 738 S.E.2d at 202.
However, relying on cases from Utah, Montana, and Colorado that have
interpreted similar statutes, the court below held that in North Carolina “ ‘the
remedies available under Rule . . . 60 are limited by the Full Faith and Credit
Clause of the United States Constitution when a foreign judgment is at issue.’ ” Id.
at ___, 738 S.E.2d at 202-03 (quoting Bankler v. Bankler, 963 P.2d 797, 799-800
(Utah Ct. App. 1998)). The court adopted the rule articulated by the Colorado
Court of Appeals in Craven v. Southern Farm Bureau Casualty Insurance Co., 117
P.3d 11, 14 (Colo. App. 2004), and then concluded that “intrinsic fraud,
misrepresentation and misconduct” were not sufficient grounds under the Full
Faith and Credit Clause to deny plaintiff’s motion to enforce the Alabama
judgment. Id. at ___, 738 S.E.2d at 203. This Court allowed defendant’s petition for
discretionary review.
Before this Court defendant argues that the Full Faith and Credit Clause
does not limit attack on fraudulent foreign judgments to those obtained by extrinsic
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fraud. Defendant contends that the decision of the Court of Appeals improperly
gives foreign judgments more deference than domestic judgments because a foreign
judgment cannot be attacked for intrinsic fraud under Rule 60(b) and the UEFJA,
but a domestic judgment can be attacked on such grounds. We disagree.
The central issue in this case is whether the Full Faith and Credit Clause
requires North Carolina courts to enforce the Alabama monetary judgment. This
issue involves a question of law, which we review de novo. State v. Cox, 367 N.C.
147, 151, 749 S.E.2d 271, 275 (2013).
To determine this issue, we look first to the language of the Full Faith and
Credit Clause and the United States Supreme Court’s jurisprudence interpreting
this constitutional provision. The Full Faith and Credit Clause of the United States
Constitution provides that “Full Faith and Credit shall be given in each State to the
public Acts, Records, and judicial Proceedings of every other State. And the
Congress may by general Laws prescribe the Manner in which such Acts, Records
and Proceedings shall be proved, and the Effect thereof.” U.S. Const. art. IV, § 1.
Pursuant to that clause Congress has prescribed:
Such Acts, records and judicial proceedings or
copies thereof, so authenticated, shall have the same full
faith and credit in every court within the United States
and its Territories and Possessions as they have by law or
usage in the courts of such State, Territory or Possession
from which they are taken.
28 U.S.C. § 1738 (2012). The purpose of the full faith and credit command
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“was to alter the status of the several states as
independent foreign sovereignties, each free to ignore
obligations created under the laws or by the judicial
proceedings of the others, and to make them integral
parts of a single nation throughout which a remedy upon
a just obligation might be demanded as of right,
irrespective of the state of its origin.”
Baker v. Gen. Motors Corp., 522 U.S. 222, 232, 139 L. Ed. 2d 580, 591 (1998)
(quoting Milwaukee Cnty. v. M.E. White Co., 296 U.S. 268, 277, 80 L. Ed. 220, 228
(1935)).
Under United States Supreme Court decisions, the test for determining when
the Full Faith and Credit Clause requires enforcement of a foreign judgment
focuses on the validity and finality of the judgment in the rendering state. See New
York ex rel. Halvey v. Halvey, 330 U.S. 610, 91 L. Ed. 1133 (1947); Morris v. Jones,
329 U.S. 545, 91 L. Ed. 488 (1947). In Morris v. Jones, Morris brought suit in
Missouri against Chicago Lloyds, an Illinois insurance company authorized to do
business in Missouri, for malicious prosecution and false arrest. 329 U.S. at 546-47,
91 L. Ed. at 493. Before a judgment was obtained in Missouri, Chicago Lloyds was
ordered into liquidation in Illinois, and a liquidator was appointed. Id. at 547, 91 L.
Ed. at 493. The Illinois court set “a time for the filing of claims against Chicago
Lloyds and issued an order staying suits against it.” Id. Morris had notice of the
stay order but continued to prosecute his suit in Missouri. Id. Chicago Lloyds’s
counsel withdrew from the Missouri suit, “stating to the Missouri court that the
Illinois liquidation proceedings had vested all the property of Chicago Lloyds in the
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liquidator.” Id. Thereafter, Morris obtained a judgment against Chicago Lloyds in
Missouri and filed a proof of claim in the Illinois proceedings, attaching a copy of his
Missouri judgment. Id. The Illinois Supreme Court upheld an order disallowing the
claim, notwithstanding Morris’s argument that allowance of the claim was
mandated by the Full Faith and Credit Clause. Id. The United States Supreme
Court allowed Morris’s petition for certiorari.
Before the United States Supreme Court, Jones, the statutory liquidator
appointed by the Illinois court, contended that the Illinois Supreme Court correctly
concluded that title to all property of Chicago Lloyds was vested in the liquidator
and was not subject to the process of any other court. Id. at 548, 91 L. Ed. at 494.
The Illinois court further concluded “that if a liquidator had been appointed in
Missouri, [Morris] could not have obtained his judgment or if he had obtained it, he
could not have enforced it against the property in the hands of the Missouri
liquidator.” Id. (citation omitted). Accordingly, the Illinois court determined that
disallowance of the Missouri judgment in the Illinois proceedings gave the Missouri
judgment “the same effect that it would have had under the same circumstances in
Missouri.” Id.
The Supreme Court initially made clear that Morris was “not seeking . . .
anything other than the right to prove his claim in judgment form.” Id. The
Supreme Court then reasoned as follows:
“A judgment of a court having jurisdiction of the
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parties and of the subject matter operates as res judicata,
in the absence of fraud or collusion, even if obtained upon
a default.” Such a judgment obtained in a sister State is
. . . entitled to full faith and credit in another State,
though the underlying claim would not be enforced in the
State of the forum. It is no more important that the suit
on this underlying claim could not have been maintained
in Illinois after the liquidator had been appointed than
the fact that a statute of limitations of the State of the
forum might have barred it. . . . The full faith and credit
to which a judgment is entitled is the credit which it has
in the State from which it is taken, not the credit that
under other circumstances and conditions it might have
had.
Under Missouri law petitioner’s judgment was a
final determination of the nature and amount of his claim.
That determination is final and conclusive in all courts.
....
. . . The command [of the federal statute
implementing the Full Faith and Credit Clause] is to give
full faith and credit to every judgment of a sister State.
And where there is no jurisdictional infirmity, exceptions
have rarely, if ever, been read into the constitutional
provision or the Act of Congress in cases involving money
judgments rendered in civil suits.
Id. at 550-53, 91 L. Ed. at 495-97 (citations omitted). The Court in Morris
concluded “that the nature and amount of petitioner’s claim has been conclusively
determined by the Missouri judgment and may not be relitigated in the Illinois
proceedings, it not appearing that the Missouri court lacked jurisdiction over either
the parties or the subject matter.” Id. at 554, 91 L. Ed. at 497-98.
New York ex rel. Halvey v. Halvey involved a New York court’s modification of
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a child custody decree rendered in Florida. 330 U.S. at 611-12, 91 L. Ed. at 1134-35.
The United States Supreme Court determined that since a Florida court could
modify the custody decree, it was not res judicata and the modification by the New
York Court did not violate the Full Faith and Credit Clause. Id. at 613-14, 91 L. Ed.
at 1135-36. In reaching this decision, the Court stated:
The general rule is that [the Full Faith and Credit
Clause] requires the judgment of a sister State to be given
full, not partial, credit in the State of the forum. But a
judgment has no constitutional claim to a more conclusive
or final effect in the State of the forum than it has in the
State where rendered. If the court of the State which
rendered the judgment had no jurisdiction over the person
or the subject matter, the jurisdictional infirmity is not
saved by the Full Faith and Credit Clause. . . . Whatever
may be the authority of a State to undermine a judgment
of a sister State on grounds not cognizable in the State
where the judgment was rendered, it is clear that the
State of the forum has at least as much leeway to
disregard the judgment, to qualify it, or to depart from it
as does the State where it was rendered.
Id. at 614-15, 91 L. Ed. at 1136 (citations omitted). The Court then concluded that
“[i]t is not shown that the New York court in modifying the Florida decree exceeded
the limits permitted under Florida law. There is therefore a failure of proof that the
Florida decree received less credit in New York than it had in Florida.” Id. at 615,
91 L. Ed. at 1136.
Thus, if the foreign judgment is valid and final in the rendering state, it is
conclusive in the forum state and is entitled to receive full faith and credit. See
Morris, 329 U.S. at 554, 91 L. Ed. at 497-98. If the foreign judgment can be
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modified in the rendering state, it is not conclusive and can be modified by the
forum state. Halvey, 330 U.S. at 614-15, 91 L. Ed. at 1136.
The UEFJA enacted in North Carolina sets out the procedure for filing a
foreign judgment. N.C.G.S. §§ 1C-1701 to -1708 (2013). Section 1C-1703(c) states
that “[a] judgment so filed 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.G.S.
§ 1C-1703(c). A foreign judgment debtor may seek relief from the foreign judgment
on the grounds that it “has been appealed from” or “stayed by” the rendering court
“or on any other ground for which relief from a judgment of this State would be
allowed.” N.C.G.S. § 1C-1705(a).
Defendant contends that the phrase “is subject to the same defenses as a
judgment of this State,” N.C.G.S. § 1C-1703(c), entitles it to challenge the Alabama
judgment under Rule 60(b) of the North Carolina Rules of Civil Procedure and that
the trial court was, therefore, correct in denying plaintiff’s motion to enforce the
Alabama judgment on the ground that it was obtained by “intrinsic fraud,
misrepresentation and misconduct of the plaintiff,” namely, false testimony as to
the amount of defendant’s indebtedness to plaintiff. Defendant asserts that because
Rule 60(b)(3) of the Alabama Rules of Civil Procedure, like Rule 60(b)(3) of the
North Carolina Rules of Civil Procedure, provides for relief from a judgment for
“fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation,
or other misconduct of an adverse party,” Ala. R. Civ. P. 60(b)(3), both the Full
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Faith and Credit Clause and the UEFJA are satisfied. See N.C.G.S. § 1A-1, Rule
60(b)(3) (2013).
This Court has not previously addressed the interplay among the Full Faith
and Credit Clause, North Carolina’s UEFJA, and Rule 60(b) of the North Carolina
Rules of Civil Procedure. However, other state supreme courts that have considered
the interplay between the Full Faith and Credit Clause and the UEFJA have
rejected the argument that the judgment of the rendering state can be reopened in
the forum state under Rule 60 of the Rules of Civil Procedure. For example, in
Matson v. Matson, the Minnesota UEFJA provided that “[a] judgment so filed has
the same effect and is subject to the same procedures, defenses and proceedings for
reopening, vacating, or staying as a judgment of a district court or the supreme court
of this state, and may be enforced or satisfied in like manner.” 333 N.W.2d 862, 867
(Minn. 1983) (en banc) (quoting Minn. Stat. § 548.27 (1982) (emphasis added)).
Interpreting this provision, the Supreme Court of Minnesota stated:
Appellant is under the misconception that the above-
emphasized language allows the courts of this state to
apply Minn.R.Civ.P. 60.02 to foreign judgments in the
same manner it is applied to judgments of the courts of
this state. It has been settled by the United States
Supreme Court and courts of other states that the power
of a state to reopen or vacate a foreign judgment is more
limited than under the rules of civil procedure and that a
foreign judgment cannot be collaterally attacked on the
merits. After a foreign judgment has been duly filed, the
grounds for reopening or vacating it are limited to lack of
personal or subject matter jurisdiction of the rendering
court, fraud in procurement (extrinsic), satisfaction, lack
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of due process, or other grounds that make a judgment
invalid or unenforceable. The nature and amount or other
aspects of the merits (i.e., defenses) of a foreign judgment
cannot be relitigated in the state in which enforcement is
sought. See Morris v. Jones, 329 U.S. 545, 67 S.Ct. 451, 91
L.Ed. 488 (1946).
Id. at 867-68 (citations omitted).
Similarly, the Supreme Court of Nevada stated that “the defenses preserved
by Nevada’s Uniform Enforcement of Foreign Judgments Act and available under
NRCP 60(b) are limited to those defenses that a judgment debtor may
constitutionally raise under the full faith and credit clause and which are directed
to the validity of the foreign judgment.” Rosenstein v. Steele, 103 Nev. 571, 573, 747
P.2d. 230, 232 (1987) (per curiam) (citations omitted); see also Marworth, Inc. v.
McGuire, 810 P.2d 653, 657 (Colo. 1991) (en banc) (stating that under the Colorado
UEFJA “[o]ur courts may consider C.R.C.P. 60(b) motions for relief from a foreign
judgment only to the extent permitted by the full faith and credit clause”); Carr v.
Bett, 1998 MT 266, ¶42, 291 Mont. 326, 338-39, 970 P.2d 1017, 1024 (1998) (holding
that a foreign judgment filed under the Montana UEFJA may not “be subjected to
the same defenses and proceedings for reopening or vacating as a domestic
judgment, and remain consistent with full faith and credit. . . . [T]he only defenses
that may be raised to destroy the full faith and credit obligation owed to a final
judgment are those defenses directed at the validity of the foreign judgment”);
Wooster v. Wooster, 399 N.W.2d 330, 333 (S.D. 1987) (stating that “the grounds
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mentioned in Rule 60(b) which allow relief from a judgment are not available to
vacate a foreign judgment” under the South Dakota UEFJA); Salmeri v. Salmeri,
554 P.2d 1244, 1248 (Wyo. 1976) (holding that a foreign judgment for alimony and
child support arrearages was “not subject to attack in [Wyoming] except on grounds
that would permit attack upon any other money judgment, such as want of
jurisdiction in the court entering the judgment or lack of service so as to vest
jurisdiction over the defendant”).
This interpretation of the UEFJA also finds support in the Prefatory Note to
the 1964 Revised Uniform Enforcement of Foreign Judgments Act, stating that the
UEFJA as revised
adopts the practice which, in substance, is used in Federal
courts. It provides the enacting state with a speedy and
economical method of doing that which it is required to do
by the Constitution of the United States. It also relieves
creditors and debtors of the additional cost and
harassment of further litigation which would otherwise be
incident to the enforcement of the foreign judgment. This
act offers the states a chance to achieve uniformity in a
field where uniformity is highly desirable. Its enactment
by the states should forestall Federal legislation in this
field.
Rev. Unif. Enforcement of Foreign Judgments Act prefatory note (1964), 13 U.L.A.
156-57 (2002) [hereinafter Rev. UEFJA prefatory note]. The federal statute, after
providing for the registration of a judgment in any other district, mentions only one
defense, satisfaction, but does allow that “[t]he procedure prescribed under this
section is in addition to other procedures provided by law for the enforcement of
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judgments.” 28 U.S.C. § 1963 (2012).
Defendant relies primarily on two intermediate court of appeals cases, one
from Ohio and one from Minnesota. Both cases can be distinguished from the
present case. In Schwartz v. Schwartz the defendant’s second wife sought an
annulment in Ohio on the ground that their marriage was null and void because the
defendant’s previous divorce in New York had been obtained by fraud. 113 Ohio
App. 275, 276, 173 N.E.2d 393, 393-94 (1960). An Ohio Court of Appeals granted
the annulment after determining that the New York divorce decree was not entitled
to full faith and credit when there was evidence of a prearranged, staged act of
adultery in order to obtain the divorce. Id. at 276, 279-80, 173 N.E.2d at 393, 395-
96. The court reasoned that the New York court could set aside the divorce on its
own motion for fraud on the court. Id. at 279, 173 N.E.2d at 395. Adultery was the
only ground for divorce in New York, and without an act of adultery, the court had
no authority to enter the divorce. Id. at 276, 279, 173 N.E.2d at 393, 395. Thus,
since the rendering New York court could have set aside the divorce, the divorce
was not entitled to full faith and credit in Ohio under Halvey v. Halvey. In the
present case, the Alabama court had the authority to enter a judgment on plaintiff’s
breach of contract claim. Ala. Code § 12-11-30 (2013).
In Blume Law Firm PC v. Pierce, the Minnesota Court of Appeals considered
whether an Arizona judgment should be entitled to full faith and credit when it was
alleged that the judgment was obtained through an attorney’s fraudulent
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misrepresentations in his affidavit in support of the judgment. 741 N.W.2d 921,
926-27 (Minn. Ct. App. 2007). The law firm sued a client and his parents for unpaid
legal fees. Id. at 924. In the affidavit, the attorney alleged that a valid promissory
note and security agreement were entered into by the client and his father. Id. at
926. The Arizona court held the parents liable for their son’s attorneys’ fees. Id. at
924, 926. The promissory note and security agreement referenced in the attorney’s
affidavit were contained in the record in Minnesota, but those documents were
signed only by the son. Id. at 927. At oral argument before the Court of Appeals of
Minnesota, the plaintiff law firm was unable to provide a basis for holding either
parent liable. Id. The Court of Appeals stated that the allegations sounded in fraud
and remanded the case to the trial court to give the law firm the opportunity to
demonstrate the basis for suing the parents. Id. The court did not distinguish
between extrinsic and intrinsic fraud, but instructed that if the law firm was
“unable to substantiate its claim,” the trial court “should then determine whether
the law firm’s conduct amounts to fraud that would justify disregarding the
judgment.” Id. In the present case, defendant’s evidence of the amount owed,
consisting of emails from which inferences can be drawn, differs markedly from a
signed promissory note and security agreement. The emails do not demonstrate on
their face that plaintiff’s representations were false, and the record contains no
document disclosing to whom and for how much defendant sold the pills as required
by the terms of the fee agreement at issue in this case. Moreover, the Minnesota
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Court of Appeals did not hold that the allegations constituted fraud; the court
merely stated the allegations sounded in fraud and remanded the case to the trial
court.
We hold that the defenses preserved under North Carolina’s UEFJA are
limited by the Full Faith and Credit Clause to those defenses which are directed to
the validity and enforcement of a foreign judgment. The language of the UEFJA
that a 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.G.S.
§ 1C-1703(c), does not refer to defenses on the merits but rather refers to defenses
directed at the enforcement of a foreign judgment, such as, 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. See Halvey, 330
U.S. at 614-15, 91 L. Ed. at 1136; Morris, 329 U.S. at 554, 91 L. Ed. at 497-98; White
Co., 296 U.S. at 275-76, 80 L. Ed. at 227; Matson, 333 N.W.2d at 867; Thomas, 266
N.C. at 526, 146 S.E.2d at 400. To permit a party to relitigate matters 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
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the Full Faith and Credit Clause. See Halvey, 330 U.S. 610, 91 L. Ed. 1133; Morris,
329 U.S. 545, 91 L. Ed. 488. Further, to permit a party to collaterally attack a
foreign judgment on the merits would be contrary to the rationale underlying the
UEFJA, which is to streamline the procedure for enforcing a foreign judgment and
eliminate the need for additional litigation. Rev. UEFJA prefatory note.
Moreover, even if the UEFJA and Rule 60(b) permit a foreign judgment
debtor to raise intrinsic fraud as a defense to the foreign judgment, on the record
before this Court, defendant would be barred from asserting that defense.
Alabama’s Rule 60(b) requires a judgment debtor to raise fraud within four months
of entry of the judgment. Ala. R. Civ. P. 60(b).
In the present case a default judgment against defendant in the amount of
$453,683.14 was entered on 1 April 2011 in Alabama, and the Request To File
Foreign Judgment was filed in Stanly County on 2 August 2011. Defendant’s initial
Motion For Relief From And Notice Of Defense To Foreign Judgment was filed on
25 August 2011. In that filing defendant asserted, inter alia: “Extrinsic Fraud.
The Alabama foreign judgment is void and unenforceable because the underlying
judgment was obtained by fraud – EMI’s execution of the contract upon which the
Alabama Complaint was based was fraudulently induced and DocRx engaged in
fraudulent acts in its own alleged performance of that contract.” On 17 January
2012, defendant filed an Amended Motion For Relief From And Notice Of Defense
To Foreign Judgment. In that filing defendant raised a defense under Rule 60(b)(3)
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DOCRX, INC. V. EMI SERVS. OF N.C., LLC
Opinion of the Court
of the North Carolina Rules of Civil Procedure, alleging that plaintiff’s
representations as to the amount owed constituted fraud, whether intrinsic or
extrinsic.
By the time the Alabama judgment was filed in Stanly County, the four-
month period for raising a challenge to the judgment under Alabama Rule of Civil
Procedure 60(b)(3) had passed, and the judgment was a final judgment under
Alabama law. Irrespective of whether the alleged fraud was intrinsic or extrinsic,
the Alabama judgment was final and enforceable in Alabama when it was filed in
North Carolina. Thus, plaintiff’s claim had been conclusively determined in
Alabama.
Therefore, we hold that the Alabama judgment is a final judgment, and
under Morris v. Jones it is entitled to the same credit in North Carolina that it
would be accorded in Alabama. The defenses to a foreign judgment under the
UEFJA are limited by the Full Faith and Credit Clause to those defenses that are
directed to the enforcement of the foreign judgment, and Rule 60(b) of the North
Carolina Rules of Civil Procedure has no applicability.
Defendant’s argument that the Court of Appeals decision should be reversed
because a foreign judgment creditor would get better treatment than a North
Carolina judgment creditor is misplaced and does not comport with the United
States Supreme Court’s language in Morris v. Jones and Halvey v. Halvey
emphasizing that the validity and finality of the judgment in the rendering state
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Opinion of the Court
control whether that judgment is entitled to full faith and credit in the forum state.
The UEFJA is not on a parity with the Full Faith and Credit Clause. U.S. Const.
art. VI, cl. 2. In the present case the Alabama monetary judgment was valid and
final in Alabama, and North Carolina cannot give the Alabama judgment less credit
than it would be given in Alabama.
For the reasons stated herein, the decision of the Court of Appeals is
affirmed, as modified. This case is remanded to the Court of Appeals for further
remand to the trial court for additional proceedings not inconsistent with this
opinion.
MODIFIED AND AFFIRMED; REMANDED.
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