Tropic Leisure Corp. v. HaileyÂ

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-1254-2
Filed: 7 February 2017
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.
Opinion filed 16 August 2016. Petition for rehearing granted 30 September 2016.
The following opinion supersedes and replaces the opinion filed 16 August 2016.
Warren, Shackleford & Thomas, P.L.L.C., by R. Keith Shackleford, for
plaintiffs-appellees.
The Armstrong Law Firm, P.A., by L. Lamar Armstrong, Jr. and Daniel K.
Keeney, for defendant-appellant.
DAVIS, Judge.
This case presents the question of whether a North Carolina court must give
full faith and credit to a judgment rendered in a foreign jurisdiction under procedural
rules prohibiting the defendant from being represented by counsel at trial. Jerry A.
Hailey (“Defendant”) appeals from an order denying his motion for relief from a
TROPIC LEISURE CORP. V. HAILEY
Opinion of the Court
foreign judgment that Tropic Leisure Corp. and Magens1 Point, Inc., d/b/a Magens
Point Resort (collectively “Plaintiffs”) sought to enforce against him 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 vacate the trial court’s order.
Factual and Procedural Background
On 2 April 2014, Plaintiffs, who are corporations organized under the laws of
the United States 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.
1
While 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.”
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Opinion of the Court
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
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, cert. denied, __ U.S. __, 135 S. Ct. 678, 190 L. Ed. 2d 390 (2014) (applying
de novo review to whether Full Faith and Credit Clause required North Carolina to
enforce foreign judgment).
I. UEFJA
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
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
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Opinion of the Court
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.
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,
and its Territories and Possessions”); see also Bergen v. Bergen, 439 F.2d 1008, 1013 (3d Cir. 1971)
(holding that the Full Faith and Credit Clause “is applicable to judgments of the Territory of the Virgin
Islands”).
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Opinion of the Court
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
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 Supreme 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. (emphasis added).
II. Virgin Islands Court System
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Opinion of the Court
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. An understanding of the structure of the Virgin Islands court system is
necessary in order to evaluate Defendant’s arguments.
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 Supreme Court of the Virgin
Islands, 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.
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. V.I. Code Ann. tit. 4, §
112(a). In proceedings before the small claims court, “[n]either party may be
represented by counsel and parties shall in all cases appear in person except for
corporate parties, associations and partnerships which may appear by a personal
representative.” V.I. Code Ann. tit. 4, § 112(d). In addition, small claims cases are
heard before a magistrate without a jury. See V.I. Super. Ct. R. 64.
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Opinion of the Court
In the event that a party is unsatisfied with a judgment in the small claims
division, it can appeal 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).
However, “[n]o additional evidence shall be taken or considered” 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 Supreme Court of the Virgin Islands.
See V.I. Code Ann. tit. 4, § 32; V.I. Super. Ct. R. 322.7(b); 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. See V.I. Sup. Ct. R. 4(d).
III. Due Process Right to Employ Counsel at Trial
In the present case, 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. However, Defendant argues 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
does not allow Defendant to be represented by counsel or provide the right to a trial
by jury.
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Opinion of the Court
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 of law to the Virgin Islands through enactment of the Revised Organic Act of the
Virgin Islands. 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
. . . .”); see also United States v. Christian, 660 F.2d 892, 899 (3d Cir. 1981) (noting
that 48 U.S.C. § 1561 “expresses the congressional intention to make the federal
constitution applicable to the Virgin Islands to the fullest extent possible consistent
with its status as a territory.” (citation and quotation marks omitted)). Therefore, we
apply “the same due process analysis that would be utilized under the federal
constitution.” Hendrickson v. Reg O Co., 657 F.2d 9, 13 n.2 (3d Cir. 1981).
The question of whether a rendering jurisdiction’s prohibition on a party being
represented by counsel is a due process violation that can serve as a defense to the
enforcement of a foreign judgment presents an issue of first impression in North
Carolina. After carefully considering the arguments of the parties in this case and
thoroughly reviewing the pertinent caselaw from other jurisdictions, we hold that the
Judgment was issued in violation of Defendant’s due process rights because he was
not provided a meaningful opportunity to be heard.
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Opinion of the Court
“The fundamental requirement of due process is the opportunity to be heard
at a meaningful time and in a meaningful manner.” Mathews v. Eldridge, 424 U.S.
319, 333, 47 L. Ed. 2d 18, 32 (1976) (citation and quotation marks omitted). The
United States Supreme Court has explained that “[i]f in any case, civil or criminal, a
state or federal court were arbitrarily to refuse to hear a party by counsel, employed
by and appearing for him, it reasonably may not be doubted that such a refusal would
be a denial of a hearing, and, therefore, of due process in the constitutional sense.”
Powell v. Alabama, 287 U.S. 45, 69, 77 L. Ed. 158, 170-71 (1932).
Litigants in most types of civil proceedings are not entitled to court-appointed
counsel. However, it has been widely recognized that civil litigants have a due
process right to be heard though counsel that they themselves provide. For example,
in Goldberg v. Kelly, 397 U.S. 254, 25 L. Ed. 2d 287 (1970), the United States Supreme
Court explained that
[t]he right to be heard would be, in many cases, of little
avail if it did not comprehend the right to be heard by
counsel. We do not say that counsel must be provided at
the pre-termination [of public assistance payments]
hearing, but only that the recipient must be allowed to
retain an attorney if he so desires. Counsel can help
delineate the issues, present the factual contentions in an
orderly manner, conduct cross-examination, and generally
safeguard the interests of the recipient.
Id. at 270-71, 25 L. Ed. 2d at 300 (internal citation and quotation marks omitted).
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A number of state and federal courts have expressly recognized this principle
over the past few decades. See, e.g., Danny B. ex rel. Elliott v. Raimondo, 784 F.3d
825, 831 (1st Cir. 2015) (“Civil litigants have a constitutional right, rooted in the Due
Process Clause, to retain the services of counsel.”); Anderson v. Sheppard, 856 F.2d
741, 747 (6th Cir. 1988) (“While case law in the area is scarce, the right of a civil
litigant to be represented by retained counsel, if desired, is now clearly recognized.”);
Potashnick v. Port City Const. Co., 609 F.2d 1101, 1118 (5th Cir.) (“[A] civil litigant
has a constitutional right to retain hired counsel . . . . [T]he litigant usually lacks the
skill and knowledge to adequately prepare his case, and he requires the guiding hand
of counsel at every step in the proceedings against him.”), cert. denied, 449 U.S. 820,
66 L. Ed. 2d 22 (1980); R.G. v. Hall, 37 Mass. App. Ct. 410, 412, 640 N.E.2d 492, 493
(1994) (“On due process grounds . . . parties have a constitutional right to retain
counsel in a civil case.”); Aspen Props. Co. v. Preble, 780 P.2d 57, 58 (Colo. App. 1989)
(“A civil litigant’s right to due process of law includes the right to cross-examine
witnesses and to have an opportunity for rebuttal. In order to exercise these rights
fully, due process requires that civil litigants be allowed to secure assistance of
counsel.” (internal citation and quotation marks omitted)).
Courts in several jurisdictions have specifically considered the
constitutionality of procedures under which parties are not permitted to be
represented by counsel at trial in small claims court. These cases make clear that
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while due process is satisfied when a party may appeal from a small claims court
judgment and receive a trial de novo with the opportunity to be represented by
counsel, a due process violation occurs where the laws of a jurisdiction prohibit a civil
litigant from ever being represented by counsel at the fact-finding stages of the
proceedings.
In Frizzell v. Swafford, 104 Idaho 823, 663 P.2d 1125 (1983), the Idaho
Supreme Court considered whether the procedure governing Idaho’s small claims
court was consistent with due process. Under this procedure, litigants were not
permitted to be represented by counsel in small claims court, but if a party was
dissatisfied with a small claims court judgment, it had the right on appeal to a trial
de novo in which it could employ counsel. Id. at 827, 663 P.2d at 1129. One of the
issues presented in Frizzell was whether it constituted a deprivation of property
without due process of law to permit the prevailing party in a small claims court
proceeding to execute on its judgment before the other party had the opportunity to
appeal and receive a trial de novo with counsel. Id.
In analyzing this issue, the Idaho Supreme Court explained that “the
constitutional infirmity created by the statutory prohibition of attorneys in small
claims court was overcome by the fact that an opportunity for a trial de novo is always
available to the litigants. Counsel can appear in the de novo proceeding, and this
satisfies the due process requirement.” Id. (citation and quotation marks omitted).
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The court further held that “a small claims court trial is constitutionally incomplete;
it cannot stand on its own. Without the guaranty of a trial de novo, a proceeding in
which the litigants are denied counsel is unconstitutional.” Id. (emphasis added).
Similarly, in Simon v. Lieberman, 193 Neb. 321, 226 N.W.2d 781 (1975),
judgment was entered for the plaintiff in small claims court where, by statute, the
parties were not permitted to appear with counsel. The defendant then appealed to
the district court for a trial de novo as permitted by state law. However, the district
court refused to allow the parties to be represented by counsel because the case had
originated in the small claims court. The defendant proceeded pro se, and after losing
his trial in district court he appealed on due process grounds. Id. at 322, 226 N.W.2d
at 782. On appeal, the Nebraska Supreme Court held that he had been denied due
process because “[i]n an appeal to the District Court from a judgment of the small
claims court . . . a party has the right to provide his own counsel and appear by such
counsel in the District Court.” Id. at 326, 226 N.W.2d at 784.
Other jurisdictions have reached similar conclusions. See, e.g., North Central
Servs., Inc. v. Hafdahl, 191 Mont. 440, 443, 625 P.2d 56, 58 (1981) (small claims court
procedure not permitting representation by counsel or providing for trial de novo on
appeal was “unconstitutional because it effectively denies counsel at all levels of
factual determination”); Windholz v. Willis, 1 Kan. App. 2d 683, 683, 685, 573 P.2d
1100, 1101-02 (1977) (holding that defendant’s right to due process was violated
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where he was not permitted “to appear by or with counsel at any stage during which
evidence was introduced . . . .” but noting that “[t]he exclusion of counsel from the
small claims proceeding is not fatal where a trial de novo with counsel is available”);
Brooks v. Small Claims Court, 8 Cal. 3d 661, 665-66, 504 P.2d 1249, 1252 (1973)
(reasoning that due process requirements were satisfied because if defendant “is
dissatisfied with the judgment of the small claims court he has a right of appeal to
the superior court where he is entitled to a trial de novo” in which he may appear
through counsel).
An alternative method for satisfying due process in this context was recognized
in Johnson v. Capital Ford Garage, 250 Mont. 430, 820 P.2d 1275 (1991). In that
case, Montana’s procedures neither allowed the defendant to be represented by
counsel in his small claims court trial nor permitted a trial de novo from the small
claims court judgment. However, pursuant to statute, he was given the opportunity
before trial to remove his case from the small claims court docket to a trial court in
which he could be represented by counsel. Id. at 434, 820 P.2d at 1277.
The defendant argued that this statutory scheme violated his due process
rights because it did not provide for a trial de novo — in which he could be represented
by counsel — on appeal from the small claims court. Id. The Montana Supreme
Court disagreed, holding that the statutory procedure was consistent with due
process
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because it does not absolutely prohibit counsel at all stages
in the litigation. Instead, it places the responsibility for
preservation of that right on the defendant who must
choose between the peace of mind that comes from
representation by counsel, and the quick, affordable justice
available in small claims court. . . .
Id.
These cases demonstrate the constitutional invalidity of the statutory
framework in the Virgin Islands for handling small claims cases. Litigants in such
cases are prohibited from securing the representation of counsel in the small claims
court and are not given the opportunity to either (1) opt out of the small claims court
entirely by removing the case to a trial court that permits representation by counsel;
or (2) appeal from a small claims court judgment for a trial de novo in a court that
allows representation by counsel. Instead, the only appeal allowed from the small
claims court is to the Appellate Division of the Superior Court where “[n]o additional
evidence shall be taken or considered.” See V.I. Super. Ct. R. 322.3(a).3
Thus, there is no opportunity whatsoever for a small claims court litigant to be
represented by counsel during any portion of the critical fact-finding phase of the
litigation. The utility to such a litigant of having his attorney make purely legal
arguments during the appellate phase of the proceeding is simply no substitute for
3 We note that it is unclear whether parties may even appear through counsel in the Appellate
Division of the Superior Court. See Wild Orchid Floral & Event Design v. Banco Popular de P.R., 62
V.I. 240, 249 (V.I. Super. Ct. 2015) (“[I]t is not at all clear, despite [the plaintiff’s] contention, that
counsel[ ] should be allowed to appear on appeal to the Appellate Division from a case filed in the
Small Claims Division and tried in the Magistrate Division[.]”).
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the opportunity to have his chosen counsel develop a factual record at trial. Thus, we
conclude that Defendant was denied “the opportunity to be heard at a meaningful
time and in a meaningful manner.” Mathews, 424 U.S. at 333, 47 L. Ed. 2d at 32
(citation and quotation marks omitted).
Accordingly, because the Judgment was obtained in a manner that denied
Defendant his right to due process, it is not entitled to full faith and credit in North
Carolina.4 The trial court therefore erred in its 10 September 2015 order allowing
enforcement of the Judgment.
Conclusion
For the reasons stated above, we vacate the trial court’s 10 September 2015
order and remand to the trial court for any additional steps that may be necessary in
order to effectuate our ruling.
VACATED AND REMANDED.
Judges ELMORE and DIETZ concur.
4 Because we hold that the Virgin Islands rule barring Defendant from being represented by
counsel in small claims court violated his right to due process — thus rendering the Judgment
unenforceable in North Carolina — we need not address Defendant’s companion argument that the
lack of a right to a trial by jury was likewise a due process violation.
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