Frequently, suing someone and winning in court is only half the battle. An equally important, and often uncertain, issue is getting the person against whom a judgment was entered to actually pay up. That may have gotten more difficult as a result of a court decision this week.

In a case decided March 21, the N.C. Court of Appeals restricted the use of preliminary injunctions to help enforce judgments. The case was brought by Julie and Duane Harris, who bought a piece of land in Rowan County from Ray Ritchie to build a house.

The Harrises’ dreams soon turned into a nightmare. They found that debris was buried on the site. They sued Ritchie for unfair and deceptive trade practices for concealing that the debris was buried on the site and on Aug. 27, 2004 a jury awarded them $326,901 plus interest in damages.

After the judgment, Ritchie transferred title and moved to hide assets, including transferring his North Carolina corporations to Nevada. In November 2004, the Harrises sought and were granted a preliminary injunction to prevent Ritchie from conveying interest in various parcels of land held until the judgment was paid.

Ritchie appealed, arguing that to apply for a preliminary injunction requires that there be some pending action upon which permanent relief may eventually be granted. That isn’t the case here, as a judgment had already been rendered for the Harrises. Because execution of the judgment has as yet not been returned wholly or partially unsatisfied, injunctive relief is not available.

North Carolina law provides other remedies under N.C. Gen. Stat. § 1-355, including possible jail time for contempt of court for refusing to fulfill a judgment.

A majority of the three-judge panel of the Court of Appeals agreed with Ritchie that a preliminary injunction should not have been issued.

”In light of this statutory language, we conclude that the General Assembly has provided means by which the creditor may address problems with execution, but only after it has been returned wholly or partially unsatisfied, or if the terms of § 1-355 are met,“ Judge Robin Hudson wrote for the court. “We do not see that the legislature has authorized the procedure followed here.“

Judge John Tyson dissented from the majority holding, finding that a preliminary injunction was permissible.

“While I agree this statute is an available remedy, it is not exclusive and does not address the issue before us. Plaintiffs filed this action as a ‘motion in the cause’ from which the judgment resulted and sought an equitable remedy of injunction. The trial court possesses inherent power to grant a preliminary injunction to prohibit the fraudulent transfer of assets that are subject to execution for satisfaction of that judgment.”

In support of his argument, Tyson referenced U.S. Supreme Court and N.C. Supreme Court cases, including Inland Steel Co. v. United States:

“A court of equity in the exercise of its discretion, frequently resorts to the expedient of imposing terms and conditions upon the party at whose instance it proposes to act. The power to impose such conditions is founded upon, and arises from, the discretion which the court has in such cases, to grant, or not to grant, the injunction applied for. It is a power inherent in the court, as a court of equity, and has been exercised from time immemorial.” (Emphasis in original.)

Because of Tyson’s dissent, the N.C. Supreme Court must hear the case if the Harrises further appeal.

The case is Harris v. Pinewood Development Corp., (05-606).

http://www.aoc.state.nc.us/www/public/coa/opinions/2006/050606-1.htm

Michael Lowrey is associate editor of Carolina Journal.