Henderson Oil Company, Inc. v. Cowart

Filing 68

ORDER granting [] Motion for Writ; denying 63 Motion for Declaration of Exempt Property; granting 65 Renewed Motion for Third Party Order; plaintiff is ordered to have a copy of this Order served upon Mr. Ragland by personal service being made upon him as soon as possible after filing thereof. Signed by Magistrate Judge Dennis Howell on 9/28/08. (siw)

IN THE UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF NORTH CAROLINA A SH E V IL L E DIVISION 1 :0 7 c v9 5 H E N D E R SO N OIL COMPANY, INC., P la in t i f f , V s. R O N L. COWART, D e f e nd a nt. _______________________________ ) ) ) ) ) ) ) ) ) )

O RDER

T H IS MATTER is before the court on plaintiff's Motion for Issuance of Writ of Execution (#60)1 and Renewed Motion for Third Party Order (#65). Also before the c ourt is defendant's Motion for Declaration of Exempt Property (#63). I. P r o ce dur a l History After preliminary review of Motion for Writ of Execution, the court entered an O rd er on September 16, 2008, setting such matter for hearing on September 25, 2008, a nd advising defendant as to the manner in which he could respond. See Order (#61). O n September 23, 2008, defendant filed his Objection to Issuance of Writ of E xec ution and Plaintiff's Motion for Third Party Order (#62). In support of his resp onse, defendant filed as an exhibit to a pleading entitled "Affidavit of Ron L. C ow a rt of Residency," id., at 9, what appears to be a copy of an eviction notice originating in Michigan, id., at 11, a copy of a duplicate North Carolina drivers license that was issued August 19, 2008, id., at 12, a photocopy of what appears to be a house
Plaintiff's motion for a writ was contained within a pleading styled Motion for Third Party Order (#60). -11

k ey, id., at 13, and an unverified and unfiled copy of a report of a mediator in a North C a rolina state proceeding. Id., at 15. In such objection, defendant argues and then a vers in his affidavit that he is now and has been a resident of the State of North C a rolina . In pertinent part, plaintiff avers: 3. 4. 5. O n April 11, 2008, my apartment lease in Michigan was termina ted . (See Exhibit A) W ithin 30 days thereafter I secured a residency at 230 Hayfield D rive, Canton, North Carolina, 28716. I am a North Carolina licensed driver. Offered in support is a copy of my North Carolina Drivers license No. 435768. (See Exhibit B)

O b jec tion (#62, at 9, ¶¶ 3-5). While not mentioned in his Objection, defendant states in his affidavit that he would be unable to attend the September 25, 2008, hearing, but a sk s that the court consider his objections and motions. Defendant did not seek p e r m ission to be absent from the hearing or move to continue the hearing to a later d a te . O n September 25, 2008, the court conducted the previously noticed hearing. At suc h hearing the court considered defendant's submissions as well as the submissions in reply submitted by plaintiff. Defendant did not appear and did not have permission not to appear; however, the court fully considered defendant's evidence as to his resid enc e as well as the evidence presented by plaintiff. II. P ro tec tio n of Judgment Debtors in North Carolina A. E x e m ptio ns Generally

W here a judgment creditor seeks to enforce a federal judgment against a debtor, the procedure the court employs must "accord with the procedure of the state where the c ourt is located . . . ." Fed.R.Civ.P. 69(a). North Carolina procedure, in turn, provides
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th a t a resident judgment debtor may elect between a laundry list of statutory exemp tions or take the exemption guaranteed by the North Carolina Constitution. Non-resident judgment debtors do not enjoy such protections. The statutory exemp tions are: § 1C-1601. What property exempt; waiver; exceptions. (a ) E xemp t property. ­ Each individual, resident of this State, who is a debtor is entitled to retain free of the enforcement of the claims of creditors: (1 ) T he debtor's aggregate interest, not to exceed ten thousand d olla rs ($10,000) in value, in real property or personal p rop erty that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the d eb tor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. (2 ) T he debtor's aggregate interest in any property, not to exc eed three thousand five hundred dollars ($3,500) in va lue less any amount of the exemption used under sub d ivision (1). (3 ) T he debtor's interest, not to exceed one thousand five hund red dollars ($1,500) in value, in one motor vehicle. (4 ) T he debtor's aggregate interest, not to exceed three thousand f ive hundred dollars ($3,500) in value for the debtor plus seven hundred fifty dollars ($750.00) for each dependent of the debtor, not to exceed three thousand dollars ($3,000) tota l for dependents, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the p ersona l, family, or household use of the debtor or a d ep end ent of the debtor. (5 ) T he debtor's aggregate interest, not to exceed seven hundred f if ty dollars ($750.00) in value, in any implements, p rof essional books, or tools of the trade of the debtor or the trad e of a dependent of the debtor. (6 ) Lif e insurance as provided in Article X, Section 5 of the C onstitution of North Carolina. (7 ) P rof essionally prescribed health aids for the debtor or a d ep end ent of the debtor. (8 ) C omp ensa tio n for personal injury or compensation for the d eath of a person upon whom the debtor was dependent for
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(9 )

sup p ort, but such compensation is not exempt from claims f or funeral, legal, medical, dental, hospital, and health care c ha rges related to the accident or injury giving rise to the c o m p e n s a tio n . Ind ivid ua l retirement plans as defined in the Internal R evenue Code and any plan treated in the same manner as a n individual retirement plan under the Internal Revenue C od e. For purposes of this subdivision, "Internal Revenue C od e" means Code as defined in G.S. 105-228.90. ***

N .C .Gen.Stat. § 1C-1601. The North Carolina Constitutional exemptions - - which are also only available to resident judgment debtors - - are set forth as follows: § 1C-1602. Alternative exemptions. T he debtor may elect to take the personal property and homestead exemp tions provided in Article X of the Constitution of North Carolina instea d of the exemptions provided by G.S. 1C-1601. If the debtor elects to take his constitutional exemptions, the exemptions provided in G.S. 1 C -1 6 0 1 shall not apply and in that event the exemptions provided in this A rtic le shall not be construed so as to affect the personal property and homes tea d exemptions granted by Article X of the Constitution of North C a r olina . If the debtor elects to take his constitutional exemptions, the c lerk or district court judge must designate the property to be exempt und er the procedure set out in G.S. 1C-1603. The debtor is entitled to ha ve one thousand dollars ($1,000) in value in real property owned and oc c up ie d by him and five hundred dollars ($500.00) in value in his p ersona l property exempted from sale under execution. If the value of the p rop erty in which the debtor claims his constitutional exemption is in exc ess of his exemptions, the clerk, in an execution, may order the sale of the property with the proceeds of the sale being distributed first to the d eb tor to satisfy his exemption and the excess to be distributed as ord ered . (1981, c. 490, s. 1; 1981 (Reg. Sess., 1982), c. 1224, s. 8.)

B.

P r o ce ss Employed

A c c ord ing to North Carolina law, prior to a creditor being able to obtain a writ of execution from the court, the creditor must serve a resident judgment debtor with

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a "Notice of Right to Have Exemptions Designated" ("AOC-CV-406"), which is a f orm created by the North Carolina Administrative Office of the Courts in compliance w ith Chapter 1C-1603 of the North Carolina General Statutes. Where, however, a person is not a resident judgment debtor, he has no right to ha ve exemptions designated and the judgment creditor has no obligation to serve such a non-resident debtor with any notice. The judgment creditor is not, however, entitled to an automatic issuance of a writ of execution against the non-resident debtor. In

First Union National Bank v. Rolfe, 90 N.C.App. 85 (1988), the appellate court made it clear that a trial court, before issuing the writ, must conduct a "residency hearing" to determine whether defendant now resides in the State of North Carolina. Such a p roceed ing was, in accordance with First Union, noticed on September 16, 2008, for hea ring on September 25, 2008. III. D is c u s s io n P la intif f states in its motion that defendant is a non-resident of North Carolina, w hic h is now supported by affidavits and other evidentiary material; likewise, d ef end a nt has submitted his own materials, in which he claims to now be a resident of the State of North Carolina. In his affidavit, defendant avers that he establish his res id enc e in the State of North Carolina 30 days from the termination of his lease in M ic higa n, which occurred on April 11, 2008, which the court determines to be May 1 1 , 2008. In stark contrast to defendant's affidavit, in which he claims he established resid enc e in North Carolina as of May 11, 2008, are the previous affidavits he recently

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f iled in a North Carolina state court proceeding. On July 15, 2008, defendant filed an a f f id a vit in the North Carolina General Court of Justice, Superior Court Division, H ayw ood County, in which he averred in pertinent part as follows: 1. M y name is RON L. COWART, and I am currently a resident of C linton County, State of Michigan.

Sta rk Aff., Ex. 2, Docket Entry #66-3, at 1, ¶ 1. Defendant submitted another affidavit to the same tribunal on August 4, 2008, in which he averred in pertinent part as f ollow s: 1. M y name is RON L. COWART, and I am currently a resident of C linton County, State of Michigan.

Sta rk Aff., Ex. 3, Docket Entry #66-4, at 1, ¶ 1. The court has also consider the copy of the North Carolina Drivers License submitted by defendant, as well as the official rep ort from the North Carolina Department of Motor Vehicles. While it appears true tha t defendant obtained a duplicate North Carolina Drivers License on August 19, 2 0 0 8 , the official record 2 shows that, as of September 24, 2008, the day before the hearing, defendant also holds a drivers license issued by the State of Michigan. R oseha rt Aff., Docket Entry #64, at 4 . The court further notes that it was defendant tha t removed this action to this court invoking the court's diversity jurisdiction upon a claim of residency in the State of Michigan, that such residency in the State of M ic higa n was necessitated by enrollment in law school in Lansing, Michigan, that

The court finds that the Court Search (c) research product proffered is a reliable source, wholly drawn from original records maintained by public agencies, and that such report is, therefore, admissible under a modern reading of Rule 803(8), Federal Rules of Evidence. -6-

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d ef end a nt remains a student at such institution, and that all the affidavits of defendant now before the court have the seal of a Notary of the State of Michigan. T he issue before the court is whether on September 25, 2008, defendant debtor is resident or a non-resident of the State of North Carolina. Having carefully

c onsid ered all the evidence, it appears that defendant remains a resident of the State of M ic higa n. First, defendant is judicially estopped from claiming before this court that h e has been a resident of the State of North Carolina since May 11, 2008. In two a f f id a vits filed with the North Carolina General Court of Justice since May 11, 2008, d ef end a nt has sworn that he is a resident of the State of Michigan. In King v. Herbert J. Thomas Mem. Hosp., 159 F.3d 192 (4th Cir. 1998), the C ourt of Appeals for the Fourth Circuit court held, as follows: [j]udicial estoppel, an equitable doctrine that prevents a party who has suc c es sf ully taken a position in one proceeding from taking the opposite p osition in a subsequent proceeding, is recognized to protect the integrity of the judicial system. Acting on the assumption that there is only one truth about a given set of circumstances, the courts apply judicial estoppel to prevent a party from benefitting itself by maintaining mutually inc onsistent positions regarding a particular situation. As we have p reviously observed, the doctrine is invoked to prevent a party from " p la ying fast and loose with the courts," from "blowing hot and cold as the occasion demands," or from attempting "to mislead the [courts] to ga in unfair advantage." As an equitable doctrine, judicial estoppel is invok ed in the discretion of the district court and with the recognition that e a c h application must be decided upon its own specific facts and c i r c u m s ta n c e s . Id ., at 196 (citations omitted). Because the law assumes "that there is only one truth a b out a given set of circumstances," id., the Court of Appeals for the Fourth Circuit ha s adopted the doctrines of judicial estoppel and quasi estoppel to prevent litigants f rom benefitting from inconsistent factual positions, which not only make a mockery
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out of the courts, but would put in jeopardy the full faith and credit afforded to earlier d e c is io n s . The Court of Appeals for the Fourth Circuit in National Union Fire Ins. Co. of P ittsb urgh, Inc. v. Manufacturers and Traders Trust Co., 137 Fed. Appx. 529 (4 th Cir. 2 0 0 5 ), recited the elements of judicial estoppel: T he doctrine of judicial estoppel has three necessary elements: (1) The party to be estopped must be asserting a position tha t is factually incompatible with a position taken in a prior jud ic ia l or administrative proceeding; (2) the prior inc onsistent position must have been accepted by the trib una l; and (3) the party to be estopped must have taken inc onsistent positions intentionally for the purpose of ga ining unfair advantage. But "judicial estoppel will not be applied where the party's inconsistent p ositions resulted from inadvertence or mistake." Id ., 2005 WL, at 2 (citing King, supra). The Court of Appeals for the Second Circuit ha s further elaborated on the doctrine: First, the doctrine seeks to preserve the sanctity of the oath by demanding a b solute truth and consistency in all sworn positions. Preserving the sa n c ti ty of the oath prevents the perpetuation of untruths which damage p u b lic confidence in the integrity of the judicial system. Second, the d oc trine seeks to protect judicial integrity by avoiding the risk of inc onsis tent results in two proceedings. Bates v. Long Island R.R. Co., 997 F. Supp. 1028, 1038 (2d Cir. 1993). "The [judicial estop p e l] doctrine is invoked to prevent a party from `playing fast and loose with the c ourts ,' from `blowing hot and cold as the occasion demands,' or from attempting `to mislea d the courts to gain an unfair advantage.'" King, supra, at 196. T he appellate court's description in King is precisely what defendant is

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a ttemp ting to accomplish in this case. Plaintiff is judicially estopped from asserting in this action that he has been a resident of the State of North Carolina since may 11, 2 0 0 8 , inasmuch as he has made sworn statements on two occasions in state p roc eed ings which are inapposite to such claim. Further, the additional evidence submitted by plaintiff informs the court's determination that defendant remains a resid ent of the State of Michigan, and cannot, therefore, claim North Carolina's sta tutory or constitutional exemptions. The writ of execution has, therefore, issued in a c c ord a nc e with First Union. The writ having now issued, the defendant's Motion for Declaration of Exempt P rop erty will be denied as defendant lacks standing to assert any exemptions and p la intif f 's Renewed Motion for Third Party Order will be allowed and Smoky M ounta in Development as well as certain officers of such corporation will be required to appear and answer, as provided infra. *** Finally, defendant is cautioned that submission of false affidavits to a federal c ourt could subject him not only to sanctions under Rule 11 and contempt, but is p unisha b le as a federal offense. Defendant is further cautioned that as an aspiring memb er of the Bar, his reputation for honesty is a valuable asset that can be lost when f a ls e affidavits are submitted to a tribunal. Defendant may wish to consider more c aref ully in the future the sworn representations he makes to any court as such may h a ve future consequences and repercussions beyond the immediate issue then before the court.
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O RDER IT IS, THEREFORE, ORDERED that (1) p la in tif f 's Motion for Issuance of Writ of Execution (#60) is A L L O W E D , and the writ has been issued; (2 ) (3 ) p laintif f 's Renewed Motion for Third Party Order (#65) is ALLOWED; d ef end a nt's Motion for Declaration of Exempt Property (#63) is D E N IE D ; and IT IS FURTHER ORDERED that (1) in accordance with Chapter 1-360 of the North Carolina General Statutes tha t Smoky Mountain Development Corporation, its president William R a gla nd and another corporate officer with knowledge of the settlement rea ched in Smoky Mountain Development Corporation v. Ronco investments , LLC and Ron Cowart, No. 07-CVS-743, ANSWER this O rd er and personally APPEAR on October 29, 2008, at 2 p.m. in the U nited States Courthouse in Bryson City, North Carolina, concerning the a lleged debt owing by Smoky Mountain Development Corporation in c onnec tion with the above referenced State Court Action; (2) Smok y Mountain Development Corporation is hereby ORDERED p ursua nt to Chapter 1-358 to escrow, hold in trust, and otherwise not d isp ose of any funds that may be due in relation to these matters pending f urther order of the Court; and
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ha ving considered the applicable factors, and determining that good rea son exists to file such document under seal, L.Cv.R. 6.1, in advance of such hearing, Smoky Mountain Development Corporation shall file w ith the court UNDER SEAL for IN CAMERA REVIEW the settlement agreement Smoky Mountain Development Corporation v. R onc o investments, LLC and Ron Cowart, No. 07-CVS-743 not later tha n October 21, 2008.

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Counsel for Plaintiff is ORDERED to have a copy of this ORDER served upon Mr. Ragland by personal service being made upon him as soon as possible after filing thereof.

Signed: September 28, 2008

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