In Milone & MacBroom, Inc. v. Corkum, 2021-NCCOA-526, the North Carolina Court of Appeals issued a stark reminder about the importance of executing on a judgment prior to initiating supplemental proceedings as part of collection efforts. In Milone, the plaintiff obtained a judgment against the defendant for monies owed. Defendant had partially paid on that debt under a prior agreement, which authorized entry of a Consent Judgment in the event of default. After default and entry of the Consent Judgment, the plaintiff served interrogatories and requests for production of documents in a supplemental proceeding. Defendant did not respond, and plaintiff filed a motion to compel.

The defendant subsequently filed a motion to dismiss for lack of jurisdiction. The record did not reflect the plaintiff had first sought a writ of execution, nor that one had been returned unsatisfied, at the time the plaintiff served its supplemental discovery. Nevertheless, the trial court compelled defendant to respond to the discovery and further sanctioned defendant under Rule 11 for having opposed the requests.

The Court of Appeals heard the case based on a petition for certiorari, noting the error here was so “contrary to the express statutory requirements” that it could not “escape review.” The express statutory rule at play is simple: a party may not proceed with supplemental or post-judgment proceedings until an execution has been returned unsatisfied, in whole or in part. Failure to do so deprives the trial court of subject-matter jurisdiction over the supplemental proceedings.

The applicable statute is N.C. Gen. Stat. § 1-352:

“When an execution against property of a judgment debtor, or any one of several debtors in the same judgment, issued to the sheriff of the county where he resides or has a place of business, or if he does not reside in the state, to the sheriff of the county where a judgment roll or a transcript of a judgment is filed, is returned wholly or partially unsatisfied, the judgment creditor at any time after the return, and within three years from the time of issuing the execution, is entitled to an order from the court to which the execution is returned or from the judge thereof, requiring such debtor to appear and answer concerning his property before such court or judge, at a time and place specified in the order, within the county to which the execution was issued.”

N.C.G.S. § 1-352.1 (interrogatories), § 1-352.2 (additional discovery methods), and § 1-353 (requiring debtor to appear) contain similar requirements.

Accordingly, the court vacated the trial court’s order without prejudice to plaintiff’s ability to proceed after seeking a writ of execution. The Court of Appeal’s opinion highlights the need to ensure that you proceed with a writ of execution prior to initiating supplemental proceedings. The result in Milone was a costly exercise that could have been avoided.

October 15, 2021/by Construction