NCCOA: The Constitution Reins In The Uniform Enforcement Of Foreign Judgments Act

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If you've been practicing law for more than a few years, you've undoubtedly been asked to "domesticate" in North Carolina's courts a judgment entered in another state. A pretty easy task you think, covered by North Carolina's adoption of the Uniform Enforcement of Foreign Judgments Act, N.C. Gen. Stat. Sec. 1C-1701 to -1708.

Let's say that the lawyer defending against the domestication tells you that the out-of-state judgment was obtained based on "intrinsic fraud, misrepresentation, and misconduct." Those would probably be grounds for setting aside a North Carolina judgment under Rule 60(b) of the North Carolina Rules of Civil Procedure. Can the foreign judgment be enforced in North Carolina under the Uniform Act?

Those of you who are particularly sharp are wondering about the constitutional principle of Full Faith and Credit. Article IV, Section 1 of the Constitution says that "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State." Not surprisingly, there is a good bit of judicial discussion of the interplay between the Uniform Act and the Constitution, with the most recent comment this week from the North Carolina Court of Appeals, in DOCRX, Inc. v. EMI Services of NC, LLC.

DOCRX was on the receiving end of a judgment in Mobile County, Alabama, of nearly half a million dollars. When EMI sought to have its Alabama judgment enforced in North Carolina, DOCRX argued per NCRCP 60(b) that the judgment  could not be enforced because it was obtained on the basis of intrinsic fraud.  

The trial judge refused to enforce the judgment based on the Rule 60(b) argument and the Court of Appeals noted that this interpretation was "warranted from the plain language of the statute." Section 1C-1703(c) states that a foreign "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[.]" And Rule 60(b) refers to "[f]raud (whether heretofore denominated intrinsic or extrinsic)" as a ground for setting aside a judgment.

But the Constitution intervenes here. The core of the Court of Appeals' holding was that:

We hold that postjudgment relief from foreign judgments under N.C.G.S. § 1A-1, Rule 60(b) is limited to the following grounds: '(1) the judgment is based upon extrinsic fraud; (2) the judgment is void; or (3) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application.

Op. at 9 (quoting Craven v. Southern Farm Bureau Cas. Ins., 117 P.3d 11, 14 (Colo. App. 2004))(emphasis added)

These were the only grounds on which the trial court could have denied enforcement. The arguments of "intrinsic fraud, misrepresentation and misconduct" were insufficient. So, the Court of Appeals reversed the trial judge and remanded the case "for further proceedings." Op. at 11.

Oh, and what about "intrinsic" fraud anyway? What is that and how is it different from "extrinsic" fraud? The federal Third Circuit called the terms a "most unfortunate" distinction, in Averbach v. Rival Mfg. Co., 809 F.2d 1016 (3d Cir. 1987). Intrinsic fraud is fraud deceiving the court in obtaining a judgment. Extrinsic fraud is conduct which happens outside of court, but which deprives an adversary of the opportunity to present his case.