N.C. Ct. of Appeal: KB Aircraft v. Jack Berry- Period to seek Commence Voidable Transfer Action Determined as of Transfer Date not Discovery; Statute of Repose

 

Summary:

While factually complicated, this case presents two issues of first impression under North Carolina law, first regarding the interpretation of the term “transfer” the North Carolina Uniform Voidable Transactions Act, N.C.G.S. § 39-23.9, and secondly, whether this is a statute of limitations or repose.

The Court of Appeals held that based on both the plain language of the statute and the legislative history, the term “transfer” refers to the actual date on which an asset was transferred, rather than the date when its fraudulent nature became apparent to a creditor.

Further, and that the statute is one of repose and not limitation. A statute of limitation begins to run on the date an action accrues, generally “the time of an injury or the discovery of the injury.” Tipton & Young Constr. Co. v. Blue Ridge Structure Co., 116 N.C. App. 115, 117, 446 S.E.2d 603, 604 (1994). By contrast a statute of repose runs from “ ‘defendant’s last act giving rise to the claim.’ ” Boudreau v. Baughman, 322 N.C. 331, 340, 368 S.E.2d 849, 856 (1988). (quoting Trustee of Rowan Tech. v. Hammond Assoc., 313 N.C. 230, 234. n.3, 328 S.E.2d 274, 276-77 n.3 (1985)). As such a statute of repose is a substantive, rather than procedural, matter of law and must be affirmatively plead.

Commentary:

This opinion is particularly important in the current question regarding the filing of Proofs of Claim for stale debts. N.C.G.S. § 58-70-115 provides that “No collection agency shall collect or attempt to collect any debt by use of any unfair practices.” When the collection agency is a debt buyer, this includes “bringing suit or initiating an arbitration proceeding against the debtor or otherwise attempting to collect on a debt when the collection agency knows, or reasonably should know, that such collection is barred by the applicable statute of limitations.” As such, where the Statute of Limitations must be plead as an affirmative defense against an original creditor, this provision precludes such collection action, becoming a Statute of Repose.

In the context of a bankruptcy, a debt buyer no longer would, under applicable non-bankruptcy law, have claim, since 11 U.S.C. § 101(5) defines such as a “right to payment.” Together with Wisconsin and Louisiana, North Carolina law would seem to provide an even greater basis than found by the Fourth Circuit in Dubois, et al. v. Atlas Acquisitions LLC (and similarly pending before the Supreme Court in Midland Funding, LLC v. Johnson) that the filing of a stale Proof of Claim is a debt collection activity and, regardless of other states, may be problematic.

For a copy of the opinion, please see:

KB Aircraft v. Jack Berry- Period to seek Commence Voidable Transfer Action Determined as of Transfer Date not Discovery Statute of Repose

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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One comment on “N.C. Ct. of Appeal: KB Aircraft v. Jack Berry- Period to seek Commence Voidable Transfer Action Determined as of Transfer Date not Discovery; Statute of Repose
  1. Ed Boltz says:

    This case is set for argument before the North Carolina Supreme Court on October 9, 2017.

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