N.C. Ct. of Appeals: East Bay v. Baxley- No Tolling of Statute of Limitations for Judgment Renewal

Summary:

The North Carolina Court of Appeals affirmed the trial court’s dismissal of a complaint by East Bay Company, Ltd. to renew a judgment against defendant Brandon Baxley. East Bay had obtained a judgment in 2010, which included principal, interest, and attorney’s fees, but the statutory ten-year period for renewing the judgment expired in July 2020.

The defendant filed for Chapter 7 bankruptcy in 2018, triggering an automatic stay under federal law, with discharge being denied in that case in June of 2020. While East Bay argued that this stay tolled the statute of limitations for renewing the judgment under 11 U.S.C. § 362 and related provisions, the court disagreed. It found that the stay did not extend the statutory deadline beyond 30 days after the stay was lifted in June 2020,  as   N.C.G.S. § 1-23 provides that the Statute of Limitations is tolled only: 

"When the commencement of an action is stayed by injunction or statutory prohibition, the time of the continuance of the injunction or prohibition is not part of the time limited for the commencement of the action."

As East Bay did not renew its judgment by July 2020, the attempt to file in 2022 was untimely.  Consequently, the dismissal of East Bay's complaint was upheld, and the judgment renewal was denied.

Commentary:

The import of this case could actually be rather large on the practice of bankruptcy in North Carolina,  especially in conjunction with other N.C.  Court of Appeals decisions regarding the interplay of bankruptcy and Statutes of Limitation,  especially  Person Earth Movers v. Buckland,  that held  a payment by a bankruptcy trustee "is not ...an acknowledgment of the debt as will stop the running of the Statute of Limitations."

This may result in more judgment creditors seeking,  during bankruptcy cases,  to obtain relief from the stay in order to renew judgment liens,  but that should be resisted in cases where the debtor is performing under the plan.

Further,  this is another factor to consider in regards to vesting.  In a cases where assets vest in the debtor at confirmation and where the stay has terminated as to the debtor,  for example due to a second bankruptcy  filing without, as is the norm in jurisdictions such as the M.D.N.C. which follow   In re Paschal, 337 B.R. 274 and In re Jones  being extended under 11 U.S.C. § 362(c), not only might a creditor be able to commence a lawsuit and obtain a judgment and lien(s),  but would then also be able to execute on those liens.  At the same time,  however,  absent taking such action,  a creditor could find its claims become stale (often under a 3 year Statute of Limitations) during the Chapter 13 plan and subject to disallowance.

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