Creditors seeking to execute a judgment must do so within 10 years or forfeit that right, the South Carolina Supreme Court has ruled. The court’s Nov. 21 opinion overruled its previous decision in Linda Mc Co. v. Shore, closing a loophole which appeared to allow creditors to extend the life of a judgment simply by filing actions to collect, as long as they do so within that 10-year period.
The case involved a 2002 judgment against Rudolph Drews, who was found civilly liable for violating securities laws. After appeals, Frank Gordon, a creditor on the judgment, petitioned for supplemental proceedings in 2006. These proceedings led Gordon to believe that Drews’ wife and his nephew, Donald Lancaster, were complicit in shielding his assets from creditors.
After delays in proceedings, Drews died in 2007 and his estate was opened shortly thereafter, causing further delays. When proceedings continued in February 2010, Lancaster confirmed in a deposition Gordon’s suspicion that he and his aunt had helped shield Drews’ assets. Drews’ wife died before she could testify, but Gordon sued Lancaster over the hiding of the assets.
During a 2014 trial, Lancaster sought a directed verdict based on Gordon’s concession that the suit was based on the 2002 judgment. He argued that because 10 years had passed, the judgment’s “active energy” had expired. Charleston County Circuit Court Judge J.C. Nicholson, citing Linda Mc, disagreed, saying that if a party takes action to enforce a judgment within the 10-year statutory period, the resulting order is still effective after the time period has expired.
The state’s Court of Appeals upheld Nicholson’s decision in Gordon’s favor, and Lancaster appealed again, arguing that the Court of Appeals had erroneously expanded the holding in Linda Mc, nullifying the statutory 10-year limit on executing judgments.
Justice Kaye Hearn, writing for the majority, agreed, holding that Section 15-39-30 of the South Carolina Code of Laws plainly says that a creditor “has ten years to execute on the judgment from the date of its entry, a time period that cannot be renewed.”
Hard cases make bad law
While the court said its ruling in Linda Mc was narrow, Hearn pointed to broad language in a later paragraph of the opinion which appears to allow parties to extend judgments by taking legal action: “if a party takes action to enforce a judgment within the ten-year statutory period of active energy, the resulting order will be effective even if issued after the ten-year period has expired.”
Hearn concluded that this language created ambiguity in the law that didn’t previously exist and that it must be overruled to clear things up.
“While we appreciate the compelling facts at issue therein, the decision has created confusion in what was heretofore a well-settled area of the law,” Hearn said. “Accordingly, we overrule it and return to the traditional bright-line rule.”
Hearn said that even if Linda Mc was “good law” the Court of Appeals erred in relying on it to grant relief to Gordon because the facts in the cases were too dissimilar. While in Linda Mc, the order of execution was issued one day after the 10-year time period ended, in this case, the hearing wasn’t even held until over a year after expiration occurred. Furthermore, she said an order of execution still hasn’t been issued.
The ruling overrules Linda Mc prospectively, therefore protecting pending cases that fall within its narrow holding, which Gordon’s case did not.
Justices Donald Beatty and John Kittredge concurred with Hearn’s opinion, but Justice John Few wrote a separate concurring opinion in which he agreed with the result, but disagreed with overruling the holding in Linda Mc and said he would have reversed the Court of Appeals’ decision on a narrower basis. He said the language at issue in Linda Mc should be viewed as merely dictum.
Justice George James wrote another separate opinion in which he concurred with the majority’s opinion that Linda Mc should be overruled, but disagreed that this case does not fall within the exception recognized in that case. James said that because Gordon took legal action within the 10-year period, his circumstance is similar enough to those of Linda Mc to warrant an exception. Furthermore, he said he disagreed with applying the overruling to pending supplemental proceedings in other cases.
Exception swallowed the rule
Stephen Groves and Alexandra Austin of Nexsen Pruet in Charleston and John Dodds III of The Law Firm of Cisa & Dodds in Mount Pleasant represented Donald Lancaster.
Groves said that from the time Section 15-39-30 was passed in 1946 until the Supreme Court’s ruling in Linda Mc, everyone knew that “ten years meant ten years.” But when the court made that decision, he said it opened the floodgates to extending judgments well past their due date.
“Taking this to the logical extreme, a judgment holder could file and serve an action to collect the judgment on the final day of the ten years and extend the time limit for however long it took the trial court to reach a verdict, oftentimes several years,” he said. “In this case, the Supreme Court has concluded that the legislature meant what it said in limiting the collection time frame to ten years.”
Groves said the court made the correct ruling to make the process easier for all sides going forward.
“[Linda Mc] could not stand because it afforded a judgment holder a ‘small’ opportunity to extend the ten years’ time period,” Groves said. “Unfortunately, that ‘small’ opportunity could be expanded to the point the exceptions almost overtook the rule.”
Justin Lucey and Stephanie Drawdy, both of Mount Pleasant, represented Gordon in the case. Neither responded to requests for comment on the ruling.
The 12-page decision is Gordon v. Lancaster (Lawyers Weekly No. 010-102-18). The full text of the opinion is available online at sclawyersweekly.com.
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