Cross v. Capital Transaction Group, Inc.

• Decision Date: 17 June 2008
• Docket Number: No. COA07-1519.,COA07-1519.
• Citation: 661 S.E.2d 778
• Court: North Carolina Court of Appeals
• Parties: Marie A. CROSS and Samuel A. Scudder, Plaintiffs, v. CAPITAL TRANSACTION GROUP, INC., d/b/a Captran, and Wayne Walker, Defendants.

661 S.E.2d 778

Marie A. CROSS and Samuel A. Scudder, Plaintiffs, v. CAPITAL TRANSACTION GROUP, INC., d/b/a Captran, and Wayne Walker, Defendants.

No. COA07-1519.

Court of Appeals of North Carolina.

June 17, 2008.

Appeal by Plaintiffs from judgment entered 4 September 2007 by Judge R. Allen Baddour, Jr., in Wake County Superior Court. Heard in the Court of Appeals 20 May 2008.

Scudder & Hedrick, PLLC, by Samuel A. Scudder and April D. Seguin, Raleigh, for Plaintiff-Appellants.

Wayne C. Walker, Pro Se, Pinehurst, for Defendant-Appellee Wayne C. Walker.

ARROWOOD, Judge.

Plaintiffs appeal an order declaring Defendant Wayne Walker to be the holder of a valid lien on $5,625.00 awarded to Plaintiff Cross in a settlement of her workers' compensation claim, and directing Plaintiff Scudder to disburse these funds to Walker. We reverse.

Plaintiffs are workers' compensation claimant, Marie Cross, and her attorney, Samuel Scudder. Defendants are Capital Transaction Group, Inc., d/b/a CapTran (CapTran), and Wayne Walker. CapTran "is a Nevada corporation engaged in the business of investing capital in personal injury cases." Defendant (Wayne Walker) is an assignee of CapTran's interest in the instruments at issue in this case.

In February 2002 Cross suffered a workplace injury for which she filed a workers' compensation claim. On 22 November 2002 Cross and CapTran executed a document titled "Transfer and Assignment of Proceeds and Security Agreement." Under the terms of this agreement, CapTran agreed to "advance $1500.00" to Plaintiff in return for "a portion of [Plaintiff's] future settlement and/or litigation proceeds" from her workers' compensation claim. The agreement, which obligated Plaintiff to repay CapTran the principal amount of $1500.00 and an additional "investment fee" of $1875.00, purported to grant CapTran a "security interest in the Proceeds of the Litigation for the original investment of $1500.00 plus [the investment fee amount]." The agreement also stated that if Plaintiff failed to obtain workers' compensation benefits, she would be excused from repaying CapTran.

On 23 December 2002 Cross and CapTran signed another agreement, identical to the first except for the dollar amounts involved. Pursuant to the second agreement, CapTran advanced Plaintiff another $1000.00, and obtained a "security interest" in that amount plus an additional $1250.00, again contingent on Plaintiff's receiving workers' compensation benefits. Under the terms of these contracts, Plaintiff then owed CapTran $2500.00, plus "investment fees" of $3125.00, for a total of $5625.00 of her workers' compensation proceeds.

In February 2006 Cross settled her workers' compensation claim. On 17 January 2007 Plaintiffs filed a Declaratory Judgment action against CapTran, seeking a declaration that CapTran did not have a lien on $5625.00 of Cross's workers' compensation benefits. Plaintiffs asserted that CapTran was barred from obtaining a lien on the proceeds of Cross's workers' compensation claim by N.C. Gen.Stat. § 97-21 (2007). On 29 March 2007 Plaintiffs filed an amended complaint naming Wayne Walker as an additional defendant. In a series of assignments, Walker obtained CapTran's interest in the agreements signed by Cross and CapTran. Defendant CapTran was dismissed from the action, and is not a party to this appeal.

On 24 August 2007 the matter was heard by the trial court, and on 4 September 2007 the court entered an order declaring that Walker held a valid lien on $5625.00 of Cross's workers' compensation benefits, and ordering Scudder "to transfer the compensation proceeds in the amount of $5,625.00 to Defendant Walker." From this order Plaintiff timely appealed.

Standard of Review

"The standard of review in declaratory judgment actions where the trial court decides questions of fact is whether the trial court's findings are supported by any competent evidence. Where the findings are supported by competent evidence, the trial court's findings of fact are conclusive on appeal." Lineberger v. N.C. Dep't of Corr., ___ N.C.App. ___, ___, 657 S.E.2d 673, 678 (2008) (citations omitted). "However, the trial court's conclusions of law are reviewable de novo." Browning v. Helff, 136 N.C.App. 420, 423, 524 S.E.2d 95, 98 (2000) (citations omitted).

Plaintiffs argue that the trial court erred by concluding that Defendant held a lien on Cross's workers' compensation benefits. At issue is the proper interpretation of N.C. Gen.Stat. § 97-21 (2007), "Claims unassignable and exempt from taxes and debts[,]" which provides in pertinent part:

No claim for compensation under this Article shall be assignable, and all compensation and claims therefor shall be exempt from all claims of creditors and from taxes.

This appeal presents two questions: (1) does the prohibition in G.S. § 97-21 against assignment of a workers' compensation claim include a bar on the advance assignment of workers' compensation benefits? and (2) is Defendant a creditor of Plaintiff, and thus barred from asserting a claim to Plaintiff's workers' compensation proceeds? We answer both questions affirmatively, and conclude that (1) G.S. § 97-21 prohibits assignment of workers' compensation claims, benefits, or awards; and that (2) the transaction at issue was a loan and Defendant is a creditor of Plaintiff.

We first consider the statutory provision that "[n]o claim for compensation under this Article shall be assignable[.]" Plaintiffs argue that "the plain language of the statute does not give rise to an interpretation differentiating a claim for compensation and the compensation arising from the claim." We agree.

"In resolving issues of statutory interpretation, we look first to the language of the statute itself." Rhyne v. K-Mart Corp., 149 N.C.App. 672, 685, 562 S.E.2d 82, 92 (2002) (citing Sara Lee Corp. v. Carter, 351 N.C. 27, 519 S.E.2d 308 (1999)). As regards N.C. Gen.Stat. § 97-21, the statute's title states in part "Claims unassignable and exempt from taxes and debts[.]" (emphasis added). However, the statute addresses the bar on assignment of a workers' compensation "claim" separately from the exemption from creditors and taxes of "compensation and claims." The heading's use of the word "claims" to refer to both parts of the statute indicates that, for purposes of N.C. Gen.Stat. § 97-21, there is no functional difference between the "claim" and the "compensation."

The North Carolina Supreme Court also has used these terms interchangeably. In Higgins v. Simmons, 324 N.C. 100, 376 S.E.2d 449 (1989), the North Carolina Supreme Court discussed, in dicta, whether § 97-21 prohibited garnishment of a bank account that had been funded in part by proceeds from a workers' compensation claim. The Court stated that "the garnishee bank has no standing to enforce this right of its depositor under the Workers' Compensation Act" and explained:

[T]he personal character of compensation payments has resulted in their being made nonassignable by statute[.] . . . Once the proceeds from a compensation claim have been deposited in a bank, they become indistinguishable from other funds on deposit.

Higgins, 324 N.C. at 103-04, 376 S.E.2d at 452 (emphasis added). Significantly, the Court stated that workers' compensation payments were not assignable.

Our conclusion, that G.S. § 97-21 prohibits assignment of a workers' compensation claim or of the proceeds of such a claim, is supported by the significant differences between an employee's statutory rights to workers' compensation benefits and an individual's common law rights in a personal injury or tort suit. For example, "the remedies sought in a workers' compensation claim and a tort claim are different, and . . . only tort claims, not workers' compensation claims, are tried before a jury." Brooks v. Paulk & Cope, Inc., 176 F.Supp.2d 1270, 1276 (M.D.A1.2001) "There is no question that the Supreme Court agrees that benefits received on account of worker's compensation are different from damages awarded in connection with a tort claim." In re Sanchez, 362 B.R. 342, 349 (Bankr.W.D.Mich.2007). Thus, "[c]lassification of a claim as a worker's compensation claim, as opposed to a personal injury claim, produces very different results." In re Gregoire, 210 B.R. 432, 434 (Bankr. D.R.I.1997). Indeed:

[t]he distinction is not merely a procedural matter of bringing an action in the wrong forum. As amici point out, there are fundamental differences between a claim for workers' compensation benefits and a lawsuit seeking civil damages. . . . [T]he purposes, remedies available, evidentiary burdens, and standards of proof employed in adjudicating within the two distinct systems are different by legislative design.

HDH Corp. v. Atlantic Charter Ins. Co., 425 Mass. 433, 437-38, 681 N.E.2d 847, 851 (1997). In North Carolina:

"By statute the Superior Court is divested of original jurisdiction of all actions which come within the provisions of the Workmen's Compensation Act." The Act provides that its remedies shall be an employee's only remedies against his or her employer for claims covered by the Act. N.C.G.S. § 97-10.1 [(2007)]. Remedies available at common law are specifically excluded.

Lemmerman v. A.T. Williams Oil Co., 318 N.C. 577, 579, 350 S.E.2d 83, 85 (1986) (quoting Morse v. Curtis, 276 N.C. 371, 375, 172 S.E.2d 495, 498 (1970)).

"The workers' compensation system is a creature of statute enacted by the General Assembly and is codified in Chapter 97 of the North Carolina General Statutes." Frost v. Salter Path Fire & Rescue, 361 N.C. 181, 184, 639 S.E.2d 429, 432 (2007). The Workers' Compensation Act provides that an employee is entitled to compensation for certain occupational diseases or for an "injury by accident arising out of and in the course of the employment[.]" N.C. Gen.Stat. § 97-2(6) (2007). "The term `compensation' means the money allowance payable to an employee" pursuant to statute, N.C. Gen.Stat. § 97-2(11) (2007), and...