Montford v. Grohman, 775SC583

• Decision Date: 20 June 1978
• Docket Number: No. 775SC583,775SC583
• Citation: 36 N.C.App. 733,245 S.E.2d 219
• Court: North Carolina Court of Appeals
• Parties: , 24 UCC Rep.Serv. 1340 Mildred MONTFORD v. H. G. GROHMAN, in his official capacity as Sheriff of New Hanover County, and Beneficial Finance Company of Wilmington.

Page 219

245 S.E.2d 219

36 N.C.App. 733, 24 UCC Rep.Serv. 1340

Mildred MONTFORD v. H. G. GROHMAN, in his official capacity as Sheriff of New

Hanover County, and Beneficial Finance Company of

Wilmington.

No. 775SC583.

Court of Appeals of North Carolina.

June 20, 1978.

James B. Gillespie, Jr., New Hanover Legal Services; Donald S. Gillespie, Jr., and Robert H. Gage, Legal Aid Society of Mecklenburg County, Charlotte, for plaintiff-appellee.

Poisson, Barnhill, Butler & Britt by Donald E. Britt, Jr., Wilmington, for defendant-appellant, Beneficial Finance Co. of Wilmington.

Atty. Gen. Rufus L. Edmisten by Sp. Deputy Atty. Gen. John R. B. Matthis and Asst. Atty. Gen. Alan S. Hirsch, Raleigh, amicus curiae, State of North Carolina.

Jordan, Morris & Hoke by John R. Jordan, Jr., Joseph E. Wall and Robert R. Price, Raleigh, amicus curiae, North Carolina Consumer Finance Ass'n, Inc.

VAUGHN, Judge.

It is helpful in viewing this matter to differentiate carefully between the issue actually before us and those which were decided by the magistrate on 27 July 1976. No appeal was taken from that judgment, and the parties may not now attack it or attempt to review the matters decided there. That judgment established the validity of Beneficial's security interest and the fact of plaintiff's default on her obligation. It also established the extent of the security interest which included "(a)ll of the household furniture and furnishings, electrical and gas appliances, including television sets, phonographs and record players, refrigerators, etc. and other personal property owned and located at the residence of the (plaintiff)." And finally it established that all of plaintiff's personal property is worth no more than $500.00. By not appealing the magistrate's order, plaintiff conceded that in her case the provision quoted above was not overly broad nor in any other way unconscionable and that she had no defenses against an action on the security agreement. The magistrate's order thus confirmed Beneficial's right to possession of the personal property. G.S. 25-9-503.

The question remaining for our consideration is whether the personal property exemption found in Article X of the North Carolina Constitution and G.S. 1-378 in any way prevents Beneficial from enforcing its right to possession of the articles in which it has a security interest. While the parties have made much of the fact that this security interest pertained to a high risk loan and of the fact that all plaintiff's assets are household goods and are worth less than $500.00, these matters are immaterial to the question. We also note that most of plaintiff's argument concerns itself with what she says the law should be rather than what it is. That argument should be directed to the legislative branch of government. The exemption provisions in the Constitution do not make special allowances for a resident's sole remaining assets. In Scott v. Kenan, 94 N.C. 296 (1886), the Court held that it was immaterial how much personal property a debtor possessed, for he had the right to select any of it up to the value of his exemption and leave any remainder for his creditors. Moreover, the laws of this State pertaining to security interests do not provide special protection for those creditors who make high risk loans. See G.S. 25, Article 9, North Carolina Comment and G.S. 25-9-102. We must therefore, consider more generally the interaction of the U.C.C. and the personal property exemption.

Under Article X of the Constitution and G.S. 1-369, personal property belonging to any resident of the State up to a value of $500.00 is "exempted from sale under execution or other final process of any court, issued for the collection of any debt." N.C.Const. art. X, § 1 (emphasis added.) The procedure to be followed is set out in G.S. 1-378. After levy upon his personal property by virtue of final process for the collection of a debt, the owner may demand that the sheriff summon appraisers who will lay off to him such articles as he selects of a value up to $500.00. The creditors may than take possession of the remainder. All the parties concede that plaintiff has a clear right to convey any of her property, either before or after her exemption is allotted. The law protects her not from destitution but only from loss of the property due to sale under final process for the collection of any debt. It does no more. Indeed, if she wished she could give away her last possessions. Cf. New Amsterdam Casualty Co. v. Waller, 323 F.2d 20 (4th Cir. 1963), where the Court found that under North Carolina law the first five hundred dollars of a gift in fraud of creditors might be exempt from recovery by the creditors on the theory that the debtor had a right to dispose of his exempt property and to that extent the gift was not in fraud of the creditors. Before the enactment of the U.C.C., a debtor could subject his personal property to a chattel mortgage, and if he did so, the property was liable for the mortgage debt first and the debtor's exemption was allotted only in the amount of the surplus. Gaster v. Hardie, 75 N.C. 460 (1876). The Court based its decision in part on the concept that by mortgaging his property the mortgagor conveyed a special interest in it to his mortgagee. Although the case concerned the...