              IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA18-111

                                  Filed: 17 July 2018

Mecklenburg County, No. 16-CVD-20456

UNIFUND CCR, LLC, Plaintiff,

             v.

ISABELLE FRANCOIS, Defendant.


      Appeal by plaintiff from order entered 13 July 2017 by Judge Becky T. Tin in

Mecklenburg County District Court. Heard in the Court of Appeals 17 May 2018.


      Sessoms & Rogers, P.A., by Andrew E. Hoke, for plaintiff-appellant.

      No appellee brief filed.


      DIETZ, Judge.


      Plaintiff Unifund CCR, LLC brought a debt collection action against Defendant

Isabelle Francois and obtained an entry of default after Francois failed to appear and

respond to Unifund’s complaint.

      At the default judgment hearing—where Francois again failed to appear—the

trial court, on its own initiative, denied Unifund’s motion for default judgment and

dismissed the complaint, concluding that the complaint was barred by the statute of

limitations and violated a statutory provision prohibiting debt collectors from

pursuing claims they know are barred by the statute of limitations.
                           UNIFUND CCR, LLC V. FRANCOIS

                                   Opinion of the Court



        We reverse and remand for entry of judgment in Unifund’s favor. As explained

below, the trial court had no authority to raise a statute of limitations defense on

behalf of a defaulting litigant who did not appear. Likewise, the court had no

authority to dismiss the complaint based on a perceived violation of a statute that

does not authorize courts to act on their own initiative, but instead creates a separate

civil enforcement mechanism for the debtor and the Attorney General.

                          Facts and Procedural History

        In 2011, Defendant Isabelle Francois opened a credit card account with

Citibank. Francois began making purchases on the account in March 2013 and

exceeded the account’s credit limit in May 2013. Francois stopped making payments

in May 2013. Citibank then closed the account and sent Francois a final billing

statement showing a balance of $4,618.08 with a payment due date of 20 November

2013.

        After six consecutive months of nonpayment, Citibank charged off the account.

Plaintiff Unifund CCR, LLC ultimately acquired the past due account.

        On 14 November 2016, Unifund filed a complaint against Francois for the past

due amount owed on the account. With its complaint, Unifund filed an affidavit from

its custodian of records along with the billing records for the account, and

documentation showing Unifund’s acquisition of the account. The complaint stated




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                                  Opinion of the Court



that it was filed within the statute of limitations. Unifund served Francois with the

summons but Francois did not appear in the action or file a responsive pleading.

      On 31 May 2017, Unifund moved for entry of default and for default judgment.

The Mecklenburg County Clerk of Superior Court entered default against Francois

the same day.

      The trial court heard the motion for default judgment on 10 July 2017. Francois

did not appear at the hearing. Unifund presented testimony from a Citibank

custodian of records and its own custodian of records. Unifund also submitted the

account statements and documents showing the chain of ownership of the account.

      Three days later, the trial court filed a lengthy order denying Unifund’s motion

for default judgment and dismissing the complaint with prejudice. The court found

that the action was “barred by the statute of limitations” and that it violated N.C.

Gen. Stat. § 58-70-115, a statute that makes it an unfair and deceptive trade practice

for a collection agency to “attempt[] 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.” Unifund timely appealed.

                                      Analysis

      Unifund argues that the trial court erred by denying its motion for default

judgment and dismissing its complaint sua sponte based on legal defenses not raised




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                                    Opinion of the Court



by Francois, who never appeared in the proceeding. As explained below, we agree

that the trial court erred.

      We begin by addressing the trial court’s decision to deny the motion for default

judgment, and to dismiss the complaint, because Unifund’s claims are “barred by the

statute of limitations.” Rule 8 of the Rules of Civil Procedure requires that a

defendant “set forth affirmatively” a statute of limitations defense in a responsive

pleading. N.C. R. Civ. P. 8(c). Our appellate courts repeatedly have emphasized that

“the statute of limitations is a technical defense, and must be timely pleaded or it is

deemed waived.” Gragg v. W. M. Harris & Son, 54 N.C. App. 607, 609, 284 S.E.2d

183, 185 (1981). Thus, trial courts have no authority to raise the statute of limitations

defense on their own initiative; the defendant must assert this affirmative defense or

it is waived.

      Moreover, “[w]hen default is entered due to a defendant’s failure to answer,

the substantive allegations contained in plaintiff's complaint are no longer in issue,

and for the purposes of entry of default and default judgment, are deemed admitted.”

Luke v. Omega Consulting Grp., 194 N.C. App. 745, 751, 670 S.E.2d 604, 609 (2009).

Thus, even setting aside a trial court’s inability to raise a statute of limitations

defense sua sponte, the court lacks the authority to examine the merits of an absent

litigant’s potential defenses at the default judgment stage at all. Accordingly, the trial




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                                   Opinion of the Court



court erred by raising and addressing sua sponte a purported statute of limitations

issue at the default judgment hearing.

      We next examine the trial court’s reliance on N.C. Gen. Stat. § 58-70-115, a

statute that makes it an unfair and deceptive trade practice for a collection agency to

“attempt[] 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.” The trial

court denied the motion for default judgment and dismissed the complaint based on

its conclusion that Unifund violated this statutory provision.

      As with the statute of limitations, the trial court had no authority to deny the

default judgment and dismiss the complaint on this ground. The General Assembly

selected a particular enforcement mechanism for this provision—it authorized the

debtor and the Attorney General to bring civil claims against violators to recover

actual and statutory damages. See N.C. Gen. Stat. § 58-70-130. The legislature could

have authorized trial courts to independently review debt collection claims and reject

those brought in violation of N.C. Gen. Stat. § 58-70-115. Instead, it chose a different

means of enforcement. Neither the trial court nor this Court can second-guess this

policy decision by the General Assembly. Davis v. Craven Cty. ABC Bd., __ N.C. App.

__, __ S.E.2d. __, 2018 WL 1801134, at *2 (2018). Accordingly, the trial court erred by

denying the motion for default judgment and dismissing the complaint based on N.C.

Gen. Stat. § 58-70-115.



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                         UNIFUND CCR, LLC V. FRANCOIS

                                Opinion of the Court



                                  Conclusion

      We reverse the trial court’s order and remand for entry of an appropriate

judgment in favor of Plaintiff Unifund CCR, LLC.

      REVERSED AND REMANDED.

      Judges TYSON and BERGER concur.




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