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  "name": "MARIE A. CROSS and SAMUEL A. SCUDDER, Plaintiffs v. CAPITAL TRANSACTION GROUP, INC., d/b/a CAPTRAN, and WAYNE WALKER, Defendants",
  "name_abbreviation": "Cross v. Capital Transaction Group, Inc.",
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    "judges": [
      "Judges HUNTER and ELMORE concur."
    ],
    "parties": [
      "MARIE A. CROSS and SAMUEL A. SCUDDER, Plaintiffs v. CAPITAL TRANSACTION GROUP, INC., d/b/a CAPTRAN, and WAYNE WALKER, Defendants"
    ],
    "opinions": [
      {
        "text": "ARROWOOD, Judge.\nPlaintiffs 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\u2019 compensation claim, and. directing Plaintiff Scudder to disburse these funds to Walker. We reverse.\nPlaintiffs are workers\u2019 compensation claimant, Marie Cross, and' her attorney, Samuel Scudder. Defendants are Capital Transaction Group, Inc., d/b/a CapTran (CapTran), and Wayne Walker. CapTran \u201cis a Nevada corporation engaged in the business of investing capital in personal injury cases.\u201d Defendant (Wayne Walker) is an assignee of CapTran\u2019s interest in the instruments at issue in this case.\nIn February 2002 Cross suffered a workplace injury for which she filed a workers\u2019 compensation claim. On 22 November 2002 Cross and CapTran executed a document titled \u201cTransfer and Assignment of Proceeds and Security Agreement.\u201d Under the terms of this agreement, CapTran agreed to \u201cadvance $1500.00\u201d to Plaintiff in return for \u201ca portion of [Plaintiffs] future settlement and/or litigation proceeds\u201d from her workers\u2019 compensation claim. The agreement, which obligated Plaintiff to repay CapTran the principal amount of $1500.00 and an additional \u201cinvestment fee\u201d of $1875.00, purported to grant CapTran a \u201csecurity interest in the Proceeds of the Litigation for the original investment of $1500.00 plus [the investment fee amount].\u201d The agreement also stated that if Plaintiff failed to obtain workers\u2019 compensation benefits, she would be excused from repaying CapTran.\nOn 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 \u201csecurity interest\u201d in that amount plus an additional $1250.00, again contingent on Plaintiff\u2019s receiving workers\u2019 compensation benefits. Under the terms of these contracts, Plaintiff then owed CapTran $2500.00, plus \u201cinvestment fees\u201d of $3125.00, for a total of $5625.00 of her workers\u2019 compensation proceeds.\nIn February 2006 Cross settled her workers\u2019 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\u2019s workers\u2019 compensation benefits. Plaintiffs asserted that CapTran was barred from obtaining a lien on the proceeds of Cross\u2019s workers\u2019 compensation claim by N.C. Gen. Stat. \u00a7 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\u2019s interest in the agreements signed by Cross and CapTran. Defendant CapTran was dismissed from the action, and is not a party to this appeal.\nOn 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\u2019s workers\u2019 compensation benefits, and ordering Scudder \u201cto transfer the compensation proceeds in the amount of $5,625.00 to Defendant Walker.\u201d From this order Plaintiff timely appealed.\nStandard of Review\n\u201cThe standard of review in declaratory judgment actions where the trial court decides questions of fact is whether the trial court\u2019s findings are supported by any competent evidence. Where the findings are supported by competent evidence, the trial court\u2019s findings of fact are conclusive on appeal.\u201d Lineberger v. N.C. Dep\u2019t of Corr., 189 N.C. App. 1, 7, 657 S.E.2d 673, 678 (2008) (citations omitted). \u201cHowever, the trial court\u2019s conclusions of law are reviewable de novo.\u201d Browning v. Helff, 136 N.C. App. 420, 423, 524 S.E.2d 95, 98 (2000) (citations omitted).\nPlaintiffs argue that the trial court erred by concluding that Defendant held a lien on Cross\u2019s workers\u2019 compensation benefits. At issue is the proper interpretation of N.C. Gen. Stat. \u00a7 97-21 (2007), \u201cClaims unassignable and exempt from taxes and debtsf,]\u201d which provides in pertinent part:\nNo 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.\nThis appeal presents two questions: (1) does the prohibition in G.S. \u00a7 97-21 against assignment of a workers\u2019 compensation claim include a bar on the advance assignment of workers\u2019 compensation benefits? and (2) is Defendant a creditor of Plaintiff, and thus barred from asserting a claim to Plaintiff\u2019s workers\u2019 compensation proceeds? We answer both questions affirmatively, and conclude that (1) G.S. \u00a7 97-21 prohibits assignment of workers\u2019 compensation claims, benefits, or awards; and that (2) the transaction at issue was a loan and Defendant is a creditor of Plaintiff.\nWe first consider the statutory provision that \u201c[n]o claim for compensation under this Article shall be assignable[.]\u201d Plaintiffs argue that \u201cthe plain language of the statute does not give rise to an interpretation differentiating a claim for compensation and the compensation arising from the claim.\u201d We agree.\n\u201cIn resolving issues of statutory interpretation, we look first to the language of the statute itself.\u201d 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. \u00a7 97-21, the statute\u2019s title states in part \u201cClaims unassignable and exempt from taxes and debts[.]\u201d (emphasis added). However, the statute addresses the bar on assignment of a workers\u2019 compensation \u201cclaim\u201d separately from the exemption from creditors and taxes of \u201ccompensation and claims.\u201d The heading\u2019s use of the word \u201cclaims\u201d to refer to both parts of the statute indicates that, for purposes of N.C. Gen. Stat. \u00a7 97-21, there is no functional difference between the \u201cclaim\u201d and the \u201ccompensation.\u201d\nThe 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 \u00a7 97-21 prohibited garnishment of a bank account that had been funded in part by proceeds from a workers\u2019 compensation claim. The Court stated that \u201cthe garnishee bank has no standing to enforce this right of its depositor under the Workers\u2019 Compensation Act\u201d and explained:\n[T]he personal character of compensation payments has resulted in their being made nonassisnable bv statute[.1 .. . Once the proceeds from a compensation claim have been deposited in a bank, they become indistinguishable from other funds on deposit.\nHiggins, 324 N.C. at 103-04, 376 S.E.2d at 452 (emphasis added). Significantly, the Court stated that workers\u2019 compensation payments were not assignable.\nOur conclusion, that G.S. \u00a7 97-21 prohibits assignment of a workers\u2019 compensation claim or of the proceeds of such a claim, is supported by the significant differences between an employee\u2019s statutory rights to workers\u2019 compensation benefits and an individual\u2019s common law rights in a personal injury or tort suit. For example, \u201cthe remedies sought in a workers\u2019 compensation claim and a tort claim are different, and . . . only tort claims, not workers\u2019 compensation claims, are tried before a jury.\u201d Brooks v. Paulk & Cope, Inc., 176 F. Supp. 2d 1270, 1276 (M.D. AL 2001) \u201cThere is no question that the Supreme Court agrees that benefits received on account of worker\u2019s compensation are different from damages awarded in connection with a tort claim.\u201d In re Sanchez, 362 B.R. 342, 349 (Bankr. W.D. MI. 2007). Thus, \u201c[classification of a claim as a worker\u2019s compensation claim, as opposed to a personal injury claim, produces very different results.\u201d In re Gregoire, 210 B.R. 432, 434 (Bankr. D.R.I. 1997). Indeed:\n[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\u2019 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.\nHDH Corp. v. Atlantic Charter Ins. Co., 425 Mass. 433, 437-38, 681 N.E.2d 847, 851 (1997). In North Carolina:\n\u201cBy statute the Superior Court is divested of original jurisdiction of all actions which come within the provisions of the Workmen\u2019s Compensation Act.\u201d The Act provides that its remedies shall be an employee\u2019s only remedies against his or her employer for claims covered by the Act. N.C.G.S. \u00a7 97-10.1 [(2007)]. Remedies available at common law are specifically excluded.\nLemmerman 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)).\n\u201cThe workers\u2019 compensation system is a creature - of statute enacted by the General Assembly and is codified in Chapter 97 of the North Carolina General Statutes.\u201d Frost v. Salter Path Fire & Rescue, 361 N.C. 181, 184, 639 S.E.2d 429, 432 (2007). The Workers\u2019 Compensation Act provides that an employee is entitled to compensation for certain occupational diseases or for an \u201cinjury by accident arising out of and in the course of the employment^]\u201d N.C. Gen. Stat. \u00a7 97-2(6) (2007). \u201cThe term \u2018compensation\u2019 means the money allowance payable to an employee\u201d pursuant to statute, N.C. Gen. Stat. \u00a7 97-2(11) (2007), and includes both disability and medical compensation. Disability is the \u201cincapacity because of injury to earn the wages which the employee was receiving at the time of injury in the same or any other employment!,]\u201d N.C. Gen. Stat. \u00a7 97-2(9) (2007), and disability compensation generally consists of the payment of approximately two-thirds of his salary for a certain period of time. See N.C. Gen. Stat. \u00a7 97-29 (2007) and G.S. \u00a7 97-31 (2007). \u201cMedical compensation\u201d is the \u201cmedical, surgical, hospital, nursing, and rehabilitative services, and medicines . . . and other treatment... as may reasonably be required to effect a cure or give relief[.]\u201d N.C. Gen. Stat. \u00a7 97-2(19) (2007).\nAn injured employee is not required to prove negligence on the part of his employer to qualify for workers\u2019 compensation benefits; however, workers\u2019 compensation benefits \u201cexclude all other rights and remedies of the employee. . . against the employer at common law or otherwise!.]\u201d N.C. Gen. Stat. \u00a7 97-10.1 (2007). Thus:\nAs this Court has often discussed, the North Carolina Workers\u2019 Compensation Act was created to ensure that injured employees receive sure and certain recovery for their work-related injuries without having to prove negligence on the part of the employer or defend against charges of contributory negligence. In exchange for these \u201climited but assured benefits,\u201d the employee is generally barred from suing the employer for potentially larger damages in civil negligence actions and is instead limited exclusively to those remedies set forth in the Act.\nWhitaker v. Town of Scotland Neck, 357 N.C. 552, 556, 597 S.E.2d 665, 667 (2003) (quoting Pleasant v. Johnson, 312 N.C. 710, 712, 325 S.E.2d 244, 246-47 (1985)) (citation omitted).\n\u201cIn ascertaining legislative intent, we are guided by the language of the statute, the spirit of the act, and what the statute seeks to accomplish. . . . The Workers\u2019 Compensation Act is designed to relieve against hardship. To that end, one of its primary purposes is to provide a swift and certain remedy to injured workers without the necessity of protracted litigation.\u201d Foster v. Western-Electric Co., 320 N.C. 113, 116, 357 S.E.2d 670, 672-73 (1987) (citations omitted). We conclude that the purposes of the Workers\u2019 Compensation Act are supported by the prohibition against advance assignment of workers\u2019 compensation benefits.\nDefendant argues that, because G.S. \u00a7 97-21 does not specify that the unassignability of workers\u2019 compensation claims applies to compensation awarded to a claimant, we should infer that workers\u2019 compensation benefits may be assigned. Defendant directs our attention to the common law distinction in personal injury claims between assignment of claims and compensation for claims, and urges us to apply this distinction to assignment of workers\u2019 compensation claims. Defendant fails to articulate a rationale for importing this common law distinction into workers\u2019 compensation law, and we find none. Moreover, workers\u2019 compensation is a creature of statute, and there is a statute expressing a clear intent to bar assignment of workers\u2019 compensation benefits. In contrast, there is no analogous statute barring assignment of personal injury compensation.\nWe conclude that the prohibition in G.S. \u00a7 97-21 against assignment of a workers\u2019 compensation claim refers, not just to assignment of the Industrial Commission Form 18 \u201cclaim\u201d filed by a workers\u2019 compensation claimant, but also bars assignment of the proceeds of such a claim.\nWe next consider the second part of the statute which states that \u201call compensation and claims therefor shall be exempt from all claims of creditors[.]\u201d G.S. \u00a7 97-21.\nA \u201ccreditor\u201d is defined in pertinent part in Black\u2019s Law Dictionary 396 (8th ed. 2004) as \u201c(1) One to whom a debt is owed.\u201d \u201cA debt is something due from one person, the debtor, to another called the creditor, and may be created by simple contract or evidenced by specialty or judgment according to the nature of the obligation giving rise to it.\u201d Summit Silk Co. v. Kinston Spinning Co., 154 N.C. 421, 428-29, 70 S.E. 820, 823 (1911).\nIn the instant case, Defendant claims a lien on the proceeds of Plaintiff Cross\u2019s workers\u2019 compensation benefits, on the grounds that the terms of their agreement require Cross to repay him for the funds that Defendant advanced to Cross, as well as an additional \u201cinvestment fee.\u201d We conclude that the transaction was a loan and that Defendant is a creditor of Plaintiff. As a creditor, Defendant cannot attach a lien on Plaintiff\u2019s workers\u2019 compensation benefits or compensation.\nDefendant, however, argues that he is not a creditor, on the grounds that transaction was a \u201csale\u201d not a loan. We disagree. \u201cA loan is \u2018made upon the delivery by one party and the receipt by the other party of a given sum of money, an agreement, express of implied, to repay the sum lent, with or without interest.\u2019... \u2018[C]ourts of this state regard the substance of a transaction, rather than its outward appearance, as controlling.\u2019 \u201d State ex. rel. Cooper v. NCCS Loans, Inc., 174 N.C. App. 630, 634, 624 S.E.2d 371, 374 (2005) (quoting Kessing v. Mortgage Corp., 278 N.C. 523, 529, 180 S.E.2d 823, 827 (1971); and Auto Supply v. Vick, 303 N.C. 30, 37, 277 S.E.2d 360, 366 (1981)). In Cooper usurious \u201cpay day loans\u201d were disguised as contracts for the sale of Internet service. This Court concluded that the contracts were a sham:\nTo review, in return for immediate cash, Advance Internet customers must repay both the sum advanced and an additional fe\u00e9 of at least 20% of the amount of cash received. . . . We conclude that, notwithstanding the facial resemblance to Internet service contracts, it is transparently obvious that defendants are offering loans, not bona fide internet service contracts.\nCooper, 174 N.C. App. at 638, 624 S.E.2d at 377. Similarly, in return for immediate cash, Cross signed an agreement obligating her to \u201cboth the sum advanced and an additional fee of [125%] of the amount of cash received.\u201d We conclude that this transaction constituted a loan, notwithstanding it\u2019s facial disguise as the \u201csale\u201d of proceeds of workers\u2019 compensation \u201clitigation.\u201d \u201c \u2018Where a transaction is in reality a loan of money, whatever may be its form, . . . [t]he law considers the substance and not the mere form or outward appearance of the transaction in order to determine what it in reality is.\u2019 \u201d Kessing, 278 N.C. at 531, 180 S.E.2d at 828 (quoting Ripple v. Mortgage Corp., 193 N.C. 422, 424, 137 S.E. 156, 158 (1927)).\nMoreover, the character of a transaction is not automatically changed by the inclusion of a condition under which repayment would be forgiven. \u201c[I]t makes no difference in the result, if we construe the agreement as requiring repayment by the Texas corporations only in the event that their operations should prove successful. A loan is no less a loan because its repayment is made contingent^]\u201d Island Petroleum Co. v. Commissioner, 57 F.2d 992, 994 (4th Cir. 1932). \u201cNeither is the term \u2018investment\u2019 in any way contradictory of a \u2018loan.\u2019 The word \u2018advance\u2019 in the connotation here used, commonly means a loan of money.\u201d Whittemore Homes, Inc. v. Fleishman, 190 Cal. App. 2d 554, 558, 12 Cal. Rptr. 235, 236 (1961) (citations omitted).\nIn the instant case, the parties\u2019 agreement provided that (1) Defendant would advance funds to Plaintiff; and (2) upon receipt of workers\u2019 compensation benefits, Plaintiff would repay the amount advanced and an additional \u201cinvestment fee.\u201d We conclude that the essential character of this transaction was a loan. Accordingly, Defendant was a creditor of Plaintiff, and could not assert a claim to her workers\u2019 compensation benefits.\nWe agree with Plaintiffs that the North Carolina cases allowing certain parties to reach workers\u2019 compensation benefits are easily distinguished from this case. In State v. Miller, 77 N.C. App. 436, 335 S.E.2d 187 (1985), this Court held that the exemption of workers\u2019 compensation benefits from the claims of creditors did not apply to an order for child support. The Court held that the \u201cobligation to support one\u2019s children is not a \u2018debt\u2019 in the legal sense of the word[, and] . . . helping to sustain the dependants of employees disabled on the job is one of the main purposes of our Workers\u2019 Compensation Act.\u201d Id. at 438-39, 335 S.E.2d at 188-89. The instant case does not implicate child support law.\nIn Sara Lee Corp. v. Carter, 351 N.C. 27, 35, 519 S.E.2d 308, 313 (1999), \u201coverwhelming evidence presented at trial led the trial court to conclude, inter alia, that defendant engaged in fraud, breach of fiduciary duty, and unfair and deceptive acts or practices. The trial court then ordered that \u2018a constructive trust for the benefit of [plaintiff] is hereby imposed over any and all workers [\u2019] compensation benefits that [defendant] is or shall be entitled to receive[.]\u2019 \u201d On appeal, the defendant argued that G.S. \u00a7 97-21 barred the trial court\u2019s imposition of a constructive trust. The North Carolina Supreme Court disagreed, holding that the statutory language \u201cdoes not preclude the trial court from imposing the equitable remedy of a constructive trust . . . under this extraordinary and unique set of facts[.]\u201d Id. at 35-36, 516 S.E.2d at 313-14. The holding in Sara Lee was based on the \u201cextraordinary and unique\u201d facts of that case, and upheld the trial court\u2019s imposition of the equitable remedy of a constructive trust, not a claimant\u2019s advance assignment of workers\u2019 compensation benefits.\nFor the reasons discussed above, we conclude that G.S. \u00a7 97-21 bars Defendant\u2019s assertion of a lien on the proceeds of Plaintiff\u2019s workers\u2019 compensation claim, and that the trial court\u2019s order must be\nReversed.\nJudges HUNTER and ELMORE concur.",
        "type": "majority",
        "author": "ARROWOOD, Judge."
      }
    ],
    "attorneys": [
      "Scudder & Hedrick, PLLC, by Samuel A. Scudder and April D. Seguin, for Plaintiff-Appellants.",
      "Wayne C. Walker, Pro Se, for Defendant-Appellee Wayne C. Walker."
    ],
    "corrections": "",
    "head_matter": "MARIE A. CROSS and SAMUEL A. SCUDDER, Plaintiffs v. CAPITAL TRANSACTION GROUP, INC., d/b/a CAPTRAN, and WAYNE WALKER, Defendants\nNo. COA07-1519\n(Filed 17 June 2008)\n1. Workers\u2019 Compensation\u2014 assignment of claims \u2014 assignment of proceeds and advance assignment also barred\nN.C.G.S. \u00a7 97-21 barred defendants\u2019 assertion of a lien on the proceeds of plaintiff\u2019s workers\u2019 compensation claim where defendant was the assignee of a company which invests capital in personal injury cases. The prohibition bars assignment of the proceeds, not just assignment of the Industrial Commission Form 18 claim, and the purposes of the Workers\u2019 Compensation Act are supported by the prohibition of advance assignment of workers\u2019 compensation benefits.\n2. Workers\u2019 Compensation\u2014 money advanced on claim\u2014 essentially a loan \u2014 defendant barred as creditor\nThe essential character of money advanced on a workers\u2019 compensation claim was that of a loan, so that defendant was a creditor of plaintiff and could not assert a claim to her workers\u2019 compensation benefits. N.C.G.S. \u00a7 97-21.\nAppeal 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.\nScudder & Hedrick, PLLC, by Samuel A. Scudder and April D. Seguin, for Plaintiff-Appellants.\nWayne C. Walker, Pro Se, for Defendant-Appellee Wayne C. Walker."
  },
  "file_name": "0115-01",
  "first_page_order": 147,
  "last_page_order": 155
}