COMPOSITE TECHNOLOGY, INC.,
Plaintiff,
v
.
Guilford County
No. 96 CvS 2451
ADVANCED COMPOSITE STRUCTURES
(USA), INC.,
Defendant.
Fisher Clinard & Craig, P.L.L.C., by John O. Craig, III, and
Alyce E. Hill, for plaintiff appellee.
Kennedy Covington Lobdell & Hickman, L.L.P., by Amy Pritchard
Williams, for defendant appellant.
TIMMONS-GOODSON, Judge.
Advanced Composite Structures (USA), Inc. (“defendant”) and
Bruce Anning (“Anning”), an officer of defendant corporation,
appeal from an order by the trial court assessing personal
liability against Anning for debt owed by defendant to Composite
Technology, Inc. (“plaintiff”). For the reasons set forth herein,
we vacate the order of the trial court.
On 27 December 1996, plaintiff filed a complaint against
defendant in Guilford County Superior Court, alleging that one of
plaintiff's former employees had disclosed certain trade secrets todefendant. The complaint sought relief based on claims of
misappropriation of trade secrets, breach of contract, unfair
competition, tortious interference with contract, and unfair and
deceptive trade practices. Plaintiff moved for summary judgment
pursuant to Rule 56 of the North Carolina Rules of Civil Procedure,
and the trial court heard the matter on 13 September 1999.
Defendant did not appear to defend plaintiff's motion or to
prosecute its counterclaims. Finding that no genuine issues of
material fact existed, the trial court granted plaintiff's motion
for summary judgment and awarded plaintiff actual damages in
accordance with the North Carolina Trade Secrets Protection Act.
The trial court further determined that defendant had committed
unfair and deceptive trade practices and trebled plaintiff's
damages pursuant to section 75-1.1 of the General Statutes.
Plaintiff was also awarded attorneys' fees, with total damages
awarded in the sum of $264,000,00.
On 31 May 2000, a writ of execution was filed against
defendant in the amount of $264,000.00. The writ of execution was
eventually returned unserved by the Guilford County Sheriff's
Office, as the sheriff was unable to locate any property on which
to levy. In order to discover defendant's potential assets,
plaintiff filed a “Notice For Execution Information” and a demand
for “Execution Information” pursuant to sections 1-324.2, et seq.
of the North Carolina General Statutes. The notice was addressed
to “JIM ANNING as President, Agent, Officer or other person having
charge or control of any property of ADVANCED COMPOSITE STRUCTURES(USA), INC.” The Execution Information set forth a written set of
interrogatories concerning the nature and location of defendant's
assets. On 5 July 2000, Bruce Anning, a Canadian citizen and
brother to Jim Anning, was served with the “Notice For Execution
Information.” Anning accepted service as president of defendant
corporation.
On 14 July 2000, Anning responded to plaintiff's
interrogatories by sending the following letter to the Guilford
County Sheriff's Department:
I, Bruce Anning, am no longer an officer of
Advanced Composite Structures (USA), Inc. As
far as I know, Advanced Composite Structures
(USA) Inc. has been administratively dissolved
as a result of the company ceasing operations
in May of 1999. To the best of my
recollection, I am not aware of any assets
belonging to, or debts owed to, Advanced
Composite Structures (USA) Inc.
Plaintiff thereafter filed a “Motion in the Cause for Personal
Liability” pursuant to section 1-324.3 of the General Statutes,
requesting that the court assess personal liability against Anning
for the debt owed by defendant to plaintiff.
On 30 October 2000, plaintiff's motion came before the trial
court, which found that Anning had failed to properly respond to
plaintiff's interrogatories. The trial court concluded that “Bruce
Anning's failure to respond to the interrogatories propounded in
the manner required by law hereby cause him to be liable to the
Plaintiff/Judgment Creditor herein for the amount due on the
execution.” The trial court therefore entered an order assessing
personal liability against Anning for the amount of $264,000.00,along with expenses and attorneys' fees in the amount of
$48,393.57, from which defendant and Anning appeal.
___________________________________________________
Defendant contends that the trial court improperly imposed
personal liability upon Anning for the debt owed by defendant to
plaintiff because it lacked subject matter jurisdiction over the
action. We agree with defendant, and we therefore vacate the order
of the trial court.
Although defendant made no arguments concerning subject matter
jurisdiction before the trial court, a party may raise the issue at
any stage of a proceeding. See Bache Halsey Stuart, Inc. v.
Hunsucker, 38 N.C. App. 414, 421, 248 S.E.2d 567, 571 (1978), disc.
review denied, 296 N.C. 583, 254 S.E.2d 32 (1979). This Court may
also raise the issue even if neither party has addressed the
matter. See id. Defendant asserts that, since Anning was not a
party to the original suit against defendant, the appropriate
remedy for his alleged failure to answer plaintiff's
interrogatories would have been for plaintiff to file a separate
civil action in order to obtain a judgment for personal liability.
Because plaintiff failed to file a separate action, defendant
argues the trial court lacked subject matter jurisdiction over the
matter. Under the facts of the instant case, we agree with
defendant.
“Common experience has taught that vital information regarding
assets which ought to be subjected to the lien of or discharge of
a judgment are often in the hands of third persons and, as well,information concerning such assets . . . .” Ex Parte Burchinal,
571 So. 2d 281, 283 (Miss. 1990). In order to assist legitimate
creditors in the execution of unsatisfied judgments, the North
Carolina General Statutes provide several methods to assist
judgment creditors in locating assets belonging to a judgment
debtor. One such method is set forth under section 1-324.2 of our
General Statutes, which provides that
[e]very agent or person having charge or
control of any property of the corporation, on
request of a public officer having for service
a writ of execution against it, shall furnish
to him the names of the directors and officers
thereof, and a schedule of all its property,
including debts due or to become due, so far
as he has knowledge of the same.
N.C. Gen. Stat. § 1-324.2 (2001). In the event the agent “neglects
or refuses to comply with the provisions of [section 1-324.2,]” he
becomes “liable to pay to the execution creditor the amount due on
the execution, with costs.” N.C. Gen. Stat. § 1-324.4 (2001).
Further, a judgment creditor may discover information regarding
corporate shares through section 1-324.3, which states that:
Any share or interest in any bank, insurance
company, or other joint stock company, that is
or may be incorporated under the authority of
this State, or incorporated or established
under the authority of the United States,
belonging to the defendant in execution, may
be taken and sold by virtue of such execution
in the same manner as goods and chattels. The
clerk, cashier, or other officer of such
company who has at the time the custody of the
books of the company shall, upon being shown
the writ of execution, give to the officer
having it a certificate of the number of
shares or amount of the interest held by the
defendant in the company; and if he neglects
or refuses to do so, or if he willfully gives
a false certificate, he shall be liable to theplaintiff for the amount due on the execution,
with costs.
N.C. Gen. Stat. § 1-324.3 (2001). Violation of sections 1-324.2-4
is a Class 1 misdemeanor. See N.C. Gen. Stat. § 1-324.5 (2001).
Section 1-352.1 of the General Statutes establishes further
means of locating potential assets belonging to a judgment debtor,
providing in pertinent part that
[a]s an additional method of discovering
assets of a judgment debtor, the judgment
creditor may prepare and serve on the judgment
debtor written interrogatories concerning his
property, at any time the judgment remains
unsatisfied, and within three years from the
time of issuing an execution. Such written
interrogatories shall be fully answered under
oath by the judgment debtor within 30 days of
service on the judgment debtor . . . .
Interrogatories may relate to any matters
which can be inquired into under G.S. 1-352 .
. . .
Upon failure of the judgment debtor to
answer fully the written interrogatories, the
judgment creditor may petition the court for
an order requiring the judgment debtor to
answer fully, which order shall be served upon
the judgment debtor in the same manner as a
summons is served pursuant to the Rules of
Civil Procedure, fixing the time within which
the judgment debtor can answer the
interrogatives . . . .
Any person who disobeys an order of the
court may be punished by the judge as for a
contempt under the provisions of G.S. 1-368.
N.C. Gen. Stat. § 1-352.1 (2001).
In the instant case, plaintiff attempted to utilize section 1-
324.2 in order to locate potential assets belonging to defendant by
sending the Notice for Execution Information (“Notice”) to Anning,
who accepted as president of the company. The Notice, however, was
not limited to a request for the names of defendant's directors andofficers and a schedule of its property as provided for in section
1-324.2. Instead, the Notice demanded within fifteen days after
service notarized responses to twenty-nine detailed questions, some
of which requested personal information of Anning. As such, the
Notice sent by plaintiff more closely resembled a proceeding under
section 1-352.1. During argument before this Court, plaintiff
contended that it proceeded simultaneously under both sections 1-
324.2 and 1-352.1 when it sent its Notice to Anning.
Interrogatories propounded under section 1-352.1 take place as
a supplementary proceeding to the execution of a judgment. See
N.C. Gen. Stat. §§ 1-352, et seq. Section 1-352.1 thereby allows
a judgment creditor to discover the assets of a judgment debtor
without the burden of initiating a separate action. See Rand v.
Rand, 78 N.C. 12, 15 (1878) (stating that, “[p]roceedings
supplementary to execution are but a prolongation of the action
necessary to the final discharge of the judgment, the purpose . .
. being that all matters affecting the complete satisfaction and
determination of the action shall be settled in the same action,
instead of by a multiplicity of suits”). Thus, plaintiff could
properly serve the interrogatories on Anning in his role as
president of the judgment debtor as an ancillary matter to the
original action.
Although plaintiff could properly serve the interrogatories on
Anning as an ancillary action to the underlying judgment, whether
or not plaintiff could properly seek to establish personal
liability on Anning's part for his failure to adequately respond tosuch interrogatories by filing a motion in the cause is another
matter. Plaintiff's motion in the cause for personal liability
against Anning was filed pursuant to section 1-324.3. Unlike
section 1-352.1, which details the appropriate procedure for a
judgment creditor to follow if a judgment debtor fails to
appropriately respond to propounded interrogatories, section 1-
324.3 states simply that the “clerk, cashier, or other officer of
such company who has at the time the custody of the books of the
company . . . shall be liable to the plaintiff for the amount due
on the execution, with costs” if such a person neglects or refuses
to give to the officer serving the writ of execution the
appropriate information. N.C. Gen. Stat. § 1-324.3. Thus, section
1-324.3 establishes a penalty for violation of this section, but it
does not specify a method for proceeding against a person who has
potentially violated its mandates.
In such instance, we conclude that a plaintiff who seeks to
enforce section 1-324.3 by establishing personal liability against
a person for the debt owed by the judgment creditor must do so by
filing a separate proceeding against that person. In the case at
bar, plaintiff's cause of action against Anning - namely, personal
liability for his alleged failure to comply with section 1-324.3-
was an entirely distinct and separate matter than the original
cause of action filed by plaintiff against defendant - that of
liability for alleged violations of the North Carolina Trade
Secrets Protection Act and section 75-1.1 of the General Statutes.
Anning was not a party to the original action. We do not readsection 1-324.3 to authorize a judgment creditor to pursue personal
liability against a non-party for substantial monies owed by a
judgment debtor by merely filing a motion in the prior action.
Unlike section 1-352.1, a proceeding under section 1-324.3 is not
a supplemental proceeding to the original action. Compare N.C.
Gen. Stat. § 1-352.1 (appearing in Article 31, entitled
“Supplemental Proceedings”) and N.C. Gen. Stat. § 1-324.3 (set
forth in Article 28, entitled “Execution”); see also Bronson v.
Insurance Company, 85 N.C. 411, 413 (1881) (holding that where a
judgment creditor of a corporation caused an execution to issue,
which was returned unsatisfied, and then brought a suit for himself
and all other creditors against the corporation and its
stockholders, demanding an accounting to ascertain the amount due
upon unpaid stock in order to pay the debt of the corporation, such
suit was a new and independent action and not a proceeding
supplementary to execution).
If plaintiff here was unsatisfied with the answers it received
in response to the interrogatories it sent, it could have
petitioned the court for entry of an order requiring defendant to
appear and properly respond to questions regarding defendant's
assets. See N.C. Gen. Stat. § 1-352.1. Plaintiff could have also
filed a separate action against Anning under section 1-324.4 for
his failure to comply with section 1-324.2.
(See footnote 1)
As plaintiff failedto file an action against Anning, who was not a party to the
underlying dispute, no legitimate action existed over which the
trial court could properly exercise jurisdiction. See N.C. Gen.
Stat. § 1A-1, Rules 2, 3 (2001) (requiring the filing of a
complaint with the court in order to commence a civil action); In
re Transportation of Juveniles, 102 N.C. App. 806, 808, 403 S.E.2d
557, 558 (1991)(noting that, “before a court may act there must be
some appropriate application invoking the judicial power of the
court with respect to the matter in question”). The trial court
therefore lacked subject matter jurisdiction to enter the order
assessing personal liability against Anning for debts owed by
defendant to plaintiff. We therefore vacate the order of the trial
court.
Vacated.
Judges WYNN and TYSON concur.
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