NO. COA02-429
NORTH CAROLINA COURT OF APPEALS
Filed: 18 February 2003
HAROLD LANG JEWELERS, INC.,
Plaintiff,
v
.
JERGER JOHNSON d/b/a JOHNSON JEWELERS, and TERRELL KENT JOHNSON
d/b/a JERGER JOHNSON JEWELERS,
Defendants.
Appeal by plaintiff from judgment entered 9 January 2002 by
Judge Richlyn Holt in Macon County District Court. Heard in the
Court of Appeals 13 November 2002.
Creighton W. Sossomon, for plaintiff-appellant.
Coward, Hicks & Siler, P.A., by Richard K. Walker, for
defendants-appellees.
HUDSON, Judge.
Appellant Harold Lang Jewelers, Inc. (Lang), a Florida
corporation, filed suit against the appellees (Johnson). As one
of its affirmative defenses, Johnson argued that Lang could not sue
in a North Carolina court because Lang was transacting business in
the state without a certificate of authority to do so. The trial
court agreed and dismissed the suit prior to trial. Lang appealed.
For the reasons set forth below, we affirm the decision of the
trial court.
Lang filed suit in April 1999, alleging that Johnson owed it
$160,322.90 plus interest for jewelry sold or consigned. Johnson
answered in May 1999, asserting as one of its eight affirmative
defenses that Lang could not sue in a North Carolina court because
Lang had failed to obtain a certificate of authority to transactbusiness in the state. On January 7, 2002, the case was called for
trial. At that time, Johnson orally raised the defense of Lang's
failure to obtain a certificate of authority and requested a
hearing on that issue. After hearing evidence and argument, the
district court granted the motion and dismissed Lang's action.
Lang now appeals.
Lang first argues that the trial court erred when it
considered Johnson's motion because the parties' pretrial order
precluded further motions prior to trial. We disagree.
The pretrial order dated January 14, 2000, indicates that
there are no pending Motions before the Court which need
resolution prior to Trial of this matter. However, the record
reflects that in fact there was a motion pending--whether Lang
could avail itself of the courts of this state. Pursuant to N.C.
Gen. Stat. § 55-15-02, a foreign corporation that transacts
business in North Carolina is barred from maintaining an action in
any state court unless it has obtained a certificate of authority
to transact business prior to trial. An issue arising under this
subsection must be raised by motion and determined by the trial
judge prior to trial. N.C. Gen. Stat. § 55-15-02(a); see also
State of North Carolina ex rel. Glamorgan Pipe & Foundry Co., 266
N.C. 342, 344, 145 S.E.2d 912, 913 (1966) (holding that motions
under the predecessor to § 55-15-02 challenge the authority of
the Court to proceed with a trial of the cause on its merits).
Rule 16 of our rules of civil procedure specifically permits
pretrial orders to be modified at trial to prevent manifestinjustice. We are persuaded that the trial court acted within its
discretion when it addressed this dispositive issue as it did--
prior to commencing trial, despite the erroneous statement in the
pretrial order.
We also note that Lang can hardly claim surprise. The motion
to dismiss based on failure to obtain a certificate of authority
was first presented in Johnson's answer, filed on May 21, 1999,
more than a year and a half before the matter was to be tried.
Lang had sufficient time to address the issue. Thus, we see no
error here.
Second, Lang argues that the trial court did not find
sufficient facts to support its conclusion that Lang was, in fact,
transacting business in the state of North Carolina. Again, we
disagree.
To transact business is defined by statute and common law.
Specifically, N.C. Gen. Stat. § 55-15-01 sets forth examples of
when a foreign corporation is NOT transacting business:
(1) Maintaining or defending any action or suit or any
administrative or arbitration proceeding, or effecting the
settlement thereof or the settlement of claims or disputes;
(2) Holding meetings of its directors or shareholders or
carrying on other activities concerning its internal affairs;
(3) Maintaining bank accounts or borrowing money in this
State, with or without security, even if such borrowings are
repeated and continuous transactions;
(4) Maintaining offices or agencies for the transfer,
exchange, and registration of its securities, or appointing
and maintaining trustees or depositories with relation to
its securities;
(5) Soliciting or procuring orders, whether by mail or
through employees or agents or otherwise, where such orders
require acceptance without this State before becoming
binding contracts;
(6) Making or investing in loans with or without security
including servicing of mortgages or deeds of trust throughindependent agencies within the State, the conducting of
foreclosure proceedings and sale, the acquiring of property
at foreclosure sale and the management and rental of such
property for a reasonable time while liquidating its
investment, provided no office or agency therefor is
maintained in this State;
(7) Taking security for or collecting debts due to it or
enforcing any rights in property securing the same;
(8) Transacting business in interstate commerce;
(9) Conducting an isolated transaction completed within a
period of six months and not in the course of a number of
repeated transactions of like nature;
(10) Selling through independent contractors;
(11) Owning, without more, real or personal property.
N.C. Gen. Stat. § 55-15-01(b). Our courts have interpreted
transacting business in the state to require the engaging in,
carrying on or exercising, in North Carolina, some of the functions
for which the corporation was created.
Canterbury v. Monroe Lange
Hardware Imports Divis. of Macrose Indus. Corp., 48 N.C. App. 90,
96, 268 S.E.2d 868, 872 (1980), citing
Abney Mills v. Tri-State
Motor Transit Co., 265 N.C. 61, 143 S.E.2d 235 (1965). The
business done by the corporation must be of such nature and
character as to warrant the inference that the corporation has
subjected itself to the local jurisdiction and is, by its duly
authorized officers and agents, present within the State.
Spartan
Equip. Co. v. Air Placement Equip. Co., 263 N.C. 549, 556, 140
S.E.2d 3, 9 (1965) (citation and quotation marks omitted). In
other words, the activities carried on by the corporation in North
Carolina must be substantial, continuous, systematic, and regular.
Canterbury, 48 N.C. App. at 96, 268 S.E.2d at 872.
Here, the trial court concluded that Lang's business activity
in North Carolina was regular, continuous, and substantial suchthat it was transacting business in the state. We uphold this
conclusion only if it is supported by the findings of fact, and,
contrary to Lang's assertion, we hold that it is.
Royal v. Hartle,
145 N.C. App. 181, 182, 551 S.E.2d 168, 170,
disc. review denied,
354 N.C. 365, 555 S.E.2d 922 (2001).
Specifically, the court found that Lang, through its single
employee, had sold and consigned merchandise to jewelry stores in
Franklin, Asheville, and Highlands, North Carolina, since 1970.
The court also found that Lang's employee came to North Carolina at
least twice every six weeks during the year and at least twice
every four weeks during the summer months for the purpose of
transacting business. Sometimes he came to North Carolina to
transact business as often as three times a month. The court found
that when the employee came to North Carolina, he always brought
jewelry with him for delivery. When he visited jewelry stores in
the state, he would either (1) make a direct sale on the spot
without any confirmation from any other person or entity in any
other place or (2) consign the jewelry, also without any further
confirmation or approval from any other person or entity anywhere.
When the employee took orders, he either shipped the ordered items
to the business in North Carolina or personally delivered the
merchandise. He also took returns of merchandise from customers in
the state. The court further found that the business that Lang
conducted in North Carolina did not require it to communicate with
any other person or seek any authority from any other person.
In sum, we conclude that the trial court's conclusions of laware adequately supported by the facts found in this case. There is
ample evidence that Lang's business in this state has been regular,
systematic, and extensive. Lang has been coming to North Carolina
since about 1970 to sell and consign merchandise to several jewelry
stores. In fact, Lang routinely came to North Carolina as
frequently as twice every four weeks during some parts of the year,
and each time he brought with him merchandise to deliver.
Moreover, the orders did not require acceptance without this State
before becoming binding contracts (N.C. Gen. Stat. § 55-15-
01(b)(5)); instead, Lang's employee finalized the sales in North
Carolina. Accordingly, Lang's assignments of error on this ground
are overruled.
Finally, Lang contends that the trial court erred when it
dismissed the action, arguing that the court should have continued
the case to permit Lang to obtain the requisite certificate of
authority. The applicable statute, N.C. Gen. Stat. § 55-15-02,
does not specify the procedure in the event of failure to obtain a
certificate of authority. The statute simply indicates that an
action cannot be maintained unless the certificate is obtained
prior to trial. N.C. Gen. Stat. § 55-15-02(a). Lang has not
cited, nor have we found, a case where a continuance has been
granted by a court in these circumstances. Moreover, Lang was
aware that Johnson's motion was pending and could have obtained the
certificate in the year and a half that passed between the filing
of the motion and the court's dismissal of the case. In the
absence of statutory or other authority dictating a continuance, wehold that the trial court acted within its discretion in dismissing
the action.
For the reasons set forth above, we affirm the decision of the
trial court.
Affirmed.
CHIEF JUDGE EAGLES and JUDGE McGEE concur.
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