1. Judgments_entry of default_motion to set aside--good cause not shown
The trial court did not err by denying a defendant's motion to set aside an entry of default
arising from the repossession of an automobile where defendant did not present grounds
constituting good cause.
2. Unfair Trade Practices_mechanic's lien_removal of auto from mechanic's lot_not
unfair trade practice
Plaintiff auto repair business was not entitled to recover treble damages from defendant
credit union for an unfair trade practice based upon its allegations that defendant removed an
auto from plaintiff's premises without permission or notice to plaintiff after defendant had notice
of plaintiff's mechanic's lien on the automobile. Defendant's removal of the auto did not affect
plaintiff's lien thereon, and plaintiff suffered no actual injury as a result of any deceptive or
unfair act by defendant.
3. Liens--auto removed from mechanic's lot_no direct remedy from fellow lienholder
The trial court erred by awarding actual damages to an automobile repair business for the
removal from its premises of a car on which it had a lien. Plaintiff is entitled to recover its costs
if and when the automobile is sold, but has no basis upon which to recover the amount of lien
directly from defendant, a fellow lienholder. The appropriate remedy for plaintiff lies with
N.C.G.S. § 44A-6.1, which sets forth a process by which a lienor who involuntarily relinquishes
possession of an automobile may regain possession of that vehicle. Once returned, plaintiff may
sell the automobile to recover its interest in the property.
Rosbon D. B. Whedbee for plaintiff appellee.
Fisher, Clinard & Cornwell, PLLC, by Robert A. Lefkowitz, for
defendant appellant Winston-Salem City Employees' Credit
Union.
TIMMONS-GOODSON, Judge.
Winston-Salem City Employees' Credit Union (“defendant”)appeals from an order of the trial court denying defendant's motion
seeking relief from entry of default, as well as from default
judgment entered against it. For the reasons stated hereafter, we
reverse in part the judgment of the trial court.
On 1 October 2001, Old Salem Foreign Car Service, Inc.
(“plaintiff”) filed a complaint against Anthony Webb (“Webb”) and
defendant in Forsyth County District Court. In its complaint,
plaintiff alleged that it was an automobile repair business with
its principal office located in Winston-Salem, North Carolina. The
complaint further alleged the following: On or about 14 June 2000,
Webb delivered a 1992 Datsun 300ZX automobile to plaintiff's
premises and requested an estimate of the costs of needed repairs
for the automobile. In order to estimate the costs of repair,
employees of plaintiff disassembled parts of the automobile and
thereafter informed Webb that the costs for repair would be
approximately $2,600.00. Webb agreed to pay for the diagnostic
expenses incurred by plaintiff, but did not authorize the repair.
Webb thereafter discontinued his communication with plaintiff,
failing to respond to plaintiff's repeated attempts to contact him.
The automobile remained in plaintiff's possession and Webb neither
retrieved it nor paid for plaintiff's diagnostic and other
expenses.
On the afternoon of 12 September 2001, Jim Pegram (“Pegram”),
president and chief operating officer of plaintiff corporation,
telephoned the office of defendant, which possessed a financing
lien on Webb's automobile. Pegram spoke with Anita Kimber-Crawford
(“Kimber-Crawford”), an officer of defendant, and notified her thatplaintiff was asserting a lien against the automobile pursuant to
Chapter 44A of the North Carolina General Statutes. Pegram
informed Kimber-Crawford that defendant could obtain possession of
the automobile upon payment of the lien.
At approximately 1:30 a.m. on 13 September 2001, defendant
removed the automobile from the plaintiff's premises without
notifying plaintiff of its actions. Upon discovering defendant's
actions, Pegram contacted Sam Whitehurst (“Whitehurst”), manager of
defendant institution, and demanded payment of plaintiff's asserted
lien on the automobile. Defendant did not respond to plaintiff's
requests for payment of the lien.
Based on the above-stated allegations, plaintiff requested in
its complaint that the trial court order defendant to either return
the automobile or reimburse plaintiff in the amount of the asserted
lien. Plaintiff further asserted that defendant's actions
constituted unfair and deceptive trade practices and requested
treble damages and attorneys' fees. Defendant was properly served
with a summons and a copy of plaintiff's complaint on 24 October
2001.
On 28 December 2001, entry of default was entered against Webb
and defendant for failure to respond to plaintiff's complaint. On
23 January 2002, plaintiff filed a motion for default judgment
against Webb and defendant, which motion came before the trial
court on 4 February 2002. Webb did not appear at the hearing for
default judgment. Kimber-Crawford was present on behalf of
defendant, but was unrepresented by counsel at the time of calendar
call. By the time the case was called to hearing, however,defendant had obtained counsel. During the hearing, counsel for
defendant submitted a handwritten motion entitled “Motion Under
Rule 60 + 59 + 55(d) for Relief from Default Entry.” The motion
set forth no grounds supporting relief from entry of default,
however, and the trial court entered an order denying defendant's
motion.
Upon hearing the evidence at the default judgment hearing,
including testimony by Pegram and Kimber-Crawford, the trial court
made the following pertinent findings:
1. The additional Defendant, through newly
retained counsel, Attorney Lefkowitz, moved
the Court to continue the instant hearing on
the grounds that he was just retained by the
Additional Defendant's officer, Ms. Anita
Kimber-Crawford (during the lunch break on
February 4th, 2002), and had inadequate time
to prepare for the instant hearing;
2. Additional Defendant's officer testified
that she was the officer of her employer who
was responsible for collections and legal
matters; that she had received Plaintiff's
calendar request and notice of hearing; that
her Company normally “did the suing” and had
never been sued before to her knowledge, and
that she did not know what would be happening
at the instant hearing, but that she had not
contacted counsel relative to representation .
. . in this cause until the lunch recess just
prior to the call of the instant case at 2:00
p.m. on February 4, 2002; she further
testified that she had first learned about
this civil action shortly after service when
her boss handed her the papers that the
Sheriff brought and served, and told her “to
take care of this.”
3. The factual allegations of the Complaint
are incorporated herein by reference;
. . . .
12. Plaintiff has provided notice to the
North Carolina Division of Motor Vehicles that
a mechanic's lien is asserted against thesubject vehicle, and that an enforcement sale
of the subject vehicle is proposed;
13. The Additional Defendant presently has
the subject 1992 Datsun automobile in its
possession or under its control; and that the
Plaintiff presently has possession of the
subject automobile's hood, motor, engine
assembly, and transmission, which parts had
been removed from the automobile and were
inside of Plaintiff's garage facility at the
time the automobile was removed from
Plaintiff's premises on September 13th,
2001[.]
The trial court thereafter concluded that defendant had failed to
show a meritorious defense to plaintiff's claims, and had committed
unfair and deceptive trade practices. The trial court therefore
entered judgment in favor of plaintiff and against defendant in the
amount of $11,274.24, the sum of plaintiff's actual damages
trebled. From the order of the trial court denying its motion to
set aside the entry of default and from the default judgment
entered against it, defendant appeals.
______________________________________________________
[1] Defendant argues that the trial court erred in denying its
motion for relief from entry of default, and in awarding plaintiff
actual and treble damages pursuant to Chapter 75 of the North
Carolina General Statutes. Although we affirm the order of the
trial court denying defendant's motion for relief from entry of
default, we conclude that plaintiff was not entitled to recover
actual or treble damages from defendant, and we therefore reverse
in part the default judgment entered against defendant.
Defendant contends the trial court erred in denying its motion
to set aside the entry of default. “For good cause shown the courtmay set aside an entry of default . . . .” N.C. Gen. Stat. § 1A-1,
Rule 55(d) (2001). A motion pursuant to this rule to set aside an
entry of default is addressed to the sound discretion of the court.
See Security Credit Leasing, Inc. v. D.J.'s of Salisbury, Inc., 140
N.C. App. 521, 528, 537 S.E.2d 227, 232 (2000); Britt v.
Georgia-Pacific Corp., 46 N.C. App. 107, 108, 264 S.E.2d 395, 397
(1980). “In moving for relief of judgment pursuant to Rule 55(d),
the burden is on the defendant, as the defaulting party, not to
refute the allegations of plaintiff's complaint, nor to show the
existence of factual issues as in summary judgment, but to show
good cause why he should be allowed to file answer to plaintiff's
complaint.” Bell v. Martin, 299 N.C. 715, 721, 264 S.E.2d 101, 105
(1980). Whether “good cause” exists depends on the facts and
circumstances of each particular case, and the trial court's
determination will not be disturbed on appeal unless a clear abuse
of discretion is shown. See Byrd v. Mortenson, 60 N.C. App. 85,
88, 298 S.E.2d 170, 172 (1982), affirmed and modified in part, 308
N.C. 536, 302 S.E.2d 809 (1983).
In Britt, the evidence tended to show that the legal
department of the defendant corporation misplaced the lawsuit
documents and did not locate them until the day entry of default
was made. The trial court determined that defendant failed to show
“good cause” to set aside entry of default, and this Court found no
abuse of discretion by the trial court. See Britt, 46 N.C. App. at
108-09, 264 S.E.2d at 397. In the present case, defendant advanced
no grounds constituting good cause. The evidence tended to show
that defendant was properly served with the summons and complaint,but failed to respond. Defendant's officer, Kimber-Crawford,
acknowledged receipt of the documents, but explained that defendant
normally “did the suing.” Kimber-Crawford offered no other
explanation for defendant's failure to respond to plaintiff's
summons and complaint. As such, we discern no abuse of discretion
by the trial court in denying defendant's motion to set aside entry
of default. See First Citizens Bank & Tr. Co. v. Cannon, 138 N.C.
App. 153, 157-58, 530 S.E.2d 581, 583-84 (2000); RC Associates v.
Regency Ventures, Inc., 111 N.C. App. 367, 375, 432 S.E.2d 394,
398-99 (1993).
[2] Once default is established, a defendant has no further
standing to contest the factual allegations of plaintiff's claim
for relief. See Spartan Leasing v. Pollard, 101 N.C. App. 450,
460, 400 S.E.2d 476, 482 (1991); Acceptance Corp. v. Samuels, 11
N.C. App. 504, 509-10, 181 S.E.2d 794, 798 (1971). A defendant may
still demonstrate, however, that the complaint is insufficient to
warrant the plaintiff's recovery. See Hunter v. Spaulding, 97 N.C.
App. 372, 377, 388 S.E.2d 630, 634 (1990). Defendant argues that,
even if the allegations contained in plaintiff's complaint are
accepted as fully established, they nevertheless fail to state a
claim for unfair and deceptive trade practices. Specifically,
defendant contends that the complaint fails to establish that
plaintiff suffered an injury arising from an allegedly deceptive
act by defendant. On this point, we agree with defendant.
Under section 44A-2 of the North Carolina General Statutes,
[a]ny person who repairs, services, tows, or
stores motor vehicles in the ordinary course
of the person's business pursuant to an
express or implied contract with an owner orlegal possessor of the motor vehicle, except
for a motor vehicle seized pursuant to G.S.
20-28.3, has a lien upon the motor vehicle for
reasonable charges for such repairs,
servicing, towing, storing, or for the rental
of one or more substitute vehicles provided
during the repair, servicing, or storage.
This lien shall have priority over perfected
and unperfected security interests. Payment
for towing and storing a motor vehicle seized
pursuant to G.S. 20-28.3 shall be as provided
for in G.S. 20-28.2 through G.S. 20-28.5.
N.C. Gen. Stat. § 44A-2(d) (2001). According to the allegations
contained in the complaint, plaintiff provided services and
incurred expenses pursuant to a verbal agreement with Webb
regarding his automobile. The automobile remained on plaintiff's
property for approximately four months, during which time Webb
failed to respond to plaintiff's repeated attempts to contact him.
Under section 44A-2(d), plaintiff could properly assert a motor
vehicle lien on Webb's automobile. This lien had priority over
defendant's security interest in the automobile. See id. Further,
plaintiff's lien was not extinguished by defendant's removal of the
automobile from plaintiff's premises. See N.C. Gen. Stat. § 44A-3
(2001) (stating that “[l]iens conferred under this Article do not
terminate when the lienor involuntarily relinquishes the possession
of the property.”); Case v. Miller, 68 N.C. App. 729, 732, 315
S.E.2d 737, 739 (1984).
Plaintiff's complaint further alleged that defendant committed
an unfair and deceptive act in violation of Chapter 75 by removing
the automobile from plaintiff's premises without permission or
notice to plaintiff, after defendant had actual notice of
plaintiff's lien. See N.C. Gen. Stat. § 75-1.1 (2001) (declaringunlawful unfair or deceptive acts or practices in or affecting
commerce). A practice is unfair and violates Chapter 75 if it
offends established public policy or is immoral, unethical,
oppressive, unscrupulous, or substantially injurious to consumers.
See Bailey v. LeBeau, 79 N.C. App. 345, 352, 339 S.E.2d 460, 464,
modified and affirmed, 318 N.C. 411, 348 S.E.2d 524 (1986). As an
essential element of a cause of action for unfair and deceptive
trade practices, the plaintiff must not only show that the
defendant violated Chapter 75, but also demonstrate that he has
suffered actual injury as a proximate result of the defendant's
misrepresentations. See Anders v. Hyundai Motor America Corp., 104
N.C. App. 61, 68, 407 S.E.2d 618, 622, disc. rev. denied, 330 N.C.
440, 412 S.E.2d 69 (1991).
In its complaint, plaintiff established that its actual
damages, as well as its consequential damages, arose over Webb's
failure to reimburse plaintiff for expenses it incurred in
connection with the automobile. These damages formed the basis for
plaintiff's lien upon the automobile, and defendant may no longer
dispute the amount of the asserted lien. See N.C. Gen. Stat. §
44A-4 (2001); Peace River Electric Cooperative v. Ward Transformer
Co., 116 N.C. App. 493, 502, 449 S.E.2d 202, 209 (1994), disc.
review denied, 339 N.C. 739, 454 S.E.2d 655 (1995). Plaintiff has
not shown, however, that it suffered an actual injury as a result
of any deceptive or unfair act by defendant. Plaintiff's basis for
an action pursuant to Chapter 75 rests on one act by defendant;
namely, defendant's act of removing the vehicle from plaintiff's
premises without permission or notice to plaintiff, after defendanthad actual notice of plaintiff's lien. Plaintiff's claim of injury
arose before defendant removed the automobile, however, and this
removal did not affect plaintiff's lien on the property. As there
was no causal connection between plaintiff's injury and any act by
defendant, plaintiff is not entitled to treble damages under
Chapter 75. See Mitchell v. Linville, 148 N.C. App. 71, 79, 557
S.E.2d 620, 625-26 (2001) (concluding that, where the plaintiffs
failed to show that the deceptive acts by the defendants adversely
impacted the plaintiffs, the trial court erred in awarding
plaintiffs damages pursuant to Chapter 75); Miller v. Ensley, 88
N.C. App. 686, 691, 365 S.E.2d 11, 14 (1988) (concluding that,
where the plaintiff-subcontractor was able to fully protect his
rights by a lien claim under Chapter 44A, “the harm caused by [the
defendant's] deception was, at most, theoretical, and not actual”
and thus the trial court erred in awarding treble damages pursuant
to Chapter 75). The trial court therefore erred in awarding
plaintiff treble damages pursuant to Chapter 75, and we reverse
that portion of the default judgment awarding plaintiff treble
damages.
[3] Defendant further argues that the trial court erred in
awarding actual damages to plaintiff against defendant. Defendant
contends that plaintiff's recovery from defendant is limited to
recovery of the automobile. Again, we agree with defendant.
Both plaintiff and defendant have protected interests in the
automobile. Under section 44A-2(d), plaintiff's lien has priority
over defendant's interest in the automobile. Thus, if and when the
automobile is sold to satisfy the interests of plaintiff anddefendant in the property, regardless of which party has physical
possession, plaintiff is entitled to recover its costs in the
amount of the lien before defendant may do so. Plaintiff has no
basis, however, upon which to recover the amount of the lien
directly from defendant, a fellow lienholder. At the time of the
default hearing, defendant had not yet sold the automobile to
recover its security interest. Nor is it inevitable that the
automobile will actually be sold. It is possible that Webb, as
owner of the automobile, may yet take appropriate action to recover
his property. Further, if the automobile is sold, there is no
guarantee that the sale of the automobile will fully compensate
plaintiff for the amount of its lien. When it agreed to perform
services for Webb, plaintiff took a calculated business risk that
it would be compensated for its services. Defendant took a similar
risk when it agreed to finance the automobile. To permit plaintiff
to proceed directly against defendant for the amount of its lien,
without any cause of action against defendant and before sale of
the automobile, would unfairly and prematurely allow plaintiff to
fully recoup its interest in the automobile -- in effect,
guaranteeing plaintiff's interest where no guarantee is warranted.
The appropriate remedy for plaintiff's loss of possession of
the automobile lies with section 44A-6.1 of the North Carolina
General Statutes. Section 44A-6.1 sets forth a process by which a
lienor who involuntarily relinquishes possession of an automobile
may regain possession of that vehicle. Section 44A-6.1 provides as
follows:
(a) When the lienor involuntarily relinquishes
possession of the property and the propertyupon which the lien is claimed is a motor
vehicle or vessel, the lienor may institute an
action to regain possession of the motor
vehicle or vessel in small claims court any
time following the lienor's involuntary loss
of possession and following maturity of the
obligation to pay charges. The lienor shall
serve a copy of the summons and the complaint
pursuant to G.S. 1A-1, Rule 4, on each secured
party claiming an interest in the vehicle or
vessel. For purposes of this section,
involuntary relinquishment of possession
includes only those situations where the owner
or other party takes possession of the motor
vehicle or vessel without the lienor's
permission or without judicial process. If in
the court action the owner or other party
retains possession of the motor vehicle or
vessel, the owner or other party shall pay the
amount of the lien asserted as bond into the
clerk of the court in which the action is
pending.
If within three days after service of the
summons and complaint, as the number of days
is computed in G.S. 1A-1, Rule 6, neither the
defendant nor a secured party claiming an
interest in the vehicle or vessel files a
contrary statement of the amount of the lien
at the time of the filing of the complaint,
the amount set forth in the complaint shall be
deemed to be the amount of the asserted lien.
The clerk may at any time disburse to the
lienor that portion of the cash bond which is
not in dispute, upon application of the
lienor. The magistrate shall:
(1) Direct appropriate disbursement of the
disputed or undisbursed portion of the bond;
and
(2) Direct appropriate possession of the
motor vehicle or vessel if, in the judgment of
the court, the plaintiff has a valid right to
a lien.
N.C. Gen. Stat. § 44A-6.1(a) (2001). Plaintiff involuntarily
relinquished possession of the automobile and is entitled to its
return under section 44A-6.1. Once returned, plaintiff may sell
the automobile, pursuant to section 44A-4, to recover its interestin the property. The statute provides no basis for a monetary
recovery from a fellow lienholder, nor does the default judgment
set forth grounds supporting any independent cause of action
against defendant that would entitle plaintiff to actual damages
from defendant. Because plaintiff has no cause of action against
defendant, the trial court erred in awarding actual damages against
defendant. We therefore reverse that portion of the default
judgment awarding actual damages against defendant. Plaintiff is
entitled, however, to recover the automobile from defendant.
In conclusion, we hold that the trial court did not abuse its
discretion in denying defendant's motion for relief from entry of
default. We further hold that the trial court erred in concluding
that plaintiff was entitled to actual and treble damages from
defendant, and we therefore reverse that portion of the default
judgment awarding such damages. We otherwise affirm the default
judgment. The order denying defendant's motion for relief from
entry of default is
Affirmed.
The judgment of default is
Affirmed in part, reversed in part, and remanded.
Judges WYNN and LEVINSON concur.
*** Converted from WordPerfect ***