Haizlip v MFI of South Carolina, (02-1027) 08/05/2003

Appeal by plaintiff from order dated 28 March 2002 by Judge L. Todd Burke in Superior Court, Guilford County. Heard in the Court of Appeals 15 May 2003.

Adams Kleemeier Hagan Hannah & Fouts, by Gary L. Beaver, for plaintiff-appellant.

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Derek J. Allen, for defendant-appellee, Stephen K. Miller.

    McGEE, Judge.

    Dewey Haizlip (Haizlip) filed a verified amended complaint on 6 July 2001 seeking damages for breach of a promissory note, violation of the North Carolina Securities Act, fraud, negligent misrepresentation, breach of fiduciary duty, conversion, misappropriation, aiding and abetting, and unfair and deceptive trade practices, arising from the failure of a business enterprise in which Haizlip invested. Haizlip sought damages from Stephen K. Miller (Steve Miller), the business entity MFI of South Carolina, Inc. (MFI), and F. Dale Miller II (Dale Miller), who is not related to Steve Miller.    Steve Miller filed a motion to dismiss Haizlip's complaint pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(2), for lack of personal jurisdiction on 13 September 2001. The trial court granted Steve Miller's motion to dismiss for lack of personal jurisdiction on 28 March 2002. Haizlip appeals.
    Haizlip alleged in his verified amended complaint that in November or December of 1998 Steve Miller, a resident of Indiana, telephoned Haizlip who was working and residing in Greensboro, North Carolina, to ask Haizlip if he was interested in investing in MFI. Prior to Steve Miller's telephone call, Haizlip had never heard of MFI.
    Haizlip had known Steve Miller for more than ten years; they had been business partners in Indianapolis, Indiana, and Steve Miller had acted as attorney and accountant for their business. Steve Miller and another business partner eventually bought out Haizlip's interest in that business.
    Haizlip further alleged that prior to Steve Miller's first call to Haizlip about investing in MFI, Steve Miller had served as Dale Miller's attorney in various other business ventures and knew or should have known about Dale Miller's financial condition.     Haizlip agreed to consider Steve Miller's proposal to invest in MFI. In late 1998, Steve Miller mailed an MFI investment package prepared by Dale Miller to Haizlip in North Carolina. Steve Miller set up a meeting in Myrtle Beach, South Carolina for himself, Haizlip, Kenneth E. Schmidt (Schmidt), and Dale Miller to discuss Haizlip's possible investment in MFI. Prior to themeeting, Steve Miller sent an agenda to Haizlip in North Carolina.
     Haizlip alleged that shortly after the Myrtle Beach meeting, he spoke with Steve Miller on the telephone to inform him that, in reliance on representations by Dale Miller and Steve Miller, Haizlip was willing to invest in MFI if Steve Miller also invested in the company. Steve Miller told Haizlip that he would call him back. A week or two later , Steve Miller called Haizlip in North Carolina and stated that he would invest in MFI and inquired as to whether Haizlip would invest as well. Haizlip agreed to do so.
    Steve Miller forwarded information to Haizlip in North Carolina in early February 1999. The information represented that First Union was ready and willing to act as placement agent for $10,000,000.00 in development bonds in a deal involving MFI of Georgia, Inc. Steve Miller was elected as a director of MFI, in February 1999, along with Haizlip, Dale Miller, and Schmidt. Dale Miller was elected as president, Steve Miller as secretary, Haizlip as treasurer, and Paul Lewallen (Lewallen) as assistant treasurer. Steve Miller prepared and forwarded a letter to Haizlip in North Carolina on 18 February 1999, enclosing a certificate of incorporation of MFI, along with checks from Steve Miller and Schmidt, representing their investments in MFI. In the letter, Steve Miller instructed Haizlip to open a bank account for MFI in North Carolina using the enclosed certificate of incorporation.
    Steve Miller prepared and forwarded another letter to Haizlip in North Carolina on or about 26 February 1999, which contained various documents prepared by Steve Miller to be executed toeffectuate Haizlip's investment. The letter instructed Haizlip to execute each of the investment documents and return them to Steve Miller. One of the documents acknowledged Haizlip's acceptance of a position as a director of MFI. Haizlip executed these documents on or about 2 March 1999. Steve Miller informed Haizlip that Haizlip had been elected treasurer of MFI, and that Haizlip was to deliver account documents executed by Steve Miller to BankAmerica to open a bank account, and deposit the checks from Steve Miller and Schmidt in that account. Haizlip delivered the bank account documents and opened an account at BankAmerica in North Carolina on 1 March 1999; the next day he deposited into the account Steve Miller's and Schmidt's checks, as well as $70,000.00 of his own money.
    Haizlip, Steve Miller, and Dale Miller met in Atlanta on or about 17 March 1999 to discuss the business. Haizlip received 350 shares of stock in MFI, signed by Dale Miller and Steve Miller as officers and directors of MFI. Steve Miller sent a facsimile to Lewallen in North Carolina in late May, 1999, instructing Lewallen to wire $100,000.00 from the BankAmerica account to an account controlled by Dale Miller, and to have the bank inform Dale Miller when the transaction was complete. Haizlip instructed Lewallen to proceed with the transaction. Steve Miller sent a facsimile to Haizlip and Lewallen in North Carolina in late June 1999, instructing them to wire the balance of the funds in the account to Dale Miller, which Lewallen did.
    Steve Miller sent a document to Haizlip and Lewallen on 29June 1999 for them to sign, which memorialized Haizlip's and Lewallen's resignations from all positions with MFI. Around 14 July 1999, a check in the amount of $12,000.00 was sent to Haizlip from MFI, as Haizlip's portion of a distribution to MFI's shareholders, along with a report outlining MFI's recent activities. Haizlip called Steve Miller in April 2000 to inquire about several tax forms for MFI. Steve Miller told Haizlip that he would check and get back to him. In late April or early May 2000, Haizlip again called Steve Miller to ask about the tax forms; however, Steve Miller informed Haizlip that Dale Miller had absconded with the MFI funds, had used the funds without proper authority from the corporation, and had used the funds for a purpose that did not benefit the corporation. On 2 November 2000, Steve Miller arranged for Dale Miller to sign a promissory note to reimburse Haizlip for the remaining $58,000.00 of Haizlip's investment, with accrued interest in one lump sum payment on or before 10 April 2001. Dale Miller has not paid the money due to Haizlip under this note.
    Steve Miller submitted an affidavit stating in pertinent part that he was a resident of Indiana, that he did not own any personal or real property located in North Carolina, and that he did not maintain any bank accounts or other assets in North Carolina. Steve Miller further stated that he had never incurred nor paid North Carolina taxes, entered into contracts in North Carolina, nor carried on business in North Carolina. Steve Miller also stated he had never visited North Carolina, except for a vacationapproximately ten years ago. Steve Miller stated that as to the corporate structure of MFI, he had a twelve percent ownership interest, Dale Miller had a seventy-four percent ownership interest, Haizlip owned a seven percent ownership interest, and Schmidt had a seven percent interest; that Dale Miller served as president of MFI, Steve Miller served as secretary, and Haizlip served as treasurer. Steve Miller stated that he met with Haizlip, Schmidt, and Dale Miller in Myrtle Beach in early 1999 to discuss potential investment in MFI. Steve Miller also stated he forwarded materials he had received from Dale Miller concerning MFI to Haizlip prior to Steve Miller's investment in MFI. Steve Miller contended that at the Myrtle Beach meeting he was a potential investor in MFI.
    Steve Miller stated in his affidavit that after he invested $70,000.00 of his own money in MFI, he served as secretary for the corporate entity and forwarded materials to Haizlip in furtherance of MFI's business. Steve Miller also stated that around March 1999 he met with Haizlip, Schmidt, and Dale Miller in Atlanta where Dale Miller gave each of them information concerning MFI. Steve Miller further stated that on 2 November 2000 he discovered that Dale Miller had used MFI funds for an improper purpose and he went to Dale Miller to have him sign a promissory note covering the remaining $46,000.00 of Steve Miller's investment. Steve Miller also noted that Haizlip and Schmidt both received promissory notes in the amount of $58,000.00 from Dale Miller. Steve Miller claimed that he had not been paid on the promissory note Dale Miller issuedto him.
    The single issue presented in this appeal is whether the trial court erred in granting Steve Miller's motion to dismiss for lack of personal jurisdiction. The trial court's dismissal of Haizlip's claim against Steve Miller did not resolve the case as to all parties. However, this appeal is properly before our Court pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b) (2001) and N.C. Gen. Stat. § 1-277(b) (2001), which allow immediate appeal from an adverse decision as to personal jurisdiction. See Styleco, Inc. v. Stoutco, Inc., 62 N.C. App. 525, 526, 302 S.E.2d 888, 889, disc. review denied, 309 N.C. 825, 310 S.E.2d 358 (1983).
            Whether the courts of this State may exercise personal jurisdiction over a nonresident defendant involves a two-prong analysis: "(1) Does a statutory basis for personal jurisdiction exist, and (2) If so, does the exercise of this jurisdiction violate constitutional due process?" The assertion of personal jurisdiction over a defendant comports with due process if defendant is found to have sufficient minimum contacts with the forum state to confer jurisdiction.

Golds v. Central Express, Inc., 142 N.C. App. 664, 665-66, 544 S.E.2d 23, 25, disc. review denied, 353 N.C. 725, 550 S.E.2d 775 (2001) (quoting J.M. Thompson Co. v. Doral Mfg. Co., 72 N.C. App. 419, 424, 324 S.E.2d 909, 913, disc. review denied, 313 N.C. 602, 330 S.E.2d 611 (1985)).
    "If the exercise of personal jurisdiction is challenged by a defendant, a trial court may hold an evidentiary hearing including oral testimony or depositions or may decide the matter based on affidavits." Bruggeman v. Meditrust Acquisition Co., 138 N.C. App.612, 615, 532 S.E.2d 215, 217, appeal dismissed and disc. review denied, 353 N.C. 261, 546 S.E.2d 90 (2000) (citing N.C. Gen. Stat. § 1A-1, Rule 43(e)). The trial court in the case before us held a hearing on Steve Miller's motion to dismiss on 4 March 2002 and granted the motion in an order entered 28 March 2002. The trial court did not make findings of fact in its order. However, absent a request by the parties, which does not appear in the record, the trial court is not required to find the facts upon which its ruling is based. N.C. Gen. Stat. § 1A-1, Rule 52(a)(2) (2001). "'In such case, it will be presumed that the judge, upon proper evidence, found facts sufficient to support his judgment.'" City of Salisbury v. Realty Co., 48 N.C. App. 427, 429, 268 S.E.2d 873, 875 (1980) (quoting Haiduven v. Cooper, 23 N.C. App. 67, 69, 208 S.E.2d 223, 225 (1974)). Therefore, we must review the record to determine whether it contains competent evidence to support the trial court's presumed findings to support its ruling that Steve Miller was not subject to personal jurisdiction in the courts of this state. See Bruggeman, 138 N.C. App. at 615, 532 S.E.2d at 217-18.
    Haizlip alleges personal jurisdiction over Steve Miller under North Carolina's long-arm statute, pursuant to N.C. Gen. Stat. § 1- 75.4(4),(5). We find the pertinent portion of North Carolina's long-arm statute to be N.C. Gen. Stat. § 1-75.4(4)(a) (2001), which states:
        A court of this State having jurisdiction of the subject matter has jurisdiction over a person served in an action pursuant to Rule 4(j), Rule 4(j1), or Rule 4(j3) of the Rulesof Civil Procedure under any of the following circumstances:

        . . .

        (4) Local Injury; Foreign Act. -- In any action for wrongful death occurring within this State or in any action claiming injury to person or property within this State arising out of an act or omission outside this State by the defendant, provided in addition that at or about the time of the injury either:

        a. Solicitation or services activities were carried on within this State by or on behalf of the defendant[.]

"This statute is liberally construed to find personal jurisdiction over nonresident defendants to the full extent allowed by due process." DeArmon v. B. Mears Corp., 67 N.C. App. 640, 643, 314 S.E.2d 124, 126 (1984), rev'd in part on other grounds, 312 N.C. 749, 325 S.E.2d 223 (1985). However, the plaintiff bears the burden of establishing that some ground exists for the exercise of personal jurisdiction over the defendant. Golds, 142 N.C. App. at 666, 544 S.E.2d at 26. Haizlip has sufficiently alleged damages arising out of "an act or omission outside this State by the defendant" under N.C.G.S. § 1-75.4(4). Godwin v. Walls, 118 N.C. App. 341, 349, 455 S.E.2d 473, 480 (1995) ("[T]he statute requires only that the action 'claim' injury to person or property within this state in order to establish personal jurisdiction.").
    We must next determine whether Steve Miller's conduct constituted solicitation so as to subject him to jurisdiction in North Carolina, pursuant to N.C.G.S. § 1-75.4(4)(a). We hold that it does.
    Steve Miller made several telephone calls to Haizlip in NorthCarolina in an endeavor to convince him to invest in MFI. Steve Miller himself was also investing in the business. Steve Miller sent to Haizlip in North Carolina an investment package in an attempt to encourage Haizlip to invest. Steve Miller also sent to Haizlip in North Carolina the agenda of a meeting to be held in South Carolina where Haizlip's possible investment in MFI would be discussed. We hold that this activity by Steve Miller is sufficient action to qualify as solicitation under N.C.G.S. § 75.4(4)(a). Although at trial a different conclusion may be reached in this case, the allegations indicate that Steve Miller was not simply another potential investor with no other relation to MFI or Dale Miller, but that he played a key role in arranging all communications with Haizlip about MFI.
    We must also determine whether the exercise of personal jurisdiction over Steve Miller would violate constitutional due process. Golds, 142 N.C. App. at 665-66, 544 S.E.2d at 25 (citation omitted). We first address the issue of what "contacts" can be attributed to Steve Miller for the purpose of this analysis. Steve Miller became an officer of MFI on 15 February 1999. Many of the communications Haizlip cites to support his claim that Steve Miller should be subject to the jurisdiction of this State's courts occurred after this date. Steve Miller argues that the telephone calls, mailings, or contacts between him and Haizlip in Steve Miller's role as an officer of MFI, should generally be attributed to MFI, not to Steve Miller individually, for the purpose of determining minimum contacts. Haizlip alleged that MFI hadforfeited its corporate status on 16 December 1997, and he questioned whether Steve Miller's actions after 15 February 1999 could properly be attributed to the corporate entity. However, we need not decide this issue as we hold that in taking the evidence in a light most favorable to Haizlip and considering only the contacts made by Steve Miller prior to 15 February 1999, the trial court erred in its presumed finding that Haizlip had not made a prima facie showing of sufficient minimum contacts by Steve Miller.
            In determining minimum contacts, the court looks at several factors, including: 1) the quantity of the contacts; 2) the nature and quality of the contacts; 3) the source and connection of the cause of action with those contacts; 4) the interest of the forum state; and 5) the convenience to the parties. Phoenix Am. Corp. v. Brissey, 46 N.C. App. 527, 530-31, 265 S.E.2d 476, 479 (1980). These factors are not to be applied mechanically; rather, the court must weigh the factors and determine what is fair and reasonable to both parties. Id. at 531, 265 S.E.2d at 479 (citing Farmer v. Ferris, 260 N.C. 619, 625, 133 S.E.2d 492, 497 (1963)). No single factor controls; rather, all factors "must be weighed in light of fundamental fairness and the circumstances of the case." B.F. Goodrich Co. v. Tire King of Greensboro, Inc., 80 N.C. App. 129, 132, 341 S.E.2d 65, 67 (1986).

Corbin Russwin, Inc. v. Alexander's Hdwe., Inc., 147 N.C. App. 722, 725, 556 S.E.2d 592, 595 (2001).
    We first look at the quantity of the contacts. It is undisputed that beginning in November or December of 1998, Steve Miller made several telephone calls to Haizlip in North Carolina in reference to Haizlip's potential investment in MFI. There were also several telephone calls between Steve Miller and Haizlip inNorth Carolina in 1999, some originating from Steve Miller and some from Haizlip. Steve Miller admitted in his affidavit that he mailed an investment package he had received from Dale Miller to Haizlip in North Carolina in late 1998. He also admitted that he sent a facsimile to Haizlip on 11 February 1999 containing an estimate for funds needed for the first four months of MFI's operation, and documents concerning a bond issuance in relation to another corporation, MFI of Georgia, Inc. Haizlip also avers that Steve Miller sent to him in North Carolina an agenda for a meeting with Steve Miller, Dale Miller, Haizlip and Schmidt, to be held in Myrtle Beach, South Carolina.
    We next consider the nature and quality of the contacts. Steve Miller would derive benefit from Haizlip's investment in MFI, as it would enable the business venture in which Steve Miller himself was an investor, to have sufficient funding. We note that as in Brickman v. Codella, Steve Miller's contacts "with North Carolina were not random, casual, or fortuitous, but were 'purposefully directed' toward [Haizlip] in order to obtain his financial assistance with a new business venture whereby [Steve Miller] sought personal commercial benefit" as another investor in the business venture. Brickman v. Codella, 83 N.C. App. 377, 384, 350 S.E.2d 164, 168 (1986). Steve Miller's contacts with Haizlip in North Carolina were continual efforts to get Haizlip to invest in MFI.
    We also consider the source and connection of the cause of action. The cause of action arose from the failure of the businessventure MFI, and from the alleged fraud and failure of Steve Miller and Dale Miller to make certain disclosures to Haizlip, both before his investment in MFI and after his investment. All of Steve Miller's relevant contacts with North Carolina directly related to the MFI business venture. See B. F. Goodrich Co., 80 N.C. App. at 133, 341 S.E.2d at 68.
    We must also examine the interest of the forum state. North Carolina "has a general interest in providing a forum for its residents to settle disputes in which they are involved." Id. In addition, this State has an interest in promoting judicial economy. If we decline jurisdiction in North Carolina, Haizlip would have to bring suit against Steve Miller in another state even though his litigation against Dale Miller and MFI, Inc., in the same dispute, would continue in North Carolina.
    As to the question of convenient forum, there is no showing that the burden is greater for either Haizlip or Steve Miller to travel to the other's home state. In such a situation, and where no other convenience factors weigh in favor of one party, convenience should not be determinative of jurisdiction. Cherry Bekaert & Holland v. Brown, 99 N.C. App. 626, 635, 394 S.E.2d 651, 657 (1990).
    "When an individual 'who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'" Brickman, 83 N.C. App. at 384, 350 S.E.2d at 168 (quoting Burger King v.Rudzewicz, 471 U.S. 462, 477, 85 L. Ed. 2d 528, 544 (1985)). In considering the totality of the factors as applied in this case, we find it is fair and reasonable to require Steve Miller to be subject to jurisdiction in the courts of North Carolina. We therefore reverse the trial court's order granting Steve Miller's motion to dismiss pursuant to N.C.G.S. § 1A-1, Rule 12(b)(2).
    Reversed.
    Judges TYSON and CALABRIA concur.
    Report per Rule 30(e).

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