Appeal by plaintiff from an order entered 20 August 2002 by
Judge Narley L. Cashwell in Wake County Superior Court. Heard in
the Court of Appeals 3 December 2003.
Jennifer A. Price, plaintiff-appellant, pro se.
Rolinski, Terenzio & Suarez, L.L.P., by Danielle M. Espinet;
and Kimberly A. Wallis, for plaintiff-appellant.
Davis & Harwell, P.A., by Mark H. Hoppe, for defendant-
appellees Thomas L. Hagar, Margaret Brannen Hagar, and Hagar
Diversified Holdings.
HUNTER, Judge.
Jennifer A. Price (“plaintiff”) appeals an order dismissing
her complaint as to defendants Thomas L. Hagar (“defendant
Thomas”), Margaret B. Hagar (“defendant Margaret”), and Hagar
Diversified Holdings (“defendant HDH”) (collectively “defendants”)
on the ground of lack of personal jurisdiction. For the reasons
stated herein, we affirm the trial court's order with respect todefendants Thomas and Margaret, but reverse the order with respect
to defendant HDH.
Defendants Thomas and Margaret, residents and citizens of
Florida, are the parents of Thomas Andrew Hagar (“Andrew”). Andrew
is the president of both Hagar Financial Corporation (“HFC”) and
defendant HDH, a corporation that holds an ownership interest in
HFC. HFC is a Georgia corporation that is registered and does
business in North Carolina.
On or about 14 August 2000, plaintiff entered into an
employment contract with HFC in North Carolina. She worked in the
company's Raleigh, North Carolina branch office until her
termination on 23 March 2001. On 28 March 2002, plaintiff filed an
unverified complaint asserting claims against HFC, Andrew, Brent A.
Atwood (HFC-Raleigh branch manager), Nooshin M. McKinney (HFC vice-
president and compliance manager), and defendants alleging breach
of an employment contract, fraud, deceit, misrepresentation,
negligent misrepresentation, libel, slander, wrongful discharge,
intentional infliction of emotional distress, civil conspiracy,
negligent failure to supervise, and permanent injunctive relief.
Defendant Margaret was named as a party because plaintiff alleged
that defendant Margaret had an ownership interest in HFC. As to
HFC, plaintiff also alleged that HFC was the alter ego of
defendants HDH and Thomas; thus, plaintiff asked the trial court to
disregard the corporate entity.
On 20 May 2002, Andrew, HFC, and defendants filed a motion to
dismiss plaintiff's complaint on the grounds of lack of personaljurisdiction and service of process.
(See footnote 1)
A hearing on the motion was
held on 9 August 2002, during which the trial court considered the
record in the case, the arguments of counsel, and the sworn
affidavits of Andrew and defendants Thomas and Margaret. By order
filed 20 August 2002, the trial court denied defendants' motion
with respect to Andrew and HFC on both grounds. However, the trial
court granted the motion to dismiss plaintiff's complaint as to
defendants on the ground of lack of personal jurisdiction.
Plaintiff appeals. Additional facts pertinent to this appeal are
included as necessary in analyzing plaintiff's arguments.
Both assigned errors raised by plaintiff take issue with the
trial court's order granting defendants' motion to dismiss
plaintiff's complaint on the ground of lack of personal
jurisdiction. At the outset, we recognize that:
Under North Carolina case law a two-step
inquiry and analysis is necessary to determine
whether a non-resident defendant is subject to
the in personam jurisdiction of our courts:
(1) does the transaction which gave rise to
the underlying action fall within the language
of the State's “long-arm” statute; and (2) if
so, does the decision to exercise personal
jurisdiction violate the due process clause of
the fourteenth amendment to the United States
Constitution.
Combustion Sys. Sales v. Hatfield Htg. and Air Conditioning, 102
N.C. App. 751, 754, 403 S.E.2d 600, 602 (1991). “In determining
whether the 'long-arm' statute [N.C. Gen. Stat. § 1-75.4 (2003)]
permits our courts to entertain an action against a particulardefendant, the statute should be liberally construed in favor of
finding jurisdiction.” Strother v. Strother, 120 N.C. App. 393,
395, 462 S.E.2d 542, 543 (1995). Once it has been determined that
N.C. Gen. Stat. § 1-75.4 permits the extension of personal
jurisdiction, due process demands the courts to ascertain “whether
the defendant has purposefully established minimum contacts with
the forum state so that he should reasonably anticipate being haled
into court in that forum.” Buck v. Heavner, 93 N.C. App. 142, 145,
377 S.E.2d 75, 77 (1989).
Additionally, we note that the trial court's order granting
defendants' motion to dismiss in the case sub judice contained no
findings of fact. “Where no findings are made, proper findings are
presumed, and [the] role [of the appellate court] is to review the
record for competent evidence to support these presumed findings.”
Bruggeman v. Meditrust Acquisition Co., 138 N.C. App. 612, 615, 532
S.E.2d 215, 217-18 (2000). Other than plaintiff's unverified
complaint, the only evidence of the presence or lack of personal
jurisdiction were the sworn affidavits of Andrew and defendants
Thomas and Margaret. In such an instance, this Court has held that
“[w]here unverified allegations in the
complaint meet plaintiff's 'initial burden of
proving the existence of jurisdiction . . .
and defendant[s] d[o] not contradict
plaintiff's allegations in their sworn
affidavit,' such allegations are accepted as
true and deemed controlling.” However, where
. . . defendants submit some form of evidence
to counter plaintiff['s] allegations, those
allegations can no longer be taken as true or
controlling and plaintiff[] cannot rest on the
allegations of the complaint. . . . In such a
case, the plaintiff's burden of establishing
prima facie that grounds for personaljurisdiction exist can still be satisfied if
some form of evidence in the record supports
the exercise of personal jurisdiction. . . .
Thus, in evaluating [an] appeal . . . , we
look to the uncontroverted allegations in the
complaint and the uncontroverted facts in the
sworn affidavit for evidence supporting the
presumed findings of the trial court.
Bruggeman, 138 N.C. App. at 615-16, 532 S.E.2d at 218 (citations
omitted). The trial court's presumed findings are conclusive on
appeal if based upon competent evidence of record, even if such
evidence is controverted. See Olivetti Corp. v. Ames Business
Systems, Inc., 319 N.C. 534, 541, 356 S.E.2d 578, 582 (1987).
I.
Plaintiff argues the trial court erred in not exercising
personal jurisdiction over defendants Thomas and Margaret.
Specifically, plaintiff contends the trial court erred in not
finding that defendants Thomas and Margaret (1) were subject to
North Carolina's long-arm statute because they are the alter ego of
defendant HDH and/or HFC, (2) established sufficient minimum
contacts with North Carolina so as not to offend due process by
conducting substantial activities through a North Carolina
corporation, and (3) were involved in an uncontroverted conspiracy
which supports the exercise of personal jurisdiction over these
defendants. Based on the trial court's order, it is presumed that
the court found insufficient evidence to support each of
plaintiff's contentions. Therefore, we must determine whether
there was competent evidence to support the trial court's presumed
findings.
1. Alter Ego
Plaintiff contends that, under North Carolina's long-arm
statute, the contacts that defendants Thomas and Margaret had with
North Carolina as the alter ego of defendant HDH and/or HFC should
have resulted in the trial court piercing the corporate veil and
asserting personal jurisdiction over them. However, plaintiff's
complaint fails to contain any allegations asserting that (1)
Margaret is the alter ego of HFC, or (2) either defendant is the
alter ego of defendant HDH. Since plaintiff makes these
allegations for the first time on appeal, they are not properly
before this Court.
See N.C.R. App. P. 10. Thus, our inquiry is
limited to whether defendant Thomas' contacts with North Carolina
as the alleged alter ego of HFC should have subjected him to this
state's long-arm statute.
Specifically, plaintiff argues that since HFC was merely an
instrument of defendant Thomas, the trial court could have pierced
the corporate veil and exercised jurisdiction over defendant under
five separate provisions of North Carolina's long-arm statute.
See
N.C. Gen. Stat. §§ 1-75.4(1)(d), (3), (4)(a), (5)(a), and (5)(b).
It is well recognized that courts will
disregard the corporate form or “pierce the
corporate veil,” and extend liability for
corporate obligations beyond the confines of a
corporation's separate entity, whenever
necessary to prevent fraud or to achieve
equity. In North Carolina, what has been
commonly referred to as the “instrumentality
rule,” forms the basis for disregarding the
corporate entity or “piercing the corporate
veil.” The decisions of this Court have
stated the rule as follows: “'[An entity]
which exercises actual control over another,
operating the latter as a mere instrumentality
or tool, is liable for the torts of the
corporation thus controlled. In suchinstances, the separate identities . . . may
be disregarded.'”
Glenn v. Wagner, 313 N.C. 450, 454, 329 S.E.2d 326, 330 (1985)
(citations omitted).
Here, plaintiff's unverified complaint alleged that “Thomas
Hagar actually [made] the policy and business decisions for HFC on
a substantial and continuous basis.” One of three enumerated
elements our Supreme Court recognizes as supporting an attack on a
separate entity under the instrumentality rule is whether that
entity is in “'[c]ontrol, not mere majority or complete stock
control, but complete domination, not only of finances, but of
policy and business practice in respect to the transaction attacked
so that the corporate entity as to this transaction had at the time
no separate mind, will or existence of its own[.]'”
Id. at 455,
329 S.E.2d at 330 (citation omitted). While plaintiff's allegation
initially met the burden of proving this element, defendant Thomas'
subsequently filed sworn affidavit countered that allegation as
follows: “I am not now, nor have I ever been, in control of [HFC],
and I have never 'regularly, continuously and substantially' taken
part in the decision-making and supervision of the operation of
[HFC] as is alleged in the Complaint.” Defendant Thomas' sworn
statement prevented the trial court from simply taking plaintiff's
allegation as true, and thus, provided competent evidence to
support the trial court's presumed finding that defendant Thomas
was not the alter ego of HFC.
We further note that, absent defendant Thomas being deemed the
alter ego of HFC, the presumed findings of fact do not otherwiseestablish he had sufficient contacts with North Carolina to subject
him to North Carolina's jurisdiction under the long-arm statute.
In addition to the evidence previously mentioned, defendant Thomas'
affidavit also provided that he (1) has been a resident and citizen
of Florida for sixty-three years, (2) was never a citizen or
resident of North Carolina, (3) never owned real property in North
Carolina, and (4) was never engaged in any substantial activity
within North Carolina. This evidence, although controverted by the
allegations in plaintiff's unverified complaint, provided competent
evidence upon which the trial court could conclude (and plaintiff's
complaint appears to indirectly acknowledge) that defendant Thomas
lacked sufficient contacts with North Carolina for the long-arm
statute to apply to him in the absence of defendant Thomas being
deemed the alter ego of HFC.
2. Minimum Contacts
Next, plaintiff contends defendants Thomas and Margaret
established sufficient minimum contacts with North Carolina by
conducting substantial activities through a North Carolina
corporation so as not to offend due process. However, as stated
earlier, a consideration of due process is only necessary after it
has been determined that North Carolina's long-arm statute permits
the extension of personal jurisdiction.
See Buck, 93 N.C. App. at
145, 377 S.E.2d at 77. Having previously concluded the long-arm
statute does not confer jurisdiction over these defendants, we need
not consider the sufficiency of their minimum contacts with this
state.
3. Conspiracy Theory
Plaintiff further contends defendants Thomas and Margaret were
involved in an uncontroverted conspiracy that allows the trial
court to exercise personal jurisdiction over them. In support of
her argument, plaintiff cites
Gemini Enterprises, Inc. v. WFMY
Television Corp., 470 F. Supp. 559 (M.D.N.C. 1979), a case in which
the United States District Court for the Middle District of North
Carolina concluded that certain undisputed facts provided the basis
for exercising personal jurisdiction over a defendant using the
conspiracy theory of personal jurisdiction.
Gemini Enterprises,
Inc. provides that this theory can be fairly stated as follows:
“[W]hile the mere presence of a conspirator within the forum state
is not sufficient to permit personal jurisdiction over
co-conspirators, certain additional connections between the
conspiracy and the forum state will support exercise of
jurisdiction over co-conspirators.”
Id. at 564. However, this is
a federal case that has not been cited by any North Carolina state
court. Moreover, we have found no North Carolina case law
recognizing a conspiracy theory argument as a ground for
establishing personal jurisdiction over a party and thus, decline
to do so in this case.
See Stetser v. TAP Pharm. Products, ___
N.C. App. ___, ___ S.E.2d ___ (No. COA03-180 filed 3 February
2004).
Accordingly, the trial court's presumed findings supporting
its lack of personal jurisdiction over defendant's Thomas and
Margaret are deemed conclusive on appeal.
II.
Finally, plaintiff argues the trial court erred in not
exercising personal jurisdiction over defendant HDH. As to this
argument, we note that in defendants' motion to dismiss, they only
argued that all claims against defendant HDH be dismissed due to
insufficient service of process. Defendants never denied the
following allegations in plaintiff's complaint that the trial court
had personal jurisdiction over defendant HDH:
11. Defendant [HDH] is a Corporation
which, at all times relevant to these
proceedings and upon information and belief,
held an ownership interest in HFC. In
addition, HDH was paying the salary of
Plaintiff Jennifer Price. Ms. Price[']s W2s
were issued from HDH, rather than HFC.
. . . .
96. The corporate form of HFC must be
disregarded. HFC is actually controlled by
[HDH], with HDH paying the salary of the
Plaintiff, all bills of HFC going to HDH
. . . .
97. Upon information and belief, HFC is
in fact the alter ego of HDH . . . . Because
HFC is a mere instrumentality and tool of
. . . HDH . . . , having no separate mind,
will or existence of its own, [HDH is] also
liable for the torts HFC is liable for.
These allegations were also not disputed in the affidavits
submitted with defendants' motion to dismiss. Since defendants
offered no evidence to counter plaintiff's allegations, these
uncontroverted allegations establish the court's personal
jurisdiction over defendant HDH and “'are accepted as true and
deemed controlling.'”
Bruggeman, 138 N.C. App. at 615, 532 S.E.2d
at 218 (citation omitted). Therefore, the trial court erred indismissing plaintiff's action against defendant HDH for lack of
personal jurisdiction.
In conclusion, we affirm the trial court's dismissal of the
claims against defendants Thomas and Margaret, but reverse the
dismissal of the claims against defendant HDH.
Affirmed in part; reversed in part.
Judges McGEE and GEER concur.
Report per Rule 30(e).
Footnote: 1