Medstaff Carolinas v Northwood Nursing, (04-1281) 08/16/2005

Appeal by plaintiff and defendant from order entered 5 March 2004 by Judge Beverly T. Beal in Mecklenburg County Superior Court. Heard in the Court of Appeals 11 May 2005.

James, McElroy & Diehl, P.A., by Charles M. Viser and Preston O. Odom, III, for plaintiff-appellant.

Sigmon, Clark, Mackie, Hutton, Hanvey & Ferrell, P.A., by Stephen L. Palmer, for defendant-appellee, Linn H. Wilfong.

    CALABRIA, Judge.

    Linn H. Wilfong (“defendant”) and Medstaff Carolinas, L.L.C. (“plaintiff”) appeal an order of the trial court denying defendant's motion to set aside entry of default and default judgment and denying plaintiff's motion for attorney fees. We affirm.
    In February 2001, plaintiff agreed to provide staffing services to Northwood Nursing Center, Inc. (“Northwood”) and performed services on behalf of Northwood and Beacon Health CareServices, Inc. (“Beacon”) from that time through September 2001. The principal reason for the lawsuit brought by plaintiff was the failure of Northwood to pay defendant pursuant to a contract for the services provided. Plaintiff additionally named the individual defendants in the suit based on the doctrine of piercing the corporate veil. As of 3 January 2002, the amount due and owing plaintiff for the services provided was approximately $79,334.12.
    On 23 January 2002, plaintiff filed a complaint against defendant, Northwood, Beacon, Frances L. Messer, and Durham Limited Partnership III and later added Durham Limited Partnership (collectively “defendants”) in an amended complaint. A copy of the complaint and summons was sent to defendant by certified mail at 100 Knightbridge Drive, Newton, NC 28658. Lora Mitcham (“Mitcham”) accepted service on his behalf by signing the return receipt for the certified mail on 25 January 2002. Plaintiff raised the following causes of action against defendants: breach of contract, quantum meruit, account stated, fraudulent conveyance, and unfair and deceptive trade practices. Plaintiff subsequently settled with every party except defendant for the collective sum of approximately $50,000.00. When defendant failed to plead, appear, or defend the pending action, plaintiff moved for entry of default on 19 May 2003. On 26 February 2003, the trial court ordered entry of default against defendant.
    Upon motion for default judgment by plaintiff, the trial court subsequently ordered a default judgment against defendant on 27 May 2003. On 7 August 2003, plaintiff served defendant with a Noticeof Right to Have Exemptions Designated. The notice was again sent to the same address, 100 Knightbridge Drive, and was again signed for by Mitcham. Defendant filed and served plaintiff with a Motion to Claim Exempt Property, dated 21 August 2003. On 14 October 2003, defendant filed a verified motion to set aside entry of default and default judgment. In that motion, defendant did not assert he did not receive the complaint and summons but merely argued he “d[id] not recall” receiving the pleadings. Defendant argued the trial court failed to obtain personal jurisdiction over him as a result of improper service and further argued the failure to set aside entry of default and the default judgment “would constitute a substantial miscarriage of justice.” Plaintiff moved for attorney fees.
    At the hearing, defendant abandoned his argument concerning a lack of personal jurisdiction but maintained that his motion should be granted on the second basis. The trial court denied defendant's motion. The trial court additionally denied plaintiff's motion for attorney fees. From the order entered denying the parties' motions, both plaintiff and defendant appeal.
I. Denial of Motion to Set Aside Entry of Default and Default Judgment
    Defendant asserts the trial court abused its discretion in refusing to set aside the default judgment pursuant to N.C. Gen. Stat. § 1A-1, Rule 60(b)(6) (2003). This provision authorizes a trial court to “relieve a party . . . from a final judgment, order, or proceeding” for any “reason justifying relief from the operationof the judgment.” Id. “Relief afforded under [Rule 60(b)] 'is within the discretion of the trial court, and such a decision will be disturbed only for an abuse of discretion.” Branch Banking & Trust Co. v. Tucker, 131 N.C. App. 132, 137, 505 S.E.2d 179, 182 (1998) (quoting Harrington v. Harrington, 38 N.C. App. 610, 612, 248 S.E.2d 460, 461 (1978)). An abuse of discretion is a decision manifestly unsupported by reason or one so arbitrary that it could not have been the result of a reasoned decision. White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985).
    Rule 60(b) has been characterized as “a grand reservoir of equitable power to do justice in a particular case[,]” which permits a court to vacate judgments where such action serves the ends of justice. Jim Walter Homes, Inc. v. Peartree, 28 N.C. App. 709, 712, 222 S.E.2d 706, 708 (1976) (quoting 7 Moore's Federal Practice, para. 60.27[2], at 375). Rule 60(b)(6) is neither a means for a party to relitigate a case by raising issues that could have been presented prior to entry of judgment, see Vaglio v. Town & Campus Int., Inc., 71 N.C. App. 250, 255-56, 322 S.E.2d 3, 7 (1984), nor a substitute for appeal. Concrete Supply Co. v. Ramseur Baptist Church, 95 N.C. App. 658, 660, 383 S.E.2d 222, 223 (1989). “Under the broad power of this [provision,] an erroneous judgment cannot be attacked, but irregular judgments, . . . rendered contrary to the cause and practice of the court, come within its purview.” Taylor v. Triangle Porsche-Audi, Inc., 27 N.C. App. 711, 717, 220 S.E.2d 806, 811 (1975). A defendant seeking to set aside a default judgment under Rule 60(b)(6) mustshow the following: (1) extraordinary circumstances exist, (2) justice demands that the judgment be set aside, and (3) there exists a meritorious defense. Gibby v. Lindsey, 149 N.C. App. 470, 474, 560 S.E.2d 589, 592 (2002).
    In the instant case, defendant principally argues a single ground for all three of the prongs listed above: that the trial court erred in entering a default judgment against him after Northwood, an alter ego, had been released from liability. Defendant's approach is initially troubling because it essentially reduces the three-prong analysis for Rule 60(b) motions into a single inquiry. Moreover, defendant has not cited any cases in which an abuse of discretion was found in similar circumstances. The sole case defendant cites for his assertion that the trial court abused its discretion is Branch Banking & Trust Co. v. Tucker, 131 N.C. App. 132, 137, 505 S.E.2d 179, 182 (1998), in which this Court upheld an order setting aside entries of default where a plaintiff was attempting to collect a monetary sum from the same defendants on the same promissory notes involved in an earlier action, which was voluntarily dismissed with prejudice. Our opinion in Tucker did not involve an alter ego theory or piercing the corporate veil and, therefore, fails to support defendant's arguments. Additionally, we note that in the instant case, plaintiff sued six defendants jointly and severally. Five of the six defendants timely responded and settled with plaintiff for some, but not all, of the damages arising out of plaintiff's claims. Only defendant did not respond, later citing the groundsthat he did “not recall” receiving the summons and complaint. Assuming arguendo defendant's cited grounds are legally relevant, they are unconvincing. Defendant responded to the Notice of Right to Have Exemptions Designated, which was sent in precisely the same manner and signed for in precisely the same way as the complaint. Other evidence contained in the record amply indicates defendant was aware of plaintiff's cause of action and merely failed to respond. Finally, our review of the appellate record reveals no abuse of discretion on the part of the trial court in denying defendant's motion to set aside a default judgment.
    Defendant alternatively argues the trial court erred as a matter of law in failing to set aside the default judgment. “Rule 60(b) provides no specific relief for 'errors of law' and our courts have long held that even the broad general language of Rule 60(b)(6) does not include relief for 'errors of law.'” Hagwood v. Odom, 88 N.C. App. 513, 519, 364 S.E.2d 190, 193 (1988) (citation omitted). This assignment of error is overruled.
II. Denial of Motion for Attorney Fees
    Plaintiff asserts on appeal that the trial court abused its discretion in failing to award attorney fees under N.C. Gen. Stat. § 6-21.5 (2003), which permits a trial court to award attorney fees to a prevailing party upon finding “that there was a complete absence of a justiciable issue of either law or fact raised by the losing party in any pleading.” Recovery of attorney fees under this statute is within the trial court's discretion and will only be reviewed for an abuse of that discretion. Phillips v. Warren,152 N.C. App. 619, 629, 568 S.E.2d 230, 236-37 (2002), cert. denied, 356 N.C. 676, 577 S.E.2d 633 (2003). In permitting attorney fees to the prevailing party, N.C. Gen. Stat. § 6-21.5 derogates the common law and must be strictly construed. Winston-Salem Wrecker Ass'n v. Barker, 148 N.C. App. 114, 121, 557 S.E.2d 614, 619 (2001) (citing Sunamerica Financial Corp. v. Bonham, 328 N.C. 254, 257, 400 S.E.2d 435, 437 (1991)).
    As noted supra, defendant raised two grounds upon which his motion to set aside entry of default and default judgment was predicated: lack of personal jurisdiction and failure to set aside default judgment would constitute a “substantial miscarriage of justice.” As to defendant's first jurisdictional argument, plaintiff contacted defendant to advise him of this Court's opinion in Faucette v. Dickerson, 103 N.C. App. 620, 406 S.E.2d 602 (1991), which conclusively answered the issue against plaintiff. Upon being advised of the Faucette decision, defendant withdrew his motion but later re-calendared the motion with respect to his second argument. Defendant expressly abandoned his jurisdictional argument at the hearing before the trial court. Defendant's actions with respect to the first proffered ground for his motion, upon learning of its invalidity, was appropriate and would not form a basis for the award of attorney fees under N.C. Gen. Stat. § 6- 21.5.
    As to defendant's second argument, defendant raised certain factual issues. We noted supra that the majority of these arguments concerned the propriety of treating defendant differentlythan his purported alter ego, Northwood. Defendant also argued, inter alia, that the monetary award under the default judgment was unfair when compared to the amount the remaining defendants were required to pay under the settlement. Although defendant's arguments were unavailing, we are not persuaded they were so “imagined or fanciful” that the trial court abused its discretion in denying plaintiff's motion for attorney fees. See Sprouse v. North River Ins. Co., 81 N.C. App. 311, 326, 344 S.E.2d 555, 565 (1986). This assignment of error is overruled.
    Affirmed.
    Judges McGEE and ELMORE concur.
    Report per Rule 30(e).

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