RODNEY B. NAIL,
Plaintiff
v
.
Forsyth County
No. 04-CVS-1813
MEMBER SERVICES, INC.,
Defendant
David E. Shives, PLLC, by David E. Shives, for plaintiff-
appellee.
Blanco Tackabery Combs & Matamoros, P.A., by Reginald F.
Combs, for defendant-appellant.
HUNTER, Judge.
Member Services, Inc. (“defendant”) appeals from an order of
the trial court denying its motion to set aside entry of default,
default judgment, and to recall a writ of execution. We affirm the
order of the trial court.
On 22 March 2004, Rodney B. Nail (“plaintiff”) filed a
complaint against defendant in Forsyth County Superior Court
seeking damages for breach of contract, conversion, fraud,constructive fraud, unfair and deceptive trade practices, breach of
fiduciary duties, and unjust enrichment. Counsel for plaintiff
subsequently filed an affidavit of service of process upon
defendant corporation. In the affidavit, counsel for plaintiff
certified that he mailed a copy of plaintiff's civil summons and
complaint to defendant's registered agent and president, Roger
Banks, at its registered office located at 4700 Yorkmont Road,
Suite 102, Charlotte, North Carolina 28208. Such process was
returned undelivered, however, with the notation by the U.S. Postal
Service, “Forwarding Time Expired.” Thereafter, counsel for
plaintiff achieved substitute service of process through the North
Carolina Secretary of State pursuant to section 5D-33(b) of the
North Carolina General Statutes. The Secretary of State received
the documents on 19 April 2004 and immediately forwarded them to
defendant at its registered address. The U.S. Postal Service
returned the documents to the Secretary of State's office marked,
“Forwarding Time Expired.”
Defendant failed to appear for court. Default was entered by
the clerk on 24 May 2004, and a default judgment was entered 28
June 2004. A writ of execution was issued against defendant on 11
August 2004. On 1 November 2004, defendant filed a motion to set
aside entry of default, the default judgment, and to recall the
writ of execution. Defendant's motion came before the trial courton 15 November 2004. Upon reviewing the record and considering
arguments by counsel, the trial court denied defendant's motion.
Defendant appeals.
Defendant argues the trial court abused its discretion in
denying its motion to set aside the entry of default, the default
judgment, and to recall the writ of execution. For the reasons set
forth herein, we affirm the order of the trial court.
Defendant first contends the trial court should have granted
its motion to set aside the entry of default, default judgment, and
to recall the writ of execution pursuant to Rule 60(b)(4) of the
North Carolina Rules of Civil Procedure. Defendant argues that the
entry of default and default judgment are void for lack of service
of process. Defendant acknowledges that plaintiff achieved
substitute service of process through the Office of the Secretary
of State pursuant to section 55D-33 of the North Carolina General
Statutes, but contends that its due process rights were nonetheless
violated because plaintiff had actual knowledge of an address where
defendant could be located. Citing Interior Distributors, Inc. v.
Hartland Construction Co., 116 N.C. App. 627, 449 S.E.2d 193
(1994), defendant argues that substitute service of process was
ineffective, rendering the entry of default and default judgment
void, and that the trial court therefore erred in failing to set
them aside. We do not agree. Section 55D-33 of the North Carolina General Statutes provides
for substitute service of process, in pertinent part, as follows:
When an entity required to maintain a
registered office and registered agent under
G.S. 55D-30 fails to appoint or maintain a
registered agent in this State, or when its
registered agent cannot with due diligence be
found at the registered office, or when the
Secretary of State revokes a certificate of
authority or a statement of foreign
registration of a foreign entity authorized to
transact business or conduct affairs in this
State, the Secretary of State becomes an agent
of the entity upon whom any such process,
notice or demand may be served. Service on
the Secretary of State of any such process,
notice or demand is made by delivering to and
leaving with the Secretary of State or any
clerk authorized by the Secretary of State to
accept service of process, duplicate copies of
the process, notice or demand and the
applicable fee. In the event any such
process, notice or demand is served on the
Secretary of State in the manner provided by
this subsection, the Secretary of State shall
immediately mail one of the copies thereof, by
registered or certified mail, return receipt
requested, to the entity at its principal
office or, if there is no mailing address for
the principal office on file, to the entity at
its registered office. Service on an entity
under this subsection is effective for all
purposes from and after the date of the
service on the Secretary of State.
N.C. Gen. Stat. § 55D-33(b) (2003). Defendant concedes it failed
to maintain its registered agent's address with the Office of the
Secretary of State. As stated supra, defendant also concedes that
plaintiff properly achieved substitute service of process. In Interior Distributors, Inc., this Court held that
substitute service of process on the Secretary of State was
ineffective and violated the defendant's due process rights where
the plaintiff's attorney had actual knowledge of an address where
the defendant could be served and did not attempt to serve the
defendant at the known address. Interior Distributors, Inc., 116
N.C. App. at 632, 449 S.E.2d at 195-96. The plaintiff in Interior
Distributors, Inc. sought recovery for payment it alleged it never
received after supplying building materials for a construction
project on land owned by the defendant corporation. Id. at 628,
449 S.E.2d at 193. Although the plaintiff's complaint, the notice
of claim of lien, the claim of lien, and the warranty deed for the
property where the project was located all listed the defendant's
principal place of business address as 903 Hampshire Court, Cary,
North Carolina 27511, the plaintiff sent the civil summons and a
copy of the complaint to the defendant's registered agent and
office in Charlotte, North Carolina. The civil summons and
complaint copy were returned to the plaintiff marked “'Moved-Left
No Address.'” Id. at 629, 449 S.E.2d at 194. The plaintiff then
achieved substitute service of process through the Office of the
Secretary of State. Upon review, this Court held that because the
plaintiff had actual knowledge of the defendant's address, the
plaintiff had failed to exercise due diligence in serving processon the defendant and that substitute service was therefore
ineffective.
In the instant case, defendant argues that, like the plaintiff
in Interior Distributors, Inc., plaintiff had actual knowledge of
an address where defendant could be served. Defendant contends
that several demand letters sent by plaintiff's counsel to
defendant demonstrate that plaintiff had actual knowledge of
defendant's address. Thus, defendant argues, substitute service of
process was ineffective. We disagree.
The record indicates that, prior to filing the complaint,
counsel for plaintiff sent several demand letters to defendant at
an address in Cornelius, North Carolina. One of the demand letters
was sent by certified mail, with delivery restricted to Roger
Banks, defendant's registered agent. Despite this restriction, the
signature of a person named “Pamela Jenrette” appears upon the
return receipt. Counsel for plaintiff testified in an affidavit
that he had no knowledge of such a person or her relationship to
defendant. Defendant never acknowledged or responded to the demand
letters sent by plaintiff. Defendant's Cornelius address is not
listed in the telephone directory. Based on the evidence of
record, we conclude defendant has failed to show that plaintiff had
“actual knowledge” of defendant's location. Defendant never
responded to the demand letters. One of the letters was receivedby a person with no known connection to defendant. The trial court
did not err in denying defendant's motion to set aside entry of
default and the default judgment.
Defendant next argues the trial court erred in failing to set
aside the entry of default and default judgment pursuant to Rule
60(b)(6). Defendant contends that this case presents extraordinary
circumstances, and that principles of equity and fairness justify
allowing defendant to defend plaintiff's suit on its merits. We
conclude the trial court did not abuse its discretion in denying
defendant's motion.
“A default judgment may be set aside under Rule 60(b)(6) only
upon a showing that: (1) extraordinary circumstances were
responsible for the failure to appear, and (2) justice demands that
relief.” Advanced Wall Systems v. Highlande Builders, ___ N.C.
App. ___, ___, 605 S.E.2d 728, 731 (2004). “The decision to grant
this rule's exceptional relief is within the trial court's
discretion.” Id. This Court cannot substitute its own judgment
for a discretionary ruling of a trial court except when it is
“'“manifestly unsupported by reason.”'” Id. (citations omitted).
While the law does not favor default,
preferring instead that controversies be
resolved on their merits, “it is also true
that rules which require responsive pleadings
within a limited time serve important social
goals, and a party should not be permitted to
flout them with impunity.” Howell v.Haliburton, 22 N.C. App. 40, 42, 205 S.E.2d
617, 619 (1974). Likewise, courts justifiably
disapprove of a limited liability company's
failure to properly maintain a registered
agent because that requirement is “designed to
inform potential litigants of necessary
information,” Huggins, 84 N.C. App. at 25, 351
S.E.2d at 785, thereby protecting the
company's interests and guarding against
judgment by default, as well as reducing the
chance that the company will avoid paying a
judgment by evading service of process.
Id.
Here, defendant failed to properly register an agent with the
Secretary of State for five years. Notably, there is evidence in
the record tending to show that defendant has a history of evading
service and collection actions by employing this tactic. Defendant
filed its “Annual Report for Business Corporations” in 2001 with
the Charlotte address as the contact information for the registered
agent, despite the fact that Roger Banks, defendant's president and
its registered agent, testified in an affidavit that the Charlotte
address had not been correct since 1999. The 2001 report defendant
filed was incorrect, and defendant did not report again until after
the default judgment in late 2004. Defendant also failed to
register in Mecklenburg County for auditing purposes from 1999
until the end of 2004.
Plaintiff properly followed the statutory requirements for
service of process. As there is no evidence that the trial court'sdiscretionary denial of defendant's motion is manifestly
unsupported by reason, the trial court committed no error in
refusing to set aside the default judgment under Rule 60(b)(6).
The order of the trial court is affirmed.
Affirmed.
Judges TYSON and STEELMAN concur.
Report per Rule 30(e).
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