An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NORTH CAROLINA COURT OF APPEALS
Filed: 3 October 2006
UNITED LEASING CORPORATION,
and SHIELD FAMILY
No. 03 CVS 5152
JOSEPH F. GUTHRIE, TAMI
GUTHRIE, JUDY GUTHRIE, KELLY
PITTMAN, LANCE PITTMAN, JOSEPH
GUTHRIE FAMILY TRUST, GROWTH
OPPORTUNITIES, INC., and
SHOWCASE AMERICA, INC.
Appeal by defendants from judgment entered 30 April 2004 by
Judge Evelyn W. Hill in Wake County Superior Court. Heard in the
Court of Appeals 22 February 2006.
Francis & Austin, PLLC, by John S. Austin, for plaintiffs-
Nicholls & Crampton, P.A., by Kevin L. Sink, and Steven S.
Biss, for the defendant-appellant.
United Leasing Corporation (ULC), a Virginia corporation, and
the Shield Family Partnership, III (the Shield Partnership), a
Virginia limited partnership (collectively plaintiffs), initiated
this action by filing a complaint in Wake County Superior Court
against Joseph Guthrie, Tami Guthrie, Judy Guthrie, and the JosephGuthrie Family Trust (collectively the Guthries); Kelly Pittman and
Lance Pittman (the Pittmans); Growth Opportunities, Inc. (Growth
Opportunities); and Showcase America, Inc. (Showcase). The
parties, in part through their membership in Kelsie Properties, LLC
(Kelsie Properties), a Virginia limited liability company,
conducted business activities in North Carolina.
(See footnote 1)
The underlying dispute between the parties resulted from a
series of allegedly improper business transactions. First, on or
about 8 October 1998, ULC agreed to loan $500,000.00 to United
American Company (American), a company under the operation and
control of Joseph Guthrie, in exchange for a promissory note and
security interest in American's inventory. On 23 May 2000 ULC
obtained American's entire inventory pursuant to the terms of the
loan agreement. Plaintiffs allege that Judy Guthrie and Tami
Guthrie absconded with the inventory obtained by ULC and converted
it to their own use.
Second, in November 1998, without notifying the Shield
Partnership, Joseph Guthrie and the Joseph Guthrie Family Trust
used Kelsie Properties to enter into a ten-year, $2,600,000.00,
lease agreement with Parker-Raleigh Development XX (Parker-
Raleigh). On 26 May 2000 Parker-Raleigh enforced a lockout
provision in their lease and demanded that ULC pay $37,499.37 in
back rental payments. In response, ULC filed suit against Parker-
Raleigh to obtain its inventory. Parker-Raleigh counterclaimedagainst ULC and filed third-party actions against Joseph Guthrie,
Kelsie Properties, and ULC's president, Edward Shield, asserting
claims for fraud, negligent misrepresentation, and unfair and
deceptive acts and practices. Plaintiffs assert that the Parker-
Raleigh dispute was a direct result of the Guthries' failure to pay
the rent due under the lease and engagement in unfair and deceptive
To resolve the dispute over the ten-year lease agreement, ULC
paid Parker-Raleigh $360,000.00 on behalf of themselves and Kelsie
Properties. Plaintiffs claim that the Guthries failed to properly
assist in the defense of Kelsie Properties but that they benefitted
directly from the settlement. Plaintiffs believe that making the
settlement payment was necessary to avoid prolonged litigation and
a potential judgment. In sum, ULC, on behalf of themselves and
Kelsie Properties, paid $515,000.00, which included cost of defense
and other charges.
II. Procedural History
On 16 April 2003 plaintiffs filed suit against defendants for
various claims associated with the allegedly improper transactions.
On 15 May 2003, upon motion of defendants, the court granted
defendants an additional thirty days to file a responsive
(See footnote 2)
On 7 July 2003 defendants made a special appearance and
filed a motion to dismiss for lack of personal jurisdiction underRule 12(b)(2). On 17 November 2003 this motion was granted as to
Tami Guthrie, Judy Guthrie, and the Joseph F. Guthrie Family Trust,
but denied as to defendants Joseph Guthrie and the Pittmans
(collectively defendants). During this time defendants failed to
file an answer to plaintiffs' complaint and failed to respond to
plaintiffs' discovery requests. On 26 November 2003 defendants
filed a motion to dismiss for failure to state a claim under Rule
12(b)(6) but still filed no answer. Following consideration of
defendants' Rule 12(b)(6) motion, just four of the six claims
against defendants were allowed to proceed on 16 February 2004.
One month later, on 16 March 2004, the clerk signed an entry of
default against defendants in accordance with N.C. Gen. Stat. § 1A-
1, Rule 12(a)(1), which requires the defendant to file a responsive
pleading within twenty days after notice of the court's order in
ruling on a motion permitted under Rule 12.
Only after plaintiffs had filed a motion for default judgment
on 23 March 2004 did defendants file their answer, which they filed
the next day. Soon after, on 2 April 2004, defendants filed a
motion to set aside the entry of default. These motions were
consolidated for hearing on 6 April 2004.
On 30 April 2004 the trial court entered an order denying
defendants' motion to set aside the entry of default and allowing
plaintiffs' motion for default judgment. Judge Evelyn W. Hill
granted the default judgment for plaintiffs in the amount of
$515,000.00 plus court costs. Judge Hill also found that
defendants had continuously delayed or attempted to delay theprogress of the proceeding, noting that defendants had
opportunities on three (3) separate occasions to file an answer but
failed to do so. Finally, Judge Hill found that the continued
delays by Defendants [had] seriously prejudiced Plaintiffs in this
Defendants' initial attempt to appeal from the default
judgment failed because of further procedural missteps. Defendants
timely filed a notice of appeal but failed to timely file a
proposed record on appeal. As a result, this Court dismissed the
appeal and awarded costs to plaintiff. Finally, on 1 February
2005, this Court allowed defendants' petition for writ of
to appeal from the default judgment entered 30 April
III. Entry of Default
Defendants argue that the trial court erred in failing to set
aside the entry of default and in entering the default judgment
against them. In support of their position, defendants contend
that their motions to dismiss for lack of personal jurisdiction
under Rule 12(b)(2) and failure to state a claim under Rule
12(b)(6) should have been granted. Also, defendants argue that
insufficient evidence was presented to support the sum certain
amount of damages awarded by the trial court. But at least several
of defendants' contentions are beyond the scope of our review.
Following Judge Hill's default judgment, and after the
dismissal of defendants' original appeals from that judgment, we
allowed defendants' petition for writ of certiorari. Rule 21 ofthe North Carolina Rules of Appellate Procedure allows an appellate
court to issue a writ of certiorari to review the judgments of
trial tribunals when the right to prosecute an appeal has been
lost. N.C.R. App. P. 21 (2006). An appellate court's review on
certiorari is commonly limited to a review of certain, specified
issues. See State v. Roberts
, 351 N.C. 325, 326-27, 523 S.E.2d
417, 418 (2000) (The Court of Appeals allowed the petition for
writ of certiorari for the limited purpose of vacating the
[previous] judgment and commitment . . . and reinstating the
judgment and commitment entered . . . on 22 July 1998.). Although
defendants raise fifty-four assignments of error in their brief to
this Court, certiorari was granted only to consider defendants'
appeal from the default judgment entered 30 April 2004.
Specifically, while we agreed to determine whether the trial
court erred in denying defendants' motion to set aside the entry of
default due to the fact that it is a part of the order for which
certiorari was allowed,
we did not
agree to review the trial
court's orders denying defendants' Rule 12(b)(2) and 12(b)(6)
motions. Therefore, defendants' contentions regarding personal
jurisdiction and plaintiffs' failure to state a claim will not be
considered on appeal. We note, however, that defendants'
contentions received ample consideration by the trial court, since:
the court considered affidavits, arguments, and authorities
presented by the parties before concluding that it had personal
jurisdiction over defendants due to business activities conductedby defendants in North Carolina;
(See footnote 3)
and (2) on the Rule 12(b)(6)
motion, the court heard arguments of counsel, reviewed the record,
and considered other good cause shown before it allowed four of six
claims against defendants to proceed. While we acknowledge that,
at least in some circumstances, a review of personal jurisdiction
by our Court is appropriate on certiorari following a default
judgment, see Advanced Wall Sys., Inc. v. Highlande Builders, LLC
167 N.C. App. 630, 631, 605 S.E.2d 728, 729 (2004), such a review
is not appropriate here. Unlike in the case at bar, our Court in
reviewed the trial court's denial of defendant's Rule
60(b) motion, which had been made on personal jurisdiction grounds.
167 N.C. App. at 631, 605 S.E.2d at 729.
We now turn to the question of whether the trial court erred
in failing to set aside the clerk of court's entry of default.
For good cause shown the court may set aside an entry of default,
and, if a judgment by default has been entered, the judge may set
it aside in accordance with Rule 60(b). N.C. Gen. Stat. § 1A-1,
Rule 55(d) (2005). Our review of a trial court's decision on good
cause is one of great deference. See Basnight Construction
Company, Inc. v. Peters & White Construction Company
, 169 N.C. App.
619, 620, 610 S.E.2d 469, 470 (2005) (standard of review is whethertrial court abused its discretion in denying defendants' motion to
set aside the entry of default).
After the entry of default, defendants argued that because
they had cooperated with plaintiffs' discovery requests, and
because their procedural mistakes had been inadvertent, they had
shown good cause to set aside the entry of default. Specifically,
defendants argued that they had made the appropriate documents
available to plaintiffs at all times, that they had filed an answer
prior to the entry of the default judgment
, and that their failure
to submit a timely answer was inadvertent and mistaken.
An entry of default against defendants limits their ability to
argue the merits of their case. This Court has stated that:
[w]hen an entry of default is made and the
allegations of the complaint are sufficient to
state a claim, the defendant has no further
standing to contest the merits of plaintiff's
right to recover. His only recourse is to
show good cause for setting aside the default
and, failing that, to contest the amount of
Hartwell v. Mahan
, 153 N.C. App. 788, 790-91, 571 S.E.2d 252, 253
(2002) (internal quotations omitted); see also Bell v. Martin
N.C. 715, 721, 264 S.E.2d 101, 105 (1980); Acceptance Corp. v.
, 11 N.C. App. 504, 509-10, 181 S.E.2d 794, 798 (1971).
A review of the record reveals that defendants advanced no
meritorious grounds constituting good cause for setting aside the
entry of default. In fact, defendants failed to properly file with
this Court a record on appeal detailing their grounds for setting
aside the entry of the default. The only evidence presented tended
to show that defendants were properly served with the complaint butfailed to show good cause for failing to respond in a timely
manner. See Hartwell
, 153 N.C. App. at 790-91, 571 S.E.2d at 253.
As such, we discern no abuse of discretion by the trial court in
denying defendant's motion to set aside the entry of default. See
Old Salem Foreign Car Serv., Inc. v. Webb
, 159 N.C. App. 93, 98,
582 S.E.2d 673, 676 (2003) (finding no abuse of discretion in
denying defendant's motion to set aside entry of default where
defendant advanced no grounds constituting good cause); cf. Britt
v. Georgia-Pacific Corp.
, 46 N.C. App. 107, 108, 264 S.E.2d 395,
397 (1980) (finding no abuse of discretion where defendant's legal
department misplaced the suit papers and did not relocate them
until the day of the entry of default).
IV. Default Judgment
Since defendants failed to show good cause for setting aside
the entry of default, their only remaining recourse is to contest
the amount of plaintiffs' recovery. See Hartwell
, 153 N.C. App. at
790-91, 571 S.E.2d at 253. Therefore, we turn our review to
whether the trial court abused its discretion in entering the
judgment awarding damages to plaintiffs in the sum certain amount
of $515,000.00 plus court costs. See Basnight
, 169 N.C. App. at
620, 610 S.E.2d at 470.
The record tends to show that Judge Hill relied exclusively on
allegations made in plaintiff's complaint in determining the amount
of damages. It is not clear under North Carolina law what
constitutes sufficient evidence to support a trial judge's default
judgment for a sum certain amount. For the clerk to enter adefault judgment, however, the amount due must appear in an
affidavit or, alternatively, a verified pleading if such pleading
contains information sufficient to determine or compute the sum
. N.C. Gen. Stat. § 1A-1, Rule 55(b)(1) (2005) (emphasis
added); Grant v. Cox
, 106 N.C. App. 122, 126, 415 S.E.2d 378, 381
(1992). The mere demand for judgment of a specified dollar amount
[is] not enough under the statute to permit the [clerk of court] to
enter a default judgment. Basnight
, 169 N.C. App. at 623, 610
S.E.2d at 472; (citing Hecht Realty, Inc. v. Hastings
, 45 N.C. App.
307-08, 309, 262 S.E.2d 858, 859 (1980)).
Our review of the record shows that plaintiffs offered nothing
more than the bare assertions laid forth in their complaint to
support damages in the amount of $515,000.00. See Basnight
N.C. App. at 623, 610 S.E.2d at 472. Foremost, the record tends to
show that plaintiffs presented no evidence of damages during the
consolidated motion hearing. Specifically, it appears that
plaintiffs failed to provide the trial court with copies of
contracts, submitted invoices, or other documents detailing the
alleged damages. See id.
at 623-24, 610 S.E.2d at 472 (What would
help identify the amount owed with some level of certainty would
typically be [a] contract or submitted invoice . . . .). Second,
while the damages figure appears to be based on information
contained in plaintiffs' complaint,
(See footnote 4)
the surviving claims in thecomplaint seek varying amounts of damages that do not add up to
$515,000.00; indeed, a close review of the complaint reveals that
plaintiffs claim $1,970,000.00 in alleged damages in their
surviving causes of action.
(See footnote 5)
Since it appears that the trial judge here awarded damages
based only on plaintiffs' bare assertions, the accuracy of which
are in question, we must conclude that the trial judge abused her
discretion in entering a default judgment in the amount of
$515,000.00 plus court costs. Accordingly, we remand to the lower
court for a hearing on damages.
Affirmed in part, reversed in part, and remanded.
Judges STEELMAN and JACKSON concur.
Report per Rule 30(e).
Kelsie Properties was fifty percent owned by the Shield
Partnership and fifty percent owned by the Joseph Guthrie Family
Generally, Rule 12 of the North Carolina Rules of Civil
Procedure requires a defendant to serve his answer within thirty
days after service of the summons and complaint upon him. N.C.
Gen. Stat. § 1A-1, Rule 12(a)(1) (2005).
Additionally, although not required to do so, defendants
did not appeal the trial court's personal jurisdiction ruling
under N.C. Gen. Stat. § 1-277(b) or N.C. Gen. Stat. § 7A-27
(2005), which give any interested party the right of immediate
appeal from an adverse ruling as to the court's jurisdiction over
the person. See A.R. Haire, Inc. v. St. Denis
, ___ N.C. App.
___, ___, 625 S.E.2d 894, 898 (2006).
In their complaint, plaintiffs claim in part to have
incurred the following expenses: $360,000.00 to settle claims by
Parker-Raleigh; $80,000.00 in legal fees; and $75,000 relating to
the clean-up and removal of inventory at American's Raleigh,North Carolina location. The sum of these amounts is
$515,000.00; however, these amounts were claimed only in
plaintiffs' second cause of action, which was dismissed in the
trial court's order dated 16 February 2004.
The following causes of action and corresponding damages
amounts were not dismissed by the trial court: first cause of
action (contribution), $180,000.00; second cause of action
(conversion), $900,000.00; third cause of action (fraud),
$10,000.00; fourth cause of action (unfair and deceptive trade
practices), $440,000.00; and fourth cause of action (civil
conspiracy), $440,000.00. The sum of these amounts is
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