Appeal by defendant from order entered 7 June 2006 by Judge
Jack A. Thompson in Robeson County Superior Court. Heard in the
Court of Appeals 28 March 2007.
Musselwhite, Musselwhite, Musselwhite & Branch, by W. Edward
Musselwhite, Jr., for plaintiff-appellee.
Anderson, Johnson, Lawrence, Butler & Bock, L.L.P., by Lee B.
Johnson, for defendant-appellant.
CALABRIA, Judge.
Auto-Owners Insurance Company (“defendant”) appeals from 7
June 2006 order entered in Robeson County Superior Court denying
its Rule 60 motion for relief from judgment. We affirm.
On 13 April 1998, Dexter Lowery (“plaintiff”) was injured in
a work-related accident in Myrtle Beach, South Carolina, while
traveling in a vehicle from a job site. Plaintiff was employed by
Donnie Locklear Drywall Services (“Locklear”), a subcontractor for
W. David Campbell d/b/a Campbell Interior Systems and Cisco of
Florence (“Campbell”), a South Carolina business. Defendant was
traveling in another vehicle in front of the vehicle in which
plaintiff was a passenger. Plaintiff subsequently filed a workers'
compensation claim in North Carolina, Locklear's home state. In
August of 2000, defendant, the workers' compensation carrier for
Campbell, learned that a potential claim existed against Campbell
for injuries plaintiff suffered in the accident. In December of
that year, defendant denied plaintiff's claim, citing the
expiration of the two-year statute of limitations for workers'
compensation claims that North Carolina and South Carolina share.
The North Carolina Industrial Commission (“Industrial
Commission”) heard plaintiff's claim on 17 January 2001 and the
deputy commissioner filed an opinion and award in favor of
plaintiff and against Locklear. Neither defendant nor Campbell was
a party to that action. Plaintiff then filed a declaratory judgment action against
defendant in Robeson County Superior Court on 9 September 2002.
The complaint alleged that Campbell and Locklear had a contractual
agreement where Campbell was to provide workers' compensation
coverage to Locklear's employees. Defendant was served with the
complaint on 19 September 2002 but failed to file an answer or any
other pleading.
Plaintiff moved for entry of default and default judgment on
10 December 2002, and entry of default was entered on that date.
Defendant then retained North Carolina counsel and moved to set
aside the entry of default. The trial court denied defendant's
motion on 13 October 2003. The court heard plaintiff's motion for
default judgment on 21 February 2005 and granted the motion on 8
November 2005.
Defendant then filed a Rule 60 motion for relief from judgment
on 27 December 2005 and the trial court denied that motion in a 7
June 2006 order. From that order defendant appeals.
[1] On appeal, defendant initially argues the trial court
erred in denying defendant's motion for relief from judgment on the
ground that the judgment is void for lack of subject matter
jurisdiction. Specifically, defendant argues the plaintiff lacked
standing to seek a declaratory judgment on the insurance agreement
between Campbell and Locklear and that the Industrial Commission
has exclusive jurisdiction over this matter. We disagree.
North Carolina's declaratory judgment statute states as
follows:
Courts of record within their respective
jurisdictions shall have power to declare
rights, status, and other legal relations,
whether or not further relief is or could beclaimed. No action or proceeding shall be open
to objection on the ground that a declaratory
judgment or decree is prayed for. The
declaration may be either affirmative or
negative in form and effect; and such
declarations shall have the force and effect
of a final judgment or decree.
N.C. Gen. Stat. . 1-253 (2005). “Any person interested under a
deed, will, written contract or other writings constituting a
contract. . . may have determined any question of construction or
validity arising under the instrument, statute, ordinance,
contract, or franchise, and obtain a declaration of rights, status,
or other legal relations thereunder.” N.C. Gen. Stat. . 1-254
(2005). We have previously recognized that, “in North Carolina, a
person may bring an action to enforce a contract to which he is not
a party, if he demonstrates that the contracting parties intended
primarily and directly to benefit him or the class of persons to
which he belongs.”
DeMent v. Nationwide Mut. Ins. Co., 142 N.C.
App. 598, 604, 544 S.E.2d 797, 801 (2001) (citation omitted). We
determine that plaintiff was an intended third-party beneficiary of
defendant's insurance contract with Campbell and we reject
defendant's contention that plaintiff has no standing.
We next consider defendant's argument that the Industrial
Commission has exclusive jurisdiction over plaintiff's claim since
the claim involves workers' compensation insurance. North Carolina
General Statute . 97-91 (2005) states, “All questions arising under
this Article if not settled by agreement of the parties interested
therein, with the approval of the Commission, shall be determined
by the Commission, except as otherwise herein provided.” “By
statute the Industrial Commission is vested with jurisdiction over
'all questions arising under' the Workers' Compensation Act.”
N.C.Chiropractic Assoc. v. Aetna Casualty & Surety Co., 89 N.C. App. 1,
4, 365 S.E.2d 312, 314 (1988)(quoting N.C. Gen. Stat. § 97-91
(1988)).
While plaintiff's declaratory judgment action involves
workers' compensation insurance, we reject appellant's contention
because at the time plaintiff initiated the declaratory action, the
Industrial Commission already heard plaintiff's claim against his
employer and awarded benefits accordingly. The only matters at
issue in the declaratory action were plaintiff's rights and
privileges as an intended third party beneficiary of the alleged
contract between his employer, Locklear, and Campbell.
This Court previously has stated that “[a]lthough [the
Declaratory Judgment Act] is not applicable to claims under the
Workmen's Compensation Act, it is applicable to construction of
insurance contracts and in determining the extent of coverage.”
Insurance Co. v. Curry, 28 N.C. App. 286, 289, 221 S.E.2d 75, 78
(1976) (citing
Cox v. Transportation Co., 259 N.C. 38, 129 S.E.2d
589 (1963);
Insurance Co. v. Simmons, Inc., 258 N.C. 69, 128 S.E.2d
19 (1962)). “The [Workers' Compensation Act] does not take away
common law rights that are unrelated to the employer-employee
relationship.”
N.C. Chiropractic Assoc., 89 N.C. App. at 6, 365
S.E.2d at 315 (citation omitted). By initiating the declaratory
judgment action, plaintiff merely sought a determination as to his
rights as a third-party beneficiary under the alleged contract
between Locklear and Campbell. Because this contract is distinct
from the employer-employee relationship, the superior court
retained subject matter jurisdiction over plaintiff's claim. The dissent cites
N.C. Ins. Guar. Ass'n v. International Paper
Co. as authority for the conclusion that plaintiff's declaratory
action does, in fact, arise under the purview of the Workers'
Compensation Act and thus resides within the exclusive jurisdiction
of the Industrial Commission. In the cited case, the issue was
“whether the trial court had subject matter jurisdiction to
interpret the scope of the [North Carolina Insurance Guaranty]
Association's statutory responsibilities under the 1992 amendments
[to the Workers' Compensation Act].”
N.C. Ins. Guar. Ass'n v.
International Paper Co., 152 N.C. App. 224, 226, 569 S.E.2d 285,
286 (2002). However, the concern in that case was the Industrial
Commission's ability to interpret its own statute and amendments.
This is not the issue in the case
sub judice, where we are
concerned with the scope of the Industrial Commission's
jurisdiction as it relates to matters ancillary to previously
considered claims.
[2] Defendant next argues the trial court erred in denying
defendant's motion to set aside entry of default on the ground that
defendant showed good cause to set aside entry of default. North
Carolina General Statute . 1A-1, Rule 55(d) (2005) allows a trial
court to set aside entry of default for “good cause shown” pursuant
to N.C. Gen. Stat. . 1A-1, Rule 60(b) (2005). Rule 60(b) allows
the trial court to set aside default in certain instances,
including where “mistake, inadvertence, surprise, or excusable
neglect” is shown or the judgment is void.
Id. Defendant
correctly notes that “default judgments are disfavored by the law.”
N.C.N.B. v. McKee, 63 N.C. App. 58, 61, 303 S.E.2d 842, 844 (1983). However, “A trial court's decision to grant or deny a motion
to set aside an entry of default and default judgment is
discretionary. Absent an abuse of that discretion, this Court will
not reverse the trial court's ruling.”
Basnight Constr. Co. v.
Peters & White Constr. Co., 169 N.C. App. 619, 621, 610 S.E.2d 469,
470 (2005) (internal citation omitted).
In denying defendant's motion to set aside entry of default,
the trial court entered nine findings of fact in support of its
decision. Those findings stated that defendant, when served with
plaintiff's declaratory judgment action, forwarded the “papers” to
a South Carolina attorney with no instructions or request to take
action. The court further determined that no follow up
investigation took place by defendant's insurance adjuster until
after plaintiff had obtained the entry of default. These findings
have not been assigned as error and are thus deemed binding on
appeal.
In re S.N.H. & L.J.H., 177 N.C. App. 82, 83, 627 S.E.2d
510, 512 (2006).
On these facts, the trial court concluded that defendant was
“not diligent nor was it attentive to its responsibilities and
duties,” and thus failed to demonstrate good cause to set aside the
entry of default. We have previously determined that reversal for
abuse of discretion is limited to instances where the appellant can
show the judge's decision is “manifestly unsupported by reason.”
Clark v. Clark, 301 N.C. 123, 129, 271 S.E.2d 58, 63 (1980). Based
on the findings set out in its 13 October 2003 order, we cannot
conclude that the trial court's denial of defendant's motion to set
aside the entry of default was manifestly unsupported by reason.
Accordingly, this assignment of error is overruled. [3] Defendant lastly argues the trial court erred in granting
plaintiff's motion for default judgment on the grounds that the
evidence was insufficient to warrant plaintiff's recovery. We
disagree.
A trial court's decision to enter a default judgment, like
entry of default, is reviewable for abuse of discretion.
Basnight,
169 N.C. App. at 621, 610 S.E.2d at 470. As such, we only find
abuse of discretion where the trial court's judgment is “manifestly
unsupported by reason.”
North Carolina General Statute . 1A-1, Rule 8(d) (2005) states
as follows:
Averments in a pleading to which a responsive
pleading is required, other than those as to
the amount of damage, are admitted when not
denied in the responsive pleading. Averments
in a pleading to which no responsive pleading
is required or permitted shall be taken as
denied or avoided.
Id. Because defendant failed to answer plaintiff's complaint, the
allegations stated therein are deemed admitted. However,
defendant's argument relies on
Baxter v. Jones, 14 N.C. App. 296,
188 S.E.2d 622 (1972), which states that while the trial court is
bound to accept the factual allegations in a complaint where no
answer has been filed, it is under no such duty to accept the
pleader's conclusions. Defendant here argues the trial court
accepted plaintiff's conclusions regarding insurance coverage under
the policy at issue. We find defendant's reliance on
Baxter to be
misplaced.
In the case
sub judice, a number of facts were established by
defendant's failure to answer the complaint. Those facts included
that Campbell contracted with Locklear to provide workers'compensation coverage for Locklear's employees and that Campbell
contracted with defendant to provide this coverage. It also
established that plaintiff was entitled to payment of the
Commission's 3 May 2000 opinion and award. The court did not
accept the plaintiff's contention as to the amount owed under the
opinion and award, but considered other evidence, including the
award itself, which was incorporated by reference into the
complaint. The award sets forth ten findings of fact and then
enters conclusions on those facts. As such, the opinion and award
provided a basis to justify the amount of the compensation sought
by plaintiff. The judgment of the trial court is affirmed.
Affirmed.
Judge McCULLOUGH concurs.
Judge STROUD dissents with a separate opinion.
STROUD, Judge dissenting.
I conclude that the case sub judice was not properly before
the Superior Court, Robeson County, as that court lacked subject
matter jurisdiction. The proper forum for this case was the North
Carolina Industrial Commission (“Industrial Commission”).
The North Carolina Worker's Compensation Act, which is
codified in the North Carolina General Statutes, Chapter 97,
provides that, “All questions arising under this Article if not
settled by agreements of the parties interested therein, with the
approval of the [Industrial] Commission, shall be determined by the
Commission, except as otherwise herein provided.” N.C. Gen. Stat.
. 97-91 (2005). The [Industrial] Commission is specifically
vested by statute with jurisdiction to hear
“all questions arising under” the Compensation
Act. This jurisdiction under the statute
ordinarily includes the right and duty to hear
and determine questions of fact and law
respecting the existence of insurance coverage
and liability of the insurance carrier.
Greene v. Spivey, 236 N.C. 435, 445, 73 S.E.2d 488, 495-96 (1952)
(internal citations omitted).
In N.C. Ins. Guar. Ass'n v. Int'l. Paper Co., the North
Carolina Insurance Guaranty Association (“Association”) brought a
declaratory judgment action to determine its statutory
responsibilities under the amended Insurance Guaranty Association
Act and the Worker's Compensation Act. 152 N.C. App. 224, 226, 569
S.E.2d 285, 285, petition denied by, 356 N.C. 438, 572 S.E.2d 786
(2002). This Court affirmed the trial court's decision to dismiss
the case for lack of subject matter jurisdiction concluding that
“the relief sought by the Association would directly impact upon
the Industrial Commission's duty . . . .” Id., 152 N.C. App. at
227, 569 S.E.2d at 287. That duty includes deciding “questions of
fact and law regarding the liability of an insurance carrier.” Id.
(internal citation omitted).
In the case sub judice plaintiff was injured in a work-related
accident and brought an action for a declaratory judgment “for the
court to interpret the rights and privileges [p]laintiff has with
regard to recovery of the benefits awarded in I.C. No. 915954 from
the [d]efendants and from the insurance coverage described herein.”
The dispositive issue is determining the liability of an insurance
carrier, here, Auto-Owners Insurance Company which falls within the
jurisdiction of the Industrial Commission. N.C. Ins. Guar. Ass'n,152 N.C. App. at 227, 569 S.E.2d at 287. This claim for relief
falls within the jurisdiction of the Industrial Commission as it is
a “question arising under” the purview of the Worker's Compensation
Act. See N.C. Gen. Stat. . 97-91.
Additionally, I note that Campbell could have been joined as
a defendant in the case against Donnie Locklear Drywall Services
before the Industrial Commission.
Any principal contractor, intermediate
contractor, or subcontractor who shall sublet
any contract for the performance of any work
without requiring from such subcontractor or
obtaining from the Industrial Commission a
certificate, issued by a workers' compensation
insurance carrier, or a certificate of
compliance issued by the Department of
Insurance to a self-insured subcontractor,
stating that such subcontractor has complied
with G.S. 97-93 hereof, shall be liable,
irrespective of whether such subcontractor has
regularly in service fewer than three
employees in the same business within this
State, to the same extent as such
subcontractor would be if he were subject to
the provisions of this Article for the payment
of compensation and other benefits under this
Article on account of the injury or death of
any employee of such subcontractor due to an
accident arising out of and in the course of
the performance of the work covered by such
subcontract.
N.C. Gen. Stat. . 97-19 (2005).
Campbell, as the principal contractor and owner of the
insurance policy, could have been a defendant in the original suit
heard by the Industrial Commission. Under N.C. Gen. Stat. § 97-19,
Campbell, the principal contractor, is liable for the injuries
received by plaintiff and thus is a proper party to any suit to
recover for injury. Id.
Accordingly, I would reverse the trial court order for lack of
subject matter jurisdiction. I respectfully dissent.
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