NO. COA13-833
NORTH CAROLINA COURT OF APPEALS
Filed: 15 July 2014
ROBERT PETER DOWD, III and
JONATHAN CARTER DOWD
Plaintiffs,
v. Moore County
Nos. 10 CVS 983
10 CVS 984
CHARLES DEXTER JOHNSON
Defendant.
Appeal by defendant from orders entered 18 October 2012 by
Judge James M. Webb in Moore County Superior Court. Heard in
the Court of Appeals 11 December 2013.
Robbins May & Rich, LLP, by Neil T. Oakley, R. Palmer Sugg,
and Robert M. Friesen, for plaintiffs-appellees.
Gray, Layton, Kersh, Solomon, Furr, & Smith, P.A., by
William E. Moore, Jr. and Marcus R. Carpenter, for
defendant-appellant.
DAVIS, Judge.
Charles Dexter Johnson (“Defendant”) appeals from the trial
court’s 18 October 2012 orders (1) denying his motions to set
aside the default judgments entered against him; and (2)
awarding Robert Peter Dowd, III and Jonathan Carter Dowd
(collectively “Plaintiffs”) $1,500.00 in attorneys’ fees. On
appeal, Defendant contends that the default judgments entered
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against him were void because Plaintiffs failed to properly
serve him with process. After careful review, we reverse the
trial court’s order denying Defendant’s motions to set aside the
default judgments, vacate its sanctions order awarding
attorneys’ fees to Plaintiffs, and vacate the underlying default
judgments.
Factual Background
On 29 July 2008, Plaintiffs loaned Defendant $150,000.00
pursuant to a promissory note that was secured by a deed of
trust. The property securing the loan was located in Moore
County, North Carolina. Defendant made several payments but
eventually defaulted on the loan, and Plaintiffs initiated
foreclosure proceedings on the Moore County property. The trial
court entered an order of sale authorizing the trustee to
proceed with the foreclosure, and Defendant appealed to this
Court, arguing that the trial court erred in denying his motion
for a continuance. In an unpublished opinion, this Court held
that the trial court did not abuse its discretion in denying
Defendant’s motion to continue and affirmed the court’s order of
sale. See In re Foreclosure of Johnson, ___ N.C. App. ___, 729
S.E.2d 128 (2012) (unpublished).
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On 24 May 2010, Plaintiffs filed two separate actions in
Moore County Superior Court against Defendant. The first action
sought recovery of $57,500.00 based on Defendant’s nonpayment of
amounts due under the promissory note. The second action sought
reformation of the deed of trust securing the promissory note.1
That same day, a civil summons was issued to Defendant
listing 3574 Turnberry Circle, Fayetteville, North Carolina as
his address. The Cumberland County Sheriff’s Office attempted
service at the Turnberry Circle address, but the summons was
returned unserved with a notation that Defendant “no longer
lives there.” Plaintiffs also attempted to serve Defendant at
that address via certified mail, but the mail was returned as
undeliverable.
On 29 October 2010, a new civil summons was issued listing
2201 Skyview Drive, Fayetteville, North Carolina as Defendant’s
address. There is no indication in the record, however, that
Plaintiffs ever attempted to actually serve Defendant at the
Skyview Drive address.
1
Plaintiffs’ complaint seeking reformation of the deed of trust
alleged that both parties intended for two parcels — a 7.3 acre
parcel and a 1.44 acre parcel — to secure Defendant’s repayment
of the loan but that through a mutual mistake, the deed of trust
included a description of only the 1.44 acre parcel.
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Plaintiffs subsequently commenced service by publication in
both actions. A Notice of Service of Process by Publication was
published in The Fayetteville Observer on 29 November, 6
December, and 13 December 2010.
On 8 February 2011, Plaintiffs filed motions seeking
default judgments regarding their claim to recover $57,500.00
under the promissory note and with respect to their claim for
reformation of the deed of trust. Plaintiffs filed accompanying
affidavits attesting to their service by publication efforts
along with their respective motions. The trial court granted
both of Plaintiffs’ motions and on 17 March 2011 entered default
judgments (1) awarding Plaintiffs $57,500.00 in damages and
$8,625.00 in attorneys’ fees; and (2) reforming the deed of
trust to match the property description provided for in the plat
recorded in Plat Cabinet 5, slide 109 at the Moore County
Register of Deeds office.
On 21 August 2012, Defendant filed a motion for a temporary
restraining order seeking to prevent the substitute trustee from
commencing the foreclosure sale. On 31 August 2012, Defendant
filed motions to set aside the default judgments pursuant to
Rule 60(b) of the North Carolina Rules of Civil Procedure.
Defendant argued that the default judgments were void because
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Plaintiffs failed to properly serve him with process such that
the trial court lacked personal jurisdiction over Defendant when
it entered the judgments. On 28 September 2012, Plaintiffs
filed a motion for Rule 11 sanctions, alleging that Defendant’s
motions to set aside the judgments were not well grounded in
fact or supported by existing law.
The trial court denied Defendant’s Rule 60(b) motions by
order entered 18 October 2012, ruling that Plaintiffs had
exercised due diligence in their attempts to locate Defendant
and that their service of process by publication as to Defendant
was proper. The trial court further ordered that “no Notice of
Appeal in this matter shall be filed with or accepted by the
Clerk of Superior Court of Moore County until after such time as
the Defendant shall have posted an Appeal Bond in the amount of
Eighty-Eighty Thousand Dollars ($88,000.00).” Finally, the
trial court entered a separate order on 18 October 2012 granting
Plaintiffs’ motion for Rule 11 sanctions and ordering Defendant
to pay $1,500.00 in attorneys’ fees.
Defendant attempted to file a notice of appeal from the 18
October 2012 orders on 19 November 2012, but the Moore County
Clerk’s Office marked out the file stamp and refused to accept
the notice of appeal based on his failure to comply with the
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trial court’s requirement that he post an appeal bond in the
amount of $88,000.00. On 8 May 2013, this Court granted
certiorari to review the trial court’s 18 October 2012 orders
denying Defendant’s motions to set aside the default judgments
and granting Plaintiffs’ motion for sanctions.
Analysis
I. Default Judgments
Defendant’s primary argument on appeal is that the trial
court erred in denying his motions to set aside the default
judgments because Plaintiffs’ service of process by publication
was improper. We agree.
A trial court may set aside and relieve a defendant from a
default judgment if the judgment entered is void. See N.C.R.
Civ. P. 55(d) (“[I]f a judgment by default has been entered, the
judge may set it aside in accordance with Rule 60(b)); N.C.R.
Civ. P. 60(b) (“[T]he court may relieve a party or his legal
representative from a final judgment, order, or proceeding . . .
[if] [t]he judgment is void . . . .”).
A defect in service of process by
publication is jurisdictional, rendering any
judgment or order obtained thereby void. If
a default judgment is void due to a defect
in service of process, the trial court
abuses its discretion if it does not grant a
defendant’s motion to set aside entry of
default.
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Jones v. Wallis, 211 N.C. App. 353, 356, 712 S.E.2d 180, 183
(2011) (citations and quotation marks omitted).
After Plaintiffs’ attempts to serve Defendant at the
Turnberry Circle address were unsuccessful, Plaintiffs elected
to serve Defendant by publication in The Fayetteville Observer.
Rule 4(j1) of the North Carolina Rules of Civil Procedure
permits service of process by publication on a party that
cannot, through due diligence, be otherwise served. Cotton v.
Jones, 160 N.C. App. 701, 703, 586 S.E.2d 806, 808 (2003). Rule
4(j1) provides as follows:
A party that cannot with due diligence be
served by personal delivery, registered or
certified mail, or by a designated delivery
service authorized pursuant to 26 U.S.C. §
7502(f)(2) may be served by publication.
Except in actions involving jurisdiction in
rem or quasi in rem as provided in section
(k), service of process by publication shall
consist of publishing a notice of service of
process by publication once a week for three
successive weeks in a newspaper that is
qualified for legal advertising in
accordance with G.S. 1-597 and G.S. 1-598
and circulated in the area where the party
to be served is believed by the serving
party to be located, or if there is no
reliable information concerning the location
of the party then in a newspaper circulated
in the county where the action is pending.
If the party’s post-office address is known
or can with reasonable diligence be
ascertained, there shall be mailed to the
party at or immediately prior to the first
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publication a copy of the notice of service
of process by publication. The mailing may
be omitted if the post-office address cannot
be ascertained with reasonable diligence.
Upon completion of such service there shall
be filed with the court an affidavit showing
the publication and mailing in accordance
with the requirements of G.S. 1-75.10(a)(2),
the circumstances warranting the use of
service by publication, and information, if
any, regarding the location of the party
served. . . .
N.C.R. Civ. P. 4(j1).
Because service by publication is in derogation of the
common law, “statutes authorizing service of process by
publication are strictly construed, both as grants of authority
and in determining whether service has been made in conformity
with the statute.” Fountain v. Patrick, 44 N.C. App. 584, 586,
261 S.E.2d 514, 516 (1980). In determining whether service of
process by publication is proper, this Court first examines
whether the defendant was actually subject to service by
publication — meaning that the plaintiff exercised due diligence
as required by Rule 4(j1) prior to serving the defendant by
publication. Jones, 211 N.C. App. at 357, 712 S.E.2d at 183.
“Due diligence dictates that plaintiff use all resources
reasonably available to [him] in attempting to locate
defendants. Where the information required for proper service
of process is within plaintiff’s knowledge or, with due
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diligence, can be ascertained, service of process by publication
is not proper.” Id. (citation and quotation marks omitted).
In this case, we conclude that service of process by
publication was improper because there is no indication in the
record that Plaintiffs ever attempted service on Defendant at
his Skyview Drive address despite having knowledge of said
address. Indeed, the record shows that on 29 September 2010,
approximately two months before Plaintiffs commenced service by
publication, Defendant’s counsel sent Plaintiffs’ counsel an
email stating as follows:
One other thing I forgot to include.
[Defendant] has asked me to provide you with
his current mailing address, which is as
follows: 2201 Skyview Dr., Fayetteville, NC
28304.
Thx, steve
Although Plaintiffs caused a summons to be issued listing this
address, the record is devoid of any evidence that service was
ever actually attempted on Defendant at 2201 Skyview Drive.
Indeed, Plaintiffs do not dispute the absence of such evidence
in the record.
While the record reflects that Defendant has had numerous
mailing addresses throughout this litigation, this cannot excuse
Plaintiffs’ failure to attempt service at the address provided
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by Defendant’s counsel and described as Defendant’s “current
mailing address.” Because Plaintiffs did not try to serve
Defendant personally or by certified mail at the Skyview Drive
address, we cannot conclude that they exercised the due
diligence required before resorting to service by publication.
See Thomas v. Thomas, 43 N.C. App. 638, 646, 260 S.E.2d 163, 169
(1979) (“[S]ervice of process by publication is void . . . if
the information required for personal service is within the
plaintiff’s actual knowledge or with due diligence could be
ascertained.”).
Plaintiffs contend that Defendant nevertheless submitted to
the jurisdiction of the trial court — thereby waiving any
alleged defects in service of process — by (1) filing a motion
for a temporary restraining order; and (2) seeking injunctive
and declaratory relief in his motions to set aside the default
judgments. Plaintiffs’ argument is without merit.
It is well established that by making a general appearance,
a defendant “waives any defects in the jurisdiction of the court
for want of valid summons or of proper service thereof.” Tobe-
Williams v. New Hanover Cty. Bd. of Educ., ___ N.C. App. ___,
___ S.E.2d ___, slip op. at 16 (No. COA13-679) (filed Jun. 17,
2014) (citation omitted). In this case, however, Defendant “did
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nothing that could be considered a general appearance prior to
the entry of the [judgments] now challenged.” Barnes v. Wells,
165 N.C. App. 575, 579, 599 S.E.2d 585, 588 (2004). Defendant
is challenging the validity of default judgments entered on 17
March 2011 based on improper service of process. It was not
until after the entry of the 17 March 2011 judgments that
Defendant filed his motion for a temporary restraining order (on
21 August 2012) and his motions to set aside the default
judgments (on 31 August 2012).
As we have previously explained, “[i]f the trial court
lacked personal jurisdiction over [the party] when it entered
the order, actions subsequent to that order could not
retroactively supply jurisdiction.” Id. at 580, 599 S.E.2d at
589. Because Defendant did not make a general appearance before
the entry of the default judgments, he has not waived his
objection to improper service of process. See id. (concluding
that party did not waive personal jurisdiction objection based
on improper service in moving for relief from order pursuant to
Rule 60(b) because party did not make any general appearances
prior to entry of order being challenged).
Because service by publication on Defendant was invalid,
the trial court did not possess personal jurisdiction over
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Defendant when it entered the 17 March 2011 default judgments.
As such, these default judgments are void, and the trial court
erred by denying Defendant’s motions to set them aside.
Consequently, we must reverse the trial court’s 18 October 2012
order denying Defendant’s motions to set aside and vacate the
underlying default judgments. Cotton, 160 N.C. App. at 704, 586
S.E.2d at 808-09.
II. Sanctions Order
We must also vacate the trial court’s 18 October 2012
sanctions order. In its order, the trial court granted
Plaintiffs’ motion to impose Rule 11 sanctions against Defendant
and ordered Defendant to pay $1,500.00 in attorneys’ fees
“incurred in the successful defense of Defendant’s most recent
motions.”
Rule 11 states, in pertinent part, as follows:
Every pleading, motion, and other paper of a
party represented by an attorney shall be
signed by at least one attorney of record in
his individual name, whose address shall be
stated. . . . The signature of an attorney
or party constitutes a certificate by him
that he has read the pleading, motion, or
other paper; that to the best of his
knowledge, information and belief formed
after reasonable inquiry it is well grounded
in fact and warranted by existing law or a
good faith argument for the extension,
modification, or reversal of existing law,
and that it is not interposed for any
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improper purpose, such as to harass or to
cause unnecessary delay or needless increase
in the cost of litigation.
N.C.R. Civ. P. 11(a). If a pleading, motion, or paper is signed
in violation of Rule 11, the trial court “shall impose . . . an
appropriate sanction, which may include an order to pay the
other party . . . reasonable expenses . . . including a
reasonable attorney’s fee.” Id.
It is well established that analysis under Rule 11 is
three-pronged, requiring the trial court to determine whether
the pleading, motion, or paper is (1) factually sufficient; (2)
legally sufficient; and (3) not filed for an improper purpose.
In re Will of Durham, 206 N.C. App. 67, 71, 698 S.E.2d 112, 117
(2010). “A violation of any one of these requirements mandates
the imposition of sanctions under Rule 11.” Dodd v. Steele, 114
N.C. App. 632, 635, 442 S.E.2d 363, 365, disc. review denied,
337 N.C. 691, 448 S.E.2d 521 (1994).
Here, we have already concluded that Defendant’s motions to
set aside the default judgments for lack of personal
jurisdiction based on improper service were factually and
legally meritorious. As such, Rule 11 sanctions are not
appropriate based on either of the first two prongs.
Accordingly, Rule 11 sanctions could only be appropriate if
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Defendant’s motions were filed for an improper purpose. See
Durham, 206 N.C. App. at 72, 698 S.E.2d at 118 (“The improper
purpose prong of Rule 11 is separate and distinct from the
factual and legal sufficiency requirements. . . . Thus, even if
a paper is well grounded in fact and in law, it may still
violate Rule 11 if it is served or filed for an improper
purpose.” (citations, quotation marks, and alterations
omitted)).
“An improper purpose is any purpose other than one to
vindicate rights . . . or to put claims of right to a proper
test.” Mack v. Moore, 107 N.C. App. 87, 93, 418 S.E.2d 685, 689
(1992) (citation and quotation marks omitted). When determining
whether a motion was filed for an improper purpose, the relevant
inquiry is “whether the existence of an improper purpose may be
inferred from the alleged offender’s objective behavior.” Id.
Here, we have found no evidence in the record suggesting
that Defendant filed his motions to set aside the default
judgments for any improper purpose. Furthermore, the trial
court’s sanctions order did not contain any findings indicating
that Defendant filed his motions for any such improper purpose,
instead relying on its determination that the motions were not
well grounded in fact or law to support its conclusion that
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sanctions were appropriate. See Page v. Roscoe, LLC, 128 N.C.
App. 678, 686, 497 S.E.2d 422, 428 (1998) (concluding that
improper purpose prong of Rule 11 was not violated where there
was no evidence suggesting that complaint was filed for improper
purpose and trial court made no such findings). As such, Rule
11 sanctions were not appropriate in this case, and we vacate
the trial court’s sanctions order.2
Conclusion
For the reasons stated above, we (1) reverse the trial
court’s order denying Defendant’s Rule 60(b) motions; (2) vacate
the order granting Plaintiffs’ motion for sanctions; and (3)
vacate the underlying default judgments entered 17 March 2011.
REVERSED AND VACATED.
Judges STEELMAN and STEPHENS concur.
2
Defendant also challenges the validity of the $88,000.00 appeal
bond set by the trial court. The authority of a trial court to
impose an appeal bond is limited by statute. Plaintiffs contend
that the bond imposed was appropriate under N.C. Gen. Stat. § 1-
292, which requires an appellant to execute a bond of “a sum to
be fixed by a judge” in order to stay execution of a judgment
“direct[ing] the sale or delivery of possession of real
property.” N.C. Gen. Stat. § 1-292 (2013). Because the trial
court’s 18 October 2012 order denying Defendant’s motions to set
aside the default judgments did not “direct[] the sale or
delivery of possession of real property,” N.C. Gen. Stat. § 1-
292 does not apply. However, because we granted certiorari to
review the trial court’s 18 October 2012 orders and Defendant
was not ultimately required to execute the $88,000.00 appeal
bond, we need not address with specificity each of Defendant’s
arguments regarding the validity of the appeal bond.