IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA14-815
Filed: 15 December 2015
Henderson County, No. 13 CVS 1778
SOUTHEASTERN SURETIES GROUP, INC., Plaintiff,
v.
INTERNATIONAL FIDELITY INSURANCE COMPANY and RICHARD L.
LOWRY, Defendants.
Appeal by plaintiff from order entered 3 March 2014 by Judge Marvin P. Pope,
Jr. in Superior Court, Henderson County. Heard in the Court of Appeals 6 January
2015.
McGuire, Wood & Bissette, P.A., by Joseph P. McGuire and Starling B.
Underwood III, for plaintiff-appellant.
Ellis & Winters LLP, by Matthew W. Sawchak, Leslie C. Packer, and Nora F.
Sullivan for defendant-appellee International Fidelity Insurance Company
STROUD, Judge.
Plaintiff Southeastern Sureties Group, Inc., appeals trial court order granting
defendant International Fidelity Insurance Company’s motion to stay. For the
following reasons, we affirm.
I. Background
This case has a lengthy and complex history, beginning with Elder Cortez, who
was granted pretrial release on charges for several felonies upon posting a bond of
$600,000.00. State v. Cortez, ___ N.C. App. ___, ___, 747 S.E.2d 346, 349 (2013). Mr.
SE. SURS. GRP., INC. V. INT’L FID. INS. CO.
Opinion of the Court
Cortez failed to appear for court and has never been found, see International Fidelity
Insurance Co. v. Apodaca, ___ F. Supp. 2d ___, (D. N.J. 2015) (Civ. No. 13-06077),
leading to proceedings arising from the bond forfeiture and eventually metastasizing
into numerous civil actions in two states including many individual and corporate
parties and three prior appeals to this Court. See id.; Cortez, ___ N.C. App.at ___,
747 S.E.2d at 349-54. Some background of this case is required for an understanding
of the issues presented in this appeal. Some of this information comes from pleadings
and documents that may not directly involve the current two parties in this appeal.
We will first summarize the background including some “facts” or allegations that
may not have been established before us on this appeal. We are not relying on any
contested facts or mere allegations in our legal analysis but include them here to the
extent needed to understand the case currently before us.
A. Creation of Southeastern and its Relationship with International
In 1984, Mr. Thomas Apodaca became a licensed bail bondsman. In 1987,
defendant International Fidelity Insurance Company (“International”) entered into a
contractual relationship with Mr. Apodaca which made him a bond producer for
defendant International in North Carolina (“1987 Contract”). According to defendant
International, through the contractual relationship, Mr. Apodaca wrote bonds on
behalf of International and dealt with the financial aspects of the bonds along with
ensuring that bonded individuals appeared in court. Mr. Apodaca was responsible
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for any sub-producers who aided him, while defendant International was responsible
as the surety of the bonds Mr. Apodaca executed on its behalf, and Mr. Apodaca was
to indemnify defendant International for any losses sustained. Although this 1987
Contract is central to many of the arguments in this case, unfortunately it is not part
of our record on appeal.
In 1995, plaintiff Southeastern Sureties Group, Inc. (“Southeastern”) was
incorporated and Mr. Apodaca became its president. According to Mr. Apodaca,
Southeastern was the general agent for defendant International; how or when this
agency relationship arose is unclear as the only relevant contract we are aware of
was the 1987 Contract between Mr. Apodaca and defendant International,
approximately eight years before plaintiff Southeastern was incorporated.
Nonetheless, Mr. Apodaca claims that plaintiff Southeastern had a sub-agent
executing bonds on behalf of defendant International, Mr. Richard Lowry.
In 2004, Mr. Apodaca and defendant International entered into another
contract (“2004 Contract”). Plaintiff Southeastern, which had been incorporated at
this point, is not mentioned in the 2004 Contract. The 2004 Contract states it is
between Mr. Apodaca and defendant International, and Mr. Apodaca signed the 2004
Contract only on his own behalf. The 2004 Contract sets out various terms governing
the relationship between Mr. Apodaca and defendant International including an
“APPLICABLE LAW” provision as follows:
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In event of dispute or litigation, exclusive jurisdiction and
venue shall lie in the State of New Jersey. The parties
hereby agree that any legal action brought to enforce any
of the rights of the parties under this agreement or arising
out of the disputes between them shall be brought only in
the State or Federal courts of New Jersey.
B. The Cortez Bond Forfeiture
Since the bond forfeiture from which this case arises has been addressed in
three prior appeals to this Court, we will use the background from one of the prior
cases and emphasize portions relating to any individual or entity as relevant to issues
raised in this appeal:
Twenty-nine-year-old Elder Giovani Cortez
(“defendant”) was arrested and indicted for the offenses of
first-degree kidnapping, first-degree rape of a child under
the age of thirteen, and taking indecent liberties with a
child, which offenses were alleged to have occurred on 23
August 2007. Defendant was authorized to be released
upon the execution of a secured bond in the amount of
$2,000,000.00, which was later reduced to $600,000.00. On
16 September 2008, four months after defendant’s secured
bond was reduced, defendant was released on bail subject
to the conditions of appearance bonds executed by Tony L.
Barnes, Larry D. Atkinson, and Richard L. Lowry in the
amounts of $20,000.00, $10,000.00, and $570,000.00,
respectively.
Mr. Barnes executed the $20,000.00 bond as an
accommodation bondsman, and Mr. Atkinson executed the
$10,000.00 bond as a professional bondsman, which
rendered each a surety on their respective bonds. Because
Mr. Lowry executed the $570,000.00 bond as a “bail agent,”
the surety for that bond was the insurance company on
behalf of which Mr. Lowry executed the bond. The record
shows that, at the time the bond was executed, Mr. Lowry
was authorized to execute bail bonds both for International
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Fidelity Insurance Company (“International”) and for
Accredited Insurance Company (“Accredited”). The
insurance company named on the face of the appearance
bond executed by Mr. Lowry was Accredited, while
International was the insurance company named on the
attached power of attorney that evidenced Mr. Lowry's
authority to execute criminal bail bonds of up to $1 million.
According to an affidavit from International’s Senior Vice
President Jerry W. Watson, International is not an
affiliate, subsidiary, or parent of Accredited, and
Accredited is, in fact, a competitor of International. Only
International received and accepted the $3,990.00 premium
paid for the execution of the $570,000.00 bond.
In order to secure the $570,000.00 appearance bond
executed by Mr. Lowry, defendant and his wife Raquel H.
Cortez executed a promissory note in the amount of
$600,000.00, made payable to L R & M Corp, Richard
Lowry, upon the condition that, if defendant fails to appear
for any scheduled or unscheduled court date in 07 CRS
56935 in the County of Johnston, State of North Carolina
and a forfeiture issued, this note shall be due on demand.
Two deeds of trust, each representing a total indebtedness
of $300,000.00 and naming L R & M Corp and Mr. Lowry
as beneficiaries, were provided as collateral to secure the
$600,000.00 promissory note.
On 18 February 2009, defendant failed to appear in
court, and the Johnston County Clerk of Superior Court’s
Office (“Clerk’s Office”) issued bond forfeiture notices to Mr.
Barnes, Mr. Atkinson, and International, as the sureties of
record, and to Mr. Lowry, as the bail agent for named surety
International. Each notice, which was sent using the
Administrative Office of the Courts’ Form AOC–CR–213,
indicated that the forfeiture of the bond for each surety
named on the notice would become a final judgment on 23
July 2009, unless that forfeiture was set aside upon a
party’s motion prior to that date, or unless such motion was
still pending on that date. The notices further provided
that a forfeiture will not be set aside for any reason other
than those enumerated on the form.
On 22 July 2009, one day before the forfeitures were
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set to become final judgments, Mr. Atkinson and Mr.
Barnes as sureties, and Mr. Lowry as the bail agent for
named surety International, each indicated their intent to
move to set aside the forfeitures by signing and dating the
Motion To Set Aside Forfeiture section on the second page
of the bond forfeiture notice forms they had received from
the Clerk’s Office almost five months earlier. Although
Form AOC–CR–213 allows the movant to mark the
checkbox next to the enumerated reason that supports
their request to set aside a forfeiture, Mr. Atkinson, Mr.
Barnes, and Mr. Lowry (collectively “the Bondsmen”) did
not indicate by checkmark which of the reasons supported
their motions to set aside, and instead wrote See attached
Petition at the top of their respective notice forms. Then,
the Bondsmen and International filed a Motion for
Remission of Forfeiture (“the Remission/Set Aside Motion”)
with the Clerk’s Office, in which they collectively sought to
set forth the contended ground for relief from the order of
forfeiture.
In this Remission/Set Aside Motion, the movants
alleged that they each signed as surety for the appearance
of the defendant in this matter. They further alleged that,
although defendant had been located in Mexico and a
federal arrest warrant had been issued for service by the
FBI and by the Mexican Federal Police, defendant had not
yet been served with any arrest warrant but would be
shortly. In support of their allegations, the movants then
attached to the motion approximately 160 pages of e-mails
chronicling Mr. Lowry’s efforts to locate defendant between
February 2009 and July 2009. In addition to attaching a
copy of the motion to the Form AOC–CR–213 they each
filed with the Clerk’s Office, copies of the Remission/Set
Aside Motion were also served on the Johnston County
District Attorney’s Office (“the DA’s Office”) and on the
attorney for the Johnston County School Board (“the
Board”).
Neither the DA’s Office nor the Board filed
objections to the 22 July 2009 motions seeking to set aside
the forfeitures. Consequently, on 3 August 2009, the
Johnston County Clerk of Superior Court (“the Clerk”)
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granted the movants’ requests to set aside the forfeitures.
On 7 August 2009, Mr. Lowry then executed a satisfaction
of the deeds of trust that had been provided by defendant
and his wife as collateral to secure the promissory note that
secured the appearance bonds. On 25 August 2009, the
Board filed a motion against defendant and the Bondsmen
pursuant to N.C.G.S. § 1A–1, Rule 60 (“the Rule 60
Motion”), in which the Board requested that the court
strike the 3 August 2009 order that set aside the
forfeitures. Although International was not named in the
motion's caption, International was served with a copy of
the Board's Rule 60 Motion, which specifically alleged that
International posted a bond in the amount of $570,000.00
for the release of defendant.
In its Rule 60 Motion, the Board challenged whether
the form of the movants’ requests to set aside the
forfeitures sufficiently complied with the procedures set
forth in N.C.G.S. § 15A–544.5. Specifically, the Board
asserted that the 3 August 2009 order setting aside the
forfeitures should be stricken because: the movants did not
indicate by checkmark on the second side of Form AOC–
CR–213 which of the enumerated reasons supported their
motions to set aside, and such a failure, the Board argued,
was in dereliction of the requirements set forth in N.C.G.S.
§ 15A–544.5(b); the movants’ Remission/Set Aside Motion
was filed in contravention to the direction of a 12 January
2009 Administrative Order by the chief district and senior
resident superior court judges for Judicial District 11–B
that all motions to set aside a forfeiture made pursuant to
N.C.G.S. § 15A–544.5 must be filed on Form AOC–CR–213;
the documents accompanying the movants’ Remission/Set
Aside Motion were not sufficient evidence to support any of
the grounds for which a forfeiture shall be set aside
pursuant to N.C.G.S. § 15A–544.5(b); and the movants’
Remission/Set Aside Motion was not captioned as a Motion
to Set Aside Forfeiture, but rather as a Motion for
Remission of Forfeiture, which the Board alleged caused it
to believe that no objection was required to contest said
motion pursuant to N.C.G.S. § 15A–544.5(d). In response
to this motion, the Bondsmen urged the court to conclude
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that the Board’s failure to object to the Remission/Set Aside
Motion pursuant to N.C.G.S. § 15A–544.5(d) caused the
forfeitures to be set aside by operation of law.
On 12 October 2009, the trial court entered an order
denying the Board’s motion to vacate or strike the 3 August
2009 order that set aside the forfeitures. The trial court
concluded that, notwithstanding the misleading caption on
sureties’ motion, the tenuous claim of the sureties under
N.C.G.S. § 15A–544.5(b)(4)—which provides that a
forfeiture shall be set aside when the defendant has been
served with an Order for Arrest for the Failure to Appear
on the criminal charge in the case in question as evidence
by a copy of an official court record, N.C. Gen. Stat. § 15A–
544.5(b)(4) (2011)—and the sureties’ loose compliance with
this court’s administrative order governing bond
forfeitures, the Board and the DA’s Office had actual notice
of the nature of the relief sought by the sureties, failed to
object within the then-ten-day period for doing so, and the
Board made no showing that it was entitled to relief under
Rule 60(b)(1), (b)(4), or (b)(6). The Board appealed to this
Court from the trial court’s 12 October 2009 denial of its
Rule 60 Motion; the Board did not appeal from the 3 August
2009 order setting aside the bond forfeitures.
On 19 April 2011, this Court reversed and remanded
the trial court’s denial of the Board’s Rule 60 Motion
seeking to strike the 3 August 2009 order. See Cortez I,
211 N.C. App. 198, 711 S.E.2d 876, slip op. at 14. In Cortez
I, this Court determined that the Clerk was without
authority to grant the motion because the movants’
claimed reasons for relief from forfeiture did not come
within the purview of the statute and the requisite
documentation was entirely absent. Consequently, this
Court concluded that the 3 August 2009 order, which set
aside the forfeitures, was void, and remanded the matter
with instructions for the trial court to either dismiss
Sureties’ Remission/Set Aside Motion or deny the same for
the reasons set forth herein.
However, before this Court filed its decision in
Cortez I, defendant’s case was placed on another court
calendar and, again, defendant failed to appear. Then, on
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17 November 2009, two weeks after defendant failed to
appear for the second time, and one week after the Board
gave its notice of appeal to this Court from the denial of its
Rule 60 Motion that was at issue in Cortez I, the Clerk’s
Office issued another round of bond forfeiture notices to
Mr. Barnes, Mr. Atkinson, and International, as sureties,
and to Mr. Lowry as bail agent for named surety
International. However, the sureties had not re-bonded
defendant following his initial 18 February 2009 failure to
appear; instead, this second round of forfeiture notices
were issued only for the original bonds executed by the
sureties. See Cortez II, 215 N.C. App. at ___, 715 S.E.2d at
882. Thus, in response to these second forfeiture notices,
in April 2010, the Bondsmen filed their Motion to Dismiss
and Motion to Set Aside Forfeiture, in which they asserted
that the 17 November 2009 notices of forfeiture should be
stricken, vacated and set aside, and dismissed, because the
trial court was divested of its jurisdiction to issue notices of
forfeiture once the Board gave notice of appeal from the trial
court's denial of the Board's Rule 60 Motion. After hearing
the matter, on 17 May 2010, the trial court entered an
order denying the Bondsmen’s April 2010 motions. The
Bondsmen appealed to this Court from this order.
On 20 September 2011, in Cortez II, this Court
concluded, were we to hold that the Clerk and the court had
jurisdiction to enter and affirm the second orders of
forfeiture, the sureties would currently be liable for two
separate failures to appear and, therefore, liable for two
times the actual amount of the bonds executed in
defendant’s case. Thus, after determining that the 10
November 2009 appeal divested the Clerk and the trial
court of jurisdiction to take further action relating to the
16 September 2008 bonds so long as issues surrounding
those bonds remained subject to appellate review, this
Court vacated the trial court’s second orders of forfeiture.
The Board then filed a motion in the trial court
requesting that the court comply with this Court’s decision
in Cortez I—which held that the 3 August 2009 order
setting aside the forfeitures was void—by either dismissing
or denying the movants’ 22 July 2009 Remission/Set Aside
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Motion. After hearing the matter, on 5 January 2012, the
trial court entered an order (“the 5 January 2012 Order”)
in which it did the following: vacated its own 12 October
2009 order that denied the Board’s Rule 60 Motion to strike
the 3 August 2009 order setting aside the forfeitures;
dismissed the movants’ 22 July 2009 Remission/Set Aside
Motion for the reasons set forth in the Cortez I decision;
and ordered that the forfeitures shall become final
judgments. The Clerk’s Office then entered an electronic
bond forfeiture judgment pursuant to the trial court’s order,
and issued a writ of execution to the Sheriff of Johnston
County (“the Sheriff”) giving notice that International must
pay $570,000.00 plus interest and fees.
On 4 January 2012, one day before the trial court
entered its order declaring that the forfeitures were final
judgments, the Bondsmen and International together filed
a complaint (“the Bondsmen Complaint”) designated as File
No. 12 CVS 30 against defendant, the State of North
Carolina (“the State”), the Board, the Clerk, and the Sheriff.
In the Bondsmen Complaint, plaintiffs requested that the
trial court should declare that the Clerk did in fact
terminate the Plaintiffs’ contractual obligation on the
bonds when it entered its 3 August 2009 order setting aside
the forfeitures, and that, as a consequence, plaintiffs may
not be held liable on the bonds, or, in the alternative, that,
even if the Clerk’s 3 August 2009 Orders did not terminate
the contractual obligation, the State and the Board are
estopped from seeking to impose any kind of contractual
liability upon the Plaintiffs relating to the bonds to the
extent that the bonds were formerly secured by the deeds
of trust (which deeds of trust were required to be
cancelled). The Bondsmen also sought injunctive relief
pursuant to 42 U.S.C. § 1983.
The day after the trial court entered its 5 January
2012 Order declaring that the forfeitures were final
judgments, International returned the premium it received
for defendant’s bond. Then, one week later, International
voluntarily dismissed its claims in the Bondsmen
Complaint without prejudice pursuant to N.C.G.S. § 1A–1,
Rule 41(a), and filed a separate complaint (“the
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International Complaint”) designated as File No. 12 CVS
201 against the same defendants. In the International
Complaint, International requested that the trial court
declare that no forfeiture or judgment can be held against
International in the matter of the bonds executed to secure
the appearance of defendant, because Accredited had been
the insurance company named on the face of the appearance
bond, and because Mr. Lowry had no authority to attach
International’s Power of Attorney to an Accredited bond.
International further requested that the court declare that
it was not a party to the 5 January 2012 Order, because
neither the Board’s Rule 60 Motion nor the 5 January 2012
Order named International as a party in the caption.
The Board then filed motions to dismiss the
Bondsmen and International Complaints pursuant to Rule
12(b)(1) and (b)(6), and on the grounds that the complaints
are impermissible collateral attacks on the trial court’s 5
January 2012 Order and are further barred by the
doctrines of res judicata, collateral estoppel, and equitable
estoppel. The State, with the Clerk, filed motions to
dismiss both complaints on similar grounds. The trial court
conducted hearings on the motions to dismiss in both
actions. On 11 April 2012, the trial court entered an order
in File No. 12 CVS 30 allowing the Board’s motion to
dismiss the claims alleged in the Bondsmen Complaint as
they relate to a declaratory judgment and to the
substantive law of contracts involving the original contract
or appearance bond between the plaintiffs and the State,
on the grounds that such claims constituted a collateral
attack on the 5 January 2012 Order that made the
forfeitures final judgments—from which the parties had
not appealed—and on the grounds that such claims were
barred by the doctrines of res judicata and collateral
estoppel. However, the motion to dismiss the claim in the
Bondsmen Complaint that sought injunctive relief for
alleged violations of 42 U.S.C. § 1983 by the State was
denied without prejudice. On the same day, the trial court
also entered an order in File No. 12 CVS 201, in which it
dismissed the claims that had been alleged in the
International Complaint against the Board, the State, and
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the Clerk, on the grounds that such claims constituted a
collateral attack on the 5 January 2012 Order that made
the forfeitures final judgments, and on the grounds that
such claims were barred by the doctrines of res judicata and
collateral estoppel. International appealed to this Court
from the trial court’s order allowing the motions to dismiss
the International Complaint, and the Bondsmen and L R &
M Bailbonds, Inc. appealed from the order allowing the
Board’s motion to dismiss the first cause of action in the
Bondmen Complaint. The trial court certified the
appealability of its order regarding the Bondsmen
Complaint pursuant to N.C.G.S. § 1A–1, Rule 54(b).
Then, on 17 July 2012, the Board moved for
monetary sanctions pursuant to N.C.G.S. § 15A–544.5(d)(8)
against defendant, International, and the Bondsmen in File
No. 07 CRS 56935—the underlying criminal case for which
the original appearance bonds had been made—on the
grounds that the 22 July 2009 Remission/Set Aside Motion
was plainly frivolous and filed for the sole purpose of
preventing the forfeitures from going into judgment. The
Board requested that the court impose monetary sanctions
in the amount of fifty percent of each bond against Mr.
Barnes and Mr. Atkinson individually, and against Mr.
Lowry and International together. On 24 August 2012, the
court ordered that, because Mr. Atkinson and Mr. Barnes
promptly paid their respective bonds after the 5 January
2012 Order, and because Mr. Lowry is not a surety for the
$570,000.00 bond, only International shall pay a sanction
in the amount of $285,000 pursuant to N.C.G.S. § 15A–
544.5(d)(8). International gave timely notice of appeal from
this order. The court then stayed the execution on the civil
judgment for monetary sanctions pursuant to the pending
appeal; the stay was secured by a bond.
Cortez, ___ N.C. App. at ___, 747 S.E.2d at 349-54 (“Cortez III”) (emphasis added)
(citations, quotation marks, ellipses, brackets, and footnotes omitted). Ultimately, in
Cortez III, this Court affirmed all of the trial court’s orders appealed in Cortez III;
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thus, defendant International owed $570,000.00 plus interest and fees for the bond
forfeiture and $285,000.00 in sanctions. See id. at ___, 747 S.E.2d at 354.
C. The Federal New Jersey Case Before This Appeal
In October of 2013, defendant International filed a complaint against Mr.
Apodaca and Lisa Tate Apodaca, Mr. Apodaca’s wife, in federal court in New Jersey
for breach of contract claiming that pursuant to the 1987 Contract, Mr. Apodaca was
required to indemnify defendant International for the money it was being ordered to
pay in North Carolina for the Cortez bond forfeiture.1
D. The North Carolina Case
On 1 November 2013, plaintiff Southeastern filed a complaint against
defendants International and Mr. Lowry in North Carolina seeking a declaratory
judgment which would, in effect, protect plaintiff Southeastern from any claim for
indemnification for the Cortez bond. According to the allegations in the complaint,
plaintiff Southeastern was defendant International’s “general agent . . . and was
authorized to execute bail bonds for” defendant International. Plaintiff Southeastern
requested:
(A) That the Court declare that International was not a
surety on the Bond;
(B) That the Court declare that International’s return
and/or refund of premium on the Bond released
Southeastern from any obligation arising out of the
1 As further discussed below, Mrs. Apodaca was later removed as a party to the New Jersey
case and plaintiff Southeastern was added as a defendant.
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Bond and waived any claim against Southeastern
relating to the Bond;
(C) That the Court declare that the actions and
omissions of International and Mr. Lowry resulting
in the release of the collateral securing the Bond, the
imposition of sanctions of $285,000 by the court, the
Forfeiture becoming final and a loss on the Bond
that was unnecessary and avoidable released and
discharged Southeastern from any obligation under
the Bond;
(D) That the Court declare that International’s breach
of duty and negligence in connection with the Bond
precludes any recovery against Southeastern
relating to the Bond;
(E) That Southeastern have and recover judgment
against International in an amount in excess of
$15,000, plus interest thereon at 8% per annum;
(F) That International be estopped from claiming that it
was the insurance company on the Bond and/or that
the Bond is enforceable;
(G) That Southeastern have a trial by jury;
(H) That the costs of this action be taxed to International
and Mr. Lowry; and
(I) That Southeastern have such further relief as the
Court may deem just and proper.
On or about 21 November 2013, defendant International amended its
complaint pending in the federal court in New Jersey, removing Mrs. Apodaca as a
named defendant and adding Southeastern as a defendant. On 27 December 2013,
in the North Carolina case, defendant International filed a motion to dismiss plaintiff
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Southeastern’s claims or, in the alternative, “stay proceedings in favor of an already
filed action in the U.S. District Court for the District of New Jersey.” On or about 27
January 2014, plaintiff Southeastern filed a motion “to enjoin International Fidelity
Insurance Company from proceeding with its parallel action in New Jersey[,]”
(original in all caps), stating:
Pursuant to Rule 65 of the North Carolina Rules of
Civil Procedure, Plaintiff Southeastern Sureties Group,
Inc. (“Southeastern”) moves to enjoin International
Fidelity Insurance Company (“International”) from
proceeding in a parallel lawsuit filed by International
relating to the same subject matter in the U.S. District
Court of the District of New Jersey, Civil Action No. 13-CV-
6077 (the “NJ Action’[’]), against Southeastern and its
president, Thomas M. Apodaca (“Mr. Apodaca”).
The NJ Action and this lawsuit (the “NC Action”)
arise out of a forfeiture on an Appearance Bond for Pretrial
Release filed September 17, 2008 for the defendant Elder
G. Cortez (“Mr. Cortez”) in the amount of $570,000 in File
No. 07 CRS 56935 in Johnston County, North Carolina (the
“Cortez Bond”). Prior to International’s adding
Southeastern as a party to the NJ Action, Southeastern
filed this NC Action, seeking to establish that
Southeastern has no liability relating to the Cortez Bond
and alternatively to recover damages from International
based upon its misconduct in connection with the bond.
In the absence of injunctive relief, International’s
prosecution of the NJ Action will interfere unduly and
inequitably with the progress of this NC Action and with
the establishment of Southeastern’s rights properly
justiciable in this Court. The NJ Action will also be unduly
annoying, vexatious and harassing to Southeastern and
Mr. Apodaca. Southeastern has no adequate remedy at law
and will suffer irreparable damage in the event
International is not enjoined from proceeding with the NJ
Action.
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On 10 February 2014, defendant Mr. Lowry filed a motion to dismiss plaintiff
Southeastern’s complaint.
On 3 March 2014, the trial court entered orders denying plaintiff
Southeastern’s motion to enjoin, denying defendant International’s motion to
dismiss, and granting defendant International’s motion to stay. The order granting
the motion to stay found:
1. This action was filed in Henderson County, North
Carolina on November 1, 2013 contesting the
validity of a bond executed on a criminal Defendant
by the name of Cortez in 2008 in Johnston County,
North Carolina (not Henderson County, North
Carolina). The Plaintiff alleges that the Plaintiff
was an agent of the Defendant International
Fidelity Insurance Company (IFIC) but that
Defendant Lowry was not authorized to attach
IFIC’s Power of Attorney to the bond issued in the
Cortez criminal action. Other causes of action raised
by the Plaintiff in this action against IFIC include
Declaratory Judgment action, breach of duty,
negligence and allegations that IFIC is estopped to
deny invalidity of the bond. This Court specifically
notes that all issues concerning the Defendant
Cortez bond forfeiture in Johnston County, North
Carolina have been resolved by the decision of the
North Carolina Court of Appeals.
2. A suit was initiated in the United States District
Court for the District of New Jersey captioned
International Fidelity Insurance Company
(hereinafter referred to as “IFIC”), Plaintiff vs.
Thomas M. Apodaca (hereinafter referred to as
“Apodaca”) on October 11, 2013 in file #13-CV-6077
wherein IFIC was seeking indemnification from
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Opinion of the Court
Defendant Apodaca regarding losses with the bond
issued in the Cortez criminal action. This federal
suit was amended on November 21, 2013 by the
Plaintiff IFIC by adding Southeastern Sureties
Group, Inc. (hereinafter referred to as
“Southeastern”) as a party Defendant in the New
Jersey action subsequent to the filing of this action
in Henderson County.
3. Plaintiff Southeastern Sureties Group, Inc.
(Southeastern) is a North Carolina legal entity
utilized by Apodaca in his bonding business.
Exhibits from the Secretary of State of North
Carolina and the North Carolina Department of
Insurance indicate that Apodaca is the registered
agent, President and sole officer of Southeastern.
Bail bondsman statutes for the State of North
Carolina require a natural person to write bail
bonds.
Documentation from the North Carolina
Department of Insurance verifies that Apodaca is
licensed to write bonds for the Defendant IFIC in the
State of North Carolina. Plaintiff Southeastern
Sureties Group, Inc. and Apodaca appear to this
Court to be one entity in [(sic)] the same for matters
pertaining to the criminal Cortez bond which the
subject matter of this North Carolina and New
Jersey causes of action.
4. Apodaca has not been made a party Plaintiff to this
cause of action 13 CVS 1778 in Henderson County.
IFIC did not have a contractual relationship with
Southeastern regarding surety bonds in North
Carolina.
5. The issues in the above captioned matter include the
following:
a. Was the Defendant IFIC surety on the
Cortez bond?
b. Did Defendant IFIC release Plaintiff
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Opinion of the Court
Southeastern Sureties Group, Inc.,
(Southeastern) from the bond?
c. Has Defendant IFIC waived any claim
against the Plaintiff Southeastern?
6. Issues in the federal action in New Jersey are
identical in that the Plaintiff IFIC in New Jersey is
seeking indemnification from Apodaca for costs,
fees, damages or fines incurred by Plaintiff IFIC in
the criminal Cortez bond pursuant to a contract
between Plaintiff IFIC and Apodaca which contains
an indemnification agreement.
7. The Plaintiff IFIC and Defendant Apodaca selected
their exclusive forum in 2004 pursuant to Paragraph
24 of the contract being sued upon in the New Jersey
federal action by the following language:
APPLICABLE LAW: In event of dispute or
litigation, exclusive jurisdiction and venue shall lie in the
State of New Jersey. The parties hereby agree that any
legal action brought to enforce any of the rights of the
parties under this agreement or arising out of any disputes
between them shall be brought only in the State or Federal
courts of New Jersey.
8. This Court has considered factors designated under
NCGS 1-75.12 including the nature of the case, the
exclusive forum selected by the parties in 2004 (prior
to the execution of the Cortez bond), the convenience
of witnesses, applicable law, inappropriate choice of
forum by the Plaintiff in 13 CVS 1778 and other
practical considerations.
9. Plaintiff Southeastern argues substantive law from
the State of New Jersey including matters such as
the “Entire Controversy Doctrine”; the alleged fact
that IFIC waived exclusive forum selection by filing
suits in North Carolina regarding the Cortez
criminal bond; and the inconsequential fact that
IFIC moved its national headquarters from the
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Opinion of the Court
State of New Jersey to the State of California. The
Court has considered these matters and finds that
these substantive issues may be raised by the
Plaintiff Southeastern and/or Apodaca in the New
Jersey Federal District Court if they choose to do so;
however they are inapplicable in this North Carolina
cause of action.
The trial court then concluded:
1. This matter is properly before the Court and the
Court has jurisdiction of the subject matter of this
action.
2. The real parties in interest to this action by contract
selected the State of New Jersey as the exclusive
legal forum and venue for determination of all
disputes arising between Apodaca and IFIC.
3. Apodaca and Plaintiff Southeastern Sureties Group,
Inc. are one in [(sic)] the same entity for the purpose
of this North Carolina cause of action.
4. The New Jersey federal suit was chronologically
first filed for the indemnification issues created
and/or caused by the Cortez criminal bond forfeiture
in Johnston County, North Carolina.
5. Litigation of the matter in New Jersey involves the
same matters in the above captioned action in the
State of North Carolina and is parallel and
duplicative in content.
6. It is in the best interests of the parties in this
Henderson County, North Carolina cause of action
to litigate issues raised in File #13-CV-6077 in the
Federal District Court for the District of New Jersey
prior to proceeding further in the case at bar.
The trial court then ordered:
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Opinion of the Court
1. That Defendant IFIC’s Motion of December 23, 2013
to Stay Proceedings until the completion of the
action filed in the United States District Court for
the District of New Jersey in File # 13-CV-6077 be
and is hereby GRANTED.
2. Further proceedings in this North Carolina matter
shall be stayed pending conclusion of litigation and
appeals in the United States District Court for the
District of New Jersey File # 13-CV-6077.
Plaintiff Southeastern appeals the order granting defendant International’s motion
to stay.
E. The Federal New Jersey Case During This Appeal
During the pendency of this appeal, in September of 2015, the federal New
Jersey Court proceeded with the case and heard motions for summary judgment,
sanctions, and to dismiss. See International Fidelity Insurance, ___ F. Supp. 2d ___.
The federal court addressed some of the same legal issues raised in the case before
us. See id. The federal court granted the summary judgment motion in part and
denied the motion for sanctions and to dismiss; therefore, the federal court will be
proceeding to trial on the remaining claims. See id.
F. The North Carolina Appeal
On 14 September 2015, this Court received a “MEMORANDUM OF
ADDITIONAL AUTHORITY” from defendant International which included the
September 2015 federal New Jersey Court decision; while the decision is not
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Opinion of the Court
“additional authority” pursuant to North Carolina Rule of Appellate Procedure 28, it
is relevant to this case. See generally N.C.R. App. P. 28. Nonetheless, defendant
International presented us with the “memorandum” but made no argument regarding
its effect on this case. Because of the unusual situation, this Court requested
supplemental briefs addressing the effect, if any, of the federal ruling on this appeal.
Defendant International’s brief suggested this Court simply wait to see what happens
in the federal case because it may moot the case before us. Of course, since we are
considering an order staying the North Carolina action, simply waiting on the federal
New Jersey Court would as a practical matter affirm the trial court’s order granting
the stay. No party has filed a motion to dismiss this appeal.
Plaintiff Southeastern’s brief addressing the federal New Jersey opinion notes
several ways in which the North Carolina order on appeal has adversely affected its
case in New Jersey. Plaintiff Southeastern notes that the New Jersey opinion “took
judicial notice of an erroneous finding and conclusion . . . which is critical” by
determining “that Apodaca and Southeastern are one entity in the same for matters
pertaining to the criminal Cortez Bond.” (Quotation marks omitted.); this particular
finding is one of the primary bases of plaintiff Southeastern’s arguments in this
appeal. Plaintiff Southeastern also argues that the federal New Jersey opinion
“dispel[s] International’s representation [in North Carolina] that International had
paid the settlement of the Cortez Bond, when that was not the case.” Plaintiff
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Opinion of the Court
Southeastern also reiterates its argument that the trial court applied the wrong
standard of the “best interest of the parties” instead of the substantial justice
standard which is required to grant a stay under North Carolina General Statute §
1-75.12. In light of the original briefs as well as the additional briefing of the parties
on this unusual case, we will address the current appeal.
II. Stay
This case seems to present many potential legal issues including necessary
parties, real parties in interest, collateral estoppel, and judicial estoppel which could
be determinative, but those issues were not raised. We have had substantial
difficulty addressing the issues which were actually argued, considering the absence
of crucial documents such as the 1987 Contract and the absence of argument on the
federal court decision. But we are bound by the arguments before us, and we will not
address potential arguments that are not before us on appeal. See Viar v. North
Carolina Dept. of Transp., 359 N.C. 400, 402, 610 S.E.2d 360 (2005) (“It is not the role
of the appellate courts, however, to create an appeal for an appellant.”) Although the
argument section of plaintiff Southeastern’s brief seeks to fragment the issue into 14
separate issues, the only real issue on appeal is whether the trial court abused its
discretion by granting the stay.
When evaluating the propriety of a trial court’s stay order
the appropriate standard of review is abuse of discretion. A
trial court may be reversed for abuse of discretion only if
the trial court made a patently arbitrary decision,
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Opinion of the Court
manifestly unsupported by reason. Rather, appellate
review is limited to [e]nsuring that the decision could, in
light of the factual context in which it was made, be the
product of reason.
Home Indem. Co. v. Hoechst Celanese Corp., 128 N.C. App. 113, 117–18, 493 S.E.2d
806, 809–10 (1997) (citations, quotation marks, and brackets omitted).
In determining whether to grant a stay under G.S. § 1-
75.12, the trial court may consider the following factors: (1)
the nature of the case, (2) the convenience of the witnesses,
(3) the availability of compulsory process to produce
witnesses, (4) the relative ease of access to sources of proof,
(5) the applicable law, (6) the burden of litigating matters
not of local concern, (7) the desirability of litigating matters
of local concern in local courts, (8) convenience and access
to another forum, (9) choice of forum by plaintiff, and (10)
all other practical considerations.
Lawyers Mut. Liab. Ins. Co. of N. Carolina v. Nexsen Pruet Jacobs & Pollard, 112
N.C. App. 353, 356, 435 S.E.2d 571, 573 (1993).
Plaintiff Southeastern challenges several of the trial court’s findings of fact
and conclusions of law. The most significant portions of the order challenged in the
current posture of the case are finding of fact 3 and conclusion of law 3, respectively:
“Plaintiff Southeastern Sureties Group, Inc. and Apodaca appear to this Court to be
one entity in [(sic)] the same for matters pertaining to the criminal Cortez bond[,]”
and “Apodaca and Plaintiff Southeastern Sureties Group, Inc. are one in [(sic)] the
same entity for the purpose of this North Carolina cause of action.” Plaintiff
Southeastern contends that “[t]he record does not support a finding of fact that
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Opinion of the Court
Southeastern and Mr. Apodaca operate as one and the same.” Although the “one and
the same” determination is labelled both as a finding of fact and a conclusion of law,
it is actually a conclusion of law since it addresses a legal conclusion about the
relationship between Mr. Apodaca and plaintiff Southeastern, which would have to
be based upon facts about the business entity and the individual. See, e.g., Statesville
Stained Glass v. T. E. Lane Construction & Supply, 110 N.C. App. 592, 597-98, 430
S.E.2d 437, 440-41 (1993) (“In the instant case, with certain exceptions not material
to the disposition of this case, the court’s findings regarding Lane’s involvement in
Lane Construction are supported by the evidence. Based on the evidence in the
record, Lane was the chief executive officer, sole shareholder, and controller of Lane
Construction. The evidence also supports the court’s findings that plaintiff at all
times dealt with Lane, and that Lane dissolved Lane Construction in July, 1989, at
which time Lane Construction owed business debts. However, these findings, even
though supported by the evidence, cannot provide the basis for the court’s conclusion
of law that Lane Construction had no will or existence separate and apart from Lane,
or that the stock control as exercised by Lane justifies piercing the corporate veil of
Lane Construction.” (quotation marks and brackets omitted)).
Plaintiff is essentially contending that defendant International should not be
allowed to reverse pierce the corporate veil and reach through the corporation of
plaintiff Southeastern to reach the individual Mr. Apodaca. But no issue of piercing
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Opinion of the Court
the corporate veil was raised or argued before this Court and considering the entirety
of the order in the context of this case, this determination appears to simply be a
poorly-worded statement which recognizes the fact that plaintiff Southeastern is
wholly owned and operated by Mr. Apodaca.2
But plaintiff is correct that this “one and the same” determination is not
supported by the record to the extent that it could be read as a binding legal
determination of the relationship between Mr. Apodaca and plaintiff Southeastern
for purposes of this action or the federal New Jersey action. The only finding of fact
which addresses Mr. Apodaca and plaintiff Southeastern’s relationship is finding of
fact. 3: “Plaintiff Southeastern Sureties Group, Inc. (Southeastern) is a North
Carolina legal entity utilized by Apodaca in his bonding business. Exhibits from the
Secretary of State of North Carolina and the North Carolina Department of Insurance
indicate that Apodaca is the registered agent, President and sole officer of
Southeastern.” Finding of fact 3 cannot support a conclusion of law that Mr. Apodaca
and plaintiff Southeastern are “the same entity for the purpose of this North Carolina
cause of action.” See id. Indeed, Mr. Apodaca is not even a party to this case, so the
trial court would be unable to properly make a determination as to any potential
individual liability. In addition, since no party has argued a theory of “reverse
2 Again, we note that the 1987 Contract is not part of our record, but it initially formed the
relationship between Mr. Apodaca and defendant International before the creation of plaintiff
Southeastern.
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Opinion of the Court
piercing” of the corporate veil to impose individual liability upon Mr. Apodaca and no
party has sought to make him a party to this case in North Carolina, the conclusion
that Mr. Apodaca and Southeastern are “one and the same” was not necessary for the
trial court’s consideration of the motion to stay. Because we have concluded that the
trial court could not properly determine that Mr. Apodaca and plaintiff Southeastern
were “one and the same,” to the extent that the federal New Jersey Court did rely
upon that determination, such reliance is misplaced.
Aside from the propriety of the trial court’s conclusion of law, we note that the
order on appeal is a stay order, which is necessarily a preliminary determination
based upon limited information. See generally N.C. Gen. Stat. § 1-75.12 (2013). A
trial court’s determination in a preliminary order of any important substantive
factual or legal issue which may affect the outcome of a case should rarely, if ever, be
solely relied upon to support a trial court’s later substantive ruling on an issue. An
order under North Carolina General Statute § 1-75.12 for a stay of proceedings is
necessarily a preliminary order which is entered before the case has been developed
by discovery.3 See generally id. In fact, North Carolina General Statute § 1-75.12(b)
recognizes that as a case develops, modification of a stay order may become necessary:
3 An order granting a stay is comparable to a temporary injunction, so we find our Supreme
Court’s directive regarding the effect of a temporary injunction instructive: “The findings of fact and
other proceedings of the judge who hears the application for an interlocutory injunction are not binding
on the parties at the trial on the merits. Indeed, these findings and proceedings are not proper matters
for the consideration of the court or jury in passing on the issues determinable at the final hearing.”
Huskins v. Hospital, 238 N.C. 357, 362, 78 S.E.2d 116, 120-21 (1953).
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Opinion of the Court
(b) Subsequent Modification of Order to Stay
Proceedings. - In a proceeding in which a stay has been
ordered under this section, jurisdiction of the court
continues for a period of five years from the entry of the
last order affecting the stay; and the court may, on motion
and notice to the parties, modify the stay order and take
such action as the interests of justice require. When
jurisdiction of the court terminates by reason of the lapse
of five years following the entry of the last order affecting
the stay, the clerk shall without notice enter an order
dismissing the action.
N.C. Gen. Stat. § 1-75.12. We also realize that the New Jersey federal court may
have considered information which was not before either the North Carolina trial
court or this Court and that it may have reached the same conclusions even without
any reliance upon the North Carolina stay order. But since the conclusion of law, as
stated in both finding of fact 3 and conclusion of law 3, is not supported by the other
findings of fact, it was made in error and both finding of fact 3 and conclusion of law
3 should be stricken from the stay order.
Plaintiff Southeastern also argues in its supplemental brief addressing the
federal New Jersey opinion that it “dispel[s] International’s representation [in North
Carolina] that International had paid the settlement of the Cortez Bond, when that
was not the case.” But again, the evidence presented before the federal New Jersey
court was not necessarily evidence that was before the trial court when considering
whether or not to issue a stay, the trial court made no findings on this issue, and no
argument was presented on this issue until the supplemental briefs to this Court filed
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Opinion of the Court
after the New Jersey order, so we cannot address this factual issue. As we have
previously noted, plaintiff Southeastern is able to pursue a modification of the stay
“as the interests of justice require.”4 N.C. Gen. Stat. § 1-75.12.
Plaintiff Southeastern also contends that the trial court used the wrong
standard, in concluding that a stay is in the “best interests” of the parties and not
that it would work “substantial injustice” for the case to be tried in North Carolina.
But reading the entire order and its findings and conclusions in context, it is apparent
that the trial court considered the relevant factors in Lawyers Mut. Liab. Ins. Co. of
N. Carolina, 112 N.C. App. at 356, 435 S.E.2d at 573. The stay order does not have
to use the “magic words” of “substantial injustice” where it is clear from the entire
order that the trial court was in fact considering the appropriate factors and making
the proper determination pursuant to North Carolina General Statute § 1-75.12. Use
of the term “best interests” may be poor draftsmanship, but it does not rise to the
level of reversible error.
Having addressed plaintiff Southeastern’s major arguments on appeal, we
turn back to the remainder of its argument. Plaintiff Southeastern challenges or at
least mentions virtually every finding of fact and conclusion of law in the 14 headings
in its arguments in its original brief. Most of the findings of fact are simply an
4 This opinion should not be read as suggesting or commenting in any way on the propriety or
merit of a motion to modify pursuant to North Carolina General Statute § 1-75.12(b); we merely note
that the avenue is available for plaintiff Southeastern to pursue and modification of the stay is not the
role of this Court. See generally N.C. Gen. Stat. § 1-75.12.
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Opinion of the Court
identification of the parties, the issues, and a recitation of the long procedural history
of this case, and they are supported by the record. We note again that this is a stay
order; it is a preliminary order which does not purport to make a final determination
of any disputed fact or substantive legal issue. See generally N.C. Gen. Stat. § 1-
75.12. The trial court’s order made findings of fact regarding the relevant factors.
See Lawyers Mut. Liab. Ins. Co. of N. Carolina, 112 N.C. App. at 356, 435 S.E.2d at
573. As noted above, the trial court’s conclusion of law regarding the legal
relationship between Mr. Apodaca and plaintiff Southeastern was not necessary for
purposes of the stay order, so the order is proper even without that conclusion of law.
Because the federal New Jersey action was filed first and all of the parties are
currently litigating the ultimate issue in this case, which is who should be liable for
the loss associated with the bond forfeiture, the trial court’s issuance of a stay was
not “a patently arbitrary decision, manifestly unsupported by reason.” See Home
Indem. Co., 128 N.C. App. at 117–18, 493 S.E.2d at 809–10. Given the multiple
parties and issues in dispute, the trial court’s order essentially “recognizes the
practical reality” that the New Jersey federal court “is better able to arrive at a more
comprehensive resolution of the litigation, given the broader scope of claims and
parties before it.” Wachovia Bank v. Harbinger Capital Partners Master Fund 1, Ltd.,
201 N.C. App. 507, 521, 687 S.E.2d 487, 496 (2009). The federal court’s well-reasoned
opinion which has determined that it is the proper jurisdiction for litigating the
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Opinion of the Court
claims arising from the contractual relationships between the parties only serves to
underscore the trial court’s determination.
III. Conclusion
We strike finding of fact 3 and conclusion of law 3 from the stay order, but
because the trial court did not abuse its discretion in granting the stay, we affirm.
AFFIRMED.
Judge BRYANT concurs in the result in separate opinion.
Judge HUNTER, Jr. concurs in part and dissents in part.
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No. COA14-815 – Se. Surs. Grp., Inc. v. Int’l Fid. Ins. Co.
BRYANT, Judge, concurring in the result.
I write separately to note that while I concur in the result of the majority
opinion, and concur in most of the analysis, I would affirm the trial court order
without striking its finding of fact 3 and conclusion of law 3.
As the majority noted, this Court reviews a lower court’s order granting a stay
for abuse of discretion. See Lawyers Mut. Liab. Ins. Co. v. Nexsen Pruet Jacobs &
Pollard, 112 N.C. App. 353, 356, 435 S.E.2d 571, 573 (1993). A trial court is deemed
to have abused its discretion when its decision is patently arbitrary or manifestly
unsupported by reason. Muter v. Muter, 203 N.C. App. 129, 134, 289 S.E.2d 924, 928
(2010) (citation omitted). While the majority opinion upholds the trial court’s order
in general as one that is not arbitrary, and therefore does not constitute an abuse of
discretion, by striking finding of fact 3 and conclusion of law 3, the majority appears
to determine the trial court did abuse its discretion as to that finding and conclusion.
With regard to the trial court’s conclusion of law 3, that Apodaca and
Southeastern are the same entity, Southeastern contends that this conclusion is in
error because it is not supported by the evidence. The majority opinion as well as a
portion of the dissenting opinion appears to agree with that contention. However, a
review of the record and the previous incarnations of this case before this Court
indicate that Apodaca was, at the time of the Cortez bonds, the sole owner and
controller of Southeastern Sureties. Moreover, International Fidelity presented
evidence that Apodaca signed various documents on behalf of Southeastern,
SE. SURS. GRP., INC. V. INT’L FID. INS. CO.
BRYANT J., concurrence
acknowledged his liability for the actions of Southeastern, and conducted his bail
bond/surety business in North Carolina through Southeastern. Based on our
standard of review, I cannot agree that the trial court abused its discretion where
there was sufficient evidence for the trial court to conclude that Apodaca and
Southeastern Sureties are “one and the same entity” for purposes of granting
International’s motion to stay.
Other than as stated above, I concur in the majority opinion.
2
No. COA 14-815 – Southeastern Sur. Grp., Inc. v. Int’l Fid. Ins. Co.
HUNTER, JR., Robert N., Judge, concurring in part, and dissenting in part.
I agree with the majority that this case is a bramble bush. See KARL N.
LLEWELLYN, THE BRAMBLE BUSH: THE CLASSIC LECTURES ON THE LAW AND LAW
SCHOOL. I dissent with the majority opinion only on the remedy which is required in
this matter. I also agree that North Carolina courts have subject matter jurisdiction
over the controversy based upon the record in this case and the prior pending actions
described in Cortez I, Cortez II, and Cortez III and my understanding that bond issues
and their collateral consequences are in rem or quasi in rem matters under North
Carolina law requiring resolution by state courts. N.C. Gen. Stat. § 1-75.8 (2013). I
am not convinced that under existing federal case law that in this limited area state
courts defer to federal courts. See Moses H. Cone Mem. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 103 S. Ct. 927 (1983); see also 17A CHARLES ALAN WRIGHT, ARTHUR
R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 4241 (3d ed.
1998). However, I am not sure how this matter is adjudicated given that the federal
court has been adjudicating the rights of the parties while this appeal is pending.
Based upon these findings, the court made the legal conclusion that Thomas
Apodaca was the real party in interest in the litigation in Henderson County. I agree
with the majority. This legal conclusion was made without competent evidence to
support it. While I agree that this evidence would show that Apodaca and
Southeastern may be in privity with one another, I am not convinced that the
corporate entity can be set aside so lightly merely based on ownership and control of
a corporation.
SOUTHEASTERN SUR. GRP., INC. V. INT’L FID. INS. CO.
Hunter, Jr., Concurring in part, and dissenting in part
N.C. Gen. Stat. § 1-57 and Rule 17(a) of the Rules of Civil Procedure require
that every claim be prosecuted in the name of the real party in interest. Should it
appear to a court that a claim is not being prosecuted in the name of the real party in
interest, then the procedure for the court to follow is to continue the matter to give
the real party in interest an opportunity to plead or ratify the pleadings. “Where . . .
a fatal defect of the parties is disclosed, the court should refuse to deal with the merits
of the case until the absent parties are brought into the action, and in the absence of
a proper motion by a competent person, the defect should be corrected by ex mero
motu ruling of the court.” Booker v. Everhart, 294 N.C. 146, 158, 240 S.E.2d 360, 367
(1978); see Carolina First Nat’l Bank v. Douglas Gallery of Homes, Ltd., 68 N.C. App.
246, 314 S.E.2d 801 (1984).
It does not appear from the record that Apodaca was given this opportunity.
International’s Motion to Dismiss filed on 5 February 2014 first suggests Apodaca
should have been a party. During the hearing on the motion to dismiss, International
stated, “Apodaca and International are the parties at interest here.” From then, it
was less than a month until the court entered its order granting a stay. It does not
appear from the record that Apodaca has ever been served in this case. The court has
found and concluded that Apodaca is not a party plaintiff. The record does not contain
a motion to dismiss for failure to prosecute the claim in the name of the real party in
2
SOUTHEASTERN SUR. GRP., INC. V. INT’L FID. INS. CO.
Hunter, Jr., Concurring in part, and dissenting in part
interest. No party filed a third party complaint or motion to join Apodaca. I agree
that the court can raise the issue on its own, but once raised it would be an error to
enter a stay order until the real party in interest issue was resolved procedurally. I
would hold the court should not have stayed the proceedings in this case until
Apodaca intervenes, is joined, ratifies the complaint, or is given the opportunity to
plead his case. Only then may the court take action ex mero motu to make him a
party. Should the court do so it must recite findings of fact upon which such action
should be taken.
3
Se. Sureties Grp., Inc. v. Int'l Fid. Ins. Co.
Court: Court of Appeals of North Carolina
Date filed: 2015-12-15
Citations: 785 S.E.2d 96, 244 N.C. App. 439
Copy CitationsCombined Opinion