Bauer v. Douglas Aquatics Inc, COA10-47.

• Decision Date: 07 September 2010
• Docket Number: No. COA10-47.,COA10-47.
• Court: North Carolina Court of Appeals
• Parties: John BAUER, Plaintiff,v.DOUGLAS AQUATICS, INC. and Douglas Aquatics Charlotte, LLC, Defendants,v.Charlotte Shotcrete, Inc., Cross-Claim Defendant.

698 S.E.2d 757

John BAUER, Plaintiff,

v.DOUGLAS AQUATICS, INC. and Douglas Aquatics Charlotte, LLC, Defendants,

v.Charlotte Shotcrete, Inc., Cross-Claim Defendant.

No. COA10-47.

Court of Appeals of North Carolina.

Sept. 7, 2010.

COPYRIGHT MATERIAL OMITTED

Appeal by Defendant Douglas Aquatics, Inc. from judgment entered 30 September 2009 by Judge Jesse B. Caldwell in Mecklenburg County Superior Court. Heard in the Court of Appeals 27 May 2010.

Thurman, Wilson, Boutwell, & Galvin, P.A., Charlotte, by James P. Galvin, for Plaintiff-Appellee.

Teague Campbell Dennis & Gorham, L.L.P., Asheville, by William A. Bulfer, for Defendant-Appellant Douglas Aquatics, Inc.

BEASLEY, Judge.

Defendant Douglas Aquatics, Inc. (Appellant) appeals the trial court's order denying its motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2) of the North Carolina Rules of Civil Procedure. Because Appellant raises the sole question of whether the exercise of personal jurisdiction over it by the North Carolina courts comports with due process and we conclude that it does, we affirm.

Appellant, a Virginia corporation performing pool construction services, also franchises several pool management and construction companies located in Virginia and North Carolina. John Bauer (Plaintiff) is a North Carolina resident. This action arises out of a swimming pool construction agreement entered into by Plaintiff and Defendant Douglas Aquatics Charlotte, LLC (DA Charlotte), a franchisee of Appellant residing in North Carolina. Alleging faulty construction, Plaintiff filed a verified complaint on 18 March 2009 against Appellant and DA Charlotte ¹ for breach of warranties, breach of contract, negligence, fraud, unfair and deceptive trade practice, and agency. In its answer filed 21 May 2009, Appellant included motions to dismiss for lack of personal jurisdiction and failure to state a claim.

A hearing was held on Appellant's motion to dismiss, during which the trial court considered Plaintiff's verified complaint, Appellant's answer, an affidavit from Appellant's president Thomas G. Crouch, documentary evidence, and arguments of counsel. The trial court denied Appellant's motions to dismiss for lack of personal jurisdiction and for failure to state a claim, concluding: (1) Appellant is subject to jurisdiction in North Carolina under N.C. Gen.Stat. § 1-75.4 (North Carolina's “long-arm” statute); (2) “[Appellant] has sufficient minimum contacts with North Carolina to justify personal jurisdiction”; and (3) “Plaintiff's claims sufficiently state the essential allegations necessary to support the claims asserted.” The sole basis for this appeal is the trial court's ruling on the personal jurisdiction issue.

Initially, we note that notwithstanding the interlocutory nature of the trial court's order, the denial of Appellant's motion to dismiss on personal jurisdiction grounds is immediately appealable. Bruggeman v. Meditrust Acquisition Co., 138 N.C.App. 612, 614, 532 S.E.2d 215, 217 (2000); see also N.C. Gen.Stat. § 1-277(b) (2009) (“Any interested party shall have the right of immediate appeal from an adverse ruling as to the jurisdiction of the court over the person or property of the defendant[.] ...”).

Standard of Review

Our courts engage in a two-step inquiry to resolve whether personal jurisdiction over a non-resident defendant is properly asserted: first, North Carolina's long-arm statute must authorize jurisdiction over the defendant. If so, the court must then determine whether the exercise of jurisdiction is consistent with due process. Skinner v. Preferred Credit, 361 N.C. 114, 119, 638 S.E.2d 203, 208 (2006); see also Brown v. Meter, ---N.C.App. ----, ----, 681 S.E.2d 382, 387 (2009) (noting that “ ‘[w]hen personal jurisdiction is alleged to exist pursuant to the long-arm statute, the [issue] collapses into one inquiry,’ ” which is the question of minimum contacts).

The determination of whether jurisdiction is statutorily and constitutionally permissible due to contact with the forum is a question of fact. The standard of review of an order determining personal jurisdiction is whether the findings of fact by the trial court are supported by competent evidence in the record; if so, this Court must affirm the order of the trial court.

Replacements, Ltd. v. Midwesterling, 133 N.C.App. 139, 140-41, 515 S.E.2d 46, 48 (1999) (internal citations omitted). “Where no exception is taken to a finding of fact by the trial court, the finding is presumed to be supported by competent evidence and is binding on appeal.” Nat'l Util. Review, LLC v. Care Ctrs., Inc., --- N.C.App. ----, ----, 683 S.E.2d 460, 463 (2009) (internal quotation marks and citation omitted).

Appellant disputes only the presence of federal due process requirements in challenging the court's exercise of personal jurisdiction and does not address the applicability of North Carolina's long-arm statutory authority. Therefore, we likewise confine our discussion to this issue, and our sole inquiry is whether Plaintiff's assertion of jurisdiction over Appellant comports with due process of law. Accordingly, we must determine whether the trial court's findings of fact are supported by competent evidence, which in turn support its conclusion of law that our courts' entertainment of this action over Appellant does not violate due process.

Appellant assigns error to several of the trial court's findings of fact in that they are unsupported by competent record evidence. Specifically, Appellant contends that any of the findings based on Plaintiff's verified complaint were erroneous because the complaint was not competent evidence and, thus, the allegations therein were insufficient to support those findings. Appellant argues that the verified complaint was not based on Plaintiff's personal knowledge, such that the facts found by the trial court in reliance thereon consisted of inadmissible hearsay.

The procedural context of the personal jurisdiction challenge in the trial court guides our review of this issue:

Typically, the parties will present personal jurisdiction issues in one of three procedural postures: (1) the defendant makes a motion to dismiss without submitting any opposing evidence; (2) the defendant supports its motion to dismiss with affidavits, but the plaintiff does not file any opposing evidence; or (3) both the defendant and the plaintiff submit affidavits addressing the personal jurisdiction issues.

Banc of Am. Secs. LLC v. Evergreen Int'l Aviation, Inc., 169 N.C.App. 690, 693, 611 S.E.2d 179, 182 (2005). When the parties submit “dueling affidavits” under the third category, the trial court may decide the matter from review of the affidavits, or “the court may direct that the matter be heard wholly or partly on oral testimony or depositions.” Id. at 694, 611 S.E.2d at 183 (internal quotation marks and citations omitted). In either case, the plaintiff bears the burden of proving, by a preponderance of the evidence, grounds for exercising personal jurisdiction over a defendant. Adams, Kleemeier, Hagan, Hannah & Fouts, PLLC v. Jacobs, 158 N.C.App. 376, 378, 581 S.E.2d 798, 801 rev'd on other grounds, 357 N.C. 651, 588 S.E.2d 465 (2003). As such, upon a defendant's motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of making out a prima facie case that jurisdiction exists. Wyatt v. Walt Disney World Co., 151 N.C.App. 158, 162, 565 S.E.2d 705, 708 (2002).

Appellant correctly notes that when a defendant supplements its motion with affidavits or other supporting evidence, the unverified allegations of a plaintiff's complaint “ ‘can no longer be taken as true or controlling [.]’ ” Id. at 163, 565 S.E.2d at 708 (quoting Bruggeman, 138 N.C.App. at 615-16, 532 S.E.2d at 218). In that case, a plaintiff cannot rest on the complaint's allegations, even if they meet the initial burden of proving jurisdiction, “but must respond ‘by affidavit or otherwise ... set[ting] forth specific facts showing that the court has jurisdiction.’ ” Id. However, “[a] verified complaint may be treated as an affidavit if it (1) is made on personal knowledge, (2) sets forth such facts as would be admissible in evidence, and (3) shows affirmatively that the affiant is competent to testify to the matters stated therein.” Eluhu v. Rosenhaus, 159 N.C.App. 355, 359, 583 S.E.2d 707, 711 (2003) (internal quotation marks and citations omitted).

Here, Plaintiff's verified complaint seeks redress from faulty construction of the pool for which he contracted. Plaintiff alleges that he entered into a swimming pool construction agreement with Defendant DA Charlotte, a North Carolina limited liability company. Plaintiff also named Appellant as a defendant on the basis that DA Charlotte made the contract “on its own behalf, and as agent for Douglas [Aquatics], Inc.” The allegations in his verified complaint support the assertion that jurisdiction over Appellant is proper by virtue of the services Appellant provides in North Carolina through its agent DA Charlotte. Thus, Plaintiff's verified complaint sets forth specific facts showing jurisdiction in our courts. See N.C. Gen.Stat. § 1-75.2(3) (2009) (providing that “acts of the defendant” subjecting it to personal jurisdiction “include[ ] any person's acts for which the defendant is legally responsible”). The allegations contained therein are therefore sufficient to make out a prima facie case of personal jurisdiction. Moreover, our review of the verified complaint confirms that it was based on Plaintiff's personal knowledge and affirmatively shows his competence to testify to the matters asserted.

The verification of the complaint states on its face that “John Bauer ... is the Plaintiff in the foregoing action; that he has read the foregoing Complaint and knows the contents thereof, and that the same is true of his own knowledge,” except for the allegations based on information and belief, which he believes to be true. Plaintiff's...