Inspirational Network, Inc. v. Combs

• Decision Date: 03 November 1998
• Docket Number: No. COA97-1109.,COA97-1109.
• Citation: 131 NC App. 231,506 S.E.2d 754
• Court: North Carolina Court of Appeals
• Parties: The INSPIRATIONAL NETWORK, INC., Plaintiff, v. Margaret COMBS and Thomas Petree, In Their Individual Capacities, Defendants.

506 S.E.2d 754

131 NC App. 231

The INSPIRATIONAL NETWORK, INC., Plaintiff, v. Margaret COMBS and Thomas Petree, In Their Individual Capacities, Defendants.

No. COA97-1109.

Court of Appeals of North Carolina.

November 3, 1998.

Nicholls & Crampton, P.A. by Robin Adams Anderson, Raleigh, and Johnson, Prioleau & Lynch, L.L.C. by Keven Kenison, Atlanta, for plaintiff-appellee.

Poyner & Spruill, L.L.P. by Constance L. Young and Thomas L. Ogburn, III, Charlotte, for defendants-appellants.

JOHN, Judge.

Defendants Margaret Combs (Combs) and Thomas Petree (Petree) (defendants) appeal the trial court's 5 May 1997 order denying their motion to dismiss pursuant to N.C.G.S. § 1A-1, Rule 12(b)(2)(1990) (Rule 12(b)(2)). We affirm the trial court.

Relevant facts, as alleged by plaintiff, The Inspirational Network, Inc. (INSP), in its complaint and the affidavit of Mitchell S. Martin (Martin), Vice-President and Chief Financial Officer of INSP, as well as pertinent procedural information include the following: INSP is a North Carolina corporation and cable network which presents a variety of television programs and commercial advertisements. Merchant Square Network, Inc. (MSN) is a Delaware corporation. Petree serves as Chief Financial Officer of MSN, and is a Pennsylvania resident who owns no property in North Carolina. Combs, President and Chief Executive Officer (CEO) of MSN, is a West Virginia resident and also owns no property in North Carolina. Neither Petree nor Combs own stock in MSN.

Following negotiations conducted through correspondence and via telephone, MSN entered into a contract with INSP whereby the latter produced and aired several "infomercials" in North Carolina. MSN sent and directed several payments to INSP in North Carolina, but ultimately defaulted on its contractual obligation to pay INSP for services rendered in this state.

Both Petree and Combs thereafter contacted Martin by telephone and through written correspondence in an effort to resolve the issue of payment absent litigation. The two MSN executives assured Martin that MSN was adequately capitalized to repay INSP by means of a promissory note. Relying on defendants' assurances, Martin agreed on behalf of INSP to accept MSN's note for the balance of its contractual obligation, and a note was subsequently executed in favor of INSP by Combs as President and CEO of MSN. The note provided: (1) MSN was to pay INSP the principal sum of $103,952.00 in ten monthly installments of $6,355.73, with a final balloon payment of $47,081.63; (2) upon default, any unpaid principal would bear twelve percent interest until full payment; and (3) the note was "to be governed and construed in accordance with the laws of the State of North Carolina."

MSN ultimately defaulted and INSP obtained a judgment against MSN for the debt. However, INSP was unable to recover because MSN had no assets or capital. On 4 December 1996, INSP filed suit against Combs and Petree individually, alleging fraud as well as deceptive trade practices in violation of N.C.G.S. § 75-1 et seq. (1994). On 6 February 1997, defendants jointly moved to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2). The trial court denied the motion in an order filed 5 May 1997, finding defendants had not denied or refuted plaintiff's assertions, set forth either in plaintiff's complaint or in the affidavit of Martin, that 1) "Defendants placed telephone calls to the Plaintiff to induce the Plaintiff to take the note," 2) "Defendants represented to [Martin] as Chief Financial Officer of the Plaintiff that MSN was able to repay the note," 3) defendants' statements were false and INSP accepted MSN's promissory note "[i]n reliance on [the] representation[ ]" that MSN was sufficiently capitalized to repay the note, and 4) that "Defendants had complete domination ... of the policy and business practice of MSN, and MSN had at no time a separate mind, will or existence of its own."

The trial court concluded that the contacts between INSP and MSN were sufficient for purposes of assumption of jurisdiction by North Carolina courts over MSN, and that

the unrefuted actions of the Defendants herein are sufficient that the minimum contacts of the corporation MSN are imputed to these two Defendants....

The court ruled it thereby possessed jurisdiction over Combs and Petree. Defendants filed timely notice of appeal, contending the trial court erred in denying their Rule 12(b)(2) motion. We do not agree.

Initially, we observe that

[a]ny 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....

N.C.G.S. § 1-277(b) (1996). Such an appeal

is limited to a determination of whether North Carolina statutes permit our courts "to entertain this action against defendant[s], and, if so, whether this exercise of jurisdiction violates due process."

Saxon v. Smith, 125 N.C.App. 163, 168, 479 S.E.2d 788, 791, (1997)(quoting Styleco, Inc. v. Stoutco, Inc., 62 N.C.App. 525, 526, 302 S.E.2d 888, 889, disc. review denied, 309 N.C. 825, 310 S.E.2d 358 (1983)). We therefore first examine the relevant statutory provisions.

G.S. § 1-75.4, commonly referred to as our "long arm" statute, Dillon v. Numismatic Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630 (1977), governs the exercise of jurisdiction by North Carolina courts over out-of-state defendants. The section provides, inter alia, as follows:

(4) Local Injury; Foreign Act.—In any action... claiming injury to person or property within this State arising out of an act or omission outside this State by the defendant, provided in addition that at or about the time of the injury....

a. Solicitation or services activities were carried on within this State by or on behalf of the defendant....

(5) Local Services, Goods or Contracts.— In any action which:

a. Arises out of a promise, made anywhere to the plaintiff ... for the plaintiff's benefit, by the defendant to ... pay for services to be performed in this State by the plaintiff; or

b. Arises out of services ... actually performed for the defendant by the plaintiff within this State if such performance within this State was authorized or ratified by the defendant.

G.S. § 1-75.4.

Our jurisdiction statutes are to be "liberally construed in favor of finding that personal jurisdiction exists," Chapman v. Janko, U.S.A., Inc., 120 N.C.App. 371, 374, 462 S.E.2d 534, 536 (1995), subject to the limitations of due process, Bryson v. Northlake Hilton, 407 F.Supp. 73, 75 (M.D.N.C.1976). "[When] jurisdiction is challenged [by a defendant, the] plaintiff has the burden of proving prima facie that a statutory basis for jurisdiction exists." Williams v. Institute for Computational Studies, 85 N.C.App. 421, 424, 355 S.E.2d 177, 179 (1987) (citation omitted). Where unverified allegations in the complaint meet plaintiff's "initial burden of proving the existence of jurisdiction ... and defendant[s] ... d[o] not contradict plaintiff's allegations in their sworn affidavit," such allegations are accepted as true and deemed controlling. Bush v. BASF Wyandotte Corp., 64 N.C.App. 41, 45, 306 S.E.2d 562, 565 (1983); see also Barclays Leasing, Inc. v. National Business Systems, Inc., 750 F.Supp. 184, 186 (W.D.N.C.1990)

(mere allegations of jurisdiction, if not controverted, may be sufficient for a prima facie showing of jurisdiction). Further, if the trial court makes findings of fact supported by competent evidence in the record, those findings are conclusive on appeal. Church v. Carter, 94 N.C.App. 286, 289-90, 380 S.E.2d 167, 169 (1989). Finally, if the court's findings of fact are not assigned as error, the court's findings are "presumed to be correct." Saxon, 125 N.C.App. at 169,

479 S.E.2d at 792; see also Concrete Service Corp. v. Investors Group, Inc., 79 N.C.App. 678, 684, 340 S.E.2d 755, 759-60,

cert. denied,

317 N.C. 333, 346 S.E.2d 137 (1986)(failure of appellant to "except and assign error separately to each finding or conclusion that he or she contends is not supported by the evidence ... will result in waiver of the right to challenge the sufficiency of the evidence to support particular findings of fact").

Applying the foregoing principles to the record sub judice, we first note defendants have not assigned error to the trial court's factual determinations that: (1) Petree and Combs each placed telephone calls to INSP for purposes of inducing acceptance of MSN's promissory note, (2) Petree and Combs each represented to Martin MSN's ability to repay the note, (3) the statements of defendants were false, and (4) the note was accepted by INSP in reliance thereon. Because defendants have failed to challenge these factual determinations on appeal, they are "presumed to be correct." Saxon, 125 N.C.App. at 169, 479 S.E.2d at 792.

In addition, the uncontroverted allegations of plaintiff's complaint included assertions that: (1) defendants contacted INSP to induce acceptance of MSN's promissory note for services requested and performed in North Carolina, (2) Combs executed the note on behalf of MSN, (3) defendants sent payments to North Carolina, (4) MSN defaulted on the note, (5) INSP was damaged by the default, and that (6) "upon information and belief," MSN "was a sham and facade controlled and directed by its alter ego, Defendants Combs and Petree," who "had complete domination, not only of finances, but of policy and business practice ... to the extent that [MSN] had ... no separate mind, will or existence of its own."

Further, Martin's uncontradicted affidavit stated, inter alia, that: (1) MSN solicited services to be performed in North Carolina, (2) INSP entered a contract with MSN, (3) MSN failed to pay for services rendered in North Carolina, (4) Petree and Combs induced Martin to accept a promissory note in lieu of suit, (5) Martin agreed to the note in reliance on defendants' assurances MSN was adequately...