Jones v. Wallis

• Decision Date: 19 April 2011
• Docket Number: No. COA10–349.,COA10–349.
• Citation: 712 S.E.2d 180
• Court: North Carolina Court of Appeals
• Parties: A.C. JONES, Plaintiff,v.Liam WALLIS, Viridis Building, Inc., Richard M. Greene, as Trustee and escrow agent, and Amiel J. Rossabi, as Trustee and escrow agent, Defendants.

712 S.E.2d 180

A.C. JONES, Plaintiff,

v.Liam WALLIS, Viridis Building, Inc., Richard M. Greene, as Trustee and escrow agent, and Amiel J. Rossabi, as Trustee and escrow agent, Defendants.

No. COA10–349.

Court of Appeals of North Carolina.

April 19, 2011.

OPINION TEXT STARTS HERE

Appeal by defendants Liam Wallis and Amiel J. Rossabi from orders entered 17 June 2009 and 5 November 2009 by Judges Catherine C. Eagles and Edgar B. Gregory in Guilford County Superior Court. Heard in the Court of Appeals 13 October 2010.

J. Patrick Adams and Joseph B. Bass III, Greensboro, for plaintiff-appellee.

Forman Rossabi Black, P.A., by Amiel J. Rossabi, Gavin J. Reardon and Michael C. Taliercio, Greensboro, for defendants-appellants.

STEELMAN, Judge.

Where Jones exercised “due diligence” in attempting to locate Wallis for purposes of service of process and Jones complied with all the statutory requirements for service of process by publication, the trial court did not err in denying Wallis' motion to set aside the entry of default against him. Where the trial court properly denied Wallis' motion to set aside the entry of default and properly granted summary judgment against Wallis and Rossabi, any issues concerning the execution proceedings are rendered moot.

I. Factual and Procedural History

On 20 September 2004, A.C. Jones (“Jones”) and Liam Wallis (“Wallis”) entered into an agreement to construct homes on lots six and ten of Haw River Plantation, in Rockingham County, North Carolina. Jones was to provide a line of credit to build the homes. This was secured by a deed of trust on the two lots and a promissory note both executed by Viridis Building (“Viridis”), of which Wallis was the president. Attorney Jodi Ernest prepared the note and deed of trust. Wallis and Viridis never made timely interest payments on the note, and failed to repay the principal when it was due.

In late 2006 and early 2007, well after full payment on the note was due on 20 September 2005, the State of North Carolina began negotiating to buy all of the lots in Haw River Plantation. While attempting to secure payment of the note during the negotiation process, Jones was informed that Viridis never had title to lots six and ten of Haw River Plantation, and that he did not have a valid lien on the property. On 20 June 2008, J. Patrick Adams (“Adams”), Jones' attorney, sent a letter demanding payment in full to Viridis and Wallis at 921 Greenwood Drive, Greensboro, North Carolina and 114 S. Westgate Drive, Suite D, Greensboro, North Carolina. The entire Haw River Plantation property was eventually sold to the State of North Carolina, and approximately $3,000,000 of the proceeds from the sale were placed in trust with defendants Richard M. Greene (“Greene”), attorney for Chartwell Homes, Inc. (of which Wallis was president), and Amiel J. Rossabi (“Rossabi”), attorney for Wallis.

On 16 January 2009, Jones filed a complaint against Viridis, seeking payment of sums due under the note, together with attorneys' fees. Wallis was sued individually for the sums due under the note under a piercing the corporate veil theory and also for misrepresentations made concerning the validity of the lien on lots six and ten. Greene and Rossabi were sued as escrow agents holding the proceeds of the sale of Haw River Plantation based upon Wallis' claim that he was entitled to some or all of the escrowed funds. By letter dated 16 January 2009, Adams requested that Rossabi, as counsel for Wallis and Viridis, accept service on behalf of his clients. Rossabi failed to respond to this request. On 16 January 2009, a summons was issued for Wallis and Viridis, through Wallis as its registered agent, at 2511 Patriot Way, Unit D, Greensboro, North Carolina. The Guilford County Sheriff's Department unsuccessfully attempted to serve this summons on three different occasions in February of 2009. The return of service showed that no one was living at that address. On 20 February 2009 an alias and pluries summons was issued for Wallis and Viridis at 921 Greenwood Drive, Greensboro, North Carolina. Adams personally went to the Greenwood address, but was unable to ascertain Wallis' location from the then current residents. On 23 February 2009, a second alias and pluries summons was issued. Based upon this summons, service of process by publication was commenced. On 13 April 2009, Jones filed a notice of service of process by publication and an affidavit in support of service by publication with the Clerk of Superior Court of Guilford County as to Wallis. The affidavit documented that the Sheriff of Guilford County was unable to locate Wallis at the 921 Greenwood Drive, Greensboro address, and the 2511 Patriot Way, Unit D, Greensboro address. It further stated the 921 Greenwood property was foreclosed in April of 2008. Counsel for Jones was unable to locate an address for Wallis on the Internet. A copy of the complaint was mailed to Rossabi, Wallis' counsel on 16 January 2009. A copy of the notice of service of process by publication was not mailed to Wallis because his address was not known and could not be ascertained with reasonable diligence. Default was entered against Wallis and Viridis on 15 April 2009 by the Clerk of Superior Court.

On 24 March 2009, Greene filed an answer and motion to dismiss the claims against him, which he served on Wallis by certificate of service directed to 3125 Kathleen Avenue, Unit 105, Greensboro, North Carolina. On 30 March 2009, Rossabi filed a motion to dismiss, which he did not serve on Wallis. On 1 June 2009, Wallis filed a motion to set aside the entry of default. On 17 June 2009, Wallis' motion to set aside the entry of default was denied, and summary judgment was entered against Wallis and Viridis. A writ of execution was issued against Wallis and Viridis on 22 October 2009. On 2 November 2009, judgment was entered against Greene in favor of Jones by consent. This consent judgment awarded to Jones a constructive trust on the proceeds from the sale of Haw River Plantation held by Greene as trustee and escrow agent to the extent that Wallis was entitled to any of those proceeds. On 5 November 2009, summary judgment was entered against Rossabi granting Jones a constructive trust upon the funds held by Rossabi as trustee and escrow agent for Wallis. Wallis' motion to dismiss the execution proceedings was also denied on 5 November 2009. On 24 November 2009, Wallis and Rossabi appealed the orders entered by the trial court on 17 June 2009 denying Wallis' motion to set aside the entry of default and granting partial summary judgment against Wallis. Wallis and Rossabi also appealed the orders entered on 5 November 2009 by the trial court granting summary judgment against Rossabi and denying Wallis' motion to dismiss the execution proceedings.

II. Motion to Set Aside Entry of Default

In his first argument, Wallis contends the trial court erred in denying his motion to set aside the entry of default against him, because his address was ascertainable through “due diligence” and Jones did not comply with all statutory requirements for service of process by publication. We disagree.

A. Standard of Review

“An entry of default may be set aside ‘[f]or good cause shown.’ ” Brown v. Lifford, 136 N.C.App. 379, 381, 524 S.E.2d 587, 588 (2000) (quoting N.C. Gen.Stat. § 1A–1, Rule 55(d)). “A trial court's determination of ‘good cause’ to set aside an entry of default will not be disturbed on appeal absent an abuse of discretion.” Id. at 382, 524 S.E.2d at 589 (citation omitted). “A defect in service of process by publication is jurisdictional, rendering any judgment or order obtained thereby void.” Fountain v. Patrick, 44 N.C.App. 584, 586, 261 S.E.2d 514, 516 (1980) (citation omitted). 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. Connette v. Jones, 196 N.C.App. 351, 354, 674 S.E.2d 751, 753 (2009) (citing Cotton v. Jones, 160 N.C.App. 701, 586 S.E.2d 806 (2003)).

B. Due Diligence

Service of process on Wallis was obtained by publication. Rule 4(j1) of the North Carolina Rules of Civil Procedure provides for service of process by publication:

(j1) Service by publication on party that cannot otherwise be served.—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 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. Gen.Stat. § 1A–1, Rule 4 (2009).

Wallis contends that Jones failed to exercise the “due diligence” required by Rule 4(j1) prior to serving Wallis by publication. We disagree.

“Due diligence dictates that p...