Judd v. Tilghman Med. Assocs., LLC

• Decision Date: 21 July 2020
• Docket Number: No. COA19-581,COA19-581
• Citation: 847 S.E.2d 45
• Parties: Stephen V. JUDD, Plaintiff, v. TILGHMAN MEDICAL ASSOCIATES, LLC, Defendant.
• Court: North Carolina Court of Appeals

847 S.E.2d 45

Stephen V. JUDD, Plaintiff,

v.TILGHMAN MEDICAL ASSOCIATES, LLC, Defendant.

No. COA19-581

Court of Appeals of North Carolina.

Filed: July 21, 2020

Ortiz & Schick, PLLC, Raleigh, by Heather E. Connor, for plaintiff-appellee.

The Charleston Group, by Jose A. Coker, Fayetteville, and Daniel DiMaria, for defendantappellant.

TYSON, Judge.

Tilghman Medical Associates, LLC ("Defendant") appeals from the trial court's order denying its motion to set aside the default judgment in favor of Stephen V. Judd ("Plaintiff"). We affirm.

I. Background

Plaintiff purchased three office buildings ("the properties") from Defendant for $1,800,000.00 on 3 February 2015. Plaintiff determined the properties’ effective occupancy level at the time of sale was lower than Defendant and/or its agents had allegedly represented to him.

Plaintiff filed a complaint, which alleged fraud against Defendant and its broker on 2 June 2016. The broker filed a motion to dismiss and an answer, but Defendant did not. Plaintiff filed an affidavit of service upon Defendant, and moved for entry of default, which the court entered on 5 August 2016. Plaintiff moved to file an amended complaint, which the trial court also granted.

Plaintiff filed an amended complaint, which alleged fraud and negligent misrepresentation against Defendant, the broker, and Capitol Properties I, LLC ("Capitol"), and breach of contract against Defendant, on 6 September 2016. The broker and Capitol jointly filed a motion to dismiss and an answer, but Defendant did not. Plaintiff again filed an affidavit of service upon Defendant and moved for entry of default against Defendant, which the trial court entered on 8 November 2016.

Mediation was held on 10 April 2017. The broker and Capitol settled with Plaintiff. All claims against them were dismissed with prejudice on 10 July 2017. Plaintiff moved for default judgment against Defendant on 17 November 2017.

The trial court conducted a hearing on 16 January 2018, which Defendant did not attend. The trial court entered default judgment against Defendant for $840,000.00, plus interest at the legal rate, on 31 January 2018. Writs of execution were issued to the Sheriff of Harnett County, who posted a notice of sale of lots owned by Defendant on the same road as the properties on 14 August 2018. The sale was set for 5 September 2018.

Defendant filed a verified emergency motion to stay the sale and a motion to set aside the judgment on 29 August 2018. Defendant asserted its member/manager, Dr. Ibrahim Naim Oudeh, "immediately provided the Amended Complaint to [Defendant]’s then-counsel" upon its receipt on 8 September 2016. Defendant claimed its then-counsel advised Dr. Oudeh they would move to dismiss the action, and Dr. Oudeh "reasonably believed that this matter was being timely handled" by Defendant's then-counsel "and had no reason to doubt otherwise."

Dr. Oudeh and Defendant both asserted they "were unaware at any time" their then-counsel "did not file an answer and failed to pursue any defense" on Defendant's behalf. Defendant claimed to have become first aware of the default judgment entered against it after Dr. Oudeh disclosed his real estate holdings in response to complaints filed against him by the United States and the State of North Carolina, which alleged false and fraudulent Medicare and Medicaid claims.

Defendant moved to set aside the default judgment on the basis of excusable neglect due to the non-action and negligence of its then-counsel. Defendant further moved to set aside the entry of default for good cause. Defendant also sought a stay of the sale.

The trial court stayed the sale on 30 August 2018 and set a hearing on Defendant's motion to set aside the judgment. Following the hearing, the trial court entered its order denying Defendant's motion on 8 February 2019. Defendant timely filed its notice of appeal.

II. Jurisdiction

This appeal is properly before us pursuant to N.C. Gen. Stat. § 7A-27(b)(1) (2019). Defendant's brief fails to include a statement of the grounds for appellate review, as is required by N.C. R. App. P. 28(b)(4). "Compliance with the rules ... is mandatory." Dogwood Dev. & Mgmt. Co., LLC v. White Oak Transp. Co. , 362 N.C. 191, 194, 657 S.E.2d 361, 362 (2008) (citations omitted).

However, "noncompliance with the appellate rules does not, ipso facto, mandate dismissal of an appeal." Id. at 194, 657 S.E.2d at 363 (citation omitted). "Noncompliance with [Appellate Rule 28(b) ], while perhaps indicative of inartful appellate advocacy, does not ordinarily give rise to the harms associated with review of unpreserved issues or lack of jurisdiction." Id. at 198, 657 S.E.2d at 365.

Defendant's non-jurisdictional failure to comply with Appellate Rule 28(b)(4) does not mandate dismissal. See id. Counsel is admonished that our Appellate Rules are mandatory, compliance is expected therewith, and multiple sanctions are available for violation. Id. ; N.C. R. App. P. 28(b)(4).

III. Issues

Defendant argues the trial court abused its discretion by denying its motion to set aside either the entry of default pursuant to N.C. Gen. Stat. § 1A-1, Rule 55(d) (2019) or the default judgment pursuant to N.C. Gen. Stat. § 1A-1, Rule 60(b) (2019). Defendant also challenges one finding of fact and one conclusion of law in the trial court's order as erroneous.

IV. Entry of Default

Defendant argues the trial court erred by denying his motion to set aside the entry of default under Rule 55(d). Defendant cites the first portion of Rule 55(d) : "For good cause shown the [trial] court may set aside an entry of default[.]" N.C. Gen. Stat. § 1A-1, Rule 55(d). "This standard is less stringent than the showing of ‘mistake, inadvertence, [surprise,] or excusable neglect’ necessary to set aside a default judgment pursuant to N.C. Gen. Stat. § 1A-1, Rule 60(b)." Brown v. Lifford , 136 N.C. App. 379, 382, 524 S.E.2d 587, 589 (2000) (citation omitted).

Although Defendant moved "pursuant to Rules 55 [and] 60 ... of the North Carolina Rules of Civil Procedure for an order ... setting aside the entry of default," the trial court analyzed the motion solely under Rule 60(b). "While entry of default may be set aside pursuant to Rule 55(d) and a showing of good cause, after judgment of default has been entered, the motion to vacate is governed by Rule 60(b)." Estate of Teel by Naddeo v. Darby , 129 N.C. App. 604, 607, 500 S.E.2d 759, 762 (1998) (citations omitted).

The trial court appropriately declined to analyze Defendant's motion under the Rule 55(b) "good cause" standard, after default judgment had already been entered against Defendant. This ruling accords with the plain text of Rule 55(d), when read in its entirety: "For good cause shown the court may set aside an entry of default, and, if a judgment by default has been entered, the judge may set it aside in accordance with Rule 60(b). " N.C. Gen. Stat. § 1A-1, Rule 55(d) (emphasis supplied).

The cases Defendant cites, in which this Court reviewed a trial court's denial of a motion to set aside the entry of default using the Rule 55(d) "good cause" standard, are inapposite upon closer examination. In Swan Beach Corolla, L.L.C. v. Cty. of Currituck , this Court reversed the denial of a motion to set aside the entry of default, in which case default judgment had subsequently been entered, but only after this Court had previously held the defendants’ initial appeal from the denial of a motion to set aside entry of default "was interlocutory because no default judgment had been entered. " Swan Beach Corolla, L.L.C. v. Cty. of Currituck (Swan Beach III ), 255 N.C. App. 837, 840, 805 S.E.2d 743, 746 (2017) (emphasis supplied), aff'd per curiam , 371 N.C. 110, 110, 813 S.E.2d 217, 217-18 (2018) ; see also Swan Beach Corolla, L.L.C. v. Cty. of Currituck (Swan Beach II ), 244 N.C. App. 545, 781 S.E.2d 350, 2015 WL 8747777, at *2 (2015) (unpublished). In Swan Beach III , the issue of the trial court's denial of the motion to set aside the entry of default was independently preserved upon remand, despite the subsequent entry of default judgment after this Court's decision in Swan Beach II .

In Jones v. Jones , also cited by Defendant, this Court affirmed the denial of a motion to set aside the entry of default, but again no default judgment had been entered in that case. 263 N.C. App. 606, 824 S.E.2d 185, 189 (2019), aff'd per curiam , 373 N.C. 381, 837 S.E.2d 872 (2020) (defendant appealed the trial court's entry of default, denial of motion to dismiss entry of default, and order for specific performance, but no default judgment was ever entered).

We need not consider Defendant's arguments regarding the entry of default. After default judgment was entered in this case and before Defendant filed his motion to set aside either entry of default or default judgment, the trial court was bound by the plain text of Rule 55(d) and precedents to analyze Defendant's motion under the standards set forth in Rule 60(b). "We proceed thusly as the propriety of the trial court's denial of [D]efendant's motion to vacate entry of default is irrelevant, if the trial court properly denied [D]efendant's motion to vacate entry of default judgment." Estate of Teel , 129 N.C. App. at 608, 500 S.E.2d at 762. Defendant's argument is overruled.

V. Default Judgment

Defendant argues the trial court abused its discretion by denying his motion to set aside the default judgment under N.C. Gen. Stat. § 1A-1, Rules 60(b)(1) and 60(b)(6).

A. Standard of Review

The decision whether to set aside a default judgment under Rule 60(b) is left to the sound discretion of the trial judge, and will not be overturned on appeal absent a clear showing of abuse of discretion.

Whether neglect is "excusable" or "inexcusable" is a question of law. The trial judge's conclusion in this regard will not be disturbed on appeal if competent evidence supports the judge's findings, and those findings support the conclusion.

Elliott v. Elliott , 200 N.C. App. 259,...