Opinion
NO. COA12-712
12-18-2012
JOHN B. SOLLIS, Plaintiff, v. RONALD A. HOLMAN, Defendant.
Higgins Benjamin, PLLC, by John F. Bloss, for plaintiff appellant. Robert W. Detwiler for defendant appellee.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
Onslow County
No. 10 CVS 4815
Appeal by plaintiff from order entered 12 March 2012 by Judge Arnold O. Jones in Onslow County Superior Court. Heard in the Court of Appeals 25 October 2012.
Higgins Benjamin, PLLC, by John F. Bloss, for plaintiff appellant.
Robert W. Detwiler for defendant appellee.
McCULLOUGH, Judge.
John B. Sollis ("plaintiff") appeals from an order of the trial court granting summary judgment in favor of Ronald A. Holman ("defendant") and dismissing plaintiff's action. We affirm.
I. Background
Plaintiff is a citizen and resident of Onslow County, North Carolina. Defendant is a citizen and resident of El Paso County, Texas. Plaintiff and defendant became acquainted and formed a friendship while serving together in the United States Marine Corps.
In 2002, defendant formed a corporation, Vinedos Argentinos, Ltd. ("Vinedos"), for the purpose of importing Argentine wine. Vinedos is a Delaware corporation with its principal place of business located in El Paso, Texas.
In 2003, defendant contacted plaintiff requesting a loan to help with defendant's wine importing business. Between 4 August 2003 and 25 October 2004, plaintiff advanced twelve separate payments to defendant totaling $25,000. Each payment was made in the form of a personal check from plaintiff payable to defendant personally. Following the first advance, defendant mailed to plaintiff a stock certificate for 500 shares in Vinedos dated 4 August 2003 and signed by defendant as both president and secretary of Vinedos. Following the final advance, defendant mailed to plaintiff a promissory note dated 25 October 2004 in the principal amount of $24,500 made by Vinedos and signed by defendant as president of the corporation (the "Vinedos Note"). By its terms, the Vinedos Note would be deemed in default if unpaid by 31 March 2007. Between the time plaintiff first advanced payments to defendant and the final payment deadline on the Vinedos Note, defendant made verbal assurances to plaintiff that the loan would be repaid.
On 8 February 2010, plaintiff filed an action on the Vinedos Note in the District Court for El Paso County, Texas (the "Texas Action"). Plaintiff's Texas Action named only Vinedos as the defendant. On 5 April 2010, plaintiff filed a motion for summary judgment in the Texas Action, and with the approval of counsel for both plaintiff and Vinedos, on 20 May 2010, the Texas court entered an Agreed Final Judgment against Vinedos in the amount of $43,533.42 (the "Texas Judgment").
Following entry of the Texas Judgment, the record indicates plaintiff filed a motion to compel participation in post-judgment discovery in the Texas Action. During a hearing on plaintiff's motion to compel before the Texas court, counsel for Vinedos stated that the corporation "is debunked. It's a business and name only, it has nothing. It has nothing but debt." Also during that hearing, counsel for Vinedos stated that defendant felt he had a personal obligation to pay plaintiff and had "every intention to pay that judgment."
Thereafter, the parties participated in post-judgment discovery in the Texas Action. Defendant was deposed on 31 August 2010 and 20 September 2010. During these depositions, defendant testified that he was "the sole officer of [Vinedos], as any title that you wish," including president and secretary, as well as its sole director. Also during these depositions, defendant again committed to personally pay the Texas Judgment. Plaintiff received no payment.
On 13 December 2010, plaintiff initiated the present action against defendant individually by filing a complaint in the Superior Court of Onslow County, North Carolina. Plaintiff's complaint seeks 1) to pierce the corporate veil of Vinedos and enforce the Texas Judgment against defendant and 2) to enforce defendant's promises to personally pay the obligation represented by the Vinedos Note.
On 31 January 2011, defendant filed a motion to dismiss plaintiff's action for lack of personal jurisdiction. On 5 May 2011, the trial court denied defendant's motion to dismiss. On 26 May 2011, defendant filed an answer to plaintiff's complaint, asserting the affirmative defenses of the statute of limitations, res judicata, judicial estoppel, lack of subject matter and personal jurisdiction, and waiver.
On 24 January 2012, defendant filed a motion to dismiss and for summary judgment under Rules 12(b)(6) and 56 of the North Carolina Rules of Civil Procedure, asserting as grounds the affirmative defenses raised in defendant's answer. A hearing was held on defendant's motion on 27 February 2012. At the hearing, defendant presented argument that dismissal and/or summary judgment was appropriate on two grounds: 1) that plaintiff's action is time-barred and 2) that plaintiff's allegations in the Texas Action are inconsistent with his allegations in the present action. Defendant also noted his "continuing objection to jurisdiction[.]"
On 12 March 2012, the trial court entered an order ruling "that there is no genuine issue as to any material fact, and that the Defendant is entitled to Judgment as a matter of law[,]" and granted Defendant's motion to dismiss the action under Rules 12 and 56. Plaintiff filed timely written notice of appeal from the trial court's order to this Court on 5 April 2012.
II. Standard of Review
"Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows that 'there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.'" In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting Forbis v. Neal, 361 N.C. 519, 523-24, 649 S.E.2d 382, 385 (2007)).
III. Discussion
On appeal, plaintiff's primary argument addresses defendant's statute of limitations defense. Plaintiff contends that the trial court erred in granting summary judgment in favor of defendant on the grounds that plaintiff's action is time-barred by the applicable statute of limitations. Plaintiff argues the present action is an "action upon a judgment," and therefore, the applicable limitations period is prescribed under N.C. Gen. Stat. § 1-47(1) (2011). Under this statute, an action "[u]pon a judgment or decree of any court of the United States, or of any state or territory thereof" must be brought within ten years "from the date of [the judgment's] entry." N.C. Gen. Stat. § 1-47(1). Plaintiff argues that his Texas Judgment was entered against Vinedos on 20 May 2010 and that he filed the present action to pierce the corporate veil and enforce the Texas Judgment against defendant on 13 December 2010, within the applicable ten-year period. Plaintiff argues that evidence was produced tending to show that defendant and Vinedos are alter egos, thereby subjecting defendant to the Texas Judgment, and that, because the evidence presented created a genuine issue of material fact as to whether defendant and Vinedos were alter egos, the trial court erred in granting summary judgment in favor of defendant. Plaintiff also contends that defendant's personal promises to pay the debt made during his post-judgment depositions rendered defendant personally liable to pay the debt evidenced by the Vinedos Note, and therefore summary judgment was likewise inappropriate based on defendant's statute of limitations defense.
In addressing plaintiff's arguments on appeal, defendant argues summary judgment in his favor was proper as to each of the claims raised by plaintiff in the present action. Defendant contends that plaintiff's action against him seeks to hold him personally liable for the funds loaned and is barred by the applicable statute of limitations for both breach of contract and fraud claims. Defendant further contends that, to the extent plaintiff's complaint seeks to hold him personally liable as a guarantor of the Vinedos Note, such action is barred by the statute of frauds and lack of additional consideration. Finally, defendant contends that plaintiff's claim to enforce the Texas Judgment against him in North Carolina by piercing the corporate veil fails because he was not joined as a defendant in the underlying Texas Action, and therefore North Carolina has no personal jurisdiction to enforce the Texas Judgment against him.
The trial court's order granting summary judgment in favor of defendant and dismissing plaintiff's claims did not state a basis for its award of summary judgment. Therefore, we address each of plaintiff's claims in turn. "If the granting of summary judgment can be sustained on any grounds, it should be affirmed on appeal." Shore v. Brown, 324 N.C. 427, 428, 378 S.E.2d 778, 779 (1989).
A. Action on the Debt Against Defendant Personally
To the extent plaintiff's action seeks to hold defendant personally liable for the advances plaintiff made to defendant, we note that plaintiff obtained the Texas Judgment on the basis of that same debt.
Our Supreme Court has stated the rule that "a judgment merges the debt upon which it is based and becomes the only evidence of the existence of the debt that can be used in court." Saieed v. Abeyounis, 217 N.C. 644, 647, 9 S.E.2d 399, 401 (1940). "The doctrine of merger is a collateral aspect of res judicata which determines the scope of claims precluded from relitigation by an existing judgment." Behr v. Behr, 46 N.C. App. 694, 698, 266 S.E.2d 393, 395-96 (1980).
Our Supreme Court explained this merger rule as follows:NCNB v. Robinson, 80 N.C. App. 154, 156, 341 S.E.2d 364, 366 (1986) (quoting Trust Co. v. Boykin, 192 N.C. 262, 266-67, 134 S.E. 643, 645 (1926) (quoting Grant v. Burgwyn, 88 N.C. 95, 99 (1883))). In Teele v. Kerr, 261 N.C. 148, 134 S.E.2d 126 (1964), our Supreme Court explained that "[w]hen a judgment is obtained, the precedent cause of action is merged into and extinguished by the judgment. The judgment is a debt of record, — a new cause of action, — upon which a new suit may be maintained." Id. at 149, 134 S.E.2d at 127 (internal quotation marks and citations omitted).
"'It is said that by judgment, the contract upon which it is based becomes entirely merged - loses all its vitality - and ceases to be obligatory upon the parties. Its force and effect are wholly expended, and all remaining liability is transferred to the judgment, which then becomes the evidence, and the only evidence that can be used in a court, of the existence of the original debt.'"
In light of the merger rule, any cause of action premised on the underlying debt evidenced by the Vinedos Note was extinguished upon plaintiff's obtaining the Texas Judgment. The record shows that the same facts establishing the debt owed to plaintiff under the Vinedos Note also form the basis of plaintiff's claim against defendant personally for repayment of the funds advanced. Therefore, plaintiff cannot maintain an action to hold defendant personally liable on the same debt. Accordingly, summary judgment in favor of defendant was proper to the extent plaintiff's action seeks to hold defendant personally liable on the underlying debt.
B. Guaranty Contract
N.C. Gen. Stat. § 22-1 (2011) mandates that "[n]o action shall be brought . . . to charge any defendant upon a special promise to answer the debt . . . of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party charged therewith[.]" Id. During defendant's post-judgment deposition in the Texas Action, defendant personally made oral representations that he "had every intention of paying [plaintiff his] monies" and that he wanted to pay the Texas Judgment. To the extent defendant's statements can be construed as promising to personally repay the corporation's debt, as evidenced by the Texas Judgment, the statute of frauds was satisfied when a transcript of defendant's oral deposition testimony was reduced to writing and signed by defendant on 17 September 2010 certifying the accuracy of the deposition transcript. See Powell v. City of Newton, 200 N.C. App. 342, 345, 684 S.E.2d 55, 58 (2009), aff'd in part, modified in part, 364 N.C. 562, 703 S.E.2d 723 (2010), reh'g denied, 365 N.C. 90, 706 S.E.2d 241 (2011).
In addition to satisfying the statute of frauds, a promise to personally repay the debt of another must be supported by sufficient consideration:
"A guaranty contract is supported by sufficient consideration if it is based on a benefit passing to the guarantor or a detriment to the guarantee. When the guaranty, as in this case, involves a preexisting debt, it must be supported by some new consideration other than the original debt."Klingstubbins Southeast v. 301 Hillsborough St. Partners, LLC, ___ N.C. App. ___, ___, 721 S.E.2d 749, 750 (2012) (quoting Carolina Eastern, Inc. v. Benson Agri Supply, 66 N.C. App. 180, 182-83, 310 S.E.2d 393, 395 (1984)), cert. allowed, ___ N.C. ___, 724 S.E.2d 516 (2012). In Klingstubbins, the plaintiff sought to hold the individual defendant, a principal of the corporate defendant, liable as guarantor for the corporate defendant's debts to plaintiff based on letters addressed to plaintiff from the individual defendant acknowledging the debt and committing to honor the obligation. Id. at ___, 721 S.E.2d at 750. Here, similar to the facts in Klingstubbins, plaintiff seeks to hold defendant personally liable on the debt owed by Vinedos, evidenced by the Texas Judgment, on the basis of defendant's post-judgment deposition statements, recorded in writing. While the statute of frauds may be satisfied by the signed deposition transcript, plaintiff has demonstrated no new consideration given by defendant supporting defendant's newly alleged promise to repay the corporation's debt evidenced by the Texas Judgment. Thus, plaintiff cannot proceed against defendant personally on this claim, and summary judgment in favor of defendant was proper to the extent plaintiff's action seeks to hold defendant liable as guarantor for the debt evidenced by the Vinedos Note and Texas Judgment.
C. Action on Judgment
Finally, we address plaintiff's claim seeking to hold defendant personally liable on the Texas Judgment by piercing the corporate veil in a post-judgment action.
According to our Supreme Court, an action on a judgment is "a new action on a debt" that is "separate and distinct from" the underlying action in which the judgment was obtained. Teele, 261 N.C. at 150, 134 S.E.2d at 128; see also Robinson, 80 N.C. App. at 156-57, 341 S.E.2d at 366 ("[A]n action on a judgment . . . is deemed an independent action separate and distinct from the original suit in which the prior judgment was rendered.").
[T]he only procedure now recognized by which the owner of a judgment may obtain a new judgment for the amount owing thereon is by an independent action on the prior judgment, which independent civil action must be commenced and prosecuted as in the case of any other civil action brought to recover judgment on a debt.Raccoon Valley Investment Co. v. Toler, 32 N.C. App. 461, 463, 232 S.E.2d 717, 718 (1977). "The main purpose of an action on a judgment is to obtain a new judgment which will facilitate the ultimate goal of securing the satisfaction of the original cause of action." 47 Am. Jur. 2d Judgments § 763 (2006).
Generally, an action on a judgment is instituted under two circumstances: 1) to obtain a new judgment on the underlying judgment when the statute of limitations on the underlying judgment is about to run out or when the underlying judgment has become dormant, or 2) to enforce the underlying judgment in another state. Id. §§ 763, 764. As plaintiff instituted the present action in North Carolina within a matter of months of obtaining the Texas Judgment, the first rationale is inapposite here. Accordingly, the remaining rationale supporting plaintiff's present action would be to enforce the Texas Judgment in this state in order to facilitate his goal of securing satisfaction of the Texas Judgment.
Plaintiff notes in his brief that the Uniform Enforcement of Foreign Judgments Act ("UEFJA"), N.C. Gen. Stat. §§ 1C-1701 et seq. (2011), "creates a simplified procedure for the docketing and indexing of foreign judgments in North Carolina . . . which Plaintiff did not employ here." Pursuant to the UEFJA:
(a) A copy of any foreign judgment . . . may be filed in the office of the clerk of superior court of any county of this State in which the judgment debtor resides, or owns real or personal property. Along with the foreign judgment, the judgment creditor or his attorney shall make and file with the clerk an affidavit which states that the foreign judgment is final and that it is unsatisfied in whole or in part, and which sets forth the amount remaining unpaid on the judgment.N.C. Gen. Stat. § 1C-1703 (2011). We fail to see how plaintiff could have employed the procedure prescribed under the UEFJA. Plaintiff could not successfully register the Texas Judgment for enforcement against Vinedos in North Carolina, as the record indicates that Vinedos was neither incorporated nor maintains its principal place of business nor owns any real or personal property in this state.
(b) Upon the filing of the foreign judgment and the affidavit, the foreign judgment shall be docketed and indexed in the same manner as a judgment of this State[.] . . .
(c) A judgment so filed has the same effect and is subject to the same defenses as a judgment of this State and shall be enforced or satisfied in like manner[.]
Nonetheless, as plaintiff correctly asserts, under N.C. Gen. Stat. § 1C-1707 (2011), the UEFJA does not "impair a judgment creditor's right to bring a civil action in this State to enforce such creditor's judgment." Id. Plaintiff contends "[t]his is just such an independent action." To this end, plaintiff seeks to establish that defendant is the alter ego of Vinedos, that the two are therefore the same party, and that defendant must be held to be a judgment debtor on the Texas Judgment as a result.
On this issue, defendant contends plaintiff's argument must fail because North Carolina lacks personal jurisdiction over him to enforce the Texas Judgment. We agree.
We have uncovered no case in North Carolina where a plaintiff has sought to enforce a foreign judgment obtained against a corporation against an individual defendant on an alter ego theory of liability where the individual defendant neither resided nor owned property in this state nor was joined in the prior action against the corporation. However, even assuming, without deciding, that North Carolina law allows a plaintiff to pierce the corporate veil in a post-judgment enforcement action, as plaintiff seeks to do in the present case, such an action cannot be maintained against an individual defendant who cannot be subjected to enforcement of the judgment in North Carolina. Here, the record shows that defendant, like Vinedos, neither resides in this state nor owns any real or personal property in this state that could be made the basis of supplemental proceedings to enforce the Texas Judgment in this state. In addition, defendant was not joined in the Texas Action in which the Texas Judgment was obtained, and plaintiff has failed to demonstrate any contacts between defendant and this state supporting personal jurisdiction in a new action on the Texas Judgment. Thus, the trial court had no personal jurisdiction over defendant as to an action to enforce the Texas Judgment in North Carolina. Because the trial court had no personal jurisdiction to enforce the Texas Judgment against defendant in North Carolina, even if defendant was found to be the alter ego of Vinedos and therefore liable on the Texas Judgment, the trial court properly granted summary judgment in favor of defendant. Having concluded summary judgment was proper in favor of defendant on grounds of personal jurisdiction to the extent plaintiff's action seeks to hold defendant liable in an action on the Texas Judgment in this state, we need not address plaintiff's statute of limitations arguments.
IV. Conclusion
We hold the trial court properly entered summary judgment in favor of defendant in the present case. Plaintiff cannot hold defendant personally liable on the funds plaintiff advanced to defendant, as that debt was both extinguished by and merged into the Texas Judgment. Plaintiff also cannot hold defendant personally liable as guarantor on the Vinedos Note or the Texas Judgment based on his post-judgment deposition statements, as plaintiff has demonstrated no new consideration supporting the formation of a guaranty contract. Finally, plaintiff cannot bring an action to enforce the Texas Judgment against defendant in this state, as North Carolina has no personal jurisdiction to enforce the Texas Judgment over defendant, given that defendant neither resides nor owns real or personal property in this state that could be made subject to an enforcement action. Accordingly, we affirm the order of the trial court granting summary judgment in favor of defendant and dismissing plaintiff's claims.
Affirmed.
Judges GEER and STEPHENS concur.
Report per Rule 30(e).