Opinion
NO. COA12-683
01-15-2013
JEMM, LLC, Plaintiff v. CHARLES C. CRAWFORD III, ROBERT A. WOLCOTT, AND JASON A. DESIATO, Defendants
Gordon Law Offices, by Harry G. Gordon, for plaintiff-appellee. Doran, Shelby, Pethel and Hudson, P.A., by Michael Doran, for defendant-appellant Charles C. Crawford. James P. Hoffman, Jr., for defendant-appellant Jason A. Desiato. No brief filed for defendant-appellant Robert A. Wolcott.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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.
Guilford County
No. 10 CVS 10577
Appeal by defendant Crawford and cross-appeal by plaintiff from judgment entered 10 October 2011 by Judge Patrice A. Hinnant in Guilford County Superior Court. Heard in the Court of Appeals 24 October 2012.
Gordon Law Offices, by Harry G. Gordon, for plaintiff-appellee.
Doran, Shelby, Pethel and Hudson, P.A., by Michael Doran, for defendant-appellant Charles C. Crawford.
James P. Hoffman, Jr., for defendant-appellant Jason A. Desiato.
No brief filed for defendant-appellant Robert A. Wolcott.
CALABRIA, Judge.
Charles C. Crawford III ("Crawford") appeals from a judgment entered upon a jury verdict finding Crawford breached a promissory note for failure to pay JEMM, LLC ("plaintiff"). Plaintiff cross-appeals from the judgment for the trial court's failure to award statutory attorneys' fees in addition to awarding plaintiff damages. We dismiss in part and remand in part.
I. Background
On 31 May 2007, Crawford, Robert A. Wolcott ("Wolcott"), and Jason A. Desiato ("Desiato") (collectively "defendants") cosigned an unsecured promissory note in the amount of $25,000.00, with interest, to plaintiff ("the note"). Defendants defaulted on the note for failure to pay the principal and interest. On 11 January 2008, plaintiff notified defendants that the note was in default and demanded payment in full within five days. The letter included notice of plaintiff's intent to enforce a claim for attorneys' fees in accordance with N.C. Gen. Stat. § 6-21.2.
When defendants failed to pay the note in full, plaintiff filed a complaint on 8 October 2010, alleging defendants were in default on the note. Plaintiff sought damages for the principal, plus interest, late fees and attorneys' fees. Crawford filed an answer, but Wolcott and Desiato failed to appear in the action. A default judgment was entered against Wolcott and Desiato on 26 January 2011. Desiato attempted to have the entry of default set aside, but was unsuccessful.
On 3 October 2011, only plaintiff and Crawford participated in the trial in Guilford County Superior Court. The jury returned a verdict finding that Crawford had breached the note by failing to pay. The jury awarded plaintiff damages for the amount of the unpaid note plus accrued interest of $8,690.41 and a late fee of $1,000.00 for the total amount of $34,690.41. Plaintiff also sought attorneys' fees, pursuant to the note, but the trial court denied plaintiff's request. Crawford appeals. Plaintiff cross-appeals the trial court's denial of its request for attorneys' fees.
Crawford notified Desiato's counsel via email of his intention to appeal. However, in serving notice of appeal, Crawford only served plaintiff. Both plaintiff and Desiato filed motions to dismiss Crawford's appeal.
II. Motion to Dismiss
Plaintiff and Desiato both request dismissal of Crawford's appeal, alleging that this Court is without jurisdiction to hear the appeal because of Crawford's failure to comply with Rule 3. We agree.
Rule 3 of the North Carolina Rules of Appellate Procedure governs how and when appeals are taken in civil cases. N.C.R. App. P. 3 (2012). Pursuant to Rule 3,
[a]ny party entitled by law to appeal from a judgment or order of a superior or district court rendered in a civil action or special proceeding may take appeal by filing notice of appeal with the clerk of superior court and serving copies thereof upon all other parties within the time prescribed by subsection (c) of this rule.N.C.R. App. P. 3(a) (2012). Subsection (c) requires service within 30 days. N.C.R. App. P. 3(c) (2012). Rule 3 is jurisdictional, and failure to comply requires us to dismiss the appeal. Lee v. Winget Rd., LLC, 2 04 N.C. App. 96, 98, 693 S.E.2d 684, 687 (2010).
In Lee, there were multiple parties as plaintiffs and defendants in the action. Id. at 97, 693 S.E.2d at 686. After defendants were granted summary judgment at trial, some of the plaintiffs appealed. Id. Defendants filed a motion to dismiss the appeal because the appellants failed to serve a notice of appeal on the non-appealing plaintiffs. Id. Plaintiff-appellants claimed that Rule 3(a) did not apply because they were not required to serve a notice of appeal "on all parties to the action at the trial level" or on those parties that chose not to appeal. Id. at 99, 693 S.E.2d at 687. This Court held that, pursuant to the Rule, "all other parties" must be served with a copy of the notice of appeal. Id. at 99, 693 S.E.2d at 688; N.C.R. App. P. 3(a) (2012). This Court noted that "'[a]ll' is defined as 'the whole quantity of,' 'everyone,' or 'entirely.'" Lee, 204 N.C. App. at 99, 693 S.E.2d at 688 (citation omitted). Therefore, the Court found that the appellants failed to comply with Rule 3 by failing to serve the non-appealing plaintiffs. Id. at 100-01, 693 S.E.2d at 688.
In the instant case, Crawford served a notice of appeal on plaintiff, but he failed to serve Desiato. Crawford claims that he was not required to serve Desiato because he was not a party "to the appeal." However, pursuant to this Court's holding in Lee, Crawford was required to serve "all other parties" including Desiato.
Crawford also claims that Desiato waived service of the appeal because he was notified via email of Crawford's appeal. In a dissenting opinion that was adopted by our Supreme Court, Judge Wynn argued that an appellee may waive the service of the notice of appeal without depriving this Court of subject matter jurisdiction. Hale v. Afro-American Arts Internat'l, 110 N.C. App. 621, 625, 430 S.E.2d 457, 459-60, rev'd per curiam, 335 N.C. 231, 436 S.E.2d 588 (1993) (Wynn, J., dissenting). Therefore, "pursuant to Hale, filing of the notice of appeal is jurisdictional, but where a notice of appeal is filed, service of the notice of appeal upon all parties may be waived." Lee, 204 N.C. App. at 100, 693 S.E.2d at 688. In Hale, Judge Wynn determined that failure to serve the notice of appeal could be waived by not raising the issue by motion or otherwise and by participating in the appeal. Hale, 110 N.C. App. at 625, 430 S.E.2d at 459-60. In Ribble v. Ribble, this Court concluded that appellee had not waived service of the notice of appeal where the appellee did not file a brief with the Court, participate in the appeal, and there was nothing in the record to indicate that plaintiff had received notice of the appeal. 180 N.C. App. 341, 343, 637 S.E.2d 239, 240 (2006).
In the instant case, because Desiato filed a motion to dismiss the appeal and thus did not waive his right to service of the notice of appeal, the Hale exception does not apply. In addition, despite Crawford's claims that Desiato initially indicated that he would waive any objection to the lack of service and that he gave informal notice to Desiato of his intent to appeal, Desiato's objection to the appeal filed with this Court renders Crawford's claim moot. See McQuillin v. Perez, 189 N.C. App. 394, 397, 657 S.E.2d 924, 926 (2008) (where the record contained no certificate of service showing process to the party, and the party filed a motion to dismiss the appeal, this Court found that the party had "not waived the issue"); Blyth v. McCrary, 184 N.C. App. 654, 660, 646 S.E.2d 813, 817 (2007) ("We find no authority for the proposition that a party's expression of a desire not to be served excuses another party's failure to serve all required papers.").
Pursuant to Hale, failure to serve all parties violates Rule 3 and amounts to a nonjurisdictional defect. Hale, 335 N.C. 231, 436 S.E.2d 588; Lee, 204 N.C. App. at 102, 693 S.E.2d at 689. When a party fails to comply with the Rules of Appellate Procedure, this Court may impose sanctions. N.C.R. App. P. 25(b) (2012). Thus, we must now consider whether Crawford's failure to comply with Rule 3 should result in a dismissal pursuant to Dogwood Dev. & Mgmt. Co., LLC, v. White Oak Transp. Co., 362 N.C. 191, 193, 657 S.E.2d 361, 362 (2008). In Lee, this Court considered failure to serve notice of appeal on all parties "a significant and fundamental violation" because the Court had "no way of knowing the positions [the] parties would have taken in [the] appeal[,]" the unserved plaintiffs were "denied the opportunity to be heard" and there was "no written waiver filed in the record or in response to the motion to dismiss." Lee, 204 N.C. App. at 102-03, 693 S.E.2d at 690. Thus, the Court dismissed the case. Id.
In the instant case, a default judgment was entered against Desiato by the Clerk of Superior Court. Desiato then filed a motion to set aside the default judgment, but the trial court denied the motion. Desiato had the right to appeal the trial court's order denying the motion to set aside the default judgment.
After judgment was entered against Crawford for damages, he appealed to this Court without serving Desiato with notice of the appeal. Since both Crawford and Desiato were jointly liable for damages, Crawford's decision to appeal and potentially avoid liability for damages directly affected Desiato's interests. However, as in Lee, Crawford's failure to serve Desiato denied Desiato the opportunity to be heard and this Court is unaware of the issues he would have presented in this appeal.
Despite Crawford's arguments, the fact that plaintiff served notice of his cross-appeal on Desiato did not cure Crawford's failure to serve his notice of appeal. However, Crawford correctly argues that according to Rule 5 of the North Carolina Rules of Civil Procedure he is not required to serve parties who are in default at the trial level but he has not provided any authority that this rule extends to the appellate level. N.C. Gen. Stat. § 1A-1, Rule 5 (2011). Therefore, dismissal is the appropriate sanction for failure to comply with the Rules of Appellate Procedure. N.C.R. App. P. 34(b) (2012).
Crawford requests, in his opposition to the motion to dismiss, that this Court should suspend the Rules of Appellate Procedure, pursuant to Rule 2, and allow Crawford to cure this defect. N.C.R. App. P. 2 (2012). Crawford's request is denied.
III. Cross-Appeal
Plaintiff contends that the trial court erred in failing to award attorneys' fees or in not directing the jury to address and award plaintiff's right to fifteen percent (15%) attorneys' fees as part of the verdict on the breach of the promissory note as required by statute. We agree.
North Carolina case law indicates that when reviewing a trial court's decision on an award of attorneys' fees the standard of review is abuse of discretion. Bruning & Federle Mfg. Co. v. Mills, 185 N.C. App. 153, 155-56, 647 S.E.2d 672, 674 (2007) (internal citations and quotation marks omitted). "However, where an appeal presents [a] question[ ] of statutory interpretation, full review is appropriate, and we review a trial court's conclusions of law de novo." Id. Therefore, whether an award of attorneys' fees is authorized by statute is a question reviewed de novo. When the question is of statutory interpretation, we must "ascertain the intent of the legislating body and adhere to that intent." Lee v. Gore, 365 N.C. 227, 229, 717 S.E.2d 356, 358 (2011).
Generally, "a successful litigant may not recover attorneys' fees, whether as costs or as an item of damages, unless such a recovery is expressly authorized by statute." Harborgate Prop. Owners Ass'n, Inc. v. Mountain Lake Shores Dev. Corp., 145 N.C. App. 290, 298, 551 S.E.2d 207, 212 (2001) (citations omitted). "[E]ven where parties have contractually obligated themselves to pay attorneys' fees, there must still be statutory authority for their recovery." WRI/Raleigh, L.P. v. Shaikh, 183 N.C. App. 249, 257, 644 S.E.2d 245, 250 (2007). Pursuant to § 6-21.2 of the North Carolina General Statutes,
Obligations to pay attorneys' fees upon any note, conditional sale contract or other evidence of indebtedness, in addition to the legal rate of interest or finance charges specified therein, shall be valid and enforceable, and collectible as part of such debt, if such note, contract or other evidence of indebtedness be collected by or through an attorney at law after maturity, subject to the following provisions:N.C. Gen. Stat. § 6-21.2 (2011). This statute authorizes awarding "attorneys' fees in actions to enforce obligations owed under 'an evidence of indebtedness' that itself provides for the payment of attorneys' fees." Kindred of N.C., Inc. v. Bond, 160 N.C. App. 90, 103, 584 S.E.2d 846, 854 (2003); RC Assocs. v. Regency Ventures, Inc., 111 N.C. App. 367, 372, 432 S.E.2d 394, 397 (1993).
. . .
(5) The holder of an unsecured note or other writing(s) evidencing an unsecured debt, . . . or his attorney at law, shall, after
maturity of the obligation by default or otherwise, notify the maker, debtor, account debtor, endorser or party sought to be held on said obligation that the provisions relative to payment of attorneys' fees in addition to the "outstanding balance" shall be enforced and that such maker, debtor, account debtor, endorser or party sought to be held on said obligation has five days from the mailing of such notice to pay the "outstanding balance" without the attorneys' fees. If such party shall pay the "outstanding balance" in full before the expiration of such time, then the obligation to pay the attorneys' fees shall be void, and no court shall enforce such provisions.
In Kindred, the defendants made a motion for attorneys' fees pursuant to N.C. Gen. Stat. § 6-21.2 based on a promissory note executed between the parties, but the trial court denied the defendants' motion. Id. at 102, 584 S.E.2d at 854. The note in the case had a provision indicating that if the party defaulted on the note, he would pay "reasonable attorney fees equal to fifteen percent (15%) of the outstanding balance due on the Note." Id. at 104, 584 S.E.2d at 855. This Court found that because the note provided for attorneys' fees in a specific percentage, subsection (1) of N.C. Gen. Stat. § 6-21.2 applied. Id. In addition, the defendants met the notice requirement of subsection (5). Id. Therefore, the Court held that the trial court erred in denying defendants' motion for attorneys' fees, noting that it was "unaware of the reasoning behind the trial court denying [the] motion." Id. at 104-05, 584 S.E.2d at 855.
In the instant case, attorneys' fees were included in the default section of the note:
Upon default the holder of this Note may employ an attorney to enforce the holder's rights and remedies and the maker, principal, surety, guarantor and endorsers of this Note hereby agree to pay to the holder reasonable attorneys fees a sum equal to fifteen percent (15%) of the outstanding balance owing on said Note, plus all other reasonable expenses incurred by the holder in exercising any of the holder's rights and remedies upon default.Since the default section of the note provided for payment of attorneys' fees in the amount of fifteen percent (15%) of the outstanding balance, the note fulfills the statutory requirement of designating a specific percentage of the outstanding balance. Therefore, subsection (1) of N.C. Gen. Stat. § 6-21.2 applies and this section of the Note is "valid and enforceable." N.C. Gen. Stat. § 6-21.2 (2011).
Besides designating attorneys' fees in the note, plaintiff met the notice requirements of the statute by sending defendants a letter notifying them that the note was in default and that payment in full was due within five days. Nevertheless, at trial, the jury verdict did not include attorneys' fees. Following the verdict, plaintiff's counsel requested attorneys' fees pursuant to the statute, since the default section of the note introduced at trial expressly provided that upon default defendants were responsible for paying attorneys' fees equal to fifteen percent (15%) of the outstanding balance. In addition, plaintiff gave the required notice of its intention to collect the fees. Although plaintiff met the statutory requirements, the trial court denied plaintiff's request and declined to add attorneys' fees to the award.
Both the trial court and Crawford relied on the jury's decision not to award attorneys' fees as a basis to deny plaintiff's request. Neither Crawford nor the trial court indicated that plaintiff failed to meet any of the statutory requirements. Furthermore, Crawford failed to cite any case law indicating that the statute requires that attorneys' fees must be awarded by the jury. Rather, the plain language of the statute indicates that "obligations to pay attorneys' fees ... shall be valid and enforceable...." N.C. Gen. Stat. § 6-21.2 (2011). Therefore, the trial court erred by failing to award plaintiff attorneys' fees in the amount of fifteen percent (15%) of the outstanding balance of the note.
IV. Conclusion
This Court may dismiss an appeal if (1) the appellant fails to properly serve notice as prescribed by the Rules; and (2) all the parties to the appeal have not agreed to waive the defect in service. Here, Crawford failed to formally serve notice of appeal on Desiato. Desiato and plaintiff refused to waive the defect in service. Therefore, Crawford's appeal should be dismissed. In addition, the trial court was required by statute to award plaintiff attorneys' fees as provided for in the default section of the promissory note. Therefore, we remand to the trial court to award attorneys' fees pursuant to statute.
Dismissed in part, remanded in part.
Judges HUNTER, Robert C. and GEER concur.
Report per Rule 30(e).