John Henry Spainhour & Sons Grading Co. v. Carolina E. E. Homes, Inc. , 109 N.C. App. 174 ( 1993 )

EAGLES, Judge.

Defendant Shelton argues that the trial court erred by failing to set aside the default judgment and the entry of default. We agree.

I.

Initially, we note that the entry of a default judgment against defendant Shelton by the Clerk of Stokes County Superior Court was improper. Plaintiff argues that the entry of default judgment was proper because defendant Shelton was acting individually rather than as an agent of the corporation and that the general rule on default judgments is applicable. However, plaintiff overlooks the fact that the complaint alleged that all three defendants were jointly and severally liable. In Harris v. Carter, 33 N.C. App. 179, 182-83, 234 S.E.2d 472, 474-75 (1977), this Court held:

Default judgments in this jurisdiction are now groverned [sic] by G.S. 1A-1, Rule 55, which appears to be a counterpart of Rule 55 of the Federal Rules of Civil Procedure. Discussing the Federal Rule, the author of Moore’s Federal Practice, after citing and quoting from Frow v. De La Vega [15 Wall. 552, 21 L.Ed. 60 (1872)], supra, said:

“If, then, the alleged liability is joint a default judgment should not be entered against a defaulting defendant until all of the defendants have defaulted; or if one or more do not default then, as a general proposition, entry of judgment should await an adjudication as to the liability of the non-defaulting defendant(s). If joint liability is decided against the defending party and in favor of the plaintiff, plaintiff is then entitled to a judgment against all of the defendants — both the defaulting and non-defaulting defendants. If joint liability is decided against the plaintiff on the merits or that he has no present right of recovery, as distinguished from an adjudication for the non-defaulting defendant on a defense personal as to him, the complaint should be dismissed as to all of the defendants — both the defaulting and the non-defaulting defendants.” 6 Moore’s Federal Practice, 2nd Ed., Paragraph 55.06, pp. 55-81, 55-82.

This Court has already held that, absent any specific provision in our North Carolina rules or statutes governing the situation where a default is entered or a default judgment is obtained in a case in which there are multiple defendants, we would follow the federal practice in this regard. Rawleigh, Moses & Co. v. Furniture, Inc., 9 N.C. App. 640, 177 S.E.2d 332 (1970).

See Leonard v. Pugh, 86 N.C. App. 207, 210-11, 356 S.E.2d 812, 815 (1987) (“[wjhere a complaint alleges a joint claim against more than one defendant, default judgment pursuant to G.S. 1A-1, Rule 55 should not be entered against a defaulting defendant until all defendants have defaulted; or if one or more do not default then, generally, entry of default judgment should await an adjudication as to the liability of the non-defaulting defendants.”). Accordingly, the trial court erred by not setting aside the default judgment against defendant Shelton.

II.

Next, we address the entry of default against defendant Shelton. Defendant Shelton argues that the application and the order for extension of time to answer (both contained in a single document) “are ambiguous as to whether they apply only to Carolina Homes or to both Shelton and the corporation” and that “default was entered solely as the result of the excusable neglect of his counsel, rather than Shelton himself. Shelton reasonably relied on counsel to obtain an extension of time in which to plead, and his counsel’s failure to do so should not be imputed to him.” We agree.

“Entry of default and judgment by default would be improper where defendants showed 1) excusable neglect in failing to timely file a responsive pleading and 2) a meritorious defense to plaintiff’s claim. See G.S. 1A-1, Rule 60(b)(1), North Carolina Rules of Civil Procedure.” N.C.N.B. v. McKee, 63 N.C. App. 58, 61, 303 S.E.2d 842, 844 (1983). Regarding the term “excusable neglect,” in Norton v. Sawyer, 30 N.C. App. 420, 424-25, 227 S.E.2d 148, 152, disc. review denied, 291 N.C. 176, 229 S.E.2d 689 (1976), this Court stated:

Excusable neglect is something which must have occurred at or before entry of the judgment, and which caused it to be entered. What occurred after the entry of the default judgment is not to be considered except as it relates to whether the motion to vacate was made in “reasonable time.”

The distinction between the neglect of parties to an action and the neglect of counsel is recognized by our courts, and except in those cases in which there is a neglect or failure of counsel to do those things which properly pertain to clients and not to counsel, and in which the attorney is made to act as the agent of the client to perform some act which should be attended to by him, the client is held to be excusable for the neglect of the attorney to do those things which the duty of his office of attorney requires. It was the duty of the attorney to file the defendant’s answer. The client is not presumed to know what is necessary. When he employs counsel and communicates the merits of his case to such counsel, and the counsel is negligent, it is excusable on the part of the client, who may reasonably rely upon the counsel’s doing what may be necessary on his behalf.

(Emphasis added.) (Citations omitted.)

Here, defendant filed a motion to set aside the entry of default and default judgment pursuant to G.S. 1A-1, Rule 60. This motion included an explanation of the “mistake or inadvertence of the attorney in filing for an extension of time” and set forth the defense “that the defendant, Bobby J. Shelton, was not individually involved in the ‘Exhibit A’ of the Complaint nor was he mentioned in the bill of plaintiff to Carolina E.E. Homes and Southern Single Homes which was attached to the Complaint.” Both defendant Shelton and his attorney filed affidavits explaining the mistake. In the order denying the motion, the trial court stated that:

4. The record contains no information concerning the defendant’s relationship with his attorney, no evidence of his effort or diligence in pursuit of the defense of this case prior to the entry of the Default Judgment and, therefore, there is insufficient evidence upon which to grant a Motion pursuant to Rule 60 concerning this defendant’s excusable neglect and further the neglect of his attorney, if any, is imputed to him showing on this defendant’s part of his own inexcusable conduct in handling the legal defense of this matter.

Thereafter, defendant filed a “motion to alter or amend order.” This motion was verified by defendant Shelton and his attorney and was accompanied by another affidavit from defendant Shelton. The verified motion stated that 1) defendant had a meritorious defense; 2) the entry of default and default judgment arose from the excusable neglect of defendant’s counsel; and 3) Shelton “diligently and assiduously responded to any and all requests for information and cooperation. . . . [and] kept himself fully advised of all information regarding the status of this proceeding through Movant’s counsel and at no time has failed to respond appropriately and timely to any directions, inquiries, or instructions from Movant’s counsel regarding appropriate measures to be taken in defense of this proceeding.” Additionally, defendant Shelton’s affidavit set forth his defense and stated the following:

3. In apt time before expiration of time for filing and service of answer, pleadings, or motions in response to Plaintiff’s Complaint in this action, Affiant delivered copies of the summonses and the Complaint to Piedmont Legal Associates (PLA) and requested that PLA represent Affiant and Defendant, Carolina E.E. Homes, Inc., in this action.

4. PLA agreed to represent Affiant and Carolina E.E. Homes, Inc., and, according to Affiant’s understanding, proceeded to obtain an extension of time in which to file and serve appropriate responsive pleadings in this proceeding.

5. Well before the extended deadline communicated to Affiant by PLA for filing and service of responsive pleadings, Affiant met with PLA and conveyed to them all necessary information to prepare an appropriate answer and other proper responsive pleadings to this proceeding and was advised by PLA that these pleadings would be prepared and filed in a timely and appropriate manner.

6. In reliance upon his understanding that PLA would timely file and serve appropriate responsive pleadings, Affiant entrusted responsibility for filing and service of those pleadings to PLA.

10. Affiant has timely responded to all requests for information to prepare responsive pleadings addressed to him by PLA, and has communicated regularly with PLA in preparation for his defense of his action.

11. PLA understood, according to information and belief supplied to Affiant, that PLA had obtained an appropriate extension of time on Affiant’s behalf to plead beyond and including the date Affiant’s Answer was filed. Affiant relied upon these representations and understanding and reviewing and supervising the defense of his individual interest in this action.

Given that the “ ‘law generally disfavors default judgments, [and] any doubt should be resolved in favor of setting aside an entry of default so the case may be decided on its merits,’ ” Beard v. Pembaur, 68 N.C. App. 52, 56, 313 S.E.2d 853, 855, disc. review denied, 311 N.C. 750, 321 S.E.2d 126 (1984) (citations omitted), we conclude that there is no compelling reason for the neglect of defendant Shelton’s attorney to be imputed to defendant Shelton.

Accordingly, the entry of default and default judgment against defendant Shelton are vacated and this cause is remanded to District Court for further proceedings.

Vacated and remanded.

Judges ORR and JOHN concur.