Carolina Bank, Inc. v. Northeastern Insurance Finance Co.

212 S.E.2d 552 (1975) 25 N.C. App. 211

The CAROLINA BANK, INC.,
v.
NORTHEASTERN INSURANCE FINANCE COMPANY, INC., et al.

No. 7410SC883.

Court of Appeals of North Carolina.

March 19, 1975.

Dillard M. Powell, Cary, for plaintiff.

Richard B. Conely, Raleigh, for defendant John I. Lee.

BROCK, Chief Judge.

Whether exclusable neglect has been shown is a question of law. The trial court considers the evidence and finds the facts. Upon the facts found, the trial judge determines, as a matter of law, whether they constitute excusable neglect. Equipment, Inc., v. Lipscomb, 15 N.C.App. 120, 189 S.E.2d 498 (1972). Upon the facts found in this case, we think the trial judge correctly concluded that the failure of defendant John I. Lee to file an answer within the time allowed was due to excusable neglect.

Even if there is a determination of excusable neglect, our case law requires a showing of a meritorious defense before the default judgment can be set aside. Kirby v. Contracting Co., 11 N.C.App. 128, 180 S.E.2d 407, cert. denied, 278 N.C. 701, 181 S.E.2d 602 (1971). Therefore, the sole question presented by this appeal is whether the trial court erred in determining that defendant John I. Lee "has no meritorious defense to said action."

Along with his motion to vacate the default and the default judgment, defendant tendered his proposed verified responsive pleadings. Plaintiff filed affidavits controverting defendant's factual allegations. It is clear that the trial judge resolved these controverted principal facts before making his determination that defendant John I. Lee had "no meritorious defense." In resolving these controverted principal factual allegations, his honor fell into error. In determining whether a meritorious defense has been shown, the court should determine whether the movant has, in good faith, presented by his allegations, prima facie, a valid defense. Estes v. Rash, 170 N.C. 341, 87 S.E. 109 (1915). "Where a party, in good faith, shows facts which raise an issue sufficient to defeat his adversary, if it be found in his favor, it is for the jury to try the issue and not for the judge, who merely finds whether on their face the facts show a good defense in law; otherwise, the defendant, though he establish ever so clear a case of excusable neglect entitling him to have the judgment set aside, would be deprived of the right of trial by the jury of the issue thus raised." Gaylord v. Berry, 169 N.C. 733, 735, 86 S.E. 623, 624 (1915).

It appears that defendants' proposed verified answer, prima facie, states a valid defense.

So much of the judgment appealed from as relates to the defense of defendant John I. Lee is reversed, and the cause is remanded for a new hearing to determine whether, from his proposed verified pleadings and his affidavits, defendant John I. Lee has, in good faith, stated a valid defense. If so, it will constitute the statement of a meritorious defense.

Reversed in part.

VAUGHN and MARTIN, JJ., concur.