Hayes v. EVERGO TELEPHONE CO., LTD.

397 S.E.2d 325 (1990) 100 N.C. App. 474

Jack HAYES, Plaintiff-Appellee,
v.
EVERGO TELEPHONE COMPANY, LTD., and Evergo Trading Company, Ltd., Defendants-Appellants.

No. 9021SC67.

Court of Appeals of North Carolina.

October 30, 1990.

House and Blanco, P.A. by Peter J. Juran, Winston-Salem, for plaintiff-appellee.

Adams, Kleemeier, Hagan, Hannah & Fouts by David A. Senter, Greensboro, for defendants-appellants.

LEWIS, Judge.

I. Sufficiency of Service of Process Via International Mail

Defendants first assert that the plaintiff's service of process via international mail was insufficient as a matter of law and justifies setting aside partial summary judgment and dismissing plaintiff's claims. Plaintiff effected service of process upon defendants by sending the summons, together with the complaint via registered mail, return receipt requested.

In 1969, the United States signed the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (20 U.S.T. 361-367, T.I.A.S. 6638), ("The Hague Convention"). This international treaty was also ratified by Hong Kong. The Convention "was intended to provide a simpler way to serve process abroad, to assure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad." Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 108 S.Ct. 2104, 2107, 100 L.Ed.2d 722 (1988).

The Hague Convention provides a number of acceptable methods for service of foreign process, including the creation or designation by each adherent of a Central Authority to receive requests for service of documents from other countries and to serve those documents in accordance with the internal law of the recipient nation. 20 U.S.T. 362, T.I.A.S. 6638, Art. 5. Appellee concedes that he never sent either a request or the relevant documents to the designated Central Authority in Hong Kong. Service through a Central Authority, however, is not necessarily the exclusive method of serving defendants resident in party-nations. This appeal concerns the interpretation of Article 10(a) and Article 19 of the Convention, and whether these Articles provide an alternative method for service of process via international mail.

Article 10(a) provides:

Provided the State of destination does not object, the present Convention shall not interfere with—

(a) the freedom to send judicial documents, by postal channels, directly to persons abroad,

(b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination[,]

(c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination.

Id. (Emphasis added). Hong Kong has not objected to any portion of Article 10.

Article 19 provides: "To the extent that the internal law of a contracting State permits methods of transmission, other than those provided for in the preceding articles, of documents coming from abroad, for service within its territory, the present Convention shall not affect such provisions."

These Articles pose two different questions: first, whether the authority in Art. 10(a) "to send judicial documents, by postal channels directly to persons abroad" includes the authority to serve process by those channels; and, second, whether internal Hong Kong law permits service of process in that manner. Nicholson v. Yamaha Motor Co., Ltd., et al., 80 Md.App. 695, 702, 566 A.2d 135, 139 (1989).

The applicable rules of procedure in Hong Kong apparently allow service of process by registered mail in domestic civil cases.

A split currently exists among United States jurisdictions as to whether the words "to send" found in Article 10(a) are equivalent to the words "to serve" found elsewhere in the Convention, thereby allowing Article 10(a) to support service of process via international mail. Suzuki Motor Co. v. Superior Court, 200 Cal.App.3d 1476, 249 Cal.Rptr. 376 (1988), is representative of the view of those jurisdictions that conclude that Article 10(a) of the Hague Convention does not encompass documents that require formal service. Suzuki involved service of process upon a Japanese defendant. Japan has objected to Articles 10(b) and 10(c) of the Convention. The California Court of Appeals reasoned:

Given the fact that Japan itself does not recognize a form of service sufficiently equivalent to America's registered mail system, it is extremely unlikely that Japan's failure to object to Article 10, subdivision (a) was intended to authorize the use of registered mail as an effective mode of service of process, particularly in light of the fact that Japan specifically objected to the much more formal modes of service by Japanese officials which were available in Article 10.... [T]he fact that the Convention's drafters used both the phrase ``to send' and the phrase ``service of process' indicates they intended each phrase to have a different meaning and function.

Id. at 1481, 249 Cal.Rptr. at 379.

Interestingly, the opposing view was first articulated in a California court. In Shoei Kako Co., Ltd. v. Superior Court, 33 Cal.App.3d 808, 109 Cal.Rptr. 402 (1973), the court held that the Convention did permit service of process by mail on a Japanese defendant, concluding,

Although there is some merit to the proposed distinction it is outweighed by consideration of the entire scope of the convention.... The reference to ``the freedom to send judicial documents by postal channels, directly to persons abroad' would be superflous unless it was related to the sending of such documents for the purpose of service. The mails are open to all.

Id. at 821, 109 Cal.Rptr. at 411. Shoei was not overruled by Suzuki, instead the California Court of Appeals held that it was not bound by Shoei because of factual differences in the two cases. Suzuki, supra at 1479, 249 Cal.Rptr. 376, 377. The Shoei court observed that ratification of the Hague Convention by the United States Senate came only four years after promulgation of Rule 4(i)(1)(D) of the Federal Rules of Civil Procedure, allowing service in a foreign country by any form of mail requiring a signed receipt, addressed to the person to be served. It concluded that by ratifying Article 10(a) of the Convention the Senate could not have intended to abrogate Rule 4, but instead "intended to retain service by mail ... as an effective method of service of process in a foreign country unless that country objected to those provisions." Id. at 822, 109 Cal.Rptr. at 412. See also Ackermann v. Levine, 788 F.2d 830, 839 (2d Cir.1986). More recently, in Nicholson v. Yamaha Motor Co., Ltd. 80 Md.App. 695, 566 A.2d 135 (1989), cert. denied, 318 Md. 683, 569 A.2d 1242 (1990), the Maryland Court of Appeals concluded that service of process by mail upon a Japanese defendant was permissible because

(1) when adopting the Convention, the Japanese were presumably aware of U.S. Fed.R.Civ.P. 4(i) ... (2) since then, they have been aware of the decisions in many Federal cases that art. 10(a) does not prohibit service in Japan by that method, (3) under that line of decisions, U.S. based assets of Japanese nationals would be subject to seizure to satisfy judgments founded upon such service, and (4) in their only Declaration on the matter, they did not expressly negate the validity of such service.... Principally on that basis—because otherwise there are compelling arguments on both sides of the issue—we conclude that service may be effected on a Japanese defendant....

Id. at 709-710, 566 A.2d 135, 142-43. See also, Meyers v. ASICS Corp., 711 F.Supp. 1001, (C.D.Cal.1989); Newport Components v. NEC Home Electronics, 671 F.Supp. 1525 (C.D.Cal.1987), Tamari v. Bache and Co., 431 F.Supp. 1226, 1228-9 (N.D.Ill.1977), aff'd, 565 F.2d 1194 (7th Cir. 1977), cert. denied, 435 U.S. 905, 98 S.Ct. 1450, 55 L.Ed.2d 495 (1978).

We conclude that service of process via international mail in this case was in conformity with the provisions of the Hague Convention. We find particularly compelling the fact that, unlike Japan, Hong Kong has not objected to any portion of Article 10 and apparently the internal law of Hong Kong permits service of process through the mail. Defendants do not argue that they did not receive process and indeed plaintiff sent a letter notifying the defendants of his intention to obtain a default judgment if an answer was not filed in the case. Defendants do not argue that they did not receive any of these documents. The trial court did not err in refusing to dismiss plaintiff's claims and set aside entry of partial summary judgment and default based upon insufficient service of process.

II. Existence of In Personam Jurisdiction

Defendant Evergo Trading next argues that North Carolina lacks in personam jurisdiction. Defendant Evergo Telephone concedes that North Carolina validly exercised jurisdiction over it. A judgment entered against a defendant over which the Court does not have in personam jurisdiction is void and subject to being set aside pursuant to G.S. 1A-1, Rule 60(b)(4). Allred v. Tucci, 85 N.C.App. 138, 354 S.E.2d 291, disc. rev. denied, 320 N.C. 166, 358 S.E.2d 47 (1987). Challenges to in personam jurisdiction present a two part inquiry; first, whether the statutes of North Carolina permit the exercise of jurisdiction, and second, whether exercising in personam jurisdiction over the defendant violates due process of law. Dillon v. Numismatic Funding Corp., 291 N.C. 674-75, 231 S.E.2d 629, 630 (1977). Evergo Trading apparently had nothing to do with the manufacture of the telephone which caused plaintiff's injuries. In fact, defendant argues that if allowed to present evidence as to its liability, it could show that Evergo Trading was not even incorporated at the time plaintiff received and used the telephone. However, plaintiff contends that these arguments are irrelevant since it can show that North Carolina's long arm statutes permit the exercise of jurisdiction over Evergo Trading and that exercising jurisdiction over the defendant did not violate Due Process. We agree with the plaintiff.

At the time of hearing on defendants' motions to dismiss, plaintiff was able to show that Evergo Trading sells ceiling fans to distributors, including Lowe's, K Mart, and Montgomery Ward, all of which operate stores in North Carolina. Evergo Trading has sales of approximately $35 million dollars in the United States. It has made no attempt to limit the geographic distribution of its products to any certain state or states. Both defendants carry insurance for their sales and products throughout the United States. The phone which caused plaintiff's injuries was purchased in a North Carolina Lowe's store. Although Evergo Trading did not have contacts with North Carolina as to the telephone, because of its substantial business in the United States and the unlimited geographic distribution of its products, we conclude that Evergo Trading could reasonably have expected to be hailed into our courts. G.S. 1-75.4(1)(d), Bush v. BASF Wyandotte Corp., 64 N.C.App. 41, 306 S.E.2d 562 (1983); ETR Corp. v. Wilson Welding Service, Inc., 96 N.C.App. 666, 386 S.E.2d 766 (1990). The assertion that Evergo Trading was not in any way involved in the manufacture of the telephone may have provided an excellent defense to this action. However, defendants failed to file an answer in this case after actual service and therefore waived all defenses relating to its liability in this matter.

Our conclusion that the exercise of jurisdiction over the defendant is in accordance with our long arm statutes is also in conformity with our fundamental notions of "fair play and substantial justice." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490, 498 (1980). The injury to the plaintiff occurred in North Carolina; the product was purchased in North Carolina; the majority of the witnesses are in North Carolina and North Carolina substantive law controls. North Carolina's interest in adjudicating this matter was much greater than the minimal burden on defendant to defend this action. See E.T.R. Corp. v. Wilson Welding Service, Inc., supra.

III. Existence of Excusable Neglect

Finally, defendants urge this Court to reverse the trial court's denial of their Rule 60 motion based upon their alleged showing of "excusable neglect" and the existence of a meritorious defense. G.S. 1A-1, Rule 60(b)(1). We find that the trial judge did not abuse his discretion in refusing to set aside the judgment on these grounds.

Upon commencement of this action, defendants contacted their insurance carrier and their California attorney about the case. Some dispute arose amongst these parties as to whether the insurance company would defend the appellants in this action. On 18 November 1988, defendants' carrier denied coverage and refused to defend this action. Defendants still had two weeks to retain North Carolina counsel and file an answer. This they did not do. A defendant may not simply turn a case over to its insurer and then do nothing. Milks v. Clark's Greensboro, Inc., 260 N.C. 676, 677, 133 S.E.2d 517, 518 (1963). A defendant must give its litigation matters that level of attention one gives important business matters; the primary duty of attending to litigation remains with the defendant. Howard v. Williams, 40 N.C.App. 575, 578, 253 S.E.2d 571, 573 (1979). In the present case, defendants were well aware of the fact that their insurance carrier refused to represent them in this matter. Counsel for plaintiff waited some three months before moving for default and he also sent them a letter stating his intention to seek default if the defendants continued to fail to respond. There was sufficient time to protect their interests and defendants did nothing. Accordingly, the trial court refused to grant them relief from the judgment. We hold that under the circumstances, this was not an abuse of discretion.

IV. Conclusion

We have considered defendant's remaining assignments of error and find them to be without merit. For the reasons stated above, we affirm the trial court.

Affirmed.

WELLS and EAGLES, JJ., concur.