Preview:

KYLE & ASSOCIATES, INC. Plaintiff, v. THOMAS MAHAN, and MICHAEL
AUTEN, Defendants
NO. COA03-131
Filed:                                                                                               18 November  2003
Judgments-foreign-certificate of authority-timeliness
The trial court properly denied defendants’ motion to strike a foreign judgment where
plaintiff corporation received its certificate of authority to do business in North Carolina after
defendant raised the issue, but before the North Carolina court considered the matter. The
suggestion that the certificate of authority must be obtained prior to the trial in the foreign
jurisdiction is not consistent with precedent.  N.C.G.S. § 55-15-02(a).
Appeal by defendants from judgment entered  24 September  2002
by Judge Timothy L. Patti in Gaston County Superior Court.    Heard
in the Court of Appeals  29 October  2003.
Arthurs  &  Foltz,  by  Douglas  P.  Arthurs,  for  plaintiff
appellee.
Brown  &  Associates,  P.L.L.C.,  by  Donald  M.  Brown,  Jr.,  for
defendant appellants.
McCULLOUGH, Judge.
This  case  arises  out  of  a  lawsuit  originally  filed  in  South
Carolina in which the trial court in Gaston County, North Carolina,
subsequently  denied  defendants’  motion  for  relief  from  foreign
judgment.     The  pertinent  facts  are  as  follows:  A  corporation
organized in South Carolina, Kyle & Associates, Inc.  (plaintiff),
sued  Thomas  A.  Mahan  and  Michael  Auten                                                         (defendants)  in  South
Carolina for money damages stemming from a business relationship.
A South Carolina jury returned a verdict in favor of plaintiff and
awarded it  $350,000 on  24 June  1999.




After  obtaining  its  judgment  in  South  Carolina,  plaintiff
filed a notice of filing of foreign judgment in Gaston County and
Davie County, North Carolina, and defendants received an affidavit
of service.   Defendants filed a notice of defenses and a motion for
relief  from  foreign  judgment  in  the  Superior  Courts  of  Gaston
County  and  Davie  County.  At  that  time,  defendants  claimed  that
plaintiff was not authorized to enforce a judgment in the State of
North Carolina.
Defendants appealed the judgment in South Carolina, but the
decision of the trial court was affirmed.   Once the judgment became
final  on  22  March  2002,  plaintiff  filed  an  affidavit  of  foreign
judgment.
On 3 July 2002, the North Carolina Secretary of State’s office
issued  a  certificate  of  authority  to  plaintiff.    During  July  of
2002,  the  parties  attempted  to  obtain  a  hearing  date,  but  both
sides were unable to agree to a time.   On  7 August  2002, defendant
filed a notice to withdraw motion and reserved the right to refile
at a later date.    Two days later, defendants refiled their motion
for relief from judgment. A hearing was held on  24 September  2002
in Gaston County Superior Court, and the Honorable Timothy L. Patti
denied   defendants’   motion   to   strike   the   foreign   judgment.
Defendants appealed.
On  appeal,  defendants  argue  that  the  trial  court  erred  by
denying the motion to strike a foreign judgment because plaintiff
did  not  have  a  certificate  of  authority  to  do  business  in  North
Carolina  at  the  time  it  obtained  the  foreign  judgment.     We
disagree.




N.C. Gen. Stat.  §                                                          55-15-02(a)  (2001) provides:
No foreign corporation transacting business in
this State without permission obtained through
a certificate of authority under this Chapter
or  through  domestication  under  prior  acts
shall  be  permitted  to  maintain  any  action  or
proceeding  in  any  court  of  this  State  unless
the   foreign   corporation   has   obtained   a
certificate of authority prior to trial.
An  issue  arising  under  this  subsection
must be raised by motion and determined by the
trial judge prior to trial.
Defendants  argue  that  plaintiff  was  unable  to  enforce  its
judgment in North Carolina because it did not obtain a certificate
of authority before commencing trial in South Carolina.   Plaintiff
responds  by  noting  that  it  obtained  a  certificate  of  authority
prior  to  the  hearing  in  North  Carolina.    The  question  for  this
Court  is  whether  the  certificate  of  authority  must  be  obtained
before the hearing in the foreign jurisdiction or before utilizing
the courts of North Carolina.
This Court has previously considered the statutory language at
issue in this case and explained:  “[A] foreign corporation or its
successor or assignee may not maintain any action in North Carolina
(including  an  action  to  enforce  a  foreign  judgment)  until  the
foreign  corporation  obtains  a  certificate  of  authority  to  do
business here.”   Leasecomm Corp. v. Renaissance Auto Care, 122 N.C.
App. 119, 121, 468 S.E.2d 562, 563-64 (1996) (emphasis added).  1 In
1
Leasecomm stands for the proposition that a foreign
corporation’s failure to obtain a certificate of authority to do
business in North Carolina precluded the corporation’s assignee
from maintaining an action to enforce the foreign judgment in
North Carolina, even though the assignee was authorized to do
business in North Carolina.    This case does not help defendants
because unlike the assignor corporation in Leasecomm, plaintiff
in this case did receive a certificate of authority prior to the




other words, before a foreign corporation can utilize the courts of
North  Carolina,  that  corporation  must  get  a  certificate  of
authority prior to the hearing of the matter in North Carolina.   In
this case, since plaintiff obtained its certificate of authority on
3  July                                                                         2002  before  the  hearing  on   24  September   2002  in  North
Carolina,  we  conclude  that  plaintiff  complied  with  the  statutory
requirements of N.C. Gen. Stat.  §                                              55-15-02(a).
A  recent  decision  of  this  Court  also  suggests  that  a
certificate  of  authority  may  be  obtained  at  any  time  before  the
hearing  in  North  Carolina.     In  Harold  Lang  Jewelers,  Inc.  v.
Johnson,  the  trial  court  dismissed  the  plaintiff’s  suit  in  North
Carolina because the plaintiff was a Florida corporation that never
obtained  a  certificate  of  authority  to  do  business  in  North
Carolina.                                                                       156  N.C.  App.                  187,            188,              576  S.E.2d   360,   361,  disc.
review denied,  ___ N.C.  ___,  585 S.E.2d  765  (2003).    In upholding
the  decision  of  the  trial  court,  this  Court  indicated  that
plaintiff’s  suit  would  not  have  been  dismissed  if  plaintiff  had
obtained  the  certificate  of  authority  before  the  North  Carolina
court  considered  the  matter.    Id.  at  192,  576  S.E.2d  at  363.    We
noted   that   Lang,   the   plaintiff,                                         “could   have   obtained   the
certificate in the year and a half that passed between the filing
of the [defendant’s] motion and the court’s dismissal of the case.”
Id.
In   the   case   at   bar,   defendants’   suggestion   that   the
certificate of authority must be obtained prior to the trial in the
foreign jurisdiction is not consistent with the ruling in Johnson.
hearing in North Carolina.




In  fact,  plaintiff  in  this  case,  Kyle  &  Associates,  Inc.,  did
exactly  what  the  Court  in  Johnson  suggested.  It  received  a
certificate  of  authority  after  defendant  raised  the  issue,  but
before the North Carolina court considered the matter.
We have carefully reviewed the other arguments of the parties
and  find  them  to  be  without  merit.    Therefore,  the  trial  court’s
denial  of  defendants’  motion  to  strike  a  foreign  judgment  is
affirmed.
Affirmed.
Judges TYSON and BRYANT concur.

Download 03-131-5.pdf

South Carolina Law