Tradewinds Airlines, Inc. v. C-S Aviation Services

733 S.E.2d 162, 222 N.C. App. 834, 2012 WL 4069587, 2012 N.C. App. LEXIS 1104
CourtCourt of Appeals of North Carolina
DecidedSeptember 18, 2012
DocketNo. COA11-739
StatusPublished
Cited by20 cases

This text of 733 S.E.2d 162 (Tradewinds Airlines, Inc. v. C-S Aviation Services) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tradewinds Airlines, Inc. v. C-S Aviation Services, 733 S.E.2d 162, 222 N.C. App. 834, 2012 WL 4069587, 2012 N.C. App. LEXIS 1104 (N.C. Ct. App. 2012).

Opinion

STEELMAN, Judge.

The trial court had personal jurisdiction over C-S Aviation Services (CSA). The third-party complaint stated a claim for fraud and unfair and deceptive trade practices. The trial court’s conclusions do not justify setting aside the default judgment. The trial court did not abuse its discretion in declining to set aside the default judgment.

[836]*836I. Factual and Procedural History

TradeWinds Airlines, Inc. (Airlines) is an air freight carrier. TradeWinds Holdings, Inc. (Holdings) was the sole shareholder of Airlines when this litigation began. CSA initially leased aircraft to Airlines. However, the aircraft leases were amended and restated so that Deutsche Bank Trust Company was the administrative agent for a syndicate of lenders that owned the aircraft leased to Airlines. CSA became the aircraft manager for the lessors of the aircraft.

In December 2001, Coreolis Holdings, Inc. (Coreolis) purchased the outstanding stock of Holdings. In September 2003, Deutsche notified Airlines that it was in default under the terms of the lease and threatened to seize the aircraft.

Deutsche filed this action against Airlines, Holdings, and Coreolis, (collectively TradeWinds Group) seeking possession of the aircraft and damages on 14 November 2003. TradeWinds Group filed a third-party complaint against CSA alleging fraudulent inducement, breach of contract, and unfair and deceptive trade practices on 4 February 2004. TradeWinds Group served CSA by sending copies of the summons and the third-party complaint to CSA’s registered agent, Corporation Trust Company.

On 19 August 2004, the trial court entered default against CSA for failing to respond to TradeWinds Group’s summons and third-party complaint. This entry of default was as to the claims asserted by the entire TradeWinds Group against CSA. Deutsche and TradeWinds Group subsequently reached a settlement, which resulted in the trial court dismissing the remaining claims between those parties on 29 December 2006. Excluded from the dismissal was TradeWinds Group’s third-party complaint against CSA. On 27 February 2007, the trial court made a second entry of default against CSA.

The trial court closed its file on 17 April 2007. In the spring of 2008, Airlines became aware of the possibility of piercing the corporate veil to reach the principals of CSA.1 Acting alone, Airlines moved for default judgment against CSA on 14 April 2008. CSA failed to appear at a hearing on the motion for default judgment on 19 June 2008. On 20 June 2008, Airlines filed an action in the United States [837]*837District Court for the Southern District of New York, seeking to pierce the corporate veil to reach CSA’s principals. TradeWinds Airlines, Inc. v. Soros, 2009 WL 435298 (S.D.N.Y. Feb. 23, 2009).2

On 7 July 2008, the trial court entered default judgment against CSA, awarding Airlines damages in the amount of $16,326,528.94. The trial court then trebled the damages pursuant to Chapter 75 and added interest, making the total judgment $54,867,872.49. On 25 July 2008, Airlines filed a petition for bankruptcy in the Southern District of Florida. On 31 July 2008, the trial court again closed its file in this matter.

On 27 August 2008, CSA moved to set aside the entry of default and the default judgment. On 7 January 2009, Coreolis and Holdings also filed a motion to set aside Airlines’ default judgment. Coreolis and Holdings subsequently filed motions for entry of default judgment against CSA on 6 March 2009. On 20 May 2009, the trial court entered an order staying all pending motions until the stay arising out of Airlines’ pending bankruptcy in Florida was lifted. Following the lifting of the bankruptcy stay, on 21 September 2009, the trial court set aside the 7 July 2008 default judgment in favor of Airlines, but declined to set aside the underlying entry of default against CSA.3 The trial court gave the parties 140 days to conduct discovery on damages and directed that a hearing on damages be held on 10 May 2010.

On 26 July 2010, the trial court entered judgment awarding Coreolis and Holdings damages in the amount of $11,544,000.00, subject to trebling and interest against CSA. The judgment also awarded Airlines damages in the amount of $16,111,403.00, subject to trebling and interest against CSA. A separate order was entered on 28 July 2010, denying TradeWinds Groups’ motion for attorneys’ fees. On 16 February 2011, the trial court denied CSA’s motion to amend the judg[838]*838merit and to set aside the judgment and the underlying default. On 4 March 2011, the trial court issued an order clarifying its 16 February 2011 order.

CSA appeals from the judgment of 26 July 2010 and the orders entered on 16 February 2011 and 4 March 2011. On 12 July 2011, this Court granted appellant’s motion to extend the word count for appellant’s brief to 12,500 words.

II. Personal Jurisdiction

In its first argument, CSA contends that the trial court lacked personal jurisdiction over CSA because it was not properly served with the third-party summons and complaint. CSA further argues that there was no evidence that CSA had actual notice of the third-party action. We disagree.

To obtain personal jurisdiction over a defendant, the issuance of the summons and service of process must comply with a statutorily specified method. Bentley v. Watauga Bldg. Supply Inc., 145 N.C. App. 460, 461, 549 S.E.2d 924, 925 (2001). “In any action commenced in a court of this State[,]” N.C.R. Civ. P. 4(j) provides that “the manner of service of process within or without the State shall be as follows[.]” N.C.R. Civ. P. 4Q) (2011) (emphasis added).4 N.C.R. Civ. P. 4(j)(6)c authorizes service upon a corporation by “mailing a copy of the summons and of the complaint, registered or certified mail, return receipt requested, addressed to the officer, director or agent to be served[.]” N.C.R. Civ. P. 4(j)(6)c.

CSA contends that its registered agent, Corporation Trust Company, was not authorized by appointment or by law to accept process by certified mail on its behalf. CSA further argues that the authority of a Delaware corporation’s registered agent is governed by Delaware law.

CSA contends that out-of-state service of process is controlled “by the laws of the state where the service will occur[,]” quoting B. Kelley Enterprises, Inc. v. Vitacost.com,_N.C. App._,_ 710 S.E.2d 334, 338 (2011). In that case, the plaintiff filed an action in the Superior Court of Forsyth County, seeking to collect monies under a rental agreement. The defendant pled a judgment previously entered in the court of Palm Beach County, Florida as res judicata [839]*839and moved for judgment on the pleadings. The plaintiff in the North Carolina action contended that the Florida judgment was not valid, based upon a lack of proper service upon it in the Florida case. To determine whether the courts of North Carolina were bound by the Florida judgment, this Court examined whether the Florida court had personal jurisdiction over the plaintiff. This required the Court to apply Florida law concerning service of process to determine whether the plaintiff had been properly served.

CSA selectively quoted from our decision in Kelley.

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733 S.E.2d 162, 222 N.C. App. 834, 2012 WL 4069587, 2012 N.C. App. LEXIS 1104, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tradewinds-airlines-inc-v-c-s-aviation-services-ncctapp-2012.