Taylor v. Triangle Porsche-Audi, Inc. , 27 N.C. App. 711 ( 1975 )

220 S.E.2d 806 (1975) 27 N.C. App. 711

Robert Earl TAYLOR
v.
TRIANGLE PORSCHE-AUDI, INC., a North Carolina Corporation.

No. 7515SC555.

Court of Appeals of North Carolina.

December 17, 1975.

Winston, Coleman & Bernholz by Steven A. Bernholz, Chapel Hill, for plaintiff appellant.

Newsom, Graham, Strayhorn, Hedrick, Murray & Bryson by Robert B. Glenn, Jr., and E. C. Bryson, Jr., Durham, for defendant appellee.

Clark, Judge.

The order appealed from concluded that (1) the letter from Stewart Wallace, registered service agent, to the Clerk on 12 February 1975, constituted a general appearance under G.S. 1A-1, Rule 55, and defendant was entitled to notice of hearing of at least three days; (2) that the default judgment was void in that it was not entered with the consent of defendant and was not entered in open court under G.S. 1A-1, Rule 58; and (3) that there was nothing to support the award of treble damages pursuant to G.S. 75-16.

Plaintiff in his assignments of error takes the position that, first, Judge Alvis erred in considering defendant's motion to set aside the default judgment because the motion did not set out the rule number under which it was proceeding and in allowing defendant to amend to set out the rule number; and, second, that the default judgment was not void and Judge Alvis had no authority to set it aside.

In its motion to set aside the default judgment, defendant stated as grounds therefor, as required by G.S. 1A-1, Rule 7(b)(1), mistake, inadvertence, and excusable negligence, but defendant did not state the rule number under which it proceeded as required by Rule 6, General Rules of Practice for the Superior and District Courts. It is noted that Rule 1 of the General Rules, supra, provides: "These rules . . . shall at all times be construed and enforced in such manner as to avoid technical delay and to permit just and prompt consideration and determination of all the business before them." The Rules of Civil Procedure achieve their purpose of assuring a speedy trial by providing for and encouraging liberal amendments to the pleadings under Rule 15. Roberts v. Memorial Park, 281 N.C. 48, 187 S.E.2d 721 (1972). The philosophy of Rule 15 should apply not only to pleadings but also to motions where there is no material prejudice to the opposing party. In interpreting Federal Rule 60 in a case involving a motion to vacate a judgment, the United States Supreme Court stated that a trial judge abuses his discretion when he refuses to allow an amendment unless justifying reasoning is shown. Foman v. Davis, 371 U.S. 178, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962). The trial judge not only has broad discretion in allowing amendments, but also has wide latitude in the manner of allowing the same. Shuford, N.C. Practice and Procedure, § 15-5, p. 136 (1975). In this case, the trial judge averted a decision on the basis of a mere technicality in allowing the defendant to amend his motion to set out the rule number under which it was proceeding and his action in so doing was in keeping with the spirit of the rules and was not an abuse of his discretion.

We turn now to consideration of the defects in the default judgment which Judge Alvis found in his order vacating the default judgment.

Entry of default was made by the Clerk on 14 March 1975. Entry of default under G.S. 1A-1, Rule 55(a) is the first step of a two-step process for obtaining judgment by default. The Clerk is required to make the entry if default is made to appear by affidavit or by any other appropriate proof, which may consist only of the record.

Default judgment by the Clerk is provided for by Rule 55(b)(1), is subject to the jurisdictional proofs required by G.S. 1-75.11, and is still controlled by G.S. 1-209(4) which empowers the Clerk to enter "all judgments by default final and default and inquiry as are authorized by Rule 55 . . . ." Rule 55 does not provide for judgments by "default and inquiry" per se and in any event the rule authorizes the Clerk to enter only those judgments which would have been designated formerly as "default final". The entry of default and entry of default judgment by the Clerk may be simultaneous and can be contained in the same document. In this case, plaintiff did not seek a "default final" before the Clerk but instead sought in effect a "default final" from the Judge on the theory that his claim was for a sum certain.

Default judgment by the Judge is governed by both Rule 55(b)(2) and the jurisdictional proofs required by G.S. 1-75.11. If the party against whom default judgment is sought has appeared in the action, the party entitled to default judgment must apply to the Judge, and there must be service with written notice of the application for judgment at least three days before hearing. Did the defendant appear, within the meaning of Rule 55(b)(2), in this action? A party may appear without pleading. Crawford v. Bank of Wilmington, 61 N.C. 136 (1867). Negotiations between parties after institution of an action may constitute an appearance. Highfill v. Williamson, 19 N.C.App. 523, 199 S.E.2d 469 (1973). The federal courts have interpreted the same provision in the Federal Rules broadly. See 6 Moore's Federal Practice, Para. 55.05(3) (1972) and cases cited, including Dalminter, Inc. v. Jessie Edwards, Inc., 27 F.R.D. 491, 4 F.R.Serv.2d 55b.21 (S.D.Tex. 1961) which held that a letter from defendant's officer to plaintiff indicating that his corporation was not in existence constituted an appearance. We hold that the letter from defendant's registered agent constituted an appearance under Rule 55(b)(2) and that as therein provided plaintiff was required to give at least three days' notice of the hearing on the application for default judgment. The failure to provide the notice of hearing requires that the default judgment be vacated. Miller v. Belk, 18 N.C.App. 70, 196 S.E.2d 44 (1973).

Courts applying Federal Rule 55(b)(2), or state rules or statutes based thereon, are not in agreement as to the effect of a failure to give the required three-day notice of application for judgment by default. In some cases, such judgments have been held void as working a deprivation of due process; in other cases, such judgments have been viewed as irregular and voidable. Annot., 51 A.L.R. 2d 837 (1957).

If the default judgment was not entered in open court pursuant to Rule 58 after hearing on 20 March, but was entered when filed on 28 March after being signed by Judge Smith out-of-session and out-of-county, then he as a special judge was without authority to sign the judgment without the consent of the parties, and the judgment is void. G.S. 7A-45(c). Shepard v. Leonard, 223 N.C. 110, 25 S.E.2d 445 (1943); Edmundson v. Edmundson, 222 N.C. 181, 22 S.E.2d 576 (1942); 2 McIntosh, N.C. Practice and Procedure, § 1624, p. 64 (Supp. 1970). The only pertinent facts in the record on appeal relative to entry of the default judgment appear in the order appealed from wherein Judge Alvis found that "upon the conclusion of the hearing the presiding judge in open court . . . advised counsel for plaintiff to make notes and incorporate the notes into a Judgment to be prepared by counsel and to be sent to the judge out of session . . . which counsel did on March 21, 1975 . . . ." If we assume that the judge rendered judgment in open court, there was no entry of judgment because Rule 58 requires the judge to direct the clerk as to what notation shall be made, and the making of that notation constitutes the entry of judgment. If the clerk, though directed by the judge to do so, fails to make the entry of judgment, there is no final judgment from which an appeal will lie. Sears v. Austin, 282 F.2d 340 (9th Cir. 1960). The only entry in the clerk's minutes is as follows: "Taylor v. Triangle Porsche-Audi, Inc. S. Judgment granted. S. Bernholz to prepare Judgment. Bernholz has court file to prepare file Judg." There is nothing in the record on appeal to show that the judge directed the foregoing entry in the minutes; and the entry does not qualify as a notation of the court's decision constituting the entry of judgment within the meaning of Rule 58. We, therefore, conclude that the default judgment was not entered in session, and that the judge had no authority to thereafter sign it and direct entry. The judgment was irregular. Menzel v. Menzel, 250 N.C. 649, 110 S.E.2d 333 (1959).

The order appealed from concluded that the pleadings did not support the award of treble damages. The complaint in substance alleges only a misrepresentation of the year model of the car, his reliance on it and purchase of the car, and damages in the sum of $4,600, trebled to $13,800 by G.S. 75-16. The default judgment provided for recovery of $13,800, and further provided that upon satisfaction of the judgment the plaintiff tender to the defendant the 1970 Porsche automobile. It is clear that plaintiff is seeking to rescind the sales contract and recover the sales price of $4,600. He was not damaged, nor injured within the meaning of G.S. 75-16 so as to warrant treble damages, in the sum of $4,600.

"When a person discovers that he has been fraudulently induced to purchase property he must choose between two inconsistent remedies. He may repudiate the contract of sale, tender a return of the property, and recover the value of the consideration with which he parted; or, he may affirm the contract, retain the property, and recover the difference between its real and its represented value. He may not do both. Once made, the election is final. . . ." Bruton v. Bland, 260 N.C. 429, 430, 132 S.E.2d 910, 911 (1963).

In a recent case involving fraudulent representation in the sale of an automobile where the plaintiff elected to retain the car and recover as damages the difference between the real and represented value, treble damages under G.S. 75-16 was awarded. Hardy v. Tolar, 288 N.C. 303, 218 S.E.2d 342 (1975).

A default judgment which grants plaintiff's relief in excess of that to which they are entitled upon the facts alleged in the verified complaint is irregular. 5 Strong, N.C.Index 2d, Judgments § 19, p. 39 (1968).

In the motion to vacate the default judgment, defendant stated as grounds therefor mistake, surprise and excusable neglect under Rule 60(b)(1). However, in the hearing on the motion other grounds were revealed to the court by the pleadings and records and by plaintiff's counsel relative to rendition and entry of the default judgment. Rule 60(b)(6) provides for relief from a default judgment for "any other reason justifying relief. . ." Under the broad power of this clause an erroneous judgment cannot be attacked, but irregular judgments, those rendered contrary to the cause and practice of the court, come within its purview. Shuford, N.C. Practice and Procedure, § 60-11, p. 512 (1975). And although Rule 60 says that the court is to act "on motion," it does not deprive the court of the power to act in the interest of justice in an unusual case where its attention has been directed to the necessity for relief by means other than a motion. 3 Barron and Holtzoff, § 1322, p. 281 (Supp.1972). Sub judice, Judge Alvis properly recognized the obvious irregularities in the default judgment and based his order vacating the default judgment on these irregularities rather than on the ground of surprise and excusable neglect.

Affirmed.

BRITT and PARKER, JJ., concur.