Credit Union Auto Buying Serv., Inc. v. Burkshire Props. Grp. Corp. , 243 N.C. App. 12 ( 2015 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-187
Filed: 15 September 2015
Forsyth County, No. 14 CVS 3592
CREDIT UNION AUTO BUYING SERVICE, INC., Plaintiff,
v.
BURKSHIRE PROPERTIES GROUP CORP., JOSEPH FELIX STREVELL and
CHAUNCEY STREVELL, all individually and D/B/A JOE’S GARAGE and RJC
TRADING COMPANY; STATE LINE AUTO AUCTION, INC., STRAIGHT LINE,
L.L.C., Defendants.
Appeal by defendant Straight Line, L.L.C., from order entered 13 November
2014 by Judge Anderson D. Cromer in Forsyth County Superior Court. Heard in the
Court of Appeals 26 August 2015.
Spillman Thomas & Battle, PLLC, by Bryan G. Scott, for plaintiff-appellee.
Connors Morgan, PLLC, by Jeffrey T. Workman and Daniel W. Koenig, for
defendant-appellant.
ZACHARY, Judge.
Where the property at issue was located in North Carolina, the trial court did
not err in exercising quasi in rem jurisdiction over the controversy.
I. Factual and Procedural Background
Credit Union Auto Buying Service, Inc. (appellee CUABS) is a not-for-profit
corporation organized under North Carolina law, with its principal place of business
in Winston-Salem, North Carolina. CUABS is an automobile dealer that sells cars,
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
primarily to credit unions. State Line Auto Auction, Inc. (State Line) is a company
incorporated in New York, with its principal place of business in Waverly, New York.
State Line acts as a broker for vehicle sales at its auction location in Waverly.
Burkshire Properties Group Corp., doing business as Joe’s Garage and RJC Trading
Company, (Burkshire) is another corporation organized under New York law with its
place of business in New York; it is owned by Joseph Felix Strevell and Chauncey
Strevell (the Strevells).
Burkshire purchased vehicles from State Line under a line of credit extended
by Straight Line, L.L.C. (appellant Straight Line). Appellant Straight Line
maintained a security interest in the vehicles and retained the certificates of title to
the vehicles as collateral. All transactions between Burkshire, State Line, and
appellant Straight Line occurred in New York.
Appellee CUABS began purchasing vehicles from Burkshire in January of
2013. Appellee CUABS would pay money to Burkshire to cover the price of the
vehicles, the buyer’s fees, fees to transfer certificates of title, and fees for delivery of
the vehicles to North Carolina for resale. In April of 2014, Burkshire failed to provide
to appellee CUABS the certificates of title for 46 vehicles that appellee CUABS had
purchased. The vehicles at issue had been purchased by Burkshire at a State Line
auction with financing provided by appellant Straight Line, and appellant Straight
-2-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
Line claimed a security interest in the vehicles. Burkshire delivered these vehicles
to appellee CUABS in North Carolina.
On 10 June 2014, appellee CUABS brought this action against Burkshire, the
Strevells, State Line, and appellant Straight Line, alleging breach of contract and
unjust enrichment, and seeking a declaratory judgment and specific performance. On
25 August 2014, appellant Straight Line moved to dismiss the complaint pursuant to
Rule 12(b)(2) of the North Carolina Rules of Civil Procedure due to an alleged lack of
personal jurisdiction. On 13 November 2014, the trial court denied this motion.
Appellant Straight Line filed timely notice of appeal.
II. Standard of Review
As a general rule, denial of a motion to dismiss is deemed to be interlocutory,
and is not immediately reviewable by this Court. An exception lies, however, as
concerns a denial of a motion to dismiss based on a lack of personal jurisdiction. N.C.
Gen. Stat. § 1-277 “allows a party to immediately appeal an order that . . . constitutes
an adverse ruling as to personal jurisdiction.” Can Am S., LLC v. State, ___ N.C. App.
___, ___, 759 S.E.2d 304, 307, review denied, 367 N.C. 791, 766 S.E.2d 624 (2014).
This right of immediate appeal “is limited to rulings on ‘minimum contacts’ questions,
the subject matter of Rule 12(b)(2).” Love v. Moore, 305 N.C. 575, 581, 291 S.E.2d
141, 146 (1982). Accordingly, this matter is proper for review by this Court at this
time.
-3-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
Additionally, it is well established that:
[t]he determination of whether jurisdiction is statutorily
and constitutionally permissible due to contact with the
forum is a question of fact. The standard of [appellate]
review of an order determining personal jurisdiction is
whether the findings of fact by the trial court are supported
by competent evidence in the record; if so, this Court must
affirm the order of the trial court.
Wyatt v. Walt Disney World Co., 151 N.C. App. 158, 163, 565 S.E.2d 705, 708 (2002)
(quoting Replacements, Ltd. v. MidweSterling, 133 N.C. App. 139, 140–141, 515
S.E.2d 46, 48 (1999)).
III. Personal Jurisdiction
Appellant Straight Line contends that the trial court erred in denying its
motion to dismiss for lack of personal jurisdiction. We disagree.
The appropriate exercise of personal jurisdiction by our courts is determined
first by the existence of a statutory basis for the exercise of jurisdictional authority,
and second by the dictates of federal due process.
The trial court in the instant case exercised quasi in rem jurisdiction over the
controversy pursuant to N.C. Gen. Stat. § 1-75.8. This statute provides that quasi in
rem jurisdiction may be invoked “[w]hen the subject of the action is real or personal
property in this State and the defendant has or claims any lien or interest therein, or
the relief demanded consists wholly or partially in excluding the defendant from any
interest or lien therein.” N.C. Gen. Stat. § 1-75.8(1) (2013). In the instant case,
-4-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
appellee CUABS’s claim concerned the security interest in several vehicles it had
purchased and the certificates of title to said vehicles.
Even though quasi in rem jurisdiction is provided by statute, such jurisdiction
must also meet the standards of federal law. “[T]he final determinative factor is
whether the nonresident defendant has certain minimum contacts with the forum
state such that the maintenance of the suit does not offend ‘traditional notions of fair
play and substantial justice.’” Canterbury v. Monroe Lange Hardwood Imports Div.
of Macrose Indus. Corp., 48 N.C. App. 90, 93, 268 S.E.2d 868, 870 (1980) (quoting
International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 102 (1945)).
There are two forms of personal jurisdiction which might bring this case within the
jurisdiction of North Carolina courts: specific jurisdiction, in which the controversy
arises from a defendant’s contact with the forum state; and general jurisdiction, in
which, although the controversy is unrelated to defendant’s activities within the
forum, sufficient contacts exist between defendant and the forum so as to permit
jurisdiction. Wyatt, 151 N.C. at 165, 565 S.E.2d at 709. Specific jurisdiction exists if
the defendant has purposely directed his conduct towards a resident of the forum
state, and thereby “purposefully availed itself of the privilege of conducting activities
in-state, thereby invoking the benefits and protections of the forum state’s laws,”
whereas general jurisdiction exists if the defendant has continuous and systematic
contacts with the forum state. Id. at 165, 565 S.E.2d at 710.
-5-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
The United States Supreme Court has held that “when claims to the property
itself are the source of the underlying controversy between the plaintiff and the
defendant, it would be unusual for the State where the property is located not to have
jurisdiction.” Shaffer v. Heitner, 433 U.S. 186, 207, 53 L. Ed. 2d 683, 700 (1977). This
Court, relying on Shaffer, has upheld jurisdiction where the property at issue was
located in North Carolina. For example, in Canterbury, the plaintiff, based in West
Virginia, sought and obtained an order of attachment on a quantity of lumber owned
by the defendant, a New York corporation. The lumber in question was located in
North Carolina. The plaintiff subsequently filed a complaint alleging that he had
sold the lumber to the defendant and, pursuant to the defendant’s orders, shipped it
to North Carolina. The defendant, in its answer, moved to dismiss the complaint for
lack of jurisdiction. The trial court entered an order dismissing the complaint, and
the plaintiff appealed. Canterbury, 48 N.C. App. at 91-92, 268 S.E.2d at 869.
On appeal, this Court held that statutory grounds existed for the exercise of
personal jurisdiction pursuant to N.C. Gen. Stat. § 1-75.8, and then found a
combination of several factors that established the requisite connection between the
defendant and the forum: (1) the presence of the lumber in the forum state; (2) the
relationship of the lumber to the controversy; (3) the defendant’s specific instruction
to ship the lumber to North Carolina; and (4) the tangible nature of the property, as
lumber is a physical object over which a court may exercise jurisdiction. Id. at 93-95,
-6-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
268 S.E.2d at 870-71. Based on these factors, we held that jurisdiction was
appropriate.
The instant case presents similar facts. The vehicles in question are located
in North Carolina, and their ownership is central to the controversy. Further,
appellant Straight Line was not unaware of the vehicles’ destination. In its responses
to appellee CUABS’s interrogatories, appellant Straight Line acknowledged that it
was aware that Burkshire “was purchasing vehicles at State Line Auto Auction to
eventually send to a Burkshire customer in North Carolina.” Appellant Straight Line
was informed that the North Carolina customer “paid Burkshire thirty days after any
vehicles were purchased at the auction, thus necessitating Straight Line’s financing.”
These conversations between Burkshire and appellant Straight Line took place in
late June and early July of 2013. On 26 July 2013, after having had these
conversations and having been made aware of the destination of the vehicles it was
financing, appellant Straight Line signed a financing and security agreement with
Burkshire. Although appellant Straight Line did not direct the vehicles to be shipped
to North Carolina, appellant had no reason to doubt that any challenge to its security
interest would occur here. Lastly, the tangible nature of the vehicles as the subject
of controversy and as objects over which quasi in rem jurisdiction can be exercised is
parallel to that of the lumber in Canterbury. As the facts in the instant case satisfy
-7-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
the same reasoning as Canterbury, it is evident that quasi in rem jurisdiction was
appropriately exercised in this case.
Appellant Straight Line makes extensive arguments regarding the fact that,
aside from this transaction, it has had no contact with North Carolina. Appellant
Straight Line contends that North Carolina has neither specific nor general
jurisdiction over it, and that it would be unconstitutional to exercise quasi in rem
jurisdiction under those circumstances.
Even assuming arguendo that appellant Straight Line has had no contact with
North Carolina beyond this transaction, the controversy at hand concerns a number
of vehicles in which appellant Straight Line claims a security interest. These vehicles
were purchased by a North Carolina plaintiff and the vehicles are located in North
Carolina. Moreover, appellant Straight Line had prior knowledge that these vehicles
would be sold in North Carolina. Shaffer and Canterbury make quite clear that the
presence of these vehicles in the State is a perfectly reasonable basis upon which a
trial court could find the existence of quasi in rem jurisdiction, as their presence
constitutes evidence of contact with the State. We hold that the trial court’s finding
of contact is supported by this evidence, and that the trial court did not err in denying
appellant Straight Line’s motion to dismiss.
This argument is without merit.
AFFIRMED.
-8-
CREDIT UNION AUTO BUYING SERV., INC. V. BURKSHIRE PROPS. GRP. CORP.
Opinion of the Court
Judges STEPHENS and McCULLOUGH concur.
-9-