Title: Sharpe v. Park Newspapers of Lumberton, Inc.
Citation: 347 S.E.2d 25
Docket Number: 56A86
State: north-carolina
Issuer: north-carolina Supreme Court
Date: August 12, 1986

347 S.E.2d 25 (1986) John A. SHARPE, Jr.; Helen A. Sharpe; Clifford S. Sharpe; Brenda B. Sharpe; and Hal C. Sharpe v. PARK NEWSPAPERS OF LUMBERTON, INC. No. 56A86. Supreme Court of North Carolina. August 12, 1986. *27 McCoy, Weaver, Wiggins, Cleveland &amp; Raper, by Donald W. McCoy, Fayetteville, and Lee &amp; Lee, by W. Osborne Lee, Jr., Lumberton, for plaintiffs-appellees. Smith, Anderson, Blount, Dorsett, Mitchell &amp; Jernigan, by Samuel G. Thompson, Michael E. Weddington and William H. Moss, Raleigh, for defendant-appellant. BILLINGS, Justice. In 1982, the defendant purchased the assets of The Robesonian, Inc., whose business was the publication of a daily and Sunday newspaper in Lumberton, North Carolina called The Robesonian. The plaintiffs, minority stockholders in The Robesonian, Inc., voted against the sale of the assets. In partial payment of the $11,751,000.00 purchase price for the assets of the corporation, the defendant gave promissory notes to the corporation, which were distributed to the shareholders in amounts proportional to their ownership interests. The plaintiffs object to the following provisions in their note, which, except for different amounts payable, were in all of the promissory notes, and request a judicial declaration that they are invalid and unenforceable: In his judgment dismissing the plaintiffs' action, the trial judge made, inter alia, the following findings of fact: The plaintiffs have not assigned as error any of the trial judge's findings of fact. N.C.G.S. § 1A-1, Rule 52(c) (1983) provides: This Court has held that Rule 52(c) allows a party to seek appellate review on the question of whether the evidence supported the findings of fact without excepting at trial to the judge's findings, but that in the record on appeal it is "incumbent upon appellant to assign error so as to outline his objections on appeal." Whitaker v. Earnhardt, 289 N.C. 260, 264, 221 S.E.2d 316, 319 (1976). Because the plaintiffs have not assigned error to the judge's findings, those findings are conclusive on appeal, Askew v. Tire Co., 264 N.C. 168, 141 S.E.2d 280 (1965), and we are only required to determine whether the findings support the trial judge's conclusions and the entry of judgment. Whitaker v. Earnhardt, 289 N.C. 260, 221 S.E.2d 316. Nevertheless, because the question presented involves the jurisdiction of the courts to entertain the plaintiffs' action, we have elected to review the entire record to determine whether the trial judge's findings of fact were supported by competent evidence and in turn supported his conclusion that "no justiciable controversy exists between the parties" and that the "plaintiffs are not entitled to relief under the Declaratory Judgment Act."[3] The plaintiffs' action is for a declaratory judgment as authorized by Article 26 *29 of Chapter 1 of the General Statutes of North Carolina. N.C.G.S. § 1-254 (1983) provides as follows: Although the North Carolina Declaratory Judgment Act does not state specifically that an actual controversy between the parties is a jurisdictional prerequisite to an action thereunder, our case law does impose such a requirement. Gaston Bd. of Realtors v. Harrison, 311 N.C. 230, 234, 316 S.E.2d 59, 61 (1984). An often-quoted and colorful explanation by Justice Ervin of the limitations upon jurisdiction under the Declaratory Judgment Act is contained in Lide v. Mears, 231 N.C. 111, 117, 56 S.E.2d 404, 409 (1949): While the requirement for an actual controversy is clearly a prerequisite for jurisdiction under the Declaratory Judgment Act, the determination of whether a justiciable controversy exists is not always an easy question. We begin our analysis by examining the statement by the Court of Appeals that "[t]here is no absolute requirement that the controversy exist at the time the pleadings are filed." 78 N.C.App. at 280, 337 S.E.2d at 177. In reaching its conclusion, the Court of Appeals relied upon Golden v. Zwickler, 394 U.S. 103, 89 S. Ct. 956, 22 L. Ed. 2d 113 (1969), noting, however, that the rule therein applied[4] "is usually applied to render moot controversies which have been resolved between the filing of the complaint and time of hearing." 78 N.C. App. at 280, 337 S.E.2d at 177. We disagree with the Court of Appeals and hold that in order for a court to have subject matter jurisdiction to render a declaratory judgment, an actual controversy must exist between the parties at the time the pleading requesting declaratory relief is filed. We first note that while we may look for guidance to federal court decisions regarding the existence or absence of a justiciable controversy, jurisdiction within the state courts of North Carolina is not controlled by those federal decisions but is determined by our own statutes and court decisions. See In re Peoples, 296 N.C. 109, 250 S.E.2d 890 (1978), cert. denied, 442 U.S. 929, 99 S. Ct. 2859, 61 L. Ed. 2d 297 (1979); McCune v. Manufacturing Co., 217 N.C. 351, 8 S.E.2d 219 (1940). We further note that in Golden, the plaintiff had sought a declaration that a state statute penalizing the distribution of anonymous literature in connection with an election campaign was unconstitutional. The plaintiff had already been prosecuted once for violating the statute and alleged that he would again distribute anonymous handbills criticizing a named Congressman in his bid for reelection in 1966. While the action was pending, the Congressman became a state Supreme Court Justice, mooting any opportunity for the plaintiff to violate the statute in the way in which he *30 had alleged an intention to violate it. Without addressing the question of whether the controversy had been "ripe" for adjudication at the time the complaint was filed, the United States Supreme Court found that by the time of the hearing no controversy existed; i.e., the "immediacy and reality" necessary to jurisdiction which might have existed at the time of filing of the complaint had disappeared by the time of the hearing and the matter had become moot. "It was not enough to say, as did the District Court, that nevertheless Zwickler has a `further and far broader right to a general adjudication of unconstitutionality... [in] [h]is own interest as well as that of others who would with like anonymity practise [sic] free speech in a political environment....'" 394 U.S. at 109-10, 89 S. Ct. at 960, 22 L. Ed. 2d at 118. This Court has required that an actual controversy exist both at the time of the filing of the pleading and at the time of hearing. Gaston Bd. of Realtors v. Harrison, 311 N.C. at 234-35, 316 S.E.2d at 62 ("When the record shows that there is no basis for declaratory relief, or the complaint does not allege an actual, genuine existing controversy, a motion for dismissal under G.S. 1A-1, Rule 12(b)(6) will be granted.") (Emphasis added). In stating that "we see no reason why the rule should not operate to allow consideration of any genuine controversy existing at any time after the pleadings are filed up to the time the motion to dismiss is ruled upon," 78 N.C.App. at 280, 337 S.E.2d at 177, the Court of Appeals overlooks the fact that the existence of an actual controversy is necessary to the court's subject matter jurisdiction, State ex rel. Edmisten v. Tucker, 312 N.C. 326, 323 S.E.2d 294 (1984); Adams v. Dept. of N.E.R., 295 N.C. 683, 249 S.E.2d 402 (1978), and the basic rule that "the jurisdiction of a court depends upon the state of affairs existing at the time it is invoked." In re Peoples, 296 N.C. 109, 144, 250 S.E.2d 890, 910. As Chief Justice Sharp noted in In re Peoples, 296 N.C. at 148, 250 S.E.2d at 912: "Unlike the question of jurisdiction, the issue of mootness is not determined solely by examining facts in existence at the commencement of the action." (Emphasis added.) We must next determine whether Judge Ellis correctly concluded that at the time of institution of this action no justiciable controversy existed between the parties.[5] The original complaint filed on 1 July 1983 alleged that the plaintiffs were "entitled to engage in the lawful activities of publishing a newspaper or other printed advertising media" in the area covered by the contested provisions of the promissory note, but the plaintiffs did not allege that they intended to engage in any activity covered by those provisions. Following a hearing before Judge Giles Clark on the defendant's motion pursuant to N.C.G.S. § 1A-1, Rule 12(b)(6) to dismiss the complaint, the plaintiffs amended their complaint by adding the following allegations: The only evidence before the court regarding the intention of the plaintiffs to compete with the defendant in the subject area consisted of answers by plaintiffs to interrogatories as follows: This evidence supports Judge Ellis's finding that "plaintiffs have presented no evidence of specific plans to directly or indirectly own, operate, finance, establish, control, support or become employed by a newspaper or other printed advertising medium in Robeson County or in any other county adjacent thereto." Plaintiffs rely upon this Court's statement in Light Co. v. Iseley, 203 N.C. 811, 820, 167 S.E. 56, 61 (1933) that "[i]t is not required for purposes of jurisdiction that the plaintiff shall allege or show that his rights have been invaded or violated by the defendants, or that the defendants have incurred liability to him, prior to the commencement of the action." This is an accurate statement of the law and is consistent with the portion of N.C.G.S. § 1-254 which says "[a] contract may be construed either before or after there has been a breach thereof." In order to maintain a declaratory judgment action, the plaintiff does not have to allege or prove that a *32 traditional "cause of action" exists in his favor against the defendant. On the other hand, he must establish that something more than a disagreement as to rights exists between the parties. In an effort to describe the point along a continuum between disagreement and actual breach of contract the parties must have reached in order for their conflict to have become an "actual or real presently existing controversy," Consumers Power v. Power Co., 285 N.C. 434, 451, 206 S.E.2d 178, 190 (1974), this Court has said that in order "to satisfy the jurisdictional requirement of an actual controversy, it is necessary that litigation appear unavoidable," Gaston Bd. of Realtors v. Harrison, 311 N.C. at 234, 316 S.E.2d at 61. That the plaintiffs misapprehend the nature of an actual controversy necessary for jurisdiction under the Declaratory Judgment Act is illustrated by the contention in their brief that "[t]he controversy as to whether the noncompetition clause in the promissory notes was valid as to Plaintiffs arose the instant such clause was inserted in the notes." They further contend that: We disagree. In the first place, the questioned provision in the notes has not been "enforced against the Plaintiffs," for the plaintiffs have not competed with the defendant in the covered area. Neither is it reasonably certain that the plaintiffs intend to compete with the defendants if the provisions are declared invalid, for the only intentions expressed by the plaintiffs are intentions to "explore the feasibility" or to "ascertain opportunities" for activities which would be covered by the provisions. Whether they will actually engage in competitive activity depends upon many factors other than the provisions in the notes, including the plaintiffs' health and financial ability, availability of personnel, and public demand. There is nothing to make it appear reasonably certain that if the courts agree with the plaintiffs and declare invalid the questioned provisions that the plaintiffs will engage in the covered activities rather than "put [the opinion] on ice to be used if and when occasion might arise." Tryon v. Power Co., 222 N.C. 200, 204, 22 S.E.2d 450, 453 (1942). In Consumers Power v. Power Co., 285 N.C. 434, 206 S.E.2d 178, Justice (now Chief Justice) Branch quoted with approval the following excerpt from E. Borchard, Declaratory Judgments (2d ed. 1941) at page 60: Id. at 451, 206 S.E.2d at 189. (Emphasis changed.) Because there is no evidence of a practical certainty that the plaintiffs will compete with the defendant within Robeson County or adjoining counties or that they have the intention of doing so if the provisions in the note are declared invalid, no justiciable controversy existed between the parties at the time this action was filed and the trial judge properly dismissed the action. We therefore reverse the Court of Appeals. REVERSED. [2] In their briefs and arguments before this Court, the parties attach significance to the question of whether the plaintiffs had been denied written consent to compete with the defendant. Because the plaintiffs contend that they should have an absolute right to compete without asking for permission from the defendant, we find that, except as it relates to the question of whether the plaintiffs have shown that at the time of the institution of the action they had formed an intention to compete, the absence of a request for and denial of the right to compete is irrelevant to the question of justiciability. [3] We note that in the Record on Appeal the parties have stipulated that "the trial court had jurisdiction over the [defendant] and the subject matter of this action" and yet that the defendant is contesting the subject matter jurisdiction of the courts on the basis that an actual or justiciable controversy did not exist. Because parties cannot stipulate to give a court subject matter jurisdiction when it does not exist, City of Raleigh v. R.R. Co., 275 N.C. 454, 168 S.E.2d 389 (1969), we are not bound by the stipulation. [4] "The proper inquiry was whether a `controversy' requisite to relief under the Declaratory Judgment Act existed at the time of the hearing on the remand." 394 U.S. at 108, 89 S. Ct. at 959, 22 L. Ed. 2d at 117. [5] We note that Judge Ellis's actual conclusion is that "no justiciable controversy exists between the parties" (emphasis added), suggesting that he was not limiting his consideration to the time when the complaint was filed. However, we also note that under the facts of the case, if no actual controversy existed at the time of the hearing, necessarily no controversy existed at the time of the filing of the complaint. [6] Although not important to our decision, we note that the record does not indicate whether this building is within the area of Robeson County or any adjoining county. There is evidence that Jack Sharpe, one of the plaintiffs, purchased newspapers in Nashville and Lillington, both outside the area covered by the questioned provisions in the note.