Court Opinion

ID: 4218164
Source: CourtListenerOpinion
Date Created: 2017-11-07 13:15:44.703566+00
Date Added: 2024-06-11T14:42:26.985634
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA17-472

                               Filed: 7 November 2017

Currituck County, No. 06 SP 26

ATLANTIC COAST PROPERTIES, INC., A Delaware Corporation, Petitioner

             v.

ANGERONA M. SAUNDERS and husband, ALGUSTUS O. SAUNDERS, JR., LUCY
M. TILLETT, PATRICIA W. MOORE-PLEDGER, GENEVIVE M. GOODMAN,
LYNETTE C. WINSLOW, and CARLTON RAY WINSLOW, Respondents

      Appeal by petitioner from order entered 16 November 2016 by Judge Milton F.

Fitch, Jr. in Currituck County Superior Court. Heard in the Court of Appeals 16

October 2017.

      Hornthal, Riley, Ellis & Maland, LLP, by M. H. Hood Ellis, for petitioner-
      appellant.

      Nexsen Pruet PLLC, by Norman W. Shearin, for respondent-appellees.

      CALABRIA, Judge.

      Where petitioner’s petition failed to affirmatively aver its legal existence and

capacity to sue, and petitioner challenged that fact neither at trial nor on appeal, the

trial court did not err in entering summary judgment in favor of respondents. We

affirm.

                        I. Factual and Procedural Background

      On 7 April 2006, Atlantic Coast Properties, Inc. (“petitioner”) filed a verified

petition to partition a piece of real property in Currituck County. In this petition,

petitioner alleged that it possessed a one-half undivided interest in the property, with
                        ATL. COAST PROPS., INC. V. SAUNDERS

                                  Opinion of the Court

the remaining interests divided evenly between Edna May Winslow and Angerona

Lovie Moore Saunders, each owning a one-quarter undivided interest. On 17 May

2006, Edna Winslow, Angerona Saunders, and her husband, Algustus O. Saunders,

Jr., filed an answer alleging, inter alia, that they had been in actual and exclusive

possession of the property for over twenty years, that they were its sole owners, that

petitioner had no interest in the property, and that they further had exercised

adverse possession, and adverse possession under color of title. They further alleged

that if petitioner possessed any interest in the property, it acquired that interest as

a result of constructive fraud and unfair and deceptive practices. Due to the nature

of these counterclaims, the Clerk of Court granted a motion to transfer the action to

superior court.

      On 28 September 2007, Edna Winslow, Angerona Saunders, and Algustus

Saunders moved for summary judgment.           On 4 November 2013, the trial court

entered a consent order substituting parties. Due to the death of Edna Winslow on 5

March 2013, her heirs at law were substituted as respondents. Thus, the caption was

updated to list Lucy M. Tillett, Particia W. Moore-Pledger, Genevive M. Goodman,

Lynette C. Winslow, and Carlton Ray Winslow, in addition to Angerona M. Saunders

and Algustus O. Saunders, Jr., (collectively, “respondents”) as respondents.

      On 29 May 2014, the trial court granted respondents’ motion for summary

judgment. Petitioner appealed, and on appeal, this Court reversed, holding that

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                            ATL. COAST PROPS., INC. V. SAUNDERS

                                       Opinion of the Court

petitioner “forecasted sufficient evidence to create a genuine issue of material fact on

the issue of whether W.G. Moore and his heirs recognized the title of their cotenants

and defeated any claim of constructive ouster.” Atl. Coast Props., Inc. v. Saunders,

___ N.C. App. ___, ___, 777 S.E.2d 292, 298 (2015), aff'd per curiam, 368 N.C. 776,

783 S.E.2d 733 (2016). The matter was remanded to the trial court.

       On 16 October 2013, respondents filed a second motion for summary

judgment.1 In this motion, respondents alleged that petitioner was incorporated in

Delaware on 26 October 2004; that petitioner’s petition was filed on 31 March 2006,

at a time when petitioner was not authorized to do business in North Carolina and

therefore not a proper party to commence the proceeding; that petitioner was only

issued a certificate of authority to do business in North Carolina on 16 August 2007;

that on 13 March 2013, petitioner’s corporate charter was suspended in Delaware due

to tax delinquency; and on 15 May 2013, petitioner’s certificate of authority in North

Carolina was suspended for failure to comply with Department of Revenue

requirements.      Respondents therefore alleged that petitioner’s conduct since its

certificate of authority was suspended was null and void, and that petitioner was no

longer a legal entity which could maintain the action. On 16 November 2016, the

trial court granted respondents’ motion, determining that:

               [Petitioner]’s corporate charter in the State of Delaware

       1   The motion for summary judgment includes reference to a motion to dismiss, purportedly
filed by respondents on 30 September 2016. This motion to dismiss is absent from the record, and not
properly before us.

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                        ATL. COAST PROPS., INC. V. SAUNDERS

                                  Opinion of the Court

             was declared void on March 1, 2013, that [petitioner] and
             its registered agent, M. H[.] Hood Ellis, was sent a
             notification of revenue suspension from the North Carolina
             Department of the Secretary of State in May, 2013 which
             informed [petitioner] that “(a)ny act performed . . . during
             the period of suspension is invalid and of no effect”; and it
             further appearing to the Court that [petitioner]’s notice of
             appeal was filed and served on June 27, 2014 during the
             period of revenue suspension; and it also appearing to the
             Court that [petitioner] filed its petition herein prior to
             applying for a certificate of authority in the State of North
             Carolina and failed to plead its capacity to sue as required
             by Rule 9(a) of the Rules of Civil Procedure; and the Court
             takes judicial notice and concludes that the corporate
             charter of [petitioner] has been void in its state of
             incorporation since March 1, 2013, and that its certificate
             of authority has been suspended by the North Carolina
             Department of the Secretary of State since May 15, 2013
             and not reinstated, and therefore any act performed by
             [petitioner] during the period of suspension from and after
             May 15, 2013 is invalid and of no effect, and [petitioner]
             does not have the capacity to maintain this action.

The trial court therefore dismissed the petition with prejudice.

      Petitioner appeals.

                               II. Summary Judgment

      In its sole argument on appeal, petitioner contends that the trial court erred

in granting summary judgment in favor of respondents. We disagree.

                               A. Standard of Review

      “Our standard of review of an appeal from summary judgment is de novo; such

judgment is appropriate only when the record shows that ‘there is no genuine issue

as to any material fact and that any party is entitled to a judgment as a matter of

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                         ATL. COAST PROPS., INC. V. SAUNDERS

                                   Opinion of the Court

law.’ ” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting

Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007)).

                                      B. Analysis

       At the hearing on the summary judgment motion at issue, respondents alleged

that the matter should be dismissed because petitioner lacked the capacity to

maintain the suit.      Respondents purportedly submitted uncertified copies of

certificates to underscore their point.     In response, petitioner alleged that the

certificates were not certified or under seal, and the motion for summary judgment

was not verified. Respondents replied that the certificates were public records, and

that therefore there was no need to question their authenticity.           Respondents

nonetheless offered to have the documents certified. Respondents argued, however,

that “[t]hat doesn’t change the facts. It doesn’t reinstate the corporate charter. It

doesn’t issue a certificate of authority, you know.” Petitioner then approached the

court with a procedural objection, contending that a suspended corporation may sue

and continue to maintain a civil action. Petitioner apparently cited N.C. Gen. Stat. §

55A-14-06, which provides that “[d]issolution of a corporation does not: . . . [a]bate or

suspend a proceeding pending by or against the corporation on the effective date of

dissolution[.]”   N.C. Gen. Stat. § 55A-14-06(b)(5) (2015).       Respondents argued,

however, that the statute dealt with domestic corporations where dissolution is filed,

and petitioner was a foreign corporation which had suffered a revenue suspension.

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                         ATL. COAST PROPS., INC. V. SAUNDERS

                                   Opinion of the Court

Respondents further alleged that the initial petition failed to comply with Rule 9 of

the North Carolina Rules of Civil Procedure, which requires a corporation to plead its

capacity to sue. See N.C.R. Civ. P. 9(a). The trial court, noting petitioner’s objections,

granted respondents’ motion in open court, and subsequently entered a written order.

       On appeal, petitioner once more takes issue with the form of the documents

presented to the trial court, arguing that the documents should not have been

admitted upon summary judgment motion, that petitioner was not required to have

a certificate of authority in order to own property, and that a North Carolina

corporation suspended under the Revenue Act may nonetheless engage in continued

litigation.

       Petitioner argues, and we acknowledge, that certain deficiencies may be

remedied prior to trial. N.C. Gen. Stat. § 55-15-02 specifically provides that “[n]o

foreign corporation transacting business in this State . . . shall be permitted to

maintain any action or proceeding . . . unless the foreign corporation has obtained a

certificate of authority prior to trial.” N.C. Gen. Stat. § 55-15-02(a) (2015) (emphasis

added). We have previously held that a corporate entity lacking a certificate of

authority may rectify that situation at any time prior to trial. See Harold Lang

Jewelers, Inc. v. Johnson, 156 N.C. App. 187, 192, 576 S.E.2d 360, 363 (2003) (holding

that “Lang was aware that Johnson’s motion was pending and could have obtained

the certificate in the year and a half that passed between the filing of the motion and

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                         ATL. COAST PROPS., INC. V. SAUNDERS

                                   Opinion of the Court

the court’s dismissal of the case”); Kyle & Assocs., Inc. v. Mahan, 161 N.C. App. 341,

344, 587 S.E.2d 914, 916 (2003) (where the plaintiff corporation “received a certificate

of authority after defendant raised the issue, but before the North Carolina court

considered the matter[,]” the plaintiff complied with N.C. Gen. Stat. § 55-15-02(a)),

aff'd per curiam, 359 N.C. 176, 605 S.E.2d 142 (2004). Were petitioner’s lack of a

certificate the only thing preventing it from maintaining the action at issue, we

recognize that petitioner could have remedied the matter by obtaining a certificate

prior to trial. However, the lack of a certificate was not the only thing preventing

petitioner from maintaining an action.

      Tellingly, neither at trial nor on appeal has petitioner challenged the facts that

its charter was suspended in Delaware, that its certificate of authority was suspended

in North Carolina, nor that it failed to plead capacity to sue in its initial petition.

Petitioner challenges the documents which allege these facts, but not the facts

themselves. Any of the trial court’s findings pertaining to these unchallenged facts

are therefore binding upon this Court. See Koufman v. Koufman, 330 N.C. 93, 97,

408 S.E.2d 729, 731 (1991). Further, petitioner raises no argument on appeal with

respect to the fact that it failed to allege capacity to sue pursuant to Rule 9. Because

petitioner fails to raise this argument, it is deemed abandoned. See N.C.R. App. P.

28(b)(6) (“[i]ssues not presented in a party’s brief, or in support of which no reason or

argument is stated, will be taken as abandoned”).

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                           ATL. COAST PROPS., INC. V. SAUNDERS

                                    Opinion of the Court

      It is undisputed that petitioner failed to allege its capacity to sue. Rule 9

specifically mandates that “[a]ny party not a natural person shall make an

affirmative averment showing its legal existence and capacity to sue[.]” N.C.R. Civ.

P. 9(a). It is likewise undisputed that petitioner is a corporation, and thus a “party

not a natural person[.]”

      We have previously held that an affirmative averment of legal existence and

capacity to sue is a prerequisite to standing for a non-person plaintiff. See North

Iredell Neighbors for Rural Life v. Iredell Cty., 196 N.C. App. 68, 75, 674 S.E.2d 436,

441 (2009) (where the plaintiff organization failed to make an affirmative averment

of legal existence and capacity to sue, “[t]he trial court properly found that [the

plaintiff organization] ‘d[id] not have standing to bring suit in this matter[]’ ”). As

such, we hold that petitioner’s failure to plead its legal existence and capacity to sue

failed to establish its standing to bring suit. The trial court therefore did not err in

entering summary judgment in favor of respondents.

      AFFIRMED.

      Judge ARROWOOD concurs.

      Judge DILLON dissents in a separate opinion.

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ATL. COAST PROPS., INC. V. SAUNDERS

         Opinion of the Court

                -2-
 No. COA17-472 – ATL. COAST PROPS., INC. v. SAUNDERS

      DILLON, Judge, dissenting.

      Petitioner is a Delaware corporation which purportedly owns an interest in

certain real estate in North Carolina (the “Property”) as a tenant in common.

Petitioner, however, has been dissolved and does not have a certificate of authority

to transact business in North Carolina from our Secretary of State.

      Petitioner filed this special proceeding seeking a partition of the Property. The

trial court granted summary judgment for Respondents, who argue that they are the

sole owners of the Property. The trial court based its summary judgment order on its

conclusion that Petitioner lacked the capacity to seek a partition because (1) it is a

dissolved Delaware corporation without a certificate of authority to transact business

in North Carolina and (2) it failed to plead its capacity to sue as required by Rule 9(a)

of our Rules of Civil Procedure.

      The majority affirms the order and reasoning of the trial court. However,

because I believe that the law is clear that Petitioner does not need a certificate of

authority to petition for a partition of its real estate and because I believe that

Petitioner has not violated Rule 9(a), I respectfully dissent.

                               I. Certificate of Authority

      The majority correctly explains that a foreign corporation does not need a

certificate of authority to maintain a proceeding in our courts if it is not “transacting

business” in North Carolina. Here, Petitioner argues that it is not “transacting

business” in North Carolina and therefore does not need a certificate of authority in
                             ATL. COAST PROPS., INC. V. SAUNDERS

                                        DILLON, J., dissenting

order to petition the trial court to partition the Property. I agree. Specifically, the

only activities Petitioner engages in within our State are (1) that it purportedly owns

an interest in the Property, and (2) it has brought this proceeding to partition the

Property. Our General Assembly has expressly held that a foreign corporation is not

considered to be “transacting business” for purposes of requiring a certificate of

authority “by reason of . . . [o]wning, without more, real or personal property,” N.C.

Gen. Stat. § 55-15-01(b)(11) (2015), or “by reason of . . . [m]aintaining or defending

any action or suit[.]” N.C. Gen. Stat. § 55-15-01(b)(1).2 Therefore, Petitioner does not

need a certificate of authority issued by our Secretary of State to maintain this special

proceeding.

        Further, I believe that the fact that Petitioner is dissolved does not change the

result. Our General Assembly has provided that a dissolved corporation may still

dispose of its properties, N.C. Gen. Stat. § 55-14-05(a)(2) (2015); it may do every other

act necessary to wind up and liquidate its assets, N.C. Gen. Stat. § 55-14-05(a)(5);

and it is not otherwise prevented from commencing a proceeding in its corporate

name, N.C. Gen. Stat. § 55-14-05(b)(5). And our Supreme Court has held that a

foreign corporation has the authority to deal with its real property in the same

        2 If Petitioner is successful in obtaining a partition, it may be that Petitioner will, one day in
the future, sell its portion of the Property. However, even the Petitioner’s act of selling the Property
is not considered “transacting business” for purposes of Chapter 55. See N.C. Gen. Stat. § 55-15-
01(b)(9) (“Transacting business” does not include “[c]onducting an isolated transaction completed
within a period of six months and not in the course of a number of repeated transactions of like
nature[.]”).

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                         ATL. COAST PROPS., INC. V. SAUNDERS

                                  DILLON, J., dissenting

manner as a North Carolina corporation. See Barcello v. Hapgood, 118 N.C. 712, 729,

24 S.E. 124, 126 (1896) (“The general rule is that foreign corporations may acquire

real and personal property such as a tract of land . . . , like domestic corporations[.]”).

                   II. Rule 9(a) of the N.C. Rules of Civil Procedure.

       Rule 9(a) of our Rules of Civil Procedure requires that “[a]ny party not a

natural person shall make an affirmative averment showing its legal existence and

capacity to sue.” Here, Petitioner alleged that it was a Delaware corporation, but

otherwise did not allege that it had engaged in any activity other than owning real

estate. Therefore, for the reasons stated in the prior section, I do not believe that

Petitioner was required to aver that it had not been dissolved or had obtained a

certificate of authority to transact business in North Carolina. Indeed, the General

Assembly has provided that dissolved corporations are not prevented from suing in

their own name.      N.C. Gen. Stat. § 55-14-05(b)(5).      Accordingly, I believe that

summary judgment on the basis of a failure to comply with Rule 9(a) was error.

       For the foregoing reasons, my vote is to reverse the order of summary

judgment.

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