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Swan Beach Corolla, L.L.C. v. County of Currituck

Court of Appeals of North Carolina

October 3, 2017

SWAN BEACH COROLLA, L.L.C., OCEAN ASSOCIATES, LP, LITTLE NECK TOWERS, L.L.C., GERALD FRIEDMAN, NANCY FRIEDMAN, CHARLES S. FRIEDMAN, 'TIL MORNING, LLC, and SECOND STAR, LLC, Plaintiffs,
v.
COUNTY OF CURRITUCK; THE CURRITUCK COUNTY BOARD OF COMMISSIONERS; and JOHN D. RORER, MARION GILBERT, O. VANCE AYDLETT, JR., H.M. PETREY, J. OWEN ETHERIDGE, PAUL MARTIN, and S. PAUL O'NEAL as members of the CURRITUCK COUNTY BOARD OF COMMISSIONERS, Defendants.

          Heard in the Court of Appeals 19 April 2017.

         Appeal by Defendants from a default judgment entered 9 May 2016 by Judge Milton F. Fitch, Jr., in Currituck County No. 12 CVS 334 Superior Court.

          Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by J. Mitchell Armbruster and Lacy H. Reaves, for Plaintiffs-Appellees.

          The Brough Law Firm, PLLC, by G. Nicholas Herman and Currituck County Attorney Donald I. McRee, Jr., for Defendants-Appellants.

          Conner Gwyn Schenck PLLC, by James S. Schenck, IV, and Amy Bason, for Amicus Curiae, the North Carolina Association of County Commissioners.

          Simonsen Law Firm, P.C., by Lars P. Simonsen, for Amicus Curiae, the Northern Currituck Outer Banks Association.

          Roger W. Knight, P.A., by Roger W. Knight, for Amicus Curiae, the Fruitville Beach Civic Association.

          INMAN, Judge.

         The County of Currituck, the Currituck County Board of Commissioners, and members of that Board (collectively, "Defendants") appeal from the trial court's denial of their motion to set aside entry of default and the trial court's grant of default judgment in favor of Swan Beach Corolla, L.L.C., Ocean Associates, LP, Little Neck Towers, L.L.C., Gerald Friedman, Nancy Friedman, Charles S. Friedman, 'til Morning, LLC, and Second Star, LLC (collectively, "Plaintiffs"). Defendants argue that the trial court erred because the time in which they had to file an answer never commenced, thereby making the clerk's entry of default premature and void. Defendants also argue that even if they did not timely file an answer, the trial court abused its discretion by failing to apply the good cause standard when considering Defendants' motion to set aside the entry of default.

         After careful review, we reverse the trial court's denial of Defendants' motion to set aside the entry of default.

         Factual and Procedural History

         This is the third appeal to this Court in this case. Facts relevant to this appeal follow, but additional procedural and factual history of the litigation are included in our decisions resulting from the first two appeals. See Swan Beach Corolla, L.L.C. v. Cty. of Currituck, 234 N.C.App. 617, 619-21, 760 S.E.2d 302, 305-07 (2014) (Swan Beach I); and Swan Beach Corolla, L.L.C. v. Cty. of Currituck, No. COA15-293, 2015 WL 8747777 *1, *1-3 ( N.C. Ct. App. Dec. 15, 2015) (unpublished) (Swan Beach II).

         Plaintiffs, a group of owners of real property in Currituck County, filed suit after Defendants refused to allow Plaintiffs to develop their land. Plaintiffs alleged in their complaint that: (1) Plaintiffs have common law vested rights to develop their property (the "Vested Rights Claim"); (2) Defendants were violating Plaintiffs' rights to due process and equal protection under the federal Constitution (the "Equal Protection Claim"); and (3) Defendants were violating Plaintiffs' right to taxation by uniform rules as guaranteed by Article V, Section 2 of the North Carolina Constitution (the "Uniform Tax Claim").

         Defendants moved to dismiss all three claims pursuant to Rules 12(b)(1) and (6) of the North Carolina Rules of Civil Procedure without filing an answer. The trial court entered an order granting the motion in July 2013. Plaintiffs appealed, which resulted in the first appeal to this Court and our opinion in Swan Beach I.

         Swan Beach I was decided by this Court on 1 July 2014. In Swan Beach I, we affirmed the trial court's dismissal of the Uniform Tax Claim, but reversed the dismissal of the Vested Rights Claim and the Equal Protection Claim. 234 N.C.App. at 622-31, 760 S.E.2d at 307-13. We remanded the matter to the trial court for further proceedings on the two remaining claims. Id. at 631, 760 S.E.2d at 313.

          Less than a week after our decision, counsel for Defendants contacted counsel for Plaintiffs via email to disclose documents that could be subject to discovery and to forecast a forthcoming analysis by the county planning director to address Plaintiffs' long frustrated development plans.

         On 21 July 2014, the mandate on Swan Beach I issued.

         On 18 August 2014, counsel for Plaintiffs proposed via email to counsel for Defendants a meeting on 25 August 2014 to discuss settlement of the litigation. Defendants' counsel responded the following day, agreed to the meeting, and indicated that a location had been secured for depositions related to the litigation.

         On 21 August 2014, thirty days after the issuance of the mandate and four days before the scheduled meeting to discuss settlement, Plaintiffs' counsel filed with the clerk of court a motion for entry of default based on Defendants' failure to file a timely responsive pleading as to their Vested Rights and Equal Protection claims. The clerk entered default. Plaintiffs' counsel served Defendants' counsel with notice via regular mail.

         Six days after the clerk entered default, on 27 August 2014, Defendants filed a motion to set aside the entry of default and submitted to the court, but were not allowed to file, a proposed answer. Defendants' motion asserted that there was "no clearly established rule under the North Carolina Rules of Appellate Procedure or North Carolina Rules of Civil Procedure setting forth the time in which responsive pleadings are to be filed following issuance of an opinion by the North Carolina Court of Appeals." Before the trial court, Defendants argued that N.C. Gen. Stat. § 1-298 (2015)-which states that "at the first session of the superior or district court after a certificate of the determination of an appeal is received, . . . if the judgment is modified, shall direct its modification and performance"-applied to the mandate from our decision in Swan Beach I and that Defendants' answer was not late because the trial court never entered an order directing ...


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