DAVID M. ELLIOTT and ELLIOTT AIR, INC., Plaintiffs, v. LISA L.
ELLIOTT, DIANE K. NICHOLS, KAREN POWERS, and DENNIS L. MORAN,
Defendants.
NO. COA08-1493
(Filed 6 October 2009)
1.
Civil Procedure – Rule 60 – excusable neglect – not notifying court of change
of address – domestic abuse
The trial court properly concluded that defendant Lisa Elliot’s failure to
notify the court of a change of address was excusable neglect under Rule 60(b)(1),
and the trial court did not abuse its discretion by vacating a judgement against
defendant, in light of plaintiff David Elliot’s documented history of domestic
abuse and plaintiffs’ violation of Rule 5 in not serving requests for admissions
and subsequent pleadings on all defendants.
2.
Conspiracy – civil – two allegations – prior partial summary judgment
12(b)(6) dismissal
The trial court correctly granted defendants’ Rule 12(b)(6) motion to
dismiss a civil conspiracy claim where the conspiracy allegations were raised in
two paragraphs of the complaint and a prior partial summary judgment for
defendants had disposed of the first allegation, which contained the only factual
allegation of conspiracy.
Appeal by plaintiffs from orders entered 12 August 2008 and 28
August 2008 by Judges Abraham Penn Jones and Cressie H. Thigpen,
Jr., respectively, in Alamance County Superior Court. Heard in the
Court of Appeals 20 May 2009.
Smith, James, Rowlett & Cohen, LLP, by Norman B. Smith, for
plaintiff-appellants.
Adams & Winfree, by Charles H. Winfee, for defendant-appellees
Lisa L. Elliott, Diane K. Nichols, and Karen Powers.
STEELMAN, Judge.
Although plaintiffs’ appeal is from two interlocutory orders,
we grant plaintiffs’ petition for writ of certiorari and reach the
merits of the appeal.
Where the trial court’s findings of fact
tended to show that plaintiff David Elliott had a documented
-2history of domestic abuse against defendant Lisa Elliott and that
plaintiffs violated Rule 5 of the Rules of Civil Procedure by
failing
to
serve
the
requests
for
admissions
and
subsequent
pleadings on all defendants, the trial court properly concluded
that Lisa Elliott’s failure to notify the court of her change of
address constituted excusable neglect under Rule 60(b)(1).
Where
plaintiffs
civil
failed
to
sufficiently
allege
a
claim
of
conspiracy against defendants Diane Nichols and Karen Powers, the
trial
court
properly
dismissed
that
claim
pursuant
to
Rule
12(b)(6).
I.
Factual and Procedural Background
Plaintiff David Elliott (David) and defendant Lisa Elliott
(Lisa) were formerly husband and wife and were divorced on 11
September 2006, following the parties’ separation in 2005.
During
the marriage, Lisa at times acted as office manager, bookkeeper,
and manager of accounts payable and receivable for plaintiff
Elliott Air, Inc. (EAI).
On 28 June 2005, David was arrested and
charged with assault on a female and communicating threats against
Lisa.
On or around that date, Lisa’s involvement with EAI ended.
Lisa contends that she was never “employed” by EAI or David, but
was a co-owner of EAI, owning 51% of the corporation.
David has a history of abusing and harassing Lisa.
Between
June 2005 and September 2007, David was convicted of assault on a
female
against
Lisa,
communicating
threats
against
her,
and
violating a domestic violence protective order by communicating
threats
against
Lisa’s
mother
and
co-defendant
Karen
Powers
-3(Powers). As a result of these convictions, David was incarcerated
for 75 days.
On 11 July 2007, plaintiffs filed a complaint alleging: (1)
breach of fiduciary duty to EAI against Lisa; (2) conversion from
EAI by Lisa; (3) conversion from David by Lisa; (4) fraud against
David by Lisa; (5) fraud against EAI by all defendants; (6)
conspiracy against EAI by all defendants; and (7) punitive damages.
In addition to Lisa and Powers, the other named defendants in this
case include Diane Nichols (Nichols), Lisa’s sister, and Dennis
Moran, who is not a party to this appeal.
On 29 August 2007, Lisa filed her answer, pro se, showing her
address to be the former marital home in Browns Summit, North
Carolina.
On or around 15 September 2007, Lisa moved to Virginia
and did not inform the court, plaintiffs, or plaintiffs’ attorney
of her new address.
On 21 December 2007, plaintiffs served
requests for admissions on Lisa at the address shown in her answer.
Lisa did not receive plaintiffs’ requests for admissions, nor was
it served on any of the other defendants in this case.
After she
failed to make a timely response to the requests for admissions,
the matters were deemed admitted, and summary judgment was entered
against her in the amount of $555,000.00 on 17 March 2008.
On 5
August 2008, Lisa filed a motion to set aside the judgment and to
be allowed to respond to the requests for admissions pursuant to
Rule 60(b) of the Rules of Civil Procedure.
Judge Thigpen granted Lisa’s motion.
On 28 August 2008,
-4On 20 September 2007, Nichols and Powers filed a separate
answer to plaintiffs’ complaint and a motion to dismiss pursuant to
Rule 12(b)(6) of the Rules of Civil Procedure.
Nichols and Powers
later filed a motion for summary judgment as to all of plaintiffs’
claims.
On 24 July 2008, prior to ruling on Nichols and Powers’
motion to dismiss, Judge Jones granted partial summary judgment in
favor of Nichols and Powers, holding that two checks in the amount
of $10,000.00 and $44,000.00 were the proceeds from a sale of
Powers’ real property and that plaintiffs had no claim at law or in
equity on those funds or the real property that was located on 303
Rosemont Street, Gibsonville, North Carolina.1
The order also
stated that “[t]he parties may submit briefs by July 24, 2008 on
the issue of whether the conspiracy count should be dismissed.
On
29 July 2008, Judge Jones granted the motion to dismiss plaintiffs’
civil conspiracy claim against Nichols and Powers based upon his
partial summary judgment order.
This order was revised on 12
August 2008 to include a Rule 54(b) certification.
Plaintiffs
appeal Judge Thigpen’s order setting aside the judgment and Judge
Jones’ order dismissing plaintiffs’ civil conspiracy claim.
II.
Rule 60(b) Order
[1] In their first argument, plaintiffs contend that the trial
court
erred
by
concluding
that
Lisa’s
actions
constituted
“excusable neglect” pursuant to Rule 60(b)(1) and entering an order
vacating the judgment.
1
We disagree.
The basis of plaintiffs’ civil conspiracy claim against
Nichols and Powers was that they had used money improperly taken
from EAI to purchase the property located on 303 Rosemont Street.
-5A.
Standard of Review
This Court has stated:
The decision whether to set aside a default
judgment under Rule 60(b) is left to the sound
discretion of the trial judge, and will not be
overturned on appeal absent a clear showing of
abuse of discretion.
Whether
neglect
is
“excusable”
or
“inexcusable” is a question of law . . . . The
trial judge’s conclusion in this regard will
not be disturbed on appeal if competent
evidence supports the judge’s findings, and
those findings support the conclusion.
JMM Plumbing & Utils., Inc. v. Basnight Constr. Co., 169 N.C. App.
199, 202, 609 S.E.2d 487, 490 (2005) (internal citations omitted).
B.
Analysis
Rule 60(b) of the North Carolina Rules of Civil Procedure
provides, in relevant part, “[o]n motion and upon such terms as are
just, the court may relieve a party or his legal representative
from a final judgment, order, or proceeding for . . . excusable
neglect . . . .”
N.C. Gen. Stat. 1A-1, Rule 60(b)(1) (2007).
“To
set aside a judgment on the grounds of excusable neglect under Rule
60(b), the moving party must show that the judgment rendered
against him was due to his excusable neglect and that he has a
meritorious defense.” Scoggins v. Jacobs, 169 N.C. App. 411, 413,
610 S.E.2d 428, 431 (2005) (quotation omitted).
While there is no clear dividing line as to
what falls within the confines of excusable
neglect as grounds for the setting aside of a
judgment, what constitutes excusable neglect
depends upon what, under all the surrounding
circumstances, may be reasonably expected of a
party in paying proper attention to his case.
-6McIntosh v. McIntosh, 184 N.C. App. 697, 705, 646 S.E.2d 820, 825
(2007) (quotation omitted).
Further, this Court has stated that:
provisions relating to the setting aside of
default
judgments
should
be
liberally
construed
so
as
to
give
litigants
an
opportunity to have the case disposed of on
the merits to the end that justice be done.
Any doubt should be resolved in favor of
setting aside defaults so that the merits of
the action may be reached. However, statutory
provisions designed to protect plaintiffs from
defendants
who
do
not
give
reasonable
attention to important business affairs such
as lawsuits cannot be ignored.
Howard v. Williams, 40 N.C. App. 575, 580, 253 S.E.2d 571, 573–74
(1979) (citations omitted) (emphasis added). This Court has upheld
a trial court’s denial of a party’s motion for relief from judgment
under Rule 60(b)(1) based upon the party’s failure to inform the
court of a change of address and subsequent failure to appear.
See, e.g., Smith ex. rel. Strickland v. Jones, ___ N.C. App. ___,
645 S.E.2d 198 (2007); PYA/Monarch, Inc. v. Ray Lackey Enterprises,
96
N.C.
App.
225,
385
S.E.2d
170
(1989);
Equipment
Albertson, 35 N.C. App. 144, 240 S.E.2d 499 (1978).
facts
recited
in
those
cases
do
not
reveal
the
Co.
v.
However, the
extenuating
circumstances present in the instant case.
A close examination of the facts found by the trial court,
which are supported by competent evidence in the record, supports
its conclusion that Lisa’s actions constituted excusable neglect.
Lisa did not inform the court, plaintiffs, nor plaintiffs’ attorney
of her new address in Virginia out of fear of continuing harassment
and abuse by David. Plaintiffs mailed the requests for admissions,
and other subsequent pleadings including plaintiffs’ notice that
-7the requested admissions stand as admitted, motion for summary
judgment, and notice of hearing to the Browns Summit address. (R.
292).
These documents were not served on any other party or
counsel in the case in violation of Rule 5 of the Rules of Civil
Procedure.
See N.C. Gen. Stat. § 1A-1, Rule 5(a) (2007) (“[E]very
paper relating to discovery . . ., every written motion other than
one which may be heard ex parte, and every written notice, . . .
shall be served upon each of the parties[.]”).
In
its
order,
the
trial
court
also
made
the
following
unchallenged finding of fact: “15. Both by her filed Answer and
testimony
before
this
Court,
Defendant
Lisa
Elliott
demonstrated a meritorious defense to the Plaintiffs’ action.
has
In
particular, Defendant Lisa Elliott denies embezzling money as
alleged in the Complaint, and asserts that she is 51% owner of the
Plaintiff Elliott Air, Inc.”
Because plaintiffs have failed to
challenge this finding, it is deemed to be supported by competent
evidence and is binding on appeal.
Koufman v. Koufman, 330 N.C.
93, 97, 408 S.E.2d 729, 731 (1991).
Liberally construing Rule 60(b), and in light of David’s
documented history of domestic abuse against Lisa and plaintiffs’
violation of Rule 5, the trial court properly concluded that Lisa’s
actions constituted excusable neglect under Rule 60(b)(1) and that
she has a meritorious defense.
We hold the trial court did not
abuse its discretion by vacating the judgment entered against her.
This argument is without merit.
III.
Motion to Dismiss
-8[3] In their second argument, plaintiffs contend that the
trial court erred in granting Nichols and Powers’ motion to dismiss
EAI’s
civil conspiracy claim pursuant to Rule 12(b)(6) of the
Rules of Civil Procedure.
We disagree.
“A Rule 12(b)(6) motion tests the legal sufficiency of the
pleading.”
Sterner v. Penn, 159 N.C. App. 626, 628, 583 S.E.2d
670, 672 (2003) (citations omitted).
When ruling upon a 12(b)(6) motion to dismiss,
a trial court must determine as a matter of
law whether the allegations in the complaint,
taken as true, state a claim for relief under
some legal theory. On appeal of a 12(b)(6)
motion to dismiss for failure to state a
claim, our Court “conduct[s] a de novo review
of the pleadings to determine their legal
sufficiency and to determine whether the trial
court’s ruling on the motion to dismiss was
correct.”
Estate of McKendall v. Webster, ___ N.C. App. ___, ___, 672 S.E.2d
768, 770 (2009) (internal citation and quotation omitted).
It is
well-established that dismissal of a plaintiff’s claim is proper
under Rule 12(b)(6) when one of the following three conditions is
met: “(1) the complaint on its face reveals that no law supports
the claim; (2) the complaint on its face reveals the absence of
facts sufficient to make a valid claim; or (3) the complaint
discloses some fact that necessarily defeats the claim.”
Woolard
v. Davenport, 166 N.C. App. 129, 133, 601 S.E.2d 319, 322 (2004)
(citation omitted).
This Court has defined civil conspiracy as “(1) an agreement
between two or more individuals; (2) to do an unlawful act or to do
a lawful act in an unlawful way; (3) resulting in injury to
-9plaintiff inflicted by one or more of the conspirators; and (4)
pursuant to a common scheme.”
Strickland v. Hendrick, ___ N.C.
App. ___, ___, 669 S.E.2d 61, 72 (2008) (quotation omitted).
A threshold requirement in any cause of action
for damages caused by acts committed pursuant
to a conspiracy must be the showing that a
conspiracy in fact existed. The existence of a
conspiracy requires proof of an agreement
between two or more persons. Although civil
liability for conspiracy may be established by
circumstantial evidence, the evidence of the
agreement must be sufficient to create more
than a suspicion or conjecture in order to
justify submission to a jury.
Dove v. Harvey, 168 N.C. App. 687, 690–91, 608 S.E.2d 798, 801
(2005) (quotation omitted), disc. review denied, 360 N.C. 289, 628
S.E.2d 249 (2006).
In
the
instant
case,
plaintiff
twice
alleged
conspiracy
against Nichols and Powers in the complaint, once specifically in
Paragraph 14 and once generally against all defendants in Paragraph
33.
In Paragraph 14 of plaintiffs’ complaint, EAI alleged that
Nichols and Powers conspired with Lisa to purchase a house with
improperly obtained funds:
14. Defendant Lisa L. Elliott in combination
and conspiracy with her sister, defendant
Diane K. Nichols, and her mother, defendant
Karen Powers, used money improperly taken by
her from plaintiff Elliott Air, Inc., in the
manner described above, and invested it in the
purchase of a house and lot located at 303
Rosemont Street, Gibsonville, Alamance County,
North Carolina, which was acquired on July 14,
2006, by deed recorded in Book 2438, Page 596598, Alamance County Registry of Deeds.
Defendant Diane K. Nichols is the grantee of
this deed.
Defendant Karen Powers occupies
this property as her homeplace.
-10However, on 24 July 2008, Judge Jones entered a partial summary
judgment
order
in
favor
of
Nichols
and
Powers
resolving
the
specific allegations contained in Paragraph 14:
[T]here is no genuine issue of material fact
with regard to the funds, represented by two
checks paid to Diane Nichols on February 22,
2005, and April 17, 2005 for $10,000.00 and
$44,000.00 respectively. These funds are the
proceeds of the bona fide sale of Karen
Powers’ real property, and the Plaintiffs have
no claim at law or in equity on either those
funds or the real property located at 303
Rosemont
Street
in
Gibsonville,
North
Carolina.
The
partial
summary
judgment
order
dismissed
with
prejudice
plaintiffs’ claims for recovery of $54,000.00 and their claim
against the property located at 303 Rosemont Street.
Subsequently, on 29 July 2008, the trial court entered its
Rule 12(b)(6) order dismissing EAI’s civil conspiracy claim and
specifically referenced the prior partial summary judgment order:
“In paragraph 14 of the Complaint, Plaintiff alleged that Nichols
and Powers conspired with Lisa Elliott to purchase a house with
improperly obtained funds.
However, summary judgment as to these
funds ($54,000.00) was granted to Nichols and Powers on July 24,
2008.”
Plaintiffs failed to appeal Judge Jones’ partial summary
judgment order.
As such, this Court is precluded from reviewing
that ruling and it remains undisturbed.
See Warner v. Brickhouse,
189
313,
N.C.
appellate
App.
court
445,
449,
obtains
658
S.E.2d
jurisdiction
only
316
(2008)
over
the
(“[T]he
rulings
specifically designated in the notice of appeal as the ones from
which the appeal is being taken.” (quotation omitted)).
-11Because the specific allegations contained in Paragraph 14
were resolved by the prior partial summary judgment order, the
remaining allegation of civil conspiracy contained in Paragraph 33
of plaintiffs’ complaint must sufficiently plead that cause of
action against Nichols and Powers.
Paragraph 33 of the complaint
states:
33. Each of the defendants agreed with
defendant Lisa L. Elliott to do unlawful acts,
consisting of wrongfully taking the funds and
property of plaintiff Elliott Air, Inc.; one
or more of the parties to the agreement
committed overt acts in furtherance of the
aims of the agreement; and plaintiff Elliott
Air, Inc., suffered actual injury as a
proximate result of the overt acts committed
in furtherance of the conspiracy.
Our Supreme Court has stated, “[w]e must judge the sufficiency
of
the
complaint
conclusions.
by
the
facts
alleged
and
not
by
pleader’s
The repeated use of the words combined, conspired,
and agreed together to injure the plaintiff, are but conclusions of
the pleader and without the allegation of the overt acts the
complaint is insufficient to state a cause of action . . . .”
Shope v. Boyer, 268 N.C. 401, 405, 150 S.E.2d 771, 774 (1966)
(citations omitted)); see also Dove, 168 N.C. App. at 690, 608
S.E.2d at 800 (“In civil conspiracy, recovery must be on the basis
of
sufficiently
alleged
wrongful
overt
acts.
The
charge
of
conspiracy itself does nothing more than associate the defendants
together and perhaps liberalize the rules of evidence to the extent
that under proper circumstances the acts and conduct of one might
be admissible against all.” (quotation omitted) (emphasis added)).
In the instant case, the only factual allegation regarding any
-12conspiracy with Nichols and Powers is contained in paragraph 14 of
plaintiffs’ complaint.
This contention has been resolved by Judge
Jones’ partial summary judgment order.
No other wrongful overt
acts are alleged to have been committed by any of the defendants in
furtherance of the alleged conspiracy between Lisa, Nichols, and
Powers.2
We
hold
that
plaintiffs’
blanket
and
conclusory
allegations in paragraph 33 are insufficient to state a claim of
civil conspiracy.
Accordingly, as plaintiffs’ complaint on its face reveals the
absence of facts sufficient to make a valid claim, the trial court
properly dismissed plaintiffs’ claim for civil conspiracy against
Nichols and Powers.
This argument is without merit.
AFFIRMED.
Judges HUNTER, Robert C. and GEER concur.
2
We note that plaintiffs’ complaint alleges that Lisa, inter
alia, “embezzled, cashed forged checks, and otherwise converted to
her own use a large amount of the funds of plaintiff [EAI].”
However, plaintiffs do not allege these acts were done in
furtherance of any conspiracy with Nichols and Powers.
