Swenson v. All American Assur. Co.

Annotate this Case

235 S.E.2d 793 (1977)

Norman V. SWENSON v. ALL AMERICAN ASSURANCE COMPANY.

No. 7626SC903.

Court of Appeals of North Carolina.

June 15, 1977.

*795 Cansler, Lockhart, Parker & Young, P. A., by Thomas Ashe Lockhart, Joe C. Young, and Winford R. Deaton, Jr., Charlotte, for petitioner-appellee.

Stern, Rendleman, Isaacson & Klepfer by Robert O. Klepfer, Jr., and Arthur A. Vreeland, Greensboro, for respondent-appellant.

MORRIS, Judge.

By its assignments of error one through eight, sixteen and seventeen, respondent challenges the jurisdiction of the court over the subject matter of the litigation and the person of respondent. Since this, without question, is the threshold issue arising on this appeal, we shall first address it.

The court found that "(t)his is a summary proceeding filed by Petitioner Norman V. Swenson pursuant to the provisions of North Carolina General Statutes 55-71, to determine a controversy with respect to the election of directors at Respondent's Substitute Annual Meeting proposed to be held on July 21, 1976, and an application to this Court to order a substitute meeting to be held as and for the annual meeting of Respondent's shareholders pursuant to provisions of North Carolina General Statutes 55-61(b) . . . ."

G.S. 55-71 is entitled "Proceeding to determine validity of election or appointment of directors or officers". Portions pertinent to this appeal are:

"(a) Any shareholder or director of a domestic corporation may commence a summary proceeding in the superior court to determine any controversy with respect to any election or appointment of any director or officer of such corporation. . . . . . . . . (c) The proceeding shall be commenced by filing a verified petition in the superior court directed to the resident judge or any judge holding court in the district. (d) The petition shall include: (1) The name of the county and court in which the proceeding is brought, and the title of the proceeding, which shall include as respondents the corporation, the person or persons whose purported election or appointment is questioned, *796 and any person other than the petitioner, whom the petitioner alleges to have been elected or appointed. (2) A plain and concise statement of the facts constituting the grounds for contesting the validity of the election or appointment, and a prayer for the relief sought. (e) . . . No summons shall be necessary, but a copy of the notice and petition shall be served upon each respondent at least 10 days prior to the hearing. . . . . . . . (f) Upon or after the filing of the petition and issuance of the notice the judge may, upon application, issue an interlocutory order restraining the directors or officers whose election or appointment is challenged from acting, and may make such other order as he may deem proper with respect to the directors or officers who shall hold the contested offices pending the determination of the matter in controversy. . . . . . (h) Upon completion of the hearing the judge, in determining the matter, may: (1) Declare the result of the election or appointment in controversy; (2) Order a new election or appointment and may include in such order provisions with respect to the directors or officers who shall hold the contested offices until a new election is held or appointment is made; (3) Determine the respective voting rights of shareholders and of persons claiming to own shares . . .." (Emphasis supplied.)

Appellee contends that this action properly was brought under this statute without the necessity for the issuance of a summons. It is true that the statute provides that no summons shall be necessary but the petition shall be served on the respondents. However, the statute is remedial in character, Thomas v. Baker, 227 N.C. 226, 41 S.E.2d 842 (1947), and is applicable only if its provisions apply to the remedy sought. Here, the petition seeks to restrain the holding of a stockholders' meeting for the election of directors. The statute provides a method of leaving a corporation in status quo so the corporate business can be continued while the validity of an election already held is determined. The wording of the statute clearly indicates that it applies only to contested elections after the fact and not to prospective meetings for the holding of election. The court is given the power to restrain the officers whose election is challenged from acting or to enter other orders with respect to the officers or directors who shall hold e contested offices pending the determination of the controversy. After hearing, the court may declare the result of the election, or order a new election making provisions with respect to those holding the contested offices pending the election and determining the rights of shareholders at the new election. The statute in its entirety is directed at determining rights and duties resulting from an election held which is contested as to its validity. We fail to see how it has any applicability as to the situation in the present case. There is no person named the validity of whose election petitioner challenged, nor could there have been because no election had been held which petitioner could challenge.

Petitioner further argues that if a proper proceeding under G.S. 55-71 was not before the court on the original petition, the supplemental petition alone was a proper application to the court under G.S. 55-61 to sustain the relief granted. This statute provides that if the scheduled annual meeting of stockholders is not held, a substitute annual meeting may be called, or the judge of the superior court of the county where the corporation has its registered office may, upon the application of any shareholder, order a substitute annual meeting to be held. Here, the corporation had called a substitute annual meeting. It was this meeting which petitioner sought to have restrained. Even if this statute were applicable, and we cannot perceive that it is, it would avail petitioner nothing. Respondents had no notice whatever of the supplemental petition until the day of the hearing.

*797 Since we have held that no proper proceeding under G.S. 55-71 was before the court, the real question presented by this appeal is whether there was a civil action pending in which the court acquired jurisdiction to enter an order granting any relief. Freight Carriers v. Teamsters Local, 11 N.C.App. 159, 180 S.E.2d 461, cert. den., 278 N.C. 701, 181 S.E.2d 601 (1971), is analogous and furnishes guidance. In that case the trial court issued a temporary restraining order upon the affidavit of an officer of plaintiff. No complaint was filed and no summons issued. Successive orders were entered, including show cause orders and orders holding individuals members of defendant in contempt. The plaintiff contended that, by virtue of G.S. 1A-1, Rule 65(b), a temporary restraining order is given a status different than a civil action filed pursuant to G.S. 1A-1, Rule 3, and that a temporary restraining order may be issued upon an affidavit if it clearly appears from specific facts set forth in the affidavit that immediate and irreparable injury or loss will result to the applicant if the order is not issued. We held that "Rule 3 and Rule 65(b) must be construed in pari materia; procedure under Rule 65(b) is permissible only after an action is commenced as provided by Rule 3." Id. at 161, 180 S.E.2d at 463.

In this State there is but one form of action for the enforcement or protection of private rights or for the redress of private wrongs. That form of action is, by statute, denominated a civil action. G.S. 1A-1, Rule 2.

"A civil action is commenced by filing a complaint with the court. The clerk shall enter the date of filing on the original complaint, and such entry shall be prima facie evidence of the date of filing." G.S. 1A-1, Rule 3. This rule also provides for certain instances when an action may be commenced by the issuance of a summons with the filing of a complaint in 20 days. We agree with petitioner that petition filed herein meets the requirements of a complaint. Nevertheless, this avails him nothing. G.S. 1A-1, Rule 4, is clear and unambiguous in its requirement that "(u)pon the filing of the complaint, summons shall be issued forthwith, and in any event within five days . . ." (Emphasis supplied.) It is interesting that the comment following the statute notes that "(t)his section contemplates a continuance of the present practice of ordinarily having a summons issue simultaneously with the filing of the complaint. The five-day period was inserted to mark the outer limits of tolerance in respect to delay in issuing the summons." "Service of summons, unless waived, is a jurisdictional requirement." Kleinfeldt v. Shoney's Inc., 257 N.C. 791, 794, 127 S.E.2d 573, 575 (1962).

Here, the court acquired no jurisdiction over the person of respondent or the subject matter of the action and hence was without authority to enter any order granting any relief.

The order must be vacated.

Reversed and order vacated.

PARKER and CLARK, JJ., concur.