Contract – Default – Service of Process – Due Diligence

Jones v. Wallis. (Lawyers Weekly No. 11-07-0392, 15 pp.) (Sanford L. Steelman Jr., J.) Appealed from Guilford County Superior Court. (Catherine C. Eagles & Edgar B. Gregory, JJ.) N.C. App. Click here for the full text of the opinion.

Holding: Where plaintiff exercised “due diligence” in attempting to locate defendant for purposes of service of process and complied with all the statutory requirements for service of process by publication, the trial court did not err in denying defendant’s motion to set aside the entry of default against him since Rule 4(j1) requires “due diligence,” not that a party explore every possible means of ascertaining the location of a defendant.

We affirm the trial court’s denial of defendant’s motion to set aside the entry of default.

Background

On Sept. 20, 2004, plaintiff and defendant Wallis entered into an agreement to construct homes on lots six and 10 of a plantation. Plaintiff was to provide a line of credit to build the homes. This was secured by a deed of trust on the two lots and a promissory note both executed by Viridis Building, of which Wallis was the president. Wallis and Viridis never made timely interest payments on the note and failed to repay the principal when it was due.

On Jan. 16, 2009, plaintiff sued Viridis, seeking payment of sums due under the note, together with attorney’s fees. Wallis was sued individually for the sums due under the note under a piercing the corporate veil theory and also for misrepresentations made concerning the validity of the lien on lots six and ten. Defendants Greene and Rossabi were sued as escrow agents holding the proceeds of the sale of Haw River Plantation based upon Wallis’ claim that he was entitled to some or all of the escrowed funds.

By letter dated Jan. 16, 2009, plaintiff’s attorney requested that Rossabi, as counsel for Wallis and Viridis, accept service on behalf of his clients. Rossabi failed to respond to this request.

On Jan. 16, 2009, a summons was issued for Wallis and Viridis, through Wallis as its registered agent. The sheriff’s department unsuccessfully attempted to serve this summons on three different occasions in February 2009.

On April 13, 2009, plaintiff filed a notice of service of process by publication and an affidavit in support of service by publication as to Wallis. A copy of the complaint was mailed to Rossabi.

Default was entered against Wallis and Viridis on April 15, 2009. On June 1, 2009, Wallis filed a motion to set aside the entry of default. On June 17, 2009, Wallis’ motion to set aside the entry of default was denied, and summary judgment was entered against Wallis and Viridis. This appeal followed.

Discussion

Wallis contends that plaintiff failed to exercise the “due diligence” required by Rule 4(j1) prior to serving Wallis by publication. We disagree.

Wallis and Viridis set forth a number of things that they contend plaintiff should have done to accomplish “due diligence.” We note that Rule 4(j1) requires “due diligence,” not that a party explore every possible means of ascertaining the location of a defendant.

In determining whether plaintiff acted with “due diligence,” we look to the steps actually undertaken by plaintiff to ascertain the address of Wallis. The steps undertaken include: (1) attempted service of Wallis at his last known address, 921 Greenwood Drive; (2) searching public records to find the address of 2511 Patriot Way; (3) attempted service on Wallis at 2511 Patriot Way; (4) Internet search for Wallis; (5) counsel for plaintiff went personally to 921 Greenwood Drive address and talked with current residents; (6) determination from the public records that the 921 Greenwood Drive property had been foreclosed; and (7) sending of a copy of complaint to Wallis’ attorney and request that he accept service. We hold that plaintiff’s actions constituted “due diligence” justifying the use of service of process by publication as to defendants Wallis and Viridis.

Further, a plaintiff is not required to jump through every hoop later suggested by a defendant in order to meet the requirement of “due diligence.” This is particularly true when there is no indication in the record that any of the steps suggested by a defendant would have been fruitful.

Nothing in Wallis’ motion remotely suggests that these suggested steps would have been successful in effecting service on Wallis. Rather, the record suggests that they would not have succeeded. We hold that the trial court did not abuse its discretion in denying Wallis’ motion to set aside the entry of default.

Affirmed.