Civil Practice – Interlocutory Appeal – Entry of Default Judgment on Counterclaims

Rodriguez v. Beckwith (Lawyers Weekly No. 012-120-16, 6 pp.) (Richard Dietz, J.) Appealed from Swain County Superior Court (Kristina L. Earwood, J.) N.C. App. Unpub.

Holding:  Trial court entered default judgment on counterclaims, where plaintiff’s reply to counterclaims was well past the 30-day deadline to respond. We reverse the trial court’s judgment and remand for further proceedings consistent with this opinion.

Plaintiff filed his complaint on June 19, 2014. Defendant filed an answer with various counterclaims on Aug. 25, 2014, including among her claims a permanent injunction to enjoin plaintiff from operation of his business. Plaintiff did not file his response to the counterclaims until Nov. 7, 2014. Defendant moved for default judgment on the counterclaims on Nov. 17, 2014. Defendant moved for default again on March 5, 2015, and the court entered default judgment on the counterclaims on that day. On March 13, 2015, plaintiff moved to set aside the entry of default judgment.

Even though the entry of default judgment on the counterclaims is interlocutory, it may be appealed to this court. One of the counterclaims seeks to enjoin defendant from operating his business. We have held that an order enjoining the operation of a business affects substantial rights. In an instance where a trial court’s order affects substantial rights, it is immediately appealable under G.S. § 7A-27(b)(3)(a).

This Court repeatedly has held that once a party against whom a default judgment is sought has filed a responsive pleading, a trial court may not enter a default judgment against that party, even if the party’s pleading was untimely. Here, plaintiff filed his reply to the counterclaims not only before the trial court ruled on the motion for default judgment, but also before defendant even raised the default issue with the court.

Under well-settled case law, the trial court abused its discretion as a matter of law by entering a default judgment against a party who already had appeared and filed a responsive pleading in the case.

Our holding here does not deprive the trial court of authority to sanction a litigant for filing an untimely pleading.  Trial courts have inherent authority to impose sanctions for willful failure to comply with the rules of court. In appropriate circumstances, with appropriate findings, a trial court could strike an untimely pleading as a sanction, which might then result in entry of a default judgment at some future date. But nothing suggests that, in the present case, striking plaintiff’s reply would be an appropriate sanction for the late filing.

Reversed and remanded.