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Issue  301  Article  456
Published:  4/1/2024

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Builders Mut. Ins. Co. v. Neibel (23-240) 3/19/2024
Service by Publication Requires Reasonable Due Diligence

Chris Burti, Vice President and Senior Legal Counsel

This appeal resulted in opinions by a divided court. The defendant in this case appealed from the trial court's order of summary judgment granting a money judgment in favor of the plaintiff renewing a prior judgment that the plaintiff had obtained in 2011 (2011 Judgment). The defendant filed an answer asserting affirmative defenses including an assertion that the underlying 2011 Judgment was void for lack of personal jurisdiction, insufficient process, and insufficient service of process.

The evidence submitted at the hearing on summary judgment as recited in the opinion is crucial to the outcome and we will set it out verbatim:

The Plaintiff asserted it filed a verified complaint in the underlying lawsuit on or about 25 January 2010 seeking to collect unpaid insurance premiums in the total amount of $4,543.81 related to Plaintiff's business (the 2010 Complaint). Defendant submitted his own Affidavit opposing summary judgment and other documents, including the 2010 Complaint, as exhibits attached to his Memorandum of Law opposing summary judgment. Attached as exhibits to the 2010 Complaint were billing records and insurance applications for policies purchased through an insurance agency in Boone, North Carolina, reflecting Defendant's address in Sugar Grove, North Carolina. Defendant also submitted a Certificate of Assumed Name for his construction business to do business in Watauga County. The Certificate reflected addresses in Valle Crucis and Vilas, North Carolina. Defendant also submitted documentation reflecting his address on file with the North Carolina Licensing Board for General Contractors was in Paragon, Indiana.

Following unsuccessful attempts to personally serve Defendant with the 2010 Complaint, Plaintiff served Defendant by publication on 21 December 2010 in Watauga County, North Carolina. The Affidavit of Service by Publication filed in that underlying suit reflected in January 2010, Plaintiff attempted to serve the 2010 Complaint and summons on Defendant via certified mail at Defendant's Sugar Grove address. The summons was returned unclaimed. In April 2010, Plaintiff then attempted to serve the 2010 Complaint and alias and pluries summons at Defendant's Paragon, Indiana address. The summons was again returned unclaimed. In June 2010, Plaintiff again attempted service via alias and pluries summons by certified mail at an address in Vilas, North Carolina which was also unsuccessful. Finally, in August 2010, Plaintiff yet again attempted service of process on Defendant by Watauga County Sheriff again at the addresses in Vilas and Sugar Grove. This alias and pluries summons was not served because Defendant could not be located at those addresses by the Sheriff's office. Ultimately, on or about 13 October 2010, Plaintiff caused Notice of Service of Process by Publication to be published in The Watauga Democrat newspaper as Watauga County was Defendant's last known residence. Following publication of the Notice Service of Process by Publication, Plaintiff moved for summary judgment and obtained the 2011 Judgment on 11 March 2011.

The defendant's contention that the 2011 Judgment was void for lack of personal jurisdiction and should not be renewed was based upon the argument that the plaintiff failed to exercise reasonable diligence in attempting to personally serve him before attempting service by publication and, further, by publishing the Notice of Service by Publication only in Watauga County and not in Paragon, Indiana or, particularly, in Wake County, North Carolina where the action was pending. The opinion points out that in his own affidavit the defendant claimed that while he was currently a resident of Watauga County, "he did not reside and was not present in Watauga County between March 2009 and September 2012. Instead, Defendant claimed during that time he lived in Gosport, Indiana."

These contentions left the Court of Appeals two issues to address in its opinion: "[W]hether the trial court properly entered Summary Judgment for Plaintiff renewing the 2011 Judgment where: (I) service by publication of the 2010 Complaint was utilized following multiple attempts by Plaintiff to personally serve Defendant at multiple addresses in Watauga County and Indiana; and (II) Notice of Service of Process by Publication was published in Watauga County.

Where there is no proper service in a case, a judgment rendered therein is void and cannot be renewed in a subsequent action because there is no debt or obligation by which to base it. The Court cites the following for this doctrine:

"'A defect in service of process by publication is jurisdictional, rendering any judgment or order obtained thereby void.'" Cotton v. Jones, 160 N.C. App. 701, 703, 586 S.E.2d 806, 808 (2003) (quoting Fountain v. Patrick, 44 N.C. App. 584, 586, 261 S.E.2d 514, 516 (1980)). "Service of process by publication is in derogation of the common law. Therefore, statutes authorizing service of process by publication are strictly construed, both as grants of authority and in determining whether service has been made in conformity with the statute." Id. (citation and quotation marks omitted).

Service by publication is permitted by Rule 4(j1) of the North Carolina Rules of Civil Procedure when a party cannot be served by personal delivery, registered or certified mail, or by a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2) with due diligence. Service is accomplished under the rule by "publishing a notice of service of process by publication once a week for three successive weeks in a newspaper that is qualified for legal advertising in accordance with G.S. 1-597 and G.S. 1-598 and circulated in the area where the party to be served is believed by the serving party to be located, or if there is no reliable information concerning the location of the party then in a newspaper circulated in the county where the action is pending." (emphasis added ed.)

In this case, the Rule presents the court with two requirements to address: first, was service initially attempted by the plaintiff with "due diligence" and second, if so, where was the proper place for the plaintiff to publish?

The defendant argued that the plaintiff failed to exercise due diligence in attempting service on the defendant beyond the attempts made to serve the defendant either in Watauga County or Indiana before resorting to service by publication. The opinion states:

"Due diligence dictates that plaintiff use all resources reasonably available to her in attempting to locate defendants. Where the information required for proper service of process is within plaintiff's knowledge or, with due diligence, can be ascertained, service of process by publication is not proper." Fountain, 44 N.C. App. at 587, 261 S.E.2d at 516 (citations omitted). However, "there is no 'restrictive mandatory checklist for what constitutes due diligence' for purposes of service of process by publication; '[r]ather, a case by case analysis is more appropriate.'" Jones v. Wallis, 211 N.C. App. 353, 358, 712 S.E.2d 180, 184 (2011) (quoting Emanuel v. Fellows, 47 N.C. App. 340, 347, 267 S.E.2d 368, 372 (1980)). "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." Id. at 359, 712 S.E.2d at 185.

The defendant argued that the plaintiff should have attempted service at a Post Office box in Watauga; or made multiple attempts at service to the Paragon, Indiana address on file with the State; or tried simply calling him by telephone to ascertain an address for service. However, the Court notes that this assertion was made without claiming that any of those attempts would likely have been successful.

"To the contrary, Defendant's entire factual basis for his argument is that he did not live and was not present in Watauga County at the time-necessarily defeating his suggestion that service at a Watauga County Post Office Box would have borne fruit. Likewise, Defendant casually ignores the fact that the attempt at service at the Paragon, Indiana address was returned unclaimed and offers no indication further attempts would have been successful. Defendant also makes no effort to argue telephone calls would have resulted in successful service..." concluding: "On the facts of this case, we conclude Plaintiff exercised due diligence in making multiple attempts to personally serve Defendant with the 2010 Complaint. This is particularly so where Defendant has not forecast that any other attempts would have been fruitful.

On the second prong of this argument, the defendant argues that the publication was accomplished in the wrong county. The opinion points out that Rule 4(j1) requires:

...a notice of service of process by publication . . . in a newspaper ... circulated in the area where the party to be served is believed by the serving party to be located, or if there is no reliable information concerning the location of the party then in a newspaper circulated in the county where the action is pending.

The defendant contended without case citation that publication was required "in Indiana and/or Wake County, North Carolina, or, possibly, in Indiana, Wake County, and Watauga County" because the plaintiff "either reasonably believed Defendant was located in Watauga County or Indiana and should have served him by publication in both locations. Alternatively, Defendant contends Plaintiff had no reliable information about his whereabouts and, as such, should have served Defendant in Wake County (where the action was pending) and Watauga County and/or Indiana."

The remaining paragraphs of the Majority's opinion are devoted to a point and counterpoint dissection of the defendant's arguments as to the appropriate location for publication based upon what the plaintiff knew or didn't know. The facts are unique to this case and it likely will not serve us well to go into review of them in depth other than to suggest that some may serve well as useful comparisons when litigators are formulating arguments for trial or for title professionals who are analyzing the facts of a specific case to determine sufficiency for insurability analysis.

In coming to its conclusion that, "Defendant has failed to forecast evidence Plaintiff failed to exercise due diligence in attempting personal service or that service by publication in Watauga County was invalid. Therefore, the trial court had personal jurisdiction over Defendant to enter the 2011 Judgment. Consequently, in this action, the trial court did not err in granting Summary Judgment to Plaintiff renewing the 2011 Judgment..." the Majority observed:

Defendant's argument boils down to a contention that because Plaintiff could not obtain service of him at his Watauga County addresses, then Plaintiff necessarily did not believe Defendant was in Watauga County. Indeed, this is the analysis employed by the dissenting opinion here. This contention, however, misses the point. If Plaintiff had been able to effectuate personal service on Defendant at those addresses, service by publication would not be necessary. But it cannot logically follow that just because personal service was not effectuated in a county where Defendant was last known to reside and conduct business related to the lawsuit, Defendant was no longer located in that county - or more to the point, that Plaintiff could not reasonably believe Defendant would be located in that county for purposes of publication.
Publication in the county where the suit is pending is the last resort. See e.g., Zou, 244 N.C. App. at 19, 780 S.E.2d at 575 (publication of notice inadequate in Mecklenburg County where plaintiff had information defendant had moved to New York).

Here, there is no dispute publication in Wake County would have provided practically zero chance of notice to Defendant. Meanwhile, it is not unreasonable for Plaintiff to believe Defendant would be located in Watauga County where he had resided, where his business was located, and where Defendant conducted business with Plaintiff though a local insurance agency.

Judge GORE dissented with a separate opinion. The dissent can be said to be more of an argument as to what the judge thought the Plaintiff should have concluded as to the defendant's whereabouts based upon the judge's view of the facts of the case. The meat of the dissent's conclusions seems to be; "I agree with the majority, that it is likely in this case defendant would not receive notice through publication in the county where the case was pending, after all he was in Indiana at the time of the lawsuit. But we are not given the luxury of applying the law based on how we think it should turn out, but rather by interpreting the law as articulated by the General Assembly and previously applied by the Courts." Yet, the Dissent's conclusion is arguably dependent on its determination of whether the Plaintiff's conclusions as to the likely location were reasonable and thus, reliable...which seems to be more of a determination of fact, not law.

As of the writing of this article, an appeal had not been filed. It may well be ultimately taken up by the North Carolina Supreme Court and the decision refined, but until such time, it should be clear from the opinions of the majority and dissenting judges, that what constitutes "due diligence" in the procurement of service of process will turn on the facts and the court's interpretation of those facts. It should be noted that both opinions made it clear that the plaintiff's lack of knowledge of the actual location of the defendant was not determinative of the outcome of the case, but rather the judges' opinion of whether the information that the plaintiff had was "reliable" enough to support the choice of location in serving by publication controlled the conclusions.

In addition, the Dissent suggests:

Further, while it is not required, (emphasis added) plaintiff could have published in more than one county when the evidence raised a question of whether plaintiff properly believed defendant was located in Watauga County, and whether that belief was based upon reliable information of defendant's location.

Arguably, this suggestion is not very helpful as the cost of publication is high and the legal profession is commonly disparaged for incurring unnecessary costs in applying belt and suspender cautionary efforts in order to cover every conceivable contention.

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