Sheng Yu Ke v. Heng-Qian Zhou
256 N.C. App. 485
| N.C. Ct. App. | 2017Background
- Plaintiffs (Ke and Zhang) hired Defendant Zhou/Seven Seas to convert their property into a restaurant; Zhou represented he was a licensed general contractor but was not licensed.
- Zhou allegedly displayed papers and an electrician’s license while representing he had a general contractor’s license; permits were not properly obtained.
- Plaintiffs paid $60,000, terminated the contract after the City learned work was being done without a licensed contractor, and sued for fraud, UDTP, and related relief.
- Zhou (pro se) filed an answer that listed both his name and Seven Seas; the clerk entered default against Seven Seas for failure to answer. Seven Seas’ later motion to set aside default was denied.
- A jury awarded $76,000 compensatory and $5,000 punitive damages; the trial court trebled damages under Chapter 75 to $201,000 after deducting prior recoveries. Plaintiffs’ motion for attorney’s fees was denied. Both sides appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred in denying a directed verdict on fraud (reasonableness of reliance) | Plaintiffs argue reliance on Zhou’s statements and exhibited paperwork was reasonable | Defendants argue reliance was unreasonable because Zhou displayed an electrician’s license and was not a licensed general contractor | Denied: factual dispute on reasonableness for the jury; directed verdict properly denied |
| Whether the clerk’s entry of default against Seven Seas was improper because Zhou intended his answer to appear for the corporation | Plaintiffs maintain default was appropriate because Seven Seas failed to timely plead | Defendants contend Zhou’s filing should be treated as Seven Seas’ answer (Zhou as corporate officer) | Affirmed: a corporation cannot be represented in superior court by a nonlawyer officer; clerk properly entered default |
| Whether the trial court abused its discretion in denying Seven Seas’ motion to set aside default | Plaintiffs argue default should stand given delay | Defendants argue good cause existed and the default should be set aside | Affirmed: trial court did not abuse discretion; defendant delayed (~7 months) in moving to set aside default |
| Whether the trial court erred in denying Plaintiffs’ request for attorney’s fees under N.C. Gen. Stat. § 75-16.1 | Plaintiffs argue fees appropriate given Chapter 75 violation and settlement conduct | Defendants argue no unwarranted refusal to resolve; trial court discretion applies | Affirmed: awarding fees is discretionary; trial court did not abuse discretion in denying fees |
Key Cases Cited
- Davis v. Dennis Lilly Co., 330 N.C. 314 (standard for directed verdict)
- Turner v. Duke Univ., 325 N.C. 152 (when in doubt, submit close questions to jury)
- Forbis v. Neal, 361 N.C. 519 (elements of fraud; reasonableness of reliance)
- Johnson v. Owens, 263 N.C. 754 (difficulty of drawing line between reasonable reliance and negligence)
- Lexis-Nexis, Div. of Reed Elsevier, Inc. v. Travishan Corp., 155 N.C. App. 205 (discussion of corporate representation exceptions)
- Roland v. W & L Motor Lines, Inc., 32 N.C. App. 288 (appearance by corporate officer affects default-judgment procedure)
- Bodie Island Beach Club Ass’n, Inc. v. Wray, 215 N.C. App. 283 (clarifying exceptions to corporation-by-nonlawyer representation)
- Byrd v. Mortenson, 308 N.C. 536 (setting aside default rests in trial court discretion)
- First Citizens Bank & Tr. Co. v. Cannon, 138 N.C. App. 153 (upholding denial of motion to set aside default after long delay)
- Custom Molders, Inc. v. American Yard Products, Inc., 342 N.C. 133 (attorney’s fees under § 75-16.1 are within trial court discretion)
- Willen v. Hewson, 174 N.C. App. 714 (trial court may decline fees even if statutory elements met)