Greenleaf Condo. Homeowners Ass'n, Inc. v. Forest Leaf, LLC

865 S.E.2d 376 (Table)

GREENLEAF CONDOMINIUM HOMEOWNERS ASSOCIATION, INC., Plaintiff,

v.FOREST LEAF, LLC, a North Carolina limited liability company, and Shahram Lavian, a/k/a David Lavian, Zohar Investment Group, a California limited liability company, Trustee, and Farhad Hakakka, Beneficiary, Defendants.

No. COA20-413

Court of Appeals of North Carolina.

Filed December 7, 2021

Miller, Walker & Austin, by J. Jerome Miller and Carol L. Austin, for plaintiff-appellee.

James, McElroy & Diehl, P.A., by Preston O. Odom, III, for defendants-appellants.

ZACHARY, Judge.

¶ 1 Defendants Forest Leaf, LLC, Shahram Lavian a/k/a David Lavian, Zohar Investment Group, and Farhad Hakakka appeal from the trial court's order granting Plaintiff Greenleaf Condominium Homeowners Association, Inc.’s motion for sanctions and, inter alia , entering default judgment against Defendants. After careful review, we dismiss Defendants’ appeal.

I. Background

¶ 2 Plaintiff is a homeowners’ association that manages a three-unit condominium ("the Property") in Charlotte. On 17 October 2018, Plaintiff filed a verified complaint against Defendant Forest Leaf and its owner and sole member, Defendant Lavian. Plaintiff then filed an amended complaint on 31 October 2018,¹ adding Defendants Zohar and Hakakka as parties.

¶ 3 Plaintiff alleged the following facts in its amended complaint: After purchasing a unit ("the Unit") in the Property at a foreclosure sale in 2012, Defendant Forest Leaf, by and through Defendant Lavian, made substantial changes to the Unit in violation of Plaintiff's Declaration of Condominium ("the Declaration") and its bylaws. These changes caused substantial damage to all three units and to the interior and exterior common areas of the Property, and the City of Charlotte cited the Unit for numerous code violations and declared the Property to be unsafe. Thereafter, Plaintiff sent Defendants Forest Leaf and Lavian a series of letters demanding repairs and payment of damages, but Defendants Forest Leaf and Lavian did not repair the Property or pay the assessed damages.

¶ 4 When searching the title to the Property, Plaintiff's counsel discovered that Defendant Forest Leaf had recorded a deed of trust on the Unit, naming Defendant Zohar as trustee and Defendant Hakakka as beneficiary, and notified Plaintiff. On 28 September 2018, Plaintiff filed a claim of lien on the Unit.

¶ 5 In its amended complaint, Plaintiff sought foreclosure of the claim of lien, and asserted, inter alia , claims for fraudulent transfer under the Uniform Voidable Transactions Act (based on the recording of the deed of trust encumbering the Unit) and breach of covenants.

¶ 6 On 2 January 2019, Defendant Forest Leaf filed a motion to dismiss, which was followed by motions to dismiss filed by Defendants Zohar and Hakakka on 4 January 2019 and Defendant Lavian on 18 February 2019.² On 25 February 2019, Defendants Forest Leaf's, Zohar's, and Hakakka's motions to dismiss came on for hearing before the Honorable Jesse Caldwell in Mecklenburg County Superior Court. Judge Caldwell entered an order denying the motions on 19 March 2019. Defendant Lavian's motion to dismiss came on for hearing on 6 May 2019, before the Honorable Louis A. Trosch, Jr., in Mecklenburg County Superior Court; Defendant Lavian failed to appear, and Judge Trosch denied the motion by order entered 15 May 2019.

¶ 7 In the interim, on 26 March 2019, counsel for all Defendants filed a motion to withdraw as counsel, citing Defendants’ failure to respond or to fulfill their obligations to counsel. On 2 April 2019, Plaintiff moved for entry of default against Defendants Forest Leaf, Zohar, and Hakakka, citing their collective failure to appear. On 12 April 2019, Defendants Lavian and Hakakka filed a pro se verified answer that they prepared and purported to sign on behalf of all Defendants. On 15 April 2019, over Defendants’ objection, the Honorable Forrest Bridges granted Defendants’ counsel's motion to withdraw. On 7 May 2019, Defendants Lavian and Hakakka served Plaintiff's counsel with a pro se amended verified answer and counterclaim, along with interrogatories, requests for production of documents, and requests for admissions, not only on their own behalf but also allegedly on behalf of all Defendants. The amended answer was filed on 14 May 2019. From that point on, Defendants Lavian and Hakakka filed a few pro se motions for extension of time, again allegedly on behalf of all Defendants, but Defendants otherwise failed to participate in litigation, including discovery and court-ordered alternative dispute resolution.

¶ 8 On 2 October 2019, Plaintiff filed a motion for sanctions or, in the alternative, to compel discovery and to strike Defendants’ responsive pleadings pursuant to Rule 12(f) of the North Carolina Rules of Civil Procedure. On 8 October 2019, this motion came on for hearing before the Honorable Donnie Hoover in Mecklenburg County Superior Court. Plaintiff was represented by counsel at the hearing, but Defendants failed to appear. On 21 October 2019, the trial court entered an order ("the Final Order") that, inter alia : (1) granted Plaintiff's motion for sanctions; (2) entered default judgment pursuant to Rule 37(b)(2) of the North Carolina Rules of Civil Procedure "on all claims included in Plaintiff's Amended Complaint against all Defendants"; (3) canceled the deed of trust encumbering the Unit; (4) permitted Plaintiff to foreclose on the claim of lien on the Unit; (5) ordered a judicial sale of the Unit to satisfy the lien; (6) prohibited Defendants from bidding on the Unit at the sale; and (7) awarded Plaintiff attorney's fees, to be satisfied from the proceeds of the sale of the Unit.

¶ 9 On 20 November 2019, by and through new counsel, Defendants filed notice of appeal. On 25 June 2020, Defendants moved this Court to "relinquish jurisdiction and remand for the trial court to hear and enter an indicative ruling" on their proposed motion to set aside the default judgment pursuant to Rule 60(b) of the North Carolina Rules of Civil Procedure. On 13 July 2020, this Court denied Defendants’ motion. On 28 July 2020, the trial court granted Defendants’ motion to stay pending appeal, but Defendants failed to post the requisite bond, and the Unit was sold at foreclosure.

II. Discussion

¶ 10 On appeal, Defendants argue that the trial court (1) lacked subject-matter jurisdiction over this matter because Plaintiff lacked standing to commence this action; (2) erred by denying their various motions to dismiss; and (3) reversibly erred by entering a sanctions-based default judgment against them. For the reasons that follow, we conclude that we are precluded from reviewing Defendants’ arguments on appeal.

¶ 11 Defendants filed their notice of appeal following the trial court's entry of the Final Order. In that notice of appeal, Defendants identified not only the Final Order as the ruling from which they appealed, but also the orders denying Defendants’ motions to dismiss entered by Judges Caldwell and Trosch, as well as "any intermediate order involving the merits and necessarily affecting the Final Order."

¶ 12 Defendants correctly observe that a default judgment "is a final judgment[,]" Moore v. Sullivan , 123 N.C. App. 647, 649, 473 S.E.2d 659, 660 (1996), and our General Statutes provide that "[u]pon an appeal from a judgment, the court may review any intermediate order involving the merits and necessarily affecting the judgment." N.C. Gen. Stat. § 1-278 (2019).

¶ 13 "However, ...