NC Court of Appeals: Coastal Federal Credit Union v. Falls-Entry of Default by Clerk of Court allowed only if no appearance made by Defendants

Summary: Coastal Federal Credit Union (CFCU) filed suit against the Debtors in May 2010 for following an alleged default on a retail sales installment contract for the purchase of a vehicle.  On June 18, 2010, after no answer had been filed, CFCU sought an entry of default and default judgment, both of which were allowed by the Clerk of Court  pursuant to North Carolina Rule of Civil Procedure 55(b)(1). The Debtors subsequently sought to set aside the default judgment, arguing that they had made payment arrangements with the attorneys for CFCU.  As such, the Debtors argued that they had made "an appearance" in the case and CFCU instead should have been required to seek entry of default and a default judgment under Rule 55(b)(2), which requires 3 days notice of the hearing.  CFCU disputed that the Debtors had contacted its attorneys prior to the default judgment. The trial court denied the motion to set aside the default judgment, but the Court of Appeals remanded the case for further findings.  The Court of Appeals held that the findings of fact by the trial court were an ambiguous recitation of both parties positions and did not actually determine whether there was contact between the Debtors and the attorneys for  CFCU prior to entry of default. The Court of Appeals declined to rule on whether the entry of default should be set aside for "good cause", as such a determination would only be necessary if the Clerk of Court properly had jurisdiction under Rule 55(b)(1) to allow such relief.   CFCU v Falls-Entry of Default by Clerk of Court allowed only if no appearance made by Defendants.PDF