Harold Lang Jewelers, Inc. v. Johnson
576 S.E.2d 360, 156 N.C. App. 187 (2002)
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Rule of Law:
A foreign corporation's business activities within a state are considered "transacting business," requiring a certificate of authority to maintain a lawsuit, if those activities are substantial, continuous, systematic, and regular, particularly when its agents finalize contracts within the state rather than merely soliciting orders for out-of-state acceptance.
Facts:
- Harold Lang Jewelers, Inc. ('Lang') is a Florida corporation.
- Beginning in 1970, a Lang employee sold and consigned merchandise to jewelry stores in Franklin, Asheville, and Highlands, North Carolina.
- The employee traveled to North Carolina at least twice every six weeks, and sometimes as often as three times a month, for the purpose of transacting business.
- During these visits, the employee always brought jewelry for delivery.
- The employee made direct sales and consigned jewelry on the spot, without requiring confirmation or approval from any person or entity outside of North Carolina.
- The employee also accepted returns of merchandise from customers within the state.
- Lang never obtained a certificate of authority to transact business in North Carolina.
Procedural Posture:
- Harold Lang Jewelers, Inc. filed a lawsuit against Johnson in a North Carolina trial court for $160,322.90.
- In its answer, Johnson asserted as an affirmative defense that Lang could not maintain the suit because it was transacting business in the state without a certificate of authority.
- On the day the case was called for trial, Johnson orally moved for a hearing on its affirmative defense.
- The trial court granted the motion, heard evidence, and dismissed Lang's action.
- Lang, as the appellant, appealed the trial court's dismissal to the North Carolina Court of Appeals.
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Issue:
Does a foreign corporation's regular and systematic in-state sales, deliveries, and consignments by an employee with authority to finalize transactions on the spot constitute "transacting business" under N.C. Gen. Stat. § 55-15-02, thereby barring it from suing in North Carolina courts without a certificate of authority?
Opinions:
Majority - Hudson, Judge.
Yes. A foreign corporation's regular and systematic in-state sales by an agent with authority to finalize transactions constitute "transacting business" under state law. The court reasoned that Lang's activities were not isolated or merely ancillary to interstate commerce. The facts demonstrated that Lang's business in North Carolina was "substantial, continuous, systematic, and regular," as its employee had been coming to the state for decades, multiple times per month, to conduct business. Crucially, the employee had the authority to form binding contracts within North Carolina, which distinguishes this activity from the statutory safe harbor of soliciting orders that require out-of-state acceptance. Therefore, Lang subjected itself to local jurisdiction and was required to obtain a certificate of authority to maintain an action in the state's courts.
Analysis:
This decision clarifies the threshold for what constitutes "transacting business" for a foreign corporation in North Carolina, solidifying the distinction between mere solicitation and the in-state finalization of contracts. The holding serves as a significant warning to out-of-state companies that maintaining a regular, systematic sales presence with empowered agents inside the state triggers registration requirements. The case reinforces that failure to obtain a certificate of authority is a dispositive, not merely technical, defense that can completely bar access to state courts, and trial courts have discretion to dismiss such cases without granting a continuance to cure the defect.
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