## Facts

- Harold Lang Jewelers, Inc. (“Lang”), a Florida corporation, sold and consigned jewelry to North Carolina retail jewelry stores operated by Jerger Johnson and Terrell Kent Johnson (collectively, “Johnson”).
- In April 1999, Lang sued Johnson in North Carolina to recover more than $160,000 for jewelry allegedly sold or consigned and not paid for.
- Johnson answered and raised an affirmative defense under N.C. Gen. Stat. § 55-15-02, asserting that Lang could not maintain the action because it was transacting business in North Carolina without a North Carolina certificate of authority.
- Before the merits were tried, the trial court held a hearing on the certificate-of-authority issue.
- Evidence showed Lang used an employee to conduct sales and consignments with stores in three North Carolina cities.
- The employee traveled into North Carolina at least every six weeks throughout the year and more often during summer months.
- While in North Carolina, the employee personally delivered jewelry, took orders, shipped items to North Carolina customers, accepted returns from North Carolina customers, and often directed sales and consignments without needing further approval from Lang’s Florida office.
- Lang had not obtained a North Carolina certificate of authority at the time it filed suit or by the time of trial.
- The trial court concluded Lang’s in-state conduct was regular, continuous, and substantial, found Lang was transacting business without a certificate, and dismissed Lang’s action prior to trial on the merits.
- Lang appealed.

## Issues

1. Whether the trial court could hear and decide the § 55-15-02 qualification issue before trial even though a prior pretrial order recited that there were no pending motions requiring resolution before trial.
2. Whether the evidence supported the trial court’s conclusion that Lang was “transacting business” in North Carolina, requiring a certificate of authority and barring Lang from maintaining the action under § 55-15-02.
3. Whether the trial court abused its discretion by dismissing the action rather than granting a continuance to allow Lang time to obtain a certificate of authority.

## Decision

- The North Carolina Court of Appeals affirmed the dismissal.
- The court held the trial court acted within its discretion in addressing the § 55-15-02 issue at the start of trial despite the pretrial order language, including because the defense had been pleaded in Johnson’s answer and Rule 16 permits modification of pretrial orders to prevent manifest injustice.
- The court held the evidence supported the trial court’s finding that Lang’s business activity in North Carolina was regular, continuous, and substantial and therefore constituted “transacting business” requiring a certificate of authority.
- The court held the trial court did not abuse its discretion by dismissing the action rather than continuing the case to allow Lang to obtain a certificate, especially given Lang’s notice of the defense long before trial.

## Legal Principles

- A foreign corporation transacting business in North Carolina may not maintain an action in North Carolina courts until it obtains a certificate of authority. (N.C. Gen. Stat. § 55-15-02(a))
- An issue under § 55-15-02 must be raised by motion and determined by the trial judge prior to trial.
- Regular and repeated in-state commercial activity—such as frequent in-person visits, in-state deliveries, taking orders, shipping goods into the state, accepting returns, and exercising local discretion to complete transactions—supports a finding that a foreign corporation is transacting business in North Carolina (beyond isolated interstate sales).
- A pretrial order may be modified at trial under Rule 16 when necessary to prevent manifest injustice, and a trial court may consider a properly raised statutory bar to suit even if a pretrial order suggests no pending motions.
- Whether to grant a continuance to permit later qualification is discretionary; dismissal may be appropriate where the plaintiff had early notice of the qualification defense and did not cure the defect before trial.

## Conclusion

Because Lang’s employee repeatedly entered North Carolina to deliver jewelry, conduct sales and consignments, take orders, accept returns, and complete transactions with substantial independence, the trial court had evidence supporting its finding that Lang was transacting business in the state; lacking a certificate of authority, Lang was barred by § 55-15-02 from maintaining the suit, and the Court of Appeals affirmed the pretrial dismissal and the denial of a continuance.


Harold Lang Jewelers, Inc. v. Johnson, 576 S.E.2d 360 (2003)