Bryson v. Sullivan

• Decision Date: 27 January 1992
• Docket Number: No. 168PA91,168PA91
• Citation: 412 S.E.2d 327,330 N.C. 644
• Parties: James M. BRYSON, II, and Lois I. Bryson, Individually and as Administratrix of the Estate of James P. Bryson v. Rachel B. SULLIVAN, Individually and as Administratrix of the Estate of Millie P. Bryson.
• Court: North Carolina Supreme Court

Page 327

412 S.E.2d 327

330 N.C. 644

James M. BRYSON, II, and Lois I. Bryson, Individually and as Administratrix of the Estate of James P. Bryson v. Rachel B. SULLIVAN, Individually and as Administratrix of the Estate of Millie P. Bryson.

No. 168PA91.

Supreme Court of North Carolina.

Jan. 27, 1992.

On petition for discretionary review by plaintiffs pursuant to N.C.G.S. § 7A-31 from a decision of the Court of Appeals, 102 N.C.App. 1, 401 S.E.2d 645 (1991), reversing an order filed 24 May 1990 by Allen (W. Steven), J., Superior Court, Randolph County, and remanding for further findings consistent therewith. Heard in the Supreme Court 13 November 1991.

Moser, Schmidly, Mason & Wells by Stephen S. Schmidly, John N. Ogburn, Jr., Asheboro, for plaintiffs-appellants.

Wyatt Early Harris Wheeler & Hauser by William E. Wheeler, High Point, for defendant-appellees.

J. Wilson Parker, Winston-Salem, for amicus curiae North Carolina Academy of Trial Lawyers.

MARTIN, Justice.

This case considers the propriety of sanctions under N.C.R.Civ.P. 11(a) and attorneys' fees under N.C.G.S. § 6-21.5 for alleged violations by the plaintiffs regarding certain claims in an estate case. The evidence before the trial court revealed the following relevant facts. Defendant Rachel B. Sullivan (Rachel) is the daughter of Millie P. Bryson (Millie). Plaintiff James M. Bryson, II (Marc) is the grandson of Millie and the son of James P. Bryson (James) and Lois I. Bryson (Lois). James died in December 1986; Lois was appointed administratrix of his estate. Millie suffered a stroke in August 1983. From September 1983 to February 1987 she lived with and was cared for by James (until his death), Lois, and Marc. From February 1987 to May 1989 Millie was cared for by Rachel.

On 26 June 1987, Millie filed a claim against Marc and Lois, individually and as administratrix of James's estate, and others alleging that they had misappropriated and converted her property. Millie was declared incompetent on 16 December 1987, and Rachel was appointed her general guardian. Millie's claim was eventually settled on 24 April 1989 with the execution of a consent decree. The parties executing the consent decree were Rachel, as guardian for Millie, Lois, individually and as administratrix of James's estate, and Marc. McNeill Smith was the attorney for Marc and Lois in her individual capacity and in her capacity as administratrix of James's estate.

The consent decree provided in pertinent part:

6. Any and all other claims, actions or causes of action which any of the parties might have had or might have against any of the other parties have been fully compromised, adjusted and settled; no party has admitted or been adjudged of any wrongdoing or fault on account of any matters alleged or which might have been alleged in the Complaint or Answer; and neither the plaintiff, her guardian or successor guardian, her representative or estate, nor any of the defendants, his or her representatives, successors or assigns, individually or in any capacity, shall recover anything further of any other party on account of anything occurring before the date of this judgment.

Millie died intestate on 10 May 1989, and Rachel was appointed administratrix of her estate. On 2 June 1989, Rachel sought and received from the Clerk of Superior Court of Randolph County an order allowing $14,400.00 as reimbursement to her for "room, board and transportation" she provided to Millie from December 1987 through May 1989. On 5 October 1989, Lois as administratrix of James's estate and Marc petitioned the Clerk of Superior Court of Randolph County to set aside the award to Rachel. The clerk denied the petition.

On 22 November 1989, Marc and Lois in her individual capacity and in her capacity as administratrix of James's estate filed a claim against Millie's estate for services rendered to Millie from September 1983 through February 1987. Rachel in her capacity as administratrix of Millie's estate denied this claim.

Some short time before 22 February 1990, McNeill Smith advised Lois that

there was [sic] elements in ... [the 24 April 1989 consent order] which [had been] breached on the other side. One of the principal ones being the [petition seeking reimbursement for room, board and transportation provided for Millie filed by Rachel in Randolph County contrary to the provisions of the consent judgment]....

McNeill Smith further advised Lois:

So, if you're going to do anything, though ... you've got to file it within the three months because the statute is very clear that the Superior Court is the place to consider the validity of the claim and you've got some guidance, take it and you ought to do it and you ought not to let the 3 months go by. But I might very well be a witness.

McNeill Smith called Jack Ogburn, an attorney in Randolph County, who agreed to file the complaint that is reviewed in this opinion, and he did so on 22 February 1990. The complaint sought to recover: (1) for services allegedly rendered to Millie; (2) for alleged breach of fiduciary duty and self-dealing on the part of Rachel in allowing prematurely and without adequate proof the claim made by Rachel herself in her individual capacity for reimbursement for services rendered to Millie; and (3) for attorneys' fees and costs under N.C.G.S. § 28A-19-18 because of (a) Rachel's refusal to refer the plaintiffs' claim to a panel as allowed by N.C.G.S. § 28A-19-15 and (b) her self-dealing. The complaint was signed by Marc and Lois.

On 12 March 1990, Rachel in her individual capacity and in her capacity as administratrix of Millie's estate filed an answer and pled among other things the statute of limitations, the release contained in the 24 April 1989 consent decree, and res judicata. Rachel's answer also included a motion for sanctions pursuant to Rule 11. Specifically, Rachel alleged:

68. Plaintiffs' complaint was signed and verified in violation of Rule 11 ... in that it was knowingly filed and served in the face of obvious defenses in bar of plaintiffs' claims of which plaintiffs and their counsel had prior actual notice and which notice was a matter of public record....

....

70. Plaintiffs' complaint ... was interposed for no other purpose than to harass defendant, cause unnecessary delay in the administration of the estate of Millie P. Bryson ... and [has] needlessly increased the cost of the administration of the estate ..., resulting in loss to the estate and its beneficiaries.

71. Defendant is entitled to have the Court impose sanctions upon plaintiffs for violation of Rule 11 ... by way of expenses incurred in defending this action and matters related thereto.

Rachel further requested in her answer an award for reasonable attorneys' fees pursuant to N.C.G.S. § 6-21.5. Specifically, she alleged:

73. Plaintiffs' complaint completely fails to raise any justiciable issue of law or fact. As a result, defendant is entitled to an award of reasonable attorneys fees assessed against plaintiffs pursuant to N.C.Gen.Stat. § 6-21.5.

On 30 April 1990, pursuant to N.C.G.S. § 1A-1, Rule 41(a), the plaintiffs voluntarily dismissed their action with prejudice.

In an order dated 22 May 1990, the trial court denied the motions for sanctions and attorneys' fees. The trial court's findings of fact included the following:

36. At the hearing, Defendant's [sic] counsel admitted that the Defendants sought sanctions upon and attorneys fees from the Brysons and not their attorneys.

....

38. The Brysons filed this lawsuit in good faith and after diligent inquiry of counsel.

The trial court entered the following pertinent conclusions of law:

1. Plaintiffs voluntary dismissal of their action does not relieve this Court of its duty to consider the Rule 11 and attorneys fees Motions on the merits.

....

14. Plaintiffs have at all times relied on the advice of competent counsel in pursuing their claims and their causes have been well grounded in fact and law.

The defendants appealed to the Court of Appeals the trial court's denial of their requests for sanctions under N.C.G.S. § 1A-1, Rule 11(a) and for attorneys' fees under N.C.G.S. § 6-21.5. The Court of Appeals reversed and remanded. The plaintiffs' petition for discretionary review was allowed by this Court on 12 June 1990.

We affirm the Court of Appeals' holding that the trial court was not deprived of jurisdiction to determine the appropriateness of sanctions under Rule 11 by the plaintiffs' filing a voluntary dismissal with prejudice pursuant to N.C.G.S. § 1A-1, Rule 41(a)(1). Dismissal does not deprive the court of jurisdiction to consider collateral issues such as sanctions that require consideration after the action has been terminated. In re Peoples, 296 N.C. 109, 146, 250 S.E.2d 890, 911 (1978), cert. denied, 442 U.S. 929, 99 S.Ct. 2859, 61 L.Ed.2d 297 (1979). See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990).

For this purpose, it is not relevant whether the dismissal was with or without prejudice.

Rule 41(a)(1) does not codify any policy that the plaintiffs right to ... dismissal also secures the right to file baseless papers.... If a litigant could purge his violation of Rule 11 merely by taking a dismissal, he would lose all incentive to 'stop, think and investigate more carefully before serving and filing papers.' Amendments to Rules, 97 F.R.D. 165, 192 (1983) (citations omitted).

Cooter & Gell, 496 U.S. at ----, 110 S.Ct. at 2450, 110 L.Ed.2d at 377. Accord Corcoran v. Columbia Broadcasting Sys., Inc., 121 F.2d 575, 576 (9th Cir.1941).

In this opinion we review the following principal issues:

I. Whether litigants who rely in good faith upon advice of counsel concerning the legal basis for their claims may be subject to sanctions if it is determined that their pleading violates the legal sufficiency requirement of N.C.G.S. § 1-1A, Rule 11(a); II. Whether under the facts of this case, the litigants may be...