Brooks v. Giesey

• Decision Date: 30 July 1993
• Docket Number: No. 302A92,302A92
• Citation: 334 N.C. 303,432 S.E.2d 339
• Parties: D. Wayne BROOKS and wife, Kathleen C. Brooks, v. Ella M. GIESEY, Sara Meadows, John Alexander Meadows, Sue L. Meadows and Hopie E. Beaman.
• Court: North Carolina Supreme Court

Page 339

432 S.E.2d 339

334 N.C. 303

D. Wayne BROOKS and wife, Kathleen C. Brooks, v. Ella M. GIESEY, Sara Meadows, John Alexander Meadows, Sue L.

Meadows and Hopie E. Beaman.

No. 302A92.

Supreme Court of North Carolina.

July 30, 1993.

On appeal and discretionary review of a decision of the Court of Appeals, 106 N.C.App. 586, 418 S.E.2d 236 (1992), reversing an order imposing sanctions under N.C.G.S. § 1A-1, Rule 11(a) and affirming orders imposing sanctions under N.C.G.S. § 6-21.5 and § 1A-1, Rule 37(c) entered by Llewellyn, J., in the Superior Court, Craven County, on 27 July 1990. Heard in the Supreme Court 12 April 1993.

Glover & Petersen, P.A. by James R. Glover, Chapel Hill, for plaintiffs-appellants D. Wayne Brooks and wife, Kathleen C. Brooks.

Ward & Smith, P.A. by Donalt J. Eglinton, New Bern, for defendants-appellants/appellees Ella M. Giesey, Sara Meadows, John Alexander Meadows and Sue L. Meadows.

David P. Voerman, P.A. by David P. Voerman, New Bern, for appellee David P. Voerman.

FRYE, Justice.

This case arose when plaintiffs brought an action in Superior Court, Craven County, against defendants for damages arising out of the purchase of certain real property. During 1981 and 1982, defendants Ella M. Giesey, Sara Meadows, John Alexander Meadows, and Sue L. Meadows (referred to collectively as defendants or the Meadows) subdivided land which they had inherited in Craven County into a residential subdivision known as Bellefern Subdivision. Sara Meadows hired an independent engineer and surveyor to lay out and map the development, and an independent general contractor to grade and pave the roads and dig the ditches.

After 1 April 1982, when the surveyor and general contractor completed their work and the subdivision maps and restrictive covenants were recorded, the Meadows began selling lots. They sold Lot 10 on 6 June 1983 to Hopie E. Beaman (Beaman), an independent building contractor and originally a co-defendant in this lawsuit. ¹ Lot 10 is lower than the lots on each side of it, and contains a small depression at the back of the lot. On 24 June 1983, plaintiffs, after walking over the lot, contracted with Beaman in writing to purchase the lot and a house which Beaman was to build on the lot. During the period from July to September 1983, plaintiffs became aware of a drainage problem on the lot. They expressed their dissatisfaction and asked Beaman and Sara Meadows to correct the problem. Sara Meadows contacted the independent contractor she had hired earlier to examine the property. The contractor, at no cost to plaintiffs, did some grading and filling across the back of the lot. However, the problem was not alleviated and water continued to stand at the back of the lot following heavy rains. On 12 April 1984, the house was completed and Beaman conveyed the lot to plaintiffs by warranty deed.

Plaintiffs filed a complaint against defendants and Beaman on 4 December 1986, alleging that they had suffered economic loss in connection with their property based on the following theories: (1) breach of warranty; (2) fraud; (3) negligent design and construction of the drainage facilities; (4) creation of an easement; (5) trespass; (6) nuisance; and (7) unfair and deceptive trade practices. On 25 April 1988, the trial court, Judge James D. Llewellyn presiding, granted summary judgment in favor of and awarded costs to defendants. The trial court's order was affirmed by the Court of Appeals in a unanimous, unpublished opinion. Brooks v. Giesey, 94 N.C.App. 223, 381 S.E.2d 202 (1989) (Brooks I ).

Following Brooks I, defendants pursued motions for sanctions against plaintiffs pursuant to, inter alia, Rule 11, Rule 37 and N.C.G.S. § 6-21.5. The trial court heard arguments on these motions on 23 April 1990. On 27 July 1990, Judge Llewellyn entered judgments awarding defendants costs (including reasonable attorney's fees) in the amounts of $15,532.99 (under N.C.G.S. § 6-21.5), $12,622.90 (under Rule 11), and $3,200 (under Rule 37) ². The sanctions imposed pursuant to N.C.G.S. § 6-21.5 and Rule 37 were imposed against the plaintiffs, jointly and severally. The Rule 11 sanctions were imposed against plaintiffs and their attorney, David Voerman, jointly and severally. Plaintiffs and attorney Voerman appealed separately to the Court of Appeals.

The Court of Appeals unanimously reversed the Rule 11 sanctions and affirmed the Rule 37 sanctions. Brooks v. Giesey, 106 N.C.App. 586, 418 S.E.2d 236 (1992) (Brooks II ). A majority of the panel affirmed the award under N.C.G.S. § 6-21.5 with Judge Greene dissenting from that portion of the opinion. Plaintiffs appealed to this Court as of right based on Judge Greene's dissent. Additionally, on 18 November 1992, this Court allowed defendants' petition for discretionary review of two issues relating to the imposition of sanctions under Rule 11. Brooks v. Giesey, 332 N.C. 664, 424 S.E.2d 904 (1992).

I. Sanctions Under N.C.G.S. § 6-21.5

The Court of Appeals affirmed the trial court's award of attorney's fees pursuant to N.C.G.S. § 6-21.5, with Judge Greene dissenting. Brooks II, 106 N.C.App. 586, 418 S.E.2d 236. After concluding that the order entered under N.C.G.S. § 6-21.5 was proper, the majority of the panel

noted that under Rule 11, "a represented party may rely on his attorney's advice as to the legal sufficiency of his claims" and only "will be held responsible if his evident purpose is to harass, persecute, otherwise vex his opponents, or cause them unnecessary cost or delay." Bryson [v. Sullivan], 330 N.C. [644,] 663, 412 S.E.2d [327,] 337 [1992]. In our opinion, it is unfortunate that under section 6-21.5, which does not contain the same limitations, clients who presumably know nothing about the law can be sanctioned for factual and legal deficiencies.

Id. at 592, 418 S.E.2d at 239.

The dissent disagreed with this observation and noted that there is in fact a limitation on the trial court's ability to impose sanctions under N.C.G.S. § 6-21.5. Id. at 595, 418 S.E.2d at 241 (Greene, J., dissenting). The dissent concluded that after determining that a pleading contains no "justiciable issue of law or fact" the trial court

must then determine that the plaintiff should reasonably have been aware, at the time the complaint was filed, that the pleading contained no justiciable issue of law or fact or that the plaintiff persisted in litigating the case "after the point where [he] should reasonably have become aware that the pleading [he] filed no longer contained a justiciable issue." Bryson, 330 N.C. at 665, 412 S.E.2d at 338 [ (quoting Sunamerica Financial Corp. v. Bonham, 328 N.C. 254, 258, 400 S.E.2d 435, 438 (1991)) ].

Id.

We agree with the dissent's observation that the trial court's ability to impose sanctions under N.C.G.S. § 6-21.5 is in fact limited by our holding in Sunamerica, 328 N.C. at 258, 400 S.E.2d at 438.

Neither the Court of Appeals' majority nor dissent assert that the imposition of sanctions under N.C.G.S. § 6-21.5 is subject to the Rule 11 limitation we announced in Bryson v. Sullivan, 330 N.C. 644, 661, 412 S.E.2d 327, 336 (1992). However, plaintiffs argue that such a limitation should now be recognized. We decline to do so.

In Bryson, we considered whether "litigants who rely in good faith upon advice of counsel concerning the legal basis for their claim may have sanctions imposed against them under the legal sufficiency prong of Rule 11 if it is determined that the pleading violates the Rule." Id. at 660, 412 S.E.2d at 335-36. We concluded that good faith reliance on an attorney's advice precluded sanctions against the party under the legal sufficiency prong. Id. at 662, 412 S.E.2d at 336. However, we made it clear in Bryson that this limitation applied only to the legal sufficiency prong and not the improper purpose prong of Rule 11. Id. at 663, 412 S.E.2d at 337. That distinction was based on the belief that a represented party should "be held responsible if his evident purpose is to harass, persecute, otherwise vex his opponents, or cause them unnecessary cost or delay." Id. (citing In re Kunstler, 914 F.2d 505 (4th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1607, 113 L.Ed.2d 669 (1991)).

Sanctions under N.C.G.S. § 6-21.5 may be imposed where there is "a complete absence of a justiciable issue of either law or fact." N.C.G.S. § 6-21.5 (1986). Thus, sanctions under N.C.G.S. § 6-21.5 may be appropriate despite the layperson's reliance on legal advice if the layperson persists "in litigating the case after a point where he should reasonably have become aware that the pleading he filed no longer contained a justiciable issue." Sunamerica, 328 N.C. at 258, 400 S.E.2d at 438.

Judge Greene concluded that the trial court's order could not be upheld "because the trial court made no findings or conclusions on whether these plaintiffs should reasonably have been aware of these deficiencies at the time the complaint was filed or persisted in litigating the case after a point where they should have been aware of its deficiencies." Id. 106 N.C.App. at 595, 418 S.E.2d at 241 (Greene, J., dissenting) (emphasis added). However, upon review, we find that the trial court's findings and conclusions were sufficient to uphold the order under N.C.G.S. § 6-21.5 and we now affirm the result reached by the majority of the panel of the Court of Appeals.

In Sunamerica, we observed that "[u]nder N.C.G.S. § 6-21.5, the trial court 'shall make findings of fact and conclusions of law to support its award of attorney's fees.' " Sunamerica, 328 N.C. at 260, 400 S.E.2d at 439 (quoting N.C.G.S. § 6-21.5). We held that "[i]n deciding a motion brought under N.C.G.S. § 6-21.5, the trial court is required to evaluate whether the losing party persisted in litigating the case after a point where he should reasonably have become aware that the pleading he filed no longer contained a justiciable issue." Id. at 258, 400 S.E.2d at 438 (emphasis added)...