Daniels v. Montgomery Mut. Ins. Co.

• Decision Date: 07 October 1987
• Docket Number: No. 498PA86,498PA86
• Citation: 320 N.C. 669,360 S.E.2d 772
• Parties: Jerry W. DANIELS v. MONTGOMERY MUTUAL INSURANCE COMPANY.
• Court: North Carolina Supreme Court

Page 772

360 S.E.2d 772

320 N.C. 669

Jerry W. DANIELS v. MONTGOMERY MUTUAL INSURANCE COMPANY.

No. 498PA86.

Supreme Court of North Carolina.

Oct. 7, 1987.

Brinkley, Walser, McGirt, Miller, Smith & Coles by Stephen W. Coles and Charles H. McGirt, and Wilson, Biesecker, Tripp & Sink by Joe E. Biesecker, Lexington, for plaintiff-appellee.

Yates, Fleishman, McLamb & Weyher by Joseph W. Yates, III, and Barbara B. Weyher, Raleigh, for defendant-appellant.

FRYE, Justice.

In this case, we consider whether the Court of Appeals correctly decided: (1) that a trial court may, as an alternative to granting a motion to dismiss, tax plaintiff with defendant's costs including attorney's fees incurred pursuant to the third trial of the case; and (2) that the trial court erred in dismissing the plaintiff's complaint pursuant to Rule 41(b) of the North Carolina Rules of Civil Procedure for plaintiff's failure to comply with the order to pay costs. In addition, we consider whether the trial court erred by entering judgment against plaintiff on defendant's counterclaim subsequent to dismissing the plaintiff's action.

On the first question, we agree with the Court of Appeals that the trial court has the authority to impose lesser sanctions against a party for failing to comply with a court order, and that the lesser sanctions imposed may include costs plus attorney's fees. On the second question, we hold that the trial court did not abuse its discretion in dismissing the plaintiff's complaint, pursuant to Rule 41(b), for plaintiff's failure to comply with the order to pay costs. On the third question, the trial court erred by entering judgment on defendant's counterclaim subsequent to dismissing the plaintiff's action.

Plaintiff initiated this action to recover under an insurance policy for fire damage to his home and personal property. In its answer, defendant alleged inter alia that the plaintiff intentionally caused, procured or acquiesced in the fire for the fraudulent purpose of collecting insurance benefits. Defendant, in addition, filed a counterclaim to recover mortgage indebtedness on plaintiff's home.

This action was first heard by Judge Hamilton H. Hobgood at the 7 November 1983 Civil Session of Superior Court, Davidson County. Defendant, at this trial, made a motion in limine for an order prohibiting the introduction of evidence or reference in any manner before the jury to the fact that no criminal charges had been filed against the plaintiff in connection with the subject fire. Both parties agree that Judge Hobgood orally granted defendant's motion in limine. This initial action ended in mistrial when plaintiff's counsel informed the court that he might need to testify as a witness in the proceeding.

The second trial of this case was called at the 7 May 1984 Civil Session before Judge Robert A. Collier, Jr., and ended in mistrial because of a hung jury.

The third trial of this action came on before Judge James D. Davis at the 17 September 1984 Civil Session of Superior Court, Davidson County. In the course of opening statements, plaintiff's counsel made reference to the fact that the plaintiff had not been prosecuted. Pursuant to defendant's motion, a mistrial was granted.

Defendant subsequently moved to dismiss plaintiff's action pursuant to Rule 41(b) of the North Carolina Rules of Civil Procedure, alleging that the comment by plaintiff's counsel referring to the lack of prosecution violated several court orders. Alternatively, defendant requested the court to tax the plaintiff with its reasonable out-of-pocket expenses incurred in defending this action. The motion was heard by Judge Davis at the 5 November 1984 Civil Session of Superior Court, Davidson County. The court did not enter a written order at that time. According to the clerk's minutes of this hearing, Judge Davis denied the motion to dismiss and assessed plaintiff with all expenses incurred by the defendant regarding the third trial. The minutes indicate further that an order and affidavit were to be prepared by the week of 26 November 1984. The clerk's minutes also noted an exception taken by plaintiff's counsel.

On 14 December 1984, defendant's counsel submitted by mail a proposed order and affidavit to Judge Davis with copies to plaintiff's counsel setting forth expenses incurred in the third trial totaling $6,021.02. Plaintiff's counsel, by letter to Judge Davis, filed an objection to defendant's proposed order. However, on 18 December 1984, Judge Davis filed an order denying defendant's motion to dismiss and taxing plaintiff with the expenses set forth in defendant's affidavit. The order required plaintiff to pay such expenses to the Clerk of Superior Court, Davidson County, within thirty days.

Plaintiff failed to pay expenses as ordered by the court. By letter dated 29 January 1985, a copy of which was sent to Judge Davis, plaintiff's counsel informed defendant's counsel of his opinion that the order requiring plaintiff to pay expenses was invalid and unenforceable. Defendant thereafter moved to dismiss the action pursuant to Rule 41(b) of the North Carolina Rules of Civil Procedure on grounds that plaintiff failed to comply with the order to pay costs within thirty days.

Defendant's motion to dismiss was heard by Judge Donald L. Smith. Judge Smith concluded as a matter of law that neither plaintiff nor his counsel could deliberately disregard the court's order to pay expenses, but were required instead to pursue whatever remedies might be provided by law to stay or vacate the order. Judge Smith ordered that the plaintiff's claim be dismissed and that the defendant recover on its counterclaim the sum of $48,792.76 in addition to the expenses previously ordered. From this order plaintiff appealed to the Court of Appeals.

The Court of Appeals held that trial courts have the authority, pursuant to Rule 41(b), to impose a lesser sanction of costs including attorney's fees, against a party or counsel for failure to comply with a court order. It held, however, that the trial court, in order to do so, must make findings concerning the effectiveness of alternative sanctions and the ability of plaintiff to perform the alternative sanction imposed. The Court of Appeals determined that the order taxing costs was not supported by sufficient findings and was thus erroneous. It therefore vacated this order as well as the second order dismissing the plaintiff's claim and granting defendant's counterclaim and remanded the cause for further findings. Defendant's petition for discretionary review of this decision was granted by this Court.

I.

Plaintiff contends that the trial court had no authority to tax him with defendant's costs including attorney's fees as an alternative to dismissal under Rule 41(b). Defendant, on the other hand, contends that the Court of Appeals correctly held that a trial court has the inherent authority, pursuant to Rule 41(b), to impose lesser sanctions against a party, as an alternative to dismissal, on grounds that the party failed to comply with a court order.

We note first that the question in this case is not whether a trial court may, pursuant to Rule 41(b), impose a sanction of costs, but instead, whether the trial court, in exercise of its inherent powers, may tax a party with the reasonable costs including attorney's fees of a party-opponent for failure to comply with a court order.

In a recent opinion, Beard v. N.C. State Bar, 320 N.C. 126, 129, 357 S.E.2d 694, 696 (1987), this Court stated that:

Inherent power is that which the court necessarily possesses irrespective of constitutional provisions. Such power may not be abridged by the legislature. Inherent power is essential to the existence of the court and the orderly and effective exercise of the administration of justice. Through its inherent power the court has authority to do all things that are reasonably necessary for the proper administration of justice. See 20 Am.Jur.2d Courts §§ 78, 79....

(Emphasis added.)

In In re Superior Court Order, 315 N.C. 378, 338 S.E.2d 307 (1986), this Court held that the superior court had the inherent power to order a banking corporation to disclose to the district attorney a customer's bank account records, noting that "situations occasionally arise where the prompt and efficient administration of justice requires that the superior court issue an order of the type sought here by the State." Id. at 380, 338 S.E.2d at 309.

Similarly, we hold it to be within the inherent power of the trial court to order plaintiff to pay defendant's reasonable costs including attorney's fees for failure to comply with a court order.

The power of the trial court to sanction parties for failure to comply with court orders is essential to the prompt and efficient administration of justice. Rule 41(b) of the North Carolina Rules of Civil Procedure, which is identical to the federal rule, grants the trial court authority to dismiss actions with prejudice on grounds that plaintiff failed to comply with a court order. Dismissal with prejudice, however, is a harsh sanction. In Rogers v. Kroger Co., 669 F.2d 317, 321-22 (5th Cir.1982), the court said that:

Assessments of fines, costs, or damages against the plaintiff or his counsel, attorney disciplinary measures, conditional dismissal, dismissal without prejudice, and explicit warnings are preliminary means or less severe sanctions that may be used to safeguard a court's undoubted right to control its docket.

We agree. Therefore we conclude that a trial court has the inherent power to tax a plaintiff with the reasonable costs, including attorney's fees incurred by a defendant in a proceeding in which a plaintiff has failed to comply with a court order. Further, we believe that the finding of fact by the trial court in the instant case that plaintiff's counsel failed to comply with the court's order prohibiting the introduction of evidence or reference to the fact that no criminal...