Hunter v. Spaulding

• Decision Date: 20 February 1990
• Docket Number: No. 8810SC1404,8810SC1404
• Citation: 388 S.E.2d 630,97 N.C.App. 372
• Parties: Preston and Peggy HUNTER v. George F. SPAULDING.
• Court: North Carolina Court of Appeals

Page 630

388 S.E.2d 630

97 N.C.App. 372

Preston and Peggy HUNTER v. George F. SPAULDING.

No. 8810SC1404.

Court of Appeals of North Carolina.

Feb. 20, 1990.

Hensley, Huggard, Seigle, Obiol and Bousman by John P. Huggard, Raleigh, for plaintiffs-appellees.

Hunton and Williams by Odes L. Stroupe, Jr. and A. Todd Brown, and Thigpen, Blue and Stephens by Ralph L. Stephens, Raleigh, for defendant-appellant.

BECTON, Judge.

Plaintiffs instituted this action alleging unfair and deceptive trade practices and actual and constructive fraud on the part of defendant. At trial, defendant was called as an adverse witness. Plaintiffs moved to strike his answer when he admitted he had not personally answered plaintiff's written interrogatories. The trial judge struck the answer and entered a default judgment against defendant on the actual fraud claim and awarded compensatory damages of $10,000.00. The question of punitive damages was then submitted to the jury, which returned a verdict for plaintiffs in the amount of $1,100,000.00. Defendant appealed. We affirm in part and reverse and remand in part.

I

The plaintiffs, Preston and Peggy Hunter, are citizens of Wake County. Defendant, George Spaulding, and his partner, Grady Perkins, own Spaulding and Perkins, Ltd., a North Carolina corporation. The two also own Spaulding and Perkins Realty Company, a North Carolina partnership. The Hunters joined several other Wake County residents in a lawsuit against Spaulding and Perkins individually and against their corporation and partnership. The Hunters allege that Spaulding and Perkins used the real estate company to defraud them in the purchase of a house. According to the Hunters, Spaulding and Perkins sold them a house ostensibly owned by a third party. In fact, the complaint charges, Spaulding and Perkins previously had purchased this home through their corporation for $47,000.00. They then sold the house to the Hunters for $57,000.00, never telling the Hunters about the prior transaction.

At trial, the Hunters called Mr. Spaulding as an adverse witness, and their lawyer, Mr. Huggard, attempted to examine him about certain answers he had furnished to written interrogatories. The following ensued:

[Mr. Spaulding]. We had basically two divisions. I operated the convenience food stores, Mr. Huggard. I had nothing to do with any real estate. I don't know anything about it so ask me anything you want to.

Q. But you are one of the defendants in this suit--

A. Yes.

Q. --and you have been sued?

A. Yes, sir.

Q. And the case is a case for real estate fraud?

A. If you say so, Mr. Huggard. I really don't know.

Q. Have you had the opportunity to talk with any of your attorneys about this case?

A. No, sir, because I wasn't involved in the beginning so there was no need for me getting involved in it now. I didn't know anything about it.

Q. Have you received any discovery from our office, interrogatories or requests for admission or anything like that directed expressly to you?

A. Yes, and we gave them to--I gave mine to our attorney.

Q. Okay.

A. Because I didn't know anything about it and he handled it.

Q. Those interrogatories are directed to you personally because they are required to be answered under oath and returned. Do you remember answering them under oath and returning them?

A. No, sir. Like I said, Mr. Huggard, I gave it to my attorney ... and he handled it. I didn't know anything about it.

Q. You did not give him any answers then?

A. No, sir.

The next day, Mr. Spaulding returned to the stand and "adopted" the written answers, saying, "I can't deny that I didn't sign [them] or anything. It was done in good faith and since I had no knowledge of the transaction ... what answers are on here through Perkins and my attorney, that's the answers I have to live with."

The Hunters moved that Mr. Spaulding's answer be stricken because, among other grounds, his testimony showed he had not personally answered the interrogatories. After initially denying the motion, the judge agreed to strike the answer and to enter a default judgment against Mr. Spaulding for actual fraud. ¹ The judge ruled that the Hunters were entitled to compensatory damages of $10,000.00. After the Hunters took a voluntary dismissal against the remaining defendants (Perkins the corporation, and the partnership), the judge submitted the issue of punitive damages to the jury. The jury returned a verdict holding Mr. Spaulding individually liable for punitive damages of $1,100,000.00.

II

Mr. Spaulding first argues that the judge erred as a matter of law by striking his answer and entering the default judgment. N.C.Gen.Stat. Sec. 1A-1, R.Civ.P. 33(a) in part states that "any party may serve upon any other party interrogatories to be answered by the party served...." Answers to interrogatories must be signed "by the person making them." When that party "is a public or private corporation or a partnership or association ... any officer or agent ... shall furnish such information as is available to the party." Our Rule has been read as requiring that "[w]ritten interrogatories ... be answered by the party served and [that] those answers ... contain such information as is reasonably available to the party and not simply his personal knowledge." W. Shuford, N.C.Civil Practice and Procedure, Sec. 33-10 (3d ed. 1988) (citing Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947)). Using Shuford and federal cases, Mr. Spaulding contends that Rule 33 required that he furnish information available to him through Mr. Perkins and his lawyers, in spite of his lack of any personal knowledge about the real estate transaction with the Hunters. We disagree.

Rule 33 does not permit a party to swear to the truth of answers given on interrogatories and then, at trial, to disavow knowledge about those answers. Our courts have often noted that the emphasis of our discovery rules "is not on gamesmanship, but on expeditious handling of factual information before trial so that the critical issues may be presented at trial unencumbered by unnecessary or specious issues and so that evidence at trial may flow smoothly and objections and other interruptions be minimized." Willis v. Duke Power Co., 291 N.C. 19, 34, 229 S.E.2d 191, 200 (1976). This purpose cannot be served if a party is allowed to return written answers to which he has sworn--and on which the opposing party is entitled to rely--and then effectively disaffirm those answers at trial. Any requirement that a person supply answers that are "reasonably available" does not mean that a person may distend Rule 33 to fashion a shield of so-called "deniability." Furthermore, later protestations by the party that he adopts the answers given for him does not excuse nor obviate his failure to comply with Rule 33.

The interrogatories in this case are directed to Mr. Spaulding in his individual capacity as well as in his capacity as an agent of his companies. Trial was not the time for him to aver his lack of personal knowledge about the matters inquired of him by the interrogatories. We hold that the judge correctly ruled that Mr. Spaulding violated Rule 33.

Mr. Spaulding next argues that, even if his answers were improper under Rule 33, he could not be sanctioned under N.C.Gen.Stat. Sec. 1A-1, R.Civ.P. 37(d) (1983) in that sanctions may be applied under that rule only for a complete failure to answer interrogatories. He cites language by our Supreme Court in Willis wherein the Court said that "if a party files answers ... no sanctions under Rule 37(d) may be obtained and the proper procedure for the party seeking discovery is to obtain an order compelling discovery under Rule 37(a)." 291 N.C. at 35, 229 S.E.2d at 201. The Court, however, prefaced that passage by saying that "Rule 37(d) does not ... come into operation if the responding party meets the requirements of Rule 33...." Id. (emphasis added). By attesting to answers that were not his, Spaulding did not "meet the requirements of Rule 33"; the party served in this case did not answer the interrogatories and the responses returned to plaintiffs were not verified by the person or persons who gave them. We hold, therefore, that the imposition of sanctions against Mr. Spaulding was proper under Rule 37(d).

Pursuant to N.C.Gen.Stat. Sec. 1A-1, R.Civ.P. 37(b)(2)(C) (Cum.Supp.1989), a party who fails to serve answers may have his pleadings stricken or have a default judgment entered against him. When a judge imposes sanctions, even in the severe form of defaulting the party, our review addresses whether the judge's actions constituted an abuse of discretion, First Citizens Bank and Trust Co. v. Powell, 58 N.C.App. 229, 230, 292 S.E.2d 731, 731-32 (1982), aff'd, 307 N.C. 467, 298 S.E.2d 386 (1983), remembering that the general purpose of our rules is to encourage trial on the case's merits. American Imports, Inc. v. G.E. Employees W. Region Fed. Credit Union, 37 N.C.App. 121, 124, 245 S.E.2d 798, 800 (1978). In the face of Mr. Spaulding's admission on the stand that he had not answered the interrogatories he verified--an admission that undermined trial on the case's merits--we cannot say that the judge abused his discretion by sanctioning Mr. Spaulding as he did.

Mr. Spaulding next contends that, even if his answer could be stricken, defaulting him on the Hunters' fraud claim was improper in that the Hunters' complaint for fraud was deficient. As a preliminary matter, we hold that Mr. Spaulding's exception to the judgment, entered in open court, permits him to challenge on appeal whether a default judgment could be based upon the Hunters' complaint, N.C.R.App.P. 10(b)(1) (1989), and we reject the Hunters' contention that this issue has not been preserved for appeal.

A default judgment admits only the allegations contained within the complaint, and a defendant may still show that the complaint is insufficient to warrant plaintiff's recovery. Lowe's of...