Tittle v. Case

399 S.E.2d 373 (1991)

101 N.C. App. 346

John R. TITTLE and Sally A. Tittle, individually; Sally A. Tittle, Guardian Ad Litem for Shaun T. Tittle, Plaintiffs/Appellees, v. Nancy Yount CASE, Mae Belle Yount and World Omni Leasing, Inc., a corporation, Defendants/Appellants.

No. 9029SC542.

Court of Appeals of North Carolina.

January 15, 1991.

*374 Toms & Bazzle, P.A. by James H. Toms and Eugene M. Carr, III, Hendersonville, for plaintiffs-appellees.

Hafer, Day & Wilson, P.A. by R. Wilson Day, Raleigh, for defendants-appellants.

WELLS, Judge.

Defendant assigns error to the trial court's entry of the order denying its motion for sanctions and for attorney's fees pursuant to Rule 11 of the North Carolina Rules of Civil Procedure and N.C.Gen.Stat. § 6-21.5. We affirm.

The standard for appellate review of a court's ruling on a Rule 11 motion is set out in Turner v. Duke University, 325 N.C. 152, 381 S.E.2d 706 (1989):

The trial court's decision to impose or not to impose mandatory sanctions under N.C.G.S. § 1A-1, Rule 11(a) is reviewable de novo as a legal issue. In the de novo review, the appellate court will determine (1) whether the trial court's conclusions of law support its judgment or determination, (2) whether the trial court's conclusions of law are supported by its findings of fact, and (3) whether the findings of fact are supported by a sufficiency of the evidence. If the appellate court makes these determinations in the affirmative it must uphold the trial court's decision to impose or deny the imposition of mandatory sanctions under N.C.G.S. § 1A-1, Rule 11(a).

We will approach the issues in reverse order.

Our first inquiry is whether the trial court's findings of fact are supported by a sufficiency of the evidence. We have reviewed the record and hold that each of the trial court's findings are supported by a sufficiency of the evidence. The findings imply that plaintiffs' counsel made inquiry to the Department of Motor Vehicles regarding the state of the title to Case's car, which plaintiffs' counsel asserts he did in his brief, but we find no evidence of this inquiry in the record. Based on our holding below, however, we find this to be of no import.

We must next determine whether the trial court's conclusions of law are supported by its findings of fact. The trial court's conclusion of law (though not so labelled) states:

Based upon the foregoing findings of fact, and the Court's review of the record as a whole, and the Court having considered the arguments of counsel and citations to case law, the Court denies the Motion of counsel for Defendant, World Omni Leasing, Inc., to award attorney's fees and costs under Rule 11, North Carolina Rules of Civil Procedure. The Court is of the opinion that the Plaintiff, with World Omni Leasing, Inc. listed as owner of the vehicle on the relevant Department of Motor Vehicle[s] records and the accident report, acted *375 with objective reasonableness in naming World Omni Leasing, Inc. as a Party Defendant to this lawsuit, and proceeding as he proceeded.

The findings show that the accident report listed World Omni as the owner of the vehicle driven by Case. This would support the finding that the vehicle was listed by the Department of Motor Vehicles as owned by World Omni, and that the assignment of title asserted by World Omni had not been registered with the Department at the time of the accident. This provided a reasonable basis for plaintiffs to include a claim in their complaint against World Omni, given the statutory presumptions of N.C.Gen.Stat. § 20-71.1. Rule 11(a) imposes a standard of objective reasonableness under the circumstances. Turner, supra.

World Omni argues that even if it was objectively reasonable for plaintiffs to include a count against it in the complaint, plaintiffs violated Rule 11 by failing to dismiss this claim after it should have been apparent that the claim was baseless. The crucial issue for our determination is whether Rule 11 imposes a continuing duty to analyze the basis for a pleading, motion, or other paper signed pursuant to the rule and withdraw it when it becomes apparent, or should become apparent, that the pleading, motion, or other paper no longer comports with the rule.

The North Carolina Rules of Civil Procedure, including Rule 11, are, for the most part, verbatim recitations of the federal rules. Turner, supra. Decisions under the federal rules are thus pertinent to our analysis. Id. The federal courts have reached differing conclusions in analyzing this question, however. Some courts have focused on the language of the rule, which speaks to the signing of pleadings, motions, and other papers, and determined that the only inquiry is whether the attorney acted with objective reasonableness at the time of the signing. See Oliveri v. Thompson, 803 F.2d 1265 (2nd Cir.1986), cert. denied, 480 U.S. 918, 107 S. Ct. 1373, 94 L. Ed. 2d 689 (1987). Other courts have focused on the apparent purpose of the rule as a policing mechanism and a desire not to undercut its full force in imposing a continuing duty. See Herron v. Jupiter Transp. Co., 858 F.2d 332 (6th Cir.1988).

While no North Carolina cases have spoken directly to the issue of a continuing duty, the Court's analysis in Turner must be seen as at least impliedly recognizing that such a duty exists under our own Rule 11. The Court found Rule 11 violations in the defendant's failure to adequately comply with a discovery order, and in the noticing and taking of two depositions. Sanctions in that case, then, were based on an attorney's conduct of discovery, and not simply the improper signing of a pleading, motion, or other paper. In Shook v. Shook, 95 N.C.App. 578, 383 S.E.2d 405 (1989), disc. review denied, 326 N.C. 50, 389 S.E.2d 94 (1990), this Court held that the consistent use of inflated figures in a complaint, after opportunity to amend, was sufficient to support an award of sanctions. Taken together, these cases indicate that we are to view Rule 11 broadly in viewing an attorney's conduct during the course of litigation.

In some circumstances, then, the failure to dismiss a case when irrefutable evidence has come to an attorney's attention that the case is meritless may require sanctions pursuant to Rule 11. On these facts, however, we decline to overrule the trial court. We have held that instituting the action against World Omni was reasonable under the circumstances. World Omni sent information relating to the transfer of the car title and the fact that defendant Case did not work for it on 17 October 1989. On 6 November 1989, plaintiffs noticed the depositions of defendants Case and Tittle for 1 December 1989. Plaintiffs filed their voluntary dismissal on 9 February 1990. Given that the accident report listed World Omni as the owner of the car in direct contradiction to the information World Omni had provided, plaintiffs' limited discovery of the other parties to this action before dismissing its claim against World Omni was not objectively unreasonable under the circumstances. The trial court's findings of fact support its conclusions of law, and its conclusions support its judgment *376 of no sanctions. This assignment of error is overruled.

World Omni next assigns error to the trial court's denial of its motion for attorney's fees pursuant to N.C.Gen.Stat. § 6-21.5. This statute provides in pertinent part:

In any civil action . . . the court, upon motion of the prevailing party, may award a reasonable attorney's fee to the prevailing party if the court finds that there was a complete absence of a justiciable issue of either law or fact raised by the losing party in any pleading. . . . The court shall make findings of fact and conclusions of law to support its award of attorney's fees under this section.

The judgment below does not refer to World Omni's motion pursuant to N.C.Gen. Stat. § 6-21.5. There is nothing in the record to show that this aspect of the motion was even argued before the trial court. Therefore, this question has not been preserved for our review.

The judgment of the trial court is

Affirmed.

JOHNSON and COZORT, JJ., concur.