Pleadings--Rule 11 sanctions--sufficiency of allegations
Even though the trial court found plaintiff's claim for child support arrearages based on a
consent order was barred by the statute of limitations, the trial court did not err in denying
defendant's motion for monetary sanctions under N.C.G.S. § 1A-1, Rule 11 against plaintiff and
her trial attorneys because: (1) the trial court's conclusions of law that plaintiff's pleadings were
well-grounded in fact, were warranted by the existing law or a good faith argument, and were not
interposed for an improper purpose, are supported by its findings of fact; and (2) there was a
legitimate question of whether the consent judgment could be considered a contract or a
judgment.
Guthrie, Davis, Henderson & Staton, P.L.L.C., by Dennis L.
Guthrie, for plaintiff-appellee.
James, McElroy & Diehl, P.A., by G. Russell Kornegay, III and
Paul P. Browne, for defendant-appellant.
HUNTER, Judge.
Defendant-appellant, John W. Norris, appeals the trial court's
ruling denying his motion for monetary sanctions against plaintiff-
appellee, Margaret S. Grover, and her trial attorneys of the firm
Guthrie, Davis, Henderson & Staton, P.L.L.C. Finding defendant's
argument unpersuasive, we affirm the trial court's ruling.
The record before this Court reveals that the parties divorced
in 1971 with plaintiff receiving custody of the couple's only
child. On 29 July 1977 the trial court ordered defendant to pay
child support in the amount of $85.00 every two weeks, and to
establish a savings account for the parties' daughter by depositinga total of $4,000.00 at the rate of $1,000.00 per year for four
years, which deposits would satisfy defendant's child support
arrearages.
In 1982, plaintiff filed a motion to show cause, requesting
the trial court hold defendant in contempt for his willful
violation of the court's earlier child support order. However,
prior to the hearing, the parties reached an agreement. It is this
agreement that became the basis for the trial court's later consent
order on 6 January 1983. In the order, the court found, in
relevant part:
8. That the [prior] Order of this Court
remains in force . . . .
9. That, by stipulation of the parties,
the Defendant has failed, without lawful
excuse, to make the support payments ordered
by this Court . . . the arrearage owed to the
Plaintiff is, at this time, no less than
$6,100.00; and by stipulation of the parties,
said arrearage, being an indebtedness of the
Defendant owed to the Plaintiff, shall be
reduced to judgment.
10. That, by stipulation of the parties,
the Defendant has failed, without lawful
excuse, to maintain the minor child's savings
account in accordance with the [prior] Order
. . . deposit[ing] and withdraw[ing] money at
will . . . .
. . .
12. That, by stipulation of the parties,
the Defendant has been, and continues to be,
gainfully employed and able to make the child
support payments and savings account depositsordered by this Court . . . .
. . .
15. That, by stipulation of the parties,
the Defendant and his second wife, Paula []
Norris, presently own certain improved real
estate situated at 2021 Arapaho Drive,Mecklenburg County, North Carolina, as Tenants
in Common . . . .
The trial court then made its conclusions of law and ordered, in
pertinent part:
1. That the $6,100.00 arrearage . . .
be reduced to judgment . . . with interest to
accrue thereon at the lawful rate of eight
percent (8%) per annum from and after November
8, 1982, until fully satisfied.
2. That satisfaction of the judgment,
entered with respect to the $6,100.00
arrearage in the Defendant's child support
obligations, shall be had by the Plaintiff
from funds to be received by the Defendant at
such time as [his] interest, as a Tenant in
Common, of the [Arapaho] real estate . . .
owned jointly by [him] and his second wife,
Paula [] Norris, is disposed of either
voluntarily or involuntarily.
In April 1982, defendant and his second wife Paula Norris
(“Ms. Holt”) divorced, still jointly owning the Arapaho property.
On 17 May 1993, more than ten years after the consent order was
entered, defendant transferred his interest in the Arapaho property
to Ms. Holt, who then disposed of the property. Although defendant
received his share of the proceeds from the property, he never paid
his child support arrearages owed to plaintiff.
On 30 August 1995, plaintiff's attorney learned that defendant
may have transferred the property without satisfying his child
support arrearages. After further investigation, on 25 March 1996
plaintiff's attorney filed a complaint based on the 1983 consent
order and judgment, seeking damages for breach of contract and
fraud, and a motion to show cause asking that defendant be held in
civil contempt for failure to pay the $6,100.00 arrearages as setforth in the 1983 judgment. Plaintiff further filed a motion for
attachment for ancillary remedies in the underlying actions. The
judge allowed plaintiff to attach defendant's automobile.
Defendant responded by filing his answer, a 12(b)(6) motion to
dismiss based on the theory that the statute of limitations had run
on the 1983 judgment. Defendant also filed a motion to dissolve
attachment, motion to transfer to district court, motion for
sanctions and counterclaims. Without objection by plaintiff, the
case was transferred to district court (the proper venue for civil
matters seeking damages of less than $10,000.00). At a hearing on
13 June 1996, the court granted defendant's motion to dismiss with
prejudice. The court also granted defendant's motion to dissolve
attachment since the attachment granted was based on the original
claim which was now barred. However, the court denied defendant's
motion for sanctions under Rule 11. Defendant appeals.
Defendant has brought forward only one assignment of error,
that the trial court erred in denying his motion for Rule 11
sanctions against plaintiff. Defendant relies heavily on the idea
that because the trial court found plaintiff's claim to be barred
by the statute of limitations, plaintiff's attorneys should have
known that at the time the suit was filed. Thus, the suit was
filed frivolously and to harass defendant, in violation of N.C.
Gen. Stat. § 1A-1, Rule 11. We disagree and thus overrule
defendant's argument.
The pertinent portion of Rule 11(a) states:
Every pleading, motion, . . . shall be signed
by at least one attorney of record . . . . The signature of an attorney . . . constitutes
a certificate by him that he has read the
pleading, motion, or other paper; that to the
best of his knowledge, information, and belief
formed after reasonable inquiry it is well
grounded in fact and is warranted by existing
law or a good faith argument for the
extension, modification, or reversal of
existing law, and that it is not interposed
for any improper purpose, such as to harass or
to cause unnecessary delay or needless
increase in the cost of litigation. . . . If
a pleading, motion, or other paper is signed
in violation of this rule, the court, upon
motion or upon its own initiative, shall
impose upon the person who signed it, a
represented party, or both, an appropriate
sanction . . . .
N.C. Gen. Stat. § 1A-1, Rule 11(a) (1990). Made plain, the three
things the signer is certifying to be true are that the pleadings
are: (1) well grounded in fact, (2) warranted by existing law, “or
a good faith argument for the extension, modification, or reversal
of existing law,” and (3) not interposed for any improper purpose.
“A breach of the certification as to any one of these three prongs
is a violation of the Rule.” Bryson v. Sullivan, 330 N.C. 644,
655, 412 S.E.2d 327, 332 (1992).
North Carolina law is clear in its holding that the standard
for this Court's reviewing the trial court's decision to impose or
not to impose sanctions under Rule 11 is reviewable de novo.
De novo review by an appellate court involves
a determination of: (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 these
elements are met, the trial court's decision
to impose or deny sanctions is [to be] upheld.The totality of the circumstances determine
whether Rule 11 sanctions are merited. . . .
A violation of any one of these three
[determinatives] is sufficient to support
sanctions under Rule 11.
Williams v. Hinton, 127 N.C. App. 421, 423, 490 S.E.2d 239, 240-41
(1997) (emphasis added) (citations omitted).
In the case at bar, the trial court found that after
plaintiff's attorneys learned that defendant had transferred his
interest in the Arapaho property:
11. [A] careful review was undertaken
concerning the facts of the case. Legal
theories of recovery were derived based upon
application of the facts to the law.
Pleadings and other papers were reviewed by
the Plaintiff in order to insure factual
accuracy and appropriate Affidavits were
obtained. Thereafter, pleadings and other
papers were filed on behalf of Margaret
Grover.
12. The sole reason this action was
instituted on behalf of the Plaintiff Margaret
Grover, was to obtain satisfaction of the
child support arrearage of $6,100.00 plus
interest. This action was not instituted for
any improper purpose. It was not instituted
by [plaintiff's] attorneys . . . to harass,
persecute, otherwise vex John Norris or to
cause unnecessary cost or delay.
13. Before pleadings and other papers
were filed on behalf of Margaret Grover, [her
attorney] was satisfied that by signing such
pleadings, motions and other papers that he
could in good faith certify that (1) he had
read the pleading, motion, or other paper (2)
that to the best of his knowledge,
information, and belief, formed after
reasonable inquiry, they were well grounded in
fact, and warranted by existing law or a good
faith argument for the extension,
modification, or reversal of existing law, and
that none of the documents filed was
interposed for any improper purpose, such asto harass or to cause unnecessary delay or
needless increase in the cost of litigation.
The same has been true throughout each of the
various stages of this litigation.
The trial court further found that once defendant filed his
response to plaintiff's motion to show cause and motion for
sanctions, plaintiff's attorneys conducted further legal research
and concluded that “a claim for legal redress could [still]
properly be presented on behalf of Ms. Grover.” Thus, plaintiff's
attorneys proceeded with plaintiff's case.
The trial court further found, in pertinent part, that:
27. At the Court of Appeals level
[plaintiff's attorneys] argued in good faith,
and for a proper purpose. Those arguments
included the well-founded argument that the
Consent Judgment and Order was both a valid
contract and an order of the court and that
[Norris'] breach violated a court order.
28. The arguments presented by the
former attorneys for Plaintiff Margaret S.
Grover, in this case in all stages, although
eventually unsuccessful, were instituted in
good faith, after proper research into the
facts of the case and applicable law.
29. Cases including dissenting opinions,
rules, scholarly literature cited in
Plaintiff's Brief in Support of the
Appropriateness of Plaintiff's Pleadings and
In Opposition to Defendant's Allegations of
Rule 11 Misconduct provide support for this
position.
30. [Plaintiff's attorneys] took
Plaintiff's appeal in this case on a pro bono
basis because there was ample reason to
believe the Plaintiff could recover that to
which she was entitled under the laws of the
State of North Carolina.
31. The Plaintiff and her former
attorneys . . . undertook reasonable inquiry
into the facts of this case and reasonablyconcluded that the pleadings, motions,
notices, appellate filings and all other
documents filed on behalf of the Plaintiff
. . . were well grounded in fact.
32. At the time of filing each of the
Plaintiff's pleadings, each such pleading was
facially plausible.
33. At the time of filing each of the
Plaintiff's pleadings, [and as the case
progressed,] Plaintiff and her former
attorneys had made reasonable inquiry
concerning the legal sufficiency of the
pleadings and reasonably concluded that each
pleading was warranted by existing law or a
good faith argument for the extension,
modification, or reversal of existing law.
. . .
35. The purpose of the Plaintiff's
pleadings was not to harass the Defendant,
persecute the Defendant, vex the Defendant,
cause unnecessary costs to the Defendant or to
cause delay.
36. The Defendant has not shown that the
Plaintiff's pleadings were filed for an
improper purpose.
37. The Plaintiff's purpose in bringing
and pursuing this action was not improper.
38. The Plaintiff's former attorneys'
purpose in bringing and pursuing this action
was proper.
Following its very detailed findings of fact, the trial court
then concluded as a matter of law that: (1) plaintiff's pleadings
were well-grounded in fact, thus meeting the factual sufficiency
prong of Rule 11; (2) plaintiff's pleadings were warranted by the
existing law or a good faith argument for the extension,
modification, or reversal of existing law, thus meeting the legal
sufficiency prong of Rule 11; (3) plaintiff's pleadings were notinterposed for an improper purpose, meeting the improper purpose
prong of Rule 11; and (4) neither plaintiff nor her attorneys
violated Rule 11, thus defendant's motion for Rule 11 sanctions
should be denied. We agree.
Applying the de novo standard in reviewing the trial court's
denial of defendant's motion for sanctions, we approve the trial
court's findings in their entirety, finding not only that its
conclusions of law are supported by its findings of fact, but also
finding that the record is replete with evidence to support those
findings. See Williams v. Hinton. Therefore, we hold that the
trial court's final determination not to impose sanctions on
plaintiff is also well supported by its conclusions of law. See
id.
Further, defendant's contention that plaintiff's complaint was
legally insufficient because it was “long since” barred by the
statute of limitations is unpersuasive.
Plaintiff argued before the trial court that the consent order
was a contract which defendant breached. As such, the statute of
limitations would not have begun to run until defendant's breach.
Thus, plaintiff argued that the statute of limitations did not
begin to run until 17 May 1993, when defendant transferred his
interest in the Arapaho property. Nevertheless, the trial court
found the consent order to be a judgment, adopted by the court.
In Walters v. Walters, 307 N.C. 381, 298 S.E.2d 338 (1983),
our Supreme Court reviewed the law of consent decrees and held that
whenever the parties bring their separation
agreements before the court for the court'sapproval, it will no longer be treated as a
contract between the parties. All separation
agreements approved by the court as judgments
of the court will be treated similarly, to-
wit, as court ordered judgments. These court
ordered separation agreements, as consent
judgments, are modifiable, and enforceable by
the contempt powers of the court, in the same
manner as any other judgment in a domestic
relations case. . . . This new rule applies
only to this case and all such judgments
entered after this decision.
Walters, 307 N.C. at 386, 298 S.E.2d at 342 (emphasis added)
(citations omitted).
Defendant argues that because the order was adopted by the
court, the plaintiff had no reason to believe it was not a judgment
instead of a contract. However, the case law cited by defendant,
particularly Henderson v. Henderson, 307 N.C. 401, 298 S.E.2d 345
(1983), is no more helpful to defendant than Walters, supra. Both
holdings apply prospectively, not retrospectively, and the consent
judgment in the case at bar was entered five days before the
Walters decision was filed (the Walters decision being filed before
Henderson). Thus, the prior law controlled, that being that there
were two types of consent judgments: one, “which is nothing more
than a contract . . . [and which] require[s] the parties to seek
enforcement and modification through traditional contract
channels;” and one that “'the Court adopts'” thus making it “no
longer enforc[able] or modifi[able] solely under contract law
principles.” Walters, 307 N.C. at 384-85, 298 S.E.3d at 341
(quoting Bunn v. Bunn, 262 N.C. 67, 69, 136 S.E.2d 240, 242
(1964)). Therefore, there was a legitimate question of whether the
consent judgment could be considered a contract or a judgment. We agree with plaintiff's attorneys that Rule 11 was
instituted to prevent abuse of the legal system, our General
Assembly never intending to constrain or discourage counsel from
the appropriate, well-reasoned pursuit of a just result for their
client. Case law clearly supports the fact that just because a
plaintiff is eventually unsuccessful in her claim, does not mean
the claim was inappropriate or unreasonable. An otherwise reading
of the law would compromise every attorney's ability to pursue a
claim where the status of the law is subject to dispute and force
litigants to refrain from arguing all but the most clear-cut of
issues. We do not believe this is what our Legislature intended.
Having found no violation of Rule 11 by plaintiff or her
attorneys, the trial court's order denying sanctions against them
is,
Affirmed.
Judges JOHN and McGEE concur.
*** Converted from WordPerfect ***