The two issues presented by this appeal are whether the trial
court erred in (I) denying defendant's motion for reconsideration
without a hearing; (II) entering default judgment against
defendant.
I .
The dispositive issue of the case is whether the trial court
erred by denying defendant's motion for reconsideration without a
hearing. Defendant argues that its attorneys' repeated failure to
keep defendant informed of upcoming depositions amounted to fraud.
Defendant further argues that fraud by an attorney must not be
imputed to the client. Consequently, defendant argues that it
should have received a full hearing to present evidence that it was
defrauded. We disagree.
Because no case has directly spoken to the argument that
attorney fraud should not be imputed to a client, we will review
the history of our jurisprudence in this area of law. Anexamination of our legal foundations reveals a preference in the
law to impute lawyer conduct to clients, even where the attorney
has not been hired by a client.
See, e.g. Anonymous case, 91 Eng.
Rep. 82 (K.B. 1703); Anonymous case, 91 Eng. Rep. 81 (K.B. 1698);
Alleley v. Colley, 79 Eng. Rep. 603 (K.B. 1624). This history has
been briefly summarized as follows:
[T]he early rule followed both in England and
in this country was that . . . an unauthorized
appearance (by an attorney) conferred
jurisdiction over the party thus represented
and that his only remedy after judgment was an
action or other proceeding against the
attorney, unless the latter were insolvent.
. . . .
If the attorney has acted without authority,
the defendant has his remedy against him; but
the judgment is still regular, and the
appearance entered by the attorney, without
warrant, is a good appearance as to the court.
Howard v. Boyce, 254 N.C. 255, 260, 118 S.E.2d 897, 901-02 (1961).
Our appellate courts did not continue to adhere to this strict
rule of law, and generally a client today will be “entitled to show
such want of authority and to be relieved against the judgment on
that ground, in a direct proceeding instituted for the purpose.”
Id. at 261, 118 S.E.2d at 902. Nonetheless, this history indicates
our fundamental preference for imputing attorney action to clients.
As recently as 1896, “neither the courts nor other parties could
look behind such acts on the part of attorneys to inquire into
their authority or the extent and purport of clients' instructions-
-especially when innocent third parties would be prejudiced
thereby.”
Id. at 262, 118 S.E.2d at 903;
see, e.g. Chadbourn v.
Johnston, 119 N.C. 165, 25 S.E. 705 (1896);
University Trustees v.Lassiter, 83 N.C. 38 (1880). However, these cases suggest that
“judgments entered as a result of unauthorized appearance or
consent of counsel could not be set aside or modified
except on the
ground of mutual mistake or
fraud.”
Howard at 262, 118 S.E.2d at
902-03 (emphasis added). Similarly,
[i]t is very generally understood, uniformly
so far as examined, that an attorney at law,
by virtue of his employment as such in a given
case, has the control and management of a suit
in all matters of procedure, and
in the
absence of fraud and collusion can make such
stipulations and agreements as may commend
themselves to his judgment in so far as they
may affect the remedy he is endeavoring to
pursue.
Bizzell v. Equipment Co., 182 N.C. 104, 107, 108 S.E. 439, 440
(1921) (emphasis added). The law prefers imputation but has
hesitated to directly impute, or not impute, when attorney fraud is
involved.
Analogous to the case at bar is
McNeil v. Caro Community
Hospital, 423 N.W.2d 241 (Mich. Ct. App. 1988). In
McNeil, a
Michigan trial court dismissed the plaintiff's case after the
plaintiff's attorney failed to submit a valid complaint that could
withstand a motion for summary judgment.
After the plaintiff's
attorney failed to inform the plaintiff of a second opportunity to
amend the complaint, the plaintiff's case was dismissed with
prejudice. The plaintiff's attorney claimed that the plaintiff
consented to such dismissal with prejudice. The plaintiff then,
with a new attorney, moved to set aside the order of dismissal,
arguing that the first attorney did not inform the plaintiff of theopportunity to amend or of the dismissal, and that the plaintiff
did not in fact agree to a dismissal with prejudice. The trial
court granted the motion to set aside the dismissal.
On appeal, the Michigan Court of Appeals held that the trial
court erred in reinstating the plaintiff's case. The Court stated
that “[i]n general, relief is to be granted only where the judgment
was obtained by the improper conduct of the party in whose favor it
was rendered.”
Id. at 243. The Court concluded that because the
judgment was rendered due to the improper conduct of the
plaintiff's attorney, and not because of the improper conduct of
the defendant, it would not be appropriate to grant relief to the
plaintiff.
Id. The Court noted that the trial court, in its
decision to grant relief, had improperly relied on
Coates v. Drake,
346 N.W.2d 858 (Mich. Ct. App. 1984). In
Coates, the Michigan
Court granted relief to a party upon evidence that the attorney had
settled the party's case without the party's consent, had forged
the party's signature on settlement checks, had used the money for
attorney's personal use, had signed an order dismissing the case
with prejudice, and had not informed the party of the settlement
for nine months. The
McNeil Court agreed that extraordinary
circumstances existed in
Coates to warrant the relief, but that the
circumstances in
McNeil were not so extraordinary, and that an
action against the attorney for malpractice would be a sufficient
remedy for the plaintiff.
See McNeil. The Court therefore held
that the trial court abused its discretion in granting relief, as
the plaintiff's case was properly dismissed in the first instance. The Michigan cases appear to draw a distinction
between
attorney negligence and attorney fraud, choosing to impute attorney
negligence onto a client, but not attorney fraud. Our appellate
courts have never addressed the issue.
In North Carolina, a judge “may relieve a party” from a
judgment or order for, among other reasons, “excusable neglect,”
fraud “of an adverse party” or “[a]ny other reason justifying
relief.” N.C. Gen. Stat. § 1A-1, Rule 60(b)(1),(3),(6) (1999). In
a landmark 1998 decision, the North Carolina Supreme Court decided
that “[c]learly, an attorney's negligence in handling a case
constitutes inexcusable neglect and should not be grounds for
relief under the 'excusable neglect' provision of Rule 60(b)(1).”
Briley v. Farabow, 348 N.C. 537, 546, 501 S.E.2d 649, 655 (1998).
In deciding
Briley, the Supreme Court noted that “[a]llowing an
attorney's negligence to be a basis for providing relief from
orders would encourage such negligence and present a temptation for
litigants to use the negligence as an excuse to avoid court-imposed
rules and deadlines.”
Id. It would be too tempting for a party to
extricate himself from legal difficulties by claiming insulation
from an attorney's negligence, leading to “undesirable results.”
Id. Instead, the
Briley result helps ensure that a party will be
responsible in protecting his own case rather than simply handing
the full responsibility over to the attorney. Other similar areas
of the law also highlight this preference for keeping a client
responsible for his case.
See, e.g. Smith v. Quinn, 324 N.C. 316,
378 S.E.2d 28 (1989) (sanctions may be entered against either therepresented party or the attorney, even when the attorney is solely
responsible for the delay or violation).
In the case at bar, defendant acknowledges that if the
attorneys' actions and inactions are in the realm of negligence,
Briley is the controlling precedent, and this Court must affirm the
trial court's denial of defendant's motion to reconsider.
Defendant urges this Court to consider that, according to the facts
in the case
sub judice, the attorneys' conduct was so egregious as
to amount to fraud. Defendant thus implores us to create a rule of
law protecting a party from attorney fraud. To that end, defendant
argues that we should reverse the trial court's decision to deny
its motion for reconsideration and remand for a full hearing in
concert with a new rule of law.
[1]Defendant argues that the trial court abused its
discretion in denying the motion to reconsider without a hearing.
The argument is set out in three distinct sub-arguments, any one of
which, according to defendant, gives us the power to reverse the
trial court order. We will take each part in turn.
First, defendant argues that the trial court abused its
discretion in failing to exercise its discretion in relation to
defendant's motion to reconsider. It is error for a trial court to
rule as a matter of law when the ruling requires the trial court's
discretion.
Lemons v. Old Hickory Council, 322 N.C. 271, 367
S.E.2d 655 (1988). Defendant's argument has no force, however,
because there is no indication that the trial court did not
exercise its discretion. Instead, the trial court's orderindicates that it made a “careful consideration of the Motion and
its attachments, including all affidavits,” before denying the
motion. From this we can find no abuse of discretion.
Second, defendant argues that the trial court had no choice
but to believe the evidence before it in regard to the motion for
reconsideration, because no conflicting evidence had been presented
(the trial court denied the motion without finding the need to hold
a hearing). Defendant cites authority, however, that does not
support its argument. “Whether credibility is established as a
matter of law depends on the evidence in each case.”
Bank v.
Burnette, 297 N.C. 524, 537, 256 S.E.2d 388, 396 (1979). Defendant
argues that
Bank stands for the proposition that evidence is
manifest “[w]here there are only latent doubts as to the
credibility of oral testimony and the opposing party has 'failed to
point to specific areas of impeachment and contradictions.'”
Id.
at 537-8, 256 S.E.2d at 376 (quoting
Kidd v. Early, 289 N.C. 343,
370, 222 S.E.2d 392, 410 (1976)). Defendant misapplies
Bank to the
present case. While the trial court did not conduct a hearing to
defendant's satisfaction, it did evaluate evidence available from
both sides and based upon that evaluation, made a reasoned
decision.
[2]We now turn to the third and most important sub-argument
presented by defendant. Defendant contends that if the trial court
indeed assigned credibility to the affidavits submitted in
conjunction with the motion for reconsideration, the trial court
abused its discretion in denying the motion, as the affidavitsjustify granting relief under Rule 60(b). Given the present state
of the law, we disagree.
Defendant's argument that it is entitled to relief from the
trial court's order is not assisted by Rule 60(b)(1) because, as
previously noted, attorney negligence is not excusable neglect
warranting relief.
See Briley. Thus, assuming defendant's
affidavits show attorney negligence, this negligence is imputed to
defendant. If, as defendant submits, the affidavits show fraud,
then Rule 60(b)(1) is inapplicable, because the rule does not cover
fraud. Rule 60(b)(3), which provides for relief from a judgment
upon a showing of fraud also affords defendant no relief because
the rule governs “[f]raud . . . , misrepresentation, or other
misconduct of an adverse party,” not fraud of a party's attorney.
N.C. Gen. Stat. § 1A-1, Rule 60(b)(3). The alleged misconduct at
issue is the fraud of defendant's own counsel. Thus, Rule 60(b)(3)
is likewise inapplicable.
Finally, Rule 60(b)(6), which provides for relief from an
order based on “[a]ny other reason justifying relief,” does not
support defendant's position. N.C. Gen. State. § 1A-1, Rule
60(b)(6). Defendant argues that the conduct of its attorneys
amounted to either fraud on them as clients or fraud upon the
court, and therefore defendant is entitled to relief from the trial
court's order. We are not persuaded.
North Carolina's Rule 60(b) is identical to Federal Rule of
Civil Procedure 60(b). Under Fed. R. Civ. P. 60(b)(6), courts have
“previously found that fraud on the court embodies a concept of a
deliberate, egregious scheme of directly subverting the judicialprocess which cannot be exposed by the normal adversarial process,
such as bribery of a judge or juror or improper influence exerted
by an attorney on the court.”
Matter of Tudor Associates, Ltd.,
II, 1990 WL 546146 (E.D.N.C. 1990),
affirmed, 20 F.3d 115 (4
th Cir.
1994). Defendant's attorneys did not bribe or improperly influence
the court, nor did their conduct constitute a fraud upon the court
or upon defendant. At most the affidavits show that defendant's
attorneys did not fully apprise defendant of court orders to appear
for depositions. Without so holding today, there may be situations
so egregious that would entitle a party to be relieved of fraud on
it by its own attorney, but this is not one of those situations.
Therefore, we are unable to say that the trial court abused its
discretion in its decision to deny defendant's motion for
reconsideration without a hearing.
II.
[3]By its second argument, defendant argues that the trial
court abused its discretion in entering a 20 March 2000 default
judgment and that the judgment was too severe of a sanction.
Defendant contends there was insufficient evidence to support the
court's conclusion that defendant “willfully and without just cause
failed to abide an Order of the Court.” Defendant argues that
there was no evidence before the court that defendant's failure to
abide by the court order was willful, and so the order should be
reversed. We are not persuaded.
For the order to be upheld on appeal, it must contain
conclusions of law that are supported by findings of fact.
Brooksv. Giesey, 334 N.C. 303, 432 S.E.2d 339 (1993). The default
judgment in the case at bar was entered pursuant to Rule 37(b)(2)
of our Rules of Civil Procedure. N.C. Gen. Stat. § 1A-1, Rule
37(b)(2)(1999). Rule 37 is reviewed by this Court under an abuse
of discretion standard.
Bumgarner v. Reneau, 332 N.C. 624, 422
S.E.2d 686 (1992). As such, we have the authority to reverse the
trial court's order only if it is “manifestly unsupported by
reason.”
Crutchfield v. Crutchfield, 132 N.C. App. 193, 195, 511
S.E.2d 31, 34 (1999).
Rule 37(b)(2) allows for “a judgment by default against the
disobedient party” when “a party or an officer, director or
managing agent of a party . . . fails to obey an order to provide
or permit discovery.” Defendant relies on
Foy v. Hunter, 106 N.C.
App. 614, 418 S.E.2d 299 (1992) to argue that the trial court's
conclusion that defendant willfully failed to obey the court is
fatally flawed in that no evidence supported the conclusion of
willfulness. Despite defendant's contentions to the contrary, we
find that
Foy is distinguishable from the present case.
Foy
involved Rule 41(b), providing that “a trial court may enter
sanctions for failure to prosecute
only where the plaintiff or his
attorney 'manifests an intention to thwart the progress of the
action to its conclusion' or 'fails to progress the action towards
its conclusion' by engaging in some delaying tactic.”
Id. at 618,
418 S.E.2d at 302 (quoting
Green v. Eure, 18 N.C. App. 671, 672,
197 S.E.2d 599, 601 (1973)). In other words,
Foy implicated Rule41(b) under which it is necessary for specific evidence to be
introduced as to the intention of the party in order for sanctions
to lawfully be entered.
In contrast, the plain language of Rule 37 does not require a
showing of willfullness. The order of default judgment may be
entered against a defendant pursuant to Rule 37(b)(2) for failure
to obey a court order whether the failure was willful or not. Even
so, it was reasonable for the trial court to infer the intent of
defendant from the course of conduct.
See, e.g. Link v. Wabash
R.R. Co., 370 U.S. 626, 633, 8 L.E.2d 734, 740 (1962) (holding that
a party's deliberate conduct can be reasonably inferred from facts
including a “drawn-out history of the litigation”). Likewise, it
would be reasonable for the court to have inferred deliberate or
willful conduct by the defendant in this case based on the drawn-
out history of years of discovery in this case. It would also be
reasonable for the court to have inferred willful conduct by the
defendant based on the repeated failure to appear at deposition
hearings.
See e.g. Green at 672, 197 S.E.2d at 600-01 (stating
that whether a party or a party's attorney has an intent to delay
or thwart the progress of an action may be inferred from the
facts).
We do not find that the order is unsupported by reason.
Interestingly, it seems that neither does defendant's counsel.
During oral argument before this Court, defendant's counsel, in
asserting that the denial of the motion to reconsider was the more
important issue of the case, admitted that it was “understandable”that the trial court would rule as it did at the default hearing
based on the evidence. We also believe that it was
“understandable” that the trial court would enter default judgment
against defendant. Because the ruling was supported by reason, we
cannot find that the trial court abused its discretion. We
therefore uphold the default judgment order of 20 March 2000.
Likewise, we also reject defendant's argument that the trial
court abused its discretion by entering too severe of a sanction
against defendant. Defendant was found to disobey not one, but two
court orders. The trial court determined that a “severe sanction”
was necessary for defendant's repeated willful failure. Rule 37
gives the trial court the authority to enter default as to the
entire cause of action for one failure to comply with a court
order. N.C. Gen. Stat. § 1A-1, Rule 37(b)(2). Even so, the trial
court decided to enter default judgment against defendant only as
to the first cause of action, not as to the second, third, fourth,
or fifth causes of action. We conclude that it was reasonable for
the trial court to sanction defendant with an entry of default
judgment as to the first cause of action, given defendant's
repeated failures to comply with the court's orders and the
authority granted to the court under Rule 37. Accordingly, we find
no abuse of discretion.
Based on the foregoing analysis, we conclude that the trial
court did not abuse its discretion in denying defendant's motion
for reconsideration without a hearing or in ordering the sanction
of default as to plaintiffs' first cause of action.
Affirmed. Judges TYSON and CAMPBELL concur.
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