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1. Attorneys_exceeding authority in settling case_Rule 60 motion for relief_not an
extraordinary circumstance
The trial court did not abuse its discretion by denying defendants' motion for relief under
N.C.G.S. § 1A-1, Rule 60(b)(6) for extraordinary circumstances where defendants' attorney
exceeded his authority in reaching a settlement. The attorney acted with apparent authority as
defendants' agent.
2. Attorneys_exceeding authority in reaching settlement_Rule 60 motion for relief_not
excusable neglect
The trial court did not abuse its discretion in denying defendants' motion for relief under
N.C.G.S. 1A-1, Rule 60(b)(1) for excusable neglect after their attorney exceeded his authority in
negotiating a settlement.
3. Agents_attorney exceeding authority_joint and several liability by defendants
The trial court did not err by entering judgments against defendants jointly and severally
where their attorney, acting as their agent, exceeded his actual authority in negotiating a
settlement which called for joint and several liability.
4. Compromise and Settlement_agreement entered over telephone_confession of
judgment not executed
Legal agreements are not required to be in writing, and an unauthorized settlement
agreement concluded over the telephone by defendants' attorney and plaintiff was valid.
Horack, Talley, Pharr & Lowndes, P.A., by John W. Bowers, and
Wuersch & Gering LLP, by Gregory F. Hauser, for defendants-
appellants.
Sigmon, Clark, Mackie, Hutton, Hanvey, & Ferrell, P.A., by
Warren A. Hutton and Stephen L. Palmer, for plaintiff-
appellee.
ELMORE, Judge.
Judge Richard D. Boner of the Catawba County Superior Court
ordered an enforcement of judgment against Algemene AFW N.V.;
Algemene USA, LLC; Bruvatex N.V.; Cositex N.V.; Bruvatex USA, Inc.;
Zenith Exports, Ltd.; Zensilk, Inc.; Decoviz-Produtos de Decoracao
Lda; Teviz de Vizela S.A.; Penelope; Penelope USA, LLC; High Five
Textiles, LLC; and Luc Callens (collectively, defendants) on 21
February 2006. Defendants appeal from this order, as well as from
a pre-judgment order of attachment and from a post-judgment order
denying relief from the judgment under Rule 60(b).
Purcell International Textile Group (plaintiff), a North
Carolina corporation, purchased an Illinois corporation that had
entered into sales contracts with several of the defendants. The
parties terminated the contracts on or about 27 November 2003, and
on 20 April 2004, plaintiff filed suit against defendants with
claims based in contract, fraud, and unfair and deceptive trade
practices. W. Rickert Hinnant (Hinnant) represented defendants in
the litigation.
Hinnant began settlement negotiations with plaintiff as the 9
January 2006 trial date approached. Hinnant reached a settlement
agreement with plaintiff via telephone, and the parties announced
the agreement in open court on the trial date. Pursuant to the
agreement, defendants would pay plaintiff a total of $850,000.00 in
three payments over a six-month time period. The first payment was
due 31 January 2006. The total payment of $850,000.00 exceeded theauthority defendants had vested in Hinnant; however, Hinnant
represented to plaintiff that he had obtained defendants' approval.
Plaintiff reduced the settlement agreement to writing, and Hinnant
returned the writing with what purported to be the signatures of
representatives from all but four of the defendant companies. In
fact, Hinnant never informed any of the defendants of the
agreement, never sent defendants the written agreement, never
produced a signed confession of judgment, and forged all of the
signatures forwarded to plaintiff.
Meanwhile, Hinnant tried to convince defendants to agree to
the terms of the settlement agreement, which he had negotiated
without defendants' knowledge or consent. Defendants agreed to the
monetary portion of the agreement but objected to several other
material terms. As these discussions continued, defendants failed
to make the 31 January 2006 payment due to plaintiff pursuant to
the settlement agreement Hinnant had negotiated.
On 1 February 2006, plaintiff informed Hinnant that the first
payment had not been made, and on 7 February 2006, plaintiff served
a motion to enforce the settlement by entry of a judgment against
all defendants jointly and severally. On 17 February 2006, the
court granted plaintiff's motion for a pre-judgment attachment of
up to the full amount of the judgment against any of the
defendants. On 21 February 2006, the court entered judgment
against defendants for $850,000.00 plus fifteen percent to cover
attorneys' fees (as provided for in the settlement agreement in
case of breach), for a total of $977,500.00. On 24 February and 27February 2006, the court granted plaintiff's requests for a
temporary restraining order and preliminary injunction to freeze
defendants' funds in a trust account accessible by Hinnant.
Defendants had no knowledge of the settlement agreement that
Hinnant negotiated until after the court entered judgment against
them. They claim that they never saw the written agreement until
March, 2006. At that time, defendants retained new counsel, and on
9 March 2006 moved for relief from the judgment and the pre-
judgment attachment pursuant to Rule 60(b) of our Rules of Civil
Procedure. On 15 March 2006, the trial court denied the motion,
and this appeal followed.
[1] Defendants first argue that the court abused its
discretion in denying defendants' Rule 60(b)(6) motion for relief
from judgment. Defendants contend that Hinnant committed fraud on
the court and that he exceeded his authority in the settlement
agreement. They further contend that these two acts together
resulted in circumstances so extraordinary that justice demands
relief. We disagree.
To demonstrate an abuse of discretion, an appellant must show
that the trial court's ruling was “manifestly unsupported by reason
or one so arbitrary that it could not have been the result of a
reasoned decision.” Briley v. Farabow, 348 N.C. 537, 547, 501
S.E.2d 649, 656 (1998). Rule 60(b)(6) allows a court to relieve a
party from a judgment for “any . . . reason justifying relief.”
N.C. Gen. Stat. § 1A-1, Rule 60(b)(6) (2005). This Court has held
that setting aside judgments pursuant to Rule 60(b)(6) is onlyappropriate if (1) extraordinary circumstances exist, (2) there is
a showing that justice demands it, and (3) the movant shows a
meritorious defense. Royal v. Hartle, 145 N.C. App. 181, 184-85,
551 S.E.2d 168, 171 (2001). Relief from attorney fraud on the
court “is to be granted only where the judgment was obtained by the
improper conduct of the party in whose favor it was rendered.”
Henderson v. Wachovia Bank of N.C. N.A., 145 N.C. App. 621, 625,
551 S.E.2d 464, 468 (2001).
“The attorney-client relationship is based upon principles of
agency.” Harris v. Ray Johnson Constr. Co., 139 N.C. App. 827,
830, 534 S.E.2d 653, 655 (2000) (citations omitted). North
Carolina presumes an attorney has the authority to act for a client
he represents, and that presumption must be rebutted by proving to
the satisfaction of the court that the attorney's actions were
unauthorized. Id. at 829, 534 S.E.2d at 654-55.
An act is within the power of an agent if the agent has
the legal ability to bind the principal to a third person
thereby, even though the act constitutes a violation of
the agent's duty to the principal . . . . When a[n] . .
. agent acts within the scope of his apparent authority,
and the third party has no notice of the limitation on
such authority, the [principal] will be bound by the acts
of the agent, and . . . where one of two persons must
suffer loss by the fraud or misconduct of a third person,
he who first reposes the confidence or by his negligent
conduct made it possible for the loss to occur, must bear
the loss.
Zimmerman v. Hogg & Allen Professional Assoc., 286 N.C. 24, 30, 209
S.E.2d 795, 799 (1974) (citations, quotations, and emphasis
omitted).
Henderson allows a court to grant relief on the basis of
attorney fraud only when the adverse party's attorney commits thefraud. Henderson, 145 N.C. App. at 625, 551 S.E.2d at 468.
Hinnant worked as defendants' attorney, and the court did not rely
on any representations he made to render a judgment in favor of his
clients. Therefore, defendants are not entitled to relief from any
fraud Hinnant may have committed. Id. at 625, 551 S.E.2d at 468.
Hinnant's actions were binding on defendants, who hired him to
act as their agent in handling the case and negotiating a
settlement. Harris, 139 N.C. App. at 830, 534 S.E.2d at 655.
Defendants granted Hinnant the authority to settle the case and
never stripped him of that authority.
Id. at 829, 534 S.E.2d at
654-55.
Based on his actual authority, Hinnant engaged in
negotiations offering settlement figures of $400,000.00 and
$500,000.00, and plaintiff declined both offers. Each time
plaintiff declined a settlement offer, Hinnant established a
pattern of following up with a new offer featuring a larger amount
of money. Thus, when Hinnant offered a settlement of $850,000.00,
which exceeded his actual authority, plaintiff could have
reasonably assumed that offer was within Hinnant's authority and
had no reason to know that Hinnant had exceeded his limits.
Zimmerman, 286 N.C. at 30, 209 S.E.2d at 799. Thus, the agreement
negotiated by Hinnant bound defendants despite the fact that
Hinnant exceeded his authority and violated his duty to defendants.
Id. at 30, 209 S.E.2d at 799.
Because Hinnant acted with apparent authority as defendants'
agent, defendants fail to meet the criteria for setting aside thejudgment. N.C. Gen. Stat. § 1A-1, Rule 60(b)(1) (2005): Royal,
145 N.C. App. at 184-85, 551 S.E.2d at 171. The circumstances were
not extraordinary, but dealt with basic North Carolina agency law.
Id. at 184-85, 551 S.E.2d at 171. Furthermore, defendants failed
to offer a meritorious defense as required by Royal, simply
stating, “[W]e need not show a meritorious defense.” Id. at 184-
85, 551 S.E.2d at 171. Accordingly, the court acted within its
discretion, and defendants' assignment of error is without merit.
[2] Defendants next argue that the trial court abused its
discretion in denying the Rule 60(b)(1) motion for relief from
judgment for excusable neglect. We disagree.
Rule 60(b)(1) provides that a party may be granted relief from
judgment for “[m]istake, inadvertence, surprise, or excusable
neglect.” N.C. Gen. Stat. § 1A-1, Rule 60(b)(1) (2005). A trial
court's ruling on a Rule 60(b) motion stands unless the court
abused its discretion. Thomas M. McInnis & Associates, Inc. v.
Hall, 318 N.C. 421, 425, 349 S.E.2d 552, 554 (1986). However, a
court's finding of excusable neglect, and what constitutes
excusable neglect, is a question of law reviewable based on the
court's findings of fact. Id. at 425, 349 S.E.2d at 554.
“Clearly, 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) . . . . Holding the
client responsible for the lawyer's deeds ensures that both clients
and lawyers take care to comply.” Briley, 348 N.C. at 546, 501
S.E.2d at 655 (citations and quotations omitted). Defendants admit that Hinnant was negligent in handling the
case. They attempt to rely on Dishman v. Dishman, 37 N.C. App.
543, 246 S.E.2d 819 (1978), and Wood v. Wood, 297 N.C. 1, 252
S.E.2d 799 (1979), for the proposition that attorney negligence may
constitute grounds for excusable neglect. However, Dishman and
Wood were decided well before Briley. This Court subsequently has
recognized Briley as the controlling authority on the issue of
excusable neglect under Rule 60(b)(1). Henderson, 145 N.C. App. at
626, 551 S.E.2d at 468. Accordingly, we hold that the trial court
did not abuse its discretion.
[3] Finally, defendants argue that the trial court erred in
entering judgments against defendants jointly and severally.
Again, we disagree.
A trial court's conclusions of law are reviewable de novo and
are binding on appeal if supported by findings of fact based on
competent evidence. Resort Realty of Outer Banks, Inc. v. Brandt,
163 N.C. App. 114, 116, 593 S.E.2d 404, 407-08 (2004). “A valid
contract is formed when parties assent to the same thing in the
same sense, and their minds meet as to all terms. Moreover, there
is no law requiring a compromise contract to be put in writing.”
Smith v. Young Moving & Storage, Inc., 167 N.C. App. 487, 493, 606
S.E.2d 173, 177 (2004) (citations and quotations omitted).
The trial court's conclusion that defendants entered into a
settlement agreement with joint and several liability was supported
by competent evidence. As we have noted, Hinnant had the legal
authority as defendants' agent to bind defendants through hisactions. The oral settlement agreement Hinnant and plaintiff
reached called for joint and several liability of defendants.
Therefore, Hinnant legally bound defendants to a settlement
agreement with joint and several liability.
[4] Defendants contend that the settlement agreement was
invalid because it was not signed by all the parties after it was
reduced to writing. However, Hinnant finalized the settlement
negotiation via telephone with plaintiff, and Smith does not
require legal agreements to be reduced to writing. Id. at 493, 606
S.E.2d at 177.
Defendants also contend that because they never signed the
confession of judgment, there was no meeting of the minds and no
legal settlement agreement. However, the trial court stated that
executing the confession of judgment was a term of the settlement
agreement; defendants' failure to execute the confession did not
void the agreement, but instead constituted a further breach.
The trial court did not abuse its discretion in denying
defendants relief from the judgment entered against them, nor did
it err in enforcing the settlement agreement against defendants
jointly and severally. Hinnant, as defendants' agent, entered into
a valid settlement agreement on their behalf. As in Henderson,
defendants' proper remedy is to seek relief through a malpractice
claim against Hinnant. Henderson, 145 N.C. App. at 625-26, 551
S.E.2d at 468.
Affirmed.
Judges MCGEE and STEPHENS concur.
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