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Connor v. Royal Globe Insurance Co.

Filed: February 16, 1982.

DONALD C. CONNOR, SR. AND BETTY CONNOR
v.
ROYAL GLOBE INSURANCE COMPANY



Appeal by defendant from Howell, Judge. Judgment entered 4 December 1980 in Superior Court, Cleveland County. Heard in the Court of Appeals 19 October 1981.

Becton, Judge. Chief Judge Morris and Judge Arnold concur.

Becton

I

The principal issue on this appeal concerns the effect of the plaintiffs' failure to file a reply to the defendant's counterclaim. G.S. 1A-1, Rule 8(d) provides, "Averments in a pleading to which a responsive pleading is required, other than those as to the amount of damage, are admitted when not denied in the responsive

pleading. Averments in a pleading to which no responsive pleading is required or permitted shall be taken as denied or avoided." G.S. 1A-1, Rule 7(a) provides that "[t]here shall be . . . a reply to a counterclaim denominated as such. . . ."

According to defendant, one paragraph of the counterclaim -- the one that alleges that the plaintiffs' violated the conditions of the policy by burning the building, by increasing the hazard, and by willfully misrepresenting material facts -- includes allegations which, if taken as admitted, would defeat the plaintiffs' right to recover on the policy.

The trial court refused to take this paragraph as admitted, and we agree with the trial court. Before setting forth the bases for our decision, we issue this caveat: Litigants should comply strictly with our Rules. Because, and only because, we find that defendant was entitled to recover the $19,573.66 it paid the mortgagee without reference to the counterclaim do we uphold the trial court.

Significantly, our Supreme Court in Exum v. Boyles, 272 N.C. 567, 579, 158 S.E.2d 845, 855 (1968) said:

[i]t would be exceedingly technical to hold that, though the complaint . . . alleged facts giving rise to the doctrine of the last clear chance, the plaintiff may not receive the benefit of the doctrine . . . merely because . . . facts were alleged in the complaint rather than in a reply.

Indeed, because of our "general policy of proceeding to the merits of an action," Johnson v. Johnson, 14 N.C. App. 40, 43, 187 S.E.2d 420, 422 (1972), when to do so would not violate the letter or spirit of our Rules, this Court has refused to adhere strictly to Rule 8(d) in the context of a plaintiff's failure to file a reply to a counterclaim in at least two cases.

In Eubanks v. Insurance Co., 44 N.C. App. 224, 261 S.E.2d 28 (1979), disc. review denied 299 N.C. 735, 267 S.E.2d 661 (1980), we concluded that Rule 8(d) did not apply since the defendant had not filed a true counterclaim. "In its answer defendant captioned its allegations of false representations a 'counterclaim.' . . . However, we conclude that, in effect, defendant did nothing more than raise an affirmative defense to plaintiff's cause of action to

which a reply was neither required nor permitted by G.S. 1A-1, Rule 7(a)." Id. at 229, 261 S.E.2d at 31.

In Johnson v. Johnson, the trial court allowed the plaintiff to present evidence in defense of the defendant's counterclaim and then allowed the plaintiff to file a late reply conforming to the evidence already presented. This Court held "that the trial court was within its discretion in admitting plaintiff's evidence and allowing plaintiff to file a reply." 14 N.C. App. at 43, 187 S.E.2d at 422. See also Dyotherm Corp. v. Turbo Machine Co., 233 F. Supp. 119, 39 F.R.D. 370 (E.D. Pa. 1966).

Rule 8(d) of the Federal Rules of Civil Procedure is identical to our 8(d), and commentators on the federal rules suggest one limitation upon the scope of Rule 8(d) which is not specified in the Rule. Professors Wright and Miller, in discussing the limits of Rule 8(d), write, "[a]n additional exception probably can be implied to the effect that Rule 8(d) only applies to 'material' or 'relevant' averments." 5 Wright and Miller, Federal Practice and Procedure: Civil ยง 1279, p. 354-355. We subscribe to that view, and we state the controlling proposition in this State clearly and succinctly: when a defendant makes a counterclaim denominated as such and the plaintiff fails to make a reply, the material or relevant averments of the counterclaim are deemed admitted.

We hold that the averments in the counterclaim filed by defendant in this case were neither "material or relevant" nor essential in order for defendant to recover the $19,573.66 it paid the mortgagee. Our reasoning follows.

This case was tried before a judge sitting as a jury. We are required to give deference to the trier of fact. In this context, the statements made before the presentation of evidence become significant. Presumably, Mr. Spratt, as counsel for the defendant, began the following colloquy, since it was he who answered the court's question:*fn2

"The final motion -- the motion for entry of default and default judgment -- I would say we would defer discussion of it at this time unless you would prefer to go ahead.

"The Court: With respect to what?

"Mr. Spratt: The counterclaim in the case, Your Honor.

"The Court: All right.

"Mr. Horn: Please the Court, it is my contention that the answer to the first -- my issue in this case -- against me -- that the counterclaim's automatically in your behalf, is that correct?

"Mr. Spratt: That's what you told me.

"Mr. Horn: And that's the way I see it, and it's based on the fact that under the insurance policy, they paid to the savings and loan association some $19,000. We're not entitled to recover on the primary suit, so it's automatic that they recover that from ...


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