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Page v. Roscoe

March 03, 1998


Appeal by plaintiffs from order entered 30 September 1996 by Judge Henry V. Barnette, Jr. in Wake County Superior Court. Heard in the Court of Appeals 19 November 1997.

The opinion of the court was delivered by: Walker, Judge.

On 12 August 1994, defendant Roscoe, LLC (Roscoe) purchased approximately two acres of land in the Community of Feltonsville near the Town of Apex (the Town). On 3 January 1995, the Town approved a site plan submitted by Roscoe for the construction and operation of a propane gas bulk storage and distribution facility, which is a permitted use under the zoning ordinance. Thereafter, grading and site preparation was begun. This two acres of land was re-zoned from Residential-Agricultural to Industrial-2 in 1987 as part of the Town's Comprehensive Land Use Plan even though the surrounding properties were zoned residential-agricultural at the time.

On 11 April 1995, plaintiffs filed a complaint against defendants Roscoe and Dale C. Bone (Bone), a member of Roscoe, alleging that a gas storage facility, if constructed, would constitute a nuisance. Plaintiffs allege the gas storage facility will be located in close proximity to their homes and would be located within 100 feet of plaintiff Daylene Page's home. Plaintiffs further alleged that the defendant Town of Apex engaged in racial discrimination by refusing to consider the objections of the plaintiffs. This complaint was signed by plaintiffs' attorney, Conrad Airall and verified by plaintiffs Daylene Page, Elsie Clay, Ada Farrar and James Laster. Plaintiffs subsequent application for a temporary restraining order (TRO) to enjoin the Town from issuing a building permit was denied. Plaintiffs then sought a preliminary injunction which was denied on 5 May 1995.

Plaintiffs dismissed with prejudice all claims after reaching a settlement with the Town on 8 August 1995. Plaintiffs later dismissed all claims against Roscoe and Bone on 19 December 1995. Subsequently, on 9 April 1996, Roscoe and Bone moved for Rule 11 sanctions including attorney's fees. On 30 September 1996, the trial court imposed Rule 11 sanctions against plaintiffs and plaintiffs' counsel, ordering them to pay attorney's fees in the amount of $13,065 and costs of $98.50.

Plaintiffs first argue that the trial court erred in finding that the complaint filed against Roscoe and Bone was not well grounded in fact or law and was filed for the improper purpose of hindering, delaying and preventing the operation of a lawful business enterprise in violation of Rule 11.

N.C. Gen. Stat. § 1A-1, Rule 11 (1990) provides in part: (a) Signing by Attorney.- Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. A party who is not represented by an attorney shall sign his pleading, motion, or other paper and state his address. Except when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit. The signature of an attorney or party 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 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 cost of litigation. If a pleading, motion, or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant. 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, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

"This Court exercises de novo review of the question of whether to impose Rule 11 sanctions. If we determine that the sanctions were warranted, we must review the actual sanctions imposed under an abuse of discretion standard." Dodd v. Steele, 114 N.C. App. 632, 635, 442 S.E.2d 363, 365, disc. review denied, 337 N.C. 691, 448 S.E.2d 521 (1994)(citations omitted).

The Rule 11 analysis contains three parts: (1) factual sufficiency, (2) legal sufficiency, and (3) improper purpose. "A violation of any one of these requirements mandates the imposition of sanctions." Id.

"To satisfy the legal sufficiency requirement, the disputed action must be warranted by existing law or a good faith argument for the extension, modification or reversal of existing law." Id. The two-step analysis required in determining legal sufficiency is as follows:

he court must first determine the facial plausibility of the paper. If the paper is facially plausible, then the inquiry is complete, and sanctions are not proper. If the paper is not facially plausible, then the second issue is (1) whether the alleged offender undertook a reasonable inquiry into the law, and (2) whether, based on the results of the inquiry, formed a reasonable belief that the paper was warranted by existing law, Judged as of the time the paper was signed. If the court answers either prong of this second issue negatively, then Rule 11 sanctions are appropriate.

McClerin v. R-M Industries, Inc. 118 N.C. App. 640, 643-44, 456, S.E.2d 352, 355 (1995). Our Supreme Court has interpreted "reasonable inquiry" to mean the following:

i, given the knowledge and information which can be imputed to a party, a reasonable person under the same or similar circumstances would have terminated his or her inquiry and formed the belief that the claim was warranted under existing law, then the party's inquiry will be deemed objectively reasonable.

Jerry Bayne, Inc. v. Skyland Industries, Inc., 108 N.C. App. 209, 214, 423 S.E.2d 521, 523 (1992), affirmed, 333 N.C. 783, 430 S.E.2d 266 (1993)(quoting Bryson v. Sullivan, 330 N.C. 644, 661-62, 412 S.E.2d 327, 336 (1992)). Moreover, "the reasonableness of the belief that it [the document] is warranted by existing law should be Judged as of the time the document was signed." Id. at 215, 423 S.E.2d at 524. Responsive pleadings are not to be considered. Bryson, 330 N.C. at 656, 412 S.E.2d at 333.

Further, when analyzing the factual sufficiency of a complaint, the court must determine the following: (1) whether the plaintiff undertook a reasonable inquiry into the facts and (2) whether the plaintiff, after reviewing the results of his inquiry, ...

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