Civil Practice — Appeals – Interlocutory – Res Judicata – Trusts & Estates – Attorneys – Sanctions Motions

MacMillan v. MacMillan (Lawyers Weekly No. 15-07-0215, 36 pp.) (Linda Stephens, J.) Appealed from Forsyth County District Court (David Sipprell, J.) N.C. App. Unpub.

Holding: Since defendant’s motion to dismiss plaintiff’s complaint makes no plausible claim that there has ever been a final judgment on the merits, defendant’s motion is not a “colorable assertion” of res judicata or collateral estoppel but a mere incantation of the two doctrines, which does not automatically entitle her to an interlocutory appeal of the trial court’s order rejecting those two defenses.

Defendant’s appeal is dismissed, and plaintiff’s motion for sanctions is granted.

Background

This is the third appeal in this matter, in which the plaintiff-ex-wife seeks to enforce a separation agreement she entered into with the defendant-widow’s late husband. The decedent agreed to leave plaintiff $18,000, through either life insurance or his estate. He left plaintiff $18,000 in his will, but his estate did not have enough funds to pay the bequest.

Defendant received the cash from the estate ($7,551.74) as part of her year’s allowance. She was awarded a deficiency judgment for the remainder of her $20,000 allowance. Defendant also received $35,000 in life insurance proceeds.

Plaintiff moved to add defendant and the estate’s representative to her domestic action against the decedent. In the first appeal, this court reversed the trial court’s dismissal of plaintiff’s motion in the cause.

On remand, the trial court granted plaintiff’s motion in the cause, in essence holding the decedent in contempt. In the second appeal, this court vacated that order for lack of subject matter jurisdiction since a decedent cannot be held in contempt. We noted that plaintiff might still have a remedy against defendant through an independent action for unjust enrichment and constructive trust.

Plaintiff brought such an action. The trial court denied defendant’s motion to dismiss and granted plaintiff’s motion to dismiss defendant’s counterclaims. Defendant appeals, and each party seeks sanctions against the other pursuant to N.C. R. App. P. 34.

Interlocutory Appeal

When an order rejects the affirmative defenses of res judicata and collateral estoppel, the order can affect a substantial right and may be appealed immediately. Nevertheless, incantation of the two doctrines does not automatically entitle a party to an interlocutory appeal.

Defendant notes the finality of court clerks’ deficiency judgments in foreclosure proceedings and attempts to attach the same finality to the clerk of court’s award of her year’s allowance deficiency. Defendant’s reliance on such entirely different legal proceedings is misplaced.

Even if the year’s allowance deficiency judgment were a final judgment on the merits, we remain highly skeptical as to whether defendant could show there was any identity of causes between her pursuit of the surviving spouse’s year’s allowance and plaintiff’s claim for a constructive trust. From the fragments of the estate proceeding that defendant included in the record on appeal, it appears that defendant did not ask the clerk of court to admit the decedent’s will to probate until after the deficiency judgment was entered, so it is difficult to discern how plaintiff could have made any claim before that point.

Defendant also argues that res judicata and collateral estoppel apply because this court vacated the trial court’s order granting plaintiff’s motion in the cause. However, when a trial court order is vacated by this court, it is rendered null and void. Furthermore, a dismissal based on a lack of subject matter jurisdiction is not on the merits and thus is not given res judicata or collateral estoppel effect because there has been no final judgment.

Since defendant has not pointed to a final judgment on the merits, her argument is not a colorable assertion of res judicata or collateral; instead, it is a mere incantation of the two doctrines, which does not automatically entitle her to an interlocutory appeal of the order rejecting these two defenses.

Motion to Disqualify

Defense counsel, Brian Jones, seeks to disqualify plaintiff’s counsel, William Walker, because Walker’s former law partners did some estate planning work for Jones’ parents. Walker’s former partner set up a discretionary trust for the benefit of Jones and gave the firm the authority to appoint a successor trustee and/or trust protector.

Jones argues that Walker’s Rule 34 motion for sanctions (discussed below) violates fiduciary duties he owes to Jones because it exploits confidential information about Jones and his parents that Walker’s firm possesses as a result of the earlier representation in a manner materially adverse to Jones’ interests. Thus, Jones asks that this court disqualify Walker from this case.

However, our sole focus in evaluating a Rule 34 motion is on whether the appeal is frivolous. The assets of the litigant and her attorney are irrelevant to our analysis. Also, it does not appear that Jones was ever a client of Walker’s firm.

Furthermore, Walker has been plaintiff’s counsel since 2010, and Jones did not appear in this matter until February 2013. Despite the fact that Jones’ parents were already clients of Walker’s firm, Jones made no mention of this purported conflict until July 2014. By failing to raise the issue in the trial court, Jones has failed to preserve his disqualification argument for appellate review.

Sanctions

While it is generally better practice for an appellee to wait until after the appellant has filed a frivolous brief before moving to impose Rule 34 sanctions, Jones cites no authority indicating that this is, in fact, sanctionable conduct. Moreover, Walker’s technical violation did not affect this court’s deliberations in any way, as it has been clear from the outset that the trial court’s interlocutory order was not immediately appealable. We therefore deny Jones’s Rule 34 motion for sanctions against plaintiff and Walker.

However, sanctions are warranted for the undertaking of this frivolous interlocutory appeal. Jones’ arguments are sufficiently facile, self-serving and meritless to raise serious questions of bad faith, incompetence, or both. Jones also willfully violated N.C. R. App. P. 9 and 28 by failing to timely file his reply brief and neglecting to include the estate file in the record. Furthermore, Jones’ motion to disqualify Walker was grossly lacking in propriety. Jones is ordered to personally pay the costs and reasonable expenses, including reasonable attorneys’ fees, incurred by plaintiff on account of this appeal.

Appeal dismissed.