{
  "id": 11237604,
  "name": "RANDOLPH R. FEW, JR. and XPRESS AUTOMOTIVE GROUP, INC., Plaintiffs v. HAMMACK ENTERPRISES, INC. f/k/a Muffler Xpress and Brake Centers, Inc., CARLTON L. HAMMACK and J. ELLIOTT HANEY, JR., Defendants; RANDOLPH R. FEW, JR. and XPRESS AUTOMOTIVE GROUP, INC., Plaintiffs v. HAMMACK ENTERPRISES, INC. f/k/a Muffler Xpress and Brake Centers, Inc., and CARLTON L. HAMMACK, Defendants",
  "name_abbreviation": "Few v. Hammack Enterprises, Inc.",
  "decision_date": "1999-02-16",
  "docket_number": "No. COA98-597",
  "first_page": "291",
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    "judges": [
      "Judges JOHN and HUNTER concur."
    ],
    "parties": [
      "RANDOLPH R. FEW, JR. and XPRESS AUTOMOTIVE GROUP, INC., Plaintiffs v. HAMMACK ENTERPRISES, INC. f/k/a Muffler Xpress and Brake Centers, Inc., CARLTON L. HAMMACK and J. ELLIOTT HANEY, JR., Defendants RANDOLPH R. FEW, JR. and XPRESS AUTOMOTIVE GROUP, INC., Plaintiffs v. HAMMACK ENTERPRISES, INC. f/k/a Muffler Xpress and Brake Centers, Inc., and CARLTON L. HAMMACK, Defendants"
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    "opinions": [
      {
        "text": "GREENE, Judge.\nHammack Enterprises, Inc. (Hammack, Inc.) and Carlton L. Hammack (Mr. Hammack) appeal from the trial court\u2019s Order striking the Answer and Counterclaims filed by Hammack, Inc., Mr. Hammack, and J. Elliot Haney, Jr. (Haney) (collectively, Defendants) and from the trial court\u2019s Judgment in favor of Randolph R. Few, Jr. and Xpress Automotive Group, Inc. (collectively, Plaintiffs).\nOn 19 December 1996, Plaintiffs filed a Complaint against Defendants for breach of contract, fraud, conspiracy to commit fraud, unfair and deceptive trade practices, and conspiracy to commit unfair and deceptive trade practices. Defendants filed their Answer and Counterclaims on 19 March 1997. On 12 May 1997, pursuant to the Rules Implementing Statewide Mediated Settlement Conferences in Superior Court Civil Actions 1(A)(1), 1999 Ann. R. N.C. 59 [hereinafter \u201cMediation Rules\u201d], the trial court ordered Plaintiffs and Defendants to participate in a mediated settlement conference. On 2 September 1997, the mediator\u2019s \u201cReport of Mediator,\u201d prepared pursuant to Mediation Rules 6(B)(4), 1999 Ann. R. N.C. 64 (requiring the mediator to \u201creport to the court in writing whether or not an agreement was reached by the parties\u201d and how the action will be concluded), was received by the Trial Court Administrator. The \u201cReport of Mediator\u201d noted that the parties had reached \u201cagreement on all issues\u201d and that a Confession of Judgment voluntarily dismissing the claims against Haney was to be filed by the parties. The mediator then prepared a \u201cMediated Settlement Agreement,\u201d which stated:\n[Mr. Hammack and Hammack, Inc.] will sign a Confession of Judgment to [Plaintiffs] in the amount of Five Hundred Thousand Dollars ($500,000.00). Plaintiff[s] shall file a Voluntary Dismissal with Prejudice as to [Haney].\nFollowing a letter from Plaintiffs noting that, at the mediated settlement conference, the parties had actually agreed to file a Consent Judgment with terms that would make it nondischargeable in bankruptcy, the mediator prepared a revised \u201cMediated Settlement Agreement,\u201d and sent a letter to the parties stating:\nI am enclosing a new revised Mediated Settlement Agreement reflecting the use of a Consent Judgment rather than a Confession of Judgment to effectuate the settlement agreement reached last month as a result of the mediated settlement conference, and also reflecting the protection against bankruptcy agreement and the dismissal of the claim against defendant Haney and the dismissal of all counterclaims as agreed upon.\nThis revised \u201cMediated Settlement Agreement\u201d enclosed with the mediator\u2019s letter provided, in part:\n2. This matter has been settled by Consent Judgment, said Judgment to be prepared by the attorney for [Plaintiffs]. The terms of said Consent Judgment to be as follows: [Mr.] Hammack and [Hammack, Inc.] are liable to [Plaintiffs] in the amount of $500,000.00. Consent Judgment to be drafted in a manner that will prevent said Judgment from being dischargeable in Bankruptcy. Upon entry of said Consent Judgment, a Voluntary Dismissal with Prejudice of [Haney] is to [be] filed by Plaintifffs] and Defendants shall file Voluntary Dismissals with Prejudice [of] all Counterclaims.\n3. Issues not settled by this Agreement are: None.\nPlaintiffs signed the revised \u201cMediated Settlement Agreement\u201d and drafted a Consent Judgment which incorporated the allegations of fraud in their Complaint as findings of fact. Both the revised \u201cMediated Settlement Agreement\u201d and the proposed Consent Judgment were forwarded by Plaintiffs to Defendants. Defendants informed Plaintiffs in October that they would not sign the revised \u201cMediated Settlement Agreement\u201d or the proposed Consent Judgment.\nOn 21 November 1997, Plaintiffs filed a motion to enforce the revised \u201cMediated Settlement Agreement\u201d entered by the parties and to impose sanctions against Defendants. A hearing was held on Plaintiffs\u2019 motions on 4 December 1997. At that hearing, counsel for Defendants contended Plaintiffs\u2019 motions \u201cignore[d] the confidentiality protections of mediated settlement conferences and [sought] to introduce in the cause statements made [and] conduct occurring during the mediated settlement conference, in derogation of N.C.G.S. [\u00a7] 7A-38.1(i).\u201d Defendants\u2019 counsel further informed the trial court he was \u201cnot going to go back into the mediated settlement conference and say anything about anybody\u2019s conduct or any statements that they made in reference to these matters, . . . because [I am] not going to waive the protections of the confidentiality rule of mediated settlement conferences.\u201d\nFollowing the 4 December 1997 hearing, the trial court found:\n[At the mediated settlement conference, the parties agreed to] enter into a consent judgment in the amount of $500,000.00, to be drafted by [P]laintiffs in such a way as to prevent said judgment from being dischargeable in bankruptcy. Said judgement [sic] was to include findings of fact and conclusions of law regarding [Plaintiffs\u2019 claim for fraud. All other claims by the parties would be dismissed.\n. . . Thereafter, the mediator reported to the Court that all issues in the case had been settled and issued a mediated settlement agreement to [P]laintiffs for signature. Plaintiffs and [Plaintiffs\u2019 counsel executed said mediated settlement agreement and forwarded it to counsel for [Defendants on September 8, 1997.\n. . . [C]ounsel for [Defendants informed counsel for [Plaintiffs in the latter part of October that [Defendants would not execute either the mediated settlement agreement or the consent judgment.\n... [D]efendants have offered no reason to this court for their refusal to sign either the mediated settlement agreement or the consent judgment.\n... The court finds that [D]efendants refusal to sign said documents was unwarranted and constitutes a willful and grossly negligent failure to comply with Rule 4C of the Mediated Settlement Conference Rules in Superior Court Civil Actions resulting in substantial interference with the business of the court.\nBased on these and other findings, the trial court concluded:\n[T]he parties reached a settlement of all issues in which [Mr.] Hammack and [Hammack, Inc.] would enter into a consent judgment in the amount of $500,000.00, to be drafted in such a way as to prevent said judgment from being dischargeable in bankruptcy. Said judgement [sic] was to include findings of fact and conclusions of law regarding [Plaintiffs\u2019 claim for fraud. All other claims by the parties would be dismissed.\nAccordingly, the trial court ordered: (1) Defendants\u2019 Answer and Counterclaims be stricken, (2) Plaintiffs\u2019 Complaint against Haney be dismissed; and (3) \u201ca judgment shall be entered by this court making findings of fact and conclusions of law on the basis of fraud against [Mr.] Hammack and [Hammack, Inc.] in the amount of $500,000.00 ....\u201d The trial court thereafter, \u201c[o]n consideration of the undisputed allegations contained in [Plaintiffs\u2019 complaint,\u201d found as fact the allegations of fraud contained in Plaintiffs\u2019 Complaint, and entered judgment in favor of Plaintiffs in the amount of $500,000.00.\nThe issues are whether: (I) evidence of an agreement (and its terms) reached by the parties at a mediated settlement conference is admissible; and (II) the trial court had the authority to strike Defendants\u2019 Answer and Counterclaims for failure to execute the revised \u201cMediated Settlement Agreement.\u201d\nI\nSection 7A-38.1, which \u201crequire[s] parties to superior court civil actions and their representatives to attend a pretrial, mediated settlement conference,\u201d provides:\nInadmissibility of negotiations. \u2014 Evidence of statements made and conduct occurring in a mediated settlement conference shall not be subject to discovery and shall be inadmissible in any proceeding in the action or other actions on the same claim. However, no evidence otherwise discoverable shall be inadmissible merely because it is presented or discussed in a mediated settlement conference.\nN.C.G.S. \u00a7 7A-38.1\u00a9 (1995). Defendants contend this provision prevents the parties and the mediator from revealing whether an agreement was reached at the mediated settlement conference. We disagree.\n\u201cThe cardinal principle of statutory construction is that the intent of the legislature is controlling.\u201d Nationwide Mutual Ins. Co. v. Mabe, 342 N.C. 482, 494, 467 S.E.2d 34, 41 (1996). To ascertain our General Assembly\u2019s legislative intent, we look at \u201cthe phraseology of the statute [as well as] the nature and purpose of the act and the consequences which would follow its construction one way or the other.\u201d Id. We will not adopt an interpretation that would result in injustice \u201cwhen the statute may reasonably be otherwise consistently construed with the intent of the act.\u201d Id. Finally, whenever possible, we will construe a statute \u201cso as to avoid absurd consequences.\u201d Id.\nConstruing section 7A-38.1\u00a9 consistently with its nature and purpose, we hold that section 7A-38.1(i) does not prohibit the admission of the outcome of a mediation settlement conference before a judge making the determination of whether settlement was reached and of the terms of that settlement. Section 7A-38.1(i) was enacted to prevent a chilling effect on settlement negotiations by allowing parties to freely make settlement offers without fear that these offers would be revealed to a subsequent finder of fact as some evidence of liability on either the present or a future substantive claim. See John G. Mebane, III, An End to Settlement on the Courthouse Steps? Mediated Settlement Conferences in North Carolina Superior Courts, 71 N.C. L. Rev. 1857, 1872 (1993) (\u201cFor mediation to be effective, the parties must feel completely free to tell their sides of the story without worrying that such statements will later be used against them.\u201d); Kenneth R. Feinberg, Mediation\u2014 A Preferred Method of Dispute Resolution, 16 Pepp. L. Rev. S5, S28-29 (1989) (noting that confidentiality is critical to the success of mediation because the parties must \u201cfeel free to advance tentative solutions and to make statements without fear that they will later be used as a basis for liability or as a measure of damage\u201d). We find additional support for this position in our Rules for Court-Ordered Arbitration, which were initially adopted by our Supreme Court in 1986. See Sara Lee Corp. v. Carter, 129 N.C. App. 464, 475, 500 S.E.2d 732, 739 (1998) (noting that \u201ca mediator is of the same kind, character, and nature as an arbitrator\u201d); Rules for Court-Ordered Arbitration 5, 1999 Ann. R. N.C. 52 (subsection (c) provides that \u201c[n]o reference may be made to prior arbitration proceedings in the presence of a jury without consent of all parties to the arbitration and the court\u2019s approval\u201d; subsection (d) provides that no evidence of prior arbitration proceedings is admissible \u201cin a trial de novo, or in any subsequent proceeding involving any of the issues in or parties to the arbitration, without the consent of all parties to the arbitration and the court\u2019s approval\u201d; subsection (e) provides that the arbitrator \u201cmay not be deposed or called as a witness to testify concerning anything said or done in an arbitration proceeding in a trial de novo or any subsequent civil or administrative'proceeding involving any of the issues in or parties to the arbitration\u201d (emphases added)). Accordingly, we do not read section 7A-38.1\u00a9 as prohibiting the admission of testimony or other evidence of the outcome of the mediation settlement conference before a judge making the determination of whether settlement was reached and of the terms of that settlement. It follows that, in this limited context, evidence of an agreement, and the terms of that agreement, reached by the parties during a mediated settlement conference is admissible.\nSection 7A-38.1\u00a9 also provides: \u201cNo mediator shall be compelled to testify or produce evidence concerning statements made and conduct occurring in a mediated settlement conference in any civil proceeding for any purpose, except proceedings for sanctions under this section . . . .\u201d N.C.G.S. \u00a7 7A-38.1(i). For the reasons noted above, we hold that a mediator is both competent and compellable to testify or produce evidence on whether the parties reached a settlement agreement, and as to the terms of the agreement, where the judge is making that determination. In any event, in \u201cproceedings for sanctions,\u201d the mediator is both competent and compellable to testify or produce evidence to allow the trial court to determine whether sanctions are appropriate.\nWe do not fault Defendants\u2019 counsel\u2019s caution, however, in failing to present evidence on this matter, in light of the broad (and previously unconstrued) language of section 7A-38.1(i). We therefore vacate the trial court\u2019s Order sanctioning Defendants and remand for a hearing, at which both parties may present evidence, to determine whether Defendants, free from either fraud or mutual mistake, agreed to settlement, and specifically whether Defendants agreed to the terms enumerated in the revised \u201cMediated Settlement Agreement.\u201d Cf. Becker v. Becker, 262 N.C. 685, 690, 138 S.E.2d 507, 511 (1964) (allowing parties to challenge a consent judgment by showing that agreement was reached only as a result of fraud or mutual mistake).\nII\nDefendants further contend that, even assuming they agreed to the enumerated terms of the revised \u201cMediated Settlement Agreement,\u201d the trial court lacked authority to sanction them for failure to execute that agreement. We disagree.\nTrial courts have authority, pursuant to Rule 5 of the Mediation Rules, to impose \u201cany appropriate monetary sanction\u201d on a person required to attend a mediated settlement conference who fails to attend without good cause. Mediation Rules 5, 1999 Ann. R. N.C. 63; Triad Mack Sales & Service v. Clement Bros. Co., 113 N.C. App. 405, 438 S.E.2d 485 (1994) (affirming the trial court\u2019s order striking the defendant\u2019s answer for failure to attend a mediated settlement conference pursuant to Rule 5, which, at that time, provided that failure to attend without good cause could result in \u201cany lawful sanction\u201d). The Mediation Rules do not expressly provide for sanctions under any other circumstance. See Mediation Rules, 1999 Ann. R. N.C. 59-67. Even absent an express grant of authority, however, trial courts have inherent authority to impose sanctions for wilful failure to comply with the rules of court. Lee v. Rhodes, 227 N.C. 240, 242, 41 S.E.2d 747, 749 (1947) (noting that the trial court \u201cwas not without power to deal with\u201d a plaintiff\u2019s bad faith withdrawal of consent to settlement); Lomax v. Shaw, 101 N.C. App. 560, 563, 400 S.E.2d 97, 98 (1991) (affirming trial court\u2019s order, pursuant to its inherent authority, striking the defendants\u2019 answer where the defendants \u201coffered no plausible excuse as to why they did not execute [a previously agreed upon] consent judgment\u201d). Accordingly, the trial court has inherent authority to sanction a party for wilful failure to comply with the Mediation Rules.\nIn this case, the trial court entered an order striking Defendants\u2019 Answer and Counterclaims for their \u201cunwarranted refusal\u201d to sign the revised \u201cMediated Settlement Agreement\u201d memorializing the agreement of the parties, finding that Defendants\u2019 refusal constituted \u201ca willful and grossly negligent failure to comply with Rule 4C of the Mediated Settlement Conference Rules in Superior Court Civil Actions resulting in substantial interference with the business of the court.\u201d Rule 4C provides in part: \u201cIf an agreement is reached in the conference, parties to the agreement shall reduce its terms to writing and sign it along with their counsel.\u201d Mediation Rules 4C, 1999 Ann. R. N.C. 63 (emphasis added). Although any agreement reached must be reduced to a signed writing, the failure of the parties to reduce their agreement to a signed writing does not preclude a finding that the parties indeed reached agreement at the mediated settlement conference. Indeed, it is well settled that parties may orally enter a binding agreement to settle a case. See 15A Am. Jur. 2d Compromise and Settlement \u00a7 10, at 782 (1976) (\u201c[N]o particular form of agreement and no writing is ordinarily essential to a valid compromise.\u201d); cf. Manufacturing Co. v. Union, 20 N.C. App. 544, 548, 202 S.E.2d 309, 312 (noting that parties may orally consent to a consent judgment), cert. denied, 285 N.C. 234, 204 S.E.2d 24 (1974); Nickels v. Nickels, 51 N.C. App. 690, 693-94, 277 S.E.2d 577, 579 (\u201c[Signatures of parties or their attorneys [on a consent judgment are] not necessary if consent is made to appear.\u201d), disc. review denied, 303 N.C. 545, 281 S.E.2d 392 (1981). If, on remand, the trial court determines that Defendants orally agreed to settlement and to the terms enumerated in the revised \u201cMediated Settlement Agreement,\u201d it may again enter an order imposing sanctions for Defendants\u2019 refusal to comply with Rule 4C of the Mediation Rules. We note that striking a party\u2019s answer is a severe sanction which should only be imposed where the trial court has considered less severe sanctions and found them to be inappropriate. See Triad Mack Sales & Service, 113 N.C. App. at 409, 438 S.E.2d at 488. Furthermore, if, on remand, the trial court finds that Defendants agreed to the enumerated terms of the revised \u201cMediated Settlement Agreement,\u201d it may, either in addition to or instead of the imposition of sanctions for refusal to follow court rules, enter an order requiring Defendants to specifically perform the oral contract memorialized by the revised \u201cMediated Settlement Agreement.\u201d See State ex rel. Howes v. Ormond Oil & Gas Co., 128 N.C. App. 130, 137, 493 S.E.2d 793, 797 (1997) (noting that although a trial court may not enter a consent judgment to which the parties no longer agree or with terms to which the parties did not agree, it may enter a judgment specifically enforcing \u201cthe terms found in the parties\u2019 settlement agreement\u201d).\nIn summary, we vacate the Order of the trial court sanctioning Defendants and remand for a hearing, at which both parties may present evidence, to determine whether, and under what terms, Defendants agreed to settle this case. Because the Judgment of the trial court is based on the \u201cundisputed\u201d allegations of Plaintiffs\u2019 Complaint, and because these allegations are undisputed only because Defendants\u2019 Answer and Counterclaims were stricken as a sanction in the trial court\u2019s Order, we likewise vacate the Judgment of the trial court. Accordingly, we need not address Defendants\u2019 remaining contentions, as they may not recur on remand.\nVacated and Remanded.\nJudges JOHN and HUNTER concur.\n. The \u201cReport of Mediator,\u201d which noted that Plaintiffs and Defendants had reached \u201cagreement on all issues,\u201d and the two versions of the \u201cMediated Settlement Agreement\u201d prepared by the mediator constitute admissible evidence in this context.\n. Of course, section 7A-38.1\u00a9 does prohibit the admission of evidence of statements made and conduct occurring in a mediated settlement conference before the finder of fact where the finder of fact is making a determination on the merits of either the present or a future substantive claim.",
        "type": "majority",
        "author": "GREENE, Judge."
      }
    ],
    "attorneys": [
      "Hutson Hughes & Powell, P.A., by James H. Hughes and Paul A. Arena, for plaintiff-appellees.",
      "Battle, Winslow, Scott & Wiley, PA., by M. Greg Crumpler, for defendant-appellants Hammack Enterprises, Inc. and Carlton L. Hammack."
    ],
    "corrections": "",
    "head_matter": "RANDOLPH R. FEW, JR. and XPRESS AUTOMOTIVE GROUP, INC., Plaintiffs v. HAMMACK ENTERPRISES, INC. f/k/a Muffler Xpress and Brake Centers, Inc., CARLTON L. HAMMACK and J. ELLIOTT HANEY, JR., Defendants RANDOLPH R. FEW, JR. and XPRESS AUTOMOTIVE GROUP, INC., Plaintiffs v. HAMMACK ENTERPRISES, INC. f/k/a Muffler Xpress and Brake Centers, Inc., and CARLTON L. HAMMACK, Defendants\nNo. COA98-597\n(Filed 16 February 1999)\n1. Arbitration and Mediation\u2014 agreement in terms\u2014 admissible\nN.C.G.S. \u00a7 7A-38.1(1) does not prohibit the admission of the outcome of a mediation settlement conference before a judge making the determination of whether settlement was reached and of the terms of that settlement. A mediator is both competent and compellable to testify or produce evidence on whether the parties reached a settlement agreement and as to the terms of the agreement, where the judge is making that determination, but the statute does prohibit the admission of evidence of statements made and conduct occurring in a mediated settlement conference before the finder of fact where the finder of fact is making a determination on the merits of either the present or a future substantive claim. An order sanctioning defendants was remanded for a hearing to determine whether defendants agreed to settlement free from either fraud or mutual mistake and specifically whether defendants agreed to the terms enumerated in a revised Mediated Settlement Agreement.\n2. Arbitration and Mediation\u2014 sanctions \u2014 authority\nAlthough the Mediation Rules do not expressly provide for sanctions under any circumstance other than failure to attend without good cause, the trial courts have inherent authority to impose sanctions for willful failure to comply with the rules of court. If the trial court on remand finds that defendants agreed to the enumerated terms of the revised Mediation Settlement Agreement it may, either in addition to or instead of imposition of sanctions for refusal to follow court rules, enter an order requiring defendants to specifically perform the oral contract immortalized by the revised Settlement Agreement.\nAppeal by defendants Hammack Enterprises, Inc. and Carlton L. Hammack from order filed 5 December 1997 and from judgment filed 5 December 1997 by Judge Orlando F. Hudson, Jr., in Durham County Superior Court. Heard in the Court of Appeals 12 January 1999.\nHutson Hughes & Powell, P.A., by James H. Hughes and Paul A. Arena, for plaintiff-appellees.\nBattle, Winslow, Scott & Wiley, PA., by M. Greg Crumpler, for defendant-appellants Hammack Enterprises, Inc. and Carlton L. Hammack."
  },
  "file_name": "0291-01",
  "first_page_order": 325,
  "last_page_order": 334
}
