Stone v. Martin , 69 N.C. App. 650 ( 1984 )

318 S.E.2d 108 (1984)

Ada Pearl STONE and Cecil Glynn Jernigan, Individually and as Shareholders of Creekside Enterprises, Inc.
v.
R.L. MARTIN, Jr. and Larry G. Sanderford and Creekside Enterprises, Inc.

No. 8310SC817.

Court of Appeals of North Carolina.

July 17, 1984.

Brenton D. Adams, Raleigh, and Woodall, McCormick & Felmet by Edward H. McCormick, Lillington, for plaintiff appellants.

Hunter, Wharton & Howell by John V. Hunter, III, Raleigh, for defendant appellee R.L. Martin, Jr.

WHICHARD, Judge.

Defendant Martin asserts that plaintiffs' appeal should not be heard at this time because it is interlocutory and does not affect a substantial right. While the argument is not properly raised as a cross-assignment of error pursuant to N.C.R. App.P. 10(d), we choose to address it.

This Court has authority to issue a writ of certiorari to review a trial court order "when no right of appeal from an interlocutory order exists." N.C.R.App.P. 21(a)(1). That authority was exercised by another panel of this Court with respect to the matters presented. Its grant of certiorari is the law of the case and cannot be overruled by this or any other panel of the Court of Appeals. N.C.N.B. v. Virginia Carolina Builders, 307 N.C. 563, 566-67, 299 S.E.2d 629, 631-32, rehearing denied, 307 N.C. 703 (1983).

Plaintiffs contend that Judge Farmer effectively conducted appellate review, without jurisdiction to do so, when he set aside the sanctions imposed by another superior court judge. In general, one superior court judge may not modify, overrule, or change the judgment of another previously made in the same case. Calloway v. Ford Motor Co., 281 N.C. 496, 501, 189 S.E.2d 484, 488 (1972). However, a superior court "judge has the power to modify an interlocutory order made by another whenever there is a showing of changed conditions which warrant such action." Id. at 502, 189 S.E.2d at 488. Modification or change of an interlocutory order is proper where (1) the order was discretionary, and (2) there has been a change of circumstances. Id.; see also Greene v. Charlotte Chemical Laboratories, Inc., 254 N.C. 680, 693, 120 S.E.2d 82, 91 (1961).

The sanctions imposed by Judge Lee were in the nature of a discretionary interlocutory order. A trial judge may impose such of the sanctions enumerated in G.S. 1A-1, Rule 37(b)(2) as he determines "are just." The matter thus is within the trial court's discretion. The sanctions, which included striking defendants' answers, ordering them not to oppose plaintiffs' claims, and ordering a default judgment, were also interlocutory. Although Judge Lee ordered "a judgment of default," he clearly intended only entry of default, since he further ordered a trial on the issue of damages. Generally, there is first an interlocutory entry of default, and then a final judgment by default only after the requisites to its entry, including a jury trial on damages, have occurred. See G.S. 1A-1, Rule 55 comment. In Pendley v. Ayers, 45 N.C.App. 692, 263 S.E.2d 833 (1980), as here, the trial court had ordered a default judgment and a trial on damages. This Court held: "The purported judgment entered herein was an entry of default. An entry of default is not a final order or a final judgment." Id. at 694, 263 S.E.2d at 834.

Judge Farmer had authority to set aside the default sanction both because it was a discretionary, interlocutory order, see Calloway, supra, 281 N.C. at 502, 189 S.E.2d at 488-89, and because G.S. 1A-1, Rule 55(d) specifically allows the trial court to set aside an entry of default "for good cause shown." "The determination [of whether good cause has been shown] is for the trial judge in the exercise of his sound discretion...." Pendley, supra, 45 N.C. App. at 696, 263 S.E.2d at 835.

The other sanctions ordered by Judge Lee merely reenforced the entry of default sanction. They too were interlocutory, since they did not conclude the action but left the damages issue still to be tried. All the sanctions imposed for defendants' failure to comply with the discovery order thus were discretionary and interlocutory, leaving Judge Farmer the right, in his discretion, to set aside the sanctions if a change of circumstances warranted such action. Calloway, supra.

Judge Farmer noted in his findings that defendants had relied upon the good faith advice of counsel not to answer the discovery requests because the information was privileged, and that this advice was reasonably based on then-existing case law. He also found that appellate decisions had restricted the scope of the privilege during the course of defendants' appeal, to their detriment. This finding, coupled with the fact that defendants have been willing to comply with the discovery order since this Court rejected their claim of privilege, constitutes a significant change of circumstances since Judge Lee's imposition of sanctions. Judge Farmer found and concluded that good cause was shown for setting aside the sanctions. "[T]he determination of whether good cause [to set aside an entry of default] has been shown rests within the discretion of the trial judge and will not be disturbed absent an abuse of discretion." Bailey v. Gooding, 60 N.C. App. 459, 463, 299 S.E.2d 267, 270, disc. rev. denied, 308 N.C. 675, 304 S.E.2d 753 (1983). We find no abuse of discretion in Judge Farmer's order setting aside the entry of default and the other sanctions which reinforced it.

Our affirmance of the order also accords with the policy of allowing every litigant the opportunity to present his case. "Inasmuch as the law generally disfavors default judgments, any doubt should be resolved in favor of setting aside an entry of default so that the case may be decided on its merits." Peebles v. Moore, 48 N.C.App. 497, 504-05, 269 S.E.2d 694, 698 (1980), modified, 302 N.C. 351, 275 S.E.2d 833 (1981).

Plaintiffs contend the trial court erred in limiting their cross-examination of defendant Martin and his attorney concerning why defendants refused to comply with the discovery order. Plaintiffs' cross-examination, however, attempted to range beyond the scope of the hearing before Judge Farmer and to develop the merits of the case. The affidavit and testimony of defendant Martin were limited to a statement that he relied on his attorney's advice not to answer the discovery requests, which advice was grounded in the attorney's understanding of existing case law. Plaintiffs then tried to ascertain, by inquiring as to the substance and incriminating nature of communications between defendant Martin and the attorney, whether the attorney gave his advice in good faith. The information plaintiffs sought fell within the attorney-client privilege; that privilege was not waived since the cross-examination attempted to delve into matters far beyond the scope of the direct testimony and affidavits.

The trial court properly refused plaintiffs' request to have the privileged information put in the record for purposes of appellate review. Normally, excluded evidence must be placed in the record if offered, "unless it clearly appears ... that the witness is privileged." G.S. 1A-1, Rule 43(c). "[I]f the exclusion is based upon a claim of privilege, disclosure of the answer should not be required, as it would in some sense destroy the very privilege ostensibly recognized...." 1 H. Brandis, North Carolina Evidence § 26, at 96 (1982).

Affirmed.

WEBB and HILL, JJ., concur.