Sendmail delivers mail to local user if it exists instead of passing it to the smart relay

Environment: SCO Unix Openserver 6
Sendmail ver: 8.11.3

I just put this server online replacing it's old counterpart, same OS on new machine. There are many different servers on this domain, windowssrv.thisdomain.com, oldunix.thisdomain.com, and the new newunix.thisdomain.com just to name a few. The problem is when we generate emails bound for fred@thisdomain.com, if fred is setup as a user on newunix.thisdomain.com, sendmail delivers the message to the his local mailbox in /var/spool/mail/fred. The old server didn't do this. I've compared the sendmail.cf files on oldunix and newunix and they are identical right down to the '"Smart" relay host' setting and except for the machine names. I've also looked at the /etc/resolv.conf files, which are also identical. How to I tell sendmail NOT to deliver to the local mailbox if it exists?

Not a solution, but a workaround.
If your old code looks something like:

runprogram |mail -s "reports today" fred@mydomain.com

change to

runprogram |rsh oldunix mail -s "reports today" fred@mydomain.com

Debugging:

sendmail -bv fred@thisdomain.com
sendmail -bt
0 fred@thisdomain.com
^D

You have

DSsmarthost

then also put

DHsmarthost

Restart sendmail to take effect.
Hopefully the vendor did not build the sendmail.cf with Sun's remote mode feature - that will inhibit things like DS.