Crogan v. Crogan , 236 N.C. App. 272 ( 2014 )

NO. COA14-214
NORTH CAROLINA COURT OF APPEALS
Filed: 16 September 2014
FELICIA RENEE CROGAN,
Plaintiff,
v. Granville County
No. 12 CVD 744
JON BRENT CROGAN,
Defendant.
Appeal by plaintiff from order entered 24 September 2013 by
Judge Daniel F. Finch in Granville County Superior Court. Heard
in the Court of Appeals 28 August 2014.
Dunlow & Wilkinson, P.A., by John M. Dunlow, for plaintiff-
appellant.
Tharrington Smith, LLP, by Jill Schnabel Jackson, for
defendant-appellee.
STEELMAN, Judge.
Where claims arose in tort, the trial court did not err in
applying a three-year statute of limitations to claims for
fraud, duress, and undue influence. Where plaintiff’s claim for
breach of contract arose pursuant to a contract under seal, the
trial court erred in applying a three-year statute of
limitations.
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I. Factual and Procedural Background
Felicia Renee Crogan (plaintiff) and Jon Brent Crogan
(defendant) were married on 23 March 1985. There were three
children born to the marriage.
Plaintiff and defendant separated on 1 October 2004.
Defendant’s attorney prepared a Separation Agreement which was
executed by the parties under seal and notarized on 16 November
2004. Paragraph 27 of the Separation Agreement dealt with the
effect of a reconciliation of the parties upon their property
settlement:
27. RECONCILIATION. In the event of a
reconciliation and resumption of the marital
relationship between the parties, the
provisions hereof regarding settlement and
disposition of property rights and other
rights shall nevertheless continue in full
force and effect without the abatement of
any term or provision hereof, except as
otherwise specifically provided herein or as
later agreed in writing, by and between the
parties. Except as otherwise provided by
this Agreement or by an agreement or
modification to this Agreement, performed in
writing and notarized and executed by each
of the parties after the date of this
Agreement or the date of their
reconciliation, no act on the part of either
party shall serve to modify the property
rights of the parties as established herein
in this Agreement and the rights of the
parties to the property which is
transferred, set over and designated as
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property of either party shall remain
separate property upon a reconciliation of
the parties.
On 1 October 2005, the parties reconciled and resumed their
marital relationship. The parties moved to West Virginia, but
separated again on 13 March 2011. The parties subsequently
engaged in litigation in the Family Court of Preston County,
West Virginia. This litigation involved, among other things,
the distribution of the parties’ marital property. That court
directed the parties to have the courts of this State determine
the validity of the Separation Agreement.
On 17 August 2012, plaintiff filed a verified complaint,
seeking a declaratory judgment as to the status of the
Separation Agreement. The complaint also sought to void the
Separation Agreement based upon the alleged fraud, duress, and
undue influence of the defendant. Plaintiff also asserted
breach of contract, alleging that defendant materially breached
the provisions of paragraph 21 of the Separation Agreement:
21. FULL DISCLOSURE. Each party warrants, as
part of the consideration for this
Agreement, that each party has fully and
completely disclosed all information
regarding property and finances requested by
the other and that no information of such
nature has been subjected to distortion, nor
in any manner been misrepresented.
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Plaintiff alleged that defendant falsely represented to her
that the values of their respective retirement accounts were
“virtually the same,” when in fact the value of plaintiff’s
account was $31,192.99 and the value of defendant’s account was
about $130,000.00.
On 10 October 2012, defendant filed an answer, asserting
the affirmative defenses of ratification and the statute of
limitations, as well as a counterclaim for a declaratory
judgment declaring the Separation Agreement to be valid and
enforceable. On 7 December 2012, plaintiff filed a reply to
defendant’s counterclaim.
On 10 May 2013, defendant filed a motion for summary
judgment. On 24 September 2013, the trial court entered summary
judgment in favor of defendant, declaring that “the Separation
Agreement and Property Settlement executed by the parties on
November 16, 2004, is a valid and enforceable contract.”
Plaintiff appeals.
II. Standard of Review
“Our standard of review of an appeal from summary judgment
is de novo; such judgment is appropriate only when the record
shows that ‘there is no genuine issue as to any material fact
and that any party is entitled to a judgment as a matter of
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law.’” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572,
576 (2008) (quoting Forbis v. Neal, 361 N.C. 519, 524, 649
S.E.2d 382, 385 (2007)).
III. Fraud, Duress, and Undue Influence
In her first argument, plaintiff contends that the trial
court erred in applying a three-year statute of limitations to
her claims for fraud, duress, and undue influence. We disagree.
“Under North Carolina law, there is a three-year limitation
for filing an action for duress, undue influence and fraud.”
Dawbarn v. Dawbarn, 175 N.C. App. 712, 717, 625 S.E.2d 186, 190
(2006) (citing N.C. Gen. Stat. § 1-52(9) (2005)). According to
N.C. Gen. Stat. § 1-52(9), the statute of limitations begins to
run on an action for fraud upon discovery of the facts
constituting the fraud. N.C. Gen. Stat. § 1-52(9) (2013).
The statute of limitations for plaintiff’s claims for
duress and undue influence began to run in 2004, when she
alleges she was coerced into signing the Separation Agreement.
The statute of limitations on those claims would therefore have
expired in 2007.
With regard to the claim for fraud, in her complaint,
plaintiff does not allege when she discovered the fraud.
However, in her deposition, plaintiff admitted that she began to
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manage defendant’s account in “[m]aybe 2005, 2006.” At that
time, she would have discovered the fraud. During the hearing
on summary judgment, defense counsel noted:
She acknowledged, I believe on page 91 of
the -– the –- of her deposition that she had
the ability to look at the balance of his
account at that time. So, my contention is
that by the end of 2006, by her testimony,
it was the latest, 2006, she had the ability
to look at his Thrift Savings account. She
had full access to his accounts and that the
cause of action for fraud would have accrued
no later than 2006 when she had full access
to his retirement accounts. Which means, the
three-year statute of limitations expired in
2009.
If plaintiff discovered the fraud in 2006, then the statute
of limitations on that claim would have expired in 2009.
Plaintiff’s complaint was filed in 2012, well after the
statute of limitations on her claims for fraud, duress, and
undue influence expired.
Plaintiff contends, however, that these actions arose
pursuant to a document under seal. Plaintiff contends that, as
a result, the ten-year statute of limitations in N.C. Gen. Stat.
§ 1-47 applies.
N.C. Gen. Stat. § 1-47(2) provides that a ten-year statute
of limitations applies:
Upon a sealed instrument or an instrument of
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conveyance of an interest in real property,
against the principal thereto. Provided,
however, that if action on an instrument is
filed, the defendant or defendants in such
action may file a counterclaim arising out
of the same transaction or transactions as
are the subject of plaintiff's claim,
although a shorter statute of limitations
would otherwise apply to defendant's
counterclaim. Such counterclaim may be filed
against such parties as provided in G.S. 1A-
1, Rules of Civil Procedure.
N.C. Gen. Stat. § 1-47(2) (2013).
Plaintiff contends that her lawsuit in the instant case is
effectively a counterclaim. More specifically:
In the present case, the Plaintiff-Appellant
was functioning, for all intents and
purposes, as a Defendant, in that she was
forced to come to the state of North
Carolina to "defend" against the claim made
by the Defendant-Appellee in the West
Virginia litigation. Further, the Plaintiff-
Appellant's claims for fraud, duress, undue
influence and breach are, in essence,
counterclaims asserted against the
Defendant-Appellee in response to his claims
asserted in the West Virginia litigation.
We find this logic baseless. We note that there is no
indication in the record of whether plaintiff or defendant
initiated the litigation in West Virginia; however, it is clear
from the record that plaintiff initiated the instant action in
North Carolina. Nothing in the record supports plaintiff’s
claim that she was “forced” to come to this State to “defend”
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against a claim by defendant; quite to the contrary, the filing
of plaintiff’s complaint forced action by defendant.
We acknowledge that a counterclaim for fraud pursuant to an
instrument under seal is subject to a ten-year statute of
limitations. See McGuire v. Dixon, 207 N.C. App. 330, 338, 700
S.E.2d 71, 76 (2010) (holding that the trial court erred in
applying the three-year limitations period for fraud under N.C.
Gen. Stat. § 1-52(9) where the ten-year statute of limitations
under N.C. Gen. Stat. § 1-47(2) applied). Duress and undue
influence are “forms of fraud,” under N.C. Gen. Stat. § 1-52(9).
Swartzberg v. Reserve Life Ins. Co., 252 N.C. 150, 156, 113
S.E.2d 270, 276-77 (1960). Under that logic, then, a
counterclaim for fraud, duress, or undue influence pursuant to a
document under seal should be controlled by a ten-year statute
of limitations.
However, it is clear from the record before us that
plaintiff’s claims are not counterclaims, and thus do not
involve the provisions of N.C. Gen. Stat. § 1-47(2). Thus, the
three-year statute of limitations applies to plaintiff’s claims
for fraud, duress, and undue influence. We hold that the trial
court applied the correct statute of limitations to these
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claims, and did not err in granting summary judgment in favor of
defendant on the issues of fraud, duress, and undue influence.
This argument is without merit.
IV. Breach of Contract
In her second argument, plaintiff contends that the trial
court erred in applying a three-year statute of limitations to
her claim for breach of contract. We agree.
The Separation Agreement, executed under seal, contained a
warranty of full disclosure. The Separation Agreement further
provided that, in the event of reconciliation by the parties,
the Separation Agreement would remain in full force. As stated
above, a ten-year statute of limitations applies to an agreement
under seal. N.C. Gen. Stat. § 1-47(2) (2013).
Plaintiff alleged that defendant breached the warranty of
full disclosure in the Separation Agreement by misrepresenting
the balance in their respective retirement accounts. Because
the Separation Agreement was executed under seal, a ten-year
statute of limitations, rather than the three-year statute of
limitations, is applicable to plaintiff’s breach of contract
claim. Since this action was commenced within ten years of the
execution of the Separation Agreement, it was not barred.
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We hold that the trial court erred in granting summary
judgment in favor of defendant on the issue of breach of the
Separation Agreement.
V. Conclusion
The trial court did not err in granting summary judgment in
favor of defendant on the issues of fraud, duress, and undue
influence. The trial court erred in granting summary judgment
in favor of defendant on the issue of breach of the Separation
Agreement. This matter is remanded to the trial court for
further proceedings on the issue of breach of the Separation
Agreement.
AFFIRMED IN PART, REVERSED AND REMANDED IN PART.
Judges GEER and HUNTER, Robert N., Jr. concur.
Robert N. Hunter, Jr. concurred on this opinion prior to 6
September 2014.