Head v. Gould Killian Cpa Grp., P.A.

IN THE SUPREME COURT OF NORTH CAROLINA
No. 27A17
Filed 11 May 2018
KAREN HEAD
v.
GOULD KILLIAN CPA GROUP, P.A. and G. EDWARD TOWSON, II, CPA
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of
the Court of Appeals, ___ N.C. App. ___, 795 S.E.2d 142 (2016), affirming in part and
reversing in part and remanding an order granting partial summary judgment
entered on 31 December 2015 by Judge William H. Coward in Superior Court,
Buncombe County. On 16 March 2017, the Supreme Court allowed plaintiff’s petition
for discretionary review of additional issues. Heard in the Supreme Court on 5
February 2018.
Erwin, Bishop, Capitano & Moss, PA, by J. Daniel Bishop, for plaintiff-
appellant/appellee.
Sharpless & Stavola, P.A., by Brenda S. McClearn, for defendant-
appellants/appellees.
NEWBY, Justice.
In this case we address a claim for fraudulent concealment and the application
of the statute of repose to a claim of professional negligence in the context of summary
judgment. Summary judgment is proper if no genuine issue of material fact exists
when viewed in the light most favorable to the nonmoving party. The record here,
when viewed in that light, presents genuine issues of material fact regarding
HEAD V. GOULD KILLIAN CPA GRP.
Opinion of the Court
plaintiff’s fraudulent concealment claim and the scope and timing of defendants’
duties to plaintiff, thus making summary judgment improper in both instances.
Accordingly, we affirm in part and reverse in part the decision of the Court of Appeals.
This case is currently in the summary judgment stage; thus, we review the
facts in the light most favorable to plaintiff, the nonmoving party. Plaintiff Karen
Head must annually file her federal tax return as well as several returns for different
states. Plaintiff first hired G. Edward Towson, II, CPA (Towson) and his firm Gould
Killian CPA Group, P.A. (collectively, defendants)1 to prepare her 2005 tax returns.
Defendants prepared and timely filed plaintiff’s 2005 tax returns after plaintiff had
provided the necessary information and signatures. Plaintiff subsequently engaged
defendants for tax years 2006 through 2010. Plaintiff’s federal and state tax returns
for 2006, 2007, 2008, and 2009 were not filed with the various taxing authorities until
2012, however, giving rise to the present case.
On 11 and 12 August 2011, plaintiff received two notices from the Internal
Revenue Service (IRS) stating that she had not filed her 2006 and 2007 tax returns.
Plaintiff forwarded the notices to Towson, who responded, “I need to roll up my
sleeves and sort out this mess.” Towson later stated that he believed the IRS had
1 The record reflects that Towson, as a principal at Gould Killian, was the primary
actor in the pertinent events.
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Opinion of the Court
made an error because he had provided the completed returns and filing instructions
to plaintiff.
On 27 September 2011, plaintiff informed Towson that she was “leaving
[Towson’s] accounting firm. Shortly you will be receiving information from Wayne
Roddy [plaintiff’s newly hired CPA] to begin the transfer of information.”
Nevertheless, Towson responded by expressing his intent to keep working on
plaintiff’s behalf: “We are almost finished with the 2010 income tax returns . . . . I
will/should have them ready early next week and will call to coordinate the signing.
After that, I will be happy to provide whatever is needed for Wayne Roddy.” During
his deposition, Towson stated that he understood this exchange to mean that plaintiff
terminated him, but he continued to take action for the next twelve months in
connection with plaintiff’s tax matters because “[w]e were trying merely to assist with
resolving the question . . . . [W]e were not her engaged CPA firm at that point.”
Towson did not have the 2010 returns ready as promised but did file electronically
the federal return on 21 November 2011.
In response to repeated requests to transfer the information to Roddy in
October and November 2011, Towson responded that they were working on
“amendments” to the 2008 and 2009 tax returns, which they would complete before
transferring since “it would be more difficult for [Roddy] to step into these.” Later
plaintiff received additional notices from the IRS for failing to file her 2006 and 2007
tax returns. Towson informed plaintiff that they would respond to and “rebut” these
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Opinion of the Court
tax assessments and would “keep [plaintiff] up to date on the progress.” Towson
stated during his deposition, however, that he knew he could not speak directly with
an IRS agent on plaintiff’s behalf because he did not have a power of attorney from
plaintiff at that point, which the IRS required.
Following more IRS notices in March 2012, Roddy directly contacted Towson,
specifically noting that “[t]hese notices seem to be saying that a return was never
filed for these years. . . . [W]ould it be possible to get a copy of the tax returns that
were filed for these years?” In response, Towson did not acknowledge that the returns
had not been filed. Instead, Towson stated that he would work with the IRS’s
Taxpayer Advocate Service to “personally see to it that they get the account
straightened out.” Additionally, Towson affirmed that they would provide copies of
the 2006 and 2007 tax returns to Roddy; defendants did not provide these copies.
Throughout April 2012, Towson represented to plaintiff that he was
communicating with the Taxpayer Advocate Service and working on a resolution.
Towson nevertheless stated during his deposition that defendants did not have direct
communication at any point with anyone at the Taxpayer Advocate Service, and that
organization likewise has no record of communications with Towson.
In July 2012, the IRS sent plaintiff a final notice of intent to levy. Towson
requested that plaintiff provide a power of attorney to allow him to communicate with
the IRS on her behalf, and plaintiff obliged. During August 2012, Towson used this
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Opinion of the Court
power of attorney to communicate with the assigned revenue officer at the IRS, but
Towson consistently misrepresented these communications to plaintiff. Pertinently,
Towson asserted that the revenue officer had “put a hold on collection efforts” and
would “help to get the account corrected” once Towson provided additional
information; however, the IRS records show that the revenue officer instead
communicated the IRS would seek a lien on plaintiff if the returns were not filed by
17 August 2012. On 17 August 2012, Towson requested an extension, which the IRS
granted, to “re-prepare” the returns. Towson did not notify plaintiff of this extension
but instead implied that the IRS needed more time to complete the necessary
corrections.
On 4 September 2012, the IRS filed a lien against plaintiff. On 27 September
2012, plaintiff contacted Towson declaring her intention to “retain[ ] [legal] counsel
to help resolve this matter.” The same day, Towson responded: “I actually [met] with
[the IRS revenue officer] today and I think the administrative remedies will resolve
this.” Furthermore, Towson asked that plaintiff sign 2006 and 2007 tax return
signature pages, without the whole returns, “to facilitate the proper processing.”
Plaintiff provided the signatures on 27 September 2012. Towson replied that the
revenue officer would now have everything she needed to “correct the account by re-
imputing [sic] the tax return data.” Again, Towson did not mention that he had not
yet filed the returns nor that he intended to file the returns. Towson filed the 2006
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and 2007 tax returns with the IRS on 28 September 2012. Towson later filed the
2008 and 2009 tax returns on 18 October 2012.
On 4 November 2013, plaintiff filed her complaint asserting claims against
defendants for professional negligence and fraudulent concealment, and seeking
compensatory and punitive damages. Plaintiff alleged defendants failed to properly
prepare and file her delinquent tax returns for tax years 2006 through 2009 and
intentionally deceived her about the status of the returns. On 2 May 2014,
defendants unsuccessfully moved to dismiss all claims under Rules 9(b) and 12(b)(6)
of the North Carolina Rules of Civil Procedure.
On 7 December 2015, defendants filed an amended motion for partial summary
judgment, contending that plaintiff could not satisfy the elements of fraudulent
concealment regarding the 2006 to 2009 tax returns and that the statute of repose
bars the professional negligence claim for the 2006 and 2007 tax returns.2 Regarding
the fraud claim, defendants argued that plaintiff did not reasonably rely on the
alleged concealment because plaintiff could have “learned the true facts by exercise
of reasonable diligence,” such as reading the filing instructions provided by
defendants, asking if defendants had filed the returns, contacting the IRS directly, or
hiring another CPA. As for the professional negligence claim, defendants argued that
the four-year statute of repose began to run upon defendants’ last act, which occurred
2 Defendants did not move for summary judgment on plaintiff’s professional
negligence claim relating to her 2008 and 2009 tax returns.
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six years before plaintiff filed the complaint, when defendants allegedly provided
plaintiff with the filing instructions and copies of the prepared returns.
In opposition, plaintiff argued that several genuine issues of material fact
existed, including the scope of the relationship, the delivery and receipt of the filing
instructions and prepared returns, and whether plaintiff reasonably relied on
Towson’s representations. Regarding the statute of repose, plaintiff argued that the
operative date for the 2006 return was 15 October 2010, the last day plaintiff could
have filed the tax returns and still receive a refund. Plaintiff submitted that Towson
continued to represent her in communicating with the IRS about the 2006 and 2007
tax returns and did not actually file the returns until September 2012. Because the
timing and nature of the duties of the relationship remained at issue, plaintiff argued
her claims related to the years 2006 and 2007 cannot be time-barred. Likewise,
plaintiff claimed to present sufficient evidence of fraudulent concealment arising out
of an ongoing professional relationship to create genuine issues of material fact.
On 31 December 2015, the trial court allowed defendants’ motion for partial
summary judgment regarding the fraudulent concealment claim for tax years 2006
through 2009, the corresponding claim for punitive damages, and defendants’ statute
of repose defense for professional negligence for tax years 2006 and 2007. Plaintiff
appealed.
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Opinion of the Court
A divided panel of the Court of Appeals affirmed in part and reversed in part
the trial court’s order on partial summary judgment. Head v. Gould Killian CPA
Grp., ___ N.C. App. ___, ___, 795 S.E.2d 142, 150-51 (2016). First, the majority
reversed the trial court’s decision regarding the statute of repose, concluding that
“whether Defendants were responsible for delivering, mailing, or providing Plaintiff
with her tax returns, and whether and when they did so” determined when the
statute of repose began to run, and thus constituted genuine issues of material fact.
Id. at ___, 795 S.E.2d at 148. Next, the court affirmed the trial court’s dismissal of
plaintiff’s claim for fraudulent concealment because plaintiff failed to show
defendants had an ongoing relationship with her and that defendants had a
corresponding duty to honestly disclose information. Id. at ___, 795 S.E.2d at 150.
The court based its finding that defendant owed no duty to plaintiff on its view
that the misrepresentations occurred “after Plaintiff had already terminated her
employment of Defendants on 27 September 2011.” Id. at ___, 795 S.E.2d at 150. The
court explained:
Defendants owed no per se fiduciary duty to Plaintiff at the
time the emails were sent because Defendants had already
been terminated by Plaintiff and replaced by another
accountant. Furthermore, Defendants and Plaintiff were
in no way “negotiating at arm’s length” about “the subject
matter of [a] negotiation[ ]” at the time the emails were
sent.
No relationship, fiduciary or otherwise, existed
between the parties at that point in time, as Plaintiff had
already terminated her relationship with Defendants,
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Opinion of the Court
hired a new CPA, and was not attempting to hire or pay
Defendants for any new work engagement.
Id. at ___, 795 S.E.2d at 150 (first brackets in original) (quoting Harton v. Harton, 81
N.C. App. 295, 298, 344 S.E.2d 117, 119, disc. rev. denied, 317 N.C. 703, 347 S.E.2d
41 (1986). Affirming the trial court’s grant of summary judgment on plaintiff’s
fraudulent concealment claim, the court likewise affirmed the grant of summary
judgment on plaintiff’s related claim for punitive damages. Id. at ___, 795 S.E.2d at
150.
The dissent rejected the majority’s statute of repose analysis, instead
concluding that the last act or omission regarding the “2006 and 2007 tax returns
occurred on 12 December 2008, when Defendants hand delivered Plaintiff her 2007
prepared returns.” Id. at ___, 795 S.E.2d at 151 (Enochs, J., concurring in part and
dissenting in part). Thus, the four-year statute of repose barred plaintiff’s claims
related to these returns. Id. at ___, 795 S.E.2d at 152-54. Defendants filed notice of
appeal based on the dissenting opinion, and plaintiff sought discretionary review as
to her fraudulent concealment claim, which we allowed.
I.
Summary judgment is proper if “there is no genuine issue as to any material
fact and . . . any party is entitled to a judgment as a matter of law.” N.C.G.S. § 1A-1,
Rule 56(c) (2017). “The movant is entitled to summary judgment . . . when only a
question of law arises based on undisputed facts.” Ussery v. Branch Banking & Tr.,
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368 N.C. 325, 334, 777 S.E.2d 272, 278 (2015) (citation omitted). “All facts asserted
by the [nonmoving] party are taken as true and . . . viewed in the light most favorable
to that party.” Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000) (citations
omitted). “This Court reviews appeals from summary judgment de novo.” Ussery,
368 N.C. at 334-35, 777 S.E.2d at 278 (citation omitted). “A genuine issue of material
fact ‘is one that can be maintained by substantial evidence.’ ” Id. at 335, 777 S.E.2d
at 278 (quoting Dobson, 352 N.C. at 83, 530 S.E.2d at 835). “ ‘Substantial evidence is
such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion’ and means ‘more than a scintilla or a permissible inference.’ ” Id. at 335,
777 S.E.2d at 278-79 (quoting Thompson v. Wake Cty. Bd. of Educ., 292 N.C. 406,
414, 233 S.E.2d 538, 544 (1977)).
Plaintiff and defendants disagree about which party should have filed the 2006
and 2007 tax returns. Defendants produced documents allegedly demonstrating that
they provided plaintiff the completed 2006 and 2007 returns as well as personalized
instructions on how to file those returns. The documents contain handwritten notes
by defendants indicating that defendants hand-delivered the forms to plaintiff.
Defendants maintain that they only file their clients’ returns when specifically
requested to do so, as plaintiff did for the 2005 tax returns. Plaintiff, on the other
hand, stated in her deposition that she never received the completed returns or
instructions from defendants. Because defendants had filed her 2005 tax return and
plaintiff trusted that, as paid professionals, defendants would inform her when she
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needed to act, plaintiff believed defendants were likewise filing her tax returns for
2006 through 2009.
Furthermore, Towson’s ongoing work for, and communication with, plaintiff
throughout the disputed period of representation until the tax returns were actually
filed raise genuine issues of material fact regarding the nature of the relationship
between plaintiff and Towson and the corresponding duty. Thus, the claim for
fraudulent concealment survives summary judgment. The parties dispute the scope
of defendants’ contracted-for services and what constitutes defendants’ last act that
triggered the running of the statute of repose. Thus, summary judgment on the
application of the statute of repose under the circumstances presented here is
improper as well.
II.
“Fraud can . . . be broken into two categories, actual and constructive. Actual
fraud is the more common type, arising from arm’s length transactions.” Terry v.
Terry, 302 N.C. 77, 82, 273 S.E.2d 674, 677 (1981). Arm’s-length transactions
encompass “dealings between two parties who are not related or not on close terms
and who are presumed to have roughly equal bargaining power; not involving a
confidential relationship.” [A]rm’s-length, Black’s Law Dictionary 116 (8th ed. 2007).
“Transaction” read broadly encompasses an “act or an instance of conducting business
or other dealings,” especially “the formation, performance, or discharge of a contract.”
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Transaction, id. at 1535. To successfully assert an allegation of actual fraud, the
plaintiff must plead five elements: “(1) False representation or concealment of a
material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4)
which does in fact deceive, (5) resulting in damage to the injured party.” Watts v.
Cumberland Cty. Hosp. Sys., Inc., 317 N.C. 110, 116-17, 343 S.E.2d 879, 884 (1986)
(quoting Terry, 302 N.C. at 83, 273 S.E.2d at 677). “Additionally, any reliance on the
allegedly false representations must be reasonable.” Forbis v. Neal, 361 N.C. 519,
527, 649 S.E.2d 382, 387 (2007) (citation omitted). Whether each of the elements of
actual fraud and reasonable reliance are met are ordinarily questions for the jury
“unless the facts are so clear that they support only one conclusion.” See id. at 527,
649 S.E.2d at 387 (citation omitted).
“Constructive fraud arises where a confidential or fiduciary relationship exists,
and its proof is less ‘exacting’ than that required for actual fraud.” Watts, 317 N.C.
at 115-16, 343 S.E.2d at 884 (quoting Terry, 302 N.C. at 83, 273 S.E.2d at 677). “When
a fiduciary relation exists between parties to a transaction, equity raises a
presumption of fraud when the superior party obtains a possible benefit.” Id. at 116,
343 S.E.2d at 884 (citation omitted). To assert a cause of action for constructive fraud,
the plaintiff must allege facts and circumstances “(1) which created the relation of
trust and confidence, and (2) led up to and surrounded the consummation of the
transaction in which defendant is alleged to have taken advantage of his position of
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trust to the hurt of plaintiff.” Rhodes v. Jones, 232 N.C. 547, 549, 61 S.E.2d 725, 726
(1950).
“Though difficult to define in precise terms, a fiduciary relationship is
generally described as arising when ‘there has been a special confidence reposed in
one who in equity and good conscience is bound to act in good faith and with due
regard to the interests of the one reposing confidence.’ ” Dallaire v. Bank of Am., 367
N.C. 363, 367, 760 S.E.2d 263, 266 (2014) (quoting Green v. Freeman, 367 N.C. 136,
141, 749 S.E.2d 262, 268 (2013) (citations omitted)). All fiduciary relationships are
characterized by “a heightened level of trust and the duty of the fiduciary to act in
the best interests of the other party.” Dallaire, 367 N.C. at 367, 760 S.E.2d at 266.
Specifically, a fiduciary relationship arises whenever “there is confidence reposed on
one side[ ], and resulting domination and influence on the other.” Abbitt v. Gregory,
201 N.C. 577, 598, 160 S.E. 896, 906 (1931) (quoting 25 C.J. Fiduciary § 9, at 1119
(1921)).
Here plaintiff’s evidence, viewed in the light most favorable to plaintiff, raises
genuine issues of material fact regarding the fraudulent concealment claim based on
theories of both actual and constructive fraud. The record is replete with evidence
that indicates an ongoing professional relationship between plaintiff and defendants
until the tax returns were actually filed in September and October 2012. Despite the
continued requests and inquiries from plaintiff and Roddy, defendants failed to
provide the completed 2006 or 2007 tax returns for a year. Even after plaintiff
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Opinion of the Court
notified Towson of her intent to change accountants, at Towson’s request, plaintiff
and Towson proceeded as if the relationship were unchanged regarding the disputed
tax returns. Significantly, Towson electronically filed plaintiff’s 2010 federal return
on 21 November 2011, well after 27 September 2011 when plaintiff informed him she
was leaving the accounting firm. Towson even requested that plaintiff execute a
power of attorney to facilitate the continued representation, which she did.
Furthermore, at Towson’s request, plaintiff signed signature pages for the 2006 and
2007 tax returns so Towson could file them. Moreover, for months, Towson engaged
in communications with the IRS on plaintiff’s behalf, but falsely represented to
plaintiff and Roddy the nature, frequency, and content of those conversations. Yet
throughout these communications, Towson never informed plaintiff that the 2006 and
2007 tax returns were never filed, maintaining until the end that IRS processing
errors caused the problems. Plaintiff continued to place trust in Towson to work with
the IRS on her behalf to resolve the problems. Absent these misrepresentations,
plaintiff may have been able to resolve the failure to file the returns sooner and
without injury.
Taking the facts in the light most favorable to her, plaintiff has presented
adequate evidence of both actual and constructive fraud to survive summary
judgment. Plaintiff had an ongoing professional relationship with defendant related
to the preparation and filing of her delinquent tax returns. Defendants knowingly
misrepresented the status of the returns and negotiations with the IRS. The evidence
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could support a heightened relationship of trust needed for constructive fraud. At a
minimum, even if the parties’ dealings were determined to be at “arm’s-length,”
plaintiff has presented evidence to support her actual fraud claim. Her evidence
shows she reasonably relied on Towson to perform and complete his professional
services. Thus, taking the evidence in the light most favorable to the nonmoving
party, genuine issues of material fact exist. Because plaintiff’s claim for fraudulent
concealment survives summary judgment so does her claim for punitive damages.
Therefore, we reverse the decision of the Court of Appeals affirming the trial court’s
grant of summary judgment to defendants on plaintiff’s claims for fraudulent
concealment and punitive damages.
III.
We next consider whether the statute of repose bars plaintiff’s professional
negligence claim. We have consistently recognized that a party must initiate an
action within the time frame designated by a statute of repose. E.g., Hargett v.
Holland, 337 N.C. 651, 653, 447 S.E.2d 784, 786 (1994). “Unlike statutes of
limitations, which run from the time a cause of action accrues, ‘[s]tatutes of repose
. . . create time limitations which are not measured from the date of injury.’ ” Id. at
654, 447 S.E.2d at 787 (alterations in original) (quoting Trs. of Rowan Tech. Coll. v.
J. Hyatt Hammond Assocs., 313 N.C. 230, 234 n.3, 328 S.E.2d 274, 277 n.3 (1985));
accord Christie v. Hartley Constr., Inc., 367 N.C. 534, 539, 766 S.E.2d 283, 287 (2014)
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(“The time of the occurrence or discovery of the plaintiff’s injury is not a factor in the
operation of a statute of repose.”).
A statute of repose establishes “a condition precedent” which must be satisfied
“for a cause of action to be recognized. If the action is not brought within the specified
period, the plaintiff ‘literally has no cause of action. The harm that has been done is
. . . a wrong for which the law affords no redress.’ ” Hargett, 337 N.C. at 655, 447
S.E.2d at 787 (quoting Boudreau v. Baughman, 322 N.C. 331, 340-41, 368 S.E.2d 849,
857 (1988) (quoting Rosenberg v. Town of North Bergen, 61 N.J. 190, 199, 293 A.2d
662, 667 (1972))). “Thus, the repose serves as an unyielding and absolute barrier that
prevents a plaintiff’s right of action even before his cause of action may accrue . . . .”
Hargett, 337 N.C. at 655, 447 S.E.2d at 788 (quoting Black v. Littlejohn, 312 N.C. 626,
633, 325 S.E.2d 469, 475 (1985)). “The plaintiff has the burden of proving that a
statute of repose does not defeat the claim.” Christie, 367 N.C. at 539, 766 S.E.2d at
287 (citing Hargett, 337 N.C. at 654, 447 S.E.2d at 787).
For professional negligence claims, the statute of repose begins running at “the
last act of the defendant giving rise to the cause of action.” N.C.G.S. § 1-15(c) (2017).
To determine when the last act occurred, we consider the contractual relationship
between the parties and when the contracted-for services were completed. See
Hargett, 337 N.C. at 658, 447 S.E.2d at 789 (“[T]he contractual arrangement between
attorney and client . . . determine[s] the extent of the attorney’s duty to the client and
the end of the attorney’s professional obligation.”). Compare id. at 655, 657-58, 447
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S.E.2d at 788-89 (Attorney’s contracted-for duty involved simply preparing and
supervising the execution of a will.), with Sunbow Indus., Inc. v. London, 58 N.C.
App. 751, 753, 294 S.E.2d 409, 410, disc. rev. denied, 307 N.C. 272, 299 S.E.2d 219(1982) (Attorney’s contracted-for services imposed a duty to represent the plaintiff
during closing and a continuing duty to perfect plaintiff’s security interest by filing
the financing statement.).
Here plaintiff presented substantial evidence raising a genuine issue of
material fact regarding the scope of the parties’ contractual relationship and when
the corresponding last act occurred. Viewed in the light most favorable to the
nonmoving party, the parties’ agreement included both preparing and filing plaintiff’s
tax returns and negotiations with the IRS. Viewing the evidence of the contracted-
for services in the light most favorable to plaintiff, defendants’ last act did not occur
until September 2012 when Towson filed the 2006 and 2007 returns. Additionally,
plaintiff presented substantial evidence that defendants did not even prepare or
complete the 2006 and 2007 tax returns until defendants filed them. Thus, because
plaintiff presented substantial evidence of genuine issues of material fact regarding
when the statute of repose began to run, plaintiff’s professional negligence claim
survives summary judgment, and we affirm the holding of the Court of Appeals on
that issue.
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IV.
We therefore conclude that genuine issues of material fact exist regarding the
fraudulent concealment claim and the accompanying punitive damages claim, as well
as the triggering event for the running of the statute of repose, and that the trial
court erred in granting defendants’ motion for partial summary judgment.
Accordingly, the decision of the Court of Appeals is reversed in part and affirmed in
part, and this case is remanded to that court for further remand to the trial court for
proceedings consistent with this opinion.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
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Beasley, J., concurring in part and dissenting in part
Justice BEASLEY concurring in part and dissenting in part.
I agree with the holding of the majority that there are genuine issues of
material fact regarding (1) when plaintiff’s professional negligence claim accrued
under the statute of repose and (2) plaintiff’s fraudulent concealment claim under a
theory of actual fraud. Because plaintiff failed to plead a constructive fraud theory
supporting her claim for fraudulent concealment in her complaint, however, I would
hold that plaintiff is procedurally barred from asserting a constructive fraud theory
on remand from this Court.
While North Carolina is a “notice pleading” jurisdiction, requiring generally
that complaint allegations provide a “short and plain statement of the claim
sufficiently particular to give the court and the parties notice of the transactions,
occurrences, or series of transactions or occurrences, intended to be proved showing
that the pleader is entitled to relief,” N.C.G.S. § 1A-1, Rule 8(a)(1) (2017), plaintiff’s
allegations were insufficient to put defendants on notice of a constructive fraud
theory supporting plaintiff’s fraudulent concealment claim. Pleading standards for
fraud claims under North Carolina law are even more exacting. See id. Rule 9(b)
(2017) (requiring plaintiffs asserting fraud claims to plead “the circumstances
constituting fraud . . . with particularity”). As the majority recognizes, “[t]o assert a
cause of action for constructive fraud, the plaintiff must allege facts and
circumstances ‘(1) which created the relation of trust and confidence, and (2) led up
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Beasley, J., concurring in part and dissenting in part
to and surrounded the consummation of the transaction in which defendant is
alleged to have taken advantage of his position of trust to the hurt of plaintiff.’ ”
Rhodes v. Jones, 232 N.C. 547, 549, 61 S.E.2d 725, 726 (1950). Here, plaintiff failed
to plead facts with or without particularity supporting the existence of a
relationship of trust and confidence between plaintiff and defendants: she did not
plead the existence of a fiduciary relationship, or that she placed any special trust
or confidence in defendants beyond that which any client places in his or her
accountant, or that defendants owed her an independent duty to disclose that her
returns were not filed. Instead, plaintiff pleaded that defendant Towson “concealed
the fact that [her] 2006 and 2007 federal tax returns had not been filed with the
IRS,” that the “concealment was reasonably calculated to deceive” and “made with
the intent to deceive,” that she actually was deceived, and that, consequently, she
was damaged by defendants’ concealment. These are the classic elements of an
actual fraud theory for fraudulent concealment, but they fall short of putting
defendants on notice that plaintiff was claiming a constructive fraud theory.
Thus, when defendants moved for summary judgment on the plaintiff’s claim
for fraudulent concealment, plaintiff had no constructive fraud theory properly
before the trial court. Despite defendants’ repeated efforts to extinguish this would-
be claim on grounds of plaintiff’s procedural default, both in their arguments before
the trial court in response to plaintiff’s summary judgment arguments and in their
briefs to the Court of Appeals and this Court, the majority erroneously allows
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Beasley, J., concurring in part and dissenting in part
plaintiff to raise a new, unpleaded cause of action in response to defendant’s
summary judgment motion. Although I concur with the remainder of the majority’s
reasoning and holding, I dissent from the majority’s holding that plaintiff may
proceed on a constructive fraud theory of fraudulent concealment on remand.
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