Crogan v. Crogan

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.
 -4-
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
 -5-
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
 -7-
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”
 -8-
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
 -9-
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.
 -10-
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.