Ward v. Fogel

NO. COA14-417

NORTH CAROLINA COURT OF APPEALS

Filed: 2 December 2014

JO ANN WARD,

Plaintiff,

v. Wake County
No. 11 CVS 4932
MARK E. FOGEL AND WILLIAM B.
WRIGHT, JR., as Co-Trustees under
certain trust agreements dated
February 1, 2005 and January 1,
2006; ROBERT E. WARD, III; and
ROBERT E. WARD, IV,

Defendants.

Appeal by plaintiff from order entered 2 December 2013 by

Judge Paul G. Gessner in Wake County Superior Court. Heard in

the Court of Appeals 23 September 2014.

Brady Morton, PLLC, by Travis K. Morton, for plaintiff-
appellant.

Ward and Smith, P.A., by Gary J. Rickner, for defendants-
appellees Mark E. Fogel and William B. Wright, Jr., co-
trustees.

Narron, O’Hale & Whittington, P.A., by Jason W. Wenzel, for
defendant-appellee Robert E. Ward, III.

Howard, Stallings, From & Hutson, P.A., by John N. Hutson,
Jr., for defendant-appellee Robert E. Ward, IV.

HUNTER, Robert C., Judge.
 -2-
Jo Ann Ward (“plaintiff”) appeals from an order granting

summary judgment in favor of defendants Robert E. Ward, III

(“Mr. Ward”); Robert E. Ward, IV (“Ward’s son”); and Mark E.

Fogel and William B. Wright, Jr., as co-trustees of the Robert

E. Ward, III Irrevocable Trust Agreement (“the REW trust”) and

the Ward Family Irrevocable Trust Agreement (“the WF trust”).

On appeal, plaintiff argues that the trial court erred in

granting summary judgment for defendants because: (1) North

Carolina superior court has subject matter jurisdiction over

this dispute; (2) plaintiff’s claims are not time-barred by the

statute of limitations; (3) genuine issues of material fact

exist as to plaintiff’s claims for fraudulent inducement,

constructive fraud, and breach of fiduciary duty; and (4) the

“divorce clause” in the REW trust is void as contrary to public

policy.

After careful review, we affirm the trial court’s order in

part, reverse the order in part, and remand for further

proceedings.

Background

Plaintiff and Mr. Ward are residents of Florida, where they

have both lived since approximately 2002. They married in North

Carolina on 4 April 1987, but separated on 9 October 2009. On 4
 -3-
June 2010, Mr. Ward filed an action against plaintiff for

divorce and equitable distribution in Broward County, Florida

(“the Florida divorce action”).

During the marriage, Mr. Ward and others formed a business

called Environmental Protection Services, Inc. (“EPS”) in West

Virginia. In 1997, after reacquiring a third owner’s stock, Mr.

Ward owned fifty percent of EPS. During deposition, Mr. Ward

testified that he remembered discussing with the EPS co-owner,

Keith Reid, how Mr. Reid’s ex-wife acquired EPS stock through

equitable distribution. On or about 1 February 2005, Mr. Ward

conveyed his fifty percent interest in EPS to the REW trust.

Mr. Wright, Mr. Ward’s friend and business associate, advised

him regarding the REW trust. At the time, Mr. Wright had been

helping Mr. Ward and plaintiff with their financial questions.

Mr. Wright introduced Mr. Ward to C. Wells Hall, III (“Mr.

Hall”), who was the attorney that Mr. Ward hired to draft the

REW trust.

Mr. Ward was the grantor of the REW trust. He transferred

his EPS stock into the trust, which contained a clause stating

that income would be provided to plaintiff as the beneficiary so

long as she remained married to Mr. Ward (“the divorce clause”).

Mr. Ward’s son and any grandchildren of Mr. Ward were the
 -4-
remaining beneficiaries. Mr. Wright and Mark Fogel were named

co-trustees of the REW trust. Mr. Hall testified in deposition

that the divorce clause was not included in the initial draft of

the REW trust but was inserted after having discussions with his

client, Mr. Ward. According to Mr. Ward, it was Mr. Hall’s idea

to include the divorce clause to protect his assets in the event

of divorce.

Plaintiff testified in deposition that she did not know

about either the divorce clause or the existence of the other

beneficiaries for the REW trust until she saw a copy of the

trust document for the first time in late 2009, after her

separation from Mr. Ward. All parties agree that she did not

participate in the drafting of the REW trust and was not

involved in the transfer of EPS shares by Mr. Ward into the

trust. She testified that Mr. Ward told her the purpose of the

REW trust was to protect EPS shares from claims by the

Environmental Protection Agency and other potential judgment

creditors. He also said that the trust would hold EPS stock and

that plaintiff would be the beneficiary.

After the creation of the REW trust, but before the parties

separated on 9 October 2009, checks written from the REW trust

were deposited into Mr. Ward’s and plaintiff’s joint bank
 -5-
account. Plaintiff signed forms authorizing these direct

deposits. However, plaintiff testified that she never saw bank

statements from this account and was not involved in the

family’s finances. Rather, Mr. Ward and Mr. Wright controlled

the family’s financial matters and paid their bills, with Mr.

Wright having the authority to write checks from the joint

account into which distributions from the REW trust were

deposited.

In 2006, the WF trust was created with the assistance of

Mr. Wright and Mr. Hall. To create this trust, Mr. Ward

transferred interests in a number of limited liability companies

spun off from EPS to plaintiff, who was told by Mr. Ward to

immediately transfer these interests into the WF trust. Thus,

plaintiff was the grantor of the WF trust, and Mr. Ward was its

beneficiary. Although Mr. Hall testified that he typically

represents the grantor of a trust, his client for purposes of

drafting the WF trust was Mr. Ward, not plaintiff. He did not

recall ever providing plaintiff with drafts of the WF trust or

discussing the terms of the trust with her. However, plaintiff

testified that she thought Mr. Hall represented her interests in

the creation of the WF trust. She also testified that Mr. Ward

told her that it was “her turn” to be the grantor of a trust and
 -6-
for him to be the beneficiary, like an inverse of the REW trust.

However, Mr. Ward did not disclose the existence of the divorce

clause in the REW trust, and no divorce clause was included in

the WF trust. Mr. Hall testified that because grantors of a

trust retain certain powers of control, the grantor is still

liable for payment of taxes on the trust’s income. Plaintiff

alleges that this tax obligation was not explained to her before

she transferred the spun-off LLC interests into the WF trust and

became the trust’s grantor.

Plaintiff filed this cause of action in Wake County

Superior Court on 29 March 2011. The complaint sets forth the

following claims: (1) fraudulent inducement; (2) constructive

fraud; (3) and breach of fiduciary duty; it also requests the

creation of a constructive trust and the termination of the REW

and WF trusts. Mr. Ward filed a motion for summary judgment as

to all claims on 7 October 2013, and the motion was granted in

favor of all defendants on 2 December 2013. However, the trial

court failed to specify in its order the grounds upon which it

granted summary judgment for defendants, and no transcript has

been produced of the hearing on the motion for summary judgment.

Plaintiff filed timely notice of appeal.

Discussion
 -7-
I. Subject Matter Jurisdiction

Plaintiff first argues that the trial court erred to the

extent that it granted summary judgment for defendants on the

ground that Wake County Superior Court lacked subject matter

jurisdiction to resolve the dispute. We agree.

Jurisdiction is “the power to hear and to determine a legal

controversy; to inquire into the facts, apply the law, and to

render and enforce a judgment.” High v. Pearce, 220 N.C. 266,

271, 17 S.E.2d 108, 112 (1941) (citation and internal quotation

marks omitted). “Subject matter jurisdiction, a threshold

requirement for a court to hear and adjudicate a controversy

brought before it, is conferred upon the courts by either the

North Carolina Constitution or by statute.” In re M.B., 179

N.C. App. 572, 574, 635 S.E.2d 8, 10 (2006) (citations and

internal quotation marks omitted). “In reviewing a question of

subject matter jurisdiction, our standard of review is de novo.”

Raleigh Rescue Mission, Inc. v. Bd. of Adjust. of Raleigh, 153

N.C. App. 737, 740, 571 S.E.2d 588, 590 (2002).

Here, defendants argue that Wake County Superior Court

lacked subject matter jurisdiction to hear this controversy for

two reasons: (1) proper jurisdiction to equitably distribute

marital property lies exclusively in the Florida courts, since
 -8-
Mr. Ward filed the Florida divorce action before plaintiff filed

the current suit; and (2) even if North Carolina is the proper

state in which to bring suit, the district court, and not the

superior court, has jurisdiction over plaintiff’s claims for

marital misconduct. For the following reasons, we find these

arguments unpersuasive.

First, defendants rely on Beers v. Beers, 724 So.2d 109,

116-17 (Fla. Dist. Ct. App. 1998) for the proposition that

“claims for alleged dissipation of marital assets must be

settled in the divorce setting of equitable distribution, not in

a collateral proceeding.” In Beers, the husband filed for

dissolution of marriage and equitable distribution against the

wife. Id. at 112. In response, the wife filed a counter

petition alleging fraud, constructive fraud, and breach of

fiduciary duty, based on the theory that the husband had

secretly depleted marital assets in furtherance of an adulterous

relationship throughout the marriage. Id. The Florida

appellate court held that the judgment entered in favor of the

wife on these claims was properly vacated because “[w]here no

specific transaction or agreement exists between the spouses,

the dissolution of marriage statute . . . provides the exclusive

remedy where one’s spouse has intentionally dissipated marital
 -9-
property during the marriage. . . . In our view, there simply

is no cognizable tort claim for constructive fraud for a

concealed dissipation of marital assets.” Id. at 117.

Upon careful review, we find Beers to be distinguishable

and inapposite. The Florida Court specifically held that “where

no specific transaction or agreement exists between the

spouses,” the statute controlling equitable distribution

provides the exclusive remedy for an alleged dissipation of

marital property. There was a discrete transaction and

agreement here that distinguishes this case from Beers. It is

undisputed that Mr. Ward transferred his fifty percent stake in

a number of LLC spinoffs from the EPS stock to plaintiff, with

an agreement that plaintiff would immediately transfer those

assets into the WF trust, for which Mr. Ward was the beneficiary

and plaintiff was the grantor. Thus, there is a “specific

transaction and agreement” between the spouses here that is the

subject of plaintiff’s claims for fraudulent inducement,

constructive fraud, and breach of fiduciary duty that did not

exist in Beers. Based on this material distinction, Beers is

not controlling, and the remedy for plaintiff’s claims is not

necessarily the Florida equitable distribution action based on

that holding.
 -10-
Furthermore, defendants argue that North Carolina courts

should refrain from exercising jurisdiction where the estate is

already subject to the proper jurisdiction of the Florida court.

Defendants claim that “[t]he res of the marital property is

properly subject to the jurisdiction of the Florida court

because [Mr. Ward] and [plaintiff] are longtime residents of

Florida.” Therefore, defendants argue that because “the relief

sought would require the [North Carolina] court to control a

particular property or res over which another court already has

jurisdiction,” Whitmire v. Cooper, 153 N.C. App. 730, 734, 570

S.E.2d 908, 911 (2002) (quotation marks omitted), Wake County

Superior Court should abstain from exercising jurisdiction.

The flaw in this argument is the assumption that the

Florida court has proper jurisdiction over the trusts, which are

the subject of plaintiff’s cause of action. It is well-settled

in Florida that “the trial court [in a divorce proceeding] does

not have jurisdiction to adjudicate property rights of non-

parties.” Ray v. Ray, 624 So.2d 1146, 1148 (Fla. Dist. Ct. App.

1993); see also Mann v. Mann, 677 So.2d 62, 63 (Fla. Dist. Ct.

App. 1996) (holding that because title to marital property was

held by an individual not a party to the divorce proceedings,

the trial court lacked jurisdiction to control that subject
 -11-
property). Here, neither Mr. Wright nor Mr. Fogel, the trustees

of both the REW trust and the WF trust, were named as parties in

the Florida divorce action. Thus, under Ray and Mann, the

Florida trial court does not have jurisdiction to adjudicate the

property of the trusts. Furthermore, where the third party

controlling alleged marital property is a trust, the Florida

court must exercise personal jurisdiction over the trustees in

order to affect trust property. See Hanson v. Denckla, 357 U.S.

235, 245, 2 L. Ed. 2d 1283 (1958) (“Florida adheres to the

general rule that a trustee is an indispensable party to

litigation involving the validity of the trust. In the absence

of such a party a Florida court may not proceed to adjudicate

the controversy.”). As both Mr. Wright and Mr. Fogel are

residents of North Carolina and the situs of the trust is in

North Carolina, there is no indication in the record that the

Florida court would be able to exercise personal jurisdiction

over these parties in order to enter a ruling affecting the

trust property. See In re Estate of Stisser, 932 So.2d 400, 402

(Fla. Dist. Ct. App. 2006) (holding that the law requires the

court to have personal jurisdiction over the trustees of a trust

in order to enter a ruling affecting the corpus of the trust).
 -12-
Defendants also contend that even if this action could be

brought in North Carolina, the district court, and not the

superior court, has exclusive jurisdiction. In support of this

argument, Mr. Ward cites N.C. Gen. Stat. § 7A-244 (2013), which

provides that the district court has jurisdiction over

proceedings for divorce and equitable distribution of property.

However, the North Carolina district courts only have

jurisdiction over divorce and equitable distribution when the

marital relationship exists in North Carolina and at least one

party is a North Carolina resident. N.C. Gen. Stat. § 1-

75.4(12) (2013). Because plaintiff and Mr. Ward have been

Florida residents since 2002, the district court would have

lacked jurisdiction over any potential divorce or equitable

distribution claim that plaintiff could have potentially

brought.

Nevertheless, defendants contend that the proper means of

seeking the relief requested in plaintiff’s complaint is through

the equitable distribution process. In support of this

argument, defendants rely on Garrison v. Garrison, 90 N.C. App.

670, 369 S.E.2d 628 (1988), and Hudson Int’l, Inc. v. Hudson,

145 N.C. App. 631, 550 S.E.2d 571 (2001). In each of these

cases, this Court concluded that the superior court lacked
 -13-
subject matter jurisdiction to enter orders affecting the same

marital property that was already the subject of previous

equitable distribution claims properly brought in district

court. See Garrison, 90 N.C. App. at 672, 369 S.E.2d at 629

(partition action to divide marital home improperly brought in

superior court where the marital home was already part of a

pending equitable distribution claim); Hudson, 145 N.C. App. at

636-37, 550 S.E.2d at 573-74 (declaratory action brought in

superior court by third parties concerning ownership of real

property that was the subject of a prior equitable distribution

action in district court held properly dismissed). However,

this Court subsequently noted that “[a]t the core of Garrison

and Hudson were two principles: (1) the same property was the

subject of both the superior and district court actions, and (2)

the relief sought and available was similar in each suit.”

Burgess v. Burgess, 205 N.C. App. 325, 328-29, 698 S.E.2d 666,

669 (2010) (emphasis added).

In Burgess, the Court analyzed against the backdrop of

Garrison and Hudson a wife’s claims brought in superior court

against her husband for divestiture of stock, breach of

fiduciary duty, accounting, and inspection, because an equitable

distribution suit between the husband and wife was already
 -14-
pending in district court. Id. In its analysis, the Court

focused on the similarity of the relief sought and available in

each action to determine whether the wife’s separate claims in

superior court could be “subsumed” into the equitable

distribution action in district court. Id. at 329, 698 S.E.2d

at 670. Most relevant to the analysis here is the Burgess

Court’s holding that the wife’s derivative claim premised on

breach of fiduciary duty was not sufficiently similar to the

equitable distribution action to warrant dismissal from superior

court. Id. at 332, 698 S.E.2d at 671. The Court identified the

following differences between the wife’s derivative claim

premised on breach of fiduciary duty and the equitable

distribution action: (1) the wife was entitled to a jury trial

for the derivative suit, but was barred from having a jury trial

in equitable distribution; (2) the most that the wife could

receive in equitable distribution was a larger portion of

marital or divisible property, whereas success on the derivative

suit opened access to the husband’s separate property in the

form of damages; and (3) the district court could not obtain

jurisdiction over plaintiff’s derivative suit by statute. Id.

at 331-32, 698 S.E.2d at 671. Therefore, the Court held that

because the district court would be unable to grant the wife the
 -15-
relief she sought, the superior court had subject matter

jurisdiction to decide her derivative claim. Id.

The reasoning in the Burgess Court’s holding supports

plaintiff’s argument that Wake County Superior Court has subject

matter jurisdiction over the claims pertaining to the REW trust

and the WF trust. First, there is no indication that either of

the courts that defendants claim to have more “proper”

jurisdiction than Wake County Superior Court in fact have

jurisdiction over the trusts. As discussed above, the Florida

court does not appear to have personal jurisdiction over the

trustees, and the trustees have not been named as parties in the

divorce action; therefore, the Florida court lacks jurisdiction

to adjudicate the rights pertaining to trust property. See,

e.g., In re Estate of Stisser, 932 So.2d at 402. Additionally,

the North Carolina district court does not have jurisdiction

over a potential equitable distribution claim because plaintiff

and Mr. Ward have been Florida residents since 2002.

Even if the North Carolina district court did have

jurisdiction over the parties, an equitable distribution

proceeding would not be able to provide plaintiff the relief she

requests. Plaintiff, like the wife in Burgess, has demanded a

jury trial, to which she would be denied access in district
 -16-
court. See Kiser v. Kiser, 325 N.C. 502, 511, 385 S.E.2d 487,

492 (1989) (holding that no jury trial is available in an

equitable distribution action). Additionally, like the wife in

Burgess, plaintiff is seeking compensatory damages in excess of

$10,000.00, in addition to punitive damages, on her claims for

breach of fiduciary duty, constructive fraud, and fraudulent

inducement. If she is successful on these claims, she may get a

judgment which could be enforced against Mr. Ward’s separate

property. However, in the equitable distribution claim, the

most that plaintiff would be able to win is a favorable

distribution of marital or divisible assets. Therefore, as in

Burgess, the relief plaintiff seeks in superior court would be

unavailable in district court, leading us to conclude that Wake

County Superior Court has proper jurisdiction to adjudicate

these matters.

Thus, for the foregoing reasons, we conclude that the trial

court erred to the extent that it granted defendants’ motion for

summary judgment on the ground that Wake County Superior Court

lacked subject matter jurisdiction.

II. Statute of Limitations

Plaintiff next argues that the trial court erred to the

extent that it granted summary judgment in favor of defendants
 -17-
for plaintiff’s failure to timely file this cause of action. We

agree.

Summary judgment entered in favor of a defendant based on

the statute of limitations “is proper when, and only when, all

the facts necessary to establish the limitation are alleged or

admitted, construing the non-movant’s pleadings liberally in his

favor and giving him the benefit of all relevant inferences of

fact to be drawn therefrom.” Huss v. Huss, 31 N.C. App. 463,

468, 230 S.E.2d 159, 163 (1976).

Plaintiff’s claim for constructive fraud based on a breach

of fiduciary duty is subject to the ten-year statute of

limitations under N.C. Gen. Stat. § 1-56 (2013). Adams v.

Moore, 96 N.C. App. 359, 362, 385 S.E.2d 799, 801 (1989).

Defendants have failed to argue in their briefs how this claim

is time-barred by the ten-year statute of limitations, and there

appears to be no legal support for such a contention.

Accordingly, we conclude that the trial court erred to the

extent that it dismissed plaintiff’s claim for constructive

fraud on the basis of the statute of limitations.

Additionally, for a claim based on fraud, the statute of

limitations is three years from the date that the cause of

action accrues. “The cause of action shall not be deemed to
 -18-
have accrued until the discovery by the aggrieved party of the

facts constituting the fraud[.]” N.C. Gen. Stat. § 1-52(9)

(2013). “Discovery” is defined as actual discovery or the time

when the fraud should have been discovered in the exercise of

due diligence. See Hyde v. Taylor, 70 N.C. App. 523, 528, 320

S.E.2d 904, 908 (1984).

Whether a plaintiff has exercised due
diligence is ordinarily an issue of fact for
the jury absent dispositive or conclusive
evidence indicating neglect by the plaintiff
as a matter of law. In other words, when
there is a dispute as to a material fact
regarding when the plaintiff should have
discovered the fraud, summary judgment is
inappropriate, and it is for the jury to
decide if the plaintiff should have
discovered the fraud. Failure to exercise
due diligence may be determined as a matter
of law, however, where it is clear that
there was both capacity and opportunity to
discover the mistake.

Spears v. Moore, 145 N.C. App. 706, 708-09, 551 S.E.2d 483, 485

(2001) (citation omitted).

Defendants argue that plaintiff failed to exercise due

diligence as a matter of law. They contend that because

plaintiff filed her complaint on 29 March 2011, more than three

years after she should have known about the alleged fraud, she

is time-barred by the statute of limitations. We find this

argument unpersuasive. Plaintiff testified that she did not
 -19-
have knowledge of the terms of the REW trust until after she and

Mr. Ward separated in October 2009. This claim was corroborated

by the fact that Mr. Ward admitted that plaintiff was excluded

from the drafting of the trusts and was uninvolved with the

couple’s financial affairs. Importantly, in discussing

plaintiff’s involvement in the drafting of the REW trust, Mr.

Hall testified that he “wouldn’t even consider” discussing the

terms of a trust with the beneficiary because the grantor “may

not even want the beneficiary . . . to even know the trust

exists[.]” Mr. Ward’s and Mr. Hall’s open exclusion of

plaintiff in the drafting of the REW trust undercuts their

argument that due diligence required her to seek the document

out on her own accord and review it. “[C]onstruing the non-

movant’s pleadings liberally in [her] favor and giving [her] the

benefit of all relevant inferences of fact to be drawn

therefrom,” Huss, 31 N.C. App. at 468, 230 S.E.2d at 163, the

record does not demonstrate plaintiff’s lack of diligence as a

matter of law. Accordingly, the trial court erred to the extent

that it granted summary judgment in defendants’ favor on this

ground.

III. Substantive Claims
 -20-
Plaintiff next argues that the trial court erred by

concluding that no genuine issues of material fact exist and

defendants are entitled to judgment as a matter of law on

plaintiff’s substantive claims for fraudulent inducement,

constructive fraud, and breach of fiduciary duty. We agree with

plaintiff’s arguments regarding the WF trust, but we affirm the

trial court’s granting of summary judgment for defendants on any

claims pertaining to the REW trust.

A. The REW Trust

First, we hold that the trial court did not err by granting

summary judgment in favor of defendants on plaintiff’s claims

for breach of fiduciary duty and constructive fraud as they

relate to the REW trust. Under the Uniform Trust Code, a trust

is voidable “to the extent that its creation was induced by

fraud, duress, or undue influence.” N.C. Gen. Stat. § 36C-4-406

(2013). The elements of a claim of constructive fraud require:

“(1) a relationship of trust and confidence, (2) that the

defendant took advantage of that position of trust in order to

benefit himself, and (3) that plaintiff was, as a result,

injured.” White v. Consol. Planning, Inc., 166 N.C. App. 283,

294, 603 S.E.2d 147, 156 (2004) (citing Sterner v. Penn, 159

N.C. App. 626, 631, 583 S.E.2d 670, 674 (2003)), disc. review
 -21-
denied, 359 N.C. 286, 610 S.E.2d 717 (2005). “‘[A]n essential

element of constructive fraud is that defendants sought to

benefit themselves in the transaction.’” Sterner, 159 N.C. App.

at 631, 583 S.E.2d at 674 (quoting State ex rel. Long v. Petree

Stockton, L.L.P., 129 N.C. App. 432, 445, 499 S.E.2d 790, 798

(1998)). Like constructive fraud, “[a] claim for breach of

fiduciary duty requires the existence of a fiduciary

relationship.” White, 166 N.C. App. at 293, 603 S.E.2d at 155;

see also Keener Lumber Co. v. Perry, 149 N.C. App. 19, 28, 560

S.E.2d 817, 823 (existence of fiduciary duty is essential

element of constructive fraud claim), disc. review denied, 356

N.C. 164, 568 S.E.2d 196 (2002). Although “the relationship

between husband and wife is the most confidential of all

relationships,” our Courts have found that a spouse only

breaches a fiduciary duty owed to the other spouse “within the

context of a distinct agreement or transaction between the

spouses.” Smith v. Smith, 113 N.C. App. 410, 413, 438 S.E.2d

457, 459 (1994).

As plaintiff concedes, she is merely the beneficiary of the

REW trust and was not induced into agreeing to its terms. Thus,

the claim for fraudulent inducement in the complaint only

applies to the WF trust, not the REW trust. Although Mr. Ward
 -22-
and Mr. Hall included the divorce clause in the REW trust to

divest plaintiff of beneficiary rights in the event of divorce,

plaintiff cites no authority, and we find none, indicating that

the grantor of a trust owes a duty to the beneficiary of a trust

to refrain from including such clauses that may divest the

beneficiary’s rights upon the happening of a certain event.

Because plaintiff’s claims regarding the REW trust do not arise

“within the context of a distinct agreement or transaction

between the spouses,” Smith, 113 N.C. App. at 413, 438 S.E.2d at

459, there was no fiduciary duty owed to plaintiff sufficient to

survive summary judgment on her claims for constructive fraud

and breach of fiduciary duty.

B. The WF Trust

In contrast, taking the evidence in the light most

favorable to the non-moving party, Huss, 31 N.C. App. at 468,

230 S.E.2d at 163, we hold that plaintiff has forecast

sufficient evidence regarding the creation of the WF trust to

survive summary judgment on her claims of fraudulent inducement,

constructive fraud, and breach of fiduciary duty.

“The essential elements of fraud [in the inducement] are:

(1) false representation or concealment of a material fact, (2)

reasonably calculated to deceive, (3) made with intent to
 -23-
deceive, (4) which does in fact deceive, (5) resulting in damage

to the injured party.” Media Network, Inc. v. Long Haymes Carr,

Inc., 197 N.C. App. 433, 453, 678 S.E.2d 671, 684 (2009).

Mr. Ward told plaintiff that it was “her turn” to be the

grantor of the WF trust and indicated that the WF trust and the

REW trust were merely the inverse of each other regarding which

party was to be the grantor and beneficiary, despite the fact

that the WF trust did not contain a divorce clause and the REW

trust did. Thus, there was a misrepresentation or concealment.

Furthermore, unlike in the creation of the REW trust, Mr. Ward

owed plaintiff a fiduciary duty to disclose all material

information in the creation of the WF trust. “A duty to

disclose arises where a fiduciary relationship exists between

the parties to a transaction. The relationship of husband and

wife creates such a duty.” Sidden v. Mailman, 150 N.C. App.

373, 376, 563 S.E.2d 55, 58 (2002) (citation and quotation marks

omitted). Because Mr. Ward transferred his LLC interests to

plaintiff, who was then bidden to transfer those interests to

the WF trust as the grantor of the trust, there was a specific

transaction that produced a fiduciary relationship between Mr.

Ward and plaintiff as husband and wife. The materiality of

misrepresentations or concealments is a factual issue left for
 -24-
the jury, Latta v. Rainey, 202 N.C. App. 587, 599, 689 S.E.2d

898, 909 (2010).

Additionally, whether the representations or concealments

were calculated or intended to deceive are questions of fact

generally left for the jury if the circumstances could

demonstrate fraudulent intent. Latta, 202 N.C. App. at 600, 689

S.E.2d at 909. We believe such circumstances are apparent here.

Mr. Ward knew his former business partner had lost much of his

EPS stock to his ex-wife during a divorce, he inserted the

divorce clause into the REW trust, and he transferred his own

property to plaintiff with instructions for her to then transfer

those assets into the WF trust, which did not have a divorce

clause, for which Mr. Ward was the beneficiary. Plaintiff and

Mr. Ward agreed that plaintiff never saw a copy of the REW trust

during the marriage, she did not participate in the drafting of

the trusts, and she generally left the handling of the couple’s

assets to Mr. Ward and Mr. Wright. She also testified that she

trusted her husband to look after her best interests during the

marriage. Taking this evidence in the light most favorable to

plaintiff, we believe that the circumstances could demonstrate

fraudulent calculation and intent sufficient to go to the jury.

See id.
 -25-
Finally, the evidence shows that plaintiff has suffered

harm as a result of her reliance on Mr. Ward’s representations

or concealment because she has a continuing tax burden relating

to the WF trust as its grantor.

Accordingly, because plaintiff forecast evidence

establishing each element of fraudulent inducement relating to

the creation of the WF trust, we conclude that the trial court

erred by granting summary judgment for defendants on this claim.

Because constructive fraud and breach of fiduciary duty are less

demanding causes of action than fraudulent inducement, and the

essential elements of each overlap, we further hold that

plaintiff has presented sufficient evidence to survive

defendants’ motion for summary judgment on the remaining claims

related to the WF trust. See Terry v. Terry, 302 N.C. 77, 83,

273 S.E.2d 674, 677 (1981); Ellison v. Alexander, 207 N.C. App.

401, 408, 700 S.E.2d 102, 108 (2010).

IV. Divorce Clause

Plaintiff’s final argument on appeal is that the trial

court erred by granting summary judgment in favor of defendants

because the “divorce clause” in the REW trust is void as

contrary to public policy. We disagree.
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“A trust may be created only to the extent that its

purposes are lawful, not contrary to public policy, and possible

to achieve.” N.C. Gen. Stat. § 36C-4-404. Plaintiff contends

that because the REW trust was funded with marital property, the

divorce clause would “circumvent” the parties’ prenuptial

agreement as to distribution of marital property. We take no

position as to whether the EPS stock was separate or marital

property. Rather, we reject plaintiff’s contention that the

divorce clause runs afoul of public policy. North Carolina law

already allows for certain rights to terminate upon divorce,

such as those in a will. See N.C. Gen. Stat. § 31-5.4 (2013).

In contrast, the commentary to the Restatement (Second) of

Trusts illustrates the types of divorce clauses that may

contravene public policy. For example, it may be unlawful for a

trust to contain a provision for the payment of a sum of money

to a beneficiary if he or she were to procure a divorce, because

“enforcement would tend to the disruption of the family, by

creating an improper motive for terminating the family

relation.” Restatement (Second) of Trusts § 62 comment e.

Here, rather than serving to disrupt the family unit, the

divorce clause in the REW trust incentivized plaintiff to remain
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married to Mr. Ward so that she may continue to enjoy the

distributions from the REW trust as its beneficiary.

Furthermore, some estate planning form manuals recommend

using similar divorce clauses if the grantor so chooses. See G.

Holding and C. Reid, Estate Planning Forms Manual, 8-43 (BB&T

2011) (“If my wife and I become divorced or legally separated,

she shall be deemed deceased for all purposes of this Trust.”).

We agree with defendants that a ruling that the divorce clause

here is void as against public policy may disrupt the lives of

North Carolina citizens who have already planned their estates

based on similar clauses. This argument is overruled.

Conclusion

For the foregoing reasons, we hold that the trial court

erred by granting summary judgment for defendants on plaintiff’s

claims related to the WF trust. However, we affirm summary

judgment for defendants on the claims related to the REW trust.

AFFIRMED IN PART; REVERSED IN PART; REMANDED.

Judges DILLON and DAVIS concur.