Jennings v. Lindsey

318 S.E.2d 318, 69 N.C. App. 710, 1984 N.C. App. LEXIS 3586

• Court: Court of Appeals of North Carolina
• Decided: August 7, 1984
• Docket: 8330SC684
• Status: Published

Opinion

EAGLES, Judge.

Defendants contend that this action is barred by the statute of limitations. Plaintiffs urge that under the facts of this case, the statute of limitations does not bar their claims of fraud. We agree with plaintiffs.

I

We note first that defendants’ motion to dismiss was considered by the trial court as having been brought under G.S. 1A-1, Rule 8(c). Rule 8(c) is limited by its own terms to responsive pleadings. Defendants’ motion here was made and granted prior to their filing any responsive pleading.

Dickens v. Puryear, 302 N.C. 437, 276 S.E. 2d 325 (1981), provides that “a party whose responsive pleading is not yet due may by motion for summary judgment and in support of the motion raise an affirmative defense to an asserted claim before the party pleads responsively to the claim.” Id. at 442, 276 S.E. 2d at 329. In that holding, our Supreme Court noted that this practice was consistent with the federal courts. See 2A Moore’s Fed. Practice § 8.28 (2d ed. 1980). Therefore, defendants’ motion to dismiss was properly before the court as a motion for summary judgment under G.S. 1A-1, Rule 56. Since plaintiffs’ complaint was the only material before the trial court, the motion was no different in effect from a motion to dismiss for failure to state a claim for relief under G.S. 1A-1, Rule 12(b)(6). Shoffner Industries, Inc. v. Construction Co., 42 N.C. App. 259, 257 S.E. 2d 50, disc. rev. denied, 298 N.C. 296, 259 S.E. 2d 301 (1979).

Since defendants’ motion is essentially one under G.S. 1A-1, Rule 12(b)(6), to dismiss plaintiffs’ complaint for failure to state a claim for relief, the issues before the court are whether the complaint alleges the elements of at least some legally recognized claim and whether it provides sufficient notice of the events giving rise to the claim to enable the defendants to understand and respond to it. Orange Co. v. Dept. of Transportation, 46 N.C. App. 350, 265 S.E. 2d 890, rev. denied, 301 N.C. 94, — S.E. 2d — (1980). The complaint should be dismissed if it appears that plaintiffs are entitled to no relief under any set of facts that could be proven or if the complaint discloses on its face some fact that will necessarily defeat the claim. Id. The allegations in the complaint must be taken as true. Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E. 2d 282 (1976).

G.S. 1-46, in conjunction with G.S. 1-52(9), provides that “an action . . . [f]or relief on the grounds of fraud or mistake” must be commenced within three years and that the “cause of action shall not be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake.” In considering the trial court’s dismissal of plaintiffs’ fraud claims, Vail v. Vail, 233 N.C. 109, 63 S.E. 2d 202 (1951), is instructive. Writing for the Supreme Court, Justice Johnson observed:

Fraud has no all-embracing definition. Because of the multifarious means by which human ingenuity is able to devise means to gain advantages by false suggestions and concealment of the truth, and in order that each case may be determined on its own facts, it has been wisely stated “that fraud is better left undefined,” lest, as Lord Hardwicke put it, “the craft of men should find a way of committing fraud which might escape a rule or definition.” . . . However, in general terms, fraud may be said to embrace “all acts, omissions, and concealments involving a breach of legal or equitable duty and resulting in damage to another or the taking of undue or unconscientious advantage of another.”

Id. at 113, 63 S.E. 2d at 205 (citations omitted).

Because fraud is difficult to define, it is likewise difficult to establish with certainty when the statute of limitations on a claim of fraud begins to run. Vail v. Vail holds that where a person is aware of facts and circumstances which, in the exercise of due care, would enable him or her to learn of or discover the fraud, the fraud is discovered for purposes of the statute of limitations. “[T]he law regards the means of knowledge as the knowledge itself.” Id. at 116, 63 S.E. 2d at 207. See also Wilson v. Crab Orchard Dev. Co., 276 N.C. 198, 171 S.E. 2d 873 (1970). B-W Acceptance Corp. v. Spencer, 268 N.C. 1, 149 S.E. 2d 570 (1966); Shepherd v. Shepherd, 57 N.C. App. 680, 292 S.E. 2d 169 (1982). The existence and nature of a confidential relationship between the parties to a transaction may excuse a failure to use due diligence. Bennett v. Anson Bank and Trust Co., 265 N.C. 148, 143 S.E. 2d 312 (1965) (partnership); Vail v. Vail, supra (mother-son). However, a failure to use due diligence is not always excused by the existence of such a relationship. Shepherd v. Shepherd, supra.

Ill

The only pleadings before the trial court here were plaintiffs’ complaint and defendants’ motion. The complaint appears to establish a prima facie case of fraud. See Johnson v. Phoenix Mutual Ins. Co., 300 N.C. 247, 266 S.E. 2d 610 (1980) (summary judgment in actions for fraud). In the complaint, plaintiffs describe the allegedly fraudulent acts, disclosing that those acts occurred in 1979. Plaintiffs assert, however, that they did not discover the alleged fraud until September 1981. Defendants’ motion asserts the three year statute of limitations in bar of plaintiffs’ claims, arguing that the acts complained of occurred more than three years prior to the filing of the action and that plaintiffs should have discovered the alleged fraud at that time.

The applicable statute of limitations runs from the point when the fraud was, or should have been, discovered. Vail v. Vail, supra. We believe that plaintiffs’ assertion that they did not discover the fraud until September of 1981 is sufficient to establish the approximate date from which the statute of limitations began to run on their claims. Defendants’ unsupported assertion to the contrary merely creates a conflict that, in the procedural context of this case, must be resolved in plaintiffs’ favor. Durham v. Vine, 40 N.C. App. 564, 253 S.E. 2d 316 (1979).

Moreover, plaintiffs have alleged the existence of a special relationship between themselves and defendants that could excuse their failure to exercise due diligence. Defendants were plaintiffs’ accountants. By virtue of this relationship, plaintiffs reposed a certain amount of trust and confidence in defendants and even executed a power of attorney in favor of defendant Lindsey. The fact that plaintiffs terminated their business relationship with Masters Lumber Company in August of 1979 does not mean that they terminated their special relationship with defendants as their accountants. Nor does termination of the business relationship with Masters Lumber Company mean that there was no longer a business relationship between plaintiffs and the individual defendants that could be shown to excuse plaintiffs’ failure to exercise due diligence. Accordingly, we hold that plain tiffs’ action has not been shown to be barred by the statute of limitations.

IV

Plaintiffs also assign as error the dismissal of the fifth and sixth counts of their complaint, the claims of unfair and deceptive trade practice. For the reasons set forth above, we hold that their claims are not barred by the statute of limitations and that they were incorrectly dismissed. We note further that G.S. 75-16.2 provides a four year statute of limitations for actions arising under G.S. 75-1 et seq., dealing with unfair trade practices. The fifth and sixth claims are based on the same facts that plaintiffs alleged in support of their fraud claims. Even if the fraud claims were barred by the three year limitation of G.S. 1-52, the unfair trade practice claims, being controlled by a four year statute, would not necessarily be barred.

For the reasons set forth above, the order of the trial court dismissing plaintiffs’ action is

Reversed.

Chief Judge VAUGHN and Judge BRASWELL concur.