The plaintiff appealed from an order dismissing his amended complaint against the defendant on the basis that his six claims for relief are either barred by the applicable statutes of limitation or are within the exclusive jurisdiction of the clerk of court. The Court of Appeals affirmed.
This appeal arose out of a dispute between brother and sister regarding the distribution of their mother's assets before and after her death. The parties' mother executed a last will and testament in 2002 appointing the defendant executor of her estate and deviding all of her property equally to her two children, the plaintiff and defendant. Subsequently, she executed a durable power of attorney appointing the defendant as her attorney-in-fact. The statutory form authorized the defendant to make gifts herself as the named attorney-in-fact in accordance with the mother's history of making or joining in the making of lifetime gifts. Thereafter, acting as the parties' mother's attorney-in-fact, the defendant executed a general warranty deed conveying the disputed real estate ("the real property") from her mother to herself for no taxable consideration.
The parties' mother subsequently passed in 2010. The plaintiff alleged that mother owned substantial personal property at the time of her death, which should have been divided equally between the parties as provided by their mother's will. However, The defendant did not apply to be appointed executor of their mother's estate at her death and instead, merely submitted the parties' mother's will and death certificate for filing with the clerk of court, representing that there were no remaining assets to be divided and that no probate of the will would be necessary.
The plaintiff subsequently discovered that the defendant had used her mother's power of attorney in June 2005 to convey the real property to herself. He also discovered that she had taken possession of their mother's personal property and alleged that, despite repeated demands, she refused to divide the property with him.
More than three years after their mother's death, the plaintiff filed a petition with the clerk of court requesting that the defendant be deemed to have renounced her right to be executor of their mother's estate. No executor of the parties' mother's estate had been appointed prior to this petition and none has been appointed subsequently. Almost three years later and almost six years after the mother's death, the clerk of court issued an order providing that the defendant would have three days to file an application for probate and letters testamentary. Five days later in May 2016, the clerk of court issued letters testamentary appointing the defendant as executor of the mother's estate.
The plaintiff filed his initial complaint against the defendant in her individual capacity and as executor of their mother's estate alleging that the conveyance of the real property to the defendant in June 2005 constituted an unlawful, self-dealing conveyance in violation of the defendant's fiduciary duty to her mother as her attorney-in-fact. The plaintiff also alleged that the defendant's failure to divide the personal property constituted conversion of personal property belonging to estate and to the plaintiff and was a breach of the defendant's fiduciary duty. The plaintiff subsequently amended the complaint to enumerate six specific causes of action:
- request for declaratory judgment to void the real property conveyance,
- breach of fiduciary duty,
- constructive fraud,
- unjust enrichment, and
- punitive damages.
The defendant moved to dismiss this original and amended complaints for failure to state a claim for which relief could be granted. In her motion, she alleged that the claims for self-dealing, violation of fiduciary duty, and conversion were barred by the applicable statutes of limitation, that the claim that she had failed to divide the personal property was an issue solely within the exclusive jurisdiction of the clerk of court and should also be dismissed for lack of subject matter jurisdiction.
After hearing, the trial court the court granted the motion and dismissed the complaint by a dismissal order that included no findings of fact, stating only that
After reviewing the Amended Complaint and the parties' briefs and supporting cases and statutes, and after hearing counsel's arguments, the Court concluded that Plaintiff's claims are barred by the applicable statutes of limitations, N.C. Gen. Stat. § 1-52(1) & (4) & 1-56, or are within the exclusive jurisdiction of the Clerk of Court, N.C. Gen. Stat. § 28A-2-4, and the Court therefore allowed the Motion.
On appeal, the plaintiff contended that the trial court erred in granting the motion to dismiss his amended complaint as being barred by the applicable statutes of limitation, arguing:
- Claims for breach of fiduciary duty and constructive fraud are governed by the 10-year statute of limitations under N.C.G.S. Section 1-56.
- The statute did not begin running until he had knowledge of the conveyance.
- In the alternative, that N.C. Gen. Stat. § 1-24 operated to toll the 10-year statute of limitations while his petition was pending with the clerk of court and no executor had been appointed making his filing timely even if the statute began running at the time of the June 2005 conveyance.
- In the alternative, that his request for declaratory judgment is governed by the 20-year statute of limitations for adverse possession under N.C. Gen. Stat. § 1-40 because the deed to the defendant did not pass color of title.
- In the alternative, that this claim is governed by the 10-year statute of limitations for actions upon an instrument of conveyance of an interest in real property under N.C.G.S. Section 1-47(2) again asserting that N.C.G.S. Section 1-24 operated to toll the limitations period for nearly three years.
- That his conversion claim amounts to an additional breach of fiduciary duty and constructive fraud and is governed by the 10-year statute of limitations applicable to those claims under N.C.G.S. Section 1-56 rather than the 3-year statute of limitations under N.C.G.S. Section 1-52(4) claimed by the defendant.
- That the trial court erred in concluding that any of his claims are within the exclusive jurisdiction of the clerk of court because under N.C.G.S. Section 28A-2-4(c)(2), the clerk does not have such jurisdiction over "[a]ctions involving claims for monetary damages, including claims for breach of fiduciary duty, fraud, and negligence." Contending that his that the defendant's failure to divide the personal property is not an estate proceeding within the clerk's exclusive jurisdiction, but an element of his claim for breach of fiduciary duty, for which he seeks monetary damages.
The opinion states:
Here, the dismissal order refers to the relevant statutes of limitation as N.C. Gen. Stat. § 1-52(1), 1-52(4), and 1-56. Although the order fails to specify which statute governs each particular claim, N.C. Gen. Stat. § 1-52(4) provides that a 3-year statute of limitations governs actions for conversion of goods or chattels. Likewise, "[a]llegations of breach of fiduciary duty that do not rise to the level of constructive fraud are governed by the -year statute of limitations applicable to contract actions contained in N.C. Gen. Stat. § 1-52(1)[.]" Toomer v. Branch Banking & Trust Co., 171 N.C. App. 58, 66, 614 S.E.2d 328, 335 (2005). Where such allegations do give rise to a claim of constructive fraud, that claim falls under the 10-year statute of limitations contained in N.C. Gen. Stat. § 1-56. Id. at 67, 614 S.E.2d at 335. N.C. Gen. Stat. § 1-56 provides that "[a]n action for relief not otherwise limited by this subchapter may not be commenced more than 10 years after the cause of action has accrued." Thus, where no other statute establishes the statute of limitations for a particular claim, the residual or "catch-all" period of 10 years set out in N.C. Gen. Stat. § 1-56 applies.
The plaintiff contended that the deed did not pass color of title because the defendant "knowingly exceeded her authority as attorney-in-fact" under N.C. Gen. Stat. § 32-A2 (2015) and "gifted herself the property . . . without providing any valuable consideration,". The Court of Appeals disagreed with the plaintiff's argument on several grounds. The opinion states:
In order to acquire title by adverse possession, an individual generally must possess the property "adversely to all other persons for 20 years," among other requirements. N.C. Gen. Stat. § 1-40. Challenges to an individual's possession "under color of title," however, are subject to a 7-year statute of limitations pursuant to N.C. Gen. Stat. § 1-38 (2015).Color of title may be defined to be a writing, upon its face professing to pass title, but which does not do it, either from a want of title in the person making it or the defective mode of conveyance which is used; and it would seem that it must not be so obviously defective that no man of ordinary capacity could be misled by it.
White v. Farabee, 212 N.C. App. 126, 132-33, 713 S.E.2d 4, 9 (2011)(citations and internal quotation marks omitted). "It is well established that a deed may constitute color of title to the land described therein." Id. "When the deed is regular upon its face and purports to convey title to the land in controversy, it constitutes color of title." Id.
Here, the premise of Tommy's argument that a 20-year statute of limitations applies to his request for declaratory judgment is that the deed purports to pass title to Brenda but does not in fact do so because of a defect in the method of conveyance. Notwithstanding the fact that Brenda does not claim to have acquired title by adverse Possession or to have fulfilled the additional requirements for application of that doctrine, Tommy's own argument demonstrates that the deed to Brenda passes the appearance or "color" of title, if not title in fact. Thus, a claim challenging Brenda's allegedly adverse possession of the real property would be subject to a 7-year statute of limitations under N.C. Gen. Stat. §1-38, not a 20-year limitations period under N.C. Gen. Stat. § 1-40 as Tommy contends.
The problem with this analysis by the Court of Appeals is that the Court of Appeals has previously said: "It necessarily follows that when the agent transfers the principal's property to herself, a presumption of fraud arises." Estate of Graham v. Morrison, 168 N. C. App. 63, 607 SE 2d 295 (2005). This doctrine should certainly call into question whether the deed was "regular on its face" and was, therefore, "so obviously defective that no man of ordinary capacity could be misled by it".
The North Carolina Supreme Court in Morehead v. Harris, 262 N.C. 330, 137 S.E.2d 174 (N.C., 1964) makes it clear that color of title alone is not sufficient to perfect title but that there must also be an adverse possession and that the possession of someone entitled is not necessarily adverse. Under these facts, the defendant as Attorney in Fact would have been entitled to possession and after the mother?s death she would have been entitled to possession both as a tenant in common and as the nominal personal representative. Thus, her possession would not put either their mother or the plaintiff on notice of the adverse nature of her claim. Applying both lines of cases calls into question whether the 7-year statute of limitations was applicable in this case at all.
Regardless of whether the Court was correct in its application of the law of North Carolina to these facts, this litigation highlights the reason why title companies consider it an extrahazardous risk to insure title premised merely on a representation of facts suggesting that title by adverse possession might be proved successfully without actually litigating the issue by joining all necessary and proper parties, or by having the same join in a deed to the purchaser.
As the rest of opinion by the Court of Appeals addresses limitations with respect to recovery of damages rather than for possession of real property and title, we will refrain from any further discussion of those issues.