On May 7, 2024 the North Carolina Court of Appeals issued thirty-three published opinions There’s a lot to chew on here. Here’s my summary of a few of the more interesting or unusual cases.
Warren v. Cielo Ventures, COA22-926. On July 8, 2017, the plaintiffs found that their water heater had leaked throughout their home. They notified their insurer, whose representative inspected the house two days later. The defendant notified the plaintiffs that extensive and immediate repairs were needed. Plaintiffs moved into a hotel and entered an authorization contract with the defendant. That contract included a clause stating to no action could be brought pursuant to the contract more than one year after the claiming party knew or should have known of the cause of action.
On July 20, 2017, plaintiffs visited their home and saw that no work had been done. Mold proliferated and eventually the house had to be demolished. Although the plaintiffs were compensated for the loss of their house, on July 9, 2021 they brought suit alleging an unfair and deceptive practice under N.C.G.S § 75-1.1. Defendant moved for summary judgment, arguing that the claim was time-barred based on the one-year limitations period in the contract. The trial court allowed the defendant’s motion.
The Court of Appeals reversed. The court noted that, in some instances, parties can contract for a limitations period shorter than that allowed by statute. However, the court observed that the legislative purpose of § 75-1.1 is “[t]o provide civil legal means to maintain ethical standards of dealings between persons engaged in business and …the consuming public within this State, to the end that good faith and dealings between buyers and sellers at all levels of commerce be had in this State.”
The court then cited Morris v. Rodeberg, 385 N.C. 405, 895 S.E.2d 28 (2023) for the proposition that statutes of limitation are public policy choices intended to promote, not defeat, the ends of justice. Accordingly, the court declined to “construe the generalized one-year clause of limitation contained in the authorization contract as a bar to plaintiffs’ [N.C.G.S § 75-1.1] claim.”
This case strikes me as one that the Supreme Court of North Carolina might find worthy of review. Instances arise when allowing the parties to negotiate their own limitation period benefits both sides. On the other hand, that process could be abused, especially in a world where contracts of adhesion abound. We’ll soon see if a Petition for Discretionary Review is filed.
Sneed v. Johnston (Sneed), COA23-446. This case involves the valuation of a law firm, a matter of interest to many of us. The parties married in 1996 and divorced in 2016. During the marriage, the plaintiff started a law firm. In 2019, the trial court entered a consent order appointing an appraiser to value the law firm as of the date of separation.
The plaintiff initially cooperated with the appraiser, providing financial documents. However, after the appraiser provided to the parties a draft valuation of $3,220,000, the plaintiff ignored the appraiser’s efforts to obtain additional information and also refused to pay his portion of the appraiser’s fee. In 2020, the appraiser gave both parties a final valuation and invoiced both parties for his services. The plaintiff did not respond to the invoice and eventually the defendant paid the appraiser the full amount owed.
At trial, the plaintiff testified that his firm’s value at the date of separation was zero or less. Testifying as an expert for the defendant, the appraiser valued the firm at $3,100,000 as of the date of separation. The trial court accepted this valuation and further found that the appraisal included a valuation of the firm’s total goodwill as a combination of $302,436 enterprise goodwill and $2,688,321 personal goodwill (totaling $2,990,757). The court ordered plaintiff to pay to defendant a distributive award of $1,550,000, i.e., half the full value of the firm, payable in monthly installments over a fifteen-year period. Plaintiff appealed.
On appeal, the North Carolina Court of Appeals addressed several issues. Of interest to us is the review of the trial court’s valuation of the law firm. Noting that essentially all the value of the firm was in goodwill, the Court of Appeals cited McLean v. McLean, 323 N.C. 543, 374 S.E.2d 376 (1988) for the proposition that trial courts should “value goodwill with great care, for the individual practitioner will be forced to pay the ex-spouse tangible dollars for an intangible asset at a value concededly arrived at on the bases of some uncertain elements.”
Observing (among other things) the plaintiff’s failure to cooperate with the evaluator, the Court of Appeals concluded that the trial court did not abuse its discretion when it adopted the appraiser’s testimony. The plaintiff also challenged the trial court’s valuation of goodwill. The Court of Appeals pointed out that North Carolina courts have not distinguished between enterprise goodwill and personal goodwill, citing Poore v. Poore, 75 N.C. App. 414, 331 S.E.2d 266 (1985). As a result, the court held that the total goodwill may constitute part of the value of a marital asset and be subject to equitable distribution.
State v. Simpson, COA23-676. This case falls squarely into the “A Word To The Wise About Dotting Your ‘I’s And Crossing Your ‘T’s” category. The defendant was tried and convicted of assault on a detention officer. At the conclusion of the trial, appointed defense counsel advised the court that he or she had devoted about eighteen and a half hours to the case and cited a sum of $1,202.50. Without addressing the defendant on that matter, the judge imposed sentence, then assessed attorney fees and costs, noting that they were a civil judgment. The defendant entered oral notice of appeal.
The North Carolina Court of Appeals held that the oral notice was insufficient to give it jurisdiction over a civil order. However, over a dissent by Judge Griffin, the court allowed certiorari to address the issue. The Court of Appeals then reversed on the grounds that the trial court had failed to address the defendant directly about the fee assessment, as required by State v. Friend, 257 N.C. App. 516, 809 S.E.2d 902 (2018). The Court of Appeals remanded the matter to the trial court.
In Re Bartko, COA23-980. Petitioner was licensed to practice law in North Carolina in 1988. In 2010, he was convicted in United States District Court of a slew of offenses, including conspiracy to commit mail fraud, selling unregulated securities, and money laundering. The trial court imposed an active sentence of 23 years. Petitioner was disbarred in North Carolina in 2011. In 2020, petitioner was transferred to home confinement to complete his sentence. He is scheduled for release in 2029.
The petitioner sought reinstatement of his license to practice law in North Carolina by filing a petition with the Disciplinary Hearing Commission. The Commission allowed the North Carolina State Bar’s motion to dismiss and entered an order denying the petitioner’s petition. The North Carolina Court of Appeals affirmed, citing that the petitioner failed to establish that he had completed is active and probationary federal sentence.
The outcome of this case seems foreordained but I mention it both for its unusual facts and because the opinion addresses some unexpected procedural skirmishing. If the facts intrigue you, it’s worth taking a look at the full opinion. That said, in light of the unusual facts and the straightforward outcome, I don’t expect the Supreme Court of North Carolina to show much interest in this one.
State v. Doherty, COA 820. The facts in this case are pretty straightforward. The Court of Appeals held that kicking a dog hard once in the stomach is sufficient to support a felony conviction for cruelty to animals. We recall from law school the common law that each dog gets one free bite before being found to be vicious. Looks like humans are expected to be better behaved.
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