Appeal by plaintiffs from order entered 20 March 2000 by Judge
A. Leon Stanback, Jr., in Alamance County Superior Court. Heard in
the Court of Appeals 18 April 2001.
Dorrestein & Crane, L.L.P., by Ronald Dorrestein and Shelly D.
Crane, for plaintiff appellants.
Holt, Longest, Wall & Blaetz, P.L.L.C., by Frank A. Longest,
Jr., for defendant appellee.
TIMMONS-GOODSON, Judge.
Gregory and Leslie Spears (plaintiffs) appeal from an order
granting summary judgment to Sam Moore (defendant) based on the bar
of the statute of limitations.
On 9 August 1988, the parties negotiated and executed acontract in which plaintiffs agreed to purchase from Meadowo
od
Development Corporation (Meadowood) certain real property located
in Alamance County, North Carolina. As a real estate broker and
Meadowood's representative, defendant prepared the contract, which
among other things required that the Alamance County Health
Department perform a “satisfactory 'perk' test” upon the property.
According to plaintiffs, the parties understood that the land would
pass a soil percolation test for a four-bedroom residence in order
to satisfy the "perk test" condition. In November 1988, defendant
allegedly informed plaintiffs that the land had received a
satisfactory perk test. Defendant then provided plaintiffs with a
recorded map of the property containing the following language:
CERTIFICATION OF APPROVAL OF SEWER FACILITIES
I HEREBY CERTIFY THAT ALL LOTS ARE PROVISSIONALLY [sic]
APPROVED FOR SUBSURFACE SEWAGE TREATMENT AND DISPOSAL,
EXCEPT AS NOTED ON THE PLAT, SUBJECT TO THE ISSUANCE OF
IMPROVEMENT PERMITS BY THE HEALTH DEPARTMENT, AND, TO THE
NORTH CAROLINA ADMINISTRATIVE CODE.
/S/ Alvin Cagle 11-23-88
HEALTH DIRECTOR OR DEPUTY
On 5 January 1989, the parties closed on the subject property.
Plaintiffs never developed the property, and in March 1998
plaintiffs entered into a contract to sell the property to Kenneth
and Julie Walker (the Walkers). This contract was contingent upon
plaintiffs obtaining an improvement permit indicating the
property's suitability for a ground absorption sewage system. When
plaintiffs applied for an improvement permit, however, they were
denied such by the Alamance County Health Department. Plaintiffs
now assert that a perk test was never performed upon the subject
property. Based on the denial of the improvement permit, theWalkers properly terminated the contract with plaintiffs.
On 20 April 1999, plaintiffs filed a complaint against
defendant alleging breach of contract, breach of implied warranty,
fraud and misrepresentation, negligent misrepresentation, unfair
and deceptive trade practices, and requesting punitive damages. On
20 March 2000, the trial court granted defendant's motion for
summary judgment, finding there was “no genuine issue as to any
material fact” and that defendant was “entitled to a judgment as a
matter of law as to all issues . . . based on the bar of the
Statutes of Limitations.” From this order, plaintiffs appeal.
Plaintiffs argue the trial court erred in granting summary
judgment to defendant based on the bar of the statute of
limitations. For the following reasons, we agree with plaintiffs
and reverse the order of the trial court.
An order granting summary judgment to a party is appropriate
when “pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that any
party is entitled to a judgment as a matter of law.” N.C. Gen.
Stat. § 1A-1, Rule 56(c)(1999). Such an order “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). For a claim based on fraud or mistake, “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.”
N.C. Gen. Stat. § 1-52(9) (1999). "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). A suit must then be
initiated within three years of such discovery in order to comply
with the statute of limitations.
See N.C. Gen. Stat. § 1-52
(1999).
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.
See Huss at 468, 230 S.E.2d at 163. 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."
Id.
In the case at bar, defendant argues that summary judgment was
appropriate, as plaintiffs had both opportunity and capacity to
discover the alleged fraud. Defendant notes the language on the
recorded map
regarding alleged sewage treatment approval for the
property stated that such approval was merely provisional, and
therefore, temporary in nature. Defendant contends the provisionalapproval for sewage treatment in fact expired after five years, at
which time a new application should have been submitted by
plaintiffs. Defendant argues plaintiffs had the opportunity and
the capacity any time before the provisional approval expired, and
within three years after the provisional approval expired, to
discover that the property would not perk. The discovery would
have led them to believe defendant had defrauded them. Therefore,
according to defendant, plaintiffs had ample time to discover the
facts upon which their present suit is based
, and their failure to
reasonably inquire after the nature of the provisional certificate
amounts to a failure to exercise due diligence as a matter of law.
We disagree.
As stated above, "[w]hether the plaintiff in the exercise of
due diligence should have discovered the facts [regarding the
existence of potential fraud] more than three years prior to the
institution of the action is ordinarily for the jury when the
evidence is not conclusive or is conflicting."
Huss, 31 N.C. App.
at 468, 230 S.E.2d at 163. In
Huss, this Court reversed
the trial
court's grant of summary judgment based on the statute of
limitations. In that case, a divorced wife petitioned the court
for a partition sale of realty allegedly owned
by petitioner and
her ex-husband as tenants in common. Respondent ex-husband denied
petitioner's interest in the property, asserting that petitioner's
name on the deed as a grantee, together with respondent's name, was
a result of mutual mistake. Respondent alleged that he alone had
purchased the property in 1962, and accordingly, that he had
requested and received assurances from the grantors of the propertythat the property was recorded solely in his name. Relying on
these assurances, respondent did not learn of the mistake until
1975, when a dispute arose over the divorce judgment. The trial
court subsequently entered summary judgment against respondent
based on
the statute of limitations, and respondent appealed.
On review, this Court noted that the three-year statute of
limitations begins to run from the time the mistake is actually
discovered or should have been discovered in the exercise of due
diligence. Viewing the pleadings liberally in favor of respondent
and giving him the benefit of all reasonable inferences of fact,
this Court reversed the grant of summary judgment, stating
[w]e need not speculate on what circumstances
should have led respondent to discover the
mistake more than three years previously, nor
are we to judge the likelihood of respondents'
[sic] success on his claim. We think it clear
that the pleadings do not disclose sufficient
facts to establish as a matter of law that
respondent failed to exercise due diligence.
. . . .
. . . It may be difficult for respondent to
offer evidence tending to show that, though
the realty was conveyed to him and his wife as
tenants by the entirety by deed made thirteen
years prior to this suit, he nevertheless used
due diligence but failed to discover for a
period of about ten years that the deed was so
made. But we do not find that the pleadings
preclude respondent from offering such
evidence.
Id. at 468-69, 230 S.E.2d at 163-64.
As in
Huss, we are unable to agree with the trial court in the
instant case that the pleadings and other evidence establish that
plaintiffs failed to exercise due diligence as a matter of law indiscovering alleged fraud by defendant. Plaintiffs believed, based
on their contract
and defendant's alleged representation, that
their property had passed a soil percolation test. Plaintiffs
chose not to build upon their property, nor were they required to
do so. Rather, plaintiffs apparently retained the property for
investment purposes. Thus, plaintiffs believed they were under no
pressing impetus to have their property further evaluated by the
Alamance County Health Department. We cannot say that plaintiffs'
failure to further investigate the purported certificate and its
five-year limitation constitutes neglect as a matter of law. As
such, there remain genuine issues of material fact concerning
plaintiffs' reasonableness in relying upon defendant's alleged
assurances that the contractual obligation of a satisfactory perk
test had been met. Whether plaintiffs can offer evidence tending
to show they owned their property for ten years without discovering
its poor percolation but nevertheless used due diligence may be
difficult, but "[a] judgment on the pleadings is not appropriate
merely because the claimant's case is weak and he is unlikely to
prevail on the merits."
Id. at 469, 230 S.E.2d at 163.
Because we conclude that genuine issues of material fact exist
regarding plaintiffs' exercise of due diligence, we hold the trial
court improperly granted summary judgment to defendant based on the
bar of the statute of limitations. Accordingly, the order of the
trial court is hereby reversed.
Reversed.
Judges WYNN and HUDSON concur.
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