Auman v Smith, (04-875) 07/05/2005

Appeal by plaintiffs from judgment entered 28 October 2002 by Judge J.B. Allen, Jr. in Alamance County Superior Court. Heard in the Court of Appeals 3 March 2005.

Hawkins and Whited, L.L.P., by G. Keith Whited, for plaintiffs-appellants.

Holt, Longest, Wall & Blaetz, P.L.L.C., by Frank A. Longest, Jr., for defendants-appellees.

    LEVINSON, Judge.

    Plaintiffs (Jerry and Jo Ann Auman, and Jo Ann Auman as Executrix of the estate of Mattie Shore) appeal from entry of a directed verdict in favor of defendants (Robert and Coletta Smith) entered 28 October 2002. After careful consideration of the briefs and record, we affirm.
    The evidence presented at trial was provided in large measure through the testimony of Jerry and Jo Ann Auman, husband and wife, and may be summarized as follows: Jo Ann Auman and defendantRobert Smith are first cousins. Jo Ann Auman's mother, Mattie Shore, and Robert Smith's mother were sisters. Jo Ann Auman and Robert Smith grew up together. As adults, the Aumans and Smiths socialized together frequently.
    Plaintiff Jo Ann Auman, as executrix of the estate of her mother Mattie Shore, alleges that money is owed the estate by Robert Smith for interest on a loan of $15,000.00 made by Mattie Shore to Robert Smith 1 April 1989. Jo Ann Auman joined the claim of the estate with the Aumans' claims against defendants. Jo Ann Auman alleges that interest accrued on the loan at the rate of 8% per annum and contends the interest was never paid. All parties agree defendants paid $15,000.00 to the estate of Mattie Shore prior to the instant case coming on for trial.
    At trial, plaintiffs presented evidence that money was also owed them from three separate business dealings they had with Robert Smith. The first business endeavor was a joint undertaking to buy, develop, and sell real estate. The second business dealing was the Aumans' work for Robert Smith in his auction company, in which they helped conduct personal property and real estate auctions. The third business dealing involved Robert Smith's work for the Aumans as their general contractor building their current home.
    The joint real estate venture began in 1983, five years after the Aumans were married. In 1983, Robert Smith approached them and suggested that the couples develop real estate together. The agreement was that they would purchase land jointly. Robert Smithwould find buyers for the properties who would employ him to build their homes. The Smiths and Aumans would share the profits from the sale of undeveloped land to prospective homeowners. Plaintiffs and defendants opened a joint checking account. Each couple originally contributed $5,000.00 to the account. From this account, they purchased land. Plaintiffs believed Robert Smith had purchased land from the joint account beginning in the mid-1980's through the year 1988. The Aumans never received any of the profits which they believed Robert Smith was making from developing and selling the properties. Although Jerry Auman wrote most of the checks from the joint account, he did not have control of the funds coming into the account or how the money was spent. Jerry Auman testified that, after the first development, “[A]ll the money started leaving because I was writing checks and nothing was coming back. . . . [F]or my expenditures, I got no profit back.” At the end of 1987, when all the properties had been developed and sold, Jerry Auman asked Robert Smith for the Aumans' share of the profits. Robert Smith told Jerry Auman that he had invested the money in “another property” at 5215 Swepsonville-Saxapahaw Road in 1988. This property is currently titled to third parties. Jerry Auman testified the joint venture in real estate continued until 1989 “when, essentially, the money ran out and I stopped the deal because there was suppose[d] to have been money in an account and I kept spending money and no money came back so the account was dead.” Robert Smith never provided the Aumans with an accounting of their share of the profits. In this regard, Jerry Aumanexplained, “I never could get him to pin it down to tell me.” Robert Smith continued to assure the Aumans that he was still investing their money for them and that they were making a profit of “15%, 18%, 20% or more.”
    In 1987 the Aumans began helping Robert Smith with his auction company. Robert Smith's company auctioned personal property and real estate. The Aumans worked for Robert Smith's auction company from 1987 to 1996. They helped him keep the books, prepare the auctions, and record buyers at the auctions. They also printed brochures and flyers for Robert Smith on their computer to advertise the properties being sold. The Aumans conducted open houses prior to the auctions. For Robert Smith's personal property auctions, the Aumans packaged and helped display items for sale.
    While they were working in Robert Smith's auction company, the Aumans helped Robert Smith develop and sell properties in the Tradon Place development. Robert Smith owned Tradon Place. Jerry Auman asked Robert Smith whether any of plaintiffs' money was invested in Tradon Place. Robert Smith replied, “Well, let's just get back to work.” Jerry Auman stated, “I never could get a straight answer out of him.” Jerry and Jo Ann Auman each found buyers for two of the lots at Tradon Place and helped Robert Smith sell the lots. Between 1991 and 1993 Robert Smith never paid the Aumans any money for their help selling lots at Tradon Place.
    According to Jo Ann Auman's testimony, in the beginning, the Aumans were working in Robert Smith's auction company with no expectation of being paid. They donated their services to helpRobert Smith get started in his business. Jo Ann Auman testified, “[W]e helped him . . . with the understanding that once you get successful, we expect to be paid like you were paying other people.”
    In the 1990's the Aumans began asking to be paid for their work. Jo Ann testified the only payment they ever received for their estimated 1,800 hours of work over 9 years with the auction company was a one hundred dollar bill and the $1,000.00 listed on a 1099 form they received one year. When the Aumans continued to request payment, Robert Smith first told them he would pay them after he held a “big sale.” Later, Robert Smith stated he would “pay [them] in the construction of [their] home.”
    Jerry Auman testified that Robert Smith agreed to pay them all the money he owed them, from the joint venture in real estate and their work in his auction company, by building their current home for them. Jerry Auman testified he “never could get [Robert Smith] to tie down the number [on what he owed] or put it on a piece of paper.” In 1992, the Aumans decided to build their current home. From approximately 1993 through 1994, Robert Smith worked for plaintiffs as their general contractor. The house was begun in the spring of 1994 and completed in December of the same year.
    Plaintiffs allege that Robert Smith agreed to offer his services to them as a general contractor in order to repay them for the money they were owed both from the joint venture and for their work in the auction company. Plaintiffs allege Robert Smith agreednot to make the profit he would normally make building a house and to pay some of the costs for materials himself.
    Jerry Auman testified that he and Jo Ann had expected to recoup the money Robert Smith owed them by not having to draw down the full amount of the line of credit on the construction loan they received from the bank. The construction loan was for $213,808.00. Of that amount, the Aumans were responsible for paying $27,000.00 because the construction loan only covered “85% to 90%” of the original cost. From April 1994 through February 1995, the Aumans paid a total of $85,196.09 from their personal funds to cover costs associated with building their home. The building costs the Aumans paid for out of their personal funds were in addition to the draws made on the construction loan. Funds drawn from the construction loan were paid directly to Robert Smith with the Aumans' approval. The draws on the construction loan totaled $185,000.00.
    The Aumans had paid the additional costs from their own funds at Robert Smith's request. Robert Smith had told the Aumans they should “go ahead and pay [these costs] and we'll get the money back off of the draw . . . [Robert's] taken, that [Robert will] give us a check back.” Jerry Auman stated that Robert Smith “estimated that it would be at least $35,000.00.” Until 1999, the Aumans never received an accounting for expenses Robert Smith had paid on their behalf.
    By September of 1994 the Aumans began to be concerned that they were paying more money than they had intended for the construction of their home. In September 1994 they had alreadypaid the $27,000.00 and there was still more work remaining on the house. The Aumans met with Robert Smith in September, October, and November of 1994 to discuss their concerns with him. They told Robert Smith they were worried about the costs of the home and they wanted a statement from him showing the bills he had paid and the money which had been drawn from the construction loan. Robert Smith assured the Aumans that the job was not being “overrun” and that “we're doing fine.” He assured them his bookkeeper, Frances Clark, was preparing an accounting for them.
    After the house was completed and the Aumans moved in, Robert Smith continued to request that plaintiffs pay outstanding bills for the construction of their home. The Aumans believed that everything had already been paid for by the time they moved in. But Robert Smith told them they “needed to pay these [bills], that he didn't have any money.” He told them “I used all the money up from the draws.” Jerry Auman testified, “So we at first started paying these and then it kept going and going and going. Finally we stopped.”
    In 1996 Robert Smith told the Aumans he had paid them all he owed them. He did not show them an accounting. At this point, the Aumans stopped working for Robert Smith's auction company. The Aumans stopped all business dealings with Robert Smith in 1996. Jerry Auman testified they:
        Stopped everything in 1996 because I never got a statement on how much was paid and we were still negotiating on trying to figure out how much that house cost. And I said, well, I can't take anymore of it. . . . So we workedfor him all the way up to 1996, which was two years after our house was built.

    The Aumans continued to request accountings and payment from Robert Smith. They met with Robert Smith on 25 July 1999. The Aumans then sent Robert Smith a letter requesting payment 9 December 1999. On 2 January 2000 Robert Smith telephoned Jerry Auman and told him he had received the Aumans' letter and he would reply in thirty days. He did not, in fact, ever reply to the Aumans' letter.
    At trial, Robert Smith testified as a witness in plaintiffs' case in chief. He stated he did not contract to build the plaintiffs' home for $213,000.00. While one estimate he had given the Aumans for his labor costs was $30,000.00, he had actually spent $56,000.00 for the carpentry labor on their home and had charged them accordingly. This figure included Robert Smith's own labor and the labor of his employees. Robert Smith also charged them $500.00 per week as his salary for his services in constructing their home. He testified that, including the draws he received from the construction loan and the payments he received directly from the plaintiffs, he received a total of $204,000.00 for the construction of the home. Robert Smith testified that the lumber bills he presented to the Aumans were for lumber that was used on their home.
    Plaintiffs filed the instant action 8 September 2000 alleging, inter alia, claims for breach of contract, fraud, and unfair and deceptive trade practices. Mattie Shore was an original plaintiff in the case, joining her claim for repayment, with interest, of the$15,000.00 loan to Robert Smith. Following Mattie Shore's death in February 2002, Jo Ann Auman, as executrix of her mother's estate, was allowed to maintain the claim of the estate, including the claim for interest due on the $15,000.00 loan.
    At the close of plaintiffs' evidence, the trial court granted defendants' motion for a directed verdict on all claims. Plaintiffs appeal from entry of the directed verdict.
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    In an argument related only to the claim of Mattie Shore's estate to recoup interest on the loan of $15,000.00 from Mattie Shore to Robert Smith, plaintiff Jo Ann Auman contends that the trial court erred in refusing to admit Exhibit No. 44 and her testimony concerning Shore's statements about this Exhibit. We disagree.
    During a voir dire examination, Jo Ann Auman testified her mother had made a loan to Robert Smith of $15,000.00 to be paid back with interest. While her mother was still alive, Jo Ann Auman had seen a computer-generated document illustrating a schedule of payments to be made on the $15,000.00 loan. The name “Robert Smith” was printed at the top of the document in the same computer- generated, typewritten font as the balance of the words, numbers and symbols. According to the document, interest accrued on the loan at the rate of 8.5% per annum with all payments due by 1994. Jo Ann Auman found this document after her mother's death among the deceased's papers. Plaintiff's Exhibit 44 purported to be this document. Jo Ann Auman testified on voir dire that her mother toldher that Robert Smith had given the document to her and that her mother told her that Frances Clark, Robert Smith's bookkeeper, had produced it. The trial court concluded the exhibit was inadmissible hearsay and excluded this document, together with Ms. Auman's testimony regarding her mother's statements.
    N.C.G.S. § 8C-1, Rule 802 (2003) provides, “[h]earsay is not admissible except as provided by statute or by these rules.” According to N.C.G.S. § 8C-1, Rule 801(c) (2003), “[h]earsay' is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” Mattie Shore's oral statements to Jo Ann Auman and Exhibit 44 constitute hearsay, as they were offered to help establish that Robert Smith had an unsatisfied interest obligation to the Shore estate. If believed, the fact Smith provided a schedule of payments to Shore that included interest could be material to plaintiff's claim for interest on the $15,000 loan.
    Plaintiff asserts that she, as executrix of her mother's estate, may testify to all of her mother's statements. Plaintiff does not cite any legal authority for this proposition. We decline to craft an argument for plaintiff concerning the admissibility of Shore's statements to plaintiff. We hold the trial court did not err in excluding Shore's statements.
    Citing Rule 801(d) of the North Carolina Rules of Evidence, plaintiff asserts Exhibit No. 44 constitutes a statement by a party opponent and is therefore admissible. Arguably, a computer- generated printout illustrating a schedule of loan payments whichincludes allowances for interest could qualify as a statement by a party-opponent. See N.C.G.S. § 8C-1, Rule 801(d) (2003). However, the trial court properly excluded this exhibit, as plaintiff failed to establish any foundation for its admission. Indeed, the only foundation offered by plaintiff for Exhibit No. 44 consisted of the hearsay statements by plaintiff's mother which were, again, not erroneously excluded by the trial court judge.     This assignment of error is overruled.
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    Plaintiffs argue that the trial court erred by granting the defendants' motion for directed verdict. Plaintiffs contend that they presented evidence establishing the essential elements for each of their claims of breach of contract, unfair and deceptive trade practices, and fraud. Furthermore, plaintiffs contend the applicable statutes of limitation for each claim had not expired at the time their action was filed.
    “A motion for directed verdict pursuant to G.S. § 1A-1, Rule 50(a) tests the sufficiency of the evidence to support a verdict for the non-moving party.” BNT Co. v. Baker Precythe Dev. Co., 151 N.C. App. 52, 56, 564 S.E.2d 891, 895 (2002) (citation omitted). “On a directed verdict motion, plaintiff's evidence must be taken as true[.]” Hall v. Mabe, 77 N.C. App. 758, 760, 336 S.E.2d 427, 428 (1985). “In reviewing the grant of directed verdict for defendants, [the Court] must consider the evidence in the light most favorable to plaintiffs, as the nonmoving party.” Haas v. Warren, 341 N.C. 148, 152, 459 S.E.2d 254, 256 (1995). “We mayaffirm the directed verdict for defendants only if, as a matter of law, a recovery cannot be had by plaintiffs upon any view of the facts which the evidence reasonably tends to establish.” Id. “A directed verdict is proper when there is no evidence of an essential element of plaintiff's claim.” Cap Care Group, Inc. v. McDonald, 149 N.C. App. 817, 821, 561 S.E.2d 578, 581 (2002) (citations omitted).
    We first address the trial court's entry of directed verdict for defendants on plaintiff Jo Ann Auman's claim for breach of contract for nonpayment of interest on the $15,000.00 loan from Mattie Shore. Because plaintiff failed to offer any admissible evidence to establish that, as part of the loan agreement, defendants were obligated to pay interest, the trial court properly entered a directed verdict on this claim.
    We next address the entry of directed verdict on plaintiffs' claim of unfair and deceptive trade practices. Plaintiffs' claim is based upon Robert Smith's breach of his verbal promise to pay plaintiffs money he allegedly owed. Plaintiffs' evidence failed to establish a claim for unfair and deceptive trade practices under N.C.G.S. § 75-1.1 (2003) resulting from defendant's alleged breach of contract.
        To prevail under this statute, plaintiff must prove: (1) defendant committed an unfair or deceptive act or practice, (2) that the action in question was in or affecting commerce, (3) that said act proximately caused actual injury to plaintiff.
GATX Logistics, Inc. v. Lowe's Cos., 143 N.C. App. 695, 701, 548 S.E.2d 193, 197 (2001) (citing Spartan Leasing Inc. v. Pollard, 101 N.C. App. 450, 460, 400 S.E.2d 476, 482 (1991)).
    A claim for unfair and deceptive trade practices does not lie from a mere breach of contract. See Southeastern Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 330, 572 S.E.2d 200, 206 (2002) (quoting Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 62, 418 S.E.2d 694, 700 (1992) (citations omitted)). “'[A] mere breach of contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action under N.C.G.S. § 75-1.1. To recover for unfair and deceptive trade practices, a party must show substantial aggravating circumstances attending the breach of contract.'” Id. “A violation of Chapter 75 is unlikely to occur during the course of contractual performance, as these types of claims are best resolved by simply determining whether the parties properly fulfilled their contractual duties.” Mitchell v. Linville, 148 N.C. App. 71, 75, 557 S.E.2d 620, 624 (2001) (citations omitted).
    Plaintiffs' evidence established that they helped defendant sell real estate and personal property and they were not paid. Plaintiffs contend defendant converted their money for the latter's own use and purchased land that they helped to develop and sell without being paid. These facts are related to plaintiffs' breach of contract claim, that defendant failed to pay them what was owed. In summary, plaintiffs' evidence falls short of that required to demonstrate aggravating circumstances beyond defendants' failure topay. Furthermore, plaintiffs have made no argument that defendants' conduct amounted to breaches of a fiduciary relationship, such that a claim for unfair and deceptive trade practices might be sustained. We conclude plaintiffs' claim for unfair and deceptive trade practices was properly dismissed.
    Finally, we address the entry of directed verdict, based on the running of the statute of limitations, on plaintiffs' claims for breach of contract and fraud resulting from defendant Robert Smith's breach of his promise to pay plaintiffs. Plaintiffs claim the question of when the alleged breach occurred is a question of fact for the jury and it was therefore error for the trial court to enter a directed verdict. Because we find the plaintiffs' own evidence clearly established when the breach occurred, and therefore when the statute of limitations began to run, we disagree.
    Plaintiffs' evidence established that defendant made a series of promises over the years to pay them money he owed them. Due to Robert Smith's repeated failure to pay them what he owed, plaintiffs' evidence established that they ceased all business dealings with Robert Smith in 1996:
        [COUNSEL FOR PLAINTIFFS]: What I want you to do is go through it one at a time, but I want you to give an overview of the different elements now of your business relationship with Robert Smith. You're talking now about the end of the business relationship, are you not?

        [JERRY AUMAN]: We stopped working for him in 1996.
        [COUNSEL FOR PLAINTIFFS]: Okay. In the auction business?

        [JERRY AUMAN]: In the auction business. Stopped everything in 1996 because I never got a statement on how much was paid and we were still negotiating on trying to figure out how much that house cost. And I said, well, I can't take anymore of it. We got to -- we thought that by stopping it would help alleviate that. And that was the last business deal I had with Robert. . . . So we worked for him all the way up to 1996, which was two years after our house was built.
    Our Supreme Court has held that:
        Where a defendant establishes an affirmative defense as a matter of law, there are no issues to submit to a jury and a plaintiff has no right to recover. Directing a verdict for the defendant in such instance is appropriate.
Goodwin v. Investors Life Ins. Co., 332 N.C. 326, 329, 419 S.E.2d 766, 768 (1992). Alleging a claim is barred by the statute of limitations is an affirmative defense. “Only when 'it clearly appears that plaintiff's claim is barred by the running of the statute of limitations' may that question be determined as a matter of law.” Walton v. Carolina Tel. & Tel. Co., 93 N.C. App. 368, 379, 378 S.E.2d 427, 434 (1989)(quoting Poston v Morgan- Schultheiss, Inc., 46 N.C. App. 321, 323, 265 S.E.2d 615, 616 (1980)).
    The statute of limitations for breach of contract and fraud is three years. N.C.G.S. §§ 1-52(1) and (9) (2003). “'A cause of action generally accrues and the statute of limitations begins to run as soon as the right to institute and maintain a suit arises.'” Hunter v. Guardian Life Ins. Co. of Am., 162 N.C. App. 477, 485,593 S.E.2d 595, 601 (quoting Penley v. Penley, 314 N.C. 1, 20, 332 S.E.2d 51, 62 (1985)), disc. review denied, 358 N.C. 543, 599 S.E.2d 48-49 (2004). For breach of contract, “the statute . . . begins to run on the date the promise is broken.” Harrold v. Dowd, 149 N.C. App. 777, 781, 561 S.E.2d 914, 918 (2002) (citation omitted). “In a contract action . . . to determine if plaintiff's lawsuit is barred by the three year statute of limitations, this Court must first determine when the breach occurred which caused the cause of action to accrue.” Pearce v. North Carolina State Highway Patrol Voluntary Pledge Committee, 310 N.C. 445, 448, 312 S.E.2d 421, 424 (1984) (citation omitted). “The statute of limitations for fraud is three years from the date the fraud was, or reasonably should have been, discovered.” Carolina Tel. & Tel. Co., 93 N.C. App. at 378, 378 S.E.2d at 434 (citations omitted); G.S. § 1-52(9). “'Discovery' is defined as actual discovery or the time when the fraud should have been discovered in the exercise of due diligence.” Spears v. Moore, 145 N.C. App. 706, 708, 551 S.E.2d 483, 485 (2001).
    Here, plaintiffs' evidence shows they discovered the breach of contract, and any actions constituting the alleged fraud, by the end of 1996 at the latest. Plaintiffs commenced this action in September 2000, more than three years from the time they had discovered the breach and any fraud. Consequently, plaintiffs' claims for breach of contract and fraud were barred at the time the complaint was filed. This assignment of error is overruled.
    Plaintiffs' remaining arguments are without merit.    Affirmed.
    Judges TIMMONS-GOODSON and BRYANT concur.
    Report per Rule 30(e).

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