NO. COA04-1724
NORTH CAROLINA COURT OF APPEALS
Filed: 18 October 2005
CLAUDE GAGNE AND
MARIETTE GAGNE,
Plaintiffs,
v
.
Catawba County
No. 02 CVS 2584
BEST ADVANTAGE MARKETING
GROUP, INC., BEST PUBLICATIONS,
INC., AND SUSAN LONG,
Defendants.
Appeal by defendants from order entered 7 July 2003 by Judge
Timothy S. Kincaid; order entered 25 August 2003 by Judge Robert P.
Johnston; order entered 9 October 2003 by Judge Robert C. Ervin;
and orders entered 28 April 2004 and 28 June 2004 by Judge Preston
Cornelius in Catawba County Superior Court. Heard in the Court of
Appeals 14 September 2005.
Patrick Harper & Dixon, L.L.P., by David W. Hood and Michael
P. Thomas, for plaintiff appellees.
Ferikes & Bleynat, P.L.L.C., by Edward L. Bleynat, Jr., and
Susan L. Evans, for defendant appellants.
MCCULLOUGH, Judge.
Defendants Best Advantage Marketing Group, Best Publications
Incorporated and Susan Long (BAM) appeal from entry of a partial
summary judgment on their counterclaim of breach of contract, and
sanctions pursuant to N.C. Gen. Stat. § 1A-1, Rule 37 striking
their pleadings and entry of summary judgment in favor of
plaintiffs (the Gagnes). We affirm.
FACTS
The Gagnes entered into a contract on 28 October 1997 with
BAM, a Tennessee corporation, which stated that the Gagnes would
provide BAM with a mailing list which was to remain the exclusive
property of the Gagnes and to be used only for the purpose of
distribution of a publication of BAM and solicitation of
advertising. At the end of the contract, the corporate seal of BAM
was affixed to the document. On 23 August 2002, the Gagnes filed a
complaint in Catawba County Superior Court against BAM for
violation of the Trade Secret Protection Act, unfair competition,
unfair trade practice and breach of contract. The Gagnes alleged
that BAM had misappropriated photographs and a confidential mailing
list which were the exclusive property of the Gagnes developed
through information not generally known or ascertainable. On 17
December 2002 a consent order and injunction was entered to enjoin
the use of the photographs and mailing lists until trial could be
held.
BAM filed an answer and counterclaim on 18 December 2002
alleging breach of contract for failure to pay invoices. All of the
invoices were from 1999. On 6 May 2003 counsel for BAM filed a
motion to withdraw which was granted, leaving BAM without counsel.
The Gagnes then filed a motion for partial summary judgment as to
the counterclaim for failure to bring the claim within the
appropriate statute of limitations. Partial summary judgment was
granted 7 July 2003 and an order was entered by Superior CourtJudge Timothy Kincaid. Notice of appeal was given as to the entry
of partial summary judgment on 21 July 2003.
A motion to compel discovery was filed 25 June 2003 by the
Gagnes for insufficient responses to discovery which was granted on
11 July 2003 ordering BAM to fully comply with certain discovery
requests by providing the mailing list and other documents
requested within 10 days of that order. BAM then produced
additional answers to discovery and made a motion to reconsider the
order to compel and protective order on 21 July 2003 and further
filed a motion to strike certain interrogatories. On 28 July 2003
the Gagnes brought a motion for discovery sanctions and motion to
strike the pleadings. On 20 August 2003, BAM submitted a letter to
the court asking the court to delay the entry of the order as to
the motion to strike the pleadings until new counsel could appear.
The letter indicated that counsel would be able to appear as of the
following Monday, 25 August 2003. At this time BAM had been
unrepresented by counsel for almost 4 months.
With no counsel appearance on behalf of BAM, Superior Court
Judge Robert P. Johnston entered an order on 25 August 2003 finding
that the corporate defendants could not litigate pro se, that BAM
had failed to comply with the court order to produce certain
documents, and that the refusal was willful and not privileged in
any way. The order also provided that lesser sanctions had been
considered, that these sanctions may still be insufficient, and
pursuant to N.C. Gen. Stat. § 1A-1, Rule 37 and the corporate
defendants' inability to act pro se BAM's pleadings were stricken.The order further stated that if BAM did not produce the required
documents, then further sanctions would be considered.
The Gagnes filed a motion for judgment on the pleadings
pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(c) on 29 August 2003.
On 2 September 2003, a notice of appearance was filed on behalf of
BAM by counsel. Then on 9 September 2003 BAM filed a motion for
relief from the order or, alternatively, to reconsider. On 9
October 2003 Superior Court Judge Robert C. Ervin entered an order
for judgment on the pleadings as to all issues other than damages.
Lastly, the Gagnes filed a motion for summary judgment and
injunctive relief on 24 February 2004. The motion, as well as BAM's
response, were submitted with affidavits. BAM contended in its
affidavit that the mailing list was not a trade secret. Superior
Court Judge Preston Cornelius entered an order for summary judgment
in favor of the Gagnes and a permanent injunction restraining use
of names, addresses and photographs by BAM on 28 April 2004 and a
final order and injunction on 28 June 2004.
BAM now appeals.
ANALYSIS
I
In its first argument on appeal BAM contends that the trial
court erred in granting partial summary judgment on its
counterclaim concluding that the statute of limitations had run.
They contend that this was a contract under seal to which a 10-year
statute of limitations applies and further that Tennessee lawshould have applied rather than the law of North Carolina. We
disagree.
Summary judgment is proper if the 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) (2003). On a
motion for summary judgment, [t]he evidence is to be viewed in the
light most favorable to the nonmoving party. Moore v. Coachmen
Industries, Inc., 129 N.C. App. 389, 394, 499 S.E.2d 772, 775
(1998). When determining whether the trial court properly ruled on
a motion for summary judgment, this Court conducts a de novo
review. Va. Electric and Power Co. v. Tillett, 80 N.C. App. 383,
385, 343 S.E.2d 188, 191, cert. denied, 317 N.C. 715, 347 S.E.2d
457 (1986). Claims from a breach of contract are governed by N.C.
Gen. Stat. § 1-52(1) (2003), which provides for a three-year
statute of limitations. Miller v. Randolph, 124 N.C. App. 779, 781,
478 S.E.2d 668, 670 (1996). There was no contention that three
years had not passed from the time of breach to the time the action
was brought before the Court.
Section 1-47(2) provides that an action upon a sealed
instrument against the principal thereto must be commenced within
ten years. N.C. Gen. Stat. § 1-47(2) (2003). There is no dispute
that the corporate seal of defendant is impressed upon the contract
at issue here. However, '[t]he seal of a corporation is not in
itself conclusive of an intent to make a specialty [sealedinstrument].' Square D Co. v. C.J. Kern Contractors, 314 N.C.
423, 426, 334 S.E.2d 63, 65 (1985) (citation omitted). [T]he
determination of whether an instrument is a sealed instrument . . .
is a question for the court. Id.
In Square D Co., the North Carolina Supreme Court considered
whether the impression of a corporate seal on a construction
contract would transform the contract into a specialty so that the
10-year statute of limitations under N.C. Gen. Stat. § 1-47(2)
would apply. The Court stated that the question to be answered in
order to determine whether the corporate seal transforms the
party's contract into a specialty is whether the body of the
contract contains any language that indicates that the parties
intended that the instrument be a specialty or whether extrinsic
evidence would demonstrate such an intention. Square D Co., 314
N.C. at 428, 334 S.E.2d at 66. In concluding that the contract in
that case did not evince any intention on the part of the parties
to create a specialty, the Court stated that
[t]he contract contains no language in the
body which would indicate that the parties
intended the contract to be a specialty. There
is no language such as I have hereunto set my
hand and seal, witness our hands and seals,
or other similar phrases contained within the
contract that would explicitly support
plaintiff's assertion that the instrument is a
specialty under seal. See 68 Am. Jur. 2d,
Seals § 3-4 (1973). Neither is there any
extrinsic evidence that would indicate the
parties intended the instrument to be a
specialty.
Id. This Court has also stated that [b]ecause the routine use of
a corporate seal is merely to demonstrate authority to execute adocument, the mere presence of a corporate seal, without more, does
not convert the document into a specialty. Blue Cross and Blue
Shield v. Odell Associates, 61 N.C. App. 350, 362, 301 S.E.2d 459,
465, disc. review denied, 309 N.C. 319, 306 S.E.2d 791 (1983).
In the instant case the only indication of a seal on the
contract was the corporate seal affixed to the bottom of the
contract. There were neither words indicating an intention for the
contract to be a specialty nor extrinsic evidence from which to
determine intent. Therefore, standing alone, this contract does not
fall with the 10-year statute of limitations.
BAM further contends that Tennessee's 6-year statute of
limitations should apply to the breach of contract issue instead of
North Carolina's 3-year statute of limitations.
North Carolina adheres to the lex loci contracti rule, which
holds that the law of the state in which a contract was formed
governs matters of execution, validity, and interpretation.
Cunningham v. Brown, 51 N.C. App. 264, 268, 276 S.E.2d 718, 722
(1981). However, in matters of procedure, North Carolina courts
apply the rule of lex fori and adhere to the procedural rules of
the forum state. Charnock v. Taylor, 223 N.C. 360, 361, 26 S.E.2d
911, 913 (1943). Additionally, North Carolina law is dispositive
on whether an issue is substantive or procedural. Williams v.
Riley, 56 N.C. App. 427, 429, 289 S.E.2d 102, 104 (1982). Under
North Carolina law, a statute of limitations is a procedural
device, and in actions in North Carolina courts, the forum'sstatute of limitations must be applied. Sayer v. Henderson, 225
N.C. 642, 643, 35 S.E.2d 875, 876 (1945).
BAM argues that a different rule should apply where N.C. Gen.
Stat. § 1A-1, Rule 13, requires that certain counterclaims be
brought. However, statutes of limitations are deemed only to affect
the remedy and not the substantive right. We agree with the Fourth
Circuit Court of Appeals' holding that the statute of the forum may
bar the remedy even though the action is not barred in the
jurisdiction where it arose. Eagle Nation, Inc. v. Market Force,
Inc., 180 F. Supp. 2d 752 (E.D.N.C. 2001). Therefore, the trial
judge properly applied the 3-year statute of limitations provided
for in North Carolina.
We note that this Court is cognizant of the fact that neither
the parties' briefs on the motion for partial summary judgment nor
the transcript from the hearing are contained in the record on
appeal. However, assuming arguendo, that these arguments were
presented at the trial court, partial summary judgment was
nonetheless properly granted where the 3-year statute of
limitations was properly applied and there was no issue of fact as
to whether it had expired.
II
Next, BAM contends that the trial court erred in striking
defendants' pleadings for failure to comply with a discovery order.
We disagree.
Sanctions are governed by N.C. Gen. Stat. § 1A-1, Rule 37
(2003). Subsection (b)(2) allows the trial court to impose justsanctions upon parties who fail[] to obey an order to provide or
permit discovery[.] We review the trial court's actions for an
abuse of discretion. Segrest v. Gillette, 96 N.C. App. 435, 442,
386 S.E.2d 88, 92 (1989), rev'd on other grounds, 331 N.C. 97, 414
S.E.2d 334 (1992). The fact that the trial court passed over a more
severe sanction adequately demonstrates that the trial court's
order was reasonable and fully within its discretion. See Hursey v.
Homes by Design, Inc., 121 N.C. App. 175, 464 S.E.2d 504 (1995)
(stating that by choosing not to impose the more severe sanction it
can be inferred that the trial court considered all available
sanctions).
In the instant case, BAM did not comply with the order
compelling certain documents be provided pursuant to discovery
within 10 days. Instead, they filed a motion to reconsider and a
protective order. More than a month passed from the time the court
entered a motion to compel and the time sanctions were entered.
Abuse of discretion would have required the trial judge to
have failed to consider less severe sanctions before striking the
pleadings. See Goss v. Battle, 111 N.C. App. 173, 432 S.E.2d 156
(1993) (holding that a trial judge must consider less severe
sanctions before dismissing a case for failure to comply with
discovery orders). Moreover, the trial judge's order specifically
stated that lesser sanctions than striking the pleadings were
considered and that the trial judge, believing that these sanctions
may not be sufficient, ordered that if compliance was not
forthcoming that a more severe sanction would be imposed enjoiningpublishing or disseminating magazines. Therefore, this assignment
of error is overruled.
III
Lastly, BAM argues that summary judgment was improperly
granted where a genuine issue of material fact existed. We have
reviewed the pleadings in the record on appeal and find no merit in
this argument.
A trade secret is business or technical information that
[d]erives independent actual or potential commercial value from
not being generally known or readily ascertainable through
independent development . . . [and] [i]s the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy. N.C. Gen. Stat. § 66-152(3)(a)-(b) (2003). N.C. Gen.
Stat. § 66-152(1) states that acquisition, disclosure, or use of
a trade secret of another without express or implied authority or
consent[] is misappropriation. Confidential customer lists and
pricing information have been found to constitute trade secrets.
Drouillard v. Keister Williams Newspaper Services, 108 N.C. App.
169, 173, 423 S.E.2d 324, 327, disc. review denied, cert.
dismissed, 333 N.C. 344, 427 S.E.2d 617 (1993).
Where BAM's pleadings were stricken, they were deemed to have
admitted everything in the Gagnes' pleadings thereby admitting that
the mailing list in question was secretive and confidential and
within the exclusive control of the Gagnes, and further admitting
that the list was compiled through information of independent
commercial value which is not generally known or readilyascertainable. It was impermissible for BAM to try to create a
genuine issue of material fact through affidavits which
contradicted their admissions. See Allstate Ins. Co. v. Lahoud, 167
N.C. App. 205, 605 S.E.2d 180, aff'd, 359 N.C. 628, 614 S.E.2d 304
(2005)(holding that it was well settled that a nonmovant may not
generate a conflict simply by filing an affidavit contradicting his
own sworn testimony where the only issue raised is credibility).
This assignment of error is overruled.
Accordingly, we affirm the trial court's decision to grant
partial summary judgment on the counterclaim where it was barred by
the statute of limitations, to strike the pleadings of BAM for
willful failure to comply with discovery, and to enter summary
judgment on all other issues where all allegations were deemed
admitted.
Affirmed.
Judges McGEE and JACKSON concur.
Report per Rule 30(e).
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