Appeal by Plaintiff from judgment entered 8 October 2004 by
Judge Kimberly Taylor, in Superior Court, Iredell County. Heard in
the Court of Appeals 6 December 2005.
Pope, McMillan, Kutteh, Simon & Privette, P.A., by Charles A.
Schieck, for plaintiff-appellant.
Homesley, Jones, Gaines & Dudley, by Edmund L. Gaines and
Mitchell P. Johnson, for defendant-appellee.
WYNN, Judge.
In general, public policy “is not offended by permitting
. . . spouses to execute a complete settlement of all spousal
interests in each other's real and personal property and yet live
together.”
In re Estate of Tucci
, 94 N.C. App. 428, 438, 380S.E.2d 782, 788 (1989).
In this case, Plaintiff-husband argues
that the postnuptial agreement provided an economic incentive to
his Defendant-wife to leave the marriage and therefore was
repugnant to public policy. The postnuptial agreement in this case
transferred the property to the wife upon the signing of the
agreement, whether the parties separated in the future had no
effect on the terms of the agreement; thus, we hold that the
agreement did not provide either party an incentive to end the
marriage.
The facts show that Plaintiff, Henry Dunlap Dawbarn, Jr., and
Defendant, Linda Kay Dawbarn married on 20 April 1985. On or about
25 August 1993, Defendant confronted Plaintiff about his
involvement in an extramarital affair. Two days later, at
Defendant's request, Plaintiff drafted a note stating his desire to
transfer ownership of all three houses the couple jointly owned,
with their contents, to Defendant. This transfer of property was
to be construed as Plaintiff's good faith effort to stay in and
continue to work on the marriage.
Subsequently, Plaintiff suggested having the agreement
formalized by his attorney. Defendant responded that she already
hired an attorney, Richard Rudisill, to represent her and preferred
that they go to his office to formalize the agreement. On 30
August 1993, the couple met with Mr. Rudisill, and, after reviewing
the Agreement at issue and the deeds at issue, Plaintiff signed the
Agreement, deeds, and a memorandum of agreement. The Agreement
states in relevant part: The parties hereto do contract and agree as
follows: That since the marriage of the
Parties, the property as is hereinafter
specifically enumerated has been acquired or
owned by either the Party of the First
Part/Husband or the Party of the Second
Part/Wife or both.
That it is the contract and agreement of the
Parties that from and after the date of this
document, the property enumerated below will
be the sole and separate property of the Party
of the Second Part/Wife, free and clear of any
right, title, claim, or interest of the Party
of the First Part/Husband whatsoever,
including but not limited to, claims pursuant
to N.C.G.S. § 50-20 et seq, and the said Party
of the First Part/Husband does hereby bargain,
sell, convey and quitclaim unto Party of the
Second Part/Wife all of his right, title and
interest therein.
The Agreement transferred to Defendant the three homes
purchased during the course of the marriage, all of the vehicles
owned by the parties, and all of the furnishings in the homes.
Plaintiff also assumed responsibility for all future costs
associated with the homes, including, but not limited to, ad
valorem taxes, repairs, and “redecorating costs and the like.” At
the time of the parties' execution of the Agreement, the property
conveyed to Defendant was worth approximately $850,000.00.
Defendant also specifically retained the right to pursue third
parties through the legal system, and reserved all rights to make
further claims pertaining to Plaintiff's separate property in the
event there was a subsequent equitable distribution proceeding by
either party at any time in the future. In January 1994, Plaintiff
executed another deed convening a parcel of property to Defendant
to complete the conveyance of the properties to her according tothe Agreement. Plaintiff testified that this conveyance was free
from “any kind of duress or coercion.”
After the execution of the agreements, the parties lived
together as husband and wife for more than nine years and did not
treat the property as belonging solely to Defendant. In May 2003,
Plaintiff asked Defendant to take out a loan on one of the pieces
of property that Plaintiff had conveyed to her pursuant to the
Agreement. Defendant refused, and, approximately two weeks later,
the parties separated.
In August 2003, Plaintiff filed a lawsuit seeking to set aside
the Agreement on the grounds of undue influence, fraud, duress,
breach of a fiduciary duty, lack of consideration, and
contravention of public policy. Following the depositions of both
parties and the filing of several affidavits , Defendant moved the
court to grant summary judgment on all claims raised in Plaintiff's
complaint. After hearing oral arguments and reviewing the
pleadings, deposition transcripts and affidavits tendered to the
court, Judge Kimberly Taylor granted summary judgment in favor of
Defendant on all claims advanced by Plaintiff in an order entered
8 October 2004. Plaintiff appeals to this Court.
“[T]he standard of review on appeal from summary judgment is
whether there is any genuine issue of material fact and whether the
moving party is entitled to a judgment as a matter of law.”
Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504
S.E.2d 574, 577 (1998) (citation omitted). Also, the evidencepresented by the parties must be viewed in the light most favorable
to the non-movant.
Id. The court should grant summary judgment
when “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) (2005).
[1] In his first argument on appeal, Plaintiff contends the
trial court erred in granting Defendant summary judgment on his
claim that the Agreement was void at its inception as against
public policy. We disagree.
North Carolina General Statute section 52-10(a) provides in
pertinent part:
(a) Contracts between husband and wife not
inconsistent with public policy are valid, and
any persons of full age about to be married
and married persons may, with or without
valuable consideration, release and quitclaim
such rights which they might respectively
acquire or may have acquired by marriage in
the property of each other; and such releases
may be pleaded in bar of any action or
proceeding for the recovery of the rights and
estate so released.
N.C. Gen. Stat. § 52-10(a) (2005). Public policy “is not offended
by permitting . . . spouses to execute a complete settlement of all
spousal interests in each other's real and personal property and
yet live together.”
Tucci, 94 N.C. App. at 438, 380 S.E.2d at 788.
However, when an agreement provides an economic inducement to leave
the marriage, it is void as against public policy.
Matthews v.
Matthews,
2 N.C. App. 143, 162 S.E.2d 697 (1968). Plaintiff relies on this Court's decision in
Matthews to
support its contention that the Agreement violates public policy.
Id. However, the facts in
Matthews are quite distinguishable from
the facts in this case
. In
Matthews,
the contract at issue
provided that the plaintiff had promised “that if I ever leave [the
defendant], everything I have or will have will be hers to have and
hold for the benefit of our children and herself[.]”
Id. We held
that this contract was void as against public policy because
enforcing the agreement would “induce the wife to goad the husband
into separating from her in order that the agreement could be put
into effect[.]”
Id. at 147, 162 S.E.2d at 699.
Here,
there is no evidence in the record to suggest that the
Agreement provided either party any economic inducement to leave
the marriage. Because the properties became Defendant's upon the
signing of the Agreement, whether the parties separated in the
future had no effect on the terms of the Agreement. Thus, neither
party had an incentive to end the marriage under the Agreement.
Moreover, Defendant testified that the purpose of the Agreement was
to show a good faith effort by Plaintiff to stay in and continue to
work on the marriage.
Likewise, Plaintiff's own affidavit states
that the Agreement encouraged him to stay in the marriage:
That as a result of said Agreement, I felt
that I had no choice but to remain married to
Linda Kay Dawbarn, even though our marriage
has been less than happy for quite some time
in the recent past.
Where “it appears the execution of the Agreement was intended to
encourage the parties to reconcile and improve their marriage[,]”public policy is not violated.
Tucci, 94 N.C. App. at 438, 380
S.E.2d at 788 (emphasis in original).
Because there is no evidence
in the record to suggest that the Agreement would give either
spouse an incentive to end the marriage, and, based on Plaintiff's
affidavit and Defendant's deposition testimony, the execution of
the Agreement encouraged the parties to reconcile and remain
married, the Agreement does not violate public policy. We
therefore find no merit in Defendant's first assignment of error.
[2] Plaintiff next argues the trial court erred in granting
Defendant summary judgment on Plaintiff's claim that the Agreement
was unconscionable, executed under duress, and that the agreement
at issue should be rescinded. We hold that the trial court
correctly granted summary judgment in favor of Defendant on the
grounds that the statute of limitations barred Plaintiff's
assertions of duress.
Preliminarily, we note that a postnuptial agreement, like any
other contract, is not enforceable if it is “unconscionable or
procured by duress, coercion, or fraud.”
Knight v. Knight, 76 N.C.
App. 395, 398, 333 S.E.2d 331, 333 (1985) (citations omitted). A
determination of unconscionability requires both procedural and
substantive unconscionability.
King v. King, 114 N.C. App. 454,
457-58, 442 S.E.2d 154, 157 (1994). Procedural unconscionability
“involves bargaining naughtiness in the formation of the contract,
i.e., fraud, coercion, undue influence, misrepresentation,
inadequate disclosure.”
Id. To prove substantive
unconscionability, “[t]he inequality of the bargain . . . must beso manifest as to shock the judgment of a person of common sense,
and . . . the terms . . . so oppressive that no reasonable person
would make them on the one hand, and no honest and fair person
would accept them on the other.”
Id. (quoting
Brenner v. Little
Red School House, Ltd., 302 N.C. 207, 213, 274 S.E.2d 206, 210
(1981)).
Under North Carolina law, there is a three-year limitation for
filing an action for duress, undue influence and fraud. N.C. Gen.
Stat. § 1-52(9) (2005). A cause of action for duress, undue
influence and fraud accrues upon discovery by the aggrieved party
of the facts constituting the fraud.
Id. Courts in this
jurisdiction have interpreted this language to mean that the “cause
of action accrues when the wrong is complete, even though the
injured party did not then know the wrong had been committed.”
Davis v. Wrenn, 121 N.C. App. 156, 158-59, 464 S.E.2d 708, 710
(1995) (internal quotation and citation omitted);
see also Baars v.
Campbell Univ., Inc., 148 N.C. App. 408, 417-18, 558 S.E.2d 871,
876 (2002) (applying the date of having knowledge of an alleged
undue influence as the date that a deed was executed and filed);
Biesecker v. Biesecker, 62 N.C. App. 282, 286, 302 S.E.2d 826, 829
(1983) (holding that a wife was not entitled to claim duress more
than three years after execution of the deed because the cause of
action accrued when the husband threatened the wife with physical
violence unless she signed the deed).
In this case, Plaintiff contends Defendant threatened to sue
the person with whom he engaged in an extramarital affair unless heexecuted the Agreement on 30 August 1993. Because Plaintiff was
aware of Defendant's alleged threats, any cause of action for
fraud, duress or undue influence accrued at the time he signed the
Agreement in 1993. Such claims are now barred by the three-year
limitation set forth in section 1-52(9). Since a determination of
unconscionability requires both procedural and substantive
unconscionability,
King, 114 N.C. App. at 457-58, 442 S.E.2d at
157, and we have found that Plaintiff's claims of procedural
unconscionability are barred by the statute of limitations, we need
not address Plaintiff's claim that the Agreement is substantively
unconscionable. Therefore, the trial court properly granted
Defendant summary judgment on Plaintiff's claim that the Agreement
was unconscionable at its inception.
[3] In his final argument on appeal, Plaintiff contends the
trial court improperly granted summary judgment on Plaintiff's
claim that Defendant breached her fiduciary duty to Plaintiff by
having the Agreement executed and seeking to enforce the Agreement
more than nine years later. We disagree.
The relationship between a husband and wife creates a
fiduciary duty.
Sidden v. Mailman, 150 N.C. App. 373, 376, 563
S.E.2d 55, 58 (2002) (quoting
Harton v. Harton, 81 N.C. App. 295,
297, 344 S.E.2d 117, 119 (1986)). Where
a
fiduciary relationship
exists between spouses involved in a transaction, each spouse has
a duty of full disclosure to the other.
Id.; see also Howell v.
Landry, 96 N.C. App. 516, 525, 386 S.E.2d 610, 615 (1989) (stating
“[w]hen the parties to the agreement stand in a confidentialrelationship to one another, there must be full disclosure between
the parties as to their respective financial status.”).
However,
when one or both of the spouses are represented by legal counsel,
the fiduciary relationship terminates.
Id. at 376-77, 563 S.E.2d
at 58. In the instant case, the fiduciary duty between Plaintiff
and Defendant terminated when Defendant retained Mr. Rudisill to
represent her in the transaction with Plaintiff.
See id.
Moreover, even assuming
arguendo that the fiduciary
relationship between Plaintiff and Defendant did not terminate when
Defendant retained legal counsel, Plaintiff does not point to any
evidence in the record to show that Defendant failed to disclose
any information that she should have disclosed pursuant to the
fiduciary duty that she owed Plaintiff as her husband. Plaintiff
testified that he knew that Mr. Rudisill and his law firm only
represented Defendant, that the Agreement would affect significant
legal rights with a long range effect, that he should consult an
attorney before signing it, that he had adequate time to consider
the Agreement, and that he signed the Agreement free from pressure
and coercion.
We therefore hold that Plaintiff's argument is
without merit, and the trial court properly granted Defendant
summary judgment on Plaintiff's breach of fiduciary duty claim.
Affirmed.
Judges STEELMAN and LEWIS concur.
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