Brooks v. Rogers

Decision Date19 August 1986
Docket NumberNo. 8618SC110,8618SC110
Citation82 N.C.App. 502,346 S.E.2d 677
CourtNorth Carolina Court of Appeals
PartiesNancy C. BROOKS v. Lee ROGERS; Carolina Business Consultants, Inc.; Lee Rogers, Inc.; Burroughs and Rogers, Inc.; and Lee Rogers and Ruth R. Burroughs d/b/a Burroughs and Rogers, a Partnership.

Richard M. Pearman, Jr., Greensboro, for plaintiff-appellant.

Kirby, Wallace, Creech, Sarda & Zaytoun by John R. Wallace, Raleigh, for defendants-appellees Lee Rogers, Carolina Business Consultants, Inc., and Lee Rogers, Inc.

McMillan, Kimzey, Smith & Roten by Russell W. Roten, Raleigh, for defendants-appellees Burroughs and Rogers, Inc., and Lee Rogers and Ruth R. Burroughs d/b/a Burroughs and Rogers partnership. BECTON, Judge.

This appeal is from an order dismissing plaintiff Nancy C. Brooks' action on the ground that it should have been filed as a counterclaim in a prior pending action. We modify and affirm the trial court's order.

The main issue before us is whether, under Rule 13(a) of the North Carolina Rules of Civil Procedure, the claims filed by Brooks in her Guilford County action constitute compulsory counterclaims in a prior action filed in Wake County by defendant Lee Rogers.

I

Nancy C. Brooks filed an action in Guilford County on 13 September 1983. She sued Lee Rogers, individually, and several corporations and one partnership through which Rogers allegedly acted to defraud Brooks. She alleged in her complaint that in September 1980, she retained Rogers as a personal and confidential financial advisor to assist her in managing an inheritance she had received when her husband had died one month earlier. According to Brooks, Rogers instructed her to issue a $10,000 check to one of the defendant corporations of which Rogers was president and principal stockholder. Rogers allegedly represented himself to be an expert in personal financial management and convinced Brooks to invest her money through him and his businesses. Brooks claims that, as part of Rogers' scheme, he convinced her to purchase a $100,000 certificate of deposit which was to be used primarily as collateral for loans.

Brooks then described in her complaint a series of investment transactions arranged for Brooks by Rogers, including the purchase and sale of a motel, an apartment complex, and two residential lots on which houses were to be constructed. In some of these transactions, Rogers co-invested with Brooks through various business entities.

Brooks claimed that Rogers engaged in a pattern of extensive misrepresentation, conversion of Brooks' funds, fraud, forgery, and unfair and deceptive trade practices regarding these investments and her funds. She also claimed that Rogers breached his fiduciary duty toward her in handling her inheritance tax return, income tax return, and a mortgage loan for a home she planned to buy in Greensboro.

Finally, Brooks alleged that Rogers breached his promise not to totally deplete her certificate of deposit, and she claimed that this breach left her unable to satisfy her liability to State Bank for certain interest payments. According to Brooks, she received two unsolicited payments from Rogers, checks for $10,653.33 and $2,092.55, which contained no restrictions or explanations. She endorsed the checks, believing them to be late returns on her investments. She received a third check from Rogers, for $949.82, on 16 March 1983, which she treated as the others; but it was returned for insufficient funds.

The allegedly wrongful acts spanned a period of nearly three years.

In her prayer for relief, Brooks requested $200,000 damages, $500,000 punitive damages, treble damages and attorney's fees. She also asked the court to issue an order of Arrest and Bail as to Rogers.

On 9 November 1983, default judgment was entered as to defendant Lee Rogers, Inc. On 15 November 1983, the remaining defendants filed a motion to dismiss and abate Brooks' action on the ground that a prior pending action in Wake County arose out of the same transactions and occurrences alleged by Brooks.

An action had been filed by Rogers, individually, against Brooks in Wake County on 30 August 1983. In the Wake County action, Rogers claimed that he had made loans to Brooks of $10,653.33 and $2,092.55 of which $12,092.55 remained unpaid; that he had advanced $8,038.74 for the construction of a house which had not been repaid; that Brooks' $1,457.35 interest obligation to Branch Banking and Trust Company for a construction loan had been satisfied by Burroughs & Rogers, Inc. and Lee Rogers, Inc. who subsequently assigned their claims to Rogers; and that Brooks was unjustly enriched by the total of the advances ($9,496.09) made on her behalf.

Finally, Rogers claimed that a $125,000 construction loan for the apartment complex had been made jointly to Brooks, to a corporation in which Rogers was a shareholder, and to other investors. According to Rogers, when this loan came due, all the owners except Brooks agreed to execute a new note to Branch Banking and Trust; he alleged that Brooks made false and misleading statements to the bank which were intended to and did damage Rogers' business reputation with the bank.

Rogers requested $250,000 general compensatory damages for the alleged libel, $12,092.55 for the loans and $9,496.09 for the advances.

On 30 November 1983, mistakenly believing service of process rather than the filing of a complaint determined the commencement of an action, Brooks filed a motion to dismiss and abate Rogers' Wake County action. On 9 July 1984, the Wake County Superior Court denied Brooks' motion. The basis for its ruling was that the Wake County action had been initiated before the Guilford County action, and that, therefore, the Guilford County action could not be a "prior pending action." Nothing in the Order indicates the court's opinion as to whether Brooks' claims in the Guilford County action should have been asserted as compulsory counterclaims in Rogers' Wake County action.

On 26 March 1985, venue for Rogers' Wake County action was transferred to Guilford County. On 20 August 1985, Brooks moved to consolidate the two cases, asserting that they involved "common questions of law and fact."

On 3 September 1985, the Guilford County Superior Court issued an order granting a motion, filed on 15 November 1983 by the defendants in Brooks' action, to dismiss and abate Brooks' case. Brooks appeals from this Order. She argues that the court erred in dismissing her action because (1) the court had no factual basis for its orders; (2) Brooks' claims against Rogers do not constitute compulsory counterclaims in Rogers' action; (3) Brooks' claims against the other defendants do not constitute compulsory counterclaims in Rogers' action; and (4) all defendants waived their rights to object to this proceeding. Finally, she argues that (5) the court erred in refusing to rule on her motion for sanctions.

We affirm the dismissal of Brooks' action, but we modify the trial court's order to grant leave to Brooks to file her claims as counterclaims in Rogers' pending action.

II

The main issue we are asked to consider is whether Brooks' claims are compulsory counterclaims in Rogers' action. We address this issue first, as it is dispositive of all Brooks' arguments on appeal.

Defendants' motion to dismiss Brooks' action is based on Rule 13(a) of the North Carolina Rules of Civil Procedure which provides:

Compulsory counterclaims.--A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if

(1) At the time the action was commenced the claim was the subject of another pending action, or

(2) The opposing party brought suit upon his claim by attachment or other process by which the court did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is not stating any counterclaim under this rule.

We reject Brooks' argument that no claim can be considered a compulsory counterclaim unless it is against the original opposing party or parties. Although to succeed on a theory of common law abatement, strict identity of parties was required, see Cameron v. Cameron, 235 N.C 82, 68 S.E.2d 796 (1952), this appeal involves the new rule, Rule 13(a), which clearly contemplates that all counterclaims arising out of the same transaction or occurrence be asserted even if other parties must then be joined, as long as the court can acquire jurisdiction over them. And we recognize there is dicta in Gardner v. Gardner, 294 N.C. 172, 175 n. 5, 240 S.E.2d 399, 402 (1978) suggesting that although the former plea in abatement is abolished, the substantive law of abatement may still be applicable. To the extent that it is, there is no abatement here. There is no identity of the parties, and judgment on the merits in favor of Rogers in the first action will not bar Brooks' prosecution of the second. See Cameron.

We also reject Rogers' contention that the 9 July 1984 Order, which has not been appealed, resolved whether Brooks' claims were compulsory counterclaims under Rule 13(a). The court simply determined that Brooks' motion to dismiss and abate Rogers' action could not be granted because Rogers' action had been filed first.

The proper analysis under Rule 13(a) was set forth in Gardner (applying the rule to domestic actions). See Atkins v. Nash, 61 N.C.App. 488, 300 S.E.2d 880 (1983) (holding that the Gardner analysis is generally applicable in all types of cases). The Gardner Court held that if an action may be denominated a compulsory counterclaim in a prior action, it must be either (1) dismissed with leave to file it in the former case or (2) stayed...

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13 cases
  • Jonesboro United v. Mullins-Sherman, 170PA04.
    • United States
    • North Carolina Supreme Court
    • July 1, 2005
    ...166 N.C.App. at 458, 602 S.E.2d at 688; Cloer v. Smith, 132 N.C.App. 569, 574, 512 S.E.2d 779, 782 (1999); Brooks v. Rogers, 82 N.C.App. 502, 507-08, 346 S.E.2d 677, 681 (1986). Although application of Rule 13(a) is not reducible to any simple formula, we agree that courts should inquire, a......
  • Richardson v. Mancil
    • United States
    • North Carolina Court of Appeals
    • December 21, 2010
    ...either (1) dismissed with leave to file it in the former case or (2) stayed until the conclusion of the former case." Brooks v. Rogers, 82 N.C. App. 502, 507, 346 S.E.2d 677, 681 (1986)(citing Gardner, 294 N.C. at 176-77, 240 S.E.2d at 403). Nonetheless, "[b]ecause the purpose of Rule 13(a)......
  • Hendrix v. Advanced Metal Corp.
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    • February 17, 2009
    ... ... compulsory if the legal effect of a given transaction "necessarily will resolve the conflicting assertion as to the law by the other party." Brooks v. Rogers, 82 N.C.App. 502, 509, 346 S.E.2d 677, 682 (1986) ...         All three of the Curlings factors dictate that plaintiffs' claims ... ...
  • Dep't of Transp. v. Stimpson, COA17-596
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    • North Carolina Court of Appeals
    • March 20, 2018
    ...option to stay the second action should be reserved for unusual circumstances, not present in the case at bar. Brooks v. Rogers , 82 N.C. App. 502, 507, 346 S.E.2d 677, 681 (1986) (citations omitted). The purpose of Rule 13(a) is just as relevant in the present case, and we hold that the tr......
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