Holton v. Holton, COA17-467

• Decision Date: 20 March 2018
• Docket Number: No. COA17-467,COA17-467
• Citation: 258 N.C.App. 408,813 S.E.2d 649
• Parties: Patricia K. HOLTON, Plaintiff, v. George F. HOLTON, Jr., Defendant.
• Court: North Carolina Court of Appeals

258 N.C.App. 408

813 S.E.2d 649

Patricia K. HOLTON, Plaintiff,

v.George F. HOLTON, Jr., Defendant.

No. COA17-467

Court of Appeals of North Carolina.

Filed: March 20, 2018

Law Offices of Wesley S. White, by Wesley S. White, for plaintiff-appellant.

Arnold and Smith, PLLC, by Peter E. McArdle, Charlotte, for defendant-appellee.

ELMORE, Judge.

Patricia K. Holton (plaintiff) appeals from an order dismissing with prejudice her complaint against her ex-husband, George F. Holton, Jr. (defendant), on grounds that her claims for equitable distribution (ED) and spousal support were waived by the parties’ prior separation and property settlement agreement (hereinafter, the "separation agreement"). Plaintiff also appeals from an order denying her motions for a new hearing or, in the alternative, to set aside the dismissal order.

Because the trial court's dismissal of plaintiff's complaint was either premised upon its erroneous Rule 12(b)(6) dismissal of her claim for rescission of the separation agreement, or its improper Rule 12(b)(6) dismissals of her ED and spousal support claims, we reverse. In light of our holding, we dismiss as moot plaintiff's appeal from the subsequent order denying her motions for relief from the dismissal order.

I. Background

On 22 May 2015, plaintiff filed a complaint against defendant seeking ED, postseparation support, and attorneys’ fees. In her complaint, she acknowledged that she signed the separation agreement but raised allegations challenging its validity on grounds of lack of mental capacity, duress, fraud, and unconscionability. But she never enumerated a separate claim for relief in the form of rescission of the separation agreement.

On 25 June 2015, defendant filed an answer in which he moved to dismiss plaintiff's complaint and for Rule 11 sanctions on grounds that her right to seek ED and spousal support were waived by the separation agreement. On 7 August 2015, plaintiff filed a response to defendant's motions, alleging that when she signed the separation agreement, "she was on medication that affected her mental capacity"; that defendant "forced her to sign the agreement, taking her to an attorney's office (that he had hired), and telling her to ‘sign here’ "; that she "did not understand the agreement, what it purported to do, or what her rights where [sic]"; that "[s]he did not, and was not allowed to consult with her own attorney prior to executing the agreement"; and that "the agreement was procured by fraud on the part of [defendant] in that it omitted a substantial marital asset from the provisions: Namely his retirement[.]" Therefore, on the grounds of lack of mental capacity, duress, fraud, and unconscionability, plaintiff requested that the trial court "conduct an evidentiary hearing to determine whether or not grounds exist for setting aside the Separation Agreement that the Defendant is relying on in filing his motion to dismiss." However, plaintiff's requested evidentiary hearing was neither further pursued nor ever conducted.

On 9 September 2015, without leave of court, plaintiff filed an amended complaint. The factual allegations of that complaint were identical to those in her original complaint but she added a fourth claim for relief in the form of rescission of the separation agreement.

On 8 February 2016, the trial court heard defendant's motions to dismiss and for Rule 11 sanctions. At the hearing, plaintiff orally moved for retroactive leave to amend her complaint to add the rescission claim. By written order entered 6 June 2016, the trial court denied defendant's motions and plaintiff's oral motion. In its order, the trial court found that plaintiff's "original complaint contains facts alleged sufficient to proceed on a rescission claim" and thus concluded that plaintiff's "claims are properly before the Court, and [she] may proceed on those claims," and that her "claim for rescission relates back to the original complaint ...." In denying plaintiff's oral motion for retroactive leave to amend her complaint, the trial court determined that "should Plaintiff desire to proceed on an amended complaint, she must file a motion for leave of court, but the Plaintiff's claims can move forward as originally pled." Plaintiff never later moved for leave to amend her complaint.

On 29 June 2016, defendant filed an amended motion to dismiss the complaint. He acknowledged that the trial court had previously denied his first dismissal motion due to plaintiff's potential rescission claim but asserted affirmative defenses that, since that time, the rescission claim was now barred by the expiration of the applicable statutory limitation period, and plaintiff failed to timely prosecute that claim. Defendant also asserted that, absent rescission of the parties’ separation agreement that barred plaintiff from seeking ED and spousal support, the trial court lacked jurisdiction over her complaint. Defendant filed written notice that the matter was scheduled to be heard on 21 July 2016.

On 20 July 2016, plaintiff filed a response to defendant's amended motion to dismiss in which she asserted that the trial court's prior dismissal order established the "law of the case" that her original complaint was adequate to plead a claim for rescission, which was therefore timely asserted.

On 21 July 2016, the day defendant noticed his amended dismissal motion hearing, defendant's counsel was present and plaintiff's counsel appeared telephonically. While the transcript of that hearing is absent from the appellate record, the record discloses that the trial court rescheduled the hearing with both parties’ consent.

On 3 August 2016, the day the hearing was rescheduled, defendant and his counsel were present but neither plaintiff nor her counsel appeared. According to the four-page transcript of that hearing, the trial court found that plaintiff's complaint did put defendant "on notice of a motion to rescind" but that "no motion to rescind or hearing was officially filed." The trial court noted defendant's argument that the statute of limitation had now expired on plaintiff's potential rescission claim. In ruling to grant defendant's dismissal motion, the trial court reasoned:

[THE COURT]: ... So the Court is going to at this point because [plaintiff's counsel] is not present—he was on the phone when we scheduled this hearing for the Court to hear further argument on this issue—the Court is going to grant [defendant's] Motion to Dismiss.

... [THE COURT]: And the Court will note that ... procedurally there was [sic] some missteps here. And so ... Plaintiff[ ] cannot prevail and the Motion to Dismiss is granted.

In its written order entered 24 August 2016, the trial court noted that "neither Plaintiff nor Plaintiff's counsel [were] present despite being properly noticed to appear" and made the following relevant findings:

2. Prior to the parties’ divorce judgment ..., the parties executed a Separation Agreement and Property Settlement Agreement (hereinafter the "Separation Agreement") on April 18, 2013.

3. On May 22, 2015, Plaintiff filed a Complaint which included claims for Equitable Distribution and Post-Separation Support.

Those claims, however, had been previously waived in the parties’ separation agreement.

4. Even though Plaintiff's Complaint did not include a claim for rescission of the parties’ separation agreement, the Court has previously opined that her vague reference to the circumstances surrounding the contract was enough to survive Defendant's prior Motion to Dismiss.

5. But since the time the Court denied Defendant's prior Motion to Dismiss, the Statute of Limitations has expired on Plaintiff's claim for rescission. Plaintiff has made no efforts to advance a potential claim for rescission of the parties’ separation agreement.

6. Plaintiff never filed a Motion to Amend her original Complaint. It is too late to file a claim for rescission of the parties’ separation agreement.

7. Moreover, Plaintiff failed to take steps to challenge the validity of the parties’ agreement within a reasonable time following the execution of that agreement, and she has ratified the agreement by her actions.

8. The Court does not have subject matter jurisdiction over the equitable distribution and post-separation support claims filed by Plaintiff. Those claims were resolved via the parties’ separation agreement.

9. The Court grants Defendant's Amended Motion to Dismiss Plaintiff's claims for equitable distribution and post-separation support. Since the parties are divorced and since those claims have already been resolved by the parties’ separation agreement, they cannot be refiled.

Based on these findings, the trial court concluded that "[w]ithout rescission of the parties’ separation agreement, Plaintiff cannot maintain claims for spousal support or equitable distribution against the Defendant" and thus granted defendant's amended dismissal motion and dismissed with prejudice plaintiff's complaint. Plaintiff timely appealed from this order.

Meantime, on 5 August 2016, two days after the rescheduled hearing on defendant's amended dismissal motion and before entry of the 26 August dismissal order, plaintiff filed, purportedly under Rule 60(b), a "Motion for re-hearing on Defendant's amended motion to dismiss; Motion in the alternative to vacate/set aside order for dismissal." After a 9 November 2016 hearing, the trial court denied plaintiff's motions by written order entered 11 January 2017. Plaintiff timely appealed from this order.

II. Alleged Errors

On appeal, plaintiff contends the trial court erred by dismissing with prejudice her action on the ground that she adequately pled and timely asserted a claim for rescission of the parties’ separation agreement. Thus, she argues, the trial court had no basis for dismissing her complaint under Rule 12(b)(1) for lack of jurisdiction over the subject matter of her ED and spousal support claims. She also contends that the trial court erred by denying her Rule 60(b) motions for a new...