LECIEJEWSKI v. SOUTHERN Ent. Corp.
| Decision Date | 15 April 2011 |
| Docket Number | No. 1:09-cv-995,1:09-cv-995 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | F. EUGENE LECIEJEWSKI AND WILMA M. LECIEJEWSKI Plaintiffs, v. SOUTHERN ENTERTAINMENT CORP. Defendant. |
OPINION TEXT STARTS HERE
Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendant Southern Entertainment Corporation ("SEC") filed a motion to dismiss the first amended complaint of Plaintiffs F. Eugene Leciejewski and Wilma M. Leciejewski. (Doc. 15.) SEC contends that the Leciejewskis' claims are barred by the three-year statute of limitations applicable to breach-of-contract claims under N.C. Gen. Stat. § 1-52(1). (Id. at 1.) The court exercises jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1).
On August 17, 1995, SEC entered into an advertising agreement ("Advertising Agreement") with Semora Broadcasting, Inc. ("Semora"). (Doc. 14 at 2 ¶ 3; Doc. 14-2 at 1, 7.) At the time the parties executed the Advertising Agreement, Semora was the radio licensee of call sign WYNC-AM in Yanceyville, North Carolina. (Doc. 14 at 2 ¶ 3; Doc. 14-2 at 1.) SEC was the radio permittee of call sign WQVA-FM in Semora, North Carolina.1 (Doc. 14 at 2 ¶ 3; Doc. 14-2 at 1.)
The term of the Advertising Agreement was "for a period of forty-eight months from [its] effective date." (Doc. 14-2 at 2; see Doc. 14 at 2 ¶ 3.) The "effective date" was "the sooner of August 18, 1997," or the date of the FCC's final approval of the application to assign the construction permit for call sign WQVA-FM ("Assignment Application"). (Doc. 14-2 at 2; see Doc. 14 at 2 ¶¶ 3-4.) Because the FCC approved the Assignment Application on July 12, 2005 (Doc. 14 at 5 ¶ 11), the Advertising Agreement took effect on the earlier date of August 18, 1997. The Advertising Agreement terminated on August 18, 2001. (See Doc. 14-2 at 2.)
Under the Advertising Agreement, Semora agreed to "air certain radio advertising and promotional announcements" on its WYNC-AM station on behalf of SEC's WQVA-FM station. (Id. at 1; see Doc. 14 at 2 ¶ 3.) The parties also agreed that SEC would produce the advertising and promotional announcements and provide them to Semora. (Doc. 14-2 at 1, 2.) In exchange, SEC agreed to pay Semora a lump sum of "$55,000 within ten (10) business days" of the FCC's final approval of the Assignment Application and to make "[o]ne $979 payment per month paid in advance commencing thirty (30) days after the effective date for each of the 48 months of this agreement." (Id. at 8; see id. at 1.)
On October 21, 1996, Semora assigned its right to payment under the Advertising Agreement to the Leciejewskis. (Doc. 14-3 at 2; see Doc. 14 at 3 ¶ 6.) Between November 4, 1996, and September 19, 1997, SEC sent three letters to the Leciejewskis' attorney about its obligations under the Advertising Agreement. (Docs. 14-4, 14-5, 14-6.) In the letters, SEC acknowledged Semora's assignment of the right to payment to the Leciejewskis (Doc. 14-4 at 1) and made various statements concerning the delays it was encountering with the FCC and its intention to comply with the Advertising Agreement (id.; Doc. 14-5 at 1; Doc. 14-6 at 1).
On September 20, 2006, the Leciejewskis filed a complaint in the Superior Court of Person County, North Carolina, alleging breach of contract. (Doc. 14 at 7 ¶ 19; see Doc. 2 at 4 ¶ 20.) The Leciejewskis voluntarily dismissed the complaint on November 24, 2008, and re-filed it on November 19, 2009. (Doc. 14 at 7 ¶ 19.) On December 23, 2009, SEC removed the action to federal court, pursuant to 28 U.S.C. §§ 1441 and 1446. (Doc. 1 at 1-4.) On March 17, 2010, the Leciejewskis amended their complaint; they seek payment of amounts due under the Advertising Agreement, as well as interest, attorney's fees, and costs. (Doc. 14 at 7.)
On April 5, 2010, SEC filed a motion to dismiss the first amended complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 15 at 1.) To withstand a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
SEC contends that the Leciejewskis failed to file their initial complaint within the three-year statute of limitations for a breach of contract under N.C. Gen. Stat. § 1-52(1). (Doc. 15 at 1; Doc. 16 at 6-7; Doc. 20 at 2.) The Leciejewskis respond that the ten-year statute of limitations under N.C. Gen. Stat. § 1-47(2) governs this action because the parties executed the Advertising Agreement under seal or, in the alternative, that their complaint was timely under the doctrine of equitable estoppel. (Doc. 14 at 5 ¶ 12; Doc. 19 at 8-9.) North Carolina law applies to the statute-of-limitations and equitable-estoppel issues.2
The first issue is whether the applicable statute of limitations bars this action. To resolve this issue, the court must determine (1) whether to reach the merits of this affirmative defense now; (2) whether the applicable statute of limitations is three or ten years; and (3) whether the Leciejewskis initiated their action within the applicable statute of limitations.
Initially, the court must determine whether to resolve the statute-of-limitations issue at this early stage of the proceedings. "[A] motion to dismiss filed under [Rule] 12(b)(6), which tests the sufficiency of the complaint, generally cannot reach the merits of an affirmative defense, such as the defense that the plaintiff's claim is time-barred." Goodman v. Praxair Servs., Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc). In "relatively rare circumstances," however, a court may reach a statute-of-limitations defense if and only if "all facts necessary to the affirmative defense 'clearly appear[] on the face of the complaint.'" Id. (emphasis omitted) (quoting Richmond, Fredericksburg & Potomac R.R. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993)). A movant must "show . . . that the plaintiff's potential rejoinder to the affirmative defense was foreclosed by the allegations in the complaint." Id. at 466.
In this action, the Leciejewskis themselves raise the statute-of-limitations issue in the Amended Complaint. (Doc. 14 at 5 ¶¶12-13.) The Leciejewskis allege that the ten-year statute of limitations applies because "the Advertising Agreement is an instrument under seal." (Id. ¶ 13.) The Leciejewskis attach the Advertising Agreement and three letters they received from SEC to the first amended complaint. (Docs. 14-4, 14-5, 14-6.) In combination, these documents provide all dates and information necessary to determine the applicable statute of limitations and whether the Leciejewskis initiated their action within that limitations period.
The statute of limitations under North Carolina law is three years for a breach of contract. N.C. Gen. Stat. § 1-52(1). If the parties executed the contract under seal, however, the statute of limitations is ten years. Id. § 1-47(2).
Under North Carolina law, "[t]he determination of whether an instrument is a sealed instrument . . . is a question for the court." Dunes S. Homeowners Ass'n v. First Flight Builders, Inc., 459 S.E.2d 477, 480 (N.C. 1995) (alternation in original) (internal quotation marks omitted). While courts have been relatively liberal in construing the term "seal" to encompass a wide variety of marks, scrawls, and pen flourishes,3 something representing a seal or that can be identified as a seal must be present before the contract can be deemed to be executed under seal.4See Biggers v. Evangelist, 321 S.E.2d 524, 527 (N.C. Ct. App. 1984). A testimonium clause, such as "set their hand and seal," is not enough, by itself, to make an instrument a sealed instrument.5 See Patterson v. Galliher, 29 S.E. 773, 773 (N.C. 1898); see also Garrison, 246 S.E.2d at 147-49.
Here, the Advertising Agreement contains a testimonium clause above the signature lines providing: "WHEREFORE, the parties have set their hand and seal this 17th day of August, 1995." (Doc. 14-2 at 7.) However, the signatures of Semora and SEC were not accompanied by any word, mark, scrawl, or pen flourish indicative of a seal. (Id.) As in Patterson, this testimonium clause is insufficient as a matter of law to create a contract under seal. In the absence of a seal, the three-year statute of limitations applies to this breach-of-contract action.
For a breach-of-contract claim under North Carolina law, "the statute of limitations . . . begins to run on the date the promise is broken." Harrold v. Dowd, 561 S.E.2d 914, 918 (N.C. Ct. App. 2002) (internal quotation marks omitted); see N.C. Gen. Stat. § 1-15(a). The statute of limitations generally begins to run on installment contracts "from the time each individual installment becomes due." Finova Capital Corp. v. Beach Pharmacy II, Ltd., 623 S.E.2d 289, 292 (N.C. Ct. App. 2005) (internal quotation marks omitted).
In this action, the statute of limitations had expired before the Leciejewskis filed their initial complaint in state court. SEC's alleged breach of its contractual duty to provide Semora with a copy of any advertising and promotional announcements and to make installment payments began to run, at the latest, in mid-2001, which was forty-eight months after the effective date of the Advertising Agreement.6 SEC's obligation to make the lump-sum payment never matured.7 Thus, the statute of limitations had started to run more than five years before the Leciejewskis filed their initial complaint on September 20, 2006.
"[A] defendant may properly rely on a statute of limitations as a defensive shield against 'stale' claims, but may be equitably estopped from using a statute of limitations as a sword,...
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