Pharmaresearch Corp. v. Mash

• Decision Date: 06 April 2004
• Docket Number: No. COA03-213-2.,COA03-213-2.
• Citation: 594 S.E.2d 148,163 NC App. 419
• Parties: PHARMARESEARCH CORPORATION, Plaintiff, v. James M. MASH, Defendant.
• Court: North Carolina Court of Appeals

594 S.E.2d 148

163 NC App. 419

PHARMARESEARCH CORPORATION, Plaintiff, v. James M. MASH, Defendant.

No. COA03-213-2.

Court of Appeals of North Carolina.

April 6, 2004.

Womble Carlyle Sandridge & Rice, P.L.L.C., by Pressly M. Millen, Raleigh, for plaintiff-appellee.

Fletcher, Ray & Satterfield, L.L.P., by R. Jay Short, Jr. and Kimberly L. Moore, Wilmington, for defendant-appellant.

LEVINSON, Judge.

Defendant (James Mash) appeals from entry of summary judgment on his counterclaims, and from the award of costs to plaintiff and the denial of his motion for costs. We affirm.

The relevant evidence is summarized as follows: Plaintiff (PharmaResearch Corporation) is a pharmaceutical development service company with corporate offices in Wilmington, North Carolina. In 1997, defendant was plaintiff's president, CEO, and one of plaintiff's shareholders. On 13 August 1997 plaintiff's shareholders, including defendant, executed an Amended and Restated Shareholders Agreement (the Shareholders Agreement). Paragraph 11 of the Shareholders Agreement gives plaintiff the right to repurchase an employee-shareholder's shares upon the occurrence of certain "option events," including "termination for Cause by the Company[.]" Paragraph 11 also states that:

Upon the occurrence of any of the Option Events ... the Company shall have the option ... to purchase ... the Stockholder Shares of ... [the terminated employee] provided that the Company shall have first given written notice ... [to the ex-employee] within sixty (60) days after the date that the Company receives notice of the [termination].

On 20 February 1998 plaintiff's board of directors held a meeting, attended by defendant. Members of plaintiff's board confronted defendant with their recent discovery of financial misconduct on defendant's part, including evidence that defendant had (1) paid himself an unauthorized $75,000 bonus which he concealed from plaintiff, and (2) failed to reimburse plaintiff for thousands of dollars in personal expenses that defendant charged to the company credit card. Plaintiff informed defendant that he was dismissed from his employment with plaintiff, effective immediately. Defendant's personal effects were removed from the building, and he did not perform any work for plaintiff after 20 February 1998.

Although defendant may have been, in the ordinary sense of the word, "fired" at the 20 February 1998 board meeting, the meeting did not resolve the issue of how defendant's separation would be structured. At the meeting, the board informed defendant that they had sufficient grounds to have defendant formally terminated for cause. However, because plaintiff also wished to avoid negative publicity about the company, the board offered defendant an opportunity to resign voluntarily, provided he agreed to certain conditions. At defendant's request, plaintiff sent defendant a proposed agreement setting out the terms for defendant's voluntary resignation from plaintiff. The proposed agreement provided that defendant would be allowed to resign voluntarily and would receive $50,000 in severance pay. In return, defendant had to sign a release of all claims against plaintiff, sell his shareholder stocks to plaintiff, and limit public comment about his separation from plaintiff to a statement that he "resigned to pursue other opportunities."

Defendant did not respond to plaintiff's proposal, which he received on 10 March 1998 via certified mail, return receipt requested. On 29 May 1998, plaintiff sent defendant another letter, also sent via certified mail, return receipt requested, and received by defendant on 1 June 1998. This letter stated in pertinent part:

To date we have not received any response from you to our letter dated March 10, 1998.... [T]his letter shall confirm that your employment with the Company has been terminated for cause. Accordingly, pursuant to the provisions of Section 11 of the ... [Shareholders Agreement], this letter shall serve as notice to you that the Company has chosen to exercise its option to purchase ... the Company's common stock held by you.... [P]lease return your stock certificate ... and we will mark it cancelled.

(emphasis added). Thereafter, plaintiff repurchased defendant's shares of stock and "marked its stock ledger and other corporate records to reflect the fact that the shares it had repurchased" from defendant were cancelled. Defendant failed to return the cancelled stock certificate to plaintiff, as requested in the letter of 29 May 1998. On 30 May 2001, defendant informed plaintiff's CEO that the stock certificate had been destroyed, and agreed to sign an acknowledgment to that effect. However, when defendant met with plaintiff's CEO on 31 May 2001, defendant refused either to return the stock certificate or to sign a form acknowledging that it had been destroyed. On 31 May 2001 plaintiff commenced the present action against defendant for breach of the Shareholders Agreement and conversion of the stock certificate by service of a civil summons on defendant accompanied by an order extending the time for plaintiff to file its complaint. Plaintiff timely filed a complaint on 20 June 2001. In its complaint, plaintiff sought an injunction directing defendant's specific performance of the Shareholders Agreement, "namely to surrender to PharmaResearch the cancelled certificate or, in the alternative, to execute a written acknowledgment that the certificate was destroyed[.]"

Defendant filed an answer and counterclaims on 21 August 2001. Defendant asserted various defenses, and also made counterclaims against plaintiff for: (1) declaratory relief, seeking a judgment declaring him to be the owner of the cancelled shares of stock; (2) unfair and deceptive trade practices; (3) breach of contract, alleging that plaintiff breached the Shareholders Agreement by wrongfully terminating defendant's employment without good cause and failing to notify defendant of plaintiff's exercise of its repurchase option within 60 days of defendant's termination; (4) injunctive relief, seeking to bar plaintiff from acting as owner of the subject shares of stock, and; (5) constructive trust.

Plaintiff filed its answer to defendant's counterclaims on 23 October 2001. Plaintiff sought dismissal of defendant's claims for unfair and deceptive trade practices and imposition of a constructive trust pursuant to N.C.R. Civ. P. 12(b)(6). This motion was granted on 24 January 2002 and, accordingly, these claims are not before this Court. Plaintiff also sought dismissal of defendant's other counterclaims, asserting, inter alia, that the claims were barred by the applicable statute of limitations.

On 14 June 2002 defendant filed a motion for summary judgment on his three remaining counterclaims, based on plaintiff's alleged failure to give defendant "written notice of its intention to exercise its option to purchase" defendant's shares of stock within 60 days of his termination for cause. On 17 June 2002 plaintiff filed a motion for summary judgment and again asserted that defendant's claims "are time-barred as indicated on the face of the Counterclaim." On 15 July 2002, the trial court entered an order granting plaintiff's motion for summary judgment on defendant's counterclaims and denying plaintiff's motion for summary judgment on its own claims. The court also denied defendant's summary judgment motion. The trial court's order does not state the legal basis for its rulings.

On 22 August 2002, plaintiff voluntarily dismissed its action against defendant under N.C.R. Civ. P. 41(a). Defendant then filed a motion, pursuant to N.C.R. Civ. P. 41(d), seeking an award of costs based on plaintiff's voluntary dismissal. Plaintiff also moved the trial court for an award of costs incurred in its defense of defendant's counterclaims. On 14 October 2002, the trial court granted plaintiff's motion for costs, but denied defendant's motion. Defendant appeals from the court's summary judgment order, and from its order awarding costs to plaintiff, and denying defendant's motion for costs.

Standard of Review

Defendant appeals the trial court's entry of summary judgment. Under N.C.R. Civ. P. 56(c), summary judgment is properly granted 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." Thus, "the 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. Further, the evidence presented by the parties must be viewed in the light most favorable to the non-movant." Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C.App. 729, 733, 504 S.E.2d 574, 577 (1998) (citation omitted).

Defendant presents several arguments on appeal regarding his counterclaims. We conclude, however, that the defendant's counterclaims were barred by the statute of limitations, and find this dispositive of the issues on appeal.

"Ordinarily, the question of whether a cause of action is barred by the statute of limitations is a mixed question of law and fact. However, when the bar is properly pleaded and the facts are admitted or are not in conflict, the question of whether the action is barred becomes one of law, and summary judgment is appropriate." Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985) (citing Ports Authority v. Roofing Co., 294 N.C. 73, 240 S.E.2d 345 (1978), and Little v. Rose, 285 N.C. 724, 208 S.E.2d 666 (1974)). Further, when the party moving for summary judgment pleads the statute of limitations, "the burden is then placed upon the [non-movant] to offer a forecast of evidence showing that the action was instituted within the permissible period after the accrual of the cause of action." Id. In the instant case, we...