Slaughter v. Swicegood

• Decision Date: 03 February 2004
• Docket Number: No. COA03-171.,COA03-171.
• Citation: 591 S.E.2d 577,162 NC App. 457
• Court: North Carolina Court of Appeals
• Parties: James H. SLAUGHTER, Trustee of the Freeman C. Slaughter and Genevieve P. Slaughter Charitable Remainder Trust, Freeman C. Slaughter, and Genevieve P. Slaughter, Plaintiffs, v. J. Todd SWICEGOOD, Raymond James & Associates, Inc., Raymond James Financial Services, Inc., the Estate of Robert Lee Saunders, Samuel T. Goforth, and Saunders & Goforth, Attorneys at Law, P.A., Defendants.

591 S.E.2d 577

162 NC App. 457

James H. SLAUGHTER, Trustee of the Freeman C. Slaughter and Genevieve P. Slaughter Charitable Remainder Trust, Freeman C. Slaughter, and Genevieve P. Slaughter, Plaintiffs, v. J. Todd SWICEGOOD, Raymond James & Associates, Inc., Raymond James Financial Services, Inc., the Estate of Robert Lee Saunders, Samuel T. Goforth, and Saunders & Goforth, Attorneys at Law, P.A., Defendants.

No. COA03-171.

Court of Appeals of North Carolina.

February 3, 2004.

Forman, Rossabi, Black, P.A., by Amiel J. Rossabi, Greensboro, for plaintiff-appellees.

Hunton & Williams, by Scott M. Ratchick and Amy K. Alcoke, pro hac vice, Atlanta, GA, for defendant-appellants.

LEVINSON, Judge.

J. Todd Swicegood, Raymond James & Associates, Inc. (RJA), and Raymond James Financial Services, Inc. (RJFS) appeal from the trial court's 31 October 2002 order (1) denying their motion to compel arbitration, and (2) refusing to dismiss plaintiffs Freeman and Genevieve Slaughters' individual claims. Defendants Swicegood, RJA, and RJFS (collectively defendants) also appeal from the trial court's 3 January 2003 order denying their motion to reconsider the 31 October 2002 order. The remaining defendants named in the complaint (the Estate of Robert Lee Saunders, Samuel T. Goforth and Saunders and Goforth, P.A.) are not parties to this appeal. We affirm in part, reverse in part and dismiss in part.

In 1989, plaintiffs Freeman and Genevieve Slaughter (the Slaughters) consulted with attorney Robert Saunders for retirement and estate planning. Defendant Saunders advised the Slaughters to create a charitable remainder unitrust to provide maximum financial benefit to their estate. On 7 October 1989 the Slaughters established the Freeman C. Slaughter and Genevieve P. Slaughter Charitable Remainder Trust (the Trust). Defendant Saunders was appointed as trustee. The Slaughters transferred title to approximately 155 acres of real property to the Trust. The Trust sold the real property in December 1989 and collected the proceeds of the sale in installment payments over several years. The Trust agreement required that the Slaughters be paid a sum equal to fourteen percent of the Trust's value each year. Upon the death of both Freeman and Genevieve Slaughter, the Trust's remainder would be distributed to Duke University Medical Center.

Defendant Saunders initially invested the Trust assets with Interstate Johnson Lane, Co. Saunders placed the Trust funds in an account with defendant RJA on 7 December 1990. Defendant J. Todd Swicegood served as an investment advisor and managed the Trust account with RJA. Swicegood is an employee of defendant RJA, which is a subsidiary of defendant RJFS. When establishing the Trust's RJA account, defendant Saunders, as trustee, allegedly signed a Raymond James Customer Agreement (Customer Agreement) that contained the following clause:

The undersigned client agrees, and by carrying an account for the undersigned client you agree, that all controversies [that] may arise between us concerning any transaction or the construction, performance of breach of this or any other agreement between us pertaining to securities or other property, whether entered into prior, on, or subsequent to the date hereof, shall be determined by arbitration. Any arbitration shall be in accordance with the rules, then applying, of either the National Association of Securities Dealers, Inc., New York Stock Exchange, Inc., American Stock Exchange, Inc., or where appropriate, the Chicago Board Options Exchange, Inc., as I elect.

Defendant Swicegood discouraged the Slaughters from being involved personally in the management of the trust assets. He assured the Slaughters on several occasions that the trust investments were doing well.

The Slaughters were informed in early November 1999 that defendant Saunders was critically ill. Saunders died on 8 November 1999. Before his death, Saunders resigned as trustee of the Trust and appointed defendant Swicegood as a successor trustee on 27 October 1999.

The Slaughters were notified in early 2001 that defendant Swicegood had transferred the Trust funds to an annuity account. Swicegood explained that the transfer would protect the Trust's assets from the falling prices of the stock market. Freeman and Genevieve Slaughter became concerned about defendant Swicegood's management of the Trust account and attended several meetings with him. On 9 July 2001, defendant Swicegood, at the Slaughters' request, resigned as trustee and appointed James H. Slaughter as trustee. The files relating to management of the trust were presented to Trustee Slaughter in disarray, including unopened correspondence and overdue bills from the Internal Revenue Service. Trustee Slaughter contacted defendant Swicegood on 29 August 2001 by certified mail to request that the Trust account be closed.

Trustee Slaughter, on behalf of the Trust, sued all defendants on theories of fraud, negligent misrepresentation, breach of fiduciary duty, negligence, breach of contract, unfair and deceptive trade practices, securities violations, civil conspiracy and demanded an accounting of trust funds. Freeman and Genevieve Slaughter joined the lawsuit in their individual capacities. Defendants Swicegood, RJA and RJFS moved to dismiss the Slaughters' individual claims for lack of standing. Additionally, defendants moved to compel arbitration of plaintiffs' claims. The trial court denied both motions in an order filed 31 October 2002. Defendants' motion for reconsideration was denied by the trial court in an order filed 3 January 2003. Defendants appeal.

Defendants first argue that the trial court erred in finding that no arbitration agreement existed. Defendants contend that the Customer Agreement, signed by defendants Swicegood and Saunders, contained an agreement requiring all plaintiffs to submit their claims to arbitration. Plaintiffs deny that a valid arbitration agreement exists and question the authenticity of the Customer Agreement.

As an initial matter, we note that the denial of a motion to compel arbitration is interlocutory in nature. See Raspet v. Buck, 147 N.C.App. 133, 135, 554 S.E.2d 676, 677 (2001)

. However, this Court has held that "`[t]he right to arbitrate a claim is a substantial right which may be lost if review is delayed, and an order denying arbitration is therefore immediately appealable.'" Boynton v. ESC Med. Sys., Inc., 152 N.C.App. 103, 106, 566 S.E.2d 730, 732 (2002) (quoting Howard v. Oakwood Homes Corp., 134 N.C.App. 116, 118, 516 S.E.2d 879, 881 (1999)).

If a party claims that a dispute is covered by an agreement to arbitrate but the adverse party denies the existence of an arbitration agreement, the trial court shall determine whether an agreement exists. See N.C.G.S. § 1-567.3 (2001). "The question of whether a dispute is subject to arbitration is an issue for judicial determination." Raspet, 147 N.C.App. at 136, 554 S.E.2d at 678 (citing AT & T Technologies v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). This determination involves a two-step analysis requiring the trial court to "ascertain both (1) whether the parties had a valid agreement to arbitrate, and also (2) whether `the specific dispute falls within the substantive scope of that agreement.'" Raspet, 147 N.C.App. at 136, 554 S.E.2d at 678 (quoting PaineWebber Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990)).

A dispute can only be settled by arbitration if a valid arbitration agreement exists. N.C.G.S. § 1-567.2 (2001). "[T]he party seeking arbitration must show that the parties mutually agreed to arbitrate their disputes." Routh v. Snap-On Tools Corp., 108 N.C.App. 268, 271-72, 423 S.E.2d 791, 794 (1992); see Thompson v. Norfolk S. Ry. Co., 140 N.C.App. 115, 120, 535 S.E.2d 397, 400 (2000)

. "The trial court's findings regarding the existence of an arbitration agreement are conclusive on appeal where supported by competent evidence, even where the evidence might have supported findings to the contrary." Sciolino v. TD Waterhouse Investor Servs., Inc., 149 N.C.App. 642, 645, 562 S.E.2d 64, 66 (citing Routh, 108 N.C.App. at 272,

423 S.E.2d at 794), disc. review denied, 356 N.C. 167, 568 S.E.2d 611 (2002). However, the trial court's determination of whether a dispute is subject to arbitration is a conclusion of law that is reviewable de novo on appeal. Raspet, 147 N.C.App. at 136,

554 S.E.2d at 678; Brevorka v. Wolfe Constr., Inc., 155 N.C.App. 353, 356, 573 S.E.2d 656, 659 (2002),

disc. review denied, 357 N.C. 61, 579 S.E.2d 385 (2003).

Here, the trial court found that defendants failed to prove that a valid arbitration agreement existed between the parties. Defendants, as the parties seeking to compel arbitration, held the burden of proof. Defendant Saunders purportedly signed the Customer Agreement on 7 December 1990. Saunders was deceased at the time of the motion hearing and was therefore unavailable to testify. Freeman and Genevieve Slaughter submitted affidavits stating they were not aware that the Trust account was subject to an arbitration agreement. Defendants submitted an affidavit by Mary Raver, an employee of defendant RJFS, stating that the Customer Agreement was scanned into the Raymond James electronic filing system on 28 December 2001. Raver's affidavit generally described the process for entering customer agreements and other documents in the RJFS computer system. This affidavit did not indicate that she witnessed Saunders sign the Customer Agreement and did not explain why the Customer Agreement was scanned into the filing system eleven years after it was allegedly signed. Defendants did not present any evidence whatsoever concerning, e.g., the general business practices surrounding the signing of similar customer agreements, or whether it was the usual policy of RJA advisors to require prospective clients to sign such agreements before providing investment advice and other...