Terry v. Terry, 105

• Decision Date: 27 January 1981
• Docket Number: No. 105,105
• Citation: 273 S.E.2d 674,302 N.C. 77
• Court: North Carolina Supreme Court
• Parties: Edwin McKinley TERRY, Jr. v. Charles Thurman TERRY et al.

Page 674

273 S.E.2d 674

302 N.C. 77

Edwin McKinley TERRY, Jr. v. Charles Thurman TERRY et al.

No. 105.

Supreme Court of North Carolina.

Jan. 27, 1981.

Tharrington, Smith & Hargrove by Steve Evans, Raleigh, for plaintiff.

Emanuel & Thompson by W. Hugh Thompson and Yeargan & Mitchiner by Joseph H. Mitchiner, Raleigh, for defendant.

BRANCH, Chief Justice.

Plaintiff first assigns as error the dismissal of his first and fourth claims which are grounded on fraud. In pertinent part he alleges in his complaint under these claims:

3. Plaintiff is the son of the late Edward McKinley Terry, Sr., who died testate in Wake County, North Carolina, on February 25, 1977. Plaintiff is a devisee under his father's Last Will and Testament dated February 5, 1977, which Last Will and Testament has been probated in Wake County.

4. For several years prior to his death, Edward McKinley Terry, Sr. was President and sole stockholder of Terry's Furniture Company, Inc., a retail furniture and appliance dealer in Raleigh, North Carolina.

5. Defendant Charles Thurman Terry, the brother of Edward McKinley Terry, Sr. and uncle of Plaintiff, was an employee of Terry's Furniture Company, Inc. His job was to assist in running the store and to keep the books of the store.

6. Plaintiff is informed and believes and, therefore, alleges upon information and belief that on or about May 31, 1973, Edward McKinley Terry, Sr. transferred by gift 1,087 shares of the stock of Terry's Furniture Company, Inc. to Charles Thurman Terry.

7. Plaintiff, Edward McKinley Terry, Jr., began working at his father's store when he was approximately 14 years of age and continued working there until around April, 1978. He worked closely with his uncle, Charles Thurman Terry, and relied on his honesty and integrity.

8. On many occasions prior to his death, Edward McKinley Terry, Sr. told plaintiff that he had an ownership interest in the store and that he was "working for himself."

9. In 1976, Edward McKinley Terry, Sr. discovered he had cancer. His health began to decline and surgery to remove cancerous portions of his face was required. In the two months or so prior to his death, Edward McKinley Terry, Sr. was confined to his bed in intense pain; his vision deteriorated to the point of virtual blindness; his hearing and speech ability declined; and his pain was such that his doctor had to prescribe heavy medication.

10. Edward McKinley Terry, Sr. continued to participate in the operation of Terry's Furniture Company, Inc. until at least December, 1976, two months prior to his death; but during the last months of his life because of his illness he relied increasingly on his brother, Charles Thurman Terry, and plaintiff for the day-to-day operation of the business.

11. On February 4, 1977, 21 days prior to his death, Edward McKinley Terry, Sr. was induced by his brother and business associate, Charles Thurman Terry, to sign a document purporting to transfer all of his interest in Terry's Furniture Company, Inc. to Charles Thurman Terry for $25,000.00. A copy of this document is attached to this Complaint as Exhibit A and incorporated herein by reference.

12. At the time he signed the document attached as Exhibit A, Edward McKinley Terry, Sr. was confined to his bed, nearly blind, unable to talk or hear clearly, suffering intense pain and under heavy medication.

13. Plaintiff witnessed the signing of the purported transfer of his father's interest in the store. Plaintiff was, at that time under severe emotional distress because of his father's physical condition, but was induced to sign the alleged agreement as a witness by Charles Thurman Terry who told Plaintiff that unless he witnessed the document there would be "a big mess down at the store after his father died". As a result of the stressful situation, his mental and physical condition and the inducement by his uncle, plaintiff witnessed the signing of the alleged agreement without understanding its content.

14. After his father's death, plaintiff questioned his uncle about the ownership of the store. Around April, 1978, more than one year after Edward McKinley Terry, Sr. died, Charles Thurman Terry informed plaintiff that he had bought all of Edward McKinley Terry, Sr.'s interest in the store for $25,000.00; that plaintiff had no interest in the store; and that the only thing plaintiff had at the store was a job which he would not have for long.

15. Plaintiff was fired by Charles Thurman Terry shortly thereafter.

16. Plaintiff has repeatedly requested the opportunity to inspect the books and records of Terry's Furniture Company, Inc. to determine the value of his father's interest in the business. That request has been denied by defendant.

17. Plaintiff is informed and believes and alleges upon information and belief, that the value of his father's interest in Terry's Furniture Company, Inc. on February 4, 1977 was far in excess of the $25,000.00 paid by Charles Thurman Terry.

18. Charles Thurman Terry knowingly and willfully, and with the intent to deceive, fraudulently induced his brother and business associate, Edward McKinley Terry, Sr., to sell his interest in Terry's Furniture Company, Inc. at a grossly inadequate price, and such deceit occurred at a time when Edward McKinley Terry, Sr. was confined to his bed, nearly blind, unable to talk or hear clearly, suffering from intense pain, and under heavy medication.

19. Charles Thurman Terry knowingly and willfully, and with the intent to deceive, misrepresented to plaintiff following the death of plaintiff's father the circumstances surrounding his alleged purchase of plaintiff's father's interest in Terry's Furniture Company, Inc. and that plaintiff should trust his uncle to protect plaintiff's interest.

20. As a result of Charles Thurman Terry's deceit and influence over Edward McKinley Terry, Sr. and plaintiff, plaintiff, as a devisee under the will of Edward McKinley Terry, Sr., has been damaged by the difference of the price paid by Charles Thurman Terry for Edward McKinley Terry, Sr.'s interest in Terry Furniture Company, Inc. and the true market value of that interest as of February 5, 1977, plus such consequential damages as plaintiff may prove.

As a general rule, the law of frauds contains few absolutes. In this connection, this Court has stated:

Fraud, actual and constructive, is so multiform as to admit of no rules or definitions. "It is, indeed, a part of equity doctrine not to define it," says Lord Hardwicke, "lest the craft of men should find a way of committing fraud which might escape such a rule or definition." Equity, therefore, will not permit "annihilation by definition," but it leaves the way open to punish frauds and to redress wrongs perpetrated by means of them in whatever form they may appear. The presence of fraud, when resorted to by an adroit and crafty person, is at times exceedingly difficult to detect. Indeed, the more skillful and cunning the accused, the less plainly defined are the badges which usually denote it. Under such conditions, the inferences legitimately deducible from all the surrounding circumstances furnish, in the absence of direct evidence, and often in the teeth of positive testimony to the contrary, ample ground for concluding that fraud has been resorted to and practiced by one or more of the parties. Grove v. Spike, 72 Md. 300, 20 A. 144.

Standard Oil Company v. Hunt, 187 N.C. 157, 159, 121 S.E. 184, 185 (1924); Furst v. Merritt, 190 N.C. 397, 404, 130 S.E. 40 (1925).

Fraud can nevertheless be broken into two categories, actual and constructive. Actual fraud is the more common type, arising from arm's length transactions. It requires an allegation of facts to support the five elements of fraud. These essential elements of factual fraud are:

(1) False representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party.

Ragsdale v. Kennedy, 286 N.C. 130, 209 S.E.2d 494 (1974); Dallas v. Wagner, 204 N.C. 517, 168 S.E. 838 (1933). Constructive fraud, on the other hand, is less common and arises in circumstances where a confidential relationship exists. A claim of constructive fraud does not require the same rigorous adherence to elements as actual fraud. In Patuxent Development Company v. Bearden, 227 N.C. 124, 41 S.E.2d 85 (1947), this Court said that charging actual fraud is "more exacting" than charging constructive fraud. Id. at 128, 41 S.E.2d at 87.

The proper elements for a constructive fraud claim are set out in Rhodes v. Jones, 232 N.C. 547, 61 S.E.2d 725 (1950). Justice Barnhill stated in that case:

Plaintiff bottoms his cause of action on the assertion that (defendant) ... first won and then abused his trust and confidence. That is, he relies, in part at least, upon the presumption of fraud which arises upon a breach of a confidential or fiduciary relationship....

In stating his cause of action under this principle of law, it is not sufficient for plaintiff to allege merely that defendant had won his trust and confidence and occupied a position of dominant influence over him. Nor does it suffice for him to allege that the deed in question was obtained by fraud and undue influence.... It is necessary for plaintiff to allege facts and circumstances (1) which created the relation of trust and confidence, and (2) (which) led up to and surrounded the consummation of the transaction in which defendant is alleged to have taken advantage of his position of trust to the hurt of plaintiff.

Id. at 548-49, 61 S.E.2d 725.

The courts have been as reluctant to define a confidential relationship as they have been to define fraud itself. As this Court said in Abbitt v. Gregory, 201 N.C. 577, 160 S.E. 896 (1931):

The courts generally have declined to define the term "fiduciary relation" and thereby exclude from this broad term any relation that may...