Tyson v. North Carolina Nat. Bank, 123

• Decision Date: 27 January 1982
• Docket Number: No. 123,123
• Citation: 305 N.C. 136,286 S.E.2d 561
• Court: North Carolina Supreme Court
• Parties: Barbara Larkins Ward TYSON v. NORTH CAROLINA NATIONAL BANK.

Page 561

286 S.E.2d 561

305 N.C. 136

Barbara Larkins Ward TYSON v. NORTH CAROLINA NATIONAL BANK.

No. 123.

Supreme Court of North Carolina.

Jan. 27, 1982.

Susan H. Lewis and Donald H. Beskind, Durham, for plaintiff-appellant.

Helms, Mulliss & Johnston by E. Osborne Ayscue, Jr., and Nancy Black Norelli, Charlotte, for defendant-appellee.

CARLTON, Justice.

I.

Plaintiff initiated this action by complaint filed 11 July 1979 alleging that defendant had breached certain fiduciary duties as executor of her husband's estate and as trustee of two testamentary trusts. Defendant's answer asserted that plaintiff had failed to state a claim for which relief could be granted, denied that it had breached any duties owed plaintiff, and asserted as defenses the statute of limitations, estoppel, laches, and that plaintiff's action constituted an impermissible collateral attack on a prior adjudication.

The essential facts of the controversy are not in dispute: Defendant's predecessor, State Bank and Trust Company, was named executor in the will of plaintiff's husband who died on 28 September 1968. ¹ Decedent's will established two trusts, both of which were for the primary benefit of plaintiff. The will named defendant's predecessor as trustee of these trusts.

At the time of his death plaintiff's husband owned a considerable amount of real estate. His holdings included a tobacco farm, two commercial lots on Cotanche Street (Cotanche property), three residential lots in the Sedgefield subdivision, and undivided half-interests in eighteen lots, also in the Sedgefield subdivision. Decedent also owned the home in which he, his wife and their three children had lived. (Decedent did not make a disposition of the home in his will, apparently because he believed that it was owned by himself and his wife as tenants by the entirety.) At the time of decedent's death he had incurred debts amounting to approximately $82,268, a substantial part of which were owed to State Bank. The will directed that the debts be paid out of the principal of the estate.

Because defendant believed that the homeplace had been owned by the decedent and plaintiff as tenants by the entirety, it was not initially included in the estate. Of the other real property owned by decedent only the tobacco farm and the commercial lots on Cotanche Street were readily marketable. At the time of decedent's death the tobacco farm was valued at approximately $74,940 and the Cotanche Street property was appraised at $8,500. In December 1969 the defendant sold the tobacco farm and the Cotanche Street property. The properties were sold for $74,940.00 and $8,500.00 respectively. Plaintiff, acting as guardian for her children, purchased the tobacco farm with money from their separate estates.

Approximately one year later plaintiff attempted to sell the family home and discovered that the title was in decedent's name alone. In December 1970, after learning that the home had been owned by the decedent alone and was part of his estate, defendant sold the home for $60,000.

The tobacco farm was the only significant income-producing asset in the estate. In the accounting period immediately following decedent's death the tobacco farm had a gross income of approximately $25,000, and, in the years following the sale was alleged to have yielded an average yearly income to its owners of $8,400.

Plaintiff's complaint alleges that the tobacco farm's value has increased to over $1,000,000 and that the Cotanche Street property is presently worth $80,000. After the sale of the tobacco farm the yearly income receipts of the two trusts were alleged to have been approximately $2,000 and the value of the assets held by the trusts has declined from approximately $245,000 at the end of 1973 to $95,000 as of 1 January 1978 because the principal had been invaded to provide support for plaintiff and her family.

Plaintiff's action is based primarily on the claim that the defendant should have discovered that the family home was in decedent's sole name. Had defendant known that the home was an estate asset, plaintiff argues, it would have or should have sold the home to pay the debts and retained the tobacco farm. ² She prayed for damages in the amount of $625,000 and requested $500,000 in punitive damages for defendant's alleged breach of the fiduciary duty of loyalty.

Defendant moved for summary judgment on several grounds, including the statute of limitations, estoppel and laches. Plaintiff filed a motion for partial summary judgment on the statute of limitations question and, alternatively, to disallow defendant's assertion of the statute of limitations and laches on the ground of equitable estoppel. On 9 June 1980 Judge Rouse, after a hearing, denied plaintiff's motion and allowed defendant's motion. Plaintiff appealed.

The Court of Appeals affirmed in an opinion by Judge Arnold in which Judge Martin (Harry C.) concurred. It held that while the action was not barred by the statute of limitations, plaintiff had no claim because the undisputed facts showed that the total proceeds from the sale of the house and the Cotanche Street property would have been insufficient to pay the decedent's debts. That court rejected plaintiff's argument that the debts could have been satisfied by selling the home and the Cotanche Street property and mortgaging the tobacco farm. The court gave as its reason the provision in the will directing that debts be paid out of the principal of the estate. Judge Clark dissented.

II.

Plaintiff has raised several questions on appeal to this Court: (1) whether the incorporation by reference of the provisions of G.S. 32-27(1) to -27(30), which includes a provision allowing mortgaging of property, G.S. § 32-27(12), gave defendant the power to mortgage the tobacco farm, and (2) if defendant had such a power, whether plaintiff has shown sufficient questions of fact to defeat defendant's summary judgment motion. In light of our disposition of the statute of limitations question, discussed below, we find it unnecessary to address these issues and express no opinion on them.

III.

In its summary judgment motion, defendant raised the statute of limitations as a bar to plaintiff's action. Plaintiff took exception to the trial court's entry of summary judgment for defendant and contended in the Court of Appeals that the action was not barred. Although the Court of Appeals decided this issue in plaintiff's favor, see 53 N.C.App. at 191, 280 S.E.2d at 479-80, it affirmed the entry of summary judgment on other grounds.

Plaintiff contended on oral argument that because defendant did not cross appeal from the Court of Appeals' disposition of this issue, it has waived its right to assert that ground before this Court. We disagree. Defendant was the appellee both in the Court of Appeals and in this Court. Rule 16(a) of the Rules of Appellate Procedure (1981) defines the scope of review of decisions of the Court of Appeals and provides, "A party who was an appellee in the Court of Appeals and is an appellee in the Supreme Court may present any questions which ... he properly presented for review to the Court of Appeals." Defendant's brief before the Court of Appeals included the argument that "THIS SUIT IS BARRED BY THE RUNNING OF THE STATUTE OF LIMITATIONS." In its brief before this Court defendant responded to the questions raised in the appellant's brief and asserted additional arguments in support of the entry of summary judgment: "II. IN ADDITION, SEVERAL OTHER DEFENSES RAISED BY DEFENDANT BUT ERRONEOUSLY REJECTED OR NOT REACHED BY THE COURT OF APPEALS WERE SUFFICIENT TO DISPOSE OF THIS CLAIM ON SUMMARY JUDGMENT .... B. This suit is barred by the running of the statute of limitations." Thus, defendant presented the statute of limitations question to the Court of Appeals and, under Rule 16(a) of the Rules of Appellate Procedure, is entitled to present that question to this Court.

Defendant contends that the limitation of this action is governed by G.S. 1-52(1) (Supp.1981), ³ a three-year statute of limitations, and that plaintiff's action is barred. Alternatively, defendant contends that the six-year statute of limitations, G.S. § 1-50(2) (Supp.1981), ⁴ bars this action. Plaintiff, in her Court of Appeals' brief, argued that neither of the above statutes applied and that the ten-year statute of limitations, G.S. § 1-56 (1969) ⁵, applied and did not bar her action. The Court of Appeals agreed with plaintiff.

Our research reveals that the issue of which statute of limitations applies to an action against an executor for breach of fiduciary duty has never been considered by this Court. Defendant cites us to numerous cases which hold that the three-year statute applies to actions for breach of an express trust, e.g., Solon Lodge v. Ionic Lodge, 247 N.C. 310, 101 S.E.2d 8 (1957); Teachey v. Gurley, 214 N.C. 288, 199 S.E. 83 (1938), and plaintiff cited in her Court of Appeals' brief numerous cases applying the ten-year statute to...