Opinion
No. 06-1019.
Filed June 19, 2007.
Davie County No. 04 CVS 466.
Appeal by Defendants from order entered 21 March 2006 by Judge Christopher M. Collier in Superior Court, Davie County. Heard in the Court of Appeals 8 March 2007.
Robinson Lawing, L.L.P., by C. Ray Grantham, Jr. and Rebecca H. Miller, for Plaintiff-Appellee. Jean S. Alexander, Executrix of the Estate of Terry R. Alexander, for Defendants-Appellants, pro se.
Cannon Company, LLP (Plaintiff) filed an action against the Estate of Terry R. Alexander (the estate) and the Executrix of the Estate, Jean S. Alexander (the executrix) (collectively Defendants) on 3 September 2004. Plaintiff alleged, and Defendants admitted, the following: Plaintiff is a limited liability partnership engaged in the practice of certified public accounting. Terry R. Alexander practiced certified public accounting prior to his death, and he owned and operated a business known as Terry Alexander CPA, PA. Plaintiff, as buyer, and Terry R. Alexander and Terry Alexander CPA, PA, as sellers, entered into an Asset Purchase Agreement (the agreement) on 28 April 2000. Terry R. Alexander died on 20 May 2001.
Pursuant to the agreement, Plaintiff purchased furniture, fixtures and equipment, as well as the sellers' existing clientele. As to the purchase price, the agreement provided in pertinent parts:
The Purchase Price is based upon two separate elements, fixed assets including furniture, fixtures and equipment, and projected future income from Sellers's existing clientele over the next three (3) years beginning May 1, 2000. The parties acknowledge and agree that portion of the Purchase Price based upon projected future income is subject to adjustment downward in the event that Buyer does not receive the gross income from the existing clientele as hereinafter set out.
2.1 Purchase Price. The Purchase Price for the Transferred Assets shall be Two Hundred Sixty Five Thousand One Hundred and Eight Dollars ($ 265,108.00), and shall be payable as follows:
(a) Sixty Six Thousand Two Hundred Seventy Seven Dollars ($ 66,277.00) of the Purchase Price, shall be paid in cash or certified funds payable by Buyer to Sellers at Closing.
(b) The balance of the purchase price shall be paid by Buyer as follows (i) One Hundred Eighty Five Thousand Five Hundred Seventy Five Dollars and 50/100 ($ 185,575.50), payable in equal monthly installments of Five Thousand One Hundred Fifty Four Dollars and 88/100 ($ 5,154.88) beginning June 1, 2000 and continuing on the first day of each and every month thereafter until May 1, 2003, at which time the final payment and an additional Thirteen Thousand Two Hundred Fifty Five Dollars and 44/100 ($ 13,255.44), shall be paid.
Two Hundred Fifty Five Thousand One Hundred and Eight Dollars ($ 255,108.00), of the Purchase Price is allocable to future income to be received by Buyer from Sellers's existing clientele. The Purchase Price and the payments due from Buyer to Sellers is conditioned upon Buyer receiving from Sellers's existing clientele shown on Exhibit B, gross professional fees as follows:
Year One (5/1/00-4/30/01) $ 255,108 — 100% $ 255,108
Year Two (5/1/01-4/30/02) $ 255,108 — 95% $ 242,353
Year Three (5/1/02-4/30/03) $ 255,108 — 90% $ 229,597
In the event collections from the existing clientele fall below the above-stated earn out levels payments due from Buyer to Sellers shall be reduced by an amount equal to the amount which Buyer did not receive from Sellers's existing clientele. The first payments to be reduced shall be the Thirteen Thousand Two Hundred Fifty Five Dollars and 44/100 ($ 13,255.44) payment due on May 1, 2003 with any further reduction being applicable to the monthly payments of Five Thousand One Hundred Fifty Four Dollars and 88/100 ($ 5,154.88) in reverse order. In the event that Buyer shall receive professional fees in any year in excess of $ 255,108 from the existing clientele, Buyer shall increase the Purchase Price by ten (10%) percent of the excess fees. All adjustments to the Purchase Price shall be made within forty five (45) days of the end of each formula year. Any increases in the professional fees received for prior year shall be paid within sixty (60) days of the end of that year. For the purpose of making the May 1, 2003 payment, the Parties agree that payment shall be deferred until July 1, 2003 to enable the Parties to make a final calculation of the professional fees received for the third formula year. Notwithstanding anything stated herein above, if the collections from the clientele fall below $ 229,537.00 in the third year the amount due from Buyer to Seller shall be reduced by fifty cents rather than one dollar for each dollar received, unless client shall move, sell its business, merge, or otherwise cease its operations, including or disability in the case of an individual.
Plaintiff made all scheduled payments to Defendants through the 1 January 2002 payment, and then ceased making any payments to Defendants. In its complaint, Plaintiff alleged that the gross amount of professional fees it received was substantially less than the amount required under the agreement, and Plaintiff claimed it was entitled to a refund in the amount of $196,487.31. Plaintiff alleged that it gave timely notice of its claim to Defendants. Plaintiff alleged that the executrix filed and served a notice of objection to Plaintiff's claim on 8 June 2004. Plaintiff further alleged that Defendants' failure to pay the sum requested by Plaintiff amounted to a breach of the agreement. Plaintiff requested that it "have and recover of Defendant Alexander Estate the sum of at least $196,487.31 and that an Order issue compelling Defendant Jean S. Alexander to pay from the Alexander Estate the sum so owed to [Plaintiff], or in the alternative that the action be stayed pending resolution by mandatory arbitration." Plaintiff also requested that the costs of the action, including attorneys' fees, be taxed to the estate.
Defendants filed an answer, a motion to quash the petition for arbitration, and a motion to dismiss on 7 October 2004. Defendants alleged, inter alia, that Plaintiff's claims were barred by N.C. Gen. Stat. § 28A-19-3(b) and by N.C. Gen. Stat. § 28A-19-16.
The trial court entered an order on 12 January 2005 denying Defendants' motion to quash Plaintiff's petition for arbitration and Defendants' motion to dismiss. The trial court granted Plaintiff's motion to stay the trial court proceedings without prejudice to the rights of Defendants under Chapter 28A of the North Carolina General Statutes. The trial court further ordered:
4. Arbitration shall be limited to issues arising from the execution of [the agreement] dated the 28th day of April, 2000, by Plaintiff as Buyer and by Terry [R]. Alexander, deceased, as seller. The Arbitration Award shall determine only the value of any claims Plaintiff has against the [e]state . . . and the value of any counterclaims the [e]state . . . has against Plaintiff arising from the . . . [agreement] and shall, after such determination, refer the matter back to the [Trial] Court for further proceedings and disposition in accordance with Chapter 28A of the North Carolina General Statutes.
5. Notwithstanding arbitration proceedings, the Court retains jurisdiction over all issues regarding the administration of the [e]state . . ., including claims against the [e]xecutrix and statutory defenses raised under Chapter 28A of the North Carolina General Statutes.
The arbitrator held a hearing and issued an award of arbitrator on 21 February 2006. The arbitrator determined that Plaintiff only took in $100,571.00 for year one. However, the arbitrator determined that this amount should be increased by $24,000.00 because of the following non-exclusive factors: "(i) existence of work-in-process that existed prior to 4/30/01 that did not get billed until after that date; (ii) write-downs or write-offs that were not billed at all; [and] (iii) extension of certain individual returns that were not routinely extended which might have impacted collections for fiscal year 4/30/01." Therefore, Plaintiff's total collections for year one were $124,571.00, which amount was below the benchmark amount for contract year one. The arbitrator determined that the value of Plaintiff's claim was $34,804.00. The arbitrator also determined that Defendants should reimburse Plaintiff in the amount of $875.00 for certain fees and expenses.
Plaintiff filed a motion to lift the stay and for confirmation of the arbitration award on 15 September 2005. Defendants filed a motion to dismiss based on the statutes of limitation, along with an affidavit of the executrix, on 20 October 2005. Defendants argued that Plaintiff's claims were barred by N.C. Gen. Stat. § 28A-19-3 and N.C. Gen. Stat. § 28A-19-16. Plaintiff filed a motion on 21 February 2006 to strike the affidavit filed with Defendants' motion to dismiss.
The trial court entered an order confirming the arbitration award and judgment on 21 March 2006. The trial court found that Plaintiff notified the estate in writing that Plaintiff had a claim for a refund well before the end of the third contract year. The trial court also found that the estate rejected Plaintiff's claim in writing on 8 June 2004 and that Plaintiff filed the present action on 3 September 2004. The trial court concluded that Plaintiff's motion to strike was moot. The parties appear to agree the trial court considered matters outside the pleadings, converting Defendants' motion to dismiss to a motion for summary judgment. The trial court further concluded that "Plaintiff's claim against the [e]state was timely noticed pursuant to North Carolina General Statutes Section 28A-19-3(b) and Plaintiff's Complaint against the [e]state was timely filed pursuant to North Carolina General Statutes Section 28A-19-16." Therefore, the trial court granted Plaintiff's motion to lift the stay, denied Defendants' motion to dismiss, granted Plaintiff's motion to confirm the arbitration award, and entered judgment against Defendants in the amount of $ 35,679.00. Defendants appeal.
"`Whether a cause of action is barred by the statute of limitations is a mixed question of law and fact.'" McCarver v. Blythe, 147 N.C. App. 496, 498, 555 S.E.2d 680, 682 (2001) (quoting Hatem v. Bryan, 117 N.C. App. 722, 724, 453 S.E.2d 199, 201 (1995)). "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 a question of law, and summary judgment is appropriate." Id.
Summary judgment is appropriate "if 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." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2005). The party who moves for summary judgment has the burden of "establishing the lack of any triable issue of fact." Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985). This burden may be met by "proving that an essential element of the opposing party's claim is nonexistent, or by showing through discovery that the opposing party cannot produce evidence to support an essential element of his claim[.]" Collingwood v. G.E. Real Estate Equities, 324 N.C. 63, 66, 376 S.E.2d 425, 427 (1989). "[T]he 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." Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504 S.E.2d 574, 577 (1998). We review the evidence in the light most favorable to the nonmoving party. Id.
I.
Defendants argue the trial court erred by denying their motion to dismiss because Plaintiff's claim was barred by N.C. Gen. Stat. § 28A-19-3(b)(2). N.C. Gen. Stat. § 28A-19-3(b)(2) (2005) provides:
All claims against a decedent's estate which arise at or after the death of the decedent, except claims of the United States and tax claims of the State of North Carolina and subdivisions thereof whether due or to become due, absolute or contingent, liquidated or unliquidated, secured or unsecured, founded on contract, tort, or other legal basis are forever barred against the estate, the personal representative, the collector, the heirs, and the devisees of the decedent unless presented to the personal representative or collector as follows:
. . .
(2) With respect to any claim other than a claim based on a contract with the personal representative or collector, within six months after the date on which the claim arises.
The agreement provided that the purchase price was $265,108.00, $66,277.00 of which would be paid at closing. The balance was to be paid in equal monthly installments of $5,154.88, beginning 1 June 2000 and continuing monthly until 1 May 2003, "at which time the final payment and an additional . . . $13,255.44 . . . shall be paid." Under the agreement, the purchase price was conditioned upon the receipt by Plaintiff of a certain level of professional fees in each of the three years of the contract. The agreement provided a formula, described below, by which the payments to the sellers would be reduced in the event that collections of professional fees did not meet those levels. The agreement also provided:
All adjustments to the Purchase Price shall be made within forty five (45) days of the end of each formula year. Any increases in the professional fees received for prior year shall be paid within sixty (60) days of the end of that year. For the purpose of making the May 1, 2003 payment, the Parties agree that payment shall be deferred until July 1, 2003 to enable the Parties to make a final calculation of the professional fees received for the third formula year.
(Emphasis added).
We interpret this agreement to provide for three separate claims for overpayment. Any claim for overpayment for year one arose forty-five days after the end of contract year one, or on 14 June 2001. Therefore, Plaintiff had to submit to Defendants any claim for overpayment for year one within six months of 14 June 2001, or by 14 December 2001. Any claim for overpayment for year two arose forty-five days after the end of contract year two, or on 14 June 2002. Again, Plaintiff had to submit to Defendants any claim for overpayment for year two by 14 December 2002. Any claim for overpayment for year three arose 1 July 2003, and Plaintiff had to submit any such claim to Defendants by 1 January 2004.
Under the agreement, the benchmark collection for year one was $255,108.00. However, the arbitrator determined that, after adjustments, Plaintiff only took in $124,571.00 for year one. When this figure is subtracted from the benchmark for year one, the deficiency is $130,537.00 for year one.
Pursuant to the agreement, Plaintiff was entitled to reduce the payments due under the agreement "by an amount equal to the amount which [Plaintiff] did not receive from Seller's existing clientele." The agreement provided that Plaintiff would reduce the payments in reverse order starting with the $13,255.44 payment "due on May 1, 2003 with any further reduction being applicable to the monthly payments of . . . $5,154.88? in reverse order." The total purchase price under the agreement was $265,108.00. When the deficiency of $130,537.00 is subtracted from this total, the amount remaining is $134,571.00. However, Plaintiff made payments under the agreement through 1 January 2002 in the total amount of $169,374.60, and therefore overpaid by $34,803.60.
Plaintiff's overpayment of $34,803.60 includes Plaintiff's last payment on 1 January 2002 back through part of the 1 July 2001 payment. Therefore, this overpayment occurred entirely within year two, which ran from 1 May 2001 through 30 April 2002. There was no overpayment in year one and, therefore, Plaintiff did not have any claim arising out of year one. There was also no overpayment in year three because Plaintiff did not make any payments in year three and, therefore, Plaintiff had no claim arising out of year three. Accordingly, Plaintiff's only claim was for overpayment in year two, and it is uncontradicted that Plaintiff gave written notice of this overpayment to Defendants on 29 January 2002, before the end of year two. Moreover, Plaintiff again gave notice of this overpayment on 6 August 2002 when Plaintiff wrote a letter to the executrix requesting payment. This notice was provided within six months of 14 June 2002, the accrual date for claims arising out of overpayments for contract year two. Accordingly, Plaintiff's claim was not barred by N.C.G.S. § 28A-19-3(b)(2), and the trial court did not err by denying Defendants' motion.
Defendants also argue that to the extent Plaintiff's claim arose before the death of Terry R. Alexander, Plaintiff's claim was barred by N.C. Gen. Stat. § 28A-19-3(a). See N.C. Gen. Stat. § 28A-19-3(a) (2005) (regarding claims against a decedent's estate that arose before the death of the decedent). This argument lacks merit. Terry R. Alexander died on 20 May 2001. However, Plaintiff's claim did not arise until 14 June 2002, or forty-five days after the end of contract year two. Therefore, Plaintiff's claim arose after Terry R. Alexander's death, and N.C.G.S. § 28A-19-3(a) was inapplicable.
II.
Defendants also argue Plaintiff's claim was barred by N.C. Gen. Stat. § 28A-19-16. Defendants argue that Plaintiff made a claim in writing on 6 August 2002 and that Defendants rejected this claim in a letter by the executrix dated 16 August 2002. Defendants further argue that because Plaintiff did not commence an action within three months of this rejection, Plaintiff's claim was barred.
N.C. Gen. Stat. § 28A-19-16 (2005) provides:
If a claim is presented to and rejected by the personal representative or collector, and not referred as provided in G.S. 28A-19-15, the claimant must, within three months, after due notice in writing of such rejection, or after some part of the claim becomes due, commence an action for the recovery thereof, or be forever barred from maintaining an action thereon.
However, in Elliott v. Estate of Elliott, 163 N.C. App. 577, 596 S.E.2d 819, cert. denied, 358 N.C. 731, 601 S.E.2d 530 (2004), our Court recognized that to trigger the limitations period under N.C.G.S. § 28A-19-16, "`it is necessary that there be a rejection of the claim and that the rejection be absolute and unequivocal. An administrator may not claim the benefit of the bar of the statute when the rejection leaves the matter open for further negotiation or adjustment.'" Id. at 581, 596 S.E.2d at 821 (quoting Rutherford v. Harbison, 254 N.C. 236, 239, 118 S.E.2d 540, 542 (1961)).
In the present case, we hold that the executrix's 16 August 2002 letter did not serve as a rejection of Plaintiff's claim. Rather, in the letter, the executrix stated: "At this time I do not feel that any refund is due to [Plaintiff]. I think that the books of [Plaintiff] need to be looked at very closely. I think that manipulations whether intended or not will be found." The executrix further wrote: "Please contact me with your response to these allegations." By its own terms, the 16 August 2002 letter left the matter open for further negotiation. Therefore, the 16 August 2002 letter was not an "`absolute and unequivocal'" rejection of Plaintiff's claim. See Elliott, 163 N.C. App. at 581, 596 S.E.2d at 821 (quoting Rutherford, 254 N.C. at 239, 118 S.E.2d at 542). We hold that Defendants did not reject Plaintiff's claim until 8 June 2004, when the executrix filed and served with the Davie County Clerk of Superior Court a letter to contest Plaintiff's claim. Plaintiff then filed its complaint on 3 September 2004, within three months of Defendants' rejection. Accordingly, Plaintiff's action was not barred under N.C.G.S. § 28A-19-16, and the trial court did not err by denying Defendants' motion.
Affirmed.
Judges CALABRIA and STEPHENS concur.
Report per Rule 30(e).