Court Opinion

ID: 4197252
Source: CourtListenerOpinion
Date Created: 2017-08-18 16:08:23.060566+00
Date Added: 2024-06-11T14:39:44.177548
License: Public Domain

IN THE SUPREME COURT OF NORTH CAROLINA
                                   No. 141PA16
                               Filed 18 August 2017

CHRISTENBURY EYE CENTER, P.A.
              v.
MEDFLOW, INC. and DOMINIC JAMES RIGGI

      On writ of certiorari pursuant to N.C.G.S. § 7A-32(b) to review an order entered

on 23 June 2015 by Judge James L. Gale, Chief Special Superior Court Judge for

Complex Business Cases appointed by the Chief Justice under N.C.G.S. § 7A-45.4, in

Superior Court, Mecklenburg County, dismissing plaintiff’s complaint. Heard in the

Supreme Court on 21 March 2017.

      Shumaker, Loop & Kendrick, LLP, by Frederick M. Thurman, Jr., for plaintiff-
      appellant.

      Robinson, Bradshaw & Hinson, P.A., by Douglas M. Jarrell and Fitz E.
      Barringer, for defendant-appellee Medflow. Inc.

      Moore & Van Allen PLLC, by Benjamin P. Fryer and Nader S. Raja, for
      defendant-appellee Dominic James Riggi.

      NEWBY, Justice.

      North Carolina law has long recognized the principle that a party must timely

bring an action upon discovery of an injury to avoid dismissal of the claim. Statutes

of limitations require the pursuit of claims to occur within a certain period after

discovery, thereby striking the balance between one’s right to assert a claim and

another’s right to be free from a stale claim. Here plaintiff’s action arises from an
                   CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                   Opinion of the Court

unfulfilled business agreement. Plaintiff’s complaint reveals, however, that plaintiff

had notice of the breach of the agreement and its resulting injuries fourteen years

before commencing the current action. Because plaintiff failed to pursue its claims

within the statute of limitations period, plaintiff’s claims are time barred.

Accordingly, we affirm the trial court’s order dismissing plaintiff’s claims.

      Jonathan D. Christenbury, M.D. founded plaintiff Christenbury Eye Center,

P.A., a professional association that offers ophthalmology services. In 1998 or 1999,

Dr. Christenbury approached defendant Dominic James Riggi, a consultant, about

developing a software management package for plaintiff.                    Upon Riggi’s

recommendation, plaintiff purchased a generalized software platform, with the idea

that Riggi and plaintiff would later customize and enhance the platform for plaintiff’s

practice needs and for possible sale to other physician practices and customers.

Around the same time, Riggi formed defendant Medflow, Inc., a medical record

software development company.

      In October 1999, plaintiff and defendants entered into an “Agreement

Regarding Enhancements” to the original software platform (the Agreement). The

Enhancements are improvements to the software platform such as “customized

screens, interfaces, forms, [and] procedures.”            Under the Agreement, plaintiff

assigned its rights in the Enhancements to defendants. “As consideration for the

assignment of rights . . . [defendants] agree[d] to pay [plaintiff] a royalty of ten

percent (10%) of the gross amount of all fees . . . received” from any sales of the

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                   CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                   Opinion of the Court

Enhancements made “on or after October 1, 1999” and to “provide [plaintiff] with a

written report on a monthly basis . . . includ[ing] a detailed description of the fees

received from [defendants’] Customers during the prior month, along with payment

to [plaintiff] of all corresponding fees due with respect to such charges for that prior

month.” The Agreement also required defendants to pay plaintiff “a minimum royalty

in the amount of Five Hundred Dollars ($500.00) each year for the first five years

after [20 October 1999]” and restricted defendants from selling the Enhancements to

customers within North Carolina and South Carolina without first obtaining

plaintiff’s written consent.

        Defendants never performed any of their obligations under the Agreement.

Defendants never provided plaintiff with a single monthly report detailing the fees

received from defendants’ customers nor paid any corresponding fees. Defendants

failed to make the first $500 minimum royalty payment, which became due on 20

October 2000, and never paid any royalties thereafter.      Defendants also allegedly

sold the Enhancements to other practice groups and customers in the restricted areas

of North Carolina and South Carolina without plaintiff’s express consent as early as

1999.

        For the next ten years, defendants allegedly continued to be in breach of the

Agreement, never providing plaintiff a written sales report, never making any royalty

payments, and never obtaining plaintiff’s consent for restricted sales.       Plaintiff,

however, continued to use the software platform and received periodic software

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                                   Opinion of the Court

updates from Medflow affiliated service providers. During this time, plaintiff did not

raise any question or concern regarding its rights to receive written reports and

royalty payments, nor did it inquire about restricted sales.

      Despite having never received the benefit of its bargain, plaintiff waited

fourteen years before filing this action on 22 September 2014. Plaintiff’s complaint

asserts four claims against defendants:          breach of contract, fraud, unfair and

deceptive trade practices, and unjust enrichment.1         Plaintiff alleges that “since

October 1999, [defendants have] . . . sold the Enhancements, and derivatives thereof,

to other ophthalmologic practices, both inside and outside the restricted territory of

North Carolina and South Carolina, without paying royalties to [plaintiff],” and that

“[a]t no time did [defendants] . . . inform [plaintiff] that [defendants] had sold further

developments or modifications to the Enhancements . . . . [or] paid to [plaintiff] or

accounted for any royalties due under the Agreement.”

      Defendants moved to dismiss all claims under Rule 12(b)(6) of the North

Carolina Rules of Civil Procedure, asserting that North Carolina’s statutes of

limitations barred plaintiff’s action. N.C.G.S. §§ 1-52, 75-16.2 (2015). In response,

plaintiff essentially argued that the Agreement should be treated as an installment

contract for limitations purposes, with a new limitations period beginning upon the

      1 On 27 October 2014, the Chief Justice designated this case as a mandatory complex
business case.

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                   CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                   Opinion of the Court

failure to make each payment, thus enabling plaintiff to seek recovery on royalty

payments due within the three years before the filing of its complaint. See Martin v.

Ray Lackey Enters., 100 N.C. App. 349, 357, 396 S.E.2d 327, 332 (1990) (“[W]here

obligations are payable in installments, the statute of limitations runs against each

installment independently as it becomes due.”). Defendants asserted that under

North Carolina law the Agreement should not be considered an installment contract.

      Following a hearing, the trial court granted defendants’ motions to dismiss.

Christenbury Eye Ctr., P.A. v. Medflow, Inc., No. 14 CVS 17400, 2015 WL 3823817,

at *8 (N.C. Super. Ct. Mecklenburg County (Bus. Ct.) June 19, 2015). The trial court

determined that the allegations of plaintiff’s complaint “reveal that [defendants] did

not perform [their] reporting and payment obligations at least as early as October 20,

2000, when the first minimum royalty payment was due and substantially more than

three years prior to when the Verified Complaint was filed.” Christenbury Eye Ctr.,

2015 WL 3823817, at *4. Regardless of whether the Agreement was an installment

contract, the trial court found that plaintiff’s complaint revealed that “[d]efendants

clearly repudiated the contract by their consistent and repeated failure to perform,

placing [p]laintiff on notice that future reports and payments would not be made.”

Id. at *5. As a result, the trial court concluded that North Carolina’s statutes of

limitations barred all of plaintiff’s claims. Id. at *5-8; see Teachey v. Gurley, 214 N.C.
288, 293, 199 S.E. 83, 87 (1938) (noting that the statute of limitations begins to run

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                    CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                      Opinion of the Court

when a party repudiates “in such manner that [the adverse party] is called upon to

assert his rights”).2

       Plaintiff thereafter improperly noticed appeal to the Court of Appeals, which

dismissed the case for lack of jurisdiction.           See N.C.G.S. § 7A-27(a)(2) (2015)

(providing a direct right of appeal to the Supreme Court from a final judgment of the

Business Court). We allowed plaintiff’s petition for writ of certiorari to review the

trial court’s dismissal order.

       We review a dismissal under Rule 12(b)(6) de novo, “view[ing] the allegations

as true and . . . in the light most favorable to the non-moving party.” Kirby v. N.C.

DOT, 368 N.C. 847, 852, 786 S.E.2d 919, 923 (2016) (quoting Mangum v. Raleigh Bd.

of Adjust., 362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008)). Dismissal is proper when

the complaint “fail[s] to state a claim upon which relief can be granted.” Arnesen v.

Rivers Edge Golf Club & Plantation, Inc., 368 N.C. 440, 448, 781 S.E.2d 1, 7 (2015)

(alteration in original) (quoting N.C.G.S. § 1A-1, Rule 12(b)(6) (2013)). “When the

complaint on its face reveals that no law supports the claim . . . or discloses facts that

necessarily defeat the claim, dismissal is proper.” Id. at 448, 781 S.E.2d at 8 (citing

Wood v. Guilford County, 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002)).

       2Alternatively, the trial court concluded that, “by declining to take action in regard to
[d]efendants’ failure to submit reports or make royalty payments, [plaintiff] waived any right
to future payments to the extent that the Agreement could appropriately be considered an
installment contract.” Christenbury Eye Ctr., 2015 WL 3823817, at *5.

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                     CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                       Opinion of the Court

       Plaintiff premises each of its claims on allegations that defendants breached

the Agreement by failing to provide written sales reports or pay royalties and by

conducting unauthorized sales.3 We conclude that plaintiff’s own allegations, taken

as true, establish that its claims accrued at the earliest on 20 November 1999 and at

the latest by 20 October 2000. Because plaintiff had notice of its injury but did not

initiate its current action for almost fourteen years, all of its claims are time barred.

       We have long recognized that a party must initiate an action within a certain

statutorily prescribed period after discovering its injury to avoid dismissal of a claim.

See Shearin v. Lloyd, 246 N.C. 363, 370, 98 S.E.2d 508, 514 (1957) (“Statutes of

limitations . . . require that litigation be initiated within the prescribed time or not

at all.”), superseded by statute, N.C.G.S. § 1-15(b) (1971), on other grounds as

recognized in Black v. Littlejohn, 312 N.C. 626, 630-31, 325 S.E.2d 469, 473 (1985).

“The purpose of a statute of limitations is to afford security against stale demands,

       3  Specifically, the verified complaint alleges various claims that are all based on
defendants’ nonperformance:
        (1) Plaintiff’s breach of contract claim relies on defendants’ “fail[ure] to pay royalties
under the Agreement and perform other obligations required by the Agreement.”
        (2) Plaintiff’s fraudulent concealment claim relies on defendants’ “contractual duty
under the Agreement to [report] to the Practice any fees received by Medflow related to the
Enhancement.”
        (3) Plaintiff’s unfair and deceptive trade practices claim relies on defendants’ failure
to report and pay royalties under the Agreement.
        (4) Plaintiff’s unjust enrichment claim relies on defendants’ failing to pay royalties
and conducting unauthorized sales, alleging that defendants “retained certain royalties due
to [plaintiff] and received certain disallowed fees related to impermissible sales in the
restricted territories.”

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                    CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                    Opinion of the Court

not to deprive anyone of his just rights by lapse of time.” Id. at 371, 98 S.E.2d at 514.

This security must be jealously guarded, for “[w]ith the passage of time, memories

fade or fail altogether, witnesses die or move away, [and] evidence is lost or

destroyed.” Estrada v. Burnham, 316 N.C. 318, 327, 341 S.E.2d 538, 544 (1986),

superseded by statute, N.C.G.S. § 1A-1, Rule 11(a) (Cum. Supp. 1988), on other

grounds as stated in Turner v. Duke Univ., 325 N.C. 152, 163-64, 381 S.E.2d 706, 712-

13 (1989). “[I]t is for these reasons, and others, that statutes of limitations are

inflexible and unyielding and operate without regard to the merits of a cause of

action.” Id. at 327, 341 S.E.2d at 544 (citing Shearin, 246 N.C. at 370, 98 S.E.2d at

514).

        It is well settled that “where the right of a party is once violated the injury

immediately ensues and the cause of action arises.” Sloan v. Hart, 150 N.C. 269, 274,

63 S.E. 1037, 1039 (1909). A cause of action is complete and the statute of limitations

begins to run upon the inception of the loss from the contract, generally the date the

promise is broken. See Jewell v. Price, 264 N.C. 459, 461, 142 S.E.2d 1, 3 (1965)

(“Where there is . . . a breach of an agreement . . . the statute of limitations

immediately begins to run against the party aggrieved . . . .” (citing, inter alia,

Shearin, 246 N.C. 363, 98 S.E.2d 508)).

        Here plaintiff’s complaint reveals that it had notice of its injury as early as 20

November 1999, when defendants failed to provide the first monthly report, and

certainly by 20 October 2000, when defendants failed to pay the first $500 minimum

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                    CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                     Opinion of the Court

royalty payment. See Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 493,

329 S.E.2d 350, 354 (1985) (concluding that the statutes of limitations at issue in that

case began to run “as soon as the injury [became] apparent to the claimant or should

reasonably [have] become apparent”). The complaint further alleges that, despite

such payments being due, defendants persisted in their breach and “[a]t no time . . .

paid . . . or accounted for any royalties due under the Agreement.” (Emphasis added.)

For fourteen years, however, plaintiff did not raise any question or concern regarding

its rights to receive written reports and minimum annual royalty payments, nor did

it inquire about restricted sales.        Any increase in plaintiff’s injury therefore

represents the “continual ill effects from an original violation,” Williams v. Blue Cross

Blue Shield of N.C., 357 N.C. 170, 179, 581 S.E.2d 415, 423 (2003) (quoting Ward v.

Caulk, 650 F.2d 1144, 1147 (9th Cir. 1981)), and “aggravation of the original

[breach],” Pembee Mfg., 313 N.C. at 493, 329 S.E.2d at 354 (citing Matthieu v.

Piedmont Nat. Gas Co., 269 N.C. 212, 215, 152 S.E.2d 336, 339-40 (1967)). Because

plaintiff had notice of its injury yet failed to assert its rights, all of plaintiff’s claims

are time barred.4

       4   Plaintiff’s claims for breach of contract, fraudulent concealment, and unjust
enrichment are subject to a three-year statute of limitations. N.C.G.S. § 1-52(1), (9).
Plaintiff’s unfair and deceptive trade practices claim is subject to a four-year statute of
limitations. Id. § 75-16.2. Based upon the purported claims having arisen at the latest by
October 2000, the three-year statute of limitations would have run in October 2003, and the
four-year statute of limitations would have run in October 2004.

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                  CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                  Opinion of the Court

      Plaintiff contends, however, that the Agreement should be treated as an

installment contract for limitations purposes and that each overdue sales report,

unauthorized sale, and delinquent royalty payment is a separate breach of contract

claim, thus allowing plaintiff to pursue any claims arising within three years before

filing suit. Because the terms of the Agreement demonstrate a mutual dependency

between the promised performance by plaintiff and the promised performances by

defendants, the consideration supporting the Agreement is unified and incapable of

apportionment. As such, the Agreement is not an installment contract.

      “In interpreting contracts, we construe them as a whole.” Ussery v. Branch

Banking & Tr., 368 N.C. 325, 335, 777 S.E.2d 272, 279 (2015) (citing Singleton v.

Haywood Elec. Membership Corp., 357 N.C. 623, 629, 588 S.E.2d 871, 875 (2003)).

“Each clause and word is considered with reference to each other and is given effect

by reasonable construction.” Id. at 336, 777 S.E.2d at 279 (citing Sec. Nat’l Bank of

Greensboro v. Educators Mut. Life Ins. Co., 265 N.C. 86, 93, 143 S.E.2d 270, 275

(1965)). We determine the intent of the parties and the nature of an agreement “by

the plain meaning of the written terms.” RL REGI N.C., LLC v. Lighthouse Cove,

LLC, 367 N.C. 425, 428, 762 S.E.2d 188, 190 (2014) (citing Powers v. Travelers Ins.

Co., 186 N.C. 336, 338, 119 S.E. 481, 482 (1923)).

       “An ‘installment contract’ is one which requires or authorizes the delivery of

goods in separate lots to be separately accepted.” N.C.G.S. § 25-2-612(1) (2015). In

such cases the statute of limitations runs against each installment as it becomes due,

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                  CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                  Opinion of the Court

see Shoenterprise Corp. v. Willingham, 258 N.C. 36, 39, 127 S.E.2d 767, 770 (1962),

thus permitting actions falling within the limitations period while precluding those

that fall outside of it. Though the term “installment contract” technically applies to

contracts for the sale of goods, for limitations purposes this principle has been

extended to some agreements falling outside the technical definition.         See, e.g.,

Martin, 100 N.C. App. at 357, 396 S.E.2d at 332 (lessee’s obligation to pay all real

estate taxes levied on the leased premises).

      Whether an agreement should be treated as an installment contract “depends

not on the number of promises [on either or both sides] . . . but on whether there has

been a single expression of mutual assent to all the promises as a unit.” 15 Samuel

Williston & Richard A. Lord, A Treatise on the Law of Contracts § 45:3, at 320 (4th

ed. 2014) [hereinafter Williston on Contracts].          “A contract is entire, and not

severable, when by its terms, nature and purpose it contemplates . . . that each and

all of its parts, material provisions, and the consideration, are common each to the

other and interdependent.” Wooten v. Walters, 110 N.C. 251, 254, 14 S.E. 734, 735

(1892). Conversely, the hallmark of an installment contract is that its terms contain

“two or more distinct items, both in the agreement to perform and in the promise of

compensation, capable of ‘apportionment’ or separate allocation the one to the other,

as indicated in the contract itself.” Neal v. Wachovia Bank & Tr., 224 N.C. 103, 107,

29 S.E.2d 206, 208 (1944).

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                    CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                      Opinion of the Court

       Here a fair construction of the terms of the Agreement compels the conclusion

that the Agreement is not an installment contract. The Agreement sets out that, in

a one-time assignment, plaintiff conveyed its rights in the Enhancements in exchange

for defendants’ various promises to provide monthly sales reports, refrain from selling

the Enhancements in North Carolina and South Carolina absent plaintiff’s express

consent, and pay royalties. The terms of the Agreement, therefore, demonstrate a

mutual dependency between the promises provided by the parties as consideration to

support the Agreement, inextricably tying plaintiff’s assignment of rights in the

Enhancements to defendants’ promised performance. Moreover, the Agreement lacks

any indication that the parties intended their promises to be divisible, severable, or

otherwise capable of apportionment. See Williston on Contracts § 45:4, at 321 (“There

is a presumption against finding a contract divisible unless divisibility is expressly

stated in the contract itself, or the intent of the parties to treat the contract as

divisible is otherwise clearly manifested.” (footnotes omitted)).           Accordingly, the

consideration supporting the Agreement is unified and incapable of apportionment.

As such, the Agreement is not an installment contract.5

       5 Moreover, as the trial court correctly concluded, defendants’ immediate and repeated
failure to perform effected a clear repudiation of the entire Agreement. See Edwards v.
Proctor, 173 N.C. 41, 44, 91 S.E. 584, 585 (1917) (noting that a party’s refusal to perform
results in a breach of contract when “the refusal to perform [is] of the whole contract or of a
covenant going to the whole consideration”). Because plaintiff was on notice by at least 20
October 2000 that future reports and payments would not be made, the statute of limitations
began to run on plaintiff’s claims regardless of whether the Agreement was an installment
contract. See Teachey, 214 N.C. at 293, 199 S.E. at 87 (stating, inter alia, that the statute of

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                    CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                                    Opinion of the Court

       Furthermore, unlike an installment contract, in which specified installment

payments are due at scheduled times, the terms of the Agreement contain no fixed

time or schedule for any payments beyond the first five years. See, e.g., Vreede v.

Koch, 94 N.C. App. 524, 380 S.E.2d 615 (1989) (interpreting installment contract that

required, inter alia, payments in monthly installments until all principal and interest

were paid in full). The payments on which plaintiff seeks recovery are well beyond

that five-year period. Instead, the decision to sell the Enhancements and thus trigger

the royalty provision rested entirely in defendants’ hands. Plaintiff’s installment

contract argument therefore fails.

       While a party is duty bound to honor its contractual obligations, statutes of

limitation operate inexorably without reference to the merits of a cause of action,

thereby “preventing surprises through the revival of claims that have been allowed

to slumber.” Order of R.R. Telegraphers v. Ry. Express Agency, Inc., 321 U.S. 342,

348-49, 64 S. Ct. 582, 586, 88 L. Ed. 788, 792 (1944). Plaintiff’s complaint reveals

that plaintiff had notice of its injury over fourteen years ago, well before commencing

its current action. Whatever rights existed, plaintiff’s fourteen-year slumber resulted

in their becoming stale. Because plaintiff failed to timely pursue its claims within

the statute of limitations periods, plaintiff’s claims are time barred. Accordingly, we

affirm the trial court’s decision to dismiss plaintiff’s complaint.

limitations begins to run from the time the non-breaching party learned of the repudiation).

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        CHRISTENBURY EYE CTR., P.A. V. MEDFLOW, INC.

                      Opinion of the Court

AFFIRMED.

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