Lau v. Constable,
2017 NCBC 10.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
FORSYTH COUNTY 16 CVS 4393
GREGORY LAU and VENT TECH )
CORPORATION, )
)
Plaintiffs, )
)
v. )
ORDER AND OPINION ON MOTIONS
)
TO DISMISS
DOUGLAS CONSTABLE; ROBERT )
MARTIN; TIFFANY WILLARD; and )
JENNIFER CONSTABLE, )
)
Defendants. )
)
1. THIS MATTER is before the Court on Defendant Jennifer Constable’s
Motion to Dismiss (“Mrs. Constable’s Motion”) and Defendant Tiffany Willard’s
Motion to Dismiss (“Ms. Willard’s Motion”) (collectively, the “Motions”) filed on
September 27, 2016. For the reasons set forth below, the Court DENIES Mrs.
Constable’s Motion and DENIES IN PART and GRANTS IN PART Ms. Willard’s
Motion.
Tuggle Duggins P.A., by Brandy L. Mills, Benjamin P. Hintze, and Jeffrey S.
Southerland, for Plaintiffs Gregory Lau and Vent Tech Corporation.
Blanco Tackabery & Matamoros, P.A., by Elliot A. Fus, M. Rachael Dimont,
and Peter J. Juran, for Defendants Douglas Constable, Robert Martin, Tiffany
Willard, and Jennifer Constable.
Robinson, Judge.
I. PROCEDURAL HISTORY
2. The Court sets forth here only those portions of the procedural history
relevant to its determination of the Motions.
3. Plaintiffs initiated this action by filing their Complaint on July 21, 2016.
This case was designated as a mandatory complex business case by order of the Chief
Justice of the Supreme Court of North Carolina dated July 22, 2016 and assigned to
the undersigned on the same day.
4. On September 27, 2016, Defendant Jennifer Constable (“Mrs. Constable”)
and Defendant Tiffany Willard (“Ms. Willard”) (collectively, the “Movants”) filed the
Motions pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure
(“Rule(s)”) and a brief in support. The Motions have been fully briefed, and the Court
held a hearing on the Motions on January 31, 2017. The Motions are now ripe for
resolution.
II. FACTUAL BACKGROUND
5. The Court does not make findings of fact on the Motions under Rule
12(b)(6), but only recites those factual allegations of the Complaint that are relevant
and necessary to the Court’s determination of the Motions.
6. Plaintiff Gregory Lau (“Mr. Lau”) is the founder and majority shareholder
of Plaintiff Vent Tech Corporation (the “Company”) (collectively, the “Plaintiffs”).
(Compl. ¶¶ 7, 15.) Mr. Lau was the Company’s chief executive officer until the
Company’s assets were sold on December 31, 2012 (the “Sale”). (Compl. ¶¶ 20, 24.)
7. Defendant Douglas Constable (“Mr. Constable”) was the Company’s vice
president and chief financial officer and a shareholder of the Company until the Sale.
(Compl. ¶¶ 21, 24.) Mr. Constable is married to Mrs. Constable. (Compl. ¶ 12.) Ms.
Willard was Mr. Constable’s administrative assistant. (Compl. ¶ 11.)
8. Defendant Robert Martin (“Mr. Martin”) was a shareholder of the Company
until 2009 and the president of the Company until the Sale. (Compl. ¶¶ 22, 24.)
9. As the Company’s vice president and chief financial officer, Mr. Constable
was responsible for the Company’s management, sales, accounting, record keeping,
and financial affairs. (Compl. ¶ 24.) Mr. Constable maintained the Company’s
general ledger, QuickBooks, banking and credit information, profit and loss
statements, and various financial reports. (Compl. ¶ 24.)
10. Mr. Lau effectively had no role in the Company’s United States operations.
(Compl. ¶ 27.) Instead, Mr. Lau spent most of his time in China managing the
Company’s overseas manufacturing. (Compl. ¶ 27.) Mr. Lau was not knowledgeable
or experienced in the financial aspects of the Company or the Company’s United
States operations. (Compl. ¶ 28.) As a result, Mr. Lau entrusted Mr. Constable and
Mr. Martin to manage the Company’s United States operations. (Compl. ¶ 27.)
11. In addition to ceding control of the Company’s finances, Mr. Lau entrusted
Mr. Constable with managing Mr. Lau’s personal interests in the United States.
(Compl. ¶ 31.) Accordingly, Mr. Lau provided Mr. Constable with access to Mr. Lau’s
personal bank account. (Compl. ¶ 31.)
12. After the Sale, Mr. Lau was the Company’s sole shareholder. (Compl. ¶ 33.)
Mr. Constable continued working for the buyer and maintained access to Mr. Lau’s
funds and the Company credit card. (Compl. ¶ 33.)
13. In or around late 2013, representatives of the buyer informed Mr. Lau that
there were financial irregularities in the Company’s books for which the buyer
believed Mr. Constable was responsible. (Compl. ¶ 35.) Mr. Lau conducted an
investigation into the Company’s books and records and discovered financial
irregularities and misuse of Company funds. (Compl. ¶ 36.)
14. According to Plaintiffs, beginning in 2008 and continuing into 2013, Mr.
Constable defrauded and stole millions of dollars from the Company and Mr. Lau.
(Compl. ¶ 37.) Plaintiffs contend that Mrs. Constable was aware of and complicit in
Mr. Constable’s theft of funds from the Company and Mr. Lau. (Compl. ¶¶ 12, 62,
64.)
15. Plaintiffs contend that as part of Mr. Constable’s theft from the Company
and Mr. Lau, Mr. Constable recorded false transactions in the Company’s general
ledger as payments to a company named Amerasia, but that such payments were in
fact directed to Mr. Constable. (Compl. ¶¶ 38−39.)
16. Plaintiffs also allege that from 2009 until the Sale in 2012, Mr. Constable
diverted the Company’s money into Ventlab Holdings, LLC (“Ventlab Holdings”), a
limited liability company owned by Mr. Lau, Mr. Constable, and Mr. Martin. (Compl.
¶¶ 18, 45.) Plaintiffs contend that Mr. Constable then took the Company’s money
from Ventlab Holdings for himself. (Compl. ¶ 45.)
17. Plaintiffs further allege that from 2009 until in or around 2012, Mr.
Constable diverted the Company’s funds from the Company’s bank accounts for his
own benefit. (Compl. ¶ 54.) The Complaint sets forth seventy-three specific instances
between November 25, 2009 and December 16, 2012 where Mr. Constable allegedly
diverted the Company’s funds to himself or for his benefit. (Compl. ¶ 55.)
18. Plaintiffs contend that from 2010 until in or around 2011, Mr. Constable
diverted Mr. Lau’s funds from Mr. Lau’s personal bank account for Mr. Constable’s
benefit. (Compl. ¶ 59.)
19. Mr. Constable allegedly used the Company credit card for personal
expenses for himself and his family. (Compl. ¶ 49.) The Complaint sets forth fifty-
two specific transactions between June 19, 2010 and December 12, 2013 where Mr.
Constable used the Company credit card and avers each of the transactions were Mr.
Constable’s personal, as opposed to business, expenses. (Compl. ¶¶ 50, 88.) Mr.
Constable allegedly used the Company credit card to make payments to the
University of South Carolina—where Mr. and Mrs. Constable’s son attended school—
Neiman Marcus, Windsor Jewelers, Chanel, Fendi, Prada, Hermes, as well as for
hotels in and airfare to Italy, the Bahamas, Las Vegas, and Nashville. (Compl. ¶¶
50, 61.) The allegations about two of the fifty-two transactions specifically mention
Mrs. Constable. (Compl. ¶ 50.) The Complaint alleges that:
“On or about April 5, 2011, [Mr.] Constable caused payments to be
made for airfare to Nassau, Bahamas for [Mr.] Constable, Mrs.
Constable, and others in the amount of $1,317.60 per ticket” (Compl.
¶ 50d (emphasis added)); and
“From on or about March 13, 2012 to on or about March 21, 2012,
[Mr.] Constable caused payments to be made for a trip to Nashville,
Tennessee by [Mr.] Constable and Mrs. Constable, including for
plane tickets, hotel, car rental, and shopping” (Compl. ¶ 50q
(emphasis added)).
The Complaint also alleges that Mrs. Constable wrongfully used the Company credit
card. (Compl. ¶¶ 65, 94.)
20. Plaintiffs allege that Mr. Constable’s misappropriation of the Company’s
and Mr. Lau’s funds was for the personal benefit of Mr. Constable, Mrs. Constable,
and their family. (Compl. ¶¶ 49, 61, 87, 90.) According to Plaintiffs, the
misappropriated funds were used to pay for landscaping of Mr. and Mrs. Constable’s
home, college tuition for their son, family vacations, and personal luxury items such
as jewelry, sports memorabilia, and firearms. (Compl. ¶¶ 61, 90.) Plaintiffs contend
that Mrs. Constable was aware that Mr. Constable was wrongfully diverting funds
from Mr. Lau and the Company for the benefit of Mr. and Mrs. Constable, and that
Mrs. Constable received funds and the benefit of funds wrongfully taken. (Compl. ¶¶
12, 62−63, 91−92.) Plaintiffs aver that Mrs. Constable was “complicit” in Mr.
Constable’s wrongful diversion of funds. (Compl. ¶¶ 64, 93.)
21. Further, Plaintiffs contend that Ms. Willard used the Company credit card
throughout 2013 for personal expenses. (Compl. ¶¶ 101−02.)
22. Plaintiffs contend that the misappropriation of the Company’s and Mr.
Lau’s funds was carried out pursuant to an agreement among Defendants to defraud
the Company and Mr. Lau. (Compl. ¶¶ 281−83.)
23. The Company and Mr. Lau each assert claims against Mr. Constable for
constructive fraud, breach of fiduciary duty, fraud, unfair and deceptive trade
practices, and conversion. (Compl. 51−52, 54−56, 64, 66, 68−70.) The Company
asserts claims against Mr. Martin for constructive fraud, breach of fiduciary duty,
and conversion. (Compl. 58−60.) Of specific relevance to the Motions, the Company
asserts claims against Mrs. Constable and Ms. Willard for conversion (ninth and
tenth claims), and Plaintiffs assert claims against all defendants for unjust
enrichment (sixteenth claim), constructive trust (seventeenth claim), and civil
conspiracy (eighteenth claim). (Compl. 62−63, 72−74.)
III. LEGAL STANDARD
24. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court
reviews the allegations of the Complaint in the light most favorable to plaintiff. The
Court’s inquiry is “whether, as a matter of law, the allegations of the complaint,
treated as true, are sufficient to state a claim upon which relief may be granted under
some legal theory.” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App. 669, 670,
355
S.E.2d 838, 840 (1987). The Court construes the Complaint liberally and accepts all
factual allegations as true. Laster v. Francis,
199 N.C. App. 572, 577,
681 S.E.2d 858,
862 (2009).
25. Dismissal of a claim pursuant to Rule 12(b)(6) is proper “(1) when the
complaint on its face reveals that no law supports [the] claim; (2) when the complaint
reveals on its face the absence of fact sufficient to make a good claim; [or] (3) when
some fact disclosed in the complaint necessarily defeats the . . . claim.” Oates v. JAG,
Inc.,
314 N.C. 276, 278,
333 S.E.2d 222, 224 (1985); see also Jackson v. Bumgardner,
318 N.C. 172, 175,
347 S.E.2d 743, 745 (1986). Otherwise, “a complaint should not
be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled
to no relief under any state of facts which could be proved in support of the claim.”
Sutton v. Duke,
277 N.C. 94, 103,
176 S.E.2d 161, 166 (1970) (emphasis omitted).
26. The Court is not required “to accept as true allegations that are merely
conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope
Hosp., Inc. v. N.C. Dep’t of Health & Human Servs.,
174 N.C. App. 266, 274,
620
S.E.2d 873, 880 (2005). The Court can also ignore a party’s legal conclusions set forth
in its pleading. McCrann v. Pinehurst, LLC,
225 N.C. App. 368, 377,
737 S.E.2d 771,
777 (2013).
IV. ANALYSIS
A. Conversion
27. Movants contend that the conversion claims against them are barred by the
statute of limitations. (Defs. Jennifer Constable and Tiffany Willard’s Br. in Support
Mots. to Dismiss 4.)
28. Whether a claim is time-barred by the statute of limitations is a mixed
question of law and fact. Stratton v. Royal Bank of Can., 211 N.C. App. 78, 81,
712
S.E.2d 221, 226 (2011). “A statute of limitations can provide the basis for dismissal
on a Rule 12(b)(6) motion if the face of the complaint establishes that plaintiff's claim
is so barred.” Toomer v. Branch Banking & Tr. Co.,
171 N.C. App. 58, 65,
614 S.E.2d
328, 334 (2005). Dismissal pursuant to Rule 12(b)(6) on the grounds that a claim is
barred by the statute of limitations is proper only when all the facts necessary to
establish that the claim is time-barred are either alleged or admitted in the
complaint, construing the complaint liberally in favor of plaintiff. Fox v. Sara Lee
Corp.,
210 N.C. App. 706, 708−09,
709 S.E.2d 496, 498 (2011).
29. Conversion is (1) an unauthorized assumption and exercise of the right of
ownership over goods or personal property belonging to another, and (2) a wrongful
possession or conversion by defendant, regardless of the subsequent application of
the converted property. Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs.,
LLC,
365 N.C. 520, 523, 723 S.E2d 744, 747 (2012).
30. The statute of limitations applicable to a claim for conversion is three years.
N.C. Gen. Stat. § 1-52(4); White v. Consol. Planning, Inc.,
166 N.C. App. 283, 310,
603
S.E.2d 147, 165 (2004). The discovery rule does not apply to a conversion claim;
rather, the statute of limitations begins to run at the time defendant asserts dominion
over the property. Marzec v. Nye,
203 N.C. App. 88, 96,
690 S.E.2d 537, 543 (2010);
White,
166 N.C. App. at 310,
603 S.E.2d at 165.
31. Here, the Complaint was filed on July 21, 2016. Thus, the Company’s
causes of action for conversion against Movants must have accrued on or after July
21, 2013.
32. With respect to the conversion claim against Ms. Willard, the Complaint
alleges that Ms. Willard used the Company credit card “throughout 2013” for personal
expenses. Although the Complaint does not allege a specific date in 2013 on which
Ms. Willard used the Company credit card, the Court cannot conclude that, taking
the allegations of the Complaint as true, the face of the Complaint establishes that
the Company’s conversion claim against Ms. Willard is barred by the statute of
limitations. If the Company alleges, as it implicitly has, that Ms. Willard used the
Company credit card for improper purposes at some time after July 21, 2013, then
the claim survives a Rule 12(b)(6) motion to dismiss.
33. With respect to the conversion claim against Mrs. Constable, the Complaint
contains two allegations that Mrs. Constable used the Company credit card. The first
allegation appears within the allegations of Mr. Constable’s misappropriation of
funds that are alleged to have occurred before the Sale. The second allegation
appears under the heading “Defendants’ Continued Theft and Misappropriation of
Funds After Sale of Assets” and within the allegations of Mr. Constable’s
misappropriation of funds that occurred after the Sale. (Compl. 44.) Further, the
Complaint alleges that Mr. Constable’s misappropriation of Company funds occurred
after July 21, 2013, and that Mrs. Constable received Company funds and the benefit
of Company funds wrongfully taken by Mr. Constable in the form of personal luxury
items, clothing, family vacations, and home improvements. (Compl. ¶¶ 88r−bb,
90−93.)
34. The Court concludes that the face of the Complaint does not establish that
the Company’s conversion claim against Mrs. Constable is barred by the statute of
limitations. First, construing the allegations of the Complaint liberally in favor of
Plaintiffs, the Complaint alleges that Mrs. Constable used the Company credit card
after the Sale in 2013, and the Complaint does not admit or allege that such use
occurred before July 21, 2013. Moreover, the Complaint alleges that Mr. Constable
misappropriated Company funds after July 21, 2013 and that Mrs. Constable
received those misappropriated Company funds and goods bought with such funds.
See State v. West,
293 N.C. 18, 31,
235 S.E.2d 150, 158 (1977) (noting that a person
who comes into possession of converted property is a converter liable to the true
owner, regardless of the person’s innocence or good faith).
35. Therefore, the Court concludes that the face of the Complaint does not
establish that the Company’s conversion claims against the Movants are barred by
the statute of limitations, and the Motions as to these claims are denied.
B. Unjust Enrichment
36. Movants contend that Plaintiffs’ sixteenth claim for unjust enrichment as
to Movants is also barred by the statute of limitations. (Defs.’ Br. in Support Mots.
to Dismiss 4.) Mrs. Constable further contends that the Complaint fails to state an
unjust enrichment claim against her pursuant to the “direct benefit rule.” (Reply Br.
of Defs. Jennifer Constable and Tiffany Willard in Support Mots. to Dismiss 3.)
37. The Court concludes that the face of the Complaint does not establish that
Plaintiffs’ unjust enrichment claim as to Movants is barred by the statute of
limitations. The statute of limitations applicable to a claim for unjust enrichment is
three years.
N.C. Gen. Stat. § 1-52(1); Martin Marietta Materials, Inc. v. Bondhu,
LLC,
772 S.E.2d 143, 146 (N.C. Ct. App. 2015). The discovery rule does not apply to
an unjust enrichment claim. TaiDoc Tech. Corp. v. OK Biotech Co.,
2016 NCBC
LEXIS 26, at *45 (N.C. Super. Ct. Mar. 28, 2016); Patriot Performance Materials, Inc.
v. Powell,
2013 NCBC LEXIS 9, at *5 (N.C. Super. Ct. Feb. 13, 2013). To state a claim
for unjust enrichment, plaintiff must allege facts that show: (1) plaintiff conferred a
benefit on defendant; (2) the benefit was not conferred officiously; (3) the benefit was
not gratuitous; (4) the benefit is measurable; and (5) defendant consciously accepted
the benefit. Butler v. Butler,
239 N.C. App. 1, 7,
768 S.E.2d 332, 336 (2015).
38. Here, Plaintiffs’ unjust enrichment claim is premised on their conversion
theories. Therefore, the Court concludes that the face of the Complaint does not
establish that Plaintiffs’ unjust enrichment claim against Movants is barred by the
statute of limitations for the same reasons the Court so concludes with respect to the
conversion claims.
39. Mrs. Constable contends that Plaintiffs have failed to state an unjust
enrichment claim against her pursuant to the “direct benefit rule” set forth in Effler
v. Pyles,
94 N.C. App. 349,
380 S.E.2d 149 (1989). In Effler, the Court of Appeals of
North Carolina affirmed summary judgment on plaintiff’s unjust enrichment claim
in favor of defendant because plaintiff did not confer a direct benefit on defendant.
Although Effler has not been expressly overruled, cases decided after Effler have held
that an indirect benefit can support an unjust enrichment claim. See New Prime,
Inc. v. Harris Transp. Co., No. COA12-271,
2012 N.C. App. LEXIS 921, at *11 (N.C.
Ct. App. Aug. 7, 2012) (unpublished) (“Our holding in the instant case is in line with
the Restatement and other states. Many jurisdictions do not require that the plaintiff
confer a direct benefit on the defendant in order to recover under a theory of unjust
enrichment.”); Metric Constructors, Inc. v. Bank of Tokyo-Mitsubishi, Ltd.,
72 F.
App’x 916, 921 (4th Cir. 2003) (discussing Effler and subsequent case law and
concluding that “[u]nder North Carolina law, it is sufficient for a plaintiff to prove
that it has conferred some benefit on the defendant, without regard to the directness
of the transaction”).
40. Further, the facts of Effler are distinguishable from the facts of this case.
In Effler, plaintiff and the husband-defendant’s wife signed a note, which enabled the
husband-defendant and the wife to purchase property. The husband-defendant and
his wife acquired the property as tenants by the entireties. The husband-defendant’s
wife died and the husband-defendant remarried. The husband-defendant conveyed
the property to himself and his new wife, the wife-defendant, as tenants by the
entireties.
41. The court in Effler affirmed summary judgment in favor of the wife-
defendant on plaintiff’s unjust enrichment claim. Effler,
94 N.C. App. at 353,
380
S.E.2d at 152. Although the husband-defendant acquired his interest in the property
with plaintiff’s help, the court stated that plaintiff did not show that she conferred a
benefit on the wife-defendant; rather, the wife-defendant received title to the property
from her husband. Id.
42. Here, Plaintiffs contend that Mrs. Constable received Company funds
misappropriated by Mr. Constable, and the benefit of Company funds
misappropriated by Mr. Constable in the form of personal luxury items, clothing,
family vacations, and home improvements. (Compl. ¶¶ 12, 49−50, 61−63, 87, 90−92.)
The Complaint alleges that Mrs. Constable was aware that Mr. Constable was
wrongfully diverting Company funds. (Compl. ¶¶ 12, 62, 64.) Moreover, the
Complaint alleges that Mrs. Constable herself wrongfully used the Company credit
card for her own personal benefit. (Compl. ¶¶ 65, 94.) These allegations sufficiently
state that Plaintiffs conferred a benefit on Mrs. Constable, which was not officious or
gratuitous, and that Mrs. Constable consciously accepted the benefit.
43. Therefore, the allegations of the Complaint are sufficient to state a claim
for unjust enrichment against Movants, and the Motions as to this claim are denied.
C. Constructive Trust
44. Movants contend that Plaintiffs’ seventeenth claim for constructive trust as
to Movants is barred by the statute of limitations. (Reply Br. of Defs. in Support
Mots. to Dismiss 8.) Movants further contend that the Complaint fails to state a
proper claim for constructive trust as to Movants because there is no allegation of a
relationship of trust or confidence between Movants and Plaintiffs, and there is
nothing on which a constructive trust can be imposed. (Defs.’ Br. in Support Mots. to
Dismiss 15−16.)
45. The Supreme Court of North Carolina has stated that
[a] constructive trust is a duty, or relationship, imposed by courts of
equity to prevent the unjust enrichment of the holder of title to, or of an
interest in, property which such holder acquired through fraud, breach
of duty or some other circumstance making it inequitable for him to
retain it against the claim of the beneficiary of the constructive trust.
Variety Wholesalers, Inc., 365 N.C. at 530, 723 S.E2d at 751 (quoting Wilson v. Crab
Orchard Dev. Co.,
276 N.C. 198, 211,
171 S.E.2d 873, 882 (1970)).
46. The statute of limitations applicable to a constructive trust claim is ten
years. Stratton,
211 N.C. App. at 91,
712 S.E.2d at 232. When the basis for imposing
a constructive trust is fraud or mistake, however, the statute of limitations is three
years.
Id. at 92,
712 S.E.2d at 232. Movants contend that, although Plaintiffs do not
bring express claims for fraud against Movants, the basis for Plaintiffs’ constructive
trust claim sounds in fraud and, as a result, the three-year statute of limitations
applies.
47. The Court reads the Complaint as basing Plaintiffs’ constructive trust claim
on their conversion and unjust enrichment claims. The Court has concluded that the
face of the Complaint does not establish that the conversion and unjust enrichment
claims are barred by the statute of limitations. It necessarily follows that the face of
the Complaint does not establish that Plaintiffs’ constructive trust claim as to
Movants is barred by the statute of limitations, irrespective of whether such statute
is three or ten years.
48. As to Movants’ contention that the constructive trust claim fails because
there is no allegation of a relationship of trust or confidence, it is well-settled that “a
fiduciary relationship, while generally the basis for constructive trust claims, is not
strictly required.” Variety Wholesalers, Inc.,
365 N.C. at 530, 723 S.E2d at 752. A
trial court may impose a constructive trust on “the showing of either (1) some other
circumstance making it inequitable for the defendant to retain the funds against the
claim of the beneficiary of the constructive trust, or (2) that the defendant acquired
the funds in an unconscientious manner.” Houston v. Tillman,
234 N.C. App. 691,
697,
760 S.E.2d 18, 21 (2014).
49. Here, the Complaint alleges that Movants wrongfully used the Company
credit card for personal expenses, and that Mrs. Constable received Company funds
misappropriated by Mr. Constable and goods bought with such funds. The Court
finds that such allegations are sufficient, at the motion to dismiss stage, to show that
Movants acquired Company funds and goods bought with such funds in an
unconscientious manner or under circumstances making it inequitable for Movants
to retain the funds and goods.
50. Finally, as to this claim, the Court cannot conclude that there is no property
or funds on which a constructive trust can be imposed. The Complaint alleges
Movants used the Company credit card to purchase tangible items, such as sporting
goods and jewelry. (Compl. ¶¶ 61, 90.) Such tangible items are property on which
the Court can impose a constructive trust. See Houston,
234 N.C. App. at 698,
760
S.E.2d at 22 (affirming imposition of a constructive trust on a vehicle); Hinson v.
Hinson,
80 N.C. App. 561, 569,
343 S.E.2d 266, 271 (1986) (stating a constructive
trust is a broad remedy imposed in an unlimited variety of situations); Singer Mfg.
Co. v. Summers,
143 N.C. 102, 106,
55 S.E. 522, 523 (1906) (stating that a court may
impose a constructive trust on specific property). Moreover, the Court may impose a
constructive trust on funds. Variety Wholesalers, Inc.,
365 N.C. at 532, 723 S.E2d at
752 (“[T]rust pursuit does not fail where substantial identification of the trust
property or of the proceeds or product from a conversion thereof, is made.” (quoting
Edgecombe Bank & Tr. Co. v. Barrett,
238 N.C. 579, 586,
78 S.E.2d 730, 736 (1953))).
51. Therefore, the Court concludes that the allegations of the Complaint are
sufficient to state a claim for a constructive trust against Movants, and the Motions
as to this claim are denied.
D. Civil Conspiracy
52. Movants contend that Plaintiffs’ eighteenth claim for civil conspiracy as to
Movants is barred by the statute of limitations, and that the allegations are not
sufficient to state a claim for civil conspiracy. (Defs.’ Br. in Support Mots. to Dismiss
13−14.)
53. The Court concludes that the face of the Complaint does not establish that
Plaintiffs’ civil conspiracy claim as to Movants is barred by the statute of limitations.
The applicable statute of limitations to a civil conspiracy claim is three years. Carlisle
v. Keith, 169 N.C. App. 674, 685,
614 S.E.2d 542, 549 (2005). There is not a separate
cause of action for civil conspiracy—if the underlying claim fails, the conspiracy claim
must also fail. Strickland v. Hedrick,
194 N.C. App. 1, 19,
669 S.E.2d 61, 73 (2008).
54. Here, Plaintiffs’ civil conspiracy claim against Movants is based on the
conversion claims. The Court has concluded that the face of the Complaint does not
establish that the conversion claims are barred by the statute of limitations. Thus,
it follows that the face of the Complaint does not establish that Plaintiffs’ civil
conspiracy claim against Movants is barred by the identical three-year statute of
limitations.
55. As to the sufficiency of Plaintiffs’ allegations, under North Carolina law,
[t]he elements of a civil conspiracy are: (1) an agreement between two or
more individuals; (2) to do an unlawful act or to do a lawful act in an
unlawful way; (3) resulting in injury to plaintiff inflicted by one or more
of the conspirators; and (4) pursuant to a common scheme.
Id. at 19,
669 S.E.2d at 72. The purpose of a conspiracy claim is to associate
defendants together to impose joint and several liability on the conspirators for injury
resulting from the acts of any one conspirator done in furtherance of the conspiracy.
Neugent v. Beroth Oil Co.,
149 N.C. App. 38, 53,
560 S.E.2d 829, 838 (2002); see also
Burton v. Dixon,
259 N.C. 473, 477,
131 S.E.2d 27, 30−31 (1963) (holding that a civil
conspiracy action may be maintained against a husband and wife). Further,
[a] threshold requirement in any cause of action for damages caused by
acts committed pursuant to a conspiracy must be the showing that a
conspiracy in fact existed. The existence of a conspiracy requires proof
of an agreement between two or more persons. Although civil liability
for conspiracy may be established by circumstantial evidence, the
evidence of the agreement must be sufficient to create more than a
suspicion or conjecture in order to justify submission to a jury.
S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601, 609,
659 S.E.2d
442, 449 (2008) (quoting Dove v. Harvey,
168 N.C. App. 687, 690,
608 S.E.2d 798, 800
(2005)).
56. Here, the Complaint first mentions a conspiracy on page 74 of the 75-page
Complaint. The Complaint alleges that “Defendants conspired and agreed amongst
themselves and acted in concert to defraud and otherwise harm [Mr.] Lau and the
Company as alleged [in the Complaint].” (Compl. ¶ 281.) The Complaint further
states that
Defendants conspired to conceal and deliberately withhold information
from [Mr.] Lau regarding acts as alleged herein, including inter alia,
misappropriation and misdirection of [Mr.] Lau’s and the Company’s
funds, assets, and other things of value, concealment of said
misappropriation and misdirection through fraudulent record keeping,
and unauthorized personal use of credit cards belonging to or paid for
by the Company.
(Compl. ¶ 283.)
57. The Court concludes that the allegations of the Complaint are sufficient to
state a civil conspiracy claim against Mrs. Constable. In addition to the conclusory
allegations that Defendants conspired and agreed, the Complaint contains several
allegations that Mrs. Constable was aware of and complicit in Mr. Constable’s
misappropriation of Plaintiffs’ funds for the benefit of their family, and that Mrs.
Constable herself wrongfully used the Company credit card for personal expenses.
While Plaintiffs will ultimately bear the burden of proving that a conspiracy in fact
existed, the Court finds these allegations sufficiently plead facts at the motion to
dismiss stage, as opposed to conclusions, to support the elements of a conspiracy
between Mrs. and Mr. Constable.
58. Conversely, the Court concludes that the allegations of the Complaint are
insufficient to state a civil conspiracy claim against Ms. Willard. Other than the
conclusory allegations that Defendants conspired and agreed, there are no factual
allegations to support the existence of an agreement between Ms. Willard and any
other defendant. Unlike the allegations concerning Mrs. Constable, there are no
allegations that Ms. Willard was aware of, complicit in, or otherwise involved in Mr.
Constable’s alleged misappropriation or any other defendant’s wrongful conduct
pursuant to the conspiracy. In fact, there are only two allegations in the entire
Complaint with respect to Ms. Willard—that she was Mr. Constable’s administrative
assistant, and she wrongfully used the Company credit card throughout 2013. The
only allegations that tie Ms. Willard to the alleged conspiracy are those conclusory
allegations that Defendants conspired and agreed, which appear at the very end of
the Complaint. The Court finds such conclusory allegations, without more, are
insufficient to state a civil conspiracy claim against Ms. Willard. See S.N.R. Mgmt.
Corp., 189 N.C. App. at 609,
659 S.E.2d at 449 (affirming trial court’s Rule 12(b)(6)
dismissal of plaintiff’s civil conspiracy claim when “plaintiff failed to establish
evidence of the conspiracy that was sufficient to create more than a suspicion or
conjecture” (internal quotations omitted)); Bottom v. Bailey,
238 N.C. App. 202, 213,
767 S.E.2d 883, 890 (2014) (affirming trial court’s Rule 12(b)(6) dismissal of plaintiff’s
civil conspiracy claim and stating “[t]he complaint asserts mere conclusions
concerning the elements of civil conspiracy, without offering a scintilla of factual
allegation in support of the claim”).
59. Therefore, the Court concludes that the allegations of the Complaint are
sufficient to state a civil conspiracy claim against Mrs. Constable, and Mrs.
Constable’s Motion as to this claim is denied. On the other hand, the Court concludes
that the allegations of the Complaint are insufficient to state a civil conspiracy claim
against Ms. Willard, and Ms. Willard’s Motion as to this claim is granted.
V. CONCLUSION
60. THEREFORE, pursuant to the foregoing, the Court DENIES Mrs.
Constable’s Motion, and DENIES in part and GRANTS in part Ms. Willard’s Motion.
Plaintiffs’ civil conspiracy claim against Ms. Willard is hereby DISMISSED with
prejudice.
SO ORDERED, this the 7th day of February, 2017.
/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases
