The Conference Room--Answers to Questions on N.C. Law

Attorney Fees

Money (Photo credit: 401(K) 2013)

A frequent misunderstanding about civil lawsuits that I encounter is about the payment of attorneys fees and costs. A sizeable number of potential clients assume that they can ask for the other party to pay their attorneys fees. Their (logical) thinking is they wouldn’t have to pay for an attorney if the other side would have done the right thing. This type of system is usually called the “loser pays” system. However, most of the United States, including North Carolina, follows the “American Rule.” In our system, each side is responsible for their own attorneys fees. The theory behind the rule is that people would be more inclined to fight for their rights in the court system if they did not have to worry about paying the other guy if they lost. Critics of the rule point out that, particularly in modern America, individuals are far less able to prosecute a lawsuit against corporations, businesses, and governmental entities who can afford to drag out litigation. Even an individual defendant in a car wreck lawsuit is backed by an insurance company who is paying the defendant’s attorneys fees and costs. If not for the ability of plaintiff’s lawyers to pursue cases for their clients on a contingency fee basis (meaning they earn a percentage of what they recover) hardly anyone would be able to fund a modern lawsuit. 

In North Carolina, there are exceptions to the American Rule. The North Carolina legislature can write specific laws that provide for attorneys fees. Some laws currently on the books that include attorneys fees are unfair and deceptive trade practices, frivolous lawsuits, suits against a city or county, and suits to enforce a lien.

In addition to statutory exceptions, if the claim involves a breach of contract, and the contract calls for attorneys fees, those can also be recovered. The fees in such a contract action can’t exceed 15% of the claim. Similarly, a homeowner's association can recover for attorneys fees for a violation of their declarations, including failure to pay assessments, if that power is given in the declarations.   

Your attorney should advise you on whether or not any exceptions apply, but be clear you understand the ability and the likelihood of recovering attorney's fees when you make decisions on proceeding or settling your case.

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Timber Trespass--Time to Sue

(Photo credit: Wikipedia)

Lately I have had a few calls about the wrongful cutting of timber, so I thought I would update on the state of the law in North Carolina when your timber is illegally harvested. Basically, as I have written before, if a person cuts the wood off your property, intentionally or not, they are liable for double the net value of the timber. If you can prove it was done intentionally, or can show that it is a practice of this person or company, you may be able to get treble the net value and attorney fees under the unfair and deceptive trade practices statute. For more detail you can read my original article here. 

The statute of limitations for the wrongful cutting of timber is three years from the date the trespass began. (Four years if you can proceed under unfair and deceptive trade practices). One unique problem of timber trespasses is that the cutting usually occurs on rural property, far from major roads or residences. I currently have a client who had a tract of timber in a swamp, with no access other than by small boat. In that case it could be years past the statute of limitations before the cutting is found out.

Therefore, timber cutting cases frequently benefit from an extreme application of what is known as the “discovery rule.” For the statute of limitations on timber cutting and trespass, as well as most other types of lawsuits, the statute does not begin to toll until the plaintiff knew or should have known about the trespass. In other words, to determine your deadline to file a suit, you start counting from the date you found out that your timber had been cut, or when you should have found out. If the property is on a street that you drive by several times a year, or if you hear a rumor that your property has been cut, but you fail to investigate, a jury could find that you “should have known.” I’ve had timber cases that survived a statute of limitations defense where the property was so far back in the woods that the owner didn’t find out until almost 10 years later, and that only from a coincidental aerial photo.

Some types of claims other than trespass, notably medical malpractice and construction, in addition to a statute of limitations, also have a longer statute of repose, which is a hard deadline, and will start the clock running whether the plaintiff could have known about what happened or not.   

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Medical Provider Liens

A lot of times it is easier as an attorney to obtain a personal injury or medical malpractice settlement from a defendant or an insurance company that it is to actually give that money to a client. One of the most common hurdles that an attorney and his client has to jump over is the payment of any valid liens. Essentially a lien is a claim by another person or company for some or all of the money that an injured person recovers in settlement or judgment of a personal injury or medical malpractice laws. Common liens are ones by Medicare, Medicaid, Teachers’ and State Employees’ Health Plans, ERISA, and Worker’s Compensation. One of the oldest and most common of the liens that can attach are those for medical providers. N.C.G.S 44-49 and N.C.G.S. 44-50 allow any person or company who provides drugs, medical supplies, ambulance services, physician, dentist, nurse or hospital services to claim a lien. In order to have a valid lien (or “perfect” the lien), the medical provider must furnish medical records upon request without charge. A provider is allowed to charge for copies of medical records under N.C.G.S. 90-410 and N.C.G.S. 90-411, but if it does so, it cannot have a lien on its bills for services. The lien rights are waived even if the bill for the copies is never paid or if the medical provider takes back the copying charges before they are paid. In addition, the provider must provide copies of the medical bills without charge. Further, the provider must give written notice saying that they are claiming a lien. That notice must be sent to the attorney for the injured person. Finally, the lien can only be valid if the medical treatment claimed is related to injuries that is part of the settlement or judgment. If the medical charges are for a condition that has nothing to do with the conditions at issue in a lawsuit, the provider can’t get a lien on those funds.

So when considering a settlement for a lawsuit, always determine what liens are outstanding and what you will be required to pay out of any settlement.

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Business Judgment Rule in Homeowners Associations

Under the community documents (declarations/covenants, bylaws, rules and regulations) and under the planned community and condominium acts in North Carolina, an HOA has certain obligations, for example, maintaining or repairing the common elements of the association. Unless it specifically sets forth in the declarations how late the pool can stay open or how many times a year the crape myrtles are pruned, the board of directors makes those day to day management decisions. If homeowner has a problem with the management of the common areas or other obligations like those, does he have standing to file a legal complaint against the HOA and the board and force them to perform?

Theoretically, they do, but the way the law is set up, the facts need to be so extreme, that it is extremely rare. Boards of an HOA have the advantage of the same business judgment rule that other corporations do. Homeowners don’t really consider that they are part of a corporation when they own a home in a planned community with a homeowners association, but they are. The corporate business judgment rule gives a legal presumption to a Board. In any legal action against a Board for failure to perform its duties, a court initially is required to presume, without any additional evidence, that the Board acted due care and on an informed basis for any decision they made. The court further presumes that the Board acted with good faith that the decision was the best for the association, even if later the Board is found to be wrong. The complaining homeowner is the one who must produce evidence showing this was not the case. All the Board has to show is that there was some rational business reason for the decision. The Board doesn’t have to have made the best decision, just have any rational reason for making that decision.

Usually the best way to effect changes in the management of a Board is to run for the Board and elect directors with the change you want. This usually can be done at an annual meeting, or at a special meeting called to remove the present Board.  

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Can A Spouse be Excluded From Your Will?

What if a spouse would like to leave their property to a person other than their current spouse?

A person may create a will that leaves none of their property to their spouse. However, the spouse, may dissent from or reject the provisions of the will and take a share of the property of the decedent’s estate that is authorized by statutes. This share is commonly referred to as a spouse’s elective share.

Pursuant to NCGS §30-3.1, only a surviving spouse may file a claim for an elective share. Additionally, the elective share petition must be filed in the spouse’s lifetime (and within six months of when letters of testamentary or letters of administration are issued by the Clerk of Court), by the spouse, or by the spouse’s attorney-in-fact.

Pursuant to §30-3.1(3f), the following are a few examples of the type of assets that will be included in the elective share formula: property held in a revocable trust, joint bank and brokerage accounts, one-half of tenancy by the entirety property, life insurance on the life of the decedent, retirement accounts, property transferred within one year of death, and annuities. This is not a complete list of the potential property that will be included, but rather examples of property that may be included in the calculation.

The share is calculated on the total net assets of the estate, rather than just the assets of the estate. Expenses that can reduce the amount of total net assets include reasonable funeral expenses, year’s allowances, costs of administration of an estate, valid claims against an estate, death taxes, etc…

To determine the amount of the elective share, there will be a hearing conducted by the Clerk of Court. Additionally, mediation can be ordered by the Clerk of Court pursuant to NCGS §30-3.4(d1).

The process of assigning a value to the assets of the estate as well as determine how much of each asset should be included can be a complex process.

In summary, a spouse may attempt to prohibit the surviving spouse from inheriting any assets of the estate, but the surviving spouse has certain rights as granted by the North Carolina General Statutes. As a result, a full disinheritance of a spouse is not possible if the spouse uses the elective share statutes.

--Guest post by Joshua G. Howell.  Mr. Howell currently practices estate planning law with the King law offices. 

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Corporate Pro Se Representation

In North Carolina, a person has a right to represent themselves in court, even if they are not a lawyer. However, even though a corporation or LLC is considered a “person” for many legal issues, they are not capable of representing themselves in court. Even a small corporation that is owned 100% by one individual, that person cannot represent the corporation in court, either as a plaintiff or defendant. The corporation must retain an attorney for any litigation or other proceeding. This rule is the same in North Carolina courts as well as the Federal courts.

There are a few exceptions to the general rule. First, there is some support in the decisions of the appeals courts in North Carolina that a filing from a corporate officer may be sufficient to avoid a default for failure to answer. Second, a corporation may appear through a non-lawyer representative in small claims court. If your small corporation is suing or being sued in small claims court, I recommend you bring a copy of this case. Most of the magistrate judges are aware of this exception, but I have come across some who were not familiar with it and had to be shown why they were able to hear the arguments of a non-lawyer corporate representative.

In most cases, the attorney representing the corporation can be in-house counsel. North Carolina Gen. Stat. 84-5 allows a salaried employee of the corporation who is also an attorney to represent the corporation. When however, the corporation is acting in a fiduciary capacity, the statute provides that it must hire outside independent counsel.

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Free Speech in an HOA

Recently, a retired police officer in Southport NC challenged a rule by his homeowner’s association prohibiting religious or political gatherings at the community’s amenities center. The homeowner felt that this was an infringement of his constitutional rights. After holding meetings and gathering petition signatures, the HOA board agreed to change the rule.

Some people may be surprised that when they purchase in a planned community with properly filed Declarations and By-laws, they are surrendering some of their constitutional rights. Even though HOAs appear to be small, quasi-governments, with the powers to assess residents, establish rules regarding the property and common areas and other powers that historically have been held by towns and counties, modern HOA laws have really grown out of private contracts and restrictions on the sale of land. With private agreements, you can contract away a good many of your rights. Therefore, the best way to prevail in this or in most HOA/homeowner clashes is community organization and mobilization, which apparently was what this homeowner in Southport did. With enough signatures on a petition, a meeting can be forced and rules, By-Laws or even Declarations amended, as long as the process is followed. Alternatively, get enough votes or enough signed proxies, and elect a board that will change the rule.

Assuming the community documents in this Southport association allow it, there is little in the law of North Carolina that would prevent an HOA regulation of this type. The Condominium Act and Planned Community Act only address free speech issues in two areas. Displays of political signs and US and North Carolina flags can still be prohibited, but only if they are specifically prohibited in the Declarations (“signs” or “flags” won’t do). In addition, for Declarations filed after October 1, 2005 the restriction has to be in boldface, allcaps, and no smaller than the largest print used elsewhere in the instrument. Those provisions also only apply to individual lots, not common areas, such as the clubhouse at this association in Southport.   

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Who controls the roads?

One of the most visible areas in a planned community is its roads and streets. Because of that, homeowners and their homeowner’s associations sometimes exceed their authority over those roads and get themselves in trouble. Usually, as I’ve written before, when a planned community is developed, a plat is filed that shows the lots, common areas and roads in the community. In the plat and sometimes in the declarations, the roads may be shown as “private” or may be “dedicated” to the “public.” A dedication is one half of the process for transferring the roads to the ownership and control of the North Carolina Department of Transportation. In addition to the dedication or the intent to transfer the roads, the DOT must actually accept the transfer. Usually the developer begins this procedure, but the HOA can begin it after it takes over from the developer. The DOT has building requirements for all public roads and before they accept a dedication, the private roads must be brought into compliance with those regulations. In addition, if it is the HOA that is proceeding with the dedication, the planned community act requires at least an 80% vote of the members before common areas such as the private roads are conveyed.

So the roads in a planned community are either public roads maintained by the DOT, or they are private roads, maintained by the developer or the HOA or the homeowners as a whole. Therefore the first question when trying to determine the scope of authority of an HOA over a road in the community is whether or not the road is public or private.

When the road is public, and maintained by the DOT, the HOA has no authority over the road. I have seen pages of rules regarding on-street parking, skateboard ramps, speed limits, and other limitations on roads in the written regulations, by-laws and Declarations of the HOA. However, when the Declarations fight he law, the law wins. Unlike some of the statutes contained in the Planned Community Act or the Condominium Act, the HOA has no authority to establish more restrictive regulations than the law provides over the public roads within their subdivision. The statutes provide that the Department of Transportation of the state of North Carolina has exclusive control over the public roads. 

When the road is private, the HOA does have more control over the roads within the subdivision. The extent of the HOA’s power and authority over the roads is, as usual, governed by its Declarations, By-laws and Rules and Regulations. In addition, the law of easements may come into play as the homeowners in the planned community would have an easement over the roads and would be allowed to reasonably use them based on the plat. Therefore, it is unlikely that an HOA could succeed in removing all access and use of the road from a homeowner. However, speed bumps, signage, parking restrictions, and even gates to keep out any traffic other than homeowners and their guests can be instituted if the Declarations and other community documents allow.

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Does Your Dog Bite?

“Every dog gets one bite,” is a bit of homey legal wisdom that is often repeated by laypersons and even lawyers, but it is not entirely true in the state of North Carolina. The first way a person can recover from a dog bite or attack is under a negligence theory. Legally, a dog attack on someone at a person’s house is analyzed the same way a slip and fall case would be. The owners of the dog would have to have some knowledge that the dog was vicious or mean and they should have foreseen that the dog could injure somebody. If the dog had previously bitten or attacked someone that would be evidence that the owners knew or should have known about the dog. However, an actual bite would not be required. Other behavior from the dog such as an attack prevented by a fence or leash, or even excessive barking or growling could be evidence that the owners should have known the dog could attack and hurt someone. Note that not only the owner of the dog could be held liable for injury from a dog bite under a negligence claim, but a landlord or owner of the house could also be held at fault if they had knowledge of the viciousness of the dog, making this defense unavailable. Any claim of negligence in North Carolina allows the defendants to use the defense of contributory negligence. A person has some responsibility for his own safety and if he fails to do so, to the level of a reasonable and prudent person, he is contributorily negligent and cannot win his case. If the injured person knew about the vicious propensities of a dog and was around the dog anyway; or if the injured party was teasing the dog; could be evidence of contributory negligence.

The second way to recover on a dog bite is by statute. The North Carolina statutes provide that a person who owns a “dangerous dog” is responsible for any injuries it causes, regardless of whether or not he was negligent. The statute provides that a “dangerous dog” is one that has already killed or seriously injured a person; a dog kept or trained for dog fighting; or is determined by a county or city to a “potentially dangerous dog.” A “potentially dangerous dog” is determined after a hearing by a city or county authority and can be appealed to a superior court judge. To find the dog to be a “potentially dangerous dog” the authority must either find that the dog has bitten someone that caused broken bones, disfiguring cuts, or required cosmetic surgery or a trip to the hospital; or that the dog killed or caused severe injury to another animal while not on the owner’s property (and was not involved in hunting, herding or predator control); or approached a person in a vicious or terrorizing manner when not on the owners property. If a dog is a “dangerous dog” or has been determined by a city or county to be “potentially dangerous” then the owner is responsible for any damage to people, other dogs or animals or property that the dog causes. He also would be criminally guilty of a Class 1 misdemeanor. Even if the owner kept the dog fenced up and muzzled, but through no negligence he escaped and caused damage, the owner would still be responsible. The only defenses would be if the injured person was trespassing on the property or was tormenting or abusing the dog. The statues also do not apply to police dogs “on duty” or dogs used in a lawful hunt.      

Finally, note that local cities and counties are permitted to enact additional ordinances regarding dogs and dangerous dogs that are more restrictive than the state laws. So if you have a question, be sure to check with your local laws.

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

Warranties

You can get good bargains from buying things from classified ads, or Craig’s List, or at a garage sale. Aside from scams, the biggest problem is what happens when you get that new (to you) boat, vacuum cleaner, Betamax, or automatic tomato planter, home and it quits working. What protection do you have? Legally, you have much of the same protection that you have when you buy from a large, commercial realtor. Your protection is in the form of various modifiable warranties that come with your purchase.

The first type of warranty is called an "express warranty." An express warranty is made up of the actual representations of fact made by the person selling the item. The representation can be verbal, contained in the contract, written in advertisements, or any other statement of fact or description of the goods. The representations must be part of the basis of the bargain. Therefore, you actually have had to have seen a particular advertisement or heard a particular representation, before it can form part of an express warranty. Also, the law recognizes that some statements made by a seller are mere seller’s talk or “puffing.” A statement purporting to be simply the seller’s opinion is not an express warranty, nor is a simple affirmation of the value of the goods.

The second type of warranty is an "implied warranty of merchantability."  This type of warranty, unlike the express warranty, does not rely on any actual affirmations regarding the product. This is also where you have better protection from a retailer as opposed to a Craig’s List ad, because for this warranty to apply, the seller has to be a “merchant” in that type of product. A "merchant" is a person who deals in goods and products or represents that has special knowledge and skill regarding such products. The basic test for the implied warranty of merchantability is whether the goods would pass without objection in the trade under the contract description, and whether they are fit for the ordinary purpose for which such goods are used. Also, where the goods are fungible (interchangeable) they must be of fair, average quality. If there are a number of units, they must be within the variations allowed by the agreement, to be of even kind, quality and quantity. They must also be adequately contained packaged and labeled as any agreement may say. Finally, the product should conform to any promise made on the labels. 

The third type of warranty is another implied warranty: The warranty of fitness for particular purpose. The warranty can cover all sellers, merchant or not. This warranty arises when the seller has reason to know of any particular purpose for which the goods are required, and that the buyer is relying upon the seller’s skill to select suitable goods.

So let’s say you see an ad in Craig’s List for a used boat at a good price. The ad says it’s a “fun, little boat.” (seller’s opinion or “puffing.”). The ad also says it has a fuel capacity of 45 gallons and a 1340lbs weight capacity and will run without repair for one year. (express warranty). You meet with the seller who tells you he has a side business of buying used boats and fixing them up and selling then on Craig’s List. (merchant). You want the boat to do what boats do, get you around on the water, and not just sink to the bottom. (implied warranty of merchantability). You also tell the seller you want to be able to take the boat out of the calm waters in the sound, into the ocean, where you’ll do some fishing. (Implied warranty of fitness for particular purpose). 

These warranties are modifiable or can be waived either as to the scope, or as to the damages allowed if the warranty is breached. An express warranty can be modified by express words or conduct, but if the words creating the express warranty contradict the disclaimer, the disclaimer will be ignored. So on our boat example, if the ad said it would run without repair for one year, but then said there was no express warranty, the latter would be ignored. If the ad said it would run without repair for one year, and if it didn’t, the seller would provide a new engine, but not the labor to install it, that would be a valid modification. The implied warranties can also be waived either in writing or verbally. With the implied warranty of merchantability, the magic word “merchantability” must be used and if the disclaimer is in writing, it must be “conspicuous.” For example, written in ALLCAPS or in a different color. In addition, all implied warranties may be excluded by the use of phrases like “as is” or “with all faults” or other similar language. Finally, an implied warranty can be waived if the buyer has examined or has been offered the chance and then refused to examine the product and the defect is something that an examination should have been discovered.

--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.