Notarized Contract Does Not Give Rise to the Presumption of Adequate Consideration

The North Carolina Court of Appeals discussed the presumption that contracts executed under seal are supported by adequate consideration in Burton v. Williams.


In early 1998, Walter Burton sold his home to the defendant, Tony Williams. Burton provided "owner-financing for $160,000.00 of the $185,000.00 purchase price." The terms of the Promissory Note Burton and Williams executed required Williams "to pay Burton $160,000.00 at 7% interest in 151 monthly payments of $1,240.48." In September 2005, Williams and Burton executed a Promissory Note Addendum and Payment Agreement Release that provided, in relevant part, "that if Mr. Burton died prior to the defendant completely repaying the promissory note, then the note became null and void and defendant would be 'relieved of any and all remaining financial obligations to or claims by the estate, beneficiaries, creditors, heirs, or assignees of Mr. Burton.'"


In April 2007, Burton's son, Luther Burton discovered the Release while cleaning out his father's home. Luther Burton, who had been named his father's power of attorney in March 2005, filed an action seeking to have the Release declared void and unenforceable because, among other reasons, the Release was not supported by consideration.

At the close of all the evidence, both parties moved for a directed verdict. Williams argued that Burton was not entitled to a directed verdict because "the notary public's acknowledging the release constituted the release being executed 'under seal,' which created a presumption that the release was supported by consideration." The trial court rejected this argument and granted Burton's motion for a directed verdict "on the ground that the release was void and unenforceable for lack of consideration." Williams appealed.

The Court of Appeals found that Williams argument failed because he mistook "the effect of a notary public's acknowledging a document as opposed to a party's executing an agreement 'under seal.'" A notarial seal only authenticates a document. However, "when a party executes an agreement under seal 'the presence of the seal renders the document to which it is affixed indisputable as to the terms of the underlying obligation ... and 'imports consideration' to support that instrument." In other words, "the presence of a seal raises the presumption that the instrument is supported consideration."

The Court of Appeals held that the because the Release was not executed under seal there was no presumption that it was supported by consideration. The Court affirmed the trial court's decision to direct a verdict in favor of Burton because Burton established that the Release was unsupported by consideration and Williams, because he could not rely on the presumption of consideration, had failed to present sufficient evidence to allow the matter to be submitted to the jury.

COA: Discovery Orders Requiring Disclosure of Medical Records Are Immediately Appealable

In The North Carolina State Board of Dental Examiners v. Woods, the Court of Appeals held that discovery orders requiring the disclosure of patient medical records are immediately appealable.

Woods arose out of the Dental Board's investigation into two complaints filed against Dr. E. Jean Woods. As part of the investigation, the Dental Board issued twenty one subpoenas requesting patient records from Dr. Woods' office. Dr. Woods tried, but failed, to have the subpoenas quashed on the grounds that HIPAA precluded disclosure of the subpoenaed records. The Dental Board sought and received an order from the Wake County Superior Court requiring Dr. Woods to comply with the subpoenas. Dr. Woods' filed an interlocutory appeal regarding several of the Superior Court's rulings on discovery issues, including the decision to grant the Dental Board's motion to enforce the subpoenas.

The Court of Appeals recognized that although interlocutory appeals are generally not allowed, "when a party asserts a statutory privilege, which directly relates to the matter to be disclosed under an interlocutory discovery order ... the challenged order affects a substantial right" and is immediately appealable." The Court found that the order enforcing the subpoenas for patient records satisfied this standard because "if Woods is required to disclose the very documents that she alleges are protected from disclosure by the statutory privilege, then a right materially affecting those interest which a person is entitled to have preserved and protected by law - a 'substantial right' - is affected." In other words, the statutory protections afforded to patients by HIPAA would be rendered meaningless if Dr. Woods was not allowed to seek immediate review of an order requiring disclosure of patient records.

Althought the Court sided with Dr. Woods on the issue of the propriety of the appeal, the Court sided with the Dental Board on the merits. The Court held that HIPAA did not bar the disclosure of the subpoenaed records because "[t]he Dental Board was conducting a disciplinary investigation, and Woods, as a health care provider, was authorized to release the requested information under HIPAA regulations."

COA: Oral Contracts for Real Estate Brokerage Services Are Enforceable

Today the NC COA held that an oral contract for real estate brokerage services can be valid and does not violate the statute of frauds. The case is Scheerer v. Fisher.

Scheerer was a licensed real estate broker. Fisher asked Scheerer to investigate the cost of developing some property, and per Fisher's request Scheerer also negotiated the costs of the development with the owners of the property. Fisher bought the property, and the purchase contract specified that he and his company would pay Scheerer a 2% commission. Fisher also allegedly orally assured Scheerer that he would be paid a 2% commission.

Fisher unilaterally rescinded the contract and entered into an agreement with another party under which that party would purchase the property at a lower price and then assign the purchase contract back to Fisher. Fisher didn't pay Scheerer the 2% commission. The original purchase price under Fisher's initial contract was $20,000,0000 - you can see why Fisher would sue.

The COA held that the trial court should not have granted Fisher's motion to dismiss, and that a contract to pay a commission for real estate brokerage services doesn't have to be in writing. Even though the NC Real Estate Commission rules specified that contracts for brokerage services should be in writing, the COA found that a failure to satisfy this "administrative requirement" doesn't render such contracts invalid. A failure to follow this requirement means that the broker may be subject to discipline by the NC Real Estate Commission, but it doesn't mean that the contract is unenforceable. The COA also held that Plaintiffs' quantum meruit claim should not have been dismissed, because the facts alleged show that there was an implied promise by Fisher to compensate them for services rendered.

Wynn and Diaz Nominations Go Before Judiciary Committee

The Senate Judiciary Committee is scheduled to address the nominations of Judges Jim Wynn and Al Diaz during its Thursday meeting. More here.

COA Opinion Day

The COA published 16 opinions today, half civil. More on some of these soon...

4th Circuit: LLCs Unincorporated Associations, Citizens of States Where They're Organized and Where They Have Principal Place of Business under CAFA

Last Friday, the 4th Circuit held that, in determining subject matter jurisdiction under the Class Action Fairness Act (CAFA), an LLC is an unincorporated association, and its citizenship is determined by its place of organization and its principal place of business. The case was Ferrell v. Express Check Advance of SC.

In Ferrell, plaintiff filed a class action against Express Check, alleging, among other things, violations of South Carolina's consumer protection laws in the context of payday lending. The defendant removed to federal court under CAFA, which broadened federal jurisdiction to include class actions where $5+ million is on the line and where any plaintiff is a citizen of a different state than any defendant. The District Court remanded back to state court, and the 4th Circuit affirmed.

The 4th Circuit held that an LLC, and all other non-corporate business entities, are unincorporated associations under CAFA. And an unincorporated association's home states are those under whose laws they're organized and where they have their principal place of business. The principal place of business is determined not merely by looking at an LLC's members, as the defendant in Ferrell argued. But rather, where, as here, an LLC does all of its business within a state and simply has a couple of top officers in another, the 'place of operations' test for citizenship is used, and, in Ferrell, it defeated diversity and, with that, federal jurisdiction .

Short COA Opinion Day

Today, the COA published only 4 civil cases. The common theme: interlocutory appeals. Three of the four opinions dismissed appeals as interlocutory. The fourth opinion affirmed summary judgment for the defendant in a professional negligence suit.