Bogovich v. Embassy Club of Sedgefield, Inc.
211 N.C. App. 1
| N.C. Ct. App. | 2011Background
- Embassy Club long owned by Mr. Strange and Ms. Bogovich; 50/50 ownership with fiduciary duties between directors/officer; notes/deeds of trust totaling ~$1.3M executed by Stranges without Bogovich’s knowledge; fire in 1976 destroyed club records; Bogovich in Florida sought dissolution or property conveyance; between 2000 and 2008 Stranges asserted loans/payments and concealed financials; 2009 jury awarded compensatory damages to Bogovich and punitive damages to Strange, with updated punitive reduction and subsequent reimbursement proceedings.
- Notes and deeds of trust were executed by Stranges as corporate officers to secure alleged personal obligations; Stranges admitted lack of discussion/approval and amounts exceeded advances; Bogovich sought to invalidate instruments and dissolve the corporation; district court granted partial summary judgment on constructive fraud and unfair/deceptive trade practices; damages and reimbursement issues proceeded to jury and nonjury proceedings; final affirmance by the Court of Appeals.
- Settlement enforcement in 2005 mandated sale to bona fide purchaser for market value; enforcement orders reopened case to effect settlement; damages proceedings in 2009 culminated in compensatory and punitive awards, and later reimbursement determinations were made and appealed.
- Stranges’ challenged conduct breached fiduciary duties, leading to constructive fraud finding and damages framework; appellate court affirmed ruling on constructive fraud and declined to disturb related damages and punitive damages rulings.
- Judicial posture: affirmations of trial court rulings on constructive fraud, punitive damages, and related issues, with preservation of damages framework and denial of reimbursement claims due to statute of limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constructive fraud elements established? | Bogovich—fiduciary duty breach by Stranges. | Stranges—no egregious wrongdoing. | Yes, constructive fraud established; affirmed. |
| Unfair and deceptive trade practices viability? | Bogovich—intracorporate dispute can be UDP. | Stranges—intracorporate dispute not UDP. | Ruling affirmed; not reversed due to constructive fraud outcome. |
| Damages for ad valorem taxes recoverable? | Bogovich entitled to taxes as damages. | Taxes are claims in dissolution/claims process. | Affirmed that damages may include taxes; no error in submission. |
| Punitive damages proper? | Punitive damages warranted under constructive fraud with clear and convincing evidence. | Fraud requires intent to deceive; punitive not proper. | Yes, punitive damages properly submitted and upheld. |
| Reimbursement claims time-barred? | Claims timely due to tolling in fiduciary context. | Claims tolled or timely claimed; not time-barred. | Yes, reimbursement claims barred by statute of limitations; affirmed. |
Key Cases Cited
- Forbis v. Neal, 361 N.C. 519, 649 S.E.2d 382 (2007) (constructive fraud presumption from fiduciary breach; no intent required)
- Keener Lumber Co. v. Perry, 149 N.C.App. 19, 560 S.E.2d 817 (2002) (fiduciary breach elements; constructive fraud framework)
- Miller v. Bank, 234 N.C. 309, 67 S.E.2d 362 (1951) (constructive fraud; lack of intent not essential)
- SNML Corp. v. Bank, 41 N.C.App. 28, 254 S.E.2d 274 (1979) (damages tied to breach; ad valorem taxes recoverable as damages)
- Dawson v. Dep't of Env't & Nat. Resources, N.C.App. , 694 S.E.2d 427 (2010) (damages framework including ad valorem taxes; environmental case guidance)
- Compton v. Kirby, 157 N.C.App. 1, 577 S.E.2d 905 (2003) (punitive damages allowed in constructive fraud with some compensatory damages)
- Babb v. Graham, 190 N.C.App. 463, 660 S.E.2d 626 (2008) (punitive damages appropriate where some compensatory damages shown)
- Olivetti Corp. v. Ames B.S., Inc., 319 N.C. 534, 356 S.E.2d 578 (1987) (constructive fraud framework and damages principles)