## Facts

- Two elderly sisters, Bonnie S. Newell and Augusta Lee Sustare, executed powers of attorney in 1991 naming their nephew, Beverly Lee Neal, as attorney-in-fact.
- The powers of attorney authorized broad financial transactions but did not authorize gifts to Neal or others.
- In 1995, each sister executed a will largely favoring the other, with secondary residuary gifts to multiple relatives, including Neal and LaMarr Garland Forbis.
- In 1996, Newell signed BB&T documents creating (1) a payable-on-death (POD) account naming Neal as beneficiary and (2) a joint account with right of survivorship (ROS) naming Neal as co-owner.
- In 1998, a PaineWebber joint account with right of survivorship was opened listing Newell and Neal; Neal signed the application as Newell’s attorney-in-fact.
- Neal deposited proceeds from sales of Newell’s real estate into the PaineWebber account, increasing its value; at Newell’s death, about $250,000 in the POD, ROS, and PaineWebber accounts passed to Neal by operation of the account designations rather than through the will.
- After Newell’s death, Sustare later revoked Neal’s power of attorney and replaced him with Forbis, and she cancelled joint accounts with Neal.
- Forbis, acting for the estates, sued Neal alleging actual fraud and constructive fraud based on Neal’s alleged self-dealing in establishing the accounts.

## Issues

1. Whether summary judgment was proper on plaintiffs’ actual fraud claims challenging the BB&T POD and ROS accounts.
2. Whether plaintiffs forecast sufficient evidence of constructive fraud arising from Neal’s fiduciary status and alleged self-dealing, particularly regarding the PaineWebber survivorship account opened under a non-gift power of attorney.
3. Whether the claims were barred at summary judgment by the statute of limitations for fraud or constrained by the Dead Man’s Statute in evaluating the forecast of evidence.

## Decision

- The Supreme Court of North Carolina affirmed summary judgment for Neal on the actual fraud claims concerning the BB&T POD and ROS accounts.
- The court reversed summary judgment on claims tied to the PaineWebber survivorship account, holding that genuine issues of material fact existed as to actual fraud and constructive fraud.
- The court held that limitations did not warrant summary judgment because accrual in fraud turns on discovery, and the record presented fact disputes about when the alleged wrongdoing should have been discovered with reasonable diligence.
- For summary judgment review, the court assumed inadmissible statements barred by the Dead Man’s Statute were disregarded and assessed only the remaining admissible forecast of evidence.
- The case was remanded for further proceedings consistent with these rulings.

## Legal Principles

- An agent acting under a power of attorney is a fiduciary and owes duties of utmost good faith to the principal.
- Constructive fraud may be inferred when a fiduciary benefits from a transaction connected to the fiduciary relationship, especially where the transaction diverts substantial assets from an expected distribution scheme.
- A power of attorney that does not authorize gifts cannot be used to create a beneficial ownership transfer to the agent through survivorship designations without close judicial scrutiny; such conduct can support a constructive fraud claim.
- Actual fraud requires a triable showing of a materially false representation or concealment, intent to deceive, actual deception, reasonable reliance, and resulting damage; evidence that an agent used a non-gift power of attorney to create survivorship rights in the agent can satisfy the “forecast evidence” threshold at summary judgment.
- In fraud actions, the statute of limitations begins to run when the fraud is discovered or should have been discovered with reasonable diligence; in fiduciary settings, discovery may be delayed where the fiduciary controls transaction information.
- On summary judgment, courts evaluate the forecast of admissible evidence; testimony barred by the Dead Man’s Statute is excluded from the analysis.

## Conclusion

The court limited liability where the challenged bank accounts were supported by Newell’s authenticated signatures, but permitted fraud claims to proceed where Neal, acting as fiduciary under a power of attorney that did not permit self-gifting, created survivorship rights for himself in an investment account, raising triable questions of self-dealing, deception, and resulting diversion of estate assets.


Forbis v. Neal, 361 N.C. 519, 649 S.E.2d 382 (N.C. 2007)