North Carolina Court Of Appeals Rules That Electronic Signature Satisfied The Statute Of Frauds

Digital signatures and medieval law met today in the North Carolina Court of Appeals decision in Powell v. City of Newton, and the twenty-first century emerged the winner.

The Court enforced a settlement agreement involving a conveyance of land, even though no agreement reflecting the transaction had been signed as required by the Statute of Frauds. It relied, in part, on emails between counsel reflecting the settlement and circulating the necessary deed. It held that these satisfied the signature requirement, relying on North Carolina's Uniform Electronic Transactions Act.

The case arose from the settlement by the parties of their lawsuit in open court, during trial. The transcript reflected Plaintiff's agreement to convey property to the Defendant as a part of the settlement. A settlement agreement was circulated by email between the lawyers for the parties after that, but Plaintiff refused to sign.

The Electronic Signature Of Plaintiff's Counsel Satisfied The Statute Of Frauds

Plaintiff based his refusal to follow through on the Statute of Frauds, which requires an agreement to convey land to be in writing, and "signed by the party to be charged." The trial court ordered Plaintiff to sign the settlement papers, and the Court of Appeals majority affirmed. It held that there had been "total compliance" with the Statute of Frauds. It based its decision, in part, on North Carolina's Uniform Electronic Transactions Act, N.C. Gen. Stat. §66-311 et seq). As far as I know, this is the first mention of that statute by the Court of Appeals.

Judge Jackson, writing for the majority, said:

We note that this was not some barroom conversation between drunken neighbors, agreed to in jest, and written on a random scrap of paper. See Lucy v. Zehmer, 84 S.E.2d 516 (1954). This was an agreement among four parties represented by counsel, in a court of law, supervised by the presiding judge, who inquired of each party whether the terms were agreeable. The party to be charged -- plaintiff -- confirmed, 'Yes, that's my agreement.'

The Court observed that emails had then passed back and forth between counsel regarding the settlement, including drafts of a settlement agreement and a deed. This led to the Court's first impression reliance on the Uniform Electronic Transactions Act. The Court said:

Pursuant to that Act, plaintiff's counsel affixed his electronic signature to emails concerning the transaction. . . . When the hearing transcript, draft agreement, draft quitclaim deed, and associated emails are read together, as permitted by the statute of frauds, the settlement agreement that plaintiff was ordered to execute is in total compliance with the statute of frauds.

Other Grounds

The majority also provided other grounds for its decision, including the doctrine of judicial estoppel and a discussion whether the Statute of Frauds should apply at all to court announced settlements.

On the point of judicial estoppel, the Court said "[t]he primary concern of the doctrine of judicial estoppel is to protect the integrity of the judicial process. That concern would be ill served if those intimately involved in that process, litigants, attorneys, and judges, could not rely on declarations of settlement made to the court." (quoting Correia v. DeSimone, 614 N.E.2d 1014, 1016 (Mass. App. 1993)).

There's also some discussion in the case -- and references to decisions in other jurisdictions -- that the Statute of Frauds simply shouldn't apply to court announced settlements which are transcribed by a court reporter. This is the position of Professors Calamari and Perillo, who say in their treatise that "it seems to be well settled that an oral stipulation made in open court satisfies the Statute of Frauds even though the record is not signed by the party to be charged."

Judge Wynn dissented based on the failure to meet what he termed "the exceptional safeguards . . . devised for the preservation and security of" title to land, so it's on to the Supreme Court.

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