Spoor v. Barth , 244 N.C. App. 670 ( 2016 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-172
Filed: 5 January 2016
Wake County, No. 11 CVS 15178
RICHARD B. SPOOR, Individually and Derivatively, Plaintiff,
v.
JOHN M. BARTH, JR., JOHN M. BARTH, JOHN DOES 1-5, and J.R.
INTERNATIONAL HOLDINGS, LLC, Defendants.
Appeal by plaintiff from order entered 19 June 2014 by Judge Allen Baddour
in Wake County Superior Court. Heard in the Court of Appeals 26 August 2015.
Smith Moore Leatherwood LLP, by Matthew Nis Leerberg and Sidney S.
Eagles, Jr., and Barry Nakell for plaintiff-appellant.
Manning Fulton & Skinner, P.A., by Judson A. Welborn and J. Whitfield
Gibson, for defendant-appellee John Barth, Jr.
Wilson & Ratledge, PLLC, by Reginald B. Gillespie, Jr. and N. Hunter Wyche,
Jr., and Foley & Lardner LLP, by Michael J. Small and David B. Goroff, for
defendant-appellee John M. Barth.
McCULLOUGH, Judge.
Plaintiff Richard Spoor appeals from an order of the trial court granting
summary judgment in favor of defendants John M. Barth and John M. Barth, Jr.
Based on the reasons stated herein, we reverse the order of the trial court.
I. Background
SPOOR V. BARTH
Opinion of the Court
On 5 October 2011, plaintiff Richard Spoor filed a complaint against John M.
Barth, Jr. (“Junior”), John Doe, Sr., and John Does in Wake County Superior Court.
On 14 February 2012, plaintiff filed his first amended complaint against Junior, John
Barth, Sr. (“Senior”), John Does 1-5, and JR International Holdings, LLC (“JRI”)
(collectively “defendants”).
On 16 February 2012, Junior removed the case to the United States District
Court for the Eastern District of North Carolina. On 31 October 2012, the action was
remanded to Wake County Superior Court.
On 16 June 2012, plaintiff filed his Second Amended Complaint against
defendants. The complaint alleged as follows: Plaintiff was the chairman and
majority shareholder of AmerLink, Ltd. (“AmerLink”). AmerLink was a North
Carolina corporation “engaged in the business of selling packages of materials for the
construction of log homes.” Junior was President of AmerLink and Senior was
Junior’s father. JRI is a North Carolina corporation. Plaintiff owns 50% and Junior
owns 50% of JRI. In September 2006, Junior became President and CEO of AmerLink
and Junior told plaintiff that he was interested in purchasing plaintiff’s controlling
interest in AmerLink with the use of Senior’s funds. In Fall 2007, Junior and Senior
first attempted to purchase plaintiff’s controlling interest. Senior visited and
inspected the AmerLink facility and discussed with National Consumer Cooperative
Bank (“NCB”), AmerLink’s principal lender, the financial situation for a purchase. A
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Opinion of the Court
proposed contract went through three or four drafts before Junior and Senior decided
not to complete the purchase at that time.
Plaintiff alleged that by January 2008, Junior became aware that based on his
mismanagement, AmerLink was facing financial difficulty. Junior told AmerLink’s
Vice-President that he wanted to show NCB a “higher than accurate sales volume”
and asked the Vice-President to make false entries in AmerLink’s sales and delivery
reports to reflect this. When the Vice-President refused to falsify reports, Junior
directed the Vice-President to send sales and delivery reports to Junior only.
In the summer of 2008, a second proposal regarding Junior and Senior’s
purchase of plaintiff’s controlling interest in AmerLink was discussed. Plaintiff
alleged that on or about 11 June 2008, Junior became aware that AmerLink was
insolvent and was unable to purchase materials to fulfill its contracts. Regardless of
this fact, Junior directed AmerLink staff to encourage customers to enter into sales
agreements with AmerLink, to send deposits and additional funds to AmerLink, and
to schedule deliveries. Junior became aware that he needed funds in excess of $2
million from Senior in order to keep AmerLink operating. From September 2007
through September 2008, Junior prepared false financial and delivery reports for
AmerLink and directed AmerLink employees to falsify reports in order to conceal
AmerLink’s dire financial situation. Junior prepared these false reports “in order to
mislead Plaintiff on the current state of AmerLink’s sales and profits, to keep his
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Opinion of the Court
position as President and CEO of AmerLink, Ltd., and to facilitate his purchase of
Plaintiff’s majority interest in AmerLink, Ltd.”
Plaintiff and Junior settled on an arrangement to accomplish their purpose of
having Junior purchase plaintiff’s majority interest in AmerLink through JRI, a
North Carolina corporation formed by them. Plaintiff agreed to put all of his
AmerLink shares into JRI. Junior agreed to put funds equivalent to the value of
plaintiff’s shares into JRI. Both Junior and plaintiff agreed that the value of
plaintiff’s AmerLink shares was $8 million and Junior agreed to invest $8 million
primarily obtained from Senior. Junior and plaintiff also agreed that JRI, which was
jointly owned by Junior and plaintiff, would invest its funds in AmerLink and become
the majority shareholder of AmerLink. AmerLink would then obtain the “capital
investment it needed to rescue it from insolvency and enable it to continue doing
business.” The plan also included for Junior to eventually purchase plaintiff’s
interest in JRI, making Junior the controlling owner of AmerLink.
Plaintiff further alleged that on 8 October 2008, plaintiff learned in a letter
from an employee that Junior had been submitting false reports containing inflated
sales and delivery figures. The letter provided no specifics but stated that the
employee was “ ‘resigning under duress’ because he could no longer trust [Junior] and
would not be a party to ‘lies and deception at AmerLink, Ltd.’ ” A few hours after
receiving the letter, plaintiff met with Junior and confronted Junior with the
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Opinion of the Court
information he had just received. Junior admitted falsifying the reports but stated
that he was “just ‘fudging’ the numbers a little bit, by small amounts, minor
numbers.” On 10 October 2008, plaintiff called Senior and left a message on Senior’s
answering device informing him of the following: that plaintiff was upset with
Junior; plaintiff learned that Junior had been falsifying reports; Junior had been
“running the company down” and concealing AmerLink’s financial situation; there
was a need to correct AmerLink’s problems and to accomplish this, they needed the
JRI deal in order to “get an infusion of capital” for AmerLink. On 13 October 2008,
the AmerLink Board replaced Junior with plaintiff as CEO. Junior remained
president and continued to assert that Senior would be making a sizable cash
investment in AmerLink.
On 16 October 2008, pursuant to the agreement between himself and Junior,
plaintiff transferred his AmerLink shares into JRI. Although the agreement required
Junior to provide his investment of $8,000,000, he failed to do so. On 17 October 2008,
Junior represented to plaintiff that $1.6 million from Senior was on its way to JRI.
Accordingly, Junior and plaintiff signed and sent UBS Financial Services (“UBS”) a
written request in JRI’s name to prepare a wire transfer for $1.6 million, once funds
were available, from JRI’s account into AmerLink’s account. However, the funds
were never received in JRI’s account.
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Opinion of the Court
Plaintiff alleged that on or about 7 November 2008, Senior agreed to loan
Junior up to $3 million, plus interest, to invest into JRI in order to overcome the
problems arising from Junior’s deception. Senior wrote a check payable to JRI in the
amount of $300,000, signifying the initial $300,000 of Senior’s loan of up to $3 million.
Plaintiff and Junior endorsed this check and deposited it into AmerLink’s account.
On 26 November 2008, Senior confirmed the 7 November 2008 loan agreement
in writing to Junior in an e-mail in which he wrote “I will initially loan up to
$3,000,000 to [JRI] with the understanding that $300,000 has already been
contributed.” On 11 November 2008, Junior sent plaintiff an e-mail, attaching a
“proposed schedule of payments to [JRI]” that included as follows:
$300,000 Paid on November 7, 2008
$1.7M Paid by November 14, 2008
$1.3M Paid when loan closes on new Barth residence
$600,000 Paid when Lantern Ridge Residence sells
$4.1M Remaining to be paid as soon as my father is
in a position to do so. This final payment may
be made in full or in part.
Also on 11 November 2008, Junior directed AmerLink staff to continue to tell
customers that new investment funds were on the way. On 13 November 2008,
Junior assured plaintiff that $1.7 million was on its way from Senior to UBS for JRI.
Thereafter, Junior and plaintiff signed another request that UBS wire $1.7 million
from JRI. However, because the funds were never received in the JRI account, no
funds were ever transferred by UBS.
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Opinion of the Court
Although the first payment had already been made in the form of a $300,000
check from Senior to JRI, no additional payments were made into JRI by Junior. On
15 December 2008, plaintiff received AmerLink’s financial reports for the
30 September 2008 end of the fiscal year and learned that AmerLink’s actual
financial situation was worse than Junior had represented. Plaintiff alleged that
Junior had falsified the reports of AmerLink “to a far more severe degree than he had
admitted.” Plaintiff closed the doors of AmerLink on or about 15 December 2008.
The complaint further alleged that on 11 February 2009, plaintiff, through
counsel, sent a letter to Junior advising him of his failure to make his contribution of
funds to JRI, stating that Junior had knowingly and intentionally made false
representations to the AmerLink Board of Directors, and demanding that Junior
immediately remedy the situation by paying $8 million to JRI. On 12 February 2009,
AmerLink filed for Chapter 11 bankruptcy. On 11 March 2009, Junior caused
AmerLink’s bankruptcy attorney to advise the Bankruptcy Court that within ten
days AmerLink would seek approval of a $7.5 million loan from JRI and would use
those funds to “complete its existing orders for log homes.” A letter very similar to
the letter sent from plaintiff’s counsel to Junior on 11 February 2009 was sent to
Senior on 20 February 2009.
Plaintiff alleged that on 9 March 2009, Senior sent Junior an e-mail for
AmerLink’s bankruptcy attorney that stated that he would “work with NCB to
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achieve a mutually agreeable solution . . . regarding issues of their security” and that
he would “provide financing, as needed, to meet the operating budget requirements
of AmerLink LTD.” On 17 March 2009, Junior wrote to plaintiff that he had sent an
e-mail to AmerLink’s bankruptcy attorney “about the money, told her it’s in.” Senior
sent $200,000 to Junior for deposit into the JRI account. In April 2009, Senior agreed
to loan Junior and his wife $7,500,000 at a rate of 2.5% interest. The $7,500,00 sum
provided for the $8,000,000, less the $300,000 that Junior had provided by check
directly to JRI and the $200,000 in Junior’s bank account. On 11 April 2009, a
Saturday, Junior allegedly informed plaintiff via e-mail “[m]oney to go in Monday.
Do not worry about it. We will have funds available.”
During the months of April and May, Junior sent plaintiff several e-mails
regarding the transfer of funds from Senior, stating things such as “I believe we will
absolutely make it work[,]” “[t]hings are going really well. We are knocking out all of
the contract details to everything finalized with funding[,]” “[e]verything is coming
together[,]” and “[d]ocs to be signed early in the week. Everything else to follow.
Coming together as always planned.” Plaintiff’s complaint further alleged that in
June 2009, Junior and plaintiff had discussions about changing their plans so that
Junior would purchase plaintiff’s interest in AmerLink and/or JRI outright.
However, nothing materialized from those discussions. Throughout the month of
July, e-mails were exchanged between Junior and plaintiff, Junior and AmerLink’s
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Opinion of the Court
bankruptcy attorney, and Junior and NCB. AmerLink’s bankruptcy attorney met
with plaintiff and Junior, wanting to know when the $200,000 loaned by Senior to
Junior would be deposited in AmerLink’s operating account. Junior’s attorney
reported that it “would be deposited on Monday.” Thereafter, Junior forged a bank
statement and delivered it to AmerLink’s bankruptcy attorney to reflect a $120,000
deposit into AmerLink’s bank account when no deposit had been made. This forged
bank statement was one of two parts of a criminal information for the felony of
bankruptcy fraud of which Junior was convicted on 13 May 2010 based on his plea of
guilty in the United States District Court for the Eastern District of North Carolina.
The complaint also alleged that on 17 August 2009, Junior submitted to
AmerLink’s bankruptcy attorney an e-mail purporting to be from Senior which
committed to providing “money necessary to purchase the AmerLink loan from NCB.
I understand that this may be $8.2M. This loan will be made upon plan
confirmation.” The following day on 18 August 2009, Senior notified AmerLink’s
bankruptcy attorney that he was not the source of the 17 August 2009 e-mail and
that “he has no intention to provide any financing in connection with the AmerLink
Chapter 11.” AmerLink’s attorneys promptly applied to convert their Chapter 11
bankruptcy to a Chapter 7 bankruptcy. The 17 August 2009 e-mail was the second
part of a criminal information for the felony of bankruptcy fraud of which Junior was
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Opinion of the Court
convicted on 13 May 2010 based on his guilty plea in the United States District Court
for the Eastern District of North Carolina.
Plaintiff’s complaint advanced the following claims against defendants: breach
of contract; breach of contract as third party beneficiary; breach of fiduciary duty
(constructive fraud); fraud; punitive damages; unfair and deceptive trade practices
(“UDTP”); civil conspiracy; and a derivative claim.
On 27 January 2014, Senior filed a motion for summary judgment, arguing
that (1) plaintiff did not commence the action against Senior within the statute of
limitations because he knew or should have known about the alleged scheme more
than four years prior to commencing the present action and (2) plaintiff lacked
standing to assert the claims made against Senior because all such claims were
property of the Chapter 7 bankruptcy estate of AmerLink and all such claims were
settled by the bankruptcy trustee1.
On 20 February 2014, Junior filed a motion for summary judgment arguing
that plaintiff lacked standing because all such claims were the property of the
Chapter 7 bankruptcy estate of AmerLink and were settled by the trustee in an
agreement resolving the litigation against plaintiff, Junior, Senior, and others that
1 On 23 April 2011, the AmerLink bankruptcy trustee filed an adversary proceeding against
Junior, Spoor, Senior, JRI and several others based on claims such as fraudulent conveyances,
preferential transfers, breach of fiduciary duties, constructive trust, unjust enrichment, civil
conspiracy, etc. This adversary proceeding was settled on 6 September 2011. The settlement
agreement was approved by the Bankruptcy Court on 19 September 2011.
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Opinion of the Court
the trustee brought in the form of an adversary proceeding in the AmerLink
bankruptcy proceeding.
Following a hearing held on 15 May 2014, the trial court entered an order on
19 June 2014, granting summary judgment in favor of defendant Senior as to both
bases of statute of limitations and lack of standing. The trial court also entered
summary judgment in favor of defendant Junior based on lack of standing. The trial
court dismissed plaintiff’s claims against defendants Senior and Junior with
prejudice.
On 30 June 2014, plaintiff filed a motion for reconsideration pursuant to Rules
59 and 60 of the North Carolina Rules of Civil Procedure. The trial court denied this
motion through an order entered 2 September 2014. On 17 September 2014, plaintiff
filed a notice of voluntary dismissal as to defendant JRI. On 19 September 2014,
plaintiff filed notice of appeal from the 19 June 2014 summary judgment order and
from the 2 September 2014 order denying his motion for reconsideration.
II. Standard of Review
The North Carolina Rules of Civil Procedure provide that summary judgment
shall be granted “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that any party is entitled to a judgment as a matter
of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2013).
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Opinion of the Court
A defendant who moves for summary judgment assumes
the burden of positively and clearly showing that there is
no genuine issue as to any material fact and that he or she
is entitled to judgment as a matter of law. A defendant
may meet this burden by: (1) proving that an essential
element of the plaintiff’s case is nonexistent, or (2) showing
through discovery that the plaintiff cannot produce
evidence to support an essential element of his or her
claim, or (3) showing that the plaintiff cannot surmount an
affirmative defense which would bar the claim.
James v. Clark, 118 N.C. App. 178, 180-81, 454 S.E.2d 826, 828 (1995) (citation and
quotation marks omitted).
“[T]he record is to be viewed in the light most favorable to the non-movant,
giving it the benefit of all inferences which reasonably arise therefrom.” Epps v. Duke
Univ., 122 N.C. App. 198, 202, 468 S.E.2d 846, 849 (1996) (citation omitted). “[W]e
review the trial court’s order de novo to ascertain whether summary judgment was
properly entered.” Bumpers v. Cmty. Bank of N. Va., 367 N.C. 81, 87, 747 S.E.2d 220,
225-26 (2013).
III. Discussion
Plaintiff argues that the trial court erred by granting summary judgment in
favor of (A) Senior on the grounds that plaintiff did not commence an action against
Senior within the time required under the relevant statute of limitations and in favor
of (B) both Junior and Senior based on lack of standing.
A. Statute of Limitations
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Opinion of the Court
In his first argument, plaintiff contends that the trial court erred by granting
summary judgment in favor of Senior on the grounds that plaintiff failed to commence
an action within the relevant statute of limitations. We agree.
Plaintiff filed his first complaint on 5 October 2011 but did not include Senior
as a defendant until he filed his 14 February 2012 first amended complaint. Plaintiff
alleged the following claims2 against Senior: breach of contract as third party
beneficiary; fraud; and UDTP.
“In general a cause or right of action accrues, so as to start the running of the
statute of limitations, as soon as the right to institute and maintain a suit arises.”
Pierson v. Buyher, 330 N.C. 182, 186, 409 S.E.2d 903, 905 (1991) (citation omitted).
“[A]n action for breach of contract must be brought within three years from the time
of the accrual of the cause of action. . . . The statute begins to run on the date the
promise is broken.” Penley v. Penley, 314 N.C. 1, 19-20, 332 S.E.2d 51, 62 (1985)
(citations omitted); see N.C. Gen. Stat. § 1-52(1) (2013). An action for fraud must be
brought within three years as well. For fraud “the cause of action shall not be deemed
to have accrued until the discovery by the aggrieved party of the facts constituting
2 Plaintiff also filed a civil conspiracy claim against Senior in his 14 February 2012 amended
complaint. “This Court has applied the three-year limitations period of N.C. Gen. Stat. § 1-52(5) to a
civil conspiracy claim.” Carlisle v. Keith, 169 N.C. App. 674, 685, 614 S.E.2d 542, 549 (2005). However,
because plaintiff does not specifically argue that the trial court erred in granting summary judgment
in favor of Senior on the civil conspiracy claim, we deem this argument abandoned. N.C. R. App. P.
28(a) (2015) (stating that “[i]ssues not presented and discussed in a party’s brief are deemed
abandoned”).
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the fraud or mistake.” N.C. Gen. Stat. § 1-52(9). “For purposes of N.C.G.S. 1-52(9),
‘discovery’ means either actual discovery or when the fraud should have been
discovered in the exercise of ‘reasonable diligence under the circumstances.’ ” Forbis
v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 386 (2007) (citation omitted). “[W]here a
person is aware of facts and circumstances which, in the exercise of due care, would
enable him or her to learn of or discover the fraud, the fraud is discovered for purposes
of the statute of limitations.” Jennings v. Lindsey, 69 N.C. App. 710, 715, 318 S.E.2d
318, 321 (1984). “Ordinarily, a jury must decide when fraud should have been
discovered in the exercise of reasonable diligence under the circumstances. This is
particularly true when the evidence is inconclusive or conflicting.” Forbis, 361 N.C.
at 524, 649 S.E.2d at 386. Finally, a claim for UDTP “shall be barred unless
commenced within four years after the cause of action accrues.” N.C. Gen. Stat. § 75-
16.2 (2013). “Under North Carolina law, an action accrues at the time of the invasion
of plaintiff’s right. For actions based on fraud, this occurs at the time the fraud is
discovered or should have been discovered with the exercise of reasonable diligence.”
Nash v. Motorola Communications & Electronics, Inc., 96 N.C. App. 329, 331, 385
S.E.2d 537, 538 (1989) (citations and quotation marks omitted) (emphasis in original).
Therefore, plaintiff’s claims against Senior are subject to either a three-year or four-
year statute of limitations.
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Opinion of the Court
In the present case, Senior’s motion for summary judgment stated that
plaintiff’s claims against Senior were barred by the statute of limitations because
plaintiff knew, or should have known, of the alleged fraud more than four years prior
to commencing the action against Senior. Senior argued in his motion and argues
now that in December 2007, plaintiff failed to exercise reasonable diligence in
discovering the alleged fraud. Senior asserts that plaintiff “became aware that
[Junior] had been providing him with false sales information reports” and referred to
Junior as a “m***erf***ing liar” in a conversation with Tom Slocum, an officer and
director of AmerLink. Senior also argued that plaintiff discovered greater evidence
of Junior’s alleged fraud in early October 2008 when an AmerLink employee, David
Zotter, included in his resignation letter that Junior could not be trusted. Lastly,
Senior argues that on 11 February 2009, plaintiff’s attorney sent a letter to Junior
accusing Junior of instances of fraud and threatening to sue Senior and Junior if
AmerLink did not file a petition for relief under Chapter 11 of the United States
Bankruptcy Code. Accordingly, because plaintiff waited more than three years to file
his first amended complaint, Senior argues that plaintiff’s claims should be time-
barred.
We note that Senior’s arguments are misplaced as they center around when
plaintiff’s actions accrued as to Junior. Because the trial court granted summary
judgment in favor of Senior only on the basis of a lapse in the statute of limitations,
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we review the evidence to determine when each cause of action accrued as to Senior
only. The December 2007 incident on which Senior relies regards plaintiff’s discovery
of the alleged fraudulent actions of Junior. Furthermore, we note that Senior’s
arguments that plaintiff discovered even more evidence of Junior’s alleged fraud in
October 2008 and that on 11 February 2009 plaintiff’s attorney sent a letter to Junior
accusing him of fraud only deals with the circumstances surrounding the accrual of
actions against Junior.
Viewed in the light most favorable to the non-moving party, plaintiff’s evidence
demonstrates that Junior informed plaintiff that he was interested in purchasing
plaintiff’s controlling interest in AmerLink using funds provided by Senior before the
fall of 2007. Junior and plaintiff made a plan to accomplish their purpose in having
Junior purchase plaintiff’s controlling interest in AmerLink by forming JRI. Junior
and plaintiff agreed that plaintiff would put all his AmerLink shares into JRI and
Junior would put funds equivalent to the value of plaintiff’s shares into JRI. Plaintiff
and Junior agreed that the value of plaintiff’s shares was $8 million and so that would
be the amount obtained primarily from Senior. JRI would then invest its funds in
AmerLink and JRI would become the majority shareholder of AmerLink. The plan
was for Junior to eventually purchase plaintiff’s interest in JRI, allowing for Junior
to be the controlling owner of AmerLink. In October 2008, plaintiff learned from an
employee that Junior had been submitting false reports inflating AmerLink’s sales
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and delivery figures. When plaintiff confronted Junior, Junior admitted to the false
reports but claimed he was “just ‘fudging’ the numbers a little bit, by small amounts,
minor numbers.” Plaintiff informed Senior of the falsifying of reports by Junior via a
telephone message on 10 October 2008. Junior told plaintiff that he had admitted to
his father that he had been falsifying the reports but ensured plaintiff that
“everything will be fine, that [Senior] had told him that everything was going to go
through.” On 7 November 2008, Senior wrote a check payable to JRI in the amount
of $300,000. This check was endorsed by plaintiff and Junior on behalf of JRI and
deposited into AmerLink’s bank account. On 11 November 2008, Junior sent plaintiff
an e-mail, setting out a proposed schedule of payments to JRI. Plaintiff alleged that
“[d]espite repeated assurance by [Junior] that he would make additional payments”
to JRI, Junior failed to make any additional payments besides the $300,000 payment
made by Senior in November 2008. AmerLink filed for bankruptcy under Chapter 11
on or about 12 February 2009 relying on the misrepresentations from Junior that
Senior would be providing an $8 million investment in AmerLink. On
17 August 2009, Junior submitted to AmerLink’s bankruptcy counsel a document
that he represented to be an e-mail from Senior committing to providing “money
necessary to purchase the Amer[L]ink loan from NCB. I understand that this may be
$8.2M. This loan will be made upon plan confirmation.” It was not until
18 August 2009 that Senior notified AmerLink’s bankruptcy attorneys that Senior
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was not the source of the e-mail and had “no intention to provide any financing in
connection with the AmerLink Chapter 11.”
Giving plaintiff the benefit of all reasonable inferences, we hold that plaintiff’s
pleadings present a genuine issue of material fact as to when Senior’s alleged fraud
was discovered or should have been discovered by plaintiff. Because the forecast of
evidence was inconclusive and conflicting, “a jury must decide when fraud should
have been discovered in the exercise of reasonable diligence under the
circumstances.” Forbis, 361 N.C. at 524, 649 S.E.2d at 386. A jury could determine
that plaintiff’s causes of action did not accrue until 18 August 2009 when Senior
notified AmerLink’s bankruptcy attorneys that Senior had no intention of financing
AmerLink’s Chapter 11 bankruptcy, contrary to the assurances made by Junior.
Therefore, plaintiff’s first amended complaint filed 14 February 2012 that included
Senior as a defendant would have been commenced within the three-year statute of
limitations for the breach of contract and fraud claims and commenced well within
the four-year statute of limitations for the UDTP claim. Accordingly, we hold that
the trial court erred by granting summary judgment in favor of Senior on the basis of
a lapse of the statute of limitations.
B. Standing
In his second argument on appeal, plaintiff contends that the trial court erred
in granting summary judgment in favor of both Junior and Senior on the ground that
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plaintiff lacked standing. Plaintiff argues that the adversary proceeding filed by the
AmerLink bankruptcy trustee does not preclude plaintiff, Junior, or Senior from
bringing claims against each other in their individual capacities. Plaintiff also argues
that his claims are fundamentally different from the claims of a generic shareholder
in a derivative suit and that he owns his own claims, not AmerLink, the bankruptcy
estate, nor the trustee. We agree.
“In order for a court to have subject matter jurisdiction to hear a claim, the
party bringing the claim must have standing.” Revolutionary Concepts, Inc. v.
Clements Walker PLLC, 227 N.C. App. 102, 106, 744 S.E.2d 130, 133 (2013).
“ ‘[S]tanding’ to sue means simply that the party has a sufficient stake in an otherwise
justiciable controversy to obtain resolution of that controversy.” Mitchell, Brewer,
Richardson, Adams, Burge & Boughman, PLLC v. Brewer, 209 N.C. App. 369, 379,
705 S.E.2d 757, 765 (2011).
“When a corporation enters bankruptcy, any legal claims that could be
maintained by the corporation against other parties become part of the bankruptcy
estate, and claims that are part of the bankruptcy estate may only be brought by the
trustee in the bankruptcy proceeding.” Keener Lumber Co. v. Perry, 149 N.C. App.
19, 25, 560 S.E.2d 817, 822 (2002) (citations omitted) (emphasis in original). The
issue of whether plaintiff’s claims are property of the bankruptcy estate compels us
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to examine the nature of plaintiff’s claims under state law. Id. at 26, 560 S.E.2d at
822.
Under North Carolina law, directors of a corporation
generally owe a fiduciary duty to the corporation, and
where it is alleged that directors have breached this duty,
the action is properly maintained by the corporation rather
than any individual creditor or stockholder. However,
where a cause of action is founded on injuries peculiar or
personal to an individual creditor or stockholder, so that
any recovery would not pass to the corporation and
indirectly to other creditors, the cause of action belongs to,
and is properly maintained by, that particular creditor or
stockholder.
Id. (citations and quotation marks omitted) (emphasis in original).
“A ‘derivative proceeding’ is a civil action brought . . . ‘in the right of’ a
corporation, . . . while an individual action is . . . [brought] to enforce a right which
belongs to [plaintiff] personally.” Morris v. Thomas, 161 N.C. App. 680, 684, 589
S.E.2d 419, 422 (2003) (citation omitted). “The well-established general rule is that
shareholders cannot pursue individual causes of action against third parties for
wrongs or injuries to the corporation that result in the diminution or destruction of
the value of their stock.” Barger v. McCoy Hillard & Parks, 346 N.C. 650, 658, 488
S.E.2d 215, 219 (1997). Our Supreme Court has adopted two exceptions to this
general rule:
[A] shareholder may maintain an individual action against
a third party for an injury that directly affects the
shareholder, even if the corporation also has a cause of
action arising from the same wrong, if the shareholder can
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show that the wrongdoer owed him a special duty or that
the injury suffered by the shareholder is separate and
distinct from the injury sustained by the other
shareholders or the corporation itself.
Energy Investors Fund, L.P. v. Metric Constr., Inc., 133 N.C. App. 522, 524, 516 S.E.2d
399, 400 (1999) (citation omitted).
The record before us demonstrates that on 23 April 2011, the AmerLink
bankruptcy trustee filed an adversary proceeding against Junior, plaintiff, Senior,
JRI and several others based on claims such as fraudulent conveyances, preferential
transfers, breach of fiduciary duties, constructive trust, unjust enrichment, civil
conspiracy, etc. The bankruptcy trustee alleged, inter alia, that plaintiff, Junior, and
other AmerLink directors engaged in the creation of new companies and transfer of
assets to companies in an effort to sell a substantial portion of plaintiff’s ownership
interest in AmerLink. The trustee also alleged that an employee stock option plan
was adopted at the urging of plaintiff and Junior effective 1 October 2005 and that
plaintiff, Junior, and AmerLink’s directors’ actions were solely for the purpose of
creating a means for plaintiff to extract as much cash as possible from the business
and for Junior to be in a position to take control of the company. This adversary
proceeding was settled on 6 September 2011. The trustee dismissed with prejudice
all claims and causes of action against Senior, Junior, and plaintiff and released them
from claims by the trustee or bankruptcy estate. Several parties, including plaintiff,
Junior, Senior, and JRI agreed to “waive all claims against the estate, including all
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rights associated with the proofs of claim filed in the underlying bankruptcy case, and
all other claims now known or hereafter acquired against the Trustee, individually
and as Trustee, counsel for the Trustee, the Trustee’s attorneys and attorneys’
employees, and the bankruptcy estate.” (emphasis added). The settlement agreement
was approved by the Bankruptcy Court on 19 September 2011.
As explicitly stated in the settlement agreement, Junior, Senior, and plaintiff
waived all claims against the estate, the trustee, individually and as trustee, counsel
for the trustee, the trustee’s attorneys and attorneys’ employees, and the bankruptcy
estate. It also released Junior, Senior, and plaintiff from claims by the trustee or
bankruptcy estate. However, the settlement agreement did not provide for waiver of
individual actions between plaintiff, Junior, or Senior.
Plaintiff argues that he was not an AmerLink shareholder at the time his
actions accrued against Junior and Senior. Nonetheless, even if plaintiff was an
AmerLink shareholder at the time his claims accrued against Junior and Senior,
plaintiff’s breach of contract, fraud, and UDTP claims arise from Junior and Senior’s
alleged conduct in their individual capacities. Relying on the agreement between
himself and Junior, plaintiff, in his individual capacity, invested his majority interest
AmerLink shares into JRI on 16 October 2008. Junior and plaintiff agreed that the
value of plaintiff’s shares was $8 million. Junior had previously agreed to put funds
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Opinion of the Court
equivalent to the value of plaintiff’s shares into JRI with financial assistance from
Senior but thereafter failed to fulfill his obligation to plaintiff.
Plaintiff may maintain an individual action against Junior and Senior because
plaintiff alleges that he suffered an injury, separate and distinct from other
AmerLink shareholders or AmerLink itself. Plaintiff’s alleged injury of investing $8
million worth of AmerLink stock into JRI directly affected plaintiff and was separate
and distinct from an injury sustained by a basic AmerLink shareholder or AmerLink.
Plaintiff’s claims are not based on the diminution of the value of AmerLink stock. No
other AmerLink shareholder, no other individual, nor AmerLink can allege the
following: that they were fraudulently induced into investing $8 million worth of
AmerLink shares into JRI, relying on the assurances from Junior that he would
invest funds equivalent to plaintiff’s shares, primarily obtained from Senior; that
Junior breached an agreement in forming JRI by failing to invest $8 million into JRI;
and, that Junior and Senior committed an UDTP causing injury to plaintiff. These
claims belong to plaintiff alone. Because plaintiff’s claims do not belong to AmerLink,
they were not the property of AmerLink’s bankruptcy estate. Accordingly, we reject
Junior and Senior’s arguments that AmerLink’s bankruptcy estate had exclusive
standing to bring the challenged claims and that plaintiff’s claims are derivative.
Furthermore, Junior and Senior contend that plaintiff suffered no injury
because AmerLink was insolvent before plaintiff pledged any shares to JRI and
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Opinion of the Court
therefore, the AmerLink shares had no value. However, we note that there was
evidence that both plaintiff and Junior agreed to the value of plaintiff’s AmerLink
shares as $8 million at the time they made an agreement. The record also
demonstrates that on 7 November 2008, Senior wrote a check payable to JRI in the
amount of $300,000. The check was endorsed by Junior and plaintiff on behalf of JRI
and deposited into AmerLink’s account. Taking this evidence in the light most
favorable to plaintiff, plaintiff’s shares were of some value above zero, leaving a
genuine issue of material fact as to the value of plaintiff’s shares.
Based on the foregoing, we hold that plaintiff had standing to sue Junior and
Senior and that the trial court erred by granting summary judgment in favor of
Junior and Senior on the standing issue. Accordingly, we reverse the order of the
trial court.
IV. Conclusion
Where the trial court erred in granting summary judgment in favor of Senior
on the issue of statute of limitations and in favor of both Senior and Junior on the
issue of lack of standing, we reverse the order of the trial court.
REVERSED.
Judge STEPHENS and ZACHARY concur.
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