Ussery v. Branch Banking and Trust Co.

• Citation: 777 S.E.2d 272,368 N.C. 325
• Decision Date: 25 September 2015
• Docket Number: No. 277A13.,277A13.
• Parties: William T. USSERY and wife, Carolyn B. Ussery v. BRANCH BANKING AND TRUST COMPANY.
• Court: United States State Supreme Court of North Carolina

368 N.C. 325

777 S.E.2d 272

William T. USSERY and wife, Carolyn B. Ussery

v.BRANCH BANKING AND TRUST COMPANY.

No. 277A13.

Supreme Court of North Carolina.

Sept. 25, 2015.

Anderson, Johnson, Lawrence & Butler, L.L.P., Fayetteville, by Stacey E. Tally and Steven C. Lawrence, for plaintiff-appellees.

Bell, Davis & Pitt, P.A., Winston–Salem, by Michael D. Phillips and Kevin G. Williams, for defendant-appellant.

NEWBY, Justice.

In this case we consider whether a plaintiff may recover against his bank for its failure to provide a government-backed business loan when, after learning no such loan was available, plaintiff sought and obtained a new commercial loan with the same bank and subsequently expressly waived all offsets and defenses. Plaintiff's claims arise in contract and in tort, and all of them rely upon one key date: the date on which plaintiff was made aware no government-backed loan was available. In his complaint plaintiff alleges that he incurred his indebtedness in anticipation of receiving a government-backed loan as promised by his bank. The undisputed facts, however, show that plaintiff chose to obtain a new commercial loan after learning no government-backed loan was available, and he repeatedly reaffirmed his obligations under the commercial loan and expressly waived any offsets and defenses to the loan and against the bank. Therefore, the trial court properly granted summary judgment for defendant, and the decision of the Court of Appeals is reversed.

Viewing the facts in the light most favorable to plaintiff, the nonmoving party, the record reveals the following: In 1998 plaintiff William "Pete" Ussery¹ and his business partner, D. Wayne Barker, launched a venture to establish a furniture assembling business. Barker had years of managerial experience at CAFCO Industries, Inc. (CAFCO), a local chair manufacturer, and plaintiff had greater financial resources, was a seasoned real estate developer and businessman, and sat on the board of a bank. In response to a decrease in sales, CAFCO was in the process of closure and liquidation, and the owners had approached plaintiff to discuss the sale of the company's old manufacturing building (the CAFCO building).

Plaintiff and Barker formed their business, Chair Specialists, Inc.,² with plaintiff holding sixty percent of the equity and Barker holding the remaining forty percent. According to their business plan, Barker would run the day-to-day operations and plaintiff would provide the startup capital to fund the enterprise. Plaintiff planned to individually purchase the CAFCO building and develop it into residential condominiums, and the operations of Chair Specialists would be housed in a different location. The long-range plan was for Barker to obtain a government-backed business loan with which to purchase plaintiff's interest in Chair Specialists and repay plaintiff for the startup expenses.

In November 1999, plaintiff bought equipment from CAFCO to use at Chair Specialists. For $150,000 plaintiff also purchased the "Cheraw Road Building,"³ a commercial facility in Hamlet, North Carolina, to house Chair Specialists' operations. The Cheraw Road Building had been contaminated with lead and required clean up and abatement; moreover, following remediation of the property, the building would serve as collateral for any future business loan. Plaintiff transferred ownership of the Cheraw Road Building to Chair Specialists and retained a deed of trust on the property. Plaintiff then purchased, individually, the CAFCO Building for approximately $100,000.

Plaintiff alleges that sometime in 1999, Barker and he first met with Wiley Mabe, a commercial lending officer for Branch Banking and Trust Company (BB & T), to discuss their business plan and learn about available government-backed loans. Mabe allegedly reviewed the business plan and assured plaintiff and Barker that Barker and Chair Specialists would qualify for and receive a $450,000 small business, government-backed loan.

Between 1999 and 2001, plaintiff obtained three commercial loans from BB & T for the startup of Chair Specialists and to reimburse himself for his purchases. The loans were in the amounts of (1) $100,000 on 6 December 1999, with plaintiff and Barker as debtors; (2) $50,000 on 25 February 2000, with Chair Specialists as debtor and plaintiff and Barker as guarantors; and (3) $125,000 on 21 February 2001, with plaintiff and his spouse as debtors.

By January 2002, Mabe notified all parties that no government-backed loan was available, nor would BB & T extend a long-term loan to them. According to plaintiff, Barker and he had inquired into the status of the application frequently and were repeatedly assured that they would receive the loan. Upon further inquiry, Barker discovered that neither he nor the business could qualify for a government-backed loan elsewhere because of the additional debt incurred between 1999 and 2001. The Small Business Administration (SBA) advised Barker that Mabe had not submitted the application documents to the SBA because Mabe did not believe Barker would qualify for a loan.

Knowing that no government-backed loan was available, plaintiff and Barker closed Chair Specialists in early 2002 and set about selling the accompanying real and personal property. According to Barker, plaintiff then approached BB & T to inquire about a single loan to consolidate his debts associated with the business and reduce his monthly expenditures while he attempted to sell the company's assets. On 18 April 2002, fully aware that no government-backed loan was available and that he had various potential causes of action against BB & T, plaintiff nonetheless obtained a commercial loan of $425,000 from BB & T (the $425,000 Note). The $425,000 Note provided in part: "For value received, the undersigned ... promises to pay to Branch Banking and Trust Company ... the sum of ... $425,000.00...." The $425,000 Note secured a one-year, interest-only loan, with accrued interest payments due quarterly, and was payable in full on 18 April 2003. As a condition of the loan, BB & T required Barker to issue a $122,000 promissory note to plaintiff. After paying off the antecedent debts, plaintiff personally received $99,187.75 in cash proceeds from the $425,000 loan.

On 15 April 2003, fifteen months after learning that no government-backed loan was available and one year after executing the $425,000 Note, plaintiff entered into the first of a total of six promissory note modification agreements. In the first modification BB & T agreed to extend the maturity date of the $425,000 Note by an additional year and allowed plaintiff to continue making quarterly, interest-only payments. In exchange, plaintiff reaffirmed his payment obligation and waived any offsets and defenses against the Note or the bank.

All six note modification agreements contained express and unambiguous language to this effect:

[A]ll other terms, conditions, and covenants of [the $425,000 Note] remain in full force and effect, and ... all other obligations and covenants of Borrower(s), except as herein modified, shall remain in full force and effect, and binding between Borrower(s) and [the] Bank....

....

... The original obligation of the Borrower(s) as evidenced by the [$425,000 Note] above described is not extinguished hereby. It is also understood and agreed that except for the modification(s) contained herein said [$425,000 Note] ... shall be and remain in full force and effect.... Borrower and Debtor(s)/Grantor(s), if any, jointly and severally consent to the terms of this Agreement, waive any objection thereto, affirm any and all obligations to Bank and certify that there are no defenses or offsets against said obligations or the Bank, including without limitation the [$425,000 Note].

(Emphasis added.) Plaintiff was current on the interest-only payments required under the $425,000 Note at the time of his first loan modification, and he continued to make quarterly interest payments through 27 April 2006.

In May 2003, just over a month after the execution of plaintiff's first note modification, Barker filed suit against BB & T (the Barker litigation) for its alleged misrepresentations and failure to use reasonable efforts to obtain a government-backed loan for Chair Specialists. Barker's complaint stated claims of negligence, breach of contract, and breach of fiduciary duty. According to plaintiff, after the Barker litigation commenced, plaintiff discussed with BB & T that he was contemplating filing a separate suit against the bank or joining the Barker litigation as an additional party. Plaintiff alleges that BB & T, through its agent Charles Smith, told him "everything would be worked out in the Barker litigation" and there was no need to join the Barker litigation or bring a separate action. Plaintiff contends that BB & T further promised that "the [$425,000 Note] would be canceled upon resolution of the [Barker litigation].... [T]he loan would be forgiven, and [plaintiff] would be reimbursed any expenses incurred related to BB & T's failure to obtain the [government-backed loan]." Plaintiff admits, however, that "no agents or employees of BB & T ever proposed a specific plan for resolving the issues."

Thereafter, on 25 May 2004, plaintiff executed his second modification of the $425,000 Note, which contained provisions identical to the first, but extended the maturity date to 25 February 2005. It allowed plaintiff to continue interest-only payments, affirmed plaintiff's continuing obligation to repay the debt, and waived any offsets and defenses. Plaintiff was current on his interest payments at that time.

On 21 March 2005, plaintiff executed his third modification of the $425,000 Note, which, except for extending the loan maturity date to 20 March 2006, contained provisions identical to the first two modifications, allowing plaintiff to continue quarterly interest-only payments, affirming plaintiff's obligation to repay the debt, and...