Bandy v. Gibson

• Decision Date: 26 July 2017
• Docket Number: 16 CVS 456
• Citation: 2017 NCBC 63
• Parties: SHELLEY P. BANDY, Plaintiff, v. MARGARET A. GIBSON, individually, STATE OF NORTH CAROLINA, Intervenor-Plaintiff, and RONALD WAYNE GIBSON, Defendants, A PERFECT FIT FOR YOU, INC., Defendant and Intervenor-Defendant
• Court: Superior Court of North Carolina

2017 NCBC 63

SHELLEY P. BANDY, Plaintiff,

STATE OF NORTH CAROLINA, Intervenor-Plaintiff,
v.
MARGARET A. GIBSON, individually,

and RONALD WAYNE GIBSON, Defendants, A PERFECT FIT FOR YOU, INC., Defendant and Intervenor-Defendant

No. 16 CVS 456

Superior Court of North Carolina, Carteret

July 26, 2017

Wheatly, Wheatly, Weeks, Lupton & Massie, P.A., by Wesley C. Cooper, Esq., Stevenson L. Weeks, Esq., and C.R. Wheatly, III, Esq. for Plaintiff Shelley P. Bandy.

Ward and Smith, P.A., by Michael J. Parrish, Esq. and E. Bradley Evans, Esq. for Defendants Margaret A. Gibson and Ronald Wayne Gibson.

OPINION AND ORDER

Gregory P. McGuire Special Superior Court Judge.

THIS MATTER comes before the Court upon Defendants Margaret A. Gibson and Ronald Wayne Gibson's Motion for Partial Judgment on the Pleadings ("Motion") pursuant to North Carolina Rule of Civil Procedure 12(c) (hereinafter "Rule(s)").

THE COURT, having considered the Motion, the briefs in support of and in opposition to the Motion, the arguments of counsel at the hearing, and other appropriate matters of record, concludes that the Motion should be GRANTED, in part, and DENIED, in part, for the reasons set forth below.

I. FACTUAL AND PROCEDURAL BACKGROUND.

1. Plaintiff Shelley P. Bandy ("Bandy") is a certified fitter of medical devices for use of mastectomy, diabetes, and other patients. Certification as fitter is required in order to directly bill for fitter services through Medicare, Medicaid, and some private insurance carriers. (First Am. Compl. ¶¶ 6-7.)

2. Defendant Margaret A. Gibson's ("Margaret") background is in medical insurance billing. Ronald Wayne Gibson ("Ronald") (collectively, Margaret and Ronald are the "Gibsons") is Margaret's husband. Bandy and Margaret began working together for a retail medical device and pharmacy business in Carteret County in 2008. While working together, Bandy and Margaret became experienced in billing patients for fitting services. (First Am. Compl. ¶¶ 8-11.)

3. In 2013-14, Bandy and Margaret decided to go into business together utilizing Bandy's certification as a fitter and ability to direct bill for fitting services and Margaret's experience with medical insurance billing to create a "boutique business offering custom fitting services and sales of medical and therapeutic devices." (First Am. Compl. ¶¶ 15-24.) Bandy and Margaret eventually agreed that they would form an "S" corporation with 500 shares of stock, with Bandy and Margaret each owning 250 shares. Bandy left it to Margaret to take care of forming the corporation, while Bandy worked on the "operational side of the business." (First Am. Compl. ¶ 32.) On September 14, 2014, Bandy and Margaret co-signed a lease for a retail store location, and each signed a personal guaranty on the lease. (First Am. Compl. ¶¶ 37-38, Exs. E and F.)

4. On September 18, 2014, Margaret filed with the North Carolina Secretary of State Articles of Incorporation forming A Perfect Fit for You, Incorporated ("Perfect Fit"). (First Am. Compl. ¶ 39, Exh. G.) The Articles of Incorporation authorized 500 shares of stock in Perfect Fit, but the shares have never been issued. (First Am. Compl. ¶ 41.) Bandy alleges that Margaret represented to her that they were both equal shareholders in the business with Margaret serving as President and Bandy as Vice-President. (First Am. Compl. ¶ 40.)

5. During October, 2014, Perfect Fit prepared to open its doors. Bandy contributed office equipment and furniture for use in the store, and Margaret provided an investment of approximately $65, 000. Perfect Fit opened for business in October 2014. (First Am. Compl. ¶¶ 44-49.) Bandy alleges that she and Margaret held themselves out to the public and each other as "co-owners" of the business. (First Am. Compl. ¶¶ 50-51.)

6. Bandy worked tirelessly to build Perfect Fit's business, developing relationships with health care providers and vendors and suppliers in the Carteret County area and later other parts of North Carolina. (First Am. Compl. ¶¶ 55-65.) Between May and September, 2015, Bandy generated over $2 million dollars in revenue for Perfect Fit. (First Am. Compl. ¶ 66.) In October, 2015, alone Bandy generated another $2 million dollars in revenue for Perfect Fit. (First Am. Compl. ¶ 75.) Bandy alleges she alone generated more than $7 million in revenue for Perfect Fit during 2015. (First Am. Compl. ¶¶ 77-79.)

7. In early 2016 Bandy began to suspect that "her ownership interest in [Perfect Fit] was not what [Margaret] had represented it to be and what the parties had agreed to. (sic)" (First Am. Compl. ¶ 89.) In March of 2016, Bandy discovered that Perfect Fit was paying a salary to Ronald, who was neither an employee nor an owner of Perfect Fit. (First Am. Compl. ¶ 91.) Bandy also reviewed corporate records and discovered that Margaret had never issued any shares of stock in Perfect Fit to Bandy. (First Am. Compl. ¶ 97.)

8. Bandy also reviewed Perfect Fit's financial records and discovered that Margaret had made or authorized withdrawals of over $3, 320, 419.00 from Perfect Fit to herself and Ronald during the five month period from December 2015 to April 2016, and had withdrawn over $7, 800, 000.00 from the business since its incorporation in October of 2014. (First Am. Compl. ¶ 98.) Bandy claims that the withdrawals were in "no way related to the administration or operation of [Perfect Fit]." (First Am. Compl. ¶ 99.) Margaret has directed payments from Perfect Fit to herself, Ronald, Ronald's construction company, and a limited liability company owned by Margaret and Ronald. (First Am. Compl. ¶¶ 98-109.) Margaret also has caused Perfect Fit to make payments for the purchase of automobiles and a house for her and Ronald, and for life insurance, annuities, and pension and profit sharing plans for the benefit of her and Ronald. (First Am. Compl. ¶¶ 110-125.)

9. On May 16, 2016, Bandy initiated this action by filing a verified complaint in Carteret County Superior Court against Margaret and Perfect Fit.^[1] In the verified complaint, Bandy alleged that Margaret reneged on an agreement that Bandy would be a 50% shareholder in Perfect Fit, and later transferred out of Perfect Fit and to the Gibsons millions of dollars in which Bandy has a 50% ownership interest. The verified complaint contained, inter alia, a motion for a temporary restraining order against the Gibsons and a motion for appointment of a receiver over Perfect Fit.

10. On May 16, 2016, the Honorable Benjamin G. Alford issued a Temporary Restraining Order and an Order on Appointment of Receiver ("Receiver Order"). The Receiver Order appointed Douglas Goines as the receiver of "property and assets which are the subject of this action" and provided Goines with "full power to take possession of and manage [Perfect Fit's] business, books, and profits, less any necessary expenditures incurred in connection with the necessary operation of the property and business until a final adjudication of this cause may be had." (Receiver Order 1.)

11. On June 15, 2016, Judge Alford issued an Order Granting Preliminary Injunction and Appointment of Receiver ("PI Order"). The PI Order froze all assets and funds in the possession of the Gibsons that were the result of corporate funds transferred out of Perfect Fit's bank account by Margaret. (PI Order 5-6.) Judge Alford also ordered that Goines would continue to act as receiver for Perfect Fit. (PI Order 6.) Goines has managed Perfect Fit as receiver since his appointment in May, 2016.

12. On June 15, 2016, this matter was designated to the North Carolina Business Court. On June 16, 2016, the case was assigned to the undersigned by order of the Honorable James L. Gale, Chief Judge of the North Carolina Business Court.

13. On July 12, 2016, Bandy filed the First Amended Complaint ("Amended Complaint"). The Amended Complaint makes claims against Defendants for declaratory judgment (Count One), fraud (Count Two), constructive fraud (Count Three), breach of contract (Count Four), conversion (Count Five), unjust enrichment (Count Six), violations of North Carolina's Unfair and Deceptive Trade Practices Act (Count Seven), piercing the corporate veil (Count Eight), punitive damages (Count Nine), judgment against the person (Count Ten), and attachment (Count Eleven). The Amended Complaint also sought injunctive relief (Count Twelve) and the appointment of a receiver over Perfect Fit and its assets (Count Thirteen).

14. On July 25, 2016, the Gibsons filed the Motion, seeking judgment on the pleadings on Bandy's claims for unjust enrichment (Count VI), unfair and deceptive trade practices (Count VII), and judgment against the person (Count X). On September 7, 2016, the Court held a hearing on the Motion, and the Motion was ripe for disposition.

15. Subsequent to the hearing on the Motion, however, circumstances arose that drastically altered the course of this lawsuit.^[2] As a result of those circumstances, on January 19, 2017, the Court issued an order staying the case. The stay subsequently was extended by the Court, but expired on June 30, 2017. Accordingly, the Court now decides the Motion.

II. DISCUSSION AND ANALYSIS.

16. The purpose of Rule 12(c) is "to dispose of baseless claims or defenses when the formal pleadings reveal their lack of merit." Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974). The Court must "view the facts and permissible inferences in the light most favorable to the nonmoving party." Id. "A motion for judgment on the pleadings is the proper procedure when all the material allegations of fact are admitted in the pleadings and only questions of law remain. When the pleadings do not resolve factual issues, judgment on the pleadings is generally inappropriate." Id. In deciding a 12(c) motion, the court may consider documents attached and incorporated into the pleadings. Reese v. Mecklenburg Cty., 200...