Bizrobe Trust v. Inolife Technologies, Inc.
| Decision Date | 30 November 2018 |
| Docket Number | 17 CVS 306 |
| Citation | 2018 NCBC 122 . |
| Court | Superior Court of North Carolina |
| Parties | BIZROBE TRUST, BY ITS TRUSTEE DOUBLEBENT, LLC, Plaintiff, v. INOLIFE TECHNOLOGIES, INC.; MANHATTAN TRANSFER REGISTRAR COMPANY; MTRCO, INC.; and JOHN CHARLES AHEARN, III, Defendants. and INOLIFE TECHNOLOGIES, INC., Third-Party Plaintiff, v. GARY BERTHOLD, Third-Party Defendant. And N3GU CAPITAL LTD., Third-Party Plaintiff, v. GARY BERTHOLD, Third-Party Defendant. And GARY BERTHOLD, Third-Party Plaintiff, v. RANDALL LANHAM and 8687544 CANADA, INC. Third-Party Defendants. |
Norman L. Sloan, for Plaintiff.
Higgins Benjamin, PLLC, by Gilbert J. Andia, Jr., for Defendants.
1. THIS MATTER is before the Court on Plaintiff Bizrobe Trust's ("Bizrobe") Motion for Summary Judgment (the "Motion"). (ECF No. 72 ["Mot."].) Having considered the Motion, the briefs, and the arguments of counsel at a hearing on the Motion, the Court DENIES the Motion.
2. The Court does not make findings of fact when ruling on motions for summary judgment. E.g., In re Estate of Pope, 192 N.C.App. 321, 329, 666 S.E.2d 140, 147 (2008). The following factual background, taken from the undisputed evidence submitted in support of and in opposition to the Motion, is intended solely to provide context for the Court's analysis and ruling.
3. Defendant InoLife Technologies, Inc. ("InoLife" or the "Corporation") is a New York corporation with its principle place of business in California. (Am. Compl. ¶ 8, ECF No. 24; Answer & Countercl. & Third-Party Claim ¶ 8, ECF No. 31 ["Answer"/ "Countercl. & Third-Party Compl."].)
4. Defendant Manhattan Transfer Registrar Company ("Manhattan Transfer") is a Colorado corporation with its principle place of business in Colorado. (Am. Compl. ¶ 9; Answer ¶ 9.) Several filings related to InoLife's stock appear on Manhattan Transfer's transaction journal. (See, e.g., Aff. of Gary S. Berthold Exs. 5, M, ECF No. 74 ["Berthold Aff."].)
5. Defendant John Charles Ahearn, III ("Ahearn") is a citizen and resident of Boulder, Colorado and is affiliated with Manhattan Transfer. (Am. Compl. ¶ 11; Answer ¶ 11; see Berthold Aff. ¶ 8.)
6. Defendant MTRCO, Inc. was a Colorado corporation with its principal place of business in Colorado but was voluntarily dissolved on December 31, 2016. (See Am. Compl. ¶ 10; Answer ¶ 10.)
7. Third-Party Defendant/Plaintiff Gary S. Berthold ("Berthold") was the CEO and President of InoLife from November 2009 to February 29, 2016, when he resigned. (Berthold Aff. ¶ 3.) Berthold was formerly the majority shareholder of InoLife. (Aff. of Kenneth J. Beam ¶ 5, ECF No. 19.2 ["Beam Aff."]; Aff. of Randall J. Lanham ¶ 8, ECF Nos. 19.3, 19.5, 19.6 ["Lanham Aff."].)
8. Bizrobe is purportedly a North Carolina trust.[1] (Am. Compl. ¶ 7.) Bizrobe's trustee, Doublebent, LLC, is a North Carolina limited liability company. (Beam Aff. ¶ 20, Ex. 1.)
9. On February 4, 2014, Berthold, as CEO of InoLife, filed a Certificate of Amendment of the Certificate of Incorporation of InoLife with the New York State Department of State Division of Corporations (the "Certificate of Amendment"). (Berthold Aff. Ex. 1 ["Certificate of Amendment"].) The Certificate of Amendment, in pertinent part, designated a class of stock of InoLife as Series D Preferred Stock having 10, 000, 000 shares authorized at $0.00001 par value per share. (Certificate of Amendment § 2(D)(1).) The Certificate of Amendment further provided that:
[e]ach share of SERIES D Preferred Stock shall be convertible, at any time, and/or from time to time, into the number of shares of the Corporation's Common Stock, par value $0.00001 per share, equal to the price of the SERIES D Preferred Stock, divided by the par value of the Common Stock, subject to adjustment as may be determined by the Board of Directors from time to time (the "Conversion Rate"). . . . Such conversion shall be deemed to be effective on the business day (the "Conversion Date") following the receipt by the Corporation of written notice from the holder of the SERIES D Preferred Stock of the holder's intention to convert the shares of SERIES D Stock [sic], together with the holder's stock certificate or certificates evidencing the SERIES D Preferred Stock to be converted.
(Certificate of Amendment § 2(D)(4)(a).)
10. The Certificate of Amendment further provided that "promptly after the Conversion Date, the Corporation shall issue and deliver to such holder a certificate or certificates for the number of full shares of Common Stock issuable to the holder pursuant to the holder's conversion of SERIES D Preferred Shares." (Certificate of Amendment § 2(D)(4)(b).) The price of each share of Series D Preferred Stock was set at $5.00 per share. (Certificate of Amendment § 2(D)(7)(a).) It is unclear who, if anyone, at the time the Certificate of Amendment was filed (February 4, 2014), held any of InoLife's Series D Preferred Stock, however, a December 21, 2015 InoLife account statement indicates that 10, 000, 000 of the shares were issued to Berthold on January 27, 2015, and that he continued to hold the shares as of December 21, 2015. (Berthold Aff. Ex. 4.)
11. On January 12, 2016, Ahearn and Manhattan Transfer received from Berthold an Irrevocable Stock or Bond Power, dated December 16, 2015, which stated that, "[f]or [v]alue [r]eceived," Berthold "does . . . hereby sell, assign, and transfer to" Bizrobe "10, 000, 000 Series D Preferred Shares in Gary S. Berthold [sic] name[.]" (Aff. Berthold Ex. 5, at 1, 2.) Additionally, a February 29, 2016 Manhattan Transfer transaction journal entry shows a transfer on that date from Berthold to Bizrobe of 10, 000, 000 shares of InoLife Series D Preferred Stock with certificate number PD 2. (See Aff. Berthold Ex. 5, at 3; see also Aff. Berthold Ex. M.)
12. On October 18, 2016, Norman L. Sloan, on behalf of Bizrobe as its attorney, requested in writing to Michael G. Wright, then-CEO of InoLife, and Ahearn, that InoLife convert 10, 000, 000 shares of its Series D Preferred Stock into 5, 000, 000, 000, 000 shares of InoLife common stock. (Berthold Aff. Ex. 8.) The request for conversion does not reference any certificates held by Bizrobe for the Series D Preferred Stock nor does it attach the certificate denominated "PD 2" on the February 29, 2016 Manhattan Transfer transaction journal entry. (See Berthold Aff. Ex. 8.) Ten days later, on October 28, 2016, Lanham, as InoLife's attorney, responded and denied Bizrobe's request, stating that InoLife "does not have records of Bizrobe . . . as a shareholder . . .[, ] there is no valid issuance of Preferred Series D Stock, and we confirm that there are no Preferred Series D issued and[/]or outstanding." (Berthold Aff. Ex. 9.)
13. The procedural history of this action is complex. The Court sets forth only that procedural background relevant to the Motion.
14. Bizrobe, along with Plaintiffs Norman L. Sloan ("Sloan"), John T. Root ("Root"), Candance A. Trumbull ("Trumbull"), Nick Plessas ("Plessas"), Candance Wernick ("Wernick"), and Woneeya Thundering Hawk ("Thundering Hawk") (collectively, "Plaintiffs"), initiated this action by filing the Complaint on January 17, 2017.[2] (ECF No. 1 ["Compl."].)
15. The Complaint sought a declaration ordering Defendants to convert certain shares of InoLife preferred stock to InoLife common stock and issue such shares of common stock to Plaintiffs along with stock certificates. (Compl. ¶ 34.) The Complaint also requested a temporary restraining order and preliminary injunction preventing Defendants from interfering with or harming Plaintiffs' stock ownership in InoLife during the course of this litigation. (Compl. ¶ 11.)
16. This case was designated as a mandatory complex business case by order of the Chief Justice of the Supreme Court of North Carolina dated January 19, 2017, (ECF No. 4), and assigned to the undersigned on the same day by order of then-Chief Business Court Judge James L. Gale, (ECF No. 5).
17. Following a hearing on February 3, 2017, the Court denied Plaintiffs' motion for preliminary injunction on February 9, 2017. (Order on Pls.' Mot. for Prelim. Injunction ¶ 41, ECF No. 21 ["Order"].) The Court concluded that Plaintiffs had failed to show a likelihood of success on their claim for declaratory judgment because, inter alia, the unauthenticated exhibits submitted in support of the motion for preliminary injunction were devoid of evidence (1) that Plaintiffs paid any consideration for their purported shares of InoLife stock; (2) that Plaintiffs produced to InoLife their stock certificates evidencing their shares of InoLife stock when making their request for conversion of such shares; and (3) that InoLife's shares are uncertificated. (Order ¶¶ 34-38; see Order ¶¶ 16, 18-19.)
18. On March 7, 2017, Plaintiffs filed their Amended Complaint, as of right, pursuant to Rule 15(a) of the North Carolina Rules of Civil Procedure ("Rule(s)"), again asserting the claim for declaratory judgment, along with several other claims not at issue on this Motion. (See Am. Compl. 10-15.)
19. On April 6, 2017, Defendants filed their Answer and Counterclaim and Third-Party Claim, denying the allegations and asserting counterclaims against Trumbull for fraud, unjust enrichment and conspiracy. InoLife also asserts third-party claims against Berthold, including a claim for breach of fiduciary duty and constructive fraud, alleging that, inter alia, Berthold "purport[ed] to issue stock to himself and to others for insufficient consideration and improper purposes[.]" (Countercl. & Third-Party Compl. ¶...
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