Carcano v. Jbss, LLC

• Decision Date: 06 October 2009
• Docket Number: No. COA08-1423.,COA08-1423.
• Citation: 684 S.E.2d 41
• Court: North Carolina Court of Appeals
• Parties: James R. CARCANO, Joanne Carcano and Carcano Realty Group, LLC, Plaintiffs, v. JBSS, LLC, and David Browder, Lucy Browder & Jason Browder, Defendants.

684 S.E.2d 41

James R. CARCANO, Joanne Carcano and Carcano Realty Group, LLC, Plaintiffs, v. JBSS, LLC, and David Browder, Lucy Browder & Jason Browder, Defendants.

No. COA08-1423.

Court of Appeals of North Carolina.

October 6, 2009.

Appeal by plaintiffs from order entered 3 October 2008 by Judge Laura J. Bridges in Rutherford County Superior Court. Heard in the Court of Appeals 7 April 2009.

King Law Offices, PLLC, by Brian W. King, Rutherfordton, for plaintiff appellants.

Van Winkle, Buck, Wall, Starnes and Davis, P.A., by Esther E. Manheimer, Asheville, for defendant appellees.

HUNTER, JR., ROBERT N., Judge.

James Carcano, individually, and Carcano Realty, LLC ("plaintiffs"), seek damages arising out of their investments in North Carolina real estate purchased with David Browder, Lucy Browder, and Jason Browder (the "Browders"). Plaintiffs' theories include claims for breach of contract, unfair and deceptive trade practices, common law fraud/ breach of fiduciary duty, unjust enrichment, constructive trust, and punitive damages. On 3 October 2008, the trial court heard cross motions for summary judgment and dismissed all of plaintiffs' claims except breach of contract. From this order of partial summary judgment, plaintiffs appeal.

We affirm.

I. Facts

James Carcano ("Carcano"), a licensed New York attorney, owns Carcano Realty Group, LLC ("Carcano Realty"), a New York limited liability "corporation." Defendants David Browder, Lucy Browder, and Jason Browder are all citizens and residents of South Carolina.

In November 2005, Lucy Browder purchased two pieces of Rutherford County property, 93 Flynn Court and 237 Wren Court. According to the deeds, ownership was vested in "JBSS, LLC." The Browders intended to sell these and other pieces of property in the Lake Lure area. After the purchase of these lots, in November 2005, Felix Carcano, a long-time friend and business acquaintance of David Browder, introduced David Browder to his brother, Carcano. Carcano, Felix Carcano, and the Browders then entered a business arrangement to buy undeveloped lots for development in the Lake Lure area in a newly created or soon to be formed entity presumably a limited liability company "JBSS, LLC."

The parties and David Browder agreed that ownership in the venture was to be shared: Lucy Browder (David Browder's spouse), 33%; James Carcano, 33%; Felix Carcano, 33%; and Jason Browder, 1%. In this business arrangement, David Browder was to be the manager of the venture and would handle the research, day-to-day business, purchases of property, negotiate contracts for construction and oversee property development. The parties agree that the venture was to share profits. To capitalize the business, Carcano and Felix Carcano were to contribute $100,000 each to the business, and Lucy Browder was to contribute the 93 Flynn Court and 237 Wren Court properties. The parties disagree upon whom the responsibility fell to prepare a written, formal operating agreement that would reflect the above-mentioned terms.

Despite the failure to complete the proper organization of a limited liability company at this earlier time, David Browder operated under the "mistaken" belief and represented to Carcano that "JBSS, LLC" was properly formed as a limited liability company. According to David Browder, the "mistaken" belief was based upon communications with a South Carolina law firm where his wife, Lucy Browder, was employed in which another employee of the firm stated to him that the "LLC" had been formed.

In December 2005, David Browder, purportedly acting on behalf of "JBSS, LLC," signed contracts to purchase land from the Fairfield Mountains Property Owners' Association. Carcano Realty sent approximately $24,000.00 electronically to David Browder for earnest money deposits. Of these funds $16,000.00 was returned to David Browder, and Fairfield properties retained $8,000 which was applied to an application fee and security deposit for the development of the vacant lot 53 Flynn Court.

David Browder, purportedly acting for "JBSS, LLC," contracted to purchase three additional properties in the Fairfield Mountains subdivision including: 3 Apple Valley Forest, 215 Quail Ridge, and 12 Roundabout. To purchase the Quail Ridge property, on 28 March 2006, Carcano Realty Group transferred $11,000.00 to the closing attorney's escrow account. In May 2006, David Browder requested funds from Carcano to purchase the other two properties. Carcano Realty then transferred $60,000.00 on 15 May 2006 to purchase the Apple Valley Forest and Roundabout properties. The final purchase prices for the properties were: 215 Quail Ridge ($15,000.00); 12 Roundabout ($39,000.00); and 3 Apple Valley ($20,000.00).

After the purchase of these properties, the parties discovered that "JBSS, LLC" had not been formed.¹ Plaintiff filed suit on 14 November 2006, which was subsequently answered by defendants on 30 January 2007. Discovery ensued.

On 28 August 2008, David Browder formed an entity entitled "JBSS, LLC", in South Carolina by filing the Articles of Organization with the Secretary of State of the State of South Carolina. These articles do not mention plaintiffs as members or managers of the newly formed entity. Counsel for defendants contacted the grantors of all five properties requesting that the grantors execute new deeds to the newly formed entity, "JBSS, LLC." No new deeds for the properties are included in the record.

On the cross motions for summary judgment, the trial court denied plaintiffs' motion for summary judgment and granted defendants' motion for summary judgment on all claims except breach of contract. Plaintiffs appeal.

II. Issues

On appeal plaintiffs contend that the trial court erred in granting partial summary judgment to defendants and failing to grant summary judgment to plaintiffs for: (1) unfair and deceptive trade practices, where defendants induced plaintiffs to invest in "JBSS, LLC" through misleading and fraudulent representations; (2) unjust enrichment, where defendants exercised dominion over plaintiffs' investment and were unjustly enriched; (3) constructive trust, where defendants fraudulently obtained plaintiffs' money and used it to purchase the property held in an entity in which plaintiffs had no control; (4) common law fraud, where defendants knowingly made false representations about the status of the LLC to induce plaintiffs to continue funding the venture; and (5) punitive damages, where defendants acted fraudulently. Plaintiffs also contend the trial court erred by denying a grant of summary judgment to plaintiffs for their claim for breach of contract where defendants failed to grant plaintiffs an agreed upon proportional interest in an LLC.

III. Standard of Review

A grant of summary judgment is proper when "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) (2007). An appeal from an order granting summary judgment solely raises issues of whether on the face of the record there is any genuine issue of material fact, and whether the prevailing party is entitled to judgment as a matter of law. Smith-Price v. Charter Behavioral Health Sys., 164 N.C.App. 349, 352, 595 S.E.2d 778, 781 (2004). A defendant may show entitlement to summary judgment 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, 181, 454 S.E.2d 826, 828, disc. review denied, 340 N.C. 359, 458 S.E.2d 187 (1995). After the required showing is made by the party seeking summary judgment, the burden is then on the "`nonmoving party to produce a forecast of evidence demonstrating specific facts, as opposed to allegations, showing that he can at least establish a prima facie case at trial.'" Draughon v. Harnett Cty. Bd. Of Educ., 158 N.C.App. 705, 708, 582 S.E.2d 343, 343 (2003) (citation omitted), affirmed per curiam, 358 N.C. 137, 591 S.E.2d 520, reh'g denied, 358 N.C. 381, 597 S.E.2d 129 (2004). We review a trial court's ruling on summary judgment de novo. In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008).

IV. Analysis

As a preliminary matter, plaintiffs argue this appeal is properly before this Court as an appeal from an interlocutory order affecting a substantial right, pursuant to N.C. Gen.Stat. § 1-277 and N.C. Gen.Stat. § 7A-27(d)(1). An interlocutory order or judgment is one which is "made during the pendency of an action and does not dispose of the case but requires further action by the trial court in order to finally determine the entire controversy." Bob Timberlake Collection, Inc. v. Edwards, 176 N.C.App. 33, 37, 626 S.E.2d 315, 320, disc. review denied, 360 N.C. 531, 633 S.E.2d 674 (2006). An interlocutory order may be appealed, however, pursuant to N.C. Gen.Stat. § 1-277, which provides in pertinent part:

(a) An appeal may be taken from every judicial order or determination of a judge of a superior or district court, upon or involving a matter of law or legal inference, whether made in or out of session, which affects a substantial right claimed in any action or proceeding[.]

N.C. Gen. Stat. § 1-277(a) (2007). Similarly, N.C. Gen.Stat. § 7A-27(d) recognizes that some actions have potentially serious consequences, such as when a "substantial right" is affected, and thus warrant an appeal. See N.C. Gen.Stat. § 7A-27(d)(1) (2007). If a trial court's decision "deprives the appellant of a substantial right which would be lost absent immediate review," an appeal of an interlocutory order is permitted. Bob Timberlake...