Estate of By v. Jones

• Decision Date: 05 November 2013
• Docket Number: No. COA12–758.,COA12–758.
• Citation: 750 S.E.2d 14
• Parties: ESTATE OF Timothy Alan HURST By and through Christian P. CHERRY as Collector, Jeffrey Wayne Henley and Beverly Henley, Plaintiffs, v. Patrick B. JONES, Jeffrey V. Gordon and Scott L. Bieber, Defendants.
• Court: North Carolina Court of Appeals

750 S.E.2d 14

ESTATE OF Timothy Alan HURST By and through Christian P. CHERRY as Collector, Jeffrey Wayne Henley and Beverly Henley, Plaintiffs,
v.
Patrick B. JONES, Jeffrey V. Gordon and Scott L. Bieber, Defendants.

No. COA12–758.

Court of Appeals of North Carolina.

Nov. 5, 2013.

[750 S.E.2d 16]

Appeal by defendants from order filed 24 February 2012 by Judge W. David Lee in Cabarrus County Superior Court. Heard in the Court of Appeals 12 December 2012.

Law Offices of Dale S. Morrison, Charlotte by Dale S. Morrison, for plaintiff-appellees Jeffrey Wayne Henley and Beverly Henley.

Mills Law PA, Concord by William L. Mills, III for plaintiff-appellee Estate of Timothy Alan Hurst.

Sellers, Hinshaw, Ayers, Dortch & Lyons, P.A., by Brett E. Dressler, Charlotte, for defendant-appellant Patrick B. Jones.

Ferguson, Scarbrough, Hayes, Hawkins & Demay, P.A., Concord by James R. DeMay, for defendant-appellants Jeffrey V. Gordon and Scott L. Bieber.

STEELMAN, Judge.

Where plaintiffs in prior litigation asserted that business entities were one and the same, they are judicially estopped from asserting any inconsistent factual allegations in this case and cannot show that Moorehead's transfer to defendant Jones was fraudulent under N.C. Gen.Stat. § 39–23.4(a)(2) or 39–23.5. We reverse the trial court's entry of summary judgment in favor of plaintiffs and remand for entry of summary judgment in Jones' favor as to these issues. Where there are issues of material fact as to whether Moorehead made the transfer of monies to Jones with fraudulent intent and as to whether Jones took in good faith, we reverse the trial court's entry of summary judgment in favor of plaintiffs as to Jones under N.C. Gen.Stat. § 39–23.4(a)(1) and remand for a jury trial on these issues.

Where defendants Gordon and Bieber failed to cite this Court to facts that support a conclusion that the corporate veil should be pierced as to two corporations, we hold that there was no repayment of an antecedent debt to constitute reasonably equivalent value when Moorehead transferred the monies to Gordon and Bieber. There exist genuine issues of material fact under N.C. Gen.Stat. § 39–23.5, 39–23.4, and 39–23.8 as to plaintiffs' claims against Gordon and Bieber, and we reverse the trial court's order granting summary judgment in their favor and remand for further evidentiary proceedings consistent with this opinion.

I. Factual and Procedural History

On 28 June 2006, Timothy Alan Hurst (Hurst) and Jeffrey Henley (Henley) entered into a Purchase and Sale Agreement with Cramer Mountain Development, LLC (Cramer Mountain) under the terms of which Hurst and Henley agreed to sell to Cramer Mountain two tracts of land in Cabarrus County, containing approximately 73 acres and 3.5 acres, for $4,700,000. On 2 March 2007, Moorehead I, LLC (Moorehead) was

[750 S.E.2d 17]

incorporated. On 12 March 2007, Cramer Mountain assigned its rights in the Purchase and Sale Agreement to Moorehead. The Purchase and Sale Agreement provided that at closing Hurst and Henley would be paid $1,000,000. The balance of the purchase price, $3.7 million, would be owner-financed for twelve months at an interest rate of prime rate plus one percent. This debt was to be secured by a mortgage on the property that was to be in “second position on the property behind buyer's financing.” The purchaser had the option to extend the owner-financing for another year upon the payment of an additional $2,000,000 under the same terms.

In February of 2007, Hurst and Henley were advised that the buyer wanted to make an additional advance of $200,000. Hurst and Henley understood that this would not be the closing on the property, which would take place in June. The June closing would include an Internal Revenue Code Section 1031 exchange of property. Henley, his wife, and Hurst met with the manager of Cramer Mountain, Frank DeSimone (DeSimone), at Henley's farm. DeSimone printed documents from his computer that were signed by the Henleys and Hurst. ¹ The transaction in fact was not merely an additional advance towards the purchase of the property, but a closing. Hurst and the Henleys executed a deed for the two tracts of land on 13 March 2007 and received $200,000. Moorehead executed a note in the amount of $4,500,000 secured by a second deed of trust upon the two tracts. Moorehead borrowed $3,400,000 from F & M Bank, which was secured by a first deed of trust on the two tracts conveyed by Hurst and Henley, and an additional tract of nine acres. Moorehead left the closing with $2,078,546.41 after deducting closing expenses. This sum was deposited into the bank account of Moorehead.

On 14 March 2007, Moorehead wired $650,000 to Pat Jones (Jones). On 14 March 2007, Moorehead transferred $380,383.74 from its bank account to Jeff Gordon (Gordon) by debit memo. Also on 14 March 2007, Moorehead transferred $380,383.74 from its account to Scott Bieber (Bieber) by debit memo.

Jones had previously loaned $500,000 to Park West Development Company (Park West) on 8 June 2006 at an interest rate of 30% per annum, which was due on 28 February 2007. The promissory note from Park West to Jones was signed by Bruce Blackmon (Blackmon) as President. On 10 November 2005, Gordon and Bieber had each loaned $300,000 to Investments International Incorporated (Investments) at an interest rate of 20% per annum. A promissory note in the amount of $600,000 was issued jointly to Gordon and Bieber, and was signed by Blackmon on behalf of Investments.

On 29 July 2008, Hurst ² and Henley filed suit in Cabarrus County Superior Court against Blackmon, Moorehead, Park West, Cramer Mountain, and other corporations and individuals.³ Investments was not a party to this litigation. This complaint alleged claims for fraud and unfair and deceptive trade practices. Hurst and Henley alleged that they only received $200,000 at closing rather than the $1,000,000 provided for in the Purchase and Sale Agreement, that there was no 1031 exchange, and that the proceeds of the F & M Bank Loan were “diverted and not used as part of the payment towards the purchase price of the Property.” Plaintiffs additionally sought to pierce the corporate veil with respect to Blackmon, DeSimone, and their related entities. This case was tried at the 24 January 2011 session of Civil Superior Court for Cabarrus County before a jury. Judgment was entered against Blackmon and Moorehead in the amount of

[750 S.E.2d 18]

$4,900,000 plus interest.⁴ The jury returned a verdict in favor of plaintiffs as follows:

Issue No. 11. Did defendant Bruce Blackmon control Moorehead I, LLC, Park West Development Company, Park West Investments, Inc., Park West Premier Properties, LLC and/or Park West–Stone, LLC with regard to the acts or omissions that damaged the plaintiffs?

A. Moorehead I, LLC

ANSWER: X Yes ___ No

B. Park West Development Company

ANSWER: X Yes ___ No

C. Park West Investments, Inc.

ANSWER: X Yes ___ No

D. Park West Premier Properties, LLC

ANSWER: X Yes ___ No

Park West–Stone, LLC

ANSWER: X Yes ___ No

The judgment held:

Defendant Bruce B. Blackmon, Jr. is the alter-ego of Defendants Moorehead I, LLC, Park West Development Company, Park West Investments, Inc., Park West Premier Properties, LLC and Park West–Stone, LLC. All awards against these Defendant entities shall also be an award against Defendant Bruce B. Blackmon, Jr. in his individual capacity and all awards against Defendant Bruce B. Blackmon, Jr. shall be an award against these Defendant entities, jointly and severally.

On 31 March 2011 ⁵, Hurst and Henley filed the complaint in the instant action. The complaint asserted that the transfers by Moorehead to Jones, Bieber, and Gordon were fraudulent and in violation of the Uniform Fraudulent Transfer Act, Article 3A of Chapter 39 of the North Carolina General Statutes. Each of the defendants filed answers which pled a number of affirmative defenses, including estoppel. Following discovery, Gordon and Bieber filed a motion for summary judgment on 6 December 2011. Plaintiffs filed a motion for summary judgment on 22 December 2011. On 4 January 2012, Jones entered a motion for summary judgment. The trial court held that plaintiffs were entitled to judgment as a matter of law and entered judgment against Jones in the amount of $650,000, against Gordon in the amount of $380,383.74, and against Bieber in the amount of $380,383.74. Each judgment was to bear interest at the legal rate from the date of the filing of the complaint.

Jones, Gordon, and Bieber appeal.

II. Standard of Review

“Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows 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.” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citation omitted).

III. Jones' Appeal

In his first argument on appeal, Jones contends that plaintiffs are estopped from contending that Park West, Moorehead, and Blackmon are not one and the same entity. We agree.

A. Judicial Estoppel

“[J]udicial estoppel seeks primarily to protect the integrity of judicial proceedings” and has no requirement of “mutuality of the parties.” Whitacre P'ship v. Biosignia, Inc., 358 N.C. 1, 16–17, 591 S.E.2d 870, 881 (2004). “ ‘Where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position....’ ” Id. at 22, 591 S.E.2d at 884 (quoting New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808, 149 L.Ed.2d 968, 977 (2001)). The North Carolina Supreme Court has enumerated three factors that typically

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influence the decision of whether to apply judicial estoppel in a particular case:

First, a party's subsequent position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party...