Flanders/Precisionaire Corp. v. The Bank of New York Mellon Trust Co., National Association

Decision Date07 April 2015
Docket Number14 CVS 152
Citation2015 NCBC 33
CourtSuperior Court of North Carolina
PartiesFLANDERS/PRECISIONAIRE CORPORATION and FLANDERS CORPORATION, Plaintiffs, v. THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee for MORGAN STANLEY CAPITAL I INC., COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-IQ14; WAL-PAT II, LLC; and STEVEN K. CLARK, Defendants.

Ward and Smith, P.A. by E. Bradley Evans, Paul A. Fanning, and Michael J. Parrish for Plaintiffs Flanders/Precisionaire Corporation and Flanders Corporation.

Pearce Law PLLC by Bradley E. Pearce for Defendant the Bank of New York Mellon Trust Company, National Association.

Battle, Winslow, Scott & Wiley, P.A. by W. Dudley Whitley, III for Defendant Steven K. Clark.

ORDER AND OPINION

Bledsoe, Judge.

{1} THIS MATTER is before the Court upon Defendant The Bank of New York Mellon Trust Company, National Association's ("BONY") Motion to Dismiss Plaintiffs Flanders/Precisionaire Corporation ("Precisionaire") and Flanders Corporation's ("Flanders") (unless individually identified, collectively "Plaintiff") Third, Fourth, Twelfth and Thirteenth Claims ("BONY's Statute of Limitations Motion"); BONY's Motion to Dismiss Plaintiff's Twelfth and Thirteenth Claims ("BONY's Motion to Dismiss"); Defendant Steven Clark's ("Clark") Rule 12 Motion in Lieu of Answer ("Clark's Motion to Dismiss"); and Plaintiff's Motion to Dismiss BONY's Fourth Counterclaim ("Plaintiff's Motion to Dismiss") (collectively, the "Motions") in the above-captioned case. Having considered the Motions, the briefs and other documents filed in support of and in opposition to the Motions, and the arguments of counsel at the hearing held on December 11, 2014, the Court DENIES BONY's Statute of Limitations Motion; GRANTS BONY's Motion to Dismiss; DENIES Clark's Motion to Dismiss; and GRANTS Plaintiff's Motion to Dismiss.

I. PROCEDURAL HISTORY

{2} Plaintiff commenced this action in Johnston County on January 16, 2014, alleging claims against Defendants in various combinations for breach of contract, conspiracy, tortious interference with contract, and fraudulent concealment; and seeking various declaratory judgments, an accounting, setoff, and contribution/indemnity arising from allegedly wrongful acts committed on behalf of Plaintiffs by several of their former officers.

{3} Plaintiff also filed an identical action in Bladen County on January 13, 2014, because certain of the subject property in this action is located in Bladen County.

{4} The cases were designated to the Business Court on February 4, 2014 and assigned to the Honorable John Jolly on February 6, 2014. The cases were subsequently reassigned to the undersigned on October 27, 2014 following Judge Jolly's retirement.

{5} Defendant Clark filed his Motion to Dismiss on May 7, 2014, seeking dismissal of Plaintiff's claim for fraudulent concealment. Plaintiff filed its Motion to Dismiss BONY's counterclaim for unfair and deceptive trade practices ("UDTP") on June 6, 2014. Defendant BONY filed its Statute of Limitations Motion and its Motion to Dismiss on July 29, 2014. The parties completed briefing on all of the Motions on September 2, 2014.

{6} The cases were consolidated into one action on September 9, 2014.

{7} On November 20, 2014, by request and consent of the parties, the Court added IQ14 – Clarkton Smithfield NC LLC ("IQ14") as a party to this action as the successor-in-interest to BONY with respect to the rights and obligations arising under the loan and collateral security instruments and documents that form the basis of this litigation.

{8} The Court held a hearing on December 11, 2014, at which all remaining parties, except Defendant Wal-Pat II, LLC ("Wal-Pat II"), were represented by counsel.[1] The Motions are now ripe for resolution.

II. FACTUAL BACKGROUND

{9} The Court does not make findings of fact on motions to dismiss pursuant to Rule 12(b)(6), but only recites those facts included in the Complaint that are relevant to the Court's determination of the Motions. See, e.g., Concrete Serv. Corp. v. Investors Grp., Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986).

{10} Precisionaire is a North Carolina corporation with its principal place of business in Beaufort County, North Carolina. (Compl. ¶ 1.) Precisionaire is in the business of manufacturing and selling residential and commercial air filtration products. (Compl. ¶ 5.)

{11} Flanders is also a North Carolina corporation with its principal place of business in Beaufort County, North Carolina. (Compl. ¶ 3.) Precisionaire is a wholly-owned subsidiary of Flanders. (Compl. ¶ 4.)

{12} Defendant Clark was a shareholder of Flanders and formerly served as Flanders' Chief Financial Officer ("CFO") from 1995 through December 2004; Chief Operating Officer ("COO") from 1999 through December 2004; Chief Executive Officer ("CEO") from December 2004 through September 2007; and a member of Flanders' Board of Directors from 1995 through September 2007. (Compl. ¶¶ 31– 35.)

{13} Robert Amerson ("Amerson") "is the former [CFO], the former President, the former [CEO], a former member of the Board of Directors, the former Chairman of the Board of Directors, and formerly the largest stockholder of [Flanders]." (Compl. ¶ 22.)

{14} At all relevant times, Clark and Amerson were the sole members and managers of Wal-Pat, LLC ("Wal-Pat"). (Compl. ¶¶ 15, 37.)

{15} Defendant BONY is a national bank with its principal place of business in New York and serves as trustee for Morgan Stanley Capital, Inc., Commercial Pass-Through Certificates, Series 2007-IQ14 (the "Certificates"). (Compl. ¶¶ 6–7.)

{16} On December 1, 2000, Wal-Pat purchased approximately 33.226 acres of real property in Smithfield, North Carolina (the "Smithfield Property") for $3, 500, 000.00, financing the purchase through a loan from Bank of America effective that same date for the full purchase amount of $3, 500, 000.00. (Compl. ¶¶ 42–44.)

{17} On January 1, 2006, Wal-Pat and Precisionaire entered into a lease agreement for the Smithfield Property (the "Smithfield Lease"), whereby Precisionaire agreed to lease the Smithfield Property from Wal-Pat for a period of twenty years at the rate of $84, 677.22 per month. (Compl. ¶¶ 64–70.) At the time of the execution of the Smithfield Lease, Defendant Clark was an owner and manager of Wal-Pat and the CEO and a director of Flanders. (Compl. ¶¶ 66, 68.)

{18} On June 14, 2006, Wal-Pat purchased real property in Clarkton, North Carolina (the "Clarkton Property") (collectively with the Smithfield Property, the "Properties") for $2, 300, 000.00, financing the purchase through a loan from Branch Banking & Trust Company, effective June 13, 2006, for the full purchase amount of $2, 300, 000.00. (Compl. ¶¶ 54–56.)

{19} On May 5, 2006, Wal-Pat and Precisionaire entered into a lease agreement for the Clarkton Property (the "Clarkton Lease") (collectively with the Smithfield Lease, the "Leases"), whereby Precisionaire agreed to lease the Clarkton Property from Wal-Pat for a period of twenty years at the rate of $49, 321.40 per month. (Compl. ¶¶ 72–78.) Precisionaire also agreed to pay all property taxes, insurance, and maintenance costs of the Clarkton Property during the life of the lease. (Compl. ¶ 79.) At the execution of the Clarkton Lease, Defendant Clark was an owner and manager of Wal-Pat and the CEO and a director of Flanders. (Compl. ¶¶ 66, 76.)

{20} The Leases were presented to Flanders' Board of Directors for approval before they were executed. (Compl. ¶ 83.) Plaintiff alleges that "any approval was made by directors who were beholden to and influenced by Amerson and Clark and such approval was made for the benefit of Amerson and Clark and not for the benefit of [Plaintiff]." (Compl. ¶ 83.)

{21} The Leases allegedly provided a 40% annual return on Wal-Pat's investment in the Smithfield Property and a 26% annual return on Wal-Pat's investment in the Clarkton Property. (Compl. ¶¶ 86, 90.) Plaintiff alleges that these returns on investment were "exorbitant" and "far in excess of what is customary for a commercial lease." (Compl. ¶¶ 86, 90.)

{22} On February 23, 2007, Wal-Pat conveyed the Smithfield and Clarkton properties to Wal-Pat II. (Compl. ¶ 94.) Wal-Pat is the sole member of Wal-Pat II. (Compl. ¶ 95.) That same day, Wal-Pat II obtained a loan for $11, 500, 000.00 (the "Loan") from LaSalle Bank National Association ("LaSalle Bank" or the "Original Lender") and executed a promissory note for that amount (the "Note"). (Compl. ¶¶ 96–97.) The Loan was secured by Assignments of Leases and Rents ("ALRs") and deeds of trust (the "Deeds of Trust") from Wal-Pat II to LaSalle Bank in connection with the Smithfield and Clarkton Properties. (Compl. ¶¶ 100, 103.)

{23} Under the terms of the Note, "unless Wal-Pat II, Amerson, or Clark committed an act of malfeasance in connection with the [L]oan, [LaSalle Bank] would be limited to recovering from [Plaintiff] under the Leases and enforcing its Deeds of Trust against the Properties, " regardless of Amerson's and Clark's personal guarantees of the Loan. (Compl. ¶¶ 106–07.)

{24} Flanders executed guarantees of Precisionaire's obligations under the Leases in connection with the Loan from LaSalle Bank (the "Lease Guarantees"). (Compl. ¶¶ 133–35.) The Lease Guarantees may have been approved by Flanders' Board of Directors; but, similar to the Board's approval of the Leases, Plaintiff alleges that "any such approval was made by directors who were beholden to and influenced by Amerson and Clark and such approval was made for the benefit of Amerson and Clark and not for the benefit of [Plaintiff]." (Compl. ¶ 139.)

{25} Precisionaire also executed two Subordination, Non-Disturbance and Attornment Agreements for each lease (the "SNDAs"). (Compl. ¶ 125.) Plaintiff alleges that the "terms of the SNDAs purport to subordinate certain rights of [Precisionaire] to the rights of [LaSalle Bank], and may purport...

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