In Re: Versant Properties
| Decision Date | 25 March 2011 |
| Docket Number | CIVIL CASE NO. 1:10cv98,Bankruptcy Case No. 08-10930,CIVIL CASE NO. 1:10cv198,Adversary Proceeding No. 09-01014 |
| Court | U.S. District Court — Western District of North Carolina |
| Parties | In re:VERSANT PROPERTIES, LLC and H&H CHOICE, LLC, Debtors. HUNTLEY CONSTRUCTION COMPANY, Appellant, v. WELLS FARGO BANK, N.A., Appellee. |
THIS MATTER is before the Court on the appeals filed by the Appellant Huntley Construction Company ("Huntley") from the Orders of the Bankruptcy Court granting a judgment on the pleadings in favor of Wells Fargo Bank, N.A. ("Wells Fargo") and granting Wells Fargo summary judgment. For thereasons stated herein, the Bankruptcy Court's Orders are affirmed.1
In reviewing a decision of the Bankruptcy Court, this Court applies the same standards employed by the federal appellate courts. Thus, the Bankruptcy Court's findings of fact are reviewed for clear error, and conclusions of law are reviewed de novo. In re Kirkland, 600 F.3d 310, 314 (4th Cir. 2010). The Bankruptcy Court's Orders granting judgment in favor of Wells Fargo, being determinations of law, are subject to a de novo standard of review. See Independence News, Inc. v. City of Charlotte, 568 F.3d 148, 154 (4th Cir.) (), cert. denied, 130 S.Ct. 507, 175 L.Ed.2d 349 (2009); BB&T Corp. v. United States, 523 F.3d 461, 471 (4th Cir. 2008) (). The Bankruptcy Court's determination of the issue of judicial estoppel is reviewed for an abuse of discretion. See Moore v. Universal Underwriters Inc. Co., 363 F. App'x 268, 269 (4th Cir. 2010); King v. Herbert J. Thomas Mem'l Hosp., 159 F.3d 192, 198 (4th Cir. 1998).
_A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is reviewed under the same standard employed in reviewing a Rule 12(b)(6) motion to dismiss. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). Thus, the Court must accept the factual allegations of the claim as true and construe them in the light most favorable to the non-moving party. Coleman v. Maryland Court of Appeals, 626 F.3d 187, 189 (4th Cir. 2010), pet. for cert. filed, 79 U.S.L.W. 3480 (Feb. 8, 2011). In order to survive the motion, the "complaint must contain sufficient factual matter, accepted as true, 'to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). To be "plausible on its face, " a plaintiff must demonstrate more than "a sheer possibility that a defendant has acted unlawfully." Id. A plaintiff therefore must "articulate facts, when accepted as true, that 'show' that the plaintiff has stated a claim entitling [it] to relief, i.e., the 'plausibility of entitlement to relief.'" Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 129 S.Ct. at 1949).
Taking the well-pleaded factual allegations in Huntley's Crossclaim as true, the following is a recitation of the relevant facts.
In 1999, Cary Harrison and his now deceased wife formed H&H Choice, LLC ("H&H") to hold title to approximately 397 acres of real estate located in Buncombe County, North Carolina (the "Versant Property"). [Versant Complaint, Bankr. Doc. 1 at 1¶21].2 H&H subsequently partnered with Debaran Development ("Debaran") to develop the Versant Property into a luxury real estate community. [Id. at 1¶23]. In October 2005, Debaran entered into a loan agreement with Wachovia Bank ("Wachovia")3 to borrow up to $24,525,000 for the development of the Versant Property. [Id. at ¶24; Huntley Crossclaim, Bankr. Doc. 42 at 1¶55]. The loan from Wachovia was secured by deeds of trust recorded on October 7, 2005 in the Buncombe County Public Registry. [Wachovia Crossclaim, Bankr. Doc. 40 at ¶61; Huntley Response to Wachovia Crossclaim, Bankr. Doc. 50 at 1¶61]. Versant Properties, LLC ("Versant") was created to take over the project and assumed Debaran's obligations under the Wachovia loan. [Huntley Crossclaim, Bankr. Doc. 42 at ¶56; VersantComplaint, Bankr. Doc. 1 at ¶25].
On or about October 24, 2005, Huntley contracted with Versant to perform work on the Versant Property related to the grading of roads and the installation of sewer and water lines. [Huntley Crossclaim, Bankr. Doc. 42 at ¶68]. Huntley did not require Versant to obtain payment surety bonds to secure Versant's payment for its work. [See Huntley Response to Wachovia Crossclaim, Bankr. Doc. 50 at ¶81].
The Town of Woodfin has a subdivision ordinance which requires that "rior to approval of a final plat, the subdivider shall have installed the improvements specified in this chapter or guaranteed their installation as provided herein." Woodfin Ordinance § 151.46(A). In the event the subdivider chooses to guarantee installation of the improvements, Woodfin Ordinance § 151.46(B)(1) provides that the town and the subdivider may enter into an agreement "whereby the subdivider shall agree to complete all required improvements." To secure the agreement, the Ordinance further requires the subdivider to provide the Town with a guarantee equivalent to 1.25 times the entire cost of installing all of the required improvements. Id.
In order to obtain final plat approval, Versant elected to proceed under the second option, i.e., it chose to guarantee the installation of the improvements as provided in § 151.46(B). [Id. at ¶60]. To meet itsrequirements to the Town Woodfin under the Ordinance, in June 2007, Versant obtained a letter of credit from Wachovia in the amount of $3,950,000 (the "Letter of Credit") naming the Town of Woodfin as the beneficiary. The Letter of Credit was issued pursuant to an agreement between Versant and the Town of Woodfin entitled "Infrastructure Memorandum of Understanding Regarding Versant Properties, LLC, Phase I Subdivision Plat" (the "MOU"). [Id. at ¶59]. The MOU states, in pertinent part, as follows:
Versant Properties, LLC has not, as of the date hereof, completed the construction of roadways, storm water drainage, electric, water and sewer services (collectively the "Infrastructure") necessary to obtain final approval of the Versant subdivision final plat. Versant Properties, LLC and the Town of Woodfin have entered into that certain Memorandum of Understanding dated 6-6, 2007 (the "Infrastructure MOU") setting forth the particular performance criteria and deadlines for completion of the Infrastructure. In accordance with Section 151.46(B) of the Town of Woodfin Land Usage Code Ordinances, the Town of Woodfin shall be entitled to the sum of up to $3,950,000.00 (representing 1.25 times the entire remaining costs of constructing the Infrastructure) upon presentation of this Letter of Credit to the issuer together with a written statement stating that Versant Properties, LLC has failed to perform its obligations in the completion of the Infrastructure as set forth in the Infrastructure MOU and an engineer's written estimate of the amount needed for the completion of the Infrastructure (which shall be the amount payable under this Letter of Credit).
[MOU, Doc. 42-1 at 53 (emphasis added)].4 The Letter of Credit, in turn, required:
A DATED STATEMENT ISSUED ON THE LETTERHEAD OF THE BENEFICIARY AND PURPORTEDLY SIGNED BY AN AUTHORIZED REPRESENTATIVE STATING: VERSANT PROPERTIES, LLC HAS FAILED TO PERFORM ITS OBLIGATIONS IN THE COMPLETION OF THE INFRASTRUCTURE AS SET FORTH IN THAT CERTAIN INFRASTRUCTURE MEMORANDUM OF UNDERSTANDING DATED 06/06/2007 ("MOU") AND THAT CERTAIN ENGINEER'S WRITTEN ESTIMATE OF THE AMOUNT NEEDED FOR THE COMPLETION OF THE INFRASTRUCTURE (WHICH SHALL BE THE AMOUNT PAYABLE UNDER THIS LETTER OF CREDIT). WE THEREFORE DEMAND PAYMENT IN THE AMOUNT (INSERT AMOUNT) AS SAME IS DUE AND OWING.
[Letter of Credit, Doc. 42-1 at 55].
Huntley performed various work on the Versant Property, including building and installing grading for roads, water lines, and sewer lines. [Huntley Crossclaim, Bankr. Doc. 42 at ¶¶67-68]. In April 2008, however, Versant began defaulting on its payments to its contractors. [Id. at 1¶69]. As of October 2008, Huntley filed liens against the Versant Property to secure the funds it was owed for the work it had performed in connection with the infrastructure. [Id. at ¶¶77-80]. Huntley subsequently filed suit to perfect and enforce its liens. [Id. at ¶81].
In October 2008, the Town of Woodfin made a presentment to Wachovia for the payment of $3,950,000, the full face amount of the Letter of Credit. [Id. at ¶¶82-83; Doc. 42-1 at 61]. The presentment included a written estimate dated October 8, 2008 from the project engineer, Civil Design Concepts, P.A. ("CDC"), which stated: "We estimate the total funds necessary to complete the Phase I infrastructure at the community known as Versant to be $5,139,411.83 as of the date of this letter." [Doc. 42-1 at 63]. Wachovia paid the full $3,950,000 to the Town of Woodfin. [Huntley Crossclaim, Bankr. Doc. 42 at ¶¶82-85]. The draw on the Letter of Credit was done under Town Ordinance § 151.46(B)(2) which provides, in pertinent part, as follows:
Upon default, meaning failure on the part of the subdivider to complete the required improvements in a timely manner as spelled out in the performance bond or escrow agreement, the surety or the financial institution holding the escrow account shall, if requested by the Board of Aldermen, pay all or any portion of the bond or escrow fund to the town up to the amount needed to complete the improvements based on an engineering estimate. Upon payment, the Board of Aldermen, in its discretion, may expendsuch portion of the funds as it deems necessary to complete all or any portion of the required improvements. The town shall return to the subdivider any funds not spent in completing the improvements.
(Emphasis added).
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