Investments v. Lenhil, Inc.
| Decision Date | 20 March 2014 |
| Docket Number | 11 CVS 449 |
| Citation | 2014 NCBC 6 |
| Court | Superior Court of North Carolina |
| Parties | BDM INVESTMENTS, Plaintiff, v. LENHIL, INC.; LENNON HILLS, LLC; JUDITH T. HOLLINGSWORTH in her official capacity as EXECUTRIX of the ESTATE OF GLENN HOLLINGSWORTH; EDWIN L. BURNETT, III; VIABLE CORP.; GARY LAWRENCE; KEITH MEYERS; MEYERS APPRAISAL SERVICES, LLC; and DANIEL HILLA, III, Defendants. |
Bowden & Laws, PC by Edwin W. Bowden for Plaintiff BDM Investments.
Broadwell Phillips Potter, PLLC by Samuel B. Potter for Defendant Glenn Hollingsworth.
Hodges & Coxe, PC by C. Wes Hodges, II and Sarah Reamer for Defendants Lenhil, Inc., Lennon Hills, L.L.C., Edwin L. Burnett, III, Viable Corp., and Daniel Hilla, III.
Cranfill Sumner & Hartzog, LLP by Richard T. Boyette and Meghan N. Knight for Defendant Gary Lawrence.
{1} THIS MATTER is before the court on six motions: (1) Plaintiff BDM Investments' Motion for Summary Judgment Against Lennon Hills Defendants; (2) Plaintiff BDM Investments' Motion for Summary Judgment Against Estate of Glenn Hollingsworth; (3) Defendant Judith T. Hollingsworth's, as Executrix of the Estate of Glenn Hollingsworth, Motion for Summary Judgment on All Claims; (4) Defendants Lenhil, Inc., Lennon Hills, LLC, Viable Corp., Edwin L. Burnett, III, and Daniel Hilla, III's Motion for Summary Judgment; and (5) Defendant Gary Lawrence's Motion for Summary Judgment-all made under Rule 56 of the North Carolina Rules of Civil Procedure ("Rule(s)"); and (6) Plaintiff BDM Investments' Motion to Amend Complaint and to Rescind and/or Amend Prior Order ("Motion to Amend") made under Rules 15 and 54(b).
{2} For the reasons explained below: (1) Plaintiff BDM's Motion for Summary Judgment Against Lennon Hills Defendants is DENIED; (2) Plaintiff BDM's Motion for Summary Judgment Against Estate of Glenn Hollingsworth is DENIED; (3) Defendant Judith T. Hollingsworth's, as Executrix of the Estate of Glenn Hollingsworth, Motion for Summary Judgment on All Claims is GRANTED in part and DENIED in part; (4) Defendants Lenhil, Inc., Lennon Hills, LLC, Viable Corp., Edwin L. Burnett, III, and Daniel Hilla, III's Motion for Summary Judgment is GRANTED in part and DENIED in part; (5) Defendant Gary Lawrence's Motion for Summary Judgment is GRANTED; and (6) BDM's Motion to Amend is GRANTED in part and DENIED in part.
{3} Plaintiff BDM Investments ("BDM"), a partnership organized by three practicing attorneys for the purpose of holding real estate assets and investments, seeks rescission of a land sale and damages related to its investment in undeveloped residential lots in the Lennon Hills subdivision in Brunswick County, North Carolina.
{4} As noted in a prior Order, BDM "joined as Defendants essentially every individual or entity that had anything to do with or was necessary to complete" BDM's lot purchase. BDM Invs. v. Lenhil, Inc., 2012 NCBC LEXIS 7, at *2 (N.C. Super. Ct. Jan. 18, 2012). At the outset of this case, BDM alleged a vast conspiracy among all Defendants to induce BDM to purchase lots. Most of the allegations supporting that claim centered around fraudulent acts allegedly perpetrated by some Defendants on individuals and entities entirely uninvolved in this litigation.
{5} Discovery has ended and the Parties have submitted a voluminous record in support of the various summary judgment motions now pending before the court. After tedious review of that record, the court concludes that BDM may proceed to trial on much more limited issues than those raised in its pleadings. Out of the multitude of BDM's initial allegations, the evidence reveals one possible defect in the sales process that, if a jury finds caused the purchase, may allow BDM to rescind the transaction.
{6} BDM filed its Complaint in Brunswick County on February 28, 2011. The case was designated as a Complex Business Case on April 8, 2011 and assigned to the undersigned on April 14, 2011. Plaintiffs later filed a Second Amended Complaint, the Parties filed numerous responsive pleadings and motions to dismiss, and the court entered its Order resolving those matters on January 18, 2012. The case then progressed into discovery, and the Parties filed the current motions over the course of last summer. The motions have been fully and extensively briefed (with leave of court for expanded word limitations), the court heard oral argument on December 17, 2013, and the motions are ripe for disposition.
{7} The court does not make findings of fact when ruling on a motion for summary judgment. Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26 N.C.App. 138, 142, 215 S.E.2d 162, 164–65 (1975). It is, however, appropriate for the court to describe the undisputed facts or lack of facts the record discloses in order to provide context for the court's ruling on the motion. The court believes the following facts are uncontested.[1]
{8} BDM is a general partnership of three practicing attorneys that holds various real estate assets. (King Dep. 8:6–21, Nov. 8, 2012 (hereinafter "King I").) Kenneth King ("King"), a prior Plaintiff in this case, managed BDM and represented it in the transaction at issue.[2] (King I 8:22–9:7.)
{9} Glenn Hollingsworth ("Hollingsworth") served as King's personal accountant in the 1990s and early 2000s, but never did any accounting work for BDM. (King I 209:18–213:20.) Hollingsworth passed away during the pendency of this litigation and his estate has been substituted as a Defendant. Defendant Viable Corp. ("Viable") employed Hollingsworth during the relevant time period. (Burnett Dep. 26:17–27:24.) Hollingsworth had a North Carolina real estate license during the relevant time period. (Aff. Judith Hollingsworth ¶ 19.)
{10} Defendants Lenhil, Inc. ("Lenhil") and Lennon Hills, LLC were created to own, develop, and sell lots in Lennon Hills, a residential subdivision in Brunswick County, North Carolina. (Def. Lenhil, Inc.'s Resps. Pl.'s First Req. Admis. ¶ 1.)
{11} Defendant Edwin L. Burnett ("Burnett") runs several real estate companies and business ventures in Brunswick County. (Burnett Dep. 14:24–18:7.) He is part-owner of Lenhil and Lennon Hills, LLC. (Def. Lenhil, Inc.'s Resps. Pl.'s First Req. Admis. ¶ 1; Burnett Dep. 83:10–15.) Burnett had a North Carolina real estate license during the relevant time period. (Burnett Dep. 12:5–24.)
{12} Defendant Daniel Hilla ("Hilla") is an officer, director, and shareholder of Lenhil and Lennon Hills, LLC, both of which he co-owns with Burnett. (Aff. Daniel Hilla ¶ 3; Burnett Dep. 83:10–15.)
{13} Burnett established and operates Viable for tax purposes as a pass-through entity for some of his business and real estate dealings. (Burnett Dep. 19:13–20:23.) Burnett is its sole owner and shareholder. (Burnett Dep. 19:13–15.)
{14} Defendant Gary Lawrence served as BDM's closing attorney and escrow agent in the land transaction at issue. (King I 27:1–27:17, 29:23–30:19; Gary Lawrence Dep. 122:8–13.)
{15} BDM signed a homesite purchase agreement with Lenhil to buy ten residential lots in Lennon Hills for $850, 000 on December 5, 2006. (Burnett Dep. Ex. 17, Dec. 10, 2012; King I 232:22–24.) The sale closed on March 1, 2007. (King I 232:7–21.) Although BDM alleges eleven different causes of action against seven Defendants, BDM's central contention is that it was improperly induced to purchase lots in Lennon Hills because of undisclosed conflicts of interest and collusion between the Defendants. The crux of the claim is that Hollingsworth was a dual agent who did not disclose his agency relationship with the seller. There are factual disputes over whether Hollingsworth was an agent for either buyer or seller in this transaction.
{16} In September 2005, Hollingsworth mailed Burnett a letter offering him real estate development consultation services. (Burnett Dep. 35:12–36:18.) Burnett denies that he ever engaged Hollingsworth in that capacity, insists that the letter was a joke, and maintains that he, through Viable, only employed Hollingsworth for tax and accounting work. (Burnett Dep. 35:12–40:10.)
{17} At some point, Hollingsworth approached Burnett and said he had two groups of potential buyers for lots in Lennon Hills. (Burnett Dep. 116:24–117:7.) Burnett said he would "take care" of Hollingsworth if he delivered buyers. (Burnett Dep. 116:24–117:7.) Burnett denies knowing that Hollingsworth had a North Carolina real estate license at time. (Burnett Dep. 133:5–19.) Rather, Burnett indicates he used his own real estate license to enable Viable to receive half of the sales commission in the BDM transaction. (Burnett Dep. 12:5–24, 51:14–52:12, 129:10–25.)
{18} BDM contends that Hollingsworth served as its agent in the transaction and arranged the sale on its behalf. (King I 173:8–17.) King and BDM did not compensate Hollingsworth for his services, nor did they sign a contract with Hollingsworth regarding his role in the transaction. (King I 152:18–23, 174:12–13.) Hollingsworth initially approached King about purchasing lots in Lennon Hills, faxed a map of the subdivision, provided the homesite purchase agreement, selected the lots BDM would purchase, helped arrange financing and appraisals, and picked up and delivered documents in connection with the closing. (King I 153:5–156:16, 168:21–169:12; King Dep. 23:16 – 24:19, Dec. 4, 2012 (hereinafter "King II"); Gary Lawrence Dep. 85:7–87:3.) Hilla, who handled lot pricing, availability, and sales for Lenhil, contends that Hollingsworth did not negotiate the contract price "or any of the other terms of the BDM contract." (Aff. Daniel Hilla ¶¶ 5, 9–11.) Burnett, through Viable, paid Hollingsworth a "consultation fee" equal to the amount of Viable's commission for delivering the purchase agreement to BDM and helping close the deal. (Burnett Dep. 160:13–161:21.)[3]
{19} BDM never asked Hollingsworth if he was...
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