Lockerman v. South River Electric Membership Corp.

Decision Date08 June 2015
Docket Number11 CVS 152
Citation2015 NCBC 57
PartiesTED B. LOCKERMAN, ADMINISTRATOR D.B.N. OF THE ESTATES OF ELLEN DUDLEY SPELL, DECEASED, And SULIE DANIELS SPELL, DECEASED, On Behalf of the Estates and On Behalf of All Others Similarly Situated, Plaintiff, v. SOUTH RIVER ELECTRIC MEMBERSHIP CORPORATION, a North Carolina Electric Membership Cooperative, Defendant.
CourtSuperior Court of North Carolina

Stevens Martin Vaughn & Tadych, PLLC by K. Matthew Vaughn and Michael J. Tadych and Andrew M. Jackson, Attorney by Andrew M. Jackson for Plaintiff Ted B. Lockerman, Administrator D.B.N. of the Estates of Ellen Dudley Spell, Deceased, and Sulie Daniels Spell, Deceased, on Behalf of the Estates and on Behalf of All Others Similarly Situated.

Smith and Christensen, LLP by Aaron M. Christensen and W. Britton Smith Jr. for Defendant.

James L. Gale, Chief Special Superior Court Judge

{1} THIS MATTER is before the Court on Defendant's Third Motion for Summary Judgment ("Motion for Summary Judgment") and the corresponding Plaintiff's Motion to Strike Affidavits and Reply Brief ("Motion to Strike") (collectively, the "Motions"). For the reasons expressed below, the Motion for Summary Judgment is GRANTED. The Motion to Strike is DENIED.


{2} Plaintiff seeks to represent a class consisting of the estates of deceased members of South River Electric Membership Corporation ("SREMC") whose capital credits with SREMC were retired using a discount rate. Ruling upon SREMC's earlier summary judgment motions, the Court held that SREMC did not owe the estates a fiduciary duty and that it had the legal authority to adopt the program by which it would retire capital credits at a discounted rate. The Court did not foreclose potential claims for retirements that did not comply with the terms of the program as SREMC had adopted it. SREMC's current Motion for Summary Judgment rests on two primary assertions: (1) the claims related to any capital account retirements occurring more than three years prior to the filing of the Class Action Complaint are time-barred, except the claim of unfair and deceptive trade practices ("UDTP"), which is time-barred for all capital account retirements occurring more than four years prior to the filing of the Class Action Complaint, such that all claims brought on behalf of the Estate of Ellen Dudley Spell are time-barred; and (2) the claims brought on behalf of the Estate of Sulie Daniels Spell have no merit, although brought within the applicable statutes of limitations.


{3} Plaintiff Ted B. Lockerman is Administrator de bonis non for the estates of Ellen Dudley Spell ("Ellen Estate") and Sulie Daniels Spell ("Sulie Estate") (collectively, the "Estates"), and seeks to represent a class of similarly situated estates.

{4} Ellen Dudley Spell was a citizen and resident of Sampson County, North Carolina and a member of SREMC at the time of her death on October 3, 2002.

{5} Sulie Daniels Spell was also a citizen and resident of Sampson County, North Carolina and a member of SREMC at the time of her death on April 28, 2009.

{6} Defendant SREMC is a North Carolina Electric Membership Cooperative.


{7} Plaintiff filed his Class Action Complaint on February 9, 2011. Plaintiff brings the action as the representative of two estates: (1) the Estate of Ellen Dudley Spell, Deceased; and (2) the Estate of Sulie Daniels Spell, Deceased. Plaintiff asserted the following causes of action: (1) declaratory judgment, (2) breach of fiduciary duty, (3) conversion, (4) unjust enrichment, (5) ultra vires corporate acts, (6) intra vires corporate acts, (7) unfair and deceptive trade practices ("UDTP"), and (8) breach of contract.

{8} This matter was designated a complex business case on March 14, 2011, and assigned to the undersigned on March 16, 2011.

{9} On May 13, 2011, Plaintiff voluntarily dismissed his fifth and sixth causes of action for ultra vires and intra vires corporate acts, respectively.

{10} Defendant filed its Affirmative Defenses, Answer and Counterclaims on November 4, 2011, to which Plaintiff replied on November 23, 2011.

{11} Pursuant to a Phase One Case Management Order entered on October 21, 2011, the parties submitted their Phase I Joint Stipulations of Fact on November 23, 2011. As required by that Order, SREMC submitted two summary judgment motions on December 27, 2011, presenting two limited questions: (1) "whether cooperatives may lawfully discount special retirements to the estates of deceased former members" in North Carolina (Def.'s First Rule 56 Mot. Summ. J. 1); and (2) "whether cooperatives owe fiduciary duties to the estates of deceased former members with respect to the timing and procedures for retiring capital credits" (Def.'s Second Rule 56 Mot. Summ. J. 1).

{12} On August 8, 2012, the Court entered an Order granting SREMC's two motions, holding that SREMC had the authority to adopt a program for early retirement of member capital credits on a discounted basis, and that SREMC owed its members no fiduciary duty in connection with the capital accounts. Plaintiff appealed the Court's Order. The North Carolina Court of Appeals dismissed the appeal as interlocutory. At this time, the following claims have not yet been ruled upon: Claim 1―declaratory judgment; Claim 3― conversion; Claim 4―unjust enrichment; Claim 7―UDTP; and Claim 9―breach of contract.

{13} The Court allowed limited discovery to develop a record to allow consideration of additional controlling issues of law.

{14} Defendant filed its Third Motion for Summary Judgment on January 9, 2014.

{15} Plaintiff filed his Motion to Strike on September 4, 2014.

{16} The Motions have been fully briefed and argued and are ripe for ruling.


{17} The Court does not make findings of fact when ruling on a motion for summary judgment. See 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." BDM Invs. v. Lenhil, Inc., 2014 NCBC LEXIS 32, at * 3 (N.C. Super. Ct. July 21, 2014). The Court believes the following facts to be uncontested.[1]

A. SREMC's Capital Credit Program

{18} SREMC is required by its charter to exist for the benefit of its members as a not-for-profit cooperative. As a cooperative, SREMC requires that its members furnish capital to finance SREMC's business. Any amounts received that exceed operating costs and expenses are credited to capital accounts in favor of each member on an annual basis. There is no actual cash account maintained on a member-by-member basis, but SREMC's bylaws provide that "Capital Credits shall be treated as though the Cooperative paid the Capital Credit amounts to each Member in cash pursuant to a legal obligation, and each Member furnished the Cooperative Capital in the corresponding Capital Credit amounts." (Phase I Stipulations of Fact ("Phase I Stips.") Ex. I § 7.02(A).) At a member's death, any property right in the capital credits belongs to the deceased member's estate.

{19} SREMC is obligated to return accumulated capital credits to its members and former members, subject to provisions of its bylaws. SREMC's policy is to make capital credit retirements on a dollar-for-dollar basis nineteen years after those credits are allocated to a member. SREMC is not required to and does not pay or allocate accrued interest to capital accounts. Prior to 2001, SREMC did not discount retirements of capital credits occurring before the nineteen-year expiration.

{20} In 2001, SREMC adopted bylaws that established a program to allow for the optional retirement of a deceased member's capital account on a discounted basis. At first, SREMC considered a fixed discount rate of 6 percent, but when actually implemented, the bylaws provided for a program using a variable discount rate.

{21} If an SREMC member passed away, SREMC retired the capital credits at a discounted rate to any patron upon written request from the legal representative of the estate. The SREMC Board of Directors has discretion to prevent the payout if it determines that the payout would adversely affect SREMC's finances. The amount paid during early capital credit retirement is equal to the full amount of a member's accrued capital credits, discounted by a discount rate compounded by the number of years left before natural retirement of the credits. With its 2001 bylaws, SREMC began using The Wall Street Journal prime rate as of December 31st of the year prior to the discounting. Once discounted, any payment due to the deceased member's estate would be offset by any unpaid services bill and the remainder paid to the member's estate.

{22} SREMC developed a form for use when applying for early retirement of a deceased member's capital credit. Although the form changed periodically, the following language remained virtually unchanged as it pertained to the Estates' applications:

I do hereby request that South River Electric Membership Corporation refund the aforesaid estate all credits accruing to the account of the deceased growing out of or in connection with the patronage capital which the deceased furnished to the Cooperative through the last year for which such credits have been allocated. I understand that this Application represents a request for an early retirement of the stated capital credits and that a discount factor (approved by the Cooperative's Board of Directors) will apply to this retirement and refund. The present discount factor is __%.

(Phase I Stips. Exs. A, D.)

{23} Although the typewritten portion of the form makes clear that a discount factor would be employed, in many instances SREMC staff would...

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