Norment v. Rabon
| Decision Date | 07 July 2022 |
| Docket Number | 19 CVS 7014 |
| Citation | 2022 NCBC 32 |
| Parties | JOHN NORMENT, Plaintiff, v. ROBERT GARY RABON, JAMES MIKLOSKO, ADVANTAGE LENDING LLC, CAVALIER MORTGAGE GROUP, INC., STEEL HOLDINGS, LLC and ADVANTAGE LENDING, a common law partnership, Defendants. |
| Court | Superior Court of North Carolina |
Oak City Law LLP by Robert E. Fields III, Samuel Piñero and Caroline L. Trautman, for Plaintiff John Norment
The Farrell Law Group, P.C. by Richard W. Farrell, for Defendants Robert Gary Rabon, James Miklosko, and Advantage Lending LLC.
THIS MATTER comes before the Court on Defendants' Motion for Summary Judgment as to Each of the Plaintiff Norment's Causes of Action ("Motion," ECF No. 160). The Court, having considered the Motion, the briefs, the arguments of counsel, and all applicable matters of record CONCLUDES that the Motion should be GRANTED, in part, and DENIED, in part, for the reasons set forth below.
uncontested." Hyosung USA Inc. v. Travelers Prop. Cas. Co. of Am., 2021 NCBC LEXIS 115, at **3 (N.C. Super. Ct. Dec. 16, 2021) (cleaned up). However, the Court notes throughout this opinion the existence of key factual disputes that bear upon Defendants' Motion.
2. The facts giving rise to this case arise from the business relationship between three individuals-John Norment, James Miklosko, and Robert Gary Rabon. Norment and Miklosko were the sole directors and 50% co-owners of Cavalier Mortgage Group, Inc. ("Cavalier"), a company that served as a licensed mortgage broker in North Carolina. (ECF No. 109.17, at pp. 16, 18.) Cavalier subsequently became a mortgage lender at some point in the early 2000s. (Id. at p. 18.) Cavalier operated primarily in the mortgage refinancing business. (ECF No. 67.2, at ¶ 5.)
3. By way of background, mortgage brokers licensed in North Carolina must maintain a minimum capital reserve of $25,000. In order for a company to obtain licensure as a mortgage lender, however, the minimum capital reserve is $1,000,000.
4. At some point in 2014, Norment and Miklosko developed plans to combine Cavalier's business with those of a separate company, Advantage Lending, LLC ("Advantage"), that was owned by Rabon. At the time, Advantage operated as a mortgage broker. (ECF No. 109.15, at p. 37; ECF No. 67.2, at ¶ 7.) A merger between Cavalier and Advantage was proposed, which would allow Cavalier "the opportunity to enter the purchase mortgage business, which was more stable than the mortgage refinance business." (ECF No. 67.2, at ¶ 7.) Norment also testified that it would benefit Cavalier to have access to brokers that were affiliated with Advantage. (ECF No. 61.7, at ¶ 9.) Furthermore, the proposed merger would also benefit Advantage by virtue of Cavalier transferring its mortgage lender license to Advantage. At the time, Rabon was the sole member and manager of Advantage, which was governed by an Operating Agreement that included a description of the process by which new members could be admitted to the company and by which the Operating Agreement could be amended. (ECF No. 23.2, at p. 26, 50.)
5. An attorney, Sid Aldridge, prepared two documents in connection with the proposed transaction between Cavalier and Advantage that are pertinent to the present Motion: (a) an Agreement for Subscription for Membership Interest in Advantage LLC ("Subscription Agreement); and (b) an Agreement to Admission of Members and Amendment to Operating Agreement of Advantage LLC ("Admission Agreement") (collectively, the "Agreements"). (ECF No. 20.1, at pp. 1, 4.)
6. The Subscription Agreement provided that Norment and Miklosko would each contribute $1,000,000 in cash and property to Advantage in exchange for obtaining a one-third membership interest in the company. (ECF No. 20.1, at p. 1.) Notably, however, the Subscription Agreement contained a provision stating in pertinent part as follows:
If the NCCOB [North Carolina Commissioner of Banks] has not approved this transaction by July 31, 2014, the admission of Subscribers[1] shall be null and void, and the Company shall return all consideration paid by Subscribers to each of them, and Subscribers shall return to the Company any distributions received by them from the Company with respect to their membership interest.
(Id. at p. 2.)
7. The Admission Agreement purported to amend Advantage's Operating Agreement to admit Norment and Miklosko as additional members of Advantage per the terms of the Subscription Agreement. (Id. at p. 4.) However, the Admission Agreement also stated the following:
Pursuant to the terms of the Subscription Agreement, the admission of Purchasers[2] shall be null and void if the [NCCOB] has not approved the admission of Purchasers by June 31, 2014.[3] In such case, all consideration paid by Purchasers shall be returned to them, and Purchasers shall return to the Company any distributions paid to them by the Company with respect to their Membership Interests.
(Id. at p. 5.)
8. The Admission Agreement further stated that "[e]xcept as expressly set forth in this Amendment, the Operating Agreement is hereby ratified and reaffirmed." (Id. at p. 4.) It also provided that "Purchasers hereby consent to and agree to be bound by the terms of the Operating Agreement of the Company, as amended by this Amendment." (Id. at pp. 3, 5.) Norment, Miklosko, and Rabon each signed the Admission Agreement. (Id. at p. 5.)
10. In order to comply with their monetary obligations as set out in the Subscription Agreement, Norment and Miklosko decided to distribute real estate and cash from Cavalier to themselves, after which they would transfer the property to Advantage and that this transfer would satisfy their required capital contributions. (ECF No. 61.7, at ¶ 2.) In addition, Norment and Miklosko "agreed to continue operating Cavalier until Advantage . . . obtained necessary licenses and government approvals to take over the mortgage lending business of Cavalier." (ECF No. 61.7, at ¶ 3.) Norment testified that he and Miklosko were also in agreement that once Advantage gained the requisite licenses and approvals, Cavalier would be dissolved, at which time Cavalier's remaining assets would be distributed between Norment and Miklosko. (Id.)
11. Cavalier was eventually dissolved on 17 July 2015. (ECF No. 109.17, at p. 33.) Miklosko testified that after dissolution, Cavalier paid out wages to its employees who had moved over to Advantage. (Id. at p. 109-11.) Upon Cavalier's dissolution, its loan officers began originating loans for Advantage. (Id. at pp. 113- 14.) Miklosko further stated that upon the dissolution of Cavalier, he gave Norment "bank statements of the close-out of Cavalier, [and] gave him the final checks that came out of Cavalier for whatever balances were left when the accounts were closed, which were small dollar amounts." (ECF No. 109.18 at pp. 218-19.) Norment maintains, however, that "additional capital was transferred into Advantage Lending, LLC that should have been distributed to [Norment] and . . . Miklosko[.]" (ECF No. 162.2, at ¶ 2.)
12. No action was taken by the NCCOB by 31 July 2014. However, the NCCOB issued Advantage a license to conduct mortgage lending on 27 October 2014. (ECF No. 103.1; ECF No. 103.3.) This approval from the NCCOB was received prior to Cavalier's July 2015 dissolution. (ECF No. 67.1, at ¶ 9.)
13. In July of 2015, Advantage received HUD approval to originate FHA loans. (ECF No. 67.1, at ¶ 2.) As a result, Advantage was now able to originate such loans itself without having to rely any longer on Cavalier's prior approval, effectively resulting in the transfer of all of Cavalier's business to Advantage. (Id.)
14. Between 2014 and 2016, Norment continued his work for Advantage in generating mortgage-related business. (ECF No. 61.7, at ¶¶ 7, 14.) Norment testified, however, that he faced significant difficulties at Advantage, including lack of "access to . . . real estate agents, and especially brokers-in-charge"-access that Norment had expected to receive upon the initiation of the merger. (Id. at ¶ 6.) Norment stated that he had anticipated he would continue to play the large role he had occupied at Cavalier while also receiving the benefit of access to brokers through Rabon's connections. (Id. at ¶¶ 6-9.) Miklosko and Rabon, conversely, both testified that they were not aware of any representations to Norment that he would have access to any brokers-in-charge while at Advantage. (ECF No. 67.1, at ¶ 11; ECF No. 67.2, at ¶ 17.) Norment also stated that his role at Advantage was limited to loan refinancing and that he was excluded from other types of business for the company. (ECF No. 61.7, at ¶ 9.)
15. Advantage stopped paying Norment in December 2015. (Id. at ¶ 11.) Miklosko testified that Norment "totally stopped coming to work" and that no discussions regarding Norment's salary occurred thereafter. (ECF No. 109.18, at pp. 200-01.)
16. The parties disagree on a number of issues relating to the provision in the Agreements requiring NCCOB approval by 31 July 2014 and its effect on Norment's decision to cease his work for Advantage....
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