Northington v. Michelotti

• Decision Date: 19 December 1995
• Docket Number: No. COA95-79,COA95-79
• Citation: 464 S.E.2d 711,121 N.C.App. 180
• Court: North Carolina Court of Appeals
• Parties: William E. NORTHINGTON and Northington Realty Company, Plaintiffs, v. John MICHELOTTI and Advantage Real Estate, Inc., Defendants.

Page 711

464 S.E.2d 711

121 N.C.App. 180

William E. NORTHINGTON and Northington Realty Company, Plaintiffs, v. John MICHELOTTI and Advantage Real Estate, Inc., Defendants.

No. COA95-79.

Court of Appeals of North Carolina.

Dec. 19, 1995.

White and Crumpler by Dudley A. Witt, Winston-Salem, for plaintiffs-appellees.

Jacobson & Beavers by Kenneth R. Jacobson and Robert E. Boydoh, Jr., Greensboro, for defendants-appellants.

WALKER, Judge.

Plaintiff Northington Realty Company (Northington Realty) is a Winston-Salem corporation owned by plaintiff William E. Northington (Northington) and his wife. In April, 1993, the corporation was operating as a Century 21 real estate franchise. Defendant John Michelotti (Michelotti) was the sales manager and broker-in-charge of Northington Realty until his resignation on 19 April 1993. Michelotti stayed on at Northington Realty as an independent contractor/sales agent through the end of the month.

In May 1993, Michelotti sought to purchase an existing Century 21 franchise, but Northington opposed such a purchase. On 20 May 1993, following negotiations regarding future business dealings, Northington and Michelotti signed a document prepared by Northington in his own handwriting. The document read as follows:

This Agreement of Understanding entered into by Mr. John N. Michelotti and Mr. William E. Northington documents an agreement that they have entered into. The agreement is as follows:

1) Michelotti and his wife are operating a Century 21 Real Estate Franchize [sic] known as Century 21 Advantage. Michelotti and his wife will incorporate this franchize [sic] as soon as possible since time is of the essence. The stock issued will be as follows--Northington to receive 65% of the stock and Michelotti to receive 35% of the stock.

2) Northington is operating a Century 21 real estate office known as Century 21 Alliance through a corporation known as Northington Realty. In exchange for the 65% ownership of Century 21 Advantage Northington will transfer ... 35% of their shares to Michelotti. Thus the distribution of the outstanding shares of Northington Realty will be Michelotti 35% and the Northington's [sic] 65%.

3) It is also agreed between the parties that there shall exist an understanding between the parties ... that addresses the issue of:

a) Buy out of one stock holder of the other.

b) [A] non compete agreement between the parties.

c) That ownership in any future business activities in the area of real estate, construction, insurance or real estate support services will be on a 50/50 ownership.

Thereafter, on 28 May 1993, Michelotti formed defendant Advantage Real Estate, Inc. (Advantage Real Estate) as a Century 21 franchise. Plaintiffs immediately began transferring the majority of the corporate assets of Northington Realty to Advantage Real Estate. On 9 June 1993, after meeting with Michelotti and Northington, Michelotti's attorney, Mr. W. McNair Tornow, faxed to Northington's attorney a document labeled "Letter of Intent." This document contained terms reflecting the general information found in the handwritten document of 20 May 1993, along with specific terms regarding the issues raised in Paragraph 3 of the handwritten document. The "Letter of Intent" also contained a provision regarding Northington's agreement to be a passive investor in Advantage Real Estate.

On 2 July 1993, the parties executed a Department of the Treasury Internal Revenue Service Form 2553, requesting the federal government to grant Advantage Real Estate "S corporation" status for tax purposes. This form reflected that Northington owned 65% of Advantage Real Estate and Michelotti owned 35%.

After the Form 2553 was executed, Northington informed Michelotti that he did not agree with the contents of the "Letter of Intent" and that he would not sign it. No stock was ever transferred between the parties.

Plaintiffs instituted this action on 4 November 1993, alleging breach of contract, unjust enrichment, breach of fiduciary duty, a claim for dividends, and punitive damages. Michelotti filed a counterclaim seeking compensation from Northington Realty based on his services as sales manager and broker-in-charge of that corporation. Plaintiffs filed a motion for partial summary judgment on their breach of contract claim. Following a hearing, the trial court granted plaintiffs' motion and ordered that the shares of stock in defendant Advantage Real Estate be issued in accordance with the agreement. Summary judgment is appropriate only when there is no genuine issue of material fact to be resolved, thereby entitling the movant to judgment as a matter of law. Little v. National Service Industries, Inc., 79 N.C.App. 688, 690, 340 S.E.2d 510, 512 (1986). Defendants claim that summary judgment was improper here because there existed a genuine issue of fact as to whether the 20 May 1993 handwritten document constituted the final understanding between the parties. We agree.

In support of their motion for summary judgment, plaintiffs offered the handwritten agreement of 20 May 1993, which they claim clearly and unambiguously provided that Northington would receive 65% and Michelotti 35% of the issued and outstanding shares of defendant corporation. Plaintiffs also submitted a letter from Michelotti to property management clients of Century 21 Alliance dated 28 May 1993 announcing the formation of Century 21 Advantage. Plaintiffs claim this letter indicates that defendants believed they had a contract with plaintiffs, thereby refuting defendants' argument that the 20 May 1993 document was merely an "agreement to agree." Plaintiffs also submitted the IRS Form 2553 signed by both parties and Michelotti's deposition testimony that when he signed the form he was aware that it recited a 65-35 split of Advantage...