Odell v. Legal Bucks, LLC

• Decision Date: 02 September 2008
• Docket Number: No. COA07-1094.,COA07-1094.
• Citation: 665 S.E.2d 767
• Parties: Nancy E. ODELL, individually and on behalf of those similarly situated, Plaintiff-Appellant, v. LEGAL BUCKS, LLC, a North Carolina Limited Liability Company, James Keith Tart and Lynn Davies Tart, Defendants-Appellees.
• Court: North Carolina Court of Appeals

665 S.E.2d 767

Nancy E. ODELL, individually and on behalf of those similarly situated, Plaintiff-Appellant, v. LEGAL BUCKS, LLC, a North Carolina Limited Liability Company, James Keith Tart and Lynn Davies Tart, Defendants-Appellees.

No. COA07-1094.

Court of Appeals of North Carolina.

September 2, 2008.

Appeal by Plaintiff from order dated 25 May 2006 and from order and judgment entered 28 December 2006 by Judge Peter M. McHugh, and from final order and judgment entered 30 April 2007 by Judge Anderson D. Cromer in Superior Court, Rockingham County. Heard in the Court of Appeals 19 February 2008.

Baron & Berry, L.L.P., by Frederick L. Berry; Robertson Medlin & Blocker, PLLC, by John F. Bloss, Greensboro, for Plaintiff-Appellant.

Womble Carlyle Sandridge & Rice, PLLC, by Hada de Varona Haulsee, Winston-Salem, for Defendants-Appellees.

McGEE, Judge.

The record in this case shows that Nancy E. Odell (Plaintiff) was involved in a motor-vehicle collision in June 2001. Plaintiff retained counsel and pursued a personal injury claim against the driver of the second motor vehicle. Although Plaintiff expected to recover at least thirty thousand dollars from her personal injury claim, Plaintiff was having financial difficulties and approached Legal Bucks, LLC (Defendant Legal Bucks) to obtain an advance.

Defendant Legal Bucks is a Limited Liability Company. James Keith Tart (Defendant James Tart) and Lynn Davies Tart (Defendant Lynn Tart) are member-managers of Defendant Legal Bucks (collectively, Defendants). Defendant Legal Bucks is in the business of "litigation funding." Specifically, Defendant Legal Bucks advances money to borrowers who are expecting to recover in pending tort claims, but who need money for personal expenses before their claims go to trial or settle. When a potential borrower approaches Defendant Legal Bucks to obtain an advance, Defendants James Tart and Lynn Tart investigate the borrower's legal claim to determine the merit of the borrower's claim, how much the borrower is likely to recover, and, if an advance is made, the appropriate amount of the advance. The borrower then repays Defendant Legal Bucks, with interest, out of the proceeds of his or her recovery.

After investigating Plaintiff's personal injury claim, Defendant James Tart agreed to advance Plaintiff three thousand dollars. The parties executed a "Transfer and Conveyance of Proceeds and Security Agreement" (the Agreement) on 28 March 2003. The Agreement provided, in pertinent part:

[F]or and in consideration of the sum of Three Thousand and No/100 Dollars ($3,000.00) (the "Advance") ... Legal Bucks and Plaintiff do hereby agree as follows:

....

2. Plaintiff unconditionally and irrevocably transfers and conveys to Legal Bucks all of Plaintiff's control, right, title and interest in the first monies paid to Plaintiff from the Proceeds [of Plaintiff's personal injury claim] as follows:

(A) If Legal Bucks is paid prior to July 1, 2003: $4,200 (the amount of the Advance ($750) plus 40% of the Advance ($300))¹; and

(B) If Legal Bucks is paid on or after July 1, 2003: The amount from Subparagraph A ($4,200) plus $234 (7.8% of the Advance) for each month thereafter and until Legal Bucks is paid (the "monthly assignment"). The monthly assignment will occur the first day of each month, beginning July 1, 2003. Under no circumstances, however, shall the amount owed under this Subparagraph exceed three hundred twenty-five percent (325%) of the Advance ($9,750).

3. Plaintiff hereby grants to Legal Bucks a security interest in the Proceeds of the Litigation ... in order to secure the conveyance, subject to the terms and conditions of this Agreement[.]

4. This Agreement is expressly intended to transfer, convey and relinquish control over only a specified portion of the Proceeds which may flow from and are received as a result of the Litigation, to wit: the Security Interest. This Agreement is not an assignment, nor a purchase of any right, chose in action, cause of action, or claim which Plaintiff may have or possess as against any responsible party, respondent or defendant referred to herein. No control, input, influence, right or involvement of any kind as concerns any claim, right, or interest of Plaintiff in the Litigation is contemplated by any party to this Agreement.

5. Except as expressly provided for herein, this Agreement is contingent, speculative and without recourse on the part of Legal Bucks.

6. If there is no recovery of Proceeds by Plaintiff, then Legal Bucks shall receive NOTHING. If the Proceeds do not allow for payment of the Security Interest in full, Plaintiff shall ... satisfy the Security Interest to the maximum extent possible from the Proceeds and owe nothing further. ...

. . . .

13. In the event that Plaintiff terminates or otherwise breaches the covenants, conditions or terms of this Agreement, Plaintiff shall pay liquidated damages to Legal Bucks in the amount of three times (3x) the Security Interest[.]

Plaintiff's personal injury claim settled for $18,000.00 in May 2005. Pursuant to subparagraph (2)(B) of the Agreement, Plaintiff owed Defendant Legal Bucks $9,582.00 at the time her claim settled. Plaintiff's debt reached the contractual cap of $9,750.00 on 1 June 2005.

Rather than repay Defendant Legal Bucks out of the proceeds of her settlement, Plaintiff filed a complaint on 15 June 2005 against Defendants alleging, inter alia, that the Agreement: was usurious; constituted champerty and maintenance; constituted unlawful gaming; violated the Consumer Finance Act; and was an unfair and deceptive trade practice. Plaintiff's complaint also included class allegations. The Chief Justice of the North Carolina Supreme Court issued an order on 17 August 2005 designating Plaintiff's case as exceptional and assigning Judge Peter M. McHugh to preside over the case.

Defendants filed an amended answer on 31 August 2005 denying the allegations in Plaintiff's complaint. Defendants also filed a counterclaim for breach of contract and sought $29,250.00 in liquidated damages pursuant to paragraph thirteen of the Agreement.

Plaintiff filed a motion on 27 October 2005 for partial judgment on the pleadings pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(c). Defendants also moved to dismiss Plaintiff's action pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6). The trial court held a hearing on the parties' motions on 22 November 2005. The trial court issued an order on 25 May 2006 granting Defendant's motion with respect to Plaintiff's unlawful gaming claim and two other claims not pertinent to this appeal. The trial court denied Defendants' motion as to Plaintiff's remaining claims, and denied Plaintiff's motion in its entirety.²

Plaintiff and Defendants filed cross-motions for summary judgment on 16 and 17 May 2006 as to Plaintiff's remaining claims for usury, violation of the Consumer Finance Act, champerty and maintenance, and unfair and deceptive trade practices. Plaintiff also filed a motion for class certification. The trial court issued an order and judgment on 28 December 2006 denying Plaintiff's motion for summary judgment in its entirety and granting Defendants' motion for summary judgment in its entirety. The trial court also stated that "[b]ecause this ruling resolves all claims raised by [Plaintiff] in favor of [Defendants] and against [Plaintiff], the Court has not addressed [Plaintiff's] Motion for Class Certification."

Defendants filed a motion for summary judgment on their counterclaim for breach of contract and liquidated damages on 6 March 2007. Plaintiff filed a motion for partial summary judgment on Defendants' counterclaim on 9 March 2007. The trial court issued a final order and judgment on 30 April 2007 granting Defendants' motion for summary judgment on their counterclaim and denying Plaintiff's motion for partial summary judgment. The trial court awarded Defendants $29,250.00 plus post-judgment interest. Plaintiff appeals.

I.

Before we reach the merits of Plaintiff's appeal, we address Defendants' motion for sanctions for Plaintiff's failure to comply with the Rules of Appellate Procedure. Defendants argue that Plaintiff's brief violates a number of the stylistic requirements set out in N.C.R.App. P. 26(g)(1), N.C.R.App. P. 28(b), and in the appendices to the appellate rules. Defendants contend that these violations warrant severe sanctions, including dismissal of Plaintiff's appeal.

We have reviewed Plaintiff's brief and find that it does not contain errors that constitute substantial or gross noncompliance with the appellate rules. See Dogwood Dev. & Mgmt. Co., LLC v. White Oak Transp. Co., 362 N.C. 191, 201, 657 S.E.2d 361, 367 (2008). We therefore do not impose any of the sanctions set out in N.C.R.App. P. 34(b). Id. We now turn to the merits of Plaintiff's appeal.

II.

Plaintiff first argues that the trial court erred by denying Plaintiff's Rule 12(c) motion for judgment on the pleadings, and by granting Defendants' Rule 12(b)(6) motion to dismiss, with regard to Plaintiff's claim that the Agreement is void as an illegal gaming contract. "This court reviews de novo rulings on motions made pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) and (c)." Toomer v. Branch Banking & Tr. Co., 171 N.C.App. 58, 66, 614 S.E.2d 328, 335, disc. review denied, 360 N.C. 78, 623 S.E.2d 263 (2005).

N.C. Gen.Stat. § 16-1, in defining illegal gaming contracts, provides:

All wagers, bets or stakes made to depend upon any race, or upon any gaming by lot or chance, or upon any lot, chance, casualty or unknown or contingent event whatever, shall be unlawful; and all contracts, judgments, conveyances and assurances for and on account of any money or property, or thing in action, so wagered, bet or staked, or to repay, or to secure any money, or property, or thing in action, lent or advanced for the purpose of such wagering, betting, or staking as aforesaid, shall be void.

N.C. Gen.Stat. § 16-1 (2007). Plai...