Vieira v. Vice (In re Legacy Dev. SC Grp., LLC)

• Citation: 531 B.R. 583
• Decision Date: 13 May 2015
• Docket Number: C/A No. 12–06435–dd,Adv. Pro. No. 14–80082–dd
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
• Parties: In re, Legacy Development SC Group, LLC, Debtor. Michelle L. Vieira, as chapter 7 trustee for debtor Legacy Development SC Group, LLC, Plaintiff, v. Richard L. Vice and Dinah B. Vice, Defendants.

531 B.R. 583

In re, Legacy Development SC Group, LLC, Debtor.

Michelle L. Vieira, as chapter 7 trustee for debtor Legacy Development SC Group, LLC, Plaintiff

v.Richard L. Vice and Dinah B. Vice, Defendants.

C/A No. 12–06435–dd

Adv. Pro. No. 14–80082–dd

United States Bankruptcy Court, D. South Carolina.

Signed May 13, 2015

Entered May 14, 2015

Legacy Development SC Group, LLC, pro se.

Christine E. Brimm, Barton Law Firm, PA, Columbia, SC, for Plaintiff. Reid E. Dyer, Robert A. Kerr, Jr., Moore & Van Allen, PLLC, Charleston, SC, for Defendants.

AMENDED¹ ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

David R. Duncan, Chief U.S. Bankruptcy Judge, District of South Carolina

This matter is before the Court on a motion for summary judgment filed by plaintiff Michelle L. Vieira, chapter 7 trustee for debtor Legacy Development SC Group, LLC (“Trustee”), on January 16, 2015, and the response of defendants Richard L. Vice and Dinah B. Vice (“Defendants”). The Court scheduled a hearing on the motion on February 24, 2015, but due to inclement weather continued it to March 24, 2015. After careful consideration of the applicable law, arguments of counsel, and evidence submitted, the Trustee's motion for summary judgment is granted. The Court issues the following findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a), made applicable by Fed. R. Bankr.P. 7052.²

I. FINDINGS OF FACT

The following facts are not in dispute:

1. Legacy Development SC Group, LLC (“Legacy” or “Debtor”) is a limited liability company organized and existing under the laws of Florida. Compl. ¶ 1; Answer ¶ 2.

2. Ronald and Beverly LeGrand co-own 53.75% of Legacy. C/A No. 12–06435–dd; Dkt. 12.

3. Legacy and Defendants entered into a real estate purchase agreement on March 26, 2008. Pl.'s Mem. Supp. Mot. Summ. J., Ex. G; Def.'s Obj. Mot. Summ. J., Ex. A.

4. On April 8, 2008, Defendants purchased a parcel of real property from Legacy for $670,000. Compl. ¶ 12; Answer ¶ 7.

5. As part of the transaction, Defendants signed a promissory note (“Note”) in favor of Legacy for $170,000. Compl. ¶ 13; Answer ¶ 8.

6. The Note provides for interest accruing at 5% per annum until the maturity date, and 15% thereafter. Pl.'s Mem. Supp. Mot. Summ. J., Ex. A.

7. The Note also provides that if it is “placed in the hands of an attorney for collection or is collected through any legal proceedings, Borrower promises to pay all expenses of collection and reasonable attorney's fees incurred by Lender.” Id.

8. In November 2008, Defendants received a letter from LeGrand verifying the payoff amount of the Note and advising them of the option to pay off the Note early at a discount. Def.'s Obj. Mot. Summ. J., Ex. B.

9. On October 16, 2012, an involuntary petition under chapter 7 of the Bankruptcy Code was filed against Legacy. C/A No. 12–06435–dd; Dkt. 1. The Court entered the Order for Relief on November 13, 2012, and Michelle Vieira was appointed trustee. Id .; Dkt. 7.

10. The Note matured on April 15, 2013. Pl.'s Mem. Supp. Mot. Summ. J., Ex. A. Defendants have not made any payments on the Note. Compl. ¶ 18; Answer ¶ 11.

11. Sometime after it matured, the Trustee provided written notice to Defendants of the default and made a written demand for payment. Compl. ¶ 19; Answer ¶ 12.

12. Defendants have not paid the Note and refuse to pay. Compl. ¶ 20; Answer ¶ 13.

13. On August 8, 2014, the Trustee filed this adversary proceeding to enforce the Note. Dkt. 1.

14. Defendants timely responded, conceding the underlying facts asserted by the Trustee but arguing that the Note is unenforceable due to the circumstances surrounding Defendants' signing of the Note and real estate purchase agreement. Dkt. 5. In addition, but only for the purpose of summary judgment, the Court presumes the truth of the following facts asserted by the non-moving party and not conceded by the plaintiff:

15. In late 2007, Defendant Ronald Vice attended a seminar conducted by Ronald LeGrand and learned about Legacy's development, Legacy Estates at Barefoot, in North Myrtle Beach, South Carolina. Def.'s Obj. Mot. Summ. J., Aff. Vice ¶¶ 3–4.

16. Shortly thereafter, Defendants visited Legacy Estates at Barefoot and met with Kenneth H. Gwynn (“Gwynn”), Legacy's manager.Id . ¶¶ 4–6.

17. Gywnn provided Defendants with marketing materials for the development and told Defendants that they would be entitled to amenities, including a $75,000 membership to the Dye Country Club at Barefoot, a Salmon Falls trip for two, spa privileges, and concierge services upon purchasing a lot in the development. Id . ¶¶ 6, 7.

18. Defendants bought the property with the intention of building a house on it. Id . ¶ 16.

19. Defendants were told by Gwynn that the portion of the purchase price represented by the Note was “for the purpose of marketing.” Id. ¶ 10. Gywnn represented that the Note would be enforced only upon sale of the property. Id .

20. After Defendants received notification of the payoff option from LeGrand in 2008, Defendants contacted Gwynn, who confirmed that they only need pay the Note if the property was sold. Id . ¶ 14.

21. Defendants have never received the promised amenities and the development has not been completed as was represented in the marketing materials. Id . ¶ 15.

II. Jurisdiction and Authority

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334 and 157(a). Venue is proper under 28 U.S.C. § 1409. Pursuant to 28 U.S.C. § 157(a), the United States District Court for the District of South Carolina has referred the bankruptcy case and this adversary proceeding to this Court. The parties agree that this a core proceeding under 28 U.S.C. § 157(b)(2)(A), (E), and (O). While the cause of action is one for breach of contract arising under state law, the parties have consented to the Court entering a final judgment on the motion for summary judgment.

III. Summary Judgment Standard

Summary judgment is appropriate when the “depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials ... show that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c) (made applicable to bankruptcy proceedings by Fed. R. Bankr.P. 7056 ). A genuine dispute of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The role of the judge in deciding summary judgment is “not himself to weigh the evidence ... but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249, 106 S.Ct. 2505.

The party requesting summary judgment must demonstrate the absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This initial burden requires the moving party to identify those portions of the record that it believes demonstrate the absence of a genuine dispute. Celotex, 477 U.S. at 323, 106 S.Ct. 2548 ; see also Anderson, 477 U.S. at 249, 106 S.Ct. 2505. The nonmoving party must then produce “specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324, 106 S.Ct. 2548 ; see Fed R. Civ. P. 56(e). If the nonmoving party fails to provide evidence supporting an essential element of its case, then the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The Court must view the facts and draw reasonable inferences in a light most favorable to the non-moving party. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994) (citations omitted).

IV. Arguments of the Parties

The Trustee argues that the Note, by its terms, is due, along with accrued interest, collection costs, and attorney fees. The Trustee argues that the evidence Defendants seek to present in contesting the enforceability of the Note is barred by the parol evidence rule. Because the parties do not otherwise dispute the validity and written terms of the Note and the real property purchase agreement, the Trustee argues that summary judgment is appropriate.

Defendants concede that extrinsic evidence to a contract is generally barred by the parol evidence rule. However, they argue that extrinsic evidence is admissible here because (1) it is evidence that Defendants were fraudulently induced into entering the contact; and (2) it is evidence of a subsequent agreement that Defendants are not obligated to pay the Note. Defendants further assert that there exists a question of fact as to whether the Note is enforceable because (1) in the course of negotiating the Note, Legacy breached the covenant of good faith and fair dealing; and (2) the purpose of the Note was to inflate the property values of the other lots, thus the doctrine of in pari delicto bars recovery.

V. Discussion

Defendants correctly assert that the Trustee as Plaintiff stands in shoes of the Debtor and is subject to any defenses that could be brought against it. Grayson Consulting Inc. v. Wachovia Securities, LLC (In re Derivium Capital, LLC), 716 F.3d 355, 367 (4th Cir.2013). However, Defendants have not shown a material factual dispute permitting the asserted defenses to survive summary judgment. Admission of the evidence that might create a dispute as to the enforceability of the Note is barred by the parol evidence rule and there is no evidence in the record supporting Defendants' additional defenses. Summary judgment is therefore appropriate in favor of the Trustee.

A. Parol Evidence Rule

The Trustee argues that the Note is an enforceable contract and that by refusing to pay the Note Defendants have breached the contract. Defendants do not dispute the existence of a contract that by its written terms is due and owing. Instead, Defendants argue that statements and evidence extrinsic to...