Watts v. Slough

• Decision Date: 17 February 2004
• Docket Number: No. COA03-393.,COA03-393.
• Citation: 592 S.E.2d 274,163 NC App. 69
• Parties: Brenda WATTS, Plaintiff, v. Sharon F. SLOUGH, Stephen H. Slough, Individually and as Trustee, Brian K. Sheets and Jeffrey L. Sheets, Defendants.
• Court: North Carolina Court of Appeals

592 S.E.2d 274

163 NC App. 69

Brenda WATTS, Plaintiff, v. Sharon F. SLOUGH, Stephen H. Slough, Individually and as Trustee, Brian K. Sheets and Jeffrey L. Sheets, Defendants.

No. COA03-393.

Court of Appeals of North Carolina.

February 17, 2004.

Hartzell & Whiteman, L.L.P., by Andrew O. Whiteman, Raleigh, for plaintiff-appellee.

Anderson, Johnson, Lawrence, Butler & Bock, L.L.P., by Steven C. Lawrence, Fayetteville, for defendants-appellants.

GEER, Judge.

Plaintiff Brenda Watts filed suit asserting eight claims for relief based on her loss of $243,000 as a result of an investment made in reliance on representations and omissions by defendant Sharon Slough that Ms. Watts contends were materially false and misleading. Defendants appeal from the trial court's entry of partial summary judgment in plaintiff's favor as to two claims for relief and its denial of summary judgment as to the remaining six claims for relief. Because defendants' appeal is interlocutory and does not affect a substantial right, we dismiss the appeal.

In the spring of 2000, Ms. Watts and Ms. Slough discussed possible investment opportunities for Ms. Watts' retirement funds. Ultimately, Ms. Watts agreed to invest in a program involving Global Telelink Services, Inc. ("Global"). Under this program, the investor would purchase from Cord Communications, Inc. telephone switch equipment called a Packet Gateway System ("PGS") and then would lease the PGS to Global in return for monthly payments resulting in a 14% annual return plus one-half percent of lease income. On 17 May 2000, Ms. Watts purchased nine PGS "bundles" at a cost of $243,000.

Plaintiff received distributions totaling $16,569.50 over an eight-month period beginning in June 2000. Payments ceased in March 2001 when Global closed its doors. Ms. Watts learned that on 8 March 2001, the SEC had filed a complaint alleging that this investment program was a "ponzi" scheme that had raised more than $10 million. On 9 March 2001, the United States District Court for the Northern District of Georgia entered an order granting the injunctive relief sought by the SEC, appointing a receiver for Global, and freezing Global's and other entities' assets.

Plaintiff brought suit on 28 March 2002 against Ms. Slough; Ms. Slough's husband, Stephen H. Slough; and Ms. Slough's sons, Brian K. Sheets and Jeffrey L. Sheets. Ms. Watts asserted seven claims for relief against Ms. Slough only: (1) sale of unregistered securities in violation of N.C. Gen.Stat. §§ 78A-24 and 56(a), (2) sale of securities by an unlicensed person in violation of N.C. Gen.Stat. §§ 78A-36(a) and -56(a), (3) fraudulent sale in violation of N.C. Gen.Stat. §§ 78A-8 and -56(a), (4) breach of fiduciary duty, (5) unfair and deceptive trade practices under N.C. Gen.Stat. § 75-1.1, (6) fraud, and (7) negligent misrepresentation. In her eighth claim for relief, Ms. Watts alleged that the transfer of a home owned by Ms. Slough to her sons and the transfer by them to her husband in trust was a fraudulent conveyance under the North Carolina Uniform Fraudulent Transfer Act, N.C. Gen. Stat. § 39-23.1 et seq. (2003).

Ms. Watts moved for partial summary judgment against Ms. Slough on the claims of unlicensed sale of securities and sale of unregistered securities, seeking $243,000 plus interest, costs, and attorney's fees. Defendants moved for summary judgment on all of plaintiff's claims.

The trial court granted partial summary judgment in favor of Ms. Watts on the claims of unregistered securities and unlicensed sale. The court ruled:

Plaintiff's Motion for Partial Summary Judgment is allowed. Judgment is entered against defendant Sharon F. Slough on plaintiff's first and second claims for relief under the North Carolina Securities Act in the amount of $243,000, plus interest at the rate of 8% per annum from May 17, 2000, until paid, costs and reasonable attorney's fees, less the income plaintiff received upon the investment in the amount of $16,569.50. The Court will assess the amount of recoverable costs and attorney's fees at a later hearing.

(Emphasis added) The trial court allowed defendants' motion for summary judgment as to plaintiff's fourth and seventh claims for relief (breach of fiduciary duty and negligent misrepresentation). The court ruled "[d]efendants' motion is denied as to all other claims for relief."

Because the decision enters judgment only as to one defendant and only as to four of eight claims for relief, this order is interlocutory. An interlocutory order is immediately appealable in only two circumstances: (1) if the trial court has certified the case for appeal under Rule 54(b) of the Rules of Civil Procedure; and (2) "when the challenged order affects a substantial right of the appellant that would be lost without immediate review." Embler v. Embler, 143 N.C.App. 162, 165, 545 S.E.2d 259, 261 (2001).

Since there was no certification in this case under Rule 54(b), "this avenue of interlocutory appeal is closed to defendant[s]." Id. We must determine, therefore, whether the trial court's order affects a substantial right that would otherwise be lost without immediate review.

We first hold that de...