Yelverton v. Phyllis Y. Edmundson & Yelverton Farms, Ltd., 5:15-CV-134-F

CourtUnited States District Courts. 4th Circuit. Eastern District of North Carolina
Writing for the CourtRobert B. Jones, Jr. United States Magistrate Judge
Docket NumberNO. 5:15-CV-134-F,5:15-CV-134-F
PartiesSTEPHEN THOMAS YELVERTON, as Assignee of the claims of Wade H. Atkinson, Jr., Plaintiff, v. PHYLLIS Y. EDMUNDSON AND YELVERTON FARMS, LTD., Defendants.
Decision Date09 September 2016

as Assignee of the claims of Wade H. Atkinson, Jr., Plaintiff,

NO. 5:15-CV-134-F


September 9, 2016


This matter is before the court on the following motions: Defendant Phyllis Y. Edmundson's ("Defendant Edmundson") and Defendant Yelverton Farms, Ltd.'s (collectively, "Defendants") motion to dismiss the amended complaint of pro se Plaintiff Stephen Thomas Yelverton ("Plaintiff") for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted pursuant to Rules 12(b)(1) and (b)(6) of the Federal Rules of Civil Procedure [DE-18]; Plaintiff's Motion to Extend Page Length [DE-22]; and Plaintiff's Corrected Motion to Strike Reply to Response to Motion [DE-27]. All response briefing is complete or the time for filing such briefing has elapsed, and the pending motions are ripe for adjudication. These motions were referred to the undersigned for an order or for a recommendation to the District Court as necessary. June 30, 2016 Order [DE-33]; see also 28 U.S.C. §§ 636(b)(1)(A), (B); Local Civil Rule 72.3(c). For the reasons set forth below, Plaintiff's motion to extend page length [DE-22] is denied as moot, Plaintiff's motion to strike [DE-27] is denied, and it is recommended that Defendants' motion to dismiss [DE-18] be granted.

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Plaintiff filed a Motion for Leave to Proceed In Forma Pauperis on March 31, 2015. [DE-1]. Plaintiff's motion was granted [DE-3] and the initial Complaint was filed on May 6, 2015 [DE-4]. Defendants filed a Motion to Dismiss on June 4, 2015 [DE-12], and on June 22, 2015, Plaintiff filed an Amended Complaint as of right [DE-17]. Defendants then filed the instant Motion to Dismiss the Amended Complaint on July 6, 2015 [DE-18], to which Plaintiff responded on July 27, 2015 [DE-21] and also filed a Motion to Extend Page Length as to his response in opposition [DE-22]. Defendants filed a Reply on August 10, 2015. [DE-24]. Plaintiff then filed a Motion to Strike Defendants' Reply [DE-26], followed by a Corrected Motion to Strike [DE-27]. Defendants responded in opposition to Plaintiff's Motion to Strike [DE-32] and Plaintiff filed a Reply [DE-33].

On July 30, 2015, Plaintiff filed a Motion to Amend Complaint [DE-23], to which Defendants responded in opposition on August 20, 2015 [DE-28], and Plaintiff then filed a Reply [DE-31]. The court denied Plaintiff's Motion to Amend on October 27, 2015. [DE-35]. On October 29, 2015, Plaintiff filed a Notice of Interlocutory Appeal [DE-3 6] and a Motion for Reconsideration of the court's order denying the motion to amend [DE-3 7]. Plaintiff then filed a Supplemental Motion for Reconsideration on November 30, 2015 [DE-40], to which Defendants responded in opposition [DE-41], and Plaintiff filed a Reply [DE-44]. On December 22, 2015, the court stayed the case pending resolution of Plaintiff's interlocutory appeal. [DE-43]. On March 31, 2016, the Fourth Circuit dismissed Plaintiff's appeal in an unpublished, per curiam opinion. [DE-45]. On June 24, 2016, the court consolidated Plaintiff's two pending cases (numbers 5:15-CV-134-F and 5:16-CV-31-F) into the lead case, number 5:15-CV-134-F. [DE-

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50]. On June 30, 2016, the court denied Plaintiff's Supplemental Motion for Reconsideration [DE-51] and referred the pending motions discussed above to the undersigned [DE-52].

Plaintiff has filed two prior actions in this court against these same Defendants related to the ownership of Yelverton Farms and both actions were dismissed. See Webster v. Yelverton Farms Ltd., No. 5:09-CV-331-FL (E.D.N.C. March 7, 2011) (unpublished) (holding plaintiff lacked standing to assert claims for judicial dissolution and liquidation of Yelverton Farms, payment of dividends, and other relief because the claims became property of plaintiff Yelverton's bankruptcy estate upon conversion of the bankruptcy case from Chapter 11 to Chapter 7); Yelverton v. Yelverton Farms, Ltd., No. 5:14-CV-365-FL (E.D.N.C. Feb. 26, 2015) (dismissing all claims, including demand for judicial receivership of Yelverton Farms, for failure to state a claim upon which relief can be granted).


Plaintiff, a resident of Arlington County, Virginia, has brought this action in diversity against Defendant Edmundson, a resident of North Carolina, and Defendant Yelverton Farms, Ltd., a closely-held North Carolina corporation, seeking monetary damages in an amount over $75,000.00. Am. Compl. [DE-17] at 1 ¶ 1. Plaintiff alleges that in November 2007, he obtained a $360,000.00 loan from Wade H. Atkinson, Jr. ("Atkinson"), a business associate, and pledged as collateral Plaintiff's 1,333.3 shares of stock ("the stock") in Yelverton Farms, Ltd. Id. at 3 ¶ 11. On May 30, 2008, Plaintiff assigned the stock to Atkinson for repayment of the $360,000.00 loan. Id. at 2 ¶ 4, 3 ¶ 12. On April 4, 2008, White & Allen, counsel for Defendants in the instant case, represented Atkinson in placing a lien on the stock, while simultaneously representing Defendant Edmundson with respect to the same stock. Id. at 3-4 ¶¶ 12-13. Defendant

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Edmundson, the President and controlling stockholder of Yelverton Farms, Ltd., told Plaintiff in August 2008 that she would not allow him to assign his stock to Atkinson as the company was a family business, and additionally, she would not allow Plaintiff to cash out his $700,000.00 equity in the company. Id. at 4 ¶ 14. Based upon Defendant Edmundson's representations, Plaintiff sent Atkinson a written rescission of the assignment of the stock on May 13, 2009. Id. ¶ 15.

On May 14, 2009, Plaintiff filed for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the District of Columbia, and scheduled the stock as property of the estate to be used to first repay Atkinson as a secured creditor. Id. ¶ 16. Atkinson protested the rescission of the stock assignment, and was advised by White & Allen to contact local counsel for Yelverton Farms, Ltd., John Walston ("Walston"). Id. ¶ 17. Walston advised Atkinson, through a letter dated May 27, 2009, that Atkinson could not become a stockholder in Yelverton Farms, Ltd. unless Plaintiff consented, and both Atkinson and Plaintiff believed Plaintiff was still the owner of the stock and could not consent to a reassignment due to the ongoing bankruptcy. Id. at 4-5 ¶¶ 18-21. In August of 2009, Atkinson timely filed a proof of claim in Plaintiff's bankruptcy case for repayment of the $360,000.00 loan. Id. at 5 ¶ 24.

On July 29, 2009, Plaintiff filed a case against Defendants (No. 5:09-CV-331-FL, "Yelverton I") for dissolution of the corporation or a mandatory buy-out of his stock pursuant to N.C. Gen. Stat. §§ 55-14-30(2)(ii) and 55-14-31(d), seeking to obtain funds to repay his creditors in the bankruptcy case. Am. Compl. [DE-17] at 5 ¶ 25. Defendant Edmundson stated that Plaintiff owned the stock in her Answer, filed on August 25, 2009, and Plaintiff and Atkinson relied on this representation. Id. at 6 ¶¶ 27-28. Atkinson, at the prompting of White & Allen,

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moved to intervene in Yelverton I. Id. ¶¶ 29-30. On August 20, 2009, Defendant Edmundson executed an affidavit affirming that she owed fiduciary duties to Plaintiff as a result of his stock in Yelverton Farms, Ltd. Id. ¶ 31. On January 14, 2010, Plaintiff as trustee of the bankruptcy estate, commenced Adversary Proceeding No. 10-10003 against Defendants seeking turnover of the stock to Plaintiff for the benefit of his creditors. Id. at 7 ¶ 34. On February 24, 2010, the bankruptcy court disallowed Atkinson's lien on the stock as not properly perfected in the District of Columbia. Id. ¶ 36. On February 25, 2010, Atkinson was dismissed from Yelverton I, and the parties were ordered to attend a settlement conference. Id. ¶¶ 38-39. Plaintiff was directed to obtain a stay of the turnover action in the adversary proceeding until the settlement conference had taken place. Id. at 8 ¶ 40.

Defendants filed an Amended Answer in Yelverton I on March 17, 2010 [DE-17-1], wherein Defendant Edmundson admitted that Atkinson was the owner of the stock and had been since May 30, 2008, because the rescission on May 13, 2009 was not valid pursuant to North Carolina law. Am. Compl. [DE-17] at 2, ¶ 4, 8 ¶¶ 41-42. After an unsuccessful settlement conference, Defendant Edmundson filed a motion to stay the Adversary Proceeding to allow for resolution of the stock ownership in Yelverton I, which the Bankruptcy Court granted. Id. at 8-9, ¶¶ 43-49. Plaintiff contends that no court has determined the ownership of the stock, and Defendant Edmundson has retained possession of the stock certificates such that Plaintiff has not been able to examine them. Id. at 10 ¶¶ 51, 54-55. By accepting the May 30, 2008 assignment of stock, Defendants received the benefit of removing the stock from the bankruptcy estate and not being required to turn over the stock to the trustee. Id. ¶ 53.

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On March 12, 2015, Atkinson assigned to Plaintiff all rights and interests in the stock, including litigation claims, and this assignment is effective as of that date where Atkinson and Plaintiff rescinded their Settlement Agreement, dated August 17, 2010. Id. at 2 ¶ 2, 10-11 ¶¶ 56-57; Rescission [DE-17-2]; Assignment [DE-17-3]. Plaintiff contends that he did not own the stock on May 14, 2009, when he filed for Bankruptcy, and accordingly, the stock is excluded from the bankruptcy estate. Am. Compl. [DE-17] at 2 ¶ 5. Further, Plaintiff contends that Defendant Edmundson has the responsibility to abide by her fiduciary duties to Plaintiff, but she has made clear that she will not act to protect his interests as a stockholder. Id. at 11 ¶¶ 58-60.

Plaintiff asserts the following causes of action against Defendants: a claim for judicial receivership,...

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