# In Re Se. Eye Ctr. (Old Battleground v. Ccsea)

> North Carolina Business Court · May 7, 2019 · 2019 NCBC 28

URL: https://www.frixlaw.com/law-library/cases/11058376

## Case

- **Court:** North Carolina Business Court
- **Decided:** May 7, 2019
- **Citations:** 2019 NCBC 28
- **Precedential status:** Published
- **Opinion:** Opinion by Louis A. Bledsoe, III
- **Cited by:** 1 later opinions in the Frix Law Library

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## Opinion text

In re Se. Eye Ctr. (Old Battleground v. CCSEA), 2019 NCBC 28.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
WAKE COUNTY 15 CVS 1648

IN RE SOUTHEASTERN EYE ORDER AND OPINION ON MOTIONS
CENTER-PENDING MATTERS FOR SUMMARY JUDGMENT
(OLD BATTLEGROUND V. CCSEA)

1. THIS MATTER is before the Court upon (i) Douglas Harris’s Motion for

Summary Judgment as to Nivison Family Investment, LLC, Old Battleground

Properties, and Arthur Nivison (“Doug Harris’s Motion as to Plaintiffs’ Claims”);

(ii) the Castle McCulloch Defendants’ Motion for Summary Judgment (the “Castle

McCulloch Defendants’ Motion”); (iii) Plaintiffs’ Motion for Partial Summary

Judgment as to Counts Fourteen, Fifteen, Sixteen, Twenty-Seven, Twenty-Eight, and

Thirty of Amended Consolidated Complaint (“Plaintiffs’ Motion for Partial Summary

Judgment”); (iv) Plaintiffs’ and Third Party Defendants’ Motion for Partial Summary

Judgment as to Counterclaims Filed Against Nivison Family Investments, LLC and

as to Third Party Claims Filed Against Old Battleground Properties, Inc. and Arthur

Nivison by Douglas S. Harris, Individually and as Trustee of JDPW Trust U/T/A

Dated June 8, 2007 and JDPW Trust U/T/A Date June 8, 2007 (“Plaintiffs and

Nivison’s Motion as to Doug Harris’s Claims”); (v) Douglas S. Harris’s Motion for

Summary Judgment as to Richard Harris, Historic Castle McCulloch, and Castle

McCulloch, Inc. (“Doug Harris’s Motion as to the Castle McCulloch Defendants’

Crossclaims”); and (vi) Douglas S. Harris’s Motion for Summary Judgment as to

Gerald Jeutter’s Cross Claims on Behalf of JDPW Trust, CCSEA, and DRE against
Douglas Harris (“Doug Harris’s Motion as to the Receiver’s Crossclaims”)

(collectively, the “Motions for Summary Judgment”) in the above-captioned case.

2. For the reasons stated herein, the Court (i) GRANTS Doug Harris’s Motion

as to Plaintiffs’ Claims; (ii) GRANTS in part and DENIES in part the Castle

McCulloch Defendants’ Motion; (iii) DENIES Plaintiffs’ Motion for Partial Summary

Judgment; (iv) GRANTS in part and DENIES in part Plaintiffs and Nivison’s

Motion as to Doug Harris’s Claims; (v) GRANTS Doug Harris’s Motion as to the

Castle McCulloch Defendants’ Crossclaims; and (vi) GRANTS in part and DENIES

in part Doug Harris’s Motion as to the Receiver’s Crossclaims.

Smith Debnam, Attorneys at Law, by Byron L. Saintsing, for Plaintiffs
Nivison Family Investments, LLC and Old Battleground Properties, Inc.
and Third-Party Defendant Arthur Nivison.

Oak City Law LLP, by Robert E. Fields, III, for Receiver Gerald A.
Jeutter, Jr., as Receiver for the JDPW Trust, Central Carolina Surgical
Eye Associates, P.A., HUTA Leasing LLC, Southeastern Eye
Management, Inc., Southeastern Cataract Laser Center, PLLC, EMS
Partners, LLC, KEPES Newco, LLC, and DRE Newco, LLC.

Wyatt Early Harris Wheeler, LLP, by Scott F. Wyatt and Donavan J.
Hylarides, for Defendants Richard A. Harris, Historic Castle McCulloch,
LLC, and Castle McCulloch, Inc.

Douglas S. Harris, Pro se.

Bledsoe, Chief Judge.
I.

BACKGROUND

A. Factual Background

3. The Court does not make findings of fact when ruling on a motion for

summary judgment, but “it is helpful to the parties and the courts for the trial judge

to articulate a summary of the material facts which he considers are not at issue[.]”

Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26 N.C. App. 138, 142, 215 S.E.2d 162,

165 (1975).

4. This action is a piece of a larger group of cases that have found their way to

the North Carolina Business Court and are consolidated into two files: In re

Southeastern Eye Center-Pending Matters (15 CVS 1648, Wake County) and In re

Southeastern Eye Center-Judgments (12 CVS 11322, Guilford County). The litigation

of these cases has concerned a wide variety of matters, including the appointment of

a receiver over multiple entities, disputes over ownership interests in a collection of

valuable artwork and chess sets, and appeals to the Supreme Court of North

Carolina.

5. Defendant Central Carolina Surgical Eye Associates, P.A. (“CCSEA”) is a

North Carolina medical services professional association located in Guilford County,

North Carolina. (Am. Consolidated Compl. ¶ 4, ECF No. 179.) In September 2002,

CCSEA leased a commercial premises in Greensboro, North Carolina (the

“Battleground Property”) from Battleground Real Estate Partners, LLC, a

predecessor in interest to Plaintiff Old Battleground Properties, Inc. (“Old
Battleground”). (Am. Consolidated Compl. ¶ 21.) CCSEA executed amendments to

this lease with Old Battleground in 2006 and 2010. (Am. Consolidated Comp. ¶ 22.)

6. By 2010, CCSEA was behind on its payments under the commercial lease

with Old Battleground. CCSEA executed two promissory notes to evidence its debt

to Old Battleground, each in the amount of $1,000,000 (the “2010 CCSEA Notes”).

(Am. Consolidated Compl. Ex. A, ECF No. 180.) Both notes were signed by James

Mark McDaniel, Jr. (“Mark McDaniel”) as the CEO of CCSEA. (Am. Consolidated

Compl. Ex. A.)

7. Two years later, two more promissory notes were executed in Old

Battleground’s favor. One was executed by CCSEA in the amount of $140,359.38.

(Am. Consolidated Compl. Ex. D, ECF No. 180.) The other was executed by Dr. C.

Richard Epes (“Dr. Epes”), an interest owner in CCSEA, to evidence Old

Battleground’s payment of CCSEA’s property taxes. (Am. Consolidated Compl. ¶ 24;

Am. Consolidated Compl. Ex. B, ECF No. 180.) This fourth note was in the amount

of $118,182.05. (Am. Consolidated Compl. Ex. B.)

8. In March 2012, Old Battleground sold the Battleground Property to MMRE,

LLC (“MMRE”), an entity affiliated with CCSEA. (Am. Consolidated Compl. ¶ 25.)

Old Battleground financed this transaction, and in exchange MMRE executed a

purchase-money note and deed of trust in favor of Investors Title Exchange Corp. as

a qualified intermediary for Old Battleground. (Am. Consolidated Compl. ¶ 25; Am.

Consolidated Compl. Ex. BB, at 1, ECF No. 187.) According to Plaintiffs, the
purchase-money note and deed of trust were later assigned to Plaintiff Nivison

Family Investments, LLC (“NFI”). (Am. Consolidated Compl. ¶ 25.)

9. During the time CCSEA was leasing from and incurring debts with Old

Battleground, it was also borrowing money from FNB Southeast, a predecessor in

interest to NewBridge Bank (for clarity, the Court will refer to FNB and NewBridge

Bank as “NewBridge”). (Am. Consolidated Compl. Exs. E, H, ECF Nos. 180–81.) In

2007, CCSEA engaged in two loan transactions with NewBridge, executing

promissory notes in NewBridge’s favor for each loan. (Am. Consolidated Compl. Exs.

E, H.) To provide security for these loans, CCSEA and two affiliated entities—HUTA

Leasing, LLC (“HUTA”) and Southeastern Eye Management, Inc. (“SEM”)—executed

security agreements granting NewBridge security interests in certain personal

property. (Am. Consolidated Compl. Exs. F, I, ECF Nos. 181–82.) Dr. Epes and Mark

McDaniel also personally guaranteed both loans. (Am. Consolidated Compl. Exs. G,

J, ECF Nos. 181–82.)

10. In 2008, CCSEA executed a third promissory note with NewBridge as part

of a third loan transaction. (Am. Consolidated Compl. Ex. K, ECF No. 182.) To secure

this loan, another security instrument was executed by CCSEA granting NewBridge

a security interest in further collateral. (Am. Consolidated Compl. Ex. L, ECF No.

183.) Dr. Epes and Mark McDaniel guaranteed this third loan as well. (Am.

Consolidated Compl. Ex. M, ECF No. 183.)

11. NewBridge Bank also entered into a loan agreement with several other

entities that had ties to Dr. Epes or Mark McDaniel. Specifically, NewBridge lent
money (the “Castle McCulloch Loan”) to Defendants Castle McCulloch, Inc. (“Castle

McCulloch”), Historic Castle McCulloch, LLC (“Historic Castle McCulloch”), and

NSITE Management, LLC (“NSITE”). (Am. Consolidated Compl. Ex. N, ECF No.

183.) Castle McCulloch is a North Carolina corporation whose officers included Mark

McDaniel, Defendant Douglas Harris (“Doug Harris”), and Doug Harris’s brother,

Defendant Richard Harris. (Am. Consolidated Compl. ¶ 14.) Historic Castle

McCulloch is a North Carolina LLC whose members included Mark McDaniel, Dr.

Epes, and Richard Harris. (Am. Consolidated Compl. ¶ 15.)

12. The Castle McCulloch Loan was secured by various kinds of collateral (the

“Castle McCulloch Collateral”), including a deed of trust from Historic Castle

McCulloch in favor of NewBridge (the “Castle McCulloch Deed of Trust”) and an

assignment of leases and rents (the “Assignment of Rents and Profits”) granted by

Historic Castle McCulloch in NewBridge’s favor. (Am. Consolidated Compl. Exs. T,

UU, ECF Nos. 184, 191.) The loan was also guaranteed by EMS Partners, LLC

(“EMS”), whose members included Dr. Epes and Mark McDaniel, (Am. Consolidated

Compl. Ex. U, ECF No. 184), and Dr. Epes and Mark McDaniel personally, (Am.

Consolidated Compl. Exs. V, W, ECF No. 184). Much of the present dispute stems

from the Castle McCulloch Loan and its associated collateral.

13. By mid-2012, all three of NewBridge’s loans to CCSEA (the “CCSEA

Loans”), as well as the Castle McCulloch Loan, were in default. (Am. Consolidated

Compl. Ex. X, at 2 [hereinafter “Settlement Agreement”], ECF No. 185.) The

combined outstanding balance on the loans was $3,350,139.42. (Settlement
Agreement 2.) In an attempt to recover a portion of this balance, NewBridge agreed

to a settlement agreement (the “Settlement Agreement”) with Historic Castle

McCulloch, Castle McCulloch, NSITE, CCSEA, HUTA, SEM, Mark McDaniel, and

Dr. Epes (collectively, excluding NewBridge, the “Settlement Debtors”). (Settlement

Agreement 5–6.) Under the terms of the Settlement Agreement, the Settlement

Debtors represented that they had arranged for a third party to purchase the

promissory notes, security agreements, and all other loan documents (collectively, the

“Loan Documents”) connected to the four outstanding loans for a discounted price of

$2,026,834.35. (Settlement Agreement 2.) NewBridge agreed to sell the Loan

Documents to this third-party buyer for this discounted amount. (Settlement

Agreement 2.) Under the Settlement Agreement, if the purchase did not go through

by a certain date, NewBridge would be permitted to file and enforce a confession of

judgment in the amount of $2,026,834.09 executed by the Settlement Debtors (the

“Confession of Judgment”). (Settlement Agreement 2–3.)

14. By a subsequent purchase and sale agreement between NewBridge and

Defendant JDPW Trust U/T/A Dated June 8, 2007 (“JDPW”), it was agreed that

JDPW would act as the Settlement Debtors’ third-party buyer for the Loan

Documents. (Am. Consolidated Compl. Ex. Z, at 1, ECF No. 186.) In furtherance of

this agreement, JDPW made an initial deposit of $25,000 with NewBridge. (Am.

Consolidated Compl. ¶ 47; Harris Dep. 382:9–383:12 [hereinafter Harris Dep. I], ECF

No. 887.) Doug Harris was the trustee of JDPW. (Harris Dep. I, at 382:5–14.)
15. Around the same time or shortly after the Settlement Agreement was

executed, Doug Harris and Mark McDaniel approached Third-Party Defendant

Arthur Nivison about providing a loan to JDPW so JDPW could complete the

purchase from NewBridge. (Castle McCulloch Defs.’ Br. Opp’n Pls.’ Mot. Partial

Summ. J. Ex. 3 ¶ 11 [hereinafter “Nivison Aff.”], ECF No. 879; Harris Dep. I, at 75:14–

23, 79:11–25.) Arthur Nivison was the acting manager of Old Battleground and the

manager of NFI. (Nivison Dep. 147:10–23 [hereinafter Nivison Dep. I], ECF No. 833.)

Based on his discussions with Doug Harris and Mark McDaniel, Arthur Nivison

understood the purpose of the loan was to “facilitate the purchase of the Castle

McCulloch [L]oan and the CCSEA Loans.” (Nivison Aff. ¶ 11.)

16. Eventually, it was agreed that either Old Battleground or NFI—the parties

dispute which entity was supposed to be the lender—would provide JDPW with the

funds required to complete the Settlement Agreement. However, before Old

Battleground or NFI could lend JDPW any money, MMRE had to sell the

Battleground Property and pay off the loan secured by the related 2012 deed of trust

so that Old Battleground or NFI would have money to lend. (Am. Consolidated

Compl. Ex. BB, at 1.)

17. Because the Battleground Property needed to sell before the purchase of the

Loan Documents from NewBridge could be completed, the Settlement Debtors,

JDPW, and NewBridge entered into agreements extending the date by which JDPW

could make the purchase to September 21, 2012. (Am. Consolidated Compl. Exs. AA,

at 9, BB, at 1–2, ECF No. 187.) As consideration for the extended closing date, the
Settlement Debtors agreed to pay NewBridge an additional $100,000. (Am.

Consolidated Compl. Ex. BB, at 2.) Richard Harris paid this money to NewBridge in

the form of sixty-two gold coins, which were then replaced by $100,000 in cash. (Am.

Consolidated Compl. Ex. CC, ECF No. 187.)

18. On or about September 21, 2012, a flurry of activity occurred. The

Battleground Property was sold, and the profits from that sale were used to pay off

one of the 2010 CCSEA Notes in favor of Old Battleground and the note secured by

the deed of trust held by NFI. (Nivison Aff. ¶ 9.) These funds were then wired to

NewBridge, although the record is unclear as to whether the transfer of the funds to

NewBridge occurred on September 21 or on September 24 (with interest paid by NFI

for the additional three days).

19. In either event, NewBridge then assigned the Loan Documents to JDPW.

(Am. Consolidated Compl. Exs. UU, VV, WW, ECF Nos. 191–92.) This was

accomplished by three separate documents: (i) an “Assignment of Security

Instruments” that conveyed the Castle McCulloch Deed of Trust and the Assignment

of Rents and Profits, (ii) an “Allonge” that memorialized the sale of the promissory

note for the Castle McCulloch Loan (the “Castle McCulloch Note”) to JDPW, and

(iii) a “Bill of Sale and Assignment of Loan Documents” that included the Loan

Documents connected to the CCSEA Loans as well as the remainder of the Loan

Documents connected to the Castle McCulloch Loan and Castle McCulloch Collateral

(the “Castle McCulloch Loan Documents”). (Am. Consolidated Compl. Exs. UU, VV,

WW.) Plaintiffs allege that they had no knowledge that JDPW would be purchasing
the Castle McCulloch Note, the Castle McCulloch Deed of Trust, the Assignment of

Rents and Profits, or the other Castle McCulloch Loan Documents from NewBridge

and contend that those facts were intentionally concealed from them. (Am.

Consolidated Compl. ¶¶ 65–66.)

20. Also on or about September 21, 2012, Arthur Nivison and JDPW

memorialized their own agreement in writing, but Plaintiffs and Doug Harris dispute

the final terms of that agreement and the validity of certain documents purporting to

set forth the parties’ deal.

21. First, Plaintiffs allege that Doug Harris, as trustee for JDPW, executed a

promissory note in favor of NFI in exchange for the approximately $2.1 million either

Old Battleground or NFI would be lending to JDPW (the “JDPW Note”). (Am.

Consolidated Compl. Ex. DD at 1, ECF No. 187.) Doug Harris denies executing this

note.

22. Second, the parties executed a written agreement containing further terms

for the loan to JDPW (the “Assignment Agreement”). (Pls.’ Reply Br. Resp. Castle

McCulloch Defs.’ Br. Opp’n Pls.’ Mot. Partial Summ. J. Corrected Ex. KK [hereinafter

“Corrected Ex. KK”], ECF No. 908; see also Am. Consolidated Compl. Exs. QQ, TT,

ECF No. 190.)1 Plaintiffs and Doug Harris dispute which version of this document is

controlling.

1 In their reply brief in support of their Motion for Partial Summary Judgment, Plaintiffs
represented that Exhibit KK to the Amended Consolidated Complaint inadvertently included
the wrong set of documents. (Pls.’ Reply Br. Resp. Castle McCulloch Defs.’ Br. Opp’n Pls.’
Mot. Partial Summ. J. 3 n.1, ECF No. 908.) Plaintiffs attached a corrected version of Exhibit
KK to their reply brief.
23. At around 1:02 PM on September 21, 2012, Doug Harris sent one version of

the Assignment Agreement, bearing his signature, to an attorney acting for Arthur

Nivison named Tom Harper. (Corrected Ex. KK.) Doug Harris alleges that this

original version of the Assignment Agreement is valid and enforceable. Plaintiffs,

however, allege that Tom Harper then circulated a second version of the Assignment

Agreement with handwritten modifications. (Am. Consolidated Compl. Ex. QQ.) By

5:15 PM on September 21, 2012, Nivison signed this second agreement. (Am.

Consolidated Compl. Exs. QQ.) Plaintiffs allege that Doug Harris returned an

initialed copy of this version of the Assignment Agreement to Tom Harper by e-mail

at 5:37 PM. (Am. Consolidated Compl. Ex. TT, ECF No. 190.) Doug Harris contends

that his initials on this second version of the agreement are forged.

24. The two versions of the Assignment Agreement differ in several respects.

First, the original version stated that the money lent to JDPW would come from Old

Battleground or would be wired to JDPW on Old Battleground’s behalf, (Corrected

Ex. KK), while the second version provided that the loan proceeds would be wired to

JDPW by NFI or on NFI’s behalf, (Am. Consolidated Compl. Ex. QQ). Second, the

original version of the Assignment Agreement contained language indicating that

additional security for the loan to JPDW would be tendered by Mark McDaniel and

Dr. Epes; this language was crossed out in the later version. (Corrected Ex. KK; Am.

Consolidated Compl. Exs. QQ, TT.)2 Third, the original version of the agreement

2 The record contains an “Unconditional Guaranty of Payment” in favor of NFI bearing the
signatures of Dr. Epes; his wife, Bessie Epes; Dr. Epes as president of CCSEA; and Mark
McDaniel, (Am. Consolidated Compl. Ex. FF, ECF No. 187), and a “Pledge Agreement” that
purported to secure NFI’s loan with security interests in certain property owned by Dr. Epes
included a provision stating that JDPW’s liability on default would be limited to

forfeiture of the mentioned collateral and JDPW’s interests in that collateral,

(Corrected Ex. KK); the second version of the agreement crossed this term out as well,

(Am. Consolidated Compl. Ex. QQ).

25. All versions of the Assignment Agreement expressly set out the following:

THIS AGREEMENT [is] made . . . for the purpose of transferring the security
interest in the personal property of HUTA Leasing Company, Southeastern
Eye Management, Inc., and Central Carolina Surgical Eye Associates, P.A.,
now held by NewBridge . . . to [either a legal entity designated by Old
Battleground, or, in the second version of the agreement, NFI] in exchange
for [a] $2,100,000.00 loan to JDPW . . . which loan will be used to purchase
NewBridge Bank’s security interest.

(Corrected Ex. KK; Am. Consolidated Compl. Exs. QQ, TT.) The “personal property”

referenced by the Assignment Agreement was detailed in the Assignment of Security

Instruments that Doug Harris sent to Tom Harper with the draft of the Assignment

Agreement. (Corrected Ex. KK.) The schedule attached to this document (“Schedule

A” or “Attachment A”) specifically listed which Loan Documents JDPW would be

assigning to the agreed-upon recipient, with each piece of collateral listed under its

corresponding loan. (Corrected Ex. KK; see Am. Consolidated Compl. Ex. GGG, at 1–

2 [hereinafter “Partial Summ. J. Order”], ECF No. 194.) The Court hereafter refers

to the property referenced in the Assignment Agreement and listed under the CCSEA

Loans in Schedule A as the “CCSEA Collateral” or “CCSEA Loan Documents.”

or Bessie Epes, (Am. Consolidated Compl. Ex. GG, ECF No. 188). The validity of these
documents has been disputed, and there is evidence appearing to show that neither Bessie
Epes nor anyone with authority to sign on her behalf executed these documents. See Old
Battleground Props. v. Cent. Carolina Surgical Eye Assocs., P.A., 2015 NCBC LEXIS 19, at
*19–20 (N.C. Super. Ct. Feb. 25, 2015).
26. Plaintiffs allege that the Schedule A sent to Tom Harper was nearly

identical to the list of assigned collateral JDPW received from NewBridge as an

attachment to the NewBridge-to-JDPW Bill of Sale and Assignment of Loan

Documents, except that the version sent to Tom Harper did not include reference to

the Castle McCulloch Loan and Castle McCulloch Loan Documents. (Am.

Consolidated Compl. ¶ 59; Mem. Law Opp’n Douglas S. Harris’s Mot. Summ. J.

Nivison Entities’ Claims 10, ECF No. 883.) Plaintiffs contend that Doug Harris

intentionally omitted the Castle McCulloch Loan and Castle McCulloch Loan

Documents from the Schedule A he sent Tom Harper to conceal the conveyance of the

Castle McCulloch Loan Documents to JDPW. (Mem. Law Opp’n Douglas S. Harris’s

Mot. Summ. J. Nivison Entities’ Claims 14.)

27. Problems arose after the September 21, 2012 transactions. Despite the

representations made in the Assignment Agreement, Doug Harris did not assign the

CCSEA Loan Documents to NFI until compelled to do so by a court order. (Partial

Summ. J. Order 1–2.) JDPW also failed to make payments on the allegedly valid

JDPW Note. (Partial Summ. J. Order 2.)

28. Plaintiffs also allege that Doug Harris, acting as trustee for JDPW, assigned

the Castle McCulloch Loan Documents to his brother, Richard Harris, or otherwise

released the Castle McCulloch Collateral by other means, including by preparing a

deed releasing the land encumbered by the Castle McCulloch Deed of Trust and the

Assignment of Rents and Profits (the “Release Deed”). (Am. Consolidated Compl. Ex.

YY, ECF No. 192; Harris Dep. I, at 866:19–868:25.) Plaintiffs assert that they were
unaware that JDPW ever held the Castle McCulloch Loan Documents or interests in

the Castle McCulloch Collateral and were further unaware that JDPW then released

that collateral until after this litigation commenced. Richard Harris denies by

affidavit that he, Castle McCulloch, or Historic Castle McCulloch (collectively, with

Richard Harris, the “Castle McCulloch Defendants”) ever received an assignment of

the Castle McCulloch Loan Documents. (Def. Richard A. Harris’s Am. Answer and

Countercls. Ex. A ¶ 10, ECF No. 678.)

B. Procedural Background

29. As a result of the preceding facts, NFI filed an action against JDPW, Doug

Harris, individually and as trustee of JPDW, and NewBridge on July 21, 2014.

Several months later, Old Battleground and NFI filed an action against CCSEA,

various CCSEA-affiliated entities, Dr. Epes, Bessie Epes, and Mark McDaniel and

his wife, Patricia McDaniel.

30. In the second lawsuit, upon the parties’ joint request at a February 23, 2015

hearing, the Court appointed Gerald A. Jeutter, Jr. as a receiver (the “Receiver”) for

CCSEA and several of its related entities (the “Receivership Entities”).3 Old

Battleground Props. v. Cent. Carolina Surgical Eye Assocs., P.A., 2015 NCBC LEXIS

19, at *24 (N.C. Super. Ct. Feb. 25, 2015). Following his appointment, the Receiver

investigated and asserted claims and demands on behalf of the Receivership Entities

against the Epeses. As the litigation of Plaintiffs’ cases progressed, the number of

3These entities included the above-mentioned EMS as well as Southeastern Cataract Laser
Center, PLLC, HUTA, and SEM. Old Battleground Props., 2015 NCBC LEXIS 19, at *24.
entities in receivership and the larger universe of cases related to CCSEA and various

other parties to these actions grew.

31. On June 19, 2015, the Court ordered both of Plaintiffs’ lawsuits consolidated

with other cases pending before it and directed all subsequent filings be made in the

Master File In re Southeastern Eye Center-Pending Matters (Wake 15 CVS 1648).

(Order Mot. Consolidate 8–9, ECF No. 76.) The Court then issued a case management

order in this consolidated proceeding requiring all persons asserting claims against

CCSEA or its affiliated entities to file their claims against those entities with the

Receiver. (Case Management Order 5–8, ECF No. 82.)

32. Soon after consolidation, the Court approved a settlement between the

Receiver and the Epeses. (Order Approving Settlement Agreement and Appointing

Receiver for Kepes Newco, LLC and DRE Newco LLC and Restraining Order 6

[hereinafter “Epes Settlement Order”], ECF No. 117.) To facilitate this settlement,

the Court placed two additional entities into receivership: Kepes Newco, LLC

(“Kepes”) and DRE Newco, LLC (“DRE”) (both added to the “Receivership Entities”).4

(Epes Settlement Order 7.) Kepes and DRE are limited liability companies created

for the purpose of assuming and paying the debts of Dr. Epes and Bessie Epes and to

which the Epeses have assigned a significant number of their assets. (See Joint Mot.

Approve Settlement Agreement and Release Ex. A-1, at 1, Ex. A-2, at 1, ECF No. 52.2;

4 In addition to DRE and Kepes, the Court also placed several other entities in which the
Epeses owned controlling or materially dominant shares into receivership. These entities
included Surgical Eye Center, Inc., ME Greensboro, LLC, HUTA Leasing Company, and
MEM of High Point, LLC. (Epes Settlement Order 5–6.)
Joint Mot. Approve Settlement Agreement and Release Ex. B-1, at 1, Ex. B-2, at 1,

ECF No. 52.1.)

33. In July and August 2015, Plaintiffs sought leave to amend their complaints

in each of their lawsuits. Recognizing that common issues of fact and law were

present in both of Plaintiffs’ cases and that consolidation would avoid confusion,

unnecessary costs, and potential delays, the Court ordered the two lawsuits further

consolidated for future proceedings and directed Plaintiffs to file a single amended

complaint consolidating their claims. (Order Pls.’ Mots. Amend Compl. and

Consolidation ¶¶ 6–7, ECF No. 168.) Plaintiffs filed their Amended Consolidated

Complaint on September 17, 2015. (Am. Consolidated Compl. 50.) The Amended

Consolidated Complaint added the Castle McCulloch Defendants to the case. (Am.

Consolidated Compl. 1.)

34. On March 28, 2016, Plaintiffs voluntarily dismissed their claims against

Mark McDaniel and Patricia McDaniel.

35. On April 28, 2016, upon Plaintiffs’ motion, the Court placed JDPW into

receivership by appointing the Receiver as receiver for JDPW. (Order Approving Pls.’

Mot. Appointment Receiver for JDPW Trust 7, ECF No. 472.) The Court did so after

finding and concluding for the limited purposes of Plaintiffs’ motion (i) that Doug

Harris had a conflict of interest in remaining in control of JDPW and making

decisions on its behalf; (ii) that Doug Harris was unlikely to investigate and pursue

possible claims JDPW may have against the Castle McCulloch Defendants; (iii) that

the rights and interests of the parties would be adequately protected by the Receiver
taking fiscal and operational charge of JDPW; (iv) that there was no perceived conflict

of interest in the receiver for the Receivership Entities serving as the receiver for

JDPW, provided that NFI and JDPW, under the Receiver’s direction, settled the

claims against JDPW pursuant to a negotiated settlement agreement; and (v) that

Plaintiffs had, on the record at that time, presented substantial evidence that they

had an apparent right to property in an adverse party’s possession and that JDPW,

due to Doug Harris’s involvement, was not investigating or pursing causes of action

relating to the Deed of Trust and Assignment of Rents and Profits, which NFI

asserted it had claims to in law and equity. (Order Approving Pls.’ Mot. Appointment

Receiver for JDPW Trust 5–7.) As a further part of its ruling, the Court enjoined

Doug Harris from conducting further business as trustee of JDPW. (Order Approving

Pls.’ Mot. Appointment Receiver for JDPW Trust 17.)

36. Concurrent with the Court’s order placing JDPW into receivership, the

Court approved a settlement agreement between Plaintiffs, the Receivership

Entities, and JDPW. The settlement allowed Plaintiffs a $4 million claim against

CCSEA, DRE, and Kepes, subject to certain restrictions, and a $2.1 million claim

against JDPW. (Order Approving Nivison Settlement and Related Transactions

Including Release of CCSEA Sale Proceeds 8 [hereinafter “Order Approving Nivison

Agreement”], ECF No. 471.) Both amounts represented a substantial reduction from

the amount sought by Plaintiffs against JDPW or the Receivership Entities. (Order

Approving Nivison Agreement 8.)
37. Plaintiffs voluntarily dismissed their claims against the Epeses on June 27,

2016. Several months later, Plaintiffs dismissed their claims against NewBridge.

38. On February 28, 2017, Plaintiffs, Arthur Nivison, Doug Harris, and the

Castle McCulloch Defendants filed the Motions for Summary Judgment. Following

these filings, however, the Court concluded that matters in this case should be stayed

while the Supreme Court of North Carolina considered related issues on appeal.

39. On March 2, 2018, the Supreme Court of North Carolina dismissed the

appeals relating to this case pending before it after concluding that the appellants

had failed to demonstrate grounds for appellate review.

40. This Court held a hearing on the Motions for Summary Judgment on April

26, 2018, at which all parties with claims at issue were present. Additional

supplemental briefing ordered by the Court was completed on January 30, 2019.

41. The Motions for Summary Judgment are ripe for resolution.5

II.

LEGAL STANDARD

42. Under Rule 56 of the North Carolina Rules of Civil Procedure, summary

judgment is appropriate “if the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any, show that there is no

5 On April 6, 2018, Mark McDaniel filed an untitled document that opposed Plaintiffs’ Motion

for Partial Summary Judgment. Summary judgment filings in this case were due on
February 28, 2017, and responses to those filings were due on April 3, 2017. Given that Mark
McDaniel’s opposition was filed just over a year past this deadline, to the extent the
opposition is not rendered moot by the Court’s decisions herein, the Court will, in its
discretion, refuse to consider the opposition’s contents as untimely.
genuine issue as to any material fact and that any party is entitled to . . . judgment

as a matter of law.” Craig v. New Hanover Cty. Bd. of Educ., 363 N.C. 334, 337, 678

S.E.2d 351, 353 (2009) (quoting N.C. R. Civ. P. 56(c)). A material fact is one that

“would constitute or would irrevocably establish any material element of a claim or

defense.” Abner Corp. v. City Roofing & Sheetmetal Co., 73 N.C. App. 470, 472, 326

S.E.2d 632, 633 (1985). A genuine issue is “one that can be maintained by substantial

evidence.” Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000).

“Substantial evidence is such relevant evidence as a reasonable mind might accept

as adequate to support a conclusion and means more than a scintilla or a permissible

inference.” DeWitt v. Eveready Battery Co., 355 N.C. 672, 681, 565 S.E.2d 140, 146

(2002) (internal quotation marks and citations omitted).

43. On a motion for summary judgment, the moving party bears the burden of

showing that no genuine issues of material fact remain to be resolved. Camalier v.

Jeffries, 340 N.C. 699, 706, 460 S.E.2d 133, 136 (1995). “Evidence presented by the

parties is viewed in the light most favorable to the non-movant.” Summey v. Barker,

357 N.C. 492, 496, 586 S.E.2d 247, 249 (2003). The trial court should grant summary

judgment against an adverse party’s claim only if the movant can prove “an essential

element of the opposing party’s claim does not exist, cannot be proven at trial, or

would be barred by an affirmative defense” or can show “through discovery that the

opposing party cannot produce evidence to support an essential element of [his or]

her claim.” Dobson, 352 N.C. at 83, 530 S.E.2d at 835. If the moving party meets its

burden, “the burden shifts to the nonmoving party to produce a forecast of evidence
demonstrating specific facts, as opposed to allegations, showing that he can at least

establish a prima facie case at trial.” Gaunt v. Pittaway, 139 N.C. App. 778, 784–85,

534 S.E.2d 660, 664 (2000). The responding party may not “rest upon the . . .

allegations or denials” within its pleading, but must put forward specific facts

showing there is a genuine issue for trial. N.C. R. Civ. P. 56(e).

III.

ANALYSIS

44. The Court begins its analysis by addressing Doug Harris’s Motion as to

Plaintiffs’ Claims.6 The Court then turns to the Castle McCulloch Defendants’

Motion, followed by Plaintiffs’ Motion for Partial Summary Judgment, Plaintiffs and

Nivison’s Motion as to Doug Harris’s Claims, Doug Harris’s Motion as to the Castle

McCulloch Defendants’ Crossclaims, and finally Doug Harris’s Motion as to the

Receiver’s Crossclaims.

A. Doug Harris’s Motion as to Plaintiffs’ Claims

45. Doug Harris moves for Summary Judgment as to Plaintiffs’ claims against

him: Count 6 (Legal Malpractice and Misrepresentation); Count 8 (Fraud); Count 31

(Unfair and Deceptive Trade Practices); and Count 32 (Punitive Damages). Doug

Harris also argues for the dismissal of Plaintiffs’ claims against him by contending

6 The majority of the claims contained in Plaintiffs’ Amended Consolidated Complaint allege
injury to NFI and seek relief for NFI. Nevertheless, for ease of reference and because
Plaintiffs jointly briefed the Motions for Summary Judgment, the Court will attribute
arguments made by Old Battleground or NFI to “Plaintiffs.”
that Plaintiffs’ claims are barred due to Plaintiffs’ election of remedies. The Court

begins by addressing this latter argument.

1. Election of Remedies

46. Doug Harris argues that the Court should dismiss all claims jointly brought

against himself, Dr. Epes, and Mark McDaniel because Plaintiffs have settled these

claims as to Dr. Epes. He continues, “the Nivison entities have no right to settle the

same claim . . . against Dr. Epes and then decide they are dissatisfied [with] the

amount of the damages and go after Harris on the same claim.” (Mem. Law Supp.

Douglas S. Harris’s Mot. Summ. J. Nivison Entities’ Claims Against Harris 25, ECF

No. 862.2.) This argument is mistaken.

47. Plaintiffs seek cumulative remedies. “Unless and until [a] plaintiff receives

full satisfaction of a claim, settlement against [other] joint tortfeasors [will] not bar a

claim against the remaining offender.” Swain v. Leahy, 111 N.C. App. 884, 887, 433

S.E.2d 460, 462 (1993) (citing Bowen v. Iowa Nat’l Mut. Ins. Co., 270 N.C. 486, 492,

155 S.E.2d 238, 243 (1967)). Accordingly, the claims against Doug Harris will not be

dismissed on this ground.

2. Legal Malpractice and Misrepresentation

48. Plaintiffs’ sixth count alleges that Doug Harris, as a licensed North Carolina

attorney, provided legal advice to NFI by advising Arthur Nivison and represented

NFI leading up to and during the September 21, 2012 transactions between NFI,

JDPW, and NewBridge Bank. (Am. Consolidated Compl. ¶ 137.) Plaintiffs contend

that Doug Harris breached his fiduciary duties as an attorney to NFI by intentionally
concealing from NFI both the Castle McCulloch Collateral and an alleged deal

between the Settlement Debtors to release the Castle McCulloch Collateral, by failing

to assign the Castle McCulloch Collateral to NFI, and by providing legal services to

NFI despite a clear conflict of interest. (Am. Consolidated Compl. ¶¶ 136–48.)

Legal Malpractice

49. Doug Harris moves for summary judgment on Plaintiffs’ sixth count and

argues that NFI, following discovery, cannot support an essential element of its claim

because no reasonable factfinder could conclude on the record before the Court that

an attorney-client relationship existed between Doug Harris and Plaintiffs or Arthur

Nivison.

50. Plaintiffs counter that NFI’s claim for legal malpractice is supported by

“Plaintiffs’ original verified Complaint, affidavits, subpoena responses, Doug Harris’s

deposition, and other materials in support of Plaintiffs’ Motions for Summary

Judgment[.]” (Mem. Law Opp’n Douglas S. Harris’s Mot. Summ. J. Nivison Entities’

Claims 2.) At summary judgment, however, the Court is interested in specific facts,

not general statements of support. See N.C. R. Civ. P. 56(e). Indeed, after reviewing

the record and the parties’ arguments, the Court concludes that summary judgment

is appropriate on this claim.

51. While in limited circumstances North Carolina courts have extended an

attorney’s liability to certain nonclient third parties harmed in the course of an

employment contract for another, see, e.g., United Leasing Corp. v. Miller, 45 N.C.

App. 400, 405–06, 263 S.E.2d 313, 317 (1980) (stating “we have recognized a cause of
action in negligence arising from the negligent breach of a common law duty of care

flowing from the parties’ working relationship,” and “a party not in direct privity of

contract with an attorney [can] recover if he [can] show that he was a third-party

beneficiary of the attorney-client employment contract”), the general rule in North

Carolina remains that an attorney-client relationship must exist before liability for

attorney malpractice can be established, see Rorrer v. Cooke, 313 N.C. 338, 355, 329

S.E.2d 355, 365–366 (1985) (“In a professional malpractice case predicated upon a

theory of an attorney’s negligence, the plaintiff has the burden of proving by the

greater weight of the evidence: (1) that the attorney breached the duties owed to his

client, as set forth by Hodges, 239 N.C. 517, 80 S.E. 2d 144, and that this negligence

(2) proximately caused (3) damage to the plaintiff.” (emphasis added)); Moore v.

Jordan, 816 S.E.2d 218, 220 (N.C. Ct. App. 2018) (restating the rule of Rorrer);

Chicago Title Ins. Co. v. Holt, 36 N.C. App. 284, 288, 244 S.E.2d 177, 180 (1978)

(affirming dismissal of legal malpractice claim where plaintiff was not in attorney-

client relationship with the attorney).

52. Whether an attorney-client relationship exists is generally a question of

fact. Cornelius v. Helms, 120 N.C. App. 172, 175, 461 S.E.2d 338, 339 (1995). The

existence of such a relationship can be “implied from the conduct of the parties, and

is not dependent on the payment of a fee, nor upon the execution of a formal contract.”

N.C. State Bar v. Sheffield, 73 N.C. App. 349, 358, 326 S.E.2d 320, 325 (1985). Rather,

the “dispositive question” is “whether [a] defendant’s conduct was such that an

attorney-client relationship could reasonably be inferred.” Id. “An important factor
in determining the existence of the relationship is the client’s subjective belief.”

Kingsdown, Inc. v. Hinshaw, 2015 NCBC LEXIS 33, at *18 (N.C. Super. Ct. Mar. 25,

2015) (quoting Flick Mortg. Inv’rs v. Epiphany Mortg., 2006 NCBC LEXIS 2, at *3–4

(N.C. Super. Ct. Feb. 1, 2006)).

53. Here, NFI’s claim against Doug Harris for legal malpractice is premised

upon allegations of an attorney-client relationship, (Am. Consolidated Compl. ¶ 137

(“As such, [Doug Harris] represented Plaintiff NFI in said transaction and had a

fiduciary duty to Plaintiff NFI.”)), and breaches of the fiduciary duties arising from

that relationship, (see, e.g., Am. Consolidated Compl. ¶¶ 137, 141, 146).7 NFI’s claim

fails because NFI cannot forecast substantial evidence of such an attorney-client

relationship.

54. While the exact number and the form of Doug Harris and Arthur Nivison’s

interactions is disputed, the record does not present a genuine issue of material fact

about the general nature of those interactions. Most importantly, the record reflects

that no genuine issue of material fact remains as to whether Nivison himself believed

7 Plaintiffs also argue in briefing that the transaction between NFI and JDPW “did not take
place within the context of a standard lender/debtor relationship,” that “[a]s an attorney,
Doug Harris had a fiduciary obligation to Arthur Nivison to engage in arms-length
transactions,” and that “a fiduciary relationship can exist under a variety of circumstances
and is not limited to those persons who stand in some recognized legal relationship to
another, such as attorney and client.” (Mem. Law Opp’n Douglas S. Harris’s Mot. Summ. J.
Nivison Entities’ Claims 12.) Here, however, Plaintiffs have made extensive allegations that
an attorney-client relationship existed between Doug Harris and NFI due to Doug Harris’s
interactions with Arthur Nivison and have argued as much in briefing and at oral argument.
Plaintiffs have not presented an argument that Doug Harris owed NFI some other duty, aside
from that owed by an attorney to his or her client, sufficient to allow NFI to sue Doug Harris
for malpractice.
that an attorney-client relationship existed between himself or NFI and Doug

Harris—he did not. That point is evidenced by Nivison’s deposition testimony:

Q: I just want to know if you believe that [Doug Harris] was your attorney[.]

....

Q: You can answer, if you know[.]

A: As far as I am concerned, I have not had a contract with [Doug Harris] as
an attorney.

Q: Would that be ever?

A: According to my memory, which is faulty.

Q: Well, I understand. And would it follow if you didn’t have a contract, the
next question would be, do you ever recall retaining [Doug Harris] or paying
[Doug Harris] money as an attorney even without a contract?

A: I do not.

(Nivison Dep. I, at 34:2–14.)

55. Plaintiffs contend that these statements do not defeat NFI’s claim because

neither a formal contract nor the payment of a fee are necessary prerequisites to the

formation of an attorney-client relationship. While that statement of law is true,

Sheffield, 73 N.C. App. at 358, 326 S.E.2d at 325, Arthur Nivison’s answers clearly

show that he did not recall paying or retaining Doug Harris as an attorney, either for

himself or NFI, and Plaintiffs point to no evidence suggesting that Arthur Nivison

otherwise believed Doug Harris was, in fact, serving as his attorney.

56. To the contrary, Arthur Nivison testified numerous times at his deposition

that he retained his own attorney for the transaction with JDPW, that he relied on
that attorney’s advice, and that when he said “his attorney” he was referring to Tom

Harper.

A: This is a document I would have referred to my attorney. At his
instruction, I would have -- my reliance was dependent upon his instruction.

Q: So you relied upon your attorney and you’re referring to Tom Harper?

A: Yes.

Q: And you’re not referring to [Doug Harris] as your attorney, are you?

A: No. I am not.

(Nivison Dep. I, at 71:1–9.)

A: I signed the document before sending it to Mr. Harper.

Q: And Mr. Harper is an attorney?

A: He is an attorney.

Q: Was he your attorney with regard to this transaction?

A: He was.

(Nivison Dep. I, at 107:20–108:1.)

57. Arthur Nivison also testified that he was under the impression that Doug

Harris was acting as an attorney for Mark McDaniel, an adverse party, when the

three individuals met to discuss a possible transaction between Arthur Nivison’s

entities and JDPW:

Q: I heard you say vaguely but do you remember that the purpose of that
meeting was to discuss the possibility of JDPW Trust getting a note from
NewBridge Bank and you financing it? Do you remember that much?

....
A: That was probably part of the discussions. My recollection of the meeting
was, or is, more that Mark was using it as a vehicle to introduce me to an
attorney of his named Doug Harris.

Q: You believe that [Doug Harris] was representing Mark McDaniel at that
meeting?

A: [He] seemed to be. What the exact relationship was, we did not inquire
into.

....

A: I believed that [Doug Harris] had some sort of attorney relationship with
Mark McDaniel. Whether [he was] actually representing him in that meeting
or not, I cannot say.

(Nivison Dep. I, at 28:25–29:12, 35:11–13.) Furthermore, in stark contrast to the

position Plaintiffs take now, Arthur Nivison’s testimony appears to demonstrate a

lack of concern as to Doug Harris’s role in the transactions between his entities and

JDPW:

Q: At what point did you become aware that [Doug Harris] was the trustee
of a trust known as the JDPW trust -- at what point?

A: In September, probably the closing date.

Q: You say you did not know that before September 21st?

A: I really didn’t pay any attention to it up until that point.

(Nivison Dep. I, at 29:13–18.)

58. In the face of this evidence, Plaintiffs are unable to create a genuine issue

of material fact on which NFI’s claim can proceed. The most specific assertion

Plaintiffs make in opposition to Doug Harris’s motion is that “Doug Harris was giving

legal advice to Arthur Nivison and preparing documents for Arthur Nivison to review

and asking Arthur Nivison to prepare letters to send to NewBridge Bank.” (Mem.
Law Opp’n Douglas S. Harris’s Mot. Summ. J. Nivison Entities’ Claims 5.) To support

this assertion, Plaintiffs cite pages from Doug Harris’s deposition (pages 79–84, 95,

and 130). Plaintiffs do not point the Court to specific lines or quotes, so the Court

examines Doug Harris’s testimony itself, viewing the contents in the light most

favorable to NFI.

59. In the first excerpt cited, Plaintiffs appear to refer to Doug Harris’s

testimony that he, Arthur Nivison, and Mark McDaniel met to negotiate the terms of

the deal between Arthur Nivison’s entities and JDPW at a restaurant; that he and

Mark McDaniel discussed the deal further with Arthur Nivison over the telephone;

and that during these conversations he explained the proposed deal to Arthur Nivison

and explained why JDPW was involved. (Harris Dep. I, at 79:5–81:4, 82:1–20.) Doug

Harris also testified that he brought a folder of materials to the initial restaurant

meeting for Arthur Nivison to review and that these materials were meant to

reassure Arthur Nivison and explain the deal. (Harris Dep. I, at 81:11–25.)

60. The second deposition excerpt Plaintiffs cite is a single page that appears to

refer to the aforementioned letter Doug Harris asked Arthur Nivison to prepare and

send to NewBridge. The first part of the relevant line of questioning is cut off from

the excerpt provided to the Court, but Doug Harris appears to testify that he told

Arthur Nivison “in the most general terms” what to include in the letter. (Harris

Dep. I, at 95:1–3.)

61. The final cited portion of Doug Harris’s deposition appears to discuss an

opinion letter Doug Harris prepared and sent to Arthur Nivison regarding the
transactions between Arthur Nivison’s entities, JDPW, and NewBridge. (Harris Dep.

I, at 130:2–11.)

62. Reviewing this testimony, the Court concludes that a reasonable factfinder

could not find this evidence indicative of an attorney-client relationship. First, Doug

Harris’s meeting with Arthur Nivison and Mark McDaniel, explaining the terms of

the transaction Mark McDaniel had proposed to Arthur Nivison, and providing

documents to Arthur Nivison is not substantial evidence of an attorney-client

relationship, even considering that Arthur Nivison had not yet retained his own

counsel. Indeed, the Rules of Professional Conduct contemplate attorneys meeting,

negotiating, and discussing legal matters with unrepresented adverse parties. Rev.

R. Prof. Conduct 4.3 cmt. 2 (stating, in interacting with an unrepresented adverse

party, a lawyer may inform that person of the terms on which the lawyer’s client will

enter an agreement, prepare documents that require that person’s signature, and

explain the lawyer’s own view on the meaning of the documents or the lawyer’s view

of the underlying legal obligations). Plaintiffs present no evidence that Doug Harris’s

interactions with Arthur Nivison extended beyond such acts.

63. Further, while an attorney meeting with an unrepresented party must

disclose that they are representing an adverse party to adhere to ethical standards,

Rev. R. Prof. Conduct 4.3 cmt. 2, the record is clear here that Arthur Nivison was

under no impression that Doug Harris was acting as his attorney. Instead, he

believed Doug Harris was representing Mark McDaniel.8 Considering that belief and

8 The Court notes that while Plaintiffs argue that Doug Harris has violated several of the
Revised Rules of Professional Conduct governing attorney behavior in North Carolina, “a
the arm’s-length nature of the interactions between Doug Harris and Arthur Nivison,

no reasonable factfinder could conclude that an attorney-client relationship was

formed when Doug Harris and Mark McDaniel sat down with, or subsequently called,

Arthur Nivison to negotiate the proposed deal with JDPW.

64. The Court draws a similar conclusion about the second deposition excerpt

Plaintiffs cite. A reasonable factfinder could not conclude that Arthur Nivison and

Doug Harris’s discussion concerning what NewBridge would be expecting in a letter

from JDPW’s lender created an attorney-client relationship between the two men,

particularly in light of Arthur Nivison’s lack of belief that such a relationship existed.

65. Finally, with regard to the opinion letter referenced in Plaintiffs’ last page

of cited deposition testimony, the Court finds it sufficient to note that the record

indicates that Doug Harris sent this letter to Tom Harper, (Corrected Ex. KK), who

Arthur Nivison stated was his attorney during the September 21, 2012 transaction

with JDPW and upon whose advice Arthur Nivison indicated he relied, (Nivison Dep.

I, at 71:1–9, 107:20–108:1). No reasonable factfinder could conclude that Doug Harris

created an attorney-client relationship with NFI or Arthur Nivison by drafting

documents and sending those documents to an attorney representing Arthur Nivison

with respect to the September 21, 2012 transactions. Thus, this evidence, like the

breach of a provision of the Code of Professional Responsibility is not ‘in and of itself . . . a
basis for civil liability.” Baars v. Campbell Univ., Inc., 148 N.C. App. 408, 421, 558 S.E.2d
871, 879 (2002) (quoting Webster v. Powell, 98 N.C. App. 432, 439, 391 S.E.2d 204, 208 (1990),
aff’d, 328 N.C. 88, 399 S.E.2d 113 (1991)). The Court makes no conclusion about whether
Doug Harris’s conduct violated the Rules of Professional Conduct, as that issue is not now
before the Court.
rest of the testimony Plaintiffs cite, fails to create a genuine issue of material fact in

NFI’s favor.

66. Plaintiffs contend that the Court may not resolve whether an attorney-client

relationship existed between NFI and Doug Harris on this record, citing Broyhill v.

Aycock & Spence, 102 N.C. App. 382, 402 S.E.2d 167, aff’d, 330 N.C. 438, 410 S.E.2d

392 (1991), and Ives v. Real-Venture, Inc., 97 N.C. App. 391, 388 S.E.2d 573 (1990).

In both of those cases, however, the party alleging the existence of an attorney-client

relationship presented affidavit testimony or other evidence purporting to show that

the attorney in question had been retained or engaged. Broyhill, 102 N.C. App. at

390, 402 S.E.2d at 172; Ives, 97 N.C. App. at 399, 388 S.E.2d at 578. In contrast,

there is no indication here that Arthur Nivison was under any illusion that Doug

Harris was acting as his or NFI’s attorney, and Plaintiffs offer no sworn testimony

supporting NFI’s claim.

67. Plaintiffs’ reliance upon their initial verified Complaint (the “Verified

Complaint”) is also unavailing. On the issue of representation, the Verified

Complaint contains only an allegation that begins, “Harris served as the closing

attorney for the loan from [NFI] to Defendant JDPW,” and concludes “as such,

[Harris] represented [NFI] in said transaction and had a fiduciary duty to [NFI].”

(Compl. ¶ 28 (Wake 14 CVS 9564), ECF No. 1.) Plaintiffs cannot use this allegation

to create a genuine issue of material fact at summary judgment.

68. A trial court may treat a verified complaint “as an affidavit if it (1) is made

on personal knowledge, (2) sets forth such facts as would be admissible in evidence,
and (3) shows affirmatively that the affiant is competent to testify to the matters

stated therein.” Page v. Sloan, 281 N.C. 697, 705, 190 S.E.2d 189, 194 (1972).

69. Examining the Verified Complaint, the Court first concludes that the second

portion of the above-quoted statement—“as such, [Harris] represented [NFI] in said

transaction and had a fiduciary duty to [NFI]”—cannot be considered facts admissible

in evidence or a statement based on the personal knowledge of Arthur Nivison, the

individual who verified the Complaint. Rather, this portion of the statement is a legal

conclusion. See Singleton v. Steward, 280 N.C. 460, 467, 186 S.E.2d 400, 405 (1972)

(concluding that affiant’s legal conclusions are not facts to be considered under Rule

56(e)). The Verified Complaint also alleges no facts supporting the presence of an

attorney-client relationship besides those the Court has already concluded cannot

support the existence of such a relationship. Consequently, this conclusory statement

cannot itself create a genuine issue of material fact. See United Cmty. Bank (Ga.) v.

Wolfe, 369 N.C. 555, 559–60, 799 S.E.2d 269, 272 (2017) (holding that a conclusory

statement in defendants’ affidavit, without specific supporting facts, did not create a

genuine issue of material fact); S.C. Telcoms. Grp. Holdings v. Miller Pipeline LLC,

248 N.C. App. 243, 248, 788 S.E.2d 634, 638 (2016) (holding that conclusory

statements that “photographs and video” showed fiber optic cables were clearly

marked did not provide specific facts for summary judgment or indicate the affiant

possessed personal knowledge of the issue).

70. Turning to the first part of the statement in the Verified Complaint, the

allegation that Doug Harris served as the “closing attorney” on the loan from NFI to
JDPW appears to reference a situation most commonly found in real estate

transactions where a “closing attorney” represents multiple parties. See, e.g.,

Johnson v. Schultz, 364 N.C. 90, 94, 691 S.E.2d 701, 704 (2010). This verified

allegation fails to create a genuine issue of material fact with regard to the existence

of an attorney-client relationship for two reasons.

71. First, in real estate transactions involving a “closing attorney,” the multiple

parties with which the closing attorney maintains an attorney-client relationship are

typically those allied on one side of the transaction. Id. (noting, with regard to real

estate closings, that “the most common practice is for the closing attorney to represent

the purchaser and lender while performing limited functions for the seller (such as

the preparation of the deed)” (quoting Patrick K. Hetrick et al., North Carolina Real

Estate Manual 508 (2008–2009 ed.))). In fact, this State’s Supreme Court has

“stress[ed] that it is the buyer alone in most residential real estate transactions who

is legally deemed to repose confidence in the closing attorney through the existence

of [an] attorney-client relationship,” not both sides. Id. at 96, 691 S.E.2d at 706.

72. Exceptions to this general rule exist only in rare cases. For example, in

Johnson, cited above, the Supreme Court of North Carolina held that there was a

question as to whether an attorney represented both the buyer and the seller in a real

estate transaction. Id. The Supreme Court made clear, however, that a possible

relationship existed only because of a prior relationship between the seller and the

attorney. Id. Thus, NFI’s allegation here that Doug Harris served as a “closing
attorney” does not ipso facto establish an attorney-client relationship between Doug

Harris and NFI.

73. Second, as the Court has stressed, the undisputed facts show that NFI’s

manager, Arthur Nivison, did not believe he had retained Doug Harris as an attorney;

he believed Doug Harris was acting as an attorney for another party involved in the

proposed deal. Further, on the day of the closing, NFI was represented by a different

attorney. The undisputed facts show that attorney Tom Harper handled the closing

for Arthur Nivison and NFI on September 21, 2012, reviewed documents for Arthur

Nivison and NFI, and circulated the changes to the Assignment Agreement that

Plaintiffs contend are enforceable. Arthur Nivison also stated that he relied on Tom

Harper’s instructions that day with regard to the transaction. (Nivison Dep. I, at

71:1–9.) The record thus overwhelmingly refutes any attempt by Plaintiffs to create

an attorney-client relationship between NFI and Doug Harris through the use of the

term “closing attorney.”

74. A genuine issue is “one that can be maintained by substantial evidence.”

Dobson, 352 N.C. at 83, 530 S.E.2d at 835. Proving that a genuine issue of material

fact exists requires a party to present “such relevant evidence as a reasonable mind

might accept as adequate to support a conclusion,” and that “means more than a

scintilla or a permissible inference.” DeWitt, 355 N.C. at 681, 565 S.E.2d at 146. For

the reasons stated herein, the Court concludes that NFI cannot produce substantial

evidence to support an essential element of its claim for legal malpractice. No

reasonable factfinder could examine the record before the Court and conclude that an
attorney-client relationship existed such that NFI can maintain its legal malpractice

claim against Doug Harris. Accordingly, the Court grants Doug Harris’s motion as

to NFI’s claim for legal malpractice and will dismiss this claim.

Misrepresentation

75. To the extent the reference to “Misrepresentation” in Plaintiffs’ Count 6

attempts to assert a claim for negligent misrepresentation against Doug Harris, the

Court grants summary judgment on that cause of action as well.

76. A claim for negligent misrepresentation cannot be based upon a

concealment or failure to disclose; a plaintiff must allege and prove an “actual,

affirmative representation.” USA Trouser, S.A. de C.V. v. Williams, 2016 NCBC

LEXIS 58, at *40 (N.C. Super. Ct. July 21, 2016), aff’d, 812 S.E.2d 373 (N.C. Ct. App.),

disc. rev. denied, 371 N.C. 448 (2018). The majority of the conduct NFI pleads in

connection with its claim for “Legal Malpractice and Misrepresentation” concerns

Doug Harris’s failure to disclose certain information. (See, e.g., Am. Consolidated

Compl. ¶¶ 136, 140, 142.) These allegations do not support a claim for negligent

misrepresentation.

77. The remaining allegations can be broken into two categories. The first set

alleges intentional concealment of the Castle McCulloch Collateral, and is thus (i) a

restatement of NFI’s below-discussed fraud claim and (ii) allegations of concealment,

which cannot form the basis for a negligent misrepresentation claim. (See, e.g., Am.

Consolidated Compl. ¶ 139 (alleging that Doug Harris’s failure to disclose the Castle

McCulloch Collateral “was not inadvertent” but “intentional”).) The second set of
allegations relates to Doug Harris’s representations in prepared documents that

JDPW would assign the CCSEA Collateral to NFI and Doug Harris’s subsequent

failure to do so. (See, e.g., Am. Consolidated Compl. ¶ 144.) This group of allegations

does not take issue with the care with which Doug Harris prepared these documents;

rather, NFI alleges it suffered damages because Doug Harris did not perform under

the Assignment Agreement. (See Am. Consolidated Compl. ¶ 145.) A breach of a

contractual duty cannot provide the basis for an independent claim of negligent

misrepresentation. Supplee v. Miller-Motte Bus. Coll., Inc., 239 N.C. App. 208, 233,

768 S.E.2d 582, 600 (2015). Thus, although Doug Harris failed to assign interests in

the CCSEA Collateral to NFI and may not have disclosed certain facts to NFI, NFI’s

allegations do not support a claim for negligent misrepresentation.

78. For these reasons, the Court concludes that Doug Harris’s Motion for

Summary Judgment as to Plaintiffs’ Claims should be granted with regard to Count

6 of Plaintiffs’ Amended Consolidated Complaint.

3. Fraud

79. Doug Harris next moves for summary judgment on Count 8 of Plaintiffs’

Amended Consolidated Complaint, a claim by NFI against Doug Harris labeled

“Fraud – Castle McCulloch Collateral.” (Am. Consolidated Compl. 23.) Doug Harris

argues that summary judgment should be granted in his favor because NFI has failed

to plead fraud with the specificity required by Rule of Civil Procedure 9(b) and

because the record following discovery shows an absence of facts sufficient to support

this claim.
80. “The essential elements of actionable fraud are: ‘(1) false representation or

concealment of a material fact, (2) reasonably calculated to deceive, (3) made with

intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured

party.’” RD&J Props. v. Lauralea-Dilton Enters., LLC, 165 N.C. App. 737, 744, 600

S.E.2d 492, 498 (2004) (quoting Becker v. Graber Builders, Inc., 149 N.C. App. 787,

794, 561 S.E.2d 905, 910 (2002)). Additionally, the claimant’s “reliance on alleged

false representations must be reasonable.” Sullivan v. Mebane Packaging Grp., Inc.,

158 N.C. App. 19, 26, 581 S.E.2d 452, 458 (2003). “Whether each of the elements of

actual fraud and reasonable reliance are met are ordinarily questions for the jury

‘unless the facts are so clear that they support only one conclusion.’” Head v. Gould

Killian CPA Grp., P.A., 371 N.C. 2, 9, 812 S.E.2d 831, 837 (2018) (quoting Forbis v.

Neal, 361 N.C. 519, 527, 649 S.E.2d 382, 387 (2007)).

81. In response to Doug Harris’s motion, Plaintiffs lay out three main categories

of fraudulent conduct by Doug Harris that they contend are supported by the record.

First, Plaintiffs assert that Doug Harris misrepresented the value of the CCSEA

Collateral that NFI would be assigned under the Assignment Agreement. (Mem. Law

Opp’n Douglas S. Harris’s Mot. Summ. J. Nivison Entities’ Claims 13.) Second,

Plaintiffs argue that Doug Harris represented that Dr. Epes would pledge certain

property to secure NFI’s loan despite knowing that Dr. Epes transferred his interest

in this property to his wife in 2006. (Mem. Law Opp’n Douglas S. Harris’s Mot.

Summ. J. Nivison Entities’ Claims 13, 15.) Finally, Plaintiffs contend that Doug

Harris misrepresented to NFI that the Castle McCulloch Loan Documents and
interests in the Castle McCulloch Collateral would be assigned to NFI as part of the

deal with JDPW and concealed JDPW’s receipt of that collateral. (Mem. Law Opp’n

Douglas S. Harris’s Mot. Summ. J. Nivison Entities’ Claims 14.) The Court begins

by addressing the first two categories of allegations.

Requirements of Rule 9(b)

82. Doug Harris argues that NFI’s claim for fraud should be dismissed at

summary judgment because the allegations in the Amended Consolidated Complaint

are not pleaded with sufficient particularity under Rule 9(b). Rule 9(b) requires that

a complaint alleging “circumstances constituting fraud” state its allegations “with

particularity” (with the exception of intent, which must be alleged but can be averred

generally). N.C. R. Civ. P. 9(b). The Supreme Court of North Carolina has held that

this requirement is met if a pleading alleges the “time, place and content of the

fraudulent representation,” the “identity of the person making the representation,”

and “what was obtained as a result of the fraudulent acts or representations.” Terry

v. Terry, 302 N.C. 77, 85, 273 S.E.2d 674, 678 (1981). Recognizing that it may be

difficult to satisfy Rule 9(b) when alleging fraud by omission or concealment, this

Court has previously held that a litigant pleading fraud by omission or concealment

does so with particularity by specifically alleging:

(1) the relationship between plaintiff and defendant giving rise to the duty to
speak; (2) the event that triggered the duty to speak or the general time
period over which the relationship arose and the fraud occurred; (3) the
general content of the information that was withheld and the reason for its
materiality; (4) the identity of those under a duty who failed to make such
disclosures; (5) what the defendant gained from withholding the information;
(6) why the plaintiff’s reliance on the omission was reasonable and
detrimental; and (7) the damages the fraud caused the plaintiff.
Tillery Envtl. LLC v. A&D Holdings, Inc., 2018 NCBC LEXIS 13, at *21–22 (N.C.

Super. Ct. Feb. 9, 2018); Christenbury Eye Ctr., P.A. v. Medflow, Inc., 2015 NCBC

LEXIS 64, at *13–14 (N.C. Super. Ct. June 19, 2015), aff’d, 370 N.C. 1, 802 S.E.2d

888 (2017); Island Beyond, LLC v. Prime Capital Grp., LLC, 2013 NCBC LEXIS 48,

at *19 (N.C. Super. Ct. Oct. 30, 2013); Lawrence v. UMLIC-Five Corp., 2007 NCBC

LEXIS 20, at *10 (N.C. Super. Ct. June 18, 2007); see also Breeden v. Richmond Cmty.

Coll., 171 F.R.D. 189, 195 (M.D.N.C. 1997).

83. Although parties often seek to attack a fraud claim under Rule 9(b) at the

early stages of a proceeding, the North Carolina Court of Appeals has held that

summary judgment is appropriate in cases where a plaintiff has failed to plead fraud

with particularity. Hardin v. KCS Int’l, Inc., 199 N.C. App. 687, 702, 682 S.E.2d 726,

737 (2009) (“This Court has held that when a complaint against a corporation fails to

allege, as required by Rule 9(b), the time and occasion of the misrepresentation and

the individual who made the misrepresentation, then summary judgment was proper

for failure to allege the essential elements of fraud with particularity.” (internal

quotation marks omitted)); Trull v. Cent. Carolina Bank & Tr. Co., 117 N.C. App.

220, 224, 450 S.E.2d 542, 545 (1994) (“Rule 9(b) . . . requires that a complaint

charging fraud allege [the elements of fraud] with particularity. If it does not,

summary judgment is proper.” (citations omitted)); Leake v. Sunbelt, Ltd. of Raleigh,

93 N.C. App. 199, 205, 377 S.E.2d 285, 289 (1989).

84. As Doug Harris has challenged NFI’s fraud claim on particularity grounds,

the Court examines the contents of the Amended Consolidated Complaint. Doing so,
the Court concludes that NFI has not pleaded its contentions as to the value of the

CCSEA Collateral and the ownership of Dr. Epes’s property with sufficient

particularity to base its claim for fraud on those facts now.

85. First, the Amended Consolidated Complaint contains no allegation of a

misrepresentation regarding the value of the CCSEA Collateral. The representation

that Plaintiffs take issue with—that the 2012 tax value of the CCSEA Collateral was

$4,582,222.00—is included in every version of the Assignment Agreement and several

other documents attached to the Amended Consolidated Complaint, (see, e.g., Am.

Consolidated Compl. Ex. TT), but Plaintiffs’ pleading contains no allegation that this

representation was false, that Doug Harris intended it to be false, or that NFI relied

on this statement of tax value to its detriment. NFI pleads fraud and intent only as

to the concealment of the Castle McCulloch Collateral, the Settlement Agreement,

and the documents by which NewBridge assigned interests in the Castle McCulloch

Collateral to JDPW. NFI does not allege that any statement regarding the tax value

of the CCSEA Collateral was fraudulent or was intended to deceive. Consequently,

the Court must conclude that NFI did not particularly plead a claim for fraud against

Doug Harris based on representations of the CCSEA Collateral’s value, and Plaintiffs

cannot now argue that NFI’s claim should survive summary judgment on this basis.

See Trull, 117 N.C. App. at 224, 450 S.E.2d at 545; see also United States ex rel. Owens

v. First Kuwaiti Gen. Trading & Contracting Co., 612 F.3d 724, 731 (4th Cir. 2010)

(holding nonmovant could not avoid summary judgment by asserting new grounds

for fraud claim which had not been particularly pleaded); Dongelewicz v. PNC Bank
Nat’l Ass’n, 104 Fed. App’x 811, 819 n.4 (3d Cir. 2004) (refusing, after affirming

dismissal of common law fraud claim, to consider additional theories of fraud offered

in summary judgment brief on the reasoning that “a contention in a brief . . . may not

be used to substitute for an allegation in a complaint, especially in the context of a

fraud claim, which must be pled with particularity” (citation and internal quotation

marks omitted)).

86. Second, with regard to Plaintiffs’ argument concerning Doug Harris’s

representations about Dr. Epes’s property, the Court notes that the Amended

Consolidated Complaint contains allegations of misrepresentations about this

collateral, but those allegations are pleaded only against the Epeses. (Am.

Consolidated Compl. ¶¶ 55, 149–167 (alleging the Epeses concealed the fraudulent

conveyance of Dr. Epes’s property from NFI and bringing a claim against the Epeses

for fraud on creditors and fraudulent transfer of assets).) Doug Harris’s name

appears in these allegations only in reference to deposition testimony he gave prior

to the Amended Consolidated Complaint in which he stated Dr. Epes continued to

control the personal property in question and did not abide by the terms of the

assignment agreement between him and his spouse. (Am. Consolidated Compl. ¶

158.)

87. To properly bring a claim for fraud, a claimant’s pleading must state the

specific individual who made the allegedly fraudulent misrepresentations, Hardin,

199 N.C. App. at 702, 682 S.E.2d at 737, or, in cases of concealment, must allege “the

identity of those under a duty who failed to make . . . disclosures,” Tillery Envtl. LLC.,
2018 NCBC LEXIS 13, at *21–22. Because the Amended Consolidated Complaint

contains no allegations that Doug Harris made a false representation about or

concealed the transfer of Dr. Epes’s property to Bessie Epes, NFI cannot now attempt

to assert a claim for fraud on this basis. See Trull, 117 N.C. App. at 224, 450 S.E.2d

at 545; see also Owens, 612 F.3d at 731; Dongelewicz, 104 Fed. App’x at 819 n.4.

Fraud Concerning the Castle McCulloch Collateral

88. The Court next turns to Plaintiffs’ contentions concerning Doug Harris’s

concealment of the Castle McCulloch Collateral and Doug Harris’s argument that

NFI cannot produce a sufficient forecast of certain elements of its fraud claim

following discovery. To prevail, Doug Harris need not “negate every element of

fraud,” but may succeed if he “effectively refutes even one element” of NFI’s claim.

RD&J Props., 165 N.C. App. at 745, 600 S.E.2d at 498 (quoting Ramsey v. Keever’s

Used Cars, 92 N.C. App. 187, 191, 374 S.E.2d 135, 137 (1988)).

89. At the outset, the Court notes that NFI’s allegations of fraud and Plaintiffs’

arguments in support of this claim appear, at times, inconsistent. In certain parts of

its pleading, NFI appears to assert that Doug Harris made express

misrepresentations that the Castle McCulloch Collateral would be part of NFI’s deal

with JDPW. (See, e.g., Am. Consolidated Compl. ¶ 174.) At other points, NFI claims

ignorance of the existence of the Castle McCulloch Collateral and alleges that Doug

Harris concealed it from Arthur Nivison, NFI, and their attorney. (See, e.g., Am.

Consolidated Compl. ¶ 59.) Finally, NFI also seems to put forward the theory that

Doug Harris made general representations to Arthur Nivison and NFI that caused
them to believe that NFI would be receiving everything NewBridge held as security

on the CCSEA and Castle McCulloch Loans, that Nivison and NFI were not aware

that this collateral included the Castle McCulloch Collateral or Loan Documents, and

that Doug Harris concealed the existence of that collateral from NFI. (See, e.g., Am.

Consolidated Compl. ¶ 178 (“Doug Harris, Mark McDaniel, and Richard Epes never

disclosed to Plaintiff NFI exactly what collateral had been assigned to Defendant

JDPW Trust from Defendant NewBridge Bank.”).) Examining each apparent theory,

the Court concludes that none supports NFI’s fraud claim on the record at summary

judgment.

90. First, to the extent NFI alleges that Doug Harris made affirmative

misrepresentations that the Castle McCulloch Collateral would be transferred from

JDPW to NFI—assuming for this discussion that such statements could sustain a

claim for fraud9—the record demonstrates no such representation. To the contrary,

the record contains evidence that implicitly and explicitly refutes such an allegation.

This evidence includes Arthur Nivison’s signed memos that demonstrate he was

aware that NFI’s loan would be used to pay off the Castle McCulloch Loan, (Am.

Consolidated Compl. Ex. DDD, ECF No. 193); the fact the Castle McCulloch

Collateral was not part of the specifically described collateral assigned under the

Assignment Agreement (Corrected Ex. KK; Am. Consolidated Compl. Exs. QQ, TT);

and Arthur Nivison testifying at his deposition that he could not recall any

9 Promises of future intent, as opposed to statements relating to past or existing facts, will
not generally support a claim for fraud unless made with the intent to deceive and with no
intent to comply with the stated promise or representation. Potts v. KEL, LLC, 2018 NCBC
LEXIS 24, at *8–9 (N.C. Super. Ct. Mar. 27, 2018) (citing North Carolina cases).
misleading, deceptive, or false statements made by Doug Harris personally or as a

representative of JDPW, (Castle McCulloch Defs.’ Br. Opp’n Pls.’ Mot. Partial Summ.

J. Ex. 10, at 92:3–7 [hereinafter “Nivison Dep. II”], ECF No. 880). In sum, any

allegation that Doug Harris made affirmative misrepresentations that expressly

dealt with the Castle McCulloch Collateral finds no support in the evidence before

the Court.

91. The second apparent theory of fraud NFI pursues, that of concealment,

encounters a similar issue. The record overwhelmingly supports Doug Harris’s

contention that Plaintiffs and Arthur Nivison were aware of the Castle McCulloch

Loan and Loan Documents or Collateral. Arthur Nivison himself testified that he

had the impression that a Castle McCulloch entity would somehow serve as security

for his loan, (Nivison Dep. II, at 89:4–22), and his signed memos indicate he was

aware of the Castle McCulloch Loan, (Am. Consolidated Compl. Ex. DDD). Further,

before Plaintiffs allege Doug Harris signed the amended version of the Assignment

Agreement, NFI’s attorney received an e-mail from NewBridge’s counsel reading,

“Upon [receipt] of $2,001,834.09 newbridge will transfer all ccsae [sic] and castle

mcculloch loan documents to jdpw trust.” (Am. Consolidated Compl. Ex. RR, ECF

No. 190 (emphasis added).) If Doug Harris made an attempt to conceal the Castle

McCulloch Loan, Loan Documents, or Collateral from Arthur Nivison and NFI, the

undisputed record shows that effort was not successful.

92. Further, as to Plaintiffs’ assertion that Doug Harris concealed aspects of the

deals between the Settlement Debtors and NewBridge or JDPW and NewBridge, a
claim for fraud may only be based on concealment of a material fact where one party

owed the other a duty of disclosure. Hardin, 199 N.C. App. at 696, 682 S.E.2d at 733.

A duty to disclose arises where: (1) “a fiduciary relationship exists between
the parties to the transaction”; (2) there is no fiduciary relationship and “a
party has taken affirmative steps to conceal material facts from the other”;
[or] (3) there is no fiduciary relationship and “one party has knowledge of a
latent defect in the subject matter of the negotiations about which the other
party is both ignorant and unable to discover through reasonable diligence.”

Id. (quoting Sidden v. Mailman, 137 N.C. App. 669, 675, 529 S.E.2d 266, 270–71

(2000)). Plaintiffs’ arguments to the contrary notwithstanding, the Court has

determined that Doug Harris did not have an attorney-client relationship with NFI,

and Plaintiffs have not argued or successfully shown the existence of some other

fiduciary relationship. Plaintiffs have also not argued, and the facts of this case do

not fit, a scenario in which a latent defect existed in the subject matter of a

transaction. Thus, the remaining question is whether Doug Harris took affirmative

steps to conceal information from NFI about the dealings between the Settlement

Debtors, NewBridge, and JDPW. Contrary to Plaintiffs’ assertions, the Court

concludes that the record does not contain sufficient facts of such an affirmative step

to sustain NFI’s fraud claim.

93. The final theory on which NFI’s fraud claim appears to be based is that Doug

Harris made nonspecific misrepresentations to Arthur Nivison that NFI would

receive everything NewBridge held as collateral on the loans JDPW was purchasing,

did not disclose that NewBridge held the Castle McCulloch Loan Documents or

interests in the Castle McCulloch Collateral, and thus made a fraudulent

representation to NFI about the general nature of the assets it would be receiving.
In short, this argument asserts that Doug Harris is liable to NFI for fraud because

he led NFI to believe that it would get whatever NewBridge held, and the specifics of

that collateral were never discussed or accurately disclosed to NFI. This theory of

fraud also finds little, if any, support in the evidentiary record.

94. Just as there is no evidence in the record of any fraudulent representation

mentioning the Castle McCulloch Collateral or Loan Documents specifically, the

record is also devoid of any express representation that NFI would receive any and

all collateral held by NewBridge for the CCSEA and Castle McCulloch Loans. The

numerous e-mails that Plaintiffs cite between Doug Harris and other parties involved

in the September 21, 2012 transactions do not show that Doug Harris represented

that NFI, Old Battleground, or Arthur Nivison would be receiving anything and

everything held by NewBridge. Where these e-mails do mention an assignment to

Plaintiffs or Arthur Nivison, they merely state that JDPW would be making an

unspecified assignment. For example, one e-mail on which Plaintiffs rely is from

Doug Harris to an individual named Desmond Sheridan which indicated that Doug

Harris would pick up “the assignment papers” and would “then re-assign the security

interest to Art Niverson [sic].” (Am. Consolidated Compl. Ex. SS, ECF No. 190.) The

e-mail does not identify which assignment papers or security interests are referenced.

Reading Doug Harris’s nonspecific mention of security interests in this e-mail, or

similar mentions of security interests in other e-mails Plaintiffs cite, to include

interests in the Castle McCulloch Collateral requires the factfinder to assume the

conclusion that Plaintiffs seek to prove by citing the e-mails. This final theory is also,
again, rebutted by Arthur Nivison’s testimony that he could not recall any false or

misleading statements by Doug Harris that induced him to enter the transaction with

JDPW. (Nivison Dep. II, at 92:3–7.)

95. Plaintiffs point repeatedly to a September 21, 2012 e-mail from Doug Harris

to NFI’s attorney as evidence of a fraudulent misrepresentation or an affirmative act

of concealment. In that e-mail, Doug Harris indicated that he was attaching an

“assignment of security interest which [he] basically copied from that of [NewBridge]

as well as their attachment A.” (Corrected Ex. KK.) The referenced “Attachment A”

was the Schedule A to the drafted Assignment of Security Instruments document that

was sent to NFI’s attorney. (See Corrected Ex. KK.) NFI contends that the Schedule

A it received was nearly identical to the one JDPW received from NewBridge, but

that the version sent to NFI’s attorney omitted the Castle McCulloch Loan and Castle

McCulloch Loan Documents, which had been included in the version sent to JDPW.

(Mem. Law Opp’n Douglas S. Harris’s Mot. Summ. J. Nivison Entities’ Claims 14.)

96. Upon review, the Court cannot conclude that the September 21, 2012 e-mail

from Doug Harris presents substantial evidence raising a genuine issue of material

fact about whether a fraudulent representation was made. NFI’s reading of this

e-mail is only possible if the factfinder already assumes that NFI was promised all of

the collateral in NewBridge’s possession and that the document supplied by Doug

Harris should have contained the entirety of the collateral that was to be exchanged

between NewBridge and JDPW. There is no evidence in the present record to justify

such an assumption, and a reasonable factfinder could not conclude that this e-mail,
on its own, reflects a misrepresentation or a concealment of material facts that Doug

Harris had a duty to disclose.

97. The Court has also examined Plaintiffs’ submitted Second Affidavit of

Arthur Nivison (the “Second Affidavit”) and the allegations of promises and

representations by Doug Harris made therein. After doing so, the Court concludes

NFI may not rely on these statements to create a genuine issue of material fact at

summary judgment.

98. In his Second Affidavit, Arthur Nivison affirms:

[I]t was agreed that the Castle McCulloch Loan and the CCSEA Loans would
be assigned to me. . . .

. . . Doug Harris had represented both to me and to my attorney that
NewBridge Bank would assign all of the loan documents associated with the
Castle McCulloch Loan and the CCSEA Loans to JDPW . . . and that JDPW
Trust would re-assign those same documents to NFI at closing.

(Nivison Aff. ¶¶ 17–18.) These statements are not only at variance with Plaintiffs’

verified allegations that NFI was not aware JDPW would be purchasing the Castle

McCulloch Loan or Loan Documents, but also contradict Arthur Nivison’s previous

deposition testimony.

99. When asked at his deposition whether he had “any belief that [H]istoric

Castle McCulloch, LLC was intended to be part of [the security for his loan],” Arthur

Nivison did not answer directly but responded, “There were a number of mentions of

Castle McCulloch and the fact that it was included in verbal discussions.” (Nivison

Dep. I, at 71:16–20.) When pressed on this point several minutes later, Arthur

Nivison further testified that he could not identify any statements made prior to the
deal with JDPW that were deceptive or misleading, stated that he could not explain

the absence of the Castle McCulloch Collateral from the Assignment Agreement, and

described his understanding that such collateral was part of the agreement as an

“impression”:

Q: All right. I heard you say in the morning that it had at least crossed your
mind, at least somebody had mentioned to you that Historic Castle
McCulloch, LLC might be part of the security for your loan. Did you
understand that? Was that your understanding or did you think it was not
part of your security?

....

A: I had the impression it was.

Q: If that was your impression, how is it that in neither agreement, not in
the one you signed by mistake, nor the one that you and your attorney went
over, how is it that Castle McCulloch -- Historic Castle McCulloch, LLC is not
mentioned at all? Can you explain that if you thought it was supposed to be
in there?

A: I cannot.

Q: All right. Was that another mistake on your part?

....

A: In light of the current situation, it probably was but that is not -- I’m not
-- no, that’s it.

....

Q: All right. Can you point to any specific statement made by [Doug Harris],
either personally or as a representative of JDPW Trust, that induced you to
enter this deal that was misleading or deceptive or outright false?

A: I cannot recall.

(Nivison Dep. II, at 89:4–22, 92:3–7.)
100. The assertions in Arthur Nivison’s Second Affidavit concerning Doug

Harris’s representations and the parties’ agreement are incompatible with and

contradict Arthur Nivison’s deposition testimony. The Second Affidavit describes two

statements or promises: (i) a promise that Arthur Nivison would be assigned the

Castle McCulloch Loan—a promise only Doug Harris would have the power to make

on behalf of JPDW—and (ii) a representation by Doug Harris that JDPW would

assign all of the Loan Documents associated with the CCSEA Loans and the Castle

McCulloch Loans to NFI. (Nivison Aff. ¶ 17.) Under Plaintiffs’ theory of the case,

such promises and representations were false, misleading, or deceptive, and made

with no intent of performance. As shown above, however, Arthur Nivison previously

testified that he could not recall any false or deceptive statements made by Doug

Harris that induced him to enter the deal with JDPW. (Nivison Dep. II, at 92:3–7.)

Moreover, Arthur Nivison testified that he could not explain his “impression” that

the Castle McCulloch Collateral would be assigned to NFI and the absence of any

written deal to that effect. (Nivison Dep. II, at 89:4–22.)

101. The affidavit Plaintiffs now submit attempts to do what Arthur Nivison’s

deposition testimony could not—create a genuine issue of material fact at summary

judgment—with statements concerning previously unmentioned promises or

representations that are at odds with the earlier deposition testimony. Plaintiffs may

not survive summary judgment by this tactic. See Pinczkowski v. Norfolk S. R.R. Co.,

153 N.C. App. 435, 440–41, 571 S.E.2d 4, 7 (2002) (holding plaintiff could not create

an issue of fact at summary judgment by submitting an affidavit in which he, for the
first time, testified about statements made by his doctor that he did not mention at

his deposition and which contradicted his deposition testimony “as a whole”); see also

Yeager v. Bowlin, 693 F.3d 1076, 1080–81 (9th Cir. 2012) (holding trial court properly

disregarded a declaration containing facts a witness previously testified he could not

recall where the newly remembered facts were not accompanied by a reasonable

explanation for the witness’s sudden recollection); Mitchael v. Intracorp, Inc., 179

F.3d 847, 854–55 (10th Cir. 1999) (concluding that an affidavit from a witness that

“more clearly recalled discussions and meetings” that the witness could not remember

at deposition “arguably contradicted his deposition” and represented “an attempt to

create a sham issue of fact”); Barringer v. Wake Forest Univ. Baptist Med. Ctr., 197

N.C. App. 238, 257–58, 677 S.E.2d 465, 478 (2009) (noting that no genuine issue of

fact was created at summary judgment by plaintiff’s expert providing a new,

additional allegation concerning defendants’ breach of the standard of care in an

affidavit). A “genuine issue of material fact is not created where the only issue of fact

is to determine which of the two conflicting versions of the plaintiff’s testimony is

correct.” Rohrbough v. Wyeth Labs., Inc., 916 F.2d 970, 975 (4th Cir. 1990) (quoting

Barwick v. Celotex Corp., 736 F.2d 946, 960 (4th Cir. 1984)). The Court thus

concludes that NFI cannot rely on Arthur Nivison’s Second Affidavit to create a

genuine issue of material fact at summary judgment with regard to representations

or promises concerning the Castle McCulloch Collateral.

102. For these reasons, after a careful review of the evidentiary record viewed in

the light most favorable to Plaintiffs, the Court concludes NFI has not forecast
substantial evidence of a fraudulent misrepresentation or concealment by Doug

Harris sufficient to show a genuine issue of material fact on this claim at summary

judgment and has not demonstrated its ability to establish a prima facie case of fraud

at trial.

103. The above analysis notwithstanding, the Court also notes that NFI faces

another hurdle in proving its fraud claim—NFI’s reliance must have been reasonable.

A plaintiff’s reliance will not be deemed “reasonable where the plaintiff could have

discovered the truth of the matter through reasonable diligence, but failed to

investigate.” Sullivan, 158 N.C. App. at 26, 581 S.E.2d at 458.

104. Assuming that some statement in the record could be considered evidence

of a false representation by Doug Harris that NFI would be assigned the Castle

McCulloch Collateral or all of the collateral NewBridge held, or that evidence existed

tending to show a concealment of material facts, the uncontested facts before the

Court show no effort by NFI to exercise reasonable diligence to determine what

collateral NewBridge held, what collateral JDPW would be receiving, or what

collateral NFI could expect to get as the result of the transactions between the three

entities.

105. In particular, the record contains no evidence suggesting that NFI, Arthur

Nivison, or their counsel engaged in any due diligence to ascertain or confirm what

collateral NewBridge held to secure the loans that NFI’s funds would be used to

purchase. There is no evidence Plaintiffs or Arthur Nivison inquired into this matter

with NewBridge Bank or any other party besides JDPW. There is also no evidence
that Plaintiffs or Arthur Nivison made any attempt to confirm their alleged

understanding of the agreement with JDPW or Doug Harris when faced with, at best,

vague statements of what collateral would be involved in the transaction and, at

worst, statements which detailed what collateral NFI could expect and made no

mention of the Castle McCulloch Loan, Loan Documents, or Collateral.

106. Particularly, assuming that Doug Harris’s e-mail to NFI’s counsel contained

the version of the Schedule A omitting the Castle McCulloch Collateral, that

document clearly classified each piece of collateral listed and placed it under one of

three listed loans to CCSEA. (Am. Consolidated Compl. Ex. NN, ECF No. 189; see

also Corrected Ex. KK.) It did not mention the Castle McCulloch Loan and did not

indicate that any listed collateral secured the unmentioned Castle McCulloch Loan.

(Am. Consolidated Compl. Ex. NN.) Despite this, the record contains no evidence

that NFI—whose manager had signed a memo acknowledging that NFI’s funds

would, in part, be used to purchase or pay off the Castle McCulloch Loan and had the

impression that NFI was going to be secured by collateral related to a Castle

McCulloch entity—made any inquiries concerning the omission of the Castle

McCulloch Loan or related collateral from the received Schedule A.

107. Instead, after an opportunity to consult with counsel, Arthur Nivison signed

the agreement with JDPW which promised to convey an interest in equipment and

personal property specifically owned by HUTA, SEM, and CCSEA. (See, e.g., Am.

Consolidated Compl. Ex. QQ.) This provision of the agreement remained the same

even after NFI’s attorney received the e-mail from NewBridge’s counsel notifying NFI
that NewBridge was transferring the CCSEA and Castle McCulloch Loan Documents

to JDPW, (Am. Consolidated Compl. Ex. RR), and after, according to Plaintiffs, the

Assignment Agreement was amended, (see Am. Consolidated Compl. Ex. TT).

108. Thus, even assuming that the record supported Plaintiffs’ contentions of

misrepresentation and concealment sufficient to instill in NFI some belief it would be

getting the Castle McCulloch Collateral, or everything NewBridge held, the record

also establishes that NFI never made any reasonable attempt to confirm this belief,

ignored repeated signs that there was an inconsistency between the assignment

JDPW was agreeing to in writing and the deal NFI believed it had, and lent $2.1

million to JDPW after signing an agreement that clearly did not conform to the deal

NFI envisioned. There is no evidence, or even an allegation from NFI, that Doug

Harris prevented NFI from making reasonable inquiries or conducting its own due

diligence. “When . . . parties deal at arm[’s] length and [one party] has full

opportunity to make inquiry but neglects to do so and the [other party] resorted to no

artifice which was reasonably calculated to induce the [first] to forego investigation[,]

action in deceit will not lie.” Hardin, 199 N.C. App. at 697, 682 S.E.2d at 734 (quoting

Olivetti Corp. v. Ames Bus. Sys., Inc., 319 N.C. 534, 543, 356 S.E.2d 578, 583 (1987)).

109. Based on the above, and as an additional basis for the Court’s decision at

summary judgment, the Court concludes that NFI has failed to forecast sufficient

evidence of its own reasonable reliance to proceed to trial on its fraud claim. See

McDonald’s Corp. v. Five Stars, Inc., No. COA10-346, 2010 N.C. App. LEXIS 2097, at

*9–10 (N.C. Ct. App. Nov. 16, 2010) (holding defendant’s allegations that he was
fraudulently tricked under an “excess lease” agreement into paying two thirds of his

and plaintiff’s rent to landlord when he believed each party agreed to pay half did not

show reasonable reliance when defendant did not contact the landlord, did not obtain

a copy of plaintiff’s lease with the landlord, did not request any form of confirmation

for plaintiff’s representations, and signed a contract that did not incorporate the

allegedly material terms of the negotiations between the parties); RD&J Props., 165

N.C. App. at 748, 600 S.E.2d at 500 (affirming dismissal of fraud claim at summary

judgment where plaintiff forecast insufficient evidence of reasonable reliance);

Spartan Leasing, Inc. v. Pollard, 101 N.C. App. 450, 456, 400 S.E.2d 476, 479–80

(1991) (reliance not reasonable as a matter of law as to fraud in the inducement

allegations where individual in an arm’s-length transaction signed a short document

with clear terms and was in no way prevented from reading the document); Crockett

Capital Corp. v. Inland Am. Winston Hotels, Inc., 2011 NCBC LEXIS 7, at *71–72

(N.C. Super. Ct. Feb. 28, 2011) (due diligence required inspection of documents

delivered to claimant, which would have revealed need for further action); Staton v.

Brame, 2001 NCBC LEXIS 2, at *73–74 (N.C. Super. Ct. May 31, 2001) (holding fraud

claimant did not exercise reasonable diligence where claimant failed to request

relevant documents or make inquiries to relevant parties); see also Broussard v.

Meineke Disc. Muffler Shops, 155 F.3d 331, 341 (4th Cir. 1998) (noting North Carolina

courts recognize that reliance is not reasonable “if a plaintiff had an alternative

source for the information that is alleged to have been concealed from or

misrepresented to him”); Area Landscaping, L.L.C. v. Glaxo-Wellcome, Inc., 160 N.C.
App. 520, 527, 586 S.E.2d 507, 512 (2003) (holding that a party’s assumption about

the terms of an agreement that directly conflicted with the express terms of written

communications between the parties did not constitute reasonable reliance “that

would support a cause of action based upon fraud”).

110. The Court thus concludes that summary judgment is appropriate in Doug

Harris’s favor on NFI’s claim for fraud. As a result, the Court will dismiss Count 8

of Plaintiffs’ Amended Consolidated Complaint as against Doug Harris at summary

judgment.

4. Unfair or Deceptive Trade Practices

111. Doug Harris also moves for summary judgment on Plaintiffs’ Count 31, a

claim against him for unfair or deceptive trade practices, arguing that the acts this

claim is premised upon constitute the rendering of professional services and are thus

excluded from actionable conduct under the North Carolina Unfair and Deceptive

Trade Practices Act (the “UDTPA”).

112. A claim for unfair or deceptive trade practices requires a plaintiff to show

(1) that the “defendant committed an unfair or deceptive act or practice,” (2) that the

act or practice “was in or affecting commerce,” and (3) that “the act proximately

caused injury to the plaintiff.” Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704,

711 (2001). Under the UDTPA, “‘commerce’ includes all business activities, however

denominated, but does not include professional services rendered by a member of a

learned profession.” N.C. Gen. Stat. § 75-1.1. This so-called “learned profession

exception” (also termed an “exemption” or “exclusion” by courts) applies to attorneys
or law firms “acting within the scope of the traditional attorney-client role.” Reid v.

Ayers, 138 N.C. App. 261, 267, 531 S.E.2d 231, 236 (2000).

113. On this claim, Plaintiffs assert that a genuine issue of material fact exists

as to whether Doug Harris was acting as an attorney in his and JDPW’s dealings with

Arthur Nivison and Plaintiffs or whether he was acting as the trustee of JDPW.

Plaintiffs argue in their opposition brief that Doug Harris, in his own deposition

testimony, “consistently maintained that he conducted . . . negotiations solely in his

capacity as Trustee of JDPW Trust, and not in his professional capacity as an

attorney.” (Mem. Law Opp’n Douglas S. Harris’s Mot. Summ. J. Nivison Entities’

Claims 18.) To support this contention, Plaintiffs cite the following excerpt from Doug

Harris’s deposition: “I was advancing JDPW Trust’s interest . . . and I was making

representations, which I fully knew that if they were false representations I could be

sued for.” (Mem. Law Opp’n Douglas S. Harris’s Mot. Summ. J. Nivison Entities’

Claims 18.) Plaintiffs’ arguments suffer from two inaccuracies, one factual, and one

legal.

114. First, an examination of the cited page of Doug Harris’s deposition reveals

a quite different statement than the snippet Plaintiffs have placed before the Court.

The entirety of Plaintiffs’ quoted sentence reads, “So to me, I was advancing JDPW

Trust’s interest, which I did represent, so I was acting as -- as their attorney trying to

make the thing close, and I was making representations, which I fully knew that if

they were false representations I could be sued for, you know, false representations.”

(Harris Dep. I, at 384:10–15 (emphasis added).) Three lines down, Doug Harris again
undercuts Plaintiffs’ representation that he was not acting as an attorney: “I did. I

intended for people to rely upon it. And I was speaking as the attorney for JDPW

Trust, and I expected them to rely upon it. Yes, I did.” (Harris Dep. I, at 384:18–20

(emphasis added).) In fact, reviewing the surrounding pages of Doug Harris’s

deposition, the Court is unable to locate a single instance in which Doug Harris stated

he was acting solely as the trustee for JDPW and not as an attorney. Plaintiffs’

representation to the Court and the evidence Plaintiffs rely upon to support that

representation thus appear diametrically opposed.

115. Second, Plaintiffs are mistaken in arguing that whether Doug Harris’s

conduct falls under the learned profession exception is a question of fact. With regard

to unfair or deceptive trade practice claims, the jury determines the facts underlying

the plaintiff’s claim, “and based on the jury’s finding[s], the court . . . [determines] as

a matter of law whether the defendant engaged in unfair or deceptive acts or practices

in the conduct of trade or commerce.” Hardy v. Toler, 288 N.C. 303, 310, 218 S.E.2d

342, 346–47 (1975). Thus, a question of fact could exist as to the events underlying

Plaintiffs’ unfair or deceptive trade practices claim, but whether Doug Harris’s acts

fall outside the UDTPA’s definition of commerce due to the learned profession

exception is a question of law. See id.; see also Wheeless v. Maria Parham Med. Ctr.,

Inc., 237 N.C. App. 584, 589–91, 768 S.E.2d 119, 123–24 (2014).

116. North Carolina courts assessing unfair or deceptive trade practices claims

are frequently asked to determine whether acts fall within the learned profession

exception. Although a bright line is not easily drawn, an act will be considered falling
under the learned profession exception when (1) the person or entity performing the

act is a member of a learned profession and (2) the act is a rendering of professional

services. Wheeless, 237 N.C. App. at 589; 768 S.E.2d at 123; Reid, 138 N.C. App. at

266, 531 S.E.2d at 235. What constitutes a rendering of professional services can be

a difficult question to answer, especially in cases where a learned professional’s

conduct “admits of two motives.” Battleground Veterinary Hosp., P.C. v. McGeough,

2007 NCBC LEXIS 33, at *52 (N.C. Super. Ct. Oct. 19, 2007).

117. Plaintiffs acknowledge that Doug Harris is an attorney licensed in the State

of North Carolina. Thus, whether Doug Harris’s acts fall within the learned

profession exception turns solely on whether those acts were a rendering of

professional services.

118. When answering this question, courts have applied the learned profession

exception broadly. For example, matters affecting the professional services rendered

by members of a learned profession have been deemed to fall outside commerce, even

where the actor possessed ulterior motives. Wheeless, 237 N.C. App. at 589–91, 768

S.E.2d at 123–24 (holding statements made to a licensing board about another

professional not did not constitute unfair or deceptive trade practices, even where

there were allegations that the information communicated was obtained illegally and

was reported out of malice or a chance for financial gain). Defamatory statements

made by one professional about another’s work have also been exempted. Gaunt v.

Pittaway, 139 N.C. App. 778, 784, 534 S.E.2d 660, 664 (2000) (“[I]t clearly does not

follow that a statement by a medical professional, criminal or otherwise, is governed
by [N.C. Gen. Stat. § 75-1.1(a)].”). Further, that an act might be illegal or unethical

does not prevent it from falling within the learned profession exception for purposes

of assessing a section 75-1.1 claim. Alamance Family Practice, P.A. v. Lindley, 2018

NCBC LEXIS 83, at *24 (N.C. Super. Ct. Aug. 14, 2018) (“In considering whether a

defendant’s conduct is exempt from the UDTPA’s definition of commerce, the Court

is not concerned with whether the conduct runs afoul of other legal or ethical

standards, but only whether the conduct affects the professional services rendered by

members of a learned profession.” (first citing Burgess v. Busby, 142 N.C. App. 393,

406–07, 544 S.E.2d 4, 11–12 (2001); and then citing Gaunt, 139 N.C. App. at 784, 534

S.E.2d at 664)).

119. In the context of the legal profession, the North Carolina Court of Appeals

has provided specific guidance for analyzing the acts of attorneys under section 75-

1.1. In particular, the court has drawn a distinction between nonessential and

“entrepreneurial aspects” of legal practice, such as advertising, to which the exception

does not apply, and acts “within the scope of the traditional attorney-client role,” to

which the exception does apply. Reid, 138 N.C. App. at 267–68, 531 S.E.2d at 236.

Thus, when an attorney acts in representing a client, his or her conduct will generally

not give rise to an unfair or deceptive trade practices claim. See Moch v. A.M. Pappas

& Assocs., LLC, 251 N.C. App. 198, 208–09, 794 S.E.2d 898, 904 (2016) (concluding

plaintiff could not bring a claim against defendants based upon letters sent by

defendants’ counsel); Davis Lake Cmty. Ass’n v. Feldmann, 138 N.C. App. 292, 297,

530 S.E.2d 865, 869 (2000) (emphasizing that defendants did not have a claim against
plaintiff’s counsel because “[a]ny acts engaged in by plaintiff’s counsel, even if cloaked

in terms of a principal-agent relationship, [fell] within the learned profession

exemption[.]”). The exception extends beyond work such as drafting pleadings,

negotiating settlements, and preparing contracts, and includes those acts that are a

necessary part of the legal services provided to the client. See Reid, 138 N.C. App. at

266–67, 531 S.E.2d at 235–36 (“Plaintiffs attempt to distinguish debt collection from

other aspects of an attorney’s work, such as drafting pleadings, negotiating

settlements, and preparing contracts, arguing that only the latter should fall within

the exemption. We disagree. . . . Debt collection, along with the collection of any

attorney’s fees incurred as a penalty, is a necessary part of the practice of debtor-

creditor law.”).

120. In the present case, although there are disputes as to how many times,

when, and where Doug Harris and Arthur Nivison met and exactly what was said, it

does not appear to be disputed that Plaintiffs allege Doug Harris negotiated the loan

to JDPW with Arthur Nivison and drafted certain documents that were provided to

Plaintiffs and other parties, including an opinion letter. It also appears beyond

dispute, Plaintiffs’ arguments notwithstanding, that Doug Harris was acting as an

attorney for JDPW during his interactions with Plaintiffs and NewBridge.

121. That Doug Harris’s acts may have been motivated by self-serving goals, or

that Doug Harris may have run afoul of ethical and legal standards, does not matter

for the Court’s purposes here. See Wheeless, 237 N.C. App. at 589–91, 768 S.E.2d at

123–24; Alamance Family Practice, P.A., 2018 NCBC LEXIS 83, at *24. The sole
question for the Court is whether Doug Harris’s conduct constituted the rendering of

professional services for purposes of N.C. Gen. Stat. § 75-1.1(b). Given the above, the

Court concludes the answer to that question must be yes. See Reid, 138 N.C. App. at

267–68, 531 S.E.21 at 236; cf. N.C. Gen. Stat. § 84-2.1(a) (“The phrase ‘practice law’

as used in this Chapter is defined to be performing any legal service for any other

person, specifically including . . . assisting by advice, counsel, or otherwise in any

legal work; and to advise or give opinion upon the legal rights of any person, firm or

corporation[.]”); N.C. Gen. Stat. § 84-4 (making it unlawful for persons except active

members of the State Bar to prepare legal documents for another person, firm, or

corporation); State v. Pledger, 257 N.C. 634, 636, 127 S.E.2d 337, 339 (1962) (“Practice

of law embraces the preparation of legal documents and contracts by which legal

rights are secured.”).

122. Because Doug Harris’s complained of conduct falls outside of section 75-1.1’s

definition of commerce, no genuine issue of material fact remains as to Plaintiffs’

claim against Doug Harris for unfair or deceptive trade practices. Consequently, the

Court will grant Doug Harris’s motion and dismiss that claim.

5. Punitive Damages

123. Finally, Doug Harris moves to dismiss Plaintiffs’ claim against him for

punitive damages, contending that there is no basis for such an award.

124. A party cannot “have a cause of action for punitive damages by itself.”

Oestreicher v. Am. Nat’l Stores, Inc., 290 N.C. 118, 134, 225 S.E.2d 797, 808 (1976);

see also N.C. Gen. Stat. § 1D-15. As the Court has concluded that Plaintiffs’ other,
substantive claims against Doug Harris should be dismissed at summary judgment,

the Court further concludes that Plaintiffs’ claim for punitive damages must be

dismissed as well. Horne v. Cumberland Cty. Hosp. Sys., 228 N.C. App. 142, 150–51,

746 S.E.2d 13, 20 (2013) (affirming dismissal of punitive damages claim where all of

plaintiff’s substantive claims were dismissed). The Court therefore grants Doug

Harris’s motion as to Plaintiffs’ claim against him for punitive damages.

B. The Castle McCulloch Defendants’ Motion

125. The Court next turns to the Castle McCulloch Defendants’ Motion, which

requests summary judgment on all of Plaintiffs’ claims that the Castle McCulloch

Defendants contend are directed against them.

1. Fraud

126. The Castle McCulloch Defendants contend that they are subject to Count 8

of the Amended Consolidated Complaint, NFI’s fraud claim against Doug Harris, or

that the claim at least involves the Castle McCulloch Collateral. (Br. Supp. Castle

McCulloch Defs.’ Mot. Summ. J. 8, ECF No. 834.) As such, the Castle McCulloch

Defendants move for summary judgment seeking dismissal of Count 8. In support of

their motion, the Castle McCulloch Defendants make various arguments contending

that Plaintiffs and Arthur Nivison had knowledge of the Castle McCulloch Collateral,

that the Castle McCulloch Collateral was not concealed from Plaintiffs or Arthur

Nivison, and that the Castle McCulloch Collateral was never meant to secure NFI’s

loan.
127. Plaintiffs oppose the Castle McCulloch Defendants’ Motion and argue that

NFI has a proper fraud claim against the Castle McCulloch Defendants due to those

Defendants’ agency relationship with Doug Harris. Specifically, Plaintiffs contend

Doug Harris was acting on behalf of the Castle McCulloch Defendants when he

committed the acts giving rise to NFI’s fraud claim.

128. The parties’ arguments, however, presuppose that NFI has pleaded a fraud

claim against the Castle McCulloch Defendants. The Court’s review of the Amended

Consolidated Complaint reveals that NFI brought no such claim. In particular, and

contrary to the parties’ competing contentions, NFI’s fraud claim was not pleaded

against the Castle McCulloch Defendants directly or indirectly through agency

principles. Reading Plaintiffs’ pleading, Count 8 is asserted only against Doug

Harris, Dr. Epes, and Mark McDaniel and includes no allegation of an agency

relationship between Doug Harris and the Castle McCulloch Defendants, (Am.

Consolidated Compl. ¶¶ 168–81), even considering the minimal pleading standards

agency allegations must meet, Fox v. Killian, 102 N.C. App. 819, 821, 403 S.E.2d 546,

547 (1991) (noting that agency allegations must meet Rule 8(a)(1)’s requirements).

Consequently, the Court concludes that NFI has not brought a fraud or vicarious

liability claim against the Castle McCulloch Defendants.

129. Because NFI does not maintain a fraud or vicarious liability claim against

the Castle McCulloch Defendants, the Court cannot grant summary judgment in the

Castle McCulloch Defendants’ favor on any such claim. The Court therefore denies

the Castle McCulloch Defendants’ Motion as moot to the extent it requests summary
judgment on Count 8 of the Amended Consolidated Complaint. The Court further

notes, however, that this ruling precludes NFI from contending at trial that it has

asserted a fraud or vicarious liability claim against the Castle McCulloch

Defendants.10

2. Plaintiffs’ Request for a Constructive Trust on the Confession of Judgment

130. The Castle McCulloch Defendants move for summary judgment on

Plaintiffs’ Count 14, which asks the Court to impose a constructive trust in favor of

NFI upon the Confession of Judgment, arguing that the Confession of Judgment is

void by its own terms.

131. In response, and in connection with their own motion for partial summary

judgment, Plaintiffs contend that the Court should now determine only whether NFI

is equitably entitled to possession of the Confession of Judgment, leaving any

arguments about its validity until later. As to possession, Plaintiffs argue that NFI

is entitled to have a constructive trust imposed on the Confession of Judgment

because the Confession of Judgment secured all four loans held by NewBridge, and

NFI provided money to satisfy the Settlement Agreement between NewBridge and

the Settlement Debtors. Plaintiffs further argue, however, that should the Court

wish to reach the issue of validity, the Confession of Judgment may still be

10 Had NFI pleaded a fraud claim against the Castle McCulloch Defendants based on Doug
Harris’s alleged fraud, or should the Supreme Court disagree with the Court’s reading of the
Amended Consolidated Complaint on appeal, the Court notes that its dismissal of NFI’s fraud
claim against Doug Harris likewise requires dismissal of any fraud claim based on vicarious
liability resulting from Doug Harris’s allegedly fraudulent conduct. Draughon v. Harnett
Cty. Bd. of Educ., 166 N.C. App. 464, 469–70, 602 S.E.2d 721, 726 (2004) (“The general rule
in North Carolina is that judgment on the merits in favor of the agent precludes any action
against the principal where, as here, the principal’s liability is purely derivative.”).
enforceable because a question of fact remains as to whether performance under the

Settlement Agreement was proper. Plaintiffs appear to believe that the Confession

of Judgment may still have some value because, according to Plaintiffs, NewBridge

actually received NFI’s $2.1 million payment on September 24, 2012—three days

after the September 21, 2012 deadline for payment in the Settlement Agreement—

with NFI paying interest on the additional days. (Mem. Law Opp’n Castle McCulloch

Defs.’ Mot. Summ. J. 3, ECF No. 884.) Plaintiffs contend that this question of fact

precludes summary judgment on the enforceability of the Confession of Judgment.

132. “A constructive trust ‘arises when one obtains the legal title to property in

violation of a duty he owes to another.’” Day v. Rasmussen, 177 N.C. App. 759, 762,

629 S.E.2d 912, 914 (2006) (quoting Fulp v. Fulp, 264 N.C. 20, 22, 140 S.E.2d 708,

711 (1965)).

A constructive trust is a fiction of equity, brought into operation to prevent
unjust enrichment through the breach of some duty or other wrongdoing. It
is an obligation or relationship imposed irrespective of the intent with which
such party acquired the property, and in a well-nigh unlimited variety of
situations.

Cury v. Mitchell, 202 N.C. App. 558, 560, 688 S.E.2d 825, 827 (2010) (quoting Roper

v. Edwards, 323 N.C. 461, 464, 373 S.E.2d 423, 425 (1988)). The common,

“indispensable element” of scenarios meriting a constructive trust is “some fraud,

breach of duty or other wrongdoing by the holder of the property, or by one under

whom he claims[.]” Id. By the fiction of the constructive trust, a plaintiff who has

been deprived of its property by such wrongdoing “wins an in personam order that

requires the defendant,” the constructive trustee, “to transfer specific property in
some form to the plaintiff.” Roper, 323 N.C. at 464, 373 S.E.2d at 425 (quoting Dan

B. Dobbs, Remedies § 4.3, at 241 (1973)). The plaintiff may also be “entitled to any

new form his property takes by way of exchange for other assets.” Dobbs, supra § 9.4,

at 628.

133. “[T]he ultimate decision whether to impose a constructive trust as an

equitable remedy . . . rest[s] in the discretion of the trial court.” Variety Wholesalers,

Inc. v. Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 531, 723 S.E.2d 744, 752

(2012).

134. After a review of the record and the parties’ arguments, the Court concludes

Plaintiffs are correct that the Court need not resolve issues with respect to the

Confession of Judgment’s enforceability at summary judgment. This is because, on

the issue of possession, Plaintiffs are not entitled to the constructive trust they seek.

135. First, Plaintiffs no longer maintain a claim for fraud or breach of fiduciary

duty that concerns the Confession of Judgment, and a request for a constructive trust

may not stand on its own absent a cause of action for which it is an appropriate

remedy. Azure Dolphin, LLC v. Barton, 2017 NCBC LEXIS 90, at *29 (N.C. Super.

Ct. Oct. 2, 2017) (dismissing plaintiffs request for a constructive trust because a

constructive trust is a remedy, not a cause of action, and plaintiffs’ underlying causes

of action had been dismissed), aff’d, 371 N.C. 579, 821 S.E.2d 711 (2018); see also

Weatherford v. Keenan, 128 N.C. App. 178, 179, 493 S.E.2d 812, 813 (1997)

(“Defendant errs when he suggests that a constructive trust is a cause of action rather
than a remedy.”). This alone gives the Court sufficient reason to grant the Castle

McCulloch Defendants’ Motion.

136. However, as an additional reason for denying Plaintiffs their requested

relief, the Court further concludes that the undisputed facts of this case do not create

a situation meriting the imposition of a constructive trust over the Confession of

Judgment under applicable law.

137. The Confession of Judgment was executed as consideration for the

Settlement Agreement and served as a failsafe for NewBridge in the event the

Settlement Agreement was not performed. (Am. Consolidated Compl. Ex. Y ¶ 12

[hereinafter “Confession J.”], ECF No. 185.) The Settlement Debtors authorized

NewBridge to file the Confession of Judgment “[i]n the event, and only in the event,

the [Settlement Debtors] fail[ed] to make a payment to [NewBridge] as set forth in

the Settlement Agreement.” (Confession J. ¶ 12.) The undisputed evidence shows

that NewBridge received NFI’s funds and thereafter assigned the Loan Documents

to JDPW. (Am. Consolidated Compl. Exs. UU, VV, WW.) JDPW did not receive an

interest in, or possession of, the Confession of Judgment, nor did any of the

Settlement Debtors.

138. Instead, NewBridge retained the Confession of Judgment until its successor

moved the Court for permission to transfer possession of that document to the

Receiver. (Order Yadkin Bank’s Mot. Transfer Possession Confession J. ¶ 7, ECF No.

663.) NewBridge’s successor, Yadkin Bank, represented to the Court that it believed

it had no authority to file the Confession of Judgment due to the parties’ compliance
with the terms of the Settlement Agreement. (Order Yadkin Bank’s Mot. Transfer

Possession Confession J. ¶ 3.) Yadkin Bank’s employee assigned to the relevant loan

file stated in affidavit testimony that the typical practice in such a situation would

be to return a confession of judgment to the debtor or destroy the document. (Cassidy

Aff. ¶ 4, ECF No. 377.) The employee stated she was “unable to determine why the

Confession of Judgment at issue in this lawsuit was not destroyed or returned to the

persons signing it.” (Cassidy Aff. ¶ 4.)

139. The Confession of Judgment was not part of the bargain between JDPW and

NFI and was never obtained by any party through some change in form of the $2.1

million NFI lent. Thus, neither the Receiver nor NewBridge/Yadkin Bank became

holders of the Confession of Judgment as the result of “some fraud, breach of duty or

other wrongdoing[.]” See Cury, 202 N.C. App. at 561, 688 S.E.2d at 827 (quoting

Roper, 323 N.C. at 464, 373 S.E.2d at 425). Because such fraud, breach of duty, or

other wrongdoing is the “indispensable element” common to situations where a

constructive trust may be imposed, the absence of such wrongdoing leads the Court

to conclude that a constructive trust in NFI’s favor is not available on the undisputed

record here. See Roper, 323 N.C. at 464, 373 S.E.2d at 425.

140. The case Plaintiffs cite as their primary support for imposing an equitable

trust over the Confession of Judgment is Hoffman v. Mozeley, 247 N.C. 121, 100

S.E.2d 243 (1957). (Mem. Law Supp. Pls.’ Mot. Partial Summ. J. as to Counts 14, 15,

16, 27, 28, and 30, at 5 [hereinafter “Pls.’ Partial Summ. J. Br.”], ECF No. 827.) The

equitable trust referenced in this case is not a constructive trust but a purchase-
money resulting trust. Hoffman, 247 N.C. at 123, 100 S.E.2d at 245 (“This action is

to compel conveyance of the remaining portion upon the ground that a resulting trust

in the property existed in favor of the plaintiffs by reason of their having furnished

the purchase money.”). NFI is not entitled to possession of the Confession of

Judgment under this equitable remedy either.

141. “A resulting trust arises when a person becomes invested with the title

to . . . property under circumstances which in equity obligate him to hold the title and

to exercise his ownership for the benefit of another.” Dillingham v. Dillingham, 202

N.C. App. 196, 201, 688 S.E.2d 499, 504 (2010) (quoting Mims v. Mims, 305 N.C. 41,

46, 286 S.E.2d 779, 783 (1982)). “The classic example of a resulting trust is the

purchase-money resulting trust,” i.e., a resulting trust imposed where the plaintiff

supplied the purchase money used by defendant to acquire property. Mims, 305 N.C.

at 46, 286 S.E.2d at 784 (quoting Cline v. Cline, 297 N.C. 336, 344, 255 S.E.2d 399,

404 (1979)). “The trust is created in order to effectuate what the law presumes to

have been the intention of the parties in these circumstances—that the person to

whom the land was conveyed hol

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11058376. Public record. Not legal advice.