Slate v. Byrd

BOBBY G. SLATE, et al., Plaintiffs,

v.RHONDA L. BYRD, et al., Defendants.

1:09CV852

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

March 15, 2013

MEMORANDUM OPINION AND RECOMMENDATION

OF UNITED STATES MAGISTRATE JUDGE

This case comes before the undersigned United States Magistrate Judge on Plaintiffs' Motion to Strike and for Sanctions (Docket Entry 94), as well as: (1) Defendant John Washington's Motion for Summary Judgment (Docket Entry 70); (2) Southern Community Bank and Trust's Motion for Summary Judgment (Docket Entry 72); (3) Defendant Quincy Washington's Motion for Summary Judgment (Docket Entry 74); and (4) Plaintiffs' Motion for Summary Judgment (Docket Entry 81). (See Docket Entries dated Dec. 21, 2012; see also Docket Entries dated Nov. 5, 2009 and Oct. 31, 2011 (designating case as subject to handling pursuant to this Court's Amended Standing Order No. 30 and assigning case to undersigned Magistrate Judge, respectively).) For the reasons that follow, Plaintiffs' Motion to Strike and for Sanctions should be granted inpart and denied in part,¹ and each of the summary judgment motions should be granted in part and denied in part.

I. BACKGROUND

Plaintiff Bobby Slate and various corporate Plaintiff entities of which Slate is the "president and principal" (Docket Entry 12, ¶ 1) commenced this action in Forsyth County Superior Court by filing a Complaint against Defendants Rhonda L. Byrd ("Rhonda"), Joseph Byrd ("Joseph"), Charles D. Washington ("Charles"), Quincy Washington ("Quincy"), John S. Washington ("John") and B23 Holdings, LLC, alleging claims arising from Rhonda's "scheme to embezzle funds and property from [P]laintiffs and convert them to her own use, benefit and enjoyment, or to that of other family members, especially [Joseph]." (Docket Entry 1-2 at 3.)² Plaintiffs later amended their Complaint to include Defendant Southern Community Bank and Trust ("SCB") (see Docket Entry 3) andsubsequently filed a Second Amended Complaint adding a host of corporate Defendant entities that Plaintiffs allege are "owned or controlled" by certain of the individual Defendants and which Rhonda and Charles allegedly utilized in the above-referenced embezzlement scheme (Docket Entry 12, ¶¶ 5, 47-58).³

The Second Amended Complaint asserts 17 unspecified "Claims for Relief" which appear to arise from four separate events or series of events. The factual scenario at the heart of 12 those 17 claims for relief relates to Rhonda and Charles's alleged embezzlement via unauthorized accounts at SCB (the "SCB Conversion"). The remaining five claims for relief each address a separate factual scenario.

A. SCB Conversion

With respect to the SCB Conversion, the record before the Court reveals the following:

Corporate Plaintiff Slate Marketing, owned by Slate, hired Rhonda in 1991. (Id., ¶ 7.) In 2005, Slate created La Casa Real Estate and Investment, LLC ("La Casa"). (See Docket Entry 89-5 at 3.)⁴ La Casa hired Charles in 2006. (Docket Entry 83-1, ¶ 13.) At the time, Charles's nephew Quincy worked as a "relationship banker" at SCB. (Docket Entry 90-9 at 13-14.)

On July 25, 2005, SCB Chief Executive Officer ("CEO") Scott Bauer and Slate agreed to $1,000,000 and $675,000 loan commitments between SCB and La Casa. (See Docket Entry 100-23.)⁵ As a "condition precedent," that arrangement required a deposit relationship "in the name of La Casa [] and a personal account of the guarantor with [SCB]." (Id. at 3.) The $1,000,000 loan commitment also required collateral in the form of "a first lien on marketable securities held in a U-Vest Account managed by Southern Community Advisors in the amount of $333,333." (Id. at 2.) There is no dispute that Slate agreed to and signed the loan commitment documentation. (See id. at 5; Docket Entry 83-1, ¶ 16.)

An LLC Authorization Resolution establishing the required deposit relationship between La Casa and SCB bears a date of July 27, 2005, and appears to grant Rhonda (along with Slate) authorization to "[e]xercise all of the powers listed in th[e] resolution" on behalf of La Casa, including "[o]pen[ing] any deposit or share account(s) in the name of [La Casa]" and "[e]ndors[ing] checks and orders for the payment of money or otherwise withdraw or transfer funds on deposit with [SCB]." (Docket Entry 100-6 at 2.) Slate, despite recalling an awareness of the line of credit itself and the establishment of the required U-Vest collateral account (see Docket Entry 90-6 at 16), denies any recollection of the creation of a deposit relationship at that time (id.). In the face of a signature that Slate acknowledges is "very similar to [his] signature" (id. at 23) appearing a total of three times on that resolution and corresponding signature card, Slate maintains that the document is a forgery (id.; see also Docket Entry 83-1, ¶ 18). He bases that opinion on the presence of certain "handwritten information" in areas establishing which individuals have certain authorizations with respect to the account (Docket Entry 90-6 at 23; see also Docket Entry 100-23). Of note, in a similar authorization dated July 28, 2005, establishing the loan and line of credit, those same fields appear in type. (See Docket Entry 100-22.)

Slate maintains that Rhonda was never an officer of Slate Marketing and/or La Casa with authority to sign for or bind eithercompany. (See Docket Entry 90-6 at 28, 33-34.)⁶ However, Rhonda signed numerous contracts on behalf of Slate entities, including La Casa. (See, e.g., Docket Entries 75-1 - 75-5.) Moreover, Slate acknowledges that an Amendment to the La Casa Operating Agreement, dated January 16, 2006, purports to add Rhonda as a manager of the company, but Slate again claims that his signature on that document is a forgery. (See Docket Entry 83-1, ¶ 20.) He avers that, "due to a family emergency, [he] was not present in the office the day the document was executed." (Id.) In addition, a Statutory Short Form of General Power of Attorney, executed on March 30, 2006, with the apparent initials and signature of Slate, grants Rhonda the authority to act as Slate's attorney-in-fact with respect to real property and banking transactions. (See Docket Entry 114-1 at 36-37.) Two witnesses, including Slate's long-time attorney James Iseman, attested to Slate's signature on that document. (See id. at 38.)⁷

After the opening of the SCB account, Quincy handled most of the transactions. (See Docket Entry 100-1 at 9.) In November 2007, SCB security officer Todd Osborne took notice of the La Casa deposit account because of non-sufficient funds ("NSF") issues and the frequency of activity between it and another account belonging to a separate Slate entity. (See Docket Entry 100-28 at 6; see also Docket Entry 100-5.) In response to an inquiry from Osborne regarding whether there is "any thing [he] need[s] to be worried about" on that account (Docket Entry 100-5 at 3), Quincy explained:

La Casa [] is a business [Slate] started. He is the President of Slate Marketing, and his net worth is somewhere around $80MM. My uncle [Charles] works for La Casa is how I got this acct. My uncle is the right-hand man along side Rhonda Byrd. The acct my [sic] go in the negative, but the funds are always made good within 24 hrs. There is no need to worry about this account. La Casa used to have a $1MM operating line of credit, but we lost it to BB&T do [sic] to one of our own Commercial Bankers not getting the due diligence done in an appropriate time.

(Id. at 2.)

According to Osborne, the foregoing response constituted his first indication that Quincy's uncle worked for La Casa. (See Docket Entry 100-28 at 14.) Osborne also testified that Quincy's response satisfied any concerns Osborne may have had at the time because "[Quincy] explained that these were . . . related companies [and] it's not uncommon for businesses that have common ownership to intermingle funds" and because the NSF issue on the account was resolved that day. (Id. at 14-15.) Regardless, Osborne cautioned Quincy:

Just be careful and don't get yourself in a bad situation, especially if you are handling NSF decisions for the branch, which I think you do. Don't let your family relationship with this customer come back and bite you. Make sure you are consistent with bank policies in regard to fees, paying items, etc.

(Docket Entry 100-5 at 2.)

On February 6, 2008, a compliance officer at SCB noticed further irregularities on the La Casa deposit account:

I noticed the check being returned (and 2 other deposits) are from companies that Rhonda [] is the signer. 155000.00 deposited on 1-28-2008 is from Slate Marketing with Rhonda as the signer (First Citizens Bank) 20000.00 deposited on 2-1-2008 Also from Palmetto Shores with Rhonda as the signer. (BB&T) All three located say there [sic] are at the same address. 250 W. first St Suite 400 Winston Salem, NC 27101

**Also there is a check for 140000.00 pd on 1-31-2008 going back to Slate Marketing that I guess was returned. I have a copy of it, but do not see where it hit the account.

This looks odd to me.

(Docket Entry 100-25 at 2 (erratic punctuation, capitalization and grammar in original).) Later that day and into the next, Osborne and Quincy revisited their discussion of the La Casa deposit account via email. (See Docket Entry 100-3.) Quincy again offered some background information, including his understanding of some of the irregular account activity and NSF issues:

[La Casa] is run by [] Slate, Rhonda [] and Charles []. [] Slate owns Slate Marketing, [La Casa], and Palmetto Shores of Columbia. Rhonda is basically [Slate]'s personal asst, so she has signing authority in all three businesses. [Slate] started [La Casa] when he started investing in property in the Atlantic Beach area. Shortly after that [La Casa] was building in Columbia, SC. That is when Palmetto Shores of Columbia was started.

[La Casa] checking accts were originally opened when I spoke to my uncle and Rhonda about moving some of

...