WNC Holdings, LLC v. Alliance Bank & Trust Co.

2012 NCBC 50

WNC HOLDINGS, LLC, MASON VENABLE and HAROLD KEE, Plaintiffs, v. ALLIANCE BANK & TRUST COMPANY, EDGAR W. TANNER, JR., TANNER REAL ESTATE SERVICES, INC. and DANIEL C. AYSCUE, Trustee under Deeds of Trust, Defendants.

No. 11 CVS 9668

Superior Court of North Carolina, Mecklenburg

October 2, 2012

The Odom Firm, PLLC by Thomas L. Odom, Jr. and David Murray for Plaintiffs WNC Holdings, LLC, Mason Venable, and Harold Kee.

James, McElroy & Diehl, P.A. by Jared E. Gardner for Plaintiff WNC Holdings, LLC.

Cranfill Sumner & Hartzog, LLP by Samuel H. Poole, Jr. and Todd King for Defendants Edgar W. Tanner, Jr. and Tanner Real Estate Services, Inc.

Gray, Layton, Kersh, Solomon, Furr & Smith, P.A by Michael Carpenter for Defendants Alliance Bank & Trust Company and Daniel C. Ayscue.

ORDER & OPINION

Murphy, Judge.

{1} THIS MATTER is before the Court upon Defendants Alliance Bank & Trust Company ("Alliance Bank") and Daniel C. Ayscue's ("Ayscue") (collectively "Alliance") Motion to Dismiss for Improper Venue pursuant to North Carolina General Statute section 1-83(1) and Rule 12(b)(3) of the North Carolina Rules of Civil Procedure ("Alliance Motion I"), Motion to Change Venue pursuant to North Carolina General Statute Section 1-83(2) ("Alliance Motion II"), and Motion to Dismiss Plaintiffs' Complaint pursuant to Rule 12(b)(6) ("Alliance Motion III"); Defendants Edgar W. Tanner Jr. and Tanner Real Estate Services Inc.'s (collectively "Tanner") Motion to Dismiss Plaintiffs' Complaint pursuant to Rule 12(b)(6) ("Tanner Motion I"), Motion to Dismiss Co-Defendants' Cross-Claims pursuant to Rule 12(b)(6) ("Tanner Motion II"), and Motion for Judgment on the Pleadings for Co-Defendants' Cross-Claim Complaint pursuant to Rule 12(c) ("Tanner Motion III"); and Alliance and Tanner's Joint Motion for Change of Venue pursuant to Section 1-83(2) ("Defendants' Joint Motion").

{2} After considering the Amended Complaint and the parties' motions and submissions, the Court GRANTS Alliance Motion I; finds Alliance Motion II and Defendants' Joint Motion moot; GRANTS, in part, and DENIES, in part, Alliance Motion III; and GRANTS, in part, and DENIES, in part, Tanner Motion I, II, and III.

I. PROCEDURAL HISTORY

{3} This action arose out of a 2006 land transaction in Rutherford County, North Carolina, and was filed in Mecklenburg County Superior Court on May 16, 2011. Plaintiffs sought a loan from Alliance Bank to purchase raw land and develop it into a residential subdivision. Alliance Bank's underwriting guidelines required an appraisal of the property's value before issuing a loan. Alliance Bank contracted with Defendant Tanner Real Estate Services, Inc. for a market value appraisal of the property. Plaintiffs allege that Tanner's appraisal was erroneously calculated, causing the property value to be exaggerated, and that Plaintiffs entered into loan agreements with Alliance Bank based on the inflated appraisal. Plaintiffs further allege that Alliance Bank discovered the error, did not inform Plaintiffs of the miscalculation, and used the bank's knowledge to obtain additional security interests from Plaintiffs in order to better position the bank as a creditor.

{4} Plaintiffs brought claims against the bank and the appraiser for: preliminary injunction, negligent misrepresentation, negligence, breach of fiduciary duty, vicarious liability, fraud, breach of contract, breach of good faith and fair dealing, conversion, unfair and deceptive trade practices, punitive damages, rescission, and declaratory judgment. (Original Compl. ¶¶ 44–111.) Defendants failed to file a timely answer to the original Complaint and an entry of default was entered on June 20, 2011. (Pls.' Resp. Alliance Mot. I 1.)

{5} Motions to set aside the entry of default were filed by Tanner on July 1, 2011, and Alliance on July 7, 2011. (Tanner Defs.' Mot. to Set Aside Default 2; Alliance Defs.' Mot. to Set Aside Default 5; Pls.' Resp. Alliance Mot. I 1.) Judge Yvonne Mims Evans granted the motions on August 12, 2011, and ordered answers to be filed that day.

{6} Alliance's Answer, filed on August 12, 2011, contained Alliance Motions I and II objecting to venue; counterclaims against Plaintiffs for breach of contract, breach of personal guarantees, fraud, and negligent misrepresentation; and cross-claims against co-Defendant Tanner for exoneration, indemnification, contribution, breach of contract, and negligence. (Alliance Ans. 10–12, 15–22, 23– 25.) That same day, Alliance filed a notice of designation to the North Carolina Business Court. The case was designated as a mandatory complex business case on August 15, 2011, and assigned to this Court on August 19, 2011.

{7} In compliance with Rule 17 of the General Rules of Practice and Procedure for the North Carolina Business Court, the parties jointly completed a Case Management Report ("CMR") on November 2, 2011. (Case Mgmt. Report 7.) In the CMR, Alliance objected to venue in Mecklenburg County, asserting venue was proper in Cleveland, Rutherford, or Gaston Counties. (Case Mgmt. Report 4– 5.)

{8} On November 17, 2011, this Court entered a Case Management Order ("CMO") acknowledging Alliance's objection to venue and instructing all motions to dismiss be filed on or before December 19, 2011. (Case Mgmt. Order 8–9.) The parties agreed to conduct pretrial motions in Mecklenburg County, but venue remained disputed. (Case Mgmt. Order 3.)

{9} The parties were unable to resolve the venue objection before December 19, 2011 (Defs.' Jt. Mot. 1), and pursuant to the CMO and BCR 15.2, Defendants filed the aforementioned change of venue motions and supporting affidavits.

{10} On February 9, 2012, after all the motions were fully briefed by the parties, the Court conducted a hearing on the pending motions, including Alliance Motions I–III, Tanner Motion I–III, and Defendants' Joint Motion.

{11} After the hearing, Plaintiffs filed an Amended Complaint on February 12, 2012 that further detailed Defendants' fiduciary relationship.

II. FACTUAL BACKGROUND

{12} The Court makes findings of fact in connection with the determination of proper venue pursuant to North Carolina General Statute section 1-83(1) and Rule 12(b)(3) of the North Carolina Rules of Civil Procedure. See generally Johnson v. Hampton Indus., 83 N.C.App. 157, 158, 349 S.E.2d 332, 333 (1986).

{13} Ordinarily, this Court does not make findings of fact in connection with motions to dismiss pursuant to Rule 12(b)(6), as such motions do "not present the merits, but only [determine] whether the merits may be reached, " Concrete Serv. Corp. v. Investors Group, Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986). For purposes of the Court's analysis of Defendants' Rule 12(b)(6) motions in its Order and Opinion, the Court recites only those facts from the pleadings that are relevant to the Court's legal determinations.

A. FINDINGS OF FACT FOR PROPER VENUE

{14} Plaintiffs Mason Venable ("Venable") and Harold Kee ("Kee") are residents of Cleveland County; Plaintiff WNC Holdings, LLC ("WNC"), is a North Carolina limited liability company with its principal place of business and registered agent in Cleveland County (collectively "Plaintiffs"). (Am. Compl. ¶¶ 1– 3; Ayscue Aff. ¶ 7; Ayscue Ex. C.)

{15} Defendants Ayscue and Edgar W. Tanner, Jr. are both residents of Cleveland County. (Am. Compl. ¶ 5; Ayscue Aff. ¶¶ 2, 11.) Defendant Tanner Real Estate Services, Inc. is a North Carolina corporation with its principal place of business, principal office, and registered agent in Rutherford County. (Am. Compl. ¶ 6; Ayscue Aff. ¶ 6; Ayscue Aff. Ex. B.) Defendant Alliance Bank and Trust Company is a North Carolina corporation with its principal place of business, principal office, and registered agent in Gaston County, and does business in Mecklenburg County, North Carolina. (Ayscue Aff. ¶ 5; Ex. A; Am. Compl. ¶ 4.)

B. PLAINTIFFS' ALLEGATIONS IN SUPPORT OF 12(B)(6) AND 12(C)

{16} In February 2006, WNC entered into a contract to purchase and develop as a residential subdivision 55.89 acres of undeveloped land in Rutherford County, North Carolina (the "Property"). Alliance Bank served as a lender and financial advisor to Plaintiff in the development of the Property. As part of Alliance's involvement, the Bank had a pro forma financial feasibility statement prepared for Plaintiffs in order to move the project forward and have Plaintiffs borrow the development money from the Bank. (Am. Compl. ¶ 8.)

{17} On March 22, 2006, Alliance contracted with Tanner, a licensed real estate appraiser, to prepare a market value appraisal ("Tanner Appraisal") of the Property. (Am. Compl. ¶¶ 5, 9; Ex. 1.)

{18} Tanner received $3, 500 for the appraisal ($3, 100 paid by WNC and $400 paid by Alliance Bank), but the payment was not conditioned upon the appraisal's results. (Am. Compl. ¶ 12.) The Tanner Appraisal's certification page states that Tanner employed the Uniform Standards of Professional Appraisal Practice ("USPAP") in developing the "analyses, opinions, and conclusions" contained in the appraisal. (Am. Compl. Ex. 3 at 26.) Plaintiffs allege that Tanner was bound by the USPAP's standards, and that he deviated from those standards by "failing to include the cost of the infrastructure and construction of improvements when using a projected cash flow analysis and then reducing to present value." (Am. Compl. ¶ 16.)

{19} The Tanner Appraisal valued the Property at $3, 396, 000. On April 19, 2006, Alliance Bank loaned Plaintiffs $400, 000 to apply to the purchase price of the Property. (Am. Compl. ¶ 15, 21; Ex. 4.) After Plaintiffs purchased the Property, Alliance Bank filed a deed of trust on the Property with a future advance clause in the amount of $2, 000, 000. (Am. Compl. ¶¶ 21–23; Ex. 4; Ex. 6.) Plaintiffs allege that Alliance Bank failed to properly review the appraisal and, as a result, did not discover its errors before extending credit to Plaintiffs. (Am. Compl. ¶ 18....