United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
WILLIAM L. OSTEEN, Jr., District Judge.
Presently pending and ripe for ruling is a Motion for Summary Judgment (Doc. 22) filed by Plaintiff Oakwood Apartments, LLC ("Plaintiff"). Defendants KPC Properties, LLC ("KPC") and Smoler & Associates ("Smoler") have timely responded (Doc. 34), and Plaintiff has filed a reply (Doc. 36). For the reasons that follow, this court will grant the motion in part and deny it in part.
On or around July 17, 2012, Plaintiff, a North Carolina limited liability company, agreed to sell Defendant KPC, a Florida limited liability company, a 140-unit apartment complex located in Catawba County, North Carolina ("Property"). (Complaint ("Compl.") (Doc. 2) ¶¶ 1-2, 6.) The Purchase and Sale Agreement ("Contract") contemplated a closing date of August 31, 2012 ("Closing Date") (id. ¶ 7), which was later amended to October 12, 2012 ("New Closing Date") (Defs.' Answer ("Answer"), Ex. B, First Amendment to Purchase and Sale Agreement ("Amendment") (Doc. 7-2) ¶ 4). Defendant KPC deposited $200, 000 with Defendant Smoler & Associates, P.A. (the escrow holder) pursuant to the Contract's terms. (Compl. (Doc. 2) ¶¶ 3, 7-8.) A separate clause provided that the deposit would be "non-refundable unless... (b) [Defendant KPC] is unable to obtain financing in an amount equal to at least 80% of the Value of the Property at a rate of 5.25% for a term of 60 months." (Answer, Ex. A, Purchase and Sale Agreement ("Contract") (Doc. 7-1) § 1.3.1(b).) Subsequent to the execution of the Contract, the parties amended this provision to make the deposit non-refundable unless "[KPC] is unable to obtain financing in an amount equal to at least 75% of the Value of the Property... [, ]" instead. (Id., Ex. B, Amendment (Doc. 7-2) ¶ 2.) Neither the Contract nor the Amendment defines the term "Value of the Property, " although the Contract states that the contemplated purchase price was $5, 700, 000. (Id., Ex. A, Contract (Doc. 7-1) § 1.2.)
The parties agree that they failed to complete their transaction before the revised closing date of October 12, 2012. But they disagree on whether KPC should face legal liability, as well as whether KPC is entitled to a refund of the $200, 000 deposit currently held in escrow by Defendant Smoler. Plaintiff has alleged a breach of contract claim against Defendant KPC, asserting that KPC "obtained the financing called for in the [contract], but then failed and refused to close by... the New Closing Date." (Compl. (Doc. 2) ¶¶ 11-15.) Plaintiff also raises a claim for breach of fiduciary duty against Defendant Smoler, seeking damages of no less than the $200, 000 deposit amount should this court determine that Defendant Smoler erroneously returned the deposit to Defendant KPC. (Id. ¶¶ 16-19.) Finally, Plaintiff seeks attorneys' fees, which the Contract purports to make recoverable by the "prevailing party" in any litigation over the Contract. (Id. ¶¶ 20-22.)
II. LEGAL STANDARD
A motion for summary judgment is appropriately denied when an examination of the pleadings, affidavits, and other proper discovery materials before the court demonstrates the existence of a genuine issue of material fact. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett , 477 U.S. 317, 322-23 (1986). In considering a motion for summary judgment, the court's job is not to weigh the evidence, but to determine whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250 (1986). The court must view the facts in the light most favorable to the nonmovant, drawing all inferences favorable to that party if such inferences are reasonable. Id. at 255. However, there must be more than a mere factual dispute; the fact in question must be material, and the dispute must be genuine. Anderson , 477 U.S. at 248. A dispute is only "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
A. Breach of Contract Claim Against Defendant KPC
i. Failure of a Condition Precedent
In North Carolina, contracts contingent on the ability of one party to obtain sufficient financing are not void for want of consideration. See Mezzanotte v. Freeland , 20 N.C.App. 11, 19, 200 S.E.2d 410, 416 (1973), cert. denied, 284 N.C. 616 , 201 S.E.2d 689 (1974). Instead, the party responsible for obtaining financing is charged with an implied promise to "act in good faith and [make] a reasonable effort to secure the financing." Smith v. Currie , 40 N.C.App. 739, 742, 253 S.E.2d 645, 647 (1979) (citing Mezzanotte , 20 N.C.App. 11, 200 S.E.2d 410 (1973)).
With respect to Defendant KPC's obligation to secure financing in this case, this court finds that certain factual disputes preclude an entry of summary judgment in Plaintiff's favor. The parties agree that the Contract, as amended, required Defendant "to obtain financing in an amount equal to at least 75% of the value of the Property at a rate of 5.25% for a term of sixty (60) months." (Answer, Ex. B, Amendment (Doc. 7-2) ¶ 2.) Defendant KPC pled an inability to obtain funding as an affirmative defense to the action (See Answer (Doc. 7) at 3-4), but Plaintiff asks this court to find that Defendant KPC's efforts to obtain funding were unreasonable, and therefore non-excusable. (See Pl.'s Mem. in Supp. of Mot. for Summ. J. ("Pl.'s Mem.") (Doc. 25) at 6-9.)
Plaintiff and Defendant KPC agree that Plaintiff's agent, Stephen Olson, played a major role in Defendant's financing search. (See Pl.'s Mem. (Doc. 25) at 6) ("[T]he only loan KPC applied for was through a lender brought to KPC by Steve Olson."); (Defs.' Mem. in Opp'n to Pl.'s Mot. for Summ. J. ("Defs.' Resp.") (Doc. 34) at 2 ("Stephen Olson... vetted numerous prospects for financing KPC's acquisition of the Property." (citing Deposition of Krishna Persaud ("Persaud Dep.") (Doc. 25-3) at 23)).) As a result, Plaintiff argues, "KPC... did not seek out any lenders whatsoever, on its own, in an attempt to obtain financing." (Pl.'s Mem. (Doc. 25) at 6 (citing Persaud Dep. (Doc. 25-3) at 23-24).) Instead, Plaintiff asserts, Defendant applied only to Pillar Multifamily, LLC ("Pillar"), "a single lender... suggested by [Plaintiff]'s agent...." (Id. at 7.) According to Plaintiff, Pillar was "not [a lender] identified by KPC as being likely to make the loan[, ]" nor one "with which KPC had enjoyed a past relationship." (Id.) Plaintiff argues that this alone was enough to render Defendant's efforts legally "unreasonable, " but further argues that "KPC canceled that loan [application] before the loan approval process was complete and made no further attempts to obtain financing" - yet another "unreasonable" action. (Id. at 8 (citing Persaud Dep. (Doc. 25) at 23-24).)
For its part, Defendant KPC articulates different facts, which this court finds sufficient to preclude a grant of summary judgment in Plaintiff's favor. KPC contends that, with the help of Stephen Olson and Kimberly Kirk, an independent broker, it submitted loan applications to two lenders, not one: Pillar, and Arbor Commercial Mortgage, LLC ("Arbor"). (Defs.' Resp. (Doc. 34) at 2 (citing Affidavit of Krishna Persaud ("Persaud Aff.) (Doc. 35) ¶¶ 12, 14-15.) These loan applications were submitted in May and June of 2012, respectively. (Persaud Aff. (Doc. 35) ¶¶ 14-15.) Defendant KPC apparently chose the loan offered by Pillar over that offered by Arbor (id. ¶ 16), and claims that it provided all the necessary documentation, including financial statements, tax returns, property appraisal, title insurance commitment, a land survey, and operating agreements (id. ¶ 17). According to Defendant KPC, all paperwork was signed, finalized, and mailed to Pillar via Federal Express on October 16, 2012, in anticipation of the revised October 18 closing date. (Id. ¶ 18.) Allegedly, however, Pillar "revisited the ...