in the Court of Appeals 2 May 2018.
by plaintiff from order entered 30 January 2017 by Judge
Robert C. Ervin in Transylvania County Superior Court, No. 11
Johnston, Allison & Hord, P.A., by Martin L. White and
Scott R. Miller, for plaintiff-appellant.
Parker, Warren, Anderson, Payne & McClellan, P.A., by
Ronald K. Payne and Thomas K. McClellan, for
Broad Place, LLC ("Plaintiff") appeals the trial
court's order granting summary judgment to Asheville
Savings Bank, S.S.B. ("Defendant") and dismissing
all of Plaintiff's claims. We affirm the trial
initiated development of a mixed-use construction and
development project in downtown Brevard, North Carolina,
called "French Broad Place" (the
"Project") in 2007. The Project was planned as a
four-story building, which would include office space, retail
space, restaurants, residential condominiums, and an attached
parking garage. The project's estimated cost was
approximately$19, 000, 000. Plaintiff sought a construction
lender to finance the Project, and eventually selected
Defendant as a lender.
alleges Defendant proposed a tiered or "waterfall
financing structure" that involved financing the Project
in phases of development. Phase 1 allegedly included
financing for purchasing the land for the Project, designing
and constructing the building, and completion of the building
shells of the individual units to the extent that a
certificate of occupancy could be obtained. Phase 1 was
projected to cost approximately $14, 000, 000.
was to allegedly include financing for finishing the
build-out of the residential units and finishing certain
common areas. Phase 2 was projected to cost approximately $5,
and Defendant executed a loan commitment dated 6 December
2007 (the "Loan Commitment"). The Loan Commitment
specified Defendant would loan Plaintiff the sum of $9, 950,
000. Defendant denies that the loan it proposed to Plaintiff
was to be phased, tiered, or include "waterfall
Loan Commitment included several conditions required to be
met before closing. One Loan Commitment condition required
Plaintiff to obtain $700, 000 in "pre-sales" funds.
The "pre-sales" requirement of the Loan Commitment
Prior to any Bank funding Borrower shall provide copies of
purchase agreements totaling a minimum of $8, 820, 000 with a
minimum of 10% non-refundable deposits. Of these pre-sales a
minimum of $4, 300, 000 must be either commercial or office
space. All purchase agreements must be reviewed and deemed
acceptable by Asheville Savings Bank prior to Bank funding.
Asheville Savings Bank shall be given first right of refusal
on all pre-sales or sales to affiliated buyers. On those
loans where Bank does not exercise that right, the Bank must
receive and approve any and all written takeout commitments
as well as any applicable lease agreements.
alleges that after execution of the Loan Commitment,
"Defendant agreed to accept commercial leases with
options to purchase in lieu of regular pre-sale contracts,
and agreed to count the leases with purchase options toward
the 'pre-sale contract requirement'" in the Loan
Commitment. Plaintiff purportedly relied upon Defendant's
alleged allowing of the lease-option contracts to count
towards the Loan Commitment's pre-sales requirement, and
it continued development and construction of the Project.
to the affidavit of Joshua Burdette, a principal of
Plaintiff, on 20 March 2008, several principals of Plaintiff
purportedly met with officers of Defendant, to discuss the
method by which Defendant would apply the lease-option
contracts to meet Plaintiff's pre-sale requirements under
the Loan Commitment. At that meeting, Defendant's
officers purportedly explained to Plaintiff's principals:
[T]hat the lease option contracts alone could not be counted
[towards] the required pre-sales under the Loan Commitment,
but that [Defendant] could convert Plaintiff's
construction loan into individual "Takeout Loans, "
. . . on any commercial units which were secured by a lease
option contract, in lieu of a presale, and that the
commercial units could simply be retained by Plaintiff as
investment property to satisfy the presale requirements of
the Loan Commitment.
10 June 2008, Bradley Hines, a vice-president of Defendant,
contacted members of Plaintiff, and informed them that the
"Takeout Loans" arrangement would have to change.
Plaintiff alleges Defendant instructed it to establish a
separate legal entity to purchase the commercial units for
which Plaintiff had previously obtained lease-option
contracts: (1) the new entity was to establish deposit
accounts in an entirely different bank than Defendant; (2)
the new entity would enter into purchase agreements with
Plaintiff for the commercial units that were subject to
lease-option contracts; (3) the new entity would be
pre-qualified to obtain take-out loans from Defendant on the
commercial units secured by lease-option contracts; and, (4)
Plaintiff's guarantors were to seek out and obtain
financing term sheets from other banks to demonstrate the
marketability of the commercial units.
followed Defendant's purported recommendations, and
several of Plaintiff's officers and guarantors formed LBS
Properties, LLC ("LBS") and implemented the steps
allegedly proposed by Defendant.
addition to the pre-sales requirement, another specific
condition of the Loan Commitment provided Defendant was to
"seek participant funding for no less than $2, 000, 000
from a participant Bank." Plaintiff alleges it did not
understand the $9, 950, 000 loan commitment to be contingent
upon Defendant actually obtaining the participation from
another bank. Prior to the loan closing, Defendant informed
Plaintiff that it had not been able to obtain the
participation from another bank, and, as a result, that it
would only be funding $7, 750, 000 of the $9, 950, 000 amount
specified in the Loan Commitment. Defendant also requested
Plaintiff to seek a replacement lender for the un-funded $2,
000, 000 of the loan.
had commenced construction on the Project well in advance of
the loan closing. Plaintiff owed Metromont Corporation
("Metromont"), a subcontractor on the Project, for
portions of the Project, which had already been erected.
Plaintiff convinced Metromont to subordinate its
contractor's lien for $2, 200, 000 for costs incurred in
exchange for a secured interest in the Project.
August 2008, Plaintiff and Defendant closed on the
construction loan agreement (the "Loan Agreement")
in the specific amount of $7, 750, 000.00 (the
"Loan"). The Loan was evidenced by a promissory
note (the "Note") and deed of trust in favor of
Defendant. Plaintiff asserts the Loan Commitment required
Defendant to loan the sum of $9, 950, 000, but that Defendant
required Metromont to provide $2, 200, 000 in order to close.
Plaintiff also alleges Defendant underfunded the Loan by
approximately $300, 000 at closing on 8 August 2008, and then
wrongfully deducted another $300, 000 from a draw Plaintiff
sought on the Loan for October 2008.
November 2008, Plaintiff submitted a change order request to
Defendant in the amount of $725, 801. Defendant approved the
request and the parties agreed to a written loan modification
(the "First Change in Terms Agreement"), which
increased the stated total amount of the Loan outstanding
from $7, 750, 000 to $8, 475, 801. Plaintiff alleges
Defendant unnecessarily delayed in approving the change order
until closing in January 2009.
March 2009, three businesses were opening on the ground floor
of the Project, several more were being constructed, and
initial condominium sales were several months away from
closing. Plaintiff alleges that in March 2009, Defendant
began to refuse to finance the continued construction of the
Project under the alleged phased or tiered funding, or
"waterfall financing structure, " as Defendant had
allegedly promised. Defendant also refused to provide the
allegedly promised takeout loans, which Plaintiff avers
ultimately caused the Project to fail due to lack of funding.
to a modification agreement the parties executed on 8 June
2009 (the "Second Change in Terms Agreement"),
Defendant waived the required payment of the first $1, 000,
000 in release fees, due to Defendant upon the sale of
commercial units in the Project, to help Plaintiff complete
the construction on the Project. As required by the Second
Change in Terms Agreement, the parties also executed a
modification of Plaintiff's note, deed of trust and
related loan documents regarding the Project. This
Modification was recorded at Book 510, Page 398 of the
Transylvania County Registry ("Modification of Note and
Deed of Trust").
to the express terms of this Modification, as of 8 June 2009:
The total amount of all funds disbursed by Lender to Borrower
to date under said Note, CLA [Construction Loan Agreement]
and Deed of Trust, as amended by the LMA [Loan Modification
Agreement] and Modification of Deed of Trust, included those
funds deposited in the Interest Reserve Account, is $8, 475,
801.00. There are presently no Construction Loan funds left
to be disbursed.
filed a verified complaint against Defendant on 28 December
2011. In its complaint, Plaintiff asserts claims for breach
of contract, unfair trade practices, and breach of a
fiduciary duty. Defendant filed a motion to dismiss, an
answer and counterclaim on 12 March 2012. In its
counterclaim, Defendant seeks payment in full on the Note and
asserts Plaintiff had failed to pay the balance Defendant is
joint motion of the parties, the Chief Justice of North
Carolina designated the matter as an exceptional case
pursuant to Rule 2.1 of the General Rules of Practice of the
Superior and District Courts on 1 October 2012.
discovery, Defendant filed a motion for summary judgment on
15 November 2016. Attached to Defendant's motion for
summary judgment was an affidavit of Brian Gillespie, an
employee of Defendant, and an affidavit of David A. Kozak, an
executive vice-president of Defendant. In response to
Defendant's affidavits, Plaintiff submitted affidavits of
Joshua Burdette and Scott Latell, principals of Plaintiff.
trial court entered an order granting summary judgment in
favor of Defendant on all of Plaintiff's claims and also
granting summary judgment in favor of Defendant on its
counterclaim against Plaintiff. Plaintiff filed timely notice
lies in this Court pursuant to N.C. Gen. Stat. §
7A-27(b) (2017) as an appeal from a final judgment of the
Standard of Review
ruling on a motion for summary judgment, the court views the
evidence in the light most favorable to the non-moving party
and engages in a two-part analysis of whether:
(1) the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, show
that there is no genuine issue as to any material fact; and
(2) the moving party is entitled to judgment as a matter of
Summary judgment is appropriate if: (1) the non-moving party
does not have a factual basis for each essential element of
its claim; (2) the facts are not disputed and only a question
of law remains; or (3) if the non-moving party is unable to
overcome an affirmative defense offered by the moving party.
Erthal v. May, 223 N.C.App. 373, 377-78, 736 S.E.2d
514, 517 (2012) (citations and quotation marks omitted),
disc. review denied, 366 N.C. 421, 736 ...