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McDaniel v. Saintsing

Court of Appeals of North Carolina

July 3, 2018


          Heard in the Court of Appeals 6 June 2018.

          Appeal by plaintiff from orders entered 11 July 2017 and 12 July 2017 by Judge Richard S. Gottlieb in Guilford County No. 17 CVS 4613 Superior Court.

          Douglas S. Harris for plaintiff-appellant.

          Smith Debnam Narron Drake Saintsing & Myers, LLP, by Bettie Kelley Sousa, for defendants-appellees.

          ZACHARY, JUDGE.

         Plaintiff James Mark McDaniel, Jr. appeals from the trial court's orders setting aside entry of default and granting defendants' Motion to Dismiss. Because plaintiff lacks standing, we affirm the trial court's order dismissing this action.


         McDaniel co-owned several businesses with Dr. C. Richard Epes, including Southeastern Eye Center, Inc. ("SEC") and several entities related thereto ("SEC Businesses"). According to McDaniel, "[a]s a part of that partnership, we had an agreement whereby we would each commit our wealth to make sure that the corporations continue to prosper." However, the SEC Businesses had fallen into a great deal of debt by 2014.

         Arthur Nivison and his family own several business entities ("Nivison Entities") that by early 2014 were in the midst of litigation concerning debt owed to them by the SEC Businesses. Defendants Byron L. Saintsing and the law firm Smith Debnam Narron Drake Saintsing & Myers, LLP represented the Nivison Entities in the litigation. Nivison Entities sought additional security for the Nivison loans, including a secured interest in the collection of Andrew Wyeth paintings that Dr. Epes owned, valued at over $20 million. McDaniel maintains that his business agreement with Dr. Epes "specifically included" the Andrew Wyeth paintings, whereby "Dr. Epes agreed to either borrow against or to sell paintings as necessary to protect our business[.]" According to McDaniel,

Arthur Nivison described his desire to have a secured interest in the Andrew Wyeth art collection (which if such a secured interest were granted would make the art collection unavailable for loans or sale and which would violate the agreement between Dr. Epes and me). I wrote back to Arthur Nivison (with a copy to Byron Saintsing) that under no circumstances were any Andrew Wyeth paintings to be secured and whatever we worked out would have to be worked out some other way.

         McDaniel further contends that

Defendant Saintsing's reaction to hearing the news that he could not have the Andrew Wyeth paintings as security for his clients was to personally prepare and file with the North Carolina Secretary of State a UCC-1 which gave Arthur Nivison a secured interest in the paintings - this was directly against my written instructions. At no time before the UCC-1 lien was filed with the North Carolina Secretary of State against the Andrew Wyeth paintings did Defendant Saintsing nor Defendant Smith Debnam Narron Drake Saintsing & Myers LLP nor anyone else obtain permission from Dr. Epes, from me or from anyone else to file a UCC-1, and therefore, the UCC-1 was legally unauthorized according to the UCC Rules, false and fraudulent and both defendants knew that said document was unauthorized false and fraudulent.

         The UCC-1 amendment was filed 10 April 2014.

         On 27 April 2015, Chief Justice Mark Martin of the North Carolina Supreme Court designated thirteen cases pending against McDaniel, Dr. Richard Epes, and varied SEC Businesses as exceptional cases, and assigned the cases to the Honorable Louis Bledsoe, III for hearing. Judge Bledsoe appointed a receiver to manage the assets of the various SEC Businesses in litigation. The Receiver demanded, inter alia, "payment of money, return of assets and setting aside of various transactions" by McDaniel and his wife "on the grounds of corporate mismanagement, conflict of interest, insider and self-interested transactions, fraudulent transfers, [and] failure to maintain adequate capitalization[.]" In short, McDaniel was accused of engaging in various unlawful actions with intent to defraud and hinder creditors of the SEC Businesses. In order to resolve these and other claims, McDaniel and his wife entered into a Settlement Agreement and Release with the Receiver in August 2015, pursuant to the terms of which the Receiver agreed to release all claims against the McDaniels in exchange for the McDaniels' relinquishment of any interest in virtually all of their non-exempt assets to the Receiver in satisfaction of the claims. The Settlement Agreement and Release provided for the transfer of all of the McDaniels' "tangible personal property including all artwork, furniture including all antiques, art work, collectibles, coins, collectible papers, historic ...

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