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Goldman Sachs Trust Company, N.A v. Falls

United States District Court, E.D. North Carolina, Western Division

July 16, 2018

GOLDMAN SACHS TRUST COMPANY, N.A., as Executor of t Estate of RALPH L. FALLS, JR., Plaintiff,
v.
RALPH L. FALLS, III, Defendant.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE

         This matter is before the court on defendant's motion for judgment notwithstanding the verdict and for new trial (DE 164). Plaintiff responded and defendant replied. Also before the court are the parties' post-trial briefs on the issue of setoff and interest, as directed by the court in oral order entered March 29, 2018. In this posture, the issues raised are ripe for ruling. For the following reasons, the court denies defendant's motion, denies defendant's request for relief in the form of a setoff, and directs entry of amended judgment awarding interest as set forth herein.

         BACKGROUND

         Jury trial in this matter commenced March 27, 2018, on plaintiff's claims for breach of contract and misrepresentation. The jury returned a verdict in favor of plaintiff on plaintiff's breach of contract claim on March 29, 2018, awarding damages in the amount of $193, 000.00. For case background purposes, the court incorporates herein by reference the statement of the case and statement of facts from its August 11, 2016, order on plaintiffs motion for summary judgment. (See Sum. J. Order (DE 43) at 1-7; Goldman Sachs Tr. Co., N.A. v. Falls, No. 5:14-CV-777-FL, 2016 WL 4257345, at *1-4 (E.D. N.C. Aug. 11, 2016)). The court describes the evidence introduced at trial in more detail in the analysis herein.

         The parties filed post-trial briefs on April 6, 2018, on the issue of prejudgment and post-judgment interest, as well as issues associated with defendant's asserted setoff defense. In support of his setoff defense, defendant also filed an affidavit. Defendant filed the instant motion on April 26, 2018, seeking judgment notwithstanding the verdict and a new trial.

         COURT'S DISCUSSION

         A. Standard of Review

         1. Judgment Notwithstanding Verdict

         In addressing a motion for judgment notwithstanding the verdict, the court “must determine whether there is no substantial evidence to support the verdict asked of the jury.” St. Paul Fire & Marine Ins. Co. v. Vaughn, 779 F.2d 1003, 1008 (4th Cir. 1985). If, “giving [the non-movant] the benefit of every legitimate inference in his favor, there was evidence upon which a jury could reasonably return a verdict for [it], ” then judgment notwithstanding the verdict must be denied. Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 301 (4th Cir. 1998). “In making this determination, the court must assume that testimony in favor of the non-moving party is credible, unless totally incredible on its face, and ignore the substantive weight of any evidence supporting the moving party.” Id. The court must “view the evidence in the light most favorable to the nonmoving part[y]” and “give [it] the benefit of all inferences fairly supported by the evidence, even though contrary inferences may be drawn.” Murdaugh Volkswagen, Inc. v. First Nat. Bank of S.C., 801 F.2d 719, 725 (4th Cir. 1986).

         2. New Trial

         A new trial may be granted if “(1) the verdict is against the clear weight of the evidence, or (2) is based upon evidence which is false, or (3) will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict.” Cline, 144 F.3d at 301. On a motion for new trial, the court is “permitted to weigh the evidence and consider the credibility of witnesses.” Id. “The decision to grant or deny a new trial is within the sound discretion of the district court.” Id. “Unless justice requires otherwise, no error in admitting or excluding evidence . . . is ground for granting a new trial, ” if the error “do[es] not affect [a] party's substantial rights.” Fed.R.Civ.P. 61; see Duty v. E. Coast Tender Serv., Inc., 660 F.2d 933, 942 (4th Cir. 1981).

         B. Analysis

         1. Motion for Judgment Notwithstanding Verdict

         a. Prima Facie Case

         Defendant argues that plaintiff failed to present sufficient evidence to establish a prima facie case of breach of contract. Under North Carolina law, “[t]he elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract.” Crosby v. City of Gastonia, 635 F.3d 634, 645 (4th Cir. 2011) (quotations omitted).

         The jury, in its verdict, answered “YES” to the following question on plaintiff's breach of contract claim:

Did Ralph L. Falls, Jr. and defendant reach an agreement that Ralph L. Falls, Jr. would loan defendant $200, 000.00 upon defendant's promise either to place a second mortgage on the home that defendant purchased in Summit, New Jersey or to provide a promissory note in favor of Ralph L. Falls, Jr.?

(Verdict Form (DE 152) at 1). The jury also answered “YES” to the question: “Did defendant breach the agreement?” (Id.).

         Substantial evidence supported the jury's findings on these verdict questions. On July 23, 2013, Ralph L. Falls, Jr., sent an email to defendant offering to send defendant $200, 000, in exchange for defendant agreeing to “put a second mortgage on the house for $200, 000 after the closing” in favor of Ralph L. Falls, Jr. (Trial Tr. Vol I (DE 161) at 40). Defendant responded “Thank you. I appreciate your advice and support.” (Id.). Ralph L. Falls, Jr., then sent defendant a $200, 000 check, which stated “To be secured by a second mortgage” on the “for” line. (Id. at 42). Defendant endorsed and deposited the check and used the money on the home that defendant purchased in Summit, New Jersey. (Id. at 43).

         Confirming the character of the transaction as a loan, defendant testified in his deposition, which was played as a video deposition at trial, as follows:

Q Did your father loan you $200, 000 to assist you in the purchase and improvement of a home in Summit, New Jersey?
A Yes.
Q Did you agree to provide a promissory note?
A Yes.
Q Did you agree to place a second mortgage on your home?
A I believe it was a promissory note/second mortgage, yes. I believe that's correct.

(Def's Dep. at 12, 28; see Trial Tr. Vol. II (DE 162) at 79-81).[1]

         Viewing this evidence in the light most favorable to plaintiff, there is sufficient evidence supporting the jury's determination on the verdict form that Ralph L. Falls, Jr. and defendant reached an agreement that Ralph L. Falls, Jr. would loan defendant $200, 000.00 upon defendant's promise either to place a second mortgage on the home that defendant purchased in Summit, New Jersey or to provide a promissory note in favor of Ralph L. Falls, Jr.

         There is also sufficient evidence supporting the jury's determination on the verdict form that defendant breached the agreement by failing to repay the loan and failing either to place a second mortgage on the home or to provide a promissory note in favor of Ralph L. Falls, Jr. Defendant asserted at trial that the $200, 000 transferred from his father was “a gift instead of a loan.” (Trial Tr. Vol. II (DE 162) at 123). He testified as follows:

Q. At any time after you closed on your house did you ask an attorney to prepare a note and mortgage on your house in favor of your father?
A. We had not prepared a note or a favor [sic] in my father's favor, no.
Q. Why?
A. Because it was a gift.

(Id. at 125-26; see also id. at 142). Defendant also testified in his deposition that he did not place a second mortgage on the home or provide a promissory note in favor of his father. (Def's Dep. at 39-40; see Trial Tr. Vol. II (DE 162) at 154). Finally, the parties stipulated that defendant filed “an answer denying that the payment [from his father] was a loan and denying all allegations of liability.” (Stipulations (DE 149) at 1). In sum, defendant renounced the loan and he did not place a second mortgage on the home or provide a promissory note in favor of his father.

         Defendant argues that plaintiff failed to establish a prima facie case of breach of contract because plaintiff offered no evidence of the terms of the second mortgage or time for repayment of the loan. The verdict form, however, did not require the jury to make findings of the terms of the second mortgage or time for repayment of the loan. This argument thus is not a basis for judgment notwithstanding the verdict. See St. Paul Fire & Marine Ins. Co., 779 F.2d at 1008 (4th Cir. 1985) (stating that the court “must determine whether there is no substantial evidence to support the verdict asked of the jury”).

         In any event, the law does not require plaintiff to present evidence as to terms of the second mortgage or time for repayment of the loan. As noted, “[t]he elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract.” Crosby v. City of Gastonia, 635 F.3d at 645. Here, the jury was charged to determine whether Ralph L. Falls, Jr. and defendant reached an agreement that Ralph L. Falls, Jr. would loan defendant $200, 000 upon defendant's promise either to place a second mortgage on the home that defendant purchased in Summit, New Jersey or to provide a promissory note in favor of Ralph L. Falls, Jr. (See Trial Tr. Vol. III (DE 163) at 118). It was also charged to determine whether defendant breached the agreement by failing to repay the $200, 000 loan, and by failing either to place a second mortgage on the New Jersey home or to provide a promissory note in favor of Ralph L. Falls, Jr. (Id. at 121).

         “A loan of money has been defined as a contract by which one delivers a sum of money to another and the latter agrees to return at a future time a sum equivalent to that which he borrows.” Kessing v. Nat'l Mortg. Corp., 278 N.C. 523, 529 (1971) (quotations omitted). “[A] loan [is] made upon the deliver[y] by one party and the receipt by the other party of a given sum of money, on an agreement, express or implied, to repay the sum lent, with or without interest.” Id. (quotations omitted). “These definitions require that there be a delivery of money on the one hand and an understanding to repay on the other for a loan to have been made.” Id. In addition, “a reasonable time for performance is implied in a contract which expresses no time for performance.” Lambeth v. City of Thomasville, 179 N.C. 452, 102 S.E. 775, 777 (1920) (quotations omitted).

         The alleged agreement in this case did not require specific time for repayment or specific terms for a second mortgage. Indeed it did not require a second mortgage at all but rather a second mortgage or a promissory note. Where defendant plainly testified at his deposition that he did not obtain a second mortgage or a promissory note, and where he denied the existence of a loan at trial, the evidence was sufficient to show that defendant breached the agreement alleged by nonperformance and repudiation. See Pappas v. Crist, 223 N.C. 265, 268 (1943) (holding that “an unequivocal and absolute renunciation of the entire agreement” may be treated “as a present breach and repudiation of the agreement made”).

         Defendant argues that the concept of breach by repudiation does not apply in this case because the agreement here was akin to an “installment contract which contains no acceleration clause.” (Def's Reply (DE 170) at 4 (citing Starling v. Still, 126 N.C.App. 278, 485 S.E.2d 74, 78 (1997))). However, neither plaintiff's contentions at trial nor the evidence viewed in the light most favorable to plaintiff require an interpretation of the loan agreement in this case as an “installment contract.” (Id.). Rather, the evidence showed that Ralph Falls, Jr., and defendant reached an agreement that Ralph L. Falls, Jr. would loan defendant $200, 000, and that the repayment terms were not expressed in the agreement. Plaintiff did not contend, and the evidence did not require, a finding that defendant would make monthly payments, yearly payments, or any periodic payments of principal and/or interest, at all, or in any given frequency or proportion. Defendant renounced the loan unequivocally, and upon such renouncement the evidence was sufficient for the jury to find in favor of plaintiff on the questions presented by the verdict form.

         Defendant suggests that evidence of a $7000 check paid by defendant to his father in December 2013 demonstrates that the agreement was an installment contract. Defendant notes that the payment must have been treated by the jury as a regular payment of principal due on the loan applicable for the time period from August 2013 to July 2014, because the jury found damages in the amount of $193, 000. Neither assumption is required by the evidence in the case. The fact that defendant decided to send his father a check for $7000 in December 2013, in reference to repayment of money owed, (see Trial Tr. Vol II (DE 162) at 134-136), does not establish that the loan was an installment contract that required specific payments in set amounts or frequencies. It also does not negate the fact that defendant renounced the loan in its entirety at trial.

         In sum, substantial evidence supports the jury's determination of the existence of a valid contract as set forth in question 1 of the verdict form and breach of that contract as set forth in question 2 of the verdict form. Therefore defendant's argument that plaintiff failed to establish a prima facie case of breach of contract is without merit.

         b. Completed Gift

         Defendant argues that the evidence at trial established, as a matter of law, that the $200, 000 payment from Ralph Falls, Jr., to defendant was an unconditional, completed gift, and therefore defendant cannot be liable to plaintiff. This argument, however, ignores evidence and inferences construed in the light most favorable to plaintiff. For example, defendant cites his testimony that he and his father agreed that the transfer of funds “would be a gift instead of a loan, ” after discussing the gift letter requirement imposed by Wells Fargo. (Trial Tr. Vol. II (DE 162) at 123). Other evidence, by contrast, tends to show that defendant and his father agreed that the transfer of funds would be a loan, and their agreement was not altered by the gift letters, including defendant's own unequivocal deposition testimony. (See Def's Dep. at 12, 28; see Trial Tr. Vol II (DE 162) at 79-81).

         While the jury was permitted to weigh the testimony in the manner suggested by defendant in his brief, substantial evidence supports a verdict in favor of plaintiff. Accordingly, defendant's motion for judgment notwithstanding the verdict must be denied.

         2. Motion for New Trial

         a. ...


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