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Koonts v. First National Bank

Court of Appeals of North Carolina

June 18, 2019

R.C. KOONTS and SONS MASONRY, INC., DAVID CRAIG KOONTS, and ROY CLIFTON KOONTS, III, Plaintiffs,
v.
FIRST NATIONAL BANK, f/k/a YADKIN BANK f/k/a NEWBRIDGE BANK f/k/a LEXINGTON STATE BANK, Defendant.

          Heard in the Court of Appeals 21 May 2019.

          Appeal by defendant from order entered 5 July 2018 by Judge Martin B. McGee in Davidson County No. 16 CVS 1474 Superior Court.

          Smith Law Group, PLLC, by Steven D. Smith, Matthew L. Spencer, and Jonathan M. Holt, for plaintiff-appellees.

          Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Elizabeth L. Troutman and James C. Adams, II, for defendant-appellant.

          ARROWOOD, JUDGE.

         First National Bank, formerly known as Yadkin Bank, formerly known as NewBridge Bank, formerly known as Lexington State Bank ("defendant") appeals from an order denying its motion for summary judgment. For the reasons stated herein, we affirm in part and reverse in part.

         I. Background

         Defendant engages in commercial lending. On or about 22 November 2004, R.C. Koonts and Sons Masonry, Inc. (the "corporate plaintiff") obtained a $417, 306.14 loan from defendant. The individual plaintiffs, plaintiff David Craig Koonts ("David Koonts") and plaintiff Roy Clifton Koonts, III ("R.C. Koonts"), who owned the corporate plaintiff at all times relevant to this action, guaranteed the loan.

         The parties renewed the loan in 2005. As collateral, R.C. Koonts and Sons Masonry, Inc., R.C. Koonts, and David Koonts (collectively, "plaintiffs") pledged all inventory, vehicles, accounts receivable, machinery, and equipment of the corporate plaintiff. Plaintiffs defaulted on the loan in 2007. The parties entered into a forbearance agreement on 19 December 2007, however, plaintiffs subsequently defaulted on the agreement.

         On 15 January 2009, defendant filed suit against plaintiffs seeking repayment of the loan. Defendant also instituted a claim and delivery proceeding to seize the collateral pledged as security for the loan. Pursuant to a 12 February 2009 court order, defendant posted a surety bond and seized the collateral in a claim and delivery proceeding. Plaintiffs were unable to secure a bond to recover the collateral. On 15 October 2012, the Honorable Theodore Royster of Davidson County Superior Court determined plaintiffs were liable to defendant on the loan.

         Plaintiffs filed counterclaims challenging the propriety of the seizure of collateral and requesting consequential damages. Specifically, the counterclaims challenged the enforceability of defendant's security interest and of the forbearance agreement, defendant's right to seize the collateral, and the amount of the loan that remained outstanding. The counterclaims also alleged: the amount of collateral seized forced the corporate plaintiff out of business, the corporate plaintiff lost the rental value of the collateral due to the seizure, and defendant failed to maintain the collateral in proper condition, in violation of Article 9 of the Uniform Commercial Code ("UCC"). Defendant moved for summary judgment on plaintiffs' counterclaims.

         The matter came on for hearing before the Honorable John O. Craig, III in Davidson County Superior Court on 15 June 2015. On 3 November 2015, the trial court entered an order granting partial summary judgment, as follows.

1. Insofar as [R.C. Koonts and Sons Masonry, Inc., R.C. Koonts, and David Koonts'] counterclaims challenge [the] seizure of collateral, pursuant to N.C. Gen. Stat. § 1-473, et. seq., they are hereby dismissed, with prejudice.
2. Insofar as [R.C. Koonts and Sons Masonry, Inc., R.C. Koonts, and David Koonts'] counterclaims arise out of Article 9 of the Uniform Commercial Code, N.C. Gen. Stat. § 25-9-100, et seq., for failure to make a commercially reasonable disposition of the collateral, [the] claims are not ripe at this time. The Court approves of [R.C. Koonts and Sons Masonry, Inc., R.C. Koonts, and David Koonts] voluntary dismissal of such claims without prejudice, [R.C. Koonts and Sons Masonry, Inc., R.C. Koonts, and David Koonts] shall not be required to pay the costs pursuant to Rule 41(d) when filing or refiling such counterclaims.
3. All other counterclaims of [R.C. Koonts and Sons Masonry, Inc., R.C. Koonts, and David Koonts] are dismissed with prejudice.[1]

         Following a bench trial, the trial court ruled that plaintiffs owed defendant $708, 373.80, plus interest accruing at 13.25% per annum, plus costs. The trial court entered the final ...


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