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Bethesda Road Partners, LLC v. Strachan

Court of Appeals of North Carolina

August 20, 2019

BETHESDA ROAD PARTNERS, LLC, Plaintiff,
v.
STEPHEN M. STRACHAN and wife, DEBORA L. STRACHAN, Defendants. STEPHEN M. STRACHAN and DEBORA L. STRACHAN, Third-Party Plaintiffs
v.
GEORGE C. MCKEE, JR. and wife, ADRIANNE S. MCKEE, Third-Party Defendants.

          Heard in the Court of Appeals 5 June 2019.

          Appeal by plaintiff and third-party defendant, Bethesda Road Partners, LLC, from Judgment entered 26 February 2018, and by defendant and third-party plaintiff Stephen M. Strachan from Order entered 6 June 2017 and Order and Judgment entered 26 February 2018, by Judge John O. Craig, III, in Iredell County Superior Court No. 14 CVS 1588.

          Carruthers & Roth, P.A., by J. Patrick Haywood and Rachel Scott Decker, for plaintiff and third-party defendants.

          Moore & Van Allen PLLC, by Nathan A. White and Mark A. Nebrig, for defendants and third-party plaintiffs.

          YOUNG, JUDGE.

         This appeal arises from a dispute between a guarantor of a promissory note and a third party entity, formed by another guarantor, which purchased the note. The trial court did not err in granting the note holder's Motions for Summary Judgment on its breach of guaranty claims against the guarantor where there were no issues of material fact. The guarantor did not preserve a piercing the corporate veil argument, and thus, we dismiss that argument. The trial court did not err in denying the guarantor's Motion to Join a limited liability company whose debt was secured by his guaranty. The trial court did err in holding that the note holder was only entitled to recover half of the price of the guaranteed note. The trial court did err in applying the Doctrine of Equitable Contribution. Since Equitable Contribution is not an available remedy, we dismiss the argument that the defense was waived. We therefore affirm in part, reverse in part, dismiss in part and remand.

         I. Factual and Procedural History

         On 31 July 2007, George C. McKee, Jr. ("McKee"), Stephen M. Strachan ("Strachan"), William Allen ("Allen"), and Timothy Bruin ("Bruin") created ABMS Development, LLC ("ABMS") as a real estate venture. McKee was the sole member manager of ABMS, controlled all the books and records, and made all strategic decisions for ABMS. On 28 February 2008, ABMS executed a promissory note ("Note") to CommunityOne Bank ("C1 Bank") as a part of a project. C1 Bank required each ABMS member and his spouse to execute personal guaranties. The project failed, the Note matured, and ABMS defaulted on its obligations.

         An attorney for ABMS ("ABMS Attorney") entered into negotiations with C1 Bank on a resolution. The bank said it would not sell the Note to any ABMS members/co-guarantors. ABMS Attorney communicated to C1 Bank that "a different buyer" may be interested in the purchase. ABMS Attorney told bank that "[t]he buyer is not ABMS and the potential investor LLC owners are different than the owners of ABMS." ABMS Attorney confirmed that ABMS and the guarantors would still be liable on the Note.

         McKee, the sole member manager of ABMS, formed Bethesda for the sole purpose of purchasing the Note. At the time of purchase, Adrianne S. McKee, McKee's wife ("Mrs. McKee"), was the sole member manager of Bethesda, so it did not appear to have a direct connection to ABMS. However, shortly after closing, McKee was added as a member manager. While Bethesda held the Note, McKee, as managing member of ABMS, made no effort to pay down the debt.

         In July 2014, Bethesda then commenced an action against Strachan, Allen, Bruin, and their spouses ("Defendants"), seeking damages under the Note for breach of guaranty agreements. In September 2014, Defendants denied the allegations and asserted claims against Bethesda and the McKees alleging violations of the Equal Credit Opportunity Act ("ECOA"), breach of fiduciary duty, constructive fraud, and violation of Chapter 75 of the North Carolina General Statutes. Bethesda and the McKees, as third-party defendants, denied those allegations and asserted claims against Strachan for breach of contract and unjust enrichment. Allen, Bruin, and their spouses reached a settlement with Bethesda and were voluntarily dismissed with prejudice. Strachan and Appellees filed cross-motions for summary judgment. The trial court entered an order of summary judgment on 6 June 2017 in favor of Bethesda. In August 2017, Strachan filed a Motion to Join ABMS as a party, which the trial court denied. The trial court entered a final judgment on 26 February 2018. Strachan gave timely notice of appeal on 27 March 2018. Appellees timely cross-appealed on 2 April 2018. Both appeals are now before this Court.

         II. Summary Judgment

         A. Standard of Review

         "Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows that 'there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.'" In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007)).

         B. Analysis

         a. Liability Discharged

         In his first argument, Strachan contends that the trial court erred in granting summary judgment in ...


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