Opinion
No. 1:01CV00709
March 19, 2003
The plaintiff, Central Carolina Bank (CCB) and the defendant, Weiss, Peck Greer (WPG), a brokerage firm, have filed cross motions for summary judgment. CCB requests a grant of summary judgment on its contract claim against WPG. WPG requests the entry of summary judgment dismissing CCB's contract claims as well as its claims for negligent misrepresentation, negligence, and estoppel. For the reasons which follow, it is determined that CCB is entitled to have summary judgment entered in its favor on the contract claim. Correspondingly, WPG's motion for summary judgment on the contact claim will be denied. WPG is entitled to a grant of summary judgment dismissing CCB's claims under theories of negligence, negligent misrepresentation and estoppel.
I.
On August 25, 1997 H. Randolph Watkins, the primary shareholder in Four Seasons Apparel Company (Four Seasons), and his wife Laurie J. Watkins executed a personal guaranty to secure payment of several loans Central Carolina Bank had made to Four Seasons. Contemporaneously, Ms. Watkins assigned her brokerage account at Weiss, Peck Greer to secure her guaranty. The assignment read as follows:
ASSIGNMENT
In consideration of all current and future loans and leases extended to Four Seasons Apparel Company on this date and thereafter, the undersigned hereby sells, assigns, pledges, transfers and sets over unto Central Carolina Bank and Trust Company all of its rights, title and interest in and to a certain Broker account carried with Weiss, Peck Greer, L.L.C. in the name of the undersigned which account is further identified as Weiss, Peck Greer Account No. 333-9370-500. The undersigned hereby authorizes Weiss, Peck Greer from the date of this assignment until further notice not to permit the undersigned to receive any payments, proceeds or other distributions to include interest and dividends whether of money or property from said accounts without the expressed written permission of Central Carolina Bank. The undersigned also authorizes Central Carolina Bank and Weiss, Peck Greer that in the event of default of Four Seasons Apparel Company of the terms of the loan(s) and lease(s) from Central Carolina Bank to Four Seasons Apparel Company as herein above described, Central Carolina Bank shall be empowered to direct Weiss, Peck Greer to liquidate the securities then held in the herein assigned account and remit the proceeds so generated to Central Carolina Bank to apply to the aforementioned loan(s) and lease(s) obligations of Four Seasons Apparel Company.
By executing this instrument, the undersigned warrants and represents that they have full right and authority to make the herein assignment, that the subject account is currently in existence as of the date of this assignment and contains securities or other property as represented in the attached statement from Weiss, Peck Greer dated August 21, 1997, and that the undersigned has not previously sold, assigned, transferred or pledged any part or all of its rights in and to such accounts herein assigned. [Underlining added for emphasis]
Dated this 25th day of August 1997.D. Scott Halstead Laurie J. Watkins
Witness Signed (Seal) [The underlined date and names have been written by hand] Weiss, Peck Greer, L.L.C. hereby acknowledges and accepts the terms of this assignment, and there exists no other pledges or assignments and has placed an appropriate hold on the above mentioned account for Central Carolina Bank and Trust Company.McGehee Porter Camille Focario 9/1/97 Officer Attest Date [The underlined date and names have been written by hand] By letter dated September 2, 1997, Mr. Porter, Principal of WPG, forwarded the assignment to CCB Senior Vice President Scott Halstead, writing:
Dear Scott: Enclosed is a signed copy of the Assignment of Mrs. Watkins' personal amount. This assignment does not permit her to make any withdrawals from her account without the permission of CCB.
Sincerely, McGhehee Porter
Shortly afterwards, on September 18, 1997, the assignment was modified to allow Ms. Watkins to withdraw from the account so long as it contained at least $900,000.00. The assignment agreement was modified by adding the following underlined passages to the text of the original agreement:
ASSIGNMENT
In consideration of all current and future loans and leases extended to Four Seasons Apparel Company on this date and thereafter, the undersigned hereby sells, assigns, pledges, transfers and sets over unto Central Carolina Bank and Trust Company all of its rights, title and interest in and to a certain Broker account carried with Weiss, Peck Greer, L.L.C. in the name of the undersigned which account is further identified as Weiss, Peck Greer Account No. 333-9370-500. The undersigned hereby authorizes Weiss, Peck Greer from the date of this assignment until further notice not to permit the undersigned to receive an y payments, proceeds or other distributions to include interest and dividends whether of money or property from said accounts without the expressed written permission of Central Carolina Bank if the balance of the amount is $900,000.00 or less. The undersigned also authorizes Central Carolina Bank and Weiss, Peck Greer that in the event of default of Four Seasons Apparel Company of the terms of the loan(s) and lease(s) from Central Carolina Bank to Four Seasons Apparel Company as herein above described, Central Carolina Bank shall be empowered to direct Weiss, Peck Greer to liquidate the securities then held in the herein assigned account and remit the proceeds so generated to Central Carolina Bank to apply to the aforementioned loan(s) and lease(s) obligations of Four Seasons Apparel Company.
By executing this instrument, the undersigned warrants and represents that they have full right and authority to make the herein assignment, that the subject account is currently in existence as of the date of this assignment and contains securities or other property as represented in the attached statement from Weiss, Peck Greer dated August 21, 1997, and that the undersigned has not previously sold, assigned, transferred or pledged any part or all of its rights in and to such accounts herein assigned and that the undersigned will not cause, through its action, to deplete this account below $900,000.00.
Dated this 18th day of September 1997.D. Scott Halstead Laurie J. Watkins
Witness Signed (Seal) Weiss, Peck Greer, L.L.C. hereby acknowledges and accepts the terms of this assignment, and there exists no other pledges or assignments and has placed an appropriate hold on the above mentioned account for Central Carolina Bank and Trust Company.McGehee Porter Camille Focario 9/25/97 Officer Attest Date [The underlined dates and names have been written by hand] Once more the agreement was modified, this time to allow Ms. Watkins to withdraw from the account so long as the balance remained at least $600,000.00. In a January 28, 1998 letter to Mr. McGehee Porter at WPG, Mr. Halstead wrote:
Dear Mr. McGhee: At the present time, Laurie J. Watkins has pledged her securities at Weiss, Peck Greer (Acct. #333-93700-500) for all loans extended to Four Seasons Apparel. The amount of the Assignment is $900,000.00.
Central Carolina Bank has agreed to lower this assignment from $900,000.00 to $600,00.00. At no time will you permit withdrawals from this account if the balance should decline to $600,000.00. If you need a new assignment signed by Mrs. Watkins, please let me know.
I would appreciate it if you would send a current statement on her account, along with an acknowledgment of this change. If you have any questions, please give me a call.
Sincerely, D. Scott Halstead Senior Vice President Acknowledged:
Weiss, Peck Greer, L.L.C.
[McGhehee Porter] [Principal] [2/4/98]
The material in brackets was written by hand and the document returned to Mr. Halstead. The name "McGehee Porter" was written in the same distinctive signature style as that appearing on the earlier assignment documents.
In 2001, after Four Seasons had defaulted and CCB had obtained a judgment on the personal guaranty, it learned that WPG had transferred — without CCB's approval — the entire account to NationsBank in 1999.
II.
Summary judgment is appropriately granted against a party when that party has the burden of proof on a particular claim and is unable to make a showing — by affidavit, deposition testimony, answers to interrogatories, or admissions on file — of specific facts which would be (1) admissible at trial and (2) sufficient to support a jury verdict on each element of that claim. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering the motion, the court must consider the evidence and reasonable inferences to be drawn from the evidence in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 597-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If there clearly exist factual issues "that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," then summary judgment is inappropriate.Anderson, 477 U.S. at 250. If there can be but one reasonable interpretation of the facts relating to a claim, summary judgment is appropriate as to that claim with the matter determined as one of law.
Summary judgment is appropriately granted in favor of a party with the burden of proof on a claim (1) when the party has properly made a showing of specific facts which would be (a) admissible at trial and (b) sufficient to support a jury finding on each element of the claim and (2) when the adverse party has failed to make a showing — by affidavit, deposition testimony, answers to interrogatories, or admissions on file — of at least one factual issue that is (a) necessary to the determination of the claim and which (b) could reasonably be resolved in favor of either party and (3) the law applied to the undisputed, material facts would require judgment in favor of the party with the burden of proof.
In this case, there are no material facts at issue regarding any of the claims: contract, negligence, negligent misrepresentation, or promissory estoppel. Each may be determined as a matter of law.
A.
Under the law of North Carolina, a valid contract is "an agreement reflecting a meeting of the minds based upon a sufficient consideration, with an offer and acceptance or mutuality of obligations or promises"Stewart v. Occidental Life Ins. Co., 20 N.C. App. 25, 29; 200 S.E.2d 434, 436. WPG argues it assumed no contractual duty to CCB because it received no consideration for agreeing to the terms of the assignment and, even if it had, CCB was not a party to the assignment. In discussing the meaning of consideration, North Carolina courts have accepted and applied the principles set out in the Restatement (Second) of Contracts, Section 71 which provides:
See Chemical Realty Corporation v. Home Federal Savings and Loan Assn, 84 N.C. App. 27, 351 S.E.2d 786 (1987).
(1) To constitute consideration, a performance or a return promise must be bargained for. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. . . . (4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
In this case, each party bargained for and received consideration in related transactions. CCB, in exchange for continuing to extend credit, received the security of the Watkins' personal guaranty and the assignment of Ms. Watkins' brokerage account. Ms. Watkins, in return for the credit extension to her husband's business, agreed to the personal guaranty and to assigning her brokerage account as collateral. WPG, in return for agreeing to "accept the terms of the assignment", received the implicit promise that, as an independent broker, it would be allowed to remain as the custodian and manager of the account and receive the fees entailed by that management. The wording of the assignment document would have made it obvious to a party in WPG's position that Ms. Watkins' agreement to assign the account was material to CCB's extension of credit to Four Seasons, that Ms. Watkins was relinquishing control of the account to CCB and that a manager's declination to accept the terms would necessarily result in the account being placed with one who would. CCB would have required the account to be moved had WPG declined to agree to the terms of the assignment
In responding to CCB's motion for summary judgment, WPG pointed out that CCB had offered the affidavit of a bank officer other than Scott Halstead on the issue of whether CCB would have required the account to be moved had WPG declined to agree to the terms of the assignment. According to the affidavit the bank officer, Thomas Nisbet, had been with the bank since 1985. He stated that the information was based upon his personal knowledge. While Mr. Nisbet was not responsible for overseeing the commercial loan department until 1998, there has been no showing he does not have personal knowledge of its activities on this account in 1997. It is presumed that a corporate officer has knowledge of the acts of his corporation. To cast doubt upon his personal knowledge there must be some further factual showing. See Catawba Indian Tribe v. South Carolina, 978 F.2d 1334, 1342 (4th Cir. 1992). WPG also argues CCB offered no evidence that WPG was being paid for managing the account. WPG, however, does not deny receiving management fees nor claim to be an eleemosynary institution. It is beyond argument that WPG was an independent broker and that it was involved here in a business relationship for which brokers typically charge management fees. Although CCB subsequently filed affidavits of Ms. Watkins and Robert Jones, Manager of Commercial Loan Administration during 1997 and 1998 to affirmatively state those facts WPG has argued were missing, it is unnecessary to reach them.
There is also no question that CCB was the direct beneficiary of WPG's agreement to accept the assignment on the terms set out in the assignment document. In North Carolina, the test of whether a party is a third-party beneficiary is whether the contracting parties intended to confer a benefit directly upon the third party or whether the benefit to the third party was merely incidental. Chemical Realty Corporation v. Home Federal Savings and Loan Assn, 84 N.C. App. 27, 351 S.E.2d 786 (1987). That the entire purpose of the assignment was to collateralize credit CCB had extended to Four Seasons is beyond reasonable dispute. CCB was a direct, third party beneficiary.
WPG contends that it did not breach the terms of the agreement by transferring the account to NationsBank because the agreement provided that WPG abide by its terms "until further notice" and that Ms. Watkins' direction to transfer the account constituted that further notice. This argument has no support from the plain wording of the agreement and the expressed intention of the parties that the account was assigned and transferred for CCB's benefit and for the purpose of securing loans already made and to be made.
B.
The doctrine of promissory estoppel has been applied by North Carolina courts only when raised defensively as a shield against a claim by one who, in bringing suit, is essentially reneging on a promise not to do so. However, it has been expressly disallowed as a substitute for traditional notions of consideration when raised affirmatively by one seeking to prove the existence of a contract as the basis of recovery.See Home Electric Co. of Lenoir, Inc. v. Hall Underdown Heating Air Conditioning Co., 86 N.C. App. 540, 358 S.E.2d 539 (1987), aff'd, 322 N.C. 107, 366 S.E.2d 441 (1988). Summary judgment is appropriately granted in favor of WPG on this claim.
C.
With regard to the claim that WPG should be held liable for negligence either for allowing the account to be transferred or for not apprising CCB of the fact that it had been, summary judgment is appropriate. Any duty assumed by WPG, either to maintain the account on behalf of CCB or to advise CCB of any contrary activity was contractual and a remedy, if any, must be based upon breach of that contract. CCB cites no authority to support a claim of negligence.
D.
COB's election not to respond to the motion for summary judgment on the negligent misrepresentation claim is deemed to be acquiescence to a granting of the motion.
III.
In conclusion, summary judgment is granted in favor of COB on the breach of contract claims. Summary judgment is granted in favor of WPG on the remaining claims and those will be dismissed.
Since COB obtained a judgment against the Watkins for $131,242.47 plus 8% annual interest (from the date of judgment: 7/06/2001) plus attorney's fees in the amount of $19,686.37 in the North Carolina Superior Court, it appears judgment should be entered for CCB in the amount of $150,928.84 plus interest at the rate of 8% beginning July 6, 2001. The parties shall respond within seven days regarding the correctness of this amount and the calculation of interest.