Zagaroli v. Neill

Zagaroli v. Neill, 

.


STATE OF NORTH CAROLINA                    IN THE GENERAL COURT OF JUSTICE
                                               SUPERIOR COURT DIVISION
CATAWBA COUNTY                                        15 CVS 2635

PETE ZAGAROLI,

              Plaintiff and Counterclaim
              Defendant,

v.

JAMES CLAYTON NEILL;
RICK BERRY; NEILL GRADING
AND CONSTRUCTION COMPANY,
INC.; and RECLAMATION, LLC,
                                           ORDER AND OPINION ON MOTIONS
                                              FOR SUMMARY JUDGMENT
              Defendants and
              Counterclaim/Third-Party
              Plaintiffs,

v.

BENCHMADE, LLC and DEAN
PRITCHETT,

              Third-Party Defendants.


     1.     THIS MATTER is before the Court on the parties’ motions for summary

judgment. For the reasons set forth below, the Court GRANTS in part and DENIES

in part the motions.

          Law Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for
          Plaintiff and Third-Party Defendant Benchmade, LLC.

          Young, Morphis, Bach & Taylor, LLP, by Paul E. Culpepper and
          Timothy D. Swanson, for Defendants.

Robinson, Judge.
                               I.     INTRODUCTION

   2.    This litigation arises out of a failed business relationship among long-time

family friends.    Plaintiff Pete Zagaroli (“Plaintiff” or “Zagaroli”) approached

Defendant James Clayton Neill (“Neill”) about the opportunity to redevelop historic

mills, including the Hollar Hosiery Mill (“Hollar”), Moretz Mills (“Moretz”), and

Lyerly Mills (“Lyerly”). After Zagaroli had failed to close on the purchase of Hollar,

Zagaroli approached Neill about purchasing the property.         Discussions ensued

between Zagaroli, Neill, Defendant Rick Berry (“Berry”), and other investors sought

out by Neill, and Neill formed Hollar Hosiery Investments, LLC (“HHI”) to close on

the purchase of Hollar. Zagaroli entered into an agreement with HHI pursuant to

which he assigned his rights to purchase Hollar to HHI. Zagaroli was initially

involved in the discussions among the HHI members regarding the development of

Hollar, but Zagaroli and HHI had a falling out, and Zagaroli did not participate any

further in the Hollar development.

   3.    In the midst of the Hollar development, Zagaroli informed Neill about an

opportunity to reclaim materials from a historic mill which could be used to

manufacture furniture.      This discussion ultimately led to the formation of

Reclamation, LLC (“Reclamation”), the initial members of which were Zagaroli, Neill,

Berry, and Ryan Lovern (“Lovern”). Initially, Reclamation’s business operations

included mill redevelopment and furniture manufacturing.

   4.    Despite Neill and Berry’s capital contributions and loan financing,

Reclamation struggled financially. Lovern voluntarily relinquished her ownership
interest, and Neill and Berry entered into an agreement with Zagaroli and Third-

Party Defendant Dean Pritchett (“Pritchett”) pursuant to which Neill and Berry’s

ownership interests in Reclamation would transfer to Zagaroli and Pritchett upon

repayment of Neill and Berry’s cash advances and of the promissory notes used to

fund Reclamation’s operations. Zagaroli and Pritchett did not make the repayments,

and Reclamation ultimately failed.

                           II.    PROCEDURAL HISTORY

   5.     The Court sets forth here only those portions of the procedural history

relevant to its determination of the motions.

   6.     Zagaroli filed his Complaint on October 26, 2015, (ECF No. 1), and his First

Amended Complaint on March 21, 2016, (ECF No. 2). The First Amended Complaint

asserts claims for (1) breach of fiduciary duty, constructive fraud, and fraud1; (2) self-

dealing and misappropriation of corporate opportunities; (3) quasi contract and

unjust enrichment; (4) breach of contract; (5) violation of the North Carolina Wage

and Hour Act (the “Wage and Hour Act”); and (6) defamation. (First Am. Compl. 14,

16−19.)

   7.     This action was designated as a mandatory complex business case by order

of the Chief Justice of the Supreme Court of North Carolina dated April 14, 2016,

(ECF No. 4), and assigned to Chief Business Court Judge James L. Gale that same




1 The First Amended Complaint groups these claims together under the heading

“First & Second Claims for Relief.” (First Am. Compl. 14.)
day, (ECF No. 5). This case was later reassigned to the undersigned by order dated

July 5, 2016. (ECF No. 19.)

   8.     On May 18, 2016, Defendants filed their Answer, Counterclaim, and Third-

Party Complaint against Benchmade, LLC (“Benchmade”) and Pritchett. (ECF No.

12.) Defendants assert counterclaims for (1) a declaratory judgment; (2) conversion;

(3) fraud; (4) breach of contract; (5) claim and delivery; and (6) judicial dissolution.

(Answer, Countercl. & Third-Party Compl. 25−30 [“Answer”].) Defendants assert a

third-party claim for conversion against Benchmade and a third-party claim for

breach of contract against Pritchett. (Answer 28−29.) On December 29, 2016, the

Court partially granted Zagaroli’s motion to dismiss and dismissed Defendants’ fraud

claim without prejudice. (ECF No. 42.)

   9.     Zagaroli filed his reply to Defendants’ counterclaims on July 18, 2016, (ECF

No. 21), and a “revised” reply on October 14, 2016, which Defendants did not contest,

(ECF No. 32).

   10.    On August 1, 2016, Benchmade filed its Answer to Defendants’ third-party

complaint. (ECF No. 22.)

   11.    On October 31, 2016, the Court entered default in favor of Defendants

against Pritchett. (ECF No. 37.)

   12.    On September 25, 2017, the parties filed their motions for summary

judgment. Defendants move for summary judgment on all of Zagaroli’s claims, save

and except for his defamation claim. Zagaroli moves for summary judgment on all of
Defendants’ counterclaims.       Benchmade moves for summary judgment on

Defendants’ third-party claim for conversion against it.

   13.    On November 7, 2017, the Court partially granted Defendants’ motion for

judgment on the pleadings and dismissed with prejudice Zagaroli’s claim for self-

dealing and misappropriation of corporate opportunities.            (ECF No. 105.)

Accordingly, Defendants’ motion for summary judgment as to this claim is moot.

   14.    Save and except for Benchmade’s motion for summary judgment, to which

Defendants did not respond, the motions have been fully briefed, and the Court held

a hearing on the motions on February 8, 2018.         The motions are now ripe for

resolution.

                          III.   FACTUAL BACKGROUND

   15.    The Court does not make findings of fact when ruling on motions for

summary judgment. E.g., In re Estate of Pope, 

, 

 (2008).    The following factual background, taken from the evidence

submitted in support of and in opposition to the motions for summary judgment, is

intended solely to provide context for the Court’s analysis and ruling.

   A.     The Parties

   16.    Zagaroli is a resident of Catawba County, North Carolina.       (First Am.

Compl. ¶ 1; Answer 1, ¶ 1.) Until the end of 2010, Zagaroli was a general contractor

who built new construction, renovations, and additions. (First Am. Compl. ¶ 9;

Answer 2, ¶ 9; Defs.’ Mot. Summ. J. Ex. H, at 25:9−23, ECF No. 93.9 [“Zagaroli
Dep.”].) Zagaroli started Zagaroli Construction Co., Inc. (“Zagaroli Construction”) in

1993, which went out of business in 2010. (Zagaroli Dep. 26:9−11, 28:18−20.)

   17.    Neill and Berry are also residents of Catawba County. (First Am. Compl.

¶¶ 2−3; Answer 1, ¶¶ 2−3.)

   18.    Defendant Neill Grading and Construction Company, Inc. (“Neill Grading”)

is a North Carolina corporation with its principal place of business in Hickory, North

Carolina. (First Am. Compl. ¶ 4; Answer 2, ¶ 4.) Neill is the secretary of Neill

Grading. (Defs.’ Mot. Summ. J. Ex. I, at 10:1, ECF No. 93.10 [“Neill Dep.”].) Ed Neill,

who is not a party to this action, is the president and sole owner of Neill Grading.

(Neill Dep. 12:4−6, 14:16−17.)

   19.    Reclamation is a North Carolina limited liability company, which was

administratively dissolved on February 2, 2017. (Pl.’s Mot. Summ. J. Ex. 28, ECF

No. 102.29.)

   B.     Hollar, Moretz, and Lyerly

   20.    Zagaroli prepared a general business plan for the renovation of historic

factories and mills throughout Catawba County, including Hollar, Moretz, and Lyerly

(the “Wingfoot Business Plan”). (Zagaroli Dep. 37:4−11, 44:15−17, 45:2−3.) Zagaroli

sought to renovate the old mills and develop the infill properties to attract new

businesses. (Zagaroli Dep. 37:9−20.) Zagaroli contends, and Defendants deny, that

Zagaroli, Neill, Berry, and Neill Grading entered into a partnership to redevelop

Hollar, Moretz, and Lyerly.
   21.   On three separate occasions between 2006 and July 2009, Zagaroli

contracted to purchase Hollar, an abandoned hosiery mill property. (Zagaroli Dep.

130:20−22, 131:16−19, Ex. 2.) Zagaroli was unable to close on the property pursuant

to the first two contracts, and Zagaroli contracted to purchase Hollar a third time on

July 28, 2009. (Pl.’s Resp. Defs.’ Mot. Summ. J. Ex. 2, ¶ 6, ECF No. 108 [“Second

Zagaroli Aff.”]; Zagaroli Dep. Ex. 2.) After Zagaroli went under contract on July 28,

2009, Zagaroli asked Neill for his help in closing on the purchase, and Neill sought

out other investors. (Neill Dep. 138:8−13.) Zagaroli then had meetings with Neill,

Ed Neill, Berry, Patrick Joyner, and Heather Joyner regarding Hollar, and Neill

formed HHI to close on the property. (Neill Dep. 107:1−4, 130:1−11, 130:20−131:2.)

The original members of HHI were Neill, Ed Neill, Berry, and Laurel Homes, Inc., of

which Patrick and Heather Joyner are members.2            (Neill Dep. 133:22−134:3,

162:10−13.)

   22.   On September 22, 2009, Zagaroli, on behalf of himself and Zagaroli

Construction, and HHI entered into an Agreement to Assign Rights to Purchase Real

Property and to Purchase Real Property (the “Assignment Agreement”). (Zagaroli

Dep. Ex. 2; Answer 21, ¶ 15; Pl.’s Mot. Dismiss, Affirmative Defenses & Revised

Answer to Countercls. ¶ 15, ECF No. 32 [“Pl.’s Reply”].) Pursuant to the Assignment

Agreement, Zagaroli assigned his rights to purchase Hollar to HHI, and HHI agreed



2 In addition to HHI, three other limited liability companies were formed in order to

syndicate the tax credits from the development of Hollar: Hollar Hosiery Tenant,
Hollar Hosiery Development, and Hollar Hosiery Landlord. (Neill Dep. 32:20−33:24.)
Patrick Joyner and Neill are members of these Hollar entities. (Neill Dep.
33:25−34:9.)
to purchase Hollar. (Zagaroli Dep. Ex. 2.) The Assignment Agreement provided that

“[i]t is the intention of the parties hereto, and a material part of the consideration

hereof, to use Zagaroli Construction Co., Inc. to renovate and perform construction

on [Hollar].” (Zagaroli Dep. Ex. 2, ¶ 3.) The Assignment Agreement further provided

that Zagaroli was to pay the interest incurred by HHI in purchasing Hollar. (Zagaroli

Dep. Ex. 2, ¶ 5.) The Assignment Agreement was signed by Neill on behalf of HHI.

(Zagaroli Dep. Ex. 2.)

   23.    At the end of 2010, Zagaroli did not renew his intermediate general

contractor’s license because he could not afford to, and Zagaroli Construction went

out of business. (Zagaroli Dep. 27:19−22, 28:18−20.)

   24.    At the end of 2010 or early 2011, Zagaroli introduced James Maynard

(“Maynard”) to the HHI members. (Neill Dep. 91:21−23; Zagaroli Dep. 69:10−14,

69:16−17.) Maynard is a licensed North Carolina architect who owns and operates

RedClay, PLLC (“RedClay”).      (Defs.’ Mot. Summ. J. Ex. N, ¶ 2, ECF No. 93.15

[“Maynard Aff.”].) RedClay is a design and development company that specializes in

historic adaptive reuse tax credits. (Maynard Aff. ¶ 3.)

   25.    On July 11, 2011, HHI entered into an agreement with RedClay for

architectural and engineering services at Hollar (the “RedClay Agreement”).3 (Defs.’

Mot. Summ. J. Ex. A, ECF No. 93.2; Neill Dep. 145:4−9.) Under the agreement,

RedClay was to be paid a total of $210,000 (the “A&E Fee”), which amounted to 6%



3 There is a dispute of fact as to whether HHI or Hollar Hosiery Development entered

into the RedClay Agreement. However, which Hollar entity entered into the RedClay
Agreement is immaterial to the motions for summary judgment.
of the total expected construction cost of $3.5 million and was broken down into three

overall   components:     design,   construction     documents,    and     construction

administration. (Defs.’ Mot. Summ. J. Ex. A, at Defs. 003904, 003913.) Services were

to be invoiced based on percentage of completion. (Defs.’ Mot. Summ. J. Ex. A, at

Defs. 003904.)

   26.    At or around the same time, RedClay separately agreed to pay Zagaroli a

portion of the A&E Fee in exchange for Zagaroli’s design and construction

administration work. (Zagaroli Dep. 92:24−93:17, 192:11−18, 218:9−13; Neill Dep.

36:12−13; Maynard Aff. ¶ 12.) Pursuant to this agreement, on July 29, 2011, RedClay

paid Zagaroli $7,000 out of the A&E Fee for preliminary design consulting work on

Hollar. (Second Zagaroli Aff. ¶ 213, Ex. XXX, ECF Nos. 108, 108.3; Zagaroli Dep.

85:12−15; Maynard Aff. ¶ 9.)

   27.    On or about October 12, 2011, HHI first learned that Zagaroli did not renew

his general contractor’s license for 2011 and was closing his construction company.

(Zagaroli Dep. 28:11−14; Pl.’s Mot. Summ. J. Ex. 14, at Defs. 003885, ECF No.

102.15.) As a result, five days later, HHI and Zagaroli interviewed a number of

potential general contractors for Hollar. (Pl.’s Mot. Summ. J. Ex. 14, at Defs. 003886.)

At this time, HHI was trying to involve Zagaroli in the Hollar project in some sort of

role overseeing the general contractor. (Neill Dep. 67:16−21.) After the interviews,

however, the HHI members learned that Zagaroli had been paid by Maynard out of

the A&E Fee. (Neill Dep. 67:21−68:5; Pl.’s Mot. Summ. J. Ex. 14, at Defs. 003888.)

Thereafter, HHI did not want to discuss anything further with Zagaroli, and Zagaroli
was no longer involved in the Hollar project. (Zagaroli Dep. 192:4−10, 193:14−21,

226:17−20, 228:7−8; Neill Dep. 67:24−68:13, 193:24−194:12.)

   28.    On May 22, 2012, RedClay paid Reclamation $8,000 out of the A&E Fee for

work Zagaroli performed on Hollar pursuant to RedClay’s agreement with Zagaroli.

(Maynard Aff. ¶ 9; Zagaroli Dep. 85:12−17, 93:18−23.)

   29.    Sometime in 2012, HHI cancelled the construction administration portion

of the RedClay Agreement prior to the work being performed, and the A&E Fee was

reduced by $17,500. (Neill Dep. 174:7−25; Maynard Aff. ¶ 10; Second Zagaroli Aff.

Ex. 7I, ECF No. 108.7.) Zagaroli contends, and Defendants deny, that Zagaroli is

owed $17,500 for work he allegedly performed on Hollar prior to the end of 2011.

Zagaroli contends that this money was originally owed by RedClay pursuant to their

agreement, but that Neill thereafter promised to pay Zagaroli $17,500. (Zagaroli Dep.

84:18−85:7, 215:14−216:3, 218:9−20.) Neill denies that he or Neill Grading ever

promised to pay Zagaroli $17,500. (Neill Dep. 201:4−8.)

   30.    Ultimately, Neill Grading performed the construction work on Hollar and

recognized a loss of $219,031. (Neill Dep. 58:6−8; Pl.’s Resp. Defs.’ Mot. Summ. J. Ex.

4, ECF No. 107.3.)

   31.    In addition to Hollar, Neill Grading was the general contractor for Moretz

and Lyerly. (Defs.’ Mot. Summ. J. Ex. J, ¶ 11, ECF No. 93.11.) Neill Grading began

the work on Moretz and Lyerly in 2013 and early 2014, respectively. (Neill Dep. 53:6,

274:21−23.)   Zagaroli contends, and Defendants deny, that the redevelopment

opportunities at Moretz and Lyerly were opportunities of the partnership Zagaroli
contends that he and others formed and that Neill and Neill Grading misappropriated

these opportunities.

   C.    Formation and Operation of Reclamation

   32.   At the end of 2010, Zagaroli became aware of the JP Stevens Mill in Lincoln

County and called Neill about the opportunity to reclaim materials from the mill and

use those materials to manufacture furniture. (Zagaroli Dep. 135:4−6; First Am.

Compl. ¶ 35; Answer 4, ¶ 35.) Zagaroli told Neill that he did not have the money to

pay for the reclamation of the JP Stevens factory materials, and Neill paid $52,019.69

for a crew to disassemble the materials under Zagaroli’s supervision. (First Am.

Compl. ¶ 36; Answer 4, ¶ 36; Br. Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 1, ECF No. 106.3.)

This was the precipitating event that led to the formation of Reclamation on February

18, 2011. (Zagaroli Dep. 135:7−9; First Am. Compl. ¶ 64; Answer 7, ¶ 64.) The initial

members of Reclamation were Zagaroli, Neill, Berry, and Lovern, a commercial real

estate broker. (First Am. Compl. ¶¶ 63, 65; Answer 7, ¶¶ 63, 65.) Neill, Berry, and

Zagaroli each owned thirty percent, and Lovern owned ten percent.          (First Am.

Compl. ¶¶ 63, 65; Answer 7, ¶¶ 63, 65.)        In addition to the money that Neill

contributed to Reclamation with respect to JP Stevens, Berry initially contributed

$26,000 to Reclamation. (Zagaroli Dep. 119:7−14; Br. Opp’n Pl.’s Mot. Summ. J. Ex.

A, ¶ 1, ECF No. 106.2.) Neither Zagaroli nor Lovern were required to put any money

into Reclamation for their ownership interests. (Zagaroli Dep. 138:10−12; Defs.’ Mot.

Summ. J. Ex. K, ¶ 5, ECF No. 93.12.)
   33.   It is undisputed that, at least at the very beginning of Reclamation’s

operations, Reclamation’s business consisted of both mill redevelopment and

furniture manufacturing. (Zagaroli Dep. 51:14−19, 90:13−17, 139:15−19, 142:4−9;

Neill Dep. 219:25−220:7, 229:18−230:3, 309:11−23; Defs.’ Mot. Summ. J. Ex. K, ¶¶ 6,

9.) There is a dispute of fact as to whether the scope of Reclamation’s operations was

limited to furniture manufacturing later on.

   34.   In March 2011, Neill and Berry obtained two $50,000 loans in order to

continue funding Reclamation’s operations. (Br. Opp’n Pl.’s Mot. Summ. J. Ex. A,

¶ 3; Br. Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 2.) Neill and Berry and their wives

personally guaranteed the loans. (Br. Opp’n Pl.’s Mot. Summ. J. Ex. A, ¶ 3; Br. Opp’n

Pl.’s Mot. Summ. J. Ex. B, ¶ 2.)

   35.   In May 2011, Reclamation agreed to pay Zagaroli $1,000 per week for his

furniture-related work.   (Zagaroli Dep. 116:11−13, 117:6−22, 186:11−25; Second

Zagaroli Aff. ¶ 155.) Zagaroli was in charge of Reclamation’s day-to-day operations,

and Neill and Berry’s participation was limited to weekly meetings. (Defs.’ Mot.

Summ. J. Ex. K, ¶ 10; Zagaroli Dep. 122:13−21; Second Zagaroli Aff. ¶ 228.) Zagaroli

controlled the sales, production, and administration of Reclamation. (Defs.’ Mot.

Summ. J. Ex. K, ¶ 11.) Zagaroli made the decisions on how to price items and what

supplies and inventory Reclamation needed to purchase. (Defs.’ Mot. Summ. J. Ex.

K, ¶ 11; Zagaroli Dep. 123:3−5.) Zagaroli did not, however, have the authority to sign

checks on Reclamation’s account. (Defs.’ Mot. Summ. J. Ex. K, ¶ 11; Zagaroli Dep.

123:6−17.)
   36.      In November 2011, Neill and Berry obtained a $125,000 loan in order to

continue funding Reclamation’s operations. (Br. Opp’n Pl.’s Mot. Summ. J. Ex. A,

¶ 3; Br. Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 2.) Neill and Berry and their wives

personally guaranteed the loan. (Br. Opp’n Pl.’s Mot. Summ. J. Ex. A, ¶ 3; Br. Opp’n

Pl.’s Mot. Summ. J. Ex. B, ¶ 2.)

   37.      Reclamation struggled financially.       In or around June 2012, Lovern

voluntarily relinquished her ten percent interest in Reclamation. (Defs.’ Mot. Summ.

J. Ex. K, ¶ 15.)

   38.      On November 26, 2013, Zagaroli, Neill, Berry, and Pritchett executed a

purchase agreement (the “Purchase Agreement”) by which Zagaroli and Pritchett

proposed to purchase Reclamation from Neill and Berry. (Defs.’ Mot. Summ. J. Ex.

D, ECF No. 93.5.) The Purchase Agreement set forth the then-outstanding note

obligations on the three loans. (Defs.’ Mot. Summ. J. Ex. D, at Berry 108.) Section 4

of the agreement provided that:

         [The] parties recognize and accept that [Neill] and [Berry] advanced
         cash in the respective amounts of $52,019.69 and $60,327.84. Parties
         [sic] heretofore agree that [Zagaroli and Pritchett] will reimburse [Neill]
         and [Berry] in a timely manner and on a schedule as mutually agreed
         upon by the parties for the monies they advanced.

(Defs.’ Mot. Summ. J. Ex. D, at Berry 109.)           The Purchase Agreement further

provided that:

         Upon repayment of the promissory notes, and the cash advancements
         made by [Neill and Berry] (as set forth in Section 4) 100% ownership of
         Reclamation, LLC shall be transferred to [Zagaroli] and [Pritchett]. It
         is agreed by all parties that effective upon execution of this agreement,
         [Zagaroli] and [Pritchett] will own the name Reclamation, LLC and have
         the right to any use and benefit of same. . . . If, in the event of non-
         payment [sic] of notes and advances or breach of the terms of this
         purchase agreement by [Zagaroli and Pritchett], [Zagaroli and Pritchett]
         agree to immediately transfer any right, use, benefit or ownership of the
         name Reclamation, LLC to [Neill and Berry].

(Defs.’ Mot. Summ. J. Ex. D, at Berry 109.) In addition, Section 5 provided that

Zagaroli and Pritchett “agree that upon execution of this Purchase Agreement, [Neill

and Berry] are no longer responsible for the repayment of the notes, as long as

Reclamation, LLC is in operation.” (Defs.’ Mot. Summ. J. Ex. D, at Berry 109.)

   39.      As of June 2014, Zagaroli and Pritchett were unable to make the note

payments. (Pl.’s Mot. Summ. J. Ex. 4, ¶ 39, ECF No. 102.5; Defs.’ Mot. Summ. J. Ex.

L, ¶ 15, ECF No. 93.13.) Thereafter, Neill continued to make payments on the notes

so that Carolina Trust Bank would not declare the notes in default and seek collection

from Neill and his wife as personal guarantors of the loans. (Br. Opp’n Pl.’s Mot.

Summ. J. Ex. B, ¶ 5.) Zagaroli and Pritchett never reimbursed Neill and Berry for

their cash advancements. (Defs.’ Mot. Summ. J. Ex. L, ¶ 15.)

   40.      Nevertheless, Zagaroli and Pritchett continued to operate Reclamation. In

or around December 2014, Neill Grading agreed to allow Reclamation to perform

construction work as a sub-contractor to Neill Grading on the American Honor Ale

House, a restaurant and brewery located in Hollar. (First Am. Compl. ¶ 141; Answer

12, ¶ 141.) Despite agreeing to a payment amount for Reclamation to do the work as

a sub-contractor, Reclamation had to be paid between $8,000 and $10,000 in excess

of the contracted amount in order to finish the agreed-to construction services. (Neill

Dep. 293:10−12, 293:20−22; Zagaroli Dep. 178:6−15.) As a result, in June 2015, Neill
Grading accepted some of Reclamation’s furniture as compensation for the overage.

(Neill Dep. 294:3−10; Zagaroli Dep. 178:15−21; Second Zagaroli Aff. ¶ 380.)

   41.   On July 24, 2015, Neill and Berry sent a letter to Zagaroli and Pritchett

notifying them that they had defaulted under the Purchase Agreement by failing to

make the required note payments and repay the cash advancements. (First Am.

Compl. Ex. 5.)     By this time, Reclamation had failed, and Reclamation was

administratively dissolved on February 2, 2017. (Pl.’s Resp. Defs.’ Mot. Summ. J. Ex.

1, ¶ 13, ECF No. 107.2; Pl.’s Mot. Summ. J. Ex. 28.) Shortly thereafter, Zagaroli went

to work for Benchmade. (Zagaroli Dep. 26:14−15.)

                              IV.   LEGAL STANDARD

   42.   Summary judgment is appropriate “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show

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.” N.C. Gen. Stat. § 1A-1, Rule 56(c). “A ‘genuine

issue’ is one that can be maintained by substantial evidence.” Dobson v. Harris, 

, 

 (2000).

   43.   The moving party bears the burden of showing that there is no genuine

issue of material fact and that the movant is entitled to judgment as a matter of law.

Hensley v. Nat’l Freight Transp., Inc., 

, 

(2008). The movant may make the required showing by proving that “an essential

element of the opposing party’s claim does not exist, cannot be proven at trial, or

would be barred by an affirmative defense, or by showing through discovery that the
opposing party cannot produce evidence to support an essential element of her claim.”

Dobson, 

, 

 (citations omitted).

   44.    “Once the party seeking summary judgment makes the required showing,

the burden shifts to the nonmoving party to produce a forecast of evidence

demonstrating specific facts, as opposed to allegations, showing that he can at least

establish a prima facie case at trial.” Gaunt v. Pittaway, 

, 784−85,

 (2000). The Court must view the evidence in the light most

favorable to the nonmovant. Dobson, 

, 

. However,

the nonmovant “may not rest upon the mere allegations or denials of his pleading,

but his response, by affidavits or as otherwise provided in this rule, must set forth

specific facts showing that there is a genuine issue for trial. If [the nonmovant] does

not so respond, summary judgment, if appropriate, shall be entered against [the

nonmovant].” N.C. Gen. Stat. § 1A-1, Rule 56(e).

                                   V.     ANALYSIS

   A.     Defendants’ Motion

   45.    Defendants move for summary judgment on Zagaroli’s claims for breach of

fiduciary duty, constructive fraud, and fraud; violation of the Wage and Hour Act;

breach of contract; and quasi contract and unjust enrichment.

          1.    Breach of Fiduciary Duty, Constructive Fraud, and Fraud

                a.     Breach of Fiduciary Duty

   46.    Zagaroli contends that he, Neill, Berry, and Neill Grading partnered to

pursue mill redevelopment opportunities at Hollar, Moretz, and Lyerly and, as
partners, owed fiduciary duties to one another. (See Pl.’s Resp. Defs.’ Mot. Summ. J.

6, ECF No. 107.) Zagaroli further contends that Neill, Neill Grading, and Berry

breached their fiduciary duties to Zagaroli by misappropriating the redevelopment

opportunities at Hollar, Moretz, and Lyerly. (See Pl.’s Resp. Defs.’ Mot. Summ. J.

4−5.)

   47.    Defendants argue that, to the extent that any partnership related to mill

redevelopment existed, such partnership was subsumed into Reclamation when it

was formed on February 18, 2011. (Br. Supp. Defs.’ Mot. Summ. J. 11−13, ECF No.

93.) As Zagaroli’s breach of fiduciary duty claim arises out of events occurring after

Reclamation was formed, Defendants contend that Zagaroli’s fiduciary duty claim

fails because he cannot show the existence of a fiduciary relationship. (Br. Supp.

Defs.’ Mot. Summ. J. 13−18.)

   48.    “For a breach of fiduciary duty to exist, there must first be a fiduciary

relationship between the parties.” Dalton v. Camp, 

, 

 (2001). The relationship of partners is fiduciary in nature. Compton v.

Kirby, 

, 

 (2003). Unlike partners, however,

members of a limited liability company do not owe fiduciary duties to each other,

except a controlling member owes fiduciary duties to minority members. N.C. Gen.

Stat. § 57D-3-21(b); Kaplan v. O.K. Techs., L.L.C., 

, 

 (2009). “A partnership is an association of two or more persons to carry on

as co-owners a business for profit[,]” 

(a), “[b]ut any association

formed under any other statute of this State . . . is not a partnership under this
Article,” 

 § 59-36(b). Accordingly, if Reclamation, formed under the North Carolina

Limited Liability Company Act, encompassed the parties’ alleged joint pursuit of mill

redevelopment opportunities, then any alleged partnership as to these opportunities

ceased to exist upon Reclamation’s formation.

                       (1)    Any alleged partnership was subsumed into
                              Reclamation.

   49.   Defendants’ evidence tends to show that, at Reclamation’s inception,

Reclamation’s   business     included   both   mill   redevelopment   and   furniture

manufacturing. (Zagaroli Dep. 51:14−19, 90:13−17, 139:15−19, 142:4−9; Neill Dep.

219:25−220:7, 229:18−230:3, 309:11−23; Defs.’ Mot. Summ. J. Ex. K, ¶¶ 6, 9.)

Defendants’ evidence further indicates that at a meeting sometime during the

summer of 2011, all members of Reclamation, including Zagaroli, agreed that

Reclamation should focus solely on building furniture because mill redevelopment

would require too much capital investment. (Neill Dep. 229:18−230:7, 309:16−23;

Defs.’ Mot. Summ. J. Ex. K, ¶ 9.)

   50.   The Court notes that, during Zagaroli’s deposition, Zagaroli testified at

length that Reclamation was always a mill redevelopment company, not just a

furniture manufacturing company, and that Reclamation should have performed the

redevelopment work at Moretz and Lyerly. (Zagaroli Dep. 50:24−51:10 (“I think this

goes back to our partnership with Reclamation in the fact that these buildings were

– the construction work was per- − performed by Neill Grading when it should have

really been performed by Reclamation . . . . [E]ven though Neill Grading alone did

[Moretz and Lyerly], Reclamation still pursued historic renovations, and, again, you
know, to the demise of Reclamation. That work could have and should have benefited

Reclamation.”), 51:14−19 (“Q. And is it your testimony that Reclamation was a

development company too? A. Yes. Q. And is that from the very beginning of the

formation of Reclamation? A. Yes.”), 90:13−17 (“Q. And Reclamation, according to

your testimony, it was a development company too? A. We did. We approached

whatever businesses we could, but it was primarily development – that’s – all our

marketing stated that – and furniture.”), 139:15−19 (“Q. . . . Is it your testimony that

Reclamation was always going to be a – a development company, though, as far as

redeveloping these historic mills? A. That and furniture.”), 142:4−13 (“Q. Were there

specific conversations about Reclamation being involved in redevelopment? A. Yes.

Q. Okay. So that’s not something you just assumed? A. No. And, again, it was put

into all our early marketing material. Q. Did there come a time when that direction

shifted some towards more furniture?       A. The entire time I was involved with

Reclamation, I pursued all opportunities.”).) Further, Zagaroli testified during his

deposition that the purported partnership with Neill to redevelop historic mills was

wrapped up into Reclamation when it was formed and that the partnership and

Reclamation were “one and the same.”           (Zagaroli Dep. 114:4−20, 220:14−17,

221:19−22.)

   51.    In opposition to Defendants’ motion for summary judgment, Zagaroli

submitted a 58-page, 384-paragraph affidavit, which in large part contradicts his

prior sworn deposition testimony.      (See Second Zagaroli Aff.)    In this affidavit,

Zagaroli stated numerous times that he did not “believe,” “associate,” or “understand”
the opportunities at Hollar, Moretz, and Lyerly to be a part of Reclamation’s business.

(Second Zagaroli Aff. ¶¶ 128, 171, 297, 353.)

   52.    “[I]t is well-established that a party opposing a motion for summary

judgment cannot create a genuine issue of material fact by filing an affidavit

contradicting his prior sworn testimony.” Cousart v. Charlotte-Mecklenburg Hosp.

Auth., 

, 

 (2011) (quotation marks omitted).

“If not for this rule, a party who has been examined at length on deposition could

raise an issue of fact simply by submitting an affidavit contradicting his own prior

testimony, which would greatly diminish the utility of summary judgment as a

procedure for screening out sham issues of fact.” Rider v. Hodges, 

 (N.C. Ct. App. 2017) (quotation marks omitted).

   53.    Indeed, Zagaroli attempts to evade this rule by stating in his affidavit that

his “[a]nswer to the question that about [sic] the partnership being rolled into

Reclamation, LLC and that they were ‘one and the same’ was a generalization

relating to vague [sic] question asked by Paul Culpepper that did not reference any

particular time frame.” (Second Zagaroli Aff. ¶ 384.) As explained above, Zagaroli

testified numerous times that Reclamation’s business included mill redevelopment.

Moreover, all the other evidence of record is undisputed that Reclamation pursued

mill redevelopment opportunities, at least at its inception, and that any partnership

that existed between the parties was subsumed into Reclamation.           Accordingly,

Zagaroli’s affidavit contradicting his prior deposition testimony cannot create a

genuine issue of material fact regarding the scope of Reclamation’s initial business.
   54.    Therefore, the Court concludes that there is no genuine issue of material

fact that Reclamation’s business included mill redevelopment, at least at its very

beginning, and, thus, any alleged partnership was incorporated into Reclamation.

Against this backdrop, the Court addresses whether Zagaroli has come forward with

sufficient evidence of a fiduciary relationship to create a genuine issue of fact.

   55.    It is well settled that a manager of a limited liability company owes

fiduciary duties to the company, not to the individual members. N.C. Gen. Stat.

§ 57D-3-21(b); Kaplan, 

, 

. Further, members

of a limited liability company do not owe fiduciary duties to each other or to the

company, except a controlling member owes fiduciary duties to minority members.

Kaplan, 

, 

. Here, Neill and Berry each owned

a thirty percent interest in Reclamation.

   56.    Our Court of Appeals has held “that a minority shareholder exercising

actual control over a corporation may be deemed a ‘controlling shareholder’ with a

concomitant fiduciary duty to the other shareholders.” Corwin v. British Am. Tobacco

PLC, 

 (N.C. Ct. App. 2016). Prior to Corwin, North Carolina

courts had recognized that individual minority shareholders of a closely-held

corporation who act in concert and collectively own the majority interest in the

corporation may owe fiduciary duties as the controlling shareholders. E.g., Norman

v. Nash Johnson & Sons’ Farms, Inc., 

, 

(2000). North Carolina courts have not, however, recognized that possibility in the

context of a limited liability company. See Raymond James Capital Partners, L.P. v.
Hayes, 

 (N.C. Ct. App. 2016) (“[A]n exception to [the general] rule

is that a controlling shareholder owes a fiduciary duty to minority shareholders. To

that end, our courts have extended special protections to minority shareholders in

closely held corporations.” (first alteration in original) (quotation marks omitted)

(citation omitted) (citing Norman, 

, 

)); Fiske v.

Kieffer, 

, at *10 (N.C. Super. Ct. Mar. 9, 2016) (stating that the

holding in Norman has not been extended to minority interest owners in a limited

liability company); Wortman v. Hutaff, 

, at *23 (N.C. Super. Ct.

Oct. 29, 2013) (finding that two members who each owned a one-third interest were

minority interest owners and they “did not owe Plaintiffs fiduciary duties simply

because together they owned a majority interest in [the limited liability company]

and could out-vote Plaintiffs”); Blythe v. Bell, 

, at *14−18 (N.C.

Super. Ct. Apr. 8, 2013) (stating that the Norman rule should not apply in the limited

liability company context).

   57.   Assuming, without deciding, that Corwin extends to minority interest

owners in a limited liability company, there is no evidence that Neill and Berry

exercised actual domination and control over Reclamation. The undisputed evidence

demonstrates that Zagaroli controlled almost all aspects of Reclamation’s business.

Although Zagaroli did not have the authority to sign checks on Reclamation’s account,

Zagaroli made the decisions on a day-to-day basis as to which materials Reclamation

should purchase, who needed to be paid, how to price items, and which supplies and
inventory Reclamation needed. Therefore, the Court concludes that Neill and Berry

are not controlling members and do not owe fiduciary duties to Zagaroli.

                          (2)   Zagaroli has failed to come forward with
                                sufficient evidence of a partnership to create a
                                genuine issue of fact.

   58.      Alternatively, even assuming arguendo that the scope of Reclamation’s

business never included mill redevelopment (an assumption at odds with Zagaroli’s

sworn testimony), Zagaroli has failed to come forward with sufficient evidence of a

partnership to create a genuine issue of fact.

         A partnership is a combination of two or more persons of their property,
         effects, labor, or skill in a common business or venture, under an
         agreement to share the profits or losses in equal or specified proportions,
         and constituting each member an agent of the others in matters
         appertaining to the partnership and within the scope of its business.

Compton, 

, 577 S.E.2d at 911−12. “A contract, express or implied,

is essential to the formation of a partnership.” Wiggs v. Peedin, 

, 

 (2008) (quoting Eggleston v. Eggleston, 

,

 (1948)).          “A partnership may be inferred from all the

circumstances, so long as the circumstances demonstrate a meeting of the minds with

respect to the material terms of the partnership agreement.” Compton, 

, 

. Further, it is well settled that “co-ownership and sharing of

any actual profits are indispensable requisites for a partnership.” Wiggs, 

, 

.

   59.      Here, although there is evidence that the parties combined their property,

labor, and skill, there is no evidence of an agreement to share profits. Instead, the
evidence indicates that the parties had an understanding that they “would all benefit”

from the projects, and that Zagaroli expected to be compensated for his construction

and design work on Hollar, Moretz, and Lyerly. For example, in his answer to

Defendants’ interrogatory regarding the conversations that led Zagaroli to believe

that a partnership existed, with respect to Hollar, Zagaroli stated that he

         understood that Neill agreed to partner with Zagaroli in the manner
         originally described by Zagaroli to Neill, including that Neill arranged
         for investment and Zagaroli would perform development and
         construction related services as the means Zagaroli would be
         compensated. Zagaroli understood the partnership to include Neill
         making money from the value of the re-developed, income producing
         property, tax credits and/or sale of the property.

(Zagaroli Dep. Ex. 1, at 6.)

   60.      In fact, the undisputed evidence demonstrates that Zagaroli performed

construction related services on Hollar, including securing the building and repairing

the roof, and that HHI paid Zagaroli for this work. (Pl.’s Mot. Summ. J. Ex. 11, ECF

No. 102.12; Pl.’s Mot. Dismiss & Mot. J. Pleadings Ex. 4, ECF No. 34.1; Zagaroli Dep.

81:11−21, 82:5−12.) Additionally, Zagaroli testified during his deposition that he had

no equity or ownership in the Hollar job—just the potential to do the construction

work. (Zagaroli Dep. 69:23−25.)

   61.      With respect to Moretz and Lyerly, Zagaroli stated that “Neill and

Zagaroli’s discussions included pursuing historic mill renovation opportunities for

[Moretz and Lyerly] for their mutual benefit.” (Zagaroli Dep. Ex. 1, at 9, 11.) Zagaroli

further stated that “Neill repeatedly represented to Zagaroli that when projects

would be completed, Zagaroli would be paid for example from construction
administration services, and/or promising [sic] work including development, design,

construction and similar means for compensating Zagaroli for his partnership work.”

(Zagaroli Dep. Ex. 1, at 12.)

   62.    That the parties may have pursued mill redevelopment opportunities “for

their mutual benefit,” and that Zagaroli would derive work on those opportunities for

which he would be compensated, does not create a partnership between the parties,

with attendant fiduciary duties, as there is no evidence of an agreement, express or

implied, to share the profits of the business.

   63.    In sum, the undisputed evidence tends to show that any alleged partnership

between the parties was subsumed into Reclamation, and there is no evidence that

Neill and Berry exercised the requisite domination and control over Reclamation such

that they owed fiduciary duties to Zagaroli. Alternatively, Zagaroli has failed to come

forward with sufficient evidence of a partnership so as to support the existence of a

fiduciary relationship between the parties. As Zagaroli has failed to come forward

with sufficient evidence of a fiduciary relationship, the Court grants Defendants’

motion for summary judgment on Zagaroli’s breach of fiduciary duty claim, and this

claim is dismissed with prejudice.

                 b.    Constructive Fraud

   64.    A constructive fraud claim requires proof of “(1) a relationship of trust and

confidence, (2) that the defendant took advantage of that position of trust in order to

benefit himself, and (3) that plaintiff was, as a result, injured.” White v. Consol.

Planning, Inc., 

, 

 (2004). A constructive
fraud claim requires the existence of a fiduciary duty. Brissett v. First Mount Vernon

Indus. Loan Ass’n, 

, 

 (2014).

   65.    As the Court has concluded that Zagaroli has failed to come forward with

sufficient evidence of a fiduciary relationship, the Court likewise grants Defendants’

motion for summary judgment on Zagaroli’s constructive fraud claim, and this claim

is dismissed with prejudice.

                 c.     Fraud

   66.    To establish a claim for fraud, Plaintiff must prove “(1) a false

representation or concealment of a material fact; (2) reasonably calculated to deceive;

(3) made with the intent to deceive; (4) which does in fact deceive; (5) resulting in

damage to the injured party.” Rider, 

 (quoting Forbis v. Neal, 

, 526−27, 

 (2007)). Based on the Court’s careful review

of the record in this action, and the briefs of the parties, Zagaroli has neither alleged

nor come forward with any evidence of the essential elements of fraud. Accordingly,

the Court grants Defendants’ motion for summary judgment on Zagaroli’s fraud

claim, and this claim is dismissed with prejudice.

          2.     Wage and Hour Act Violation

   67.    Zagaroli contends that Reclamation failed to pay his $1,000 per week salary

in violation of 

, which provides, in relevant part, that “[e]very

employer shall pay every employee all wages and tips accruing to the employee on

the regular payday.” 

. Defendants contend that all wages
due before October 26, 2013 are barred by the statute of limitations. (Br. Supp. Defs.’

Mot. Summ. J. 25.)

   68.     A claim pursuant to section 95-25.6 is subject to a two-year statute of

limitations. 

(f). “[T]he statute begins to run on the date

the promise is broken.” Kornegay v. Aspen Asset Grp., LLC, 

,

 (2010). “[W]hen the party moving for summary judgment pleads

the statute of limitations, ‘the burden is then placed upon the [non-movant] to offer a

forecast of evidence showing that the action was instituted within the permissible

period after the accrual of the cause of action.’” PharmaResearch Corp. v. Mash, 

, 

 (2004) (second alteration in original) (quoting

Pembee Mfg. Corp. v. Cape Fear Constr. Co., 

, 

(1985)).

   69.     Whether a claim is barred by the statute of limitations is a mixed question

of law and fact. Stratton v. Royal Bank of Can., 

, 

 (2011). “If a plaintiff’s claim is barred by the running of the applicable statute of

limitations, summary judgment in favor of a defendant is appropriate.” Lockerman

v. S. River Elec. Membership Corp., 

 (N.C. Ct. App. 2016). “When,

however, the evidence is sufficient to support an inference that the limitations period

has not expired, the issue should be submitted to the jury.” Baum v. John R. Poore

Builder, Inc., 

, 

 (2007).

   70.     Here, Zagaroli filed his Complaint on October 26, 2015. Accordingly, any

claim for wages owed prior to October 26, 2013 is barred by the statute of limitations.
In opposition to Defendants’ motion, Zagaroli argues that “[t]he evidence will show

that when Zagaroli was not paid, there were agreements that such payments would

be made in subsequent years, and the obligation was continued into the next year by

agreement.” (Pl.’s Resp. Defs.’ Mot. Summ. J. 21.) Once Defendants, as the movants,

demonstrated the absence of a genuine issue of material fact, however, the burden

shifted to Zagaroli to come forward with specific facts showing that a genuine issue

for trial exists. In re Jones, 

, 

 (2008). Zagaroli

has failed to do so.

   71.      Therefore, the Court concludes that Zagaroli’s claim against Reclamation

for unpaid wages owed before October 26, 2013 is barred by the statute of limitations.

The Court further concludes that genuine issues of material fact exist as to whether

an employment relationship existed between Zagaroli and Reclamation and whether

Reclamation failed to pay Zagaroli’s salary after October 26, 2013. As a result,

Defendants’ motion for summary judgment on Zagaroli’s Wage and Hour Act claim

against Reclamation is granted in part as to wages owed before October 26, 2013.

Defendants’ motion as to wages owed by Reclamation on or after October 26, 2013 is

denied.

            3.     Breach of Contract

   72.      At the outset, the Court notes that the basis for Zagaroli’s breach of contract

claim is less than clear. In his response brief in opposition to Defendants’ motion for

summary judgment, Zagaroli contends that

         [Zagaroli]’s breach of contract claims arise out of promises and contracts
         relating to (1) [sic] Hollar, Moretz, and Lyerly, which in many respects
         mirror the breach of fiduciary duty claims. Further, [Zagaroli]’s breach
         of contract includes breach of agreements relating to promises required
         to form and operate Reclamation, LLC. [Zagaroli]’s claims include
         failing to pay for services promised to [Zagaroli] relating to Hollar, but
         those services are not limited to the contract negotiated between [Neill]
         and [RedClay].

(Pl.’s Resp. Defs.’ Mot. Summ. J. 20.) In his First Amended Complaint, Zagaroli

alleges that “Neill and Berry breached contracts with Zagaroli by failing pay [sic]

sufficient money to Reclamation or Zagaroli to pay Zagaroli the $1000.00 per week[,]”

that Zagaroli is owed no less than $17,500 for construction administration services

Zagaroli performed on Hollar, and that Neill and Berry breached sections 2 and 5 of

the Purchase Agreement. (First Am. Compl. ¶¶ 197, 200−02.)

   73.      “The elements of a claim for breach of contract are (1) existence of a valid

contract and (2) breach of the terms of that contract.” Poor v. Hill, 

, 

 (2000).        A valid contract requires assent, mutuality of

obligation, and definite terms. Charlotte Motor Speedway, LLC v. Cty. of Cabarrus,

, 

 (2013).

                   a.    $1,000 per Week

   74.      Zagaroli contends that Reclamation’s failure to pay Zagaroli $1,000 per

week serves as a basis for his breach of contract claim. The evidence before the Court

tends to show that, in May 2011, Reclamation agreed to pay Zagaroli $1,000 per week,

(Zagaroli Dep. 116:11−13, 117:6−22, 146:22−147:2, 186:11−25; Second Zagaroli Aff.

¶ 155), and that Reclamation did not pay Zagaroli’s salary every week, (Zagaroli Dep.

148:13−15; Defs.’ Mot. Summ. J. Ex. K, ¶ 16). Unlike a claim under section 95-25.6,

a claim for breach of contract is subject to a three-year statute of limitations. 

(1). A cause of action for breach of contract accrues upon notice of

the breach. N.C. Farm Bureau Mut. Ins. Co. v. Hull, 

 (N.C. Ct.

App. 2016); Haigh v. Superior Ins. Mgmt. Grp., Inc., 

, at *16

(N.C. Super. Ct. Oct. 24, 2017). As Zagaroli filed his Complaint on October 26, 2015,

Zagaroli cannot recover on a breach of contract theory for unpaid salary owed before

October 26, 2012. As with Zagaroli’s Wage and Hour Act claim, there is a dispute of

fact as to whether Reclamation failed to pay Zagaroli’s salary after October 26, 2012.

Therefore, the Court grants Defendants’ motion for summary judgment on Zagaroli’s

breach of contract claim against Reclamation for unpaid salary owed before October

26, 2012.     The Court denies Defendants’ motion as to unpaid salary owed by

Reclamation on or after October 26, 2012.

                  b.    $17,500 Construction Administration Fee

                        (1)   Zagaroli’s alleged construction administration
                              work was performed pursuant to his agreement
                              with RedClay.

   75.      Zagaroli contends that he is owed no less than $17,500 for construction

administration services he allegedly performed for Hollar. Defendants argue that, to

the extent that Zagaroli did any construction administration work, such work was

performed pursuant to an agreement between Zagaroli and RedClay. (Br. Supp.

Defs.’ Mot. Summ. J. 23−24.) The Court agrees with Defendants.

   76.      The evidence is undisputed that, pursuant to the RedClay Agreement, HHI

agreed to pay RedClay the A&E Fee, and Zagaroli had a separate agreement with

RedClay to be paid a portion of the A&E Fee for Zagaroli’s design and construction
administration work. (Zagaroli Dep. 92:24−93:17, 192:11−18, 218:9−13; Neill Dep.

36:12−13; Maynard Aff. ¶ 12.) Further, the evidence is undisputed that HHI reduced

the scope of work under the A&E Fee such that the fee was lowered by $17,500, which

HHI was permitted to do by the express terms of the agreement, and HHI paid the

A&E Fee in full. (Neill Dep. 174:7−25, 203:25−204:7; Maynard Aff. ¶ 10.)

                       (2)    Enforcement of Neill’s alleged promise is barred
                              by the statute of frauds.

   77.    Zagaroli nonetheless argues that Neill promised to pay Zagaroli $17,500.

(Pl.’s Resp. Defs.’ Mot. Summ. J. 20.) There is a dispute of fact as to whether Neill

ever promised to pay Zagaroli $17,500. Defendants argue, however, that even if Neill

so promised, such a promise is a promise to answer for the debt of another and is thus

barred by the statute of frauds.4 (Br. Supp. Defs.’ Mot. Summ. J. 23−25.)




4 Although Plaintiff did not raise this issue in opposition to Defendants’ motion for

summary judgment, the Court notes that Defendants failed to plead the statute of
frauds as an affirmative defense in their answer. (See Answer 16−19.) “[O]rdinarily,
the failure to plead an affirmative defense results in a waiver [of that defense] unless
the parties agree to try the issue by express or implied consent.” News & Observer
Publ’g Co. v. McCrory, 

 (N.C. Ct. App. 2016) (second alteration in
original). However, Defendants expressly raised the statute of frauds in their brief
in support of their motion for summary judgment. See 

 (“[I]f an affirmative
defense required to be raised by a responsive pleading is sought to be raised for the
first time in a motion for summary judgment, the motion must ordinarily refer
expressly to the affirmative defense relied upon.” (emphasis omitted) (quoting
Dickens v. Puryear, 

, 

 (1981))). Further, Plaintiff
had the opportunity to respond and did respond. See 

 (“Simply put, the
circumstances in Dickens indicated that the plaintiff was not prejudiced by the
technical failure of the defendant to plead and reference an affirmative defense
because it was clear that the plaintiff understood the issue was contested and not
only had the opportunity to respond, but had responded.” (emphasis omitted)).
Therefore, the Court concludes that Defendants’ failure to plead the statute of frauds
in their answer does not bar its consideration on summary judgment.
   78.      Pursuant to 

,

         No action shall be brought whereby to charge an executor, administrator
         or collector upon a special promise to answer damages out of his own
         estate or to charge any defendant upon a special promise to answer the
         debt, default or miscarriage of another person, unless the agreement
         upon which such action shall be brought, or some memorandum or note
         thereof, shall be in writing, and signed by the party charged therewith
         or some other person thereunto by him lawfully authorized.

. “The general rule under the above statute is that a promise

to answer for the debt of another for which the other remains liable, must be in

writing.” Parrish Funeral Home, Inc. v. Pittman, 

, 

 (1991). North Carolina, however, recognizes the “main purpose rule” as an

exception to the statute of frauds. Watson Elec. Constr. Co. v. Summit Cos., LLC, 

, 

 (2003). Under the main purpose rule, “if it is

concluded that the promisor has the requisite personal, immediate, and pecuniary

interest in the transaction in which a third party is the primary obligor, then the

promise is said to be original rather than collateral and therefore need not be in

writing to be binding.” Terrell v. Kaplan, 

, 

 (2005) (quoting Burlington Indus., Inc. v. Foil, 

, 

 (1981)).

   79.      Even assuming arguendo that Neill promised to pay Zagaroli $17,500 that

was owed by RedClay, such a promise constitutes a promise to answer for the debt of

another and must be in writing to be enforceable. Zagaroli contends he is owed

$17,500 for services he performed on Hollar, and there is no dispute that any such

services were performed prior to the end of 2011.         (Zagaroli Dep. 91:22−92:5,
192:4−10, 193:14−21, 217:9−10, 226:17−20, 228:7−8; Neill Dep. 67:24−68:13,

193:24−194:12.) After Neill allegedly promised to pay Zagaroli $17,500, on October

26, 2012, Zagaroli e-mailed an invoice to Neill for that amount. (Second Zagaroli Aff.

Exs. 7I−7J; Zagaroli Dep. 85:18−24, 194:11−14, Ex. 4.) The invoice is billed to “Hollar

Hosiery, LLC” for “[c]onstruction administration & services rendered[.]” (Zagaroli

Dep. Ex. 4.) Any such promise by Neill in October 2012 for services performed by

Zagaroli prior to the end of 2011 is not an original promise outside the scope of the

statute of frauds. See Dealers Specialties, Inc. v. Neighborhood Housing Servs., Inc.,

, 

 (1981) (“An obligation is original if made at

the time or before the debt is created and if credit is given in consideration of the

promise made by the promissor [sic].” (emphasis added)).

   80.    Rather, such a promise, if one was made, was a collateral promise to answer

for the debt of RedClay, which must be in writing to be enforceable. See 

, 

 (“If a debt has already been made and the party is already bound under

it, and a third party comes in and promises to pay it or to assume the responsibility

for it, the third party isn’t liable there, because the credit wasn’t extended on the

basis of that, and that is the promise to answer for the debt, default or miscarriage of

somebody else, which has to be in writing before it can be enforced.” (quoting

Goldsmith v. Erwin, 

 (4th Cir. 1950))). Zagaroli has not come

forward with any evidence of a writing wherein Neill promised to pay Zagaroli

$17,500. Accordingly, enforcement of any oral promise by Neill to pay Zagaroli

$17,500 is barred by the statute of frauds.
                       (3)    Neill’s alleged      promise     fails   for    lack   of
                              consideration.

   81.    Alternatively, the Court concludes that Neill’s promise to pay Zagaroli

$17,500 is unenforceable as a matter of law for lack of consideration. A contract must

be supported by consideration in order to be enforceable. Fairfield Harbour Prop.

Owners Ass’n, Inc. v. Midsouth Golf, LLC, 

, 

(2011). “A bare promise, made without consideration, creates no legal rights and

imposes no legal obligations.” Kingsdown, Inc. v. Hinshaw, 

,

at *24 (N.C. Super. Ct. Feb. 17, 2016) (quoting Stonestreet v. S. Oil Co., 

, 

 (1946)); see also Watson Elec. Constr. Co., 

, 

 (“Consideration is the glue that binds parties together, and a

mere promise, without more, is unenforceable.”).        Here, Neill’s promise to pay

Zagaroli $17,500 for prior services Zagaroli allegedly performed on Hollar was not

supported by consideration.     It is undisputed that the $17,500 was for services

allegedly performed prior to 2011, and after 2011, Zagaroli was no longer involved in

and performed no further work on Hollar. “[P]ast consideration is not adequate to

support a contract.” Kingsdown, Inc., 

, at *24.

   82.    In sum, the Court concludes that Zagaroli’s alleged construction

administration work was performed pursuant to his agreement with RedClay, and

enforcement of Neill’s alleged promise to pay Zagaroli $17,500 is barred by the statute

of frauds. Alternatively, the Court concludes that such a promise is unenforceable

for lack of consideration.   Accordingly, the Court grants Defendants’ motion for
summary judgment on Zagaroli’s breach of contract claim to the extent that such

claim is based on the $17,500 construction administration fee.

                c.     The Purchase Agreement

   83.   The Court next addresses Zagaroli’s claim that Neill and Berry breached

the Purchase Agreement. Zagaroli alleges that Neill and Berry breached section 2 of

the Purchase Agreement by failing to modify Reclamation’s operating agreement.

(First Am. Compl. ¶ 201.) Section 2 of the Purchase Agreement provides, in relevant

part, that Neill and Berry “agree that they will modify any documents associated with

Reclamation, LLC to reflect that [Zagaroli] and [Pritchett] are the new member-

managers of Reclamation, LLC and sole owners of the name Reclamation, LLC.”

(Defs.’ Mot. Summ. J. Ex. D, at Berry 109.) The evidence is undisputed, however,

that Reclamation did not have a written operating agreement. (Pl.’s Mot. Summ. J.

Ex. 4, ¶ 27; Neill Dep. 215:23−216:8.)

   84.   Zagaroli further alleges that Neill and Berry breached section 5 of the

Purchase Agreement by refusing to agree to shut down Reclamation’s operations.

(First Am. Compl. ¶ 202.) Section 5 of the agreement provides, in relevant part, that

“[a]ny shutdown or cessation of operations must be mutually agreed upon by and

between [Neill and Berry] and [Zagaroli and Pritchett].” (Defs.’ Mot. Summ. J. Ex.

D, at Berry 109.) A plain and unambiguous contract must be interpreted as written.

State v. Philip Morris USA Inc., 

, 

 (2009). There

is nothing in section 5, or any other provision of the Purchase Agreement, that

obligates Neill and Berry to agree to shut down Reclamation’s operations. Moreover,
there is no evidence that Zagaroli and Pritchett sought to cease Reclamation’s

operations and Neill and Berry refused to agree to do so.

   85.   Therefore, the Court grants Defendants’ motion for summary judgment on

Zagaroli’s breach of contract claim to the extent that this claim is based on the

Purchase Agreement.

                d.     Formation and Operation of Reclamation

   86.   Zagaroli also contends that Neill and Berry breached “agreements relating

to promises required to form and operate Reclamation, LLC.” (Pl.’s Resp. Defs.’ Mot.

Summ. J. 20.) Zagaroli appears to contend that Neill and Berry failed to make their

initial capital contributions to Reclamation, and that Neill and Berry failed to

continuously fund Reclamation as needed.

   87.   The evidence is undisputed that Neill contributed $52,019.69 to

Reclamation in relation to the disassembly and transportation of the JP Stevens

factory materials. (Br. Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 1.) The evidence is further

undisputed that Berry made his initial contribution of $26,000 to Reclamation.

(Zagaroli Dep. 119:7−14; Br. Opp’n Pl.’s Mot. Summ. J. Ex. A, ¶ 1, ECF No. 106.2.)

Zagaroli testified during his deposition that, at or around the time of formation,

Zagaroli told Berry that Berry needed to contribute $26,000 to Reclamation and Berry

contributed that amount to Reclamation.       (Zagaroli Dep. 119:2−14, 138:18−23.)

Although Zagaroli stated in his affidavit that he does not believe Berry paid any

money to Reclamation, (Second Zagaroli Aff. ¶ 149), as discussed above, Zagaroli
cannot create an issue of fact by submitting an affidavit contradicting his own prior

sworn deposition testimony.

   88.   Additionally, Zagaroli stated in his affidavit that he “believed [Berry] and

[Neill] were obligated to make sure Reclamation, LLC had sufficient financing, and

that they were obliged to use their personal balance sheets and resources to finance

Reclamation, LLC’s needs and pursuant to a business plan that expected to lose

money for the remainder of the year.” (Second Zagaroli Aff. ¶ 212.) During his

deposition, however, Zagaroli testified that, when Zagaroli told Berry that Berry

needed to contribute $26,000, he did not tell Berry that Berry would be required to

put in more money later. (Zagaroli Dep. 119:25−120:2; see also Br. Opp’n Pl.’s Mot.

Summ. J. Ex. A, ¶ 2.) Zagaroli further testified that he never asked Neill and Berry

to put in additional capital. (Zagaroli Dep. 155:12−15.) Nevertheless, the undisputed

evidence tends to show that Berry ultimately invested a total of $61,457.93 in

Reclamation, and both Neill and Berry obtained $225,000 in loans to fund

Reclamation’s operations, which they and their wives personally guaranteed. (Br.

Opp’n Pl.’s Mot. Summ. J. Ex. A, ¶¶ 2−3; Br. Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 2.)

In sum, other than Zagaroli’s statements in his affidavit—which contradict his prior

deposition testimony—the record is devoid of any evidence that Neill and Berry

agreed to provide unlimited funding for Reclamation’s operations. What the record

does show is that Neill and Berry contributed substantial amounts of their personal

funds to Reclamation and personally guaranteed substantial loans to make additional

cash infusions to the company.
   89.   Therefore, the Court grants Defendants’ motion for summary judgment on

Zagaroli’s breach of contract claim to the extent that this claim is based on

agreements relating to the formation and operation of Reclamation.

                e.     Hollar, Moretz, and Lyerly

   90.   Zagaroli claims that Defendants breached contracts relating to Hollar,

Moretz, and Lyerly. As with the other alleged agreements giving rise to Zagaroli’s

breach of contract claim, these alleged contracts relating to Hollar, Moretz, and

Lyerly, and the terms thereof, are equivocal at best. It seems that Zagaroli contends

that the parties had an agreement to jointly pursue mill redevelopment opportunities,

and that Defendants breached such agreement by misappropriating those

opportunities for themselves. (See Pl.’s Resp. Defs.’ Mot. Summ. J. 20.)

   91.   Defendants argue that this claim must be dismissed because it is a

derivative claim that must be brought on behalf of Reclamation and, thus, Zagaroli

lacks standing to assert this as an individual claim. (Br. Supp. Defs.’ Mot. Summ. J.

23.) The Court agrees with Defendants.

   92.   It is a well-settled principle of North Carolina law that shareholders of a

corporation cannot pursue individual causes of action for wrongs or injuries to the

corporation. Barger v. McCoy Hillard & Parks, 

, 

 (1997); Corwin, 

. This same standard applies for purposes of

determining whether a member of a limited liability company can assert an

individual, as opposed to a derivative, claim. Levin v. Jacobson, 

, at *14−15 (N.C. Super. Ct. Dec. 7, 2015); see Russell M. Robinson, II, Robinson
on North Carolina Corporation Law § 34.04[5] (7th ed. 2016) (“A derivative action on

behalf of an LLC will be governed by essentially the same rules that apply to a

derivative action on behalf of a corporation.”).

   93.    There are two exceptions to the general requirement of derivative claims:

(1) when there is a special duty between the wrongdoer and the member; and (2) when

the member suffered an injury separate and distinct from the injury suffered by the

limited liability company and the other members. Barger, 

, 

; Corwin, 

; Levin, 

, at *14; see Robinson

§ 34.04[5] (“[W]hether the member must bring the suit individually or on behalf of

the LLC turns on whether the alleged injuries were caused directly to the member or

are a consequence of breaches of fiduciary duty that harmed the LLC.”).

   94.    As discussed above, the undisputed evidence tends to show that, at least

initially, Reclamation’s business included mill redevelopment. Further, Zagaroli

testified that the mill redevelopment opportunities at Moretz and Lyerly should have

been performed by Reclamation. “Misappropriation of corporate opportunities is

logically a derivative claim, but not an individual claim, because the injury is to the

corporation, not to an individual shareholder.” Plasman v. Decca Furniture (USA),

Inc., 

, at *38 (N.C. Super. Ct. Oct. 21, 2016) (citing Meiselman

v. Meiselman, 

, 

 (1983)).

   95.    There is no evidence tending to indicate that Defendants owed Zagaroli a

special duty or that Zagaroli suffered a special injury such that Zagaroli may bring

an individual claim for misappropriation of the mill redevelopment opportunities. As
Zagaroli did not make a pre-suit demand on Reclamation, Zagaroli does not have

standing to pursue this claim on behalf of Reclamation. N.C. Gen. Stat. § 57D-8-

01(a); Petty v. Morris, 

, at *4 (N.C. Super. Ct. Dec. 16, 2014).

   96.    Therefore, the Court grants Defendants’ motion for summary judgment on

Zagaroli’s breach of contract claim to the extent that this claim is based on

agreements relating to Hollar, Moretz, and Lyerly.

          4.     Quasi Contract and Unjust Enrichment

   97.    Zagaroli’s claim for quasi contract and unjust enrichment is based on the

services he contends he performed for Hollar, development plans and drawings he

provided to Defendants, and unpaid rent. (Pl.’s Resp. Defs.’ Mot. Summ. J. 15−20.)

   98.    “Quantum meruit operates as an equitable remedy based upon a quasi

contract or a contract implied in law which provides a measure of recovery for the

reasonable value of services rendered in order to prevent unjust enrichment.” Ron

Medlin Constr. v. Harris, 

, 

 (2010) (quotation

marks omitted). “In order to recover on a claim of unjust enrichment, a party must

prove that it conferred a benefit on another party, that the other party consciously

accepted the benefit, and that the benefit was not conferred gratuitously or by an

interference in the affairs of the other party.” Se. Shelter Corp. v. BTU, Inc., 

, 

 (2002).

   99.    Defendants first argue that Zagaroli’s unjust enrichment claim for services

performed on Hollar is barred by the express agreement between Zagaroli and

RedClay. (Br. Supp. Defs.’ Mot. Summ. J. 20.)
   100.   “[I]t is a well established principle that an express contract precludes an

implied contract with reference to the same matter.” Horack v. S. Real Estate Co. of

Charlotte, Inc., 

, 

 (2002); see also Plasman,

, at *19 (“[O]ur case law clearly holds that ‘an express contract

precludes an implied contract with reference to the same matter.’” (quoting Keith v.

Day, 

, 

 (1986))).

   101.   Here, the evidence is undisputed that Zagaroli had an express agreement

with RedClay to be paid for his work on Hollar, which included construction

administration services. Therefore, Zagaroli cannot recover on an implied contract

theory for services he performed on Hollar.

   102.   Next, Zagaroli contends that he provided development plans and drawings

to Defendants. (First Am. Compl. ¶ 189; Pl.’s Resp. Defs.’ Mot. Summ. J. 18−20.)

Defendants argue that Zagaroli’s plans and drawings did not confer a benefit on

Defendants so as to support an unjust enrichment claim. (Br. Supp. Defs.’ Mot.

Summ. J. 20−21.) The Court agrees with Defendants.

   103.   The undisputed evidence tends to show that Defendants did not use

Zagaroli’s plans or drawings for Hollar, Moretz, or Lyerly. (Defs.’ Mot. Summ. J. Ex.

J, ¶ 11; Defs.’ Mot. Summ. J. Ex. M, ¶ 3, ECF No. 93.14.)     Zagaroli’s drawings for

Hollar could not be used because they did not meet the National Park Service

requirements for historic tax credits. (Maynard Aff. ¶ 14.) The undisputed evidence

further shows that CBSA Architects, Inc., the architect of record for Moretz, prepared

all drawings and plans necessary for the redevelopment of Moretz and did not use
any plans or drawings prepared by Zagaroli. (Defs.’ Mot. Summ. J. Ex. O, ¶¶ 2−4,

ECF No. 93.16.) Additionally, the undisputed evidence indicates that MHA Works,

P.A., the architect of record for Lyerly, prepared all drawings and plans necessary for

the redevelopment of Lyerly and such drawings and plans were the original work of

MHA Works. (Defs.’ Mot. Summ. J. Ex. M, ¶¶ 1−3, ECF No. 93.14.) Neill Grading,

as the general contractor for Moretz and Lyerly, followed the plans and specifications

drawn by the architects of record, and Zagaroli did not perform any work or services

for Neill Grading on Moretz or Lyerly. (Defs.’ Mot. Summ. J. Ex. J, ¶ 11.)

   104.   Additionally, Zagaroli contends that, at Neill’s request, Zagaroli prepared

development plans for development of a property referred to as “Little Mountain,” for

which Zagaroli expected to be paid. (Pl.’s Resp. Defs.’ Mot. Summ. J. 18.) Little

Mountain is a 1,000-acre property located in Denver, North Carolina. (Zagaroli Dep.

Ex. 1, at 7, 18.) Little Mountain Farms Limited Partnership, of which Neill and Ed

Neill are partners, owns Little Mountain. (Defs.’ Mot. Summ. J. Ex. J, ¶ 3; Neill Dep.

14:21−15:14.) The evidence is undisputed that sometime in 2008, Ed Neill told

Zagaroli that he wanted to sell Little Mountain for $30,000 per acre and, to obtain

such a price, needed development plans demonstrating the various uses of the

property. (Zagaroli Dep. 42:12−16; Zagaroli Dep. Ex. 1, at 18.) Thereafter, Zagaroli

worked on development plans with Neill, Ed Neill, and a well-known architect named

Beau Welling. (Zagaroli Dep. 42:20−25; Zagaroli Dep. Ex. 1, at 18.) The evidence is

undisputed that Zagaroli, Neill, and Ed Neill agreed that Zagaroli was to receive a

percentage of the sales price as compensation for his work on Little Mountain,
(Zagaroli Dep. Ex. 1, at 7, 18; Defs.’ Mot. Summ. J. Ex. J, ¶ 5); however, the property

never sold and a development deal was never reached, (Defs.’ Mot. Summ. J. Ex. J, ¶

6; Zagaroli Dep. 42:12−15).     As there is an express agreement relating to the

development drawings Zagaroli prepared for Little Mountain, Zagaroli cannot

recover for such work under an implied contract theory.

   105.   Third and last, Zagaroli contends that, pursuant to 

,

he is entitled to unpaid rent for Reclamation’s use of two buildings referred to as the

“Zag Building” and the “Conover Building.” (Pl.’s Resp. Defs.’ Mot. Summ. J. 17.)

   106.   Zagaroli acquired the Zag Building on June 28, 2005 and the Conover

Building on May 26, 2006. (Defs.’ Mot. Summ. J. Ex. F, ECF No. 93.7.) The evidence

tends to indicate that Reclamation operated out of the Zag Building and stored

materials in both the Zag Building and the Conover Building. (Second Zagaroli Aff.

¶¶ 140−41; Zagaroli Dep. 114:13−16.) On May 31, 2011, Zagaroli sold both buildings

to his parents. (Defs.’ Mot. Summ. J. Ex. G, ECF No. 93.8.)

   107.   Defendants argue that Zagaroli does not have standing to pursue unpaid

rent that accrued after he sold the properties to his parents on May 31, 2011, and

that a claim for unpaid rent that accrued prior to May 31, 2011 is barred by the

statute of limitations.

   108.   Section 42-4 provides that “[w]hen any person occupies land of another by

the permission of such other, without any express agreement for rent, or upon a parol

lease which is void, the landlord may recover a reasonable compensation for such

occupation[.]” 

. The record is undisputed that, as of May 31,
2011, Zagaroli was not the owner of the Zag Building or the Conover Building. (Defs.’

Mot. Summ. J. Ex. G.) Therefore, Zagaroli only has standing to bring a claim for rent

owed from February 18, 2011, the date on which Reclamation was formed, to May 31,

2011, the date on which Zagaroli sold the properties to his parents.

   109.   A claim for reasonable compensation for occupation of one’s property under

section 42-4 is subject to a three-year statute of limitations. 

(2);

Simon v. Mock, 

, 

 (1985). “[A] cause of action

for rent under [§ 42-4] must accrue continually, for each day the property is occupied.”

Simon, 

, 

.

   110.   Here, Zagaroli filed his Complaint on October 26, 2015. Accordingly, any

claim for rent owed prior to October 26, 2012 is barred by the statute of limitations.

As Zagaroli only has standing to pursue rent owed prior to May 31, 2011, Zagaroli’s

claim for unpaid rent must fail.

   111.   In sum, Zagaroli has failed to come forward with sufficient evidence that he

conferred a benefit on Defendants so as to create a genuine issue of material fact. As

a result, Defendants’ motion for summary judgment on Zagaroli’s unjust enrichment

claim is granted, and this claim is dismissed with prejudice.

   B.     Plaintiff’s Motion

   112.   Zagaroli moves for summary judgment on all of Defendants’ counterclaims.

The Court addresses each in turn.
          1.    Declaratory Judgment

   113.   Defendants seek a declaratory judgment that Neill, Berry, and Zagaroli

each own a one-third ownership interest in Reclamation, and that Neill and Berry

own the name Reclamation, LLC.5 (Answer 25−26; Br. Opp’n Pl.’s Mot. Summ. J. 4,

ECF No. 106.)     Zagaroli argues that he is entitled to summary judgment on

Defendants’ declaratory judgment counterclaim because Neill and Berry did not

perform as required to obtain their membership interests in Reclamation. (Pl.’s Mem.

Supp. Pl.’s Mot. Summ. J. 12−14, ECF No. 102.)

   114.   First, N.C. Gen. Stat. § 57D-3-01(c) expressly provides that, “[t]o be a

member a person need not make or have the obligation to make any contributions to

the LLC[.]” N.C. Gen. Stat. § 57D-3-01(c). Second, as discussed above with respect

to Zagaroli’s breach of contract claim, the evidence is undisputed that Neill and Berry

made their capital contributions to Reclamation in exchange for their ownership

interests, and there is no evidence that Neill or Berry were required to provide any

other consideration in exchange for their ownership interests. (Br. Opp’n Pl.’s Mot.

Summ. J. Ex. A, ¶ 1; Br. Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 1; Zagaroli Dep. 119:7−14.)

Third, it is undisputed that Neill signed Reclamation’s articles of organization in the

capacity of a member, (Neill Dep. 226:2−4), and, thus, became a member on February




5 In their counterclaim, Defendants request a declaratory judgment that Neill and

Berry each own a fifty percent ownership interest in Reclamation, and that Neill,
Berry, and Zagaroli each own a one-third economic interest in Reclamation. In their
brief in opposition to Plaintiff’s motion, however, Defendants conceded to a
declaratory judgment that Neill, Berry, and Zagaroli each own a one-third ownership
interest in Reclamation. (Br. Opp’n Pl.’s Mot. Summ. J. 4.)
18, 2011, see N.C. Gen. Stat. § 57D-3-01(a)(1) (providing that a person executing the

articles of organization in the capacity of a member becomes a member at the time

the articles of organization become effective under section 55D-13); id. § 55D-13

(providing that a document accepted for filing is effective on the date it is filed).

   115.    The undisputed evidence tends to show that Neill, Berry, and Zagaroli each

owned a thirty percent interest in Reclamation and Lovern owned a ten percent

interest in Reclamation. (First Am. Compl. ¶¶ 63, 65; Answer 7, ¶¶ 63, 65.) Lovern

relinquished her ten percent interest in June 2012. (Defs.’ Mot. Summ. J. Ex. K,

¶ 15.)    Thereafter, on November 26, 2013, Neill, Berry, Zagaroli, and Pritchett

executed the Purchase Agreement. (Defs.’ Mot. Summ. J. Ex. D.) Pursuant to this

agreement, upon repayment of the promissory notes and Neill and Berry’s cash

advancements, Neill and Berry’s ownership interests in Reclamation would have

transferred to Zagaroli and Pritchett. (Defs.’ Mot. Summ. J. Ex. D, at Berry 109.) It

is undisputed, however, that Zagaroli and Pritchett did not repay either the

promissory notes or the cash advancements and, as a result, Neill and Berry retained

their ownership interests. (Pl.’s Mot. Summ. J. Ex. 4, ¶ 39; Defs.’ Mot. Summ. J. Ex.

L, ¶ 15.) Additionally, the Purchase Agreement expressly provided that upon its

execution, Zagaroli and Pritchett would own the name Reclamation, but “[i]f, in the

event of non- payment [sic] of notes and advances or breach of the terms of this

purchase agreement by [Zagaroli and Pritchett], [Zagaroli and Pritchett] agree to

transfer any right, use, benefit or ownership of the name Reclamation, LLC to” Neill

and Berry. (Defs.’ Mot. Summ. J. Ex. D, at Berry 109.)
   116.   Therefore, the Court concludes that there is no genuine issue of material

fact that Neill, Berry, and Zagaroli each own a one-third ownership interest in

Reclamation, and Neill and Berry own the name Reclamation, LLC. Accordingly, the

Court denies Plaintiff’s motion for summary judgment on Defendants’ declaratory

judgment counterclaim and enters judgment in favor of Defendants against Plaintiff

on this claim. See Erthal v. May, 

, 

 (2012)

(“Rule 56 does not require that a party move for summary judgment in order to be

entitled to it. Thus, the trial court can grant summary judgment against the moving

party.” (citations omitted) (quotation marks omitted)).

          2.    Conversion

   117.   Reclamation contends that Zagaroli converted at least $65,721.15 by

forging Neill’s name on checks drawn on Reclamation’s account, as well as numerous

pieces of Reclamation’s machinery and equipment. (Answer 26−27.)

   118.   Conversion is (1) an unauthorized assumption and exercise of the right of

ownership over goods or personal property belonging to another, and (2) a wrongful

possession or conversion, regardless of the subsequent application of the converted

property. Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 

, 723 S.E2d 744, 747 (2012).

   119.   Zagaroli testified during his deposition that Neill authorized Zagaroli to

sign Neill’s name on Reclamation checks.             (Zagaroli Dep. 164:23−165:1,

172:24−173:9.) Defendants have come forward with evidence that Neill did not give

Zagaroli permission to sign Neill’s name on Reclamation checks.         (Neill Dep.
265:10−17.) Therefore, the Court concludes that there is a genuine issue of material

fact as to whether Zagaroli converted Reclamation’s funds.

   120.   As to the machinery and equipment, Zagaroli argues that Defendants failed

to make a demand for the return of the equipment. (Pl.’s Mem. Supp. Pl.’s Mot.

Summ. J. 24.)    Defendants contend that Zagaroli wrongfully took and sold the

machinery and equipment, thereby dispensing with the demand requirement. (Br.

Opp’n Pl.’s Mot. Summ. J. 13.) Alternatively, Defendants contend that they did make

a demand. (Br. Opp’n Pl.’s Mot. Summ. J. 13.)

   121.   “[W]hen the defendant lawfully obtains possession or control and then

exercises unauthorized dominion or control over the property, demand and refusal

become necessary elements of the tort.” Stratton, 

, 

. Here, Zagaroli lawfully came into possession of Reclamation’s machinery and

equipment as he was in charge of Reclamation’s day-to-day operations and

Reclamation stored the equipment in the Zag and Conover Buildings previously

owned by Zagaroli. The evidence tends to indicate that Zagaroli sold the machinery

and equipment in July 2017—more than one year after Defendants filed their

counterclaims.   (Pl.’s Mot. Summ. J. Ex. 4, ¶¶ 55−56.)      Thus, Defendants were

required to make a demand for the return of the machinery and equipment prior to

asserting their claim.

   122.   There is a genuine issue of material fact as to whether Defendants made a

demand for the return of the machinery and equipment and whether Zagaroli refused

to return the property. (Zagaroli Dep. 180:22−181:7; Neill Dep. 273:19−274:3; Br.
Opp’n Pl.’s Mot. Summ. J. Ex. B, ¶ 3.) Therefore, the Court denies Plaintiff’s motion

for summary judgment on Reclamation’s conversion counterclaim.

          3.     Breach of Contract

   123.   Defendants contend that Zagaroli breached the Purchase Agreement by

failing to repay the promissory notes and Neill and Berry’s cash advances. (Answer

28.) Zagaroli first contends that he was not obligated under the express terms of the

Purchase Agreement to repay the promissory notes. (Pl.’s Mem. Supp. Pl.’s Mot.

Summ. J. 17−18.) Conversely, Defendants contend that Zagaroli was obligated under

the Purchase Agreement to repay the promissory notes. (Br. Opp’n Pl.’s Mot. Summ.

J. 9.)

   124.   “Interpreting a contract requires the court to examine the language of the

contract itself for indications of the parties’ intent at the moment of execution.” Philip

Morris USA Inc., 

, 

. “Since the object of construction

is to ascertain the intent of the parties, the contract must be considered as an entirety.

The problem is not what the separate parts mean, but what the contract means when

considered as a whole.” 42 E., LLC v. D.R. Horton, Inc., 

, 

 (2012) (quoting Jones v. Casstevens, 

, 413−14, 

 (1942)). The Court’s task is to harmonize and give effect to all clauses, if possible.

Philip Morris USA Inc., 

, 

. The contract is to be

construed consistently with reason and common sense. Variety Wholesalers, Inc., 

, 

. When a contract is plain and unambiguous, the Court

can determine the parties’ intent as a matter of law. 42 E., LLC, 

, 

. If a contract is ambiguous, however, interpretation of the

contract is a question of fact for the jury. Variety Wholesalers, Inc., 

,

. An ambiguity exists when the effect of provisions is uncertain or

capable of several reasonable interpretations. Id.

   125.   Here, the Purchase Agreement sets forth the outstanding note obligations

under the heading “Repayment of Note Obligations” without expressly providing who

is responsible for making the payments. (Defs.’ Mot. Summ. J. Ex. D, at Berry 108.)

The agreement further states that “[u]pon repayment of the promissory notes” and

cash advancements, 100% ownership of Reclamation shall be transferred to Zagaroli

and Pritchett. (Defs.’ Mot. Summ. J. Ex. D, at Berry 109.) The agreement states that

Zagaroli and Pritchett “agree that upon execution of this Purchase Agreement, [Neill

and Berry] are no longer responsible for repayment of the notes,” (Defs.’ Mot. Summ.

J. Ex. D, at Berry 109), and although the agreement expressly provides that Zagaroli

and Pritchett are to repay the cash advancements, it does not expressly provide that

Zagaroli and Pritchett are to repay the promissory notes.

   126.   The Court cannot conclude as a matter of law that Zagaroli and Pritchett

had no obligation to repay the promissory notes. The agreement expressly provides

that Neill and Berry are no longer responsible for repaying the notes while failing to

provide who is responsible therefor. As the agreement states that Zagaroli and

Pritchett were to be the sole owners of Reclamation upon repayment of the notes and

cash advancements, and that Zagaroli and Pritchett were to repay the cash
advancements, the agreement can reasonably be interpreted as obligating Zagaroli

and Pritchett to repay the notes and, therefore, is ambiguous.

   127.   Zagaroli next contends that Defendants rescinded the Purchase Agreement

when they sent Zagaroli and Pritchett a letter of default and, as a result, Defendants

cannot recover damages for breach of the agreement. (Pl.’s Mem. Supp. Pl.’s Mot.

Summ. J. 19−20.) This argument is without merit. Defendants’ letter of default

informed Zagaroli and Pritchett that they failed to make the required payments

under the Purchase Agreement and, as a result, Zagaroli and Pritchett’s rights in

Reclamation had ceased. (First Am. Compl. Ex. 5.) The letter does not state that

Defendants are rescinding the agreement or anything to that effect. Rather, the

letter expressly states that Neill and Berry “would like to work with [Zagaroli] to

agree upon payment terms for the notes and reimbursement of all cash advanced by

[Neill and Berry] on behalf of Reclamation, LLC, as is required under the Agreement.”

(First Am. Compl. Ex. 5.)

   128.   In sum, the Court concludes that genuine issues of material fact exist as to

whether Zagaroli was obligated to repay the promissory notes and, as such, Plaintiff’s

motion for summary judgment on Defendants’ breach of contract counterclaim is

denied.

          4.    Claim and Delivery and Judicial Dissolution

   129.   Plaintiff moves for summary judgment on Defendants’ counterclaims for

claim and delivery and judicial dissolution of Reclamation. In their response brief in

opposition to Plaintiff’s motion for summary judgment, Defendants state that they
are no longer pursuing these counterclaims. (Br. Opp’n Pl.’s Mot. Summ. J. 7 n.1, 12

n.2.)     Accordingly, Plaintiff’s motion for summary judgment on Defendants’

counterclaims for claim and delivery and judicial dissolution is granted, and these

claims are dismissed with prejudice.

   C.      Benchmade’s Motion

   130.    Benchmade moves for summary judgment on Defendants’ third-party

conversion claim against it. Defendants did not file a response in opposition to

Benchmade’s motion and, at the hearing on the motions, Defendants stated that they

are not pursing a conversion claim against Benchmade. Therefore, Benchmade’s

motion for summary judgment on Defendants’ third-party claim for conversion is

granted, and this claim is dismissed with prejudice.

                                 VI.   CONCLUSION

   131.    For the foregoing reasons, the Court hereby ORDERS as follows:

           A.    The Court GRANTS Defendants’ motion for summary judgment on

                 Plaintiff’s breach of fiduciary duty, constructive fraud, and fraud

                 claims, and these claims are dismissed with prejudice.

           B.    The Court DENIES Defendants’ motion for summary judgment on

                 Plaintiff’s Wage and Hour Act claim to the extent this claim is based

                 on unpaid salary owed on or after October 26, 2013, and this claim

                 shall go forward to trial. The Court GRANTS Defendants’ motion

                 for summary judgment on Plaintiff’s Wage and Hour Act claim to the
     extent this claim is based on unpaid salary owed before October 26,

     2013.

C.   The Court DENIES Defendants’ motion for summary judgment on

     Plaintiff’s breach of contract claim to the extent this claim is based

     on unpaid salary owed on or after October 26, 2012, and this claim

     shall go forward to trial. The Court GRANTS Defendants’ motion

     for summary judgment on Plaintiff’s breach of contract claim in all

     other respects.

D.   The Court GRANTS Defendants’ motion for summary judgment on

     Plaintiff’s quasi contract and unjust enrichment claim, and this

     claim is dismissed with prejudice.

E.   The Court DENIES Plaintiff’s motion for summary judgment on

     Defendants’ declaratory judgment counterclaim, and judgment is

     entered in favor of Defendants against Plaintiff on this claim. The

     Court hereby DECLARES that Neill, Berry, and Zagaroli each own

     a one-third ownership interest in Reclamation, and Neill and Berry

     own the name Reclamation, LLC.

F.   The Court DENIES Plaintiff’s motion for summary judgment on

     Defendants’ conversion counterclaim, and this claim shall go forward

     to trial.
  G.    The Court DENIES Plaintiff’s motion for summary judgment on

        Defendants’ breach of contract counterclaim, and this claim shall go

        forward to trial.

  H.    The Court GRANTS Plaintiff’s motion for summary judgment on

        Defendants’ claim and delivery counterclaim, and this claim is

        dismissed with prejudice.

  I.    The Court GRANTS Plaintiff’s motion for summary judgment on

        Defendants’ judicial dissolution counterclaim, and this claim is

        dismissed with prejudice.

  J.    The Court GRANTS Third-Party Defendant Benchmade’s motion for

        summary judgment on Defendants’ third-party conversion claim,

        and this claim is dismissed with prejudice.

SO ORDERED, this the 28th day of March, 2018.



                                /s/ Michael L. Robinson
                               Michael L. Robinson
                               Special Superior Court Judge
                                 for Complex Business Cases