Norment v. Rabon,
2021 NCBC 1.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
COUNTY OF WAKE SUPERIOR COURT DIVISION
19 CVS 7014
JOHN NORMENT,
Plaintiff,
v.
ROBERT GARY RABON; ORDER AND OPINION ON
JAMES MIKLOSKO; NORMENT’S MOTION FOR PARTIAL
ADVANTAGE LENDING LLC; SUMMARY JUDGMENT AGAINST
CAVALIER MORTGAGE ADVANTAGE LENDING, LLC
GROUP, INC.; STEEL
HOLDINGS, LLC; and
ADVANTAGE LENDING, a
common law partnership,
Defendants.
THIS MATTER comes before the Court on Plaintiff John Norment’s
(“Norment”) Motion For Partial Summary Judgment against Defendant Advantage
Lending, LLC (“Advantage LLC”) on Norment’s claims of (1) Breach of Contract; (2)
Accounting; and (3) Dissolution of Partnership and Receivership. (“Motion for
Summary Judgment,” ECF No. 60.) In support of the Motion for Summary Judgment,
Norment filed evidentiary materials (ECF Nos. 61.1–.7), and a Brief in Support of his
Motion for Summary Judgment. (“Brief in Support,” ECF No. 62.) Advantage LLC
filed a Brief in Opposition to Norment’s Motion for Summary Judgment (“Response
Brief,” ECF No. 68), and evidentiary materials (ECF Nos. 67.1–.4). Norment filed a
Reply Brief in Support of his Motion for Partial Summary Judgment. (“Reply Brief,”
ECF No. 74.)
THE COURT, having considered the Motion for Summary Judgment, the
evidence filed with the Court, briefs in support of and in opposition to the Motion for
Summary Judgment, the arguments of counsel at the hearing, and other appropriate
matters of record, CONCLUDES that the Motion for Summary Judgment should be
DENIED, for the reasons set forth below.
Oak City Law, LLP, by Robert E. Fields, Esq., Samuel Pinero, Esq., and
Caroline L. Trautmam, Esq. for Plaintiff John Norment.
The Farrell Law Group, P.C., by Richard W. Farrell, Esq. for Defendants
Robert Gary Rabon, James Miklosko, Advantage Lending LLC, and
Advantage Lending, a common law partnership.
McGuire, Judge.
I. FACTS
1. In 1998, Norment and Defendant James Miklosko (“Miklosko”) formed
Defendant Cavalier Mortgage Group, Inc., (“Cavalier”) as a mortgage broker. (Dep.
of Miklosko, ECF No. 61.3 at pp. 32–33). Norment and Miklosko were each 50%
shareholders in, and the sole directors of, Cavalier. The North Carolina Secure and
Fair Enforcement (SAFE) Mortgage Licensing Act (“SAFE Act” or the “Act,” N.C.G.S.
§ 53-244.010 et seq.) requires individuals and businesses engaging in the mortgage
business as a mortgage loan originator, transitional mortgage loan originator,
mortgage lender, mortgage broker, or mortgage servicer to be licensed through the
North Carolina Commissioner of Banks. (“NCCOB”) (N.C.G.S. § 53-244.100(a)). The
SAFE Act sets standards for licensure, including net worth and liquidity
requirements for license holders. At times relevant to this lawsuit, the capital
requirement for mortgage brokers was approximately $25,000 while the capital
requirement for mortgage lenders was at least one million dollars (“$1 million”). Id.,
§ 53-244.104. The Act also requires NCCOB approval of licensure transfers from one
entity to another through mergers and ownership changes. Id., § 53-244.100(e).
2. Cavalier subsequently also became licensed as a mortgage lender. (ECF
No. 61.3 at p. 24.) Cavalier satisfied the capital requirements for becoming a
mortgage lender using office condominiums owned by Norment and Miklosko. (ECF
No. 61.3, at pp. 21–26.) Cavalier was very profitable through approximately 2013.
(Affidavit of Norment, ECF No. 61.7, ¶ 10.)
3. On April 2, 2004, Robert Gary Rabon (“Rabon”) formed Advantage LLC
as a mortgage broker. (Dep. of Rabon, ECF No. 61.2 at pp. 18, 63.) Rabon executed
the Operating Agreement of Advantage Lending, LLC (“Operating Agreement”)
establishing himself as Advantage LLC’s sole member and manager and providing,
inter alia, requirements for admitting new members and amending the Operating
Agreement. (Exs. To Dep. of Norment, ECF No. 23.2, at Ex. 3, Operating Agreement.)
Advantage LLC operated as a “captive” of Coldwell Banker Advantage Realty
(“Advantage Realty”), a real estate brokerage firm controlled by Rabon. Advantage
LLC was marginally successful, but by the end of 2013, its net worth on its books was
negative. (ECF No. 61.2 at pp. 17–27, 58–60, 129–32, and Ex. 41, Advantage LLC
Financial Statement.)
4. In or around early 2014, Rabon and Miklosko developed a plan to move
Cavalier’s business to Advantage LLC (the “Transaction”). Cavalier had lending
experience and an underwriting department, Norment’s and Miklosko’s loan
originations, processing and operational management experience, and the capital
required for a licensed mortgage lender. (ECF No. 61.3, at pp. 21–26, 32–36; ECF
No. 61.2, at pp. 17–27, 58–60; November 14, 2018 Dep. of Norment, ECF No. 23.1, at
p. 33.) Advantage LLC lacked the lending capabilities and the net worth needed to
obtain a mortgage lender license, but had relationships with Advantage Realty real
estate agents and access to home buyers seeking financing from the agents. (ECF
No. 61.2, at pp. 17–27, 58–60; ECF No. 23.1, at p. 33; ECF No. 61.3, at pp. 44–51.)
The Transaction was intended to help Advantage Realty offer its home buyers in-
house lending and to help Norment and Miklosko increase their lending volume
through access to Advantage Realty agents. (Id.)
5. Sid Aldridge (“Aldridge”), a Raleigh attorney, assisted the parties with
and sought regulatory approval of the Transaction from the NCCOB. (ECF No. 23.1,
at p. 40.) Norment, Rabon, Miklosko, and Advantage LLC, by Rabon, executed
documents prepared by Aldridge to effectuate the Transaction. In particular, they
signed the Agreement for Subscription for Membership Interest in Advantage LLC
(“Subscription Agreement,” ECF No. 23.2, Ex. 5, at p. 60) and an Agreement to
Admission of Members and Amendment to Operating Agreement of Advantage LLC
(“Admission Agreement,” ECF No. 23.2, Ex. 4, at p. 57).
6. Under the Subscription Agreement, Norment and Miklosko each
contributed $1 million in cash and property to Advantage LLC for a thirty-three and
one-third percent (33 1/3%) membership interest in “the profits, losses, distributions,
capital, and right to vote and participate in the management of” Advantage LLC.
(ECF No. 23.2, at Ex. 5, p. 1.) The Subscription Agreement further provides:
If the NCCOB has not approved this transaction by July
31, 2014, the admission of Subscribers shall be null and
void, and the Company shall return all consideration paid
by Subscribers to each of them, and Subscribers shall
return to the Company any distributions received by them
from the Company with respect to their membership
interest.
(Id. at p. 2.) (emphasis added). The Subscription Agreement was effective on January
1, 2014.
7. The Admission Agreement, also effective on January 1, 2014, amended
the Operating Agreement to admit Norment and Miklosko as members of Advantage
LLC per the terms of the Subscription Agreement. (ECF No. 23.2, at Ex. 4.) The
Admission Agreement also provides, inter alia, as follows:
Pursuant to the terms of the Subscription Agreement, the
admission of Purchasers shall be null and void if the
[NCCOB] has not approved the admission of Purchasers by
June 31, 2014. 1 In such case, all consideration paid by
Purchasers shall be returned to them, and Purchasers shall
return to the Company any distributions paid to them by
the Company with respect to their Membership Interests.
(Id. at p. 2.) (emphasis added). The Admission Agreement further states that
“[e]xcept as expressly set forth in this Amendment, the Operating Agreement is
hereby ratified and reaffirmed.” (Id. at p. 1.)
8. As their respective $1 million contributions, Norment and Miklosko
caused the transfer of $355,000 of cash, the office condominiums, and certain other
1 The Court notes that the parties concede that the date “June 31, 2014” in the Admission
Agreement is in error and was intended to be “July 31, 2014.” (ECF No. 61.1 at p. 56.)
assets held by Cavalier. (ECF No. 61.7, ¶ 2; ECF No. 23.1, at pp. 13, 65–68, 84; ECF
No. 61.2, at pp. 28, 34–39; ECF No. 61.3, at pp. 295–301, Exs. 38 (Bank Statement)
and 39 (Wake County Real Estate Data Record).) It is undisputed that Norment
made the $1 million contribution to Advantage LLC required by the Subscription
Agreement. (ECF No. 61.2, at pp. 38–39.)
9. In his deposition, Rabon acknowledged that failure to obtain NCCOB
approval by July 31, 2014 would entitle Norment to the return of his capital:
Q Okay. So the operating agreement of
Advantage Lending provided that approval of
the admission of John and Jim as members of
Advantage Lending had to occur by July 31st,
2014 or the capital
A Yeah.
Q --should be returned to them. Is that
correct?
A That's what the paragraph says.
Q Okay. And that's what you agreed to,
correct?
A I signed it.
Q And you signed it with intent to agree to it,
correct?
A I wouldn't sign it otherwise.
(ECF No. 61.2, at p. 44.)
10. In order for Cavalier to transfer its mortgage lender license, the
Transaction had to be approved by the NCCOB. The SAFE Act provides that:
Licenses and registrations issued under this Article are not
assignable. Control of a licensee or registrant shall not be
acquired through a stock purchase, merger, or other device
without the prior written consent of the [NCCOB]. The
[NCCOB] shall not give written consent if the [NCCOB]
finds that any of the grounds for denial, revocation, or
suspension of a license or registration are applicable to the
acquiring person.
N.C.G.S. § 53-244.100(e).
11. Regulations adopted by the NCCOB under the Act further provide, in
relevant part:
(b) A change in the identity of a control person or any
material change in organizational structure shall be
considered a transfer or assignment of the license or
registration. A licensee or registrant may transfer a
license or registration without submission of an application
by providing the following to the Commissioner:
(1) the licensee or registrant gives notice to the
Commissioner at least 60 days in advance of the effective
date of the proposed change; and
(2) the Commissioner determines that permitting the
licensee or registrant to continue to operate under its
existing license or registration would not be inconsistent
with the purposes of the Act.
...
(d) The Commissioner shall waive or reduce the advance
notice requirement of Subparagraph (b)(1) of this Rule if
the Commissioner determines that:
(1) circumstances beyond the licensee or registrant's
control would make compliance unduly burdensome
to the licensee or registrant;
(2) consumers would not be harmed by such a waiver or
reduction of the advance notice requirement;
(3) the licensee or registrant has otherwise satisfied the
requirements of this Rule; and
(4) waiver of the requirement of Subparagraph (b)(1) is
in the public interest.
4 N.C. Admin Code .0202 (1978) (hereinafter, “the code”).
12. In addition to NCCOB’s approval, the parties also needed approval from
HUD/FHA 2 in order for Advantage LLC to take over that portion of Cavalier’s
mortgage lending business. (ECF No. 61.7, ¶ 5; ECF No. 67.1, ¶ 6.) The HUD/FHA
approval was not obtained until July 2015. (ECF No. 61.7, ¶ 5.)
13. Aldridge communicated with Sara Weed, director and counsel of the
NCCOB Non-Depository Entities Division, seeking NCCOB’s approval of the
Transaction. (Dep. of Aldridge, ECF No. 61.1 at pp. 60, 67–79, 119, 127, Ex. 15 (Letter
to NCCOB).) On May 6, 2014, Aldridge sent Weed a letter summarizing the nature
of the transaction. (ECF No. 61.1, at Ex. 15.) The letter stated, in relevant part, as
follows:
Due to the two companies being different types of legal
entities (LLC and corporation), there are limitations on
doing a formal merger. Therefore, the de facto merger will
be carried out by the contribution of certain assets to
Advantage by Mr. Miklosko and Mr. Norment in exchange
for ownership interest in Advantage. Upon completion of
that transaction, Mr. Rabon, Mr. Miklosko, and Mr.
Norment will each own a 33 1/3 percent membership
interest in Advantage.
After Mr. Miklosko and Mr. Norment become members of
Advantage, both companies will continue to operate
separately until Advantage is approved as an FHA lender.
Once that occurs, Cavalier will take the required steps to
2 The United States Department of Housing and Urban Development and the federal Fair
Housing Act.
wind down and cease operations. At that time, Mr.
Miklosko and Mr. Norment will apply to become qualified
individuals of Advantage.
From our conversation, I understand my client may be
required to give advance notice of the transaction to the
Commissioner of Banks. Due to urgent circumstances
related to completing the transactions, we would ask that
the Commissioner expedite this request for approval so the
transaction can be finalized as soon as possible. In the
alternative, we would request that the Commissioner
waive the advance notice requirements of 04 NCAC
03M.0202(b)(I) in that a 60-day waiting period would be
unduly burdensome. Consumers would not be harmed by
a waiver and/or reduction in the advance notice
requirement in that the entities will continue to operate
and all consumers will be properly serviced. Allowing the
matter to transfer immediately would effect a streamlining
process and give the public access to a stronger mortgage
lending source.
(Id. at p. 2.)
14. On May 28, 2014, Aldridge sent an email to Norment, Rabon, and
Miklosko stating the following:
I just got off the phone with Sara Weed. Everything is fine
with them. They understand and approve the transaction.
I will write to her a confirming letter. She said you have to
file an advance change notice with NMLS. 3 They will get
a copy of that, but that it is purely administrative and it
isn’t an approval process. I presume you guys understand
that aspect better than I do.
(ECF No. 23.2, Ex. 10 (Aldridge Email).)
15. It is undisputed that NCCOB did not issue any written document
stating that the Transaction was approved prior to July 31, 2014. (ECF No. 61.1, at
p. 60, 67–79; ECF No. 61.3, at pp. 91–92; ECF No. 61.2, at pp. 44–45.) It is also
3 The Nationwide Multistate Licensing System & Registry. (“NMLS”)
undisputed that Aldridge, Miklosko, and Rabon did not submit any additional notice
to NCCOB or the NMLS and did not follow-up to confirm that approval had been
obtained from NCCOB by July 31, 2014. (ECF No. 61.1, at pp. 60, 67–79; ECF No.
61.3, at pp. 91–92; ECF No. 61.2, at pp. 44– 45.) The NCCOB approved the transfer
of Cavalier’s license and issued a mortgage lender license to Advantage LLC on
October 27, 2014. (Mortgage Lender License, ECF No. 103.1; NCCOB State
License/Registration Status History for Advantage LLC, ECF No. 103.3.)4
16. Norment alleges that based on Aldridge’s May 28, 2014 email, he
believed that the “necessary approval from NCCOB had been obtained.” (ECF No.
61.7, ¶ 4.) Norment continued to work for Advantage LLC until March 31, 2016. (Id.
¶¶ 7, 14.) However, during 2014 and 2015, Norment claims that Rabon and Miklosko
began to exclude Norment from management of Advantage LLC, and that he became
increasingly concerned with the financial condition of Advantage LLC caused by what
he believed was mismanagement by Rabon and Miklosko. (Id., ¶¶ 5–9, 12.) Norment
alleges that during the same period he expressed concerns to Rabon and Miklosko
that “required approvals” and “compliance actions” related to the merger were not
being “obtained timely.” (Id., ¶ 5.)
17. Norment claims that he first learned in October 2016 that the NCCOB
had not provided written approval of his admission to membership in Advantage LLC
by July 31, 2014. (Id., ¶ 7.) Defendants vehemently dispute Norment’s claim,
4 The NCCOB’s approval of the Transaction permitted Advantage LLC to begin making
conventional mortgage loans under Advantage LLC’s, instead of Cavalier’s, authority.
Advantage LLC was not able to make HUD/FHA mortgage loans until approval was obtained
in July 2015.
contending that he was heavily involved in the merger process, that he was kept
informed of the approval process, and that he “clearly knew . . . the status of approvals
not having been obtained from NCCOB in July 2014.” (ECF No. 67.1, ¶¶ 3–7;
Affidavit of Miklosko, ECF No. 67.2, ¶¶ 34, 7–10.)
18. Norment and Miklosko continued to operate Cavalier during the time
the parties were seeking approvals for the merger. (ECF No. 61.7, ¶ 3; ECF No. 67.2,
¶¶ 12, 16.) During this period, Cavalier was under significant financial distress and
was being investigated by the NCCOB and HUD/FHA. (ECF No. 61.7, ¶¶ 6, 8; ECF
No. 67.2, ¶¶ 6–7, 11.) In July 2015 Advantage LLC took over all mortgage lending
processes for Cavalier and Advantage LLC. (ECF No. 67.2, ¶ 14.) Cavalier was
dissolved in July 2015. (Id., ¶ 14.)
II. PROCEDURAL BACKGROUND
19. Rabon and Miklosko initiated this lawsuit on May 28, 2019 by filing a
complaint against Norment. (ECF No. 3.) On July 25, 2019, the Court granted
Norment’s Motion to Add Counterclaim-Defendants pursuant to N.C.R. Civ. P. 13(h),
allowing Norment to add Advantage LLC, Cavalier, Steel Holdings, Inc., (“Steel”) and
Advantage Lending, a common law partnership as Counterclaim-Defendants
(hereinafter, Rabon, Miklosko, Advantage LLC, Cavalier, Steel, and Advantage
Lending, a common law partnership are referred to as “Counterclaim Defendants”).
(ECF No. 12.) On July 29, 2019, Norment filed his First Amended Answer and
Counterclaim Complaint reflecting this change. (ECF No. 13.) On September 11,
2019, Counterclaim Defendants filed their Amended Answer and Affirmative
Defenses. (ECF No. 17.)
20. On October 2, 2019, Norment filed his Second Amended Answer and
Counterclaim Complaint. (“Second Amended Counterclaim,” ECF No. 20, at pp. 5–
41.) In the Second Amended Counterclaim, Norment alleges claims for:
Conversion/Trespass to Chattels against Rabon, Miklosko, and Advantage LLC;
Breach of Contract against Rabon, Miklosko, and Advantage LLC; Action to Quiet
Title and for Legal and Equitable Relief as to Real Estate against Rabon, Miklosko,
and Advantage LLC; Breach of Contract-Unpaid Wages against Advantage LLC;
Quantum Meruit against Advantage LLC; Breach of Fiduciary Duty against
Miklosko and Cavalier; Breach of Fiduciary Duty for Constructive Trustees and of
Partners against Rabon and Miklosko; Breach of Fiduciary Duty in Management of
Partnership and Advantage LLC against Rabon and Miklosko; Constructive Fraud
against Rabon and Miklosko; Fraud/Misrepresentation against Miklosko, Rabon, and
Advantage LLC; Accounting against all Counterclaim-Defendants; Winding Up of
Cavalier; Receivership against Miklosko, Dissolution of Steel, Claim for Dividends
and Receivership against Miklosko and Steel; Dissolution of Partnership and
Receivership against Rabon and Miklosko; and Dissolution and Receivership against
Advantage LLC. (Id.)
21. On October 3, 2019, Counterclaim Defendants filed their Answer and
Affirmative Defenses to Norment’s Second Amended Complaint. (ECF No. 21.) In
response to Norment’s counterclaims, Advantage LLC pleaded, inter alia, an
affirmative defense of waiver.
22. On December 5, 2019, Rabon and Miklosko voluntarily dismissed their
claims against Norment without prejudice (ECF No. 33), leaving Norment’s
counterclaims against Counterclaim-Defendants as the only remaining claims in this
action.
23. On March 23, 2020 the Court issued an order disqualifying
Counterclaim Defendant’s counsel from representing Cavalier and Steel and striking
the pleadings filed on behalf of Cavalier and Steel. (Order on Norment’s Motion to
Strike Answers of Cavalier and Steel and to Disqualify Counsel, ECF No. 45.) No
new counsel ever made an appearance on behalf of Cavalier or Steel in this action.
24. The Court issued a notice realigning the parties and amending the case
caption in this matter to reflect that Norment is the Plaintiff and Counterclaim-
Defendants are Defendants. (Hereinafter, Rabon, Miklosko, Advantage, Cavalier,
Steel, and Advantage Lending, a common law partnership are collectively
“Defendants”) (Notice of Realignment of Parties and New Case Caption, ECF No. 75.)
25. On June 15, 2020, Norment filed his Motion for Partial Summary
Judgment Against Advantage LLC and a Brief in Support. (“Brief in Support,” ECF
No. 62.) On July 15, 2020, Advantage LLC filed its Brief in Opposition to Norment’s
Motion for Summary Judgment (“Response Brief,” ECF No. 68), and Norment filed a
Reply Brief on July 24, 2020. (“Reply Brief,” ECF No. 75.)
26. The Court held a hearing on the Motion for Summary Judgment on
October 13–14, 2020, at which the Court heard oral arguments from counsel. The
Motion for Summary Judgment is now ripe for disposition.
III. STANDARD OF REVIEW
27. “Summary judgment is appropriate ‘if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with affidavits, if any,
show that there is no genuine issue of material fact and that any party is entitled to
judgment as a matter of law.’” Variety Wholesalers, Inc. v. Salem Logistics Traffic
Servs., LLC, 365 N.C. 520, 523,
723 S.E.2d 744, 747 (2012) (quoting N.C.G.S. § 1A-1,
N.C. R. Civ. P. 56(c)). The moving party bears the burden of presenting evidence
which shows 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.,
193
N.C. App. 561, 563,
668 S.E.2d 349, 351 (2008). An issue is “material” if “resolution
of the issue is so essential that the party against whom it is resolved may not prevail.”
McNair v. Boyette,
282 N.C. 230, 235,
192 S.E.2d 457, 460 (1972). “A ‘genuine issue’
is one that can be maintained by substantial evidence.’” Dobson v. Harris,
352 N.C.
77, 83,
530 S.E.2d 829, 835 (2000).
28. “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, 139 N.C. App. 778, 784–85,
534 S.E.2d 660, 664 (2000). As recently reiterated by the North Carolina Court of
Appeals, the burden on the non-movant goes beyond merely producing some evidence
or a scintilla of evidence in support of its claims. Rather, if the movant meets this
burden, the nonmovant must take affirmative steps to set forth specific facts showing
the existence of a genuine issue of material fact. An adverse party may not rest upon
the mere allegations or denials of his pleading. Substantial evidence is such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion and
means more than a scintilla or a permissible inference. Khashman v. Khashman, No.
COA16-765,
2017 N.C. App. LEXIS 715, at *15 (N.C. Ct. App. Sept. 5, 2017) (citations
and internal quotation marks and modifiers omitted).
IV. ANALYSIS
29. Norment seeks summary judgment only as to his claims for (1) breach
of the Subscription Agreement and Admission Agreement (Second Amended
Counterclaim, ECF No. 20, ¶¶ 117–124), (2) an accounting of Advantage LLC,
Cavalier, and Steel (Id., ¶¶ 176–181), and (3) dissolution of Advantage Partnership
(Id., ¶¶ 203–11). 5 (ECF No. 60.) The Court begins its analysis by summarizing the
parties’ contentions on the Motion for Summary Judgment.
A. Norment’s Argument
30. Norment argues that, under the Agreements, his membership in
Advantage LLC was rendered null and void when NCCOB did not approve his
5 Norment alleges claims for dissolution of Steel, of Advantage LLC, and, alternatively, of
Advantage Partnership. (ECF No. 20, ¶¶ 195–214.) In his Brief in Support and Reply Brief,
Norment states that the Motion for Summary Judgment seeks judgment only on his claims
for an accounting and dissolution of Advantage Partnership. (ECF No. 62, at p. 21; ECF No.
82, at pp. 2, 11.)
admission to membership in Advantage LLC by July 31, 2014. (ECF No. 62, at pp.
1–2, 12–17.) Norment contends that such approval from NCCOB was required by
statute and regulation for him to become a member in Advantage LLC. (Id. at pp.
13–14.)6 Norment claims that he believed Aldridge’s email on May 28, 2014 meant
that the NCCOB had approved his admission to membership in Advantage LLC. (Id.
at p. 16.) Norment admits that he “was aware that other required approvals” needed
to implement the combination of Advantage LLC and Cavalier “had not been obtained
before July 31, 2014.” (Id. at p. 2.) However, Norment contends that he “did not
become aware until 2016 that approval of his admission as a member of Advantage
LLC had not been obtained.” (Id.) Norment argues that the failure to obtain approval
of his admission to membership required Advantage LLC to return his $1 million
capital investment, and the failure to do so is a breach of the Subscription Agreement
and Admission Agreement. (Id. at pp. 17–19.)
31. Norment contends that since his membership in Advantage LLC was
rendered null and void, he never became a member of Advantage LLC. Norment
6 The Court believes Norment’s claim that the NCCOB had would issue an approval of
Norment’s admission to membership with Advantage LLC is something of a “red herring.”
The SAFE Act provides that “[c]ontrol of a licensee . . . shall not be acquired through a stock
purchase, merger, or other device without the prior written consent of the [NCCOB].”
N.C.G.S. § 53-244.100(e). The plain language of the statute requires the NCCOB’s consent
to a transaction that will result in the transfer of control of a mortgage license. There is
simply no reading of the Act and its implementing regulations that suggests that when
transfer is accomplished through a transaction involving an LLC, the NCCOB must issue a
written approval of admissions to membership in a limited liability company separate from
approval of transfer of control of the license. To the extent the Admission Agreement requires
NCCOB’s approval of Norment and Miklosko’s admission to Advantage LLC, there is, at a
minimum, a fact dispute over whether Norment reasonably believed that written approval of
his admission was something different than consent to the transaction by NCCOB.
argues that after July 31, 2014, he, Rabon, and Miklosko conducted business as a
common law partnership. (Id. at pp. 19–20.) Norment seeks dissolution and an
accounting of the common law partnership.
B. Advantage LLC’s Argument
32. On the other hand, Advantage LLC contends that the approval
contemplated by the Agreements was the NCCOB’s consent to the transfer of
“control” over Cavalier’s mortgage lending license to Advantage LLC and Rabon. See
N.C.G.S. § 53-244.100(e) (“Control of a licensee or registrant shall not be acquired
through a stock purchase, merger, or other device without the prior written consent
of the Commissioner.”). Advantage LLC concedes that the NCCOB did not consent
to, or approve, the Transaction by July 31, 2014. However, Advantage LLC argues
that the evidence establishes Norment was fully aware that approval had not been
obtained by July 31, 2014 and waived any breach of the Agreements by continuing to
work towards completion of the Transaction until March 2016, thus failing to exercise
his right to claim return of his investment. (ECF No. 68, passim.) Advantage LLC
contends that Norment became a member of Advantage LLC upon the NCCOB’s
approval of the Transaction in October 2014. (Id. at pp. 14–16.) Advantage LLC
argues that Norment’s claim that he, Rabon, and Miklosko functioned as a common
law partnership after July 31, 2014 is not supported by the facts or law. (Id. at p. 25.)
33. Advantage LLC further argues that Norment “abandoned [Advantage
LLC] to pursue other interests” and has not established grounds for judicial
dissolution of Advantage LLC. (Id. at pp. 22–24.)
C. Breach of Contract
34. Since the claims for accounting and dissolution depend on resolutions of
issues arising under the breach of contract claim, the Court first addresses that claim.
35. In North Carolina, a party asserting breach of contract must show “(1)
existence of a valid contract; and (2) breach of the terms of that contract.” Cater v.
Barker, 172 N.C. App. 441, 445,
617 S.E.2d 113, 116 (2005), citing Poor v. Hill,
138
N.C. App. 19, 26,
530 S.E.2d 838, 843 (2000). The well-settled elements of a valid
contract are offer, acceptance, consideration, and mutuality of assent to the contract's
essential terms. Snyder v. Freeman,
300 N.C. 204, 218,
266 S.E.2d 593, 602 (1980)
(“The essence of any contract is the mutual assent of both parties to the terms of the
agreement so as to establish a meeting of the minds.”). “In the obligations assumed
by a party to a contract is found his duty, and his failure to comply with the duty
constitutes the breach.” Sale v. Highway Comm'n,
242 N.C. 612, 619,
89 S.E.2d 290,
296 (1955). In construing a contract, the courts are to give full effect to each
unambiguous contractual provision. Singleton v. Haywood Elec. Membership. Corp.,
357 N.C. 623, 629,
588 S.E.2d 871, 875 (2003) (holding that “various terms of the
[contract] are to be harmoniously construed, and if possible, every word and every
provision is to be given effect”).
36. The parties do not dispute that: (a) the Agreements are valid contracts
executed between Norment, Miklosko, Rabon, and Advantage LLC; (b) the Admission
Agreement provided that it would be “null and void” if the NCCOB “has not approved
the admission of [Norment and Miklosko] by July 31, 2014” and the Subscription
Agreement provided that it “shall be null and void” if NCCOB did not approve the
“transaction by July 31, 2014”; (c) the NCCOB did not approve the Transaction until
October 27, 2014; (d) the Agreements provided that if approval from the NCCOB was
not obtained by July 31, 2014, Advantage LLC “shall” return the contributions paid
by Norment and Miklosko; and, (e) Advantage LLC did not return Norment’s
contribution.
37. While these undisputed facts would establish a breach of the
Agreements, Advantage LLC argues that Norment waived his rights by continuing
to work with Rabon and Miklosko, and on behalf of Advantage LLC, toward
completing the Transaction after July 31, 2014, and up until March 2016.
38. It is well settled in North Carolina that a “party may waive a
contractual right by any intentional and voluntary relinquishment.” McNally v.
Allstate Ins. Co., 142 N.C. App. 680, 683,
544 S.E.2d 807, 809-10 (2001) (citation
omitted). Advantage LLC has the burden of proof on its waiver defense. Rose v.
Vulcan Materials Co.,
282 N.C. 643, 664,
194 S.E.2d 521, 535 (1973).
39. “The essential elements of waiver are (1) the existence, at the time of
the alleged waiver, of a right, advantage or benefit; (2) the knowledge, actual or
constructive, of the existence thereof; and (3) an intention to relinquish such right,
advantage or benefit.” Fetner v. Granite Works, 251 N.C. 296, 302,
111 S.E.2d 324,
328 (1959) (citation omitted). Furthermore,
a waiver is sometimes defined to be an intentional
relinquishment of a known right. The act must be
voluntary and must indicate an intention or election
to dispense with something of value or to forego some
advantage which the party waiving it might at his option
have insisted upon. The waiver of an agreement or of a
stipulation or condition in a contract may be expressed or
may arise from the acts and conduct of the party which
would naturally and properly give rise to an inference that
the party intended to waive the agreement. Where a
person with full knowledge all the essential facts dispenses
with the performance of something which he has the right
to exact, he therefore waives his rights to later insist upon
a performance. A person may expressly dispense with the
right by a declaration to that effect, or he may do so with
the same result by conduct which naturally and justly
leads the other party to believe that he has so dispensed
with the right.
Guerry v. Trust Co., 234 N.C. 644, 648,
68 S.E.2d 272, 275 (1951).
40. “The question of waiver is generally one of intention, which is said to lie
at the foundation of the doctrine. It may sometimes be declared as matter of law, but
is usually an inference of fact for the jury.” Brittain v. Taylor, 168 N.C. 271, 276,
84
S.E. 280, 282 (1915).
41. Advantage LLC argues that the record establishes that Norment knew
that the NCCOB did not approve the Transaction by July 31, 2014, waived the
approval deadline in the Agreements and, therefore, cannot pursue a claim for breach
of contract. (ECF No. 68, at pp. 18–22.) Norment argues, for several reasons, that
he either could not have waived his rights as a matter of law, or that Advantage LLC
has failed to establish a fact dispute as to the elements of a waiver defense. (ECF No.
62, at pp. 6–10; ECF No. 82, at pp. 16–17, 19–20.) The Court considered each of
Norment’s arguments but finds them to be without merit.
42. The Court has thoroughly reviewed the evidence in the record and finds
that substantial issues of genuine fact exist as to whether Norment waived the
requirement that NCCOB approval be obtained by July 31, 2014, including: whether
Norment knew or should have known that the NCCOB had not approved the
Transaction by July 31, 2014; whether his conduct “naturally and justly” led
Advantage LLC to believe that Norment was waiving the approval deadline, Guerry,
234 N.C. at 648,
68 S.E.2d at 275; and whether Norment intended to waive the
approval deadline. The facts and inferences arising from those facts should be
determined by a jury. Brittain, 168 N.C. at 276,
84 S.E. at 282. Therefore, to the
extent it seeks summary judgment as to the claim for breach of contract, the Motion
for Summary Judgment should be DENIED.
43. Since the Court concludes that summary judgment on Norment’s claim
for breach of the Agreements must be denied, it also concludes that summary
judgment cannot be granted on the current record regarding whether Norment is
entitled to a return of his investment in Advantage LLC, whether Norment is a
member of Advantage LLC, or whether his work with Rabon, Norment, and
Advantage LLC created a common-law partnership.
D. Dissolution, Accounting, and Receivership
44. Norment seeks summary judgment only as to his claims for dissolution,
accounting, and appointment of a receiver premised on the contention that he, Rabon,
and Miklosko operated as a common law partnership after July 31, 2014. (ECF No.
82, at pp. 11–12.) Since the Court has concluded that it cannot grant summary
judgment on the issue of whether a common law partnership was formed, it also
cannot grant summary judgment on Norment’s claims for dissolution, accounting,
and appointment of a receiver premised on the contention that he, Rabon, and
Miklosko formed a common law partnership. Accordingly, to the extent it seeks
summary judgment as to these claims, the Motion for Summary Judgment should be
DENIED.
V. Conclusion
THEREFORE, IT IS ORDERED that the Motion for Summary Judgment is
DENIED.
SO ORDERED, this the 5th day of January, 2021.
/s/ Gregory P. McGuire
Gregory P. McGuire
Special Superior Court Judge for
Complex Business Cases
