Opinion
No. 07 CVS 59
February 24, 2011
Ward Smith, PA by A. Charles Ellis, Esq. and E. Bradley Evans, Esq. for Plaintiff EHP Land Co., Inc. Graebe Hanna Welborn, PLLC by Christopher T. Graebe, Esq. for Defendants Virginia W. Bosher, Robert M. Bosher, Jr., Jennifer L. Bosher, Phil Upton and Cindy W. Bosher, individually and in her capacity as Executrix of the Estate of Robert M. Bosher. Poyner Spruill, LLP by David Dreifus, Esq. and John W. O'Hale, Esq. for Defendants Christina Bosher Herz and Carolyn Bosher Maloney. Christina P. Maloney, pro se. Virginia M. Maloney, pro se. Clifton H.W. Maloney, pro se. John P. Dooley, pro se. Michael C. Dooley, pro se. Sarah E. Herz, pro se. Andrew T. Herz, pro se. Arthur R. Robb, Jr. and Christine Bosher, as Co-Executors of the Estate of Ralph G. Bosher, Deceased, pro se. HPB Enterprises, a North Carolina General Partnership.
THIS CAUSE, designated a mandatory complex business case by Order of the Chief Justice of the North Carolina Supreme Court, dated April 10, 2007, pursuant to N.C. Gen. Stat. § 7A-45.4(b) (hereinafter, references to the North Carolina General Statutes will be to "G.S."); and assigned to the undersigned Chief Special Superior Court Judge for Complex Business Cases, is before the court upon Plaintiff's Motion for Summary Judgment on the Amount Owed Plaintiff by Defendants Pursuant to the Court's October 5, 2010 Order (the "Motion"), under Rule 56, North Carolina Rules of Civil Procedure ("Rule(s)"); and THE COURT, after considering the arguments, briefs, affidavits, other submissions of counsel and appropriate matters of record, as discussed infra, CONCLUDES that the Plaintiff's Motion should be GRANTED.
OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT
I. PROCEDURAL BACKGROUND
This civil action involves disputes between the parties arising from the acquisition, ownership and development of land in Perquimans County, North Carolina, for a resort residential, golf and marina community known as Albemarle Plantation. At times material, Albemarle Plantation was owned by Defendant HPB Enterprises ("HPB"), which is a North Carolina General Partnership.
On January 11, 2008, the court entered a Consent Order for Appointment of Manager, pursuant to which N. Hunter Wyche, Esq. was appointed manager (the "Manager") of HPB. On May 12, 2008, the Manager filed, under seal, a motion seeking court approval of sale of Albemarle Plantation to a third party. By Order dated June 12, 2008, the court allowed this motion and authorized the sale of Albemarle Plantation. The property ultimately was sold. The sale is not relevant to the instant issues.
On April 2, 2007, Plaintiff EHP Land Co., Inc. ("EHP") filed its Complaint in this matter. The Complaint alleges seven claims for relief ("Claim(s)"): First Claim for Relief (Breach of Contract — General Partnership Agreement); Second Claim for Relief (Dissolution — General Partnership Agreement); Third Claim for Relief (Dissolution — General Partnership Agreement); Fourth Claim for Relief (Dissolution — North Carolina Uniform Partnership Act); Fifth Claim for Relief (Dissolution — General Partnership Agreement/Assignment); Sixth Claim for Relief (Breach of Contract — Phase II Contract) and Seventh Claim for Relief (Declaratory Judgment — N.C. Gen. Stat. § 1-253).
This Claim is stated in the alternative to the Second Claim.
Defendants have answered timely and raised certain affirmative defenses and counterclaims, and there has been extensive motion practice by the various parties to this action.
The counterclaiming Defendants subsequently dismissed, without prejudice, their Second, Third, Fourth and Fifth Counterclaims.
On August 29, 2007, EHP filed a Motion for Judgment on the Pleadings, seeking dismissal of the answering Defendants' Counterclaims.
On December 10, 2007, Defendants voluntarily dismissed all counterclaims except their claim for declaratory judgment.
On August 30, 2007, the Defendants filed a Motion to Dismiss all of EHP's claims except its Seventh Claim for declaratory judgment pursuant to Rule 12(b)(6).
On June 26, 2008, EHP filed a Motion for Summary Judgment on its Fourth Claim for dissolution of HPB and its Seventh Claim for declaratory judgment as to the meaning of the term "inventory" as used in a Partnership Agreement at issue in this matter.
On January 12, 2009, the Defendants also filed a Motion for Summary Judgment as to the meaning of the term "inventory" as used in Section 13 of the Partnership Agreement.
On October 5, 2010, the court entered an Order granting EHP's Motion for Summary Judgment with regard to paragraphs 132, 138 and 139 of its Seventh Claim. The court declared that the definition of the word "inventory" for purposes of Sections 11 and 13 of the Partnership Agreement shall include unsold developed lots and condominiums in Phase I and the undeveloped land in Phase II of Albemarle Plantation. With regard to the remaining allegations of EHP's Seventh Claim, EHP's Motion for Summary Judgment was denied. The court denied EHP's Motion for Summary Judgment with regard to its Fourth Claim and its Motion for Judgment on the Pleadings as to Defendants' Counterclaims. The court also denied the Defendants' Motion to Dismiss Plaintiffs' First through Sixth Claims. The court granted the Defendants' Motion for Summary Judgment with regard to Plaintiffs' Second, Third, Fourth and Fifth Claims, and denied the Defendants' Motion for Summary Judgment with regard to Plaintiff's First, Sixth and Seventh Claims.
On November 4, 2010, Defendants filed a Motion for Reconsideration and Clarification of the Court's Order of October 5, 2010.
On November 4, 2010, the court indicated in open court that this motion would be denied.
On November 10, 2010, EHP filed the Motion.
The court has heard oral argument on the Motion, and it is ripe for determination.
Unless otherwise indicated herein, the material facts reflected in paragraphs 13 through 33, 35, 56, 57, 59 and 68 of this Order exist, are undisputed and are pertinent to the issues raised by the Motion.
It is not proper for a trial court to make findings of fact in determining a motion for summary judgment under Rule 56. However, it is appropriate for a Rule 56 order to reflect material facts that the court concludes exist and are not disputed, and which support the legal conclusions with regard to summary judgment. Hyde Ins. Agency v. Dixie Leasing, 26 N.C. App. 138, 142 (1975).
II. FACTUAL BACKGROUND
On or about July 22, 1987, Nathan S. Hurdle ("Hurdle"); EHP; Ralph George Bosher ("Ralph Bosher") and Ralph Bosher's children, Robert M. Bosher ("Bo Bosher"), Virginia W. Bosher ("Ginny Bosher"), Carolyn Bosher Maloney ("Carolyn Bosher") and Christina Bosher Herz ("Christina Bosher"), executed a written general partnership agreement (the "Partnership Agreement"), by which they (collectively, the "Partners") formed and intended to operate HPB as a North Carolina general partnership (the "Partnership").
Now deceased. Cindy W. Bosher has been substituted as a representative party in her capacity as Executrix of the Estate of Robert M.("Bo") Bosher. For purposes of this Opinion and Order, the Estate of Robert M. Bosher will be rerferred to as "Bo Bosher."
For purposes of the Motion, Bo Bosher, Ginny Bosher, Carolyn Bosher and Christina Bosher also may be referred to collectively as the "Bosher Partners".
Am. Countercls. ¶ 18.
The Partnership Agreement was amended pursuant to written amendments dated January 8, 1990; March 27, 1991 and May 18, 1993.
Id. at ¶ 20.
At the time of execution of the Partnership Agreement in 1987, the primary asset of the Partnership consisted of approximately 750 acres of undeveloped land in Perquimans County. Over the years that followed, HPB successfully developed Albemarle Plantation.
Id. at ¶¶ 18-19.
In 1991, Hurdle withdrew from HPB and his interest was divided among the remaining partners. In May 2001, Ralph Bosher assigned his remaining ownership interest in HPB to his children and to some extended family members.
Id. at ¶ 21.
Id. at ¶¶ 23-24.
As a result of Ralph Bosher's poor health beginning in the late 1990's, EHP took over primary management of the Partnership, including the marketing and sale of Albemarle Plantation's lots, condominiums and single family homes.
Id. at ¶¶ 25-26.
On October 25, 2005, EHP gave HPB notice of its intent to withdraw from the Partnership ("Notice of Withdrawal"), effective December 31, 2005. At that time, EHP had a twenty-five (25) percent ownership interest in HPB.
Id. at ¶ 27.
Under Section 11 of the Partnership Agreement, upon withdrawal of a partner, the remaining partners had the option either to terminate the Partnership or purchase the withdrawing partner's interest in the Partnership.
Compl. Ex. A.
By letter dated October 27, 2005, the Bosher Partners accepted EHP's withdrawal and elected to purchase EHP's Partnership interest and to continue the Partnership as a going concern.
Am. Countercls. ¶¶ 28-29.
Section 11 of the Partnership Agreement further provides that "[i]f the remaining partners (or any of them) elect to purchase the withdrawing partner's interest, the value of the interest of a withdrawing partner shall be as stated in Section 13 herein and payment of the amount due to the withdrawing partner shall be made in cash in equal quarterly installments . . . with interest at the rate of 9% per annum on the unpaid balance"
Compl. Ex. A.
Section 13 of the Partnership Agreement provides that the value of a withdrawing partner's interest shall be:
the book value thereof, as it appears upon the books and records of the partnership as of the close of business on the effective date of withdrawal, (with the date of such evaluation hereinafter referred to as "the effective date"), as adjusted by substituting the fair market value as of such date, in place of book value, of any inventory owned by the partnership. Such book value, adjusted as herein provided, shall be computed by the certified public accountant regularly employed by the partnership, in accordance with the accounting practices regularly followed by the partnership, and in cases not covered by such practices in accordance with standard accounting practice. . . . In making the adjustment for the fair market value of inventory, the accountant shall rely on and use the written appraisal of an appraiser selected by the accountant for that purpose, with the approval of and at the expense of the partnership.
Id.
(emphasis added).
The term "inventory" is not defined in the Partnership Agreement.
Id.
Pursuant to Section 13 of the Partnership Agreement, the parties retained F. Bruce Sauter to appraise the value of the real property of the Partnership as of the effective date of EHP's withdrawal, December 31, 2005.
Id.
Sauter began the appraisal process in or about February 2006, but a dispute subsequently arose between the parties as to the definition of the term "inventory" in the context of Section 13 of the Partnership Agreement and what Sauter was to appraise pursuant to that provision. That dispute ultimately led to this civil action.
Am. Countercls. ¶ 34.
On or about March 30, 2006, EHP and the Bosher Partners entered into a Forbearance Agreement. Pursuant to the Forbearance Agreement, EHP agreed to forbear from initiating legal action against the Bosher Partners for a period of time in return for the Bosher Partners' agreement to make quarterly payments of $500,000 to EHP.
November 8, 2010 Ellis Aff. Ex. 1.
Id.
The Forbearance Agreement also states that EHP and the Bosher Partners agree to Sauter as the appraiser and authorize him to provide separate appraisal reports for (a) the vacant lots in Phase I of Albemarle Plantation, (b) the undeveloped land referred to as Phase II and (c) the development amenities.
Id.
Paragraph 3 of the Forbearance Agreement provides that "Sauter's judgment as to the fair market value of the HPB Properties which are subsequently determined or agreed to be `inventory' as of the Appraisal Date shall be binding on the parties."
Id.
At times material, the HPB property comprising the entirety of Albemarle Plantation consisted of two phases: (a) Phase I, the property south of Holiday Island Road, including a golf course, pools, a marina, a fitness center, a sewer and utility plant, condominiums and land developed and actually offered for sale as residential lots; and (b) Phase II, undeveloped land north of Holiday Island Road, which was contemplated ultimately to be developed and offered for sale as residential lots.
There has been no forecast of evidence that the Phase II land was contemplated to be used for any other purposes.
Sauter appraised the fair market value of the Phase I property, as of December 31, 2005, at $13,341,400, and the fair market value of the Phase II property at $12,300,000.
February 9, 2009 Perry Aff. Exs. 3, 4.
Pursuant to Section 13 of the Partnership Agreement, Art Robb, HPB's regularly employed accountant, prepared an Adjusted Fair Market Balance Sheet as of December 31, 2005 (the "2005 Balance Sheet"), which reflects the book value of HPB's assets and the fair market value of those assets, based on Sauter's appraisals.
November 10, 2010 Crisp Aff. Ex. A.
According to the 2005 Balance Sheet, the total book value of HPB's assets as of December 31, 2005, net of all liabilities, was $8,906,883.07. The fair market value of the unsold developed lots and condominiums in Phase I and the undeveloped land in Phase II (what this court defined as "inventory") was $25,704,342.67, and the total book value of such "inventory" was $6,726,227.96.
Id.
Id.
After execution of the Forbearance Agreement, with the exception of Defendants Ginny Bosher and Bo Bosher (the "Bosher Defendants"), EHP settled its differences relative to this civil action with the remaining Bosher Partners. As a result of this settlement, the two Bosher Defendants are the only remaining parties who have disputed issues with Plaintiff EHP, and their collective liability to EHP is one-half of such amount as ultimately is determined to represent the value of EHP's prior twenty-five (25) percent ownership in HPB.
The Bosher Defendants now dispute the accuracy of both Sauter's appraisals and Robb's 2005 Balance Sheet.
III. PLAINTIFF'S MOTION — THE PARTIES' CONTENTIONS
EHP argues there exist no more remaining issues of fact with respect to the dollar amount of EHP's partnership interest because the only disputed issue with regard to the value of EHP's interest as a withdrawing partner, the meaning of the word "inventory" under the Partnership Agreement, has been resolved by the court's October 5, 2010 Order. EHP contends that the fair market value of the undeveloped lots and condominiums in Phase I and the undeveloped land in Phase II, property the court defined as "inventory," has been established by Sauter's appraisals, which the parties agreed would be final and binding.
Pl's. Mem. Supp. Mot. Summ. J. 11.
Id. 11-13.
EHP retained J. Marion Crisp, CPA to calculate the amount which the Bosher Defendants owe EHP for its twenty-five (25) percent share of HPB based on the formula contained in Section 13 of the Partnership Agreement, the 2005 Balance Sheet (which incorporates Sauter's appraisals) and the definition of "inventory" set forth in the court's October 5, 2010 Order. After reviewing all of the above documents, Crisp determined that the amount owed to EHP for its interest in HPB is $6,971,249.45, and the Bosher Defendants are responsible for half of this amount, or $3,485,624.72.
Id. 14-16.
EHP submits the Partnership Agreement, the Forbearance Agreement and Sauter's Affidavits in support of its contention that the Bosher Defendants are bound by Sauter's appraisals. EHP contends that the parties agreed on the selection of Sauter and agreed that his appraisals would be final and binding in determining the value of EHP's interest. EHP submits the 2005 Balance Sheet and Robb's affidavits in support of its contention that the 2005 Balance Sheet is correct and valid.
Id. 6-7.
Defendants on the other hand argue that while they agreed to Sauter being designated as the appraiser and to being bound by the appraisals, they did not agree to appraisals that contained math, technical or computation errors. Specifically, the Defendants argue that Sauter mistakenly used a five (5) percent quarterly rate of appreciation instead of a five (5) percent annual rate of appreciation in performing the appraisals. Defendants argue that this resulted in a compounded annual rate of appreciation of approximately twenty-one (21) percent and an appraisal of approximately $3,000,000 more than the actual fair market value. Defendants contend this computation error creates a genuine issue of material fact as to the fair market value of the inventory, and therefore, as to the amount of damages owed to EHP.
Defs.' Mem. Resp. Pl.'s Mot. Summ. J. 3.
Id.
Id.
Id. 3-4.
In support of their contention, Defendants submit the affidavit of Robert Birch, a certified real estate appraiser. In his affidavit, Birch states that after reviewing Sauter's appraisal reports and deposition and talking with Phil Upton, he concluded that Sauter erred in using a five (5) percent per quarter appreciation rate, and this error resulted in a fair market value for the HPB approximately $3,000,000 more than the actual value.
December 3, 2010 Birch Aff.
Defendants also argue that Robb made several errors in creating the 2005 Balance Sheet including recording the wrong value for cash as of December 31, 2005, which was assigned a value of $2,939,355.36. Defendants contend that an incorrect value recorded for cash as of December 31, 2005, could reduce the value assigned for the total current assets on the 2005 Balance Sheet. Defendants argue that this potential error in the cash value used in the calculations creates a genuine issue of material fact as to the amount of damages owed to EHP.
Defs.' Mem. Resp. Pl.'s Mot. Summ. J. 4.
Id.
Id.
To support this contention, Defendants submit the Affidavit of Brenda Knapp, CPA. In her Affidavit, Knapp states that the "Notes and loans receivables" entry on the 2005 Balance Sheet "might" include three general ledger accounts that should not have been included. Knapp also alleges that two other accounts receivable, one totaling $6,219.97 and the other totaling $90,000.00, should be eliminated from the 2005 Balance Sheet. Knapp argues that if these accounts receivables are removed from the 2005 Balance Sheet the total assets of HPB will be reduced, and this creates a genuine issue of material fact as to the amount of damages owed to EHP.
These intercompany receivables include the following general ledger accounts: # 1110-130 A/R Utility Co. ($250,331.93), # 1110-140 A/R Oceanside ($69,155.56) and # 1110-160 A/R APPOA ($88,030.60). December 3, 2010 Knapp Aff.
Id.
Id.
Knapp goes on to state that any accounts receivable that were recorded and outstanding on December 31, 2005, but not actually collected in 2006 and beyond, should be written off as bad debts and not included in the 2005 Balance Sheet.
Id.
Knapp also states that she believes there may be an incorrect value recorded on the 2005 Balance Sheet for cash, which was assigned a value of $2,939,355.36. Defendants argue this error could reduce the value for the total current assets on the 2005 Balance Sheet and create a genuine issue of material fact as to the amount of damages owed to EHP.
Defendants also argue that Robb admittedly did not perform the valuation of a withdrawing partner's interest. Defendants contend that because the calculation required by the Partnership Agreement has not been made, summary judgment is not appropriate.
Defs.' Notice of Filing of Art Robb's Admission That He Has Not Prepared a Valuation of EHP's Interest in HPB Enterprises.
Id.
In response to the Defendants' newly submitted affidavits and arguments, EHP contends that the court should not consider these Affidavits because at the time of the original Cross-Motions for Summary Judgment, filed in 2008 and 2009, the court had before it all of the evidence necessary to render a final judgment on the amounts owed to EHP. EHP also contends that the Defendants' purpose in submitting these Affidavits is to further delay the entry of final judgment against them. EHP argues that even if the court deems these Affidavits to be properly submitted, they do not raise genuine issues of material fact as to the amount of EHP's interest in HPB.
EHP contends that it properly submitted Elwood Perry's Affidavit, dated November 8, 2010, because it had received additional payments from the Bosher Defendants pursuant to the Forbearance Agreement between the filing of the parties' original Motions for Summary Judgment and the court's October 5, 2010 Order. EHP also argues that it was forced to offer the Affidavits of Charles Ellis and Bruce Sauter concerning the parties' agreement that Sauter's appraisal would be final and binding as to the fair market value of HPB's assets because the Defendants refused to confirm, despite multiple requests, that they would continue to honor the Forbearance Agreement. The court, in its discretion, considers the Affidavits and other filings of the Defendants submitted in response to the Plaintiff's Motion. The court, in its discretion, also considers the Affidavits of Charles Ellis, Bruce Sauter and Elwood Perry submitted by EHP on November 10, 2010.
In response to Birch's affidavit, EHP submits Sauter's affidavit, dated December 8, 2010, which states he intentionally used a five (5) percent per quarter appreciation rate based on the real estate market at the time and the level of interest in Albemarle Plantation. EHP argues that the Defendants are bound by this rate, regardless of whether they agree with Sauter's judgment in using the per quarter appreciation rate based on the real estate market conditions at the time.
December 4, 2010 Sauter Aff.
In response to the Defendants' contention that Robb's 2005 Balance Sheet contains several errors, EHP argues that Knapp's affidavit fails to create an issue of material fact because it is unreasonably speculative.
Pl's. Reply Br. Supp. Mot. Summ. J. 6.
EHP submits Robb's affidavit, dated December 10, 2010, in response to Knapp's allegations that the 2005 Balance Sheet contains computation errors. Robb states that the 2005 Balance Sheet is correct and accurate in all respects and that the receivables included in the Balance Sheet are actual and valid receivables as of December 31, 2005. In response to the allegation that receivables not actually collected in 2006 should not be included on the Balance Sheet, Robb asserts that the Partnership Agreement provides the book value is to be computed "as it appears upon the books and records of the partnership as of the close of business on the effective date of withdrawal." Robb states that the value recorded for cash on the 2005 Balance Sheet is accurate based on the cash amounts reconciled by the Partnership's bookkeeper.
December 10, 2010 Robb Aff.
Id.
Id.
EHP also submits the Affidavit of Robb dated December 30, 2010, in response to the Defendants' argument that Robb did not actually perform the valuation of EHP's interest as a withdrawing partner. Robb states all the information necessary to determine the value of EHP's interest in the Partnership is incorporated in the 2005 Balance Sheet, and that because of the dispute over the meaning of the term "inventory," he did not perform the valuation in 2006. Now that the meaning of the term inventory has been resolved, Robb states that the value of EHP's interest as withdrawing partner is $6,971,249.45.
December 30, 2010 Robb Aff.
Id.
A. DISCUSSION
The sole issue is whether the court can determine the dollar amount the Bosher Defendants owe EHP for its interest in HPB as a matter of law.
Under Rule 56(c), summary judgment is to be rendered "forthwith" if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that upon the forecast of evidence there exists no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law. Grayson v. High Point Dev. Ltd. P'ship, 175 N.C. App. 786, 788 (2006). The court views the evidence in the light most favorable to the nonmoving party. Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733 (1998).
"A party with the burden of proof may be entitled to summary judgment where he relies on the uncontradicted affidavit of a witness to establish that a genuine issue does not exist as to a material fact." Miller Mach. Co. v. Buie, 58 N.C. App. 300, 305 (1982).
Once the moving party has made and supported its motion for summary judgment, Rule 56(e) provides that the burden is then shifted to the non-moving party to introduce evidence setting forth specific facts showing that there is a genuine issue for trial. Ruff v. Reeves Bros., Inc., 122 N.C. App. 221, 224-25 (1996) ("At this time, the non-movant must come forward with a forecast of his own evidence.").
An issue is only material if "the facts alleged would constitute a legal defense, or would affect the result of the action, or if its resolution would prevent the party against whom it is resolved from prevailing in the action." Id. at 225.
The court's inquiry is two part. First, the court must determine whether EHP has supported its Motion with sufficient evidence. Second, if EHP has met its burden, the court must decide whether the Defendants have introduced evidence setting forth specific facts showing that there exists a genuine issue of fact as to the amount EHP is due under the Partnership Agreement.
EHP submits the Partnership Agreement; the 2005 Balance Sheet; Sauter's appraisals as incorporated in the Balance Sheet; the Forbearance Agreement and the Affidavits of Crisp, Perry, Robb and Sauter in support of its Motion.
It is undisputed that pursuant to Section 13 of the Partnership Agreement, the value of a withdrawing partner's interest is the book value of HPB, as it appears on the books and records of the partnership as of the close of business on the effective date of withdrawal, as adjusted by substituting the fair market value as of that date of any inventory owned by the partnership. The only contested issue regarding the formula set forth in Section 13, the definition of the term "inventory," was resolved by the court in its October 5, 2010 Order. The court determined that inventory includes unsold developed lots and condominiums in Phase I and undeveloped land in Phase II of Albemarle Plantation.
Robb computed the book value of all HPB assets, as directed in Section 13 of the Partnership Agreement, in the 2005 Balance Sheet. Included within the 2005 Balance Sheet are Sauter's appraisals.
All of the elements of the formula set forth in Section 13 of the Partnership Agreement have been determined. EHP retained Crisp to perform the necessary calculations under the formula set forth in Section 13 of the Partnership Agreement to determine a withdrawing partner's interest.
Using the Partnership Agreement, the 2005 Balance Sheet and the court's October 5, 2010 Order, Crisp determined that the amount which the Bosher Defendants owe EHP is calculated by substituting the fair market value of the Phase I and Phase II property (as appraised by Sauter) for the book value of that property and then adding that substituted amount to the total book value of the Partnership assets, as set forth on the 2005 Balance Sheet. In performing this calculation, Crisp determined that the amount owed to EHP for its twenty five (25) percent interest in HPB is $6,971,249.45, and the Bosher Defendants are responsible for half of this amount, or $3,485,624.72.
November 10, 2010 Crisp Aff.
Id.
The court has before it evidence sufficient to calculate the amount owed to EHP for its interest in the Partnership. Accordingly, the court CONCLUDES that EHP has set forth sufficient support for its Motion.
Having concluded that EHP has sufficiently supported its Motion, the court now must decide whether the Defendants have introduced sufficient evidence in opposition to EHP's Motion to show that there exist genuine issues of material fact as to the amount owed EHP for its interest in the Partnership.
Defendants submit excerpts from Sauter's deposition, an e-mail from Robb stating that he did not prepare a valuation of EHP's interest in HPB and the Affidavits of Birch and Knapp in support of their opposition to EHP's Motion. Defendants argue these submissions raise issues of material fact.
Defendants primarily rely on Miller Machine Co. in their assertion that the Affidavits of Birch and Knapp raise genuine issues of fact about the accuracy of Sauter's appraisals and the 2005 Balance Sheet. In Miller Machine Co., the parties disagreed about the value of stock that was the subject of a stock purchase agreement. 58 N.C. App. at 304. The stock purchase agreement provided that the book value of the corporation, upon which the price of the stock is based, at the designated date shall be determined by a certified public accountant in accordance with sound accounting practices. Id. Both parties moved for summary judgment. Id.
Defs.' Mem. Resp. Pl.'s Mot. Summ. J. 5.
To show that there did not exist a genuine issue of fact as to book value of the stock, Plaintiff Miller Machine submitted the affidavits of two certified public accountants who calculated the book value at issue. Id. In response, the defendant submitted affidavits, including one by a then-current Miller Machine employee regarding corporate inventory that the employee contended was concealed from the auditors, and which evidence it was contended would result in a change to the book value of the stock. Id. The Court of Appeals concluded that the plaintiff failed to show there was not a genuine issue as to the material fact of the stock's book value because the validity of the auditor's review depended upon the accuracy of the audit. Id. at 305. The audit's accuracy was undermined by the employees' affidavit. Id.
Miller Machine Co. is materially distinguishable from the instant matter. There, the affidavits submitted by the defendants directly challenged the accuracy of the audit with specific allegations that the company withheld material information regarding its inventory. Here, the affidavits submitted by the Defendants are speculative and lacking in material detail.
Birch states in his affidavit that based upon the appraisal reports, Sauter's deposition and conversation with Phil Upton, he believes Sauter intended to use a five (5) percent annual rate of appreciation for the HPB properties, but mistakenly used a five (5) percent per quarter rate of appreciation. Birch does not provide a basis for his belief that Sauter mistakenly used the wrong appreciation rate, nor does he explain why Sauter should have used an annual appreciation rate.
December 3, 2010 Birch Aff.
In response, Sauter states that he intentionally used a five (5) percent quarterly appreciation rate based upon his judgment and market conditions at the time. Sauter unequivocally states that his use of the quarterly appreciation rate was not a computation error.
December 4, 2010 Sauter Aff.
Id.
Sauter used his professional judgment as a real estate appraiser in determining the appropriate appreciation rate for the HPB property. Pursuant to Section 13 of the Partnership Agreement, the parties by agreement had retained Sauter to appraise the value of the HPB property as of the effective date of EHP's withdrawal, December 31, 2005. Further, in their March 30, 2006 Forbearance Agreement, EHP and the Bosher Defendants agreed to use Sauter as the appraiser for (a) the vacant lots in Phase I of Albemarle Plantation, (b) the undeveloped land referred to as Phase II and (c) the development amenities. They agreed that Sauter's judgment as to the fair market value of the HPB Properties that subsequently were determined to constitute "inventory" would be binding on the parties.
Id.
Id.
Id.
The court is not persuaded by the Defendants' argument that because Sauter testified during his deposition that he could not then "do the math" for his appraisal calculations that Sauter made computation errors in his appraisal reports. When asked by counsel for the Defendants whether he could do the math to show how he arrived at the appreciation rate, Sauter answered that he would "have to go back and figure it out." This testimony is insufficient to raise genuine issues of fact as to the accuracy of Sauter's appraisals.
See Defs.' Notice of Filing Depo. Excerpts in Resp. to Sauter's Aff.
Id. at 125, 134.
Birch states that his opinion regarding Sauter's appraisals is partly based on "conversations with Defendant [Phil] Upton." Birch fails to provide specific facts about this conversation. This brief reference to a conversation, without any supporting facts, is insufficient to raise genuine issues of fact as to the accuracy of Sauter's appraisals.
December 3, 2010 Birch Aff.
By agreeing to be bound by Sauter's appraisals the parties also agreed to Sauter's professional judgment in creating the appraisals.
Accordingly, the court CONCLUDES that Birch's Affidavit fails to raise genuine issues of material fact as to the accuracy of Sauter's appraisals.
Knapp's affidavit is similarly deficient. It is riddled with speculation, and all of Knapp's allegations with regard to the receivables on the Balance Sheet are prefaced with "it is possible." Knapp goes on to state that any accounts receivable outstanding on December 31, 2005, but not actually collected in 2006, should be written off as bad debts and not included in the Balance Sheet. Knapp further alleges that she has a "reasonable belief that there may be an incorrect value recorded on the [Balance Sheet] for cash. . . ." Knapp not only prefaces every allegation with "it is possible" or "there may be," she also fails to provide specific facts to support her conclusions.
December 3, 2010 Knapp Aff.
Id.
Id.
Knapp's Affidavit fails to set forth specific facts showing that there exists a genuine issue of material fact. See Cameron-Brown Capital Corp. v. Spencer, 31 N.C. App. 499, 501 (1976).
The court CONCLUDES that Knapp's vague and speculative affidavit statements are insufficient to raise genuine issues of material fact as to the accuracy of the 2005 Balance Sheet.
The court also CONCLUDES that Defendants' contention that Robb's refusal to perform the valuation of EHP's interest back in 2006, when the parties were in disagreement over the meaning of the term inventory, fails to raise genuine issues of material fact as to the accuracy of the 2005 Balance Sheet.
"When faced with plaintiff's motion for summary judgment, properly supported as it was, it [is] defendants' duty to come forward with specific facts showing that there [is] a genuine issue for trial." Cameron-Brown, 31 N.C. App. at 503. Here, Defendants are unable to come forward with facts showing Sauter's appraisals and the 2005 Balance Sheet contain computation errors.
Based upon the foregoing, the court CONCLUDES that there exist no genuine issues of material fact as to the amount due from the Bosher Defendants to EHP under the Partnership Agreement; and that as of September 30, 2010, the Bosher Defendants were indebted to EHP in the total amount of $2,758,294.08 for their purchase of EHP's partial ownership interest in HPB.
See November 10, 2010 Crisp Aff. 3.
Accordingly, EHP's Motion should be GRANTED.
NOW THEREFORE, based upon the foregoing CONCLUSIONS, it is ORDERED, ADJUDGED and DECREED that:
Plaintiff's Motion for Summary Judgment on the Amount Owed Plaintiff by Defendants Pursuant to the Court's October 5, 2010 Order is GRANTED.
As of September 30, 2010, Virginia W. Bosher and Robert M. Bosher were indebted to EHP in the total amount of $2,758,294.08 for their purchase of EHP's partial ownership interest in HPB.
Defendants' Motion for Reconsideration and Clarification of the Court's Order of October 5, 2010 is DENIED.
On March 7, 2011, at 2:00 p.m., at the North Carolina Business Court, 225 Hillsborough Street, Suite 303, Raleigh, North Carolina, the court will conduct a hearing and status conference with all remaining parties to this action for the purpose of determining any then-remaining issues between the parties, including but not limited to the exact dollar amount that the Bosher Defendants owe EHP. At that time, the court anticipates entering a final judgment relative to this matter.
This the 24th day of February, 2011.