North Carolina Industrial Capital, LLC v. John E. Clayotn, Jr., et al.

This case arises out of a June 1999 lease of commercial property in Charlotte, North Carolina, between Plaintiff and its lessee, Defendant West's Charlotte Transfer & Storage, Inc. ("WCT"). On 15 August 2001, Plaintiff filed a complaint in Mecklenburg County small claims court seeking summary ejectment against David D. Rushing ("Rushing") and John Clayton ("Clayton"), allegedly doing business as West's Charlotte Metro Moving & Storage. On 4 October 2001, the court entered judgment in favor of Plaintiff against Rushing and West's Charlotte Metro Moving & Storage. The court dismissed Clayton from the suit with prejudice. Rushing appealed to district court, where his motion to dismiss himself as a party and to add the actual lessee, Defendant WCT, was allowed.

On 9 April 2002, Plaintiff filed a motion in Mecklenburg County District Court for summary judgment against Defendant WCT in the ejectment case. The court granted Plaintiff's motion for possession of the property on 14 May 2002. Defendant WCT appealed to this Court from this order. (See footnote 1) Pending this appeal, the Mecklenburg County Clerk of Superior Court issued an order requiring Defendant WCT to pay into the Clerk's office $11,719.77 monthly to stay the district court's judgment. This sum represented base rent and other common area expense amounts dueunder the lease. The Clerk's office forwarded payment to Plaintiff, less $2,200.00 per month which represented the portion of the monthly payment Defendant WCT disputed. Defendant WCT contested a portion of the common area operating expenses Plaintiff alleged was owed. At the time this case was heard by the trial court, the amount withheld by the Clerk totaled $48,400.00 in contested expenses.

On 13 June 2002, Plaintiff filed a complaint in Mecklenburg County Superior Court against the individual Defendants (See footnote 2) and WCT seeking monetary damages for breach of the lease. Plaintiff also sought to "pierce the corporate veil" against the individual Defendants, claiming, inter alia, that the individual Defendants
are and have always been the sole shareholders and officers of West's[,] . . . commingled their own funds with those of West's[,] . . . caused West's to be inadequately capitalized[,] . . . so dominated and controlled West's as to make the corporation their alter-ego, . . . caused distributions to be made from West's which have caused the corporation to be unable to pay its debts as they come due in the usual course of business[,] [and that] . . . the total assets of [West's] did not exceed total liabilities after the distributions occurred.

Plaintiff sought "damages in an amount in excess of $373,000.00, plus attorney's fees and interest at the maximum legal rate from the date of the breach until paid." On 6 September 2002, Defendants filed an answer to Plaintiff's complaint. In theiranswer, Defendants moved to dismiss the suit against the individual Defendants because "they have never entered into possession of the premises." Defendants also asserted that the only amounts "due and owing to Plaintiff are the remaining amounts of common area operating expenses that are an issue in the first lawsuit . . . [and that] Plaintiff's claim for $300,000.00 for actual consequential and incidental damages has no factual basis and should be dismissed." Finally, Defendants pled that the funds of WCT and the individual Defendants were never commingled and that WCT was not "an alter-ego and a mere instrumentality for the individual Defendants."

On 11 September 2002, Plaintiff served on Defendants a set of interrogatories and requests for production of documents. On 4 October 2002, Defendants moved to enlarge the time to respond to Plaintiff's discovery requests and, that same day, an order was entered enlarging the response time to 13 November 2002. Defendants nevertheless failed to respond and, on 10 December 2002, Plaintiff moved to compel responses.

By order filed 2 February 2003, the Honorable Robert P. Johnston ordered Defendants to answer the interrogatories and respond to the requests for production of documents on or before 21 February 2003. Defendants did not comply with Judge Johnston's order and, on 3 March 2003, Plaintiff moved for sanctions. The motion for sanctions was heard before the Honorable Yvonne Mims Evans on 9 April 2003. By order entered 11 April 2003, Judge Evans struck "those portions of each Defendants' [sic] Answer whichconstitute a defense to or denial of liability to the Plaintiff[.]" She further ordered that the civil action "shall proceed to judgment solely on the issue of the amount of damages to be awarded to Plaintiff[.]"

On 9 May 2003, Defendants gave notice of appeal from Judge Evans's order. However, Defendants failed to timely perfect their appeal and, on 15 October 2003, Plaintiff moved to dismiss. By order filed 3 November 2003, the Honorable David S. Cayer dismissed Defendants' appeal. Defendants did not appeal from Judge Cayer's order.

On 17 September 2004, Defendants moved to vacate Judge Evans's order striking portions of their answer. By order filed 19 October 2004, Judge Evans denied Defendants' motion to vacate. The case then proceeded to trial between 4 and 6 January 2005 before the Honorable W. Robert Bell on the sole issue of the amount of damages Plaintiff was entitled to receive for breach of its lease. Following Judge Bell's denial of Plaintiff's motion for directed verdict at the close of the evidence, the jury awarded Plaintiff $101,830.38 in actual, consequential, and incidental damages. Based on this verdict Judge Bell entered judgment against Defendants on 23 March 2005 in the amount of $101,830.38, with "prejudgment interest at the maximum legal rate from June 9, 2001 [date of breach of the lease] to date of this Judgment on the amount of $53,430.38[,]" (See footnote 3) and "an award of attorneys['] fee in theamount of $15,274.55 representing 15% of the $101,830.38 amount the jury determined to be the outstanding balance [owed under the lease]."

On 4 April 2005, Plaintiff moved for judgment notwithstanding the verdict, seeking damages in the amount alleged in its complaint, or in the alternative a new trial. On 2 November 2005, pursuant to Rule 52(a)(2) of the North Carolina Rules of Civil Procedure, Plaintiff requested that the trial court make findings of fact and conclusions of law in ruling on its 4 April 2005 motion. By order entered 30 November 2005, Judge Bell denied Plaintiff's motion for judgment notwithstanding the verdict or new trial, without making findings of fact or conclusions of law.

On 29 December 2005, Plaintiff filed notice of appeal from Judge Bell's judgment entered 23 March 2005 and his order of 30 November 2005. On 30 December 2005, Defendants filed notice of appeal from Judge Evans's 11 April 2003 order striking portions of Defendants' answer, Judge Evans's 19 October 2004 order denying Defendants' motion to vacate the 11 April 2003 order, and Judge Bell's 23 March 2005 judgment. We affirm Judge Evans's orders and uphold the judgment for Plaintiff, but remand for an additional award of interest and an order containing findings of fact and conclusions of law regarding Plaintiff's motion for a new trial.