STEELMAN, Judge.
The trial court's findings of fact support its denial of defendants' motion for involuntary dismissal. When the defendants' last act of negligence occurred is a factual issue to be decided by the trial court. The trial court's findings of fact on this issue support its ruling that a portion of Jorgenson and Mellor's claims were barred by the three-year statute of limitations, and that a portion of these claims were not barred. It was for the trial court to determine what amount of plaintiffs' damages were proximately caused by the negligence of defendants.
In 1997, Chase Development Group-PTIA, Limited Partnership ("Chase NC") acquired a tract of real property located in Guilford County, North Carolina, upon which it operated a Biltmore Suites Hotel ("the Property"). Chase Group, Inc. d/b/a Chase Group-Maryland ("Chase MD") was the general partner of Chase NC. John Jorgenson ("Jorgenson") was the Vice-President of Chase MD. Michael Mellor ("Mellor") was the President of Chase MD. Jorgenson and Mellor were the beneficial owners of Chase NC and Chase MD.
In August of 1999, Chase NC entered into a loan agreement with Bank of America, N.A. ("Lender"). The loan was evidenced by a note and secured by a deed of trust on the Property, an assignment of leases and rents, a security agreement, and a fixture filing. Jorgenson and Mellor were designated as "Borrower Principals" under the loan agreement. They did not personally guarantee the repayment of the loan. However, the loan agreement contained certain "recourse covenants" which triggered the personal liability of Jorgenson and Mellor. Specifically, paragraph 8(b) provided that Chase NC, Jorgenson,
On 24 January 2002, Chase NC established a line of credit with First Union National Bank ("Credit Line"). Jorgenson and Mellor steadfastly maintained that the Lender had full knowledge of the Credit Line.
Prior to 2003, the Lender sold the note to an unidentified entity ("the Note Holder"). The loan was serviced and administered by GMAC Commercial Mortgage Corporation ("GMAC"). Following the events of 11 September 2001, the occupancy rates for the Property dropped. In early 2003, Chase NC stopped making payments on the loan. Jorgenson and Mellor entered into negotiations with Allan Hanson ("Hanson") of GMAC, the objective of which was to resolve the loan default while retaining the Property. There were discussions of Chase NC tendering a deed in lieu of foreclosure to the Note Holder in exchange for a full release of liability for Chase NC, Jorgenson, and Mellor. GMAC and the Note Holder would have accepted such a settlement in the fall of 2003.
In October 2003, when it appeared that it could not reach an agreement with Hanson that would allow it to keep the Property, Chase NC consulted with the law firm of Fisher, Clinard & Cornwell, PLLC ("Fisher Clinard") and specifically with Robert Lefkowitz ("Lefkowitz") (collectively "defendants"), an expert in bankruptcy law. Fisher Clinard commenced representation of Chase NC with respect to its default under the loan. Lefkowitz advised Chase NC through Jorgenson and Mellor not to tender a deed in lieu of foreclosure, but to keep its options open. At this point, Jorgenson and Mellor reasonably believed that Fisher Clinard represented them individually as well as Chase NC. Lefkowitz did not discuss with Jorgenson and Mellor the possibility of their personal liability for attorneys' fees if foreclosure, receivership, or bankruptcy was initiated.
Based upon advice of defendants, Chase NC elected not to tender a deed in lieu of foreclosure, and communicated this decision to Hanson. On 7 November 2003, GMAC filed suit in the Superior Court of Guilford County ("state court action") against Chase NC. As a result of this suit a receiver was appointed for Chase NC, who shortly thereafter took over the operation of the Property. On 22 December 2003, GMAC filed an amended complaint, seeking to recover from Jorgenson and Mellor as "Borrower Principals" all amounts due under the note and loan documents, including attorneys' fees. The amended complaint asserted that the Credit Line was a violation of the recourse covenant.
Lefkowitz advised Jorgenson and Mellor that GMAC did not have a strong argument for recovery of attorneys' fees from them personally. Lefkowitz advised counsel for GMAC that he did not represent Jorgenson or Mellor and declined to accept service on their behalf. Negotiations for resolution of the dispute continued between counsel and between Jorgenson, Mellor, and Hanson.
Immediately prior to a hearing on GMAC's motion for a preliminary injunction in the state court action, Fisher Clinard filed a petition under Chapter 11 of the United States Bankruptcy Code on behalf of Chase NC, on 15 April 2004. With the filing of the bankruptcy it was clear to all parties that Fisher Clinard only represented Chase NC, and did not represent Jorgenson or Mellor individually. In June of 2004, a settlement proposal that would have allowed Chase NC to retain the Property was rejected by the Note Holder. On 19 January 2005, the Bankruptcy Court refused to approve Chase NC's plan of reorganization. On 22 April 2005, the Bankruptcy Court dismissed the bankruptcy petition. GMAC then instituted foreclosure on the Property.
On 9 May 2005, Lefkowitz filed answer in the state court action to GMAC's amended complaint on behalf of Jorgenson and Mellor, individually. On 14 November 2005, GMAC
Jorgenson and Mellor negotiated a settlement with GMAC and the Note Holder. Under the terms of the settlement, Chase NC relinquished title to the Property; Jorgenson and Mellor paid GMAC $300,000 (which included the $237,797.16 previously awarded by the trial court); and the Note Holder released Chase NC, Jorgenson, and Mellor from any further liability.
On 6 November 2007, Chase NC, Chase MD, Jorgenson, and Mellor ("plaintiffs") filed this action against defendants seeking compensatory damages for negligence arising out of the representation of plaintiffs. Defendants pled the statute of limitations in bar of plaintiffs' claims. The case was heard before the trial court sitting without a jury. A judgment containing detailed findings of fact and conclusions of law was entered on 28 May 2009.
The judgment found that defendants had breached the applicable standard of care, and that Chase NC was entitled to recover of defendants the sum of $50,000, the amount paid to defendants in fees and costs. As to Jorgenson and Mellor, the court found that there were two periods of legal representation by defendants: (1) from October 2003 until 15 April 2004 (the date of filing bankruptcy on behalf of Chase NC); and (2) from the dismissal of the bankruptcy petition until the dismissal of the state court case (14 March 2006). As to the first period of representation, the trial court held that the claims of Jorgenson and Mellor were barred by the three-year statute of limitations. As to the second period of representation, the trial court awarded damages to Jorgenson and Mellor of $48,720.16. Costs and interest from the date of filing the lawsuit were also awarded to plaintiffs.
From the judgment of the trial court, both plaintiffs and defendants appeal.
"It is well settled in this jurisdiction that when the trial court sits without a jury, the standard of review on appeal is whether there was competent evidence to support the trial court's findings of fact and whether its conclusions of law were proper in light of such facts." Shear v. Stevens Building Co., 107 N.C. App. 154, 160, 418 S.E.2d 841, 845 (1992). The trial court's findings of fact are conclusive on appeal if supported by competent evidence. Finch v. Wachovia Bank & Tr. Co., 156 N.C. App. 343, 347, 577 S.E.2d 306, 308-09 (2003) (quotation omitted). "Conclusions of law drawn by the trial court from its findings of fact are reviewable de novo on appeal." Food Town Stores v. City of Salisbury, 300 N.C. 21, 26, 265 S.E.2d 123, 127 (1980) (citation omitted).
In their first argument, defendants contend that the trial court erred in denying their motion for a directed verdict. We disagree.
This case was tried before a judge, sitting without a jury. A motion for directed verdict pursuant to Rule 50 of the North Carolina Rules of Civil Procedure was not the appropriate mechanism to challenge the sufficiency of plaintiffs' evidence. Rather, the correct motion was one for involuntary dismissal pursuant to Rule 41(b) of the North Carolina Rules of Civil Procedure that based "`upon the facts and the law the plaintiff has shown no right to relief.'" Hill v. Lassiter, 135 N.C. App. 515, 517, 520 S.E.2d 797, 799-800 (1999) (quoting Kelly v. Harvester Co., 278 N.C. 153, 159, 179 S.E.2d 396, 398 (1971)).
Hill, 135 N.C.App. at 517, 520 S.E.2d at 800.
Given the nature of appellate review of non-jury cases set forth above, our review is essentially whether there was evidence to support the trial court's findings of fact. We treat defendants' motion to dismiss as a motion for involuntary dismissal pursuant to Rule 41(b), and review the evidence in the record to determine whether it supports the key findings of fact challenged by defendants on appeal.
The trial court found that:
Defendants argue that while there was discussion of Chase NC tendering a deed in lieu of foreclosure in the fall of 2003, that it was mere speculation that the Note Holder would have accepted a settlement on that basis. Any settlement proposal would have to have been agreed upon among Jorgenson, Mellor, and Hanson. It then would have to be submitted and approved by GMAC's investment committee. Once these approvals were attained, it would then have been submitted to the Note Holder for final approval. Defendants assert that since none of these approvals were actually obtained, whether the Note Holder would have approved such a settlement was pure speculation. They also point to the fact that the Note Holder rejected a settlement recommended by GMAC during the pendency of the bankruptcy.
We note that in a non-jury trial, the judge also assumes the role of the jury. The judge determines the credibility of the witnesses and other evidence, and also determines the weight to be given to each piece of evidence. Laughter v. Lambert, 11 N.C. App. 133, 136, 180 S.E.2d 450, 452 (1971). On appeal, if
Hanson testified that he was "99.9 percent certain" that his recommendation to resolve the dispute by a deed in lieu of foreclosure would have been accepted by the Note Holder in 2003. This resolution would have included a full release of Chase NC, Jorgenson, and Mellor from any additional liability. Jorgenson and Mellor would not have been exposed to liability for GMAC's attorneys' fees.
The court also found that the fall 2003 settlement and the final 2006 settlement were "materially the same" in that the Property was conveyed by Chase NC, and GMAC's fees and expenses were reimbursed by Jorgenson and Mellor. The fees and expenses were incurred by GMAC after October of 2003 as a result of the state court and federal bankruptcy case litigation. The settlement proposal that was rejected by the Note Holder did not include a conveyance by Chase NC of the Property. It is clear from the course of the negotiations that the Note Holder would not agree to any settlement that left the Property under the control of Chase NC. The rejection of the settlement by the Note Holder during the course of the bankruptcy supports the trial court's findings rather than contradicting them.
Finally, we note that this was a civil case. Therefore, the plaintiffs' burden of proof was "by the greater weight of the evidence." Taylor v. Abernethy, 174 N.C. App. 93, 103, 620 S.E.2d 242, 249 (2005), cert. denied, 360 N.C. 367, 630 S.E.2d 454 (2006). The trial court recognized this by finding that the evidence established that "more likely than not" a deed in lieu of foreclosure would have been accepted with a full release of all plaintiffs at any point after October 2003 if plaintiffs paid GMAC's attorneys' fees incurred to date. "More likely than not" is language that is frequently found in cases involving issues of medical causation. This language is used to explain the meaning of "by the greater weight of the evidence" to juries in the North Carolina Pattern Jury Instructions. N.C.P.I.—Civ. 101.10 ("The greater weight of the evidence does not refer to the quantity of the evidence, but rather to the quality and convincing force of the evidence. It means that you must be persuaded, considering all of the evidence, that the necessary facts are more likely than not to exist.").
We hold that the trial court's findings on this issue are supported by evidence in the record, and are thus binding upon this Court. The trial court applied the correct burden of proof as to this critical finding of fact. The trial court did not err in holding that plaintiffs were damaged by the negligence of defendants.
This argument is without merit.
In their second argument, defendants contend that the trial court erred in denying their motion for a directed verdict when the last act of any alleged negligence occurred outside of the applicable statute of limitations. We disagree.
We treat defendants' motion for directed verdict as a motion for involuntary dismissal pursuant to Rule 41(b) of the Rules of Civil Procedure.
When a defendant pleads the statute of limitations in bar of a plaintiff's claim, the burden is upon the plaintiff to show that its suit was commenced within the appropriate time from the accrual of the cause of action. Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985). In this case, based upon allegations of professional negligence, the applicable statute of limitations was three years, pursuant to N.C. Gen.Stat. § 1-15(c) (2007).
In a legal malpractice action, the limitations period begins to run when the last
However, the judgment of the trial court focused on defendants' representation following the dismissal of the bankruptcy petition. In conclusion of law 4(e), the trial court held:
When the defendants' last act of negligence occurred is a factual issue to be determined by the trial court, sitting in the role of the jury. The above conclusion of law, and the underlying findings of fact show that the trial court found that defendants engaged in negligent conduct from 22 April 2005 through 15 March 2006. These findings are supported by evidence in the record, and are thus binding on this Court on appeal. Lake, 186 N.C.App. at 610, 652 S.E.2d at 673. Since plaintiffs' complaint was filed on 6 November 2007, this entire time period was within the three-year statute of limitations set forth in N.C. Gen.Stat. § 1-15(c). The trial court correctly determined that a portion of plaintiffs' claims were not barred by the applicable statute of limitations.
This argument is without merit.
In their first argument, plaintiffs contend that the trial court erred in concluding that a portion of plaintiffs' claims were barred by the applicable statute of limitations. We disagree.
Our standard of review for this argument has been previously set forth in Section II.
This argument is directed towards defendants' representation of the individual plaintiffs, Jorgenson and Mellor. The trial court found as a fact and concluded that there were two separate and distinct periods of representation of Jorgenson and Mellor by defendants: the first running from October 2003 until the filing of the bankruptcy on behalf of Chase NC, and the second running from the dismissal of the bankruptcy petition until the dismissal of the state court action.
Plaintiffs set forth three arguments in support of their position that the trial court erred in applying the three-year statute of limitations to bar any claims arising out of the first period of representation.
Plaintiffs argue that defendants' representation of the individual plaintiffs was continuous, and that defendants' last act of negligence was within the three-year statute of limitations.
The evidence presented at trial was conflicting as to whether defendants represented Jorgenson and Mellor from October 2003 through April of 2004. Defendants asserted that they only represented Chase NC during this time period. Jorgenson and Mellor asserted that defendants did represent them individually and gave them legal advice concerning their potential personal liability during this time period. The trial court found that when GMAC filed an amended complaint in the state court action adding Jorgenson and Mellor as individual defendants that Lefkowitz advised opposing counsel that he did not represent the individuals.
Each of these findings by the trial court is supported by evidence in the record and they are binding upon this Court. Lake, 186 N.C.App. at 610, 652 S.E.2d at 673. Whether there were two periods of legal representation of Jorgenson and Mellor or just one, was a factual determination to be made by the trial court. We hold that the trial court's findings of fact support its conclusion of law that any claims against defendants for legal malpractice during the period October 2003 through April of 2004 were barred by the three-year statute of limitations under N.C. Gen.Stat. § 1-15(c).
Plaintiffs next contend that "Mr. Lefkowitz's renewed representation on the same matter as he previously advised, beginning on or about April 22, 2005, would have halted the running of the statute." Plaintiffs' cite no case authority for this creative proposition. We have found none, and find this argument to be without merit. N.C. R.App. P. 28(b)(6).
Finally, plaintiffs argue that even if Jorgenson and Mellor were not clients of defendants during the period of the bankruptcy, they were owed a duty by defendants under the rationale of Leasing Corp. v. Miller, 45 N.C. App. 400, 263 S.E.2d 313, disc. review denied, 300 N.C. 374, 267 S.E.2d 685 (1980). In Miller, this Court held that an attorney could be held liable for a defective title opinion that was furnished to and relied upon by a third-party non-client. The basis of this holding was that the express purpose of furnishing the title opinion was to induce plaintiff to consummate a transaction with the client, and it was directly intended to affect plaintiff. Id. at 407, 263 S.E.2d at 318.
We first of all note that neither Jorgenson nor Mellor asserted a third-party beneficiary theory in their complaint, or at trial. "Failure to argue a theory of recovery below prohibits its assertion on appeal." River Birch Associates v. City of Raleigh, 326 N.C. 100, 131, 388 S.E.2d 538, 556 (1990) (citing Plemmer v. Matthewson, 281 N.C. 722, 725, 190 S.E.2d 204, 206 (1972)).
Even assuming arguendo that this argument was preserved for appellate review, it has no merit. The trial court's findings of fact make it abundantly clear that for the duration of the bankruptcy proceedings defendants did not represent Jorgenson or Mellor individually. This was documented in a number of communications by defendants, which were noted by the trial court. Where it was clear that defendants did not represent Jorgenson and Mellor individually, there can be no reasonable third-party reliance upon legal advice given solely to Chase NC. The trial court made no findings of fact that defendants provided any individual advice to Jorgenson or Mellor during the course of the bankruptcy.
In their second argument, plaintiffs contend in the alternative that the trial court erred in the amount of damages awarded to Jorgenson and Mellor, specifically not including the additional $62,202.84 over and above the amount ordered by the trial court that was paid by Jorgenson and Mellor as part of the $300,000 settlement. We disagree.
On 17 January 2006, the trial court awarded GMAC $237,797.16 in attorneys' fees against Jorgenson and Mellor. The 27 February 2006 settlement was for a total of $300, 000, which included the amount awarded by the trial court, and an additional $62,202.84 "to cover the expected balance of GMAC's fees and costs." Plaintiffs contend that the $62,202.84 necessarily was for sums accrued after 30 September 2005, the last date for billings submitted to the trial court by GMAC in its motion. Since these damages accrued after 9 May 2005, plaintiffs argue
The trial court set out in detail how it computed the amount of attorneys' fees awarded to Jorgenson and Mellor as follows:
The trial court went on to hold that "[a]ny other damages claimed by Mr. Mellor and Mr. Jorgenson are either barred by the statute of limitations or were not proximately caused by the Defendants' negligence."
We have previously discussed that Jorgenson and Mellor's claims for damages accruing prior to 15 April 2004 were barred by the three-year statute of limitations. In addition, the trial court held that throughout the dispute with GMAC, Jorgenson and Mellor consistently asserted that the line of credit was not obtained in violation of the recourse covenants. The trial court held that any negligent advice given by defendants to plaintiffs with respect to the personal liability of Jorgenson and Mellor resulting from the line of credit was "not the proximate cause of any damage to the Plaintiffs."
Short v. Chapman, 261 N.C. 674, 681, 136 S.E.2d 40, 46 (1964).
In a non-jury trial, the court sits in the stead of the jury and makes the factual determinations as to damages that the jury would have made. One of these determinations was whether plaintiffs had shown that the damages claimed were proximately caused by the negligence of defendants.
In the instant case, the trial court found and concluded that with the exception of $4,563.16, the costs and attorneys' fees paid by Jorgenson and Mellor to GMAC were not proximately caused by the negligence of defendants. We note that the finding of fact supporting the amount of $4,563.16 is not assigned as error by plaintiffs and is thus binding on this Court on appeal. Koufman v. Koufman, 330 N.C. 93, 97, 408 S.E.2d 729, 731 (1991) (citations omitted).
This finding supports the amount of the trial court's award to Jorgenson and Mellor contained in its conclusions of law.
This argument is without merit.
We hold that each of the challenged findings of fact of the trial court were supported by competent evidence in the record. These findings in turn, support the trial court's conclusions of law. The rulings of the trial court are affirmed.
AFFIRMED.
Judges STEPHENS and HUNTER, Jr., ROBERT N. concur.
