Filed: Nov. 20, 2015
Latest Update: Mar. 02, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-1853 FIRST SOUTH BANK, Plaintiff - Appellant, v. FIFTH THIRD BANK NA, d/b/a Fifth Third Bank, formerly known as First Charter Bank, formerly known as First Charter Corporation; FIRST CHARTER BANK; FIRST CHARTER CORPORATION, Defendants - Appellees. No. 14-1917 FIRST SOUTH BANK, Plaintiff - Appellee, v. FIFTH THIRD BANK NA, d/b/a Fifth Third Bank, formerly known as First Charter Bank, formerly known as First Charter Corporati
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-1853 FIRST SOUTH BANK, Plaintiff - Appellant, v. FIFTH THIRD BANK NA, d/b/a Fifth Third Bank, formerly known as First Charter Bank, formerly known as First Charter Corporation; FIRST CHARTER BANK; FIRST CHARTER CORPORATION, Defendants - Appellees. No. 14-1917 FIRST SOUTH BANK, Plaintiff - Appellee, v. FIFTH THIRD BANK NA, d/b/a Fifth Third Bank, formerly known as First Charter Bank, formerly known as First Charter Corporatio..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1853
FIRST SOUTH BANK,
Plaintiff - Appellant,
v.
FIFTH THIRD BANK NA, d/b/a Fifth Third Bank, formerly known
as First Charter Bank, formerly known as First Charter
Corporation; FIRST CHARTER BANK; FIRST CHARTER CORPORATION,
Defendants - Appellees.
No. 14-1917
FIRST SOUTH BANK,
Plaintiff - Appellee,
v.
FIFTH THIRD BANK NA, d/b/a Fifth Third Bank, formerly known
as First Charter Bank, formerly known as First Charter
Corporation; FIRST CHARTER BANK; FIRST CHARTER CORPORATION,
Defendants - Appellants.
Appeals from the United States District Court for the District
of South Carolina, at Spartanburg. Mary G. Lewis, District
Judge. (7:10-cv-02097-MGL)
Argued: October 28, 2015 Decided: November 20, 2015
Before NIEMEYER and MOTZ, Circuit Judges, and M. Hannah LAUCK,
United States District Judge for the Eastern District of
Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Robert F. Goings, GOINGS LAW FIRM, LLC, Columbia, South
Carolina, for Appellant/Cross-Appellee. William H. Hurd,
TROUTMAN SANDERS, LLP, Richmond, Virginia, for Appellees/Cross-
Appellants. ON BRIEF: Joel W. Collins, Jr., COLLINS AND LACY,
P.C., Columbia, South Carolina, for Appellant/Cross-Appellee.
Frank H. Gibbes, III, GIBBES BURTON, LLC, Spartanburg, South
Carolina; Alan J. Statman, STATMAN HARRIS & EYRICH LLC,
Cincinnati, Ohio, for Appellees/Cross-Appellants.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Pursuant to the invitation of a Charlotte, North Carolina,
branch of Fifth Third Bank, ∗ First South Bank, of Spartanburg,
South Carolina, agreed to participate with Fifth Third in the
$11 million financing of a real estate project in Lincoln
County, North Carolina, by providing $4 million of the
financing. The project, which involved the construction of 204
lots for single family houses, was being developed by Burton
Creek Investment, LLC.
Fifth Third represented in documents given to First South,
among other things, that 79% of the lots had been prepurchased;
that Burton Creek was required, as a condition of the loan, to
provide “letters from the applicable utility companies or
governmental authorities confirming that all utilities necessary
for the Improvements [on the 204 lots] [were] available at the
Land in sufficient capacity, together with evidence satisfactory
to Bank of paid impact fees, utility reservation deposits, and
connection fees required to assure the availability of such
services”; that the five individual partners of Burton Creek
would guarantee the loan; and that Carlton and Carol Tyson, the
∗Fifth Third Bank is the successor by a June 2008 merger
with First Charter Bank, of Charlotte, North Carolina, and
before then, First Charter was the bank involved in the
transactions in this case. For clarity, we refer to Fifth Third
and First Charter collectively as Fifth Third.
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parents of one of the partners, would provide a limited guaranty
for $2.1 million. Through a participation agreement between
Fifth Third and First South, Fifth Third, as lead lender, agreed
to obtain at closing the executed guaranty agreements and
evidence of the utility approvals.
The loan closed on March 8, 2007, and the closing documents
represented that Fifth Third received both the utility approvals
and executed guaranty agreements. Shortly after closing, Fifth
Third disbursed roughly $5 million of the loan to Burton Creek,
and after First South received a package of closing documents,
it disbursed roughly $1.85 million. While the closing package
did not contain a copy of the Tysons’ Guaranty Agreement, Fifth
Third later provided First South with a copy that was dated and
executed before a notary public on March 8, 2007, the date of
closing. And while the closing package did not contain the
utility approval letters, Fifth Third indicated on the closing
checklist that they had been received.
In January 2008, as the national economy began to collapse,
Burton Creek informed Fifth Third that the prepurchasers of the
lots began to back out, stalling the project. Also, Burton
Creek advised Fifth Third that Lincoln County officials had
reduced the sewer taps available by more than one-half, to 74
lots. Several months later, in October 2008, Fifth Third
declared Burton Creek in default.
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As it turned out, the developer Burton Creek had been told
before closing that because of demands on the Lincoln County
sewer system, the County would have to reduce significantly the
number of sewer taps it could approve for the project. As a
consequence, Fifth Third never received evidence of Lincoln
County’s utility approvals for 204 lots, as represented in the
closing documents. In addition, it turned out that Carlton
Tyson never executed the $2.1 million loan Guaranty Agreement as
represented by Fifth Third. Fifth Third had a notary in its
office witness the Tysons’ signatures, but the notary stated at
trial that the Tysons never appeared before her to sign the
documents; she was simply presented with a signed copy to
notarize. Indeed, an email exchange between Fifth Third and
Burton Creek a few days after the closing indicated that the
Tysons’ Guaranty Agreement had not then been executed, despite
the closing date that appeared on the notarization. And Carlton
Tyson testified at trial that he never signed the Guaranty
Agreement, that he did not authorize anyone to sign it on his
behalf, and that the signature on the Guaranty Agreement was not
his.
First South commenced this action and, with its second
amended complaint, alleged, among other claims, breach of
contract, fraud, and violation of the North Carolina Unfair and
Deceptive Trade Practices Act (“NCUDTPA”), N.C. Gen. Stat.
5
§ 75-1.1. In its prayer for relief, First South sought, among
other relief, both rescission and damages for breach of contract
and fraud.
Before trial, the district court advised First South that
First South could not “have it both ways” -- i.e., that it could
not both affirm the contract and thereby claim damages for its
breach and for fraud in the inducement and at the same time
rescind the contract. First South elected rescission, demanding
only that the monies it had advanced be restored to it less
credits it had already received, a sum that the parties
stipulated was $2,764,232.46. The parties also agreed that the
court, not the jury, would try the NCUDTPA claim, based on the
jury verdict.
The jury returned a verdict in favor of First South and
awarded it the stipulated amount of $2,764,232.46. Because the
district court concluded, among other things, that the jury was,
with that award, effecting rescission and not awarding damages,
it ruled against First South on its NCUDTPA claim, which allows
treble damages only with respect to an award of damages. See
Winant v. Bostic, 5 F.3d 767, 776-77 (4th Cir. 1993). More
particularly, the court concluded first that South Carolina law
applied to this action and therefore First South did not have a
claim under NCUDTPA, a North Carolina law. It also concluded
that even if First South had made a claim under the analogous
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South Carolina Unfair Trade Practices Act (“SCUTPA”), it failed
to prove “actual damages,” as required under the SCUTPA to
obtain treble damages. See S.C. Code Ann. § 39-5-140. The
court noted that instead of seeking “actual damages,” First
South only sought rescission. Finally, the court concluded that
if the NCUDTPA applied, again First South did not seek damages,
but rather rescission, precluding it from recovering treble
damages under the specific language of the NCUDTPA. See Winant,
5 F.3d at 776-77.
First South appealed and now contends that the district
court erred in ruling against it on the NCUDTPA claim, arguing
that the jury awarded it damages, thus justifying a treble
damages award for the fraud that the jury found. First South
also contends that the district court erred in refusing to award
it prejudgment interest. Fifth Third cross-appealed and
contends that the evidence against it was insufficient to
support the jury’s verdict on fraud and breach of contract and
that the district court erred in granting First South roughly
$8,000 in experts’ costs when the experts themselves never
testified at trial.
The principal issue in this case centers on whether First
South elected rescission and whether the consequences imposed by
the court on it because of that election were appropriate. In
essence, First South contends that it elected to seek
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“rescissionary damages” and that the jury in fact gave it what
it requested, filling in its verdict on a line labeled
“damages.” It points out that throughout the proceedings, it
referred repeatedly to its claim for “damages,” thereby
suggesting that it was not in fact pursuing rescission.
While the language used by First South’s attorneys -- i.e.,
“rescissionary damages” -- was peculiar, the record supports the
district court’s conclusion that First South indeed elected
rescission and that the case was presented, argued, and decided
as a rescission case. First, before trial, the court advised
First South that it had to make an election:
I’ve said this before. I think there’s going to have
to be an election. I don’t think you can sue and say
put me back where I would be if the contract hadn’t
even happened. I want all my money back. Oh, and I
also want damages for breach of that contract that I
basically want nullified. I don’t think you can do
both of those.
In response, First South elected rescission, stating, “Our
damages are purely, one hundred percent rescissionary damages,
whether or not it’s a breach of contract or it’s fraud.” After
explaining that its claim for “rescissionary damages” was
essentially a claim for “rescission,” First South left no doubt
about this, stating:
The damages we seek are essentially our money back and
to restore us in the position we were prior to signing
the contract. We’re not seeking actual damages that
are above rescission or our money back. The proper
measure of damages encompasses damages to restore
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First South Bank in a condition in its original place
as if the misrepresentations and the fraud and the
material breach had not occurred and that the
agreement had not been reached.
(Emphasis added). Not only was the election unambiguous, the
case was thereafter presented to the jury as a rescission case,
and First South never placed that fact in question. When First
South presented its case to the jury after presenting all the
evidence, it directed the jury to the line of the verdict form
labeled “damages” and explained, “And the damages are, simply
put, our money back. We’re not asking for anything more or
anything less than a refund. And this is the amount of the
refund.” Finally, the district court, without any objection
from First South, instructed the jury on rescission, stating:
[T]he plaintiff had to prove . . . that the plaintiff
timely elected to cancel the contract.
* * *
[T]he plaintiff must show that the plaintiff has
restored to, offered to restore to, credited or in a
position to restore so much of the consideration it
received from the defendant as would be fair and
equitable under the circumstances. Once a contract is
canceled, both the plaintiff and the defendant must be
returned to same relative positions they occupied
immediately preceding the formation of the contract.
* * *
As I stated earlier, the plaintiff in this case seeks
recovery in the form of rescission. Specifically, the
plaintiff seeks to recover back the monies it has
parted with because of the contract at issue.
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And consistent with rescission, the parties agreed to the amount
of refund -- the amount that First South parted with -- and the
jury, in finding for First South, awarded that stipulated
amount.
Because First South pursued its case for rescission and the
jury award represented the refund of what it had advanced, it
did not receive a damage award. Yet a damage award is what is
necessary to receive an award of treble damages under the
NCUDTPA. See Winant, 5 F.3d at 776-77 (“By the terms of [N.C.
Gen. Stat.] § 75-16, only ‘if damages are assessed’ is the
amount trebled. Because damages were not assessed, but
rescission elected, we conclude the amount should not have been
trebled”). Similarly, a plaintiff may only bring an action
under the SCUTPA “to recover actual damages.” S.C. Code Ann. §
39-5-140; see also Fields v. Yarborough Ford, Inc.,
414 S.E.2d
164, 166-67 (S.C. 1992) (explaining that a plaintiff must prove
it suffered “actual damages” to recover under the SCUTPA, and
that because the “two remedies [an action for damages and an
action for rescission] are inconsistent,” the plaintiff “cannot
in the one form of action secure the relief appropriate to the
other” (alteration in original) (internal quotation marks and
citation omitted)).
In short, we conclude that the district court correctly
found that First South had elected rescission and thereby waived
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its claims for damages. The court also correctly concluded that
First South’s unfair trade practices claim, under either the
NCUDTPA or the SCUTPA, must therefore fail.
We also reject First South’s argument that the district
court improperly denied its claim for prejudgment interest. The
district court noted that prejudgment interest of $231,467.22
was included in the sum to which First South stipulated at trial
as the amount of refund due it. The court correctly explained
that because the stipulated sum included interest, any award of
additional prejudgment interest would amount to a windfall.
As to Fifth Third’s cross-appeal, Fifth Third contends
first that the evidence was insufficient to support the jury’s
verdict. We reject this argument. Our review of the record
shows that ample testimony was presented to support the verdict.
In essence, the jury could well have found that Fifth Third
deliberately deceived First South into believing that at closing
Fifth Third had received letters approving utilities and the
properly executed $2.1 million Guaranty Agreement from the
Tysons, when in fact it had received neither and it knew or was
reckless in not knowing that it had received neither. These
false representations were material to the risk that First South
believed it was accepting in entering into the participation
agreement. The evidence showed that without the utility
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approvals and the $2.1 million guaranty from the Tysons, First
South would not have participated in the $11 million financing.
Finally, on Fifth Third’s claim that the district court
erred in assessing the costs of expert witnesses because the
experts never testified, we affirm the district court. The
court did not impose costs incurred for expert testimony at
trial, but rather for testimony obtained in responding to
discovery. See Fed. R. Civ. P. 26(b)(4)(E).
Accordingly, the judgment of the district court is
AFFIRMED.
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