You all know that there is no Chapter 75 claim for a breach of contract unless there are "substantial aggravating circumstances." What if you have the substantial aggravating circumstances but you don't have a breach of contract? The Court of Appeals answered that question Tuesday in SunTrust Bank v. Bryant/Sutphin Properties, LLC.
The answer is you might not have anything. That's why the COA set aside the Defendants' $2.1 million verdict against SunTrust.
Here's how Judge Stroud summed it up:
the jury found that although there was not a breach of contract there were "[s]ubstantial aggravating circumstances" that took place. Mitchell, 148 N.C. App. at 75, 557 S.E.2d at 623-24. While this was a logical conclusion for the jury to make, as they could properly find that a breach of contract had not taken place and that plaintiff had committed the acts listed in [the verdict question covering the allegedly unfair and deceptive acts]. . . it was error for the trial court to determine as a matter of law that these acts constituted a Section 75-1.1(a) violation where the only acts alleged were "[s]ubstantial aggravating circumstances" to a breach of contract when there was no breach of contract. Id. Without an independent Section 75-1.1(a) claim based upon some conduct outside the scope of the contracts, an award for a Section 75-1.1(a) claim could be entered only if the jury found a breach of contract accompanied by "[s]ubstantial aggravating circumstances." Id. As the jury did not find a breach of contract, the inquiry should have ended because there was no breach of contract. Id.
If you can't understand that unusual result, and you don't want to slog through Judge Stroud's 23 page opinion to figure it out, here's the story:
The jury found that the Bank had frozen one of the Defendant's money market accounts without any notice of a default or making any demand for repayment of a separate loan it had made, which action the Defendants said had destroyed their business. The jury also found, somewhat inconsistently, that the Bank hadn't breached the contract that governed the money market account by freezing the account. The trial judge had determined those actions to be an unfair and deceptive practice and had trebled the $700,000 damages awarded by the jury for those actions, per G.S. §75-16.
The reversal was based on the lack of breach of contract to accompany the "substantial aggravating circumstances."
The moral of this story seems to be that if you are trying to morph a breach of contract claim into a treble damage claim under Chapter 75, you'd better be able to prove the breach of contract.
The SunTrust decision marks the second time this month that Judge Stroud has tangled with Chapter 75. In the other opinion, Green v. Freeman, the Judge affirmed the dismissal of Chapter 75 claims made by investors in a business. She ruled that this was "raising capital," which "is not a business activity contemplated within the Act." Op. 37. By the way, that case is headed to the Supreme Court of NC based on a dissent, though the majority and the dissent agreed on the Chapter 75 issue. The issue for the appeal concerns the sufficiency of the evidence to support a breach of fiduciary duty claim on which the Plaintiffs prevailed.
Lexis.com subscribers can access the Lexis enhanced version of the Suntrust Bank v. Bryant/Sutphin Prop., LLC, 2012 N.C. App. LEXIS 1105 (N.C. Ct. App. Sept. 18, 2012) and Green v. Freeman, 2012 N.C. App. LEXIS 1081 (N.C. Ct. App. Sept. 4, 2012), decisions with summary, headnotes, and Shepard's.
Read this article in its entirety on North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.
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