Alkemal Sing. Pte. Ltd. v. Dew Glob. Fin., LLC

2017 NCBC 110

• Court: North Carolina Business Court
• Decided: December 12, 2017
• Docket: 15-CVS-1406
• Status: Published

Opinion

Alkemal Sing. Pte. Ltd. v. DEW Glob. Fin., LLC, 2017 NCBC 110.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION HENDERSON COUNTY 15 CVS 1406

ALKEMAL SINGAPORE PTE LTD,

Plaintiff, ORDER AND OPINION ON v. DEFENDANTS’ MOTION TO AMEND ANSWER AND PLAINTIFF’S DEW GLOBAL FINANCE, LLC and MOTION FOR PARTIAL SUMMARY DONALD E. WASHINGTON III, JUDGMENT

Defendants.

1. THIS MATTER is before the Court on Defendants’ Motion to Amend

Answer (the “Motion to Amend”) and Plaintiff’s Motion for Partial Summary

Judgment (the “Motion for Partial Summary Judgment”). The Motion to Amend and

the Motion for Partial Summary Judgment are collectively referred to as “the

Motions.” Having considered the Motions, the briefs, and the arguments of counsel,

the Court DENIES the Motions.

Tuggle Duggins P.A., by Richard W. Andrews and Jeffrey S. Southerland, for Plaintiff.

Law Firm of John C. Hensley, Jr., P.C., by John C. Hensley, Jr., for Defendants.

Robinson, Judge.

I. INTRODUCTION

2. This litigation arises out of Plaintiff Alkemal Singapore Private Limited’s

(“Alkemal” or “Plaintiff”) efforts to secure financing for a new business venture

through the services of Defendants DEW Global Finance, LLC (“DEW”) and Donald E. Washington, III (“Washington”) (collectively, the “Defendants”). Defendants

offered to connect Alkemal to an unidentified investor who Defendants represented

had the ability to provide a standby letter of credit for $20 million if Alkemal wired

$2.6 million to DEW as a service fee. Alkemal and DEW agreed to Joint Escrow

Instructions pursuant to which DEW would serve as escrow holder and Washington

would serve as escrow officer for the transaction. Thereafter, various versions of a

Bank Instrument Lease Agreement, which identified Avion Consulting Group, LLC

(“Avion”) as the entity that would provide the standby letter of credit, were executed

by some, but not all, of the parties. DEW, Avion, and Velocity Partners Limited

(“Velocity Partners”) then executed a Funds Release Escrow Agreement whereby

DEW would lease the standby letter of credit that Avion procured from an undisclosed

lessor, and Velocity Partners would serve as the escrow agent. The parties dispute

whether Alkemal agreed to the terms of the Bank Instrument Lease Agreements or

the Funds Release Escrow Agreement. After Alkemal wired $2.6 million to DEW,

DEW retained a $400,000 fee for itself and forwarded the remainder of the funds to

Velocity Partners. The documents received by Alkemal purporting to show that a

standby letter of credit had been issued were later determined to be fraudulent.

Alkemal never received the standby letter of credit or a refund of any part of the $2.6

million it delivered to Defendants to obtain the letter of credit.

II. PROCEDURAL HISTORY

3. The Court sets forth here only those portions of the procedural history

relevant to its determination of the Motions. 4. Alkemal initiated this action by filing the Complaint on August 19, 2015.

The Complaint asserts claims against Defendants for breach of contract, breach of

fiduciary duty, constructive fraud, fraud, negligent misrepresentation, civil

conspiracy, conversion, unfair and deceptive trade practices (“UDTP”), unjust

enrichment, constructive trust, and for an accounting. (Compl. 5–14, ECF No. 1.)

The Complaint also asserted many of the same claims against Avion and its owner,

Timothy J. Carre a/k/a Tim Carr (“Carr”), and two other business entities not relevant

to the Motions, JPierce Investments, Inc. (“JPierce”) and Loria Trading Group, S.A.

(“Loria”). (Compl. 9–14.) These other defendants were later voluntarily dismissed

by Alkemal. Plaintiff did not name as a defendant in this action Velocity Partners,

the entity to which DEW allegedly forwarded $2.2 million—the $2.6 million wired by

Plaintiff to DEW minus the $400,000 “fee” DEW retained for itself.

5. This action was designated as a mandatory complex business case by order

of the Chief Justice of the Supreme Court of North Carolina dated August 21, 2015

and assigned to the Honorable Louis A. Bledsoe, III, Special Superior Court Judge

for Complex Business Cases, by order dated August 24, 2015. This case was later

reassigned to the undersigned by order dated July 5, 2016.

6. On October 23, 2015, Defendants filed their Answer and Crossclaims

(“Answer”). Defendants later voluntarily dismissed their crossclaims.

7. After completion of discovery, on July 31, 2017, Plaintiff filed its Motion for

Partial Summary Judgment pursuant to Rule 56 of the North Carolina Rules of Civil

Procedure (“Rule(s)”) and a brief in support. 8. After briefing on Plaintiff’s Motion for Partial Summary Judgment was

complete, Defendants filed their Motion to Amend pursuant to Rule 15(a) and a brief

in support on October 2, 2017.

9. The Court held a hearing on the Motions on November 29, 2017, at which

all parties were represented by counsel.

10. The Motions have been fully briefed and are now ripe for resolution.

III. FACTUAL BACKGROUND

11. The Court does not make findings of fact when ruling on a motion for

summary judgment. The following background, drawn from the evidence submitted

in support of and in opposition to Plaintiff’s Motion for Partial Summary Judgment,

is intended to provide context for the Court’s analysis and ruling and is solely for

purposes of this Order and Opinion.

A. The Parties

12. Alkemal is a private limited company organized under the laws of

Singapore. (Compl. ¶ 1; Br. Supp. Pl.’s Mot. Partial Summ. J. Ex. A, ¶ 3, ECF No.

78.1 [“Pl.’s Br. Supp.”].) Daljit Singh (“Singh”) is a director of Alkemal. (Defs.’ Br.

Opp’n Pl.’s Mot. Partial Summ. J. 3, ECF No. 82 [“Defs.’ Br. Opp’n”]; Defs.’ Br. Opp’n

Ex. A.2, ECF No. 83.) Puneeta Singh Wasan (“Wasan”) is the manager of Alkemal.

(Pl.’s Br. Supp. Ex. A, ¶ 2.) Neither Singh nor Wasan are parties to this litigation.

13. DEW is a Florida limited liability company that maintains its principal

office and place of business in Henderson County, North Carolina. (Compl. ¶ 2.)

DEW was formed in 2010 and does business as Criss-Cross Financial Group (“Criss- Cross”). (Defs.’ Br. Opp’n Ex. A, ¶ 3.)

14. Washington is the sole member of DEW. (Compl. ¶ 4.)

B. Alkemal Seeks Financing for a New Business Venture

15. In the summer of 2014, Alkemal sought to procure financing needed to

engage in a new business venture related to importing and exporting timber. (Compl.

¶ 11; Pl.’s Br. Supp. Ex. A. ¶ 4.)

16. In September 2014, Mike Mwara (“Mwara”), a representative of CB Morgan

Capital Group and a non-party to this litigation, introduced Alkemal to Defendants.

(Pl.’s Br. Supp. Ex. A, ¶ 5; Defs.’ Br. Opp’n Ex. A, ¶ 5.) Alkemal and Defendants

discussed a transaction whereby DEW would procure a $20 million leased standby

letter of credit for Alkemal in exchange for Alkemal paying DEW a $2.6 million

service fee. (Compl. ¶¶ 13–15.) During these discussions, Wasan explained to

Washington that Alkemal needed the standby letter of credit by September 29, 2014

because Alkemal had cargo that was at risk of confiscation. (Defs.’ Br. Opp’n Ex. A,

¶ 21.)

C. DEW’s Service Proposal

17. On September 24, 2014 at 10:25 p.m., Mwara e-mailed Wasan a copy of a

service proposal for a standby letter of credit (the “Service Proposal”) prepared by

DEW. (Pl.’s Br. Supp. Ex. A.1.) Mwara asked that Wasan execute and return the

Service Proposal at her earliest opportunity so that Defendants could send her “the

other bunch [of documents] tonight so that we can beat the Friday deadline” for

procuring the letter of credit. (Pl.’s Br. Supp. Ex. A.1.) 18. The Service Proposal stated that it was Criss-Cross’s proposal for

professional services and outlined the proposed transaction. (Pl.’s Br. Supp. Ex. A.1.)

The Service Proposal stated that “[i]f [Criss-Cross] and/or one of our investment

partners decide to facilitate the Alkemal transaction[,]” the “most likely terms” of the

agreement were that Scotia Bank, or a similar bank, would issue a leased standby

letter of credit to Alkemal in the amount of $20 million. (Pl.’s Br. Supp. Ex. A.1, § 1.)

The Service Proposal requested that Alkemal provide a corporate resolution

demonstrating that Alkemal had decided to proceed with the transaction. (Pl.’s Br.

Supp. Ex. A.1, § 1.) The Service Proposal also stated that it was standard protocol to

require Alkemal to execute a service agreement and an escrow agreement before

proceeding with the transaction. (Pl.’s Br. Supp. Ex. A.1, § 2.) In exchange for Criss-

Cross’s services, Alkemal was to pay a service fee of $2.6 million, which was thirteen

percent of the value of the $20 million standby letter of credit. (Pl.’s Br. Supp. Ex.

A.1, § 3.) The Service Proposal was signed by Washington as President/CEO of DEW,

but was not signed by Singh as a director of Alkemal. (Pl.’s Br. Supp. Ex. A.1.)

19. On September 26, 2014, Alkemal submitted the requested directors’

resolution to Defendants, asserting that Alkemal accepted the Service Proposal and

authorized Singh to execute any related agreements for the proposal and transaction.

(Defs.’ Br. Opp’n Ex. A, ¶ 10, Ex. A.2.) The resolution was signed by Singh and one

other individual as directors of Alkemal. (Defs.’ Br. Opp’n Ex. A.2.)

D. The Escrow Instructions Between DEW and Alkemal

20. On September 26, 2014 at 9:02 a.m., Washington e-mailed Mwara a copy of “the escrow agreement” and asked that he “have [his] clients review, execute and

return ASAP.” (Pl.’s Br. Supp. Ex. A.2.) Mwara then forwarded the e-mail to Wasan

at 12:16 p.m. that same day. (Pl.’s Br. Supp. Ex. A.2.) At the hearing, Plaintiff’s

counsel represented that the document attached to that e-mail was the Joint Escrow

Instructions (the “Escrow Instructions”). (See Pl.’s Br. Supp. Ex. A.2 [“Escrow

Instructions”].)

21. The Escrow Instructions identified the parties to the transaction as DEW

and Singh, individually and as a director of Alkemal. (Escrow Instructions § 1.01.)

The Escrow Instructions provided that DEW would serve as both “Provider” and

“Escrow Holder,” and Alkemal was identified as “CLIENT.” (Escrow Instructions

§ 1.01.) The Escrow Instructions also provided that Washington would serve as

“Escrow Officer,” but did not further define that term or assign any specific duties to

the Escrow Officer. (Escrow Instructions 1.)

22. Section 2.03 of the Escrow Instructions stated that “CLIENT has requested

Provider to introduce CLIENT to an Investor” who is able to provide a standby letter

of credit in the amount of $20 million. (Escrow Instructions § 2.03.) In exchange,

DEW was to receive “a reasonable fee for services in acting as Escrow Holder in

fulfilling these Instructions and in the performance of its duties as Escrow Holder

pursuant to its letter agreement with Provider.” (Escrow Instructions § 3.03.) The

Escrow Instructions provided that DEW’s Financial Services Fee would be $2.6

million. (Escrow Instructions § 4.01.) 23. The Escrow Instructions detailed how the transaction would proceed, and

prohibited DEW, as Escrow Holder, from “mak[ing] any disbursement of funds except

as described” in the Escrow Instructions. (Escrow Instructions Art. IV.) The

instructions provided that, immediately upon execution of the Escrow Instructions,

Alkemal was to deposit a Financial Services Fee of $2.6 million into DEW’s bank

account with Bank of America. (Escrow Instructions § 4.01.) Upon receipt of the

Financial Services Fee, DEW, as the Provider, was to deliver to Alkemal “any

reasonable document that evidence[d] cash or cash equivalents under the control of

the Provider” in an amount no less than $20 million. (Escrow Instructions § 4.02.)

Upon delivery of such documentation, Alkemal was to have three banking days to

verify that the documents were genuine. (Escrow Instructions §§ 4.02–03.) If

Alkemal failed to notify DEW, in writing, within three days that the documents were

“not acceptable due to specifically identified misrepresentations or fraud,” the close

of escrow would occur, entitling DEW to the $2.6 million Financial Services Fee.

(Escrow Instructions § 4.04.) If Alkemal objected to the documents, DEW would have

two days to correct the deficiency or DEW would be obligated “immediately thereafter

[to] refund the entire Financial Services Fee” to Alkemal. (Escrow Instructions

§ 4.04.) Additionally, the Escrow Instructions provided that, should DEW fail to

provide any documentation whatsoever to Alkemal within seven days after Alkemal

deposited the Financial Services Fee, DEW would be obligated, upon Alkemal’s

written demand, to refund the entire fee. (Escrow Instructions § 4.05.) 24. The Escrow Instructions also prohibited assignment or delegation of the

parties’ rights and duties, (Escrow Instructions § 5.07), and required any amendment

or cancellation of the instructions to be in writing, executed by all parties, (Escrow

Instructions § 5.03).

25. The Escrow Instructions stated that they would “become binding on the

date last executed by a Party and only upon execution by all Parties.” (Escrow

Instructions § 5.10.) The Complaint alleges and the Answer admits that Washington,

on behalf of DEW, and Alkemal signed the Escrow Instructions on September 26,

2014. (Compl. ¶ 16; Answer & Crosscls. ¶ 16, ECF No. 12 [“Answer”].)

Notwithstanding Plaintiff’s allegation and Defendants’ admission, both parties have

produced copies of the Escrow Instructions that are signed by Washington on behalf

of DEW, but which do not contain a signature on behalf of Alkemal. (Pl.’s Br. Supp.

Ex. A.2; Defs.’ Br. Opp’n Ex. A.3.)

E. Bank Instrument Lease Agreements

26. On or about September 26, 2014—the same day that the Escrow

Instructions were sent to Alkemal—Defendants informed Alkemal that Avion, an

entity that Defendants sought out to participate in the transaction, had agreed to

have the standby letter of credit issued by an undisclosed investor. (Defs.’ Br. Opp’n

Ex. A, ¶¶ 13, 15.) Thereafter, three versions of a Bank Instrument Lease Agreement

(the “Lease Agreement”) were drafted, (Defs.’ Br. Opp’n Exs. A.4, A.5, A.9), however,

the parties dispute whether Alkemal agreed to be bound by any of the three versions,

(Pl.’s Br. Supp. 8 & n.3; Defs.’ Br. Opp’n 5–7). All three versions of the Lease Agreement are nearly identical except for the date, the parties to the agreement, the

amount of the leasing fee, and the signatures on the agreement. (See Defs.’ Br. Opp’n

Exs. A.4, A.5, A.9.)

1. Common Provisions of the Three Versions of the Lease Agreement

27. Each version of the Lease Agreement identified the Applicant’s

Representative and the Lessee as parties to the agreement. (E.g., Defs.’ Br. Opp’n

Ex. A.4, at 1.) The Lease Agreement stated that “[t]he Applicant’s Representative

represent [sic] on behalf of itself and the undisclosed Lessor (“Lessor”) who is willing

to use a credit facility at a certain bank or banks to cause the issuance of a Standby

Letter of Credit . . . which the Lessee agrees to lease[.]” (E.g., Defs.’ Br. Opp’n Ex.

A.4, at 1 (emphasis in original).) The Applicant was defined as the Lessor of the

standby letter of credit. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ A.1.)

28. The Lease Agreement defined a standby letter of credit generally as “a

written obligation of an issuing bank to pay a sum of money to a beneficiary when the

obligor of an underlying obligation does not pay the beneficiary.” (E.g., Defs.’ Br.

Opp’n Ex. A.4, ¶ A.14.a.) The Lease Agreement identified the parties involved in the

proposed standby letter of credit transaction as: (1) the applicant; (2) the issuing

bank; (3) the beneficiary; and (4) the advising bank, none of whom were parties to the

Lease Agreement. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ A.14.d.) The applicant was

defined as the bank customer who applied to the issuing bank for the standby letter

of credit. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ A.14.d(1).) The beneficiary was defined as

the party in whose favor the standby letter of credit was issued, usually a lender or a creditor to whom the Lessee was obligated. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶

A.14.d(3).) The advising bank was defined as the bank that represented the

beneficiary, and it was permitted to accept the standby letter of credit on the

beneficiary’s behalf. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ A.14.d(4).)

29. The Lease Agreement provided procedures for the issuance of the standby

letter of credit that differed from those in the Escrow Instructions. The Lease

Agreement stated that the Lessee and the Applicant’s Representative were to reach

agreement on various “Primary Documents,” which were to include the Lease

Agreement and an Escrow Funds Release Agreement, before setting a closing date on

which to execute those documents. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)b–e.) After

the Primary Documents were executed, “the Lessee [was to] deposit the Leasing Fee

with the Escrow Agent and thereby into the Escrow account to be governed pursuant

to the Escrow Funds Release Agreement.” (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)f.)

The Lease Agreement stated that the Primary Documents, which included the

Escrow Funds Release Agreement, were to be attached to the Lease Agreement as

exhibits, (e.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)e), and the Lease Application, which

was attached as Exhibit A to the Lease Agreement, stated that an escrow agreement

was to be attached as Exhibit C to the Lease Agreement, (e.g., Defs.’ Br. Opp’n Ex. A

to Ex. A.4).

30. After the Issuing Bank delivered the standby letter of credit to the

Receiving Bank, the Escrow Agent was to verify the authenticity of the standby letter

of credit. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)h.) After authenticating the standby letter of credit, the Escrow Agent “ha[d] the duty to authenticate that the notification

was in fact directly sent to the Escrow Agent from the Issuing Bank[,]” which could

be done through e-mail with the bank officer of the Issuing Bank that was handling

the transaction. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)h (emphasis omitted).) The

Escrow Agent “also ha[d] the duty to authenticate that the SWIFT receipt contain[ed]

an ‘Authentication Result: success’ result and a MIR/MOR (or TMIR/TMOR) code

proving transmission.” (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)h.) Upon completing

these authentications, the Escrow Agent was to release the Leasing Fee to the

Applicant’s Representative. (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)h.) If the Escrow

Agent determined that the documents were not sent to the Escrow Agent by the

Issuing Bank, or if the Escrow Agent did not authenticate that the SWIFT receipt

contained the required authentication result, then the Escrow Agent was directed to

close the escrow and deliver all remaining escrowed funds back to the Lessee. (E.g.,

Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(ii).) The Lease Agreement further provided that if

“for any reason [the Applicant’s Representative] fail[ed] to have the Issuing Bank

issue the Standby and deliver it to the receiving Bank within thirty (30) days after

deposit into escrow, then the Escrow Agent [was to] close the Escrow and return all

remaining sums on deposit to the Lessee.” (E.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(iii).)

31. The Lease Agreement also had several exhibits. Exhibit A was the Lease

Application in which the Lessee was to apply to the Applicant’s Representative for a

lease of the standby letter of credit. (E.g., Defs.’ Br. Opp’n Ex. A to Ex. A.4.) The

Lease Application provided that the Lessee was in agreement with the terms of the Lease Agreement and “underst[ood] and agree[d] that we [would] utilize an

independent escrow agent and escrow agreement, both defined in Exhibit C. [sic]

attached hereto.” (E.g., Defs.’ Br. Opp’n Ex. A to Ex. A.4.) An attachment to the

Lease Application provided Avion’s “General Policy Terms,” which provided that the

Leasing Fee required by the Lease Agreement would be “paid into an escrow with a

third party escrow and only delivered to [the Applicant’s Representative.]” (E.g.,

Defs.’ Br. Opp’n sched. 2 to Ex. A to Ex. A.4.) Exhibit B to the Lease Agreement set

out the Leasing Fee that the Lessee would be required to deposit in the escrow

account within twenty-four hours of execution of the Lease Agreement. (E.g., Defs.’

Br. Opp’n Ex. B to Ex. A.4.) Exhibit C was titled “Escrow Agreement (Three Party

Escrow Agreement),” but was an otherwise blank page to which no other document

was attached. (E.g., Defs.’ Br. Opp’n Ex. C to Ex. A.4.)

2. The September 25th Lease Agreement

32. The earliest Lease Agreement is dated September 25, 2014 (the “September

25th Lease Agreement”) and named Avion as the Applicant’s Representative and

Alkemal as the Lessee. (Defs.’ Br. Opp’n Ex. A.4, at 1.) The September 25th Lease

Agreement was signed by Singh on September 26th, 2014 on behalf of Alkemal but

was not signed on behalf of Avion. (Defs.’ Br. Opp’n Ex. A.4, at 13.) Singh’s signature

also appears on Exhibit A to the Lease Agreement and the attached schedules that

called for the Lessee’s signature. (Defs.’ Br. Opp’n Ex. A & scheds. 1–3 to Ex. A.4.)

Exhibit B to the September 25th Lease Agreement provided that the Leasing Fee for

the transaction would be $2.6 million. (Defs.’ Br. Opp’n Ex. B to Ex. A.4.) Exhibit C referenced an attached document for the Escrow Agreement but no such document

was attached. (Defs.’ Br. Opp’n Ex. C to Ex. A.4.)

3. The September 26th Lease Agreement

33. The Lease Agreement dated September 26, 2014 (the “September 26th

Lease Agreement”) named Avion as the Applicant’s Representative and named both

DEW and Alkemal as Lessee. (Defs.’ Br. Opp’n Ex. A.5, at 1.) Defendants contend

that this second Lease Agreement naming DEW and Alkemal as Lessee was required

by Avion for compliance reasons. (Defs.’ Br. Opp’n 5–6, Ex. A, ¶ 18.) The September

26th Lease Agreement was signed on September 26, 2014 by Singh, on behalf of

Alkemal, and by Washington, on behalf of DEW. (Defs.’ Br. Opp’n Ex. A.5, at 13.)

The September 26th Lease Agreement was not signed by Avion. (Defs.’ Br. Opp’n Ex.

A.5, at 13.) Exhibit A to the Lease Agreement and the attached schedules that call

for the Lessee’s signature were also signed by Singh and Washington. (Defs.’ Br.

Opp’n Ex. A & scheds. 1–3 to Ex. A.5.) As with the September 25th Lease Agreement,

Exhibit B listed the Leasing Fee for the transaction as $2.6 million, (Defs.’ Br. Opp’n

Ex. B to Ex. A.5), and Exhibit C referenced an attached document for the Escrow

Agreement but no such document was attached, (Defs.’ Br. Opp’n Ex. C to Ex. A.5).

4. The September 29th Lease Agreement

34. The final Lease Agreement was dated September 29, 2014 (the “September

29th Lease Agreement”) and named Avion as the Applicant’s Representative but

listed only DEW as the Lessee. (Defs.’ Br. Opp’n Ex. A.9, at 1.) The September 29th

Lease Agreement was signed by Carr on behalf of Avion and by Washington on behalf of DEW, however it was not signed on behalf of Alkemal. (Defs.’ Br. Opp’n Ex. A.9,

at 13.) In contrast to the earlier Lease Agreements, the September 29th Lease

Agreement listed the Leasing Fee as $2.2 million. (Defs.’ Br. Opp’n Ex. B to Ex. A.9.)

As with the earlier Lease Agreements, Exhibit C referenced the attached document

for the parties’ Escrow Agreement, but no such document was attached. (Defs.’ Br.

Opp’n Ex. C to Ex. A.9.)

F. The Funds Release Escrow Agreement

35. The final document submitted by the parties for the Court’s consideration

is the Funds Release Escrow Agreement (the “Funds Release Agreement”), which

bears a similar but not identical title to the Primary Document identified in the Lease

Agreement as the “Escrow Funds Release Agreement.” The Funds Release

Agreement stated that it was made by and among: (1) Avion; (2) DEW and Alkemal

as Lessee; and (3) Velocity Partners as the Escrow Agent. (Defs.’ Br. Opp’n Ex. A.6,

at 1.)

36. The Funds Release Agreement stated that Avion and the Lessee were

parties to the “Lease Agreement of even date,” and that “Avion, the Lessee and the

Escrow Agent [were] parties to this Escrow Agreement.” (Defs.’ Br. Opp’n Ex. A.6, at

1.) The Funds Release Agreement further stated that “Avion and the Lessee desire

to release the Escrowed Funds pursuant to the terms of the Escrow Agreement[.]”

(Defs.’ Br. Opp’n Ex. A.6, at 1.)

37. The Funds Release Agreement provided procedures for the issuance of the

standby letter of credit and the release of the escrowed funds that are identical to those in the Lease Agreement. (Defs.’ Br. Opp’n Ex. A.6, §§ 2–3.) The signature page

bore the type-written date of September 26th and was signed on behalf of Avion by

Carr, on behalf of DEW by Washington, and on behalf of Velocity Partners by Peter

McLaughlin (“McLaughlin”). (Defs.’ Br. Opp’n Ex. A.6, at 8.) Only McLaughlin’s

signature is dated, and it bears the date of September 29, 2014. (Defs.’ Br. Opp’n Ex.

A.6, at 8.) The Escrow Agreement stated that the Leasing Fee for the transaction is

$2.2 million. (Defs.’ Br. Opp’n Ex. A.6, at 8.)

G. Alkemal Wires $2.6 Million to DEW’s Bank Account

38. On September 29, 2014, Alkemal wired $2.6 million (the “Alkemal Funds”)

to DEW’s bank account. (Compl. ¶ 18; Answer ¶ 18; Pl.’s Br. Supp. Ex. G, ECF No.

78.7.)

39. Defendants retained a $400,000 fee for their services before releasing the

remainder of the Alkemal Funds to Velocity Partners. (Compl. ¶ 20; Answer ¶ 20.)

Washington testified that this was done ten minutes or one hour after the Alkemal

Funds were transferred. (Pl.’s Br. Supp. Ex. B, 30:19–21, ECF No. 78.2.) According

to Defendants, even though the service fee had been sent, Avion would not proceed

with the transaction until it received the executed Lease Agreement and Funds

Release Agreement. (Defs.’ Br. Opp’n 7, Ex. A, ¶ 24.) Defendants, therefore, claim to

have executed the September 29th Lease Agreement and Funds Release Agreement

with Alkemal’s knowledge and consent to ensure that Alkemal would receive the

standby letter of credit by its September 29, 2014 deadline. (Defs.’ Br. Opp’n 7, Ex.

A, ¶ 25.) 40. Velocity Partners received a fraudulent e-mail purportedly from a

representative of Scotia Bank, the bank that was to issue the standby letter of credit,

and then closed the escrow account, retained a $55,000 escrow fee, and wired the

remaining Alkemal Funds ($2.6 million less the $400,000 retained by Defendants and

the $55,000 escrow fee retained by Velocity Partners) to Avion and the other parties

previously dismissed from this action. (Compl. ¶¶ 21–22; Answer ¶¶ 21–22.)

H. Alkemal Requests a Refund of the Alkemal Funds

41. On September 30, 2014, Wasan sent an e-mail to Washington requesting

that Defendants refund the $2.6 million because Alkemal did not receive the standby

letter of credit by its September 29th deadline. (Pl.’s Br. Supp. Ex. A.5, at 7.)

Washington and Wasan exchanged e-mails over the next week wherein Wasan

requested a refund and information on why the standby letter of credit had not been

received, and Washington replied that he was working to find a solution. (Pl.’s Br.

Supp. Ex. A.5.)

42. In two separate e-mails sent by Wasan on October 3, 2014, Wasan referred

to Washington as her escrow agent. In the first e-mail, Wasan told Washington that

“you are my escrow [sic] and the money is to be sitting with you till [sic] there is

confirmation on the [standby letter of credit] receipt.” (Pl.’s Br. Supp. Ex. A.5, at 3–

4.) Wasan’s second e-mail to Washington stated that “you are my escrow [sic] and I

am unaware of any further agreements you have behind the scene[.]” (Pl.’s Br. Supp.

Ex. A.5, at 3.) Washington responded by e-mail, stating that he had “received a

notification from the escrow attorney that the escrow conditions were satisfied, and the funds were released to satisfy the escrow conditions.” (Pl.’s Br. Supp. Ex. A.5, at

1.) Washington further stated that he “absolutely understand[s] the urgency of an

immediate resolution[,]” but that he only had limited information because “we only

provision the instrument transactions and are not involved in the delivery of them.”

(Pl.’s Br. Supp. Ex. A.5, at 2.) In the days that followed, Washington and Wasan

continued working to locate the standby letter of credit to no avail. (Pl.’s Br. Supp.

Ex. A.6.)

I. Alkemal Learns that It Received Fraudulent Documentation

43. In late 2014 or early 2015, Alkemal and its bank received e-mails and

documentation, purportedly from Scotia Bank, that appeared to confirm the

transmission of the standby letter of credit. (Compl. ¶ 29; Pl.’s Br. Supp. Ex. A.7, at

4.) Alkemal, in attempting to confirm that Scotia Bank issued the standby letter of

credit, learned that Scotia Bank was not involved with any transaction involving

Alkemal and that the e-mails and documents Alkemal had received were fraudulent.

(Pl.’s Br. Supp. Ex. A.7, at 1–2, Ex. A.8.)

IV. DEFENDANTS’ MOTION TO AMEND

44. On February 10, 2017, the Court entered a Case Management Order in

which the Court set March 15, 2017 as the deadline for the parties to amend their

pleading, (Case Management Order 8, ¶ B.1, ECF No. 65), a deadline which the

parties proposed in their Case Management Report, (Case Management Report 3,

ECF No. 60). The Case Management Order further set June 30, 2017 as the discovery

deadline. (Case Management Order 4, ¶ A.1.) 45. Following the completion of discovery and briefing on Plaintiff’s Motion for

Partial Summary Judgment, Defendants filed their Motion to Amend on October 2,

2017. (ECF No. 85.) Pursuant to Rule 15(a), Defendants seek leave to amend two

paragraphs of their Answer in which they admit allegations of the Complaint. (Mot.

Am. Answer 1, ECF No. 85.) Defendants now seek to deny the allegations in

paragraphs 16 and 18 of Plaintiff’s Complaint, which allege:

16. On or about September 26, 2014, Alkemal signed [the Escrow Instructions] with DEW and Washington. . . . Under the [Escrow Instructions], DEW and Washington would serve as the escrow holder and escrow officer, respectively.

....

18. On or about September 29, 2014, Alkemal wired the sum of $2,600,000.00 to DEW as required by the [Escrow Instructions] and the agreement of DEW and Washington to procure the Letter of Credit (the “Alkemal Funds”).

(Compl. ¶¶ 16, 18.) Defendants answered by stating:

16. It is admitted that on September 26, 2014, Alkemal and DEW signed [the Escrow Instructions] and that under the [Escrow Instructions] DEW and Washington would serve as the escrow holder and escrow officer respectively. Except as admitted, denied.

18. It is admitted that on or about September 29, 2014, Alkemal wired the sum of $2,600,000.00 to DEW as required by the [Escrow Instructions], the terms of which speak for themselves. Except as admitted, denied.

(Answer ¶¶ 16, 18.)

46. Under Rule 15(a), a party may amend a pleading to which no responsive

pleading is permitted at any time within thirty days after it is served. N.C. Gen. Stat. § 1A-1, Rule 15(a). Thereafter, the party may only amend its pleading by leave of

court or by written consent of the adverse party, and leave shall be freely given when

justice so requires. Id. The party opposing the motion bears the burden of

establishing that it will be materially prejudiced by the amendment. N. River Ins.

Co. v. Young, 117 N.C. App. 663, 671, 453 S.E.2d 205, 210 (1995). A motion for leave

to amend is addressed to the sound discretion of the trial court. E.g., Draughon v.

Harnett Cty. Bd. of Educ., 166 N.C. App. 464, 467, 602 S.E.2d 721, 724 (2004).

Reasons justifying denial of a motion to amend are undue delay, bad faith, dilatory

motive, repeated failure to cure defects by previous amendments, undue prejudice,

and futility of amendment. Bodie Island Beach Club Ass’n v. Wray, 216 N.C. App.

283, 288–89, 716 S.E.2d 67, 73 (2011). “In deciding if there was undue delay, the trial

court may consider the relative timing of the proposed amendment in relation to the

progress of the lawsuit.” Draughon, 166 N.C. App. at 467, 602 S.E.2d at 724. “[A]

trial court may appropriately deny a motion for leave to amend on the basis of undue

delay where a party seeks to amend its pleading after a significant period of time has

passed since filing the pleading and where the record or party offers no explanation

for the delay.” Rabon v. Hopkins, 208 N.C. App. 351, 354, 703 S.E.2d 181, 184 (2010)

(denying motion to amend answer where defendants “fail[ed] to offer a sufficient

explanation for the nine-month delay in seeking to amend their answer”).

47. Defendants argue that when they filed their Answer, they believed Alkemal

had signed the Escrow Instructions and that they should now be allowed to amend

their Answer “to reflect what all parties now know is true so that this matter may be decided on the merits.” (Defs.’ Br. Supp. Mot. Amend Answer 1, ECF No. 86.)

Defendants further argue that they moved without delay to amend their Answer once

Plaintiff attached a copy of the unsigned agreement to its brief in support of the

Motion for Partial Summary Judgment, before which time Defendants were unaware

that Alkemal never signed the Escrow Instructions. (Defs.’ Reply Supp. Mot. Amend

Answer 2, ECF No. 92.) Defendants contend that, prior to that time, they “had no

reason to question the veracity of Plaintiff’s allegation that it had signed” the Escrow

Instructions. (Defs.’ Reply 2.) Plaintiff counters that Defendants’ Motion to Amend

should be denied on the basis of undue delay, undue prejudice, and futility. (Pl.’s

Resp. Opp’n Defs.’ Mot. Amend 1–2, ECF No. 90.) Plaintiff argues that the requested

amendment is not based on new information that was not readily ascertainable by

Defendants, but rather, that (1) Defendants produced a copy of the Escrow

Instructions that was unsigned by Alkemal in discovery on September 7, 2016, (Pl.’s

Resp. Opp’n Defs.’ Mot. Amend 4, ECF No. 90); (2) the unsigned document was

provided to Defendants as an exhibit at Washington’s deposition, which was taken

over three months before Defendants filed the Motion to Amend, (Pl.’s Resp. Opp’n

4–5); and (3) that Defendants did not serve any discovery requests or take any

depositions as part of this lawsuit, (Pl.’s Resp. Opp’n 4).

48. In arguing that they did not unduly delay in moving to amend, Defendants

rely on Davis v. Rudisill, 209 N.C. App. 587, 706 S.E.2d 784 (2011). The Court finds

that case to be clearly distinguishable from the current procedural situation. In

Davis, the complaint in a medical malpractice action alleged that the plaintiff came to the defendant clinic to have his blood drawn on a particular date but was turned

away because he had not followed the clinic’s instructions for fasting prior to a blood

draw. Davis, 209 N.C. App. at 589, 706 S.E.2d at 786. Although defendants stated

in their answer that the plaintiff had in fact come to the clinic that day, subsequent

evidence revealed that defendant clinic had been closed on the date alleged and the

trial court allowed defendants to amend their answer during trial to reflect that fact.

Id. Our Court of Appeals affirmed, finding that there was no undue delay in seeking

to amend where the plaintiff had been aware for some time that defendants were

contending the clinic was in fact closed that day and where all of the evidence

produced in discovery revealed that the clinic had been closed. Id. at 591–92, 706

S.E.2d at 787–88.

49. Throughout discovery and up until the time that Plaintiff filed its Motion

for Partial Summary Judgment, Defendants never disputed that Plaintiff and

Defendants entered into the Escrow Instructions, pursuant to which DEW was to act

as escrow holder and Washington was to act as escrow officer. Defendants not only

answered the Complaint by admitting that the parties signed the Escrow

Instructions, but also affirmatively alleged in crossclaims brought against previously

dismissed co-defendants that Alkemal and Defendants had signed the Escrow

Instructions and that pursuant to those instructions DEW would act as Escrow

Holder. (Answer 9, ¶¶ 5–6.) Additionally, Washington answered affirmatively when

asked during his deposition if “DEW, as escrow holder, and you as escrow officer, were

operating under these Joint Escrow Instructions with Alkemal[.]” (Pl.’s Br. Supp. Ex. B, 29:22–30:1.) It was not until Alkemal filed its Motion for Partial Summary

Judgment on September 8, 2017—almost two years after Defendants filed their

Answer—that Defendants asserted, for the first time, that they dispute those factual

allegations. (Defs.’ Br. Opp’n 8.) Although Washington suggested in his deposition

that the Escrow Instructions were not the entire agreement between the parties, he

affirmed that Defendants were operating under the Escrow Instructions as escrow

holder and escrow officer. (Pl.’s Br. Supp. Ex. B, 29:8–12 (stating that the Escrow

Instructions were his “agreement with Alkemal in a certain aspect of it”), Ex. B,

36:17–19 (stating that there were “several contracts that also govern the transaction

as a whole”).)

50. The Court concludes, in its discretion, that the Motion to Amend should be

denied based on Defendants’ undue delay. Defendants filed the Motion to Amend on

October 2, 2017—nearly two years after they filed their Answer and after briefing

was complete on Plaintiff’s Motion for Partial Summary Judgment. In addition,

Defendants filed their Motion to Amend over six months after the deadline for filing

amended pleadings set by the Case Management Order had passed, a deadline which

the parties themselves requested. Further, Plaintiff provided Defendants with a copy

of the Escrow Instructions that was not signed by Alkemal at Washington’s

deposition, which was taken more than three months before Defendants filed the

Motion to Amend. (Pl.’s Resp. Opp’n 4–5; see also Pl.’s Br. Supp. Ex. B, at 3.) See

Wilkerson v. Duke Univ., 229 N.C. App. 670, 679, 748 S.E.2d 154, 161 (2013)

(affirming trial court’s denial of plaintiff’s motion to amend based on undue delay when the motion was made one year and one month after plaintiff filed his original

complaint and five days before the hearing on defendants’ motion for summary

judgment); Williams v. Craft Dev., LLC, 199 N.C. App. 500, 510, 682 S.E.2d 719, 726

(2009) (affirming trial court’s denial of plaintiff’s motion to amend based on undue

delay when the motion was filed more than one year after plaintiff filed her original

complaint); Media Network, Inc. v. Long Haymes Carr, Inc., 197 N.C. App. 433,

447−48, 678 S.E.2d 671, 681 (2009) (affirming trial court’s denial of defendant’s

motion to amend when the motion was filed almost four months after defendant filed

its original answer and defendant did not offer any credible explanation for the delay);

Draughon, 166 N.C. App. at 467, 602 S.E.2d at 724 (affirming trial court’s denial of

plaintiff’s motion to amend based on undue delay when the motion was filed one year

and eleven months after plaintiff filed her second complaint and less than one week

before the hearing on defendant’s motion to dismiss and motion for summary

judgment); Wall v. Fry, 162 N.C. App. 73, 80, 590 S.E.2d 283, 287 (2004) (affirming

trial court’s denial of plaintiffs’ motion to amend based on undue delay when the

motion was filed one year and two months after plaintiffs filed their original

complaint and after defendants filed motions for summary judgment); Johnson v.

Beverly-Hanks & Assocs., Inc., 97 N.C. App. 335, 341, 388 S.E.2d 584, 587 (1990)

(affirming trial court’s denial of plaintiffs’ motion to amend based on undue delay

when the motion was made seven months after plaintiffs filed their original

complaint and there was nothing in the record to indicate why plaintiffs were delayed

in moving to amend); Wright v. Commercial Union Ins. Co., 63 N.C. App. 465, 469, 305 S.E.2d 190, 192 (1983) (affirming trial court’s denial of plaintiffs’ motion to amend

based on undue delay when the motion was filed one year and two months after

plaintiffs filed their original complaint, one year after defendant filed its answer, and

one month after defendant filed its motion for summary judgment).

51. Therefore, the Court, in its discretion, denies Defendants’ Motion to Amend

based on Defendants’ undue delay.

V. PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT

A. Claims for Relief

52. Alkemal seeks summary judgment on its claims for breach of contract,

breach of fiduciary duty, constructive fraud, fraud, conversion, and UDTP. (Pl.’s Mot.

Partial Summ. J. 1, ECF No. 76.)

B. Legal Standard

53. Summary judgment is appropriate “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that any party is entitled

to a judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c). “A genuine

issue of material fact is one that can be maintained by substantial evidence.

Substantial evidence is such relevant evidence as a reasonable mind might accept as

adequate to support a conclusion and means more than a scintilla or a permissible

inference.” Ussery v. Branch Banking & Tr. Co., 368 N.C. 325, 335, 777 S.E.2d 272,

278–79 (2015) (citations and quotation marks omitted). The moving party bears the

burden of showing that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Hensley v. Nat’l Freight Transp., Inc., 193

N.C. App. 561, 563, 668 S.E.2d 349, 351 (2008). “Once the party seeking summary

judgment makes the required showing, the burden shifts to the nonmoving party to

produce a forecast of evidence demonstrating specific facts, as opposed to allegations,

showing that he can at least establish a prima facie case at trial.” Gaunt v. Pittaway,

139 N.C. App. 778, 784−85, 534 S.E.2d 660, 664 (2000). The Court must view the

evidence in the light most favorable to the non-movants. Dobson, 352 N.C. at 83, 530

S.E.2d at 835. However, the non-movants “may not rest upon the mere allegations

or denials of [their] pleading, but [their] response, by affidavits or as otherwise

provided in this rule, must set forth specific facts showing that there is a genuine

issue for trial. If [the non-movants] do[] not so respond, summary judgment, if

appropriate, shall be entered against [the non-movants].” N.C. Gen. Stat. § 1A-1,

Rule 56(e).

C. Breach of Contract

54. The Court concludes, based on the evidence and construing the facts in the

light most favorable to Defendants as the non-moving parties, that a genuine issue of

material fact exists as to whether the parties intended the transaction to be governed

by the Escrow Instructions, on the one hand, or the Lease Agreement and Funds

Release Agreement, on the other.

55. Alkemal asserts that it is entitled to summary judgment on its claim that

Defendants breached the Escrow Instructions because there is no genuine issue of

material fact that pursuant to the Escrow Instructions, which were binding on the parties, Defendants breached their obligation to hold the Alkemal Funds in escrow

until the conditions of the Escrow Instructions were satisfied. (Pl.’s Br. Supp. 12.)

Alkemal contends that, in violation of the Escrow Instructions, Defendants released

the Alkemal Funds to Velocity Partners prior to Alkemal receiving any

documentation of the standby letter of credit, much less being given three days to

object to the authenticity of the documentation. (Pl.’s Br. Supp. 12.) As a result of

Defendants’ alleged breach, Alkemal claims to have been harmed in the amount of

$2.6 million. (Pl.’s Br. Supp. 13.)

56. Defendants admitted that the parties signed the Escrow Instructions,

pursuant to which “DEW and Washington would serve as the escrow holder and

escrow officer respectively[,]” (Answer ¶ 16), and that Alkemal wired the funds to

DEW’s account “as required by the escrow agreement,” (Answer ¶ 18). Nevertheless,

Defendants argue that the Escrow Instructions were only meant to govern if the

parties decided that Defendants would facilitate the transaction directly, rather than

arranging for an investor to facilitate the transaction. (Defs.’ Br. Opp’n 4–5.)

Defendants further argue that Alkemal subsequently agreed that Avion would

facilitate the transaction and that the Alkemal Funds would be held by a third-party

escrow agent, as provided by the Lease Agreement and Funds Release Agreement.

(Defs.’ Br. Opp’n 9.)

57. As evidence that Alkemal intended to be bound by the Lease Agreement,

Defendants submitted the September 25th and the September 26th versions of the

Lease Agreement, both signed by Singh on behalf of Alkemal. (Defs.’ Br. Opp’n Exs. A.4–A.5.) Each version of the Lease Agreement referenced an Escrow Funds Release

Agreement that was to be attached as an exhibit to the Lease Agreement. (E.g., Defs.’

Br. Opp’n Ex. A.4, ¶ D.13(1)b(3).) The Lease Application, which is attached to the

Lease Agreement as Exhibit A and signed by Singh, stated “I understand and agree

that we will utilize an independent escrow agent and escrow agreement, both defined

in Exhibit C, attached hereto.” (E.g., Defs.’ Br. Opp’n Ex. A to Ex. A.4.) Exhibit C to

the Lease Agreements, however, was titled “Escrow Agreement (Three Party Escrow

Agreement)” but was an otherwise blank page to which no other document was

attached. (E.g., Defs.’ Br. Opp’n Ex. C to Ex. A.4.) At the hearing on the Motions,

Defendants’ counsel argued that the parties intended the Funds Release Agreement,

(Defs.’ Br. Opp’n Ex. A.6), not the Escrow Instructions, to be the governing escrow

agreement. Defendants contend that Washington, with Alkemal’s full knowledge and

consent, executed the Funds Release Agreement on September 29, 2014 in order to

carry out the transaction by Alkemal’s deadline because Avion would not proceed

with the transaction until it “had a complete lease agreement, including an escrow

agreement, executed by the lessee,” which was identified as DEW in the September

29th Lease Agreement. (Defs.’ Br. Supp. Ex. A, ¶ 25.)

58. In further support of this argument, Washington testified that when

Alkemal was provided the September 26th Lease Agreement, Alkemal was also

provided with the Funds Release Agreement that listed Velocity Partners as escrow

agent “and was otherwise made aware by DEW of the identity of [Velocity Partners

as] the escrow agent.” (Defs.’ Br. Opp’n Ex. A, ¶ 19.) Additionally, Defendants’ counsel argued at the hearing that Defendants had produced a “smoking gun” e-mail

sent from Washington to Mwara on September 26, 2014, which stated:

It is completely up to the client where they wish to wire the funds. If they wire funds directly to us we will have more control over the transaction and can coordinate directly with the provider to ensure that everything is handled immediately. If to the attorney escrow [sic] we will need to continuously follow up to make sure that funds are received. It is there [sic] call.

(Defs.’ Br. Opp’n Ex. A.7.) Defendants’ counsel represented that “attorney escrow”

referred to Velocity Partners, a law firm in Massachusetts and that this e-mail proves

that Plaintiff was aware of and agreed to Velocity Partners serving as the escrow

agent. Although Washington testified that he sent this e-mail in response to an e-

mail from Mwara asking whether Alkemal should wire the service fee to Velocity

Partners or DEW, (Defs.’ Br. Opp’n Ex. A, ¶ 20), no copy of the e-mail from Mwara

was submitted to the Court.

59. Alkemal, on the other hand, disputes that it ever agreed to be bound by the

Lease Agreement, noting that the Escrow Instructions provided that “[u]nless and

until subsequently amended or cancelled in the manner provided herein, these

Instructions shall constitute the complete and only Escrow Instructions of The

Parties.” (Pl.’s Br. Supp. 6; see also Pl.’s Br. Supp. Ex. D, § 5.01, ECF No. 78.4.)

Alkemal acknowledged that it signed earlier versions of the Lease Agreement, but

notes that it did not sign the final September 29th Lease Agreement, to which it is

not named as a party, and that Avion did not sign any version of the Lease Agreement

that was signed by Alkemal. (Pl.’s Br. Supp. 8.) Alkemal points to the Escrow

Instructions’ provisions that require any amendment or cancellation of the instructions to be in writing and signed by Alkemal and DEW, (Escrow Instructions

§§ 5.03–.04), and contends that no subsequent instructions or amendments were

executed by Alkemal and DEW absolving Defendants of their obligations under the

Escrow Instructions. (Pl.’s Br. Supp. 12.)

60. As evidence of its assertions, Alkemal submitted Wasan’s affidavit, which

states that she was neither aware of nor consented to Velocity Partners acting as

escrow agent for the transaction. (Pl.’s Br. Supp. Ex. A, ¶¶ 10–11.) Alkemal points

to the fact that it did not sign any document that made specific reference to Velocity

Partners. (Pl.’s Br. Supp. Ex. A, ¶¶ 12–13.) Indeed, none of the Lease Agreements

mention Velocity Partners by name, referring only generically to the “Escrow Agent,”

(e.g., Defs.’ Br. Opp’n Ex. A.4, ¶ D.13(i)f), which was to be identified in Exhibit C to

the Lease Agreement, (e.g., Defs.’ Br. Opp’n Ex. A to Ex. A.4). In addition, Wasan

testified that she “specifically told Washington that [she] was not comfortable sending

money to an escrow agent with which [she] had not been dealing.” (Pl.’s Br. Supp.

Ex. A, ¶¶ 10–12.) Wasan testified that “[i]t was always her understanding . . . that

Washington and DEW would hold the Alkemal Funds in escrow, in their entirety,

until the conditions in the Escrow [Instructions] had been satisfied[,]” (Pl.’s Br. Supp.

Ex. A, ¶ 14), an assertion that is supported by her e-mails to Washington after

Alkemal transferred the $2.6 million to DEW’s account in which she told Washington

“you are my escrow and I am unaware of any further agreements you have behind

the scene [sic].” (Pl.’s Br. Supp. Ex. A.5, at 3.) 61. Based on the foregoing, the evidence reveals that a genuine issue of

material fact exists as to which written agreement, if any, the parties intended to

control the transaction. Defendants essentially argue that the Escrow Instructions

were superseded or abrogated by the Lease Agreements and the Funds Release

Agreement. The Escrow Instructions provided that cancellation could only be effected

by “supplementary escrow instructions; or, a written notice that complies with the

respective provisions of these Instructions relating to Amendments[,]” (Pl.’s Br. Supp.

Ex. D § 5.04), which provision states that “[n]o amendment or modification of [the

Escrow] Instructions shall be valid or effective unless and until being duly executed

by all the Parties and being lodged with Escrow Holder[, DEW,]” (Pl.’s Br. Supp. Ex.

D § 5.03). There is, therefore, some question as to whether the parties intended the

September 26th Lease Agreement, which was signed by DEW and Alkemal as Lessees

and contained substitute escrow instructions, to amend or cancel the Escrow

Instructions.

62. “It is clear that parties may modify their agreement by entering into a new

contract prescribing their rights and liabilities in regard to the entire subject matter

and the new agreement amounts to a novation.” Penney v. Carpenter, 32 N.C. App.

147, 149, 231 S.E.2d 171, 173 (1977). Our Court of Appeals has previously defined

novation “as a substitution of a new contract or obligation for an old one which is

thereby extinguished.” Bowles v. BCJ Trucking Servs., 172 N.C. App. 149, 153, 615

S.E.2d 724, 727 (2005). “The essential requirements of a novation are a previous

valid obligation, the agreement of all the parties to the new contract, the extinguishment of the old contract, and the validity of the new contract.” Anthony

Marano Co. v. Jones, 165 N.C. App. 266, 269, 598 S.E.2d 393, 395 (2004).

63. However, the making of a second contract regarding the same subject

matter as an earlier contract does not necessarily abrogate the earlier agreement.

Zinn v. Walker, 87 N.C. App. 325, 336, 361 S.E.2d 314, 320 (1987). “Whether a new

contract between the same parties discharges or supersedes a prior agreement

between them depends upon their intention as ascertained from the instrument, the

relation of the parties, and the surrounding circumstances.” Id. at 335, 361 S.E.2d at

320; see also Penney, 32 N.C. App. at 149, 231 S.E.2d at 173.

Where the question of whether a second contract dealing with the same subject matter rescinds or abrogates a prior contract between the parties depends solely upon the legal effect of the latter instrument, the question is one of law for the court, but where the second agreement does not show on its face that it must have been intended as a substitution for the prior agreement, and the facts relating to the intent of the parties are controverted, the question of intent is for the jury.

Penney, 32 N.C. App. at 149, 231 S.E.2d at 173 (quoting 2 Strong, N.C. Index 2d,

Contracts § 19).

64. Here, Plaintiff alleged and Defendants admitted that the parties signed the

Escrow Instructions and that DEW and Washington would serve as escrow holder

and escrow officer, respectively. (Compl. ¶ 16; Answer ¶ 16.) Washington further

stated in his deposition that DEW, as escrow holder, and Washington, as escrow

officer, were operating under the Joint Escrow Instructions. (Pl.’s Br. Supp. Ex. B, at

29:22–30:1.) There was, therefore, a valid agreement between the parties, and the

question becomes whether the parties agreed to a new valid contract that extinguished their rights and obligations under the Escrow Instructions.

Commensurate with the Escrow Instructions’ requirement that any amendment or

cancellation be in writing executed by both parties, DEW and Alkemal both signed

the September 26th Lease Agreement that provided procedures for the escrow

transaction wholly at odds with those provided for in the Escrow Instructions.

However, the parties’ conflicting evidence as to whether the parties intended to

remain bound by the Escrow Instructions or intended the transaction to be governed

by the Lease Agreement and Funds Release Agreement creates a genuine issue of

material fact that requires jury determination and thus precludes summary

judgment.

65. The Court, therefore, denies Plaintiff’s Motion for Partial Summary

Judgment as to its breach of contract claim.

D. Breach of Fiduciary Duty

66. “For a breach of fiduciary duty to exist, there must first be a fiduciary

relationship between the parties.” Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d

704, 707 (2001). Courts in North Carolina recognize that “a fiduciary duty can arise

by operation of law (de jure) or based on the facts and circumstances (de facto)[.]”

Lockerman v. S. River Elec. Membership Corp., 794 S.E.2d 346, 351 (N.C. Ct. App.

2016). Thus, a fiduciary relationship will arise not only from “all legal relations, such

as attorney and client, broker and principal, . . . [and] principal and agent,” for

example, “but it extends to any possible case in which there is a confidence reposed on one side and a resulting domination and influence on the other.” White v. Consol.

Planning, Inc., 166 N.C. App. 283, 293, 603 S.E.2d 147, 155 (2004).

67. Plaintiff contends that it is entitled to summary judgment on its claim for

breach of fiduciary duty because Defendants, pursuant to the Escrow Instructions,

were Plaintiff’s agents, entrusted to hold the Alkemal Funds in escrow until all

conditions of the Escrow Instructions had been satisfied. (Pl.’s Br. Supp. 15.) Plaintiff

asserts that by releasing the funds before the conditions of the Escrow Instructions

had been satisfied, Defendants breached their duties to act in good faith and with due

concern for Alkemal’s interest, resulting in Alkemal’s loss of the escrow funds. (Pl.’s

Br. Supp. 15.)

68. Plaintiff relies on appellate cases standing for the proposition that “[a]n

agent is a fiduciary concerning the matters within the scope of his agency.” SNML

Corp. v. Bank of N.C., N.A., 41 N.C. App. 28, 37, 254 S.E.2d 274, 279 (1979). In SNML

Corp., our Court of Appeals found that defendant-bank, which agreed to act as escrow

agent and not release securities held in escrow until certain conditions were satisfied,

owed fiduciary duties to plaintiff by virtue of its agency relationship. Id. at 37, 254

S.E.2d at 279–80. In SNML Corp., the fiduciary relationship arose as a matter of

law. Id. However, whether a de facto fiduciary relationship existed between the

parties is generally “determined by specific facts and circumstances, and is thus a

question of fact for a jury.” See Stamm v. Salomon, 144 N.C. App. 672, 680, 551

S.E.2d 152, 158 (2001). 69. As discussed above, questions of fact remain as to what role the parties

ultimately intended Defendants to play in this transaction. If, as Plaintiff contends,

Defendants remained bound to act as escrow holder and escrow officer under the

Escrow Instructions, then they were Alkemal’s agents and, accordingly, a jury may

find that Defendants owed Alkemal fiduciary duties with respect to the transaction.

Conversely, if, as Defendants contend, the parties agreed to be bound by the terms of

the Lease Agreement and Funds Release Agreement whereby Velocity Partners was

to serve as escrow agent, then a de jure fiduciary relationship would not exist between

the parties by virtue of the Escrow Instructions. Even assuming arguendo that

Defendants’ position is correct, a genuine issue of material fact exists as to whether

Defendants owed Plaintiff fiduciary duties by virtue of the special confidence that

Alkemal allegedly reposed in Defendants by relying on them to facilitate the

transaction and entrusting them with $2.6 million.

70. Taking all facts and inferences in the light most favorable to Defendants as

the non-moving parties, the Court concludes that a genuine issue of material fact

remains as to whether Defendants owed Plaintiff fiduciary duties. The Court,

therefore, denies Plaintiff’s Motion for Partial Summary Judgment as to Plaintiff’s

claim for breach of fiduciary duty.

E. Constructive Fraud

71. To prove constructive fraud, Plaintiff must show “(1) a relationship of trust

and confidence akin to that of a fiduciary and (2) that the defendant took advantage

of that position of trust in order to benefit himself to the detriment of plaintiff.” Sterner v. Penn, 159 N.C. App. 626, 631, 583 S.E.2d 670, 674 (2003); see also Se.

Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 329, 572 S.E.2d 200, 206 (2002). “Put

simply, a plaintiff must show (1) the existence of a fiduciary duty, and (2) a breach of

that duty.” Hunter v. Guardian Life Ins. Co. of Am., 162 N.C. App. 477, 482, 593

S.E.2d 595, 599 (2004). “The primary difference between pleading a claim for

constructive fraud and one for breach of fiduciary duty is the [additional] constructive

fraud requirement that the defendant benefit himself.” White, 166 N.C. App. at 294,

603 S.E.2d at 156.

72. Having concluded that there is a genuine issue of material fact as to

whether Defendants owed Plaintiff fiduciary duties, the Court denies Plaintiff’s

Motion for Partial Summary Judgment as to Plaintiff’s constructive fraud claim.

F. Fraudulent Inducement

73. The essential elements of fraudulent inducement are: “(1) [f]alse

representation or concealment of a material fact, (2) reasonably calculated to deceive,

(3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage

to the injured party.” S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C.

App. 601, 609, 659 S.E.2d 442, 449 (2008). “Elements three and four comprise

‘scienter,’ both of which are required to show fraud.” Forbes v. Par Ten Grp., Inc., 99

N.C. App. 587, 594, 394 S.E.2d 643, 647 (1990).

74. Alkemal argues that it is entitled to summary judgment on its fraud in the

inducement claim because Defendants falsely represented that they would hold the

Alkemal Funds in escrow until the conditions of the Escrow Instructions had been satisfied, which representation was intended to and did in fact deceive Alkemal, thus

causing Alkemal to wire the Alkemal Funds to DEW’s bank account in reliance on

the misrepresentation. (Pl.’s Br. Supp. 17–18.)

75. As with Plaintiff’s other claims, the fraud in the inducement claim depends

on whether the parties intended to be bound by the Escrow Instructions or the Lease

Agreement and the Funds Release Agreement. The Court concludes that Defendants

have proffered sufficient evidence that Plaintiff was aware of and consented to

Velocity Partners acting as a third-party escrow agent so as to create a genuine issue

of material fact. Schedule 2 to the Lease Agreements, two of which are signed by

Singh on behalf of Alkemal, stated that the “Leasing Fee [will be] paid into an escrow

with a third party escrow[.]” (E.g., Defs.’ Br. Opp’n sched. 2 to Ex. A to Ex. A.4.)

Exhibit A to the Lease Agreements, two of which are signed by Singh on behalf of

Alkemal, similarly stated “I understand and agree that we will utilize an independent

escrow agent and escrow agreement, both defined in Exhibit C.” (E.g., Defs.’ Br.

Opp’n Ex. A to Ex. A.4.) The two versions of the Lease Agreement that were signed

by Singh list both DEW and Alkemal as the Lessee. (Defs.’ Br. Opp’n Ex. A.4 at 1,

Ex. A.5 at 1.) As a Lessee and a party to the Lease Agreement, DEW could not have

been an independent escrow agent, suggesting that the parties contemplated another

entity acting in that capacity. Additionally, the e-mail from Washington to Mwara

on September 26, 2014 suggests that the parties may have had some discussion

regarding the use of an independent escrow attorney. (Defs.’ Br. Opp’n Ex. A.7.) 76. The Court concludes that the question of whether Alkemal agreed that

Velocity Partners or some entity other than DEW would act as escrow agent is a

disputed issue of material fact that goes to whether Defendants made a material

misrepresentation to Plaintiff. Therefore, the Court denies Plaintiff’s Motion for

Partial Summary Judgment as to its fraud in the inducement claim.

G. Conversion

77. “Conversion is the unauthorized assumption and exercise of the right of

ownership over the goods or personal chattels belonging to another, to the alteration

of their condition or the exclusion of an owner’s rights.” White, 166 N.C. App. at 309,

603 S.E.2d at 165 (quotation marks omitted). “There are, in effect, two essential

elements of a conversion claim: ownership in the plaintiff and wrongful possession or

conversion by the defendant.” Variety Wholesalers, Inc. v. Salem Logistics Traffic

Servs., LLC, 365 N.C. 520, 523, 723 S.E.2d 744, 747 (2012).

78. Plaintiff contends that it is entitled to summary judgment on its conversion

claim because Defendants exercised dominion and control over the Alkemal Funds

belonging to Plaintiff in violation of the Escrow Agreement. (Pl.’s Br. Supp. 18.)

Because Defendants were not yet entitled to any part of the funds, Plaintiff contends

that Defendants wrongfully converted the entire $2.6 million. (Pl.’s Br. Supp. 18–

19.)

79. If the parties were at all times bound by and acting under the Escrow

Instructions, then DEW, as Escrow Holder, would have been entitled to disburse the

Financial Services Fee of $2.6 million to the provider of the standby letter of credit if Alkemal did not inform DEW in writing that documentation of the standby letter of

credit was unacceptable within three days. (Pl.’s Br. Supp. Ex. D, §§ 4.02, 4.04.)

Thus, under those instructions, Defendants’ release of the Alkemal Funds and their

retention of a $400,000 fee would have been a wrongful conversion of Plaintiff’s

property because Washington admitted that he did not give Alkemal three days to

determine whether the standby letter of credit had been properly issued, but rather

released the funds within an hour of having received them. See Se. Shelter Corp., 154

N.C. App. at 331, 572 S.E.2d at 207 (reversing grant of summary judgment on

plaintiffs’ conversion claim where defendants were not entitled to any of plaintiffs’

assets until the end of the parties’ business relationship as defined by contract).

80. However, Plaintiff’s conversion claim hinges on what the parties intended

to be the controlling agreement in this transaction. If Defendants were properly

acting under the Lease Agreement and Funds Release Agreement, then as Lessee,

they were obligated to deposit that money with the escrow agent, (Defs.’ Br. Opp’n

Ex. A.9, § M.21), which, under the Funds Release Agreement, was Velocity Partners,

(Defs.’ Br. Opp’n Ex. A.6, at 1).

81. Because Defendants have offered sufficient evidence to raise a genuine

issue of material fact as to whether the parties intended the transaction to proceed

under the Escrow Instructions, on the one hand, or the Lease Agreement and Funds

Release Agreement, on the other, the Court concludes that Plaintiff is not entitled to

summary judgment on its conversion claim. H. UDTP

82. To establish a UDTP claim under N.C. Gen. Stat. § 75-1.1, “a plaintiff must

show: (1) defendant committed an unfair or deceptive act or practice, (2) the action in

question was in or affecting commerce, and (3) the act proximately caused injury to

the plaintiff.” Dalton, 353 N.C. at 656, 548 S.E.2d at 711. While the issue of whether

an act is unfair or deceptive is a question of law for the Court, id., “[w]hether

defendants committed the alleged act is a question of fact for the jury[,]” Forbes, 99

N.C. App. at 600, 394 S.E.2d at 650–51 (quotation marks omitted).

83. Plaintiff alleges that it is entitled to summary judgment on its UDTP claim

based on its claims for breach of fiduciary duty, constructive fraud, and fraud. As the

Court has concluded that genuine issues of material fact exist so as to preclude

summary judgment on those claims, the Court likewise concludes that Plaintiff is not

entitled to summary judgment on its UDTP claim.

VI. CONCLUSION

84. For the foregoing reasons, the Court DENIES Defendants’ Motion to

Amend and DENIES Plaintiff’s Motion for Partial Summary Judgment.

SO ORDERED, this the 12th day of December, 2017.

/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases