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

2018 NCBC 35

• Court: North Carolina Business Court
• Decided: April 19, 2018
• Docket: 15-CVS-1406
• Status: Published

Opinion

Alkemal Sing. Pte. Ltd. v. DEW Glob. Fin., LLC, 2018 NCBC 35.

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

ALKEMAL SINGAPORE PRIVATE LTD,

Plaintiff,

v. OPINION AND FINAL JUDGMENT

DEW GLOBAL FINANCE, LLC; and DONALD E. WASHINGTON III,

Defendants.

1. THIS MATTER came on for trial without a jury before the undersigned on

March 19, 2018. The matter is now ripe for final determination, and the Court issues

its Opinion and Final Judgment.

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

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

Robinson, Judge.

I. INTRODUCTION

2. Plaintiff Alkemal Singapore Private, Ltd. (“Plaintiff” or “Alkemal”) and

Defendants DEW Global Finance, LLC (“DEW”) and Donald E. Washington, III

(“Washington”) negotiated a transaction whereby Defendants would procure for

Plaintiff, or would introduce Plaintiff to an investor who would procure for Plaintiff,

a $20 million leased standby letter of credit (“SBLC”) in exchange for Plaintiff paying

Defendants a service fee of $2.6 million. The service fee represented thirteen percent of the instrument’s value and was to be held in escrow until the instrument was

authenticated.

3. In negotiating the transaction, Plaintiff and Defendants dealt with each

other almost entirely through a third-party intermediary, with multiple versions of

different agreements being exchanged between them. The parties disagree as to

which agreement or agreements were intended to govern the transaction. Plaintiff

contends that the parties entered into and were bound by a document entitled “Joint

Escrow Instructions,” which obligated Defendants to hold the service fee in an escrow

account until Plaintiff was given a reasonable opportunity to verify the authenticity

of the SBLC. Defendants contend that the Joint Escrow Instructions did not

constitute a controlling or operative and enforceable contract between the parties

because the parties entered into a Bank Instrument Lease Agreement and a separate

Funds Release Escrow Agreement, pursuant to which Defendants’ only obligations

were to (1) introduce Plaintiff to a provider who could issue the SBLC and (2) deliver

the service fee to an agreed upon third-party escrow agent.

4. After Plaintiff wired the $2.6 million service fee to Defendants, Defendants

retained a portion of the fee before forwarding the remainder of the funds to a third

party within an hour of Plaintiff’s wire transfer. Plaintiff never received the SBLC,

and the documents received by Plaintiff purporting to show that a SBLC had been

issued were later determined to be fraudulent. Plaintiff never received a refund of

any portion of the service fee it delivered to Defendants. 5. Based on the following Findings of Fact and Conclusions of Law, the Court

issues its Opinion and Final Judgment that the parties entered into and were bound

by the Joint Escrow Instructions; that DEW breached the terms thereof; that in

retaining Plaintiff’s funds, DEW converted Plaintiff’s property; and that all other

claims for relief are denied. Therefore, Plaintiff is entitled to compensatory damages

in the amount of $2.6 million plus prejudgment interest at the legal rate and

Plaintiff’s reasonable costs in prosecuting this action against DEW.

II. PROCEDURAL HISTORY

6. Plaintiff initiated this action on August 19, 2015 by filing a Complaint, with

a demand for a jury trial, asserting 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 an accounting. (Compl. 5–14, ECF No. 1.)

7. 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,

(ECF No. 3), and assigned to the Honorable Louis A. Bledsoe, III, Special Superior

Court Judge for Complex Business Cases, by order dated August 24, 2015, (ECF No.

4). This case was later reassigned to the undersigned by order dated July 5, 2016.

(ECF No. 42.)

8. On October 23, 2015, Defendants filed an answer in which Defendants

requested a jury trial. (ECF No. 12.) 9. After completion of discovery, on July 31, 2017, Plaintiff filed a Motion for

Partial Summary Judgment. (ECF No. 76.) After briefing on Plaintiff’s Motion for

Partial Summary Judgment was complete, Defendants filed a Motion to Amend

Answer on October 2, 2017. (ECF No. 85.)

10. Following a hearing on the motions, the Court entered an Order and

Opinion denying both motions. (ECF No. 93.) The Court set this matter for trial to

begin on March 19, 2018 in Henderson County, North Carolina. (ECF No. 94.)

11. On February 2, 2018, the parties entered a joint stipulation withdrawing

their respective jury demands and consenting to trial of this action by the Court

sitting without a jury. (ECF No. 95.)

12. On March 12, 2018, Plaintiff and Defendants filed their respective proposed

findings of fact and conclusions of law. (ECF Nos. 98–99.)

13. Beginning on March 19, 2018, the parties, through their counsel, presented

evidence to the Court at trial in the form of two live witnesses, various exhibits, and

deposition testimony. Following conclusion of the trial, Plaintiff and Defendants

submitted additional proposed findings of fact and conclusions of law on April 3, 2018.

(ECF Nos. 101–02.)

14. All issues and claims are now ripe for resolution.

III. FINDINGS OF FACT

15. Based on the evidence properly considered by the Court, the Court makes

the following Findings of Fact. Any determination later stated as a conclusion of law that should have been stated as a finding of fact is incorporated into these Findings

of Fact.

16. Plaintiff is a private limited company organized under the laws of

Singapore that primarily engages in the international timber trade. Daljit Singh

(“Singh”) is a director of Alkemal, and Puneeta Singh Wasan (“Wasan”) is Singh’s

daughter and the manager of Alkemal. Neither Singh nor Wasan are parties to this

litigation.

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

office and place of business in Henderson County, North Carolina. DEW was formed

in 2010 and does business as Criss-Cross Financial Group (“Criss-Cross”). For

purposes of this Opinion, DEW, sometimes doing business as Criss-Cross, will be

referred to as “DEW.”

18. Washington is the president and managing member of DEW.

19. In the summer of 2014, Alkemal had already purchased timber in Myanmar

but was required to pay between $15 and $20 million to the Myanmar Timber

Enterprise, a government agency, before September 30, 2014 to avoid confiscation of

its cargo. In order to make the necessary payment, Alkemal sought financing from a

third party.

20. The Bridging Edge, a Singapore company, put Alkemal in contact with

Mike Mwara (“Mwara”), a representative of CB Morgan Capital Group and a non-

party to this litigation. 21. After Wasan explained Alkemal’s financing needs, Mwara proposed that

Alkemal lease a SBLC that Alkemal could then use as collateral for a bank loan to

pay the amounts owed for the timber. (Pl.’s Ex. 8.) Throughout much of September

2014, Wasan and Mwara communicated regularly about the proposed transaction.

(See, e.g., Pl.’s Exs. 8–9, 11–13.) During these discussions, Wasan explained that

Alkemal needed the SBLC by September 29, 2014 to avoid confiscation of its cargo.

(See Pl.’s Exs. 8, 15–16.)

22. Mwara, having previously referred other transactions to DEW, contacted

Washington to inquire whether DEW would be willing to assist with the transaction.

Washington was made aware of Alkemal’s deadline before agreeing to assist Alkemal

in obtaining the SBLC.

23. On September 22, 2014, Mwara informed Alkemal that DEW would issue

the SBLC on Alkemal’s behalf. (Pl.’s Ex. 13.) Thereafter, Wasan, on behalf of

Alkemal, and Washington, on behalf of DEW, communicated almost entirely by

e-mail through Mwara.

24. On Wednesday, September 24, 2014, Mwara e-mailed Wasan a copy of

DEW’s service proposal and instructed her to review, execute, and return the

documents at her earliest convenience so that Plaintiff’s deadline could be met. (Pl.’s

Ex. 16.)

25. The service proposal stated that “[i]f [DEW] and/or one of our investment

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

agreement would provide that Scotia Bank, or a similar bank, would issue a $20 million leased SBLC to Alkemal. (Defs.’ Ex. A, § 1.) The service proposal stated that

Alkemal must submit certain documents to proceed with the transaction, including

proof of funds, a corporate resolution authorizing the transaction, and a copy of the

contract governing the underlying transaction. (Defs.’ Ex. A, § 1.) On the copy of the

service proposal submitted by both Plaintiff and Defendants, a number of these items

were struck through as having been received by Washington, including the

requirement that Alkemal submit a copy of the governing contract. (Defs.’ Ex. A, § 1;

Pl.’s Ex. 16, at 2, § 1.)

26. The service proposal also stated that it was standard protocol to require

Alkemal to execute a service agreement before proceeding with the transaction.

(Defs.’ Ex. A, § 2.) In exchange for DEW’s services, Alkemal was to pay a service fee

of $2.6 million. (Defs.’ Ex. A, § 3.) The service proposal was signed by Washington

as president/CEO of DEW and by Singh as a director of Alkemal. (Defs.’ Ex. A, at 4.)

27. Alkemal submitted the required directors’ resolution to Defendants,

asserting that Alkemal accepted the service proposal and authorized Singh to execute

any related agreements. (Defs.’ Ex. B.)

28. During the course of negotiations, Defendants, through Mwara, presented

Alkemal with several different written documents as draft proposed agreements. The

parties dispute which documents governed the agreement between them.

29. The Joint Escrow Instructions (“Escrow Instructions”) identified the parties

to the agreement as DEW, on the one hand, and Singh, on the other, both individually

and in his capacity as a director of Alkemal. (Defs.’ Ex. C, § 1.01.) The Escrow Instructions identified DEW as both “Provider” and “Escrow Holder,” and identified

Alkemal as the “Client.” (Defs.’ Ex. C, at 1.) The Escrow Instructions referenced

Washington only to: (1) identify him as escrow officer, (Defs.’ Ex. C, at 1, 5–6; Ex. A

to Defs.’ Ex. C); (2) instruct that notices to DEW should be directed to Washington,

(Defs.’ Ex. C, § 5.05); and (3) record his acknowledgement of acceptance of the Escrow

Instructions “for and on behalf of DEW[,]” (Defs.’ Ex. C, at 6). Nowhere do the Escrow

Instructions define the rights or duties of the escrow officer. Washington signed the

Escrow Instructions on behalf of DEW as its president. (Defs.’ Ex. C, at 5–6; Ex. A,

add. A to Defs.’ Ex. C.)

30. The Escrow Instructions stated that “[Alkemal] has requested Provider to

introduce [Alkemal] to an Investor” who is able to cause the issuance of a $20 million

SBLC. (Defs.’ Ex. C, § 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 Escrow Holder’s letter

agreement with Provider.” (Defs.’ Ex. C, § 3.03.) The Escrow Instructions provided

that DEW’s fee would be $2.6 million. (Defs.’ Ex. C, § 4.01.)

31. The Escrow Instructions provided that, immediately upon their execution,

Alkemal was to deposit a financial services fee of $2.6 million into DEW’s bank

account. (Defs.’ Ex. C, § 4.01.) Upon receipt of the fee, DEW was to deliver to Alkemal

“any reasonable document that evidence[d]” that DEW had obtained the $20 million

SBLC. (Defs.’ Ex. C, §§ 4.02–.03.) Upon delivery of such documentation, Alkemal

was to have three banking days to verify that the SBLC documents were genuine. (Defs.’ Ex. C, § 4.03.) If Alkemal failed to notify DEW, in writing, within three

banking days that the documents were “not acceptable due to specifically identified

misrepresentations or fraud,” DEW would be entitled to close escrow and retain the

$2.6 million fee. (Defs.’ Ex. C, § 4.04.) If Alkemal objected to the documents, DEW

would have two business days to correct the deficiency or DEW would be obligated

“immediately thereafter [to] refund the entire . . . [f]ee” to Alkemal. (Defs’ Ex. C,

§ 4.04.) If the provider failed to issue the SBLC within seven days of execution of the

Escrow Instructions, Alkemal was entitled to a refund of all funds that remained in

escrow. (Defs.’ Ex. C, § 4.05.)

32. The Escrow Instructions prohibited DEW, as Escrow Holder, from

“mak[ing] any disbursement of funds except as described” in the Escrow Instructions.

(Defs.’ Ex. C, Art. IV.) The Escrow Instructions also prohibited assignment or

delegation of the parties’ rights and duties, (Defs.’ Ex. C, § 5.07); required any

amendment or cancellation of the instructions to be in writing, executed by all

parties, (Defs.’ Ex. C, § 5.03); and prohibited an oral waiver of terms or conditions,

instead requiring that any waiver be in writing and executed by the party whom the

waived term or condition was intended to benefit, (Defs.’ Ex. C, § 5.06).

33. The Escrow Instructions would “become binding on the date last executed

by a Party and only upon execution by all Parties.” (Defs.’ Ex. C, § 5.10.)

34. Defendants introduced into evidence three versions of a Bank Instrument

Lease Agreement (the “Lease Agreement”). (Defs.’ Exs. D−E, I.) All three versions

of the Lease Agreement are nearly identical except for: (a) the date stated at the beginning of each document; (b) the parties to the agreement; (c) the amount of the

leasing fee; and (d) the signatures on the agreement. (Compare Defs.’ Ex. D, with

Defs.’ Exs. E, I.)

35. Each version of the Lease Agreement was created and provided by Avion

Consulting Group, LLC (“Avion”), an entity that DEW solicited to provide the SBLC.

Timothy Carr (“Carr”) was the Avion representative with whom Washington

communicated regarding the issuance of a SBLC.

36. Each version of the Lease Agreement generically identified the parties to

the agreement as: (a) the applicant’s representative and (b) the lessee of the SBLC.

(E.g., Defs.’ Ex. D, at 1.) The Lease Agreement provided that the applicant’s

representative, Avion, acted on behalf of itself and an undisclosed lessor “who is

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

[SBLC] . . . which the [l]essee agrees to lease[.]” (E.g., Defs.’ Ex. D, at 1.)

37. The Lease Agreement provided that the lessee and the applicant’s

representative were to reach agreement on certain primary documents: the Lease

Agreement, a lease application, and an Escrow Funds Release Agreement, all of

which were to be attached to the Lease Agreement as exhibits. (E.g., Defs.’ Ex. D,

¶ D.13(i)b, e.) After the primary documents were executed, the lessee was to deposit

a leasing fee “with the [e]scrow [a]gent and thereby into the [e]scrow account to be

governed pursuant to the Escrow Funds Release Agreement.” (E.g., Defs.’ Ex. D,

¶ D.13(i)f.) 38. Under each version of the Lease Agreement, after the investor’s bank (the

“issuing bank”) delivered the SBLC to the lessee’s bank (the “receiving bank”), the

escrow agent was obligated “to authenticate that the notification was in fact directly

sent to the [e]scrow [a]gent from the [i]ssuing [b]ank.” (E.g., Defs.’ Ex. D, ¶ D.13(i)h

(emphasis omitted).) The escrow agent could fulfill this duty by e-mailing the bank

officer at the issuing bank who handled the transaction. (E.g., Defs.’ Ex. D,

¶ D.13(i)h.) The escrow agent was also obligated to authenticate that the SBLC

transmission receipt showed certain authentication results and transaction codes,

which purportedly demonstrate that the transmission had occurred. (E.g., Defs.’ Ex.

D, ¶ D.13(i)h.) After authentication was complete, the escrow agent was to release

the leasing fee to the applicant’s representative. (E.g., Defs.’ Ex. D, ¶ D.13(i)h.) If

the escrow agent determined that the documents were not sent by the issuing bank,

or if the escrow agent did not authenticate that the transmission receipt had the

required results and codes, then the escrow agent was to close escrow and deliver all

remaining funds back to the lessee. (E.g., Defs.’ Ex. D, ¶ D.13(ii).) The Lease

Agreement further provided that if the SBLC was not issued and delivered to the

receiving bank within thirty days after the fee was deposited in escrow, the escrow

agent was to close the escrow account and deliver all remaining funds back to the

lessee. (E.g., Defs.’ Ex. D, ¶ D.13(iii).)

39. Each version of the Lease Agreement referred to several other documents

to be attached to the Lease Agreement as exhibits. Exhibit A was the Lease

Application, which provided that the lessee “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., Ex. A to Defs.’ Ex. D.) An attachment to the

Lease Application provided that the required leasing fee would be “paid into an

escrow with a third party escrow[.]” (E.g., sched. 2 to Ex. A to Defs.’ Ex. D.) Exhibit

B set out the leasing fee to be paid by Alkemal for issuance of the SBLC. (E.g., Ex. B

to Defs.’ Ex. D.) Exhibit C was a blank page titled “Escrow Agreement (Three Party

Escrow Agreement),” to which no other document was attached. (E.g., Ex. C to Defs.’

Ex. D.)

40. Defendants also introduced into evidence a Funds Release Escrow

Agreement (the “Funds Release Agreement”), which bears a similar but not identical

title to the primary document identified in each version of the Lease Agreement as

the “Escrow Funds Release Agreement.” (Compare Defs.’ Ex. J, with Defs.’ Ex. D,

¶ D.13(i)b(3).) The parties listed in the Funds Release Agreement were: (a) Avion;

(b) DEW and Alkemal, together as lessee; and (c) Velocity Partners, Ltd. (“Velocity”)

as escrow agent. (Defs.’ Ex. J, at 1.)

41. The Funds Release Agreement stated that “Avion and the [l]essee desire to

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

(Defs.’ Ex. J, at 1.) The Funds Release Agreement provided procedures for the

issuance of the SBLC and the release of escrowed funds that are identical to those in

the Lease Agreements. (Compare Defs.’ Ex. J, §§ 2–3, with Defs.’ Ex. I, ¶ D.13.)

42. Because of the inconsistencies between the Escrow Instructions, on the one

hand, and the Lease Agreement and Funds Release Agreement, on the other hand, it would be impossible for Defendants to simultaneously comply with both sets of

documents. The Escrow Instructions gave Alkemal the right to verify the

authenticity of the SBLC before the funds could be released, whereas the Lease

Agreement and Funds Release Agreement placed an obligation on the escrow agent

to verify the authenticity of the SBLC but gave no such right to Alkemal. (Compare

Defs.’ Ex. C, §§ 4.03–.04, with Defs.’ Ex. D, ¶ D.13(i)h, and Defs.’ Ex. J, § 2(i)h.) The

Escrow Instructions unquestionably obligated DEW to hold the $2.6 million in escrow

for up to three banking days to give Plaintiff an opportunity to verify the authenticity

and issuance of the SBLC, (Defs.’ Ex. C, Art. IV, §§ 4.04–.05), whereas the Lease

Agreement created no such obligation, (e.g., Defs.’ Ex. D, ¶ D.13(i)h), and the Funds

Release Agreement named Velocity as escrow agent, (Defs.’ Ex. J, at 1).

43. The timestamps on the e-mails sent between Mwara, Washington, and

Wasan were sent from two, or potentially three, different time zones. Mwara is

believed to have been located either on the East Coast or in Houston, Texas, and was

thus in either the Eastern or Central Time Zone of the United States. Washington

(and as a result DEW) was located in North Carolina, which is in the Eastern Time

Zone. Wasan was located in Singapore, which is twelve hours ahead of the Eastern

Time Zone. After careful review of the evidence presented, the Court finds that the

communications between the parties and the resulting transaction proceeded as

follows, with all times stated as Eastern Time unless otherwise indicated.

44. After Alkemal accepted DEW’s service proposal, which was sent on

September 24, 2014, Wasan was provided a Lease Agreement dated September 25, 2014 (the “September 25th Lease Agreement”) and a copy of the Funds Release

Agreement.

45. The September 25th Lease Agreement named Avion as the applicant’s

representative and Alkemal as the lessee and set the leasing fee for the transaction

at $2.6 million. (Defs.’ Ex. D, at 1; Ex. B to Defs.’ Ex. D.) Exhibit C was an otherwise

blank page indicating that an Escrow Agreement was attached, but no such document

was attached. (Ex. C to Defs.’ Ex. D.)

46. Wasan was not comfortable with the September 25th Lease Agreement

because the authentication procedures offered very little protection for Alkemal and

required that Velocity act as escrow agent. Wasan’s biggest concern was wiring

money to Velocity because she did not know Velocity’s representative, Peter

McLaughlin (“McLaughlin”), and had not dealt with him. Wasan expressed these

concerns to Mwara. Nevertheless, Singh signed the agreement on Alkemal’s behalf

on September 26, 2014. (Defs.’ Ex. D, at 13, Ex. A & scheds. 1–2, 4, Ex. B.)

47. At 9:02 a.m. on September 26, after the September 25th Lease Agreement

had been sent, reviewed, and signed by Singh on behalf of Alkemal, and after Wasan

expressed concerns about the security of the transaction process, Washington sent

the Escrow Instructions (naming Washington as escrow officer and DEW as escrow

holder) to Mwara, instructing Mwara to “have [his] clients review, execute and return

ASAP.” (Pl.’s Ex. 19.) Within a half hour of receiving the Escrow Instructions, Wasan

responded that she had authorized the wire transfer and would send the agreement

the next day because she could not print the agreement at that time. (Pl.’s Ex. 20.) Washington, on behalf of DEW, signed the Escrow Instructions on September 26,

2014. (Defs.’ Ex. C, at 5.) The Escrow Instructions were also executed by Alkemal.

48. At approximately 1:30 p.m. on September 26, 2014, Washington, on behalf

of DEW, electronically signed a subsequent Lease Agreement dated September 26,

2014 (the “September 26th Lease Agreement”) naming Avion as the applicant’s

representative and naming both Alkemal and DEW as “[l]essee.” (Defs.’ Ex. E, at 1,

13.) Except as explained below, the September 26th Lease Agreement was otherwise

identical to the September 25th Lease Agreement. (Compare Defs.’ Ex. D, with Defs.’

Ex. E.)

49. Although a mark similar to Singh’s signature appears on the September

26th Lease Agreement, the pages bearing Singh’s signature were photocopied from

the previously signed September 25th Lease Agreement and inserted into the

September 26th Lease Agreement without his knowledge or consent. The signatures

on the September 25th and September 26th Lease Agreements are identical in

appearance and placement on each respective page of the two documents. (Compare

Defs.’ Ex. D, at 13–16, 18–19, with Defs.’ Ex. E, at 13–16, 18–19.) Additionally, the

first page of the September 25th Lease Agreement contained definitions numbered 1

through 11, continuing onto the next page with definition number 12. (Defs.’ Ex. D,

at 1–2.) The September 26th Lease Agreement did not include a definition number

11. (Defs.’ Ex. E, at 1–2.) Definition number 11 was omitted from the September

26th Lease Agreement because the addition of DEW as lessee added a line of text to

the first page of the agreement. (Defs.’ Ex. E, at 1–2.) Thus, in order to be able to use the pages from the September 25th Lease Agreement that contained Singh’s

signature as his purported signature on the September 26th Lease Agreement,

definition 11 was omitted to maintain the pagination and spacing for the remainder

of the document.

50. Washington denies any knowledge of how the September 26th Lease

Agreement was slip-sheeted or who did it. Before trial, Wasan had not seen the

September 26th Lease Agreement naming both Alkemal and DEW as lessee.

51. At 1:49 p.m. on September 26, 2014, Washington, on behalf of DEW, affixed

his electronic signature to a Funds Release Agreement that named Velocity, rather

than DEW, as the escrow agent. (Defs.’ Ex. F, at 1, 8.) The Funds Release Agreement

stated that the leasing fee was $2.2 million, notwithstanding the fact that the

September 26th Lease Agreement, which Washington signed roughly twenty minutes

earlier, set the fee at $2.6 million. (Compare Ex. B to Defs.’ Ex. E, with Defs.’ Ex. F,

at 8.)

52. Wasan wired the $2.6 million to DEW’s bank account on Monday,

September 29, 2014 in reliance on DEW’s designation as escrow holder in the Escrow

Instructions and the fact that Alkemal would have three banking days to verify the

SBLC’s authenticity before any funds could be released from escrow.

53. Sometime after Wasan wired the funds, a third lease agreement was

executed, dated September 29, 2014 (the “September 29th Lease Agreement”). (See

Defs.’ Ex. I.) The September 29th Lease Agreement named Avion as the applicant’s

representative but listed only DEW as the lessee, having deleted Alkemal as a party. (Defs.’ Ex. I, at 1.) Washington believed he was authorized to execute the September

29th Lease Agreement on Alkemal’s behalf because Singh had executed the

September 25th Lease Agreement; however, Washington did not tell Alkemal that

the September 29th Lease Agreement did not list Alkemal as a party because he

considered it to be irrelevant. In contrast to the earlier Lease Agreements, the

September 29th Lease Agreement set the leasing fee at $2.2 million. (Ex. B to Defs.’

Ex. I.) As with the earlier Lease Agreements, Exhibit C was an otherwise blank page

that referenced an attached escrow agreement, but no such document was attached.

(Ex. C to Defs.’ Ex. I.) Washington, on behalf of DEW, signed the September 29th

Lease Agreement, which was also signed by Carr on behalf of Avion. (Defs.’ Ex. I, at

13.)

54. In addition to the September 29th Lease Agreement, Defendants

introduced into evidence the Funds Release Agreement, (Defs.’ Ex. J), which

Washington testified was the parties’ final escrow agreement and was intended to be

Exhibit C to the September 29th Lease Agreement. The signature page of the Funds

Release Agreement was dated September 26, (Defs.’ Ex. J, at 8), and was

electronically signed by Washington on that date, (Defs.’ Ex. F, at 8). The Funds

Release Agreement was also signed by Carr on behalf of Avion and by McLaughlin on

behalf of Velocity. (Defs.’ Ex. J, at 8.) Carr and McLaughlin signed the agreement

by hand, and McLaughlin’s signature was dated September 29, 2014. (Defs.’ Ex. J,

at 8.) The Funds Release Agreement was not signed by anyone on Alkemal’s behalf. (See Defs.’ Ex. J, at 8.) The executed Funds Release Agreement set the leasing fee at

$2.2 million. (Defs.’ Ex. J, at 8.)

55. Although Singh signed the September 25th Lease Agreement on Alkemal’s

behalf, Alkemal neither saw nor agreed to be bound by later versions of the Lease

Agreement or the Funds Release Agreement. Because Alkemal did not agree to be

bound by the September 26th or September 29th Lease Agreements or the Funds

Release Agreement, those documents do not constitute agreements between Plaintiff

and Defendants.

56. The terms of the September 25th Lease Agreement materially differed from

those of the September 26th and September 29th Lease Agreements in that the

parties, the service fee, or both were changed. (Compare Defs.’ Ex. D, at 1, and Ex.

B to Defs.’ Ex. D, with Defs.’ Ex. E, at 1, Ex. B to Defs.’ Ex. E, Defs.’ Ex. I, at 1, and

Ex. B to Defs.’ Ex. I.) Prior to trial, Wasan had never seen a document listing DEW,

either solely or along with Alkemal, as lessee or stating that the leasing fee was $2.2

million rather than $2.6 million. Had she seen such an agreement, it would have

raised red flags as to what was going to happen to the other $400,000 of the $2.6

million service fee being paid for the SBLC.

57. Within an hour of Wasan wiring $2.6 million to DEW, DEW retained

$400,000 as its service fee before releasing the remainder of the funds to Velocity.

Washington testified that DEW had agreed to pay Mwara $200,000 for his services

rendered in the transaction. From the $400,000 retained by DEW, Mwara was paid

$10,000 of the $200,000 that was to have been Mwara’s fee, but DEW withheld the remaining $190,000 of Mwara’s fee because the transaction was still in flux. (See Pl.’s

Ex. 7.)

58. When asked if the Escrow Instructions were part of DEW’s agreement with

Alkemal and whether DEW and Washington were obligated to act pursuant to the

Escrow Instructions, Washington’s testimony was “sort of, kind of.”

59. Alkemal did not receive the SBLC by the deadline for paying the Myanmar

Timber Enterprise. As a result, Alkemal forfeited to the Myanmar Timber Enterprise

the shipload of lumber it was purchasing and for which Alkemal had already paid

approximately $20 million.

60. On September 30, 2014, Wasan e-mailed Washington requesting that the

$2.6 million be refunded to Alkemal “as per the Escrow Agreement” because the

SBLC had not been timely issued. (Pl.’s Ex. 25, at 3.) Washington and Wasan

exchanged e-mails over the next several days wherein Wasan repeatedly requested a

refund and information on why the SBLC had not been received, and Washington

replied that he was working on a solution. (Pl.’s Exs. 25, 28.) In e-mails sent by

Wasan on October 2, 2014, Wasan told Washington that “you are my escrow and the

money is to be sitting with you till [sic] there is confirmation on the SBLC receipt”

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

the scene [sic][.]” (Pl.’s Ex. 28, at 1.) None of the e-mails introduced into evidence

demonstrate that Washington denied that DEW was obligated under the Escrow

Instructions or that the Escrow Instructions did not control the method for releasing

funds from escrow. 61. On October 2, 2014, McLaughlin, on behalf of Velocity, e-mailed

Washington to inform him that “escrow ha[d] been closed upon conditions in the

agreement having been met[.]” (Pl.’s Ex. 26, at 2.) McLaughlin then described how

the conditions required by the Lease Agreements and the Funds Release Agreement

had been met. (Pl.’s Ex. 26, at 2; see also Defs.’ Exs. D–F, I–J.) Washington responded

to McLaughlin’s e-mail within the hour, stating that “[t]he instrument ha[d] not been

received by the intended party, and I did not authorize the closure of escrow.” (Pl.’s

Ex. 26, at 1.) Washington forwarded these e-mails to Mwara, who then forwarded

them to Wasan on Thursday, October 2, 2014. (Pl.’s Ex. 26, at 1.)

62. The parties agree that Plaintiff was the victim of a fraudulent scheme by

unknown third parties. As a result, the $2.6 million wired by Alkemal to DEW for

the issuance of a $20 million SBLC was lost.

63. Plaintiff learned on October 2, 2014 that DEW had forwarded the escrowed

funds to Velocity in violation of the terms of the Escrow Instructions.

IV. CONCLUSIONS OF LAW

64. Based on the foregoing Findings of Fact, the Court makes the following

Conclusions of Law.

65. The Court has jurisdiction over the parties and the subject matter of this

action.

66. This case was properly designated as a mandatory complex business case

and assigned to the undersigned, who has authority to make Findings of Fact following the completion of the trial and the submission of all disputed issues for

resolution by the Court without a jury.

67. The parties waived their right to a jury trial on this action.

68. The parties tendered thirty exhibits, which the Court admitted into

evidence for purposes of this bench trial. The Court also received testimony by

Plaintiff’s two witnesses appearing at trial, Wasan and Washington.

69. Any Findings of Fact that are more appropriately deemed Conclusions of

Law are incorporated by reference as the Court’s Conclusions of Law.

A. Breach of Contract

70. Plaintiff alleges that the Escrow Instructions are a valid and binding

contract and that Defendants breached the agreement by failing to procure the leased

SBLC and failing to hold Plaintiff’s funds in escrow until the instrument had been

obtained. (Compl. ¶¶ 35, 37–38.)

71. Under North Carolina law, a claim for breach of contract requires (1) the

existence of a valid contract and (2) breach of the terms thereof. Poor v. Hill, 138

N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000).

72. “The well-settled elements of a valid contract are offer, acceptance,

consideration, and mutuality of assent to the contract’s essential terms.” Se.

Caissons, LLC v. Choate Constr. Co., 784 S.E.2d 650, 654 (N.C. Ct. App. 2016). “It is

axiomatic that a valid contract between two parties can only exist when the parties

assent to the same thing in the same sense . . . .” Normile v. Miller, 313 N.C. 98, 103,

326 S.E.2d 11, 15 (1985) (quotation marks omitted). “This mutual assent and the effectuation of the parties’ intent is normally accomplished through the mechanism

of offer and acceptance.” Snyder v. Freeman, 300 N.C. 204, 218, 266 S.E.2d 593, 602

(1980). In discussing offer and acceptance, our Court of Appeals has stated:

Ordinarily one party, by making an offer, assents in advance; the other, upon learning of the offer, assents by accepting it and thereby forms the contract. The offer may be communicated directly or through an agent; but information received by one party that another is willing to enter into a bargain is not necessarily an offer. The test is whether the offer is so made as to justify the accepting party in a belief that the offer is made to him.

Schwarz v. St. Jude Med., Inc., 802 S.E.2d 783, 789 (N.C. Ct. App. 2017) (quoting

Restatement (Second) of Contracts § 23, cmt. a). “Whether mutual assent is

established and whether a contract was intended between the parties are questions

for the trier of fact.” Creech v. Melnik, 347 N.C. 520, 527, 495 S.E.2d 907, 911 (1998).

73. Plaintiff’s evidence that Defendants, through Mwara, presented Plaintiff

with an offer to proceed under the Escrow Instructions, requesting that Wasan review

it, execute it, and return it “ASAP,” demonstrates that Defendants made an offer that

justified Alkemal in believing that Defendants intended to be bound upon acceptance.

74. Alkemal’s acceptance of Defendants’ offer is adequately demonstrated by

Wasan’s conduct, which occurred within thirty minutes of receiving the offer, in

sending the initial wire transfer and saying she would send the signed agreement the

next day.

75. The Court therefore concludes that the Escrow Instructions are a binding

contract. 76. Defendants argue that the Escrow Instructions cannot be enforced because

Plaintiff failed to produce a signed copy or demonstrate that a signed copy was

transmitted to Defendants. The Court finds this argument unavailing.

77. Defendants admitted in their Answer that Plaintiff and Defendants signed

the Escrow Instructions, pursuant to which DEW and Washington would act as

escrow holder and escrow officer, respectively, and that Alkemal wired the funds to

DEW as required by that agreement. (Answer and Crosscls. of DEW and Washington,

¶¶ 16, 18, ECF No. 12.) “It is well settled that parties are bound by admissions and

allegations within their pleadings unless withdrawn, amended or otherwise altered

pursuant to [Rule] 15.” Webster Enters., Inc. v. Selective Ins. Co. of the Se., 125 N.C.

App. 36, 41, 479 S.E.2d 243, 247 (1997). Defendants’ motion to amend their answer

to retract this admission was denied by this Court.

78. Even had Defendants been permitted to amend their Answer, the evidence

admitted at trial showed that Alkemal did in fact execute the Escrow Instructions.

Further, even if this finding is in error, the fact that a party seeking to enforce an

agreement did not execute the agreement is not fatal to a breach of contract claim,

even where the agreement expressly stated that it was not binding until fully

executed, as did the Escrow Instructions. “The object of a signature to a contract is

to show assent, but the signing of a written contract is not necessarily essential to its

validity. Assent may be shown in other ways, such as acts or conduct or silence.”

Burden Pallet Co. v. Ryder Truck Rental, Inc., 49 N.C. App. 286, 289, 271 S.E.2d 96,

97 (1980); see also Fid. & Cas. Co. of N.Y. v. Charles W. Angle, Inc., 243 N.C. 570, 575–76, 91 S.E.2d 575, 579 (1956) (holding that an agreement that was not executed

by plaintiff was enforceable and noting that a “signature is not always essential to

the binding force of an agreement” and that “mutuality or assent . . . may be shown

in other ways” such as whether it “is delivered and acted on”); W.B. Coppersmith &

Sons, Inc. v. Aetna Ins. Co., 222 N.C. 14, 17, 21 S.E.2d 838, 840 (1942) (“The signing

of a written contract is not necessarily essential to its validity. It is equally efficacious

if a written contract is prepared by one party and delivered to the other party, and

acquiesced in by the latter without objection.”); Walker v. Goodson Farms, Inc., 90

N.C. App. 478, 487, 369 S.E.2d 122, 127 (1988) (holding that “the parties’ failure to

execute a written contract does not preclude the creation of an enforceable

agreement”).

79. Defendants’ arguments that Plaintiff waived the Escrow Instructions’

requirements or entered into a substitute agreement are equally unavailing. For a

waiver to exist, “[t]here must always be an intention to relinquish a right, advantage

or benefit.” 42 E., LLC v. D.R. Horton, Inc., 218 N.C. App. 503, 509, 722 S.E.2d 1, 6

(2012). Such an intention “may be expressed or implied from acts or conduct that

naturally leads the other party to believe that the right has been intentionally given

up.” Id. This is true even where the contract provides that any modification must be

in writing. Id. at 511, 722 S.E.2d at 7.

80. As to the substitution of a new agreement for an old agreement, “[i]t 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); see also Bowles v. BCJ Trucking Servs., Inc., 172 N.C. App.

149, 153, 615 S.E.2d 724, 727 (2005) (“Novation may be defined as a substitution of a

new contract or obligation for an old one which is thereby extinguished.”). “[T]he

essential requisites 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.” Bowles, 172 N.C. App. at 153, 615 S.E.2d at 727.

81. The Court has found, by the greater weight of the evidence, that Plaintiff

signed the September 25th Lease Agreement before it was presented with and agreed

to be bound by the Escrow Instructions. It necessarily follows that the earlier

September 25th Lease Agreement cannot replace or modify the subsequent Escrow

Instructions. Further, having found that Plaintiff was never presented with the later

versions of the Lease Agreements, the Court cannot conclude that Plaintiff assented

to those agreements by virtue of its initial agreement to the September 25th Lease

Agreement, particularly where material terms such as the parties and the service fee

had been modified without Plaintiff’s knowledge or consent. Because Defendants

have not established that Plaintiff assented to the terms of the September 29th Lease

Agreement or the Funds Release Agreement, those defenses must fail.

82. Having found that the Escrow Instructions were a valid contract, the Court

must determine whether Defendants breached the terms thereof.

83. The Court concludes that DEW, as escrow holder, breached its obligation

under the Escrow Instructions to “not make any disbursement of funds except as described [therein,]” (Defs.’ Ex. C, Art. IV), because DEW released the funds to

Velocity almost immediately after Plaintiff transferred the funds without any

documentation being provided to Alkemal with which Alkemal could verify the

authenticity of the SBLC. See Marcuson v. Clifton, 154 N.C. App. 202, 204–05, 571

S.E.2d 599, 601–02 (2002) (affirming summary judgment in favor of plaintiff on

breach of contract claim where defendant escrow agent released escrowed funds in

violation of the express terms of the parties’ agreement).

84. However, the Court concludes that the Escrow Instructions did not impose

any binding obligations on Washington, as escrow officer. As Washington had no

contractual obligations under the Escrow Instructions, he cannot be liable for breach

of those instructions.

85. Based upon the foregoing, the Court concludes that DEW breached a valid

contract with Plaintiff—the Escrow Instructions—and Plaintiff is entitled to

compensatory damages as a result. The Court further concludes that Plaintiff has

failed to prove, by the greater weight of the evidence, its claim for breach of contract

against Washington individually and, accordingly, this claim is dismissed with

prejudice.

B. Breach of Fiduciary Duty

86. Plaintiff alleges that Defendants breached fiduciary duties owed to Plaintiff

pursuant to the Escrow Instructions by releasing the escrowed funds before the

conditions of the Escrow Instructions were satisfied. (Compl. ¶¶ 42, 45.) 87. To prevail on its claim for breach of fiduciary duty, Plaintiff must show that:

(1) Defendants owed Plaintiff a fiduciary duty; (2) Defendants breached their

fiduciary duty; and (3) the breach of fiduciary duty was a proximate cause of injury

to Plaintiff. Farndale Co. v. Gibellini, 176 N.C. App. 60, 68, 628 S.E.2d 15, 20 (2006);

see also Miller v. Burlington Chem. Co., 2017 NCBC LEXIS 6, at *23 (N.C. Super. Ct.

Jan. 27, 2017). “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).

88. “Under well-established principles of North Carolina agency law[,] [a]n

agent is a fiduciary with respect to matters within the scope of his agency.” Estate of

Graham v. Morrison, 168 N.C. App. 63, 74, 607 S.E.2d 295, 303 (2005) (quotation

marks omitted). “An agent is one who, by the authority of another, undertakes to

transact some business or manage some affairs on account of such other, and to

render an account of it.” SNML Corp. v. Bank of N.C., N.A., 41 N.C. App. 28, 36, 254

S.E.2d 274, 279 (1979). “There are two essential ingredients in the principal-agent relationship: (1) [a]uthority, either express or implied, of the agent to act for the

principal, and (2) the principal’s control over the agent.” Phelps-Dickson Builders,

L.L.C. v. Amerimann Partners, 172 N.C. App. 427, 435, 617 S.E.2d 664, 669 (2005).

“[T]he critical element of an agency relationship is the right of control.” Coastal

Plains Utils., Inc. v. New Hanover Cty., 166 N.C. App. 333, 344, 601 S.E.2d 915, 923

(2004) (quotation marks omitted). “Specifically, the principal must have the right to

control both the means and the details of the process by which the agent is to

accomplish his task in order for an agency relationship to exist.” Id. (quotation marks

omitted).

89. Plaintiff did not exercise control over Defendants’ conduct in carrying out

the transaction beyond the express terms of the Escrow Instructions. Therefore, the

Court concludes that Plaintiff and DEW did not stand in a principal-agent, de jure

fiduciary relationship by virtue of the Escrow Instructions.

90. Whether a de facto fiduciary relationship exists is generally a question of

fact. Carcano v. JBSS, LLC, 200 N.C. App. 162, 178, 684 S.E.2d 41, 53 (2009). “The

standard for finding a de facto fiduciary relationship is a demanding one: ‘Only when

one party figuratively holds all the cards—all the financial power or technical

information, for example—have North Carolina courts found that the special

circumstance of a fiduciary relationship has arisen.’” Lockerman, 794 S.E.2d at 352.

Additionally, “[p]arties to a contract do not thereby become each others’ fiduciaries;

they generally owe no special duty to one another beyond the terms of the contract[.]”

Highland Paving Co. v. First Bank, 227 N.C. App. 36, 43, 742 S.E.2d 287, 292 (2013). Generally, “parties who interact at arms-length do not have a fiduciary relationship

with each other[.]” Crumley & Assocs., P.C. v. Charles Peed & Assocs., P.A., 219 N.C.

App. 615, 620–21, 730 S.E.2d 763, 767 (2012).

91. DEW agreed to be bound by the Escrow Instructions, but no evidence was

presented that either Defendant agreed to represent Plaintiff’s best interests or that

Defendants exerted any special influence over Plaintiff. That Plaintiff was operating

under a fast-approaching deadline does not elevate DEW’s contractual obligations to

that of a fiduciary obligation. Further, Wasan’s testimony that she came to rely on

and trust Washington as a result of their very limited direct interaction is insufficient

to establish that Wasan reposed a special trust and confidence in either Defendant.

92. The Court concludes that DEW was obligated to act pursuant to the Escrow

Instructions, but neither Defendant was thereby obligated to act in Alkemal’s best

interests pursuant to a de facto fiduciary relationship.

93. Based on the foregoing, the Court concludes that Plaintiff has failed to

prove the existence of a fiduciary relationship and, therefore, Plaintiff’s second claim

for breach of fiduciary duty is dismissed with prejudice.

C. Constructive Fraud

94. “To establish constructive fraud, a plaintiff must show that defendant

(1) owes plaintiff a fiduciary duty; (2) breached this fiduciary duty; and (3) sought to

benefit himself in the transaction.” Highland Paving Co., 227 N.C. App. at 42, 742

S.E.2d at 292. 95. Plaintiff alleges that Defendants breached their fiduciary obligations and

took advantage of their position of trust to benefit themselves by releasing the

escrowed funds to Velocity before the conditions of the Escrow Instructions were

satisfied. (Compl. ¶ 54.)

96. Having concluded that Plaintiff has failed to prove the existence of a

fiduciary relationship, the Court concludes that Plaintiff has failed to prove its claim

for constructive fraud and, accordingly, Plaintiff’s third claim for constructive fraud

is dismissed with prejudice.

D. Fraud

97. The essential elements of a claim for fraud are a “(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.” Forbis v. Neal, 361 N.C. 519, 526–27, 649 S.E.2d 382, 387 (2007). Proof of a

fraud claim requires proof of scienter, which requires “an intent to deceive,

manipulate, or defraud.” RD & J Props. v. Lauralea-Dilton Enters., LLC, 165 N.C.

App. 737, 745, 600 S.E.2d 492, 498 (2004). “Additionally, reliance on alleged false

representations must be reasonable.” Sullivan v. Mebane Packaging Grp., Inc., 158

N.C. App. 19, 26, 581 S.E.2d 452, 458 (2003).

98. Plaintiff alleges in its fourth claim for relief that Defendants, by signing the

Escrow Instructions, falsely represented to Plaintiff that they would abide by the

terms of the Escrow Instructions, despite knowing that they had already signed or

planned to sign the Funds Release Agreement. (Compl. ¶¶ 61–64.) Plaintiff alleges that Defendants concealed that they had signed or planned to sign the Funds Release

Agreement, and that Defendants’ concealment and misrepresentations were

reasonably calculated to deceive Plaintiff, did in fact deceive Plaintiff, and were

intended to induce Plaintiff to wire the funds to DEW. (Compl. ¶¶ 65–66.) Plaintiff

alleges in its seventh claim for relief that Defendants, and other defendants

previously dismissed from this action, engaged in a scheme to defraud Plaintiff by

offering the leased SBLC without any intent to provide that financial instrument to

Plaintiff. (Compl. ¶ 82.)

99. Plaintiff did not demonstrate by the greater weight of the evidence that

Defendants were responsible for the slip-sheeted September 26th Lease Agreement

or that Defendants engaged in any other conduct that would satisfy the requirements

for successfully proving the elements of a claim for fraud.

100. Based on the foregoing, the Court concludes that Plaintiff has failed to

prove its claims for fraud and, therefore, Plaintiff’s fourth and seventh claims are

dismissed with prejudice.

E. Negligent Misrepresentation

101. “The tort of negligent misrepresentation occurs when a party justifiably

relies to his detriment on information prepared without reasonable care by one who

owed the relying party a duty of care.” Dallaire v. Bank of Am., N.A., 367 N.C. 363,

369, 760 S.E.2d 263, 267 (2014). Under well-settled North Carolina law,

[a] breach of duty that gives rise to a claim of negligent misrepresentation has been defined as: One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, [and thus] is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Rountree v. Chowan Cty., 796 S.E.2d 827, 831 (N.C. Ct. App. 2017) (second alteration

in original) (quoting Simms v. Prudential Life Ins. Co. of Am., 140 N.C. App. 529, 534,

537 S.E.2d 237, 241 (2000)).

102. Plaintiff alleges that Defendants represented that they would timely

deliver a SBLC to Plaintiff but that the representation was made without reasonable

care. (Compl. ¶¶ 70–71.) Plaintiff further alleges that Defendants knew that

Plaintiff would rely on Defendants’ representation, that the representation was false,

and that Plaintiff reasonably relied on the representation. (Compl. ¶¶ 72–74.)

103. Because Plaintiff presented neither evidence nor argument as to how

Defendants failed to exercise reasonable care or competence in obtaining or

communicating information to Plaintiff, the Court concludes that Plaintiff has failed

to establish its claim for negligent misrepresentation. See Guyton v. FM Lending

Servs., Inc., 199 N.C. App. 30, 49, 681 S.E.2d 465, 479 (2009) (concluding that plaintiff

failed to state a claim for negligent misrepresentation where plaintiff did not allege

unintentional or negligent conduct).

104. Accordingly, Plaintiff’s fifth claim for negligent misrepresentation is

dismissed with prejudice. F. Civil Conspiracy

105. It is well-established that North Carolina does not recognize a separate

cause of action for civil conspiracy. Strickland v. Hedrick, 194 N.C. App. 1, 19, 669

S.E.2d 61, 73 (2008). “Only where there is an underlying claim for unlawful conduct

can a plaintiff state a claim for civil conspiracy . . . .” Sellers, 191 N.C. App. at 83,

661 S.E.2d at 922.

106. Plaintiff alleges that Defendants, including defendants who were later

dismissed from this action, agreed to defraud Plaintiff and acted in concert by

intentionally committing wrongful and unlawful acts in furtherance of the alleged

conspiracy. (Compl. ¶¶ 78–79.)

107. Although it is not entirely clear from the Complaint, Plaintiff’s conspiracy

claim appears to be based on its fraud claim. Having concluded that Plaintiff has

failed to prove its fraud claim, Plaintiff’s conspiracy claim fails to the extent that it is

premised on the underlying fraud claim.

108. Even if Plaintiff had succeeded in proving an underlying claim for wrongful

conduct, Plaintiff has still failed to prove its claim for civil conspiracy. To establish a

claim for civil conspiracy, Plaintiff must demonstrate the existence of a conspiracy,

wrongful acts done by certain of the alleged conspirators, and injury. Newton v.

Barth, 788 S.E.2d 653, 663 (N.C. Ct. App. 2016). As to the first element, Plaintiff

must offer “proof of an agreement between two or more persons.” Sellers v. Morton,

191 N.C. App. 75, 83, 661 S.E.2d 915, 922 (2008). “Although civil liability for

conspiracy may be established by circumstantial evidence, the evidence of the agreement must be sufficient to create more than a suspicion or conjecture . . . .”

Cameron v. New Hanover Mem’l Hosp., Inc., 58 N.C. App. 414, 438, 293 S.E.2d 901,

916 (1982). Additionally, “[t]he doctrine of intra-corporate immunity provides that

because at least two persons must be present to form a conspiracy, a corporation

cannot conspire with itself, just as an individual cannot conspire with himself.”

Conleys Creek Ltd. P’ship v. Smoky Mountain Country Club Prop. Owners Ass’n, 805

S.E.2d 147, 156 (N.C. Ct. App. 2017) (quotation marks omitted).

109. Although the fact that the September 26th Lease Agreement was slip-

sheeted strongly suggests foul play on the part of some actor involved in the SBLC

transaction, Plaintiff offered no evidence that Defendants conspired with any other

person or entity to falsify that agreement. Further, Washington, as president and

managing member of DEW, could not conspire with DEW under the doctrine of intra-

corporate immunity. Conleys Creek Ltd. P’ship, 805 S.E.2d at 156; see also State ex

rel. Cooper v. Ridgeway Brands Mfg., LLC, 184 N.C. App. 613, 625, 646 S.E.2d 790,

799 (2007), rev’d on other grounds, 362 N.C. 431, 666 S.E.2d 107 (2008).

110. Based on the foregoing, the Court concludes that Plaintiff has failed to

prove its claim for civil conspiracy and, therefore, this claim is dismissed with

G. Conversion

111. A claim for conversion requires that Plaintiff demonstrate “(1) an

unauthorized assumption and exercise of right of ownership over property belonging

to another and (2) a wrongful deprivation of it by the owner, regardless of the subsequent application of the converted property.” N.C. State Bar v. Gilbert, 189 N.C.

App. 320, 324, 663 S.E.2d 1, 4 (2008). Stated more concisely, the necessary elements

of a claim for conversion are “(1) ownership in the plaintiff, and (2) a wrongful

conversion by the defendant.” Bartlett Milling Co., L.P. v. Walnut Grove Auction &

Realty Co., 192 N.C. App. 74, 86, 665 S.E.2d 478, 489 (2008). “[I]t is of no importance

what subsequent application was made of the converted property, or that defendant

derived no benefit from the act.” Lake Mary L.P. v. Johnston, 145 N.C. App. 525, 532,

551 S.E.2d 546, 552 (2001). In general, “money may be the subject of an action for

conversion only when it is capable of being identified and described.” Variety

Wholesalers, Inc. v Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 528, 723 S.E.2d

744, 750 (2012) (emphasis omitted). Our Supreme Court has held that “funds

transferred electronically may be sufficiently identified through evidence of the

specific source, specific amount, and specific destination of the funds in question.” Id.

at 529, 723 S.E.2d at 750–51.

112. Plaintiff alleges that it was the lawful owner of the $2.6 million that

Defendants converted for their own use or a use other than that for which they were

entrusted. (Compl. ¶¶ 88–89.) Although not clear from the Complaint, the Court

understands Plaintiff to allege that Defendants converted Plaintiff’s funds by

refusing to return the $2.6 million after Plaintiff made numerous demands that the

money be returned. (Compl. ¶¶ 90–92.)

113. Having found that, under the Escrow Instructions, DEW was obligated to

(1) hold the funds until Plaintiff had been given three banking days to verify the authenticity of the SBLC, and (2) issue Plaintiff a refund of the escrowed funds should

the SBLC not issue, the Court concludes that Plaintiff retained ownership rights in

the funds and that DEW’s failure to hold the funds for the required period of time or

to refund Plaintiff’s money after the SBLC did not issue was an unauthorized

violation of Alkemal’s rights to the funds. Because evidence in the record identifies

Alkemal’s bank account from which the funds originated, shows the exact amount of

the funds, and shows DEW’s bank account to which the funds were transferred, the

Court concludes that the funds are sufficiently identified so as to support a conversion

claim against DEW.

114. As DEW’s managing member and the individual handling the Alkemal

transaction, Washington was aware of the circumstances surrounding DEW’s

conversion of Plaintiff’s funds. “A party who comes into possession of stolen or

converted funds will not be permitted thus to use [the] funds when he is fully aware

of their nature, or there are circumstances to awaken suspicion and put him on

inquiry.” Variety Wholesalers, Inc., 365 N.C. at 526, 723 S.E.2d at 749 (alteration in

original) (quotation marks omitted). Because the Court was not presented with

evidence that any portion of those funds was transferred to Washington, the Court

concludes that any funds that were transferred to Washington were not sufficiently

identified so as to support a conversion claim against Washington.

115. Based upon the foregoing, the Court concludes that Plaintiff has proven its

claim for conversion against DEW and Plaintiff is entitled to compensatory damages. 116. The Court further concludes that Plaintiff has failed to prove its claim for

conversion against Washington and, therefore, this claim is dismissed with prejudice.

H. UDTP

117. To establish a violation of N.C. Gen. Stat. § 75-1.1, a plaintiff must show,

by the greater weight of the evidence, “(1) an unfair or deceptive act or practice, (2) in

or affecting commerce, and (3) which proximately caused injury to plaintiff[].”

Highland Paving Co., 227 N.C. App. at 45, 742 S.E.2d at 294.

If a practice has the capacity or tendency to deceive, it is deceptive for the purposes of the statute. “Unfairness” is a broader concept than and includes the concept of “deception.” A practice is unfair when it offends established public policy, as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.

Supplee v. Miller-Motte Bus. Coll., Inc., 239 N.C. App. 208, 230, 768 S.E.2d 582, 598

(2015). “Whether a trade practice is unfair or deceptive depends upon the facts of

each case and the impact the practice has in the marketplace.” Mitchell v. Linville,

148 N.C. App. 71, 74, 557 S.E.2d 620, 623 (2001) (quotation marks omitted).

118. Although not clear from the Complaint, the Court interprets Plaintiff to

allege that Defendants’ conduct in presenting Plaintiff with the Escrow Instructions

and then executing the September 26th and 29th Lease Agreements and the Funds

Release Agreement was an unfair or deceptive act or practice that had the capacity

to deceive, and did in fact deceive, Plaintiff. (Compl. ¶¶ 97–98.)

119. Having concluded that Plaintiff has not succeeded in proving its claims for

breach of fiduciary duty, constructive fraud, or fraud, the Court similarly concludes that those claims and the underlying conduct alleged do not constitute an unfair or

deceptive act or practice in violation of N.C. Gen. Stat. § 75-1.1.

120. Plaintiff has, however, successfully demonstrated that DEW, in breaching

its contractual obligations under the Escrow Instructions, converted Plaintiff’s funds.

“[I]t is true that acts of conversion may constitute [UDTP] . . . .” Bartlett Milling Co.,

L.P., 192 N.C. App. at 83, 665 S.E.2d at 487. However, the Court concludes, as a

matter of law, that the Findings of Fact “do not establish the additional egregious,

immoral, oppressive, unscrupulous, or substantially injurious acts needed to impose

the heightened penalty of [UDTP].” Id. (citing Moretz v. Miller, 126 N.C. App. 514,

518, 486 S.E.2d 85, 88 (1997)).

121. Thus, the only remaining issue is whether Defendants’ conduct in

negotiating and carrying out the parties’ contract was unfair or deceptive. “[A] mere

breach of contract, even if intentional, is not sufficiently unfair or deceptive to sustain

an action under [N.C. Gen. Stat.] § 75-1.1” absent a showing of “substantial

aggravating circumstances attending the breach” of contract. Branch Banking & Tr.

Co. v. Thompson, 107 N.C. App. 53, 62, 418 S.E.2d 694, 700 (1992). “Our case law

establishes that ‘[s]imple breach of contract . . . do[es] not qualify as unfair or

deceptive acts, but rather must be characterized by some type of egregious or

aggravating circumstances before the statute applies.’” Supplee, 239 N.C. App. at

230, 768 S.E.2d at 598 (alterations and omissions in original) (quoting Norman Owen

Trucking, Inc. v. Morkoski, 131 N.C. App. 168, 177, 506 S.E.2d 267, 273 (1998)). Thus,

“[a] violation of Chapter 75 is unlikely to occur during the course of contractual performance, as these types of claims are best resolved by simply determining

whether the parties properly fulfilled their contractual duties.” Mitchell, 148 N.C.

App. at 75, 557 S.E.2d at 624.

122. Having found that the confusion surrounding this transaction and which

agreement or agreements controlled was the result of hurried negotiations conducted

almost entirely through an intermediary, the Court concludes that DEW’s conduct as

alleged and proven, including its breach of contract, was not attended by egregious or

aggravating circumstances sufficient to warrant a finding that such conduct was

unfair or deceptive within the meaning of N.C. Gen. Stat. § 75-1.1.

123. Accordingly, the Court concludes that Plaintiff has failed to prove its claim

for UDTP and, thus, this claim is dismissed with prejudice.

I. Unjust Enrichment

124. To recover under a theory of unjust enrichment, Plaintiff must show “that

it conferred a benefit on another party, that the other party consciously accepted the

benefit, and that the benefit was not conferred gratuitously or by an interference in

the affairs of the other party.” Se. Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 330,

572 S.E.2d 200, 206 (2002); see also Booe v. Shadrick, 322 N.C. 567, 570, 369 S.E.2d

554, 556 (1988). An unjust enrichment claim is based “neither in tort nor contract

but is described as a claim in quasi contract or a contract implied in law.” Booe, 322

N.C. at 570, 369 S.E.2d at 556. “If there is a contract between the parties the contract

governs the claim and the law will not imply a contract.” Id. 125. Plaintiff alleges that, in order to obtain the SBLC, it wired $2.6 million to

DEW at Defendants’ request and based on their promises to procure a SBLC. (Compl.

¶ 103.) Plaintiff further alleges that DEW knowingly and voluntarily accepted the

payment, and that Defendants, including defendants previously dismissed from this

action, received various amounts of the $2.6 million under circumstances that create

a “legal or equitable obligation on the part of those Defendants to account for the

benefits received” because Plaintiff received nothing in return. (Compl. ¶¶ 105–06.)

126. Having concluded that the Escrow Instructions were a valid, binding

agreement, the Court concludes that Plaintiff’s claim for unjust enrichment is

precluded by the parties’ express agreement, and Plaintiff’s tenth claim for relief is

therefore dismissed with prejudice.

J. Remedies

127. Plaintiff’s eleventh and twelfth “claims” seeking a constructive trust and an

accounting, respectively, are remedies and will be discussed herein below.

1. Compensatory Damages

128. “The objective of compensatory damages is to restore the plaintiff to his

original condition or to make the plaintiff whole.” Watson v. Dixon, 352 N.C. 343,

347, 532 S.E.2d 175, 178 (2000). An award of damages is intended to give back to a

successful claimant “that which was lost as far as it may be done by compensation in

money.” Shera v. N.C. State Univ. Veterinary Teaching Hosp., 219 N.C. App. 117,

126, 723 S.E.2d 352, 357 (2012) (emphasis omitted). 129. As stated in paragraphs 85 and 115, Plaintiff is entitled to compensatory

damages as a proximate result of DEW’s breach of contract and conversion of

Plaintiff’s funds in the total amount of $2.6 million.

130. Plaintiff is further entitled to recover damages in the form of prejudgment

interest at the legal rate from the date of breach. The Court has found that Plaintiff

became aware that its money had been misdirected on October 2, 2014. The Court

finds that prejudgment interest accrues from that date, at the legal rate on the award

of $2.6 million.

131. Although Plaintiff’s Complaint requests incidental, consequential, and

anticipatory damages, (Compl. 15), the Court declines to award such damages

because Plaintiff has not provided any proof or argued that it is entitled to such

damages or offered any basis on which the Court could calculate such damages. See

Olivetti Corp. v. Ames Bus. Sys., Inc., 319 N.C. 534, 547–48, 356 S.E.2d 578, 586

(1987) (“[T]he party seeking damages must show that the amount of damages is based

upon a standard that will allow the finder of fact to calculate the amount of damages

with reasonable certainty.”).

2. Punitive Damages

132. Punitive damages may be appropriate “to punish a defendant for

egregiously wrongful acts and to deter the defendant and others from committing

similar wrongful acts.” N.C. Gen. Stat. § 1D-1. However, such damages may only be

awarded if the claimant, in addition to proving that the defendant is liable for

compensatory damages, also proves that fraud, malice, or willful or wanton conduct was present. Id. § 1D-15. Generally, a party cannot recover punitive damages for

breach of contract. Richardson v. Bank of Am., N.A., 182 N.C. App. 531, 558, 643

S.E.2d 410, 427 (2007).

133. Having concluded that the facts attendant to DEW’s conversion of

Plaintiff’s funds do not demonstrate sufficient misconduct to support Plaintiff’s UDTP

claim, the Court similarly concludes that the facts do not demonstrate fraud, malice,

or willful or wanton conduct that would justify an award of punitive damages.

134. The Court concludes that Plaintiff has not demonstrated that punitive

damages would be appropriate under the facts and circumstances of this case and,

therefore, denies Plaintiff’s request for punitive damages.

3. Constructive Trust

135. Plaintiff seeks imposition of a constructive trust on Defendants’ funds. A

constructive trust has been described by our appellate courts as “a duty, or

relationship, imposed by courts of equity to prevent the unjust enrichment of the

holder of title to . . . property which such holder acquired through fraud, breach of

duty or some other circumstance making it inequitable for him to retain it against

the claim of the beneficiary[.]” Norman v. Nash Johnson & Sons’ Farms, Inc., 140

N.C. App. 390, 415, 537 S.E.2d 248, 264–65 (2000). Constructive trusts, though they

may arise in a variety of situations, require that there be some fraud, breach of duty,

or other wrongdoing by the holder of the property. Id. at 415, 537 S.E.2d at 265.

“Constructive trusts ordinarily arise from actual or constructive fraud and usually

involve the breach of a confidential relationship.” Carcano, 200 N.C. App. at 169, 684 S.E.2d at 48 (quotation marks omitted). Although a confidential relationship is not

strictly required, in its absence, a plaintiff “faces the difficult task of proving some

other circumstance making it inequitable” for a defendant to possess the property in

question. Variety Wholesalers, Inc., 365 N.C. at 530–31, 723 S.E.2d at 752 (quotation

marks omitted).

136. Although Plaintiff has proven its conversion claim against DEW, the Court

concludes that the creation of a constructive trust is unwarranted because Plaintiff’s

successful contract claim provides an adequate remedy at law. Estate of Chambers

v. Vision Two Hosp. Mgmt., LLC, 2013 NCBC LEXIS 49, at *18–19 (N.C. Super. Ct.

Nov. 21, 2013) (citing In re Gertzman, 115 N.C. App. 634, 640–41, 446 S.E.2d 130,

135 (1994); Branch Banking & Tr. Co. v. Lighthouse Fin. Corp., 2005 NCBC LEXIS

4, at *27–28 (N.C. Super. Ct. July 13, 2005) (dismissing constructive trust claim

where defendants’ assets upon which a constructive trust could be imposed were

recoverable through legal remedies available for plaintiff’s other claims)).

137. Based on the foregoing, the Court concludes that Plaintiff is not entitled to

the equitable remedy of a constructive trust.

4. Accounting

138. “The remedy of an equitable accounting may be available when a plaintiff

has asserted a valid claim for relief in equity and an accounting is necessary to compel

discovery of information regarding accounts held exclusively by the defendant.” Mkt.

Choice, Inc. v. New Eng. Coffee Co., 5:08-CV-90, 2009 U.S. Dist. LEXIS 73627, at *35– 36 (W.D.N.C. Aug. 18, 2009) (applying North Carolina law); see also Miller, 2017

NCBC LEXIS 6, at *36.

139. Because Plaintiff has proven its breach of contract claim and has a legal

remedy for the entirety of the funds transmitted to DEW, the Court concludes that it

would be both unnecessary and improper to impose the equitable remedy of an

accounting for the same reasons stated above in relation to Plaintiff’s request that a

constructive trust be imposed.

140. Based on the foregoing, the Court concludes that Plaintiff is not entitled to

the equitable remedy of an accounting.

5. Costs

141. “In actions where allowance of costs is not otherwise provided by the

General Statutes, costs may be allowed in the discretion of the court.” N.C. Gen. Stat.

§ 6-20. “Costs awarded by the court are subject to the limitations on assessable or

recoverable costs set forth in [N.C. Gen. Stat. §] 7A-305(d), unless specifically

provided for otherwise in the General Statutes.” Id.

142. The Court concludes, in its discretion, that Plaintiff should be awarded its

reasonable costs in pursuing claims against DEW. Plaintiff shall have fourteen (14)

days from the date of entry of this Opinion and Final Judgment to file a motion

seeking recovery of costs reasonably incurred in the prosecution of this action against

DEW along with a supporting brief and appropriate supporting materials. V. CONCLUSION

143. Based on the foregoing Findings of Fact and Conclusions of Law, it is

HEREBY ORDERED, ADJUDGED, AND DECREED THAT:

A. On account of Defendant DEW’s breach of the Joint Escrow

Instructions and conversion of Plaintiff’s funds, Plaintiff is entitled

to recover from DEW the full amount of the funds deposited in escrow

in the total amount of $2,600,000.00, plus prejudgment interest at

the legal rate from October 2, 2014 and post-judgment interest at the

legal rate until the judgment is satisfied.

B. Plaintiff shall have fourteen (14) days from the entry of this Opinion

and Final Judgment to submit to the Court a motion and supporting

brief and materials seeking recovery of Plaintiff’s costs in

prosecuting this action against DEW.

C. All parties shall bear their own attorneys’ fees.

D. All other requested relief is DENIED.

144. Having resolved all claims, this Opinion and Final Judgment constitutes

the Court’s final judgment.

SO ORDERED, this the 19th day of April, 2018.

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