IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA22-495
Filed 21 February 2023
Wake County, No. 16 CVS 1526
FIRST RECOVERY, LLC, and DYLAN BROOKS, Plaintiffs,
v.
UNLIMITED REC-REP, LLC, f/k/a UNLIMITED RECOVERY REPOSSESSION DIVISION, LLC, KEITH SANDERS, individually, and RITCHIE, INC. d/b/a SUNBELT OF RALEIGH, Defendants.
Appeal by Plaintiffs from Order entered 1 February 2022 by Judge A. Graham
Shirley, II in Wake County Superior Court. Heard in the Court of Appeals 24 January
2023.
Austin Law Firm, PLLC, by John S. Austin, for Plaintiff-Appellants.
Cozen O’Connor, by Alycen Moss and Travis Ray Joyce, for Defendant-Appellee Richie Inc. d/b/a Sunbelt of Raleigh.1
HAMPSON, Judge.
First Recovery, LLC and Dylan Brooks (Plaintiffs) appeal from an Order
granting Summary Judgment to Richie, Inc. d/b/a Sunbelt of Raleigh2 (Richie) on the
1 Denise L. Besselieu appeared on briefs for Defendant-Appellee. By Order entered 21 November 2022, this Court permitted Denise L. Besselieu to withdraw and Alycen Moss to be substituted as counsel. Travis Ray Joyce subsequently entered a Notice of Appearance in this Court indicating that appearance was in substitution of Alycen Moss. However, this Court was not asked to allow Alycen Moss to withdraw as counsel. 2 It appears the case caption in the case as filed below misspelled Richie as Ritchie. While we keep
the caption as-is to maintain consistency, we will endeavor to use the correct spelling utilized by the parties in their briefing to this Court in the body of our opinion. FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
Opinion of the Court
basis Plaintiffs are collaterally estopped from pursuing their claims against Richie
following a decision by a bankruptcy court dismissing Plaintiffs’ Adversary
Proceeding against co-Defendant Keith Sanders (Sanders). However, during the
pendency of this appeal, the bankruptcy court’s decision was vacated by a United
States District Court and the Adversary Proceeding remanded for a new trial. As
such, for the following reasons, we vacate the trial court’s Order granting Summary
Judgment in favor of Richie in this case and remand this matter to the trial court to
conduct further proceedings. Relevant to this appeal, the Record before us tends to
reflect the following:
Factual and Procedural Background
Plaintiffs commenced this action on 2 February 2016 by filing a Complaint
against Unlimited Rec-Rep, LLC, f/k/a Unlimited Recovery Repossession Division,
LLC (URR) and Sanders alleging claims of breach of contract, breach of warranty,
fraud, and unfair and/or deceptive trade practices arising from the sale of URR to
Plaintiffs from Sanders. On 8 August 2016, Plaintiffs filed an Amended Complaint
adding Richie, the broker in the sale of the business, as a defendant. In the Amended
Complaint, in addition to the claims against URR and Sanders, Plaintiffs alleged
claims of fraud, negligent misrepresentation, and unfair and/or deceptive trade
practices against Richie.
On 21 September 2017, URR filed a Chapter 7 bankruptcy proceeding in the
United States Bankruptcy Court for the Eastern District of North Carolina. The case
-2- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
was subsequently placed on inactive status. On 27 March 2019, URR’s bankruptcy
case was resolved. On 9 August 2019, Sanders filed his own Chapter 7 bankruptcy
petition in the United States Bankruptcy Court for the Eastern District of North
Carolina. On 13 January 2020, Plaintiffs filed an Adversary Proceeding against
Sanders in the United States Bankruptcy Court for the Eastern District of North
Carolina seeking to have the alleged debt owed to Plaintiffs arising from the sale of
URR deemed non-dischargeable on the basis of fraud and/or misrepresentation under
11 U.S.C. § 523(a)(2).
On 19 March 2020, Plaintiffs and Richie entered into a Consent Order
removing the matter from inactive status to allow the litigation as between them to
proceed, while the matter remained inactive as to Sanders. On 16 December 2020,
Richie filed a Motion for Summary Judgment. This Motion was heard on 17 February
2021 before the Honorable G. Bryan Collins in Wake County Superior Court. On 9
April 2021, Judge Collins rendered his decision denying Richie’s Motion for Summary
Judgment via email to the parties. Plaintiffs did not submit a proposed Order to
Judge Collins until 25 January 2022.
On 17 December 2021, following evidentiary hearings, the Bankruptcy Court
issued an Order concluding Plaintiffs in that action had failed to present sufficient
evidence of either justifiable or reasonable reliance to establish a prima facie case of
fraud or misrepresentation under 11 U.S.C. § 523(a)(2) for non-dischargeability. The
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Bankruptcy Court, thus, entered judgment for Sanders and dismissed the Adversary
Proceeding.
On 29 December 2021, Richie filed a second Motion for Summary Judgment,
this time contending the Bankruptcy Court’s ruling collaterally estopped Plaintiffs
from asserting claims of fraud and misrepresentation against Richie. On 27 January
2022, Richie’s second Motion for Summary Judgment was heard before the Honorable
A. Graham Shirley, II in Wake County Superior Court. On 1 February 2022, Judge
Shirley entered his Order granting Richie’s Motion for Summary Judgment and
dismissing Plaintiffs’ claims against Richie. Later that day, Judge Collins entered
his Order denying Richie’s first Motion for Summary Judgment. Plaintiffs filed
Notice of Appeal to this Court from Judge Shirley’s Order on 9 February 2022.
During the pendency of this appeal, Plaintiffs appealed the Bankruptcy Court’s
Order in the Adversary Proceeding to the United States District Court for the Eastern
District of North Carolina. On 9 January 2023, the District Court vacated the
Bankruptcy Court’s Order and remanded the case for a new trial.3 See First Recovery,
LLC v. Sanders, No. 5:21-CV-530-FL (E.D.N.C. Jan. 9, 2023).
Analysis
3 Plaintiffs have filed a Motion to Amend the Record to include the District Court’s Order and Judgment as part of the Record. Richie did not file any response to this Motion. Both parties have included portions of the Adversary Proceeding filings in the Record and relied on those filings in their arguments to this Court. As such, we allow the Motion to Amend the Record.
-4- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
Judge Shirley’s Order granted Richie’s Motion for Summary Judgment which
alleged Plaintiffs were collaterally estopped from re-litigating issues of fraud and
misrepresentation by the Bankruptcy Court’s Order. On appeal to this Court,
Plaintiffs contend the trial court erred in granting Summary Judgment because the
Bankruptcy Court’s Order should not be deemed to collaterally estop their claims in
this action.
“The companion doctrines of res judicata and collateral estoppel have been
developed by the courts of our legal system during their march down the corridors of
time to serve the present-day dual purpose of protecting litigants from the burden of
relitigating previously decided matters and of promoting judicial economy by
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IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA22-495
Filed 21 February 2023
Wake County, No. 16 CVS 1526
FIRST RECOVERY, LLC, and DYLAN BROOKS, Plaintiffs,
v.
UNLIMITED REC-REP, LLC, f/k/a UNLIMITED RECOVERY REPOSSESSION DIVISION, LLC, KEITH SANDERS, individually, and RITCHIE, INC. d/b/a SUNBELT OF RALEIGH, Defendants.
Appeal by Plaintiffs from Order entered 1 February 2022 by Judge A. Graham
Shirley, II in Wake County Superior Court. Heard in the Court of Appeals 24 January
2023.
Austin Law Firm, PLLC, by John S. Austin, for Plaintiff-Appellants.
Cozen O’Connor, by Alycen Moss and Travis Ray Joyce, for Defendant-Appellee Richie Inc. d/b/a Sunbelt of Raleigh.1
HAMPSON, Judge.
First Recovery, LLC and Dylan Brooks (Plaintiffs) appeal from an Order
granting Summary Judgment to Richie, Inc. d/b/a Sunbelt of Raleigh2 (Richie) on the
1 Denise L. Besselieu appeared on briefs for Defendant-Appellee. By Order entered 21 November 2022, this Court permitted Denise L. Besselieu to withdraw and Alycen Moss to be substituted as counsel. Travis Ray Joyce subsequently entered a Notice of Appearance in this Court indicating that appearance was in substitution of Alycen Moss. However, this Court was not asked to allow Alycen Moss to withdraw as counsel. 2 It appears the case caption in the case as filed below misspelled Richie as Ritchie. While we keep
the caption as-is to maintain consistency, we will endeavor to use the correct spelling utilized by the parties in their briefing to this Court in the body of our opinion. FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
Opinion of the Court
basis Plaintiffs are collaterally estopped from pursuing their claims against Richie
following a decision by a bankruptcy court dismissing Plaintiffs’ Adversary
Proceeding against co-Defendant Keith Sanders (Sanders). However, during the
pendency of this appeal, the bankruptcy court’s decision was vacated by a United
States District Court and the Adversary Proceeding remanded for a new trial. As
such, for the following reasons, we vacate the trial court’s Order granting Summary
Judgment in favor of Richie in this case and remand this matter to the trial court to
conduct further proceedings. Relevant to this appeal, the Record before us tends to
reflect the following:
Factual and Procedural Background
Plaintiffs commenced this action on 2 February 2016 by filing a Complaint
against Unlimited Rec-Rep, LLC, f/k/a Unlimited Recovery Repossession Division,
LLC (URR) and Sanders alleging claims of breach of contract, breach of warranty,
fraud, and unfair and/or deceptive trade practices arising from the sale of URR to
Plaintiffs from Sanders. On 8 August 2016, Plaintiffs filed an Amended Complaint
adding Richie, the broker in the sale of the business, as a defendant. In the Amended
Complaint, in addition to the claims against URR and Sanders, Plaintiffs alleged
claims of fraud, negligent misrepresentation, and unfair and/or deceptive trade
practices against Richie.
On 21 September 2017, URR filed a Chapter 7 bankruptcy proceeding in the
United States Bankruptcy Court for the Eastern District of North Carolina. The case
-2- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
was subsequently placed on inactive status. On 27 March 2019, URR’s bankruptcy
case was resolved. On 9 August 2019, Sanders filed his own Chapter 7 bankruptcy
petition in the United States Bankruptcy Court for the Eastern District of North
Carolina. On 13 January 2020, Plaintiffs filed an Adversary Proceeding against
Sanders in the United States Bankruptcy Court for the Eastern District of North
Carolina seeking to have the alleged debt owed to Plaintiffs arising from the sale of
URR deemed non-dischargeable on the basis of fraud and/or misrepresentation under
11 U.S.C. § 523(a)(2).
On 19 March 2020, Plaintiffs and Richie entered into a Consent Order
removing the matter from inactive status to allow the litigation as between them to
proceed, while the matter remained inactive as to Sanders. On 16 December 2020,
Richie filed a Motion for Summary Judgment. This Motion was heard on 17 February
2021 before the Honorable G. Bryan Collins in Wake County Superior Court. On 9
April 2021, Judge Collins rendered his decision denying Richie’s Motion for Summary
Judgment via email to the parties. Plaintiffs did not submit a proposed Order to
Judge Collins until 25 January 2022.
On 17 December 2021, following evidentiary hearings, the Bankruptcy Court
issued an Order concluding Plaintiffs in that action had failed to present sufficient
evidence of either justifiable or reasonable reliance to establish a prima facie case of
fraud or misrepresentation under 11 U.S.C. § 523(a)(2) for non-dischargeability. The
-3- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
Bankruptcy Court, thus, entered judgment for Sanders and dismissed the Adversary
Proceeding.
On 29 December 2021, Richie filed a second Motion for Summary Judgment,
this time contending the Bankruptcy Court’s ruling collaterally estopped Plaintiffs
from asserting claims of fraud and misrepresentation against Richie. On 27 January
2022, Richie’s second Motion for Summary Judgment was heard before the Honorable
A. Graham Shirley, II in Wake County Superior Court. On 1 February 2022, Judge
Shirley entered his Order granting Richie’s Motion for Summary Judgment and
dismissing Plaintiffs’ claims against Richie. Later that day, Judge Collins entered
his Order denying Richie’s first Motion for Summary Judgment. Plaintiffs filed
Notice of Appeal to this Court from Judge Shirley’s Order on 9 February 2022.
During the pendency of this appeal, Plaintiffs appealed the Bankruptcy Court’s
Order in the Adversary Proceeding to the United States District Court for the Eastern
District of North Carolina. On 9 January 2023, the District Court vacated the
Bankruptcy Court’s Order and remanded the case for a new trial.3 See First Recovery,
LLC v. Sanders, No. 5:21-CV-530-FL (E.D.N.C. Jan. 9, 2023).
Analysis
3 Plaintiffs have filed a Motion to Amend the Record to include the District Court’s Order and Judgment as part of the Record. Richie did not file any response to this Motion. Both parties have included portions of the Adversary Proceeding filings in the Record and relied on those filings in their arguments to this Court. As such, we allow the Motion to Amend the Record.
-4- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
Judge Shirley’s Order granted Richie’s Motion for Summary Judgment which
alleged Plaintiffs were collaterally estopped from re-litigating issues of fraud and
misrepresentation by the Bankruptcy Court’s Order. On appeal to this Court,
Plaintiffs contend the trial court erred in granting Summary Judgment because the
Bankruptcy Court’s Order should not be deemed to collaterally estop their claims in
this action.
“The companion doctrines of res judicata and collateral estoppel have been
developed by the courts of our legal system during their march down the corridors of
time to serve the present-day dual purpose of protecting litigants from the burden of
relitigating previously decided matters and of promoting judicial economy by
preventing needless litigation.” Thomas M. McInnis & Assocs., Inc. v. Hall, 318 N.C.
421, 427, 349 S.E.2d 552, 556 (1986). In particular, collateral estoppel “ ‘is designed
to prevent repetitious lawsuits over matters which have once been decided and which
have remained substantially static, factually and legally.’ ” King v. Grindstaff, 284
N.C. 348, 356, 200 S.E.2d 799, 805 (1973) (quoting Comm’r v. Sunnen, 333 U.S. 591,
599, (1948)). “ ‘ [W]hen a fact has been agreed upon or decided in a court of record,
neither of the parties shall be allowed to call it in question, and have it tried over
again at any time thereafter, so long as the judgment or decree stands unreversed.’ ”
Id. at 355, 200 S.E.2d at 804 (quoting Masters v. Dunstan, 256 N.C. 520, 523-24, 124
S.E.2d 574, 576 (1962)); see also State v. Summers, 351 N.C. 620, 622, 528 S.E.2d 17,
20 (2000) (citing this principle specific to collateral estoppel). “[U]nder the doctrine
-5- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
of collateral estoppel, when an issue has been fully litigated and decided, it cannot be
contested again between the same parties, even if the first adjudication is conducted
in federal court and the second in state court.” McCallum v. N.C. Co-op. Extension
Serv., 142 N.C. App. 48, 52, 542 S.E.2d 227, 231 (2001) (citing King, 284 N.C. at 359,
200 S.E.2d at 807)).
However, the District Court’s Order and Judgment vacating the Bankruptcy
Court’s Order and remanding for a new trial alters the posture of this case. “A
vacated order is null and void, and has no legal force or effect on the parties or the
matter in question.” Brown v. Brown, 181 N.C. App. 333, 336, 638 S.E.2d 622, 624
(2007). Federal case law agrees: “A vacated judgment has no preclusive force either
as a matter of collateral or direct estoppel or as a matter of the law of the case.” No
E.-W. Highway Comm., Inc. v. Chandler, 767 F.2d 21, 24 (1st Cir. 1985). Put another
way, the Bankruptcy Court’s Order no longer stands unreversed. See King, 284 N.C.
at 355, 200 S.E.2d at 804.
Thus, in this case, the Bankruptcy Court’s Order no longer retains any
preclusive effect it may have had on the issues in this case between Plaintiffs and
Richie. Therefore, collateral estoppel arising from the vacated Bankruptcy Court
Order does not bar Plaintiffs claims against Richie. Consequently, Richie is not
entitled to Summary Judgment on this basis.
Conclusion
Accordingly, we vacate the trial court’s 1 February 2022 Order Granting
-6- FIRST RECOVERY, LLC V. UNLIMITED REC-REP, LLC
Summary Judgment and remand this matter for further proceedings.4
VACATED AND REMANDED.
Judges ZACHARY and GRIFFIN concur.
4 The subsequent Order denying Summary Judgment entered by Judge Collins is not before us. As such, we express no opinion as to whether that Order was properly entered or decided.
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