Jcg & Assocs., LLC v. Disaster Am. USA, LLC

2021 NCBC 76

• Court: North Carolina Business Court
• Decided: December 9, 2021
• Docket: 19-CVS-746
• Status: Published

Opinion

JCG & Assocs., LLC v. Disaster Am. USA, LLC, 2021 NCBC 76.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION BRUNSWICK COUNTY 19 CVS 746

JCG & ASSOCIATES, LLC; MIP 1, LLC; JAMES BONICA; PATRICIA BONICA; and DAVID L. PETERSON, Trustee of the David L. Peterson Living Trust,

Plaintiffs and Counterclaim ORDER AND OPINION Defendants, ON MOTION FOR PARTIAL v. SUMMARY JUDGMENT

DISASTER AMERICA USA, LLC; DA ROOFING SYSTEMS; ESTATE OF DONALD LEE HUSK, by and through KATHLEEN KAREN HUSK as executrix; and JASON HUSK,

Defendants and Third-Party Plaintiffs,

and

DISASTER AMERICA OF NORTH CAROLINA, LLC,

Defendant, Counterclaim Plaintiff, and Third-Party Plaintiff,

v.

TERRY WILLIAMS; and AIRWARE TRANSPORTATION AND LOGISTICS, LLC,

Third-Party Defendants.

1. Pending is a motion for partial summary judgment filed by three plaintiffs

in this case. For the following reasons, the Court GRANTS the motion in part and

DENIES it in part.

Reiss & Nutt, PLLC, by W. Cory Reiss and Kyle J. Nutt, for Plaintiffs JCG & Associates, LLC, MIP 1, LLC, James Bonica, Patricia Bonica, and David L. Peterson, Trustee of the David. L. Peterson Living Trust. Hodges Coxe & Potter, LLP, by Samuel B. Potter and Bradley A. Coxe, for Defendants Disaster America USA, LLC, Disaster America of North Carolina, LLC, DA Roofing Systems, Donald Husk, and Jason Husk.1

No counsel appeared for Third-Party Defendants Terry Williams and Airware Transportation and Logistics, LLC.

Conrad, Judge. I. BACKGROUND

2. The Court does not make findings of fact when ruling on motions for

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

by the parties, is intended only to provide context for the Court’s analysis and ruling.

3. This case arises from the aftermath of Hurricane Florence, which

devastated parts of the North Carolina coast in September 2018. Among the hardest

hit areas was the Village of Bald Head Island. The storm damaged many homes on

the island, including those owned by MIP 1, LLC, David Peterson, and James and

Patricia Bonica (together, “Homeowners”).

4. In October 2018, after the hurricane had passed, the Homeowners engaged

Disaster America USA, LLC to repair and restore their homes. (See Pls.’ Exs. 1–3,

ECF Nos. 99.2–99.4.) Disaster America USA—along with its sister companies,

Disaster America NC, LLC and DA Roofing Systems—markets itself as an

experienced provider of catastrophic remediation and restoration services. Donald

Husk was its sole owner and CEO at all relevant times; his son, Jason, was the chief

1 The Court granted leave for Hodges Coxe & Potter, LLP to withdraw after briefing on the

motion was complete. operating officer. (See Dep. D. Husk 19:5–7, ECF No. 99.6; Aff. J. Husk ¶ 2, ECF No.

102.3.)

5. Disaster America USA is not a licensed general contractor in North Carolina

and was not licensed at the time it contracted with the Homeowners. (See, e.g.,

30(b)(6) Dep. Disaster Am. USA 190:4–7, ECF No. 99.5.) The Husks did not view this

as a problem. According to their deposition testimony, Disaster America USA

obtained permission to use the North Carolina license of another general contractor,

JCG & Associates, LLC. (See, e.g., 30(b)(6) Dep. Disaster Am. USA 120:16–24,

216:12–24; Dep. D. Husk 160:25–161:18.) JCG & Associates—which is undisputedly

not a party to any of the contracts—denies giving permission and denies having heard

of Disaster America USA at all. (See Aff. Greene ¶¶ 9–11, ECF No. 99.34.) Even so,

Disaster America USA named “DISASTER AMERICA USA, LLC/JCG &

ASSOCIATES, LLC” as the general contractor in each contract. (Pls.’ Exs. 1–3.)

Later, Disaster America USA purported to assign the contracts to Disaster America

NC, which obtained a North Carolina general contractor’s license in late 2018. (See

Dep. D. Husk 144:4–24; Defs.’ Ex. 5, ECF No. 102.5.)

6. The anticipated scope of work was broad. Disaster America USA was to

perform all repair and restoration work for the full scope of the Homeowners’

insurance proceeds. (See, e.g., Pls.’ Exs. 1–3.) According to Jason Husk, the

Homeowners “hired us to handle everything” from mitigation to reconstruction. (Dep.

J. Husk 137: 9–12, ECF No. 99.24; see also, e.g., Dep. D. Husk 70:8–11, 147:12–19;

Dep. J. Husk 177:2–8.) 7. By spring 2019, the Homeowners had lost faith in Disaster America USA

and its capabilities. They questioned the pace of the restorations, believed that

Disaster America USA had overcharged and unnecessarily butted heads with the

insurance companies, and accused its workers and subcontractors of damaging parts

of the homes that hadn’t been damaged by the hurricane. Frustrated, the

Homeowners retained counsel and terminated the contracts. (See Aff. Bonica ¶¶ 15,

17–20, 22, ECF No. 99.49; Aff. Smith ¶¶ 17, 22, 24, ECF No. 99.50; Aff. Peterson

¶¶ 14, 15, ECF No. 99.51.)

8. This case followed. The Homeowners have asserted several claims,

including negligence, fraud, constructive fraud, unfair or deceptive trade practices

under section 75-1.1, and others. (See generally Compl., ECF No. 2; Am. Compl., ECF

No. 70.) In addition, they seek a declaratory judgment that the contracts with

Disaster America USA are illegal and unenforceable. (See Compl. ¶¶ 206–10.) JCG

& Associates also joined the suit as a plaintiff, alleging that Disaster America USA

had no right to use its name and general contractor’s license. (See, e.g., Compl.

¶¶ 121–35.) Disaster America NC, as Disaster America USA’s assignee, responded

with counterclaims for breach of contract and quantum meruit. (See generally

Answer to Am. Compl., ECF No. 71.)

9. In December 2020, while discovery was ongoing, the Homeowners moved for

partial summary judgment. (See ECF No. 98.) Their motion has been fully briefed,

but two events have delayed its resolution. Shortly after the completion of briefing,

counsel for all defendants moved to withdraw, which the Court granted. Then, a few weeks later, Donald Husk died. His estate has since been substituted as a party in

his place. No counsel has appeared, however, on behalf of the estate or any other

named defendant (together, “Defendants”).

10. Although the Court invited Defendants to suggest a convenient hearing date

for the pending motion for summary judgment, they did not respond. The Court

therefore elects to decide the motion based on the briefs and supporting materials

filed by counsel. See BCR 7.4.

II. LEGAL STANDARD

11. 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. R. Civ. P. 56(c). In deciding a motion for summary

judgment, the Court views the evidence in the light most favorable to the nonmoving

party and draws all inferences in its favor. See Vizant Techs., LLC v. YRC Worldwide,

Inc., 373 N.C. 549, 556 (2020); N.C. Farm Bureau Mut. Ins. Co. v. Sadler, 365 N.C.

178, 182 (2011).

12. The moving party “bears the initial burden of demonstrating the absence of

a genuine issue of material fact.” Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571,

579 (2002). If the moving party carries this burden, the opposing party “may not rest

upon the mere allegations or denials of his pleading,” N.C. R. Civ. P. 56(e), but must

instead “come forward with specific facts establishing the presence of a genuine

factual dispute for trial,” Liberty Mut. Ins. Co., 356 N.C. at 579. “An issue is ‘genuine’ if it can be proven by substantial evidence and a fact is ‘material’ if it would constitute

or irrevocably establish any material element of a claim or a defense.” Lowe v.

Bradford, 305 N.C. 366, 369 (1982) (quoting Bone Int’l, Inc. v. Brooks, 304 N.C. 371,

374–75 (1981)).

13. “When the party with the burden of proof moves for summary judgment, a

greater burden must be met.” Almond Grading Co. v. Shaver, 74 N.C. App. 576, 578

(1985). The movant “must show that there are no genuine issues of fact; that there

are no gaps in his proof; that no inferences inconsistent with his recovery arise from

the evidence; and that there is no standard that must be applied to the facts by the

jury.” Kidd v. Early, 289 N.C. 343, 370 (1976). For that reason, “rarely is it proper

to enter summary judgment in favor of the party having the burden of proof.”

Blackwell v. Massey, 69 N.C. App. 240, 243 (1984); see also Parks Chevrolet, Inc. v.

Watkins, 74 N.C. App. 719, 721 (1985).

III. ANALYSIS

14. At issue are the Homeowners’ claims for declaratory judgment and unfair or

deceptive trade practices and Disaster America NC’s counterclaims for breach of

contract and quantum meruit. Because the arguments directed to the

declaratory-judgment claim and the counterclaims are closely tied together, the Court

considers them in tandem.2

2 In their opposition brief, Defendants object that the motion is premature because it was

filed before the end of discovery. Not so. The Rules of Civil Procedure and the case management order in this action do not bar early motions for summary judgment. And in any event, the parties completed discovery well in advance of this opinion, yet Defendants have never asked to supplement the record. A. Contract Enforceability

15. It is undisputed that Disaster America USA was not a licensed general

contractor when it inked contracts with the Homeowners to repair and restore their

properties. The Homeowners contend that the contracts are illegal and unenforceable

as a result. They seek a declaration to that effect and further contend that Disaster

America NC’s counterclaims to enforce the contracts necessarily fail.

16. By statute, anyone who makes a contract to perform construction services

valued over $30,000 must have a general contractor’s license. See N.C.G.S. § 87-1.

Our Supreme Court has stressed that a “contract illegally entered into by an

unlicensed general construction contractor is unenforceable by the contractor.”

Brady v. Fulghum, 309 N.C. 580, 586 (1983). This is an unyielding rule. The contract

“cannot be validated by the contractor’s subsequent procurement of a license,” id., or

by partnering with a licensed contractor, see, e.g., Hawkins v. Holland, 97 N.C. App.

291, 294 (1990); Joe Newton, Inc. v. Tull, 75 N.C. App. 325, 328 (1985). Likewise,

assignment to a licensed contractor does not “cure the illegal contract.” Jenco v.

Signature Homes, Inc., 122 N.C. App. 95, 100 (1996).

17. Under these decisions, the contracts between Disaster America USA and the

Homeowners are unenforceable. In each contract, Disaster America USA agreed to

perform comprehensive repair and restoration services with a value greater than

$30,000. (See Pls.’ Exs. 1–3; see also, e.g., Pls.’ Exs. 40–43, ECF Nos. 99.54–99.57

(addressing cost of services).) Later, Disaster America USA assigned the contracts to

Disaster America NC. (See Defs.’ Ex. 5.) But Defendants concede that Disaster America USA “was not licensed as a general contractor” when it made the contracts.

(Opp’n 7, ECF No. 102; see also, e.g., 30(b)(6) Dep. Disaster America USA 70:22–71:3.)

Thus, neither it nor Disaster America NC can enforce them now.

18. Defendants’ responses are not persuasive. They argue, first, that Disaster

America USA had permission from JCG & Associates to use its license to perform the

contracts. Even if true, that is immaterial because the contracting party itself “must

be licensed.” Hawkins, 97 N.C. App. at 294; see also Joe Newton, 75 N.C. App. at 328–

29. Here, it is undisputed that the Homeowners’ contracts are with Disaster America

USA, not JCG & Associates.

19. Next, Defendants deny that Disaster America USA needed a license. They

contend that the contracts were not for construction services, as defined by section

87-1, and that they performed no such services before the Homeowners terminated

the contracts. (See Opp’n 7–9.) This contention is meritless.

20. Each contract bears the title “Construction Agreement,” states that it is “a

construction contract,” and contemplates extensive restoration work, including

potentially “roof removal, roofing, siding, trim, gutters, awnings, carports, carpentry,

and masonry.” (Pls.’ Exs. 1–3.) Defendants’ own witnesses and evidence confirm that

Disaster America USA contracted for construction work. (See, e.g., Dep. D. Husk

70:8–11, 147:12–19; Defs.’ Ex. 5 at 1 (stating that assigned contracts were for

“construction services”).) And everything done before the contracts were

terminated—demolition, removal, and related preparatory work—was part and

parcel of the overall restoration project. Without question, section 87-1 requires a general contractor’s license for home renovation and restoration of this kind. See

Daye v. Roberts, 89 N.C. App. 344, 346 (1988) (“There is no doubt that plaintiff’s work

[to restore] defendants’ home [after a fire] constituted an ‘improvement’ under G.S.

87-1.”); Mill-Power Supply Co. v. CVM Assocs., 85 N.C. App. 455, 460–61 (1987) (“We

find that plaintiff undertook to construct an ‘improvement’ under G.S. 87-1 by adding

a roof over an existing structure.”); Reliable Props., Inc. v. McAllister, 77 N.C. App.

783, 786 (1985) (requiring license when “renovation included the installation of new

roofing, correction of dry rot, installation of new storm doors and windows, and the

complete renovation of all apartment interiors; including new paint, wallpaper and

carpet”).

21. Defendants also argue that they may rely on the contracts, even if

unenforceable, for defensive purposes—namely, to offset any damages claimed by the

Homeowners. Perhaps that is true, but the Court need not and does not address the

issue because the Homeowners have not moved for summary judgment as to any

affirmative defense. (See Reply Br. 8, ECF No. 107.)

22. In sum, the undisputed evidence shows that the contracts at issue are illegal

and unenforceable. The Homeowners are entitled to a declaration saying the same.

23. No further analysis is required for Disaster America NC’s counterclaims.

“Our Courts have repeatedly held that an unlicensed contractor may not recover on

a contract or in quantum meruit.” Reliable Props., 77 N.C. App. at 785. The Court

therefore enters summary judgment in favor of the Homeowners as to the

counterclaims as well. B. Section 75-1.1

24. The Homeowners seek summary judgment as to their claim for unfair or

deceptive trade practices under section 75-1.1. This claim, too, is based on Disaster

America USA’s actions as an unlicensed contractor. Going further, the Homeowners

contend that all Defendants are liable on a theory of concerted action.

25. Section 75-1.1 requires a plaintiff to show that “(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 v. Camp,

353 N.C. 647, 656 (2001). If the claim stems from an alleged misrepresentation, the

plaintiff must “demonstrate reliance on the misrepresentation in order to show the

necessary proximate cause.” Bumpers v. Cmty. Bank of N. Va., 367 N.C. 81, 88 (2013).

26. Numerous factual disputes preclude summary judgment. First, the

Homeowners argue, in part, that Disaster America USA misrepresented its status as

a licensed contractor and impersonated JCG & Associates in violation of N.C.G.S.

87-13. There is evidence, though, that Disaster America USA informed prospective

customers that it was unlicensed, telling them that it was instead relying on someone

else’s license. (See 30(b)(6) Dep. Disaster Am. USA 182:24–183:5; Aff. Smith ¶ 9.)

27. Second, whether the Homeowners relied on any alleged misrepresentation

is contested. They claim that they would not have hired Disaster America USA had

they known that it was unlicensed. (See Aff. Bonica ¶ 13; Aff. Smith ¶ 13; Aff.

Peterson ¶ 11.) In response, though, Defendants point to evidence that the

Homeowners hired Disaster America USA based on referrals from their insurance adjuster, property manager, or both. (See, e.g., 30(b)(6) Dep. Disaster Am. USA

138:18–140:23, 176:18–177:11; Dep. Hill 119:15–122:2; see also Dep. Hill 132:1–18

(“the contract process actually went through Wendy Wilmot’s office”).) This evidence

could support an inference that the Homeowners relied on referrals rather than any

representations by Disaster America USA.

28. Third, the evidence of injury is also muddled. The Homeowners claim to

have suffered injury due to damage caused by workers and unreasonable delays by

Disaster America USA, among other things. These injuries appear to stem from

allegedly deficient performance under the contracts. It is less clear whether they

were proximately caused by misrepresentations about Disaster America USA’s

licensing status.

29. Notably, the Homeowners’ briefs do not mention, much less satisfy, the

higher burden they face when seeking summary judgment on their own claim. The

Homeowners have not shown an absence of genuine issues of material fact and that

there are no gaps in their proof. The Court therefore denies the Homeowners’ motion

as to the claim for unfair or deceptive trade practices. See, e.g., Kidd, 289 N.C. at 370

(“[I]f the need for cross-examination appears, the court is free to deny the summary

judgment motion.”); Blackwell, 69 N.C. App. at 243 (“[R]arely is it proper to enter

summary judgment in favor of the party having the burden of proof.”).

IV. CONCLUSION

30. For all these reasons, the Court GRANTS the Homeowners’ motion for

summary judgment in part and DENIES it in part, as follows: a. The Court enters judgment in favor of the Homeowners as to their claim

for declaratory judgment. The Court DECLARES that Disaster

America USA and Disaster America NC may not enforce the contracts at

issue, (Pls.’ Exs. 1–3).

b. The Court enters judgment in favor of the Homeowners as to Disaster

America NC’s counterclaims for breach of contract and quantum meruit.

These counterclaims are DISMISSED with prejudice.

c. The Court DENIES the motion as to the Homeowners’ claim for unfair

or deceptive trade practices. This claim shall proceed to trial.

SO ORDERED, this the 9th day of December, 2021.

/s/ Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases