Court Opinion

ID: 4290929
Source: CourtListenerOpinion
Date Created: 2018-07-03 12:13:53.392727+00
Date Added: 2024-06-11T07:49:29.791904
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                    No. COA18-88

                                  Filed: 3 July 2018

Guilford County, No. 17 CVS 4613

JAMES MARK MCDANIEL, JR., Plaintiff,

               v.

BYRON L. SAINTSING and SMITH DEBNAM NARRON DRAKE SAINTSING &
MYERS, LLP, Defendants.

      Appeal by plaintiff from orders entered 11 July 2017 and 12 July 2017 by Judge

Richard S. Gottlieb in Guilford County Superior Court. Heard in the Court of Appeals

6 June 2018.

      Douglas S. Harris for plaintiff-appellant.

      Smith Debnam Narron Drake Saintsing & Myers, LLP, by Bettie Kelley Sousa,
      for defendants-appellees.

      ZACHARY, Judge.

      Plaintiff James Mark McDaniel, Jr. appeals from the trial court’s orders

setting aside entry of default and granting defendants’ Motion to Dismiss. Because

plaintiff lacks standing, we affirm the trial court’s order dismissing this action.

                                        Background

      McDaniel co-owned several businesses with Dr. C. Richard Epes, including

Southeastern Eye Center, Inc. (“SEC”) and several entities related thereto (“SEC

Businesses”). According to McDaniel, “[a]s a part of that partnership, we had an
                              MCDANIEL V. SAINTSING

                                 Opinion of the Court

agreement whereby we would each commit our wealth to make sure that the

corporations continue to prosper.” However, the SEC Businesses had fallen into a

great deal of debt by 2014.

      Arthur Nivison and his family own several business entities (“Nivison

Entities”) that by early 2014 were in the midst of litigation concerning debt owed to

them by the SEC Businesses. Defendants Byron L. Saintsing and the law firm Smith

Debnam Narron Drake Saintsing & Myers, LLP represented the Nivison Entities in

the litigation. Nivison Entities sought additional security for the Nivison loans,

including a secured interest in the collection of Andrew Wyeth paintings that Dr.

Epes owned, valued at over $20 million. McDaniel maintains that his business

agreement with Dr. Epes “specifically included” the Andrew Wyeth paintings,

whereby “Dr. Epes agreed to either borrow against or to sell paintings as necessary

to protect our business[.]” According to McDaniel,

             Arthur Nivison described his desire to have a secured
             interest in the Andrew Wyeth art collection (which if such
             a secured interest were granted would make the art
             collection unavailable for loans or sale and which would
             violate the agreement between Dr. Epes and me). I wrote
             back to Arthur Nivison (with a copy to Byron Saintsing)
             that under no circumstances were any Andrew Wyeth
             paintings to be secured and whatever we worked out would
             have to be worked out some other way.

McDaniel further contends that

             Defendant Saintsing’s reaction to hearing the news that he
             could not have the Andrew Wyeth paintings as security for

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                               MCDANIEL V. SAINTSING

                                  Opinion of the Court

             his clients was to personally prepare and file with the
             North Carolina Secretary of State a UCC-1 which gave
             Arthur Nivison a secured interest in the paintings - this
             was directly against my written instructions. At no time
             before the UCC-1 lien was filed with the North Carolina
             Secretary of State against the Andrew Wyeth paintings did
             Defendant Saintsing nor Defendant Smith Debnam
             Narron Drake Saintsing & Myers LLP nor anyone else
             obtain permission from Dr. Epes, from me or from anyone
             else to file a UCC-1, and therefore, the UCC-1 was legally
             unauthorized according to the UCC Rules, false and
             fraudulent and both defendants knew that said document
             was unauthorized false and fraudulent.

The UCC-1 amendment was filed 10 April 2014.

      On 27 April 2015, Chief Justice Mark Martin of the North Carolina Supreme

Court designated thirteen cases pending against McDaniel, Dr. Richard Epes, and

varied SEC Businesses as exceptional cases, and assigned the cases to the Honorable

Louis Bledsoe, III for hearing. Judge Bledsoe appointed a receiver to manage the

assets of the various SEC Businesses in litigation. The Receiver demanded, inter alia,

“payment of money, return of assets and setting aside of various transactions” by

McDaniel and his wife “on the grounds of corporate mismanagement, conflict of

interest, insider and self-interested transactions, fraudulent transfers, [and] failure

to maintain adequate capitalization[.]” In short, McDaniel was accused of engaging

in various unlawful actions with intent to defraud and hinder creditors of the SEC

Businesses. In order to resolve these and other claims, McDaniel and his wife entered

into a Settlement Agreement and Release with the Receiver in August 2015, pursuant

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                               MCDANIEL V. SAINTSING

                                  Opinion of the Court

to the terms of which the Receiver agreed to release all claims against the McDaniels

in exchange for the McDaniels’ relinquishment of any interest in virtually all of their

non-exempt assets to the Receiver in satisfaction of the claims. The Settlement

Agreement and Release provided for the transfer of all of the McDaniels’ “tangible

personal property including all artwork, furniture including all antiques, art work,

collectibles, coins, collectible papers, historic documents, glassware, and any and all

other tangible items of value,” as well as “[a]ll judgments, rights, claims and causes

of action including without limitation, any and all counterclaims or complaints

currently pending in any ongoing action or proceeding and any and all unasserted or

inchoate claims or causes of action” to the Receiver.

      Notwithstanding McDaniel’s transfer of all “claims and causes of action” to the

Receiver in settlement of various claims against him and his wife, McDaniel filed an

obstruction of justice suit against defendants Saintsing and his firm on 10 April 2017

for their conduct relating to the April 2014 filing of the UCC-1 amendment. Default

was entered as to McDaniel’s claim against defendants on 19 June 2017. Defendants

filed a Motion to Dismiss McDaniel’s complaint for lack of subject-matter jurisdiction

on 20 June 2017 and a Motion to Set Aside Entry of Default on 28 June 2017. The

trial court granted defendants’ Motion to Set Aside Entry of Default on 11 July 2017.

The next day, the trial court granted defendants’ Motion to Dismiss.

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                                MCDANIEL V. SAINTSING

                                   Opinion of the Court

       On appeal, McDaniel argues that the trial court erred (1) when it set aside the

entry of default, and (2) when it granted defendants’ Motion to Dismiss pursuant to

Rules 12(b)(1) and 12(b)(3).

                                         Discussion

       We first address whether the trial court erred when it granted defendants’

Motion to Dismiss for lack of subject-matter jurisdiction. Defendants maintain that

the trial court properly granted their Motion to Dismiss because McDaniel does not

have standing in the instant case and that therefore, “. . . the trial court lacks subject

matter jurisdiction. . . .”

       At the hearing on defendants’ Motion to Dismiss, the trial court summarized

defendants’ standing argument as twofold: “One is [McDaniel] never owned the

artwork and, therefore, any claim related to a false filing, he never had anyway as an

initial matter[.] And, then, secondly, if he had a claim, it was transferred by virtue of

either the transfer of the artwork or by virtue of the language of the settlement

agreement.” We first address whether McDaniel lacks standing by virtue of the terms

of the Settlement Agreement and Release to which he was a party.

       Subject-matter jurisdiction “involves the authority of a court to adjudicate the

type of controversy presented by the action before it.” Haker-Volkening v. Haker, 143

N.C. App. 688, 693, 547 S.E.2d 127, 130 (2001). “A court’s lack of subject matter

jurisdiction is not waivable and can be raised at any time, including on appeal.”

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                               MCDANIEL V. SAINTSING

                                   Opinion of the Court

Banks v. Hunter, ___ N.C. App. ___, ___, 796 S.E.2d 361, 365 (2017) (citing Pulley v.

Pulley, 255 N.C. 423, 429, 121 S.E.2d 876, 880 (1961)). “Whether a trial court has

subject-matter jurisdiction is a question of law, reviewed de novo on appeal.” McKoy

v. McKoy, 202 N.C. App. 509, 511, 689 S.E.2d 590, 592 (2010) (citation omitted).

      It is axiomatic that “[s]tanding is a necessary prerequisite to a court’s proper

exercise of subject matter jurisdiction.” Cook v. Union Cty. Zoning Bd. of Adjustment,

185 N.C. App. 582, 588, 649 S.E.2d 458, 464 (2007) (citation and quotation marks

omitted). Standing “refers to whether a party has a sufficient stake in an otherwise

justiciable controversy so as to properly seek adjudication of the matter.” Neuse River

Found., Inc. v. Smithfield Foods, Inc., 155 N.C. App. 110, 114, 574 S.E.2d 48, 51

(2002) (citing Sierra Club v. Morton, 405 U.S. 727, 731-32, 31 L. Ed. 2d 636, 641

(1972)). Three elements must be satisfied in order for a plaintiff to establish standing:

             (1) ‘injury in fact’—an invasion of a legally protected
             interest that is (a) concrete and particularized and (b)
             actual or imminent, not conjectural or hypothetical; (2) the
             injury is fairly traceable to the challenged action of the
             defendant; and (3) it is likely, as opposed to merely
             speculative, that the injury will be redressed by a favorable
             decision.

Neuse River Found., Inc., 155 N.C. App. at 114, 574 S.E.2d at 52 (quoting Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560-61, 119 L. Ed. 2d 351, 364 (1992)).

      In the instant case, as a part of his Settlement Agreement and Release with

the Receiver, McDaniel agreed to “transfer and assign all of [his] assets, both

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                               MCDANIEL V. SAINTSING

                                   Opinion of the Court

disclosed and undisclosed, known and unknown, tangible and intangible,” including

any and all “judgments, rights, claims and causes of action including, without

limitation, any and all counterclaims or complaints currently pending in any ongoing

action or proceeding and any and all unasserted or inchoate claims or causes of

action” to the Receiver. Thus, even assuming, arguendo, that McDaniel had a

colorable claim for obstruction of justice against defendants, the claim would have

existed at the time of execution of the Settlement Agreement and Release, pursuant

to the terms of which the right to assert that claim was conveyed to the Receiver.

Accordingly, in that McDaniel’s potential legal claim is held by the Receiver,

McDaniel does not have “a sufficient stake” in his obstruction of justice claim to

establish standing in the instant matter. Neuse River Found., Inc., 155 N.C. App. at

114, 574 S.E.2d at 51.

      McDaniel also argues that the Settlement Agreement and Release has no

bearing on his claim against defendants because defendants were neither parties to,

nor beneficiaries of that contract. While it is true that defendants were neither parties

to, nor beneficiaries of the Settlement Agreement and Release, this is irrelevant. The

Settlement Agreement and Release does not affect defendants’ ability to defend

against the obstruction of justice claim, but rather affects McDaniel’s ability to assert

that claim from the outset in that the right to assert that claim became vested in the

Receiver by operation of the Settlement Agreement and Release.

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                               MCDANIEL V. SAINTSING

                                   Opinion of the Court

      Accordingly, we conclude that the trial court properly granted defendants’

Motion to Dismiss because McDaniel lacks standing to assert the obstruction of

justice claim at bar, as any such right to do so would belong not to McDaniel, but to

the Receiver. Because there is no subject-matter jurisdiction in the instant case, we

need not review the trial court’s order setting aside entry of default.

                                         Conclusion

      For the reasons contained herein, the trial court’s orders granting Defendants’

Motion to Dismiss and granting Defendants’ Motion to Set Aside Entry of Default are

      AFFIRMED.

      Judges ELMORE and HUNTER, JR. concur.

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