Court Opinion

ID: 4246330
Source: CourtListenerOpinion
Date Created: 2018-02-20 13:12:42.045615+00
Date Added: 2024-06-11T07:48:08.160988
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. 16-1187

                             Filed: 20 February 2018

Wake County, No. 15 CVS 11985

THE ESTATE OF EDUARDO ROBERTO RIVAS,
by and through Administrator MILETSY SOTO,
and MILETSY SOTO Individually, Plaintiffs,

              v.

FRED SMITH CONSTRUCTION, INC., Defendant.

      Appeal by plaintiffs from order entered on 27 June 2016 by Judge Orlando F.

Hudson, Jr. in Wake County Superior Court. Heard in the Court of Appeals on 19

April 2017.

      Poyner Spruill, LLP, by Cynthia L. Van Horne, and the Law Offices of Wade
      Byrd, P.A., by Wade E. Byrd, for plaintiffs-appellants.

      Dean & Gibson, PLLC, by Michael G. Gibson and Michael R. Haigler, for
      defendant-appellee.

      BERGER, Judge.

      The Estate of Eduardo Roberto Rivas, by and through Miletsy Soto as

administrator and individually, (“Plaintiffs”) appeal from a June 27, 2016 order

granting summary judgment in favor of Fred Smith Construction, Inc. (“Defendant”).

Plaintiffs argue the trial court erred by granting Defendant’s motion and denying

their motions under N.C. Gen. Stat. § 1A-1, Rule 56(f) and Rule 15. We disagree.
                        RIVAS V. FRED SMITH CONSTR., INC.

                                 Opinion of the Court

                        Factual and Procedural Background

        In March 2012, the State of North Carolina Department of Transportation

(“NCDOT”) awarded Contract No. C202996 (“Smith Project”) to “FSC II LLC DBA

FRED SMITH COMPANY” for 11.26 miles of road construction beginning at the

Chatham County line on US-1 to US-64. The Smith Project was completed that same

year.

        In the early morning hours on November 27, 2013, Eduardo Roberto Rivas

(“Rivas”) hydroplaned off of US-1 in Cary, North Carolina. Upon exiting his vehicle

to inspect for damage, Rivas was fatally struck by an oncoming vehicle that

hydroplaned at the same location. Cary Police Department’s Accident Reconstruction

concluded neither vehicle was negligently or carelessly operated at the time of the

accident.

        Plaintiffs filed a complaint in the Wake County Superior Court against

Defendant for negligence, breach of contract, third-party beneficiary claims, and

punitive damages. On April 6, 2016, Defendant filed a motion for summary judgment

pursuant to Rule 56 asserting it was incorrectly named as a party, and the Smith

Project was performed in accordance with NCDOT standards.         Plaintiffs filed a

memorandum in opposition to Defendant’s motion for summary judgement and

requested leave from the trial court to amend their complaint and to allow further

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                         RIVAS V. FRED SMITH CONSTR., INC.

                                  Opinion of the Court

discovery. The trial court granted Defendant’s motion for summary judgment and

dismissed Plaintiffs’ claims with prejudice. Plaintiffs timely filed Notice of Appeal.

                                       Analysis

      On appeal, Plaintiffs argue the trial court erred in granting Defendant’s motion

under Rule 56 and denying their motions under Rule 56(f) and Rule 15. Specifically,

Plaintiffs assert that there existed a genuine issue of material fact as to whether

Defendant was a mere instrumentality of a third party, and that Plaintiffs should be

permitted to amend their complaint after the statute of limitations had run to name

the correct entity as a party to the suit. We disagree.

I.    Defendant’s Rule 56 Motion

      “Our standard of review of an appeal from summary judgment is de novo . . . .”

In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citation omitted).

“[S]ummary judgment is appropriate ‘if the pleadings, depositions, answers to

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

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

as a matter of law.’ ” Austin Maint. & Constr., Inc. v. Crowder Constr. Co., 224 N.C.

App. 401, 407, 742 S.E.2d 535, 540 (2012) (citing N.C. Gen. Stat. § 1A-1, Rule 56(c)).

      “The party seeking summary judgment bears the initial burden of

demonstrating the absence of a genuine issue of material fact.” Id. (citation and

quotation marks omitted). “If the moving party satisfies its burden of proof, then the

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                         RIVAS V. FRED SMITH CONSTR., INC.

                                   Opinion of the Court

burden shifts to the non-moving party to ‘set forth specific facts showing that there is

a genuine issue for trial.’ ” Lowe v. Bradford, 305 N.C. 366, 369-70, 289 S.E.2d 363,

366 (1982) (quoting N.C. Gen. Stat. § 1A-1, Rule 56(e)). In determining that there

are no genuine issues of material fact, “[i]t is not the trial court’s role to resolve

conflicts in the evidence.” Wallen v. Riverside Sports Ctr., 173 N.C. App. 408, 413,

618 S.E.2d 858, 862 (2005) (citation omitted). Rather, the court’s role is only to

determine whether such issues exist. Id. (citation omitted).

      In the case sub judice, Defendant submitted a memorandum in support of

summary judgment with attached affidavits and exhibits to the trial court.

Defendants argued at the motion hearing that Plaintiffs had sued the wrong entity,

noting that Defendant answered the complaint prior to expiration of the statute of

limitations. Said answer specifically denied being the company that had built the

section of the roadway in question.

      Plaintiffs submitted a memorandum with an affidavit and also argued at the

motion hearing that Defendant was part of an overlapping structure of corporations

that operate as alter egos and mere instrumentalities of each other, and that further

discovery would be necessary to resolve this issue. Specifically, Plaintiffs argued that

the two entities, FSC II and Defendant, shared a business address, overlapping

personnel, and common ownership by a third entity. However, Plaintiffs failed to

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                            RIVAS V. FRED SMITH CONSTR., INC.

                                     Opinion of the Court

offer substantive evidence to create a disputed issue of material fact to withstand

summary judgment.

      To prove an alter ego relationship between corporate entities, a claimant must

establish three things:

                (1) Control, not mere majority or complete stock control,
                but complete domination, not only of finances, but of policy
                and business practice in respect to the transaction attacked
                so that the corporate entity as to this transaction had at
                the time no separate mind, will or existence of its own; and

                (2) Such control must have been used by the defendant to
                commit fraud or wrong, to perpetrate the violation of a
                statutory or other positive legal duty, or a dishonest and
                unjust act in contravention of plaintiff’s legal rights; and

                (3) The aforesaid control and breach of duty must
                proximately cause the injury or unjust loss complained of.

Fischer Inv. Capital, Inc. v. Catawba Dev. Corp., 200 N.C. App. 644, 650, 689 S.E.2d
143, 147 (2009) (citation omitted). Plaintiffs contended that the following evidence

was sufficient to create a disputed issue of material fact regarding the alter ego

relationship:

      (1) Defendant, which is owned by Construction Partners, Inc., in turn owns

         FSC II, a limited liability company;

      (2) Defendant has no employees and earns no revenue;

      (3) Defendant was created by Construction Partners, Inc. in 2011 to serve as

         the legal owner of FSC II for tax and operating purposes;

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                         RIVAS V. FRED SMITH CONSTR., INC.

                                   Opinion of the Court

      (4) FSC II does business as Fred Smith Company, and Defendant, as legal

          owner of FSC II, also has the right to do business as Fred Smith Company;

      (5) FSC II’s sole member manager also serves as registered agent for

          Defendant; and

      (6) FSC II and Defendant share the same business address, contrary to the

          deposition testimony by witnesses for Defendant.

      Plaintiffs’ evidence was insufficient to create a genuine issue of material fact

regarding the alleged alter ego relationship. Instead, Plaintiffs’ evidence merely

gives rise to conjecture and speculation that Defendant and its affiliate are alter egos

of one another. Plaintiffs contend the evidence presented is sufficient to withstand a

motion for summary judgment in this regard, relying on prior decisions by this Court.

However, these decisions are distinguishable both factually and procedurally from

the case sub judice and are not applicable as precedent. See Timber Integrated Invs.,

LLC v. Welch, 225 N.C. App. 641, 653, 737 S.E.2d 809, 818 (2013) (reversing summary

judgment because the trial court refused to review material evidence offered at the

summary judgment hearing); see also Monteau v. Reis Trucking & Constr., Inc., 147
N.C. App. 121, 127, 553 S.E.2d 709, 713 (2001) (reversing summary judgment where

plaintiff submitted evidence that corporate defendant was undercapitalized,

commingled funds with individual owners, failed to meet payroll, and failed to keep

formal financial records).

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                         RIVAS V. FRED SMITH CONSTR., INC.

                                  Opinion of the Court

      Plaintiffs argued in an oral 56(f) motion that it would be premature to grant

summary judgment at that juncture in the proceeding. Rule 56(f) provides:

             Should it appear from the affidavits of a party opposing the
             motion that he cannot for reasons stated present by
             affidavit facts essential to justify his opposition, the court
             may refuse the application for judgment or may order a
             continuance to permit affidavits to be obtained or
             depositions to be taken or discovery to be had or may make
             such other order as is just.

N.C. Gen. Stat. § 1A-1, Rule 56(f) (2017) (emphasis added). Because discovery is used

to disclose “any relevant unprivileged materials and information, . . . motions for

summary judgment generally should not be decided until all parties are prepared to

present their contentions on all issues raised.” Ussery v. Taylor, 156 N.C. App. 684,

686, 577 S.E.2d 159, 161 (2003) (citations omitted). Nevertheless, the trial court’s

decision to grant or deny summary judgment before the completion of discovery will

only be reversed upon a showing of a manifest abuse of discretion. See Evans v.

Appert, 91 N.C. App. 362, 367-68, 372 S.E.2d 94, 97, disc. review denied, 323 N.C.
623, 374 S.E.2d 584 (1988); see also White v. White, 312 N.C. 770, 777, 324 S.E.2d
829, 833 (1985) (“A ruling committed to a trial court’s discretion is to be accorded

great deference and will be upset only upon a showing that it was so arbitrary that it

could not have been the result of a reasoned decision.”) Therefore, the trial court’s

decision to disallow further discovery is reviewed under an abuse of discretion

standard.

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                           RIVAS V. FRED SMITH CONSTR., INC.

                                   Opinion of the Court

      Here, nine months and twenty-four days elapsed from the filing of Plaintiffs’

Complaint to the trial court’s order for summary judgment.          During this time,

Defendant produced affidavits, corporate records, and depositions from Alan Palmer

(“Palmer”) and F. Jule Smith, III (“Jule Smith”). The trial court inquired: “[W]hat do

you believe the evidence that you are looking for is going to show? Defense counsel

says that . . . your evidence is not going to show anything different than what the

discovery already shows now.” Plaintiffs’ counsel stated that it spoke directly to the

existence of a genuine dispute of material fact, such as potential overlapping officers

or financial situations.

      Regardless of whether outstanding discovery requests existed at the time

summary judgment was ordered, Plaintiffs failed to meet their burden of showing the

trial court abused its discretion by granting summary judgment. Defendant produced

sufficient information that Plaintiffs had named the wrong entity, and failed to

amend or otherwise correct the error in the complaint. The information set forth in

discovery included affidavits, articles of incorporation, and depositions sufficient for

the trial court to make a reasoned ruling on Plaintiffs’ and Defendant’s motions. Even

if Plaintiffs’ arguments are persuasive, we find no abuse of discretion on behalf of the

trial court’s decision to deny Plaintiffs’ Rule 56(f) motion.

      Furthermore, we hold that there was no genuine issue of material fact before

the trial court regarding Defendant’s liability. Plaintiffs acknowledged that they

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                           RIVAS V. FRED SMITH CONSTR., INC.

                                    Opinion of the Court

sued the wrong legal entity. Thus, Defendant was entitled to judgment as a matter

of law. The trial court did not err when granting Defendant’s Rule 56 motion.

II.   Plaintiffs’ Rule 15 Motion

      Plaintiffs contend the trial court erred by denying their Rule 15 motion to

amend their complaint to include the proper name of Defendant on the grounds of

alter ego and mere instrumentality, despite the statute of limitations having expired.

We disagree.

      Rule 15 provides in pertinent part:

               A party may amend his pleading once as a matter of course
               at any time before a responsive pleading is served . . . .
               Otherwise a party may amend his pleading only by leave of
               court or by written consent of the adverse party; and leave
               shall be freely given when justice so requires.

N.C. Gen. Stat. § 1A-1, Rule 15(a) (2017).

               Generally, Rule 15 is construed liberally to allow
               amendments where the opposing party will not be
               materially prejudiced. . . . [O]ur standard of review for
               motions to amend pleadings requires a showing that the
               trial court abused its discretion. Denying a motion to
               amend without any justifying reason appearing for the
               denial is an abuse of discretion. However, proper reasons
               for denying a motion to amend include undue delay by the
               moving party[,] . . . unfair prejudice to the nonmoving
               party[,] . . . bad faith, futility of amendment, and repeated
               failure to cure defects by previous amendments. When the
               trial court states no reason for its ruling on a motion to
               amend, this Court may examine any apparent reasons for
               the ruling.

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                         RIVAS V. FRED SMITH CONSTR., INC.

                                  Opinion of the Court

Delta Env. Consultants of N.C. v. Wysong & Miles Co., 132 N.C. App. 160, 165-66, 510
S.E.2d 690, 694 (citations omitted), disc. review denied, 350 N.C. 379, 536 S.E.2d 70

(1999).

      “Our Supreme Court has stated that ‘substitution in the case of a misnomer is

not considered substitution of new parties, but a correction in the description of the

party or parties actually served.’ ” Franklin v. Winn Dixie Raleigh, Inc., 117 N.C.

App. 28, 34, 450 S.E.2d 24, 28 (1994) (brackets omitted) (quoting Blue Ridge Electric

Membership Corporation v. Grannis Bros. Inc., 231 N.C. 716, 720, 58 S.E.2d 748, 751

(1950)), aff’d per curiam, 342 N.C. 404, 464 S.E.2d 46 (1995). “A misnomer is a

‘mistake in name; giving an incorrect name to the person in accusation, indictment,

pleading, deed, or other instrument.’ ” Pierce v. Johnson, 154 N.C. App. 34, 39, 571
S.E.2d 661, 665 (2002) (brackets omitted) (quoting Black’s Law Dictionary (6th ed.

1990)). If “the misnomer or misdescription does not leave in doubt the identity of the

party intended to be sued, . . . the misnomer or misdescription may be corrected by

amendment at any stage of the suit.” Franklin, 117 N.C. App. at 34, 450 S.E.2d at

28 (citation omitted). “However, if the amendment amounts to a substitution or

entire change of parties, . . . the amendment will not be allowed.” Id. (citation and

quotation marks omitted). Accordingly, an attempt to amend a complaint to include

a “separate and distinct corporation” at the time the cause of action accrues amounts

to adding a new party rather than correcting a misnomer. See id. at 35, 450 S.E.2d

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                          RIVAS V. FRED SMITH CONSTR., INC.

                                    Opinion of the Court

at 28. Substantive mistakes, such as naming a wrong corporate defendant, are

potentially fatal to actions. Id.

      Rule 15 allows for the relation-back doctrine to apply when amending a

pleading to assert claims, but it does not apply to parties after the statute of

limitations expires. Bailey v. Handee Hugo’s, Inc., 173 N.C. App. 723, 726-27, 620
S.E.2d 312, 315 (2005) (emphasis added) (citation omitted). See also N.C. Gen. Stat.

§ 1A-1, Rule 15(c) (2017) (“A claim asserted in an amended pleading is deemed to

have been interposed at the time the claim in the original pleading was

interposed . . . .”). “If the effect of the amendment is to substitute for the defendant

a new party, or add another party, such amendment amounts to a new and

independent cause of action and cannot be permitted when the statute of limitations

has run.” Bailey, 173 N.C. App. at 726, 620 S.E.2d at 315 (emphasis added) (citation

omitted).

      Here, Plaintiffs sought to amend their complaint to add FSC II, d/b/a Fred

Smith Company, after the statute of limitations had expired. Plaintiffs filed their

complaint on September 3, 2015, and the statute of limitations ran on November 27,

2015, twenty-two days after Defendant had denied being the correct company in their

answer in response to Plaintiffs’ complaint. Plaintiffs requested to amend their

complaint by leave of the trial court more than six months later by oral motion on

June 5, 2016.

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                          RIVAS V. FRED SMITH CONSTR., INC.

                                   Opinion of the Court

      In the case sub judice, the statute of limitations expired 191 days before

Plaintiffs moved to amend. Accordingly, amending the complaint to add FSC II, d/b/a

Fred Smith Company, would amount to adding a new party and would be futile since

the statute of limitations had expired, thus the trial court did not abuse its discretion

by denying Plaintiff’s Rule 15 motion.

                                      Conclusion

      The trial court did not err in granting Defendant’s motion for summary

judgment, and we affirm the trial court’s denial of Plaintiffs’ Rule 56(f) motion and

Rule 15 motion to amend their complaint.

      AFFIRMED.

      Judges ELMORE and INMAN concur.

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