Allen Smith Inv. Props., LLC v. Barbarry Props., LLC

Allen Smith Inv. Props., LLC v. Barbarry Props., LLC, 2013 NCBC 1.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG MASTER CASE FILE NO. 09 CVS 28709

ALLEN SMITH INVESTMENT
PROPERTIES, LLC, and THE HERMAN
GROUP, LLC,

Plaintiffs,
ORDER AND OPINION
v.

BARBARRY PROPERTIES, LLC, and
BARRY WEINSTEIN,

Defendants.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG 09 CVS 20255

ALLEN SMITH INVESTMENT
PROPERTIES, LLC, and THE HERMAN
GROUP, LLC,

Plaintiffs,

v.

BARBARRY PROPERTIES, LLC,

Defendant.

James L. Blane, PLLC by James L. Blane; and C. Michael Wilson, Attorney at
Law, PLLC by C. Michael Wilson for Plaintiffs.

Nelson Mullins Riley & Scarborough LLP by Thomas G. Hooper and Julia B.
Hartley for Defendants.

Murphy, Judge.
{1} THIS MATTER is before the Court on Defendants Barbarry Properties,
LLC (“Barbarry”), and Barry Weinstein’s (“Weinstein”) (collectively “Defendants”)
Motion for Summary Judgment pursuant to Rule 56 of the North Carolina Rules of
Civil Procedure (“Motion I”), Motion to Strike Affidavit and For Sanctions (“Motion
II”), and Motion for Leave to Amend and Supplement Motion for Summary
Judgment (“Motion III”). After considering the parties’ motions, briefs, affidavits,
depositions, and arguments of counsel at the October 12, 2011, hearing, the Court
GRANTS in part and DENIES in part Motion I, GRANTS in part and DENIES in
part Motion II, and DENIES Motion III.
I.
PROCEDURAL HISTORY
{2} On August 26, 2009, Plaintiffs Allen Smith Investment Properties, LLC
(“ASIP”), The Herman Group, LLC (“Herman”), and James Allen Smith (“Smith”)
filed a Complaint in 09 CVS 20255 (the “First Action”) asserting claims against
Barbarry for breach of fiduciary duties, fraud and constructive fraud. On or about
November 23, 2009, ASIP, Herman, and Smith filed a second Complaint in 09 CVS
28709 (the “Second Action”) asserting claims for breach of fiduciary duty, fraud and
constructive fraud against Barbarry, and for fraud and conversion against
Weinstein.
{3} The Second Action was designated a complex business case and assigned to
this Court. In the interest of judicial economy, and to promote the ends of justice,
both cases were consolidated by consent of the parties on January 6, 2010, under
the case captioned 09 CVS 28709, which became the Master File.
{4} On November 24, 2010, Smith voluntarily dismissed all of his claims
against both Defendants.
{5} On December 3, 2010, ASIP and Herman (collectively “Plaintiffs”) filed an
Amended and Restated Complaint and Motion for Preliminary Injunction against
Defendants.
{6} Pursuant to Rule 17.4 of the General Rules of Practice and Procedure for
the North Carolina Business Court, the Court previously entered a Case
Management Order (“CMO”) on February 1, 2010, setting November 22, 2010, as
the end date for discovery. (CMO at 3, Feb. 1, 2010.) After several extensions, the
Court ultimately set April 12, 2011, as the end date for discovery, and ordered that
no further extensions would be granted. (Order Am. CMO, Feb. 11, 2011.)
{7} On May 13, 2011, Defendants filed Motion I for Summary Judgment on the
surviving claims: breach of fiduciary duty against Barbarry; fraud against Barbarry
and Weinstein; and constructive fraud against Barbarry.
{8} In response, on June 23, 2011, Plaintiffs filed their Brief in Opposition to
Defendants’ Motion for Summary Judgment, attaching a sworn affidavit from
Smith.
{9} On July 11, 2011, Defendants filed their Motion II moving to strike
Paragraphs 5 and 6 of Smith’s affidavit and for sanctions.
{10} On October 12, 2011, the Court conducted a hearing on Defendants’
Motions I and II.
{11} On October 1, 2012, Defendants filed their Motion III to amend and
supplement their motion for summary judgment.
II.
FACTUAL BACKGROUND
A.
FACTS CONSIDERED IN DETERMINING MOTION I
{12} On a motion for summary judgment under Rule 56 of the North Carolina
Rules of Civil Procedure, the Court does not make findings of fact to resolve an issue
of material fact. “[S]ummary judgment presupposes that there are no triable issues
of material fact.” Hyde Ins. Agency v. Dixie Leasing, 26 N.C. App. 138, 142, 215
S.E.2d 162, 165 (1975). Therefore, the Court recites only those material facts that
the Court concludes are not disputed, and which justify entering judgment. Id.
{13} ASIP is a North Carolina limited liability company owned and managed by
Smith. (Am. Compl. ¶ 1; Smith Aff. ¶ 1, Jan. 29, 2010.)
{14} Herman is a New York limited liability company managed by Samuel L.
Savarino (“Savarino”). (Am. Compl. ¶ 2; Savarino Aff. ¶ 1.)
{15} Weinstein is a principal member of Barbarry, a Delaware limited liability
company located in New York. (Weinstein Aff. ¶ 4, Feb. 16, 2010; Am. Compl. ¶ 3.)
{16} In or around 1998, Plaintiffs formed a partnership to develop
approximately 22 acres in Crowfield Plantation, Goosecreek, South Carolina into an
apartment community (“Coventry Green”). (Am. Compl. ¶ 5.)
{17} In approximately September 1999, Plaintiffs invited Barbarry to become a
partner in a new limited partnership – Herman-Coventry Green, LP (the
“Partnership”) – created to develop Coventry Green. (Am. Compl. ¶ 5.)
{18} The Third Amended and Restated Limited Partnership Agreement (the
“Partnership Agreement”) designates Barbarry, Herman and ASIP as General
Partners in the Partnership with Barbarry acting as Managing General Partner,
and names Weinstein and Smith as Limited Partners. (Weinstein Aff. Ex. 1 § 7.2,
Feb. 16, 2010.) The Partnership Agreement further designates the laws of the state
of South Carolina as the applicable law governing the terms of the agreement.
(Weinstein Aff. Ex. 1 § 20.5, Feb. 16, 2010.)
{19} On August 1, 2005, in its role as Managing General Partner, Barbarry
entered into an agreement on behalf of the Partnership with InterMark
Management Corporation (“InterMark”), a property management company.
(Stuckey Aff. ¶ 5, Ex. A.) Under the agreement, InterMark was obligated to
manage Coventry Green, including leasing the apartments and making necessary
repairs. (Stuckey Aff. ¶ 5, Ex. A; Weinstein Aff. ¶¶ 23–25, Feb. 16, 2010.) As a
result, Barbarry did not handle the day-to-day maintenance and repair issues of
Coventry Green. (Weinstein Aff. ¶ 25, Feb. 16, 2010.)
{20} Barbarry also agreed that InterMark had the authority to defer some
maintenance based on the recommendations of InterMark management personnel.
(Weinstein Aff. ¶ 25, Feb. 16, 2010.)
{21} To assure the availability of financing, the Partnership budgeted for
certain repairs each year. (Smith Dep. 119:16–17, Nov. 10, 2010.) In 2009, some of
the repairs that had been budgeted for and scheduled were not completed. (Smith
Aff. ¶ 9, Jan. 29, 2010.)
{22} On January 28, 2010, Plaintiffs’ witness, Glenn P. Kropilak, detailed in a
Property Condition Report the various deficiencies found on the apartment complex
property, and estimated the cost of repairs for the deferred maintenance to be in
excess of $90,000. (Kropilak Aff. ¶ 7.) However, as of July 19, 2010, all deferred
items were repaired or scheduled for repair within weeks at a total cost of
$61,353.61, a difference of $28,646.39 from cost estimates. (Zdunczyk Aff. ¶ 3, July
19, 2010; Stuckey Aff. ¶ 10.)
{23} Plaintiffs allege that the deferred maintenance resulted in lost profits.
(Pls.’ Br. Opp. Mot. Summ. J. 7–8.) Smith, on behalf of ASIP, asserts that the
Partnership is still trying to figure out how to quantify losses to get a “pretty good
idea of what the impact of all of this has been,” and it does not anticipate being able
to calculate the loss in profits until “[t]he day before the trial.” (Smith Dep. 122:22,
Nov. 10, 2010.)
{24} Smith further points out that a December 31, 2009, Competitive Market
Survey (the “Survey”), prepared by Intermark, stated that Coventry Green’s
occupancy rates would be 12%–18% below the rates of other properties in the area.
(Smith Aff. ¶ 10, Jan. 29, 2010; Stuckey Aff. ¶¶ 11–12.) According to Smith, this
disparity amounts to a difference in income of $316,506 to $474,759 a year. (Smith
Aff. ¶ 10, Jan. 29, 2010.) However, Smith goes on to say that the overall damage to
the Partnership would be “impossible to quantify.” (Smith Aff. ¶ 13, Jan. 29, 2010.)
{25} Both Smith, on behalf of ASIP, and Savarino, on behalf of Herman, gave
deposition testimony that the lower occupancy rate would be only one consideration
in accounting for lost profits, and that they could not provide a calculation for
damages without considering many other factors. (Smith Dep. 144:6–23, Nov. 10,
2010; Savarino Dep. 109:7–110:13, Nov. 12, 2010.) Neither could provide a complete
list of the factors requiring consideration. Moreover, Savarino agreed that “[t]here’s
a number of factors to be considered . . .,” and acknowledged that he did not know if
he could quantify the loss. (Savarino Dep. 109:7–8, 110:13, Nov. 12, 2010.)
{26} In addition to the deferred maintenance, Plaintiffs also take issue with
Defendants’ use of Apartment 1111 at Coventry Green and the withdrawal of funds
from the Partnership account. (See Am. Compl.)
{27} Apartment 1111 is a three bedroom apartment at Coventry Green (Am.
Compl. ¶ 19) that Barbarry used on occasion. (Am. Compl. ¶ 23; Answer ¶ 23.)
Weinstein, on behalf of Barbarry, stated that Barbarry only used Apartment 1111
in connection with Partnership business, including overseeing construction and
inspections and participating in a Partnership related arbitration. (Weinstein Aff.
¶¶ 26–27, Feb. 16, 2010.)
{28} According to Smith, in October 2009, he attempted to enter Apartment
1111 but found the locks had been changed. (Smith Aff. ¶ 12, Jan. 29, 2010.)
Intermark instructed Smith to contact Weinstein for access to the apartment.
(Smith Aff. ¶ 12, Jan. 29, 2010.) However, Weinstein denies that Smith ever
contacted him about staying at Apartment 1111 or asked for a new key, which
Smith does not refute. (Weinstein Aff. ¶¶ 29–31, Feb. 16, 2010.) Furthermore,
Weinstein clarified that Intermark did not change the locks on the apartment at his
request. (Weinstein Aff. ¶ 31, Feb. 16, 2010.) Smith later stated that he heard from
the property manager that Weinstein told them not to allow the other partners to
use Apartment 1111. (Smith Aff. ¶ 7, June 23, 2011.)
{29} On or about February 27, 2009, Barbarry, through Weinstein, asked that
Barbarry be paid an administrative fee equal to one percent of gross profits each
month, but the Partnership refused to pay such a fee. (Am. Compl. ¶ 7; Smith Aff. ¶
3, Jan. 29, 2010; Weinstein Aff. ¶ 18, Feb. 16, 2010.)
{30} Thereafter, in April 2009, Barbarry claimed a reimbursement from the
Partnership for expenses totaling $11,207.65. (Smith Aff. ¶ 4, Jan. 29, 2010;
Weinstein Aff. ¶ 19, Feb. 16, 2010.) Under the Partnership Agreement, the
Managing General Partner (Barbarry) was authorized to recover all expenses
incurred while acting on behalf of the Partnership. (Weinstein Aff. Ex. 1 § 7.2, Feb.
16, 2010.)
{31} After discovering the withdrawal, Smith claims he contacted Weinstein to
have him explain the purpose of the withdrawal. (Smith Aff. ¶ 5, Jan. 29, 2010.)
Weinstein responded that the withdrawal covered reimbursement of expenses
incurred by Barbarry while acting on behalf of the Partnership. (Smith Aff. ¶ 5,
Jan. 29, 2010.) Plaintiffs suspected, however, that the withdrawal represented an
impermissible administrative fee and demanded verification for the claimed
expenses, which Smith claims Defendants never produced. (Smith Aff. ¶¶ 4–7, Jan.
29, 2010.)
{32} Smith had his attorney write a letter to Mark Stuckey (“Stuckey”),
President of InterMark, informing Stuckey that the transfer of funds to Barbarry
had not been approved by all the General Partners, and instructing Stuckey to
cease making any further payments to Barbarry without approval of 51% of the
partners. (Smith Aff. ¶ 6, Feb. 23, 2010.)
{33} Despite this directive, in November 2009, InterMark informed Smith that
Barbarry, through Weinstein, continued to withdraw “expenses” totaling $2,150.00
a month from May 2009 to November 2009, but never provided an expense report.
(Smith Aff. ¶¶ 6–7, Jan. 29, 2010.) Defendants assert that Barbarry only withdrew
valid expenses. (Weinstein Aff. ¶ 19, Feb. 16, 2010.)
B.
ADDITIONAL FACTS CONSIDERED IN RESOLUTION OF MOTION II
{34} In the affidavit submitted with Plaintiffs’ brief opposing summary
judgment, Smith attempts to outline a calculation of damages. (Smith Aff. ¶ 6,
June 23, 2011.)
{35} In Paragraph 5, Smith states that he is a real estate broker with expert
knowledge of the Charleston apartment market. (Smith Aff. ¶ 5, June 23, 2011.)
{36} In Paragraph 6, Smith relies on the Survey and 2010 income levels to
calculate damages from lost profits allegedly caused by deferred maintenance at
Coventry Green based on the disparity in occupancy rates between Coventry Green
and nearby properties. (Smith Aff. ¶ 6, June 23, 2011.)
III.
ANALYSIS
A.
MOTION I
1.
STANDARD OF REVIEW
{37} “The purpose of summary judgment is to determine whether any issues of
material fact exist, and if not, eliminate the necessity of a full trial where only
questions of law are involved.” Strickland v. Lawrence, 176 N.C. App. 656, 661, 627
S.E.2d 301, 305 (2006) (citing Foster v. Winston-Salem Joint Venture, 303 N.C. 636,
641–42, 281 S.E.2d 36, 40 (1981)). Thus, the Court must grant summary judgment
“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 judgment as a matter of law.” N.C. R.
Civ. P. 56(c).
{38} “The movant has the burden of establishing the absence of any triable
issues of fact.” Strickland, 176 N.C. App. at 661, 627 S.E.2d at 305. This burden
can be met in one of two ways: “(1) ‘by proving an essential element of the opposing
party’s claim does not exist, cannot be proven at trial, or would be barred by an
affirmative defense’; or (2) ‘by showing through discovery that the opposing party
cannot produce evidence to support an essential element of her claim.’” Id. (quoting
Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000)).
{39} In ruling on a summary judgment motion, the court must view the
evidence in the light most favorable to the nonmoving party. See Wilmington Star-
News v. New Hanover Reg’l Med. Ctr., 125 N.C. App. 174, 178, 480 S.E.2d 53, 55
(1997) (citation omitted).
2.
BREACH OF FIDUCIARY DUTY AGAINST BARBARRY
{40} Under South Carolina law, “[t]o establish a claim for breach of fiduciary
duty, the plaintiff must prove (1) the existence of a fiduciary duty, (2) a breach of
that duty owed to the plaintiff by the defendant, and (3) damages proximately
resulting from the wrongful conduct of the defendant.” RFT Mgmt. Co., LLC v.
Tinsley & Adams LLP, 399 S.C. 322, 335–36, 732 S.E.2d 166, 173, reh’g denied,
2012 S.C. LEXIS 193 (2012) (citing Moore v. Moore, 360 S.C. 241, 599 S.E.2d 467
(Ct. App. 2004)).1
{41} While Barbarry does not dispute that it owes a fiduciary duty to Plaintiffs
(Am. Compl. ¶ 26; Answer ¶ 26), Barbarry contends that Plaintiffs have failed to
present a genuine issue of material fact to support Plaintiffs’ claim (a) for breach of
the fiduciary duty or damages arising from the alleged improper use of partnership
property; and (b) for damages from the deferral of certain maintenance and repair
projects.2

a.
BARBARRY’S USE OF PARTNERSHIP PROPERTY
{42} Under the South Carolina Uniform Limited Partnership Act (“ULPA”), “a
general partner of a limited partnership has the rights and powers . . . of a partner
in a partnership without limited partners,” unless the ULPA or the partnership
agreement states otherwise. S.C. CODE ANN. § 33-42-630(a) (2012). Here, neither
the Partnership Agreement nor the ULPA declares the General Partners’ rights to
partnership property. (See Weinstein Aff. Ex. 1, Feb. 16, 2010.) Thus, because
Barbarry is a general partner in the Partnership, the Court looks to the South
Carolina Uniform Partnership Act (“UPA”) for guidance. Under the UPA, “[a]
partner is a co-owner with his partners of specific partnership property, holding the
partnership property as a tenant in partnership.” S.C. CODE ANN. § 33-41-720(1)

1 The parties do not dispute that South Carolina law governs all substantive issues before the Court

and that North Carolina law governs all procedural matters. (Pls.’ Br. Opp. Mot. Summ. J. 1; Defs.’
Br. Supp. Mot. Summ. J. 7.)
2
Plaintiffs also claim that Barbarry breached its fiduciary duty by improperly removing partnership
funds. However, Defendants acknowledge the existence of conflicting testimony on this issue, and
therefore, do not seek summary judgment for breach of fiduciary duty based on the alleged removal
of partnership funds. (Defs.’ Br. Supp. Mot. Summ. J. 9.)
(2012). Accordingly, “a partner . . . has an equal right with his partners to possess
specific partnership property for partnership purposes . . . .” § 33-41-720(2)(a).
{43} Plaintiffs argue that Barbarry’s use of Apartment 1111 constituted a
breach of fiduciary duty because it excluded other partners from the apartment and
precluded it from being available as a rental unit, thus depriving the Partnership of
income. (Am. Compl. ¶¶ 20, 22.) Barbarry asserts that it is entitled to use and
possess Apartment 1111 for partnership purposes because Coventry Green is
partnership property. Weinstein provided an affidavit wherein he admits that
Barbarry used Apartment 1111 on occasion, but asserts that Barbarry only used the
location in connection with partnership business, including overseeing construction
and inspections and participating in a Partnership related arbitration. (Weinstein
Aff. ¶ 26, Feb. 16, 2010.) Plaintiffs do not allege any facts or present any evidence
to dispute Barbarry’s use of the property for partnership business. Therefore, there
is no genuine issue as to whether Barbarry acted within its rights as a General
Partner in the Partnership.
{44} Although Smith argues that he could not access Apartment 1111 after the
locks were changed (Smith Aff. ¶ 12, Jan. 29, 2010), Plaintiffs present no evidence
that either of them ever asked Weinstein for access and was denied. In fact,
Weinstein asserts that Smith never contacted him about staying at Apartment
1111, and that Barbarry had no involvement in the decision to change the locks.
(Weinstein Aff. ¶¶ 29–31, Feb. 16, 2010.) Smith did not put forth any facts to
dispute Barbarry’s assertions or to support its allegation that Barbarry excluded
other partners from using Apartment 1111. Even Smith’s assertion that he heard
from the property manager that Weinstein told them not to allow the other partners
to use Apartment 1111 is unsupported by any evidence that Plaintiffs were
subsequently excluded from the property or that Weinstein actively prevented them
from using the property. (Smith Aff. ¶ 7, June, 23, 2011.)
{45} If Barbarry had an equal right with its partners to possess the property for
partnership purposes, as provided for by S.C. Code Ann. § 33-41-720(2)(a), and
acted accordingly, Plaintiffs’ unsupported assertion that Barbarry’s use excluded
other partners from Apartment 1111 and precluded Apartment 1111 from being
available as a rental unit, depriving the Partnership of income, avails them nothing.
Therefore, because there remains no issue of material fact regarding breach, the
Court concludes that Barbarry has met its burden of demonstrating Plaintiffs’
failure on an essential element of their claim for breach of fiduciary duty based on
Barbarry’s alleged improper use of partnership property.3
{46} Accordingly, the Court GRANTS Motion I as to Plaintiffs’ claim for breach
of fiduciary duty by improper use of partnership property, and hereby DISMISSES
with prejudice this aspect of Plaintiffs’ claim for breach of fiduciary duty.
b.
BARBARRY’S DEFERRAL OF MAINTENANCE
{47} Restated, to establish breach of fiduciary duty, the plaintiff must show
“damages proximately resulting from the wrongful conduct of the defendant.” RFT
Mgmt. Co., 399 S.C. at 336, 732 S.E.2d at 173. Thus, where a plaintiff seeks
damages based on lost profits, as is the case here, the plaintiff must demonstrate
that the profits lost were a natural consequence of the breach. Drews Co., Inc. v.
Ledwith-Wolfe Assoc., Inc., 296 S.C. 207, 213, 371 S.E.2d 532, 535 (1988) (citation
omitted).
{48} To survive summary judgment, “the evidence should allow the court or
jury to determine the amount of damages with reasonable certainty or accuracy.”
Gauld v. O’Shaugnessy Realty Co., 380 S.C. 548, 559, 671 S.E.2d 79, 85 (Ct. App.
2008) (affirming summary judgment for defendants based on plaintiff’s failure to
produce sufficient evidence of damages) (citations omitted). “Neither the existence,
causation, nor amount of damages can be left to conjecture, guess, or speculation.”
Id. at 559, 671 S.E.2d at 85–86 (citations omitted). “The law does not require
absolute certainty of data upon which lost profits are to be estimated, . . . , and it is
sufficient if there is a certain standard or fixed method by which profits sought to be
recovered may be estimated and determined with a fair degree of accuracy.” Petty

3
Having held there was no breach of fiduciary duty, the Court does not reach Defendant Barbarry’s
argument that Plaintiffs failed to adequately prove damages.
v. Weyerhauser Co., 288 S.C. 349, 355, 342 S.E.2d 611, 615 (Ct. App. 1986)
(quotation and citation omitted). “The proof . . . must consist of actual facts from
which a reasonably accurate conclusion regarding the cause and the amount of the
loss can be logically and rationally drawn.” Drews, 296 S.C. at 213, 371 S.E.2d at
536 (citing 22 AM. JUR. 2d Damages § 641 (1988)).
{49} Lost profits “may be established with reasonable certainty with the aid of
expert testimony, economic and financial data, market surveys and analyses,”
Drews, 296 S.C. at 214, 371 S.E.2d at 536 (quoting RESTATEMENT (SECOND) OF
CONTRACTS § 352, at 146 (1981)), but must be diminished by the costs which would
have been incurred in earning such profits. Id. at 210, 371 S.E.2d at 534 (citing
RESTATEMENT (SECOND) OF CONTRACTS § 331, Comment B (1932); Mali v. Odom, 295
S.C. 78, 367 S.E.2d 166 (Ct. App. 1988)). In Drews, the court held, as a matter of
law, that proof of damages was insufficient to submit to a jury because the
complaining party only put forth evidence of gross profits without any figures for
operating expenses averted or a standard for establishing net profits. 296 S.C. at
214, 371 S.E.2d at 536.
{50} Furthermore, in Mali, the court ruled that estimates of monthly income
and expenses were speculative when offered “without reference to any operational
history . . . or to any particular standard or fixed method . . . .” 295 S.C. at 84, 367
S.E.2d at 170. The court in Mali noted that a three-month operating history from
before the breach or harm occurred, accompanied by a certain standard or method
to estimate lost profits, had previously been found sufficient to afford a reasonable
basis for determining lost profits. Id. (citing Petty, 288 S.C. at 356–57, 342 S.E.2d
at 615–16.) Without these facts, the court would be left to speculate about the
amount and causation of lost profits. Thus, where a plaintiff fails to provide such
proof of lost profits, the Court may rule as a matter of law on the issue of damages.
{51} Here, Plaintiffs allege Barbarry breached the fiduciary duty owed to the
Partnership when it deferred certain maintenance and repair projects at Coventry
Green, resulting in lost profits.4 (Pls.’ Br. Opp. Mot. Summ. J. 7–8.) However,
Barbarry argues that Plaintiffs failed to offer adequate proof of damages.
{52} In his initial affidavit, Smith, on behalf of ASIP, pointed out that
Intermark’s Survey projected that Coventry Green’s occupancy rates would be 12%–
18% below other properties in the area, amounting to a difference of $316,000 to
$475,000 in income. (Smith Aff. ¶ 10, Jan. 29, 2010.) However, in that same
affidavit, Smith stated that the overall damage would be “impossible to quantify.”
(Smith Aff. ¶ 13, Jan. 29, 2010.) When asked how Plaintiffs planned to calculate
damages, Smith later testified that he would not be able to quantify or know the full
impact on the Partnership until “[t]he day before trial.” (Smith Dep. 122:22, Nov.
10, 2010.) Specifically, Smith asserted that Plaintiffs planned to look at a number
of factors that could contribute to the Partnership’s loss in profits, and that lower
occupancy rates constituted only one consideration. (Smith Dep. 144:6–23, Nov. 10,
2010.) However, Smith could not provide a list of all the considerations Plaintiffs
intended to rely on in calculating lost profits. (Smith Dep. 144:6–23, Nov. 10, 2010.)
Savarino, on behalf of Herman, reiterated these statements in his own deposition,
stating that “[t]here’s a number of factors to be considered . . .” and that he did not
know if he could quantify the loss to the Partnership. (Savarino Dep. 109:7–110:13,
Nov. 12, 2010.)
{53} Although Plaintiffs supplied a projected occupancy rate below comparable
properties, they, much like the party in Drews, failed to account for any operating
costs that a lower occupancy rate saved them or provide a method of calculation to
equate the loss in income with a loss in profits. While a strict mathematical
calculation is not necessary, Plaintiffs must provide the Court with some method of

4 The Court notes that Plaintiffs do not argue for any measure of damages beyond lost profits, nor do

they put forth any evidence to support any other measure of damages. (Pls.’ Br. Opp. Mot. Summ. J.
5.) Indeed, since all the deferred items have been completed at a lower than estimated cost (Zdunczyk
Aff. ¶ 3, Feb. 16, 2010; Stuckey Aff. ¶ 10), Plaintiffs have not argued for relief based on increased costs.
Therefore, although a party pursuing a breach of fiduciary duty claim may seek damages beyond lost
profits, see Moore v. Moore, 360 S.C. 241, 256–57, 599 S.E.2d 467, 475 (Ct. App. 2004), Plaintiffs
here do not put forth any arguments or evidence from which the Court could ascertain another
measure of damages to withstand summary judgment.
calculation and with sufficient information to determine damages with a fair degree
of accuracy.
{54} In addition, as in Mali, Plaintiffs did not present any facts that would
advance the issue of causation beyond mere conjecture. Specifically, Plaintiffs
allege that the maintenance deferrals began in 2009. (Smith Aff. ¶ 9, Jan. 29,
2010.) However, neither party submitted any operating data from before 2009 that
could show a correlation between the maintenance deferrals and any drop in profits.
Also, Plaintiffs never asserted that any specific tenant left Coventry Green or
decided not to rent there because of concerns related to the deferral of maintenance.
Without such data or other information showing causation or the amount of lost
profits, the Court cannot conclude that Plaintiffs’ claim that the deferral of
maintenance caused a loss of profits is anything more than mere speculation.
{55} Although the parties conducted discovery for over a year, Plaintiffs could
not provide sufficient evidence for the Court to determine the causation or amount
of damages with reasonable certainty. Therefore, the Court concludes that
Barbarry has met its burden of demonstrating Plaintiffs’ failure to provide adequate
proof of damages to support their breach of fiduciary duty claim.
{56} Accordingly, the Court GRANTS Defendant Barbarry’s Motion for
Summary Judgment as to Plaintiffs’ claim for breach of fiduciary duty based on the
deferral of maintenance. The Court, therefore, DISMISSES,
DISMISSES with prejudice,
Plaintiffs’ claim for breach of fiduciary duty based on the deferral of maintenance
and repair projects.
3.
FRAUD AGAINST BARBARRY AND WEINSTEIN
{57} Under South Carolina law, “the [Plaintiffs], in order to state a good cause
of action [for fraud] must allege (1) a representation; (2) its falsity; (3) its
materiality; (4) the speaker’s knowledge of its falsity; (5) his intent that it should be
acted upon by the person; (6) [Plaintiffs’] ignorance of its falsity; (7) [Plaintiffs’]
reliance on its truth; (8) [Plaintiffs’] right to rely thereon; and (9) [Plaintiffs’]
consequent and proximate injury. Mut. Sav. & Loan Assoc. v. McKenzie, 274 S.C.
630, 633, 266 S.E.2d 423, 425 (1980) (alteration original) (citations omitted). “Each
and every one of these elements must be proven by clear, cogent, and convincing
evidence.” Regions Bank v. Schmauch, 354 S.C. 648, 672, 582 S.E.2d 432, 445 (Ct.
App. 2003).
{58} Plaintiffs argue that Defendants Barbarry and Weinstein committed fraud
when Defendants misrepresented the purpose of certain withdrawals from the
Partnership account. (Am. Compl. ¶¶ 30–35.) Specifically, Plaintiffs assert that
Defendants’ “expenses,” in actuality, represented unauthorized administrative fees.
Defendants deny that any false representation was ever made to Plaintiffs or that
Plaintiffs relied on any such representations. (Defs.’ Br. Supp. Mot. Summ. J. 20–
26.)
{59} Defendants first argue that they never made any representations to
Plaintiffs. Black’s Law Dictionary defines a representation as “[a] presentation of
fact – either by words or by conduct – made to induce someone to act.” BLACK’S LAW
DICTIONARY 1327 (8th ed. 2004).
{60} Here, Plaintiffs state that they did not know about or authorize the initial
withdrawal of $11,207.65 in April 2009. (Smith Aff. ¶ 4, Jan. 29, 2010; Weinstein
Aff. ¶ 19, Feb. 16, 2010.) Given that, it would be incongruous for Plaintiffs to
simultaneously argue that Defendants made a representation of fact, by words or by
conduct, to induce Plaintiffs to authorize the withdrawal. Thus, Plaintiffs cannot
prove an essential element of their claim. The Court, therefore, concludes that the
claim for fraud fails based upon the initial withdrawal in April 2009.
{61} However, after the April 2009 withdrawal, Plaintiffs claim that Weinstein
responded to direct questioning about the withdrawal’s purpose and stated that the
withdrawal was for business expenses. (Smith Aff. ¶ 5, Jan. 29, 2010.) According to
Plaintiffs, Defendants continued to withdraw a monthly amount from May 2009
until November 2009, despite failing to provide requested documentation to support
the claimed expenses. (Smith Aff. ¶¶ 6–7, Jan. 29, 2010; Smith Aff. ¶ 6, Feb. 23,
2010.) This testimony, viewed in a light most favorable to Plaintiffs, presents a
question of fact as to whether Defendants’ conduct and assertions after the initial
withdrawal were representations that the May 2009 to November 2009 withdrawals
were for reimbursements of valid business expenses. Given this evidence, the Court
concludes that a factual dispute remains at issue regarding whether Defendants
made a false representation regarding the May 2009 to November 2009
withdrawals. For that reason, summary judgment premised on this argument is
inappropriate.
{62} Defendants next argue that, even if they made a representation for the
withdrawals, Plaintiffs did not rely and could not have relied on any alleged
misrepresentation, given Plaintiffs’ suspicions after the April 2009 withdrawal.
{63} “Whether reliance is justified in a given situation requires an evaluation
of the circumstances involved, including the position and relations of the parties.”
Elders v. Parker, 286 S.C. 228, 233, 332 S.E.2d 563, 567 (Ct. App. 1985). As a
result, “[t]he general rule is that questions concerning reliance and its
reasonableness are factual questions for the jury.” Redwind L.P. v. Edwards, 354
S.C. 459, 475, 581 S.E.2d 496, 504 (Ct. App. 2003) (quoting Unlimited Servs., Inc. v.
Macklen Enters., Inc., 303 S.C. 384, 387, 401 S.E.2d 153, 155 (1991)).
{64} Although Plaintiffs state that they questioned the true purpose of the
initial withdrawal and did not believe it reimbursed valid expenses (Smith Aff. ¶ 6,
Feb. 23, 2010), Plaintiffs also assert that they demanded verification for the claimed
expenses. (Smith Aff. ¶¶ 5–7, Jan. 29, 2010.) And, until they received a breakdown
of the claimed expenses for approval, Plaintiffs argue that they had to rely on
Defendants’ response regarding the purpose of the withdrawals. (Am. Compl. ¶ 11.)
The Court concludes that whether Plaintiffs were justified in their reliance, based
on the relationship and positions of the parties involved, is a factual question that is
inappropriate for determination at summary judgment.
{65} Accordingly, the Court DENIES Motion I as to Plaintiffs’ claim for fraud
based on the withdrawals from May 2009 to November 2009 and GRANTS Motion I
as to Plaintiffs’ claim for fraud based on the April 2009 withdrawal. The Court,
therefore, DISMISSES with prejudice Plaintiffs’ claim for fraud based on the April
2009 withdrawal.
4.
CONSTRUCTIVE FRAUD AGAINST BARBARRY
{66} To establish a claim for constructive fraud, the plaintiff must prove the
existence of a fiduciary relationship along with all the elements for fraud, except the
element of intent. Pitts v. Jackson Nat’l Life Ins. Co., 352 S.C. 319, 333, 574 S.E.2d
502, 509 (Ct. App. 2002) (quoting Ardis v. Cox, 314 S.C. 512, 515, 431 S.E.2d 267,
269 (Ct. App. 1993)).
{67} Restated, it is undisputed that Barbarry owes a fiduciary duty to the
Plaintiffs. Having concluded above that a factual dispute remains at issue
regarding Plaintiffs’ claim of fraudulent withdrawals from the Partnership account
between May 2009 and November 2009, Motion I likewise fails as to Plaintiffs’
claim for constructive fraud based on these same withdrawals. However, the Court
also concluded above that Defendants did not make a representation as to the
withdrawal in April 2009, which similarly defeats Plaintiffs’ claim for constructive
fraud against Barbarry based on that withdrawal.
{68} Accordingly, the Court DENIES Motion I as to Plaintiffs’ claim for
constructive fraud based on the withdrawals from May 2009 to November 2009 and
GRANTS Motion I as to Plaintiffs’ claim for constructive fraud based on the April
2009 withdrawal. The Court, therefore, DISMISSES with prejudice Plaintiffs’ claim
for constructive fraud based on the April 2009 withdrawal.
B.
MOTION II
{69} Under Rule 37(b)(2) of the North Carolina Rules of Civil Procedure, if a
party fails to comply with Rule 26(e) or a court order directing discovery, the Court
has broad discretion to impose sanctions, including prohibiting the introduction of
matters in evidence. N.C. R. Civ. P. 37(b)(2); Willoughby v. Wilkins, 65 N.C. App.
626, 643, 310 S.E.2d 90, 101 (1983). Rule 26(e) requires that the parties seasonably
supplement their responses during discovery when they obtain new information
which either reveals that the response was incorrect when made or is no longer
correct. N.C. R. Civ. P. 26(e). “[T]he purpose behind Rule 26(e) is to prevent a party
with discoverable information from making untimely, evasive, or incomplete
responses to requests for discovery.” Bumgarner v. Reneau, 332 N.C. 624, 630, 422
S.E.2d 686, 689 (1992).
{70} In this case, the original CMO ordered that all discovery be completed by
November 22, 2010. (CMO at 3, Feb. 1, 2010.) After granting several extensions on
the discovery deadlines outlined in the CMO and refusing to grant any further
extensions, the Court ordered the parties to complete all discovery by April 12,
2011. (Order Am. CMO, Feb. 11, 2011.)
{71} Throughout the discovery period, Plaintiffs made numerous responses to
direct questioning and submitted affidavits stating that they did not know what the
full extent of the damages would be from the deferral of maintenance or how to
quantify lost profits. (See Smith Aff. ¶ 13, Jan. 29, 2010; Smith Dep. 122:22, 144:6–
23, Nov. 10, 2010; Savarino Dep. 109:7–110:13, Nov. 12, 2010.) Plaintiffs claimed
that any number of factors would have to be considered, and that they did not
anticipate being able to quantify lost profits until the day before trial. (Smith Dep.
122:22, 144:6–23, Nov. 10, 2010; Savarino Dep. 109:7–110:13, Nov. 12, 2010.)
{72} Subsequently, and in spite of the Court-ordered deadline, Plaintiffs
submitted the affidavit at issue on June 23, 2011, attempting to present a
calculation for lost profits more than two months after discovery ended. (See Smith
Aff., June 23, 2011.) In Paragraphs 5 and 6 of the new affidavit, Smith claims to be
an expert in real estate in the area and provides a more definite calculation of
damages.5 (Smith Aff. ¶¶ 5–6, June 23, 2011.)
{73} With regard to Paragraph 5, Defendants argue that Plaintiffs attempted to
qualify Smith as an expert witness also in violation of the CMO deadlines. The
Business Court Rules specifically require that “[d]iscovery with respect to experts . .
. be conducted within the discovery period set forth in the [CMO].” BCR 18.5.
However, Plaintiffs state that they are not attempting to qualify Smith as an

5
The Court notes that Defendants only move to have paragraphs 5 and 6 of the disputed Smith
affidavit stricken from evidence. Therefore, the Court will not address the propriety of the
remaining portions of the affidavit.
expert, and that all the testimony provided in the affidavit is based on Smith’s
personal knowledge. (Pls.’ Br. Opp. Mot. Strike 15.) In the exercise of its discretion,
the Court declines to strike Paragraph 5 based upon Defendants’ argument that
Plaintiffs attempt, therein, to qualify Smith as an expert witness.
{74} In Paragraph 6, Smith relies on income levels in 2010 and the Survey that
he attached to his initial affidavit on January 29, 2010, to calculate lost profits from
the deferral of maintenance. (Smith Aff. Ex. F, Jan. 29, 2010.) However, Plaintiffs
had all the information used to make the calculation early in discovery but failed to
supplement their previous incomplete responses. Indeed, Plaintiffs submitted the
Survey into evidence over a year before discovery ended, and both parties referred
to the Survey throughout discovery. (Stuckey Aff. ¶¶ 11–12; Kropilak Aff. ¶ 6;
Smith Aff. ¶ 10, Jan. 29, 2010; Smith Aff. ¶ 2, Feb. 23, 2010.) In addition, Plaintiffs
gave no explanation for why they could not provide the damages calculation within
the ordered discovery period. Such conduct goes directly against the purpose of
Rule 26(e) in preventing “untimely, evasive, and incomplete responses.” Therefore,
to the extent that Plaintiffs sought to introduce new evidence for lost profits with
the submission of Paragraph 6 of the affidavit, the Court concludes that Plaintiffs
violated the amended CMO and failed to seasonably supplement previous responses
in discovery, warranting sanctions under Rule 37. Consequently, the Court, in the
exercise of its discretion, strikes Paragraph 6 from the affidavit and will not
consider it for purposes related to Motion I.6
{75} Accordingly, the Court hereby GRANTS in part and DENIES in part
Motion II to Strike Affidavit and for Sanctions. The Court, in the exercise of its
discretion, STRIKES Paragraph 6 from the Affidavit of James Allen Smith dated
June 23, 2011.

6
Given the Court’s conclusion under Rule 37, it need not address Defendants’ remaining arguments
for striking portions of the affidavit under Rule 56.
C.
MOTION III
{76} Having considered Motion III and the parties’ briefs, the Court concludes
that good cause does not exist to allow Defendants to amend and supplement their
motion and briefs seeking summary judgment. Accordingly, the Court hereby
DENIES Motion III for Leave to Amend and Supplement Defendants’ Motion for
Summary Judgment.
IV.
CONCLUSION
{77} For the reasons stated above, the Court GRANTS in part and DENIES in
part Defendants’ Motion for Summary Judgment; GRANTS in part and DENIES in
part Defendants’ Motion to Strike Affidavit and For Sanctions; and DENIES
Defendants’ Motion for Leave to Amend and Supplement Motion for Summary
Judgment.
{78} WHEREFORE,
WHEREFORE the Court hereby DISMISSES,
DISMISSES with prejudice, Plaintiffs’
claims for breach of fiduciary duty based on the improper use of partnership
property and the deferral of maintenance, fraud based on the April 2009
withdrawal, and constructive fraud based on the April 2009 withdrawal.
SO ORDERED,
ORDERED this the 3rd day of January, 2013.