SOFT LINE, S.P.A. v. ITALIAN HOMES, LLC

Soft Line, S.p.A. v. Italian Homes, LLC, 2015 NCBC 6.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF GUILFORD 13 CVS 9429

SOFT LINE, S.p.A., Individually, and )
in the Right of and for the Benefit of )
SOFT LINE CALIA AMERICA, LLC, )
)
Plaintiffs, )
)
v. )
)
ITALIAN HOMES, LLC; CALIA )
TRADE, S.p.A.; VINCENT )
SCOCUZZA; GIUSEPPE CALIA; and ) ORDER
ANGELO CALCULLI, )
)
Defendants, )
)
and )
)
SOFT LINE CALIA AMERICA, LLC, )
)
Nominal Defendant. )
)

{1} THIS MATTER is before the Court on Defendants’ Motion for
Summary Judgment (“Motion”), made pursuant to Rule 56 of the North Carolina
Rules of Civil Procedure (“Rule(s)”). For the reasons expressed below, the Motion is
GRANTED in part and RESERVED IN PART, pending discovery.
Womble Carlyle Sandridge & Rice, LLP by Jason C. Hicks, Mark N. Poovey,
and Jonathan Reich for Plaintiffs.
Nexsen Pruet, PLLC by Gary L. Beaver, Christine L. Myatt, and Catherine
B. Lane for Defendants.
Gale, Chief Judge.

I. INTRODUCTION

{2} This dispute arises out of a joint venture between Plaintiff Soft Line,
S.p.A. (“Soft Line”) and Defendant Calia Trade S.p.A. (“Calia Trade”) organized as
Soft Line Calia America, LLC (“SLCA”). After approximately two years of
operation, Soft Line and Calia Trade elected to dissolve the joint venture, as it had
failed to make a profit. Plaintiff contends that SLCA’s financial failures are
attributable to Defendants’ fraudulent statements, waste of corporate assets, and
breach of fiduciary duty through self-dealing. Plaintiff also complains that
Defendants breached their fiduciary duties in winding up SLCA, by making
preferential payments to themselves and Calia-affiliated companies and by forming
another North Carolina limited liability company as, essentially, a successor-in-
interest to SLCA, but excluding Plaintiff. They contend these actions constitute a
breach of fiduciary duty coupled with an improper personal benefit. Defendants
have disclaimed any misconduct and raise multiple defenses. The subject of the
present Motion is limited to whether the statute of limitations has run on Plaintiff’s
claims.
{3} The Motion is made in advance of any significant discovery.
Defendants urge that granting the Motion, in whole or part, will promote judicial
efficiency by narrowing the scope of claims on which discovery must be taken.
However, the Court notes that the discovery relevant to the claims for civil
conspiracy, unjust enrichment, fraud, and unfair and deceptive trade practices
(“UDTP”) is also relevant to the constructive fraud claim, which, as discussed below,
is not time-barred. Additionally, fact issues remain as to whether or not the statute
of limitations bars claims under the continuing wrong doctrine. The Court then
grants the Motion in part, but concludes that some parts of the Motion would be
better considered after further discovery.

II. FACTUAL BACKGROUND

{4} The Court does not make findings of fact when ruling on a motion for
summary judgment. Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26 N.C. App.
138, 142, 215 S.E.2d 162, 164–65 (1975). However, to provide context for the
Court’s ruling, it is appropriate for the Court to outline the following facts, which
are either undisputed or construed in Plaintiff’s favor.
A. The Parties

{5} Plaintiff Soft Line is an Italian furniture manufacturer that sells
upholstered furniture worldwide, including in the United States. Soft Line is
organized as a societa per azioni, which is the Italian equivalent of a corporation.
Soft Line’s principal place of business is in Bari, Italy. Modesto Scagliusi, a
nonparty, is the president of Soft Line.
{6} Defendant Calia Trade, formerly Calia Trade SRL, is an Italian
furniture manufacturer that sells leather upholstered furniture and regularly does
business in North Carolina. Calia Trade is part of a larger group of companies (“the
Calia-affilated companies”) that Defendants Calia and Calculli control.
{7} Before it dissolved in February 2009, SLCA was a North Carolina
limited liability company with its principal office in Greensboro, North Carolina.
SLCA was a joint venture between Calia Trade and Soft Line, organized in 2006 to
gain a stronger foothold in the American furniture market. Calia Trade and Soft
Line each held a fifty-percent (50%) ownership interest in SLCA.
{8} Defendant Italian Homes, LLC (“Italian Homes”) is a North Carolina
limited liability company with its principal place of business in High Point, North
Carolina. Italian Homes was formed approximately one month before SLCA
dissolved in 2009.
{9} Defendant Vincent Scocuzza resides and works in High Point, North
Carolina. Before serving as manager for SLCA, Scocuzza worked for the Calia-
affiliated companies. Scocuzza is presently a manager of Italian Homes.
{10} Defendant Angelo Calculli primarily resides in Italy and has not yet
been served with the Complaint in this case.1
{11} Defendant Giuseppe Calia resides in Italy, but travels to and does
business in Guilford County, North Carolina, the Calia-affiliated companies’ agent.
{12} Scocuzza, Calculli, and Calia, occasionally referred to as “the
Individual Defendants,” are all managers of Italian Homes.

1 There is a separate motion regarding such service that this Order does not address.
B. Institution of the Lawsuit

{13} Plaintiff initiated this action on October 16, 2013, bringing derivative
and individual claims for breach of fiduciary duty, UDTP, civil conspiracy,
accounting, breach of contract, unjust enrichment, declaratory judgment, waste of
corporate assets, fraud in the inducement, constructive fraud, and constructive
trust. The matter was designated a mandatory complex business case on November
12, 2013, and assigned to the undersigned on November 20, 2013.
{14} At argument on Defendants’ Motions to Dismiss, Plaintiff voluntarily
dismissed its breach of contract claim.
{15} On May 30, 2014, based on the applicable statutes of limitations,
Defendants moved for summary judgment on Plaintiff’s claims for breach of
fiduciary duty, UDTP, civil conspiracy, unjust enrichment, waste of corporate
assets, fraud in the inducement, constructive fraud, and constructive trust. The
Motion has been fully briefed; the Court has heard oral argument; and the Motion is
ripe for disposition.

C. SLCA’s Formation and Operation

{16} Beginning in 2006, Soft Line and Calia Trade began negotiations to
create a joint venture to sell leather upholstered furniture in the United States.
Scagliusi negotiated on behalf of Soft Line; and Calia negotiated on behalf of Calia
Trade. Under the joint venture plan, Soft Line and Calia Trade would each own fifty
percent of SLCA and Foshan Shunde Divextra Furniture Co., Ltd. (“Divextra”).2
SLCA had three managers: Roberto Romano, Soft Line’s former CEO (now
deceased); Angelo Calculli, associated with Calia Trade; and Vincent Scocuzza, also
associated with Calia Trade. Scocuzza was the only on-site manager for SLCA in
Greensboro, North Carolina.3

2 Soft Line owned a direct twenty-percent interest in Divextra and an indirect thirty-percent interest

through SLCA.
3 The parties disagree as to the nature and degree of Scocuzza’s authority as a manager and the

extent to which he should be charged with the alleged breaches of fiduciary duty involving control of
SLCA finances.
{17} Plaintiff alleges that the Individual Defendants and Calia Trade
conspired to mismanage corporate assets, solicit loans or capital contributions from
Soft Line for SLCA, and sell joint-venture assets below cost to a Calia-affiliated
company, Manifattura Italiana Divani S.p.A. (“MID”). Moreover, Defendants
allegedly made false reports to Soft Line regarding Divextra to induce Soft Line to
make additional investments in or lend to SLCA.

D. Post-SLCA

{18} Once it became apparent that SLCA would not be profitable for either
Soft Line or Calia Trade, the owners agreed to dissolve the joint venture and that
an independent accountant would perform a final accounting. Plaintiff contends
that because Defendants controlled the financial and accounting documents, they
were responsible for conducting the final accounting but failed to do so. Plaintiff
also contends that in dissolution, the Individual Defendants made preferential
payments to Calia-affiliated companies rather than to Soft Line.
{19} On January 30, 2009, around the time SLCA was formally dissolved,
Scocuzza formally founded Italian Homes. Plaintiff contends that Defendants built
Italian Homes on SLCA’s “assets, goodwill, and business opportunities,” essentially
as a successor-in-interest to SLCA. (Compl. ¶ 118.)
{20} Six months later, Romano, representing Soft Line, filed a complaint
with the Carabinieri, an Italian police force and court (“Carabinieri Complaint”),4 in
which he alleged, inter alia, the following: (1) in August and September of 2008,
Defendants’ agent sent Soft Line financial reports for SLCA and Divextra which
showed that SLCA was operating at a profit of $324,321.29 and Divextra was
operating at a loss of $386,130.97 (Carabinieri Compl. 3–4); (2) based on this
information, Soft Line and Calia Trade decided to equally contribute another $2
million to Divextra (Carabinieri Compl. 4); (3) Soft Line made these contributions,
but Calia never did (Carabinieri Compl. 4); (4) three months after the original

4 The Carabinieri Complaint is attached as Exhibit Q to Defendants’ Memorandum in Support of

Defendants’ Motion for Summary Judgment.
financial report, Defendants’ agent sent an updated statement which showed that
SLCA had incurred a $940,946.51 loss and that Divextra was in over $4 million of
debt (Carabinieri Compl. 5); (5) Soft Line repeatedly asked Defendants to explain
the disparity between the two reports, to no avail (Carabinieri Compl. 5); (6) other
financial statements conflicted such that one set showed that MID owed Divextra
$604,431 and a subsequent set showed that Divextra owed MID $373,006
(Carabinieri Compl. 6–7); and (7) though Divextra was supposed to sell furniture to
MID at a 10% mark-up, Defendants instructed Divextra to sell to MID at below cost
(Carabinieri Compl. 6). Plaintiff makes the same allegations in its Complaint, filed
more than four years later in the present action. (Compare Compl. ¶¶ 57–58, 67–
72, 78 with Carabinieri Compl. 3–6.)

III. STANDARD OF REVIEW

{21} Summary judgment is proper when the evidentiary record shows that
no genuine issue as to any material fact exists and that the movant is entitled to
judgment as a matter of law. N.C. R. Civ. P. 56(c); Andresen v. Progress Energy,
Inc., 204 N.C. App. 182, 184, 696 S.E.2d 159, 160–61 (2010). In ruling on a
summary judgment motion, the trial court must consider the evidence in the light
most favorable to the nonmovant. Barger v. McCoy Hillard & Parks, 346 N.C. 650,
662, 488 S.E.2d 215, 221 (1997).

IV. ANALYSIS

A. As Pleaded, Plaintiff’s Claims for Breach of Fiduciary Duty,
Constructive Fraud, and Constructive Trust Are Governed by a Longer
Limitations Period and Survive the Present Motion

{22} To succeed on a breach of fiduciary duty claim, a plaintiff must show
that (1) a fiduciary relationship exists from which fiduciary duties arise; (2) the
fiduciary duty was breached; and (3) the breach proximately caused the plaintiff’s
injury. BDM Invs. v. Lenhil, Inc., 2014 NCBC LEXIS 6, at *23 (N.C Super. Ct. Mar.
20, 2014) (citing Green v. Freeman, 367 N.C. 136, 141, 749 S.E.2d 262, 268 (2013)).
A claim for constructive fraud lies where (1) a relationship of trust and confidence
exists, (2) the defendant takes advantage of that position of trust to benefit himself,
and (3) the plaintiff was consequently injured. White v. Consol. Planning, Inc., 166
N.C. App. 283, 294, 603 S.E.2d 147, 156 (2004). In cases where an individual
obtains legal title to property in violation of a fiduciary duty he owes to another, a
constructive trust arises. Day v. Rasmussen, 177 N.C. App. 759, 762, 629 S.E.2d
912, 914 (2006).
{23} Typically, breaches of fiduciary duty are governed by the three-year
statute of limitations contained in section 1-52(1). Marzec v. Nye, 203 N.C. App. 88,
93, 690 S.E.2d 537, 541 (2010) (citing Toomer v. Branch Banking & Trust Co., 171
N.C. App. 58, 66, 614 S.E.2d 328, 335 (2005)). “However, a claim of constructive
fraud based upon a breach of fiduciary duty falls under the ten-year statute of
limitations contained in N.C. Gen. Stat. § 1-56.” Babb v. Graham, 190 N.C. App.
463, 480, 660 S.E.2d 626, 637 (2008) (quoting Toomer, 171 N.C. App. at 67, 614
S.E.2d at 335 (internal quotations and alterations omitted)). A claim for a
constructive trust based on a constructive fraud claim is also governed by the ten-
year statute of limitations. Bowen v. Darden, 241 N.C. 11, 17, 84 S.E.2d 289, 294
(1954).
{24} Here, Plaintiff asserts that Defendants breached their fiduciary duties,
taking SLCA’s property to benefit themselves and Calia-affiliated companies to
SLCA’s detriment. Assuming Plaintiff can ultimately prove each element of
constructive fraud, as presently pleaded, its fiduciary duty and constructive trust
claims are those to which a ten-year statute of limitations applies and are,
therefore, not time barred.5

5 The present Motion does not address, and the Court does not presently express an opinion as to

whether Plaintiff can bring those claims directly as well as derivatively.
B. Plaintiff’s Claims for Civil Conspiracy, Unjust Enrichment, Fraud in
the Inducement, and Unfair and Deceptive Trade Practices Are not
Time-Barred if Plaintiff Ultimately Develops a Record to Support
Application of the Continuing Wrong Doctrine

{25} Plaintiff’s claims for civil conspiracy, unjust enrichment, and fraud in
the inducement each have a three-year limitations period. N.C. Gen. Stat. § 1-52(1),
(4), (9) (2014). A fraud claim does not begin to accrue until discovery of the fraud.
N.C. Gen. Stat. § 1-52(9). A UDTP claim has a four-year limitations period. N.C.
Gen. Stat. § 75-16.2 (2014). Defendants argue that the events giving rise to each of
these claims occurred and were known to Plaintiff more than four years ago,
making them time barred. Among other arguments, Defendants assert that the
Carabinieri Complaint, filed well outside the limitations period, makes abundantly
clear that Plaintiff was on notice of its various claims, even if not aware of each
specific fact Plaintiff would now seek to prove.
{26} As to the fraud claims, Plaintiff invokes the discovery rule and
contends that it did not discover much of the conduct until recently. As to other
claims, Plaintiff contends that the causes of action either rest on acts occurring
within the limitations period, or alternatively, are based on ongoing wrongs
supporting application of the continuing wrong doctrine which tolls the running of
the limitations period.
{27} For instance, Plaintiff contends that, after dissolution and within the
limitations period, Defendants made preferential payments to Italian Homes and
MID, two Calia-affiliated companies. (Vincent Scocuzza’s Resps. Pl.’s First Set
Interrogs. (“Scocuzza Interrogs. Resps.”) Nos. 7, 8.) Plaintiff also urges that
Defendants failed to disclose the existence of and mismanaged (1) an Australian
lawsuit against SLCA, pending from 2010 to 2012 and (2) an IRS tax levy against
the joint venture arising in 2013.6 These facts arguably assert new claims that did
not arise prior to 2010 and are inside the limitations period.

6 The Court makes no determination whether post-dissolution omissions regarding the Australian

lawsuit and the IRS tax levy amount to fraud. However, viewing facts in the light most favorable to
{28} However, the facts alleged in the 2009 Carabinieri Complaint occurred
outside of the limitations period, and claims based on them are time-barred unless
the continuing wrong doctrine tolls the limitations period. “A party having notice
must exercise ordinary care to ascertain the facts, and if he fail [sic] to investigate
when put upon inquiry, he is chargeable with all the knowledge he would have
acquired, had he made the necessary effort to learn the truth of the matters
affecting his interests.” Blankenship v. English, 222 N.C. 91, 92, 21 S.E.2d 891, 892
(1942), quoted in Vail v. Vail, 233 N.C. 109, 116, 63 S.E.2d 202, 207 (1951); see also
Pembee Mfg. Corp. v. Cape Fear Const. Co., 313 N.C. 488, 493, 329 S.E.2d 350, 354
(1985).
{29} Under the continuing wrong doctrine, the statute of limitations does
not begin to run until the unlawful act ceases. Marzec, 203 N.C. App. at 94, 690
S.E.2d at 542. The continuing wrong doctrine is not easily invoked. For the
continuing wrong doctrine to apply, Soft Line must show that Defendants
continuously committed unlawful acts, not merely that there were continual ill
effects from an original unlawful act. Id. The doctrine has been said to arise from
“separate obligations stemming from the same essential . . . legal obligation,”
Eubank v. Van Riel, No. COA11-1088, 2012 N.C. App. LEXIS 727, at *20 (N.C. Ct.
App. June 19, 2012), rather than from “a discrete occurrence,” Stratton v. Royal
Bank of Can., 211 N.C. App. 78, 87, 712 S.E.2d 221, 229 (2011).
{30} Importantly, this Motion is presented at the preliminary pleadings
stage. Genuine issues of fact remain as to the continuing wrong doctrine’s
application. Moreover, the disputed facts necessary to resolve the competing
arguments on the continuing wrong doctrine’s application overlap with those
required to determine whether Plaintiff has stated a constructive fraud claim with a
longer limitations period, such that ruling on the Motion as to the continuing wrong
doctrine would not promote judicial efficiency. Considering the currently limited

Plaintiff, this could amount to a concealment of material fact which was reasonably calculated to,
intended to, and did actually deceive Plaintiff and resulted in injury to Plaintiff. Ragsdale v.
Kennedy, 286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974).
factual record in the light most favorable to Plaintiff, the Court allows the claims to
proceed into discovery. In so doing, it does not presently rule on the limitations
questions or foreclose subsequently revisiting those issues by the undersigned, or if
necessary, another superior court judge, as discovery advances.
{31} However, the Court believes it is appropriate to rule on a more limited
issue and now rejects Plaintiff’s arguments that Defendants are equitably estopped
from asserting the statute of limitations as a defense or that the limitations period
is otherwise equitably tolled because Plaintiff sought justice in Italy prior to filing
in North Carolina. Equitable tolling does not save present claims that are also
alleged in the Carabinieri Complaint because the Carabinieri Complaint expressly
states that Soft Line reserves the right “to bring a civil action to the established
criminal proceedings,” (Carabinieri Compl. 8), indicating that Plaintiff understood
the Carabinieri Complaint did not create a civil suit and that it would have to take
additional measures to bring a civil action. Equitable estoppel is not appropriate
because it requires, inter alia, that a party asserting the defense have “(1) a lack of
knowledge and the means of knowledge as to the real facts in question; and (2)
relied upon the conduct of the party sought to be estopped to his prejudice.”
Stratton, 211 N.C. App. at 88, 712 S.E.2d at 230 (internal citations omitted).
{32} There is no actionable allegation that Plaintiff relied on any of
Defendants’ representations or omissions to its detriment or in refraining from
filing a civil action. In sum, the Court will not entertain an assertion of equitable
estoppel or equitable tolling, other than the doctrine of continuing wrong, to defeat
an otherwise valid defense based on the statute of limitations. Stated otherwise, as
to the claims for civil conspiracy, unjust enrichment, fraud, and UDTP, Plaintiff will
survive the limitations defense, only if (1) the continuing wrong doctrine tolls the
statute of limitations for claims based on acts that occurred outside the limitations
period or (2) the claims first arose because of conduct that occurred within the
limitations period.
C. Plaintiff’s Claim for Corporate Waste Is Dismissed

{33} North Carolina does not recognize corporate waste as an independent
cause of action. Green v. Condra, 2009 NCBC LEXIS 20, at *29 (N.C. Super. Ct.
Aug. 14, 2009). Rather, Plaintiff’s claim for corporate waste is subsumed in its
breach of fiduciary duty claim. McKee v. James, 2013 NCBC LEXIS 33, at *41
(N.C. Super. Ct. July 24, 2013). Accordingly, that claim is DISMISSED.

V. CONCLUSION

{34} For the foregoing reasons, Plaintiff’s claim for corporate waste is
DISMISSED. As to all other claims, ruling on Defendants’ Motion for Summary
Judgment is DEFERRED pending a subsequent determination on a fuller
evidentiary record.

IT IS SO ORDERED, this the 16th day of January, 2015.