Brady v. Van Vlaanderen

Brady v. Van Vlaanderen, 2016 NCBC 56.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF CUMBERLAND 12 CVS 7552

PATRICIA M. BRADY, )
)
Plaintiff, )
)
v. )
)
BRYANT C. VAN VLAANDEREN; )
RENEE M. VAN VLAANDEREN; )
)
MARC S. TOWNSEND; LINDA M. )
TOWNSEND; UNITED TOOL & ) ORDER & OPINION
STAMPING COMPANY OF NORTH )
CAROLINA, INC.; UNITED )
REALTY OF NORTH CAROLINA, )
)
LLC; ENTERPRISE REALTY, LLC; )
and WATERS EDGE TOWN )
APARTMENTS, LLC, )
)
Defendants. )
)

{1} THIS MATTER is before the Court on Defendant Enterprise Realty,
LLC’s Motion for Summary Judgment (“Enterprise’s Motion”). For the reasons
expressed below, Enterprise’s Motion is GRANTED in part and DENIED in part.
Bain & McRae, LLP by Edgar R. Bain for Plaintiff.
Shanahan Law Group, PLLC by Kieran J. Shanahan, Brandon S. Neuman,
and Jeffrey M. Kelly for Defendants.
Gale, Chief Judge.

I. INTRODUCTION

{2} Plaintiff Patricia M. Brady (“Brady”), and Defendants Bryant C. Van
Vlaanderen (“B. Van Vlaanderen”), Renee M. Van Vlaanderen (“R. Van
Vlaanderen”), Marc S. Townsend (“M. Townsend”), and Linda M. Townsend (“L.
Townsend”) (collectively, without Brady, the “Individual Defendants”; with Brady,
the “Members”) are family members, each of whom have or had ownership interests
in the various Defendant companies. Brady asserts that her employment with
Defendant United Tool & Stamping Company of North Carolina, Inc. (“United
Tool”) was wrongfully terminated, that she has been unfairly excluded from
participating in management of the various company Defendants, and that she has
not been allowed access to documents and information regarding the companies.
She has brought claims for judicial dissolution (“Meiselman claim(s)”) and
inspection of corporate records against each of the companies, and other claims
against the Individual Defendants.
{3} The present motion relates solely to claims involving Enterprise
Realty, LLC (“Enterprise”), of which Brady is a one-third owner.1 Enterprise has
brought counterclaims—namely for breach of Enterprise’s operating agreement and
breach of fiduciary duty—to recover contributions that it contends Brady was
required to make under Enterprise’s operating agreement.
{4} Brady does not deny that she and the Individual Defendants agreed to
make such capital contributions as necessary to cover Enterprise’s shortfalls and
pay down its debt, nor does she deny that she and the Individual Defendants agreed
to sell Enterprise’s properties, likely at a loss. However, Brady argues that she has
not been given access to adequate documentation to determine the amount of the
capital contribution, if any, that she should be required to make to Enterprise, and
also that she should be excused from making the capital contributions because of
her exclusion from, and the mismanagement of, Enterprise and the other company
Defendants.
{5} Enterprise also counterclaims that Brady breached her fiduciary duty
to Enterprise by refusing to make contributions that were necessary for the best
interests of the company. However, the record makes clear that Brady did not owe
Enterprise a fiduciary duty, even though she may have been contractually obligated
to make certain payments.
{6} The Court concludes that Brady has now been given full access to any
and all documentation related to her claims involving Enterprise, that her
allegations against the other company Defendants do not excuse Brady from her
obligation make capital contributions, and that Brady did not owe a fiduciary duty
to Enterprise to make capital contributions and thus did not breach a duty by

1 Because of the nature of Enterprise’s structure and business, the Court may consider claims

involving Enterprise separately from other claims in this matter, even though Brady makes similar
claims against each of the company Defendants.
failing to make those contributions. Accordingly, Enterprise is entitled to summary
judgment on all of Brady’s claims and on its claim for breach of the operating
agreement. As to Enterprise’s claim that Brady’s failure to make capital
contributions was a breach of her fiduciary duty to Enterprise, the Court concludes
that the uncontested record indicates that Brady had no fiduciary duty to make
those contributions and that any failure to make the contributions was instead a
matter of contract between Enterprise’s members, as a result of which Enterprise’s
claim for breach of fiduciary duty should be dismissed.

II. PROCEDURAL HISTORY

{7} Brady filed her original Complaint on August 24, 2012. The case was
designated as a complex business case on September 12, 2012, and assigned to the
undersigned on September 19, 2012. The operative complaint in this matter is the
Second Amended Complaint, which was filed on August 6, 2013, and which brings
two claims against Enterprise: a claim for inspection of Enterprise’s records and a
Meiselman claim. The Court case stayed the case by consent of the parties from
August 26, 2013, until March 15, 2014.
{8} Defendants filed their Answer and Counterclaims on April 21, 2014.
Enterprise asserts two counterclaims: breach of operating agreement and breach of
fiduciary duty. Brady replied to Enterprise’s counterclaims on May 16, 2014.
{9} The case has involved an unusual amount of contested discovery.
Ultimately, Enterprise’s Motion was filed on April 9, 2015, and briefing was
completed on June 17, 2015. On June 3, 2015, the Court dismissed Brady’s claim
against Defendant United Realty of North Carolina, LLC (“United Realty”) for
inspection of corporate records, following Brady’s admission that Defendants have
provided her with copies of, or access to, all documents to which she contends that
she is entitled. See Brady v. Van Vlaanderen, No. 12 CVS 7552, 2015 NCBC LEXIS
59, at *6–7 (N.C. Super. Ct. June 3, 2015).
{10} The Court heard oral argument on Enterprise’s Motion on August 27,
2015. Resolution of Enterprise’s Motion and several other motions was delayed
because of a dispute over an affidavit filed after the close of briefing on the motions.
Regarding Enterprise’s Motion, the Court instructed Brady to file “a specific list of
what she contends are the material issues of fact that preclude granting summary
judgment to [Enterprise].” Order at 2, Brady, No. 12 CVS 7552 (N.C. Super. Ct.
Aug. 28, 2015). On September 3, 2015, Brady made a filing that listed as the sole
issue of material fact the question of “[w]hether there is a genuine issue of material
fact as to the amount, if any, that the Defendants allege are owed to Enterprise
Realty by the Plaintiff.” Plaintiff’s List of Proposed Issues of Material Fact at 1,
Brady, No. 12 CVS 7552 (N.C. Super. Ct. Sept. 3, 2015). Brady also provided
several pages of additional legal argument, which the Court struck as improper by
its June 21, 2016 Order.
{11} Enterprise’s Motion is now ripe for decision.

III. FACTUAL HISTORY

{12} Enterprise is a North Carolina LLC that was organized in August 2001
and has a principal office in Fayetteville, North Carolina. Enterprise is or was
engaged in the purchase, sale, and rental of real estate.
{13} Brady is a resident of Cumberland County, North Carolina and is a
one-third owner of Enterprise. The Individual Defendants own equal percentages of
the remaining interest in Enterprise. Brady and the Individual Defendants are
related either by blood or by marriage, and each owns shares in each of the
company Defendants.
{14} Brady was employed by United Tool until May 24, 2012, when her
employment was terminated.
{15} Each of the Members executed the Operating Agreement of Enterprise
Realty, LLC (“Operating Agreement”) on November 15, 2002. The Operating
Agreement provides as follows:
1.2. Additional Funds. In the event that the Members
determine at any time . . . that additional funds are required by
[Enterprise] for or in respect of its business or to pay any of its
obligations, expenses, costs, liabilities, or expenditures (including,
without limitation, any operating deficits), then the Members may
agree by unanimous action to make additional contributions to the
capital of the Company or may, acting in their capacities as Managers,
borrow all or part of such additional funds on behalf of the Company,
with interest payable at then-prevailing rates, from one or more of the
Members or from commercial banks, savings and loan associations, or
other commercial lending institutions.
1.3. Additional Capital Contributions. If the Members
determine that additional funds are required for the purposes set forth
in Section 5.2 [sic] above and that all or any portion of such additional
funds should be contributed to the Company as additional Capital
Contributions, the Members, in the absence of any written agreement
between them to the contrary, shall make the necessary additional
Capital Contributions to the Company in proportion to their respective
Percentage Interests at the time such additional contributions are
made.
(M. Townsend Aff. Ex. B (“Operating Agreement”) art. V, ¶¶ 1.2 to .3, Apr. 9,
2015.)
{16} Enterprise purchased five properties in 2004 and one property in 2005.
Each property required remodeling and repair.
{17} Enterprise is registered as a member-managed LLC. However, the
Members executed a resolution on January 1, 2005, to give M. Townsend full
authority over Enterprise’s day-to-day management and expressly vested M.
Townsend with the authority to determine, in his sole discretion, whether
Enterprise required additional funds. He was also given the authority to borrow
money on Enterprise’s behalf.
{18} In 2008, the value of Enterprise’s properties suffered a marked decline,
such that the debt secured by Enterprise’s various properties exceeded the
properties’ value. Enterprise began selling its properties. The first property sold on
August 7, 2008. The second sold on April 30, 2009, at a loss, which required
Enterprise to make a cash payment to satisfy the secured debt. The Members then
began making capital contributions to cover the shortfall and pay down Enterprise’s
remaining debt, collectively contributing an average of $15,000 per month. Brady
personally guaranteed several loans to Enterprise, including one guaranty she
provided in 2013.
{19} On May 24, 2012, United Tool terminated Brady’s employment, salary,
and benefits on the basis that she was doing no work for United Tool.
{20} Also on May 24, 2012, the Members, including Brady, agreed to sell all
of the remaining properties at a loss in order to mitigate further losses and
minimize the company’s outstanding debt. Over the next few years, Enterprise sold
its remaining properties for less than the total amount of its loans, which required
Enterprise to contribute cash to close the sales.
{21} All Members made capital contributions to Enterprise up until June
2012, at which time Brady ceased her contributions of approximately $5,000 per
month, which constituted one-third of the value of the Members’ monthly capital
contributions. Enterprise then began to borrow funds to make up for shortfalls in
its budget, and the other Members loaned money to Enterprise to prevent it from
defaulting on bank loans that all Members had personally guaranteed. Some of the
loans that Enterprise satisfied in this way—releasing the guarantors’ liability for
the loan—included loans that Brady had personally guaranteed.
{22} In March 2013, Enterprise sent Brady a letter detailing $249,291.73 of
expenditures that Enterprise had incurred since June 2012 and requesting that
Brady make a capital contribution of one-third of that amount, or $83,097.00.
Brady refused and requested information from Enterprise to enable her to verify the
amount of her obligation. Although Brady has consistently represented that she
has not been given adequate information to verify that Enterprise was managed
responsibly and that Enterprise actually required the funds, during discovery,
Brady admitted that Enterprise has provided or given her access to all of the
documents to which she is entitled. (See Suppl. Resps. Defs.’ First Set Interrogs. Pl.
¶ 14.)

IV. ANALYSIS

{23} On a motion for summary judgment made under Rule 56 of the North
Carolina Rules of Civil Procedure, the movant bears the burden of showing that
there is no genuine issue of material fact with respect to the essential elements of a
claim and that the movant is entitled to judgment as a matter of law. See Steel
Creek Dev. Corp. v. James, 300 N.C. 631, 636–37, 268 S.E.2d 205, 209 (1980). Once
the movant satisfies that burden, the nonmovant then bears the burden “to present
a forecast of the evidence which shows that a genuine issue of fact exists, or to
provide an excuse for not so doing.” Watts v. Cumberland Cty. Hosp. Sys., Inc., 75
N.C. App. 1, 6, 330 S.E.2d 242, 247 (1985), aff’d in part, rev’d in part, 317 N.C. 110,
343 S.E.2d 879 (1986). The Court must view the evidence in the light most
favorable to the nonmovant. See Coats v. Jones, 63 N.C. App. 151, 154, 303 S.E.2d
655, 657 (1983).

A. Enterprise Is Entitled to Summary Judgment on Brady’s Claim for
Inspection of Corporate Records.

{24} Brady’s claims against Enterprise and United Realty for inspection of
corporate records are identical. The Court dismissed Brady’s inspection claim
against United Realty on June 3, 2015, based on Brady’s admission that she had,
during the course of discovery, obtained all documents to which she is entitled. See
Brady, 2015 NCBC LEXIS 59, at *6–7. Brady’s claim for inspection of corporate
records against Enterprise should now be dismissed based on the same admission.

B. Enterprise Is Entitled to Summary Judgment on Brady’s Meiselman Claim.

{25} Brady asserts that she had reasonable expectations as a one-third
owner of Enterprise, including employment and fringe benefits from one of the
family companies, a meaningful role in Enterprise’s management, and access to
Enterprise’s financial information. She now claims that judicial dissolution of
Enterprise is appropriate because those expectations have been frustrated.
{26} Subsection 57D-6-02(2) of the North Carolina Limited Liability
Company Act (“LLC Act”) allows for judicial dissolution of an LLC by a member if
“(i) it is not practicable to conduct the LLC’s business in conformance with the
operating agreement . . . or (ii) liquidation of the LLC is necessary to protect the
rights and interests of the member.” N.C. Gen. Stat. § 57D-6-02(2) (2015). In
addition to invoking this statute, Brady also relies on Meiselman v. Meiselman,
which involved a closely held corporation, rather than an LLC. See 309 N.C. 279,
300–05, 307 S.E.2d 551, 564–67 (1983) (determining the applicable standard of
analysis for whether judicial dissolution of a closely held corporation is
appropriate). As this Court has noted, “[t]he North Carolina courts have not yet
had to address whether . . . [the LLC Act] embodies the same policies [as the North
Carolina General Corporation Act] that should equally lead to granting a minority
owner in a limited liability company similar rights to protect his reasonable
expectations as a minority owner.” Blythe v. Bell, No. 11 CVS 933, 2013 NCBC
LEXIS 7, at *6 (N.C. Super. Ct. Feb. 4, 2013). However, the Court’s ruling here
does not turn on this possible distinction.
{27} To prove her Meiselman claim, Brady must provide evidence that
[s]he had one or more substantial reasonable expectations known or
assumed by the other participants; (2) the expectation has been
frustrated; (3) the frustration was without fault of plaintiff and was in
large part beyond h[er] control; and (4) under all of the circumstances
of the case, plaintiff is entitled to some form of equitable relief.
Meiselman, 309 N.C. at 301, 307 S.E.2d at 564.
{28} Enterprise bears the initial burden of establishing that there are no
disputed issues of material fact with relation to these elements. See Steel Creek
Dev. Corp., 300 N.C. at 636–37, 268 S.E.2d at 209. The Court ascertains whether
Brady has offered sufficient evidence to support Brady’s allegations of her
reasonable expectation by reviewing the context of the overall history of the
relationship of the parties. See Meiselman, 309 N.C. at 299, 307 S.E.2d at 563.
{29} Brady provides substantial argument that she had a reasonable
expectation of employment with one of the family-owned companies and that her
expectation was frustrated as to all of the companies when she was discharged from
United Tool. The Court does not by this Order & Opinion rule on Brady’s
expectations as to any other company, but only as to Enterprise.
{30} Enterprise has presented substantial and uncontested evidence that it
has never had any employees, that it has never employed Brady, and that Brady
has never expressed the desire to become an Enterprise employee. Further, there is
no evidence that Brady has requested or has been denied employment with
Enterprise. The Court finds that, regardless of whether Brady had a reasonable
expectation of employment with another company, including United Tool, she had
no reasonable expectation of employment with Enterprise that can support her
Meiselman claim.
{31} As to Brady’s claim that she was denied her reasonable expectation of
a meaningful role in Enterprise’s management, the uncontested evidence reflects
that she was given that right and that she participated in the decision to vest
substantial management authority in M. Townsend. While such a delegation
should not alone be interpreted to defeat a member–manager’s expectation of a
management role, see N.C. Gen. Stat. § 57D-3-22 (noting that a delegation of
management authority does not cause a manager to cease to be a manager), Brady
has not presented or forecasted any evidence that she or any of the other Members
required M. Townsend to routinely discuss his management activities with them or
that she made her desire to be included in M. Townsend’s management decisions
known to the other Members. See Meiselman, 309 N.C. at 301, 307 S.E.2d at 564
(requiring the claimant’s reasonable expectations to have been known or assumed
by the other participants).
{32} Further, even if Brady’s expectation of a meaningful role in
management was reasonable, Enterprise has presented uncontested testimony
detailing that the Members, including Brady, had informal conversations regarding
repairs to Enterprise’s properties and that no one was omitted from those
conversations. There is no evidence that Brady was treated any differently in that
regard. For example, it is undisputed that during a meeting of the Members on
May 24, 2012, all Members, including Brady, agreed to sell the beach properties.
The Court concludes that no Meiselman claim can be supported by Brady’s
assertion that she was not informed of the particulars of each sale or of any
property renovations or repairs.
{33} Finally, as noted above, the Court has determined that, even if Brady
had a reasonable expectation of access to Enterprise’s company records, Enterprise’s
delivery of those records shows that her expectation has not been frustrated.
{34} In sum, Brady has not produced a sufficient forecast of evidence that
she, as a Member of Enterprise, had reasonable expectations that have been
frustrated. There is, therefore, no legal basis for Enterprise’s judicial dissolution
based on those expectations, and her claim for such dissolution should be dismissed.
This holding does not adjudicate Brady’s Meiselman claim as to any company other
than Enterprise.2

C. Enterprise Is Entitled to Summary Judgment on Its Claim that Brady
Breached Enterprise’s Operating Agreement.

{35} Enterprise counterclaimed for Brady’s breach of the Operating
Agreement, alleging that Brady’s failure to make capital contributions is a breach of
the obligations required by the Operating Agreement when analyzed in conjunction
with the subsequent agreements of the Members.
{36} “The elements of a claim for breach of contract are (1) existence of a
valid contract and (2) breach of the terms of that contract.” One Beacon Ins. Co. v.
United Mech. Corp., 207 N.C. App. 483, 487, 700 S.E.2d 121, 124 (2010) (quoting
Ahmadi v. Triangle Rent A Car, Inc., 203 N.C. App. 360, 362, 691 S.E.2d 101, 103
(2010)). An LLC’s operating agreement is a contract, N.C. State Bar v. Merrell, __
N.C. App. __, 777 S.E.2d 103, 114 (2015), and the LLC and its interest-owners are
bound by that contract, see N.C. Gen. Stat. § 57D-2-31(a)–(b).
{37} The Operating Agreement requires that the Members make capital
contributions in proportion to their respective percentage interests once the
Members unanimously agree to make additional capital contributions to pay for
Enterprise’s obligations, expenses, costs, liabilities, or expenditures. Although
Brady has disputed whether the amount of the requested capital contributions is

2
The Court’s ruling in this Order & Opinion effectively resolves, as to Enterprise, Brady’s motion for
summary judgment, which requests entry of summary judgment in Brady’s favor on her Meiselman
claims. This ruling does not resolve Brady’s motion as to any other company.
proper, she has not disputed that she agreed to make the capital contributions or
that she agreed to the actions that led to Enterprise’s indebtedness. Further, Brady
admits that, in June 2012, she stopped making capital contributions that were used
to pay down Enterprise’s debt.
{38} Brady argues, in part, that her failures to make the capital
contributions should be excused because of the facts underlying her claims against
the other Defendants. As noted above, the Court concludes that the actions
underlying Brady’s claims against the other company Defendants, and particularly
the termination of her employment with United Tool, do not translate to claims
against Enterprise or defenses to Enterprise’s claims and do not excuse Brady’s
failure to make capital contributions as an Enterprise Member.
{39} Although Brady has also argued that she had not been given adequate
information to allow her to verify the amount she owed to Enterprise or to
determine whether Enterprise was being mismanaged, Brady now admits that she
obtained that information in discovery. When pressed by the Court to detail any
contested issue of material fact that the jury should determine, Brady responded
with no detail to support her contention that the amount that Enterprise requested
was incorrect. The Court concludes that Brady has failed to forecast evidence
challenging the amount of Enterprise’s request to her for capital contributions.
{40} After viewing all of the evidence in the light most favorable to Brady,
the Court concludes that Enterprise has met its burden of proving that there are no
disputed issues of material fact regarding Brady’s liability for breach of the
Operating Agreement as a result of her failure to provide capital contributions and
that summary judgment should be entered in Enterprise’s favor on that claim.

D. Enterprise’s Claim that Brady Breached a Fiduciary Duty Owed to
Enterprise Must Be Dismissed.

{41} Enterprise claims that Brady’s failure to make capital contributions
constitutes a breach of fiduciary duty.
{42} Generally speaking, “[m]embers of a limited liability company are like
shareholders in a corporation in that members do not owe a fiduciary duty to each
other or to the company.” Kaplan v. O.K. Techs., LLC, 196 N.C. App. 469, 473, 675
S.E.2d 133, 137 (2009). However, a manager of an LLC owes a fiduciary duty to the
company to discharge his or her duties (1) in good faith, (2) with the care of an
ordinarily prudent person, and (3) subject to the operating agreement, in a manner
he or she believes to be in the best interest of the company. Id. at 473–74, 675
S.E.2d at 137; see also N.C. Gen. Stat. § 57D-3-21. Even if the members of a
member-managed LLC delegate the authority to act on behalf of the LLC to
someone else, the members retain their manager status. See id. § 57D-3-22.
{43} The Members delegated to M. Townsend the full and sole discretion to
manage Enterprise, but Enterprise remained a member-managed LLC. See id.
Brady therefore remained one of Enterprise’s managers and owed Enterprise a
fiduciary duty in her capacity as a member–manager. See id. However, LLC
managers are not required to make capital contributions. See id. § 57D-3-20.
Enterprise’s Operating Agreement specifically places the obligation of making
additional capital contributions on the Members, which it defines as “each Person
designated as a member of [Enterprise] on Schedule I [of the Operating Agreement.”
(See Operating Agreement arts. V ¶ 1.2, II ¶ 1.1.) That is, the obligation, if any, to
make capital contributions arises as a result of a member’s status as a member, not
as a result of his or her status as a manager.
{44} The Court concludes that Brady’s decision to stop making capital
contributions was made in her capacity as a member and that Brady’s failure to
make such contributions is properly considered as a breach of her contract as a
member and not as a breach of the fiduciary duty she owed as a manager. As a
result, the Court concludes that Enterprise is not entitled to summary judgment on
its counterclaim for breach of fiduciary duty. Instead, this claim must be dismissed.
See N.C. R. Civ. P. 56(b) (“Summary judgment, when appropriate, may be rendered
against the moving party.”).
V. CONCLUSION

For the reasons expressed above, the Court concludes as follows:
1. Summary judgment is GRANTED in favor of Enterprise as to Brady’s
liability arising from Enterprise’s counterclaim for breach of the
Operating Agreement, and Enterprise is entitled to recover from Brady
the sum of $83,097.00, plus interest. Payment of such amount shall be
deferred until final resolution of Brady’s other claims.
2. Summary judgment is DENIED as to Enterprise’s claim for breach of
fiduciary duty, and this claim is DISMISSED WITH PREJUDICE.
3. Summary judgment is GRANTED in favor of Enterprise on Brady’s
Meiselman claim, and this claim is DISMISSED WITH PREJUDICE.
4. Summary judgment is GRANTED in favor of Enterprise on Brady’s claim
for inspection of Enterprise’s records, and this claim is DISMISSED
WITH PREJUDICE.
This the 21st day of July, 2016.

/s/ James L. Gale
James L. Gale
Chief Special Superior Court Judge
for Complex Business Cases