Grupo Resilient International Inc (GRUI)

[skier321]

Wickstiff’s and Tortfeasors....oh my:

Wickstiff’s is a typo?---- (see near the end of statement of facts) and Tortfeasor.....I have not a clue. FWIW...... McGuire, Wood & Bissette, P.A. is probably the best known law firm in Asheville....very well respected.

Sounds to me like Moody is gonna have a hard time with this 3rd party crap. I would like for him to get it shoved so bad where the sun don't shine one of these days that he has a hard time crapping period.....pardon my French.....

In summary: "Third-party plaintiff Moody’s third-party complaint must be dismissed because the Employment Agreement was not executed until September 1, 2005, and therefore, it establishes no obligation for indemnification for Moody’s actions prior to that date. It is noted that Defendant admits that the Employment Agreement was signed on September 1, 2005. (Third-party Complaint ¶ 11). Furthermore, Moody has failed to allege a sufficient basis for Homeland's being a joint tortfeasor with Moody to support a claim of contribution against Homeland."



http://www.ncbusinesscourt.net/TCDDotNetPublic/default.aspx?CID=3&caseNumber=07CVS06038





STATE OF NORTH CAROLINA

COUNTY OF BUNCOMBE
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
07-CVS-6038
FREDERICK W. WICKS,
Plaintiff,

v.

FRANK A. MOODY, II and SCENIC MARKETING GROUP, LLC,

Defendants,
v.

HOMELAND INTEGRATED SECURITY SYSTEMS, INC., JAMES T. BULLOCK, PERSONAL BUSINESS ADVISORS, LLC, and UWE BRETTMAN,

Third-party Defendants.)
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)BRIEF IN SUPPORT OF MOTION TO DISMISS THIRD-PARTY COMPLAINT
INTRODUCTION
Plaintiff FREDERICK W. WICKS ("Wicks") sued defendants and third-party plaintiffs FRANK A. MOODY, II and SCENIC MARKETING GROUP, LLC (collectively “Moody”) for violations of the North Carolina Securities Act, N.C. Gen. Stat. 78A-56, fraud, negligent misrepresentation and unjust enrichment relating to Wicks' purchase of shares during December, 2004 in Homeland Integrated Security Systems, Inc. ("Homeland"). In a third-party Complaint, Moody in turn has asserted claims for indemnification and contribution against Homeland and three others, with claims against Homeland for: 1) indemnification pursuant to an indemnification provision in Homeland's Employment Agreement with Moody; 2) damages for Homeland's failure to indemnify Moody; and 3) contribution. Homeland's Answer includes a motion to dismiss the third-party Complaint pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. This brief is in support of Homeland’s motion to dismiss.
STATEMENT OF FACTS

Third-party plaintiff Moody is an individual who is a citizen and resident of Buncombe County, North Carolina. (Third-party Complaint ¶ 1). This case arises out of a dispute between Plaintiff Wicks and Moody. Wicks brought suit against Moody, alleging that Moody, while serving as President and CEO of Homeland, purposefully misrepresented material facts related to Homeland’s financial status, thereby inducing Wicks to invest $290,000.00 in Homeland stock. (Complaint ¶ 11, 15-17). The alleged misrepresentations and subsequent investments occurred in their entirety in 2004. (Complaint ¶ 17). On September 1, 2005, Moody signed an Employment Agreement with Homeland (Third-party Complaint ¶ 11). The Employment Agreement contained an “Indemnification Provision” requiring that Homeland indemnify Moody for decisions made by him in good faith while performing services for Homeland. (Third-party Complaint ¶ 15). Third-party plaintiff Moody alleges that Homeland has breached its contractual obligations to Moody by refusing to indemnify him for costs relating to the suit brought against him by Wicks. (Third-party Complaint ¶ 22). Moody also alleges that Homeland is liable for contribution based upon Homeland's participation in the allegedly false written and oral statements made to Wickstiff’s. (Third-party Complaint ¶ 27, 73).
ARGUMENT
Third-party plaintiff Moody’s third-party complaint must be dismissed because the Employment Agreement was not executed until September 1, 2005, and therefore, it establishes no obligation for indemnification for Moody’s actions prior to that date. It is noted that Defendant admits that the Employment Agreement was signed on September 1, 2005. (Third-party Complaint ¶ 11). Furthermore, Moody has failed to allege a sufficient basis for Homeland's being a joint tortfeasor with Moody to support a claim of contribution against Homeland.
I. NORTH CAROLINA COURTS APPLY THE ORDINARY RULES OF CONTRACT CONSTRUCTION TO INDEMNITY CLAUSES AND CONSTRUE THEIR MEANING IN THE CONTEXT OF THE AGREEMENT AS A WHOLE.

As a general rule, North Carolina courts employ the rules of contract construction to an indemnity clause. 42 C.J.S. Indemnity § 8; See also Lewis v. Dunn Leasing Corp., 36 N.C. App. 556, 559 (N.C. Ct. App. 1978); Dixie Container Corp. v. Dale, 273 N.C. 624, 627 (N.C. 1968). “Clear and express language of the contract controls its meaning and neither party may contend for an interpretation at variance with the language on the ground that the writing did not fully express his intent.” Olive v. Williams, 42 N.C. App. 380, 383 (N.C. Ct. App. 1979). The Courts also construe the contract as a whole, “and an indemnity provision ‘must be appraised in relation to all other provisions.’” Schenkel & Shultz, Inc. v. Hermon F. Fox & Assocs., P.C., 362 N.C. 269, 273 (N.C. 2008) (quoting Dixie, 160 S.E.2d at 711).
The Indemnification Provision signed by Moody reads in its in entirety:
8. Indemnification. The company shall indemnify the Executive and hold him harmless for all acts or decisions made by him in good faith while performing services for the Company and Company Subsidiaries and affiliates. The Company shall also use its best efforts to obtain coverage for him under any insurance policy now in force or hereinafter obtained during the term of this Agreement covering the other officers and directors of the Company and Company Subsidiaries and affiliates against lawsuits. The company shall pay all expenses including attorney’s fees, actually and necessarily incurred by the Executive in connection with the defense of such act, suit or proceeding, and in connection with any related appeal, including the cost of court settlements.

Plain language must control in order to fulfill the intent of the contracting parties. 42 C.J.S. 574-5. The Indemnification Provision reads prospectively, promising indemnification for “all acts or decisions made by [Moody] in good faith while performing services for the Company and Company Subsidiaries and affiliates.” “Whether or not a guaranty is retrospective or is merely prospective depends entirely upon the form of the contract. It is easily possible to make the contract one or the other, or both.” Stearns Law and Suretyship, 5th Ed., § 4.10. In Continental Casualty Co. v. Funderburg, the Supreme Court of North Carolina found that an indemnification clause promising indemnification against loss of bonds “theretofore” or “thereafter” executed was both prospective and retrospective in nature. 264 N.C. 131 (N.C. 1965). In finding that the clause covered losses suffered prior to the agreement, the Court held that “the intent of the parties, shown by the words used to state their respective rights and obligations, is controlling.” Id. at 134. The Indemnification Provision at issue contains no such language from which the Court may find intent by the parties to insure acts occurring prior to the September 1, 2005 agreement. In a contract for indemnity, “the agreement will be construed to cover all losses, damages, and liabilities which reasonably appear to have been within the contemplation of the parties, but not those which are neither expressed nor reasonably inferable from the terms. Dixie, 273 N.C. at 708. (emphasis added).
A study of the Indemnification Provision finds no hint of the parties’ intent to contract for the coverage of prior acts. However, we must look at the contract as a whole to gain further insight into the aim of the parties. The Employment Agreement reads prospectively, with terms such as “heretofore” absent from its pages. Its language is plain and unambiguous. Since both parties are sophisticated in these types of agreements and were represented by counsel through arms-length negotiations, the absence of such retroactive language must be assumed to be intentional. See Daniels v. Non-Fluid Oil Equip. Co., 1993 U.S. App. LEXIS 15161 (4th Cir. June 22, 1993).


II. NORTH CAROLINA COURTS “STRICTLY CONSTRUE” INDEMNITY PROVISIONS AGAINST THE PARTY ASSERTING IT.

Moody has the burden to show that the Indemnification Provision applies to his acts in 2004. Courts “do not favor indemnity contracts that relieve the indemnitee from liability for its own negligence.” City of Wilmington v. North Carolina Natural Gas Corp., 117 N.C. App. 244, 248 (N.C. Ct. App. 1994) (citing New River Crushed Stone v. Austin Powder Co., 24 N.C. App. 285, 287 (1974). “Accordingly, courts strictly construe indemnity clauses against the party asserting it.” Id. (citing Hill v. Carolina Freight Carriers Corp., 235 N.C. 705, 710 (1952).
In City of Wilmington, the Court refused to apply an indemnification provision, citing a lack of “explicit” language to hold the plaintiff harmless. The Court stated that “mere general, broad, and seemingly all-inclusive language in the indemnifying agreement has been said not to be sufficient to impose liability for the indemnitee’s own negligence.” 41 Am. Jur. 2d, Indemnity, § 15. The Indemnification Provision does not contain any implicit language regarding coverage of prior acts, much less any explicit language. As the Supreme Court of North Carolina has stated, “indemnity against negligence must be made unequivocally clear in the contract, particularly in a situation where the parties have presumably dealt at arm’s length.” Candid Camera Video v. Mathews, 76 N.C. App. 634, 636 (1985); disc. review denied, 315 N.C. 390 (1986).
Courts in other jurisdictions have limited indemnity provisions to operating prospectively, including where the indemnity clause is silent as to its retroactive effect. See Prim Securities, Inc. v. McCarthy, 2006 U.S. Dist. LEXIS 55754, at *13-14 (N.D.Ohio 2006)(held an indemnity clause in an agreement, while silent as to its retroactive effect, "is unambiguous and does not apply to acts prior to the date of its execution"); Anaconda Co. v. Chapman-Dyer Steel Manuf. Co., 117 Ariz. 254, 257, 571 P.2d 1050 (Ariz.App. 1977)(affirming judgment that defendant had no obligation to indemnify plaintiff for any claims that arose prior to the execution of the parties' indemnity agreement); John v. Worthen, 188 Ill.App. 406, 411-12 (Ill.App. 1914)("the bond will not be retroactive in effect, and does not cover past delinquencies, unless it in terms says that it is to have such effect, so that before before an obligation of this character shall be construed as being retroactive it is not sufficient that the language implies a liability but the language must be such as to expressly include such liability in its terms."); Fernandez v. Tormey, 121 Cal. 515, 520, 53 P. 1119, 1121 (Cal. 1898)(held agreement's "natural import is indemnity against loss contingent and not yet accrued; that such agreements shall have a prospective operation, when a different intent is not expressed, is the rule of law concerning their interpretation"). See also Employers Liability Assurance Corp., Ltd. v. Greenville Business Men's Assoc., 423 Pa. 288, 224 A.2d 620 (Pa. 1966)(held exculpatory clause in lease was intended to operate prospectively, not retrospectively").
III. NORTH CAROLINA COURTS REQUIRE THAT A THIRD-PARTY COMPLAINT STATING A CLAIM FOR CONTRIBUTION SHOW THAT THE THIRD-PARTY IS A JOINT TORTFEASOR.

A. There Is No Contribution Unless Homeland Is a Joint Tortfeasor with Defendants.

The rights of contribution and indemnity are mutually inconsistent; the former assumes joint fault, the latter only derivative fault. Ingram v. Trotter, 16 N.C.App. 147, 151, 191 S.E.2d 390 (1972); CPB Resources, Inc. v. SGS Control Services, Inc., 394 F.Supp.2d 733, 746 (M.D.N.C. 2005). Contribution, as opposed to indemnity, "arises when more than one tortfeasor is found liable for the plaintiff's injury. It allows a defendant to demand assistance from the other joint tortfeasor(s) if his payment to the plaintiff exceeds his pro rata share." Bridgestone/Firestone, Inc. v. Ogden Plant Maintenance Co., 144 N.C. App. 503, 510, 548 S.E.2d 807 (2001) (citations omitted).
Thus, under N.C. Gen. Stat. 1B-l (2001), part of the Uniform Contribution Among Tortfeasors Act (UCATA), "there is no right to contribution from one who is not a joint tortfeasor." Kaleel Builders, Inc. v. Ashby, 161 N.C.App. 34, 43, 587 S.E.2d 470 (2003) (affirming dismissal of claim for contribution). To show joint tortfeasorship, “it is necessary that the facts alleged in the cross complaint be sufficient to make the third party liable to the plaintiff along with the cross-complaining defendant in the event of a recovery by the plaintiff against him.” Hayes v. Wilmington, 243 N.C. 525, 533 (N.C. 1956) (citing Hunsucker v. High Point Bending & Chair Co., 237 N.C. 559, 563 (N.C. 1953)).
The Third-Party Complaint against Homeland lacks any allegation of Homeland's scienter in any representations made to plaintiff Wicks. Without proper allegation and proof of scienter, Homeland cannot be found to have been a joint tortfeasor with Moody. The elements of fraud include an intent to deceive, and the elements of a violation of N.C. Gen. Stat. 78A-56(b) include that a defendant "cannot show that he did not know, or in the exercise of reasonable care could not have known, of the untruth or omission. Sullivan v. Mebane Packaging Group, Inc., 158 N.C.App. 19, 26, 31, 581 S.E.2d 452 (2003)(affirming summary judgment on claims of fraud and the North Carolina Securities Act). In contrast, plaintiff Wicks alleged Moody's scienter generally and with specifics relating to Moody's seeking to benefit personally from his misrepresentations. (Plaintiff’s Complaint, ¶ 28-29). Without any allegations of scienter by Homeland, the Third-Party Complaint is defective and should be dismissed for failure to state a claim.

Further, the Third-Party Complaint fails to plead fraud with the requisite degree of particularity by alleging the time, place and content of any fraudulent representation by Homeland, and the identity of Homeland's agent(s) making the representation. S.N.R. Management Corp. v. Danube Partners 141, LLC, 659 S.E.2d 442, 449 (N.C.App. 2008).
B. The Third-Party Complaint Fails to Seek Contribution from Homeland.

The Third-Party Complaint should be dismissed for failing to seek contribution from Homeland. The third-party plaintiffs' Sixth Claim for Relief, while referencing "Contribution" in its title, contains no allegation that third-party plaintiffs are entitled to contribution from Homeland. To the contrary, the final paragraph of the Sixth Claim alleges Homeland's liability for all of Plaintiff's claims against Moody, which can only be construed as seeking indemnity and not contribution from Homeland. Similarly, the third-party plaintiffs' prayer for relief makes no mention of contribution. Accordingly, the Third-Party Complaint fails to state a claim for relief against Homeland upon which relief may granted, and should be dismissed pursuant to Rule 12(b)(6), N.C.R.Civ.P.
CONCLUSION
For the foregoing reasons, third-party defendant Homeland respectfully requests that this Court enter an order dismissing the third-party complaint with costs, or, in the alternative, dismissing Homeland as a third-party defendant in this case.
Certificate of length:
The undersigned certifies that this brief does not exceed the word count specified in Rule 15.8, General Rules of Practice and Procedure for the North Carolina Business Court.
This the 16th day of September, 2008.

/s/ Joseph P. McGuire
Joseph P. McGuire (NC Bar No. 6739)
Attorney for Third-Party Defendant Homeland Integrated Security Systems, Inc.
McGuire, Wood & Bissette, P.A.
P.O. Box 3180
Asheville, NC 28802-3180
Phone: [phone]
Fax: [phone]
Email: [e-mail]

CERTIFICATE OF SERVICE

This is to certify that the undersigned counsel has this date served the foregoing BRIEF IN SUPPORT OF MOTION TO DISMISS THIRD-PARTY COMPLAINT on all of the parties to this cause by electronic filing with the North Carolina Business Court.

Sam B. Craig, Esq.
Craig Law Firm, PLLC
Post Office Box 1861
Asheville, NC 28802-1861
Attorney for Plaintiff
Patrick L. Robson, Esq.
Kenneth D. Bell, Esq.
Hutton & Williams, LLP
Bank of America Plaza
101 South Tryon Street, Suite 3500
Charlotte, NC 28280
Attorneys for DefendantsRobert B. Newkirk III, Esq.
Hanzel & Newkirk
19425-G Liverpool Parkway
Cornelius, NC 28031
Attorneys for Third Party Defendants Personal Business Advisors, LLC, and Uwe Brettman

This the 16th day of September, 2008.

/s/Joseph P. McGuire
Joseph P. McGuire
Attorney for Third Party Defendant
Homeland Integrated Security Systems, Inc.
N.C. Bar No. 6739
McGuire Wood & Bissette, P.A.
P.O. Box 3180
Asheville, NC 28802-3180
Phone: [phone]
Fax: [phone]
Email: [e-mail]