IN THE SUPREME COURT OF NORTH CAROLINA
No. 155A16
17 March 2017
OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY and UNITED
BANK & TRUST COMPANY, VERSAILLES, KY., f/k/a FARMERS BANK &
TRUST COMPANY (GEORGETOWN, KY.)
v.
HARTFORD FIRE INSURANCE COMPANY, SHRIJEE LLC, HELM BUILDERS,
LLC, and MICHAEL D. ANDREWS, in his official capacity as Sheriff of Durham
County, North Carolina
Appeal pursuant to N.C.G.S. § 7A-30(2) from the unpublished decision of a
divided panel of the Court of Appeals, ___ N.C. App. ___, 785 S.E.2d 185 (2016),
affirming an order on summary judgment entered on 30 September 2014 by Judge
Henry W. Hight, Jr., and reversing and remanding an order granting judgment on
the pleadings entered on 14 August 2014 by Judge G. Wayne Abernathy, both in
Superior Court, Durham County. Heard in the Supreme Court on 14 February 2017.
Manning Fulton & Skinner, P.A., by Judson A. Welborn, J. Whitfield Gibson,
and Natalie M. Rice, for plaintiff-appellant United Bank & Trust Company.
Lewis & Roberts, PLLC, by James A. Roberts, III and Jessica E. Bowers, for
defendant-appellee Hartford Fire Insurance Company.
NEWBY, Justice.
The doctrine of judicial estoppel preserves the integrity of judicial proceedings
by preventing a party from taking inconsistent positions before the court, thus
safeguarding the rule of law and securing public confidence in the court system. Here
the trial court found that, in a prior related case, defense counsel assured a federal
OLD REPUBLIC V. HARTFORD FIRE
Opinion of the Court
court that defendant Hartford Fire Insurance Company (defendant or Hartford)
would not collaterally attack the federal judgment post hoc by relitigating its related
claims arising from the same facts. Defendant declined to join that federal litigation,
but nonetheless raises substantially similar tort claims here. As such, the trial court
found that defendant essentially takes the action which defense counsel stated it
would not take, thereby adopting an inconsistent position. Affording the appropriate
deference to the trial court, we conclude that the trial court did not abuse its
discretion by invoking the doctrine of judicial estoppel to bar defendant from
proceeding with its tort counterclaims. Accordingly, we reverse the decision of the
Court of Appeals.
This case arises from a bonding dispute, which stems from a failed hotel
development project. Four suits involving various parties, including the property
owner, general contractor, lender, and bonding company, ensued, the last of which is
before this Court. The third suit arose in federal court, which Hartford, the bonding
company, declined to join, and during which the bonding company’s counsel made
declarations to the federal court, which may reasonably be interpreted as
contravening the bonding company’s actions sub judice.
On 14 November 2007, Shrijee LLC (owner and developer) contracted with
Helm Builders, LLC (general contractor) for the construction of a Durham hotel
project, known as Hotel Indigo. Under the contract Helm agreed to furnish labor and
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Opinion of the Court
materials for a total cost of $13,050,000, and Helm was required to obtain a payment
and performance bond.
On 20 December 2007, United Bank & Trust Company (lender) issued a
construction loan to Shrijee in the amount of $13,600,000 for use on the project,1 and
Shrijee executed a “deed of trust, assignment and security agreement” on the
underlying hotel real property for the benefit of the Bank, which was recorded on 21
December 2007 with the Durham County Register of Deeds. At Helm’s request, on
22 February 2008, United Bank sent a letter (the 2008 Letter) to Helm “confirm[ing]
that the financing is available for the Hotel Indigo,” that “[t]he minimum of
$13,050,000 has been allocated for the contract amount to Helm Builders, LLC for
the construction of the project,” and that “payment authorizations will be determined
and conducted by a third-party architect.” The Bank further stated: “We understand
this letter is to be used to release the Payment and Performance bonds for the
construction of this project.”
On 8 July 2008, Hartford issued a labor and material payment bond and a
performance bond “to guarantee HELM’s faithful performance of HELM’s obligations
under the Contract.” Helm had executed various general indemnity agreements
beforehand, dating back to 15 August 2005, which assigned to Hartford all of its
1 Farmers Bank & Trust was the original issuer of the loan and merged with United
Bank in November 2008. For purposes of this opinion, actions by Farmers Bank before the
merger are referred to as those of United Bank, its undisputed successor in interest.
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Opinion of the Court
rights under the construction contract, including tort claims, and which also gave
Hartford the discretion to “assert and pursue all of the assigned . . . rights, actions,
causes of action, claims, and/or demands.”
Over the next two years, Helm substantially completed the Hotel Indigo
project, which received a conditional certificate of occupancy in August of 2009, but
Shrijee withheld payment for certain work. Hartford subsequently made payments
under the bonds to various subcontractors whom Helm had failed to pay. On 28
January 2010, Helm sued Shrijee in Superior Court, Durham County (Helm I), and
ultimately obtained a judgment for the unpaid work in the amount of $1,074,163.20,
plus interest of $352,796.40 and $278,287.05 in attorneys’ fees, on 20 October 2011
(the Shrijee Judgment).
During the pendency of the Helm I suit, on 31 January 2011, Helm sued United
Bank in the United States District Court for the Middle District of North Carolina
(the federal action), alleging that the 2008 Letter, which “confirmed in writing . . .
that financing was being made available,” contained fraudulent “misrepresentations
made by the Bank,” namely, that the monies were not actually allocated to pay Helm.
Helm asserted claims of, inter alia, fraud, fraud in the inducement, negligent
misrepresentation, and unfair and deceptive trade practices, all of which relied upon
the alleged misrepresentations in the 2008 Letter.
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Opinion of the Court
On 14 November 2012, counsel for Hartford contacted United Bank to
“reaffirm” that “Hartford was the lawful owner of the Shrijee Judgment” under its
previous general indemnity agreements. On 20 November 2012, Helm re-
memorialized the agreement by executing an “Assignment of Judgment,” filed with
the Durham County Clerk of Superior Court, which stated that “HELM Builders,
LLC does hereby further assign, transfer and grant to Hartford all of its rights to sue
. . . and all other legal processes necessary to the enforcement of the [Shrijee]
Judgment and all proceeds recovered,” and that “the [previous indemnity
agreements] shall remain in full force and effect.”
Nonetheless, on 4 June 2013, Helm filed a complaint in Superior Court, New
Hanover County, against Hartford (Helm II) seeking, inter alia, a declaratory
judgment that Helm’s “Assignment is null and void,” that Hartford “has no rights or
interest in the [federal action],” and that “Helm’s claims asserted in the [federal
action] are not subject to the assignment provisions of the Hartford Indemnity
Agreements.”
In light of Helm’s apparent assignment to Hartford of the Shrijee Judgment
and tort claims, United Bank became “concern[ed] over the possibility of inconsistent
verdicts should United Bank be forced to litigate the same issues against Helm and
Hartford in separate actions.” Furthermore, faced with “Hartford’s alleged
ownership of all claims arising from or related to the [Hotel Indigo] Project,” the Bank
became concerned about not only the claims arising in Helm’s name, but those arising
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Opinion of the Court
in the name of Hartford. Ultimately, on 7 June 2013, the Bank moved the federal
court to substitute Hartford as the plaintiff or, in the alternative, to join Hartford as
a necessary party, noting that “it is undisputed that Hartford claims an interest in
the subject of this [federal] action,” and thus any related claims arising therefrom.
On 21 June 2013, in the action sub judice United Bank filed its complaint in
Superior Court, Durham County, against Hartford seeking, inter alia, a declaratory
judgment that the Bank’s deed of trust securing the construction loan has priority
over Helm’s lien against Shrijee for “labor performed or materials furnished.” 2
On 3 July 2013, counsel for Helm, United Bank, and Hartford appeared before
the federal court regarding the Bank’s motion to include Hartford as a plaintiff or
necessary party in the federal action. Noting the recently filed state court litigation,
the Helm II suit and the suit sub judice, the court inquired about the “purported
dispute between the plaintiff here [Helm] and Hartford with regard to what rights
Hartford may or may not have in this litigation.” The court expressed concerned
about
who would be the real party in interest in this case, who
owns this action, and whether or not if Helm pursues this
case, Hartford would have some right to come along at a
later time and say we’re not bound by that, we own this,
and we think Helm should have pursued a different course,
we don’t think they waived anything that would effect [sic]
us. That bothers me. So my question to you is, are Helm
and Hartford on the same page with regard to our
2 Old Republic National Title Insurance Company, as the title insurer for the deed of
trust, is a co-plaintiff.
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Opinion of the Court
proceeding ahead with this lawsuit?
Counsel for Hartford responded: “Hartford has no objection with this case
moving forward without Hartford . . . , and that Hartford does not—will not seek to
collaterally attack any judgment entered in this action with Hartford not as a named
party.” Counsel acknowledged concerns regarding the possible estoppel of its claims
in the related actions, stating to the court: “To the extent there are—there is evidence
brought to the Court’s attention in this case, it would be Hartford’s position that there
would be no issue preclusion as to Hartford in that related litigation.”
The court responded: “I don’t know that I can make any ruling with regard to
issue preclusion that would be applied by the state court, . . . [and] anything I say or
do would be only advisory with regard to what the state court may find to be
precluded.” In other words, if Hartford declined to join the federal action, it would
assume the risk that its claims may be estopped in the related state court litigation.
Counsel for Hartford acquiesced, stating:
[I]t is clear from Hartford’s perspective that it is not a
necessary party to this litigation. To the extent Your
Honor does have concerns as to any purported assignments
of the general agreements indemnity as they are brought
to the Court’s attention, or issues of equitable subrogation,
I think that that could be essentially be handled post-
litigation through interpleader action.
The court agreed. Hartford ultimately declined to join the federal action.
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Opinion of the Court
After extensive discovery and deposition testimony, Helm’s claims arising from
the 2008 Letter were tried before a jury in the federal action. As described by United
Bank, “Counsel for Hartford sat through the majority of the trial and never advised
the court of any reason to add Hartford to the case.” On the verdict sheet the jury
expressly concluded that the February 2008 Letter did not contain “false information”
and that Helm did not suffer harm therefrom. Following adjudication of Helm’s
claims, on 16 July 2013, the federal court ordered that Helm “have and recover
nothing from [United Bank]” and dismissed the case with prejudice.
On 17 October 2013, Hartford answered United Bank’s complaint sub judice
and filed, inter alia, tort counterclaims based on the alleged falsity of the 2008 Letter,
which are the only claims at issue before this Court.3 Based on that alleged falsity,
Hartford raises strikingly similar tort counterclaims as those raised by Helm in the
federal action, consisting of fraud, fraud in the inducement, negligent
misrepresentation, and unfair and deceptive trade practices. Hartford alleges that
United Bank acted fraudulently by “ma[king] false and misleading representations”
in the 2008 Letter and that “Hartford would not have issued both the Payment and
Performance Bonds absent the Bank’s express representations” therein. In response,
United Bank points to the related federal action and raises affirmative defenses of
“res judicata and/or collateral estoppel” because the same tort claims “were litigated
3 On 13 October 2014, the trial court entered a consent judgment, which the parties
concede resolved all other remaining claims.
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Opinion of the Court
to final judgment” by Hartford’s assignor Helm. The Bank asserted other defenses
as well, including waiver, unclean hands, and “judicial estoppel/estoppel by
inconsistent positions” based on Hartford’s counsel’s declarations to the federal court.
On 25 February 2014, United Bank successfully moved for judgment on the
pleadings as to the tort counterclaims. See N.C.G.S. § 1A-1, Rule 12(c) (2016). The
trial court found that “Hartford is in privity with Helm” due to Helm’s prior
assignment. Given “Hartford’s counsel’s representations to [the federal court]” and
“Hartford’s decision not to participate in the [federal action],” which would have
afforded Hartford “a full and fair opportunity to litigate its claims,” the trial court
found that “Hartford is bound by the judgment entered in the [federal action].” Citing
Whitacre Partnership v. BioSignia, Inc., 358 N.C. 1, 591 S.E.2d 870 (2004), the trial
court concluded that “Hartford is judicially estopped from asserting the
counterclaims against United Bank.” In addition to finding judicial estoppel, the trial
court found that Hartford’s counterclaims were also barred by the doctrines of
collateral estoppel and res judicata because the “central issue to the Counterclaims
all revolves around the truth or falsity of the statements in the February 2008 Letter,”
which statements the federal jury had already determined “to be true.” Hartford
appealed to the Court of Appeals.
In a divided opinion, the Court of Appeals reversed the dismissal of Hartford’s
tort counterclaims. Old Republic Nat’l Title Ins. Co. v. Hartford Fire Ins. Co., ___
N.C. App. ___, 785 S.E.2d 185, 2016 WL 1321139 (2016) (unpublished). The majority
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Opinion of the Court
concluded that, though “Hartford was in privity with respect to [Helm’s] claims in the
federal action,” Old Republic, 2016 WL 1321139, at *4, such participation “only bars
any claim Hartford might otherwise have (as assignee of [Helm’s] claims) to recover
for [Helm’s] damages based on [Helm’s] reasonable reliance on representations made
by United Bank,” id. The dissent opined that Hartford had “numerous opportunities”
to join the federal action and that the doctrines of res judicata and collateral estoppel
bar its tort counterclaims. Id. at *12 (Hunter, Jr., J., dissenting). Neither the
majority nor the dissent, however, addressed the trial court’s implementation of
judicial estoppel, despite arguments made by the parties. United Bank appeals as a
matter of right.
North Carolina has long recognized the importance of candor with the trial
court. See Whitacre P’ship, 358 N.C. at 12, 591 S.E.2d at 878 (citing Kannan v. Assad,
182 N.C. 77, 78, 108 S.E. 383, 384 (1921)). The doctrine of “judicial estoppel seeks to
protect the integrity of the judicial process,” id. at 16, 591 S.E.2d at 880, “which ‘lies
at the foundation of all fair dealing . . . and without which, it would be impossible to
administer law as a system,’ ” id. at 27, 591 S.E.2d at 887 (quoting Armfield v. Moore,
44 N.C. (Busb.) 157, 161 (1852)).
A party is generally not “allowed to change his position with respect to a
material matter, during the course of litigation, nor should he be allowed to ‘blow hot
and cold in the same breath.’ ” Id. at 12, 591 S.E.2d at 878 (quoting Kannan, 182
N.C. at 78, 108 S.E. at 384); see id. at 29, 591 S.E.2d at 888 (Judicial estoppel is proper
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Opinion of the Court
when “a party’s subsequent position . . . [is] ‘ “clearly inconsistent” with its earlier
position.’ ” (quoting New Hampshire v. Maine, 532 U.S. 742, 750, 121 S. Ct. 1808,
1815, 149 L. Ed 2d 968, 978 (2001))). Unlike its “closely related” cousins, the doctrines
of collateral estoppel and res judicata, judicial estoppel is “dissimilar in critical
respects.” Id. at 16, 591 S.E.2d at 880 (quoting Allen v. Zurich Ins. Co., 667 F.2d
1162, 1166 (4th Cir. 1982)). Judicial estoppel seeks to protect the judicial process
itself and does not require “ ‘mutuality’ of the parties,” detrimental reliance, or that
an issue have been “actually litigated in a prior proceeding.” Id. at 16-18, 591 S.E.2d
at 880-82 (citations omitted).
As a “discretionary equitable doctrine,” id. at 26, 591 S.E.2d at 887, judicial
estoppel empowers the court with the necessary “means to protect the integrity of
judicial proceedings where [other] doctrines . . . might not adequately serve that role,”
id. at 26, 591 S.E.2d at 887 (citations omitted). Because judicial estoppel “protect[s]
the courts rather than the litigants, . . . a court, even an appellate court, may raise
[judicial] estoppel on its own motion.” Matter of Cassidy, 892 F.2d 637, 641 (7th Cir.)
(footnote omitted) (citing Allen, 667 F.2d at 1168 n.5)), cert. denied, 498 U.S. 812, 111
S. Ct. 48, 112 L. Ed. 2d 24 (1990).
We review de novo the trial court’s order granting judgment on the pleadings.
See CommScope Credit Union v. Butler & Burke, LLP, ___ N.C. ___, ___, 790 S.E.2d
657, 659 (2016). The trial court’s implementation of judicial estoppel as a basis to
grant the order, however, is reviewed for abuse of discretion, Whitacre P’ship, 358
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Opinion of the Court
N.C. at 38, 591 S.E.2d at 894 (citing New Hampshire, 532 U.S. at 750, 121 S. Ct. at
1814-15, 149 L. Ed 2d at 977-78), and will only be overturned “upon a showing that
its ruling was manifestly unsupported by reason and could not have been the result
of a reasoned decision,” In re Foreclosure of Lucks, ___ N.C. ___, ___, 794 S.E.2d 501,
506 (2016) (quoting State v. Riddick, 315 N.C. 749, 756, 340 S.E.2d 55, 59 (1986)).
Though the parties have primarily focused their briefing on the companion
doctrines of collateral estoppel and res judicata, we proceed no further than judicial
estoppel. Hartford argues that it is not prosecuting its “Assigned Claims” from Helm
but rather “its own, independent Tort Claims.” Such a factual inquiry, however,
reaches beyond the appropriate standard of review for judicial estoppel. Presented
with Hartford’s counsel’s apparently contradictory declarations before the federal
court and the substantial similarities of its tort claims to those of Helm, as revealed
in the pleadings, the trial court reasonably invoked judicial estoppel to prevent
Hartford from taking an inconsistent position, and therefore, did not abuse its
discretion.
By filing its similar tort counterclaims, the trial court could reasonably
conclude that Hartford takes the action that it stated to the federal court it would not
take. See Whitacre P’ship, 358 N.C. at 29, 591 S.E.2d at 888. The federal court
expressed concerns that Hartford might “come along at a later time and say we’re not
bound by [the federal action]” and further advised Hartford that it could not rule
regarding its state-court estoppel concerns. Despite knowing of the estoppel risk,
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Opinion of the Court
Hartford declined to join the federal action and stated that it “will not seek to
collaterally attack any judgment entered in this action with Hartford not as a named
party.” See Hamilton v. Zimmerman, 37 Tenn. (5 Sneed) 39, 47-48 (1857) (“The law
. . . will not . . . suffer a man to contradict or gainsay, what, under particular
circumstances, he may have previously said or done.”); see also Collateral Attack,
Black’s Law Dictionary (10th ed. 2014) (“[A]n attempt to undermine a judgment
through a judicial proceeding in which the ground . . . is that the judgment is
ineffective.”). Nonetheless, Hartford seeks to raise similar fraud claims to those of
its assignor Helm, all of which contest the same adjudicated facts in the federal
action—the very situation about which the federal court expressed concern.
Moreover, United Bank moved to join Hartford as a necessary party in that action,
seeking to avoid such relitigation.
Allowing Hartford to proceed in the face of its own contravening assertions
made before the federal court poses a significant threat of inconsistent court
determinations. See Whitacre P’ship, 358 N.C. at 13-14, 591 S.E.2d at 879; Jones v.
Sasser, 18 N.C. (1 Dev. & Bat. ) 452, 464 (1836) (Estoppel is “founded upon the great
principles of morality and public policy . . . to prevent that which deals in duplicity
and inconsistency.”); see also Cates v. Wilson, 321 N.C. 1, 18, 361 S.E.2d 734, 744
(1987) (Mitchell, J., concurring in result) (“A lawsuit is not a parlor game . . . .”).
Permitting such a conflicting position and inconsistency would serve to undermine
public confidence in the judicial process.
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Opinion of the Court
In sum, Hartford had ample opportunity to litigate all of its related claims,
including those attributable to its assignor Helm and to Hartford individually, by
joining the federal action. Hartford elected not to do so. Given the statements made
by Hartford’s counsel before the federal court and the substantial similarity of its
counterclaims, which contest prior adjudicated facts, we conclude that the trial court
reasonably invoked judicial estoppel to restrain Hartford from adopting an
inconsistent position. See Whitacre P’ship, 358 N.C. at 26-27, 591 S.E.2d at 887
(Judicial estoppel serves “as a gap-filler” and is appropriate “where the technical
requirements of” its companion estoppel doctrines may not be met.). The trial court
did not abuse its discretion and therefore, properly dismissed Hartford’s tort
counterclaims. Accordingly, we reverse the decision of the Court of Appeals, which
reversed the trial court’s dismissal of the tort counterclaims.
REVERSED.
Justice ERVIN dissenting
The majority has resolved this case based upon judicial estoppel considerations
instead of the collateral estoppel and res judicata principles upon which the
dissenting opinion in the Court of Appeals relied in determining that the trial court’s
order should be upheld. Moreover, in holding that Hartford is judicially estopped
from seeking relief from United Bank separate and apart from Helm, the majority
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ERVIN, J., dissenting
assumes, without demonstrating, that (1) Hartford “collaterally attack[ed] the federal
judgment post hoc” and (2) attempted to “re-litigat[e] its related claims arising from
the same facts.” On the contrary, the fact that two different parties have asserted
that the same defendant committed the same torts in connection with the same
overall transaction does not, at least in my opinion, mean that these parties have
asserted identical claims in the event that those claims are supported by different
facts. As a result, given that the dissenting opinion in the Court of Appeals, which
provides the basis for our jurisdiction over this case, did not rely on judicial estoppel
principles in upholding the trial court’s decision and my belief that the claims that
Hartford seeks to assert against United Bank are fundamentally different from the
claims that Helm asserted against that financial institution, I respectfully dissent
from the Court’s decision with respect to the judicial estoppel issue.
Neither the majority nor the dissenting opinions in the Court of Appeals make
any mention of judicial estoppel. Old Republic Nat’l. Title Ins. Co. v. Hartford Fire
Ins. Co., --- N.C. App. ---, 785 S.E.2d 185 (2016). “When the sole ground of the appeal
of right is the existence of a dissent in the Court of Appeals, review by the Supreme
Court is limited to a consideration of those issues that are (1) specifically set out in
the dissenting opinion as the basis for that dissent, (2) stated in the notice of appeal,
and (3) properly presented in the new briefs required by Rule 14(d)(1) . . . . N.C. R.
App. P. 16(b). Although “ ‘[t]his Court will not hesitate to exercise its rarely used
general supervisory authority when necessary to promote the expeditious
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ERVIN, J., dissenting
administration of justice,’ and may do so to ‘consider questions which are not properly
presented according to [its] rules,’ ” State v. Ellis, 361 N.C. 200, 205, 639 S.E.2d 425,
428 (2007) (brackets in original) (quoting State v. Stanley, 288 N.C. 19, 26, 215 S.E.2d
589, 594 (1975)), I am not persuaded that we should do so in this case given the
limited extent to which the parties addressed this subject in their briefs. As I read
the record, United Bank mentioned the subject of judicial estoppel in an eight line
footnote found on the last page of its principal brief in which it made the conclusory
assertion that Hartford was not entitled to “represent to the court in the Prior Action
that it was not a necessary party and would not collaterally attack the judgment
entered in that action and then – three months after the jury verdict – assert identical
claims premised on the same facts and issues actually litigated to a final judgment in
the Prior Action.” (Citing Whitacre P’ship v. Biosignia, Inc., 358 N.C. 1, 21, 591 S.E.2d
870, 884 (2004)). Although Hartford addressed the judicial estoppel issue in more
detail, it did little more than point out that the judicial estoppel issue had not been
addressed in the dissenting opinion in the Court of Appeals and was not, for that
reason, properly before the Court and to assert that, since it was “prosecuting its own,
independent Tort Claims,” it was not judicially estopped from pursuing those claims
in this case. (Citing Price v. Price, 169 N.C. App. 187, 191, 609 S.E.2d 450, 452 (2005),
and Whitacre P’ship, 358 N.C. at 29, 591 S.E.2d at 888-89)). As a general proposition,
deciding an issue that has not been fully briefed and argued by the parties involves
risks that I see no reason for the Court to take in this case. In addition, I am not
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ERVIN, J., dissenting
persuaded, and the majority has not demonstrated, that a decision to address and
resolve the judicial estoppel issue when it is not properly before us promotes the
“expeditious administration of justice.” Ellis, 361 N.C. at 205, 639 S.E.2d at 428. As
a result, I do not believe that we should deviate from our usual practice of refraining
from deciding issues that are not properly before us. However, in light of the fact
that I disagree with the majority’s decision with respect to the judicial estoppel issue
as well, I will discuss the merits of the Court’s determination that Hartford is
judicially estopped from pursuing the claims that it has asserted against United
Bank.
The matter before the Court stems from the trial court’s decision to grant
United Bank’s motion for judgment on the pleadings. “A motion for judgment on the
pleadings is the proper procedure when all the material allegations of fact are
admitted in the pleadings and only questions of law remain. When the pleadings do
not resolve all the factual issues, judgment on the pleadings is generally
inappropriate.” Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974)
(citation omitted). “The trial court is required to view the facts and permissible
inferences in the light most favorable to the nonmoving party. All well pleaded
factual allegations in the nonmoving party’s pleadings are taken as true and all
contravening assertions in the movant’s pleadings are taken as false.” Id. at 137,
209 S.E.2d at 499 (citing, inter alia, Beal v. Mo. Pac. R.R. Corp., 312 U.S. 45, 61 S.
Ct. 418, 85 L. Ed. 577 (1941); Austad v. United States, 386 F.2d 147 (9th Cir. 1967)).
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ERVIN, J., dissenting
A trial court order granting a motion for judgment on the pleadings is reviewed de
novo. See CommScope Credit Union v. Butler & Burke, LLP, --- N.C. ---, ---, 790 S.E.2d
657, 659 (2016) (citation omitted). “Under the de novo standard of review, the [Court]
‘consider[s] the matter anew[ ] and freely substitut[es] its own judgment for’ [that of
the lower court].” Midrex Techs., Inc. v. N.C. Dep’t of Revenue, --- N.C. ---, ---, 794
S.E.2d 785, 791 (2016) (brackets in original) (quoting N.C. Dep’t of Env’t & Nat. Res.
v. Carroll, 358 N.C. 649, 660, 599 S.E.2d 888, 895 (2004)).
Judicial estoppel is “customarily used to promote the fairness and integrity of
judicial proceedings.” Whitacre P’ship, 358 N.C. at 13, 591 S.E.2d at 879. “A party is
not permitted to take a position in a subsequent judicial proceeding which conflicts
with a position taken by him in a former judicial proceeding, where the latter position
disadvantages his adversary.” Id. at 21, 591 S.E.2d at 884 (quoting Rand v.
Gillette, 199 N.C. 462, 463, 154 S.E. 746, 747 (1930)). However, “a party may not be
judicially estopped to assert ‘inconsistent positions with respect to issues that are
only superficially similar.’ ” Id. at 16, 591 S.E.2d at 880 (quoting 18 James Wm.
Moore et al., Moore's Federal Practice § 134.30, at 134–69 (3d ed. 1997)). In other
words, “judicial estoppel is limited to the context of inconsistent factual assertions.”
Id. at 32, 591 S.E.2d at 890. For that reason, in order to invoke judicial estoppel, a
party must show that (1) the opposing party “advanced an inconsistent factual
position in a prior proceeding, and (2) the prior inconsistent position was adopted by
the first court in some manner.” AXA Marine & Aviation Ins. (UK) Ltd. v. Seajet
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ERVIN, J., dissenting
Indus. Inc., 84 F.3d 622, 628 (2d Cir. 1996); see also Wight v. BankAmerica Corp. 219
F.3d 79, 90 (2d Cir. 2000) (same). In other words, “there must be a true inconsistency
between the statements in the two proceedings”; “[i]f the statements can be reconciled
there is no occasion to apply an estoppel.” Simon v. Safelite Glass Corp., 128 F.3d 68,
72-73 (2d Cir. 1997) (citing, inter alia, AXA Marine & Aviation, 84 F.3d at 628). As a
general proposition, “a trial court’s application of judicial estoppel is reviewed for
abuse of discretion.” Whitacre P’ship, 358 N.C. at 38, 591 S.E.2d at 894 (citation
omitted). “Where the essential element of inconsistent positions is not present, it is
an abuse of discretion to bar plaintiff’s claim on the basis of judicial estoppel.” Estate
of Means ex rel. Means v. Scott Elec. Co. Inc., 207 N.C. App. 713, 719, 701 S.E.2d 294,
299 (2010) (citation omitted). Thus, the issues before us in this instance are: (1)
whether the allegations and admissions in the parties’ pleadings, considered in the
light most favorable to Hartford, demonstrate that Hartford took inconsistent
positions in the related federal case and in this case; and (2) whether the trial court
abused its discretion in invoking judicial estoppel to bar the assertion of Hartford’s
claims. In view of my belief, after reviewing the allegations and admissions in the
pleadings in the light most favorable to Hartford, that Hartford has not made
inconsistent assertions in the related federal case and this case, I believe that the
trial court erred by dismissing Hartford’s claims on judicial estoppel grounds.
In the related federal action, Helm asserted claims against United Bank for (1)
fraudulent and deceptive conduct, including the intentional misrepresentation and
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concealment of material facts from Helm, that constituted unfair and deceptive trade
practices; (2) fraud, based upon representations made to Helm by Michael Schornick
in a February 2008 letter, by Judy Tackett in July 2009 telephone conversations, and
by Kermin Fleming in both a voice mail and telephone conference in July 2009; (3)
fraud in the inducement based upon these same representations to Helm; (4) unjust
enrichment; and (5) negligent misrepresentation based upon these same
representations to Helm.
On 7 June 2013, United Bank filed a motion in the related federal action
seeking to have Hartford substituted for Helm as the party plaintiff on the grounds
that Hartford, which owned any judgment that Helm might obtain, was the real party
in interest. At a hearing held for the purpose of considering various pretrial motions
held on 3 July 2013, United States District Judge N. Carlton Tilley, Jr., expressed
concern that “Hartford would have some right to come along at a later time and say
we’re not bound by [the federal court judgment], we own this, and we think Helm
should have pursued a different course, we don’t think they waived anything that
would [a]ffect us.” In response, counsel for Hartford informed the federal district
court that: (1) “Hartford has no objection with this case moving forward without
Hartford as a named party to this litigation”; and (2) “Hartford . . . will not seek to
collaterally attack any judgment entered in this action.” (Emphases added.) In other
words, as the italicized statements make clear, the representations made by
Hartford’s counsel to the federal district court were strictly limited to the issues
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currently before that forum. Shortly thereafter, Hartford’s counsel told United
Bank’s counsel in an e-mail that the representations that she had made to the district
court in the federal proceeding did not include any separate claims that Hartford
might have against United Bank. More specifically, Hartford’s counsel informed
counsel for United Bank that, while it “will not seek to re-litigate those claims
brought by HELM Builders in” the federal action, “Hartford did not represent to the
[federal district court] that it was waiving and/or in any way releasing any claim that
it may possess against United Bank from this date until the end of time, whether
known or unknown.”
About three months after the conclusion of the federal trial, in which the jury
returned a verdict in United Bank’s favor, Hartford asserted claims against United
Bank for (1) fraud, based upon a contention that the 22 February 2008 letter
contained representations and omitted material facts that had the effect of making
that letter false and misleading so as to deceive Hartford; (2) fraud in the inducement,
based upon a contention that United Bank had induced Hartford to provide bonding
services for the Hotel Indigo project based upon misleading representations and
omissions to Hartford associated with the 22 February 2008 letter; (3) unfair trade
practices, based upon the misleading representations and omissions to Hartford
associated with the 22 February 2008 letter; and (4) negligent misrepresentation,
based upon a contention that United Bank had failed to exercise ordinary care in its
communications with Hartford. In determining that Hartford is judicially estopped
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from asserting these claims based upon the representations that it had made to the
district court during the related federal case, the majority has failed to analyze the
claims that Hartford has asserted against United Bank in order to ascertain whether
they are the same as those that Helm asserted against United Bank. When such an
analysis is undertaken, it is clear to me that the claims that Hartford seeks to assert
against United Bank in this case are not identical to the claims that Helm asserted
against United Bank in the related federal action.
In seeking relief from United Bank, Hartford alleged that, “[p]rior to the
issuance of the performance and payment bond,” it “required verification and written
assurance from the Bank that the Bank had allocated funds from the Construction
Loan sufficient to cover and pay to HELM Builders the base scope of the Shrijee
Contract—i.e. $13,050,000.00” and that, “prior to February 22, 2008, the Bank knew
and understood that HELM Builders’ surety had refused to issue the performance
and payment bond in the amount of $13,050,000.00 for the Hotel Indigo Project based
solely upon the Bank’s issuance of the Bank Commitment Letter” and that Hartford
“required the Bank to provide assurances that it had allocated funds from the
Construction Loan sufficient to cover the base scope of the Shrijee Contract—i.e.,
$13,050,000.00 in order for Hartford to issue the performance and payment bond.” In
light of that understanding, United Bank provided a letter from Michael E.
Schornick, Jr., an Executive Vice President, to Scott McAllister, who served as Helm’s
President, dated 22 February 2008 in which Mr. Schornick stated that:
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This letter is to confirm that the financing is available for
the Hotel Indigo, Durham, NC project. The minimum of
$13,050,000 has been allocated for the contract amount to
Helm Builders, LLC for the construction of the project.
Direct funding to Helm Builders LLC is contingent upon
Shrijee LLC authorization, draw percentages must be
commensurate with completion percentage and the
standard lien waivers from both Helm and all sub-
contractors including vendors. Inspections & payment
authorizations will be determined and conducted by a
third-party architect.
We understand this letter is to be used to release the
Payment and Performance bonds for the construction of
this project.
According to Hartford, United Bank “provided the February 2008 Bank Letter to
Har[t]ford, in care of HELM Builders, to obtain Hartford’s issuance of the requested
performance and payment bonds for the construction of the Hotel Indigo Project.”
However, as Hartford discovered during the trial of the related federal action, United
“Bank had not allocated at least $13,050,000 of the Construction Loan for the Shrijee
Contract;” “never intended to allocate at least $13,050,000.00 of the Construction
Loan for the Shrijee Contract;” and did not “include within the February 2008 Bank
Letter sufficient information to put Hartford on notice that the Bank was not
financing one hundred percent (100%) of the construction costs for the Hotel Indigo
Project” or “to put Hartford on notice that the Bank had not allocated at least
$13,050,000 of the Construction Loan for the Shrijee Contract.” Hartford contended
that it “would not have issued both the Payment and Performance Bonds absent the
Bank’s express representations to Hartford, set forth in the February 2008 Bank
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Letter.” As a result, Hartford alleged that it was entitled to recover damages from
United Bank for fraud, fraud in the inducement, unfair and deceptive trade practices,
and negligent misrepresentation.
The essence of the claim that Hartford seeks to assert against United Bank is
that Hartford could have reasonably understood the statements contained in the 22
February 2008 letter to indicate that the bank had committed sufficient funds from
the construction loan to pay for the construction of the Hotel Indigo project; that no
such commitment had, in fact, been made; and that Hartford would not have provided
bonding services for the project had it understood that the bank had not allocated
sufficient funds from the construction loan to pay for the construction of the Hotel
Indigo. Although Helm had asserted that the 22 February 2008 letter contained
misrepresentations as to Helm and that Helm would not have commenced
construction had it known that sufficient funds had not been committed from the
construction loan to pay the costs that Helm anticipated occurring in connection with
the construction of the Hotel Indigo, I do not believe that there is any inconsistency
between a representation to a federal district court that Hartford did not intend to
collaterally attack or otherwise seek to relitigate claims based upon representations
that were allegedly false as to Helm, which Hartford owned by virtue of an
assignment that it had received from Helm, and the assertion of claims based upon
misrepresentations that were alleged to have been made directly to Hartford,
particularly given that this issue is being resolved at the pleading stage without the
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benefit of further factual development. As a result, given that the statements made
by Hartford to the federal district judge prior to the federal trial were limited to a
commitment that Hartford would not attempt to relitigate the claims that Helm had
asserted against United Bank and given that the claims that Hartford has asserted
against United Bank rest upon alleged misrepresentations made to Hartford rather
than to Helm, I do not believe that the undisputed information in the present record
provides any basis for a determination that Hartford’s representations to the federal
district court conflict with the position that Hartford has taken in this case. As a
result, since the allegations set out in the parties’ pleadings, viewed in the light most
favorable to Hartford, provide ample justification for a determination that Hartford
did not make inconsistent representations in the related federal case and in this case,
I respectfully dissent from the Court’s decision to uphold the dismissal of Hartford’s
claims against United Bank on judicial estoppel grounds.4
Justices HUDSON and BEASLEY join in this dissenting opinion.
4In view of the fact that the Court has not reached the issue of whether Hartford is
precluded from asserting its claims against United Bank on collateral estoppel or res judicata
grounds, I express no opinion concerning the manner in which that issue should be decided.
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