KEVIN P. PORTER and MACNIFISENSE, INC.,
Plaintiffs,
v
.
AMERICAN CREDIT COUNSELORS CORPORATION; JOHN A. WASKIN; CHERYL
WASKIN; and CREDIT MANAGEMENT SYSTEMS, INC.,
Defendants/Crossclaim-Plaintiffs,
v.
ALLIANCE CREDIT COUNSELING, INC.,
Crossclaim-Defendant.
Appeal by defendants from judgment entered 15 February 2001
by Judge James E. Lanning in Mecklenburg County Superior Court.
Heard in the Court of Appeals 22 August 2002.
Carley & Rabon, PLLC, by Stephen R. Carley and Charles H.
Rabon, Jr., for plaintiffs-appellees.
Wishart, Norris, Henninger & Pittman, P.A., by Robert J.
Wishart, David C. Boggs, June K. Allison, and Pamela S.
Duffy, for defendants-appellants.
THOMAS, Judge.
Plaintiff Kevin P. Porter and defendants entered into a
settlement agreement as part of the dissolution of their business
relationship. The agreement included a stipulation whereby they
bound themselves to the determination of a referee or special
master if a dispute developed regarding the fulfillment of its
terms.
A dispute eventually arose. Defendants, claiming Porter did
not fully transfer certain data, refused to make a payment to
Porter which would otherwise be due. Porter and his company,
plaintiff Macnifisense, Inc., filed suit, and moved for theappointment of a referee. The trial court then entered an order
for Appointment of Expert, with the parties subsequently
agreeing for David Asbury to be the expert. After his evaluation
and analysis, Asbury submitted a report to the court stating the
data had been fully and properly transferred to defendants.
Based on the pleadings, matters of record in the file and
applicable law, plaintiffs moved for summary judgment.
On 15 February 2001, the trial court granted partial summary
judgment in favor of plaintiffs on the issue of whether they had
breached the agreement. Defendants American Credit Counselors
Corporation (ACCC), John A. Waskin (Waskin), Cheryl Waskin, and
Credit Management Systems, Inc. (CMS), appeal. Crossclaim-
defendant Alliance Credit Counseling, Inc., allegedly a company
developed by Porter that competes with ACCC and CMS, is not a
party to this appeal.
The primary basis of defendants' appeal is that there are
genuine issues of material fact. Further, they contend, the
trial court erred by accepting the report of Asbury, which was
not verified, without defendants having the opportunity to depose
or cross-examine him. Plaintiffs counter that the settlement
agreement provided for Asbury's report to be conclusive.
Based on the reasons herein, we reverse and remand.
Porter and Waskin were co-owners and business partners of
CMS. ACCC is a nonprofit corporation that provides credit
counseling, debt management plans, and related services. The
services of ACCC are highly automated and dependent on electronicdocument and data management. Through a written service
agreement, CMS supplied ACCC with necessary data management.
Porter was the computer, software, and database expert of CMS.
His copyrighted software, known as Star Wars, powered the
computer-related part of ACCC's business. Waskin's expertise was
in the area of credit counseling and management.
The business relationship between Porter and Waskin
deteriorated, however, with the parties entering into a
settlement agreement dated 6 April 2000. The agreement provided
that ACCC would pay Porter $300,000 for his stock in CMS with
Porter retaining ownership in Star Wars. Defendants were
prohibited from using Star Wars after the period during which
data would be transferred.
The $300,000 payment was to be made in two equal
installments contingent on the transfer of data to defendants.
The contingencies are set forth in paragraphs 1(a) and (b) of the
settlement agreement. The first condition required Porter to
deliver the data in a certain format:
(a) [Porter shall deliver] to ACCC . . . an
alpha numeric text file of all client-related
data, field delineated, using the same field
and record delineation as was used by Amerix
when Amerix transferred similar data to CMS.
Additionally, the data provided will not be
encrypted nor randomized. The data will be
provided without skipping fields or tables.
Upon a determination by Mr. Waskin that
condition 1(a) has been fulfilled Waskin will
authorize the release of $150,000.00 to
Porter[.]
Porter transferred the files on 7 April 2000 and was paid the
first installment of $150,000. The second installment would bepaid when:
(b) ACCC has verified that the data has been
provided in the form promised by Porter and
that the file is complete using spot checks
of records and total record count. Upon
determination that condition (b) above has
been fulfilled, [defendants' lawyers] will be
instructed to pay the balance of the
settlement proceeds to Porter.
Defendants refused to pay Porter the remaining $150,000. In his
affidavit, Waskin contends that the first $150,000 was paid to
insure Porter's continued cooperation, but that the requirements
of the settlement agreement had not been met.
The settlement agreement further provided that, in the event
of a dispute, a court-appointed referee or special master would
determine whether the conditions had been met:
2. Porter will arrive at the ACCC office on
Friday, April 7th, 2000 between 8:00 and
9:00am EDT and will work with the technical
people designated by ACCC until the data is
satisfactorily loaded into ACCC's computer
system. Waskin will make a determination
about the fulfillment of condition (b) by
Wednesday April 12th, 2000 at noon. In the
event Waskin determines that the conditions
have not been met and Porter disagrees any
party may apply to a Superior Court Judge in
Mecklenburg County North Carolina for the
appointment of a referee or special master
whose decision will be final. In the event a
referee or special master is appointed the
losing party will pay the winners reasonable
attorney's fees in an amount to be determined
by a Judge.
(Emphasis added).
After he did not receive the second payment of $150,000,
Porter filed a complaint containing motions for the appointment
of a referee to determine whether the data files had beenproperly transferred and for a preliminary injunction. In
opposition to the motions, defendants filed the affidavit of
Robert Ducker, an expert in software operations and conversion
hired by Waskin to complete the data conversion from Porter's
operating system to a Windows-based operating system. Ducker
claimed the data provided by Mr. Porter was not in the format he
promised. Additionally, Waskin
filed his own affidavit disputing Porter's assertion that he had
performed his obligations under the settlement agreement.
On 21 June 2000, the trial court issued an Order for
Appointment of Expert and for Preliminary Injunction. The order
reads in pertinent part:
After considering the briefs and affidavits
submitted by both parties, the pleadings and
other matters of record, the arguments and
representations of counsel and with the
agreement of the parties the Court rules as
follows:
IT IS ORDERED that:
1. The Court shall appoint its own expert
pursuant to North Carolina Rule of Evidence
709 [sic] rather than a Rule 53 referee, to
determine and advise the Court whether the
Data Files at issue in this case were
properly transferred by plaintiffs to ACCC,
as required by the Settlement Agreement
executed by the parties on April 6, 2000.
We initially note that it is clear from the context of the
order that the trial court intended to reference Rule 706, and
not Rule 709, which does not exist.
The order further provided that the parties were to agree on
the appointed expert or submit separate recommendations. It alsoallowed the parties to retract their consent: Any party, for
any reason, may withdraw his consent and seek a ruling by placing
the matter on for hearing before the undersigned and providing
proper notice of the same.
The parties consented to Asbury as the court-appointed
expert. The trial court entered an additional order appointing
Asbury, requiring him to make a determination and advise the
court in a written report whether Porter had complied with the
settlement agreement.
In his written report to the court filed 20 July 2000 Asbury
stated:
As a result of my work, I conclude that Mr.
Porter transferred to ACCC an alpha numeric
text file of all client-related data field
delineated, without skipping fields or
tables, that the transfer was complete and
the data was not encrypted or randomized.
Defendants, however, then filed an amended answer, counterclaim,
and third-party complaint. On 20 November 2000, plaintiffs filed
a motion for summary judgment. In opposition to the motion,
defendants/crossclaim plaintiffs, filed the affidavit of Ronald
McFarland, Ph.D. Porter filed a second affidavit in which he
asserted that since the Star Wars System was provided to CMS in a
configuration that permitted data to be deleted or modified, it
is highly unlikely that any third-party review of the data
conducted subsequently to that of David Asbury can be considered
reliable. He further stated that due to the system's unique and
complex structure, Asbury's review was by necessity conducted
with the assistance of Porter, Waskin, and designatedrepresentatives. Without their assistance, a third-party could
not competently review the system. On 29 December 2000, seven
days before the hearing on summary judgment, defendants filed a
Notice of Deposition of Asbury. The trial court did not continue
the matter for defendants to depose Asbury and granted partial
summary judgment to plaintiffs. Defendants appeal.
At the outset, we note that because a grant of partial
summary judgment does not entirely dispose of the case, it is an
interlocutory order which is ordinarily not appealable. Liggett
Group v. Sunas, 113 N.C. App. 19, 23, 437 S.E.2d 674, 677 (1993).
The order here granted partial summary judgment in favor of
plaintiffs.
There is, however, an exception applicable here that permits
appellate review of an interlocutory order. If the order or
judgment is final as to some but not all of the claims or
parties, and the trial court certifies the case for immediate
appeal pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b) (2001), an
immediate appeal may lie. Van Engen v. Que Scientific Inc., __
N.C. App. __, __, 567 S.E.2d 179, 182 (2002). The order here was
final as to the breach of contract claim and included the trial
court's certification pursuant to Rule 54(b). Therefore, it is
appealable and properly before us.
By their first and second assignments of error, defendants
contend the trial court erred in granting summary judgment
because: (1) defendants had not been afforded an opportunity to
depose or examine Asbury; and (2) genuine issues of material factwere presented. They argue that the trial court did not appoint
a referee or special referee as contemplated by the parties in
the settlement agreement but rather an expert under Rule 706 of
the North Carolina Rules of Evidence. We agree.
Summary judgment is appropriate when the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that any party is
entitled to a judgment as a matter of law. N.C.R. Civ. P.
56(c). The party moving for summary judgment has the burden of
establishing that an essential element of the claim does not
exist, or that the non-moving party cannot produce evidence to
support an essential element of the claim. Evans v. Appert, 91
N.C. App. 362, 365, 372 S.E.2d 94, 96, disc. review denied, 323
N.C. 623, 374 S.E.2d 584 (1988). The record is reviewed in the
light most favorable to the non-movant, and all inferences will
be drawn against the movant. Allstate Ins. Co. v. Oxendine, 149
N.C. App. 466, 468, 560 S.E.2d 858, 860 (2002).
Asbury was appointed as a court expert pursuant to Rule 706,
which provides in pertinent part:
A witness so appointed shall advise the
parties of his findings, if any; his
deposition may be taken by any party; and he
may be called to testify by the court or any
party. He shall be subject to cross-
examination by each party, including a party
calling him as a witness.
N.C.R. Evid. 706(a).
Absent indication from the parties to the contrary, we givethe words of their agreement their ordinary and common meaning.
Briggs v. Mills, Inc., 251 N.C. 642, 644, 111 S.E.2d 841, 843
(1960). The original agreement here provided for a court-
appointed referee or special master. Subsequently, however,
the parties consented to the court's order appointing its own
expert. The parties are bound by this substitute agreement.
Had the court order contemplated appointing a referee or special
master it would have said so; it would not have used the words
its own expert and pursuant to North Carolina Rule of Evidence
709 [sic].
Both parties are bound by their agreement to have a Rule 706
expert appointed and, in doing so, both risked the possibility of
further litigation initiated by the party opposing Asbury's
decision. Since Asbury was not a referee or special master as
contemplated by the original settlement agreement, his report was
not conclusive. As with any other witness, he could be called
to testify by the court or any party, or have his deposition .
. . taken by any party. N.C.R. Evid. 706(a).
Moreover, the affidavits submitted by defendants set forth
factual issues of whether Porter complied with the settlement
agreement. Ducker's affidavit reads:
The data supplied by Mr. Porter was not
complete when supplied and did not contain
the requirement of all client related data.
. . .
The data was not fully field delineated. In
fact, a substantial delay in my conversion
included located a non-field delineated
receipts file.
. . .
The data provided by Mr. Porter was not in
the format promised. It was encrypted and
randomized such that data conversion was
difficult and even, at times, impossible.
McFarland's affidavit states:
As a result of my examination of the data
files, I have discovered that not all files
were fully field delineated. This lack of
adherence to conversion specifications would
cause errors in converting data from the CMS
system to the CreditMaster system if this
data error were not accommodated for in the
data conversion programs.
Asbury, meanwhile, sent a report to the trial court but was
not deposed and did not testify. Porter submitted two of his own
affidavits and a verified complaint. Since the parties and the
trial court are not bound by Asbury's conclusions, there are
viable issues of fact. Accordingly, we find merit to defendants'
assignment of error and reverse the trial court's order.
In their second assignment of error, defendants contend the
trial court erred by not granting their motion to continue the
summary judgment hearing. Because of our holding as to the first
assignment of error, we do not address defendants' argument.
REVERSED AND REMANDED.
Judge MARTIN concurs.
Judge TYSON dissents.
*** Converted from WordPerfect ***