SMILEY'S PLUMBING CO., INC.,
Plaintiff,
v
.
PFP ONE, INC. and/or PFP HOLDINGS, INC., and ROYAL AMERICAN
CONSTRUCTION OF N.C., INC.,
Defendants.
Ferguson and Scarbrough, P.A., by James E. Scarbrough; and
William C. Isenhour, for plaintiff appellant.
Johnston, Allison, & Hord, P.A., by Greg C. Ahlum and Jennifer
McKay Patterson, for defendant appellees.
McCULLOUGH, Judge.
Plaintiff Smiley's Plumbing Co., Inc. (Smiley's), appeals from
an order granting summary judgment to defendants PFP One, Inc.
and/or PFP Holdings, Inc., and Royal American Construction of N.C.,
Inc. This appeal was born out of a dispute involving the
construction of apartment complexes between the builder, a
subcontractor, and a supplier.
The Chapman family is a wealthy Florida family that owns
several companies and has built over 100 apartment projects up and
down the eastern seaboard. The main Chapman company is People's
First Properties, Inc. (PFP). PFP is a Florida corporation and the
parent company which owns and controls most of the other Chapmancompanies. One of these companies is Royal American Construction
Corp., another Florida corporation. PFP is the sole shareholder of
Royal American of Florida.
Defendant Royal American Construction of North Carolina, Inc.,
was formed as a North Carolina corporation for the sole purpose of
obtaining a North Carolina contractor's license to build two
apartment projects in this State. This defendant is owned by Royal
American of Florida, but PFP is the sole shareholder.
As for the two apartment projects planned for North Carolina,
one was the Oak Crest Apartments in Kannapolis, N.C., which is
located in Cabarrus County. The other project was the Stonecreek
Apartments in Mooresville, N.C., which is located in Iredell
County. Two limited partnerships were created by the Chapmans to
own and run the apartment complexes. They were Oak Crest
Apartments of Kannapolis, Ltd., and Stonecreek Apartments of
Mooresville, Ltd., respectively.
The last player in the Chapman group involved in this
litigation is defendant PFP One, Inc. PFP One was a Florida
corporation that served as an investment company to own real estate
and act as a holding company. PFP is also the sole shareholder of
this company. It is to be noted that during the present litigation,
PFP One was folded into another corporation named PFP Holdings,
Inc.
Plaintiff, Smiley's Plumbing Co., Inc., is a North Carolina
plumbing subcontractor out of Kannapolis, N.C. Plaintiff was hired
by defendant Royal American of N.C., the general contractor on thetwo projects, to install plumbing on the two apartment projects.
The last player in this litigation, though not a party to this
appeal, is Parnell-Martin Companies, LLC. Parnell-Martin is a
plumbing materials supplier out of Mecklenburg County, N.C., which
supplied plaintiff with all of its material needs for these two
projects.
During 1997, the Oak Crest and Stonecreek projects were
proceeding with construction, and plaintiff was installing the
plumbing on both projects pursuant to its 19 March 1997 subcontract
agreement with defendant Royal American of N.C. According to
plaintiff, on 13 November 1997, defendant Royal American of N.C.
unilaterally terminated the agreement between the two. Plaintiff
made a demand for payment of the services and material provided on
both the projects, which was rejected. Thus, plaintiff filed a
complaint in Cabarrus County against defendant Royal American of
N.C., Oak Crest Apts. of Kannapolis, Ltd., and Stonecreek Apts. of
Mooresville, Ltd., on 20 February 1998, (docket number 98-CVS-382),
demanding payment on both projects.
While this dispute was ongoing, Parnell-Martin's bill for
materials it had supplied to the projects came due. After
plaintiff refused to pay for the materials, Parnell-Martin filed a
complaint in Iredell County on 20 April 1998 against plaintiff,
plus the same parties sued in 98-CVS-382, and a couple of banks in
Florida that provided financing (docket number 98-CVS-854),
demanding payment for the materials provided on the Stonecreek
Project in the amount of $58,222.15, plus interest. The complaintalso noted that Parnell-Martin had filed liens against the real
property, the owner of the real property (Stonecreek Apartments of
Mooresville, Ltd.), the funds due to Smiley's from Royal American
of N.C., plus the funds due to Royal American of N.C. from
Stonecreek Apts. of Mooresville, Ltd.
Parnell-Martin also filed a complaint against the same parties
on 21 April 1998 (docket number 98-CVS-874) in Cabarrus County,
demanding payment for the materials provided on the Oakcrest
Project in the amount of $42,034.65, plus interest. As in
98-CVS-854, this complaint also noted that Parnell-Martin had filed
liens against the real property, the owner of the real property
(Oak Crest Apartments of Kannapolis, Ltd.), the funds due to
Smiley's from Royal American of N.C., plus the funds due to Royal
American of N.C. from Oak Crest Apts. of Kannapolis, Ltd.
The Chapman companies decided to rid themselves of the
Parnell-Martin liens. Negotiations between Parnell-Martin, Royal
American of N.C., and PFP One, Inc., began. Soon after, these
parties signed a “Settlement Agreement” on 29 May 1998.
As Parnell-Martin filed separate suits as to each project, the
agreement dealt with each project separately. As to the Oak Crest
suit, a settlement was reached between PFP One and Parnell-Martin.
PFP One was to pay Parnell-Martin the sum of $42,034.65 (the amount
Smiley's owed Parnell-Martin) to purchase all of Parnell-Martin's
rights and litigation claims against Smiley's involving the Oak
Crest project, namely case number 98-CVS-874. Accordingly,
Parnell-Martin was to assign all of such rights to PFP One, anddismiss all claims against any Chapman company and the banks, as
well as withdraw all the liens on the project.
As to the Stonecreek suit, a settlement was reached between
Royal American of N.C. and Parnell-Martin. Royal American of N.C.
was to pay Parnell-Martin the sum of $37,965.35 to satisfy all
claims which Parnell-Martin had against any Chapman company in case
number 98-CVS-854. Accordingly, Parnell-Martin was to dismiss the
Chapman defendants from 98-CVS-854 and remove all liens on the
project. Parnell-Martin's claim in 98-CVS-854 against Smiley's was
for $58,222.15. The agreement noted that “[t]he remaining claim of
Parnell-Martin against Smiley's Plumbing Co., Inc., is reduced by
the payment of $37,965.35 made by [Royal American of N.C.].” This
left $20,256.80 on Smiley's debt to Parnell-Martin in case number
98-CVS-854.
One last interesting note on the settlement agreement: Joey
Chapman, was the Vice President of PFP One and the President of
Royal American of N.C. He signed for both companies, and his was
the only signature on the agreement from either Chapman entity.
In the suit filed by Smiley's against Royal American of N.C.,
et. al, 98-CVS-382, the subcontract agreement between the two
parties mandated that they submit to arbitration pursuant to N.C.
Gen. Stat. § 1-567 (2001) for all claims. The parties were ordered
to do so on 16 September 1998 by the trial court. Subsequent to
that order, but before the arbitration took place, PFP One was
substituted for Parnell-Martin in the Cabarrus County suit, docket
number 98-CVS-874, pursuant to the 29 May 1998 agreement, on 14January 1999. PFP One also made a motion for summary judgment in
that case. At the 4 January 1999 hearing, the motion was granted
despite arguments by Smiley's that PFP One and Royal American of
N.C. were similar entities and summary judgment was not appropriate
because of their involvement with Royal American of N.C. in
arbitration. Judgment was filed on 14 January 1999 in favor of PFP
One for $42,831.52. Smiley's did not appeal.
The arbitrators heard the matter of 98-CVS-382 and made an
award on 15 September 1999. The arbitrators made an award to
Smiley's: $28,237.00 for the Oak Crest Project; and $11,565.40 for
the Stonecreek Project. The net sum that Royal American of N.C. was
to pay Smiley's came to $39,802.40. In awarding so, the arbitrators
explained that:
Responsibility for controlling and
administering the project was weighted
against Royal American Construction Company.
The project was viewed as a “troubled project”
separate from the Smiley's Plumbing problems.
Neither party produced manpower, workday
history, progress schedules, etc. as support
of their claims of lack of performance and/or
accelerated effort. The cost of the work
completed by Smiley's Plumbing was viewed as a
fair and reasonable cost. Both parties were
viewed as having contributed to the lack of
effective communication. The project was
viewed as improperly planned, scheduled and
administered by Royal American Construction.
Smiley's Plumbing was viewed as a “difficult
subcontractor” but, Royal American's process
of terminating Smiley's Plumbing was
questionable. Both parties allowed personal
feelings to over ride [sic] sound business
practices. Smiley's Plumbing failed to
support its claimed amount of work completed
as presented in its summary. Royal American
Company had “double dipped” relative to
backcharges included in its payments toSmiley's and as shown in its summary listing
of backcharges. Some of the backcharges
claimed by Royal American against Smiley's
Plumbing were viewed as inappropriate. It was
viewed that Royal American's efforts to
mitigate damages after the termination of
Smiley's Plumbing could have been improved.
The award consists of retainage amounts due to
Smiley's Plumbing on completed work as
identified in documents presented by Royal
American Construction during the Arbitration
proceedings.
This AWARD is in full settlement of all claims
and counterclaims submitted to this
Arbitration.
In addition, the arbitrators included the following statement:
Royal American Construction shall provide
information and/or documents within twenty
calendar days to Smiley's Plumbing to satisfy
the condition that no further claim by
Parnell-Martin will be made against Smiley's
Plumbing for monies paid to Parnell-Martin by
Royal American Construction.
Of specific note in the record is Royal American of N.C.'s
summary of damages for the arbitration. This statement was a
laundry list of the money owed between the parties. Included in
that summary was a column titled, “Parnell-Martin Settlement.”
This column contained two sections: a Stonecreek Project section
and an Oak Crest Project section. Royal American of N.C. included
the amount of $37,965.35 in the Stonecreek Project column, the
precise amount that it paid to Parnell-Martin pursuant to the 29
May 1998 agreement. This amount was used as a set-off by Royal
American of N.C. of the money it owed Smiley's at the arbitration,
considering that debt was actually owed by Smiley's in the first
place. In contrast, Royal American of N.C. listed nothing in the Oak
Crest column, as PFP One had paid that sum to Parnell-Martin. This
was reduced to judgment in 98-CVS-874. After the arbitration, PFP
One executed on its $42,034.65 judgment in 98-CVS-874. The parties
had a dispute as to whether the judgment in 98-CVS-874 had been
satisfied by the arbitration hearing and award. Eventually
Smiley's filed a motion in the cause under Rule 60 for relief from
the 98-CVS-874 judgment alleging that it had been satisfied.
According to Smiley's, in order to compel discovery, it withdrew
its Rule 60 motion and filed an independent action on 14 February
2000. The complaint alleged that the arbitration award took into
account any sums owed by Smiley's in the Parnell-Martin matter “so
that all matters would be resolved.” Further,
[a]ccording to the award, no further claim
would be made against Smiley's Plumbing in the
Parnell Martin matter for any monies. The
arbitration award was intended to be the “net”
amount owed to Smiley's after taking into
account the amount owed by Smiley's in the
Parnell Martin matter. Royal American and PFP
One both signed the settlement agreement with
Parnell Martin and both knew the arbitration
award meant that the judgment held by PFP One
would be satisfied by the arbitration award
since PFP One took the position of Parnell
Martin by purchasing Parnell Martin's claim
against Smiley's.
It also claimed that PFP One and Royal American of N.C. were the
same entities.
PFP One and Royal American of N.C. filed their answer on 20
March 2000, essentially claiming that the arbitration had nothing
to do with PFP One and its judgment and certainly didn't satisfyit.
By February 2001, PFP One had been folded into another
corporation named “PFP Holdings, Inc.,” and they were joined as
parties by order of the trial court on 13 March 2001. Smiley's
filed an amended complaint reflecting this change but alleged the
same grounds for recovery. Defendants filed an answer to the same
effect, along with several affidavits.
Defendants had filed a previous motion for summary judgment on
12 December 2000. On 10 July 2001, this motion was granted by
Judge Michael E. Beale. Smiley's appealed.
Plaintiff assigns as error the following: The trial court
erred in granting defendant's motion for summary judgment on the
ground that (I) an independent action may be brought to determine
whether the judgment in 98-CVS-874 held by defendant PFP Holdings,
Inc., against plaintiff has been satisfied; and (II) there is a
genuine issue of fact as to whether the judgment held by defendants
against plaintiff has been satisfied.
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