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All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
FIRST UNION NATIONAL BANK, Plaintiff, v. STEPHEN PAUL BROWN and
GLOBAL SUPPORT SERVICES, INC., Defendants
Filed: 19 October 2004
1. Appeal and Error--appealability--interlocutory order--Rule 54(b) certification
Although defendant company's appeal from an order granting summary judgment in
favor of plaintiff bank is an appeal from an interlocutory order based on the fact that defendant
company's cross-claims against defendant company president are still pending, the appeal is
properly before the Court of Appeals because the trial court included a Rule 54(b) certification in
its order entering final judgment as to plaintiff's claims against defendant company and
defendant company's counterclaims against plaintiff.
2. Agency; Corporations_-apparent authority--corporate loans and guarantees-
_personal loan--president's signature
The trial court erred by granting summary judgment in favor of plaintiff bank on the
bank's claims to recover money from defendant company after a default on a 1999 guaranty
based on defendant company president's signature on the guaranty, because: (1) neither party has
offered direct evidence from defendant president or anyone else regarding the actual purpose of
the loan or how the proceeds were in fact used, and the Court of Appeals has affirmed summary
judgment only when the corporate-related purpose was undisputed; (2) a guaranty of a personal
loan is not necessarily outside the apparent authority of an officer of a closely held corporation,
and it supplies evidence giving rise to a genuine issue of fact; and (3) the evidence presented an
issue of fact as to whether plaintiff bank had notice that defendant president was exceeding his
authority when he signed the 1999 guaranty.
3. Fiduciary Relationship; Fraud--breach of duty of good faith and fair dealing--
misrepresentation by concealment
The trial court did not err by granting summary judgment in favor of plaintiff bank on
defendant company's counterclaims for breach of the duty of good faith and fair dealing and
misrepresentation by concealment, because: (1) if the fact finder concludes that defendant
president did not have apparent authority to enter into the guaranty on behalf of defendant
company, then defendant company was not induced to enter into the contract by any
nondisclosure, and plaintiff bank cannot be said to have accepted the contract without having
made a required disclosure; and (2) even if defendant president did have apparent authority to
sign a guaranty in defendant company's name, there is no authority suggesting that plaintiff may
be held liable for breach of good faith and fair dealing or nondisclosure when negotiating with an
officer of a company having apparent authority.
4. Unfair Trade Practices--use of corporate resolution with other loan documents--
duty to disclose--objectively reasonable lawsuit
The trial court did not err by granting summary judgment in favor of plaintiff bank on
defendant company's counterclaim for unfair and deceptive trade practices in violation of
N.C.G.S. § 75-1.1, because: (1) plaintiff bank's use of a corporate resolution among the other
loan documents that defendant president signed as a condition of the 1997 $250,000 loan was not
unfair or deceptive when defendant company failed to present any evidence of harm from the
act; (2) plaintiff bank did not owe a duty to the guarantor to disclose information about theprincipal debtor; and (3) contrary to defendant company's assertion, a lawsuit which is
objectively reasonable cannot constitute an unfair trade practice.
Appeal by defendant Global Support Services, Inc. from order
entered 13 February 2003 by Judge Robert P. Johnston in Mecklenburg
County Superior Court. Heard in the Court of Appeals 4 February
Parker, Poe, Adams & Bernstein, L.L.P., by Kiah T. Ford, IV
and Maria Blue Barry, for plaintiff-appellee.
McKenna Long & Aldridge, L.L.P., by Gaspare J. Bono; and
Hutson, Hughes & Powell, P.A., by James H. Hughes, for
defendant-appellant Global Support Services, Inc.
No brief filed on behalf of defendant Stephen Paul Brown.
This appeal arises out of a loan by First Union National Bank
("First Union") to defendant Stephen Paul Brown in the amount of
$250,000. In his capacity as President of Global Support Services,
Inc. ("Global"), Brown purported to sign a guaranty of this
personal loan by Global. When Brown defaulted on the loan, First
Union sued Global to enforce the guaranty. Global, contending that
Brown lacked authority to sign the guaranty, filed counterclaims
against First Union for breach of the covenant of good faith and
fair dealing, nondisclosure, and violation of N.C. Gen. Stat. § 75-
1.1 (2003). The trial court entered summary judgment for First
Union on all of the claims. Based on our review of the record, we
conclude that there are genuine issues of material fact on the
question of Brown's apparent authority to sign the guaranty, but
that Global has failed to forecast sufficient evidence to establisha prima facie case on its counterclaims. We therefore reverse the
entry of summary judgment in First Union's favor on First Union's
claims, but affirm the entry of summary judgment for First Union on
In September 1997, defendant Brown approached First Union
about obtaining a $250,000 personal loan ("the $250,000 loan"). A
credit approval request prepared by Mary Smith, a Vice President of
First Union, indicated that the loan, which was to be funded 15
December 1997, was for the purpose of "financ[ing] start up
operations of tape distribution company" and would be repaid from
"cash flow from operations of company" and "personal income and
assets of borrower." The credit approval request also specified
that the loan would be guaranteed by the company.
On 16 December 1997, Global was incorporated as a Delaware
corporation with defendant Brown and Don M. Brindley as co-owners
of the company. Brown served as President and Secretary and was
responsible for the day-to-day running of the business. Brindley
was the Chief Executive Officer. According to Brindley's
affidavit, Brown and he agreed that neither of them "could take
funds, create debts, guarantee loans, sell shares, or otherwise
encumber the assets of Global without the other owner's approval."
During the underwriting of Brown's $250,000 loan and prior to
the incorporation of Global, e-mail communications circulated among
various First Union loan officers expressing uncertainty as to
which officers of Global would be authorized to sign the guaranty. On 16 December 1997, Mary Smith announced that "Paul Brown is going
to be the only officer authorized to sign. . . . Paul Brown is CEO,
VP & Secretary. Don Brindley will not be signing on the loan at
Brown's loan closed on 22 December 1997. On that date, Brown
executed three documents: (1) a promissory note in favor of First
Union for $250,000 ("the 1997 note"); (2) an unconditional guaranty
that purported to bind Global as guarantor of the same loan ("the
1997 guaranty"); and (3) a "Certificate of Borrowing Resolution" on
First Union letterhead ("the Certificate"). The 1997 note did not
limit the purposes for which the $250,000 could be used and was
signed by Brown in his personal capacity. The Certificate,
presented by First Union to Brown for the first time on 22 December
1997, stated that it was a "true copy of the Resolution duly
adopted by the Board of Directors as of 12/22/97 . . . ." The
Certificate, as drafted by First Union, purported to authorize the
Global "CEO/President/Secretary" to, among other things, "guarantee
the obligations of others to Bank."
Although the Certificate also required Brown to subsequently
provide First Union with a certified copy of an actual board
resolution, Brown never did so. According to Brindley, he was not
aware of the 1997 note or the guaranty signed by Brown on behalf of
On 15 May 1998, Brown obtained a second loan from First Union
for $400,000 ("the $400,000 loan"). At that time, Brindley
executed an unconditional guaranty, also dated 15 May 1998, bywhich Brindley personally guaranteed repayment of the $400,000
loan. Brindley believed that Brown had sought this loan in order
to obtain sufficient funds to become a co-equal owner of Global.
The 1997 note for the $250,000 loan was renewed and extended
on 21 December 1998 by Brown's signature on a new promissory note
("the 1998 note"). Apparently, First Union did not obtain a new
guaranty. The 1997 guaranty had provided that Global guaranteed
not only the 1997 note but also "all modifications, extensions or
renewals thereof." At the time of the 1998 renewal, Brindley was
still unaware of the 1997 note, its extension, or Global's
Brown never invested the full amount of the $400,000 loan into
Global, but rather used a portion of the loan for personal
expenses, including the purchase of a home. When the $400,000
became due, Brindley learned that First Union was going to renew
the loan in reliance on Brindley's personal guaranty. Brindley
called Mary Smith and informed her that he would not guarantee the
renewal of the $400,000 loan.
Subsequently, Brindley discovered that Brown had then
attempted to secure the $400,000 renewal by Global assets.
According to Brindley's affidavit, he again contacted Smith and
"informed her that Global would not secure Brown's loan, and
insisted that Global not be obligated to secure Brown's loan." On
approximately 1 October 1999, Eileen Hague, a Global employee, also
informed Smith that neither Global nor Brindley would renew theguaranty on Brown's $400,000 loan. Smith wrote Brown on 14
December 1999 stating:
This letter verifies your loan [for $400,000]
matured and expired on September 30, 1999.
First Union National Bank did not renew this
note under its original terms and released the
personal guaranty of Mr. Don Brindley as of
October 31, 1999.
On 22 December 1999, First Union again renewed and extended
the $250,000 loan. Brown signed a promissory note in his
individual capacity ("the 1999 note") and also a new "Unconditional
Guaranty" as "President" of Global ("the 1999 guaranty"). Smith
confirmed in an affidavit that she never spoke with Brindley about
the $250,000 loan or the guaranty. Brindley was unaware that Brown
had purported to obligate Global by the 1999 guaranty until 2001.
In August 2001, Janet Simpson of First Union called Brindley
and informed him that Brown was in default on the $250,000 loan and
told him, for the first time, that Global was the guarantor of the
note. Brindley protested the guaranty, claiming that Brown had no
authority to sign a guaranty on behalf of Global without Brindley's
knowledge and approval.
After Global declined to pay the unpaid balance on the
$250,000 loan, First Union filed suit on 8 October 2001 against
Global and Brown seeking $196,337.96 plus interest. First Union
brought suit only on the 1999 note and the 1999 guaranty. The
complaint does not mention the 1997 note, the 1997 guaranty, or the
1998 note. Global not only answered the complaint, but asserted
counterclaims against First Union for unfair and deceptive trade
practices, breach of the duty of good faith and fair dealing, andmisrepresentation by concealment. Global also brought cross-claims
against Brown for breach of contract, breach of fiduciary
duty/constructive fraud, misrepresentation by concealment, and
First Union moved for summary judgment against both Global and
Brown. Global cross-moved for summary judgment on its
counterclaims. On 13 February 2003, the trial court granted First
Union's motion for summary judgment and entered judgment against
Global in the amount of $240,574.85, including principal, interest,
and attorney's fees. The court also entered judgment in favor of
First Union on Global's counterclaims. In a separate document,
also filed on 13 February 2003, the court entered a consent
judgment in the amount of $240,574.85 on behalf of First Union and
against Brown. Global has appealed from the order granting summary
judgment in favor of First Union.
 We first note that since Global's cross-claims against
Brown are still pending, this appeal is interlocutory. Mitsubishi
Elec. & Elecs. USA, Inc. v. Duke Power Co., 155 N.C. App. 555, 559,
573 S.E.2d 742, 745 (2002). An interlocutory appeal is permissible
only if (1) the trial court certified the order under Rule 54(b) of
the Rules of Civil Procedure, or (2) the order affects a
substantial right that would be lost without immediate review.
Embler v. Embler, 143 N.C. App. 162, 164-65, 545 S.E.2d 259, 261
(2001). Since the trial court included a Rule 54(b) certification
in its order entering final judgment as to First Union's claimsagainst Global and Global's counterclaims against First Union, this
appeal is properly before this Court.
 Global first contends that the trial court erred in
granting summary judgment to First Union on the 1999 guaranty on
the grounds that Brown's signature on the guaranty could not bind
Global. Global further contends that it was entitled to summary
judgment on First Union's claims.
The North Carolina Rules of Civil Procedure provide that
summary judgment shall be granted "if 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). In deciding the motion,
"'all inferences of fact . . . must be drawn against the movant and
in favor of the party opposing the motion.'" Caldwell v. Deese
288 N.C. 375, 378, 218 S.E.2d 379, 381 (1975) (quoting 6 James W.
Moore, Moore's Federal Practice
§ 56-15, at 2337 (2d ed. 1971)).
The party moving for summary judgment has the burden of
establishing the lack of any triable issue. Collingwood v. Gen.
Elec. Real Estate Equities, Inc.
, 324 N.C. 63, 66, 376 S.E.2d 425,
427 (1989). Once the moving party meets its burden, then the
non-moving party must "produce a forecast of evidence demonstrating
that the plaintiff will be able to make out at least a prima facie
case at trial." Id.
at 66, 376 S.E.2d at 427. In opposing a
motion for summary judgment, the non-moving party "may not restupon the mere allegations or denials of his pleading, but his
response, by affidavits or as otherwise provided in this rule, must
set forth specific facts showing that there is a genuine issue for
trial." N.C.R. Civ. P. 56(e).
On appeal, this Court's task is to determine, based on the
materials presented to the trial court, whether there is a genuine
issue as to any material fact and whether the moving party is
entitled to judgment as a matter of law. Oliver v. Roberts
N.C. App. 311, 314, 271 S.E.2d 399, 401 (1980), cert. denied,
S.E.2d 283 (1981). A trial court's ruling on a motion for summary
judgment is reviewed de novo
as the trial court rules only on
questions of law. Va. Elec. & Power Co. v. Tillett
, 80 N.C. App.
383, 384-85, 343 S.E.2d 188, 191, cert. denied
, 317 N.C. 715, 347
S.E.2d 457 (1986).
Because First Union's complaint does not mention the 1997
guaranty, but sought only to enforce the 1999 guaranty, we address
only Global's liability under the 1999 guaranty. Global argues
initially that it cannot, as a matter of law, be bound under that
guaranty because of N.C. Gen. Stat. § 55-8-32 (2003):
(a) Except as provided by subsection (c),
a corporation may not
directly or indirectly
lend money to or guarantee the obligation of a
director of the corporation unless
(1) The particular loan or guarantee is
approved by a majority of the votes
represented by the outstanding
voting shares of all classes, voting
as a single voting group, except the
votes of shares owned by or voted
under the control of the benefited
(2) The corporation's board of directors
determines that the loan or
guarantee benefits the corporation
and either approves the specific
loan or guarantee or a general plan
authorizing loans and guarantees.
(Emphasis added) As, however, First Union correctly points out,
when the North Carolina Business Corporations Act, of which N.C.
Gen. Stat. § 55-8-32 is a part, refers to a "corporation," it
means only an entity incorporated under North Carolina law:
"Corporation" or "domestic corporation" means
a corporation for profit or a corporation
having capital stock that is incorporated
under or subject to the provisions of this
Chapter and that is not a foreign corporation
except that in G.S. 55-9-01 and G.S. 55-15-21
"corporation" includes domestic and foreign
N.C. Gen. Stat. § 55-1-40(4) (2003). When the Act intends to refer
to a foreign corporation, it uses the term "[b]usiness entity."
N.C. Gen. Stat. § 55-1-40(2a) (2003). Since N.C. Gen. Stat. § 55-
8-32 sets out restrictions only on "corporations" and not on
"business entities," it does not apply to Global, a Delaware
(See footnote 1)
First Union argues that Global's guaranty of Brown's loan was
not necessarily unlawful under the applicable Delaware law. While
the North Carolina statute uses a "may not . . . unless"
construction with respect to corporate loans and guaranties, the
applicable Delaware statute uses a broader "may . . . whenever"
Any corporation may
lend money to, or
guarantee any obligation of, or otherwise
assist any officer or other employee of the
corporation or of its subsidiary, including
any officer or employee who is a director of
the corporation or its subsidiary, whenever
in the judgment of the directors, such loan,
guaranty or assistance may reasonably be
expected to benefit the corporation. The loan,
guaranty or other assistance may be with or
without interest, and may be unsecured, or
secured in such manner as the board of
directors shall approve, including, without
limitation, a pledge of shares of stock of the
corporation. Nothing in this section contained
shall be deemed to deny, limit or restrict the
powers of guaranty or warranty of any
corporation at common law or under any
Del. Code Ann. tit. 8, § 143 (2004) (emphasis added).
We agree with First Union that the plain language of the
Delaware statute does not prohibit First Union from arguing that
Brown had authority to bind Global to a guaranty. Neither party,
however, addresses a necessary preliminary question: which state's
common law should we apply on the issue of Brown's authority?
Since the parties in this case both assume the applicability of
North Carolina common law, we will proceed accordingly. TennesseeCarolina Transp., Inc. v. Strick Corp.
, 283 N.C. 423, 431, 196
S.E.2d 711, 716 (1973) ("However, in the case before us the parties
have not contended that any law other than the law of Pennsylvania
shall govern. We proceed accordingly . . . .").
As this Court explained in Foote & Davies, Inc. v. Arnold
, 72 N.C. App. 591, 595, 324 S.E.2d 889, 892 (1985):
A principal is liable upon a contract
duly made by its agent with a third person in
three instances: when the agent acts within
the scope of his or her actual authority; when
a contract, although unauthorized, has been
ratified; or when the agent acts within the
scope of his or her apparent authority, unless
the third person has notice that the agent is
exceeding actual authority.
First Union does not dispute that Global has submitted evidence
that Brown was not authorized to sign the guaranty and does not
contend that Global ratified the guaranty. First Union instead
relies solely on Brown's apparent authority.
First Union contends that summary judgment was proper under
Zimmerman v. Hogg & Allen, P.A.
, 286 N.C. 24, 209 S.E.2d 795
(1974), on the grounds that the president of a close corporation
always has apparent authority to bind a corporation by signing a
contract. First Union has, however, overlooked two critical
aspects of Zimmerman
. First, the Supreme Court in Zimmerman
only that evidence such as that relied upon by First Union in this
case was sufficient to give rise to an issue of fact warranting
denial of the motion for summary judgment
at 40, 209 S.E.2d
at 805 ("Plaintiff met the burden imposed upon him by Rule 56(c),
and, therefore, the trial judge erred by rendering summary judgmentin favor of [the principal]."). Zimmerman
did not hold that
evidence of the signature of a president of a close corporation
warrants resolution of apparent authority as a matter of law. This
Court has noted, relying upon Zimmerman
, that "[t]he law of
apparent authority usually depends upon the unique facts of each
case . . . ." Foote & Davies
, 72 N.C. App. at 595, 324 S.E.2d at
893. In cases in which "the evidence is conflicting, or
susceptible to different reasonable inferences, the nature and
extent of an agent's authority is a question of fact to be
determined by the trier of fact." Id.
The question is one of law
for the court only "[w]here different reasonable and logical
inferences may not be drawn from the evidence . . . ." Id.
recognized that the president's apparent
authority only extends to matters "'that are within the
corporation's ordinary course of business.'" Zimmerman
, 286 N.C.
at 32, 209 S.E.2d at 800 (quoting Burlington Indus., Inc. v. Foil
284 N.C. 740, 758, 202 S.E.2d 591, 603 (1974)). When a president's
act "'relates to material matters that are outside the
corporation's ordinary course of business, in the absence of
express authorization for such act by the board of directors, the
corporation is not bound.'" Id.
(quoting Burlington Indus.
N.C. at 759, 202 S.E.2d at 603). This Court has since
president of a corporation is the head and general agent of the
corporation and may act for it in matters that are within the
corporation's ordinary course of business or incidental to it."
Foote & Davies
, 72 N.C. App. at 596, 324 S.E.2d at 893. See alsoBell Atl. Tricon Leasing Corp. v. DRR, Inc.
, 114 N.C. App. 771,
775, 443 S.E.2d 374, 376 (1994) ("The law of this state is clear as
to the apparent authority of the president of a closely held
corporation to enter into contracts for the corporation. The
president of the corporation is the head and general agent of the
corporation and may act for it in matters that are within the
corporation's ordinary course of business or incidental to it.");
Sentry Enters., Inc. v. Canal Wood Corp.
, 94 N.C. App. 293, 297,
380 S.E.2d 152, 155 (1989) ("The president of a corporation has the
apparent authority to bind the corporation to contracts which are
within the corporation's ordinary course of business.").
Here, Brown was the president of Global, a closely held
corporation. For First Union to be entitled to summary judgment
based on Brown's apparent authority, the undisputed evidence and
all inferences drawn from that evidence must establish that the
1999 guaranty was in the corporation's ordinary course of business
or incidental to it. Our review of the evidence indicates that a
genuine issue of material fact exists as to this question.
Neither party has offered direct evidence from Brown or anyone
else regarding the actual purpose of the loan
or how the proceeds
were in fact used.
(See footnote 2)
First Union points to the credit request
application that its employee completed in 1997 indicating that the
original $250,000 loan was for the initial capitalization ofGlobal. We observe that neither the form nor any affidavit
indicates the source of this information. Since Global has not
objected to consideration of this statement, we consider it as
evidence supporting First Union's position. On the other hand, the
$250,000 loan from 1997 _ closed three months after completion of
the credit request form _ was a personal loan and was not
restricted to any particular purpose. By the time Brown signed the
1999 note and guaranty, the sole contracts at issue here, First
Union had already loaned Brown an additional $400,000 for the
capitalization of Global and had, in the loan documents, restricted
use of the loan proceeds to Global's business. Global has also
offered evidence that Brown never made the required investment to
be a co-equal owner of Global. The evidence produced by both
parties, although hardly substantial, is sufficient to raise an
issue of fact regarding the purpose of the loan.
, our Supreme Court held that the defendant's
affidavits _ stating (1) that the agent's investment activity was
in the agent's personal capacity, (2) that the partnership was not
in the business of making investments, and (3) that it knew nothing
of the agent's activity _ were sufficient to support the contention
that the agent was not acting within the scope of his apparent
authority. 286 N.C. at 37-38, 209 S.E.2d at 803. On the other
hand, the Zimmerman
plaintiff's evidence _ suggesting (1) that the
investment acts brought good will to the partnership and (2) that
the firm in fact knew of them _ "raised a genuine material issue
for trial" and required reversal of the trial court's ordergranting summary judgment. Id.
at 39-40, 209 S.E.2d at 804-05.
This case presents a similar conflict in the evidence.
This Court has affirmed summary judgment only when the
corporate-related purpose was undisputed. Thus, in Foote & Davies
72 N.C. App. at 597, 324 S.E.2d at 893-94, the president of the
defendant company had signed a guaranty in connection with a
contract for the printing of a catalog for a wholly-owned
subsidiary of the defendant company. Similarly, in Bell Atlantic
, the president of the defendant corporation, which owned a
fleet of trucks, had signed a guaranty of a business equipment
lease for an affiliate corporation existing solely for the purpose
of servicing those trucks. This Court held that the lease
agreement was incidental to the defendant's business. Bell
, 114 N.C. App. at 775, 443 S.E.2d at 377. In both
of these cases, the purpose of the guaranty and the guaranty's
relationship to the defendant corporation's business interests were
undisputed. That is not the case here and, therefore, the trial
court erred in granting summary judgment to First Union.
Global, however, contends that it was entitled to summary
judgment on First Union's claims since the evidence is undisputed
that the $250,000 loan was a personal loan. A guaranty of a
personal loan is not necessarily outside the apparent authority of
an officer of a closely held company. In Investors Title Ins. Co.
, 320 N.C. 770, 774-75, 360 S.E.2d 786, 789 (1987), the
Supreme Court held that the fact a partner in a law firm executed
a title certificate on property that he owned for the purpose ofobtaining a personal loan for himself did not establish as a matter
of law that the partner's act "was not for carrying on the business
of the partnership." Affidavits that the law firm had no knowledge
of its partner's act and that it was done solely for the partner's
personal benefit instead "create[d] a genuine issue of material
fact on this question" of apparent authority. Id.
at 775, 360
S.E.2d at 789. Likewise, the fact that the loan involved in this
case was a personal one supplied evidence giving rise to a genuine
issue of fact; it is not dispositive.
In addition to the dispute over the purpose of the loan, a
dispute exists regarding First Union's knowledge of Brown's
authority. A principal is not liable to a third person if "the
third person has notice that the agent is exceeding actual
authority." Foote & Davies
, 72 N.C. App. at 595, 324 S.E.2d at
892. We hold that the evidence raises an issue of fact as to
whether First Union had notice that Brown was exceeding his
authority when he signed the 1999 guaranty. Global offered
evidence that both Brindley and another Global employee told First
Union prior to the signing of the 1999 guaranty that Brown had no
authority to bind Global with respect to the $400,000 loan. In
addition, Global points to evidence that First Union's internal
procedures required authorization by Global's board of directors as
a prerequisite to the loan and yet never obtained from Brown a
certified copy of the actual board resolution. A jury could
reasonably conclude, in light of these facts, that First Union, in
the exercise of reasonable care, was not justified in believingthat Brown had authority to bind Global through the 1999 guaranty.
, 286 N.C. at 31, 209 S.E.2d at 799 ("[T]he
determination of a principal's liability in any particular case
must be determined by what authority the third person in the
exercise of reasonable care was justified in believing that the
principal had, under the circumstances, conferred upon his
agent."). First Union urges that the 1999 notification was limited
to the $400,000 loan, while Global contends that the 1999
notification should be dispositive as to its liability. Both
arguments are more properly presented to a jury.
Global relies on Wachovia Bank v. Bob Dunn Jaguar, Inc.
N.C. App. 165, 172, 450 S.E.2d 527, 532 (1994), in which the
president of Bob Dunn Ford notified Wachovia that any guaranties
had to have his personal approval and signature. Subsequently, a
new corporation called Bob Dunn Jaguar was formed as a subsidiary
of Bob Dunn Ford. Wachovia sought to enforce a guaranty signed by
a vice president of Bob Dunn Ford for a Jaguar sold by Bob Dunn
Jaguar. This Court affirmed the trial court's decision not to
enforce the guaranty on the grounds that the earlier communication
regarding guaranties and Bob Dunn Ford "divested [the vice
president] of any authority which may have been imputed to him."
. In response to Wachovia's claim that it was entitled to rely
upon its belief that the guaranty signer's status as vice president
authorized him to sign guaranties, the court held that the
communication from the president provided "ample evidence from
which plaintiff should have been on notice that [the vicepresident] was exceeding his authority." Id.
While Global urges
that Bob Dunn Jaguar
justifies entry of summary judgment in its
favor, it overlooks the fact that the trial court's decision in Bob
was reached after a bench trial.
For the foregoing reasons, we hold that neither party was
entitled to summary judgment on First Union's claims. Genuine
issues of material fact exist regarding whether Brown was acting
within his apparent authority and whether First Union was on notice
that Brown was exceeding his authority when he signed the 1999
Global next contends that the trial court erred in granting
summary judgment to First Union on its counterclaims. We hold that
the trial court properly concluded that Global failed to forecast
sufficient evidence to support its counterclaims.
 Global first contends that First Union breached a duty of
good faith and fair dealing and made a material misrepresentation
by concealment when it failed to disclose that Brown was signing a
guaranty on behalf of Global for a personal loan to Brown. Global
argues that First Union should not have accepted a guaranty signed
by Brown without verifying that he had authority to act when First
Union had reason to believe that Global was being misled by Brown.
This Court has previously held that "in some instances a
creditor owes a duty to the guarantor to disclose information about
the principal debtor." Gant v. NCNB Nat'l Bank of N.C., 94 N.C.App. 198, 199, 379 S.E.2d 865, 867, appeal dismissed and disc.
review denied, 325 N.C.706, 388 S.E.2d 453 (1989). Specifically,
"[i]f the creditor knows, or has good grounds
for believing that the surety [or guarantor]
is being deceived or misled, or that he is
induced to enter into the contract in
ignorance of facts materially increasing the
risks, of which he has knowledge, and he has
an opportunity, before accepting his
undertaking, to inform him of such facts, good
and fair dealing demand that he should make
such disclosure to him; and if he accepts the
contract without doing so, the surety [or
guarantor] may afterwards avoid it."
Id. at 199-200, 379 S.E.2d at 867 (quoting First-Citizens Bank &
Trust Co. v. Akelaitis, 25 N.C. App. 522, 526, 214 S.E.2d 281, 284
(1975); alteration in original).
It is unclear whether a breach of this duty to disclose is
more properly labeled a breach of the covenant of good faith and
fair dealing or a claim for negligent nondisclosure. See Gant, 94
N.C. App. at 200, 379 S.E.2d at 867 ("Plaintiff has alleged
sufficient facts to state a claim against defendant, whether the
cause of action is ultimately determined to be one for negligence
or 'breach of duty of good faith,' as plaintiff has labeled her
claims."). Although Global has asserted separate counterclaims for
breach of the duty of good faith and fair dealing and
"misrepresentation by concealment," it relies in each counterclaim
on Gant to provide a duty to speak and points to the same facts as
supporting each claim. We, therefore, address the counterclaims
The facts of this case do not fall within the scope of Gant.
If the finder of fact concludes that Brown did not have apparentauthority to enter into the guaranty on behalf of Global, then
Global never entered into a guaranty of Brown's loan. Accordingly,
Global was not "induced to enter into the contract" by any non-
disclosure and First Union cannot be said to have "accept[ed] the
contract" without having made a required disclosure. Id. at 199-
200, 379 S.E.2d at 867. On the other hand, if Brown did have
apparent authority to sign a guaranty in Global's name, the
question arises whether First Union had a duty to make a disclosure
to someone other than an agent of Global. Global has cited no
authority suggesting that First Union may be held liable for a
breach of good faith and fair dealing or non-disclosure when
negotiating with an officer of a company having apparent authority.
We have found none. See Furman Lumber, Inc. v. Mountbatten Sur.
Co., No. 96-7906, 1997 U.S. Dist. LEXIS 12118, at *35 (E.D. Pa.
Aug. 6, 1997) (creditors who had made the required disclosure to an
agent of the guarantor "were under no duty to take any further
 Second, Global contends that the trial court erred in
granting summary judgment to First Union on Global's counterclaim
for unfair or deceptive trade practices in violation of N.C. Gen.
Stat. § 75-1.1. Global points to the following acts as
constituting violations of N.C. Gen. Stat. § 75-1.1: (1) "First
Union's preparation and presentment of a fictitious corporate
resolution[;]" (2) First Union's renewal of the corporate guaranty
without disclosing it to Global; and (3) the filing and pursuit of
this action. In order to establish a claim under N.C. Gen. Stat. § 75-1.1,
a plaintiff must show: (1) defendant committed an unfair or
deceptive act or practice; (2) the action in question was in or
affecting commerce; and (3) the act proximately caused injury to
the plaintiff. Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704,
711 (2001). "A practice is unfair if it is unethical or
unscrupulous, and it is deceptive if it has a tendency to deceive."
Id. Although it is a question of fact whether the defendant
performed the alleged acts, it is a question of law whether those
acts constitute an unfair or deceptive trade practice. First Atl.
Mgmt. Corp. v. Dunlea Realty Co., 131 N.C. App. 242, 252-53, 507
S.E.2d 56, 63 (1998). In a business context, this question is
determined based on the likely effect on "the average
businessperson." Bolton Corp. v. T. A. Loving Co., 94 N.C. App.
392, 412, 380 S.E.2d 796, 808, disc. review denied, 325 N.C. 545,
385 S.E.2d 496 (1989).
First Union's use of the "corporate resolution" among the
other loan documents that Brown signed as a condition of the 1997
$250,000 loan was not unfair or deceptive within the meaning of
N.C. Gen. Stat. § 75-1.1. Global never saw this corporate
resolution until this litigation and provides no explanation how
the resolution could have deceived it or how it harmed Global. See
Melton v. Family First Mortgage Corp., 156 N.C. App. 129, 135, 576
S.E.2d 365, 370 (bank's backdating of loan application documents
could not support claim under N.C. Gen. Stat. § 75-1.1 whenplaintiff failed to present any evidence of harm from act), aff'd
per curiam, 357 N.C. 573, 597 S.E.2d 672 (2003).
Global also contends that the same facts supporting its claim
for breach of the covenant of good faith and fair dealing supports
a claim for unfair and deceptive trade practices. For the same
reasons that we held summary judgment was appropriate as to that
counterclaim, we also hold those facts are insufficient to
establish a claim under N.C. Gen. Stat. § 75-1.1.
Finally, Global argues that First Union's pursuit of this
lawsuit constitutes an unfair and deceptive trade practice. In
Reichhold Chems., Inc. v. Goel, 146 N.C. App. 137, 157, 555 S.E.2d
281, 293 (2001), appeal dismissed, 356 N.C. 677, 577 S.E.2d 635,
disc. review denied, 356 N.C. 677, 577 S.E.2d 634 (2003), this
Court held that a lawsuit which is "objectively reasonable" cannot
constitute an unfair trade practice under N.C. Gen. Stat. § 75-1.1.
Since Global has not demonstrated that this lawsuit was objectively
unreasonable, it cannot form a basis for an unfair and deceptive
trade practices claim.
We hold that the record reveals genuine issues of material
fact with respect to First Union's claim for relief against Global
and, therefore, reverse the trial court's entry of summary judgment
in favor of First Union on that claim and remand this matter for
such further proceedings as may be appropriate. We affirm the
trial court's entry of summary judgment as to Global's
Affirmed in part, reversed in part and remanded.
Chief Judge MARTIN and Judge STEELMAN concur.
Global asserts that "First Union cannot seriously argue that
North Carolina common law applies to this dispute with Global, but
that a North Carolina statute, which is not favorable to its
position, does not. First Union cannot pick and choose which North
Carolina law it believes governs this case." Global has mistaken
the issue. We are not addressing a question of choice of law, but
rather a question of statutory construction. If the General
Assembly chooses not to include foreign corporations within the
scope of N.C. Gen. Stat. § 55-8-32, it is irrelevant that North
Carolina common law might otherwise apply. Global argues
alternatively that Fla. Stat. § 607.0833 (2003) should apply
because Global's principal place of business is in Florida. As
with the North Carolina statute, however, the Florida statute
applies only to a corporation, which "means a corporation for
profit, which is not a foreign corporation, incorporated under orsubject to the provisions of this act." Fla. Stat. § 607.01401(5)
Global relies on its own unverified answers to First Union's
request for admissions, but presents no authority allowing a party
to rely upon its own unverified discovery responses in opposing
summary judgment. See
N.C.R. Civ. P. 56(c).
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