Appeal by Defendants from order entered 16 August 2006 by
Judge Milton F. Fitch, Jr., in Currituck County Superior Court.
Heard in the Court of Appeals 18 September 2007.
Vandeventer Black, LLP, by Norman W. Shearin, Jr. and Allison
A. Holmes, for Plaintiff-Appellee.
Sharp, Michael, Outten & Graham L.L.P., by David R. Tanis, for
James M. Mraz (Defendant) and Heidi P. Mraz (together,
Defendants) appeal from an order granting a new trial in favor of
George W. Huguely, IV (Plaintiff). We affirm.
The relevant evidence is summarized as follows: On 3 July
1998, Plaintiff offered to purchase property located at 809
Lighthouse Drive, Corolla, North Carolina, for $357,500.00, making
a $5,000.00 earnest money deposit. The sellers accepted
Plaintiff's offer, and the closing date was set for 12 September
1998. At that time, Plaintiff and his estranged wife were undergoing
a divorce. Entry of Plaintiff's final divorce judgment was
continued to November 1998, two months after the closing date, and
consequently, the First Union loan officer with whom Plaintiff
arranged to finance the purchase decided not to extend the loan to
Plaintiff. First Union's representative explained that the
continuance of Plaintiff's divorce created financial uncertainty.
Attorney John Gaw (Attorney Gaw) testified, the bank wanted his
wife to sign the deed of trust and maybe some other loan
documents[.] Defendant said, [Plaintiff] did not want [the
property] to somehow get involved in his divorce proceedings and
somehow entangle[d.] Plaintiff attempted to extend the closing
date and obtain financing after the finalization of his divorce,
but the sellers would not extend the date. Rather than lose the
contract, Plaintiff sought a partner.
Plaintiff contacted Defendant with a proposal regarding the
property. Plaintiff testified:
I really loved that property and I didn't want
to lose it. I told [Defendant] that the deal
was going down. I asked for an extension. I
couldn't get the extension and that if I
didn't have a partner to close in their name
in the next week, I would lose the deal. So I
proposed a joint venture, partnership to
[Defendant] where he would take the property
down in his name. I would then design [the
property], renovate it and build it, supply
the materials at my cost. We would then . . .
transfer it to a limited liability company. .
. . I had come up with a name for the limited
liability company called Corolla Associates.
I explained that we would then own the
property and operate the property as partners,
50/50 partners in Corolla Associates. Our
families could use it. . . . He and I talkedabout the deal. . . . He said, he lik[ed] the
deal. It sounded good to him. We shook
On 30 September 1998, approximately ten days after Plaintiff and
Defendant met, Defendant purchased the property, making a down
payment of $60,461.53. At that time, Defendant had not visited 809
Lighthouse Drive. The $5,000.00 earnest money deposit that
Plaintiff paid was applied toward the purchase price of the
property. The amount owed, $296,000.00, was supplied from
Defendant's loan from First Union Bank, the terms of which were
prearranged by Plaintiff.
After the purchase, Plaintiff and Defendants discussed
renovation of the property, and Plaintiff supervised the process.
Plaintiff estimated the cost of renovation to be approximately
$100,000.00 to $120,000.00. Defendant obtained an equity line and
made payments to Plaintiff for renovations, which Plaintiff
initially deposited into the 809 Lighthouse Drive checking account.
However, on 22 July 1999, Corolla Associates, LLC, was formed, and
Plaintiff established a checking account for Corolla Associates,
LLC, into which he began depositing Defendant's payments.
Plaintiff contributed approximately $75,000.00 of his own money to
the project, often in the form of checks to Defendant for half of
the mortgage payment. When Plaintiff engaged in manual labor on
the renovation project, Plaintiff was paid $20.00 per hour for his
After the renovation was completed, Plaintiff and Defendants
shared 809 Lighthouse Drive with their families, consistent withPlaintiff's original proposal in 1998. Plaintiff and Defendant
also arranged a schedule for summer use and for rental of the
property, and Defendant consulted with Plaintiff before allowing
third parties to use the property. However, Defendant did not
transfer title of the property to Corolla Associates, LLC, pursuant
to the alleged partnership agreement between Plaintiff and
Several drafts of an operating agreement were circulated
between Plaintiff and Defendants, but the drafts were never signed.
Plaintiff nonetheless received statements from Defendant's
accountant, which updat[ed] [Plaintiff] on the current financial
status of the North Carolina property and detailed the steps
necessary for each partner to be on an equal footing. Despite
repeated email exchanges regarding the transfer of title of the
property to Corolla Associates, LLC, and emails about settling
up, Defendant kept the title to the property in his name.
Defendant testified at trial that the property was probably
[worth] over two million dollars.
As time passed, Plaintiff learned that Defendant had removed
Plaintiff as a beneficiary of the insurance policy on the property,
and in late summer of 2002, Plaintiff and Defendant had a heated
conversation: Plaintiff told [Defendant] that . . . I did
everything I promised to do with our partnership. You know, I
[renovated] the house[.] I delivered everything I said I would do.
I made him and [his wife] a lot of money, and now he's trying to
screw me, and . . . I was very disappointed[.] Finally, in aletter to Plaintiff dated 16 May 2003, Defendant gave Plaintiff the
I want to impress upon you that I have no
tolerance for you or those connected with you
being found on the property. I have relatives
in the area and others who observe the house
on a regular basis. They have been instructed
to call me immediately if any intruder is seen
on the property. I would then call the
sheriff who in turn would arrest any intruder
for trespassing whether still there or not.
This delivery constitutes my formal notice . .
. not to trespass.
On 3 June 2003, Plaintiff commenced an action against Defendant
seeking dissolution of the alleged partnership.
On 10 April 2006, the matter came to trial, and on 14 April
2006, a jury returned a verdict in Defendants' favor, finding that
Defendant and Plaintiff did not enter into a partnership or joint
venture concerning 809 Lighthouse Drive. On 17 May 2006, the court
entered judgment against Plaintiff. On 25 May 2006, Plaintiff
filed a N.C. Gen. Stat. § 1A-1, Rule 59(a) motion for a new trial,
which the court granted in an order entered 21 August 2006. From
this order, Defendants appeal.
Defendants contend that the trial court erred by granting
Plaintiff's N.C. Gen. Stat. § 1A-1, Rule 59 motion for a new trial.
N.C. Gen. Stat. § 1A-1, Rule 59(a)(7) (2005) authorizes the
trial court to grant a new trial based on the [i]nsufficiency of
the evidence to justify the verdict[.] In this context, the term
'insufficiency of the evidence' means that the verdict 'wasagainst the greater weight of the evidence.' In re Buck
, 350 N.C.
621, 624, 516 S.E.2d 858, 860 (1999) (quoting Nationwide Mut. Ins.
Co. v. Chantos
, 298 N.C. 246, 252, 258 S.E.2d 334, 338 (1979)).
The trial court has discretionary authority to appraise the
evidence and to 'order a new trial whenever in his opinion the
verdict is contrary to the greater weight of the credible
(quoting Britt v. Allen
, 291 N.C. 630, 634, 231
S.E.2d 607, 611 (1977)) (internal quotation marks omitted).
This Court's review of a trial court's discretionary ruling
granting a new trial is strictly limited to the determination of
whether the record affirmatively demonstrates an abuse of
discretion by the court. Worthington v. Bynum and Cogdell v.
, 305 N.C. 478, 482, 290 S.E.2d 599, 602 (1982). Because
'the trial court has directly observed the evidence as it was
presented and the attendant circumstances, as well as the demeanor
and characteristics of the witnesses,' a trial court's ruling on a
motion for new trial is given great deference. Kummer v. Lowry
165 N.C. App. 261, 263, 598 S.E.2d 223, 225, disc. review denied
359 N.C. 189, 605 S.E.2d 153 (2004) (quoting Buck
, 350 N.C. at 628,
516 S.E.2d at 863). '[A]n appellate court should not disturb a
discretionary Rule 59 order unless it is reasonably convinced by
the cold record that the trial judge's ruling probably amounted to
a substantial miscarriage of justice.' Anderson v. Hollifield
345 N.C. 480, 483, 480 S.E.2d 661, 663 (1997) (quoting Campbell v.
Pitt County Memorial Hosp., Inc.
, 321 N.C. 260, 265-65, 362 S.E.2d
273, 275-76 (1987)). In the instant case, the sole question for the jury at trial
was whether Defendant and Plaintiff entered into a partnership or
joint venture concerning the property located at 809 Lighthouse
Drive. In Miller v. Rose
, 138 N.C. App. 582, 532 S.E.2d 228
(2000), this Court discussed partnerships formed by parole
A partnership may be formed by an oral
agreement. Even without proof of an express
agreement to form a partnership, a voluntary
association of partners may be shown by their
conduct. A finding that a partnership exists
may be based upon a rational consideration of
the acts and declarations of the parties,
warranting the inference that the parties
understood that they were partners and acted
as such. [A] course of dealing between the
parties of sufficient significance and
duration . . . along with other proof of the
fact [may] be admitted as evidence tending to
establish the fact of partnership, provided it
has sufficient substance and definiteness to
evince the essentials of the legal concept,
including, of course, the necessary intent.
at 586, 532 S.E.2d at 232 (quoting Potter v. Homestead
, 330 N.C. 569, 576-77, 412 S.E.2d 1, 5-6
(1992)). Furthermore, [p]roperty acquired by purchase or
otherwise on account of the partnership is partnership property, as
is property acquired with partnership funds, unless a contrary
intention appears. Potter
, 330 N.C. at 577, 412 S.E.2d at 6
(citing N.C. Gen. Stat. § 59-38(a) (2005)).
In the instant case, Plaintiff presented evidence tending to
show an oral agreement and 'acts and declarations of the parties,
warranting the inference that the parties understood that they were
partners and acted as such.' Miller
, 138 N.C. App. at 587, 532S.E.2d at 232 (quoting Potter
, 330 N.C. at 576-77, 412 S.E.2d at 5-
6). The evidence included Plaintiff's own testimony: I told
[Defendant] my plan. We shook hands. I trusted him. We had an
agreement, an oral agreement.
The evidence admitted at trial also includes the testimony of
Attorney Gaw, who reported discussions about the possibility of
[titling the property to] a corporation or a LLC and . . . aspects
of those two business entities. Attorney Gaw testified:
[I]t's my best recollection that I believe
that we tried to see if the loan could be
closed using a business entity in his own name
that we could form for him. For whatever
reason, the bank was not willing for him to
form an LLC or corporation and close this
particular loan using one of those entities.
So at some point before the closing,
[Plaintiff] indicated to me that [he] had
begun having some discussions with
[Defendant][.] . . . [Defendant] was informed
of his dilemma or this problem and was willing
to help him by taking title and closing the
loan. . . . [T]hey were going to make
adjustments in the title and whatever their
arrangements were after that closing.
The evidence further shows that, on two occasions, Attorney Gaw
received payment for legal work [with funds] . . . that either
came out of 809 Lighthouse Drive or it came out of Corolla
Associates[,] . . . for legal work that he did for the
Attorney Gaw prepared a detailed operating agreement for
Corolla Associates, LLC, and signature lines were prepared for
Plaintiff and Defendant as managers; however, the operating
agreement was never signed. At Plaintiff's request, Attorney Gaw
also prepared a deed conveying the property from Defendants toCorolla Associates, LLC, but Attorney Gaw stated that I have no
indication in my file that the original of this deed was [ever]
signed or recorded. Attorney Gaw sent the prepared deed, along
with a transmittal letter dated 27 September 2001 and an
affidavit of consideration, to Defendant.
When questioned about his own monetary contributions to the
alleged partnership, Plaintiff stated that he would pay:
[w]hatever money I was obligated for my 50
percent of the deal. . . . I put five or six
thousand dollars in the account after the deal
closed, just to get the operating account
moving so we could pay bills and get some work
in the house done. I put in my own money
before [Defendant] put . . . any of his money
in the deal. . . . I told him I would be
obligated for everything after we closed[,]
that I would be obligated for everything
At trial, Plaintiff also explained the process of renovation of the
home and his role and investment in the process:
To the best of my knowledge, sir, the
accounting shows that I put $75,000.00 in the
project. Of that $75,000, $55,000 went
directly to construction, labor and materials.
. . . [Defendant] put in [$175,000.00]. I put
in [$75,000.00] and covered everything, the
construction, all the cost of the job,
overdraft fees, miscellaneous expenses, money
that came out for various things. And at the
end of the day, the accounting shows the
numbers are there[.]
Giving a more detailed explanation of his investment,
Q: . . . What was the total for the year
A: The total deposits I made for the year
2000 were $52,400.
Q: . . . Do you have on your schedule a
total for the list of deposits you made
A: Yes, sir. Total deposits that I made for
2001 was $12,800.
Q: All right. And do you have a total for
the deposits for 2002 on that schedule?
A: Yes, sir. The total deposits I made in
2002 were $10,460.
Q: All right. And do you have . . . the
total then of the deposits that you made
according to the bank statements?
A: Okay. According to the bank statements
the total deposits I made was $75,885.
The evidence also includes a memorandum dated 6 April 2001
from Defendant's accountant to Plaintiff, stating that in order
for each partner . . . to be on equal footing, [Plaintiff] would
need to reimburse [Defendant] for one half of his investment,
$12,683.65. Plaintiff also wrote a letter to Defendant, dated 14
November 2001, in which Plaintiff said:
Pursuant to our agreement and ownership of the
referenced property, enclosed please find a
final accounting for the renovation/
remodeling work. As agreed, we decided to
remodel the second floor bathroom and settle
up the accounts and adjust everything to
reflect our 50/50 ownership when the work was
complete. The work has been completed and I
have enclosed the final construction
accounting for your review[.] . . . As per
our agreement, when the final accounting is
agreed upon by both parties, and the monies
are adjusted to reflect 50/50 contributions by
both partners, the property will be deeded to
Corolla Associates, LLC. If you remember
Corolla Associates, LLC was set up to own and
operate [the property] with [Defendant] 50%
owner and [Plaintiff] 50% owner. Due to the
final accounting and cash accounts needing to
be adjusted, the conveyance has not takenplace. John Gaw has prepared the Deed and the
necessary paper work for the Deed of
The evidence further reveals that Plaintiff and Defendant
discussed and completed a detailed schedule for summer rental and
for each family's use of the property.
Q: . . . [T]ell us what your agreement with
him was concerning each family's use of
the property[.] . . .
A: This was [Defendant's] idea and I went
along with it. He said that we could
come up with a rental rate for what the
house would rent for on a weekly basis,
and that we would then pick dates that
his family would use it and my family
would use it, and then since the
accounting was still open and we were
still trying to finalize the accounting,
. . . we would have a credit based on the
rental use of the property. So for
example if [Defendant] used it for six
weeks and I used it for three weeks, then
technically [Defendant] would owe Corolla
Associates three weeks' worth of rent[.]
Plaintiff introduced as evidence the email correspondences between
Plaintiff and Defendant detailing the schedule for summer use of
the property and a detailed rental schedule for the summer of 2001.
The following e-mail was also admitted as evidence:
Q: What is [this e-mail]?
A: It's an e-mail from [Defendant] to
[Plaintiff], and it says: George, my Dad
and his wife would like to use the house
these days. JM. . . .
Q: . . . [A]re there two parts[?]
A: Right. I think the top part references
that [Defendant] had e-mailed me back
that his father's stay in the house was
going to be the 19th through the 26th,
and then the bottom part was my responseback which said _ I'll incorporate the
rental income into the final numbers and
that the dates for your father to use the
property are fine and [sic] that it was
okay for your father to stay there for
An insurance policy from Public Western Insurance was also
admitted as evidence, showing liability, fire and contents coverage
of 809 Lighthouse Drive, which was insured in both Plaintiff and
Defendants' names; Plaintiff's office address was on the insurance
policy. Defendant, however, later removed Plaintiff's name as
beneficiary of the policy.
In summary, the evidence presented at trial included email
correspondences between Defendant and Plaintiff asking what a fair
price would be to rent our house, discussing unwind[ing]
proposing that Plaintiff float offers to buy [Defendant] out, and
acknowledging Plaintiff's interest in the home's equity; checks
written by Plaintiff for one half of the monthly mortgage payment;
a detailed schedule of payments made by Plaintiff into the Corolla
Associates, LLC, checking account totaling approximately $75,000;
memos from Defendant's accountants detailing contributions of each
partner; and emails between Defendant and Plaintiff scheduling
each family's summer use of the property.
In light of the foregoing evidence, we cannot say the trial
court's decision to grant a new trial was manifestly unsupported
by reason or so arbitrary that it could not have been the result
of a reasoned decision. The court did not abuse its discretion in
ruling that the jury's verdict was contrary to the greater weightof all the evidence in the case. Therefore, we will not disturb
the trial court's order granting a new trial.
Chief Judge MARTIN and Judge STROUD concur.
Report per Rule 30(e).
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