Bank of Am., N.A. v. Rice

Annotate this Case

Download PDF

NO. COA13-180 NORTH CAROLINA COURT OF APPEALS Filed: 19 November 2013 BANK OF AMERICA, N.A., Plaintiff, Mecklenburg County No. 11 CVS 4263 v. CHRISTOPHER HARVEY RICE, DAVID HALVORSEN, HALEY BECK HILL, JENNIFER BURKHARDT-BLEVINS, MARK GROW, AND UBS FINANCIAL SERVICES, INC., Defendants. Appeal entered 16 by defendant April 2012 Christopher and 22 Harvey August 2012 Rice by from Judge Williamson in Superior Court, Mecklenburg County. orders F. Lane Heard in the Court of Appeals 15 August 2013. Johnston, Allison & Hord, P.A., by Martin L. White and John C. Lindley III, for defendant-appellant Christopher Harvey Rice. Williams Mullen, by Kelly Colquette Hanley, Michael C. Lord, Kevin W. Benedict, and Robert Ward Shaw, for plaintiff-appellee. STROUD, Judge. Defendant arbitration. appeals orders denying his motions For the following reasons, we affirm. I. Background to compel -2 No man, for any considerable period, can wear one face to himself, and another to the multitude, without finally getting bewildered as to which may be the true. Nathaniel Hawthorne, The Scarlet Letter 197 (Bantam Books 1986) (1850). Indeed, the wearing of multiple faces may bewilder not only men, but also corporations. The record before us contains multiple documents regarding plaintiff Bank of America, N.A. and/or some variation of plaintiff these and/or include, but one may of not plaintiff s corporate affiliates; be to, of limited Bank America Corporation; NB Holdings Corporation; BAC North America Holding Company; BANA Holding Corporation; Bank of America, National Association; Banc of America Investment Services, Inc. (which is often referred to in various documents as BAI, although some documents also use BAI to refer to several of the entities affiliated with it); U.S. Trust, N.A.; Merrill Lynch & Co.; and Merrill Lynch, Pierce, Fenner and Smith, Incorporated. an attorney for plaintiff explained in an affidavit: Bank of America Corporation owns 100% of its subsidiary NB Holdings Corporation, which in turn holds 100% of BAC North America Holding Company, which in turn holds 100% of BANA Holding Corporation, which in turn holds 100% of Bank of America, N.A. U.S. Trust is a line of business within a division of Bank of America, N.A. Bank of America Corporation also owns 100% of another subsidiary, Merrill Lynch & Co., which in turn holds 100% of Merrill Lynch, Pierce, Fenner & Smith, Incorporated. Thus Merrill Lynch Pierce Fenner & Smith, Inc. is Indeed, -3a separate legal entity from Bank America, N.A. and its U.S. Trust line business. The trial court found that defendant Rice of of was initially employed by BOA s corporate affiliate Banc of America Investment Services, Inc. ("BAI"), and later became employed by BOA s U.S. Trust[;] defendant does not challenge this finding on appeal. In its brief plaintiff summarized some of the facts regarding the corporate entities involved in stating that [f]ollowing BOA s acquisition of the U.S. Trust line of business in July 2007, Rice transferred his employment from BAI to the new and separate division of BOA. . . . Thereafter, the Rice Team provided wealth management services only to U.S. Trust clients. Any brokerage services performed by the Rice Team were nominal because U.S. Trust is not a retail securities broker. Plaintiff further stated that [a]s a result of its 23 October 2009 merger into Merrill Lynch, Pierce, Fenner and Smith Incorporated ( MLPF&S ), BAI was no longer an affiliate of BOA . . ., and BAI terminated or withdrew its registration with FINRA . . . MLPF&S is a separate legal entity from BOA and its U.S. Trust line of business. . . . Rice was never an employee of MLPF&S. While this Court both respects and values the variety of methods available for creating business entity dons various multiple business corporate entities, masks purposes, the results may be what no one intended. for when a various We will not seek to set forth the entire history of defendant s employment -4with plaintiff or some related entity and the reorganization of the various corporate structures but will summarize only those facts which are necessary for an understanding of the disposition of this case. On 24 September 2004, plaintiff s corporate affiliate BAI hired defendant as an employee. On this same date defendant and Banc of America Investments Services, Inc. ( BAI ), entered into an agreement entitled BAI SERIES 7 AGREEMENT[.] 1 The BAI Series 7 Agreement contained provisions regarding the following general topics: other employment at-will[,] customer lists and proprietary solicitation compliance and confidential covenants[,] with procedures[,] right applicable hold laws, information[,] to an rules, harmless[,] non- injunction[,] policies and arbitration[,] assignment[,] non-waiver[,] invalid provisions[,] choice of law[,] and terms and modifications[.] caps.) (Original in all The arbitration provision provided: 7.1 With the limited exception of statutory discrimination claims, all controversies or claims arising out of or relating to Employee s employment with BAI including, but not limited to, the voluntary or involuntary suspension or termination of employment, or claims for compensation, this Agreement, and/or the construction, There is some dispute about whether the BAI Series 7 Agreement should be characterized as an employment agreement. Although it seems to look like an employment agreement, this characterization is not relevant for our purposes. 1 -5performance or breach of this Agreement, shall be brought in arbitration before the National Association of Securities Dealers, Inc., (NASD), and any judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereover. In the event Employee brings a statutory discrimination claim arising out of or relating to employment with BAI, no other claims relating to those statutory claims may be arbitrated. 7.2 Paragraph 7.1 shall not be deemed a waiver of BAI s right to seek injunctive relief in a court of competent jurisdiction as provided for in paragraph 4.1 above. Also, on 24 September 2004, defendant executed a promissory note payable to plaintiff Bank of America, National Association, not BAI ( 2004 Note ). The 2004 Note provided for defendant to pay to plaintiff the sum of $500,000.00, to be paid in six separate annual payments between 2005 and 2010. The 2004 Note provided that [a]ny controversy or claim arising out of or relating to this Note or breach thereof shall be settled by arbitration in accordance with the rules of the National Association of Securities Dealers, Inc. or the New York Stock Exchange, Inc. substantially For the following two years, defendant executed similar promissory notes, with almost verbatim arbitration provisions, but these two notes are payable to BAI, not plaintiff Bank of America, National Association. 2 The We are unable to discern from the record why the 2004 Note differs from the 2005 Note and 2006 Note in this regard, but must read the Notes as written and construe them accordingly. 2 -6promissory note from 2005 was for $219,928.50, payable from 2006 to 2011 ( 2005 Note ) and the promissory note from 2006 was for $219,928.50, payable from 2007 to 2012 ( 2006 Note ). On 4 May 2010, plaintiff entered into three PROMISSORY NOTE NOVATION Novations all AGREEMENT[s;] stated they ( 2010 were Novations ). between 3 plaintiff The Bank 2010 of America, not BAI, and defendant and they were replac[ing] the prior 2004 Note, 2005 Note, and 2006 Note; the 2010 Novations did not contain arbitration provisions and provided that [t]his Note contains the complete understanding between the undersigned and the Lender [, Bank of America, National Association,] relating to the matters contained herein and supersedes all prior oral, written and contemporaneous oral negotiations, commitments and understandings between and among Lender and the undersigned. The undersigned did not rely on any statements, promises or representations made by the Lender or any other party in entering into this Note. (emphasis added.) On 2 March 2011, plaintiff filed a COMPLAINT, MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION, AND MOTION FOR EXPEDITED DISCOVERY against defendants, including Mr. Christopher Harvey Rice, the only defendant in this appeal. (Original in all caps.) Plaintiff summarized its allegations of the case as follows, As discussed below, we conclude that the 2010 Novations are not valid legal novations, but we refer to them as novations as this is what they were entitled by the parties. 3 -7This Complaint arises from the Individual Defendants breach of contract and misappropriation of the Plaintiff s confidential, proprietary and trade secret information which occurred at the time of their coordinated and abrupt resignation from Plaintiff s U.S. Trust business on January 28, 2011. BOA is informed and believes that the Individual Defendants continue to breach their contractual duties and continue to commit tortious acts by misappropriating the Plaintiff s confidential, proprietary and trade secret information (despite a demand for its return) and by soliciting certain clients and customers of Plaintiff s U.S. Trust business. BOA is informed and believes that the Individual Defendants are engaged in this misconduct for the benefit of UBS. Plaintiff brought claims for breach of contract, conversion, computer trespass, misappropriation of trade secrets, tortious interference with contractual relations, tortious interference with contractual relations with plaintiff s U.S. Trust business clients, unfair competition, and breach of the 2010 Novations of the promissory notes. On 23 April 2011, pursuant to Rule 41 of the Rules North stipulated Carolina to dismissal of of Civil Procedure, its first seven plaintiff claims against defendants with prejudice; thus, the only remaining claim was for breach of the promissory notes identified in plaintiff s complaint as the 2010 Novations.4 On or about 31 May 2011, defendant filed a motion to We note that plaintiff has not made any claim based upon the 2005 Note or the 2006 Note but instead relies solely on the 2010 Novations. 4 -8compel arbitration [o]riginal and stay [p]romissory litigation [n]otes contending the [a]rbitration [m]andate that and [p]laintiff is bound to [a]rbitrate even without [a]rbitration [a]greement[.] motion, adding On or about 1 July 2011, defendant amended his to his initial motion that [t]he [a]mended [p]romissory [n]otes do not replace the [o]riginal [p]romissory [n]otes and [p]laintiff is bound to [a]rbitrate regardless of language of [a]mended [p]romissory [n]otes[.] On 16 April 2012, the trial court denied defendant s amended motion. On 26 April 2012, defendant filed a motion requesting the trial court amend its findings denying his amended motion. filed a second litigation[,] motion (original its 16 April This same date, to in in compel all 2012 defendant also arbitration caps), order and wherein stay defendant asserted that [t]he instant motion arises from a completely different arbitration provision than the one upon which the First Motion was based; this motion heavily relied upon the BAI Series 7 Agreement as the basis for arbitration. On 22 August 2012, the trial court denied defendant s motion to amend the 16 April 2012 order and defendant s arbitration and stay litigation. second motion to Defendant appeals both the 16 April and 22 August 2012 orders. II. Whether Standard of Review a compel dispute is subject to -9arbitration is an issue for judicial determination. Our review of the trial court s determination is de novo. Pursuant to this standard of review, the trial court s findings regarding the existence of an arbitration agreement are conclusive on appeal where supported by competent evidence, even where the evidence might have supported findings to the contrary. Accordingly, upon appellate review, we must determine whether there is evidence in the record supporting the trial court s findings of fact and if so, whether these findings of fact in turn support the conclusion that there was no agreement to arbitrate. A two-part analysis must be employed by the court when determining whether a dispute is subject to arbitration: (1) whether the parties had a valid agreement to arbitrate, and also (2) whether the specific dispute falls within the substantive scope of that agreement. The law of contracts governs the issue of whether there exists an agreement to arbitrate. Accordingly, the party seeking arbitration must show that the parties mutually agreed to arbitrate their disputes. Harbour Point Homeowners Ass n, Inc. v. DJF Enters., Inc., 201 N.C. App. 720, 723-24, 688 S.E.2d 47, 50 (citations, quotation marks, and brackets omitted), review denied, 364 N.C. 239, 698 S.E.2d 397 (2010). III. BAI Series 7 Agreement Defendant first contends that he was entitled to arbitration under the BAI Series 7 Agreement which he contends -10is an employment agreement. While both parties argue vigorously about what exactly the BAI Series 7 Agreement is and exactly which entities it binds, it is unnecessary to engage in this analysis as the only remaining claim left after the dismissal of plaintiff s first seven claims is for breach of the 2010 Novations. For the reasons stated below, we conclude that the BAI Series 7 Agreement has no effect in determining the terms of the promissory notes. See Stovall v. Stovall, 205 N.C. App. 405, 410, 698 S.E.2d 680, 684 (2010). With all contracts, the goal of construction is to arrive at the intent of the parties when the contract was issued. The intent of the parties may be derived from the language in the contract. It is the general law of contracts that the purport of a written instrument is to be gathered from its four corners, and the four corners are to be ascertained from the language used in the instrument. When the language of the contract is clear and unambiguous, construction of the agreement is a matter of law for the court and the court cannot look beyond the terms of the contract to determine the intentions of the parties. Id. (citation omitted). While it is true that the BAI Series 7 Agreement included an extremely agreement are broad free arbitration at any time provision, to enter parties into to any additional -11agreements and to state the specific terms of those documents within the four corners of those particular documents. the 2004 Note, 2005 Note, and 2006 Note Indeed, each included arbitration provisions, and the 2010 Novations replac[ing] the 2004 Note, 2005 Note, and 2006 Note all provided that they are the complete understanding between the undersigned and the Lender relating to the matters contained herein and supersedes all prior oral, written and contemporaneous oral negotiations, commitments and understandings between and among Lender and the undersigned. (Emphasis added.) The 2010 Novations unambiguous in stating that they supersede all prior are . . . written . . . commitments and understandings between and among the Lender [,Bank of America, National Association,] and the undersigned [defendant;] understandings would the include prior any written prior commitments promissory notes and or agreements between defendant and plaintiff to the extent that the 2010 Novations are valid. 5 See id. Accordingly, defendant s argument as to the BAI Series 7 Agreement is overruled.6 Likewise, the 2010 Novations would have no effect on the rights by and between defendant and BAI, since BAI was the entity which entered into the BAI Series 7 Agreement with defendant, but BAI has not brought any claim against defendant and is not a party to this action. 5 6 Defendant contends that Equitable Estoppel Bars BOA from Selectively Affirming Provisions in the Employment Agreement While Eschewing Others[.] Even assuming arguendo that plaintiff could be equitably barred from denying the validity of -12IV. Defendant reversible replaced next error and Promissory Notes contends when that ruling superseded the the trial various promissory notes court [2010] since committed novations there was no mutuality of parties between the novations and the original promissory notes. (Original in all caps.) Defendant is partially correct. A. 2004 Note Defendant makes no specific argument regarding the 2004 Note, presumably because the 2004 Note was between defendant and plaintiff, and the 2010 Novation replac[ing] the 2004 Note was also between defendant and plaintiff. Accordingly, the 2004 Note and the 2010 Novation both have the same parties, defendant and plaintiff. Defendant has not attacked the 2010 Novation on any other ground. stated that it As the 2010 Novation replacing the 2004 Note is the entirety of the parties agreement regarding the 2004 Note obligation it is replacing and as it does not contain an agreement to arbitrate, there was no agreement to arbitrate the 2004 Note since the 2010 Novation superseded any agreement the parties may or may not have made in the 2004 Note and/or the BAI Series 7 Agreement. See generally Harbour Point Homeowners' Ass'n, Inc., 201 N.C. App. at 724, 688 the BAI Series 7 Agreement, the result in this case does not depend upon the BAI Series 7 Agreement, as explained below, so we will not address equitable estoppel. -13S.E.2d at 50 ( A two-part analysis must be employed by the court when determining whether a dispute is subject to arbitration: (1) whether the parties had a valid agreement to arbitrate . . . . ) Thus, the 2010 Novation as to the 2004 Note is a valid novation which is enforceable and not subject to arbitration. B. 2005 Note and 2006 Note Defendant contends that the 2005 Note and 2006 Note are between defendant and BAI, but the 2010 Novations replac[ing] those documents were between defendant and plaintiff; thus, contends defendant, a valid novation could not have occurred because BAI was not a party to the 2010 Novations replacing the 2005 and 2006 Notes. This is correct. Novation may be defined as a substitution of a new contract or obligation for an old one which is thereby extinguished . . . The essential requisites of a novation are a previous valid obligation, the agreement of all the parties to the new contract, the extinguishment of the old contract, and the validity of the new contract[.] Oil Co. v. Oil Co., 34 N.C. App. 295, 300, 237 S.E.2d 921, 925 (1977) (citation and quotation marks omitted) (emphasis added) (quoting Tomberlin v. Long, 250 N.C. 640, 644, 109 S.E.2d 365, 367-68 (1959)). Plaintiff first directs our attention to findings of fact which it contends are binding; however, these findings of fact -14are regarding the BAI Series 7 Agreement which we have already concluded is not applicable to the resolution of this case. Plaintiff also contends that the parties mutual performance under the New Notes confirms the novation. But the 2010 Novations would have to be confirmed by the performance of the original party to the 2005 and 2006 Notes, BAI. Any performance by that defendant or plaintiff would not indicate BAI, the original party to the 2005 Note and the 2006 Note which the 2010 Novation purportedly replace[d,] agreed to the 2010 Novations. Indeed, BAI is not even a party to this lawsuit. 34 N.C. App. at 300, 237 S.E.2d at 925. contends that [i]t is not necessary See Oil Co., Similarly, plaintiff for all parties to expressly agree to a novation in order for it to be effective and cites to one case wherein a party was found to be bound by a novation although he did not expressly agree to it; however, in plaintiff s cited case, the party took some action to acquiesce to the novation. See Westport 85 Limited Partnership v. Casto, 117 N.C. App. 198, 204-05, 450 S.E.2d 505, 510 (1994) (noting that the defendant who was a party to a contract ratif[ied] a novation to which he was not a party by acknowledging receipt of the . accepting. . . . [novation], . performance negotiating under the the $7,500 check, [novation] ). and Here, plaintiff has not directed us to nor are we aware of any action taken by BAI which shows acquiescence to the replace[ment] of -15its 2005 Note and 2006 Note with the 2010 Novations to which it was not a party. the 2005 Note We conclude that the 2010 Novations regarding and 2006 Note are invalid and unenforceable because BAI was not a party to the 2010 Novations purporting to replace the 2005 Note and 2006 Note, as the record does not contain any ratified or evidence in any indicating other form that BAI accepted agreed, the acquiesced, 2010 Novations purportedly replac[ing] the 2005 Note and 2006 Note. 7 As such, the purported 2010 Novations between plaintiff and defendant had no effect upon the 2005 Note and 2006 Note. Both the 2005 Note and 2006 Note, which, we assume without deciding, are in full force and effect, contained arbitration provisions, but plaintiff has not brought any claim based upon the 2005 Note and 2006 Note. Furthermore, plaintiff is not even a party to the 2005 Note or 2006 Note. Accordingly, defendant cannot compel arbitration as to plaintiff s claims under the 2010 Novations of the 2005 and 2006 Notes, because a valid novation could not occur without BAI, see Oil Co., 34 N.C. App. at 300, 237 S.E.2d at 925, and plaintiff was not a party to the 2005 Note and 2006 Note. V. Conclusion In conclusion, we affirm the trial court s order denying Nor is there any indication that the 2005 and 2006 Notes were ever transferred by BAI to plaintiff. 7 -16arbitration as to the 2010 Novation regarding the 2004 Note, because the 2010 Novation includes the entire agreement of the parties as to the 2004 Note and that novation does not contain an arbitration provision. We further affirm the trial court s denial of arbitration as to plaintiff s claims based upon the 2010 Novations regarding the 2005 Note and 2006 Note, but for a different reason than the trial court; here we affirm because there is no claim as currently pled to be arbitrated. Because of the narrow issue presented in this appeal, we express no opinion on the enforceability of the 2005 Note, the 2006 Note, or the 2010 Novations. AFFIRMED. Judges CALABRIA and DAVIS concur.

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.