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McDonald v. Green Energy Solutions

United States District Court, D. South Carolina, Florence Division

May 8, 2017

FOSTER O. MCDONALD, as Personal Representative of the Estate of Sidney L McDonald, deceased Plaintiff,
v.
NIXON ENERGY SOLUTIONS; GREEN ENERGY SOLUTIONS, INC., ARBORONE ACA, Defendants. NIXON ENERGY SOLUTIONS, Cross-Claim Plaintiff,
v.
ARBORONE, ACA, Cross-Claim Defendant.

          ORDER

          R. Bryan Harwell United States District Judge

         Cross-Claim Defendant ArborOne, ACA (“ArborOne”) filed a Motion for Judgment on the Pleadings or for Summary Judgment on the cross-claims brought by Nixon Energy Solutions on December 28, 2016. [ECF #113-1]. On January 11, 2017, Plaintiff filed a response to and joinder in ArborOne's Motion, explaining that both the fraudulent transfer and intentional interference with contractual relations cross-claims that are the subject of this motion are based upon the same contentions by Nixon Energy Solutions in its counterclaims against Plaintiff. [ECF #115]. Plaintiff requested this Court render summary judgment in favor of Plaintiff on Nixon Energy Solutions's counterclaims against Plaintiff, as well. On January 23, 2017, Nixon Energy Solutions (“Nixon”) filed its response in opposition to Defendant's Motion. [ECF 117]. Defendant filed its reply in support of its motion on January 30, 2017. [ECF #120]. This Court has considered all of the pleadings filed in this case, and this matter is now before the Court for review[1" name="FN1" id= "FN1">1].

         Standards of Review

         ArborOne brings this motion as one for judgment on the pleadings, or in the alternative, for summary judgment. Under Rule 12 of the Federal Rules of Civil Procedure, a party may move for judgment on the pleadings after the pleadings are closed, but early enough so as not to delay trial. Fed.R.Civ.P. 12(c). A party may seek judgment in its favor on certain claims on the ground that none of the claims, here the cross-claims, state a claim upon which relief may be granted. Fed.R.Civ.P. 12(h)(2)(B). When ruling on a motion under Rule 12, the court “must accept as true all of the factual allegations contained in the complaint.” Erickson v. Pardus, 1 U.S. 89');">551 U.S. 89, 94 (2007). In considering such a motion, the factual allegations in a complaint are accepted as true, and the plaintiff is afforded the benefit of all reasonable inferences to be drawn from the allegations contained within the complaint. Mylan Laboratories, Inc. v. Matkari, 1130');">7 F.3d 1130, 1134 (4th Cir. 1993). In considering motions made pursuant to Rule 12(c), Courts follow a restrictive standard to avoid “hasty or imprudent use” of the procedure. Fitzhenry v. Independent Order of Foresters, No. 2:14-cv-3690, 2015 WL 3711287, at *1 (D.S.C. June 15, 2015).

         Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The moving party has the burden of proving that summary judgment is appropriate. Once the moving party makes the showing, however, the opposing party must respond to the motion with “specific facts showing there is a genuine issue for trial.” Fed.R.Civ.P. 56(e).

         When no genuine issue of any material fact exists, summary judgment is appropriate. Shealy v. Winston, 29 F.2d 1009');">929 F.2d 1009, 1011 (4th Cir. 1991). The facts and inferences to be drawn from the evidence must be viewed in the light most favorable to the non-moving party. Id. However, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).

         In this case, Defendant “bears the initial burden of pointing to the absence of a genuine issue of material fact.” Temkin v. Frederick Cnty. Comm'rs, 2d 716');">845 F.2d 716, 718 (4th Cir. 1991) (citing Celotex Corp. v. Catrett, 17');">477 U.S. 317, 322 (1986)). If Defendant carries this burden, “the burden then shifts to the non-moving party to come forward with fact sufficient to create a triable issue of fact.” Id. at 718-19 (citing Anderson, 477 U.S. at 247-48).

         Moreover, “once the moving party has met its burden, the nonmoving party must come forward with some evidence beyond the mere allegations contained in the pleadings to show there is a genuine issue for trial.” Baber v. Hosp. Corp. of Am., 2d 872');">977 F.2d 872, 874-75 (4th Cir. 1992). The nonmoving party may not rely on beliefs, conjecture, speculation, of conclusory allegations to defeat a motion for summary judgment. See id; Doyle v. Sentry, Inc., 1002');">877 F.Supp. 1002, 1005 (E.D. Va. 1995). Rather, the nonmoving party is required to submit evidence of specific facts by way of affidavits, depositions, interrogatories, or admissions to demonstrate the existence of a genuine and material factual issue for trial. See Fed. R. Civ. P. 56(c), (e); Baber, 977 F.2d at 875 (citing Celotex, 477 U.S. at 324)). The nonmovant's proof must meet “the substantive evidentiary standard of proof that would apply at a trial on the merits.” Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1316 (4th Cir. 1993); DeLeon v. St. Joseph Hosp., Inc., 1 F.2d 1229');">871 F.2d 1229, 1223 n.7 (4th Cir. 1989). The parties have had the opportunity to conduct discovery in this case. This Court will analyze this Motion under the applicable standard for summary judgment.

         Factual Background and Procedural History

         On or about December 17, 2010, ArborOne made a loan in the amount of $300, 000.00 to provide necessary funds to James Lamar Collins and Cynthia W. Collins to enable their business associate, Green Energy Solutions, Inc. to commence work on the construction of a biogas facility. Nixon was an entity which furnished materials for the construction of the facility pursuant to a contract with Green Energy Solutions, Inc. [ECF #113-1, 2');">p. 2]. Nixon furnished said materials on credit and on an unsecured basis, except to the extent of its rights under South Carolina law to assert a mechanic's lien. [ECF #113-1, 2');">p. 2]. Defendant states that Mr. and Mrs. Collins represented to ArborOne that commencement of this project would enable Green Energy Solutions, Inc. (“GES”), to qualify for a grant from the U.S. Department of the Treasury under Section 1603 of Division B of the American Recovery and Reinvestment Act of 2009 (“Section 1603”). This loan was apparently evidenced by a Nonrevolving Variable Rate Note, dated December 17, 2010, in the principal amount of $300, 000.00, payable to the order of ArborOne, and signed by Mr. and Mrs. Collins (the “Initial ArborOne Note”). [ECF #113-2, Ex. A]. GES guaranteed the payment of the Initial ArborOne Note by signing a Continuing Guaranty, dated December 17, 2010. [ECF #113-2, Ex. A, Declaration of Mr. Richard Pitts].

         Thereafter, ArborOne states that it made additional loans for the construction of the biogas facility at the request of Mr. and Mrs. Collins and in reliance upon the Continuing Guaranty. These additional loans were evidenced by new promissory notes, modifications of earlier promissory notes, or new notes that evidenced both new loans and a refinancing of earlier loans. [ECF #113-2, Ex. A]. Then, on June 27, 2011, Mr. and Mrs. Collins executed a Nonrevolving Variable Rate Note in the principal amount of $2, 165, 000.00, with a final maturity date of March 1, 2012 (the “ArborOne Note”). Proceeds from this, and other, loans were used to pay contractors, such as Nixon, who supplied materials for the biogas facility. [ECF #113-1, 2');">p. 2].

         ArborOne also states that Mr. and Mrs. Collins and GES signed and delivered a Security Agreement dated June 27, 2011 and created in favor of ArborOne to induce ArborOne to make available the loan amount of $2, 165, 000.00, which included the additional $567, 037.70, for the construction of the biogas facility. [ECF #113-2, Ex. A]. This document reflects a security interest on behalf of ArborOne in all respective “general intangibles” as defined by the South Carolina Uniform Commercial Code (the “UCC”) as revised and effective as of July 1, 2001, and “rights to payment, now or hereafter owing, to the Debtor from entitlement programs of every kind, both federal and state.” This is ArborOne's basis for proving it has a security interest in the Section 1603 Program grant funds that are the subject of Nixon's cross claims. Nixon does not allege that on June 27, 2011, the date of the execution of the Security Agreement that GES was insolvent.

         According to ArborOne, on March 1, 2012, Mr. and Mrs. Collins and GES became unable to pay ArborOne pursuant to the ArborOne Note. Meanwhile, on April 25, 2013, Nixon filed a mechanic's lien against the property. Thereafter, on or around May 14, 2013, ArborOne filed a UCC-1 financing statement with the Secretary of State of Nevada, thereby “perfecting” its existing Security Agreement. [ECF #113-2, Ex. A].[2" name="FN2" id= "FN2">2] Although ArborOne had a valid Security Agreement on any payments due GES from federal programs, the Security Agreement was not “perfected” until after GES and Mr. and Mrs. Collins became unable to pay the loan. GES completed its application for a grant under the Section 1603 Program, and after using those proceeds to satisfy the ArborOne Note, a balance was left owing on the ArborOne Note in the amount of $112, 356.18. For its part, Defendant Nixon asserts that GES failed to pay $79, 172.90 under its contract with Nixon to supply a generator for the biogas facility. For this reason, Nixon filed a mechanic's lien on April 25, 2013 against the property and on June 5, 2013, filed a lis pendens and a lawsuit seeking to foreclose on this lien. However, Mr. and Mrs. Collins and GES's indebtedness to Nixon did not arise until sometime after the execution of the Security Agreement.

         ArborOne does not dispute that Nixon was among the contractors and/or subcontractors who provided labor and materials for the biogas facility. However, ArborOne submits that it disbursed to Nixon the amount of $692, 811.10 of the proceeds of the loan, leaving behind an unpaid balance of $79, 192.90 (an amount ArborOne does not dispute for purposes of this Motion). Nixon is now seeking to collect as a creditor of GES, by virtue of a cross-claim against ArborOne and counterclaims against Plaintiff, to recover its unpaid balance, on a theory of fraudulent conveyance and tortious interference with contract. Nixon ...


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