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NO. COA12-767
NORTH CAROLINA COURT OF APPEALS
Filed:  19 February  2013
TIMBER INTEGRATED INVESTMENTS,
LLC, a North Carolina limited
liability company, and MOUNTAIN
WORKS ENTERPRISES, LLC, a North
Carolina limited liability
company,
Plaintiffs,
v.                                                                        Haywood County
No.  06 CVS  905
LARRY WELCH, JOAN MISHKIN, RONALD
MISHKIN and THE BALSAM GROUP, LLC,
Defendants,
and
LARRY WELCH,
Counterclaimant,
v.
TIMBER INTEGRATED INVESTMENTS,
LLC, a North Carolina limited
liability company, and MOUNTAIN
ENTERPRISES, LLC, a North Carolina
limited liability company, HAROLD
HEATHERLY, and PHILLIP DANIEL
HEATHERLY,
Defendants by Counterclaim.
Appeal  by  Plaintiffs  from  Order  entered  29  October  2010  by
Judge  James  U.  Downs  and  Judgment  entered                           23  February     2012  by
Judge  Bradley  B.  Letts  in  Haywood  County  Superior  Court.  Heard
in the Court of Appeals  28 November  2012.




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Jeffrey  W.  Norris  &  Associates,  PLLC,  by  Jeffrey  W.  Norris
and Jerad R. Davis, for Plaintiffs-Appellants.
David  R.  Payne,  P.A.,  by  David  R.  Payne,  for  Defendants-
Appellees.
STEPHENS, Judge.
Facts and Procedural History
This  case  concerns  the  purchase  of  a  163-acre  tract  of  real
property  located  at                                                       122   Skyland  Road  in  Waynesville,  North
Carolina                                                                    (“the  Property”  or                                                    “the  Land”).  A  portion  of  the  Land
was   previously   an   apple   orchard,   but   has   since   become
contaminated  with  arsenic  and  other  substances.  As  a  result,  the
Property  cannot  be  used  for  residential  purposes.  Plaintiffs
Timber  Integrated  Investments,  LLC  (“Timber”)  and  Mountain  Works
Enterprises,  LLC                                                           (“Mountain”)  purchased  the  Property  from  the
Balsam  Group  (“Balsam”)  on  22  November  2005.  Timber  and  Mountain
were  formed  by  Plaintiffs  Harold  Heatherly                             (“Harold”)  and  his
son  Danny  Heatherly                                                       (“Danny”),  respectively.  Balsam  was  formed
by  Defendants  Larry  Welch                                                                                                                        (“Welch”)  and  Joan  Mishkin                  (“Joan”).
                                                                            Plaintiffs  contend  that  Joan‖s  husband,  Ronald  Mishkin                                                           (“Ron”),
                                                                            also  participated  in  Balsam‖s  organization.  This  appeal  arises
                                                                            from  two  judicial  proceedings  in  Haywood  County,  a  summary
judgment  order                                                             (“the                                                                   2010  order”)  and  the  findings  of  fact,




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conclusions  of  law,  and  judgment  which  followed                         (“the                                             2012
judgment”).
The  Property  was  originally  owned  by  two  siblings,  Carolyn
Metts  and  Paul  Davis                                                       (collectively,                                    “the  Siblings”),  who  had
inherited  the  land  and  were  interested  in  selling  it.  In             2003,
Defendants  Welch  and  Ron,  along  with  a  third  party                    (“the  Third
Party”),  expressed  an  interest  in  purchasing  the  Property  from
Metts  and  Davis.  Over  the  course  of  discussions  about  that
possibility,  Metts  informed  Welch  that  the  Property  could  be
polluted  with  a  number  of  contaminants,  including  arsenic.  While
Metts  discussed  the  purchase  with  Welch  and  Ron,  Welch  also
began  talking  with  Harold  Heatherly  about  selling  the  Property
to  Harold.  Neither  Harold  nor  his  son  Danny  had  visited  the  site
and neither was aware of the potential arsenic contamination.
Later  that  year,  Welch,  Ron,  and  the  Third  Party  executed  a
contract  under  the  name  Arbor  Investment  Group,  LLC,  to  purchase
the  Property  from  the  Siblings.  That  purchase  was  contingent  on
an   acceptable   soil-contamination   evaluation.   When   the   soil-
contamination  evaluation  returned,  it  confirmed  Metts‖s  prior
statement  to  Welch                                                          —  that  the  Property  was  contaminated  with
significant   amounts   of   arsenic   and   could   not   be   used   for
residential  purposes.  As  a  result,  the  Third  Party  withdrew  from




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the  transaction.  Because  of  the  Third  Party‖s  unwillingness  to
enter  the  contract,  Welch  and  Ron  also  terminated  the  agreement.
Welch  then  sent  a  letter  to  ReMax  Realty                                (“ReMax”),  which  had
served  as  the  realtor  for  both  parties,  concluding  that                “[t]he
level  of  arsenic  in  the  soil  was  found  to  be  much  higher  than
had  been  expected  .  .  .  [and]  is  entirely  too  much  difference  to
proceed toward a closing of the subject property.”
Despite  terminating  the  contract  with  the  Siblings,  Welch
maintained   communication   with   Harold   Heatherly   and   assured
Harold  that  he  and  Ron  were  getting  the  matter                         “resolved”  with
the  Siblings.  In  an  attempt  to  explain  things,  Welch  falsely
blamed  the  delay  on  a  family  dispute  between  Metts  and  Davis.
During  that  time,  Welch  continued  to  represent  to  Harold  that
the  Property  would  be  an  excellent  location  for  residential
development.
Two  years  after  the  original,  failed  contract  from                      2003,
Welch  contacted  Harold  with  the  hope  of  re-initiating  talks
regarding  purchase  of  the  Property.  Welch  explained  that  the
fictional  Metts-Davis  feud  had  been  resolved  and  again  described
the  Property  as  well-suited  for  residential  use.  For  a  second
time, Harold expressed an interest in purchasing the property.
On                                                                             25  August               2005,  Welch  and  Joan  entered  into  a  contract




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to  sell  the  Property  to  Timber.  The  contract  listed  Welch  and
Joan  individually  as                                                        “Seller[s].”  Above  their  respective  names,
Welch  and  Joan  had  also  written                                          “[doing  business  as]  Balsam
Group.”  The  contract  stipulated  that  the  land  did  not  contain
any                                                                           “existing  environmental  contamination.”  Five  days  later,  on
30  August  2005,  Joan  entered  into  a  second  contract  and  offer  to
purchase  the  Property  from  Metts  and  Davis,  identifying  herself
as  the  Buyer  and  including  the  words  “By:  The  Balsam  Group  &  or
Assigns”  typed  below  her  name.  Welch‖s  wife,  Marge  Welch,  is
listed  as  the  realtor  on  the  contract.  The  contract  contained
the following addendum, which
specifically  represent[ed]  to  Buyer  that  an
apple   orchard   was   part   of   the   subject
property    and    Buyer    is    accepting    said
property  in                                                                  “as  is”  condition,  fully  aware
that  the  area  where  the  apple  orchard  was
located                                                                       could                                                               contain   environmental
conditions  that  would  need  to  be  rectified
before   the   area   is   used   for   residential
purposes.
Six  days  after  Joan  contracted  with  the  Siblings  and  eleven
days  after  Joan  and  Welch  contracted  with  Timber,  on  6  September
2005,  Balsam  was  formed  in  the  State  of  Delaware.  According  to
the  2012  trial  court,  Balsam  was  formed  by  Welch,  Joan,  and  Ron
for   the   exclusive   purpose   of   committing   fraud   against
Plaintiffs.  That  court  also  determined  that                              “[e]ach  of  the




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members/partners  engaged  in  and  participated  in  a  scheme  to
defraud  plaintiffs  and  each  of  them  knowingly  worked  in  concert
with the others throughout all times relevant hereto.”1
After  Timber  agreed  to  purchase  the  Land  from  Welch  and
Joan,   Harold   and   Danny                                                   “undertook   a   variety   of   steps   to
investigate   the   Property   and   to   conduct   reasonable   due
diligence.”  Harold  reviewed  the  contract,  searched  the  Haywood
County   public   records,   and   walked   the   boundaries   of   the
property.   Harold   also   talked   with   some   of   the   neighboring
landowners,  one  of  whom  mentioned  that  he                                “had  heard  that  some
medical   waste   may   have   been   dumped   on   a   portion   of   the
Property.”  Harold  and  the  neighbor  inspected  that  portion  of  the
Land,  but  they  were  not  able  to  uncover  evidence  of  medical
waste.  According  to  the                                                     2012  judgment,  when  Harold  questioned
Welch  about  the  waste,  “Welch  stated  that  he  did  not  know  of  any
such  waste.”  When  Harold  asked  if  there  was  anything  else  he
should  know,                                                                  “like  any  other  waste  or  contamination,”  Welch
informed  him  that  he  was  not  aware  of  any.  Based  on  those
1  Though  Defendants  have  not  appealed  the  trial  court‖s                2012
judgment,  they  disagree  with  these  findings  in  their  brief,
noting  that  “Larry  Welch  and  Joan  Mishkin  were  the  only  members
of  The  Balsam  Group,  LLC”  and  contending  that  Plaintiffs  failed
to  support  their  contentions  with  regard  to  any  facts  that
supported claims against the Defendants personally.




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findings,  the                                                              2012  court  determined  that  Plaintiffs  would  not
“have  had  any  interest  in  the  Property  had  they  known  it  could
not  be  used  for  residential  purposes.”  During  continued  meetings
between  Harold,  Welch,  and  Harold‖s  attorney  at  that  time,  Welch
persistently represented the Property as free of contamination.
On                                                                          28  November                                            2005,  approximately  two  months  after  the
original  purchase  contracts  were  entered  into,  Balsam  acquired
the  property  from  Metts  and  Davis.2  That  same  day,  Balsam  sold
the  property  to  Timber  and  Mountain.  Approximately  one  week
after  that,  Danny  learned  of  the  contamination  after  speaking
with  a  local  attorney.  The  two  had  been  discussing  their  recent
real   estate   purchases,   and   the   attorney   mentioned   Danny‖s
purchase  of  the  Property  to  another  individual  who  worked  at
ReMax,  which  had  been  involved  in  the  transaction  between  the
Siblings  and  Balsam.  That  individual  knew  about  the  arsenic
contamination  and  promptly  called  Danny  to  ensure  that  he  was
aware  of  the  situation.  Danny  informed  his  father,  and  Harold
quickly  confronted  Welch.  Welch  admitted  to  the  situation,  but
“played                                                                     [it]   down,”   according   to   the                    2012   judgment.   As   a
2  The                                                                      2012  judgment  lists  the  day  of  closing  as        “November                                       22,
2008.”  However,  all  other  documentation  in  the  record,  including
the   General   Warranty   Deed   signed   by   Timber,   Mountain,   and
Balsam, lists the closing date as  28 November  2005.




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consequence,  Harold  informed  Welch  that  Timber  and  Mountain  were
prepared   to   undo   the   transaction   in   order   to                    “fix”   the
Defendants‖  failure  to  disclose  the  contamination.  Welch  asked
for   time   to   discuss   this   possibility   with   his   partners,
“especially  Ron,”  but                                                       “[a]fter  months  of  delays,”  Welch,  Joan,
and  Ron  informed  Harold  that  they  were  not  willing  to  undo  the
transaction. Plaintiffs filed suit.
On                                                                            23  November                                    2009,  Plaintiffs  moved  for  partial  summary
judgment  on  grounds  that:                                                  (1)  the  corporate  veil  surrounding
Balsam   should   be   pierced   and   the   parties   should   be   held
individually  liable,  and                                                    (2)  Ronald  Mishkin  was,  in  fact,  a
partner  in  Balsam  and  should  also  be  held  individually  liable.
Defendants  responded  on  4  December  2009  by  asserting  that  there
were   genuine   issues   of   material   fact   regarding   Plaintiffs‖
allegations  and  moved  for  partial  summary  judgment  on  a  third,
unrelated  matter.  Five  days  later,  on                                    11  December                                    2009,  the
trial   court   denied   Defendants‖   motion   for   partial   summary
judgment.  The  next  year,  on  22  September  2010,  Defendants  filed
another  motion  for  summary  judgment,  which  simply  alleged  that
there  was  no  genuine  issue  of  material  fact  raised  by  the
pleadings,    depositions,    answers    to    interrogatories,    and
admissions  of  fact  and,  thus,  judgment  was  proper  as  a  matter  of




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law.  Defendants‖  motion  provided  no  empirical  or  legal  support
for   its   assertions.   Plaintiffs   responded   and   renewed   their
motion  for  summary  judgment  in  mid-October  of  2010.  They  argued
that  their  claims  were  supported  by  “the  pleadings  filed  in  this
matter,  depositions  taken  and  exhibits  thereto,  the  affidavits
filed  herewith  or  prior  to  the  hearing,  and  such  other  matters
as  may  be  properly  presented  to  the  Court                             .”  In  further
support  of  their  motion,  Plaintiffs  filed  affidavits  of  both
Harold  and  Danny  Heatherly,  which  asserted,  inter  alia,  that
neither  was  aware  of  the  Property‖s  condition  when  the  Land  was
purchased   by   Timber   and   Mountain.   Defendants   responded   to
Plaintiff‖s motion on Thursday,  21 October  2010.
The  next  Monday,  on                                                       25  October       2010,  the  Haywood  County
Superior  Court,  the  Honorable  James  U.  Downs  presiding,  held  a
hearing  on  the  parties‖  summary  judgment  motions.  Four  days
later,  on  29  October  2010,  the  trial  court  entered  an  order  (1)
granting  Defendants‖  motion  for  summary  judgment                        “with  respect
to   the   claims   asserted   by   the   Plaintiff[s]   against   the
individual   defendants   Larry   Welch,   Joan   Mishkin   and   Ronald
Mishkin,”  (2)  denying  Defendants‖  motion  with  regard  to  Balsam,
and  (3)  denying  Plaintiffs‖  motion  for  partial  summary  judgment
against Defendants.




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One  year  and  four  months  later,  on                                   23  February                                           2012,  the
Haywood  County  Superior  Court,  the  Honorable  Bradley  B.  Letts
presiding,   entered   judgment   as   to   Balsam.   After   carefully
delineating  the  facts,  the                                              2012   trial  court  concluded  that
“Defendant  Balsam  Group,  by  and  through  its  members/partners,
committed  fraud.  .  .                                                    .  violated  the  Unfair  and  Deceptive  Trade
Practices                                                                  statute.  .  .                                         [and]        made      negligent
misrepresentations.”  The  court  also  found  that  Plaintiffs  had
been  damaged  and  were  entitled  to  recover  damages.  Accordingly,
the  court  entered  judgment  in  favor  of  Plaintiffs  and  against
Balsam  for  $5,442,785.12.  The  court  then  trebled  that  number  to
$16,328,355.36                                                                                                                    and          awarded   prejudgment                       interest   at
                                                                           $2,406,158.38,  punitive  damages  at                                         $10,000,000.00,  and  costs  at
$170,417.45.
Plaintiffs  appeal  the                                                    2010  order  to  the  extent  that  it
granted  Defendants‖  motion  for  summary  judgment  and  excluded
Defendants  from  individual  liability.  Plaintiffs  also  appeal  the
2012  judgment,                                                            “[but]  only  to  the  extent  that  the  individual
defendants  Larry  Welch,  Joan  Mishkin,  and  Ronald  Mishkin  were
not  subject  to  the  judgment  because  of  the                          [2010  trial  court
order]  granting  summary  judgment  in  [Defendants‖]  favor  prior  to
the trial.”




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Standard of Review
“Our  standard  of  review  of  an  appeal  from  summary  judgment
is  de  novo;  such  judgment  is  appropriate  only  when  the  record
shows  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.‖”  In  re  Will  of  Jones,  362  N.C.  569,  573,  669  S.E.2d  572,
576                                                                           (2008)                                                        (quoting  Forbis  v.  Neal,   361  N.C.   519,   523-24,   649
S.E.2d  382,  385  (2007)).
Discussion
Plaintiffs  contend  that  the                                                2010   trial  court  erred  in
granting   Defendants‖   motion   for   summary   judgment   as   to
Plaintiffs‖  claims  against  Larry,  Joan,  and  Ron,  individually.
In  support  of  that  assertion,  Plaintiffs  argue,  inter  alia,  that
(1)  there  is  a  genuine  issue  of  material  fact  as  to  whether  Ron
was    a    member/partner    of    Balsam,    and                            (2)                                                           Balsam‖s
members/partners  should  be  held  personally  liable.  In  addition,
Plaintiffs  contend                                                           (3)  the  trial  court  erred  by  failing  to
consider  the  evidence  presented  by  Plaintiffs  at  the  summary
judgment  hearing.  We  agree.  For  purposes  of  discussion,  we  first
address  Plaintiffs‖  third  contention                                       —  that  the  trial  court
erred  by  failing  to  consider  Plaintiffs‖  evidence  during  the  25
October  2010 hearing on Defendants‖ motion for summary judgment.




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I. The  2010 Summary Judgment Hearing
In   response   to   Plaintiffs‖   assertion   that   Balsam   was
completely  dominated  by  Welch,  Joan,  and  Ron,  the  following
exchange   occurred   between   the   trial   court   and   counsel          for
Plaintiffs during the  2010 summary judgment hearing:
THE  COURT:  How  have  you  got  that  articulated
in   your   response   to   a   summary   judgment
motion  or  in  support  of  the  one  that  you‖re
after?
[PLAINTIFFS‖  ATTORNEY]:  We  have  got  that                                —
we‖ve    got    that    articulated    in    the
depositions. It is  —
THE  COURT:  Now,  listen  to  me.  You  and  your
predecessors  have  had  this  case  for  going  on
four  years.  And  I  don‖t  think  it‖s                                     —  it‖s
wise  at  all  to  ask  anybody                                              —  me  or  anybody
else                                                                         —    to    go    fishing    through    your
depositions   to   ferret   out   a   fact   that
supports  some  issue  that‖s  in  dispute.  It‖s
your  obligation  to  put  up  affidavits  about
what  exists  and  what  doesn‖t  exist.  Fair
enough?
[PLAINTIFFS‖ ATTORNEY]: Yes, sir.
THE  COURT:  So  let‖s                                                       —  now,  what  I‖m  asking
is forget the depositions.  .  .
Plaintiffs  contend  that  the  trial  court‖s  failure  to                  consider
the  depositions  constitutes  reversible  error  because  Plaintiffs
were  not  given  a  “reasonable  opportunity”  to  present  material  in
opposition  to  Defendants‖  motion  for  summary  judgment,  citing
Locus  v.  Fayetteville  State  Univ.,  102  N.C.  App.  522,  402  S.E.2d




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862                                                                           (1991).  We  are  not  persuaded  by  Plaintiffs‖  reliance  on
Locus, but find error nonetheless.
As  Plaintiffs  rightly  note,  we  determined  in  Locus  that  the
trial  court  had  erred  in  granting  summary  judgment  for  the
defendants  because  it  had  refused  to  consider  the  plaintiff‖s
depositions   and   not   given   the   plaintiff                             “a   reasonable
opportunity  to  oppose  the  defendants‖  Rule  56  motion  for  summary
judgment.”  Id.  at  528,  402  S.E.2d  at  866  (emphasis  added).  That
decision  is  not  applicable  here.  In  Locus,  the  court  based  its
decision  on  the  trial  court‖s  conversion  of  defendants‖  Rule
12(b)(6)  motion  to  a  Rule  56  motion  for  summary  judgment.  Id.  at
526,                                                                          402  S.E.2d  at                                                   865.  When  a  trial  court  converts  a  party‖s
12(b)(6)  motion  to  dismiss  into  one  for  summary  judgment  under
Rule  56,  “all  parties  shall  be  given  a  reasonable  opportunity  to
present  all  material  made  pertinent  to  such  a  motion  by  Rule
56.” N.C. Gen. Stat.  §  1A-1, Rule  12(b)  (2011). This is because
Rule                                                                          12(b)   clearly   contemplates   the   case
where   a   party   is                                                        “surprised”   by   the
treatment  of  a  Rule                                                        12(b)(6)  motion  as  one
for   summary   judgment;   it   affords   such   a
party  a  reasonable  opportunity  to  oppose  the
motion  with  her  own  materials  made  pertinent
to such a motion.
Locus,                                                                        102  N.C.  App.  at                                               528,                                                                        402  S.E.2d  at   866.  In  this  case,
                                                                                                                                                Plaintiffs  were  not  subjected  to  the  surprise  resulting  from  the




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                                                                                                 conversion  of  a  Rule                                                                                                                                                            12(b)(6)  motion  into  a  summary  judgment
                                                                                                                                motion.  Therefore,  because  the  trial  court‖s                                                                                                                                                              25  August                    2010
                                                                                                                                                                                                           hearing  in  this  case  was  not  based  on  a  converted  motion  to
                                                                                                                                dismiss  for  failure  to  state  a  claim  under  Rule                                                                                                                                                        12(b)(6),  we
                                                                             hold  that  the                                                                                                                                                                                        2010  trial  court  was  under  no  obligation  to  give
                                                                             Plaintiffs  a                                                                                                                                                                                          “reasonable  opportunity”  to  present  all  materials.
                                                                                                                                See  Raintree  Homeowners  Ass’n  v.  Raintree  Corp.,                                                                                                                                                         62  N.C.  App.
668,                                                                         673,                303  S.E.2d                    579,                                                                       582                                                                      (1983)                                                     (“It  is  significant  that
                                                                                                 the   rule   provides   a                                                                                                                                                          ―reasonable   opportunity‖   rather   than
requiring  that  the  presentation  of  materials  be  in  accordance
with Rule  56.”).
Nonetheless,  “[i]t  has  long  been  the  law  in  North  Carolina
that  in  granting  or  denying  a  motion  for  summary  judgment  under
                                                                             N.C.  Gen.  Stat.   §                              1A-1,  Rule                                                                56,  the  trial  court  may  consider
                                                                                                                                the  pleadings,  depositions,  interrogatories,  and  admissions  on
                                                                                                                                file,  together  with  any  affidavits  which  are  before  the  court.”
                                                                                                 Murdock  v.  Chatham  Cnty.,   198  N.C.  App.                                                            309,                                                                     315,                                                       679  S.E.2d
850,                                                                         855                 (2009)                                                                                                    (internal   quotation   marks,   citations,   and
ellipsis  omitted).  Rule  56  gives  the  trial  court  discretion  over
whether  to  consider  certain  evidence  when  ruling  on  a  summary
judgment  motion.  That  discretion  is  not  so  broad,  however,  as  to
allow  the  trial  court  to  flatly  refuse  to  consider  competent  and




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potentially  relevant  evidence  that  has  been  offered  by  one  of
the parties.
Summary  judgment  provides  a  drastic  remedy
and  should  be  cautiously  used  so  that  no  one
will  be  deprived  of  a  trial  on  a  genuine,
disputed  issue  of  fact.  The  moving  party  has
the  burden  of  clearly  establishing  the  lack
                                                                                              of                                     [a]  triable  issue,  and  his  papers  are
                                                                                                                                     carefully   scrutinized   and   those   of   the
                                                                                                                                     opposing party are indulgently regarded.
                                                                                              Koontz  v.  City  of  Winston-Salem,   280  N.C.                                               513,           518,   186  S.E.2d
897,                                                                        901               (1972).                                “The  goal  of  summary  judgment  is  to  allow  the
disposition  before  trial  of  an  unfounded  claim  or  defense,”
Weber  v.  Holland,                                                         115  N.C.  App.   160,                                   162,                                                    443  S.E.2d    746,   747
(1994),  and  in  pursuit  of  that  goal  the  trial  court                “should
consider  the  pleadings,  depositions,  answers  to  interrogatories
and   admissions   on   file,   together   with   the   affidavits   to
determine  if  there  are  genuine  issues  of  material  fact.”  See
Lavelle  v.  Schultz,                                                       120  N.C.  App.   857,                                   861-62,                                                 463  S.E.2d    567,
570  (1995)  (quotation  marks  omitted)  (quoting  Meyer  v.  McCarley
&   Co.,                                                                    288   N.C.        62,                                    67-68,                                                  215   S.E.2d   583,   586           (1975)).
Accordingly,  the  trial  court  has  an  obligation  to                    “indulgently
regard”   the   opposing   party‖s   papers   on   a   summary   judgment
motion.
The  2010  summary  judgment  hearing  transcript  indicates  that
the   court   in   this   case   disregarded   that   obligation.   When




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Plaintiffs  attempted  to  present  their  evidence,  the  trial  court
abruptly  cut  off  counsel  for  Plaintiffs  with  the  words              “[n]ow
listen  to  me”  and  refused  to  consider  Plaintiffs‖  depositions.
Though   the   court   couched   its   refusal   in   terms   of   an
unwillingness   to                                                          “ferret   out”   certain   facts   in   Plaintiffs‖
library  of  evidence,  we  find   nothing  in  the  transcript  to
suggest  that  Plaintiffs  had  failed  to  submit  specific,  detailed,
and  well-researched  evidence  of  their  claims.  Rather,  the  trial
court  simply  informed  Plaintiffs  that  they  needed  to  “forget  the
depositions”  altogether.  This  is  a  violation  of  the  court‖s
obligation  in  a  summary  judgment  hearing,  and  we  hold  that  the
trial court committed error.
II. The Corporate Veil
In  order  to  determine  whether  the  trial  court‖s  error  was
harmless  or  prejudicial,  we  review  Plaintiffs‖  first  contention,
that  there  is  a  genuine  issue  of  material  fact  concerning  the
individual  liability  of  Defendants.  In  doing  so,  we  consider  the
depositions  and  other  evidence  that  was  available  for  review  by
the trial court at its  2010 summary judgment hearing.
During  that  hearing,  counsel  for  the  Defendants  argued  to
the  court  that                                                            “[t]he  affidavits  that  I  have  presented  do
clearly  indicate  that                                                     [Balsam]  was  formed,  and  these  people            —




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the two members  [of Balsam] were Jones3 and Larry  [Welch]. That‖s
it.   There‖s   been   no   refuting   affidavits   to   that   fact.”
Continuing  that  argument,  Defendants  now  contend  that  there  are
simply  “no  facts  which  supported  the  claims  against  Larry  Welch,
Joan  Mishkin  and  Ronald  Mishkin,  personally  or  the  concept  that
somehow the veil  .  .  . should be pierced.” We disagree.
In  his                                                                         18  January                                            2008  deposition,  Welch  testified  that
Balsam  was  solely  comprised  of  himself  and  Joan,  with  each
person  having  a                                                               50-50  ownership  interest  in  the  company.  Welch
also  admitted,  however,  that                                                 “she,  I,  and  him”                                   —  referring  to
Joan,  himself,  and  Ron,  respectively                                        —  were  involved  in  the
organization‖s  decision-making  processes.  When  asked  why  Joan
was   a   member   of   Balsam   and   Ron   was   not,   Welch   responded
“[t]hat‖s   the   way                                                           [Ron]   wanted   it.”   As   the   deposition
progressed,  Welch  went  on  to  categorize  himself  as  the  manager
of   the   organization   and   affirmed   that   the   company‖s   only
transaction  was  the  one  concerning  this  lawsuit.  He  also  noted
that  Balsam  was  formed  “on  the  internet”  like  the  other  “[t]hree
or  four”  LLCs  in  which  he  held  an  ownership  interest.  When  asked
3  Given  the  context  of  this  case  and  the  lack  of  any  party  named
“Jones,”   the   transcription                                                  “Jones”   appears   to   be   either   a
misstatement  by  the  attorney  or  a  mistake  by  the  court  reporter,
intended in either case as a reference to  “Joan” Mishkin.




-18-
about  Balsam‖s  operating  agreement,  Welch  expressed  confusion
about  the  nature  of  such  a  document,  eventually  asserting  that
the  company  had  one.  In  answering  that  question,  Welch  also
noted,  variously,  that                                                     (1)                                              “we  have  our  meetings.  We  call  each
other.  We  talk  to  each  other  occasionally  on                          —  you  know,  if
there‖s  business  to  be  done,”  and  (2)  he  “and  the  Mishkins”  had
drafted  the  operating  agreement  together.  When  asked  about  his
meeting  with  Harold  —  who  had  just  learned  of  the  contamination
and  was  then  seeking  to  undo  the  deal                                 —  the  following  colloquy
occurred  between  Welch                                                     (here,                                           “A”)  and  Plaintiffs‖                      attorney
(here,  “Q”):
A                                                                            .  I  think  at  the  time,  if  I‖m  not
                                                                             mistaken,  I  told  Mr.  Heatherly  that,
                                                                             you  know,  before  I  could  do  anything,  I
                                                                             had to talk with my partner.
Q                                                                            Go ahead. I‖m listening.
A                                                                            And  I  think  we  had  our  breakfast  and
                                                                             left.
Q                                                                            Did  you  thereafter  talk  to  your  partner
                                                                             about it?
A                                                                            Oh, yes.
Q                                                                            That‖s  [Ron] we‖re referring to?
A                                                                            Yes. a  [sic]
Q                                                                            Tell me about that conversation.
A                                                                            Well,  I  explained  the  situation  to  him,




-19-
and,  I  mean,  you  know,  he  was  —  he  was
not  —  you  know,  he  was  not  willing  to  —
you know, to undo anything.
During  his  8  June  2009  deposition,  Welch  went  on  to  confirm
that,  in  the  time  leading  up  to  Balsam‖s  purchase  of  the  Land,
Ron   had   contacted   him   to   ask   if   the   property   was   still
available.  He  clarified  that  Joan  had  provided  the  money  for  the
down  payment  on  the  Property  and  affirmed  the  statement  that
“[Ron]  had  put  you  in  charge  of                                         [selling  the  property  to  the
Heatherlys].”  Welch  also  clarified  that  Balsam  had  never  filed
tax returns.
                                                                              Joan   provided   additional   details   in   her                        9   June                                 2009
                                                                              deposition.  There  she  stated  that  she  had  become  a  member  of
                                                                              Balsam,  instead  of  her  husband,  because  she  was                                                            “trying  to
establish                                                                     [her]  own  credit,  get                                                 [her]  own  credit  cards,               [and]
have                                                                          [her]  own  stocks                                                       .”  She  also  acknowledged  that  the
money  she  contributed  to  go  into  Balsam  belonged  to  both  her  and
Ron  and  affirmed  that                                                      “it  wasn‖t  particularly  important  which
account it came from.”
In  his  deposition,  taken  that  same  day,  Ron  testified  that
he  did  not  have  any  relationship  with  Balsam.  At  the  beginning
of  the  deposition,  he  denied                                              “know[ing]  any  of  these  people,”
but  affirmed  that  he  is  married  to  Joan  Mishkin.  When  asked  who




-20-
Balsam‖s  members  were,  Ron  replied,                                       “I  know  Larry  Welch  and  I
think  Joan  Mishkin,”  but  stated  that  he  was  not  aware  of  any
other  members.  Concerning  Balsam‖s  sale  of  the  property,  Ron
avowed  that  he  was  uninvolved,  stating:                                  “Now,  I  don‖t  know
because  I  wasn‖t  part  of  it,  but  that  was  my  understanding,  that
[Welch]   was   approached   by   someone   doing   bush   hogging   or
something  to  buy  the  property.”  When  asked  how  he  learned  this
information,  Ron  testified  that  he  heard  it  “[o]ver  dinner  with
[Welch].”  Throughout  the  deposition,  Ron  disavowed  any  decision-
making authority over or business relationship with Balsam.
“It  is  well  recognized  that  courts  will  disregard  the
corporate   form   or                                                         ―pierce   the   corporate   veil,‖   and   extend
liability  for  corporate  obligations  beyond  the  confines  of  a
corporation‖s  separate  entity,  whenever  necessary  to  prevent
fraud  or  to  achieve  equity.”  Glenn  v.  Wagner,  313  N.C.  450,  454,
329  S.E.2d                                                                   326,                                                330                                                       (1985).  In  North  Carolina,  we  employ  the
                                                                                                                                                                                            “instrumentality  rule  to  determine  whether  to  disregard  the
                                                                                                                                                                                            corporate  entity  and  hold  parent  or  affiliated  corporations  or
                                                                                                                                                                                            shareholders  liable  for  the  acts  of  a  corporation.”  East  Mkt.
                                                                                                                                  St.  Square,  Inc.  v.  Tycorp  Pizza  IV,  Inc.,                                                                                  175  N.C.  App.                628,
632-33,                                                                       625  S.E.2d                                         191,                                                196   (2006)                                                                   (quotation  marks  omitted).
                                                                              This   rule   provides   that                                                                                 “the   corporate   entity   will   be




-21-
disregarded  and  the  corporation  and  the  shareholder  treated  as
one  and  the  same  person,  it  being  immaterial  whether  the  sole  or
dominant  shareholder  is  an  individual  or  another  corporation,”
if   that   corporation                                                       “is   so   operated   that   it   is   a   mere
instrumentality  or  alter  ego  of  the  sole  or  dominant  shareholder
and  a  shield  for  his  activities  in  violation  of  the  declared
public  policy  or  statute  of  the  State[.]”  Id.  at  633,  625  S.E.2d
at                                                                            196                                               (quoting  Henderson  v.  Fin.  Co.,   273  N.C.         253,   260,                   160
S.E.2d  39,  44  (1968)  (emphasis in original)).
We   consider   three   elements   when   evaluating   whether                to
pierce the corporate veil under the instrumentality rule:
(1)  Control,  not  mere  majority  or  complete
stock  control,  but  complete  domination,
not  only  in  finances,  but  of  policy  and
business   practice   in   respect   to   the
transaction    attacked    so    that    the
corporate  entity  as  to  this  transaction
had  at  the  time  no  separate  mind,  will
or existence of its own; and
(2)  Such  control  must  have  been  used  by  the
defendant  to  commit  fraud  or  wrong,  to
perpetrate  the  violation  of  a  statutory
or   other   positive   legal   duty,   or   a
dishonest                                                                     and                                               unjust                                act               in
contravention  of  [the]  plaintiff‖s  legal
rights; and
(3)  The  aforesaid  control  and  breach  of  duty
must   proximately   cause   the   injury   or
unjust loss complained of.
Glenn,                                                                        313  N.C.  at                                     455,                                  329  S.E.2d  at   330    (citation  omitted).




-22-
When  evaluating  whether  those  elements  are  present  in  any  one
particular factual scenario, we consider the following factors:
1. Inadequate capitalization  (“thin
corporation”);
2. Non-compliance with corporate
formalities;
3. Complete  domination  and  control  of  the
corporation  so  that  it  has  no  independent
identity; and
4. Excessive    fragmentation    of    a    single
enterprise into separate corporations.
Id.  at                                                                     455,                                                329  S.E.2d  at                                                                                                330-31.  Other  factors  that  may  be
                                                                                                                                                                     considered  when  determining  whether  to  pierce  the  veil  include:
                                                                                                                                                                     “non-payment  of  dividends,  insolvency  of  the  debtor  corporation,
                                                                                                                                                                     siphoning  of  funds  by  the  dominant  shareholder,  non-function  of
                                                                                                                                other   officers   or   directors,                                                                             [and]   absence   of   corporate
                                                                            records.”  Id.  at                                  458,                                 329  S.E.2d  at                                                           332.  These  are,  however,
“merely  factors  to  be  considered  to  determine  whether  sufficient
control  and  domination  is  present  to  satisfy  the  first  prong  of
the  three-pronged  [instrumentality  rule].”  Id.  No  one  factor  is
dispositive.  See  id.  Instead,  our  Supreme  Court  has  instructed
us  to  focus  on  the                                                      “reality”  of  the  situation  and  determine  if
“an  element  of  injustice  or  abuse  of  corporate  privilege”  exists
such   that   the   corporate   entity   was   used   as   a                “mere
instrumentality or tool.” See id.  (citation omitted).




-23-
After  a  thorough  review  of  the  evidence  in  the  record  at
the  time  of  the                                                            2010  summary  judgment  hearing,  especially  the
depositions  of  Welch,  Joan,  and  Ron,  we  conclude  that  there  is  a
genuine  issue  of  material  fact  as  to  the  nature  of  Balsam  and
its  relationship  to  Welch,  Joan,  and  Ron.  Welch‖s  testimony,  in
particular,   suggests   that   Balsam   may   have   been   dominated
entirely  by  Welch  or  Welch  and  Ron.  Though  the  extent  to  which
Balsam  was  capitalized  is  unclear,  Welch‖s  testimony  suggests
that   the   organization   adhered   to   few,   if   any,   corporate
formalities.  This  fact,  coupled  with  Welch‖s  testimony  that
Balsam  had  failed  to  pay  any  taxes  and  had  not  participated  in
any   other   business   transactions,   suggests   that   there   is   a
genuine  issue  regarding  Balsam‖s  true  corporate  identity.  In
addition,  though  Ron  denies  any  involvement  in  Balsam,  the
testimony  of  Welch  and  Joan  suggests  that  he  was  a  dominant
player,  if  not  the  decisive  figure.  Welch‖s  statements  that  he
needed  to  confer  with  Ron  about  Harold‖s  request  to                   “undo”  the
contract,  coupled  with  his  further  representation  that  Joan,
Ron,  and  he  were  involved  in  the  creation  of  the  company‖s
operation  agreement,  suggests  a  genuine  issue  as  to  whether  Ron
was  a  member  of  Balsam  in                                                “reality.”  These  questions,  coupled
with  the                                                                     2012  trial  court‖s  condemnation  of  Balsam,  lead  us  to




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the   conclusion   that   the   ends   of   justice   warrant   a   deeper
examination of these issues.
Therefore,  though  Defendants  contend  that  there  are                     “no
facts  which  supported  the  claims  against  Larry  Welch,  Joan
Mishkin  and  Ronald  Mishkin,  personally  or  the   concept  that
somehow   the   veil                                                          .  .  .   should   be   pierced,”   we   find   that
Plaintiffs‖   depositions   contained   a   sufficient   forecast   of
evidence  to  establish  the  existence  of  a   genuine  issue  of
material  fact  as  to  Balsam‖s  true  corporate  identity  and  Ron‖s
relationship  to  the  company.  Therefore,  we  reverse  the                 2010
order  and  remand  to  the  trial  court  to  determine  whether  each  of
the  individual  Defendants,  if  any,  should  be  held  personally
liable for Balsam‖s actions.
Because  we  have  held  that  there  is  a  genuine  issue  of
material  fact  on  the  issue  of  Balsam‖s  status  as  a  legitimate
limited   liability   company,   we   need   not   address   Plaintiffs‖
additional arguments.
REVERSED AND REMANDED.
Judges STEELMAN and MCCULLOUGH concur.

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South Carolina Law