Contract – Unfair Trade Practices Claim – Commercial – Promissory Note – Banks & Banking

SunTrust Bank v. Bryant/Sutphin Properties, LLC (Lawyers Weekly No. 12-07-0952, 23 pp.) (Donna S. Stroud, J.) Appealed from Forsyth County Superior Court (Lindsay R. Davis Jr., J.) N.C. App.

Holding: Although defendants contended that the plaintiff-bank committed unfair practices separate from the parties’ contracts, in alleging these “separate” acts, defendants were really claiming that the bank acted outside of its authority under the contract; this is a breach of contract. Since the jury found that the bank had not breached the parties’ contracts, the trial court should not have concluded that the bank violated G.S. § 75-1.1.

We reverse the trial court’s determination that the bank violated § 75-1.1 and the award based thereon. Otherwise, we affirm the trial court’s judgment.

The plaintiff-bank sued the defendant-borrower and the defendant-guarantor for allegedly defaulting on a promissory note. Defendants counterclaimed, alleging that the bank had breached the terms of the parties’ contracts and that the bank had violated G.S. § 75-1.1.

The jury found that neither party had breached the contracts. However, the jury also found that the bank had (1) placed a “hold on [defendant] Donald H. Sutphin’s money market account without any prior notice”; (2) failed “to make written demand for payment in full of the two D.H. Sutphin Builders’ demand notes before placing the hold on Mr. Sutphin’s account”; (3) failed “to make written demand for payment in full of the Bryant/Sutphin Properties, LLC loan before placing the hold on Mr. Sutphin’s account”; and (4) changed “the prior manner in which it had been dealing with Defendants by placing the hold on Mr. Sutphin’s account….”

The jury awarded defendants $700,000. Based on the jury’s findings, the trial court concluded that the bank had violated § 75-1.1, and the court trebled the jury’s award.

In this case, there are two ways in which defendants could have proven and prevailed on a § 75-1.1(a) claim: (1) a § 75-1.1(a) claim standing separate and apart from a breach of contract claim or (2) a 21 75-1.1(a) claim based upon a breach of contract accompanied by substantial aggravating circumstances.

Since the jury found not breach of contract, the second method of proof failed.

To prevail on their Chapter 75 claim, defendants had to show that the bank’s acts possessed the tendency or capacity to mislead or created the likelihood of deception. Beyond repeatedly stating that the bank did not have a right to place holds on the Sutphin accounts, defendants have not alleged any conduct which demonstrates the tendency or capacity to mislead or to create the likelihood of deception.

The fact that the bank committed any of the four acts found by the jury will not support a § 75-1.1(a) claim if the bank had the right to do these acts under the parties’ contracts.

Defendants argue that these actions are outside of the scope of the contracts, including the bank deposit agreement and the loan documents, but in actuality, defendants are claiming that the bank acted outside of its authority under these contracts; this is a breach of contract.

There is no doubt that the bank’s placing a hold on the Sutphin accounts without prior notice, failing to make written demands for payment, and acting in a different manner than the bank had in the past would be surprising to defendants and likely disruptive to their businesses; while we agree that this disruption may have been the straw that broke the camel’s back and caused the collapse of defendants’ businesses, this does not make the bank’s actions immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers or accurately described as having the capacity or tendency to deceive. Thus, the unfairness or deceptiveness upon which defendants must rely is a contractual issue despite defendants’ contentions otherwise. Therefore, defendants did not prove their unfair trade practices claim.

Even though the jury’s verdicts on the bank’s claim and defendants’ counterclaims may be factually inconsistent, they are not legally inconsistent, since a finding that one party did not breach a contract does not legally require a finding that the other party breached the same contract. The trial court correctly denied the bank’s motion for a directed verdict on the contract claims.

With regard to defendants’ appeal, as the jury determined that the bank did not breach any of its contracts with defendants, it would be illogical for this court to conclude that plaintiff somehow breached implied terms of the same contracts. Accordingly, the trial court did not err in denying defendants’ motion for JNOV as to defendants’ good faith claims.

Reversed in part and affirmed in part.