Howe v. Links Club Condo. Ass'n, Inc.
263 N.C. App. 130
N.C. Ct. App.2018Background
- Links Club Condominium owners (minority plaintiffs) sued after Fairway Apartments affiliates and FCP Fund affiliates (through Links Raleigh) acquired >80% of units, terminated the condominium under N.C. Gen. Stat. § 47C-2-118, and sold the entire property to Greens at Tryon (also FCP-controlled).
- Plaintiffs allege the Association used an allocation appraisal (measuring individual unit values) rather than obtaining an appraisal of the condominium as a whole, then sold the property for the sum of the allocation appraisals ($27,080,000) —below true market value—benefiting FCP affiliates.
- Plaintiffs asserted claims for breach of the Termination Agreement (contract), breach of statutory obligations under the Condominium Act, breach of fiduciary duty (trustee duties of the association), piercing the corporate veil, and unfair and deceptive trade practices under N.C. Gen. Stat. § 75-1.1.
- The trial court granted defendants’ motions to dismiss all claims with prejudice; plaintiffs appealed. The Court of Appeals reviewed Rule 12(b)(6) and 12(b)(2) issues.
- The Court affirmed dismissal of breach of contract, statutory breach, and UDTP claims, but reversed dismissal of fiduciary-duty claims and the associated veil-piercing remedy and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Association can be liable for breach of the Termination Agreement | Termination Agreement’s appraisal/price provisions were violated when Association used allocation appraisals as the sale price | Termination Agreement was executed by Links Raleigh (not the Association); sale price exceeded $26M so no breach | Dismissed: plaintiffs failed to plead facts showing the Association was a contracting party or manifested assent beyond statutory duties, so no contract claim against Association |
| Whether Association breached statutory obligations under N.C. Gen. Stat. § 47C-2-118 | Statute and Termination Agreement together require the Association to follow the Agreement’s valuation/sale process | Statute does not prescribe a method for setting sale price; Association has broad powers to effect sale | Dismissed: no specific statutory duty alleged tying the Association to the Termination Agreement procedures; statute does not impose the claimed obligation |
| Whether N.C. Gen. Stat. § 75-1.1 (UDTP) applies | Defendants’ conduct in orchestrating the termination and sale was deceptive and affected commerce | Conduct was internal to the condominium association and did not affect commerce outside the membership | Dismissed: acts were internal to a single market participant (the Association) and thus not "in or affecting commerce" under §75-1.1 |
| Whether plaintiffs adequately alleged breach of fiduciary duty and can pierce the corporate veil to reach FCP, its affiliates, and officers | Association, as trustee upon termination, owed fiduciary duties to unit owners; defendants dominated Association and orchestrated self-dealing and biased appraisals; veil piercing appropriate to hold controllers liable | Defendants argued dismissal was proper and some raised personal jurisdiction defenses | Reversed dismissal: plaintiffs sufficiently alleged a statutory trustee fiduciary relationship, breaches (self-dealing, biased appraisal selection, failure to seek highest available price), and factual predicates for veil piercing; personal jurisdiction over out-of-state trustee alleged sufficiently |
Key Cases Cited
- Newberne v. Dep’t of Crime Control & Pub. Safety, 359 N.C. 782 (legal-sufficiency standard for Rule 12(b)(6) dismissal)
- Woolard v. Davenport, 166 N.C. App. 129 (Rule 12(b)(6) tests legal sufficiency; allegations liberally construed)
- Wachovia Bank & Trust Co. v. Johnston, 269 N.C. 701 (trustee loyalty rule; trustee cannot buy at own sale)
- Green v. Freeman, 367 N.C. 136 (standards and factors for piercing the corporate veil)
- Tom Togs, Inc. v. Ben Elias Indus. Corp., 318 N.C. 361 (specific personal jurisdiction and purposeful availment analysis)
- Dalton v. Camp, 353 N.C. 647 (existence and elements of fiduciary relationships)
- J.M. Thompson Co. v. Doral Mfg. Co., 72 N.C. App. 419 (trial court not required to enter findings on 12(b)(2) motion absent request)