Howe v. Links Club Condo. Ass'n, Inc.
263 N.C. App. 130
N.C. Ct. App.2018Check Treatment IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA18-150
Filed: 18 December 2018
Wake County, No. 17 CVS 6880
DIANE GAIL HOWE; WILLIAM BUTLER BAILEY, TRUSTEE OF THE WILLIAM
BUTLER BAILEY REVOCABLE TRUST AGREEMENT DATED MAY 25, 2011;
WILLIAM T. BAILEY and wife, ALLISON ANN BAILEY; WILLIAM B. BAILEY, and
wife, CATHERINE E. BAILEY; JOHN C. BEGENY, III; JACK D. CALLISHER and
wife, KATHRYN K. CALLISHER; WEIQUN CHEN and wife, YAN SUN and
QICHUAN CHEN (unmarried); MARTIN E. FRAZIER and wife, BARBARA M.
FRAZIER; GILBERT R. GRISHAM and wife, JAE YOUN GRISHAM; JOSEPH
TREVOR HARGIS; ELENA HOPPER; GLORIA A. PEIRSOL-MARINO and
husband, CHARLES J. MARINO; FABRICE MEUNIER; ROBERT OLIVA and wife,
SHEILA K. OLIVA; PHAN INVESTMENTS, LLC; TARA PREZIOSO; KENNETH E.
RICKARD; JONATHAN M. SCHADE; KIMMY YANG and wife, ELIZABETH YANG;
MICHAEL YANG and wife, SUSANA YANG, Plaintiffs,
v.
THE LINKS CLUB CONDOMINIUM ASSOCIATION, INC., a North Carolina non-
profit corporation; FCP FUND III TRUST, a Maryland real estate investment trust
by THOMAS A. CARR, authorized Trustee; LINKS RALEIGH, LLC, a Delaware
limited liability company and GREENS AT TRYON, LLC, a Delaware limited
liability company; NASON KHOMASSI; ALEX CATHCART and BRYAN M. KANE,
Defendants.
Appeal by plaintiffs from order entered 14 November 2017 by Judge R. Allen
Baddour, Jr. in Wake County Superior Court. Heard in the Court of Appeals 5
September 2018.
Harris & Hilton, P.A., by Nelson G. Harris, for plaintiffs-appellants.
Parker Poe Adams & Bernstein LLP, by Kevin L. Chignell and Collier R. Marsh,
for defendants-appellees The Links Club Condominium Association, Inc.,
Nason Khomassi, Alex Cathcart, and Bryan M. Kane.
HOWE V. THE LINKS CLUB CONDO.
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Shanahan McDougal, PLLC, by John E. Branch III, Kieran J. Shanahan,
Tonya B. Powell, and Jeffrey M. Kelly, for defendants-appellees FCP Fund III
Trust, Thomas A. Carr, Links Raleigh, LLC, and Greens at Tryon, LLC.
ZACHARY, Judge.
Plaintiffs, minority unit owners in a condominium complex, appeal from the
trial court’s order granting defendants’ motions to dismiss plaintiffs’ claims for breach
of contract, breach of statutory obligations, breach of fiduciary duty, piercing the
corporate veil, and unfair and deceptive trade practices. We reverse the trial court’s
dismissal of plaintiffs’ claims for breach of fiduciary duty and piercing the corporate
veil, but affirm as to the trial court’s dismissal of the claims for breach of contract,
breach of statutory obligations, and unfair and deceptive trade practices.
Background
I. The North Carolina Condominium Act
The instant dispute arose in the context of Chapter 47C of the North Carolina
General Statutes (“the Condominium Act”), which provides, inter alia, a process by
which condominium unit owners may terminate and sell a condominium
development. Pursuant thereto, “a condominium may be terminated only by
agreement of unit owners of units to which at least eighty percent (80%) of the votes
in the association are allocated, or any larger percentage the declaration specifies.”
N.C. Gen. Stat. § 47C-2-118(a) (2017). The “agreement to terminate must be
evidenced by the execution of a termination agreement . . . in the same manner as a
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deed, by the requisite number of unit owners.” N.C. Gen. Stat. § 47C-2-118(b). In
addition, the termination agreement “must be recorded in every county in which a
portion of the condominium is situated, and is effective only upon recordation.” Id.
In the event that “any real estate in the condominium is to be sold following
termination, title to that real estate, upon termination, vests in the association as
trustee for the holders of all interests in the units. Thereafter, the association has all
powers necessary and appropriate to effect the sale.” N.C. Gen. Stat. § 47C-2-118(e).
“[T]he minimum terms of the sale” must also be set forth in the termination
agreement. N.C. Gen. Stat. § 47C-2-118(c). “Proceeds of the sale must be distributed
to unit owners and lienholders as their interests may appear, in proportion to the
respective interests of unit owners as provided in subsection (h).” N.C. Gen. Stat. §
47C-2-118(e). Subsection (h) provides, in relevant part:
(1) Except as provided in paragraph (2), the respective
interests of unit owners are the fair market value of their
units, limited common elements, and common element
interests immediately before the termination, as
determined by one or more independent appraisers
selected by the association. The decision of the independent
appraisers shall be distributed to the unit owners and
becomes final unless disapproved within 30 days after
distribution by unit owners of units to which twenty-five
percent (25%) of the votes in the association are allocated.
The proportion of any unit owner’s interest to that of all
unit owners is determined by dividing the fair market
value of that unit owner’s unit and common element
interest by the total fair market values of all the units and
common elements.
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N.C. Gen. Stat. § 47C-2-118(h)(1).
II. Termination and Sale of the Links Club Condominium
On 25 April 2001, the Links Club Condominium (“the Condominium”) was
created by recording a Declaration of Covenants, Conditions, and Restrictions in the
Wake County Register of Deeds. At the same time, Links Club Condominium
Association (“the Association”) was created pursuant to the Condominium Act “to
manage the Condominium on behalf of all of the condominium unit owners.” As of
September 2009, there were 264 units within the Condominium. By July 2016, close
to eighty percent of the Condominium units were owned by affiliated entities known
as the Fairway Apartments, LLC, “which collectively operated a portion of the
Condominium as an apartment complex.” The remaining units were owned by
individual unit owners, some of whom are the plaintiffs in the instant case (hereafter
“minority owners” or “plaintiffs”).
On 26 July 2016, defendant FCP Fund III Trust (“FCP Fund”), a Maryland
real estate investment trust operated by defendant Thomas A. Carr, formed
defendant Links Raleigh, LLC. Plaintiffs allege that before FCP Fund formed Links
Raleigh, FCP Fund had “arranged for or contracted with Fairway Apartments to
purchase their units in the Condominium” and “intended to purchase, through Links
Raleigh or some other entity under its control, the units owned by Fairway
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Apartments” as well as “additional units until it owned 80 percent of the units in the
Condominium.”
Plaintiffs allege that on 31 August 2016, defendant Alex Cathcart, “in
furtherance of FCP Fund’s plan, acting as a representative of Links Raleigh, and with
proxies provided by Fairway Apartments, conducted a special meeting of the
Association[.]” At that meeting, all members of the Association’s Board of Directors
were removed, and the number of Directors was reduced to three. Defendants
Cathcart, FCP employee Nason Khomassi, and Senior Vice-President of FCP Bryan
M. Kane were elected as the new members of the Association’s Board of Directors.
By 28 February 2017, Links Raleigh had purchased 212 of the 264
Condominium units, giving it an 80.3% ownership interest. At that point, Links
Raleigh, under the control of FCP Fund, had obtained a sufficient ownership interest
to terminate the Condominium pursuant to N.C. Gen. Stat. § 47C-2-118. Accordingly,
also on 28 February 2017, Links Raleigh sent a letter to the owners of the remaining
units alerting them that it intended to terminate the Condominium and that upon
termination, “all 264 units and common elements . . . will be sold to an entity owned
and controlled by an affiliate of Links Raleigh, LLC and converted into a rental
apartment community.” Links Raleigh “offered . . . to permit owners to remain at the
Links as [tenants], and . . . offered to honor existing third party leases by unit owners,
so long as they were at market rates and terms.”
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On 17 May 2017, in accordance with the provisions of N.C. Gen. Stat. § 47C-2-
118(b), Links Raleigh prepared and recorded a Plan of Termination of Condominium
and Agreement (“Termination Agreement”). In addition to memorializing the
termination, the Termination Agreement set forth various provisions concerning the
sale and valuation of the Condominium. Particularly, Section 2 of the Termination
Agreement provided, in pertinent part, that:
The Association shall offer to sell the Property for a price
of not less than $26,000,000.00 Twenty-Six Million Dollars,
or for the Appraised Value (as that value is determined by
the method set forth in Section 6), whichever is greater,
and may contract for sale of the Property to any qualified
purchaser, on commercially reasonable terms, for any
amount in excess of $26,000,000.00 (Twenty-Six Million
Dollars).
As referenced above, Section 6, titled “Determination Of Value Of the Property As A
Whole,” provided that “[t]he Association shall contract with one or more independent
appraisers licensed in the state of North Carolina to determine the fair market value
of the Property as a whole . . . .” Section 5 governed the “Determination Of Respective
Interests” subsequent to sale, and provided, inter alia, that “the respective interests
of the unit owners, for purposes of distribution of the net proceeds of the sale of the
Property” shall be determined by an allocation appraisal—that is, an appraisal “of
the fair market value of the units, limited common elements, and common element
interests, immediately before the termination” as provided for under N.C. Gen. Stat.
§ 47C-2-118(h).
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In accordance with N.C. Gen. Stat. § 47C-2-118(h) and Section 5 of the
Termination Agreement, on 2 May 2017 Links Raleigh hired a third-party appraiser
to independently and separately value each of the 51 units still owned by the minority
owners (“Owners Appraisal”). A separate, limited appraisal of the independent values
of some of the units owned by Links Raleigh was also conducted (“Links Raleigh
Appraisal”). Collectively, both appraisals constituted the Allocation Appraisal—i.e.,
the appraisal of “the fair market value of the units, limited common elements, and
common element interests, immediately before termination”—for purposes of
distributing the net sale proceeds pursuant to N.C. Gen. Stat. § 47C-2-118(h) and
Section 5 of the Termination Agreement. Together, the Allocation Appraisal values
totaled $27,080,000.00. Pursuant to Section 5 of the Termination Agreement, the
Allocation Appraisal was to be used “only for purposes of distribution of the net
proceeds of the sale of the Property.”
The Association, however, never secured an appraisal of the fair market value
of the Condominium as a whole, as required by Sections 2 and 6 of the Termination
Agreement. Instead, on 31 May 2017, the Association sold the Condominium to
Greens at Tryon, LLC—another company wholly owned by FCP Fund—for the
Allocation Appraisal values: $27,080,000.00. Plaintiffs contend that the value
reflected in the Allocation Appraisals was not an accurate measure of the value of the
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Condominium as a whole, and that the Association therefore contracted to sell their
property for a wholly inadequate price.
The Association then distributed to the minority owners their portion of the
sales proceeds according to the Allocation Appraisal values. Plaintiffs contend,
however, that in addition to failing to secure a second appraisal of the fair market
value of the Condominium as a whole, Links Raleigh had only selected a sample of
its units for inclusion in the Allocation Appraisal. Plaintiffs allege that the units
selected “were not occupied by tenants; had been prepared for re-leasing, and,
therefore, were, in a general sense, in better condition tha[n] other units owned by
Links Raleigh having the same or similar size.” According to plaintiffs, the biased
selection of Links Raleigh units for appraisal skewed the distribution of the ultimate
sales proceeds—which plaintiffs maintain was already inadequate—by “inflat[ing]
the value of the units owned by Links Raleigh, and therefore, increas[ing] the pro
rata share of the purchase price of the entire Condominium allocable to Links
Raleigh.”
Plaintiffs filed suit against defendants on 5 June 2017 for (1) failing to obtain
a fair market value appraisal and instead selling the Condominium for the amount
reflected in the Allocation Appraisals—which plaintiffs maintain was an insufficient
price and well below the Condominium’s fair market value; and (2) manipulating the
Links Raleigh Appraisal in order to reduce the amount of the sales proceeds
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distributed to plaintiffs. Plaintiffs asserted two counts of breach of fiduciary duty
against the Association and two counts of unfair trade practices against all
defendants. Plaintiffs then filed an amended complaint on 18 August 2017, adding
counts of breach of contract and breach of statutory obligations against the
Association. Though stated as an independent claim, plaintiffs also sought to pierce
the corporate veil of the Association as an additional remedy on the claims for breach
of contract, breach of statutory obligations, and breach of fiduciary duties.
On 7 September 2017, the Association and its directors Khomassi, Kane, and
Cathcart filed a motion to dismiss plaintiffs’ complaint pursuant to Rules 12(b)(1) and
(6) of the North Carolina Rules of Civil Procedure. FCP Fund, along with Carr, Links
Raleigh, and Greens at Tryon, filed a motion to dismiss pursuant to Rules 12(b)(1),
(2) and (6) on 20 September 2017.
On 14 November 2017, the trial court entered an order granting both motions
to dismiss plaintiffs’ complaint entirely. The trial court’s order does not contain
findings of fact or conclusions of law, nor does it indicate the specific grounds upon
which its dismissal was based. The order instead provides only that “having reviewed
and considered the pleadings, the applicable statutes, case law, and other materials,
and having heard oral arguments of counsel for all parties, the Court GRANTS
Defendants’ Motions to Dismiss and hereby dismisses all of Plaintiffs’ claims with
prejudice.” Plaintiffs filed notice of appeal on 29 November 2017.
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Standard of Review
“In reviewing a trial court’s Rule 12(b)(6) dismissal, the appellate court must
inquire whether, as a matter of law, the allegations of the complaint, treated as true,
are sufficient to state a claim upon which relief may be granted under some legal
theory.” Newberne v. Dep’t of Crime Control & Pub. Safety, 359 N.C. 782, 784,618 S.E.2d 201
, 203 (2005) (citation and quotation marks omitted).
Dismissal is proper . . . when one of the following three
conditions is satisfied: (1) the complaint on its face reveals
that no law supports the plaintiff’s claim; (2) the complaint
on its face reveals the absence of facts sufficient to make a
good claim; or (3) the complaint discloses some fact that
necessarily defeats the plaintiff’s claim.
Id. at 784,618 S.E.2d at 204
(citations and quotation marks omitted). Otherwise, it is error for a trial court to grant a defendant’s motion to dismiss “if the complaint, liberally construed, shows no insurmountable bar to recovery.” Jenkins v. Wheeler,69 N.C. App. 140
, 142,316 S.E.2d 354
, 356, disc. review denied,311 N.C. 758
,321 S.E.2d 136
(1984). “The effect of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint by presenting the question of whether the complaint’s allegations are sufficient to state a claim upon which relief can be granted under any recognized legal theory.” Woolard v. Davenport,166 N.C. App. 129
, 133,601 S.E.2d 319
, 322 (2004) (emphasis added) (citation omitted). Thus, when a
defendant files a motion to dismiss, the issue for the court “is not whether [the]
plaintiff will ultimately prevail but whether the plaintiff is entitled to offer evidence
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to support the claim.” Brown v. Lumbermens Mut. Casualty Co., 90 N.C. App. 464, 471,369 S.E.2d 367
, 371 (1988), aff’d in part and rev’d in part,326 N.C. 387
,390 S.E.2d 150
(1990).
“The standard of review to be applied by a trial court in deciding a motion
under Rule 12(b)(2) depends upon the procedural context confronting the court.”
Parker v. Town of Erwin, 243 N.C. App. 84, 95,776 S.E.2d 710
, 720 (2015). When the
defendant “makes a motion to dismiss without submitting any opposing evidence,”
id. at 96, 776 S.E.2d at 720, then “the allegations of the [plaintiff’s] complaint must
disclose jurisdiction although the particulars of jurisdiction need not be alleged.” Id.
at 96, 776 S.E.2d at 721. “The trial judge must decide whether the complaint contains
allegations that, if taken as true, set forth a sufficient basis for the court’s exercise of
personal jurisdiction.” Id.
Discussion
Plaintiffs do not dispute that Links Raleigh—of which FCP Fund was the sole
member—had the authority to terminate the Condominium upon obtaining an 80%
ownership interest therein, or that the Association—of which FCP employees elected
themselves the sole directors—was thereafter empowered to sell the entire
Condominium to Greens at Tryon—of which FCP Fund was the sole member. Rather,
the thrust of plaintiffs’ complaint is that defendants illicitly orchestrated the minority
owners’ forced relinquishment of their property for a price below market value so that
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FCP Fund could purchase those units at a below-market rate. Moreover, plaintiffs
allege that the purposeful selection bias in the Links Raleigh Appraisal further
diminished plaintiffs’ respective shares of the already inadequate sales price.
In their complaint, plaintiffs assert that the Association’s actions in
effectuating the sale and distributing the proceeds constituted a breach of its
contractual obligations under the Termination Agreement (Count One), a breach of
its statutory obligations under the Condominium Act (Count Two), and a breach of
its fiduciary duties owed to plaintiffs (Counts Three and Four). Further, plaintiffs
seek to pierce the corporate veil of the Association (Count Five) as to the above Counts
in order to also recover from defendants FCP Fund, Carr, Links Raleigh, Greens at
Tryon, Khomassi, Cathcart, and Kane. Lastly, plaintiffs allege that all defendants
committed an unfair trade practice in violation of N.C. Gen. Stat. § 75-1.1 (Counts
Six and Seven).
I. Count One: Breach of Termination Agreement Against the Association
We first address the legal sufficiency of Count One of plaintiffs’ complaint for
breach of contractual obligations under the Termination Agreement against the
Association.
“The elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of that contract.” Poor v. Hill, 138 N.C. App. 19, 26,530 S.E.2d 838
, 843 (2000) (citation omitted). Thus, in any breach of contract
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action, “the complaint must allege the existence of a contract between [the] plaintiff
and [the] defendant, the specific provisions breached, the facts constituting the
breach, and the amount of damages resulting to [the] plaintiff from such breach.”
RGK, Inc. v. U.S. Fid. & Guar. Co., 292 N.C. 668, 675,235 S.E.2d 234
, 238 (1977)
(citation, quotation marks, and emphasis omitted).
In order for a valid contract to exist between two parties,
an offer and acceptance are essential elements; they
constitute the agreement of the parties. The offer must be
communicated, must be complete, and must be accepted in
its exact terms. Mutuality of agreement is indispensable;
the parties must assent to the same thing in the same
sense, idem re et sensu, and their minds must meet as to all
the terms.
Yeager v. Dobbins, 252 N.C. 824, 828,114 S.E.2d 820
, 823-24 (1960) (citations and quotation marks omitted). Additionally, as a matter of law, a non-party to a contract “cannot be held liable for any breach that may have occurred.” Canady v. Mann,107 N.C. App. 252
, 259,419 S.E.2d 597
, 601 (1992), disc. review improvidently allowed,333 N.C. 569
,429 S.E.2d 348
(1993).
In the instant case, the substance of plaintiffs’ breach of contract claim is that
the Association breached the provisions of the Termination Agreement when it
neglected to secure an independent appraisal of the fair market value of the
Condominium as a whole and instead used the sum of the Allocation Appraisal values
to determine the purchase price for the Condominium.
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Pertaining to the element of breach, plaintiffs’ complaint contains the following
allegations:
69. . . . Section 2 of the Termination Agreement
provided:
The Association shall offer to sell the Property
for a price of not less than $26,000,000.00
Twenty-Six Million Dollars, or for the
Appraised Value (as that value is determined
by the method set forth in Section 6),
whichever is greater, and may contract for
sale of the Property to any qualified
purchaser, on commercially reasonable terms,
for any amount in excess of $26,000,000.00
(Twenty-Six Million Dollars).
70. Section 5 of the Termination Agreement provided for
an appraisal to permit the allocation of the net proceeds
among the various unit owners, [and] in particular,
provid[ed]:
. . . The appraisal of the fair market value of
the units, limited common elements, and
common element interests, immediately
before termination, shall be used only for
purposes of distribution of the net proceeds of
the sale of the Property.
71. Section 6 of the Termination Agreement provided for
the appraisal to be used as part of establishing the sale
price for the entire condominium, providing:
The Association shall contract with one or
more independent appraisers . . . to determine
the fair market value of the Property as a
whole . . . .
....
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73. Although . . . the specific language of Section 5 of the
Termination Agreement[] provide[s] that the Allocation
Appraisal shall be used only for purposes of distribution of
the net proceeds of the sale of the Property, the Association
used the sum of the Allocation Appraisal values as the
amount to be paid by Greens at Tryon for the entire
Condominium.
74. Use of the Allocation Appraisal values as the
purchase price (and the amount to be allocated to each
unit) is in violation of the specific provisions of Section 5 of
the Termination Agreement.
75. The Association did not have an independent
appraiser determine the fair market value of the
Condominium as a whole, as required by Section 6 of the
Termination Agreement.
76. Because the Association did not have an
independent appraiser determine the fair market value of
the Condominium as a whole, its sale of the entire
Condominium, for the sum of the Allocation Appraisal
values, violated the requirements of Section 2 of the
Termination Agreement.
Defendants, on the other hand, construe Section 2 of the Termination
Agreement as simply providing that the Condominium was to be sold “for any amount
in excess of $26,000,000.00[.]” Because the Association ultimately sold the
Condominium for $27,080,000.00, defendants maintain that there was no breach of
the Termination Agreement and that the trial court therefore properly dismissed
Count One of plaintiffs’ complaint. However, Section 6 of the Termination Agreement
required the Association to obtain an appraisal of the fair market value of the
Condominium as a whole, and Section 5 provided that the Allocation Appraisal was
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to be used “only for purposes of distribution of the net proceeds of the sale of the”
Condominium. Thus, when construed as true, plaintiffs’ allegations are adequate to
allege a breach of the Termination Agreement, notwithstanding defendants’
references to the latter clause contained in Section 2. See Woolard, 166 N.C. App. at
134, 601 S.E.2d at 323.
More fundamentally, however, defendants argue that the trial court properly
dismissed plaintiffs’ claim for breach of contract because “neither [plaintiffs] nor the
Association executed the Termination Agreement” or were parties thereto.
Nevertheless, plaintiffs maintain that dismissal was improper because the
Termination Agreement is “by its form and style a contract” that is binding upon the
Association, and that plaintiffs have standing to enforce its provisions against the
Association because they were the intended third-party beneficiaries thereof.
We agree with defendants that, despite having adequately alleged a breach of
the terms of the Termination Agreement, the trial court properly dismissed plaintiffs’
claim for breach of contract against the Association. Absent from the complaint are
allegations setting forth the other necessary element of plaintiffs’ breach of contract
claim—that is, that the Termination Agreement constituted a binding contract to
which the Association was in fact a party. The Termination Agreement explicitly
states that it was “made . . . by Links Raleigh” only. The Association did not execute
the Termination Agreement, nor is the Association named as a party thereto. The
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particular breaches for which plaintiffs’ complaint seeks to hold the Association liable
are preceded by a declaration that only “Links Raleigh, being the owners of more than
eighty (80) percent of the condominium units within the Links Club Condominiums .
. . hereby agrees as follows[.]”1
In seeking to hold the Association liable as a party to the Termination
Agreement, plaintiffs’ complaint only contains the following allegations:
63. On May 17, 2017, Links Raleigh, as the owner of
more than eighty (80) percent of the units within the
Condominium, executed [the Termination Agreement] . . .
.
....
77. . . . [T]he Association breached its contractual and
other obligations by failing to comply with the specific
requirements of the Termination Agreement.
Beyond the conclusory statement in paragraph 77 that the Association had
“contractual and other obligations” under the Termination Agreement, plaintiffs’
complaint is devoid of allegations that the Association was a party to, or otherwise
bound by, the Termination Agreement, thereby rendering the Association liable for a
breach of its terms.
Nevertheless, “a complaint should not be dismissed for insufficiency unless it
appears to a certainty that [the] plaintiff is entitled to no relief under any state of
1 This language is in accordance with the requirements of N.C. Gen. Stat. § 47C-2-118, which
directs that a termination agreement shall be executed “by the requisite number of unit owners”—i.e.,
in the instant case, Links Raleigh, as the eighty-percent owners, rather than between the requisite
number of owners and some other entity, such as the Association. N.C. Gen. Stat. § 47C-2-118(b).
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facts which could be proved in support of the claim.” Snyder v. Freeman, 300 N.C.
204, 209,266 S.E.2d 593
, 597 (1980) (citation, quotation marks, and emphasis omitted). Thus, in the instant case, the question is not whether plaintiffs have affirmatively alleged the Association to be a party to the Termination Agreement, but whether the complaint alleges facts which, if true, would be sufficient to establish the same. Seeid.
(“The question is, then, whether under any set of facts which [the]
plaintiff may be able to prove relevant to the agreement on which she relies, there is
some legal theory available by which she can establish liability against [the]
defendants . . . .”).
In the instant case, while the complaint and attached documents reveal that
the Termination Agreement does not name the Association as a party and that the
Association did not otherwise manifest an assent to its terms via signature, we note
that the facts alleged in plaintiffs’ complaint do permit the possibility that the
Association had nonetheless manifested an assent to the Termination Agreement by
virtue of beginning performance thereunder. See, e.g., id. at 218, 266 S.E.2d at 602(“Acceptance by conduct is a valid acceptance.” (citations omitted)); Burden Pallet Co. v. Ryder Truck Rental, Inc.,49 N.C. App. 286
, 289,271 S.E.2d 96
, 97 (1980) (“The
object of a signature to a contract is to show assent, but the signing of a written
contract is not necessarily essential to its validity. Assent may be shown in other
ways, such as acts or conduct . . . .” (citations omitted)), disc. review denied, 301 N.C.
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722, 276 S.E.2d 282 (1981). Here, plaintiffs’ complaint contains allegations that the
Association performed in accordance with the provisions of the Termination
Agreement. In particular, the Association secured the Allocation Appraisal,
effectuated the Condominium’s sale, and held title to the units as trustee for all of
the unit owners, all of which the Association was compelled to do pursuant to the
terms of the Termination Agreement.
The Association’s performance, however, was limited to those acts which it was
statutorily required to discharge pursuant to the Condominium Act. See, e.g., N.C.
Gen. Stat. § 47C-2-118(e) (providing, inter alia, that “[t]he association, on behalf of
the unit owners, may contract for the sale of real estate in the condominium”; “[i]f
any real estate in the condominium is to be sold following termination, title to that
real estate, upon termination, vests in the association as trustee for the holders of all
interests in the units”; and “[p]roceeds of the sale must be distributed to unit owners
and lienholders as their interests may appear [pursuant to the Allocation Appraisal]
as provided in subsection (h)”).
Plaintiffs’ complaint is devoid of facts establishing that the Association
performed any act specifically in furtherance of the Termination Agreement above
and beyond that which it was required to do by statute. In fact, the only provisions of
the Termination Agreement beyond the purview of the Condominium Act are those
provisions which plaintiffs allege the Association to have breached. Thus, the
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allegations reveal that the Association’s conduct in the instant case represented an
abidance by the statutory obligations under the Condominium Act, rather than
indicating an assent to be independently bound by the Termination Agreement.
We are unable to divine any additional theories, and plaintiffs have proffered
none, that would otherwise establish that the Association had assented to be bound
by the terms of the Termination Agreement above and beyond the scope of its
statutory duties under N.C. Gen. Stat. § 47C-2-118. Accordingly, even when taken as
true, we conclude that the allegations in plaintiffs’ complaint are insufficient to
establish that the Termination Agreement constituted a valid contract between the
Association and Links Raleigh.
Because we conclude that plaintiffs’ complaint fails to establish that the
Termination Agreement was a valid contract binding on the Association, the trial
court did not err in granting defendants’ motions to dismiss this claim. Moreover, we
need not address the issue of whether plaintiffs had standing to sue for breach of the
Termination Agreement as the alleged intended third-party beneficiaries thereof.
II. Count Two: Breach of Statutory Obligations Against the Association
In Count Two of their amended complaint, plaintiffs allege that “[t]he
Association is statutorily obligated, pursuant to the provisions of N.C.G.S. § 47C-2-
118, to comply with the provisions of the Termination Agreement; and to comply with
the provisions of that statute, and by failing to so comply, violated N.C.G.S. § 47C-2-
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118.” Further, while N.C. Gen. Stat. § 47C-2-118 does not provide for a private right
of action that would allow plaintiffs to assert a breach of statutory obligations claim
against the Association, plaintiffs contend that “[t]he language, structure and context
of the act imply that unit owners have a private right of action for violation of the
act.”
We need not determine whether N.C. Gen. Stat. § 47C-2-118 implies a private
right of action. Even assuming that it does, the allegations in plaintiffs’ complaint do
not support their claim for breach of statutory obligations.
First, plaintiffs do not identify any particular provision of N.C. Gen. Stat. §
47C-2-118 that the Association has violated. The only indication of a specific statutory
violation is found in paragraph 73 of the complaint, which alleges that “[a]lthough
the structure of the Condominium Act . . . provide[s] that the Allocation Appraisal
shall be used only for purposes of distribution of the net proceeds of the sale of the
Property, the Association used the sum of the Allocation Appraisal values as the
amount to be paid . . . for the entire Condominium.” (First emphasis added). However,
the text of N.C. Gen. Stat. § 47C-2-118 does not delineate any particular method by
which a condominium’s sale price must be determined. See Correll v. Div. of Soc.
Servs., 332 N.C. 141, 144,418 S.E.2d 232
, 235 (1992) (“Statutory interpretation
properly begins with an examination of the plain words of the statute.” (citation
omitted)).
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Moreover, notwithstanding the admittedly logical “structure” proposed by
plaintiffs, the only provision contained in N.C. Gen. Stat. § 47C-2-118 that addresses
the use of an appraisal is Subsection (h), which merely requires that an appraisal be
obtained of the “fair market value of [the owners’] units, limited common elements,
and common elements interests” for the sole purpose of establishing how the sale
proceeds are to be allocated among unit owners. N.C. Gen. Stat. § 47C-2-118(h)(1).
The General Assembly’s explicit inclusion of a requirement that a particular
appraisal be obtained in order to determine the appropriate allocation of proceeds
suggests that its exclusion of any prescribed mechanism for establishing a
condominium’s ultimate sale price was intentional. See Mangum v. Raleigh Bd. of
Adjustment, 196 N.C. App. 249, 255,674 S.E.2d 742
, 747 (2009) (“One of the long- standing rules of interpretation and construction in this state is expressio unius est exclusio alterius, the expression of one thing is the exclusion of another.” (citations omitted)). Indeed, N.C. Gen. Stat. § 47C-2-118 explicitly provides that “the association has all powers necessary and appropriate to effect the sale.” N.C. Gen. Stat. § 47C-2-118(e). Absent a specific statutory provision limiting those powers, there is no support for plaintiffs’ contention that the Association violated its obligations under N.C. Gen. Stat. § 47C-2-118 when it failed to obtain a separate appraisal and instead used the Allocation Appraisal as the basis for the Condominium’s sale price. Cf. Correll,332 N.C. at 145
,418 S.E.2d at 235
(“If our
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Opinion of the Court
General Assembly had intended to require that applicants own their primary places
of residence before receiving the advantage of the contiguous property exclusion
contained in N.C.G.S. § 108A-55, we must assume that it would have included plain
language to that effect in the other plain language of the statute.” (citation omitted)).
Next, plaintiffs attempt to circumvent the absence of a statutory requirement
governing the sale price of a condominium terminated under the Act by arguing that
N.C. Gen. Stat. § 47C-2-118 nevertheless required the Association “to comply with
the provisions of the Termination Agreement[,]” which did contain such a
requirement. Thus, because the Association did not sell the Condominium in a
manner consonant with the procedures provided in the Termination Agreement,
plaintiffs maintain that it was error for the trial court to dismiss Count Two of their
complaint for breach of statutory obligations. However, this contention is likewise
unsupported by law.
Again, plaintiffs do not identify the provision of N.C. Gen. Stat. § 47C-2-118
that they allege requires a condominium association to abide by the terms of a
termination agreement. Subsection (b) addresses execution of a termination
agreement, but provides only that “[a]n agreement to terminate must be evidenced
by the execution of a termination agreement . . . by the requisite number of unit
owners.” N.C. Gen. Stat. § 47C-2-118(b) (emphasis added). Subsection (c) does
provide that “[i]f, pursuant to the agreement, any real estate in the condominium is
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Opinion of the Court
to be sold following termination, the termination agreement must set forth the
minimum terms of the sale.” N.C. Gen. Stat. § 47C-2-118(c). However, when read in
conjunction with the requirements of Subsection (b) that (1) “[a] termination
agreement and all ratifications thereof must be recorded . . . and is effective only upon
recordation[,]” and (2) a termination agreement “must specify a date after which the
agreement will be void unless recorded before that date[,]” it appears that the purpose
of setting forth the minimum terms of the sale under Subsection (c) is not to hold a
condominium association liable with respect thereto, but instead to provide the public
with adequate notice of the transaction. Cf. Hill v. Pinelawn Mem’l Park, Inc., 304
N.C. 159, 163,282 S.E.2d 779
, 782 (1981) (“The purpose of [our recording] statute is to enable intending purchasers and encumbrancers to rely with safety on the public record concerning the status of land titles.” (citations omitted)). Quite plainly, N.C. Gen. Stat. § 47C-2-118 imposes no explicit statutory duty upon a condominium association to abide by the provisions that the requisite number of unit owners have specified in a termination agreement. This Court cannot require otherwise, however provident doing so might be. Fagundes v. Ammons Dev. Grp., Inc., ___ N.C. App. ___, ___,796 S.E.2d 529
, 533 (“We lack the authority to change the law on the ground that it might make good policy sense to do so.”), disc. review denied,370 N.C. 66
,803 S.E.2d 626
(2017).
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Opinion of the Court
Accordingly, we conclude that the trial court did not err by dismissing Count
Two of plaintiffs’ complaint for breach of statutory obligations against the
Association, in that the allegations of plaintiffs’ complaint are insufficient to state a
claim upon which relief can be granted.
III. Counts Six and Seven: Unfair Trade Practices Against All Defendants
We next address plaintiffs’ argument that the trial court erred in dismissing
Counts Six and Seven of the amended complaint for unfair trade practices in violation
of N.C. Gen. Stat. § 75-1.1. Defendants contend that the trial court properly
dismissed plaintiffs’ unfair trade practices claims against all defendants because the
allegations in plaintiffs’ complaint “do not relate to business activities that were in or
affecting commerce.” We agree.
“The elements of a claim for unfair and deceptive practices in violation of G.S.
§ 75-1.1 are: (1) an unfair or deceptive act or practice, or an unfair method of
competition, (2) in or affecting commerce, (3) which proximately caused actual injury
to the plaintiff . . . .” Furr v. Fonville Morisey Realty, Inc., 130 N.C. App. 541, 551,503 S.E.2d 401
, 408 (1998) (citation and quotation marks omitted), disc. review improvidently allowed,351 N.C. 41
,519 S.E.2d 314
(1999). In analyzing the second
element of “in or affecting commerce,” our Supreme Court has explained that “our
General Assembly sought to prohibit unfair or deceptive conduct in interactions
between different market participants. The General Assembly did not intend for the
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Opinion of the Court
Act to regulate purely internal business operations[,]” or “to intrude into the internal
operations of a single market participant.” White v. Thompson, 364 N.C. 47, 47-48, 53,691 S.E.2d 676
, 676, 680 (2010). Accordingly, “any unfair or deceptive conduct contained solely within a single [market participant] is not covered by the Act.” Id. at 53,691 S.E.2d at 680
.
In the instant case, the alleged unfair and deceptive conduct on the part of
defendants all occurred within the Condominium Association of which plaintiffs were
members. While plaintiffs maintain that defendants’ acts went “well beyond the
internal operations of the Association” and “involve[d] interactions with and affecting
the public,” they do not identify any particular member of the public—beyond the
members of the Association itself—affected by defendants’ conduct. Rather, each of
the acts of which plaintiffs complain involved the “internal conduct of individuals
within a single market participant”—that is, the Association. Id.
Because defendants “unfairly and deceptively interacted only with” fellow
members of the Condominium Association, plaintiffs cannot establish that
defendants’ actions were “in or affecting commerce.” Id. at 54, 691 S.E.2d at 680. Accordingly, the allegations contained in Counts Six and Seven of plaintiffs’ amended complaint fall outside of the scope ofN.C. Gen. Stat. § 75-1.1
, and the trial court
therefore properly granted defendants’ motions to dismiss those claims.
IV. Counts Three and Four: Breach of Fiduciary Duty Against the Association
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Finally, after establishing that the law does not support plaintiffs’ claims for
breach of contract, breach of statutory obligations, and unfair trade practices, we
nevertheless agree with plaintiffs that they have stated a claim for breach of fiduciary
duty against the Association.
a. Fiduciary Relationship
It is axiomatic that “[f]or a breach of fiduciary duty to exist, there must first be
a fiduciary relationship between the parties.” Dalton v. Camp, 353 N.C. 647, 651,548 S.E.2d 704
, 707 (2001) (citations omitted).
[T]here are two types of fiduciary relationships: (1) those
that arise from legal relations such as attorney and client,
broker and client . . . , partners, principal and agent,
trustee and cestui que trust, and (2) those that exist as a
fact, in which there is confidence reposed on one side, and
the resulting superiority and influence on the other.
S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601, 613,659 S.E.2d 442
, 451 (2008) (citation and internal quotation marks omitted). For example, it is well established “that the trustee of a trust has a fiduciary obligation to the beneficiary of the trust.” Melvin v. Home Fed. Savings & Loan Ass’n,125 N.C. App. 660
, 664,482 S.E.2d 6
, 8, disc. review denied,346 N.C. 281
,487 S.E.2d 551
(1997).
By asserting that a fiduciary relationship existed between plaintiffs and the
Association, plaintiffs have not, as defendants contend, attempted to hold the
Association liable pursuant to N.C. Gen. Stat. § 55A-8-30 (2017), which defendants
note “vests the fiduciary duty obligations of a nonprofit corporation like the
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Opinion of the Court
Association in its Board of Directors.” Rather, Counts Three and Four of plaintiffs’
complaint explicitly reference N.C. Gen. Stat. § 47C-2-118, and implicitly reference
Subsection (e), by alleging that “[t]he Association, by virtue of its position as Trustee
for all of the unit owners, owed a fiduciary duty, to each and every one of the unit
owners” in effectuating the Condominium’s sale.
Indeed, N.C. Gen. Stat. § 47C-2-118(e) explicitly provides that when a
condominium is terminated pursuant thereto and is thereafter to be sold, title to all
of the units “vests in the association as trustee for the holders of all interests in the
units.” N.C. Gen. Stat. § 47C-2-118(e) (emphasis added). Moreover, an association’s
independent status as a fiduciary is further evidenced by N.C. Gen. Stat. § 47C-3-
119—quite aptly titled “Association as Trustee”—which provides that “[w]ith respect
to a third person dealing with the association in the association’s capacity as a trustee
under G.S. 47C-2-118 following termination . . . , the existence of trust powers and
their proper exercise by the association may be assumed without inquiry.” N.C. Gen.
Stat. § 47C-3-119 (2017). The Condominium Act thus makes clear that an association
will separately and independently owe certain fiduciary duties as trustee in the sale
of a condominium pursuant to N.C. Gen. Stat. § 47C-2-118. This statutorily imposed
fiduciary relationship is the basis of plaintiff’s complaint.2 Accordingly, plaintiffs
2 We also note that even absent the specific statutory language implicating the Association as
“trustee,” upon agreement by the majority owner to terminate the Condominium, plaintiffs were
divested of any and all power to participate in negotiations for the sale of their property, and were left
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Opinion of the Court
have adequately alleged the existence of a fiduciary relationship between themselves
and the Association so as to survive dismissal.
b. Breach
Having determined that plaintiffs sufficiently pleaded a fiduciary relationship,
we next examine whether plaintiffs have adequately alleged facts necessary to
establish a breach of the Association’s duties associated therewith.
As our Supreme Court has stated, “one of the most fundamental duties of [a]
trustee throughout [a] trust relationship is to maintain complete loyalty to the
interests of his [beneficiaries].” Wachovia Bank & Trust Co. v. Johnston, 269 N.C.
701, 711,153 S.E.2d 449
, 457 (1967). Trustees may “never paramount their personal interest over the interest of those for whom they have assumed to act.” Miller v. McLean,252 N.C. 171
, 174,113 S.E.2d 359
, 362 (1960) (citations omitted). For instance, “[i]t is a well established principle, that a trustee cannot buy at his own sale. He cannot be vendor and vendee at the same time of trust property[.]” Wachovia Bank & Trust Co.,269 N.C. at 713
,153 S.E.2d at 458
(citation and quotation marks omitted). The North Carolina Uniform Trust Code also illustrates that a trustee’s sale of trust property is “rebuttably presumed to be affected by a conflict of interest if the trustee enters into the transaction with[,]” inter alia, an “officer, director, instead to the will of the Association. See Lockerman v. South River Elec. Membership Corp., ___ N.C. App. ___, ___,794 S.E.2d 346
, 352 (2016) (“[W]hen one party figuratively holds all the cards—all the
financial power or technical information, . . . North Carolina courts [have] found that the special
circumstance of a fiduciary relationship has arisen.” (citation and quotation marks omitted)).
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Opinion of the Court
member, manager, or partner of the trustee, or an entity that controls, is controlled
by, or is under common control with the trustee;” or “[a]ny other person or entity in
which the trustee, or a person that owns a significant interest in the trust, has an
interest or relationship that might affect the trustee’s best judgment.” N.C. Gen.
Stat. § 36C-8-802(c)(3)&(4) (2017).
The reasons for the loyalty rule are evident. A man cannot
serve two masters. He cannot fairly act for his interest and
the interest of others in the same transaction. Consciously
or unconsciously, he will favor one side or the other, and
where placed in this position of temptation, there is always
the danger that he will yield to the call of self-interest.
Wachovia Bank & Trust Co., 269 N.C. at 715,153 S.E.2d at 459-60
(emphasis added).
There are, however, “rare and justifiable exceptions” when a self-interested
transaction might not run afoul of a trustee’s fiduciary duties, including where it is
found that “(1) complete disclosure of all facts was made by the trustee, (2) the sale .
. . materially promote[d] the best interests of the trust and its beneficiaries, and (3)
there [were] no other purchasers willing to pay the same or a greater price[.]” Id. at
715,153 S.E.2d at 460
. In other words, where a trustee is alleged to have made a self-interested transaction involving property held in trust in breach of its fiduciary duties, the trustee must be able to demonstrate that it nevertheless “affirmatively put forth real and good faith endeavors to find the most advantageous purchaser and that there [were] no other available purchasers willing to pay the same price[.]”Id. at 716
,153 S.E.2d at 460
. “This precaution must be taken, not because there is
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Opinion of the Court
fraud[,]” id.,but because “[t]he trustee, because of his fiduciary relationship, is skating on the thin and slippery ice of presumed fraud, which he must rebut by proof that no fraud was committed and no undue influence . . . exerted[,]”id. at 715
,153 S.E.2d at 460
.
In the instant case, plaintiffs alleged in their complaint that “[t]he Association
breached its fiduciary duty to Plaintiffs by arranging for, approving, and proceeding
with the forced sale of the entire Condominium to FCP Fund (through its subsidiary,
Greens at Tryon), for an inadequate price[,]” and “by failing to have an independent
appraiser generate the Allocation Appraisal, ensure that the appraisal used was
without bias, and distribute it within the time frame specified by N.C.G.S. Section
47C-2-118.” Plaintiffs additionally set forth various particular allegations, including
the following:
80. [T]he Links Raleigh Appraisal was deficient in that
Williams Appraisers, Inc. only looked at a subset of the
units owned by Links Raleigh, with those units having
been selected by Links Raleigh. On information and belief,
the units made available . . . for inspection were not
occupied by tenants; had been prepared for re-leasing, and,
therefore, were, in a general sense, in better condition
tha[n] other units owned by Links Raleigh having the same
or similar size. This selection bias creates a persistent
appraisal bias which inflates the value of the units owned
by Links Raleigh, and therefore, increased the pro rata
share of the purchase price of the entire Condominium
allocable to Links Raleigh. . . .
....
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88. The Association could and should have attempted to
fulfill its duty to each and every one of the unit owners by
listing and exposing the Condominium for sale; by offering
the same to potential third party apartment complex
owners for a price no less than that determined by an
independent third party appraisal, or by otherwise acting
in a way consistent with attempting to maximize the sales
price for the benefit of all unit owners.
....
90. On information and belief, [the Association’s Board
Members] Khomassi; Cathcart and Kane each also had a
financial interest in completing the transaction resulting
in the sale of the entire Condominium to Greens at Tryon;
and the Association was similarly prioritizing their
interests by proceeding with the sale to Greens at Tryon.
....
99. Although N.C.G.S. Section 47C-2-118 provides that
the Allocation Appraisal shall be distributed to the unit
owners, who shall then have thirty (30) days to object to
the same; Links Raleigh distributed the Other Owners
Appraisal on May 2, 2017, and the Association proceeded
with the closing on May 31, 2017; not allowing the unit
owners thirty (30) days to object.
100. The Association did not distribute the Links Raleigh
Appraisal to the Other Owners, although it apparently
used the same (with the Other Owners Appraisal) as the
Allocation Appraisal.
We conclude that these allegations are more than sufficient to withstand
defendants’ motions to dismiss plaintiffs’ breach of fiduciary duty claims against the
Association. The trial court thus erred when it dismissed Counts Three and Four of
plaintiffs’ complaint for breach of fiduciary duty against the Association.
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c. Veil Piercing
Likewise, the amended complaint alleges appropriate facts and circumstances
sufficient to withstand dismissal of veil piercing as a potential remedy on plaintiffs’
breach of fiduciary duty claims.3
“Piercing the corporate veil . . . allows a plaintiff to impose legal liability for a
corporation’s obligations . . . upon some other company or individual that controls and
dominates the corporation.” Green, 367 N.C. at 145, 749 S.E.2d at 270 (citation
omitted). “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) (citation
omitted).
The Supreme Court has explained that “[e]vidence upon which [our courts]
have relied to justify piercing the corporate veil includes inadequate capitalization,
noncompliance with corporate formalities, lack of a separate corporate identity,
excessive fragmentation, siphoning of funds by the dominant shareholder,
nonfunctioning officers and directors, and absence of corporate records.” Green, 367
N.C. at 145, 749 S.E.2d at 270 (citation omitted). Ultimately, “[t]he aggrieved party
must show that the corporation is so operated that it is a mere instrumentality or
3 We need not examine plaintiffs’ “claims” for veil piercing as to the other counts, as those
counts were properly dismissed. See Green v. Freeman, 367 N.C. 136, 146,749 S.E.2d 262
, 271 (2013).
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Opinion of the Court
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. (citation and quotation marks
omitted).
The circumstances pleaded in plaintiffs’ complaint demonstrate that the
instant case is one in which it would be appropriate to pierce the corporate veil, and
the allegations are sufficient to survive defendants’ motions to dismiss. Plaintiffs
alleged that the Association was entirely dominated by FCP Fund, through its
subsidiary Links Raleigh. The Association’s Board was fully composed of FCP
personnel Khomassi, Cathcart, and Kane. Moreover, it appears that the Association
is wholly uncapitalized, in that the Termination Agreement provided for dissolution
of the Association upon sale of the Condominium and distribution of the net proceeds,
according to statute. A judgment against the Association would be indexed in the
name of the Condominium and the Association; yet, upon termination, all of the
Association’s assets were presumably distributed amongst the unit owners—over
eighty percent of which to defendants—and any preexisting lienholders. See N.C.
Gen. Stat. §§ 47C-2-118(g), 47C-3-117(d) (2017). It would be inequitable to allow
dominant shareholders to shield themselves from liability through use of a corporate
entity, the dissolution of which was intended from the outset of their course of action.
Next, because the allegations, if true, are sufficient to allow a fact finder to
determine “that the corporate identity should be disregarded” in the present case,
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Opinion of the Court
“the next inquiry is whether [the] noncorporate defendant[s] may be held liable for
[their] personal actions as an officer or director.” Green, 367 N.C. at 145, 749 S.E.2d
at 270. Plaintiffs’ complaint must contain allegations sufficient to establish three
elements:
(1) Control, not mere majority or complete
stock control, but complete domination, not
only of 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 a plaintiff’s legal
rights; and
(3) The aforesaid control and breach of duty
must proximately cause the injury or unjust
loss complained of.
Id. at 145-46, 749 S.E.2d at 270 (emphases added) (citation, quotation marks, and
alteration omitted).
Plaintiffs’ complaint contains the following allegations relevant to piercing the
corporate veil of the Association in order to hold defendants FCP Fund, Carr, Links
Raleigh, Greens at Tryon, Khomassi, Cathcart, and Kane personally liable for the
Association’s alleged breaches of fiduciary duty:
22. On information and belief, Defendant Thomas A. Carr
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Opinion of the Court
. . . is an Authorized Trustee for FCP Fund . . . . On further
information and belief, the acts of FCP Fund, complained
herein, were at the direction, and under the control of Carr.
....
25. On information and belief, Defendant Nason Khomassi
. . . has been, since prior to August 31, 2016, employed by
[FCP] . . . . On further information and belief, Khomassi
has been, since August 31, 2016, a member of the Board of
Directors of the Association; and the President of the
Association.
26. On information and belief, Defendant Alex Cathcart . .
. has been, since prior to August 31, 2016, employed by
[FCP] . . . . On further information and belief, Cathcart has
been, since August 31, 2016, a member of the Board of
Directors of the Association; and the Vice-President and
Secretary of the Association.
27. On information and belief, Defendant Bryan M. Kane .
. . has been, since prior to August 31, 2016, Senior Vice-
President—Acquisitions for [FCP] . . . . On further
information and belief, Kane has been, since August 31,
2016, a member of the Board of Directors of the
Association; and the Treasurer of the Association.
28. On information and belief, FCP Fund is the sole
member of both Links Raleigh and Greens at Tryon.
....
38. On July 26, 2016, FCP Fund caused Links Raleigh to
be formed by recording Articles of Incorporation with the
Delaware Secretary of State.
....
39. On information and belief, prior to July 26, 2016, FCP
Fund had, either directly or through an entity that it
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Opinion of the Court
controlled, arranged for or contracted with Fairway
Apartments to purchase their units in the Condominium.
....
41. FCP Fund intended to purchase 80 percent of the units
in the Condominium through Links Raleigh (or some other
entity under its control) so that it could, acting through the
unit purchasing entity, terminate the Condominium . . . .
42. FCP Fund intended to terminate the Condominium so
that the entire Condominium would be available for
purchase; and so that it, acting through Links Raleigh, or
some other entity under its control, could purchase the
entire Condominium at a below market price[.]
....
44. FCP Fund and its Trustee intended to ensure that it,
acting through Links Raleigh, or another entity under its
control, would purchase the entire Condominium, by
having Links Raleigh . . . use its majority of the voting
interests in the condominium to elect a compliant board,
who would have the Association contract to sell the entire
Condominium to an entity under FCP Fund’s control.
45. FCP Fund and its Trustee intended to use its control
over the Board of the Association to secure, as a purchase
price for an entity under its control, a non-market price for
the entire condominium, and terms otherwise favorable to
it.
46. On August 31, 2016, Cathcart, in furtherance of FCP
Fund’s plan, acting as a representative of Links Raleigh,
and with proxies provided by Fairway Apartments,
conducted a special meeting of the Association, at which
time: (a) all of the then current Directors of the Board were
removed; (b) the number of authorized Directors was
reduced to three (3); and (c) Khomassi[,] Cathcart and
Kane were elected as the Directors of the reduced
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Opinion of the Court
Association Board.
....
65. On May 31, 2017, the Association, acting on behalf
through its Board, Khomassi, Cathcart and Kane, and on
behalf of FCP Fund III and the other Defendants, sold the
entire Condominium to Greens at Tryon for
$27,080,000.00[.]
....
75. The Association did not have an independent appraiser
determine the fair market value of the Condominium as a
whole, as required by Section 6 of the Termination
Agreement.
....
111. The Association was operated as a mere
instrumentality or alter ego of FCP Fund; Carr; Links
Raleigh; Greens at Tryon; Khomassi[,] Cathcart and Kane,
who collectively exercised such complete domination and
control of the Association that it had no independent will
or identity.
112. FCP Fund; Carr; Links Raleigh; Greens at Tryon;
Khomassi; Cathcart and Kane used their domination of the
Association to perpetuate a series of wrongs, including the
forced sale of the units owned by Plaintiffs, to FCP Fund,
through its wholly owned subsidiary Greens at Tryon, for
an inadequate price, and in an improper percentage
amount, in violation of the Association’s fiduciary duties.
Taken as a whole and viewed in the light most favorable to plaintiffs, we
conclude that the above allegations, together with those setting forth a breach of
fiduciary duty, allege domination and control sufficient to establish a theory of
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liability upon which to hold defendants FCP Fund, Carr, Links Raleigh, Greens at
Tryon, Khomassi, Cathcart, and Kane personally liable for the Association’s alleged
breaches of fiduciary duty. Plaintiffs are entitled to offer evidence to support the
appropriateness of that remedy. Brown, 90 N.C. App. at 471, 369 S.E.2d at 371.
As plaintiffs’ complaint demonstrates no insurmountable bar to piercing the
corporate veil on Counts Three and Four of plaintiffs’ complaint, we conclude that the
trial court erred to the extent that it dismissed the same.
d. Personal Jurisdiction
Lastly, defendants FCP Fund, Carr, Links Raleigh, and Greens at Tryon’s
motion to dismiss also cited Rule 12(b)(2), maintaining that plaintiffs’ complaint
failed to allege sufficient facts to support the proper exercise of personal jurisdiction
over defendant Carr, an out-of-state resident, by a Court of this State. On appeal,
defendants argue that “[plaintiffs] failed to establish personal jurisdiction over
defendant Thomas Carr and have failed to preserve its appeal of that determination
by the trial court.” Accordingly, defendants maintain that this Court must “affirm
dismissal of the [complaint] against Carr pursuant to Rule 12(b)(2).” However, the
trial court’s order reveals no such determination, nor does the transcript of the
hearing indicate the same.
It is axiomatic that “[a]bsent a request by the parties,” the trial court need not
include findings of fact or conclusions of law in its order on a motion to dismiss under
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Opinion of the Court
Rule 12(b)(2). J.M. Thompson Co. v. Doral Mfg. Co., 72 N.C. App. 419, 423-24,324 S.E.2d 909
, 912, disc. review denied,313 N.C. 602
,330 S.E.2d 611
(1985). Here, neither party requested that the trial court include specific findings in its order. The trial court granted defendants’ motions to dismiss by entering a general, one-sentence order, thereby tasking this Court with determining whether the trial court’s dismissal should be upheld under any of the grounds alleged. Cf. Helm v. Appalachian State Univ.,194 N.C. App. 239
, 250,670 S.E.2d 571
, 578 (2008) (holding that a trial court need not provide “conclusions of law explaining its decision to dismiss [a] plaintiff’s complaint” because, under de novo review, this Court “disregard[s] any . . . conclusions of law drafted by the trial court”), rev’d on other grounds,363 N.C. 366
,677 S.E.2d 454
(2009). Accordingly, because we conclude that
dismissal of Counts Three, Four, and Five of plaintiffs’ complaint was improper under
Rule 12(b)(6), we next determine whether that dismissal must nevertheless be upheld
as to defendant Carr pursuant to Rule 12(b)(2).
A complaint against a non-resident defendant should not be dismissed for lack
of personal jurisdiction if the complaint reveals that there exists “certain minimum
contacts between the non-resident defendant and the forum such that the
maintenance of the suit does not offend traditional notions of fair play and substantial
justice.” Tom Togs, Inc., v. Ben Elias Indus. Corp., 318 N.C. 361, 365,348 S.E.2d 782
,
786 (1986) (citation and quotation marks omitted); see also J.M. Thompson Co., 72
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N.C. App. at 424, 324 S.E.2d at 913(“[T]he critical inquiry in determining whether North Carolina may assert in personam jurisdiction over a defendant is whether the assertion comports with due process.”). “In each case, there must be some act by which the defendant purposefully avails himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws[.]” Tom Togs, Inc., 318 N.C. at 365,348 S.E.2d at 786
. Where the particular controversy at issue “arises out of the defendant’s contacts with the forum state, the state is said to be exercising ‘specific’ jurisdiction.” Id. at 366,348 S.E.2d at 786
. To establish “specific” jurisdiction, it must be evident that “a defendant has ‘fair warning’ that he may be sued in a state for injuries arising from activities that he ‘purposefully directed’ toward that state’s residents.”Id.
(citation omitted).
In the instant case, because the controversy arises from defendant Carr’s
alleged contacts with North Carolina, specific jurisdiction is at issue.
Plaintiffs’ complaint alleges, in pertinent part, that “Defendant Thomas A.
Carr . . . is an Authorized Trustee for FCP Fund” and that “the acts of FCP Fund,
complained of herein, were at the direction, and under the control of Carr.”
Defendants did not attach to their motion to dismiss any evidence purporting to
establish otherwise. Plaintiffs’ allegation is therefore “accepted as true and deemed
controlling.” Parker, 243 N.C. App. at 97, 776 S.E.2d at 721. In that plaintiffs allege
that defendant Carr directed and controlled each of the acts complained of in the
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Opinion of the Court
instant case, plaintiffs have sufficiently disclosed the existence of personal
jurisdiction over defendant Carr so as to survive dismissal under Rule 12(b)(2). See
Wyatt v. Walt Disney World Co., 151 N.C. App. 158, 165,565 S.E.2d 705
, 710 (2002) (“Specific jurisdiction exists if the defendant has purposely directed its activities toward the resident[s] of the forum and the cause of action relates to such activities.”); Inspirational Network, Inc. v. Combs,131 N.C. App. 231
, 236,506 S.E.2d 754
, 758
(1998) (holding that the trial court properly denied the motion to dismiss for lack of
personal jurisdiction over the individual defendants where the complaint included
uncontroverted allegations that the principal corporation “was a sham and facade
controlled and directed by” the individual defendants).
Accordingly, we likewise reverse the trial court’s dismissal of Counts Three,
Four, and Five of plaintiffs’ complaint to the extent that it was based in part upon a
lack of personal jurisdiction against defendant Carr.
Conclusion
For the reasoning contained herein, the trial court’s order granting defendants’
motions to dismiss plaintiffs’ claims for breach of contract, breach of statutory
obligations, and unfair and deceptive trade practices is affirmed. We reverse the
dismissal of plaintiffs’ Counts Three, Four, and Five, plaintiffs’ claims for breach of
fiduciary duty and piercing the corporate veil, and remand to the trial court.
AFFIRMED IN PART; REVERSED IN PART AND REMANDED.
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Judges STROUD and MURPHY concur.
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