Barnes v. Perry
| Decision Date | 30 July 2018 |
| Docket Number | 18 CVS 177 |
| Citation | 2018 NCBC 77 |
| Court | Superior Court of North Carolina |
| Parties | RONALD HOWARD BARNES, Plaintiff, v. ELY J. PERRY, III; PERRY BROTHERS PROPERTIES, LLC; PERRY WIVES, LLC; PERRY GRANDCHILDREN, LLC; DOWN EAST HOLDINGS, LLC; and PERRY'S, INC., Defendants. |
Mast Mast, Johnson, Wells & Trimyer, P.A., by George B. Mast and Clint A. Mast, for Plaintiff.
White & Allen, P.A., by John P. Marshall & Matthew S Sullivan, for Defendants.
1. THIS MATTER is before the Court on Defendants' motion to strike (the "Motion to Strike") and motion to dismiss (the "Motion to Dismiss") filed on April 16, 2018 as a single motion. (The Motion to Strike and Motion to Dismiss are collectively referred to herein as the "Motions.") For the reasons set forth below, the Court hereby DENIES the Motion to Strike and GRANTS in part and DENIES in part the Motion to Dismiss.
2. The Court does not make findings of fact on motions to dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)") but only recites those factual allegations of the Complaint that are relevant and necessary to the Court's determination of the Motion to Dismiss.
3. Plaintiff Ronald Howard Barnes ("Plaintiff") and Defendant Ely J. Perry, III ("Perry") are North Carolina residents who allegedly agreed to form a partnership to develop commercial properties for lease or sale. (Compl. ¶¶ 1-2, 24, 28, 34, ECF No. 4.)
4. Defendants Perry Brothers Properties, LLC ("Perry Brothers"), Perry Wives, LLC, Perry Grandchildren, LLC, and Down East Holdings, LLC ("Down East") (collectively, the "Perry Entities") are North Carolina limited liability companies with their principal offices at the same address in Lenoir County. (Compl. ¶¶ 3, 7, 11, 14.) Perry is both the registered agent for and a member and manager of each of the Perry Entities. (Compl. ¶¶ 4-6, 8-10, 12-13, 15-17, 23.)
5. Defendant Perry's, Inc. is a North Carolina corporation that shares an address for its principal office with the Perry Entities. (Compl. ¶ 18.) Perry is the registered agent and secretary of Perry's, Inc. (Compl. ¶¶ 20, 22.)
6. Beginning in approximately 2009 and ending in 2016, Plaintiff and Perry operated as a partnership developing commercial properties to be sold or leased. (Compl. ¶¶ 24, 28, 60, 66, 90, 146.) Plaintiff and Perry initially agreed to contribute equal capital to the partnership, but when Plaintiff was unable to do so, Plaintiff was permitted to instead contribute his "expertise, contacts, services, and expenses." (Compl. ¶¶ 25-27.) Plaintiff and Perry agreed that profits and losses would be shared equally by the partners. (Compl. ¶ 27.)
7. Beginning in 2009, Plaintiff located suitable properties to be purchased for the partnership. (Compl. ¶¶ 28, 54.) Once the properties were under contract, Perry usually advanced Plaintiff a portion of the expected profits. (Compl. ¶¶ 34, 37.) Plaintiff and Perry understood that the advances were not intended to represent Plaintiff's entire share of the partnership profits but that once a property began generating profits, Plaintiff was entitled to half of the profits less the amount previously advanced. (Compl. ¶¶ 37-38, 40.) Were the partnership to experience a loss, Plaintiff and Perry would share those losses equally. (Compl. ¶ 34.)
8. Plaintiff and Perry acquired and developed eight separate properties. (Compl. ¶¶ 54-56, 59, 70-73, 83-85, 88, 96-99, 108-10, 120-24, 129-33, 154, 157.) Although the properties were acquired for the benefit of the partnership, all of the properties were titled to one of the Perry Entities. (Compl. ¶¶ 29, 67, 82, 95, 107, 110, 128, 130, 150, 166, Exs. B-G, I-J, L.)
9. Once a partnership property was acquired, Plaintiff developed the property, located and secured tenants, negotiated and entered into contracts and leases, and addressed any issues that arose that affected the profitability of the partnership's investment. (Compl. ¶ 28.) Perry provided the capital necessary for Plaintiff to fulfill his part of the partnership agreement and encouraged Plaintiff to provide services to the partnership. (Compl. ¶¶ 28, 47.)
10. During the course of the partnership, Plaintiff and Perry referred to each other as partners in their own dealings and held each other out to third parties as partners. (Compl. ¶¶ 42-46.) Third parties with whom Plaintiff dealt also understood Plaintiff and Perry to be partners and treated Plaintiff as "the face of the partnership," coming to him with any issues concerning the properties. (Compl. ¶¶ 47, 49.)
11. On at least two occasions, Plaintiff, for purposes of expediency, had his separate business, on behalf of the partnership, enter into a lease or a development contract involving the partnership properties. (Compl. ¶¶ 123, 158.) Notwithstanding the fact that the properties were held by the Perry Entities and Plaintiff's separate business entered into contracts on behalf of the partnership, the properties and their profits were partnership assets. (Compl. ¶¶ 29, 31, 123, 130, 158.) At the same time, the partnership agreed to provide Down East with a portion of the profits generated by a partnership property in Fayetteville and to provide a Perry Entity with a portion of the profits generated by a partnership property in Raleigh. (Compl. ¶¶ 118, 159.)
12. Plaintiff alleges that, with limited exceptions, when a partnership property generated income, Perry or one of the Perry Entities improperly retained Plaintiff's share of partnership profits. (Compl. ¶¶ 39, 66, 80, 93, 104-05, 114-15, 127, 147- 48.) For example, when the partnership allowed a lessee to buy out its lease of a partnership property that was held by Down East, Plaintiff was not paid his share of the $150, 000 buy-out price. (Compl. ¶¶ 113-15.) Additionally, Perry sold a partnership property held by Perry Brothers for $1, 520, 000 without informing Plaintiff of the sale and then refused to pay Plaintiff his share of the sale proceeds when Plaintiff discovered the sale and demanded to be paid his share. (Compl. ¶¶ 66, 68.) The only occasion on which Plaintiff was alleged to have received partnership profits occurred after a partnership property in Fayetteville that was titled to Down East was sold on February 18, 2015 and Plaintiff received a portion of the sale proceeds. (Compl. ¶¶ 117-18, Ex. H.)
13. While the Complaint generally alleges that Plaintiff and Perry agreed that profits were to be split 50-50, after Plaintiff located a suitable property in Raleigh and contracted with a tenant through his separate business, Plaintiff alleges that the partnership agreed that Plaintiff and Perry would each be entitled to 40% of the profits and a Perry Entity would receive the final 20%. (Compl. ¶¶ 154-59.) Perry, who controlled all of the financial information about the Raleigh property, offered to purchase Plaintiff's share but refused to provide Plaintiff with financial information about the profitability of the property despite repeated demands. (Compl. ¶¶ 161- 62, 164.) Plaintiff ultimately sold his share to Perry for the price offered by Perry without receiving the requested financial information. (Compl. ¶ 165.)
14. Throughout the course of the partnership, Plaintiff relied on Perry's representations that they were partners and believed that Perry was looking after his interest in the partnership. (Compl. ¶ 51.) However, in September 2016, Perry informed Plaintiff that Plaintiff would not receive any additional profits from the partnership. (Compl. ¶ 53.)
15. The Court sets forth here only those portions of the procedural history relevant to its determination of the Motions.
16. Plaintiff initiated this action on February 13, 2018 by filing his Complaint. (ECF No. 4.) Plaintiff asserts claims against Perry for breach of partnership agreement, breach of fiduciary duty, and constructive fraud, and alternative claims for fraud, negligence, negligent misrepresentation, conversion, unfair and deceptive trade practices ("UDTP"), and unjust enrichment.[1] (Compl. 13-19.) Plaintiff also requests that the Court impose a constructive trust on the Perry Entities. (Compl. 20.)
17. The action was designated as a mandatory complex business case by order of Chief Justice Mark Martin of the Supreme Court of North Carolina dated February 22, 2018, (ECF No. 3), and was assigned to the undersigned by order of then-Chief Business Court Judge James L. Gale dated February 23, 2018, (ECF No. 2).
18. On April 16, 2018, Defendants filed the Motions seeking dismissal of Plaintiff's Complaint pursuant to Rules 12(b)(6) and 12(f). (ECF No. 14.) The Motions have been fully briefed, and the Court held a hearing on the Motions on July 19, 2018 at which all parties were represented by counsel.
19. The Motions are now ripe for resolution.
20. Rule 12(f) permits the Court to strike from a pleading "any redundant, irrelevant, immaterial, impertinent, or scandalous matter." N.C. Gen. Stat. § 1A-1, Rule 12(f). "The purpose of Rule 12(f) is to avoid expenditure of time and resources before trial by removing spurious issues . . . ." Estrada v. Jaques, 70 N.C.App. 627, 642, 321 S.E.2d 240, 250 (1984). A pleading may be stricken, in whole or in part, under Rule 12(f) if it fails to comport with the North Carolina Rules of Civil Procedure. See Barnes v. Erie Ins. Exch., 156 N.C.App. 270, 280-81, 576 S.E.2d 681, 687-88 (2003) ().
21. "Unless an allegation in a complaint has no possible bearing upon the litigation, matters...
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