BDM Investments v. Lenhil, Inc.

Decision Date18 January 2012
Docket Number11 CVS 449
Citation2012 NCBC 7
CourtSuperior Court of North Carolina
PartiesBDM INVESTMENTS, KENNETH W. KING, JR., LEAH L. KING and RICHARD A. MU, Plaintiffs, v. LENHIL, INC.; LENNON HILLS, LLC; GLENN HOLLINGSWORTH; EDWIN L. BURNETT, III; VIABLE CORP.; GARY LAWRENCE; PAM LAWRENCE; LAWRENCE SALES & MARKETING GROUP, LLC; KEITH MEYERS; MEYERS APPRAISAL SERVICES, LLC; DANIEL HILLA, III; ALTON LENNON; MARTIN J. EVANS and HOMEPLACE REALTY ASSOCIATES, INC., Defendants.

{1} THIS MATTER is before the Court on a collection of motions attacking the pleadings. Defendants have a series of motions based on Rules 8, 9, and 12 of the North Carolina Rules of Civil Procedure ("Rule(s)") challenging or seeking to strike portions of the Second Amended Complaint. Plaintiffs move to dismiss one counterclaim pursuant to Rule 12(b)(6) ("Plaintiffs' Motion"). The Defendants' motions are GRANTED in part and DENIED in part. Plaintiffs' Motion is GRANTED.

Bowden & Laws, PC by Edwin W. Bowden for Plaintiffs BDM Investments, Kenneth W. King, Jr., Leah L. King, and Richard A. Mu.

Hodges & Coxe, P.C. by C. Wes Hodges, II and Sarah Reamer for Defendants Lenhil, Inc., Lennon Hills, L.L.C., Edwin L. Burnett, III, Viable Corp., and Daniel Hilla.

Toll & Potter, PLLC by Samuel B. Potter for Defendant Glenn Hollingsworth.

Cranfill Sunmer Hartzog, LLP by Richard T. Boyette for Defendant Gary Lawrence.

Nexsen Pruet, PLLC by R. Daniel Boyce for Defendants Pam Lawrence and Lawrence Sales & Marketing Group, L.L.C.

Kurt B. Fryar, Attorney at Law by Kurt B. Fryar for Defendant Alton Lennon.

Baker, Jones, Daly & Carter PA by Ronald G. Baker for Defendants Martin J. Evans and Homeplace Realty Associates, Inc.

ORDER

Gale, Judge.

I. INTRODUCTION

{2} Plaintiffs seek to recover damages and to rescind a purchase contract by which they invested in residential lots to be developed as a part of the Lennon Hills development in Brunswick County, North Carolina. Plaintiff BDM Investments ("BDM") is a partnership whose partners, the individual Plaintiffs, are all licensed North Carolina attorneys. Plaintiffs contend that each Defendant engaged in a conspiracy calculated to induce the purchase by fraud. Defendants challenge the fraud claims for lack of specificity and for lack of reasonable reliance. Plaintiffs contend that they are excused from proving reliance because their purchase was induced by Defendant Glenn Hollingsworth ("Hollingsworth") with whom they enjoyed a fiduciary relationship. Plaintiffs seek to impute Hollingsworth's liability to individual members of the conspiracy.

{3} Initially, Plaintiffs joined as Defendants essentially every individual or entity that had anything to do with or was necessary to complete the purchase in the Lennon Hills development. Several defendants were dismissed between the time of the original Complaint and the filing of the Second Amended Complaint. Plaintiffs' Second Amended Complaint has twenty (20) causes of action. Each rests on broad allegations, many of which are alleged only on information and belief. Plaintiffs contend that they should be allowed to pursue discovery based on their broad allegations and should be expected to further narrow their claims only after such discovery. Defendants contend that Plaintiffs have not alleged and cannot allege sufficient particularity to allow the broad claims to proceed. The various motions require the Court to grapple with defining an appropriate dividing line that affords Plaintiffs the pleading liberality demanded by the Rule 12(b)(6) standards while at the same time drawing reasonable limits to avoid imposing the unfair burden and expense of litigation upon those whose fault for the failed real estate transaction is based on supposition rather than reasonable assertion of fact. That task is made even more difficult in this case where: (1) the genesis of the conspiracy is alleged to have arisen because of harms directed at and suffered by persons who are neither plaintiffs in this action nor have been alleged to have any connection to the Plaintiffs; and (2) the case arises in the context of licensed attorneys who invested several hundreds of thousands of dollars with little or no due diligence.

{4} The Court concludes that some claims should proceed toward discovery, but the allegations, even broadly read, are insufficient to justify keeping certain Defendants in the case. Further, the claims should be narrowed for those Defendants who remain. The defamation counterclaim against the Plaintiffs should be dismissed.

II. PROCEDURAL BACKGROUND

{5} Plaintiffs filed their Complaint in the Brunswick County Superior Court on February 28, 2011. The matter was designated as a Complex Business Case by Order of Chief Justice Sarah Parker dated April 8, 2011 and assigned to the undersigned by Order dated April 14, 2011. Motions attacked the initial Complaint. The Second Amended Complaint was filed on August 8, 2011.

{6} Prior to filing their Second Amended Complaint, Plaintiffs voluntarily dismissed Wells Fargo & Company; Wells Fargo Bank, N.A.; Wells Fargo Financial Mortgage, L.L.C.; Wachovia Corporation; Wachovia Bank, N.A.; Wachovia Mortgage Corporation; Wachovia Affordable Housing Corporation; Exit Realty 1st, LLC; Exit Realty and Associates, Inc.; Exit Realty Seaside, LLC; Kelly K. Johnson; Rosalind Johnson; and Flo Smith. Plaintiffs later voluntarily dismissed Nicholas R. Frank and Nick Frank who had been included in the Second Amended Complaint.

{7} Defendants Lenhil, Inc. ("Lenhil"), Lennon Hills, LLC ("Lennon Hills"), Edwin L. Burnett, III ("Burnett"), Viable Corp. ("Viable"), and Daniel Hilla ("Hilla") have asserted a defamation counterclaim. Plaintiffs' Motion attacking that claim was timely filed on July 22, 2011.[1]

{8} Following several Answers and pre-answer motions, [2] the Court determined it should address the common issues on a consolidated basis. To that end, the Court directed that all motions based on the pleadings be filed by a date certain and that the Defendants prepare a consolidated brief, supplemented by individual briefs only where necessary.

{9} On or before September 30, 2011, each of the named Defendants submitted motions pursuant to Rules 8, 9, and 12. Specifically, Defendants Alton Lennon ("Lennon"), J. Martin Evans ("Evans"), Homeplace Realty Associates Inc. ("Homeplace"), Hollingsworth, Pam Lawrence, Lawrence Sales & Marketing, LLC ("Lawrence S&M"), and Gary Lawrence seek to dismiss all claims against them pursuant to Rule 12(b)(6) and to have certain portions of the Second Amended Complaint stricken pursuant to Rule 12(f). Defendants Lenhil, Lennon Hills, Burnett, Viable, and Hilla have similar motions but additionally assert a Motion for Judgment on the Pleadings pursuant to Rule 12(c).

{10} These various motions have been fully briefed, the Court heard extensive oral arguments, and the motions are ripe for disposition.

III. STATEMENT OF FACTS

{11} The following facts are taken from the pleadings as well as documents they incorporate, [3] construed favorably to the moving party with reasonable inferences not inconsistent with the facts alleged, but without being bound by unwarranted legal conclusions. The Court does not make findings of facts in connection with motions to dismiss as such motions do "not present the merits, but only [determine] whether the merits may be reached." Concrete Serv. Corp. v. Investors Group, Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986). However, it is appropriate for the Court to state facts accepted from the pleadings that are relevant to the legal determinations the Court is called upon to make.

A. The Parties

{12} Plaintiff BDM is a general partnership organized and existing under the laws of the State of North Carolina for the purpose of owning office facilities and holding certain other real estate. (Second Am. Compl. ("2nd Am. Compl.") ¶¶ 1, 3.) BDM filed a Certificate of Assumed Name in Onslow County, North Carolina on April 15, 1993, the county in which their law firm and the individual partners practice. (2nd Am. Compl. ¶ 3.) There is no allegation that Plaintiffs have filed an assumed name certificate in Brunswick County. There is also no allegation by Defendants that such a certificate has not been filed.

{13} Plaintiffs Kenneth W. King ("Kenneth King") and Leah L. King ("Leah King") are licensed North Carolina attorneys and are citizens and residents of New Hanover County, North Carolina. Plaintiff Richard A. Mu ("Mu") is a licensed North Carolina attorney and a citizen and resident of Onslow County, North Carolina. The Kings and Mu are the sole BDM partners and are collectively referred to as the "Individual Plaintiffs."

{14} Defendants Hilla, Hollingsworth, [4] and Lennon are citizens and residents of New Hanover County, North Carolina. Defendants Burnett, Pam Lawrence, and Gary Lawrence are citizens and residents of Brunswick County, North Carolina. Gary Lawrence is a licensed North Carolina attorney. Defendant Evans is a citizen and resident of Pender County, North Carolina and a licensed North Carolina real estate broker.

{15} Defendant Homeplace is a corporation organized and existing under the laws of the State of North Carolina doing business in Pender County, North Carolina. Evans owns and operates Homeplace.

{16} Defendant Lawrence S&M is a limited liability company organized and existing under the laws of the State of North Carolina doing business in Brunswick County, North Carolina. Pam Lawrence owns and operates Lawrence S&M and is Gary Lawrence's wife.

{17} Defendants Lenhil and Lennon Hills are corporations organized and existing under the laws of the State of North Carolina doing business in Brunswick County, North Carolina. Lenhil and Lennon Hills develop and sell real property, including tracts of land and homes in residential subdivisions. Defendants Burnett and Hilla are Lenhil's sole shareholders. Defendants Burnett and Lennon are ...

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