Bob Timberlake Collection, Inc. v. Edwards

• Decision Date: 21 February 2006
• Docket Number: No. COA04-1434.,COA04-1434.
• Citation: 626 S.E.2d 315
• Parties: The BOB TIMBERLAKE COLLECTION, INC., Plaintiff v. Marshall EDWARDS, Defendant.
• Court: North Carolina Court of Appeals

626 S.E.2d 315

The BOB TIMBERLAKE COLLECTION, INC., Plaintiff v. Marshall EDWARDS, Defendant.

No. COA04-1434.

Court of Appeals of North Carolina.

February 21, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Appeal by defendant from orders entered 24 May and 17 June 2004 by Judge Steve A. Balog in Davidson County Superior Court. Heard in the Court of Appeals 15 June 2005.

Allman, Spry, Leggett & Crumpler, P.A., by W. Rickert Hinnant, Winston-Salem, for plaintiff-appellee.

Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Robert J. King, III, and Katherine A. Murphy, Greensboro, for defendant-appellant.

BRYANT, Judge.

Marshall Edwards (Edwards-defendant) appeals from orders entered 24 May and 17 June 2004 by which the trial court (1) granted The Bob Timberlake Collection, Inc.'s (BTI-plaintiff) motion to dismiss defendant's counterclaims and (2) denied defendant's motion for leave to amend his counterclaims.

The dispute between BTI and Edwards arose out of the sale of Riverwood, Inc. (Riverwood) in 2001. Pursuant to a stock purchase agreement, Edwards purchased 90% of the stock in Riverwood in exchange for which he agreed to pay BTI $800,000.00 in three payments. Edwards made the first payment of $250,000.00 at closing on 30 April 2001, and the remaining payments of $250,000.00 and $300,000.00 were to be secured by promissory notes.

After entering into the stock purchase agreement, Edwards claimed that prior to his purchase, BTI made inaccurate statements to him regarding the following as to Riverwood's: "established" sales force; general ledger trial balance; and general ledger reflecting ownership of certain equipment that was actually owned by third parties. Edwards raised his concerns with the chief operating officer of BTI, Daniel Timberlake (Timberlake). In response to Edwards' concerns, Timberlake wrote Edwards a letter dated 18 January 2002 that stated if Edwards made the second payment due under the terms of the stock purchase agreement, the third payment of $300,000.00, originally "due and payable on or before" 15 February 2002, would be delayed indefinitely. Edwards did not respond to the 18 January 2002 letter. He did not make the second $250,000.00 payment, or the third $300,000.00 payment, or sign a new promissory note.

As of October 2002, Edwards had paid a total of $5,250.00 in interest payments under the terms of the promissory note. However Edwards did not make further payments toward the principal balance owed despite BTI's demand to do so. On 2 July 2003, BTI filed a complaint alleging breach of the stock purchase agreement, default of promissory note, and misrepresentation. On 5 September 2003, Edwards filed an answer and counterclaims which included claims for fraud, negligent misrepresentation, securities fraud, unfair and deceptive trade practices, breach of the stock purchase agreement and breach of a January 2002 agreement. BTI answered Edwards' counterclaims on 29 September 2003 and filed a motion to dismiss Edward's counterclaims. On 10 May 2004, the trial court heard BTI's motion to dismiss. Edwards's oral motion for leave to amend his counterclaims was denied in open court. In an order signed 17 May 2004, the trial court granted BTI's motion to dismiss Edward's counterclaims with prejudice for failure "to state proper claims for which relief can be granted pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure." Edwards subsequently filed a motion requesting the trial court to reconsider its denial of his motion to amend, which was also denied. Edwards appeals.

On appeal defendant raises two substantive issues whether the trial court erred by: (I) granting plaintiff's motion to dismiss defendant's counterclaims and (II) denying defendant's motion for leave to amend his counterclaims.

As a preliminary matter we must determine whether the appeal is from an interlocutory order and therefore is subject to dismissal. An order or judgment is interlocutory if it is made during the pendency of an action and does not dispose of the case but requires further action by the trial court in order to finally determine the entire controversy. Cagle v. Teachy, 111 N.C.App. 244, 247, 431 S.E.2d 801, 803 (1993) (citation omitted). There is generally no right to appeal an interlocutory order. Jeffreys v. Raleigh Oaks Joint Venture, 115 N.C.App. 377, 379, 444 S.E.2d 252, 253 (1994) (citation omitted). The purpose of this rule is "`to prevent fragmentary, premature and unnecessary appeals by permitting the trial court to bring the case to final judgment before it is presented to the appellate courts.'" Id. (quoting Fraser v. Di Santi, 75 N.C.App. 654, 655, 331 S.E.2d 217, 218, disc. rev. denied, 315 N.C. 183, 337 S.E.2d 856 (1985)).

However, a party may immediately appeal an interlocutory order or judgment in two ways. First, if the order or judgment is final as to some but not all of the claims or parties, and the trial court certifies the case for appeal pursuant to N.C. Gen.Stat. § 1A-1, Rule 54(b), an immediate appeal will lie. Id. Second, an appeal is permitted under N.C. Gen.Stat. §§ 1-277(a) and 7A-27(d)(1) if the trial court's decision deprives the appellant of a substantial right which would be lost absent immediate review. Id.

In Green v. Duke Power Co., 305 N.C. 603, 290 S.E.2d 593 (1982), the North Carolina Supreme Court held that the right to avoid a trial is generally not a substantial right, but the right to avoid two trials on the same issue may be a substantial right. Id. at 608, 290 S.E.2d at 596. The Court stated that "the possibility of undergoing a second trial affects a substantial right only when the same issues are present in both trials, creating the possibility that a party will be prejudiced by different juries in separate trials rendering inconsistent verdicts on the same factual issue." Id. In Liggett Group, Inc. v. Sunas, 113 N.C.App. 19, 437 S.E.2d 674 (1993), this Court stated:

A substantial right ... is considered affected if `there are overlapping factual issues between the claim determined and any claims which have not yet been determined' because such overlap creates the potential for inconsistent verdicts resulting from two trials on the same factual issues.

Id. at 24, 437 S.E.2d at 677 (citation omitted). There is a two-part test requiring a party to show that (1) the same factual issues would be present in both trials and (2) the possibility of inconsistent verdicts on those issues exists. Moose v. Nissan of Statesville, Inc., 115 N.C.App. 423, 426, 444 S.E.2d 694, 697 (1994).

Defendant, while acknowledging the appeal is from an interlocutory order, nevertheless asserts the appeal should be heard because the trial court's ruling affects a substantial right. Defendant contends the claims asserted by both parties involve identical issues of fact and that defendant would be prejudiced if these factual issues are not heard by the same jury. Defendant argues he is entitled to an immediate appeal because the trial court's order exposes him to the possibility of inconsistent verdicts upon "overlapping factual issues." After carefully reviewing the pleadings and the procedural development of this case, we agree.

Although BTI's claims remain viable and therefore not a final determination of the rights of the parties, we hold defendant would be deprived of a substantial right if an immediate appeal is not allowed. Defendant shows that plaintiff's claims of breach of a stock purchase agreement, default on a promissory note and negligent misrepresentation and his counterclaims of fraud, negligent misrepresentation, securities fraud, unfair and deceptive trade practices, breach of a stock purchase agreement and breach of a January 2002 agreement involve identical issues of fact. Defendant's defense of fraud would be presented in plaintiff's trial on the breach of contract claim and defendant's trial on fraud in the inducement. Therefore, there exists the possibility of inconsistent verdicts resulting from the same factual issues. Accordingly, the trial court's dismissal of defendant's counterclaims affects a substantial right which would prejudice defendant if we did not hear this appeal. Therefore, we will reach the merits of defendant's appeal.

I

Defendant first argues the trial court erred by granting plaintiff's motion to dismiss defendant's counterclaims for failure to state a claim upon which relief may be granted. We disagree.

The question for this Court on a motion to dismiss pursuant to Rule 12(b)(6) is 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. Harris v. NCNB Nat'l Bank, 85 N.C.App. 669, 670, 355 S.E.2d 838, 840 (1987).

Fraud

Rule 9(b) of the North Carolina Rules of Civil Procedure requires that "in all averments of fraud ... the circumstances constituting fraud ... shall be stated with particularity." N.C. Gen.Stat. § 1A-1, Rule 9(b) (2005). "The well-recognized elements of fraud are 1) a false representation or concealment of a material fact, 2) reasonably calculated to deceive, 3) made with intent to deceive, 4) which does in fact deceive, and which 5) results in damage to the injured party. A complaint charging fraud must allege these elements with particularity." Hunter v. Spaulding, 97 N.C.App. 372, 377, 388 S.E.2d 630, 634 (1990) (internal citations omitted). "[I]n pleading actual fraud, the particularity requirement is met by alleging time, place and content of the fraudulent representation, identity of the person making the representation and what was obtained as a result of the fraudulent acts or representations." Terry v. Terry, 302 N.C. 77, 85, 273 S.E.2d 674, 678 (1981). Dismissal of a claim for failure to plead with particularity is proper where there are "no facts whatsoever setting forth the time, place, or specific individuals who purportedly...