Broad St. Clinic Found. v. Weeks

• Decision Date: 18 August 2020
• Docket Number: No. COA19-1033,COA19-1033
• Citation: 848 S.E.2d 224
• Parties: The BROAD STREET CLINIC FOUNDATION, Plaintiff, v. Orin H. WEEKS, Jr., Individually and as Trustee of the Orin H. Weeks, Jr. Revocable Living Trust, Plantation Venture, LLC, Izorah, LLC, Edward Hill, LLC, Robert H., LLC, and Carteret-Craven Electric Membership Corporation, Defendants.
• Court: North Carolina Court of Appeals

848 S.E.2d 224

The BROAD STREET CLINIC FOUNDATION, Plaintiff,

v.Orin H. WEEKS, Jr., Individually and as Trustee of the Orin H. Weeks, Jr. Revocable Living Trust, Plantation Venture, LLC, Izorah, LLC, Edward Hill, LLC, Robert H., LLC, and Carteret-Craven Electric Membership Corporation, Defendants.

No. COA19-1033

Court of Appeals of North Carolina.

Filed: August 18, 2020

Harvell and Collins, P.A., by Wesley A. Collins, Morehead City, and Samuel K. Morris-Bloom, for plaintiff-appellant.

Ward and Smith, P.A., by Michael J. Parrish, New Bern, and Alex C. Dale, for defendants-appellees Orin H. Weeks, Jr., individually and as Trustee of The Orin H. Weeks, Jr. Revocable Living Trust, Izorah, LLC, Edward Hill, LLC, and Robert H., LLC.

White & Allen, P.A., Kinston, by John P. Marshall, and Womble Bond Dickinson (US) LLP, Winston-Salem, by Michael Montecalvo, for defendant-appellee Plantation Venture, LLC.

Blanco Tackabery & Matamoros, P.A., by Chad A. Archer, Greensboro, and Ashley S. Rusher, Winston-Salem, for defendant-appellee Carteret-Craven Electric Membership Corporation.

ZACHARY, Judge.

Plaintiff The Broad Street Clinic Foundation appeals from the trial court's order granting Defendants’ motions to dismiss its claims, asserting that the provision of a deed that Plaintiff seeks to enforce is not an unenforceable transfer fee covenant. After careful review, we affirm.

Background

The relevant factual allegations of Plaintiff The Broad Street Clinic Foundation's (the "Clinic's") complaint, which for purposes of this appeal are taken as true, are as follows: Among other assets, John R. Jones owned three valuable tracts of land, consisting of approximately 60 acres in Carteret County, North Carolina (the "Property"). Upon his death on 23 April 2015, Mr. Jones's 88-year-old wife, Lois B. Jones, inherited the Property.

Shortly after Mr. Jones's death, Mrs. Jones and Orin H. Weeks, Jr., negotiated the sale of the Property to Weeks. Although the Property's tax value exceeded $800,000, Weeks offered Mrs. Jones approximately $200,000; however, he suggested that the deed contain a provision obligating Weeks to give 25% of the proceeds of the first conveyance of the Property to the charitable organization of her choice. Mr. Jones was a dedicated supporter of the Clinic, a non-profit, free health clinic that provides medical care to underserved individuals in Carteret County and the surrounding areas. Accordingly, Mrs. Jones designated the Clinic as the charitable organization to benefit from Weeks's first conveyance of the Property.

Mrs. Jones agreed to accept Weeks's offer of $200,000 for the Property, with the proviso that she retain a life estate in the Property, and that the deed provide that the Clinic would receive 25% of the proceeds of the first conveyance of the Property.

On 21 May 2015, Mrs. Jones conveyed the Property to Weeks, and retained a life estate. On 22 May 2015, the deed was recorded at Book 1509, Page 191, Carteret County Register of Deeds (the "Jones Deed"). The deed, which the Clinic contends was prepared by Weeks's attorneys, also contained the agreed-upon "25% Provision."

And the party of the second part, [Weeks,] for itself and its successors and assigns, hereby covenants and agrees with the parties of the first part[, Mrs. Jones,] that upon the first conveyance of the Property from [Weeks ] or its successors or assigns to a party other than Orin H. Weeks, Jr. or an heir or devisee of Orin H. Weeks, Jr., [Weeks ] or its successor or assign, as the case may be, will pay twenty-five percent (25%) of the gross proceeds less all customary costs (excluding any debt repayment) to be received by [Weeks ] to The Broad Street Clinic Foundation , or if The Broad Street Clinic Foundation does not then exist, then to Carteret County General Hospital Foundation Corporation, or if Carteret County General Hospital Foundation Corporation does not then exist, then to a similar non-profit organization serving Carteret County and Eastern North Carolina chosen by [Weeks].

(Emphasis added).

Mrs. Jones died later that year. The Clinic alleges that, following Mrs. Jones’ death, Weeks "or a presently unknown associate" formed four limited liability companies: Defendant Plantation Venture, LLC; Defendant Izorah, LLC; Defendant Robert H., LLC; and Defendant Edward Hill, LLC.

On 17 August 2017, Weeks recorded a gift deed conveying title to a portion of the Property to Plantation Venture, LLC. On 24 January 2018, Weeks conveyed approximately 10.35 acres of the Property by special warranty deed to Defendant Robert H., LLC; approximately 10.33 acres of the Property by special warranty deed to Defendant Izorah, LLC; and approximately 10.44 acres of the Property by special warranty deed to Defendant Edward Hill, LLC. The revenue stamps on the Robert H., LLC deed, the Izorah, LLC deed, and the Edward Hill, LLC deed indicate that the land was conveyed for no consideration. On 22 February 2018, Plantation Venture, LLC, used 4.588 acres of the land as collateral for a $750,000 loan from Defendant Carteret-Craven Electric Membership Corporation, and executed a deed of trust and security agreement securing the loan.

The Clinic eventually learned about Weeks's conveyance to Plantation Venture, LLC and, by letter dated 14 June 2018, demanded payment in accordance with the 25% Provision. By letter dated 18 June 2018, Weeks informed the Clinic's counsel that no proceeds had been generated by the conveyance, and that therefore the Clinic was "not entitled to anything."

On 6 November 2018, the Clinic filed its complaint against Defendants and its notice of lis pendens. On 16 November 2018, the Clinic filed an amended complaint, adding Defendant Carteret-Craven Electric Membership Corporation as a named party. The amended complaint included two requests for declaratory judgment, as well as a claim to void transfers of trust property, and claims for breach of contract/covenant (Weeks only); breach of fiduciary duty (Weeks only); constructive fraud (Weeks only); interference with prospective advantage (Plantation Venture, LLC; Izorah, LLC; Edward Hill, LLC; and Robert H., LLC only); fraud (excluding Carteret-Craven Electric Membership Corporation); unjust enrichment (excluding Carteret-Craven Electric Membership Corporation); civil conspiracy (excluding Carteret-Craven Electric Membership Corporation); punitive damages (excluding Carteret-Craven Electric Membership Corporation); unfair and deceptive trade practices (excluding Carteret-Craven Electric Membership Corporation); and piercing the limited liability shield (excluding Carteret-Craven Electric Membership Corporation).

On 21 December 2018, Weeks, individually and as Trustee of the Orin H. Weeks, Jr., Revocable Living Trust; Izorah, LLC; Edward Hill, LLC; and Robert H., LLC moved to dismiss the Clinic's claims pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, and filed their answer to the Clinic's amended complaint. In their answer, these defendants asserted, inter alia , that the Clinic "has no right to bring any claim against" them because, "[t]o the extent that the Jones Deed required the payment of any amount of proceeds to the Clinic upon the sale of any portion of the [Property], such a requirement is void, invalid, and/or unenforceable as a matter of North Carolina law and public policy," in that "[a]ny such requirement is a transfer fee covenant which is specifically prohibited by, and deemed void under, N.C. Gen. Stat. § 39A-1 et seq. " That same day, Plantation Venture, LLC also moved to dismiss the Clinic's claims pursuant to Rule 12(b)(6), asserting that the 25% Provision "is an unenforceable ‘transfer fee covenant’ prohibited by N.C. Gen. Stat. § 39A." Plantation Venture, LLC filed its answer to the Clinic's amended complaint as well. Lastly, on 27 December 2018, Carteret-Craven Electric Membership Corporation moved to dismiss the Clinic's claims pursuant to Rule 12(b)(1) and (6), and moved for attorneys’ fees.

On 7 January 2019, Defendants’ motions came on for hearing in Carteret County Superior Court before the Honorable George F. Jones. On 20 May 2019, the trial court entered an order granting Defendants’ motions to dismiss. The Clinic entered timely notice of appeal.

Discussion

Each of the Clinic's claims is predicated on the enforceability of the 25% Provision. Accordingly, the determinative issue at bar is whether the 25% Provision in the Jones Deed is an unenforceable transfer fee covenant.

I. Standard of Review

A party may move for the dismissal of a claim or claims based on the complaint's "[f]ailure to state a claim upon which relief can be granted[.]" N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) (2019). "The motion to dismiss under N.C. R. Civ. P. 12(b)(6) tests the legal sufficiency of the complaint." Stanback v. Stanback , 297 N.C. 181, 185, 254 S.E.2d 611, 615 (1979) (citation omitted). "In ruling on the motion[,] the allegations of the complaint must be viewed as admitted, and on that basis the court must determine as a matter of law whether the allegations state a claim for which relief may be granted." Id. (citation omitted). "[T]he well-pleaded material allegations of the complaint are taken as admitted; but conclusions of law or unwarranted deductions of fact are not[.]" Sutton v. Duke , 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970) (citation omitted).

Dismissal of a claim under Rule 12(b)(6) is proper "(1) when the complaint on its face reveals that no law supports [the] plaintiff's claim; (2) when the complaint reveals on its face the absence of facts sufficient to make a claim; [or] (3) when some fact disclosed in the complaint necessarily defeats the plaintiff's claim." Intersal, Inc. v. Hamilton , 373 N.C. 89, 98, 834 S.E.2d 404, 411 (2019) (citation omitted). "However, a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of a claim which would entitle the...