Crouse v. Mineo

Decision Date18 March 2008
Docket NumberNo. COA07-344.,COA07-344.
Citation658 S.E.2d 33
PartiesJames T. CROUSE and Mineo & Crouse, PLLC a/k/a Mineo & Crouse, a North Carolina General Partnership, Plaintiffs-Appellants, v. Robert A. "Tony" MINEO, Defendant-Appellee.
CourtNorth Carolina Court of Appeals

2006 by Judge Carl R. Fox in Superior Court, Wake County. Heard in the Court of Appeals 17 October 2007.

Smith Moore LLP, by Mark A. Finkelstein, Raleigh, for Plaintiffs-Appellants.

Mineo & Mineo, by Athena R. Mineo, Raleigh, for Defendant-Appellee.

McGEE, Judge.

James T. Crouse (Mr. Crouse) and Mineo & Crouse, PLLC (collectively, Plaintiffs) filed a complaint against Robert A. "Tony" Mineo (Defendant) on 3 December 2004, alleging claims for breach of fiduciary duty and anticipatory breach of fiduciary duty, anticipatory breach of contract, an accounting, quantum meruit, quantum valebant, and unfair or deceptive trade practices. Plaintiffs alleged that at all relevant times, Mr. Crouse and Defendant were members of Mineo & Crouse, PLLC. Plaintiffs further alleged that Defendant misappropriated funds that were owed to Mineo & Crouse, PLLC or to Mr. Crouse.

Defendant filed an answer and counterclaims for an accounting and for quantum meruit dated 2 February 2005. Plaintiffs filed a reply on 1 April 2005. Defendant filed a motion to dismiss pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) on 26 June 2006, alleging

[P]laintiffs have no standing to prosecute this action; that [Mr.] Crouse is not a proper party plaintiff and has not satisfied the conditions precedent to pursuing this action on behalf of Mineo & Crouse, PLLC; that Mineo & Crouse in any form is without authority to pursue this action; and that G.S. Chapter 75 is inapplicable to the dispute between these parties.

Plaintiffs filed a "motion for appointment of [Mr.] Crouse to wind up affairs of Mineo & Crouse, PLLC and motion to amend complaint to reflect this appointment" on 17 August 2006.

The trial court entered an order allowing Defendant's motion to dismiss on 21 August 2006. Plaintiffs filed a "motion to amend judgment pursuant to Rules 52(b) & 59(b) or in the alternative, for relief from judgment pursuant to Rule 60(b)(1) and 60(b)(6)," and the trial court denied the motion in an order dated 8 December 2006. The trial court also denied Plaintiffs' "motion for appointment of [Mr.] Crouse to wind up affairs of Mineo & Crouse, PLLC and motion to amend complaint to reflect this appointment" in an order dated 8 December 2006. The trial court did not dismiss Defendant's counterclaims. Plaintiffs appeal from the order granting Defendant's motion to dismiss and from the orders dated 8 December 2006.

Plaintiffs acknowledge that the orders are interlocutory because the orders did not dispose of the case in its entirety. See Sharpe v. Worland, 351 N.C. 159, 161, 522 S.E.2d 577, 578 (1999). As a general rule, interlocutory orders are not immediately appealable. Id. However, immediate review of an interlocutory order is available in two limited circumstances: (1) where the trial court certifies, pursuant to N.C. Gen.Stat. § 1A-1, Rule 54(b), that there is no just reason for delay of an appeal from a final order as to one or more, but not all, of the claims; and (2) where the interlocutory order affects a substantial right in accordance with N.C. Gen.Stat. § 1-277(a). Sharpe, 351 N.C. at 161-62, 522 S.E.2d at 579.

In the present case, the orders that Plaintiffs appeal do not contain a Rule 54(b) certification. Nevertheless, Plaintiffs contend that the interlocutory orders affect their substantial right to avoid the possibility of two trials on the same factual issues. An appellant bears the burden of demonstrating that an order will adversely affect a substantial right. Jeffreys v. Raleigh Oaks Joint Venture, 115 N.C.App. 377, 379, 444 S.E.2d 252, 253 (1994). "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." Liggett Group v. Sunas, 113 N.C.App. 19, 24, 437 S.E.2d 674, 677 (1993) (quoting Davidson v. Knauff Ins. Agency, 93 N.C.App. 20, 26, 376 S.E.2d 488, 492, disc. review denied, 324 N.C. 577, 381 S.E.2d 772 (1989)).

Defendant filed counterclaims for an accounting and for quantum meruit, which have not been dismissed. However, these claims raise factual issues that are identical to the factual issues raised by Plaintiffs' claims, which were dismissed. Accordingly, Plaintiffs have demonstrated that the denial of an immediate appeal in the present case "creates the potential for inconsistent verdicts resulting from two trials on the same factual issues." See Liggett Group, 113 N.C.App. at 24, 437 S.E.2d at 677. Therefore, we hold that the orders Plaintiffs have appealed affect a substantial right and are immediately appealable.

I.

Plaintiffs argue the trial court erred by granting Defendant's motion to dismiss Plaintiffs' complaint for lack of standing. Plaintiffs contend that Defendant waived the defense of lack of standing by failing to specifically raise the defense in Defendant's answer. However, "[a] lack of standing may be challenged by motion to dismiss for failure to state a claim upon which relief may be granted." Energy Investors Fund, L.P. v. Metric Constructors, Inc., 351 N.C. 331, 337, 525 S.E.2d 441, 445 (2000). Plaintiffs' argument fails because the first defense in Defendant's answer clearly alleged that plaintiffs' complaint failed to state a claim upon which relief may be granted. Plaintiffs subsequently filed an additional motion to dismiss specifically contending the plaintiffs "had no standing to prosecute this action." Furthermore, because standing is a "necessary prerequisite to a court's proper exercise of subject matter jurisdiction," a challenge to standing may be made at any time. Aubin v. Susi, 149 N.C.App. 320, 324, 560 S.E.2d 875, 878-79, disc. review denied, 356 N.C. 610, 574 S.E.2d 474 (2002).

A.

Plaintiffs next argue the trial court erred in dismissing their complaint because the allegations in the complaint did not allege facts that could constitute a complete bar to recovery. Specifically, Plaintiffs argue that Mr. Crouse, in his capacity as a member-manager of Mineo & Crouse, PLLC, had the authority to cause Mineo & Crouse, PLLC to institute this lawsuit.

The standard of review of an order granting a motion to dismiss pursuant to N.C. Gen.Stat. § 1A-1, 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, whether properly labeled or not." Harris v. NCNB, 85 N.C.App. 669, 670, 355 S.E.2d 838, 840 (1987). "In ruling upon such a motion, the complaint is to be liberally construed, and the court should not dismiss the complaint 'unless it appears beyond doubt that [the] plaintiff could prove no set of facts in support of his claim which would entitle him to relief.'" Holloman v. Harrelson, 149 N.C.App. 861, 864, 561 S.E.2d 351, 353 (quoting Dixon v. Stuart, 85 N.C.App. 338, 340, 354 S.E.2d 757, 758 (1987)), disc. review denied, 355 N.C. 748, 565 S.E.2d 665 (2002). "Rule 12(b)(6) `generally precludes dismissal except in those instances where the face of the complaint discloses some insurmountable bar to recovery.'" Id. (quoting Sutton v. Duke, 277 N.C. 94, 102, 176 S.E.2d 161, 166 (1970)).

A limited liability company (LLC) is a "`statutory form of business organization . . . that combines characteristics of business corporations and partnerships.'" Hamby v. Profile Prods., L.L.C., 361 N.C. 630, 636, 652 S.E.2d 231, 235 (2007) (quoting Russell M. Robinson, II, Robinson on North Carolina Corporate Law § 34.01, at 34-2 (rev. 7th ed.2006) (hereinafter Robinson)).

The [LLC] Act contains numerous "default" provisions or rules that will govern an LLC only in the absence of an explicitly different arrangement in the LLC's articles of organization or written operating agreement. Because these default provisions can be changed in virtually any way the parties wish, an LLC is primarily a creature of contract.

Robinson, § 34.01, at 34-2 to 34-3. In the present case, the parties agree that they never entered into a written operating agreement. Therefore, the default provisions of the LLC act govern the present case.

Plaintiffs rely upon agency principles to argue that an LLC manager has "the inherent authority to authorize lawsuits to protect the LLC's interests." Plaintiffs cite N.C. Gen.Stat. § 57C-3-23, which provides:

Every manager is an agent of the limited liability company for the purpose of its business, and the act of every manager, including execution in the name of the limited liability company of any instrument, for apparently carrying on in the usual way the business of the limited liability company of which he is a manager, binds the limited liability company, unless the manager so acting has in fact no authority to act for the limited liability company in the particular matter and the person with whom the manager is dealing has knowledge of the fact that the manager has no authority.

N.C. Gen.Stat. § 57C-3-23 (2007). Plaintiffs also cite Robinson, which notes that "[a] manager's agency power is similar to that of a corporate officer and a general partner." Robinson, § 34.04[2], at 34-21 n. 22.

Defendant counters that the filing of the present action was a managerial decision, requiring the approval of a majority of the managers. Defendant cites N.C. Gen.Stat. § 57C-3-20(b), which provides:

Subject to any provisions in the articles of organization or a written operating agreement or this Chapter restricting, enlarging, or modifying the management rights and duties of any manager or managers, or...

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