GOVERNORS CLUB v. GOVERNORS CLUB P'SHIP

• Decision Date: 20 August 2002
• Docket Number: No. COA01-394.,COA01-394.
• Citation: 152 NC App. 240,567 S.E.2d 781
• Parties: GOVERNORS CLUB, INC., a North Carolina non-profit corporation, and Robert L. Alpert, on behalf of himself and all other similarly situated members of Governors Club, Inc., Plaintiffs, v. GOVERNORS CLUB LIMITED PARTNERSHIP, a Delaware limited partnership, Governors Club Development Corporation, a North Carolina Corporation, Estate of Truby J. Proctor, Jr., and Kirk J. Bradley, Defendants.
• Court: North Carolina Court of Appeals

567 S.E.2d 781

152 NC App. 240

GOVERNORS CLUB, INC., a North Carolina non-profit corporation, and Robert L. Alpert, on behalf of himself and all other similarly situated members of Governors Club, Inc., Plaintiffs, v. GOVERNORS CLUB LIMITED PARTNERSHIP, a Delaware limited partnership, Governors Club Development Corporation, a North Carolina Corporation, Estate of Truby J. Proctor, Jr., and Kirk J. Bradley, Defendants.

No. COA01-394.

Court of Appeals of North Carolina.

August 20, 2002.

Womble Carlyle Sandridge & Rice, PLLC by Burley B. Mitchell, Jr. and Charles L. Becker, Raleigh, for plaintiff-appellant Governors Club, Inc.

McCoy, Weaver, Wiggins, Cleveland & Raper, P.L.L.C. by John E. Raper, Jr., Fayetteville, for defendants-appellees Governors Club Limited Partnership and Governors Club Development Corporation.

Smith Helms Mulliss & Moore, L.L.P. by James G. Exum, Jr., and Gary R. Govert, Raleigh, for defendant-appellee Estate of Truby G. Proctor, Jr.

Boyce & Isley, P.L.L.C. by G. Eugene Boyce, Raleigh, for defendant-appellee Kirk J. Bradley.

WYNN, Judge.

Plaintiff Governors Club, Inc. (the "Club") appeals from a 4 October 2000 trial court order dismissing its complaint on all issues against Governors Club Limited Partnership (the "Partnership"), Governors Club Development Corporation (the "Development Corporation") (the Partnership and the Development Corporation are hereinafter referred to collectively as the "Developer"), Estate of Truby J. Proctor, Jr. ("Proctor"), and Kirk J. Bradley ("Bradley") (the Partnership, the Development Corporation, Proctor and Bradley are hereinafter referred to collectively as the "defendants"). Plaintiff Robert L. Alpert is not a party to this appeal. Following careful review, we reverse the trial court's 4 October 2000 order.

The Club and the Development Corporation are both North Carolina corporations. On 27 June 1989, the Club and the Development Corporation entered into a Facilities Purchase Agreement ("Agreement"). At the time, Bradley was the President of both the Club and the Development Corporation, and signed the Agreement on behalf of both entities. The Agreement provided for the Development Corporation's construction of an "eighteen (18) hole championship golf course designed by Jack Nicklaus," as well as a clubhouse, putting and chipping greens, a driving range, tennis courts and pool (collectively the "Facilities"). The Agreement further provided for the eventual sale of the Facilities to the Club no later than 1 January 1997, at which time the Club would purchase the Facilities and acquire the control and management thereof. Prior to closing, the Development Corporation would operate the Facilities.

In addition, the Agreement provided for the future creation of a six-member Advisory Committee, selected annually by the Development Corporation, to serve as a liaison between the Development Corporation and the Club members; the Advisory Committee was to have "no right, duty or obligation to act on behalf of the [Club] members" until closing. The Development Corporation agreed to select twelve Advisory Committee members immediately prior to closing, who would become the Club's Board of Directors upon closing. The Agreement also contained several provisions that would limit the Development Corporation's liability after title was conveyed to the Club. The Development Corporation later assigned the Agreement to the Partnership; at the time of the assignment, the Development Corporation was the Partnership's general partner.

Prior to closing, the Club and the Partnership amended the Agreement (the "Amendment") on 23 December 1996; Bradley signed the Amendment on behalf of both the Club (as its President) and the Partnership (as the President of its general partner, the Development Corporation). The Amendment altered various terms of the Agreement, such as (1) requiring the Developer to furnish a Closing Certificate to the Club at closing making certain representations; (2) requiring the then-sitting Advisory Committee to select independent legal counsel, at least thirty days prior to closing, to represent the Club in connection with the transactions contemplated within the Agreement, (3) requiring the Developer to select sixteen Advisory Committee members immediately prior to closing to become the Club's Board of Directors upon closing, and (4) setting a closing date of 1 January 1997. The Amendment recited that the amendments therein had been approved by a majority of the Club's members, and stated that "[e]xcept as specifically amended by this Amendment, the Agreement is hereby restated in full."

Closing of the contemplated transaction did in fact take place on 1 January 1997, at which time the Partnership furnished the required Closing Certificate to the Club, containing the required representations and warranties. However, plaintiff later brought this action, alleging that the Club and its members subsequently discovered numerous "latent defects in and problems with the [ ] Facilities that were not apparent or reasonably discoverable before the closing." Plaintiff detailed extensive defects in the golf course, wastewater holding ponds, and the clubhouse, and alleged that "neither the Agreement nor the Amendment nor the representations and warranties in the Closing Certificate were the result of an `arm's length' bargaining between independent parties." Instead, "the Agreement and the Amendment were in reality agreements by the Developer with itself," whereby Defendants intended that the Club members would bear ultimate responsibility, financial and otherwise, for the Facilities. Plaintiff pointed out various disclaimers throughout the Agreement whereby the Developer sought to exonerate itself from any responsibility for the Facilities that it constructed, and exclusively cared for and controlled until the closing date.

The complaint further asserted that the Club members had no rights whatsoever under the Agreement, and were not intended third-party beneficiaries thereof. Additionally, the complaint alleged that the Club's Board of Directors prior to closing, as well as the "new" Board of Directors that took office at closing (comprised of the sixteen-member Advisory Committee selected by the Developer), were "hand-picked" by the Developer. The "independent legal counsel" selected by the Club's "new" Board of Directors to represent the Club in connection with the transfer at closing was alleged to be a long-time friend of defendant Bradley, suggested by Bradley to the Board. Plaintiff alleged that said "independent" counsel actually began providing counsel to the incoming Board of Directors on or about June 1996. Accordingly, plaintiff asserted claims for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) reformation of contract, (4) fraudulent misrepresentation, (5) negligent misrepresentation, (6) breach of fiduciary duty, (7) constructive fraud, and (8) unfair and deceptive trade practices.

The Partnership and the Development Corporation answered separately, each asserting a N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) (1999) motion to dismiss plaintiff's complaint for failure to state a claim upon which relief can be granted. Both the Partnership and the Development Corporation also alleged that (1) upon information and belief, the Club members voted on and approved the Amendment in writing; (2) sometime between 1 January 1995 and 1 January 1997, all Club members were provided with a Governor's Club, Inc. Membership Offering Memorandum (the "Memorandum") containing a copy of the Agreement; (3) upon information and belief, sometime between 1 January 1995 and 1 January 1997, all Club members accepted the terms of Club membership set forth in the Memorandum, including an Acknowledgment Agreement specifically including an agreement by all Club members to be bound by the terms and conditions of the Agreement; (4) plaintiff "voluntarily assumed the risk of damage allegedly resulting from the purchase [of the Facilities] and [is] barred from recovery by an affirmative and voluntary assumption of known risks which were fully appreciated"; and (5) plaintiff waived its right to bring the claims in the complaint by ratifying all applicable agreements, wherein the Developer disclaimed all warranties and responsibilities relating to the alleged defects.

The Partnership and the Development Corporation each also asserted a counterclaim alleging that all Club members accepted the terms of Club membership as set forth in the Memorandum, as evidenced by the members' execution of the Acknowledgment Agreement whereby they agreed to be bound by the terms and conditions of the Agreement. The counterclaim alleged that, upon information and belief, the Amendment and its execution were voted upon and approved by the Club members in writing prior to the Amendment's execution. The counterclaim alleged further that the Memorandum refers to the "Disclaimer of Warranties" section of the Agreement, and specifically alerts the reader to the "substantial risks" to the Club and its members as a result thereof. The Partnership and the Development Corporation each pled plaintiff's alleged written acknowledgment and acceptance of the terms of the Agreement and the Amendment in bar to plaintiff's claims of fraud, and sought recovery from plaintiff for costs and expenses incurred in defending plaintiff's lawsuit.

In replying to the counterclaims of the Partnership and the Development Corporation, plaintiff asserted that "defendants collectively and/or individually misrepresented the contents and/or the effect of accepting the [ ] Memorandum, including the Agreement." Additionally, plaintiff asserted that:

several documents, including the Amendment, were submitted to then Club members for their approval by vote; that the defendants collectively and/or individually misrepresented the contents of said documents and/or the effect of accepting

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