Gress v. Rowboat Co., Inc.

• Decision Date: 03 June 2008
• Docket Number: No. COA07-961.,COA07-961.
• Citation: 661 S.E.2d 278
• Court: North Carolina Court of Appeals
• Parties: Stephen P. GRESS, Plaintiff, v. The ROWBOAT COMPANY, INC., and C&C Grading, Inc., Defendants.

661 S.E.2d 278

Stephen P. GRESS, Plaintiff, v. The ROWBOAT COMPANY, INC., and C&C Grading, Inc., Defendants.

No. COA07-961.

Court of Appeals of North Carolina.

June 3, 2008.

Appeal by defendants from order entered 26 April 2007 by Judge Richard L. Doughton in Iredell County Superior Court. Heard in the Court of Appeals 6 February 2008.

Templeton & Raynor, P.A., by Kenneth R. Raynor, Charlotte, for plaintiff appellee.

Homesley, Jones, Gaines, Dudley, Childers, McLurkin & Donaldson, PLLC, by Mark L. Childers, Mooresville, for defendant appellants.

McCULLOUGH, Judge.

The sole issue before us is whether the trial court properly dismissed defendants' counterclaim asserting that plaintiff engaged in unfair and deceptive trade practices pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. "In our review of the dismissal of this action pursuant to [N.C. Gen.Stat. § 1A-1,] Rule 12(b)(6) [(2007)], we must consider the allegations of plaintiff's complaint as true." Arroyo v. Scottie's Professional Window Cleaning, 120 N.C.App. 154, 155, 461 S.E.2d 13, 14 (1995).

The facts as pled by defendants are as follows: The Rowboat Company, Inc. ("Rowboat") and C&C Grading, Inc. ("C&C") (collectively referred to as "defendants") are North Carolina corporations wholly owned by Robert Wilson ("Wilson"), who is the president of both corporations. Rowboat is engaged in the business of building piers, docks, boathouses, boat slips, and other waterfront structures for residential and commercial customers. C&C is engaged in the business of grading real property and constructing upland amenities for resort developments.

In May 2005, Stephen P. Gress ("plaintiff") approached Wilson about the possibility of buying the assets of both Rowboat and C&C. Plaintiff and Wilson entered into a written letter of intent on 30 May 2005, and plaintiff paid Wilson a $10,000 earnest money deposit, refundable only in the event of a material misrepresentation. Plaintiff represented that he would close the asset purchase within sixty to ninety days.

During negotiations, plaintiff and Wilson agreed that plaintiff would be permitted to observe the operations of the businesses and to conduct due diligence measures in and about the business premises prior to the closing of the deal. Further, in the interest of maintaining the continuity of business, the parties agreed to keep plaintiff's pending purchase of defendants' assets confidential. To that end, the parties agreed to introduce plaintiff as an employee of C&C and entered into a fictitious employment agreement, entitled "C&C Grading Co. Inc. Agreement President Opportunities and Expectations." Neither party intended for this contract to be a true contract of employment; rather, the parties agreed that defendants would "recoup from [p]laintiff at the closing of the purchase and sale of the [defendants'] assets . . . those sums . . . paid to [p]laintiff as a nominal employee[.]"

Thereafter, plaintiff did not purchase defendants' assets as planned within ninety days. In fact, plaintiff had no intention of purchasing defendants' assets, yet plaintiff induced defendants to continually extend the closing deadline so that plaintiff could continue to draw a salary and receive quarterly profit-sharing bonuses. Further, while acting as a "nominal employee," plaintiff knowingly engaged in a series of unauthorized activities that resulted in financial loss and damage to defendants, including among other acts, upgrading the business's computer network, rebuilding and painting a remote office, and negotiating the purchase of another company.

In January of 2006, it became evident to defendants that plaintiff had no intention and no ability to close the purchase of defendants' assets. C&C terminated the "nominal" employment contract and revoked plaintiff's access to defendants' business premises and records.

Plaintiff brought suit against defendants to recover his $10,000 earnest money deposit. Defendants asserted counterclaims against plaintiff for breach of contract and for Unfair and Deceptive Trade Practices ("the UDTPA claim") under N.C. Gen.Stat. § 75.1.1 (2007). Pursuant to Rule 12(b)(6), plaintiff moved to dismiss the UDTPA claim on the ground that defendants had failed to state a claim upon which relief could be granted. The trial court granted this motion, concluding that the relationship between plaintiff and defendants was that of an employee and employer, and defendants' counterclaim was, therefore, outside of the intended scope of N.C. Gen. Stat. § 75-1.1.

On appeal, defendants contend that the trial court erred in dismissing their UDTPA claim. We agree. Treating defendants' allegations as true and construing their claim liberally, as we must at the Rule 12(b)(6) stage, defendants have alleged that plaintiff engaged in a fraudulent scheme arising from the sale of corporate assets, which is sufficient to establish a claim for relief under N.C. Gen.Stat. § 75-1.1.

"An inquiry into the sufficiency of a counterclaim to withstand a motion to dismiss under Rule 12(b)(6) is identical to that regarding the sufficiency of a complaint to survive the same motion." Chesapeake Microfilm, Inc. v. Eastern Microfilm Sales & Service, 91 N.C.App. 539, 542, 372 S.E.2d 901, 902 (1988). In deciding a motion to dismiss pursuant to Rule 12(b)(6), the trial court must determine "`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.'" Block v. County of Person, 141 N.C.App. 273, 277, 540 S.E.2d 415, 419 (2000) (quoting Harris v. NCNB, 85 N.C.App. 669, 670, 355 S.E.2d 838, 840 (1987)). The court must construe the complaint liberally and "should not dismiss the complaint unless it appears beyond a doubt that the plaintiff could not prove any set of facts to support his claim which would entitle him to relief." Id. at 277-78, 540 S.E.2d at 415, 540 S.E.2d at 419.

To establish a prima facie claim for unfair trade practices, the defendants must show: (1) plaintiff committed an unfair or deceptive act or practice, (2) the action in question was in or affecting commerce, N.C. Gen.Stat. § 75-1.1, and (3) the act proximately caused injury to defendants. Pleasant Valley Promenade v. Lechmere, Inc., 120 N.C.App. 650, 664, 464 S.E.2d 47, 58 (1995). "`[T]he unfair and deceptive acts and practices forbidden by G.S. 75-1.1(a) are those involved in the bargain, sale, barter, exchange or traffic.'" Cameron v. New Hanover Memorial Hospital, 58 N.C.App. 414, 444-45, 293 S.E.2d 901, 919 (1982) (quoting Edmisten, Attorney General v. Penney Co., 292 N.C. 311, 316-17, 233 S.E.2d 895, 899 (1977)), appeal dismissed, cert. denied, 307 N.C. 127, 297 S.E.2d 399 (1982). The UDTPA is intended to apply "`"to dealings between buyers and sellers at all levels of commerce."'" Sara Lee Corp. v. Carter, 351 N.C. 27, 32, 519 S.E.2d 308, 311 (citations omitted), reh'g denied, 351 N.C. 191, 541 S.E.2d 716 (1999). This Court has held that "it is not necessary for the plaintiff to show fraud, bad faith, deliberate or knowing acts of deception, or actual deception," but "plaintiff must . . . show that the acts complained of possessed the tendency or capacity to mislead, or created the likelihood of deception." Overstreet v. Brookland, Inc., 52 N.C.App. 444, 452-53, 279 S.E.2d 1, 7 (1981).

A. Employee-Employer Relationships

As a general rule, there is a presumption against unfair and deceptive practice claims as between employers and employees. Dalton v. Camp, 353 N.C. 647, 658, 548 S.E.2d 704, 711 (2001). Ordinarily, in such a context, the claimant must make a showing of business related conduct that is unlawful or of deceptive acts that affect commerce beyond the employment relationship. Durling v. King, 146 N.C.App. 483, 488-89, 554 S.E.2d 1, 4 (2001). The rationale behind this general rule is that pure employer-employee disputes are not sufficiently "in or affecting commerce" to satisfy the second element of a UDTPA claim. Id. at 489, 554 S.E.2d at 5.

Here, however, defendants do not allege the existence of a true employer-employee relationship. See State ex rel. Employment Security Comm. v. Faulk, 88 N.C.App. 369, 374, 363 S.E.2d 225, 227-28 ("Whether someone is an `employee' is a mixed question of law and fact. The question of fact is...