Hillsboro Partners, LLC v. City of Fayetteville

• Decision Date: 19 March 2013
• Docket Number: No. COA12–987.,COA12–987.
• Citation: 738 S.E.2d 819
• Parties: HILLSBORO PARTNERS, LLC, Plaintiff, v. The CITY OF FAYETTEVILLE, Defendant.
• Court: North Carolina Court of Appeals

738 S.E.2d 819

HILLSBORO PARTNERS, LLC, Plaintiff,

v.The CITY OF FAYETTEVILLE, Defendant.

No. COA12–987.

Court of Appeals of North Carolina.

March 19, 2013.

Appeal by defendant from order entered 7 May 2012 by Judge James F. Ammons, Jr. in Superior Court, Cumberland County. Heard in the Court of Appeals 10 January 2013.

J. Duane Gilliam, Jr., Fayetteville and Coy E. Brewer, Jr., for plaintiff-appellee.

Poyner Spruill LLP, Raleigh by Keith H. Johnson and Andrew H. Erteschik and Office of the Fayetteville City Attorney by Assistant City Attorney Brian M. Meyer, for defendant-appellant.

STROUD, Judge.

The City of Fayetteville (“defendant”) appeals from an order entered 7 May 2012 denying its motion to dismiss the complaint filed by Hillsboro Partners, LLC (“plaintiff”) on the grounds that the trial court lacked jurisdiction, that the claim was barred by collateral estoppel, and that defendant was immune from suit under sovereign immunity. On appeal, defendant argues only that the trial court erred in denying its motion because plaintiff was collaterally estopped from claiming that its building was safe and structurally sound, given its failure to appeal the initial condemnation proceedings. For the following reasons, we agree and reverse the trial court's order denying defendant's motion to dismiss.

I. Background

Plaintiff purchased a 2.1 acre lot on Hillsboro Street in Fayetteville, North Carolina, on 21 May, 2010. On that lot were several buildings, including a former church building that had been damaged in a fire. On 16 July 2010, Bart Swanson, manager of the Housing and Code Enforcement Division of the City of Fayetteville sent plaintiff a letter alerting it that an inspection found the former church building to be unsafe. On 28 July 2010, Mr. Swanson held a hearing, which plaintiff did not attend, where he found that plaintiff's building posed a “fire, health and safety hazard,” and ordered plaintiff to repair or demolish the structure.

On 11 October 2010, the City of Fayetteville passed an ordinance requiring the demolition of plaintiff's building after adopting Mr. Swanson's findings and determining that plaintiff had failed to comply with the order. After the ordinance passed, plaintiff sought a permit to demolish its building and funding from the City to do so.

Plaintiff has alleged that during the asbestos inspections in preparation for demolition, its inspectors found that the fire damage to the former church structure was more superficial than previously thought. Plaintiff alleged that it provided the reports of these inspectors to defendant. Although plaintiff did not state when these reports were provided, the reports were not even provided to plaintiff until 5 February 2011 and 16 February 2011, nearly seven months after the hearing and four months after the demolition ordinance. Defendant proceeded with the demolition despite plaintiff's claims that the structure was in fact safe.

On 3 March 2011, plaintiff filed its first complaint, alleging that defendant had violated its rights to equal protection and due process, that defendant had taken its property without just compensation, and that defendant had acted under the wrong statutory authority. Plaintiff requested a temporary restraining order as well as temporary and permanent injunctions. The Superior Court, Cumberland County, denied plaintiff's motion for a temporary restraining order and temporary injunction. Defendant then moved to dismiss the complaint for lack of subject matter jurisdiction under N.C. Gen.Stat. § 1A–1, Rule 12(b)(1), arguing that the Superior Court lacked jurisdiction because plaintiff had failed to exhaust its administrative remedies. The Superior Court granted defendant's motion by order entered 5 April 2011.

Plaintiff filed its second complaint, the subject of the present appeal, on 15 November 2011, alleging only that it was entitled to just compensation for the building defendant ordered demolished.¹ Defendant answered, denying any taking requiring compensation, asserted several affirmative defenses, and moved to dismiss the complaint on the grounds of lack of jurisdiction for failure to exhaust administrative remedies, sovereign immunity, and failure to state a claim. Defendant argued that plaintiff failed to state a claim because of governmental immunity, res judicata, and collateral estoppel. The Superior Court held a hearing and denied defendant's motion to dismiss by order entered 7 May 2012. Defendant filed written notice of appeal to this Court on 15 May 2012.

II. Motion to Dismiss

As an initial matter, we must address the question of whether defendant's motion to dismiss was converted into a motion for summary judgment. We note that the motion filed by defendant was entitled a “motion to dismiss” and the trial court's order denying defendant's motion also labeled it as such. The motion to dismiss was brought pursuant to Rules 12(b)(1), (2), and (6) of the North Carolina Rules of Civil Procedure.

As discussed in detail below, the ground underlying defendant's motion upon which we focus our analysis is collateral estoppel. Because in this case the fact that defendant argues plaintiff is collaterally estopped from contesting relates to plaintiff's ability to state a claim, rather than a jurisdictional issue, it is properly analyzed under Rule 12(b)(6) rather than Rules 12(b)(1) or (2).

As a general proposition, a trial court's consideration of a motion brought under Rule 12(b)(6) is limited to examining the legal sufficiency of the allegations contained within the four corners of the complaint. Newberne v. Department of Crime Control and Public Safety, 359 N.C. 782, 784, 618 S.E.2d 201, 203 (2005). Here, although the record is unclear, it appears that the trial court received and considered documents at the hearing on the motion to dismiss that had not been incorporated into the complaint or answer. Specifically, the parties submitted all of the pleadings and evidence from the first lawsuit, including the relevant documents regarding the Town's administrative decision and testimony taken at the hearing on defendant's motion to dismiss in the earlier action.

Both parties cited to these documents in their briefs to this Court. Moreover, neither party has asserted that the exhibits filed with this Court were not considered by the trial court or challenged the propriety of the trial court's review of these documents. Nor have any of the parties challenged the inclusion of these materials in the record on appeal.

Rule 12(b) of the North Carolina Rules of Civil Procedure states in pertinent part as follows:

If, on a motion asserting the defense numbered (6), to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

N.C. Gen.Stat. § 1A–1, Rule 12(b) (2011); see also DeArmon v. B. Mears Corp., 312 N.C. 749, 758, 325 S.E.2d 223, 229 (1985) (“Where matters outside the pleadings are presented to and not excluded by the [trial] court on a motion to dismiss for failure to state a claim, the motion shall be treated as one for summary judgment under Rule 56.”); N.C. Steel, Inc. v. National Council on Compensation Ins., 123 N.C.App. 163, 169, 472 S.E.2d 578, 581 (1996) (“When a trial court considers matters outside the pleadings, a motion under Rule 12 is automatically converted into a motion for summary judgment.” (emphasis added) (citations omitted)), rev'd in part on other grounds,347 N.C. 627, 496 S.E.2d 369 (1998).

In the present case, neither party claims that it did not have a reasonable opportunity to present evidence or was surprised by the introduction of this material. Cf. Kemp v. Spivey, 166 N.C.App. 456, 462, 602 S.E.2d 686, 690 (2004) (reversing and remanding an appeal from an order granting a motion to dismiss where the trial court considered matters outside the pleadings, but the parties were not accorded a reasonable opportunity to present all pertinent material). Therefore, we conclude that defendant's motion to dismiss was converted into a motion for summary judgment.

III. Interlocutory Order

An order denying a motion for summary judgment is an interlocutory order. DeArmon, 312 N.C. at 758, 325 S.E.2d at 230.

Interlocutory orders are those made during the pendency of an action which do not dispose of the case, but instead leave it for further action by the trial court in order to settle and determine the entire controversy. As a general rule, interlocutory orders are not immediately appealable. However, immediate appeal of interlocutory orders and judgments is available in at least two instances: when the trial court certifies, pursuant to N.C.G.S. § 1A–1, Rule 54(b), that there is no just reason for delay of the appeal; and when the interlocutory order affects a substantial right under N.C.G.S. §§ 1–277(a) and 7A–27 (d)(1).

Turner v. Hammocks Beach Corp., 363 N.C. 555, 558, 681 S.E.2d 770, 773 (2009) (citations, quotation marks, and ellipses omitted).

Defendant has raised the defense of collateral estoppel before the trial court and on appeal. Our Supreme Court has recognized that an order which denies dismissal of a claim in this situation may affect a substantial right.

Defendant's argument in favor of appealability is that the denial of a motion to dismiss a claim for relief affects a substantial right when the motion to dismiss makes a colorable assertion that the claim is barred under the doctrine of collateral estoppel. We agree. Under the collateral estoppel doctrine, parties and parties in privity with them are precluded from retrying fully litigated issues that were decided in any prior determination and were necessary to the prior determination. The doctrine...