Kerry Bodenhamer Farms, LLC v. Nature's Pearl Corporation, 16 CVS 217

• Decision Date: 27 March 2017
• Docket Number: 16 CVS 217
• Citation: 2017 NCBC 27
• Court: Superior Court of North Carolina
• Parties: KERRY BODENHAMER FARMS, LLC, Plaintiff, v. NATURE'S PEARL CORPORATION; JERRY SMITH; and LE BLEU CORPORATION, Defendants.

2017 NCBC 27

KERRY BODENHAMER FARMS, LLC, Plaintiff, v. NATURE'S PEARL CORPORATION; JERRY SMITH; and LE BLEU CORPORATION, Defendants.

No. 16 CVS 217

Superior Court of North Carolina, Davie

March 27, 2017

Wyche P.A., by Wade S. Kolb, III, Matthew T. Richardson, and Eric B. Amstutz, and Brooks, Pierce, McLendon, Humphrey &amp Leonard, LLP, by Kearns Davis, Eric M. David, and Kimberly M Marston, for Plaintiff Kerry Bodenhamer Farms, LLC.

Wilson & Helms, LLP, by G. Gray Wilson and Lorin J. Lapidus, for Defendants Nature's Pearl Corporation, Jerry Smith, and Le Bleu Corporation.

ORDER AND OPINION ON DEFENDANTS' MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS

Adam M. Conrad Judge

1. In this contract dispute, Plaintiff Kerry Bodenhamer Farms, LLC ("KB Farms") contends that Defendant Nature's Pearl Corporation improperly refused to pay for part of a shipment of muscadine grapes and then terminated the governing contract without cause. KB Farms brings claims against Nature's Pearl for breach of contract, tortious breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair or deceptive trade practices.

2. KB Farms also asserts those claims against two additional defendants: Jerry Smith, the owner and chief officer of Nature's Pearl; and Le Bleu Corporation, another company owned by Smith. KB Farms asserts a fifth claim against Smith and Le Bleu for tortious interference with the contract between KB Farms and Nature's Pearl.

3. Defendants jointly moved for partial judgment on the pleadings under Rule 12(c) of the North Carolina Rules of Civil Procedure. Smith and Le Bleu challenge all of the causes of action brought against them. Nature's Pearl contends that the Court should dismiss the claims against it for tortious breach of contract and unfair or deceptive trade practices.

4. Having considered the motion, the briefs in support of and in opposition to the motion, and the arguments of counsel at the hearing on February 15, 2017, the Court GRANTS in part and DENIES in part the motion.

I. BACKGROUND

5. The Court does not make findings of fact on a motion for judgment on the pleadings under Rule 12(c). The following factual summary is drawn from relevant allegations in the Complaint and the attached exhibits.

6. KB Farms is a North Carolina limited liability company that raises and sells a variety of crops, "including soybeans, peanuts, wheat, and muscadine grapes." (Compl. ¶¶ 1, 6.)

7. Nature's Pearl and Le Bleu are North Carolina corporations, and Smith owns all or a controlling interest of both corporations. (Compl. ¶¶ 2, 7.) Nature's Pearl sells products, such as juices and nutritional supplements, that require muscadine grapes. (Compl. ¶ 7.) Le Bleu sells bottled water. (Compl. ¶ 7.)

8. The parties' business relationship began in 2005. At that time, Smith requested that KB Farms begin growing muscadine grapes-a crop KB Farms had not previously grown commercially. (Compl. ¶¶ 8, 11.) Smith agreed to pay a $200 per ton premium in return for the exclusive right to purchase all of KB Farms' grapes. (Compl. ¶ 9.) After planting 18 acres in 2006 and 2007, KB Farms sold its first crop of muscadine grapes in 2008. (Compl. ¶¶ 11, 12.) KB Farms grew and sold grapes under this oral exclusivity agreement in 2009, 2010, and 2011. (Compl. ¶¶ 13-15.)

9. KB Farms and Nature's Pearl executed a written contract in 2012. (Compl. ¶ 18.) Styled "Exclusive Growers Muscadine Whole Grape Agreement" ("Agreement"), the Agreement grants to Nature's Pearl "the sole and exclusive right to purchase all of [KB Farms'] muscadine grapes ('whole grapes') on an annual basis" for 20 years. (Compl. Ex. A, ¶¶ 1, 8 ["Agreement"].) Nature's Pearl agreed to pay $700 per ton for the 2012 harvest, but "[f]uture prices for whole grapes shall be determined by market conditions as determined by [Nature's Pearl] for each year of this Agreement." (Agreement ¶ 2.)

10. The Agreement gives Nature's Pearl "the right to reject any whole grapes that" it determines "to be unusable" and the authority to "make the sole determination as to the quality of the product at the time of processing the whole grapes." (Agreement ¶ 4.) Specifically, Nature's Pearl has the right to "reject all whole grapes that it determines to be spoiled, rotten, molded, fermented or do not meet a minimum of 15 bri[x] sugar content at the time of processing." (Agreement ¶ 4.) The Agreement also permits the parties to terminate the contract upon 60-days' written notice following certain conditions, including "[e]ither party's failure to comply with any term or provision of this Agreement" or Nature's Pearl's determination "that [KB Farms] has failed to supply whole grapes of suitable quality." (Agreement ¶ 11.)

11. KB Farms delivered shipments of muscadine grapes in 2012 and 2013 without incident. (Compl. ¶ 26.) It also expanded production, eventually devoting 63 acres to muscadine grapes. (Compl. ¶ 29.)

12. This dispute concerns the 2014 harvest, delivered during September of that year. Although Nature's Pearl did not reject any grapes at the time of delivery, Smith submitted only partial payment on October 15, 2014. (Compl. ¶¶ 32, 35 & Ex. B.) According to Smith, "our contract calls for 13 - 15 brix, " but 47.28 tons of grapes had a brix level of 18 "and tested 0.70 alcohol." (Compl. Ex. B.) The attached check, from Le Bleu's bank account, withheld payment of $33, 096.00 for that portion of the harvest. (Compl. ¶ 35.) Smith closed by stating that "[w]e will work through this next year." (Compl. Ex. B.)

13. In a responsive e-mail, KB Farms disputed Smith's interpretation of the contract. Pointing to paragraph 4, KB Farms stated that the Agreement requires "a minimum of 15 brix, " not a level between 13 and 15 brix. (Compl. Ex. C; see also Agreement ¶ 4.) On that basis, KB Farms requested full payment. (Compl. Ex. C.)

14. The parties' relationship deteriorated. On October 29, 2014, in a letter from counsel, Nature's Pearl stated that it was "considering cancellation of your contract, but will decide in the next 60 days whether or not to do so." (Compl. Ex. D.) It further stated that "[a]ny future business dealings will require strict compliance" with a 13-15 brix level and an alcohol content of 0.5% or less. (Compl. Ex. D.) Following up a month later, Smith asserted that the parties had a longstanding "verbal agreement" to lower the contractual brix requirement and informed KB Farms that "it is fine with me that you sell your grapes to someone else." (Compl. Ex. D.)

15. After the new year, the parties discussed the possibility of amending the Agreement. In a letter dated February 19, 2015, counsel for KB Farms stated that the company "would be willing to provide [grapes] at a desired brix level lower than what the Contract requires" but that "we would need to work with you to amend the Contract in writing." (Compl. Ex. E.) KB Farms also requested that Nature's Pearl "confirm its intention to perform its obligations under the Contract." (Compl. Ex. E.) Counsel for Nature's Pearl responded on March 16 that, "[w]ith regard to doing business going forward, [Nature's Pearl] remains willing to enter into a new agreement with [KB Farms], but only upon the terms that apply to all other suppliers . . . ." (Compl. Ex. F.)

16. Smith proposed a new contract on June 2 and requested a response within 10 days. (Compl. Ex. G.) He then informed KB Farms that, unless it signed the contract, he "would find 'another grower' to replace" KB Farms. (Compl. ¶ 43.) The deadline passed without a response, and on June 26 Smith provided written notice of termination of the Agreement "for your failure to provide suitable grapes for processing, " adding that KB Farms could "still sign the new contract." (Compl. Ex. H.) On July 1, counsel for Nature's Pearl reiterated the written notice of termination and offer of a new contract. (See Compl. Ex. J.)

17. KB Farms objected, stating that "[t]he Contract remains in full force and effect" and that "the limited circumstances" permitting termination had not occurred. (Compl. Ex. I.) In a letter dated July 2, KB Farms' counsel stated Nature's Pearl "is in breach of the Contract" and "has no right to terminate the Contract." (Compl. Ex. K.) After KB Farms stated its intent to deliver the 2015 harvest under the Agreement (Compl. ¶ 48), Nature's Pearl responded on August 18 that any attempt by KB Farms to deliver would be "criminal and civil trespass." (Compl. Ex. N.)

18. Around this time, Smith sent a check from Le Bleu's bank account for $33, 096.00 in payment for the disputed 2014 harvest. (Compl. Ex. M.) KB Farms returned the check, stating that "Nature's Pearl has intentionally breached the Contract and, among other amounts, owes Kerry Bodenhamer Farms for the 2014 grapes and the entire 2015 harvest." (Compl. Ex. O.) KB Farms ultimately sold to a third party about 276 tons of the 2015 harvest for $400 per ton, but it was unable to find a purchaser for about 200 tons. (Compl. ¶¶ 57, 58.)

19. On October 23, 2015, counsel for Defendants stated that the new contract was "the only agreement under which [Nature's Pearl] and [Le Bleu] will ever do any further business with" KB Farms. (Compl. Ex. P.) The letter requested prompt execution of the new agreement or that KB Farms "cease further communication." (Compl. Ex. P.)

20. KB Farms filed this action on May 11, 2016. Defendants filed their Answer on June 22, 2016, and Nature's Pearl filed counterclaims. Defendants jointly moved for partial judgment on the pleadings under Rule 12(c) on December 8, 2016, and the Court held a hearing on the motion on February 15, 2017, at which all parties were represented by counsel. The motion is ripe for resolution.

II. LEGAL STANDARD

21. "A motion for judgment...