Moody v. Able Outdoor, Inc.

• Citation: 609 S.E.2d 259,169 NC App. 80
• Decision Date: 15 March 2005
• Docket Number: No. COA03-1493.,COA03-1493.
• Court: Court of Appeal of North Carolina (US)
• Parties: Frank A. MOODY, II, Plaintiff-Appellee, v. ABLE OUTDOOR, INC.; PNE Media Holdings, L.L.C.; PNE/Able, L.L.C.; PNE Media, L.L.C.; Braun Insurance Group of the Carolinas, Inc.; and Morgan & Morgan Ltd., Defendants-Appellants.

609 S.E.2d 259

169 NC App. 80

Frank A. MOODY, II, Plaintiff-Appellee, v. ABLE OUTDOOR, INC.; PNE Media Holdings, L.L.C.; PNE/Able, L.L.C.; PNE Media, L.L.C.; Braun Insurance Group of the Carolinas, Inc.; and Morgan & Morgan Ltd., Defendants-Appellants.

No. COA03-1493.

Court of Appeals of North Carolina.

March 15, 2005.

Kelly & Rowe, P.A., by E. Glenn Kelly, Asheville, for plaintiff-appellee.

McGuire, Wood & Bissette, P.A., by T. Douglas Wilson, Jr. Asheville, for defendants-appellants.

Kilpatrick Stockton, L.L.P., by Stephen E. Husdon, pro hoc vice, Atlanta, GA, for defendants-appellants. BRYANT, Judge.

Able Outdoor, PNE Media Holdings, PNE/Able, and PNE Media, (collectively PNE defendants) appeal from a 14 August 2003 order denying defendant's motion for summary judgment.

In February 1999, Frank A. Moody, II (plaintiff) sold his billboard company, Able Outdoor, to PNE. Able Outdoor's three-year lease to occupy the building owned by plaintiff was assigned to PNE. One of the lease provisions required PNE to maintain fire insurance on the "buildings, improvements, and fixtures" or notify plaintiff in the event insurance coverage ceased. In January 2001, PNE ceased using the leased building and abandoned the space, since the PNE division occupying Moody's space had been sold to another billboard company.

In February 2001, fire insurance for the building was canceled. Another billboard company, SMS Media, L.L.C., operated by Julie Snipes then moved into the building. Snipes obtained fire insurance to cover the building and its contents. In November 2001, plaintiff contacted Braun Insurance about procuring fire insurance. Shortly thereafter and about the time plaintiff had listed his building for sale with a real estate agent, a fire occurred, damaging the building.

Plaintiff has brought three separate actions arising out of his business relationship with PNE defendants. Plaintiff filed a lawsuit (Case I) against PNE defendants on 24 May 2001 for the following: breach of contract (based on failure to pay rent from August 1999 to December 1999); fraud (based on misrepresentations regarding the timing and proceeds from a public stock offering of PNE Holdings); unfair and deceptive trade practices (based on the sale of Able Outdoor assets to be used to pay PNE Media Holdings' debts); and breach of employment contract (based on failure to pay alleged bonuses, vacation benefits and contract termination fees). Defendants counterclaimed. Almost two years later, on 4 February 2003, all claims and counterclaims were dismissed with prejudice.

On 28 January 2002 plaintiff filed a second lawsuit, this one in federal court (Case II) against PNE Media Holdings and several individual defendants initially alleging securities fraud and breach of contract based on an alleged violation of a stock purchase agreement. Defendants counterclaimed. The matter was sent to arbitration. Plaintiff then amended his complaint to add claims for: fraud (based on violations of state and federal securities law); breach of contract (based on failure to pay plaintiff pursuant to the lease agreement for rent and for the purchase of Able Outdoor); breach of fiduciary duty (for conduct including breach of lease agreement and canceling fire insurance without notifying plaintiff); fraud and misrepresentation; negligence and negligent misrepresentation; respondeat superior; and breach of the implied covenant of good faith and fair dealing. The claims were arbitrated and a judgment entered on 3 June 2003 dismissing all claims, with prejudice.

The present action was filed on 25 February 2002 (present action) against Case I PNE defendants (Able Outdoor, PNE Media Holdings, PNE/Able, and PNE Media); Braun Insurance Group (plaintiff's insurance broker), and Morgan & Morgan (PNE defendants' insurance broker). In the present action, plaintiff alleged PNE defendants were in breach of contract (based on allowing the fire insurance policy to lapse) and had committed unfair and deceptive trade practices. Plaintiff alleged Morgan & Morgan breached the lease agreement and breached the fiduciary duty owed to plaintiff by canceling the insurance and failing to notify him accordingly. Plaintiff alleged Braun Insurance Group breached the lease agreement and the fiduciary duty owed to plaintiff by listing Julie Snipes, instead of plaintiff, as policy holder.

In Case I, pursuant to a Settlement Agreement entered on 4 February 2003, the parties agreed to jointly dismiss all claims and counterclaims with prejudice. In Case II, plaintiff's and defendants' claims and counterclaims were resolved through arbitration. Most significantly, in Case II plaintiff's claim for breach of fiduciary duty (for conduct including breach of the lease agreement and canceling the fire insurance without notifying plaintiff) was dismissed with prejudice in an order confirming the arbitration award dated 3 June 2003. In the present action PNE defendants filed a motion for summary judgment based on res judicata which was denied on 14 August 2003.

PNE defendants appeal.

The dispositive issue is whether the trial court erred in denying defendants' motion for summary judgment. Because we find that summary judgment should have been granted based on res judicata, we reverse the decision of the trial court.

The denial of a motion for summary judgment is interlocutory and not immediately appealable unless it affects a substantial right. N.C. Gen.Stat. § 7A-27 (2003). The denial of a motion for summary judgment on the basis of res judicata affects a substantial right and thus, entitles a party to an immediate appeal. Bockweg v. Anderson, 333 N.C. 486, 491, 428 S.E.2d 157, 160 (1993). Therefore, PNE defendants' appeal is properly before this Court.

In reviewing a superior court order denying a motion for summary judgment, the standard of review is de novo. Falk Integrated Techs., Inc. v. Stack, 132 N.C.App. 807, 809, 513 S.E.2d 572, 574 (1999). Such review requires a two-step analysis whereby "[s]ummary judgment is appropriate if (1) the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact; and (2) the moving party is entitled to judgment as a matter of law." Stephenson v. Warren, 136 N.C.App. 768, 771-72, 525 S.E.2d 809, 811-12 (2000). "Once the movant makes the required showing, the burden shifts to the non-moving party to produce a forecast of evidence demonstrating specific facts, as opposed to allegations, establishing at least a prima facie case at trial." Id. "Summary judgment is appropriate for the defending party when (1) an essential element of the other party's claim or defense is non-existent; (2) the other party cannot produce evidence to support an essential element of its claim or defense; or (3) the other party cannot overcome an affirmative defense which would bar the claim." Caswell Realty Assocs. I, L.P. v. Andrews Co., 128 N.C.App. 716, 720, 496 S.E.2d 607, 611 (1998) (emphasis added) (citing Gibson v. Mutual Life Ins. Co. of N.Y., 121 N.C.App. 284, 465 S.E.2d 56 (1996)).

Res judicata precludes a second suit involving the same claim between the same parties or those in privity with them when there has been a final judgment on the merits in a prior action in a court of competent jurisdiction. Northwestern Fin. Group v. County of Gaston, 110 N.C.App. 531, 536, 430 S.E.2d 689, 692-93 (1993) (citations omitted). A judgment operates as an estoppel not only as to all matters actually determined or litigated in the proceeding, "but also as to all relevant and material matters within the scope of the proceeding which the parties, in the exercise of reasonable diligence, could and should have brought forward for determination." Rodgers Builders, Inc. v. McQueen, 76 N.C.App. 16, 22, 331 S.E.2d 726, 730 (1985). "In general, `privity involves a person so identified in interest with another that he represents the same legal right' previously represented at trial." State v. Summers, 351 N.C. 620, 623, 528 S.E.2d 17, 20 (2000) (quoting State ex rel. Tucker v. Frinzi, 344 N.C. 411, 417, 474 S.E.2d 127, 130 (1996)). In determining whether such a privity relationship exists, "`courts will look beyond the nominal party whose name appears on the record as plaintiff and consider the legal questions raised as they may affect the real party or parties in interest.'" Whitacre P'ship v. Biosignia, Inc., 358 N.C. 1, 36, 591 S.E.2d 870, 893 (2004) (citing State v. Summers, 351 N.C. 620, 623-24, 528 S.E.2d 17, 21 (2000)).

PNE defendants contend the trial court committed error by failing to grant summary judgment based on the doctrine of res judicata. In order to successfully assert the doctrine of res judicata, a litigant must prove the following essential elements: (1) a final judgment on the merits in an earlier suit, (2) an identity of the causes of action in both the earlier and the later suit, and (3) an identity of the parties or their privies in the two suits.

In the present action, this Court must determine if the prior judgments (in either Case I or Case II) bar plaintiff from bringing the present action against PNE defendants. It is clear that Case I resulted in a final judgment on the merits due to a joint dismissal with prejudice entered by all parties in settlement on 4 February 2003. See Riviere v. Riviere, 134 N.C.App. 302, 306, 517 S.E.2d 673, 676 (1999) (quoting Caswell Realty Assoc. v. Andrews Co., 128 N.C.App. 716, 720, 496 S.E.2d 607, 610 (1998) ("[A] voluntary dismissal with prejudice is a final judgment on the merits")); Kabatnik v. Westminster Co., 63 N.C.App. 708, 712, 306 S.E.2d 513, 515 (1983); Barnes v. McGee, 21 N.C.App. 287, 290, 204 S.E.2d 203, 205 (1974). It is also clear that the parties involved in Case I (Moody v. PNE defendants) are the same as those in the present action.

In Case II plaintiff brought state and federal claims against only one of...