Peninsula Property v. Crescent Resources

• Decision Date: 21 June 2005
• Docket Number: No. COA04-796.,COA04-796.
• Citation: 614 S.E.2d 351
• Parties: The PENINSULA PROPERTY OWNERS ASSOCIATION, INC., Plaintiff, v. CRESCENT RESOURCES, LLC, Defendant.
• Court: North Carolina Supreme Court

614 S.E.2d 351

The PENINSULA PROPERTY OWNERS ASSOCIATION, INC., Plaintiff, v. CRESCENT RESOURCES, LLC, Defendant.

No. COA04-796.

Court of Appeals of North Carolina.

June 21, 2005.

Appeal by plaintiff from judgment entered 24 February 2004 by Judge W. Robert Bell in Mecklenburg County Superior Court. Heard in the Court of Appeals 2 March 2005.

Weaver, Bennett & Bland, P.A., by Michael David Bland and Benjamin L. Worley, Matthews, for plaintiff-appellant.

Parker, Poe, Adams & Bernstein, L.L.P., by Irvin W. Hankins, III, and John W. Francisco, Charlotte, for defendant-appellee.

TYSON, Judge.

The Peninsula Property Owners Association, Inc. (the "PPOA") appeals from judgment entered granting Crescent Resources, LLC's ("Crescent") motion to dismiss and motion for summary judgment based on the PPOA's lack of standing. We affirm.

I. Background

Beginning in 1989, Crescent, a subsidiary of Duke Power Company, developed "the Peninsula," a planned residential community on Lake Norman near Charlotte, North Carolina. Crescent sold over nine hundred lots in the Peninsula between 1990 and 1 January 1999. As part of the development, Crescent established the PPOA as a North Carolina non-profit corporation. Crescent appointed the original members of the Board of the PPOA ("the Board") and maintained majority control of the Board until 1 January 1999. The Declaration of Covenants, Conditions, and Restrictions ("the Declaration") and the Bylaws of the PPOA ("Bylaws") were created by Crescent. Both the Declaration and the Bylaws contain the following provision:

the affirmative vote of no less than two-thirds (2/3) of all votes entitled to be cast by the Master Association Members shall be required in order for the Master Association to (1) file a complaint, on account of an act or omission of Declarant, with any governmental agency which has regulatory or judicial authority over the Project or any part thereof; or (2) assert a claim against or sue Declarant.

In addition, the Declaration and the Bylaws granted authority to the Board to contract with third parties to install infrastructure for the Peninsula including streets, sewers, sidewalks, the golf course, the clubhouse, parking lots, and street lights. The Board entered into a lease agreement with Duke Power to install and maintain decorative brass street light poles and fixtures. The PPOA made lease payments to Duke Power from annual dues collected from the homeowners.

When Crescent relinquished control of the Board in January 1999, the PPOA's members "discovered" the lease agreement between the PPOA and Duke Power. The Board decided to buy the street light equipment from Duke Power for $1,200,000.00, instead of completing the remaining lease payments totaling $1,500,000.00.

On 1 September 2000, the PPOA and one of its members filed a complaint in Mecklenburg County Superior Court against Crescent and sought certification of the matter as a class action. The PPOA made no attempt to secure a vote of two-thirds of its members prior to instituting this action. The complaint alleged constructive fraud, unfair and deceptive trade practices, and violation of the Interstate Land Sales Full Disclosure Act. The trial court entered an order denying the request for class certification on 26 October 2001. The PPOA subsequently filed a voluntary dismissal without prejudice.

On 30 October 2002, the PPOA filed this action in Mecklenburg County Superior Court. As with the earlier suit, the PPOA did not attempt to garner the required two-thirds vote under the Bylaws and the Declaration. The PPOA asserted claims of constructive fraud and unfair and deceptive trade practices. These causes of action were alleged on behalf of the PPOA itself, rather than individual homeowners. The PPOA filed an amended complaint on 6 January 2003 to correct Crescent's business organization status.

Crescent answered on 24 March 2003 and argued in part that the PPOA lacked standing to assert its claims. Following discovery by both parties, Crescent filed a motion for summary judgment on 9 December 2003 claiming: (1) the PPOA did not have the authority or standing to assert its claims; (2) the PPOA's claims are time barred by the statute of limitations; and (3) the PPOA has not asserted valid claims. Crescent filed an amended motion to dismiss combined with a motion for summary judgment on 3 December 2003 arguing: (1) the trial court lacked jurisdiction; (2) allegations in PPOA's complaint fail to state a claim upon which relief can be granted; (3) the PPOA does not have authority or capacity to assert its claims; and (4) there are no genuine issues of material fact.

After submission of affidavits, pleadings, and other documents and arguments by both parties, the trial court ruled that the PPOA did "not have standing to file and prosecute this action" and granted Crescent's motion to dismiss and motion for summary judgment. The PPOA appeals.

II. Issue

The issue on appeal is whether the trial court erred in ruling the PPOA lacked standing and authority to assert its claims against Crescent.

III. Standard of Review

Our review of a motion to dismiss under Rule 12(b)(1) of the North Carolina Rules of Civil Procedure is de novo. Country Club of Johnston Cty., Inc. v. U.S. Fidelity & Guar. Co., 150 N.C.App. 231, 238, 563 S.E.2d 269, 274 (2002) (citation omitted); N.C. Gen.Stat. § 1A-1, Rule 12(b)(1) (2003). "Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the [trial court]." In re Appeal of the Greens of Pine Glen Ltd. P'ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003) (citing Mann Media, Inc. v. Randolph Cty. Planning Bd., 356 N.C. 1, 13, 565 S.E.2d 9, 17 (2002)).

IV. Subject Matter Jurisdiction

The PPOA argues the trial court erred by: (1) dismissing its complaint for lack of subject matter jurisdiction; and (2) granting Crescent's motion for summary judgment. We disagree.

A. Standing

"Standing refers to whether a party has a sufficient stake in an otherwise justiciable controversy such that he or she may properly seek adjudication of the matter." American Woodland Indus., Inc. v. Tolson, 155 N.C.App. 624, 626, 574 S.E.2d 55, 57 (2002) (citations omitted), cert. denied, 357 N.C. 61, 579 S.E.2d 283 (2003). "Standing is a necessary prerequisite to a court's proper exercise of subject matter jurisdiction." Street v. Smart Corp., 157 N.C.App. 303, 305, 578 S.E.2d 695, 698 (2003) (internal quotation marks omitted). As the party seeking to invoke jurisdiction, the PPOA has the burden of proving the elements of standing. Neuse River Found., Inc. v. Smithfield Foods, Inc., 155 N.C.App. 110, 113, 574 S.E.2d 48, 51 (2002) (citations omitted), disc. rev. denied, 356 N.C. 675, 577 S.E.2d 628 (2003).

"Standing ... is ... properly challenged by a Rule 12(b)(1) motion to dismiss," Fuller v. Easley, 145 N.C.App. 391, 395, 553 S.E.2d 43, 46 (2001), and a showing must be made "`that the plaintiff have been injured or threatened by injury or have a statutory right to institute an action,'" Bruggeman v. Meditrust Co., LLC, 165 N.C.App. 790, 795, 600 S.E.2d 507, 511 (2004) (quoting In re Baby Boy Scearce, 81 N.C.App. 531, 541, 345 S.E.2d 404, 410, disc. rev. denied, 318 N.C. 415, 349 S.E.2d 589 (1986)). "If a party does not have standing to bring a claim, a court has no subject matter jurisdiction to hear the claim." Estate of Apple v. Commer. Courier Express, Inc., ___ N.C.App. ___, ___, 607 S.E.2d 14, 16 (2005) (citations omitted), disc. rev. denied, ___ N.C. ___, 613 S.E.2d 688 (2005).

Statutes or contract provisions may also prescribe whether a court possesses subject matter jurisdiction. See N.C. Gen.Stat. § 55-7-42 (2003) (a shareholder may not commence a derivative action without: (1) "written demand ... upon the corporation to take suitable action;" and (2) "90 days have expired from the date the demand was made unless, prior to the expiration of the 90 days, the shareholder was notified that the corporation rejected the demand, or unless irreparable injury to the corporation would result by waiting for the expiration of the 90 day period."); see also Allen v. Ferrera, 141 N.C.App. 284, 287-89, 540 S.E.2d 761, 764-65 (2000) (applying N.C. Gen.Stat. § 55-7-42); Johnston County v. R.N. Rouse & Co., 331 N.C. 88, 92, 414 S.E.2d 30, 33 (1992) ("[P]arties have endeavored to avoid potential litigation concerning judicial jurisdiction and the governing law by including in their contracts provisions concerning these matters. Although the language used may differ from one contract to another, one or more of three types of provisions (choice of law, consent to jurisdiction, and forum selection), which have very distinct purposes, may often be found in the boilerplate language of a contract.").

B. Two-Thirds Voting Provision

The North Carolina Nonprofit Corporation Act ("the Act") is found in N.C. Gen.Stat. § 55A-1-01 et seq. Included within the Act are guidelines for corporations' bylaws, which "may contain any provision for regulating and managing the affairs of the corporation that is not inconsistent with law or the articles of incorporation." N.C. Gen.Stat. § 55A-2-06(b) (2003).

Neither party asserts a discrepancy between the Bylaws and the articles of incorporation. For corporations with members, the bylaws "may include any provisions not inconsistent with law ... with respect to: ... (2) Voting rights and the manner of exercising voting rights; (3) The relative rights and obligations of members among themselves, to the corporation, and with respect to the property of the corporation; ... (7) Any other matters." N.C. Gen.Stat. § 55A-6-20 (2003).

Here, Article III, Section 10 of the Bylaws and Article III, Section 3.3 of the Declaration state, "[t]he affirmative vote of no less than two-thirds (2/3) of all votes entitled to be cast by the [PPOA] members shall be required in order for the [PPOA] to ... assert a claim against or sue [Crescent]."...