Phillips and Jordan, Inc. v. Bostic
| Decision Date | 19 March 2016 |
| Docket Number | 11 CVS 53 |
| Parties | PHILLIPS AND JORDAN, INC., Plaintiff, v. JOSEPH E. BOSTIC, JR., JEFFERY L. BOSTIC, MELVIN MORRIS, TYLER MORRIS, and MICHAEL HARTNETT, Defendants. |
| Court | Superior Court of North Carolina |
McKinney & Tallant, P.A. by Zeyland G. McKinney, Jr. for Plaintiff.
Ivey, McClellan, Gatton, & Talcott, LLP by Edwin R. Gatton for Defendants Melvin Morris and Tyler Morris.
Smith Moore Leatherwood, LLP by Jonathan A. Berkelhammer for Defendant Michael Hartnett.
Nexsen Pruet, PLLC by Randall W. Reavis and Christine L. Myatt for Defendants Joseph E. Bostic, Jr. and Jeffery L. Bostic.
{1} THIS MATTER is before the Court on Defendants' (Joseph E. Bostic, Jr., Jeffery L. Bostic ("Bostic Defendants"), Melvin Morris, Tyler Morris ("Morris Defendants"), and Michael Hartnett) Motions to Dismiss and the Bostic Defendants and Morris Defendants' alternative Motions for More Definite Statement. After considering the parties' motions and briefs, and the arguments and contentions of counsel made during a hearing before this Court on September 28, 2012, the Court DENIES in part and GRANTS in part Defendants' Motions to Dismiss, and DENIES Defendants' Motions for More Definite Statement.
{2} This action is the second case filed by Plaintiff against the Bostic and Morris Defendants relating to the same transactions and occurrences. The first case (the "Prior Action") (08 CVS 07) was filed in Graham County Superior Court on January 18, 2008. (Bostic Defs.' Br. Supp. Mot. Dismiss 2.) The Prior Action was removed to the North Carolina Business Court but voluntarily dismissed without prejudice on November 1, 2010. (Bostic Defs.' Br. Supp. Mot. Dismiss 2.)
{3} The current action was filed on April 1, 2011, designated a complex business case, and assigned to this Court on May 5, 2011. (Compl. p. 26; Designation Order 1; Assignment Order 1.) Defendant Hartnett was named a Defendant for the first time in the current case; he was not a named party in the Prior Action.
{4} The Bostic Defendants, Morris Defendants, and Defendant Hartnett filed their Motions to Dismiss, Motions for More Definite Statement, and supporting briefs on May 25, 2011.
{5} Defendants' Motions were fully briefed on June 28, 2011, and the Court conducted a hearing on the Motions on September 28, 2012. During the hearing, in open Court, counsel for Plaintiff announced that he was voluntarily dismissing the claim of Unfair and Deceptive Trade Practices against Defendant Michael Hartnett.
{6} Defendants move the Court to dismiss Plaintiff's action pursuant to Rules 12(b)(1), 12(b)(6), and 41(b) of the North Carolina Rules of Civil Procedure. "'When reviewing a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), a trial court may consider and weigh matters outside the pleadings.'" Munger v. State, 202 N.C.App. 404, 410, 689 S.E.2d 230, 235 (2010) (quoting DOT v. Blue, 147 N.C.App. 596, 603, 556 S.E.2d 609, 617 (2001)). "'However, if the trial court confines its evaluation to the pleadings, the court must accept as true the plaintiff's allegations and construe them in the light most favorable to the plaintiff.'" Id. (quoting Blue, 147 N.C.App. at 603, 556 S.E.2d at 617). The following facts are taken from Plaintiff's Complaint and are accepted as true for the purpose of resolving Defendants' Motions to Dismiss pursuant to Rule 12(b)(1). However, the Court does not make findings of fact in connection with Defendants' Motions to Dismiss pursuant to Rule 12(b)(6), as such motions do "not present the merits, but only [determine] whether the merits may be reached." Concrete Serv. Corp. v. Investors Group, Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986). Accordingly, for purposes of the Court's Rule 12(b)(6) analysis, this Order and Opinon recites only those facts from the Complaint that are relevant to the Court's legal determinations.
{7} Plaintiff is a corporation organized under the laws of North Carolina, with its principle office and place of business in Robbinsville, Graham County, North Carolina. (Compl. ¶ 1.)
{8} The Morris Defendants, Defendant Hartnett, and Defendant Joseph E. Bostic, Jr. are all citizens and residents of North Carolina. Defendant Jeffery L. Bostic is a resident of Georgia. (Compl. ¶¶ 6–10.)
{9} From 2002 until 2005, Plaintiff, a subcontractor, rendered services on construction projects with companies (principally Bostic Construction, Inc. and Bostic Development, LLC ("Defendants' Affiliated Companies")) that were allegedly under Defendants' complete dominion and control. (Compl. ¶¶ 3, 13.) Plaintiff became aware of the "facts necessary to assert these causes of action on December 6, 2005." (Compl. ¶ 11.)
{10} Throughout the relevant time period alleged by Plaintiff, Defendants all held official positions of responsibility, such as officer, director, or shareholder, within Defendants' Affiliated Companies. (Compl. ¶¶ 15, 22, 24.) Plaintiff alleges that Defendants used their positions and control over the Affiliated Companies to create "a relationship wherein the Plaintiff trusted that the Defendants would use the construction loan proceeds for each project to pay for the actual costs of each project . . . ." (Compl. ¶ 86.)
{11} Prior to and during Plaintiff's work on various construction projects with Defendants' Affiliated Companies, including the West Commons project, Defendants used a group of sham companies to "commingle, misuse, and misappropriate the construction loans provided to finance the construction projects on which the Plaintiff performed services." (Compl ¶ 85.)
{12} Rather than holding loan proceeds to pay off debts for a particular project, Defendants used the proceeds to advance large sums of money to other companies owned by Defendants and make preferential payments for their own benefit. (Compl. ¶¶ 92–93.)
{13} During the time Plaintiff worked with Defendants' Affiliated Companies, Bostic Construction was operated in a condition that verged on near or actual insolvency and constituted dissolution or winding up of the affairs of the company. (Compl. ¶¶ 94–95.)
{14} For the purposes of evaluating Defendants' 12(b)(1) Motions, the Court takes judicial notice that on or about January 17, 2005, an involuntary bankruptcy petition under Chapter 7 of the Bankruptcy Code was filed against Bostic Construction. (Def. Hartnett's Br. Supp. Mot. Dismiss 3.) The Court also takes judicial notice of an order entered in the Bostic Construction bankruptcy proceeding approving the settlement agreement between the Chapter 7 Trustee, the Bostic Defendants, and Melvin Morris related to Bostic Construction's potential claims for (1) preferential payments under the Bankruptcy Code and (2) alleged breaches of the fiduciary duties these Defendants owed to Bostic Construction in their capacities as officers and directors. In re Bostic Construction, Inc., No. B–05– 11199C–7G (Bankr. M.D. N.C. 2005);
LEGAL STANDARD
MOTION TO DISMISS PURSUANT TO RULE 12(b)(1)
{15} "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." Am. Woodland Indus., Inc. v. Tolson, 155 N.C.App. 624, 626, 574 S.E.2d 55, 57 (2002). Standing is a question of subject matter jurisdiction, which is a prerequisite to the exercise of any authority by the state courts. Street v. Smart Corp., 157 N.C.App. 303, 305, 578 S.E.2d 695, 698 (2003); Neuse River Foundation, Inc. v. Smithfield Foods, Inc., 155 N.C.App. 110, 113, 574 S.E.2d 48, 51 (2002).
{16} "'When reviewing a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), a trial court may consider and weigh matters outside the pleadings.'" Munger, 202 N.C.App. at 410, 689 S.E.2d at 235 (quoting Blue, 147 N.C.App. at 603, 556 S.E.2d at 617).
MOTION TO DISMISS PURSUANT TO RULE 12(b)(6)
{17} The question for the court on a motion to dismiss is "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, whether properly labeled or not." Harris v. NCNB Nat'l Bank, 85 N.C.App. 669, 670, 355 S.E.2d 838, 840 (1987) (citing Stanback v. Stanback, 297 N.C. 181, 254 S.E.2d 611 (1979)). "[T]he pleadings, when taken as true, [must be] legally sufficient to satisfy the elements of at least some . . . recognized claim." Arroyo v. Scottie's Prof'l Window Cleaning, Inc., 120 N.C.App. 154, 158, 461 S.E.2d 13, 16 (1995) (citing Harris, 85 N.C.App. 669, 355 S.E.2d 838).
{18} "'Dismissal of a complaint is proper under the provisions of Rule 12(b)(6) . . . when some fact disclosed in the complaint necessarily defeats the plaintiff's claim.'" Carlisle v. Keith, 169 N.C.App. 674, 681, 614 S.E.2d 542, 547 (2005) (quoting Hooper v. Liberty Mut. Ins. Co., 84 N.C.App. 549, 551, 353 S.E.2d 248, 250 (1987)). A motion to dismiss "is an appropriate method of determining whether the statutes of limitation bar plaintiff's claims if the bar is disclosed in the complaint." Id. (citing Horton v. Carolina Medicorp, 344 N.C. 133, 136, 472 S.E.2d 778, 780 (1996)).
{19} When considering a motion to dismiss for failure to state a claim upon which relief can be granted, "the well-pleaded material allegations of the complaint are taken as admitted; but conclusions of law or unwarranted deductions of fact are not admitted." Pinewood Homes, Inc. v. Harris, 184 N.C.App. 597, 613, 646 S.E.2d 826, 837 (2007) (quoting Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970)).
{20}...
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