Reid Pointe, LLC v. Stevens, 08 CVS 4304
| Decision Date | 18 August 2008 |
| Docket Number | 08 CVS 4304 |
| Citation | 2008 NCBC 15 |
| Parties | REID POINTE, LLC, TUCKER CHASE, LLC, MEADOW, LLC, SOUTHEASTERN LAND INVESTMENTS, LLC, KYLIGLEN, LLC, HARRY C. GRIMMER, and HARRY C. GRIMMER AND ASSOCIATES, LLC, Plaintiffs, v. CHARLES A. STEVENS and CAROLINA DEVELOPMENT OF CHARLOTTE, INC., Defendants. |
| Court | Superior Court of North Carolina |
Bishop, Capitano, & Moss, P.A. by J. Daniel Bishop for Plaintiffs.
James, McElroy & Diehl, P.A. by Edward T. Hinson, Jr. for Defendants.
{1} Before the Court is Plaintiffs' Motion for Judgment on the Pleadings as to Defendants' Counterclaims (the "Motion").
{2} After considering the Motion, the briefs of the parties, and the arguments of counsel, the Court GRANTS in part and DENIES in part Plaintiffs' Motion.
{3} On 26 February 2008, Plaintiffs filed their Complaint in this case.
{4} The Complaint seeks a declaratory judgment with respect to the parties' rights under a series of real estate development agreements. (Compl. ¶¶ 32–35.)
{5} The Complaint also asserts claims for (1) breach of fiduciary duty; (2) constructive fraud; (3) conversion; (4) unfair and deceptive trade practices; and (5) breach of contract.
{6} On 26 March 2008, Defendants answered the Complaint and filed Counterclaims asserting claims for (1) dissolution of the five limited liability companies created pursuant to the parties' real estate development agreements; (2) breach of contract; and (3) unfair and deceptive trade practices.
{7} On 15 May 2008, Plaintiffs filed the Motion and a supporting brief.
{8} Defendants filed a response brief on 4 June 2008.
{9} Plaintiffs filed a reply brief on 18 June 2008.
{10} The Court heard oral argument on the Motion on 10 July 2008.
{11} Plaintiff Harry C. Grimmer and Associates ("Grimmer Associates") is a North Carolina limited liability company. Plaintiff Harry C. Grimmer ("Grimmer") is the sole member of Grimmer Associates. (Compl. ¶ 2.)1[]
{12} Defendant Carolina Development of Charlotte, Inc. ("CDC") is a North Carolina corporation. Defendant Charles A. Stevens and his wife are the sole owners of CDC. (Compl. ¶ 4.)
{13} Plaintiffs Meadow, LLC ("Meadow"), Tucker Chase, LLC ("Tucker Chase"), Reid Pointe, LLC ("Reid Pointe"), Southeastern Land Investments, LLC ("Southeastern") and Kyliglen, LLC ("Kyliglen"), are North Carolina limited liability companies (herein collectively referred to as the "LLCs"). (Compl. ¶ 6.)
{14} Meadow, Tucker Chase, Reid Pointe and Kyliglen were created to develop real property as residential subdivisions. (Compl. ¶ 7.)
{15} Southeastern was created to hold for resale parcels within each of the Reid Pointe and Tucker Chase subdivisions. (Compl. ¶ 8.)
{16} Grimmer Associates and CDC are the sole members of Meadow. (Compl. ¶ 6.)
{17} Grimmer and CDC are the sole members of Tucker Chase, Reid Pointe and Southeastern. (Compl. ¶ 6.)
{18} Grimmer and CDC (along with non-party John R. Poore) are the sole members of Kyliglen.
{19} In 2003, Stevens and John R. Poore approached Grimmer to propose a partnership to acquire and develop real property in North Carolina. (Countercl. ¶¶ 1–2.)
{20} Grimmer agreed to provide the financing for the project, and the three created Kyliglen to hold the property. (Countercl. ¶¶ 1–2.)
{21} Stevens subsequently assigned his interest in Kyliglen to CDC. (Countercl. ¶ 3.)
{22} Following their partnership in Kyliglen, Stevens and Grimmer discussed the prospect of forming other real estate ventures. (Countercl. ¶ 4.)
{23} On 24 September 2003, the parties executed a letter outlining their "proposed working relationship."
{24} Among other things, the parties agreed to form a new LLC for each development project.
{25} The Letter Agreement contemplated that Grimmer and Stevens would be members of the LLCs, but that each would have a different role and ownership interest.
{26} Grimmer, as a 70% owner of the LLCs, would be primarily responsible for financing the projects.
{27} Specifically, Grimmer assumed responsibility for "us[ing] [his] financial connections with a local lender to obtain the necessary financing . . . in the [sic] an amount sufficient to provide for all project costs . . . that would carry the financial requirements of the project for approximately one year."
{28} Stevens, on the other hand, would own 30% of the LLCs and be responsible for managing each company's "day-to-day affairs."
{29} In 2004, Stevens and Grimmer created Reid Pointe, Tucker Chase, Meadow, and Southeastern, as contemplated by the terms of the Letter Agreement. (Countercl. ¶ 10.)2[]
{30} Each LLC was governed by an identical Operating Agreement entered into by Grimmer (or Grimmer Associates in the case of Meadow) and CDC. (Compl. ¶ 9.)
{31} Reid Pointe, Tucker Chase, and Meadow also entered into separate Land Development Construction and Management Services Agreements (the "Development Agreements") with CDC, setting forth CDC's construction, development, and marketing responsibilities with respect to each parcel of land. (Compl. ¶¶ 13–15.)
{32} For each project, CDC developed draft budgets in accordance with the terms of the respective Operating and Development Agreements. (Countercl. ¶ 11.)
{33} Defendants allege that heightened regulation in the construction industry, coupled with extreme price increases in the cost of construction materials, resulted in significant cost overruns for the development projects. (Countercl. ¶¶ 14–17.)
{34} Defendants also allege that Grimmer was well aware of these circumstances and was also partly to blame for the cost overruns. (Countercl. ¶¶ 15, 18.) According to Defendants, Grimmer intervened in project management issues on several occasions (despite the expectation that he would serve primarily as a financial backer), which resulted in added and unnecessary expenses. (Countercl. ¶ 18.)
{35} Among other things, Defendants assert Grimmer required Meadow to pay $100, 000.00 in excess invoices to his brother-in-law's employer and caused Tucker Chase to terminate a profitable contract in order to benefit his son. (Countercl. ¶¶ 18–19.)
{36} In January 2008, Grimmer offered to redeem CDC's member interest in Reid Pointe for $3000.00 (Countercl. ¶ 23.) When CDC refused, Defendants allege Grimmer embarked on a calculated campaign to drive CDC out of the LLCs. (Countercl. ¶ 28.)
{37} Defendants assert Grimmer demanded that the LLCs no longer pay CDC for its services under the Development Agreements and (to that end) arranged to freeze the LLCs' bank accounts. (Countercl. ¶ 24.)
{38} Defendants further allege that Grimmer contacted numerous vendors and financial institutions and made damaging and untrue statements about Defendants to cripple the LLCs' operations and facilitate Grimmer's scheme to seize control. (Countercl. ¶¶ 25–26.)
{39} Defendants also assert that Grimmer, as majority member of each LLC, removed CDC as manager of the LLCs. (Countercl. ¶ 29.) Shortly thereafter, according to Defendants, Grimmer began (1) harassing Defendants repeatedly for information relating to the operation of the LLCs that Defendants had already provided; and (2) making capital calls for each entity, knowing full well that CDC would be unable to meet the calls and thus would be forced to forfeit its member interests. (Countercl. ¶¶ 28–30.)
{40} Defendants contend that judicial dissolution of the LLCs is proper under section 57C-6-02 of the North Carolina General Statutes on two grounds: (1) that the assets of the LLCs are being misapplied and wasted; and (2) that such action is required to protect the rights and interests of CDC.
{41} Plaintiffs respond that Defendants have failed to assert any specific factual allegations in support of this claim, making it ripe for dismissal.
{42} Defendants have asserted three separate bases for their breach of contract claim.
{43} First, Defendants allege that CDC performed services pursuant to the Tucker Chase and Reid Pointe Development Agreements for which it has not been paid.
{44} Second, Defendants allege that Grimmer failed to arrange and secure the necessary financing to complete the Tucker Chase and Reid Pointe projects, which, according to Defendants, constitutes a material breach of the Letter Agreement.
{45} Third, Defendants assert that Grimmer has withheld CDC's pro-rata portion of profits from Meadow.
{46} With respect to the fees allegedly owed CDC under the Tucker Chase and Reid Pointe Development Agreements, Plaintiffs contend the underlying contracts are illegal and therefore not enforceable because CDC is not licensed as a general contractor in North Carolina or a construction manager in South Carolina.3[]
{47} According to Plaintiffs, the Development Agreements require CDC to render services that constitute general contracting in North Carolina and construction management in South Carolina. Because CDC never obtained the requisite licensing to engage in such work, Plaintiffs contend CDC may not recover fees under the contracts.
{48} Plaintiffs also dispute Defendants' breach of contract claims based on the Letter Agreement.
{49} Plaintiffs contend the Letter Agreement merely constitutes an agreement to agree, and in any event, is superseded by the parties' subsequently-executed Operating Agreements, which deal thoroughly with Grimmer's financing obligations vis-à-vis the LLCs.
{50} Plaintiffs also argue that Grimmer has not breached the financing terms of the Letter Agreement. According to Plaintiffs, the Letter Agreement did not impose an open-ended commitment on Grimmer to provide financing, but instead limited his...
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... ... whether the statement, was [, in fact, ] defamatory." Reid Pointe, LLC v. Stevens , 2008 NCBC 15 ¶ 110 (N.C. Super ... ...