Turner v. Hammocks Beach Corp.

Decision Date19 August 2008
Docket NumberNo. COA07-1287.,COA07-1287.
Citation664 S.E.2d 634
PartiesHarriett Hurst TURNER and John Henry Hurst, Plaintiffs, v. The HAMMOCKS BEACH CORPORATION, Nancy Sharpe Caird, Seth Dickman Sharpe, Susan Spear Sharpe, William August Sharpe, North Carolina State Board of Education, Roy A. Cooper, III, in his capacity as Attorney General of the State of North Carolina, Defendants.
CourtNorth Carolina Court of Appeals

The Francis Law Firm, PLLC, by Charles T. Francis, Raleigh, for Plaintiffs-Appellees.

Hunton & Williams LLP, by Anthony R. Foxx and Frank E. Emory, Jr., Charlotte, for Defendant-Appellant The Hammocks Beach Corporation.

McGEE, Judge.

The Hammocks Beach Corporation (Defendant) appeals from the trial court's order denying its motion to dismiss under N.C. Gen.Stat. § 1A-1, Rule 12(b)(6). For the reasons set forth herein, we reverse and remand with instructions to the trial court to grant Defendant's motion to dismiss.

Harriett Hurst Turner and John Henry Hurst (Plaintiffs) filed a complaint on 15 December 2006 against Defendant and several other defendants who are not parties to this appeal. Plaintiffs' claims arose out of the administration of a trust created by deed in 1950 (the 1950 deed) by Dr. William Sharpe (Dr. Sharpe).

Specifically, Plaintiffs alleged that in 1923, Dr. Sharpe, who was a neurosurgeon from New York, purchased 810 acres on the mainland in Onslow County, North Carolina. Subsequently, in 1930 and 1931, Dr. Sharpe "purchased adjacent property consisting of approximately 2,000 acres of sandy beach outer banks (known as Bear Island) and approximately 7,000 acres of marshland." The high land on the mainland portion of the property was known as "the Hammocks."

According to Plaintiffs' complaint, Dr. Sharpe became friends with John and Gertrude Hurst (the Hursts), an Onslow County couple who moved onto Dr. Sharpe's property as its managers and caretakers. After many years of a mutually beneficial business relationship and personal friendship between Dr. Sharpe and the Hursts, Dr. Sharpe advised the Hursts that he wanted to devise the Hammocks to them. However, as reflected in an agreement dated 6 September 1950 (the 1950 agreement), recorded in the Onslow County Registry, "Gertrude Hurst, having formerly served as a black teacher in the then racially segregated public school system, requested Dr. Sharpe instead make a gift of the property in such manner that African-American teachers and their then existing organizations could enjoy the property." Plaintiffs further alleged as follows:

Pursuant to [Gertrude] Hurst's request, and rather than wait until his death, Dr. Sharpe, in 1950, by deed of gift, deeded certain real property to a nonprofit corporation, as trustee. The Hammocks Beach Corporation was the name given to the trustee entity, and its charter spelled out its purpose — to administer the property given to it by Dr. Sharpe "primarily for the teachers in public and private elementary, secondary and collegiate institutions for Negroes in North Carolina ... and for such other groups as are hereinafter set forth." The deed to The Hammocks Beach Corporation as trustee restricted the use of the property "for the use and benefit of the members of The North Carolina Teachers Association, Inc., and such others as are provided for in the Charter of the Hammocks Beach Corporation." The deed is recorded in the Onslow County Register of Deeds at Deed Book 221, Page 636[.]

The 1950 deed specifically made provision for the property in the event that the purposes of the trust became impossible or impracticable:

IT IS FURTHER PROVIDED AND DIRECTED by the said grantors, parties of the first part, that if at any time in the future it becomes impossible or impractical to use said property and land for the use as herein specified and if such impossibility or impracticability shall have been declared to exist by a vote of the majority of the directors of the Hammocks Beach Corporation, Inc., the property conveyed herein may be transferred to The North Carolina State Board of Education, to be held in trust for the purpose herein set forth, and if the North Carolina State Board of Education shall refuse to accept such property for the purpose of continuing the trust herein declared, all of the property herein conveyed shall be deeded by said Hammocks Beach Corporation, Inc. to Dr. William Sharpe, his heirs and descendants and to John Hurst and Gertrude Hurst, their heirs and descendants; The Hurst family shall have the mainland property and the Sharpe family shall have the beach property[.]

Plaintiffs further alleged that in a prior action filed by Defendant in 1986,

the Sharpe and Hurst heirs contended that fulfillment of the trust terms had become impossible or impracticable, that The Hammocks Beach Corporation had acted capriciously and contrary to the intent of the settlor in not declaring its recognition of such, and that the court should declare the trust terminated and either mandate a conveyance of all of the property to the Sharpe and Hurst families or adjudicate title in their names.

However, prior to trial in the earlier action, the parties reached a settlement, which was approved by the trial court in a consent judgment (the 1987 consent judgment). Plaintiffs in the present action cited portions of the 1950 deed, the 1950 agreement, and the 1987 consent judgment in their complaint.

Plaintiffs also alleged that "[a]s in 1987, fulfillment of the trust terms has become impossible or impracticable." Plaintiffs alleged claims for (1) an accounting, (2) "Termination of Trust and Reversion to Contingent Beneficiaries," and (3) breach of fiduciary duty. In support of Plaintiffs' claim for an accounting, Plaintiffs alleged that they were "remainder beneficiaries and interested parties" under the 1950 deed. Similarly, under their claim for "Termination of Trust and Reversion to Contingent Beneficiaries," Plaintiffs alleged that they were "contingent beneficiaries" of the 1950 deed. In support of their claim for breach of fiduciary duty, Plaintiffs also alleged that they were "remainder beneficiaries and interested persons" under the 1950 deed.

Defendant filed a motion to dismiss and a motion for a protective order on 5 July 2007. Regarding its motion to dismiss, Defendant asserted as follows:

Pursuant to the [1987] Consent Judgment, Plaintiffs have no rights to the property that is the subject of this lawsuit and therefore no further rights as beneficiaries of the trust to an accounting or a claim of breach of fiduciary duty. To the extent Plaintiffs seek to relitigate that issue now, they are precluded from doing so by the doctrine of issue preclusion.

Defendant filed a memorandum in support of its motion to dismiss, and Plaintiffs filed a memorandum in opposition to Defendant's motion to dismiss. The trial court entered an order denying Defendant's motion to dismiss on 23 August 2007. Defendant appeals.

I.

We first address the interlocutory nature of this appeal. "In general, the denial of a motion to dismiss is interlocutory and thus not immediately appealable." McCarn v. Beach, 128 N.C.App. 435, 437, 496 S.E.2d 402, 404, disc. review denied, 348 N.C. 73, 505 S.E.2d 874 (1998). However, immediate review of an interlocutory order is available: (1) where the trial court certifies, pursuant to N.C. Gen.Stat. § 1A-1, Rule 54(b), that there is no just reason for delay of an appeal from a final order as to one or more, but not all, of the claims; and (2) where the interlocutory order affects a substantial right in accordance with N.C. Gen.Stat. § 1-277(a). Sharpe v. Worland, 351 N.C. 159, 161-62, 522 S.E.2d 577, 579 (1999).

In the case before us, the trial court's order from which Defendant appeals does not contain a Rule 54(b) certification. Defendant thus argues that the trial court's order denying its motion to dismiss based upon collateral estoppel affects a substantial right.

Whether or not "a substantial right is affected is determined on a case-by-case basis." McCallum v. N.C. Coop. Extension Serv., 142 N.C.App. 48, 50, 542 S.E.2d 227, 231, disc. review denied, 353 N.C. 452, 548 S.E.2d 527 (2001). In McCallum, our Court recognized that "[l]ike res judicata, collateral estoppel (issue preclusion) is `"designed to prevent repetitious lawsuits over matters which have once been decided and which have remained substantially static, factually and legally."'" Id. at 51, 542 S.E.2d at 231 (quoting King v. Grindstaff, 284 N.C. 348, 356, 200 S.E.2d 799, 805 (1973) (quoting Commissioner v. Sunnen, 333 U.S. 591, 599, 68 S.Ct. 715, 92 L.Ed. 898, 907 (1948))). Our Court further recognized that "[u]nder collateral estoppel, parties are precluded from retrying fully litigated issues that were decided in any prior determination, even where the claims asserted are not the same." Id. Therefore, our Court held as follows:

The denial of summary judgment based on collateral estoppel, like res judicata, may expose a successful defendant to repetitious and unnecessary lawsuits. Accordingly, we hold that the denial of a motion for summary judgment based on the defense of collateral estoppel may affect a substantial right, and that [the] defendants' appeal, although interlocutory, is properly before us.

Id.

Our Court recently held that a trial court's order denying a Rule 12(b)(6) motion to dismiss based in part upon a rejection of the defendants' affirmative defense of collateral estoppel affected a substantial right in Strates Shows, Inc. v. Amusements of America, Inc., 184 N.C.App. 455, 646 S.E.2d 418 (2007). In Strates, as in the case before us, several of the defendants appealed from the denial of their motions to dismiss based upon collateral estoppel. Id. at 458-59, 646 S.E.2d at 422. Our Court held that "[the] def...

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