Walter v. Freeway Foods, Inc. (In re Freeway Foods of Greensboro, Inc.)

• Decision Date: 21 March 2012
• Docket Number: Adversary No. 10–02057.,Bankruptcy No. 10–11282.
• Citation: 467 B.R. 853
• Court: U.S. Bankruptcy Court — Middle District of North Carolina
• Parties: In re FREEWAY FOODS OF GREENSBORO, INC., Debtor.Jane H. Walter, Plaintiff, v. Freeway Foods, Inc., Freeway Foods of Greensboro, Inc., Gary M. Fly, individually, Lynne R. Fly, individually, Yellow Sign, Inc., and Waffle House, Inc., and Kimberly S. Kraft, individually, Defendants.

467 B.R. 853

In re FREEWAY FOODS OF GREENSBORO, INC., Debtor.Jane H. Walter, Plaintiff,

v.Freeway Foods, Inc., Freeway Foods of Greensboro, Inc., Gary M. Fly, individually, Lynne R. Fly, individually, Yellow Sign, Inc., and Waffle House, Inc., and Kimberly S. Kraft, individually, Defendants.

Bankruptcy No. 10–11282.

Adversary No. 10–02057.

United States Bankruptcy Court, M.D. North Carolina,Greensboro Division.

March 21, 2012.

John Patrick Haywood, Rachel Scott Decker, Carruthers & Roth P.A., Greensboro, NC, for Plaintiff.

Christopher C. Finan, High Point, NC, William B. Sullivan, Julie B. Pape, Ron Davis, Womble Carlyle Sandridge & Rice PLLC, Winston–Salem, NC, for Defendants.

MEMORANDUM OPINION

THOMAS W. WALDREP, JR., Bankruptcy Judge.

This matter came before the Court on January 30, 2012, upon the Motion for Judgment on the Pleadings (the “Motion”) filed by Yellow Sign, Inc. (“YSI”), Waffle House, Inc. (“Waffle House”), and Kimberly H. Kraft (“Kraft” and together with YSI and Waffle House, the “Corporate Defendants”) on July 25, 2011, and the Opposition to the Motion filed by the above-captioned plaintiff (“Walter”) on January 24, 2012. At the hearing, Rachel S. Decker and J. Patrick Haywood appeared on behalf of Walter, and William B. Sullivan appeared on behalf of the Corporate Defendants.

I. JURISDICTION

The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334, and Local Rule 83.11 of the United States District Court for the Middle District of North Carolina. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), which this Court has the jurisdiction to hear and determine.

II. FACTS

The facts of this case are fully set forth in the Memorandum Opinion Denying Plaintiff's Motion to Remand, entered by this Court on May 24, 2011, and are incorporated by reference. They will not be repeated here.

III. ANALYSIS

A. Standard of Review

Motions under Rules 12(b)(6) and 12(c) of the Federal Rules of Civil Procedure permit a party to challenge the legal sufficiency of his opponent's allegations. While they are different motions, the standards for analyzing each motion are essentially the same. Alexander v. Greensboro, 801 F.Supp.2d 429, 432 (M.D.N.C.2011) (citing Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405–06 (4th Cir.2002)); Gregory v. Schatzman, No. 1:08CV497, 2009 WL 3151867, at *1 (M.D.N.C. Sept. 24, 2009) (“[T]he standard for a motion for judgment on the pleadings is the same as that for a motion to dismiss under Rule 12(b)(6)”); Sherman v. Litton Loan Servicing, L.P., 796 F.Supp.2d 753, 757 (E.D.Va.2011) (“[A] motion under 12(c) ... is assessed under the same standard that applies to a Rule 12(b)(6) motion.”) (quoting Walker v. Kelly, 589 F.3d 127, 139 (4th Cir.2009)). However, given the fact that an answer must be filed before a Rule 12(c) motion may be made, a court may consider a broader scope of material when analyzing a motion under Rule 12(c).

1. Motions to Dismiss Under Rule 12(b)(6)

In order to survive a motion to dismiss for a failure to state a claim upon which relief can be granted, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Garcia–Contreras v. Brock & Scott, PLLC, 775 F.Supp.2d 808, 817 (M.D.N.C.2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)). When analyzing a Rule 12(b)(6) motion to dismiss, a court should consider the “facts in the light most favorable to the plaintiff.” Id. However, legal conclusions, unwarranted inferences, unreasonable conclusions, or arguments need not be accepted as true. Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.2008). In other words, the factual allegations in the complaint “must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Sherman, 2011 WL 2634097, at *3 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

A motion to dismiss under Rule 12(b)(6) must be made “before pleading if a responsive pleading is allowed.” Fed.R.Civ.P. 12(b). Moreover, such a motion may only be filed by a party against whom a claim has been made. In other words, only the defendant to a certain claim is able to bring a Rule 12(b)(6) motion. As a result, only the sufficiency of the complaint is available for the court to analyze in determining whether the motion should be granted.

2. Motions for Judgment on the Pleadings Under Rule 12(c)

Pursuant to Rule 12(c), “after the pleadings are closed—but early enough not to delay trial,” any party may make a motion for judgment on the pleadings. Fed.R.Civ.P. 12(c). Such a motion should be granted “where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law.” Garcia–Contreras, 775 F.Supp.2d. at 817. Similar to the motion under Rule 12(b)(6), the “Court must assume ‘the facts alleged in the complaint are true and draw all reasonable factual inferences in [the non-movant's] favor.” Price v. Brock & Scott, PLLC, No. 1:10CV40, 2011 WL 1326934, at *10 (M.D.N.C. April 6, 2011) (quoting Burbach Broad. Co., 278 F.3d at 406). Unlike on a Rule 12(b)(6) motion, however, on a Rule 12(c) motion the court may consider the answer as well. Rinaldi v. CCX, Inc., No. 3:05–CV–108, 2008 WL 2622971, at *2 n. 3 (W.D.N.C. July 2, 2008). However, any factual allegations in the answer “are taken as true only where and to the extent they have not been denied or do not conflict with the complaint.” Jadoff v. Gleason, 140 F.R.D. 330, 331 (M.D.N.C.1991). With regard to a Rule 12(c) motion, the defendant “cannot rely on allegations of fact contained only in the answer, including affirmative defenses, which contradict [the] complaint,” because “Plaintiffs were not required to reply to [the] answer, and all allegations in the answer are deemed denied.’ ” Alexander v. City of Greensboro, 801 F.Supp.2d 429, 433 (M.D.N.C.2011) (quoting Jadoff, 140 F.R.D. at 332); Fed.R.Civ.P. 8(b)(6) (“If a responsive pleading is not required, an allegation is considered denied or avoided.”).

Although this framework is more expansive than under Rule 12(b)(6), a court “cannot consider evidence outside the pleadings without converting [the] motion into one for summary judgment under Fed.R.Civ.P. 56 and giving both parties a chance to present further evidence.” Gregory v. Schatzman, No. 1:08CV497, 2009 WL 3151867, at *3 (M.D.N.C. Sept. 24, 2009); A.S. Abell Co. v. Baltimore Typographical Union No. 12, 338 F.2d 190, 193 (4th Cir.1964) (“If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56.”).

Accordingly, where a party moves for judgment on the pleadings under Rule 12(c), the court may consider the complaint, facts in the answer that do not expand on or controvert facts in the complaint, and judicially noticed facts, and should assume the facts alleged in the complaint are true. Price, 2011 WL 1326934, at *10. “The test applicable for judgment on the pleadings is whether or not, when viewed in the light most favorable to the party against whom the motion is made, genuine issues of material fact remain or whether the case can be decided as a matter of law.” Smith v. McDonald, 562 F.Supp. 829, 842 (M.D.N.C.1983), aff'd, 737 F.2d 427 (4th Cir.1984), aff'd, 472 U.S. 479, 105 S.Ct. 2787, 86 L.Ed.2d 384 (1985); Jadoff, 140 F.R.D. at 331; 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1368 (3d ed. 2004). Granting a Rule 12(c) motion is proper when, drawing all reasonable factual inferences in favor of the nonmovant, there are “no material facts in dispute and the moving party is entitled to judgment as a matter of law.” Garcia–Contreras, 775 F.Supp.2d at 817.

B. Walter's Claims

Walter's amended complaint sets forth fourteen causes of action, but only the last ten are asserted against the Corporate Defendants: (5) breach of lease agreement against Waffle House and YSI; (6) successor liability against Waffle House and YSI; (7) lender liability against Waffle House and YSI; (8) interference with contract against Waffle House and YSI; (9) fraud against Waffle House and YSI; (10) unfair and deceptive trade practices against Waffle House and YSI; (11) conspiracy against all of the above-captioned defendants; (12) interference with contract against Kraft; (13) fraud against Kraft; ¹ and (14) unfair and deceptive trade practices against Kraft. ²

1. Breach of Lease

Walter asserts in her Fifth Cause of Action that the lease that she executed with the Debtor was validly assigned to Waffle House and YSI pursuant to the terms of the lease itself. She further alleges that Waffle House and YSI breached that lease by failing to pay rents due under it.

To support a claim for breach of lease, a “plaintiff must allege sufficient facts to show (1) existence of a valid contract and (2) breach of the terms of that contract.” Poor v. Hill, 138 N.C.App. 19, 530 S.E.2d 838, 843 (2000); see also Jackson v. Carolina Hardwood Co., Inc., 120 N.C.App. 870, 463 S.E.2d 571, 572 (1995) (requiring a showing that “valid contract existed which terms were breached by the defendant.”). However, where a claim implicates the enforceability of the contract, rather than its underlying validity, a motion to dismiss or for judgment on the pleadings may not be warranted—for example, in cases where one party attempts to use the Statute of Frauds as an affirmative defense. See N.C. Gen.Stat. § 8(c); see also Green v. Harbour, 113 N.C.App. 280, 437 S.E.2d 719, 720 (1994).³ As a general rule, the Statute of Frauds cannot be utilized to demonstrate the invalidity of a contract on a motion to dismiss for a failure...