Opinion
No. COA18-950
05-21-2019
MEDPORT, INC., Plaintiff, v. CRAIG SMITH, Defendant.
The Law Office of D. Christopher Osborn, PLLC, by D. Christopher Osborn, for plaintiff-appellant. Lord Law Firm, PLLC, by Harrison A. Lord, for defendant-appellee.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure. Mecklenburg County, No. 17 CVS 2595 Appeal by plaintiff from orders entered 24 April 2018 and 21 May 2018 by Judge Jesse Caldwell in Mecklenburg County Superior Court. Heard in the Court of Appeals 14 March 2019. The Law Office of D. Christopher Osborn, PLLC, by D. Christopher Osborn, for plaintiff-appellant. Lord Law Firm, PLLC, by Harrison A. Lord, for defendant-appellee. BERGER, Judge.
On February 17, 2017, Medport, Inc. ("Plaintiff") filed suit against American Ventures Group, LLC ("American Ventures"), Marc Hubbard a/k/a Mark Hubbard ("Hubbard"), Club Hush Management Company, LLC ("Club Hush"), MAM International Holdings, LLC ("MAM International"), (collectively, "Defendants") and Craig Smith ("Defendant Smith") alleging three separate causes of action regarding a deed of trust. Plaintiff voluntarily dismissed its claims against Defendants, but not against Defendant Smith. Defendant Smith filed a motion to dismiss, which the Mecklenburg County Superior Court granted. Plaintiff then filed a motion for reconsideration and for relief from order of dismissal, which the Mecklenburg County Superior Court denied. On appeal, Plaintiff contends that the trial court (1) erred in granting Defendant Smith's motion to dismiss because it incorrectly relied on the doctrines of collateral estoppel, election of remedies, judicial estoppel, and quasi-estoppel; and (2) abused its discretion in denying Plaintiff's motion for reconsideration because it was not the product of diligent analysis and was unsupported by reason. We disagree and affirm.
Factual and Procedural Background
In its complaint, Plaintiff alleged that American Ventures, MAM International, and Club Hush are limited liability companies organized and existing under the laws of the State of Delaware. Plaintiff also alleged that American Ventures, MAM International, and Club Hush are controlled by and are the alter egos of Hubbard, who is a citizen of Mecklenburg County, North Carolina.
By deed of trust dated March 1, 2015, and recorded in the Office of the Register of Deeds of Mecklenburg County ("Mecklenburg Register of Deeds"), American Ventures granted Club Hush a security interest in certain real property ("the Sugar Creek Road Property") to secure the repayment of a debt owed by American Ventures to Club Hush in the amount of $600,000.00. American Ventures was the record owner of the Sugar Creek Road Property at the time of this transaction. That same day, American Ventures granted Plaintiff a security interest in the Sugar Creek Road Property securing the repayment of a debt owed by American Ventures to Plaintiff in the amount of $149,500.00. On June 17, 2016, Club Hush assigned all of its right, title, and interest in the deed of trust to MAM International, and recorded the transaction with the Mecklenburg Register of Deeds.
On November 7, 2016, American Ventures sold the Sugar Creek Road Property to Defendant Smith. As part of the closing, Hubbard presented the closing attorney with an instrument, which purported to be a satisfaction of the deed of trust held by Plaintiff. This purported satisfaction of security instrument was recorded with the Mecklenburg Register of Deeds. However, the instrument was fraudulently procured because the trustee did not authorize or execute the trustee's satisfaction. Thus, when American Ventures closed upon the sale of the Sugar Creek Road Property to Defendant Smith, the deed to such property purportedly conveyed the property free and clear of all liens and encumbrances held by Plaintiff. Because the deed incorrectly extinguished Plaintiff's secured interest, Plaintiff did not receive any funds from the sale of the Sugar Creek Road Property and the obligation secured by the deed of trust to Plaintiff remained unpaid.
On February 13, 2017, Plaintiff filed suit against Defendants and Defendant Smith in Mecklenburg County Superior Court ("Mecklenburg Complaint"). In its Complaint, Plaintiff requested the court to quiet title to the Sugar Creek Road Property, cancel the fraudulently procured satisfaction of security instrument that had purportedly canceled the deed of trust Plaintiff held in the Sugar Creek Road Property, and enter declaratory judgment concerning the status of the Sugar Creek Road Property. Defendants filed a reply, in which they asserted affirmative defenses and brought counterclaims against Plaintiff. Plaintiff filed a reply, in which it moved for judgment on the pleadings. Subsequently, Plaintiff voluntarily dismissed without prejudice its claims against Defendants. Then on October 12, 2017, the Mecklenburg County Superior Court entered an order granting Plaintiff's motion for judgment on the pleadings as to Defendant's counterclaims.
In addition to filing suit in Mecklenburg County, Plaintiff also filed suit in Forsyth County Superior Court ("Forsyth Complaint") on February 19, 2017, four days after it had filed its Mecklenburg Complaint. Suit was brought against American Ventures, MAM International, and Hazelhurst and Blake, PLLC, the law firm that had performed the closing of the sale of the Sugar Creek Road Property. Hubbard, Club Hush, and Defendant Smith were not named parties in this proceeding. Plaintiff asserted causes of action for fraud, and unfair and deceptive trade practices, and sought compensatory and punitive damages. In support of its cause of action for fraud, Plaintiff stated that its "deed of trust has been cancelled in the public records of Mecklenburg County, North Carolina" as a result of Defendants' fraudulent conduct in procuring and filing the satisfaction of security instrument. Because American Ventures and MAM International did not appear in the action, the Forsyth County Superior Court first entered default against them.
On April 4, 2017, the Forsyth County Superior Court then entered default judgment against American Ventures and MAM International ("Default Judgment"). The Superior Court ordered that the Plaintiff recover compensatory damages and punitive damages, jointly and severally, from American Ventures and MAM International for fraud in the amount of $208,369.11. It also ordered the Forsyth County Sheriff's Department to pay over to Plaintiff the garnished sum of $23,414.41 received from the garnishee, Hazelhurst and Blake, PLLC, to credit Plaintiff against the award of punitive damages. With Plaintiff's consent, the Superior Court also dismissed with prejudice Plaintiff's claim for unfair and deceptive trade practices.
After the Forsyth proceedings had been completed, Defendant Smith filed an answer on December 4, 2017 in the Mecklenburg proceedings, in which he asserted several affirmative defenses. That same day, Smith also filed a motion to dismiss in which he attached the pertinent Forsyth County records. Subsequently, Smith renewed his motion to dismiss and moved in the alternative for summary judgment.
On April 24, 2018, after taking "judicial notice of the pleadings and orders of record in the related Forsyth County Superior Court case, No. 17 CVS 922, attached to Defendant's Smith's Motion," the Mecklenburg County Superior Court entered an order granting Smith's motion to dismiss ("Order of Dismissal"). The Superior Court found that "Plaintiff's claims against Defendant Smith are barred by the doctrines of collateral estoppel, election of remedies, judicial estoppel, and quasi-estoppel, and the Complaint should therefore be dismissed as a matter of law." Plaintiff filed a motion for reconsideration and for relief from Order of Dismissal. The Mecklenburg County Superior Court entered an order denying Plaintiff's motion for reconsideration ("Order of Reconsideration"). Plaintiff appeals from the Order of Dismissal and Order of Reconsideration.
Analysis
I. Motion to Dismiss
Plaintiff contends that its Mecklenburg Complaint is sufficient to withstand dismissal, and argues that the trial court erroneously relied on the doctrines of collateral estoppel, election of remedies, judicial estoppel, and quasi-estoppel when it dismissed its claims against Defendant Smith. We disagree.
"On a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, the standard of review 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." Highland Paving Co., LLC v. First Bank, 227 N.C. App. 36, 39, 742 S.E.2d 287, 290-91 (2013) (citation and quotation marks omitted).
Dismissal under Rule 12(b)(6) is proper when one or more of the following three conditions is satisfied: (1) when on its face the complaint reveals no law supports plaintiff's claim; (2) when on its face the complaint reveals the absence of fact sufficient to make a good claim; and (3) when some fact disclosed in the complaint necessarily defeats plaintiff's claim. Thus, a complaint is deemed sufficient to withstand a motion to dismiss under Rule 12(b)(6) where no 'insurmountable bar' to recovery appears on the face of the complaint and the complaint's allegations give adequate notice of the nature and extent of the claim. More important, plaintiff's complaint should not be dismissed unless it affirmatively appears plaintiff is entitled to no relief under any state of facts which could be presented in support of the claim. . . . Pursuant to a Rule 12(b)(6) motion, well-pleaded allegations are treated as true. . . . Thus, [t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.Johnson v. Bollinger, 86 N.C. App. 1, 4, 356 S.E.2d 378, 380-81 (1987) (citations and quotation marks omitted).
"Generally, a plaintiff is deemed to have made an election of remedies and therefore estopped from suing a second defendant only if he has sought and obtained final judgment against a first defendant and the remedy granted in the first judgment is repugnant or inconsistent with the remedy sought in the second action." McCabe v. Dawkins, 97 N.C. App. 447, 448, 388 S.E.2d 571, 572 (1990) (citation omitted). "The purpose of the doctrine of election of remedies is to prevent more than one redress for a single wrong." Id. (citation omitted).
Settlement of or judgment on the first action is inconsistent with suit in the second action when the relief demanded in the second action is a continuation of relief sought in the first action, or if relief sought in the first action can redress the damage claimed in the second action. A second action is a continuation of the first action when plaintiff seeks to recover some alleged deficiency in the settlement or judgment of the first action. If plaintiff accepts settlement, or judgment is rendered on his demand in the first action, such acceptance or judgment is a final redress of that action, regardless of whether the amount of relief is what plaintiff requested.Id. at 448-49, 388 S.E.2d at 572 (citations omitted).
"A judgment by default is a final judgment . . . ." Moore v. Sullivan, 123 N.C. App. 647, 649, 473 S.E.2d 659, 660 (1996). A judgment by default
establishes the matters adjudicated, if supported by verified allegations in the complaint, and concludes by way of estoppel. Judgment by default final, where there is no appeal or motion to set aside, concludes the controversy between plaintiff and defaulting defendant, and further proceedings between plaintiff and other defendants cannot adjudicate rights between plaintiff and the defaulting defendant against whom final judgment already had been entered.Piney Mountain Properties v. Nat'l Theatre Supply Co., 6 N.C. App. 191, 193, 169 S.E.2d 465, 466 (1969).
[A] party who has been fraudulently induced to enter into a contract or sale has a choice of remedies. He may repudiate the contract, and, tendering back what he has received under it, may recover what he has parted with or
its value; or he may affirm the contract, keeping whatever property or advantage he has derived under it, and may recover in an action for deceit the damages caused by the fraud. And, in a proper case, the defrauded party may be entitled to the equitable remedies of rescission and cancellation or reformation. But, as a general rule, the defrauded party cannot both rescind and maintain an action for deceit. If he elects to rescind the contract, he may recover back what he has parted with under it, but cannot recover damages for the fraud. On the other hand, if he elects to maintain an action for deceit, he cannot sue for rescission or reformation.Parker v. White, 235 N.C. 680, 688, 71 S.E.2d 122, 128 (1952) (emphasizing that this "principle applies to contracts and sales of both real and personal property").
Here, Plaintiff was entitled to seek rescission or reformation of its purportedly cancelled deed of trust, or seek compensatory damages under a theory of fraud. However, when Plaintiff filed its Forsyth Complaint seeking damages under a theory of fraud, and Default Judgment was subsequently entered in Plaintiff's favor awarding it $208,369.11 in compensatory damages, Plaintiff could no longer seek rescission or reformation. In awarding damages, the trial court relied on Plaintiff's assertion that its "deed of trust has been cancelled in the public records of Mecklenburg County, North Carolina" as a result of Defendants' fraudulent conduct in procuring and filing the satisfaction of security instrument. Therefore, in its Default Judgment, the trial court reasoned "Medport was owed the sum of $208,369.11 . . . under the terms of the promissory note and deed of trust in question, which deed of trust was cancelled improperly due to the fraudulent conduct of Defendants as aforesaid."
As held in Parker v. White, when a plaintiff "elect[s] to affirm the transaction in question, and sue to recover damages, plaintiff may not, at the same time, sue to rescind or reform in whole or in part." Parker, 235 N.C. at 688, 71 S.E.2d at 128. Because Plaintiff elected and obtained a judgment and remedy for fraud, Plaintiff cannot now seek an inconsistent remedy of rescission or reformation. Therefore, we affirm the trial court's Order of Dismissal because the election of remedies doctrine barred Plaintiff's claims against Defendant Smith.
Plaintiff also challenges the trial court's reliance on collateral estoppel, judicial estoppel, and quasi-estoppel. However, we need not address each doctrine because the trial court properly relied on the election of remedies doctrine to dismiss Plaintiff's claims against Defendant Smith. See Hindman v. Appalachian State Univ., 219 N.C. App. 527, 531, 723 S.E.2d 579, 581 (2012) (determining that this court was not required to address plaintiffs' remaining arguments on appeal after affirming the trial court's order on one ground raised on appeal).
II. Motion for Reconsideration
Plaintiff also asserts that the trial court abused its discretion when it denied Plaintiff's motion for reconsideration. Plaintiff specifically contends that the trial court's decision was not the product of diligent analysis and unsupported by reason because it did not provide an explanation of its decision or hold a hearing. We disagree.
"Appellate review of a trial court's ruling pursuant to Rule 60(b) is limited to determining whether the trial court abused its discretion." Parris v. Light, 146 N.C. App. 515, 518, 553 S.E.2d 96, 97 (2001) (citations and quotation marks omitted). "Rendition of findings of fact is not required of the trial court in ruling upon a Rule 60(b) motion absent the request of a party, although it is the better practice to do so." Id., 553 S.E.2d at 98 (citation and quotation marks omitted). Moreover, "Rule 60(b) provides no specific relief for 'errors of law' and our courts have long held that even the broad general language of Rule 60(b)(6) does not include relief for 'errors of law.' " Hagwood v. Odom, 88 N.C. App. 513, 519, 364 S.E.2d 190, 193 (1988). "The appropriate remedy for errors of law committed by the court is either appeal or a timely motion for relief under N.C.G.S. Sec. 1A-1, Rule 59(a)(8) . . . ." Id.
Here, we first note that Plaintiff did not specify in its motion for reconsideration the subsection of Rule 60(b) pursuant to which it sought relief. More importantly, in its motion for reconsideration, Plaintiff did not request that the trial court make findings of fact. Instead, Plaintiff requested that the court vacate or modify its Order of Dismissal, or in the alternative that the trial court "explain how [its Order of Dismissal] does not overrule (and can be reconciled with) each of Judge Archie's prior orders, which constitute the law of the case." Although Plaintiff's request in the alternative arguably might be construed as a generalized request for findings, it did not request that the trial court make specific findings of fact required by Rule 60(b).
Also, a trial court is not required to hold a hearing on a motion to reconsider when it "evaluate[s] evidence available from both sides and based upon that evaluation, made a reasoned decision." Henderson v. Wachovia Bank of N.C., N.A., 145 N.C. App. 621, 627, 551 S.E.2d 464, 469 (2001). Here, the trial court heard arguments regarding Defendant Smith's motion for dismissal, entered the Order of Dismissal, and subsequently reviewed the motion for reconsideration. At each stage, the trial court had the opportunity to evaluate and consider the available evidence.
Thus, the trial court was not required to hold a hearing prior to entering its Order of Reconsideration or make findings of fact in its Order of Reconsideration without Plaintiff's request to do so. Therefore, we find that the trial court did not abuse its discretion. Accordingly, we affirm.
Conclusion
Because Plaintiff's complaint failed to state a claim upon which relief may be granted, we affirm the trial court's Order of Dismissal on its ground that the election of remedies doctrine barred Plaintiff's claims against Defendant Smith. Also, the trial court did not abuse its discretion. We therefore affirm the trial court's Order of Reconsideration.
AFFIRMED.
Chief Judge MCGEE and Judge MURPHY concur.
Report per Rule 30(e).