Town of Belhaven, NC v. Pantego Creek

Citations: 793 S.E.2d 711; 250 N.C. App. 459Docket: 16-373

Court: Court of Appeals of North Carolina; November 14, 2016; North Carolina; State Appellate Court

Original Court Document: View Document

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The Town of Belhaven, Pungo District Hospital Community Board, and several NAACP branches (collectively "Plaintiffs") appealed a trial court order granting a motion to dismiss by Pantego Creek, LLC, and Vidant Health, Inc. (collectively "Defendants") under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. The appeal followed a 13 October 2015 order issued by Judge R. Stuart Albright in Beaufort County Superior Court, which was heard by the Court of Appeals on 19 October 2016. 

The case revolves around a 1948 deed in which the Town of Belhaven granted Pungo District Hospital Corporation (PDHC) a 100-foot strip of land to support the construction and operation of a hospital. The deed specifies the land's description and confirms the rights conveyed to PDHC. The hospital was built on this land and operated by PDHC until 2011 when it entered a 2011 Agreement with Vidant and Pantego Creek, transferring control of the hospital to Vidant. Under this agreement, Pantego Creek was given the authority to enforce any breaches by Vidant. The appellate court affirmed the trial court's order dismissing the case.

The 2011 Agreement specified that it and all related Transaction Agreements were not intended for third-party beneficiaries. In September 2013, Vidant announced plans to close the Hospital, prompting public opposition from Belhaven and several NAACP branches. Subsequent meetings led to the creation of the Mediation Agreement, which required the establishment of the Pungo District Hospital Community Board (Community Board). If the Community Board failed to assume operational responsibility by July 1, 2014, the Hospital would close. Belhaven did not meet this requirement, and Vidant closed the Hospital on that date, transferring the property to Pantego Creek via the 2014 Deed. 

On August 13, 2014, Plaintiffs filed a complaint and motion for a temporary restraining order, which was granted the next day. The case was transferred to federal court but later remanded back to state court, as the Plaintiffs did not present a federal civil rights claim but rather a state claim under N.C. Gen. Stat. 99D-1. On April 6, 2015, the Plaintiffs amended their complaint, including six causes of action against Defendants, such as breach of contract and fraud. 

On April 30, 2015, a judge recommended the case be designated as exceptional, leading to the appointment of Judge R. Stuart Albright. Defendants filed a motion to dismiss the amended complaint on July 10, 2015, which included multiple relevant documents. A hearing was held on October 6, 2015, and on October 13, Judge Albright granted the motion to dismiss. Plaintiffs appealed on November 10, 2015, arguing that they had adequately pled their claims; however, the court disagreed.

The standard of review for a 12(b)(6) motion to dismiss assesses whether a complaint states a claim for which relief can be granted, with all allegations treated as true. Dismissal is appropriate if: 1) no law supports the plaintiff's claim; 2) the complaint lacks sufficient factual allegations for a valid claim; or 3) facts disclosed defeat the plaintiff's claim. Appeals of such motions are reviewed de novo for legal sufficiency.

In the case at hand, Plaintiffs contend that Defendants, as successors to a 1948 Deed, are bound by its terms, which they interpret as imposing a reversionary interest for hospital use. They argue the trial court incorrectly dismissed Belhaven’s breach of contract claim against Vidant and failed to declare a judgment regarding the land’s use under Article V, Section 3 of the North Carolina Constitution, asserting the land must serve a public purpose.

However, the argument is flawed as the 1948 Deed lacks any explicit reversionary language indicating the land would revert to Belhaven if not used for a hospital. The deed conveys the land in fee simple absolute to PDHC, which the court emphasizes is consistent with the longstanding principle that deeds must contain clear language for reversionary interests to be recognized. The court concludes that the deed merely expresses the intended use without imposing conditions, and therefore, no reversionary interest exists. It is established that a grantor can impose conditions, but absent clear intention, expressions of motive do not affect the legal title conveyed.

For a reversionary interest to be valid, a deed must explicitly state the conditions for reversion or termination; vague purposes for property use without clear forfeiture terms do not suffice. Plaintiffs failed to provide legal support for the claim that a governmental entity's intent implicitly creates a reversionary interest. As established in Station Assocs. Inc. and similar cases, a clear expression in the property grant is necessary for such an interest to exist. Therefore, the 1948 Deed did not create a reversionary interest, allowing PDHC and its successors to hold the property in fee simple absolute. Additionally, North Carolina law stipulates that if a person claims title to real property for 30 years without conflicting claims being recorded, prior claims based on earlier transactions are extinguished. The General Assembly recognizes that outdated restrictions on property can hinder marketability. Consequently, individuals with a 30-year record title possess a marketable title free from prior claims, as outlined in N.C. Gen. Stat. 47B-1 and 47B-2(a, c).

The 1948 Deed establishes a fee simple title, upheld for over 60 years, leading to the dismissal of Belhaven's breach of contract and declaratory judgment claims. Defendants acquired fee simple absolute title from PDHC, precluding any arguments about violations of the North Carolina Constitution regarding title transfers to Vidant and Pantego Creek, as they met the statutory requirements outlined in N.C. Gen. Stat. 47B-1 and 47B-2. 

Regarding the fraud claim against Vidant, the trial court's dismissal was justified due to a failure to plead with particularity the necessary elements of fraud. The elements include a false representation of a material fact, intent to deceive, and resulting damages, all of which must be detailed in the complaint. The plaintiffs did not provide specifics about the time, place, or individuals involved in the alleged misrepresentations. 

The Mediation Agreement explicitly stated that if the Community Board could not assume operational responsibility for the hospital by July 1, 2014, the hospital would close, which Belhaven acknowledged. Therefore, Vidant's closure of the hospital was justified under the agreement. The plaintiffs' claims of fraud did not adequately address this provision and failed to meet the requirements of Rule 9(b) of the North Carolina Rules of Civil Procedure, which mandates a detailed account of the circumstances surrounding any fraud allegations.

To plead actual fraud, plaintiffs must specifically detail the time, place, content of the fraudulent representation, the identity of the person making it, and what was obtained through the fraud. Plaintiffs cannot claim damages from the 2011 Agreement or the 2014 Deed involving Vidant, PDHC, and Pantego Creek, as they were neither parties nor intended third-party beneficiaries of those agreements. Under North Carolina law, to establish rights as a third-party beneficiary, plaintiffs must demonstrate the existence of a valid contract intended to benefit them directly. A direct beneficiary must be someone the contracting parties intended to confer a legally enforceable benefit upon; incidental benefits are insufficient. The court should examine the circumstances and contract language to assess intent. In this case, the 2011 Agreement explicitly states it is not intended for third-party beneficiaries, implying that any benefits to plaintiffs were incidental. Consequently, without standing to challenge these agreements, plaintiffs cannot pursue a fraud claim against Vidant. Furthermore, the plaintiffs did not sufficiently detail how Vidant's actions constituted fraud, leading to the dismissal of their claim.

Regarding the unfair and deceptive trade practices claim, the court found no error in dismissing it against Vidant. According to N.C.G.S. 75-1.1, an unfair trade practice is one that is immoral or substantially injurious, while a deceptive practice has the potential to mislead. However, breaches of contract alone, even if intentional, do not qualify as unfair or deceptive trade practices. To succeed in such a claim, plaintiffs must prove an unfair or deceptive act affecting commerce that caused actual injury.

Belhaven and the Community Board failed to demonstrate any fraud or deception by Vidant, leading to the dismissal of their claim for unfair and deceptive trade practices. They lack standing since there was no business relationship with Vidant, and they did not sufficiently plead an injury in fact, which must be tangible and not merely hypothetical. The trial court's dismissal was therefore justified. Regarding the breach of fiduciary duty claim against Pantego Creek, the 2011 Agreement explicitly stated it was not intended to benefit third-party beneficiaries, nullifying any claim of a fiduciary relationship between Pantego Creek and the Plaintiffs. Consequently, Belhaven's claim for breach of fiduciary duty was inadequately pled. Finally, the NAACP's claim under N.C. Gen. Stat. 99D-1 was also dismissed, as organizations typically lack standing to sue for damages on behalf of their members unless the claims are common to the entire membership. The statute prohibits conspiracies motivated by race, religion, ethnicity, or gender that interfere with constitutional rights, requiring proof of specific acts of harassment or violence to support such claims.

Any individual whose rights have been interfered with due to a violation of the specified Chapter can initiate a civil action. The North Carolina Human Relations Commission is also authorized to bring such an action on behalf of affected individuals, provided they consent. Courts have the authority to issue injunctions against future violations and award both compensatory and punitive damages to the aggrieved party. Court costs may be assigned to the prevailing party, either the Commission or the defendant. The Commission is represented by its staff attorney, as stated in G.S. 114-2.

The statute clearly indicates that only aggrieved individuals or the Commission have standing to bring actions under Section 99D-1. Since no named individuals are part of this lawsuit, the NAACP lacks the standing to assert a claim under this section. 

Regarding the designation of the case as exceptional, the plaintiffs argue that their right to a fair hearing was compromised when the Chief Justice labeled it as such, based on the Senior Resident Superior Court Judge's recommendation, and appointed Judge Albright. The plaintiffs claim prejudice from Judge Albright’s handling and seek to vacate his dismissal order for a new hearing with a judge of their choosing. However, the appellate court lacks jurisdiction to address this issue since the superior court had no authority to override a Supreme Court directive. Therefore, the appellate court dismisses this aspect of the plaintiffs' appeal and affirms the trial court’s order. The court's decision is partially affirmed and partially dismissed, with concurrence from Chief Judge McGee and Judge Inman.