Nelson v. Alliance Hospitality Mgmt., LLC ( 2014 )

An unpublished opinion of the North Carolina Court of Appeals does not constitute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.
NO. COA13-1325
NORTH CAROLINA COURT OF APPEALS
Filed: 20 May 2014
KENNETH E. NELSON,
Plaintiff,
v. Wake County
No. 11 CVS 3217
ALLIANCE HOSPITALITY MANAGEMENT,
LLC, a Georgia limited liability
company, ROLF A. TWEETEN, and AXIS
HOSPITALITY, INC., an Illinois
corporation,
Defendants.
Appeal by plaintiff from order entered 20 August 2013 by
Special Superior Court Judge for Complex Business Cases James L.
Gale in Wake County Superior Court. Heard in the Court of
Appeals 8 April 2014.
Meynardie & Nanney, PLLC, by Joseph H. Nanney, Jr., for
plaintiff-appellant.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP,
by Michael W. Mitchell and Jackson Wyatt Moore, Jr.; and
Leader, Bulso & Nolan, PLC, by Eugene N. Bulso, Jr., pro
hac vice for defendants-appellees.
HUNTER, Robert C., Judge.
Plaintiff Kenneth Nelson (“plaintiff” or “Nelson”) appeals
the order granting defendants’ motion for summary judgment as to
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plaintiff’s claims for damages. On appeal, plaintiff argues
that the trial court erred as a matter of law by ruling that:
(1) plaintiff’s damages were too remote; (2) certain damages are
recoverable only in a derivative action; and (3) plaintiff was
not entitled to punitive damages.
After careful review, we dismiss plaintiff’s appeal because
the trial court’s order is interlocutory and does not affect a
substantial right.
Background
Defendant Alliance Hospitality (“Alliance”) is a Georgia
LLC that provides hotel management services. Defendant Axis
Hospitality (“Axis”) is an Illinois corporation, with its
principal place of business in Wake County. Axis is owned
solely by defendant Rolf Tweeten (“Tweeten”) (collectively,
Alliance, Axis, and Tweeten are referred to as “defendants”).
Sometime in 2007, Axis purchased a 51% interest in Alliance;
Tweeten had hired plaintiff as a consultant to help him
investigate and acquire the majority interest in Alliance.
Later, Axis acquired the rest of Alliance. Nelson and Tweeten
allegedly reached an oral agreement that Nelson would receive a
ten percent interest in Alliance; Nelson became an Alliance
Director and later became CFO of Alliance. Nelson remained CFO
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and on the Board of Alliance until January 2011.
In a separate, yet related, series of events, Nelson had
several judgments entered against him in other jurisdictions.
Specifically, a Tennessee state-court judgment had been entered
against Nelson in favor of Orlando Residence (“Orlando”), an
unrelated third-party (“the Tennessee judgment”). In addition,
on 11 September 2012, Orlando obtained a second judgment in
South Carolina against plaintiff in the amount of $4,000,000
(“the South Carolina judgment”). To satisfy the Tennessee
judgment, Orlando enforced the judgment in Wisconsin and caused
two houses belonging to Mrs. Nelson, plaintiff’s wife, to be
sold. After entry of the Tennessee judgment and sale of the
Wisconsin houses, Nelson was removed from the Alliance board and
his CFO position was eliminated. Alliance entered into an
agreement to sell certain contracts to Interstate Hotels &
Resorts (“Interstate”); the sale closed on 1 April 2011. The
sale proceeds from this transaction are central to plaintiff’s
claims.
Orlando sought to enforce the Tennessee and the South
Carolina judgments in North Carolina. Judge Michael J.
O’Foghludha in Wake County Superior Court entered charging
orders against Nelson’s interest in Alliance, requiring Alliance
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to pay the distributions of the Interstate sale proceeds to
Orlando instead of to Nelson (“the charging orders”). Although
Nelson appealed the enforcement of the Tennessee judgment in
Wisconsin, it was affirmed by the Wisconsin Court of Appeals.
An order was issued by Wake County Court in February 2013
confirming the continued applicability of the 2011 charging
order against Nelson.
On 25 February 2011, Nelson filed suit against defendants,
bringing claims for: (1) breach of fiduciary duty; (2)
constructive fraud; (3) judicial dissolution of Alliance; (4) a
declaratory judgment that Nelson owns ten of Alliance’s sixty-
one outstanding membership interest units; and (5) wrongful
termination. Plaintiff’s complaint is not included in the
record on appeal. Defendants filed counterclaims against
plaintiff, but these counterclaims were eventually dismissed by
defendants. On 22 March 2011, the matter was designated a
complex business case. On 22 November 2011, the wrongful
termination claim (claim no. 5) was dismissed by the trial
court.
Defendants filed two summary judgment motions. The first
motion for summary judgment was in regards to plaintiff’s claim
for a declaratory judgment that he is a member of Alliance and
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the extent of his ownership interest in Alliance (claim no. 4).
The actual motion is not included in the record on appeal;
however, the trial court’s order is included. The trial court
denied the motion, concluding that there was a material issue of
fact that precluded determining the issues as a matter of law.
In other words, the trial court concluded that whether Nelson
was a member of Alliance and what his ownership interest was
should be decided by a jury.
In the second motion, the subject of this appeal,
defendants moved for summary judgment with regard to all of
plaintiff’s claims for consequential, punitive, and other
damages. The grounds for Nelson’s claims are premised on his
contention that had defendants properly distributed the sales
proceeds from the sale of Alliance to Interstate, he would not
have had to sell his property in Wisconsin to satisfy the
Tennessee judgment. Furthermore, Nelson claims that had Tweeten
timely distributed the sale proceeds, Nelson could have paid
Orlando on time, and Orlando would not have been forced to
obtain the South Carolina judgment against him nor enforce it in
North Carolina. After concluding that Georgia law governs
Nelson’s damage claims, the trial court held that defendants
acts were not the proximate cause of Nelson’s alleged losses;
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instead, Nelson’s own failure to pay his debts caused his
Wisconsin property to be sold at a loss and for Orlando to
obtain a judgment against him in South Carolina. Since Nelson
was not entitled to compensatory damages, the trial court also
concluded that he was not entitled to punitive damages. By
granting summary judgment, the trial court dismissed plaintiff’s
claims for breach of fiduciary duty and constructive fraud
(claim nos. 1 and 2). However, plaintiff’s claims for judicial
dissolution of Alliance and for a declaratory judgment (claim
nos. 3 and 4) were not disposed of by the trial court’s order.
Plaintiff appeals from this order.
Discussion
Initially, we must first consider whether plaintiff may
appeal from the trial court’s interlocutory order. It is
undisputed that the trial court’s order is interlocutory because
plaintiff’s claims for judicial resolution and a declaratory
judgment were not disposed of and are still pending. See
Liggett Group v. Sunas, 113 N.C. App. 19, 23, 437 S.E.2d 674,
677 (1993) (“A grant of partial summary judgment, because it
does not completely dispose of the case, is an interlocutory
order from which there is ordinarily no right of appeal”).
Defendants contend that plaintiff’s appeal is interlocutory and
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should be dismissed because the order does not affect a
substantial right. In contrast, plaintiff, citing Tinch v.
Video Industries Services, 347 N.C. 380, 493 S.E.2d 426 (1997),
claims that the legal interdependence of his dismissed claims
and the remaining claims increases the risk of inconsistent
verdicts and affects a substantial right; therefore, the
interlocutory order is immediately appealable.
“Generally, there is no right of immediate appeal from
interlocutory orders and judgments.” Goldston v. Am. Motors
Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990).
There are only two means by which an
interlocutory order may be appealed: (1) if
the order is final as to some but not all of
the claims or parties and the trial court
certifies there is no just reason to delay
the appeal pursuant to N.C.R. Civ. P. 54(b)
or (2) if the trial court’s decision
deprives the appellant of a substantial
right which would be lost absent immediate
review.
Turner v. Norfolk S. Corp., 137 N.C. App. 138, 141, 526 S.E.2d
666, 669 (2000) (internal quotation marks omitted). The burden
is on the moving party to show that the “affected right is a
substantial one, and that deprivation of that right, if not
corrected before appeal from final judgment, will potentially
injure the moving party.” Flitt v. Flitt, 149 N.C. App. 475,
477, 561 S.E.2d 511, 513 (2002). Because the trial court’s
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order does not include a Rule 54(b) certification, we must
determine whether it affects a substantial right.
“A substantial right . . . is considered affected if there
are overlapping factual issues between the claim determined and
any claims which have not yet been determined because such
overlap creates the potential for inconsistent verdicts
resulting from two trials on the same factual issues.” Sunas,
113 N.C. App. at 24, 437 S.E.2d at 677 (internal quotation marks
omitted). This Court has repeatedly held that the moving party
must show that “(1) the same factual issues would be present in
both trials and (2) the possibility of inconsistent verdicts on
those issues exists.” N.C. Dep’t of Transp. v. Page, 119 N.C.
App. 730, 735-36, 460 S.E.2d 332, 335 (1995).
Here, plaintiff has failed to meet his burden of showing
that the same factual issues would be present in both trials or
that the possibility of inconsistent verdicts in the two
proceedings exists. See id. Plaintiff’s claims for damages
arise from his contention that because defendants did not make
sufficient distributions from the Interstate sale proceeds, he
suffered damages from the sale of his Wisconsin properties and
the entry and enforcement of the South Carolina judgment against
him. In contrast, the issues regarding the nature and extent of
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his alleged interest in Alliance and whether Alliance should be
judicially dissolved are predicated on various agreements
between the parties and operating agreements. The facts at
issue with regard to claim nos. 3 and 4 have no bearing on the
trial court’s determination that defendants’ failure to make
distributions did not cause his injury. Thus, there is no risk
of inconsistent verdicts because whether Nelson has an interest
in and, relatedly, how much interest he has in Alliance has no
factual relationship with his claims for damages. Furthermore,
plaintiff’s reliance on Tinch is misplaced. Tinch does not
stand for the proposition that a dismissal of damage claims
automatically constitutes a substantial right; in contrast,
Tinch requires the Court determine whether there is a risk of
inconsistent verdicts in determining whether an interlocutory
order affects a substantial right. Id. at 382, 493 S.E.2d at
428. As discussed, since the factual bases for plaintiff’s
claims are not intertwined, there is no risk of inconsistent
verdicts. Therefore, we conclude that no substantial right
would be lost in denying plaintiff an immediate appeal;
accordingly, we dismiss this appeal as interlocutory.
Conclusion
Because plaintiff has failed to establish that the trial
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court’s partial grant of summary judgment affects a substantial
right, we dismiss plaintiff’s appeal.
DISMISSED.
Judges BRYANT and STEELMAN concur.
Report per Rule 30(e).