Baldelli v. Baldelli , 249 N.C. App. 603 ( 2016 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-142
Filed: 4 October 2016
Moore County, No. 15 CVS 217
SUSAN J. BALDELLI; TRAVEL RESORTS OF AMERICA, INC.; and TRIDENT
DESIGNS, LLC, Plaintiffs,
v.
STEVEN R. BALDELLI, individually and as President of Travel Resorts of America,
Inc.; TRAVEL RESORTS OF NORTH CAROLINA, LLC; DERBY INVESTMENT
COMPANY, LLC; and TRIDENT CAPITAL, LLC, Defendants.
Appeal by Plaintiffs from orders entered 22 October 2015 and 9 December 2015
by Judge James M. Webb in Superior Court, Moore County. Heard in the Court of
Appeals 8 August 2016.
Poyner Spruill LLP, by Daniel G. Cahill and Caroline P. Mackie, for Plaintiffs-
Appellants.
Robinson & Lawing, LLP, by C. Ray Grantham Jr. and L. Bruce Scott, for
Defendant-Appellee Steven R. Baldelli.
The Bomar Law Firm, by J. Chad Bomar, for Defendants-Appellees Travel
Resorts of North Carolina, LLC; Derby Investment Company, LLC; and Trident
Capital, LLC.
McGEE, Chief Judge.
Susan J. Baldelli (“Plaintiff”), together with Travel Resorts of America, Inc.
(“TRA”) and Trident Designs, LLC (“Trident Designs”) (“Plaintiffs”) and Steven R.
Baldelli, (“Defendant”), individually and as president of TRA, together with Travel
BALDELLI V. BALDELLI
Opinion of the Court
Resorts of North Carolina (“TNC”), Derby Investment Company, LLC (“Derby”) and
Trident Capital, LLC (“Trident Capital”) (“Defendants”) are parties to this action.
Plaintiff and Defendant were married on 15 September 1979 and separated in 2013.
Both Plaintiff and Defendant filed claims for equitable distribution of their marital
property in District Court, Moore County. During the course of their marriage
Plaintiff and Defendant incorporated a number of businesses, including those named
above as parties to this action. Along with Plaintiff and Defendant, Trident Capital
and TRA are parties to both the district court action and the present superior court
action. Derby, TNC, and Trident Designs are not named parties in the district court
equitable distribution action. Plaintiff and Defendant are in agreement that TRA
and Trident Designs constitute marital property. Plaintiff contends that Trident
Capital, TNC, and Derby are marital property. Defendant contests this contention.
Plaintiffs filed the complaint in this action on 23 February 2015, in Superior
Court, Moore County, and filed an amended complaint on 4 May 2015, in which they
set forth five claims: (1) breach of fiduciary duty against Defendant, relative to his
actions as president of TRA; (2) demand for accounting, also related to Defendant’s
role as president of TRA; (3) breach of contract against TNC and Trident Capital; (4)
breach of contract against Derby; and (5) an alternate claim against Derby for
quantum meruit. Defendant moved to dismiss Plaintiffs’ complaint on 8 June 2015,
pursuant to the prior pending action doctrine, arguing that superior court did not
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Opinion of the Court
have jurisdiction over the claims because of the ongoing district court action for
equitable distribution which, according to Defendant, encompassed substantially
similar claims and parties. Defendant further asked the trial court to dismiss the
breach of fiduciary duty claim because it was required to be brought as a derivative
action, and Plaintiffs had failed to do so; in the alternative, Defendant asked the
superior court to hold the present action in abeyance until the district court matter
was settled. The remaining Defendants also filed motions to dismiss, based in part
on arguments that the prior pending action doctrine served to divest the superior
court of jurisdiction. Plaintiffs filed a motion to file a second amended complaint on
14 July 2015, requesting that they be allowed to amend the complaint in order to
“assert the breach of fiduciary duty claim directly by TRA against Defendant[.]”
Defendants’ motions were heard on 16 September 2015 in superior court.
Plaintiffs’ action was dismissed by order entered 22 October 2015, because the
superior court ruled that it “lack[ed] subject matter jurisdiction over the matters
asserted.” The superior court, also by order entered 22 October 2015, further denied
Plaintiffs’ motion to file a second amended complaint as moot. Plaintiffs appeal.
Plaintiffs argue that the trial court erred by dismissing Plaintiffs’ claims for
lack of subject matter jurisdiction. We agree.
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Opinion of the Court
Specifically, Plaintiffs argue that the trial court “improperly concluded the
prior pending domestic action precluded the [trial court] from considering Plaintiffs’
claims.” This Court has stated:
The “prior pending action” doctrine involves “essentially
the same questions as the outmoded plea of abatement,”
and is, obviously enough, intended to prevent the
maintenance of a “subsequent action [that] is wholly
unnecessary” and, for that reason, furthers “the interest of
judicial economy.” “The ordinary test for determining
whether or not the parties and causes are the same for the
purpose of abatement by reason of the pendency of the prior
action is this: Do the two actions present a substantial
identity as to parties, subject matter, issues involved, and
relief demanded?”
Jessee v. Jessee, 212 N.C. App. 426, 438, 713 S.E.2d 28, 37 (2011) (citations omitted).
In Burgess v. Burgess, 205 N.C. App. 325, 698 S.E.2d 666 (2010), the plaintiff
filed an action in superior court alleging, inter alia, “breach of fiduciary duties,
inspection, and accounting” related to a business, Burgess & Associates, that had
been jointly owned by the plaintiff and her husband (“the defendant”) during their
marriage. Id. at 330-31, 698 S.E.2d at 670. At the time the superior court action was
filed, the plaintiff and the defendant were already involved in an equitable
distribution action involving Burgess & Associates. Id. at 326, 698 S.E.2d at 667.
The defendant moved to dismiss the plaintiff’s action based in part on his argument
that the prior pending action doctrine served to divest the superior court of
jurisdiction because the parties and subject matter of the two actions were
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Opinion of the Court
substantially similar. Id. at 326, 698 S.E.2d at 668. This Court held that the superior
court had not erred in ruling that it had jurisdiction to hear the claims of breach of
fiduciary duties, inspection, and accounting. This Court reasoned:
It is apparent that if plaintiff is successful in her equitable
distribution action, she can only receive a portion of the
issued shares of Burgess & Associates, along with any
other marital or divisible property she may be awarded in
the trial court’s discretion. Should she prove that she is
entitled to an unequal distribution, she may, at the most,
receive a larger portion of marital or divisible property as
an offset—property which she assisted in contributing to
the marriage. She would not be entitled to any of [the
defendant’s] separate property.
In stark comparison, if plaintiff is successful in prosecuting
her derivative suit for breach of the duties of good faith and
due care, she may obtain a judgment against [the
defendant] in the right of the company in excess of $10,000
from a jury verdict. The judgment would be against [the
defendant] in his individual capacity, and Burgess &
Associates would be able to enforce the judgment against
[the defendant’s] separate property. Despite the breadth
and variety of the factors in section 50–20, there is no
similarity between the relief sought in plaintiff’s equitable
distribution action and the derivative suit. In particular,
plaintiff sets out several factual allegations in the
shareholder suit predating [the defendant’s] and plaintiff’s
separation. Were we to follow defendants’ suggestion to
lump the derivative suit here into subsection (11a) of
N.C.G.S. § 50–20(c), those allegations would not be
available to plaintiff in the distribution of marital property.
N.C.G.S. § 50–20(c)(11a) (only waste or neglect occurring
“during the period after separation of the parties and before
the time of distribution” considered in making an unequal
distribution) (emphasis added). Even if pre-separation acts
could be considered pursuant to N.C. Gen. Stat. § 50–
20(c)(12) (allowing consideration of “[a]ny other factor
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Opinion of the Court
which the court finds to be just and proper,” the district
court cannot, as we have already noted, reach [the
defendant’s] separate property in equitable distribution.
Burgess v. Burgess, 205 N.C. App. 325, 331–32, 698 S.E.2d 666, 671 (2010).
In Ward v. Fogel, the plaintiff and the defendant were already involved in an
action for equitable distribution when the plaintiff filed a second action in superior
court alleging, inter alia, “(1) fraudulent inducement; (2) constructive fraud; (3) and
breach of fiduciary duty[.]” Ward v. Fogel, 237 N.C. App. 570, 573, 768 S.E.2d 292,
296 (2014), disc. review denied, __ N.C. __, 771 S.E.2d 302 (2015).
Though this Court held that Florida courts had exclusive jurisdiction, it further
reasoned:
Even if the North Carolina district court did have
jurisdiction over the parties, an equitable distribution
proceeding would not be able to provide plaintiff the relief
she requests. Plaintiff, like the wife in Burgess, has
demanded a jury trial, to which she would be denied access
in district court. Additionally, like the wife in Burgess,
plaintiff is seeking compensatory damages in excess of
$10,000.00, in addition to punitive damages, on her claims
for breach of fiduciary duty, constructive fraud, and
fraudulent inducement. If she is successful on these
claims, she may get a judgment which could be enforced
against Mr. Ward’s separate property. However, in the
equitable distribution claim, the most that plaintiff would
be able to win is a favorable distribution of marital or
divisible assets. Therefore, as in Burgess, the relief
plaintiff seeks in superior court would be unavailable in
district court, leading us to conclude that Wake County
Superior Court has proper jurisdiction to adjudicate these
matters.
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Opinion of the Court
Ward, 237 N.C. App. at 577–78, 768 S.E.2d at 299 (citation omitted).
In the case before us, Plaintiffs allege, inter alia, breach of fiduciary duty
against Defendant for which Plaintiffs claim damages in excess of $25,000.00. If
Plaintiffs prevail in this breach of fiduciary duty claim, they will collect from
Defendant’s separate property, which is a remedy not available to them in the district
court equitable distribution action. Although it is possible that the equitable
distribution action could resolve the issues underlying Plaintiffs’ claim for breach of
fiduciary duty, it is also possible that the equitable distribution action will leave these
issues unresolved or, as stated above, leave Plaintiffs without the full remedy that
would be provided in the superior court action. Further, as in Burgess, at least some
of the acts that Plaintiff contends constituted a breach of Defendant’s fiduciary duties
occurred before the date of separation. These acts will generally not be relevant to
equitable distribution decisions concerning how to divide marital property. Burgess,
205 N.C. App. at 332, 698 S.E.2d at 671. We therefore hold that the prior pending
action doctrine did not serve to divest the superior court of jurisdiction over Plaintiffs’
breach of fiduciary duty claim, and we reverse the order of the trial court and remand
for further action as provided below.
However, because the parties and subject matter of Plaintiffs’ breach of
fiduciary duty claim are closely related – when not identical – to the parties and the
subject matter to be decided in a portion of the district court action, and because there
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Opinion of the Court
is a clear interrelationship between the issues in both actions, we do not believe it is
in the interest of judicial economy or clarity for both of these actions to proceed
simultaneously. To allow both actions to proceed concurrently would be to invite
conflict between the resolution of interrelated issues in the two actions.
We have addressed a similar situation of potential
unresolvable conflict between two courts with jurisdiction
in Jessee v. Jessee, 212 N.C. App. 426, 713 S.E.2d 28 (2011).
In Jessee, the plaintiff-husband had commenced an action
in Forsyth County alleging that the defendant-wife had
fraudulently converted funds to her own use after the
defendant had filed an action for equitable distribution in
Alamance County. Because the claims brought in the
Forsyth County action concerned acts which occurred after
the date of separation and the equitable distribution action
would only address what had occurred prior to separation,
we concluded that the equitable distribution action did not
deprive the superior court in Forsyth County of jurisdiction
under the prior pending action doctrine. Nevertheless,
because of the “clear interrelationship” between the two
cases, we concluded that “the Forsyth County case should
be held in abeyance pending resolution of the Alamance
County domestic relations case.”
Johns v. Welker, 228 N.C. App. 177, 182, 744 S.E.2d 486, 490–91 (2013) (citations
omitted); see also Jessee, 212 N.C. App. at 439, 713 S.E.2d at 38 (citations omitted)
(“[D]espite our belief that . . . the ‘prior pending action’ doctrine [does not] mandate
dismissal of the [superior court] action, there is a clear interrelationship between the
two cases, such that the equitable distribution portion of the [district court] domestic
relations case should be resolved prior to the determination of the [superior court]
case. For that reason, we further conclude that the [superior court] case should be
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Opinion of the Court
held ‘in abeyance pending resolution of the’ [district court] domestic relations case,
and the results of that equitable distribution case taken into consideration in the
resolution of the [superior court] case.”).
We hold that Plaintiffs’ breach of fiduciary duty claim in this case should be
held in abeyance by the superior court until the district court equitable distribution
action is resolved. Concerning Plaintiffs’ additional superior court claims, they are
similar in that though the underlying issues might be resolved in the equitable
distribution action, we cannot say for certain that unresolved issues would not
remain. Further, the record before us has not been developed to an extent as to
provide this Court full confidence in making a determination on subject matter
jurisdiction.
The determination of subject matter jurisdiction is a
question of law and this Court has the “power to inquire
into, and determine, whether it has jurisdiction and to
dismiss an action ex mero motu when subject matter
jurisdiction is lacking.” However, the record is devoid of
evidence from which we may ascertain whether or not the
trial court possessed subject matter jurisdiction[.] We
vacate the order filed 22 October 2002 and remand this
case for findings of fact based on competent evidence to
support the trial court’s conclusion of law regarding subject
matter jurisdiction[.]
In re J.B., 164 N.C. App. 394, 398, 595 S.E.2d 794, 797 (2004) (citations omitted).
Though the record before us is not “devoid” of evidence from which to determine
whether dismissal based upon lack of subject matter was proper, we believe it is
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Opinion of the Court
appropriate, based upon the facts before us, to hold all of Plaintiffs’ superior court
claims in abeyance so that the record can be more fully developed through resolution
of the district court action. Following resolution of the equitable distribution action
in district court, Plaintiffs can decide whether to proceed with any unresolved claims
in the present superior court case. If Plaintiffs decide to advance any of their superior
court claims, the superior court, based in part on the resolution of the equitable
distribution action, will then decide which claims, if any, should be allowed to
proceed.
We further vacate the superior court’s 22 October 2015 order denying
Plaintiffs’ motion for leave to file a second amended complaint as moot. Plaintiffs
may, if needed, file for the superior court’s consideration a motion for leave to file a
second amended complaint at the appropriate time following resolution of the district
court action.
REVERSED AND REMANDED.
Judges CALABRIA and STROUD concur.
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