Providence Volunteer Fire Dep't

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-80
Filed: 18 April 2017
Union County, No. 15 CVS 1449
PROVIDENCE VOLUNTEER FIRE DEPARTMENT, a North Carolina non-profit
corporation, Plaintiff,
v.
THE TOWN OF WEDDINGTON, a North Carolina municipal corporation,
Defendant.
Appeal by Defendant from orders entered 25 August 2015 by Judge W. David
Lee in Union County Superior Court. Heard in the Court of Appeals 9 August 2016.
The Duggan Law Firm, PC, by Christopher Duggan, Henderson, Nystrom,
Fletcher & Tydings, by Robert E. Henderson and John Fletcher, for Plaintiff-
Appellee.
Parker Poe Adams & Bernstein, LLP, by Anthony Fox and Benjamin R.
Sullivan, for Defendant-Appellant.
INMAN, Judge.
A municipality’s motion to dismiss a tort claim based on governmental
immunity is properly denied when the motion does not refute a verified complaint
alleging that the tort occurred when the municipality was engaged in a proprietary
function. A preliminary injunction is inappropriate where a plaintiff has filed a notice
of lis pendens, thereby securing a full, adequate, and complete remedy at law.
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
Providence Volunteer Fire Department, Inc. (“Plaintiff” or “Providence”) owned
a fire station in Union County that needed substantial and cost prohibitive repairs
and improvements. Providence agreed to convey the fire station to the Town of
Weddington (“Defendant” or the “Town”) in exchange for the Town’s agreement to
pay for repairs and improvements. The Town also agreed to lease the improved fire
station back to Providence and to continue to pay for fire suppression and emergency
medical services from Providence for ten years. After the conveyance and completion
of repairs, the Town terminated its relationship with Providence and leased the fire
station to another fire department. Providence filed a law suit against the Town for
breach of contract, fraud, and unfair and deceptive trade practices and filed a notice
of lis pendens in Union County Superior Court.
The Town appeals from orders (1) granting a motion by Providence to amend
its complaint, (2) denying in part its motion to dismiss Providence’s tort claims based
on governmental immunity, and (3) granting Providence’s motion for a preliminary
injunction. After careful review, we reverse the order granting injunctive relieve and
otherwise affirm the trial court.
Factual Background
From 1954 to 2012, Providence provided fire protection service to the Town and
the surrounding areas in Union and Mecklenburg counties. In May 2012, the Town
Council passed a resolution establishing a Municipal Fire District and taking
-2-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
responsibility for overseeing and funding this new district. To do so, the Town raised
taxes and entered into various agreements with Providence and two other area fire
departments, the Wesley Chapel Volunteer Fire Department and the Stallings Fire
Department.
At the heart of this action is a series of agreements between Providence and
the Town stemming from the creation of the new fire district. In October 2013,
Providence and the Town entered into an Interlocal Agreement, which contemplated,
inter alia, that the Town would invest approximately one million dollars in repairs
and improvements to the Hemby Road fire station owned by Providence, and in
exchange, Providence would convey the fire station and the land upon which it rests
(the “Property”) to the Town. In addition to the Interlocal Agreement, the parties
entered into a Fire Suppression Agreement (the “Suppression Agreement”), which
designated Providence as the Town’s primary fire protection and emergency medical
service provider for ten years.
The Suppression Agreement provided that after the first year of the ten-year
term, the amount of compensation paid to Providence would be “established during
the Town’s annual budget process.” Either party could terminate the Suppression
Agreement for cause, but if the Town terminated the agreement without cause, it was
obligated to pay liquidated damages to Providence:
If this Agreement is terminated by the Town for a reason
other than cause or mutual agreement of the parties, the
-3-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
Department shall be entitled to $750,000 as liquidated
damages. . . . Such liquidated damages shall be the sole
and exclusive remedy of the Department by reason of a
default by Town under this Agreement, and the
Department hereby waives and releases any right to sue
Town, and hereby covenants not to sue Town, for specific
performance of this Agreement or to prove that the
Department’s actual damages exceed the amount which is
herein provided the department as full liquidated
damages.
Almost a year later after executing the Interlocal Agreement and the
Suppression Agreement, in August 2014, Providence conveyed the Property by deed1
and the parties entered into a third agreement (the “Lease Agreement”) providing
that the Town would lease the Property to Providence for the same ten-year period
as the term of the Suppression Agreement. The Lease Agreement also provided that
if the Suppression Agreement were terminated early, the Lease Agreement would be
terminated at the same time.
During the year following the Interlocal and Suppression Agreements and
preceding the Lease Agreement, several new Town Council members were elected.
Providence alleges that the new Town Council members opposed the first two
agreements and that the new council members’ acts and omissions fraudulently
induced Providence to convey the Property to the Town through the Lease Agreement.
1 The deed is not included in the record on appeal, but the Second Verified Amended Complaint
alleges that the agreement in which the Town purchased and leased back the Property was executed
on 19 August 2014.
-4-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
In February 2015, Providence projected a deficit of approximately $70,000 in
its operations budget and requested increased funding from the Town in order to meet
its obligations to provide fire suppression and emergency medical services according
to the standards required by the Suppression Agreement. On 15 April 2015, the Town
notified Providence that unless it could provide documents and information
confirming that it would be able to meet its performance obligations without
increased funding, the Town intended to terminate the Suppression Agreement for
cause. Providence responded with a revised operating budget and other documents.
The Town Council reviewed the documents and voted to terminate the Suppression
Agreement. On 29 April 2015, the Town notified Providence that it was terminating
the Suppression Agreement for cause, effective 29 July 2015, because Providence had
failed to provide adequate assurances that it could meet its ongoing and future
obligations; the Lease Agreement also would terminate on that date.
The Town then contracted with the Wesley Chapel Volunteer Fire Department
(“Wesley Chapel”) as its new primary fire service provider to begin on 29 July 2015.
The Town and Wesley Chapel signed an agreement requiring Wesley Chapel to use
the Hemby Road fire station and containing a lease for the Property. The agreement
also provided an option for Wesley Chapel to purchase the Property from the Town
for $750,000.
Procedural Background
-5-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
On 4 June 2015, Providence filed a complaint alleging that the Town breached
the Suppression Agreement and seeking $750,000 in liquidated damages. On 10 July
2015, Providence filed a First Verified Amended Complaint, which added claims for
fraud in the inducement and unfair and deceptive trade practices. On the same day,
Providence filed a notice of lis pendens on the Property.
The Town on 17 July 2015 filed a motion for a preliminary injunction seeking
to force Providence to surrender possession of the fire station. The trial court granted
the motion and ordered Providence to vacate the Property and enjoined Providence
from obstructing or interfering with the Property’s use, occupancy, or possession by
the Town or the Town’s designees.
On 27 July 2015, Providence filed a motion for a temporary restraining order
and a preliminary injunction seeking to prevent the Town from selling, transferring,
or conveying the Property or any interest therein. The trial court granted
Providence’s request for a temporary restraining order on 29 July 2015.
The Town filed a motion to dismiss Providence’s tort claims on 29 July 2015,
asserting complete governmental immunity. On 6 August 2015, Providence filed a
motion to amend the First Verified Amended Complaint.
The trial court granted Providence’s motion to amend and Providence filed its
Second Verified Amended Complaint on 27 August 2015. The trial court granted the
-6-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
Town’s motion to dismiss Providence’s unfair and deceptive trade practices claim but
denied the Town’s motion to dismiss Providence’s fraud claim.
The Town filed a notice of appeal from the orders denying its motion to dismiss
the fraud claim, granting Providence’s motion to amend, and granting Providence’s
motion for a preliminary injunction.
Analysis
I. Appellate Jurisdiction
As an initial matter, we address Providence’s motion to dismiss the Town’s
appeal as interlocutory. Because the Town is appealing the trial court’s denial of its
motion to dismiss based in part on a challenge to personal jurisdiction, we hold that
it is properly before us.
The North Carolina Supreme Court has not directly addressed whether
governmental immunity is an issue of personal jurisdiction or subject matter
jurisdiction, and consequently whether an appeal of a denial of immunity should be
reviewed either as a challenge to personal jurisdiction or subject matter jurisdiction.
However, this Court has classified the issue as one of personal jurisdiction, which
permits an immediate appeal. See, e.g., Can Am S., LLC v. State, 234 N.C. App. 119,
123-24, 759 S.E.2d 304, 308 (2014) (“[B]eginning with Sides v. Hosp., 22 N.C. App.
117, 205 S.E.2d 784 (1974), mod. on other grounds, 287 N.C. 14, 213 S.E.2d 297
(1975), this Court has consistently held that: (1) the defense of sovereign immunity
-7-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
presents a question of personal, not subject matter jurisdiction, and (2) denial of Rule
12(b)(2) motions premised on sovereign immunity are sufficient to trigger immediate
appeal under section 1-277(b).”); Data Gen. Corp. v. Cnty. of Durham, 143 N.C. App.
97, 100, 545 S.E.2d 243, 245-46 (2001) (“[A]n appeal of a motion to dismiss based on
sovereign immunity presents a question of personal jurisdiction rather than subject
matter jurisdiction, and is therefore immediately appealable.”) (citations omitted).
The Town asserts, citing Church v. Carter, 94 N.C. App. 286, 288, 380 S.E.2d
167, 168 (1989), and N.C. Gen. Stat. § 1-75.4 (2015), that because subject matter
jurisdiction is a prerequisite to personal jurisdiction, our Court may properly review
a challenge to subject matter jurisdiction when there was an accompanying challenge
to personal jurisdiction. Church, 94 N.C. App. at 288, 380 S.E.2d at 168 (holding that
when a defendant challenges both subject matter jurisdiction and personal
jurisdiction, the court was required to “decide the issue [the defendant] ha[d] raised
concerning subject matter jurisdiction”). The Town’s argument overlooks the
difference in the nature of the Rule 12(b)(1) challenges at issue in Church and in the
present case. In Church, the defendant’s motion to dismiss for lack of subject matter
jurisdiction was not based on sovereign immunity, but rather on the defendant’s
status as a non-North Carolina entity. Id. Here, the Town’s motion to dismiss for
lack of subject matter jurisdiction is based on governmental immunity.
-8-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
In Can Am, our Court denied a defendant’s appeal asserting sovereign
immunity as an issue of subject matter jurisdiction as interlocutory, while granting
the defendant’s appeal of the lower court’s denial of the defendant’s motion to dismiss
for sovereign immunity as an issue of personal jurisdiction. 234 N.C. App. at 124,
759 S.E.2d at 308. This case presents a procedural posture in line with that of Can
Am. Because governmental immunity has traditionally been recognized as an issue
of personal jurisdiction and not subject matter jurisdiction, we grant Providence’s
motion to dismiss the Town’s appeal under Rule 12(b)(1) (subject matter jurisdiction)
and deny Providence’s motion to dismiss the Town’s appeal under Rule 12(b)(2)
(personal jurisdiction).
The remainder of the Town’s appeal—challenging the denial of the motion to
dismiss based on Rule 12(b)(6) and the orders allowing Providence to amend its
complaint and imposing a preliminary injunction—raises issues that generally are
not subject to interlocutory review. We agree that the Town’s appeal based upon
substantive defenses other than governmental immunity do not affect a substantial
right. However, in our discretion, because all of the remaining issues appealed are
closely interrelated, we choose to address the Town’s additional arguments to avoid
“fragmentary appeals.” RPR & Assocs., Inc. v. State, 139 N.C. App. 525, 530-31, 534
S.E.2d 247, 251-52 (2000) (choosing to address the defendant’s additional question on
appeal, despite its interlocutory nature, noting “to address but one interlocutory or
-9-
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
related issue would create fragmentary appeals”). We first address the Town’s appeal
from the trial court’s order allowing a motion by Providence to file a Second Verified
Amended Complaint because that amendment is ultimately dispositive of the Town’s
motion to dismiss the tort claims.
II. Motion to Amend
The Town asserts that the trial court erred in granting Providence’s motion to
amend its complaint. We disagree.
We review a trial court’s decision on a motion to amend the pleadings for abuse
of discretion. Williams v. Owens, 211 N.C. App. 393, 394, 712 S.E.2d 359, 360 (2011)
(citation omitted). “An abuse of discretion occurs when the trial court’s ruling is so
arbitrary that it could not have been the result of a reasoned decision.” Warren v.
Gen. Motors Corp., 142 N.C. App. 316, 319, 542 S.E.2d 317, 319 (2001) (internal
quotation marks and citations omitted).
“The party opposing the amendment has the burden to establish that it would
be prejudiced by the amendment.” Carter v. Rockingham Cnty. Bd. of Educ., 158 N.C.
App. 687, 690, 582 S.E.2d 69, 72 (2003) (citations omitted). “Reasons justifying denial
of an amendment are (a) undue delay, (b) bad faith, (c) undue prejudice, (d) futility of
amendment, and (e) repeated failure to cure defects by previous amendments.”
Martin v. Hare, 78 N.C. App. 358, 361, 337 S.E.2d 632, 634 (1985) (citations omitted).
- 10 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
Here, the Town challenges the order allowing Providence’s motion to amend
because counsel for Providence has admitted that it had no factual basis for alleging
waiver of governmental immunity through the purchase of liability insurance and
had not conducted any inquiry into the matter. As discussed infra, Providence
concedes this issue; however, even with this concession, the record before us does not
establish that the trial court abused its discretion in allowing the motion to amend.
We therefore affirm the trial court.
Because the Town’s 12(b)(6) motion to dismiss was based primarily on
Providence’s First Verified Amended Complaint and we hold that the trial court did
not err in allowing Providence to amend its complaint, the Town’s 12(b)(6) motion to
dismiss was properly denied. Additionally, we hold that the trial court properly
denied the motion to the extent that the Town’s argument was applicable to
Providence’s Second Verified Amended Complaint. As discussed infra, the Second
Verified Amended Complaint alleged alternative grounds upon which governmental
immunity was unavailable beyond waiver by purchase of liability insurance and to
which the Town did not adequately respond in its initial motion to dismiss or
accompanying affidavit. Therefore, the trial court was proper in denying the Town’s
motion to dismiss based on Rule 12(b)(6).
III. Governmental Immunity
- 11 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
The Town argues that the trial court erred by denying its motion to dismiss
the fraud claim based on governmental immunity because (1) the Town was acting in
its governmental capacity when it entered into the agreements, (2) waiver of
immunity through contractual agreement does not waive immunity as to tort claims
that may arise out of the contract, and (3) the Town did not have insurance to cover
such claims. We disagree.
Because we hold that the trial court did not abuse its discretion in allowing
Providence’s motion to amend, the Second Verified Amended Complaint, verified
under oath by Jack E. Parks, Jr., President of the Providence Volunteer Fire
Department, was properly before the trial court as a source of evidence. The trial
court, therefore, was permitted to consider its weight and credibility, along with the
weight and credibility of the affidavit of Peggy Piontek, the Town Clerk of
Weddington, submitted by the Town in support of its motion to dismiss.
A. Standard of Review
“The standard of review of an order determining personal jurisdiction is
whether the findings of fact by the trial court are supported by competent evidence
in the record; if so, this Court must affirm the order of the trial court.” Replacements,
Ltd v. MidweSterling, 133 N.C. App. 139, 140-41, 515 S.E.2d 46, 48 (1999) (citations
omitted). However, our review is also “depend[ent] upon the procedural context
confronting the court.” Banc of Am. Secs. LLC v. Evergreen Int’l Aviation, Inc., 169
- 12 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
N.C. App. 690, 693, 611 S.E.2d 179, 182 (2005). Three procedural postures are
typical: “(1) the defendant makes a motion to dismiss without submitting any
opposing evidence; (2) the defendant supports its motion to dismiss with affidavits,
but the plaintiff does not file any opposing evidence; or (3) both the defendant and the
plaintiff submit affidavits addressing the personal jurisdiction issues.” Id.
In this first category where neither party submits evidence, “[t]he allegations
of the complaint must disclose jurisdiction although the particulars of jurisdiction
need not be alleged.” Bruggeman v. Meditrust Acquisition Co., 138 N.C. App. 612,
615, 532 S.E.2d 215, 217 (2000) (citations omitted). If, however, the defendant
submits supportive evidence—for example an affidavit—along with the motion to
dismiss, the complaint’s allegations “can no longer be taken as true or controlling and
[the] plaintiff[] cannot rest on the allegations of the complaint.” Id. at 615-16, 532
S.E.2d at 218 (citation omitted). In this instance, the court must consider “(1) any
allegations in the complaint that are not controverted by the defendant’s affidavit
and (2) all facts in the affidavit (which are uncontroverted because of the plaintiff’s
failure to offer evidence).” Banc of Am., 169 N.C. App. at 693-94, 611 S.E.2d at 182-
83 (citations omitted).
- 13 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
In the third category, when the parties submit competing evidence—such as
affidavits or an affidavit and a verified complaint2—“the court may hear the matter
on affidavits presented by the respective parties, but the court may direct that the
matter be heard wholly or partly on oral testimony or depositions.” N.C. R. Civ. P.
43(e) (2015); see also Bruggeman, 138 N.C. App. at 615, 532 S.E.2d at 217 (“If the
exercise of personal jurisdiction is challenged by a defendant, a trial court may hold
an evidentiary hearing including oral testimony or depositions or may decide the
matter based on affidavits.”) (citation omitted). When the trial court decides the
motion on affidavits, “[t]he trial judge must determine the weight and sufficiency of
the evidence [presented in the affidavits] much as a juror.” Fungaroli v. Fungaroli,
51 N.C. App. 363, 367, 276 S.E.2d 521, 524 (1981). Even when the trial court is
required to weigh evidence, it is not required to make findings of fact unless requested
by a party when deciding a motion to dismiss. N.C. R. Civ. P. 52(e) (2015). When the
record contains no findings of fact, “it will be presumed that the judge, upon proper
evidence, found facts sufficient to support his ruling.” Cameron-Brown Co. v. Daves,
83 N.C. App. 281, 285, 350 S.E.2d 111, 114 (1986) (citation omitted). “Where such
presumed findings are supported by competent evidence, they are deemed conclusive
2 “A verified complaint may be treated as an affidavit if it (1) is made on personal knowledge,
(2) sets forth such facts as would be admissible in evidence, and (3) shows affirmatively that the affiant
is competent to testify to the matters stated therein.” Page v. Sloan, 281 N.C. 697, 705, 190 S.E.2d
189, 194 (1972) (citations omitted).
- 14 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
on appeal, despite the existence of evidence to the contrary.” Data Gen., 143 N.C.
App. at 101, 545 S.E.2d at 246.
In order to deny the Town’s motion to dismiss based on governmental
immunity, the trial court presumably determined that the Town was precluded from
its governmental immunity defense by one of the three following alternatives: (1)
acting in a proprietary capacity, (2) entering into a valid contract thereby implicitly
waiving immunity, or (3) purchasing liability insurance.
B. Proprietary Function
Providence’s primary contention on appeal is that the Town was engaged in a
proprietary function when the parties entered into the series of agreements,
particularly the Lease Agreement and the Interlocal Agreement, so that
governmental immunity does not shield the Town from suit for torts related to those
agreements.
Whether an entity is entitled to governmental immunity can turn on whether
its alleged tortious conduct arose out of an activity that was governmental or
proprietary in nature. Estate of Williams v. Pasquotank Cnty. Parks & Recreation
Dep’t, 366 N.C. 195, 199, 732 S.E.2d 137, 141 (2012) (reviewing the Court of Appeals
analysis of whether a county’s operation of a swimming hole was governmental or
proprietary in nature). A governmental function has long been held as an activity
that is “discretionary, political, legislative, or public in nature and performed for the
- 15 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
public good in behalf of the State rather than for itself.” Britt v. City of Wilmington,
236 N.C. 446, 450, 73 S.E.2d 289, 293 (1952). Conversely, a proprietary function is
one that is “commercial or chiefly for the private advantage of the compact
community.” Id. (citations omitted). The reason for this distinction is that “[w]hen a
municipality is acting ‘in behalf of the State’ in promoting or protecting the health,
safety, security or general welfare of its citizens, it is an agency of the sovereign.
When it engages in a public enterprise essentially for the benefit of the compact
community, it is acting within its proprietary powers.” Id. at 450-51, 73 S.E.2d at
293.
Our Supreme Court recently provided guidance on this often difficult and fact
determinative distinction. In Williams, the Court laid out a three-step procedure
with “the threshold inquiry” being “whether, and to what degree, the legislature has
addressed the issue.” 366 N.C. at 200, 732 S.E.2d at 141-42. This determination
“turns on the facts alleged in the complaint.” Id. at 201, 732 S.E.2d at 143. The Court
remanded the case in Williams to this Court with instructions for further remand to
the trial court “for detailed consideration of the degree of effect, if any, of section
160A-351,” the policy provision of the Recreation Enabling Law providing that
recreation is a governmental function, had on whether the defendant’s operation of a
swimming hole was a governmental or a proprietary endeavor. Id.
- 16 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
The Court in Williams addressed additional considerations necessary when the
legislature has not specifically commented on the function to aid in a court’s
determination of the nature of an activity. Williams, 366 N.C. at 202, 732 S.E.2d at
142. “[W]hen an activity has not been designated as governmental or proprietary by
the legislature, that activity is necessarily governmental in nature when it can only
be provided by a governmental agency or instrumentality.” Id. If, however, as is
increasingly more often the case, the activity may be performed both privately and
publicly, “the inquiry involves consideration of a number of additional factors, of
which no single factor is dispositive.” Id. at 202, 732 S.E.2d at 143. The Court
concluded that “[r]elevant to this inquiry is whether the service is traditionally a
service provided by a governmental entity, whether a substantial fee is charged for
the service provided, and whether that fee does more than simply cover the operating
costs of the service provider.” Id. at 202-03, 732 S.E.2d at 143. Ultimately, “the
proper designation of a particular action of a county or municipality is a fact intensive
inquiry, turning on the facts alleged in the complaint, and may differ from case to
case.” Id. at 203, 732 S.E.2d at 143.
The Town’s motion to dismiss, but not its supporting affidavit, refutes a theory
of waiver based on proprietary activity underlying the alleged fraud. We therefore
consider whether the complaint contains sufficient allegations to support the court’s
- 17 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
exercise of jurisdiction on this basis. After a careful review of the pleadings, we hold
that it does.
Because the trial court did not abuse its discretion in allowing Providence’s
motion to amend, the Second Verified Amended Complaint controls our review. The
Second Verified Amended Complaint alleges that “[t]he Town’s function in entering
into the purchase agreement with lease back dated August 19, 2014 . . . with the
Plaintiff is proprietary in nature and as such the Town can be sued by the Plaintiff
for the causes of action stated herein.” This allegation was unchallenged by the Town
through any evidence submitted in support of its motion. Therefore, we are required
to take this allegation as true. The allegation is sufficient to support the trial court’s
presumed finding that the Town was not entitled to immunity because it was
performing a proprietary function. Accordingly, we hold that the trial court did not
err in denying the Town’s motion to dismiss.
In affirming the trial court’s denial of the Town’s motion to dismiss based upon
the theory of proprietary activity, we emphasize that our holding addresses only the
sufficiency of the allegations in the Second Verified Amended Complaint that were
not controverted by any evidence produced by the Town.
On remand should the trial court, at a subsequent procedural posture, base its
jurisdiction over the Town on the ground that the Town was acting in a proprietary
- 18 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
function when it entered into the agreements, the trial court must adhere to the
guidance provided by this opinion and the Supreme Court’s precedent.
C. Waiver by Contract
Providence also asserts that the Town waived its immunity by entering into a
valid contract, and based on this waiver, the trial court’s denial of the Town’s motion
to dismiss was proper. Providence relies on two decisions by our Supreme Court,
Smith v. State, 289 N.C. 303, 222 S.E.2d 412 (1976), and Ports Authority v. Fry
Roofing Co., 294 N.C. 73, 82, 240 S.E.2d 345 (1978), rejected on other grounds by
Trustees of Rowan Technical College v. J. Hyatt Hammond Associates, Inc., 313 N.C.
230, 328 S.E.2d 274 (1985), to extend the principles of waiver of governmental
immunity by contract to tort claims arising out of a particular contract—we disagree.
The Supreme Court held in Smith that “whenever the State of North Carolina,
through its authorized officers and agencies, enters into a valid contract, the State
implicitly consents to be sued for damages on the contract in the event it breaches
the contract.” Smith, 289 N.C. at 320, 222 S.E.2d at 423-24. Smith involved only a
breach of contract claim. Id. at 307-08, 222 S.E.2d at 415-16. Its holding has not
been extended to tort claims against a government entity. See Dickens v. Thorne, 110
N.C. App. 39, 47, 429 S.E.2d 176, 181 (1993) (rejecting the argument that an
employee’s employment contract with a county was sufficient to trigger a waiver of
- 19 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
governmental immunity for tort liability on a libel claim because the complaint was
not based on a breach of contract).
Ports Authority established that a tort claim may arise out of a breach of
contract in the following instances:
(1) The injury, proximately caused by the promisor’s
negligent act or omission in the performance of his
contract, was an injury to the person or property of
someone other than the promisee.
(2) The injury, proximately caused by the promisor’s
negligent, or wilful[sic], act or omission in the performance
of his contract, was to property of the promisee other than
the property which was the subject of the contract, or was
a personal injury to the promisee.
(3) The injury, proximately caused by the promisor’s
negligent, or wilful[sic], act or omission in the performance
of his contract, was loss of or damage to the promisee’s
property, which was the subject of the contract, the
promisor being charged by law, as a matter of public policy,
with the duty to use care in the safeguarding of the
property from harm, as in the case of a common carrier, an
innkeeper, or other bailee.
(4) The injury so caused was a wilful[sic] injury to or a
conversion of the property of the promisee, which was the
subject of the contract, by the promisor.
Ports Authority, 294 N.C. at 82, 240 S.E.2d at 350-51 (internal citations omitted). But
the holding is limited to the context of an applicable statute of limitations and does
not address governmental immunity. Id. at 81-86, 240 S.E.2d at 350-52.
- 20 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
Providence asks this Court to combine the principles delineated in Smith and
Ports Authority to establish that the Town implicitly waived immunity against tort
claims arising out of a breach of contract claim. Providence contends that because its
claim of fraud in the inducement alleges a willful conversion of the Property, the claim
arises out of the agreements and the Town implicitly waived its immunity to the fraud
claim.
In light of Dickens and the lack of any precedent extending the holding of Ports
Authority to a governmental immunity case, we decline to do so here. We therefore
reject this theory of waiver asserted by Providence.
D. Waiver by Insurance
The parties dispute whether Providence’s Second Verified Amended
Complaint’s allegation concerning the purchase of insurance was properly made on
the basis of personal knowledge.
During oral argument before this Court, Providence’s counsel conceded that he
was not aware of any factual basis for the allegation in the Second Verified Amended
Complaint that the Town had purchased liability insurance, thereby waiving its
governmental immunity as to the fraud claim. Although the parties agree that this
allegation was unsubstantiated, because we affirm the trial court’s order on an
alternative theory of wavier of governmental immunity, we decline to address the
- 21 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
Town’s argument that an unfounded allegation contained in a verified complaint may
not be used as evidence for the purposes of a motion to dismiss.
IV. Preliminary Injunction
The Town argues that the trial court erred in granting Providence’s motion for
a preliminary injunction because Providence’s filing of a lis pendens provided for an
adequate remedy at law and Providence failed to establish a likelihood of success on
the merits. We agree.
“A preliminary injunction is an interlocutory injunction which restrains a
party pending trial on the merits.” N.C. Baptist Hosp. v. Novant Health, Inc., 195
N.C. App. 721, 724, 673 S.E.2d 794, 796 (2009) (citing A.E.P. Industries, Inc. v.
McClure, 308 N.C. 393, 400, 302 S.E.2d 754, 759 (1983); N.C. Gen. Stat. § 1A-1, Rule
65 (2007)). “[O]n appeal from an order of superior court granting or denying a
preliminary injunction, an appellate court is not bound by the findings, but may
review and weigh the evidence and find facts for itself.” A.E.P., 308 N.C. at 402, 302
S.E.2d at 760 (citations omitted).
A preliminary injunction will be issued only “(1) if a plaintiff is able to show
likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain
irreparable loss unless the injunction is issued, or if, in the opinion of the Court,
issuance is necessary for the protection of a plaintiff’s rights during the course of
litigation.” Ridge Cmty. Investors, Inc. v. Berry, 293 N.C. 688, 701, 239 S.E.2d 566,
- 22 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
574 (1977) (emphasis omitted) (citations omitted). “Ordinarily, an injunction will not
be granted where there is a full, adequate and complete remedy at law, which is as
practical and efficient as is the equitable remedy.” City of Durham v. Public Serv.
Co. of N.C., Inc., 257 N.C. 546, 557, 126 S.E.2d 315, 323-24 (1962) (citations omitted).
Our Supreme Court has held that the filing of a lis pendens provides “a full,
complete and adequate remedy at law.” Whitford v. N.C. Joint Stock Land Bank of
Durham, 207 N.C. 229, 232, 176 S.E. 740, 742 (1934). The Court went on to note that
“[b]y complying with these plain statutory provisions [regarding lis pendens] the
plaintiffs can preserve every right they may have under their pleadings; and it is too
well settled in this jurisdiction to require citations of authority that where there is a
full, complete, and adequate remedy at law, the equitable remedy of injunction will
not lie.” Id. at 233, 176 S.E. at 742.
Here, the record is clear that Providence filed a notice of lis pendens on the
Property. This provided constructive notice to any subsequent purchaser and binds
him to “all proceedings taken after the cross-indexing of the notice to the same extent
as if he were made a party to the action.” N.C. Gen. Stat. § 1-118 (2015). Therefore,
Providence was provided an adequate remedy at law and the issuance of the
preliminary injunction was improper. Accordingly, we reverse the trial court’s grant
of Providence’s motion for a preliminary injunction.
Conclusion
- 23 -
PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON
Opinion of the Court
For the above reasons, we affirm the trial court’s order granting Providence’s
motion to amend and denying the Town’s motion to dismiss based on governmental
immunity pursuant to Rules 12(b)(2) and (6). We reverse the trial court’s order
granting Providence’s motion for a preliminary injunction. We remand for further
proceedings not inconsistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
Judges BRYANT and TYSON concur.
- 24 -