Whitehurst Investment Properties, LLC v. Newbridge Bank

NO. COA14-257
NORTH CAROLINA COURT OF APPEALS
Filed: 21 October 2014
WHITEHURST INVESTMENT PROPERTIES,
LLC,
Plaintiff,
v. Guilford County
No. 13 CVS 6888
NEWBRIDGE BANK, and HENRY
PROPERTIES, LLC,
Defendants.
Appeal by defendant NewBridge Bank from order entered 22
October 2013 by Judge James M. Webb in Guilford County Superior
Court. Heard in the Court of Appeals 27 August 2014.
James, McElroy & Diehl, P.A., by Preston O. Odom, III and
John R. Buric, for plaintiff-appellee.
Carruthers & Roth, P.A., by Rachel S. Decker and J. Patrick
Haywood, for defendant-appellant NewBridge Bank.
HUNTER, Robert C., Judge.
Whitehurst Investment Properties, LLC (“plaintiff” or
“Whitehurst”) filed this action against NewBridge Bank
(“NewBridge”) and Henry Properties, LLC (“HP”) (collectively
“defendants”), asserting claims for breach of contract, unjust
enrichment, and declaratory judgment. NewBridge appeals from
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the trial court’s order denying defendants’ motion to dismiss.1
On appeal, NewBridge argues that the trial court erred in
denying the motion to dismiss because the doctrines of res
judicata and collateral estoppel bar plaintiff’s claims.
After careful review, we dismiss this appeal from the trial
court’s interlocutory order.
Background
On 5 December 2001, Starmount Company (“Starmount”) and
Henry James Bar-Be-Que, Inc. (“HJBBQ”) executed a Ground Lease
Agreement (“Ground Lease”). Under the Ground Lease, Starmount
assumed a landlord position, leasing to HJBBQ a 2.28 acre
property (the “property”) in Greensboro, North Carolina. The
Ground Lease also provided that if the tenant decided to
sublease the property, the Landlord (Starmount) would be
entitled to any excess rent payments. HJBBQ contracted with
NewBridge’s predecessor in interest to finance construction of a
building on the property, which was required under the Ground
Lease. HJBBQ and NewBridge entered into a Leasehold Deed of
Trust (“the Deed of Trust”) as security for the loans made to
HJBBQ. However, the Deed of Trust provided that NewBridge was
entitled to any excess rents that may be produced by sublease.
1
HP did not appeal from the trial court’s order.
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NewBridge entered into a Landlord’s Consent agreement with
Starmount, in which Starmount consented to this amendment to the
Ground Lease.
Starmount sold the property to Whitehurst in December 2007,
making Whitehurst the successor to all of Starmount’s interests
as landlord under the Ground Lease. In October and November
2008, Whitehurst forwarded notices of lease default to
NewBridge. In August 2009, NewBridge created HP as its wholly
owned subsidiary. HJBBQ then assigned its interest in the
Ground Lease to HP through an Assignment in Lieu of Foreclosure,
through which HP assumed every obligation as tenant under the
Ground Lease.
HP was obligated to pay plaintiff $4,965.84 per month under
the terms of the Ground Lease. On 20 August 2009, HP executed
a sublease to another restaurant, REFS, LLC. Pursuant to the
sublease, REFS agreed to pay HP rent in the amount of $9,500 per
month from 20 December 2009 to 19 April 2010, later increasing
to $14,000 per month from 20 April 2010 to 19 November 2010.
The parties disputed who was entitled to the rent payments in
excess of the $4,965.84 set forth in the Ground Lease.
On 31 August 2009, NewBridge and HP sued Whitehurst
alleging, among other claims, breach of contract (“the First
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Action”). On 31 December 2009, Whitehurst counterclaimed for a
declaratory judgment asserting its right to the excess rent
payment. Following dismissal of all other claims, Whitehurst’s
declaratory judgment counterclaim was the only matter still
before the trial court.
On 14 March 2011, the Honorable John O. Craig entered
judgment in favor of NewBridge and HP. This Court reversed on
appeal, holding that the Deed of Trust executed by HJBBQ and
NewBridge was cancelled in exchange for the Assignment in Lieu
of Foreclosure. See NewBridge Bank v. Kotis Holdings, LLC, No.
COA11-1016, 2012 WL 3570377 (Aug. 21, 2012) (“NewBridge I”).
Therefore, the Ground Lease became the controlling contract,
which awarded any excess rent payment to Starmount, and
therefore Whitehurst, by its plain language. On remand, the
trial court granted summary judgment in favor of Whitehurst as
ordered by this Court.
Whitehurst thereafter demanded payment of excess rent,
which HP refused to pay. Whitehurst commenced the current
action against NewBridge and HP on 11 July 2013 for breach of
contract, unjust enrichment, and declaratory judgment. In its
complaint, Whitehurst alleged that HP was the legal alter ego of
NewBridge, and therefore, NewBridge was liable for the excess
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rents paid to HP. On 14 August 2013, defendants moved to
dismiss plaintiff’s claims on res judicata and collateral
estoppel grounds, which was denied on 22 October 2013.
NewBridge filed timely notice of appeal from the trial court’s
order.
Discussion
I. Grounds for Appellate Review
NewBridge first contends that the trial court’s
interlocutory order is immediately appealable because a
substantial right would be deprived without immediate review.
We disagree.
“An interlocutory order is one made during the pendency of
an action, which does not dispose of the case, but leaves it for
further action by the trial court in order to settle and
determine the entire controversy.” Veazey v. City of Durham,
231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950). “Denial of a
motion to dismiss is interlocutory because it simply allows an
action to proceed and will not seriously impair any right of
defendants that cannot be corrected upon appeal from final
judgment.” Baker v. Lanier Marine Liquidators, Inc., 187 N.C.
App. 711, 717, 654 S.E.2d 41, 46 (2007). “Generally, there is
no right of immediate appeal from interlocutory orders and
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judgments.” Goldston v. Am. Motors Corp., 326 N.C. 723, 725,
392 S.E.2d 735, 736 (1990). However, immediate appeal of an
interlocutory order is available where the order deprives the
appellant of a substantial right which would be lost without
immediate review. See N.C. Dep’t of Transp. v. Page, 119 N.C.
App. 730, 734, 460 S.E.2d 332, 334 (1995); N.C. Gen. Stat. § 1-
277(a) (2013).
NewBridge argues that immediate review is appropriate
because the trial court’s order affects a substantial right.
However, at no point in NewBridge’s brief does it attempt to
identify this right or explain how it would be deprived without
immediate review of the trial court’s order. Rather, it
provides a conclusory statement that the denial of a motion to
dismiss based on the defenses of res judicata or collateral
estoppel “is immediately appealable as affecting a substantial
right.”
This Court has held that denial of a motion to dismiss
premised on res judicata and collateral estoppel does not
automatically affect a substantial right; the burden is on the
party seeking review of an interlocutory order to show how it
will affect a substantial right absent immediate review. See
Bockweg v. Anderson, 333 N.C. 486, 491, 428 S.E.2d 157, 161
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(1993) (“[W]e hold that the denial of a motion for summary
judgment based on the defense of res judicata may affect a
substantial right, making the order immediately appealable.”
(emphasis added)); see also Williams v. City of Jacksonville
Police Dept., 165 N.C. App. 587, 589–90, 599 S.E.2d 422, 426
(2004) (stating that “the denial of a motion for summary
judgment based on the defense of collateral estoppel may affect
a substantial right[.]” (emphasis added)). As this Court has
previously noted:
We acknowledge the existence of an apparent
conflict in this Court as to whether the
denial of a motion for summary judgment
based on res judicata affects a substantial
right and is immediately appealable.
However, our Supreme Court has addressed
this issue in Bockweg, and, like the panel
in [Country Club of Johnston Cnty., Inc. v.
U.S. Fid. & Guar. Co., 135 N.C. App. 159,
166, 519 S.E.2d 540, 545 (1999)], “we do not
read Bockweg as mandating in every instance
immediate appeal of the denial of a summary
judgment motion based upon the defense of
res judicata. The opinion pointedly states
reliance upon res judicata ‘may affect a
substantial right.’”
Heritage Operating, L.P. v. N.C. Propane Exch., LLC, __ N.C.
App. __, __, n.2, 727 S.E.2d 311, 314, n.2 (2012). Thus, to
meet its burden of showing how a substantial right would be lost
without immediate review, the appealing party must show that
“(1) the same factual issues would be present in both trials and
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(2) the possibility of inconsistent verdicts on those issues
exists.” Id. at __, 727 S.E.2d at 314 (quotation marks
omitted).
First, we overrule NewBridge’s argument that the trial
court exposed defendants to the possibility of inconsistent
verdicts when it rejected their argument that plaintiff’s cause
of action is barred by res judicata. Res judicata prevents
litigation of the same legal claims, not the same legal issues.
Foreman v. Foreman, 144 N.C. App. 582, 587, 550 S.E.2d 792, 796,
disc. review denied, 354 N.C. 68, 553 S.E.2d 38 (2001); see also
State ex. rel. Tucker v. Frinzi, 344 N.C. 411, 413-14, 474
S.E.2d 127, 128 (1996) (“For res judicata to apply, a party must
show that the previous suit resulted in a final judgment on the
merits [and] that the same cause of action is involved[.]”
(emphasis added)). In the First Action, the sole claim before
the trial court was a request for a declaratory judgment to
determine which party was entitled to excess rent payments.
Here, Whitehurst is suing NewBridge and HP in order to collect
those payments after declaratory judgment in the First Action
was entered in its favor. Thus, because the claims asserted
here are distinct from those litigated in the First Action,
NewBridge has failed to demonstrate the existence of the risk of
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an inconsistent verdict and consequently fails to show how a
substantial right would be deprived without immediate appellate
review of the trial court’s order.
Additionally, NewBridge argues that Whitehurst is
collaterally estopped from arguing that NewBridge and HP are the
same legal entity. Collateral estoppel is a companion doctrine
of res judicata and serves to promote judicial efficiency and to
protect litigants from having to relitigate issues that were
previously decided. Bockweg, 333 N.C. at 491, 428 S.E.2d at 161.
For purposes of collateral estoppel, “the prior judgment serves
as a bar only as to issues actually litigated and determined in
the original action.” City of Asheville v. State, 192 N.C. App.
1, 17, 665 S.E.2d 103, 117 (2008) (quotation marks omitted)
(emphasis in original), disc. review denied, 363 N.C. 123, 672
S.E.2d 685 (2009).
In support of its argument, NewBridge points to this
Court’s opinion in NewBridge I, where the Court noted that
“[HJBBQ] never transferred its leasehold interest to
[NewBridge]; rather, the leasehold interest was transferred to
HP, a limited liability company owned wholly by [NewBridge.]”
NewBridge I at *4. However, the basis of the Court’s holding in
NewBridge I was not the legal relationship between HP and
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NewBridge, but the language of the contracts involved in the
case. As the Court noted, the Assignment in Lieu of Foreclosure
read: “WHEREAS, in order to avoid foreclosure under the Deed of
Trust, [HJBBQ] has agreed to assign, grant, convey and transfer
to [HP], as the designee of the Bank, all right, title and
interest in and to the Lease and the Property in exchange for,
among other things, the cancellation of the Deed of Trust[.]”
Id. (emphasis in original). The Court concluded that “[t]he
language of the assignment is clear and unambiguous” and “in
partial consideration of the assignment, it was agreed the Deed
of Trust was to be cancelled.” Id. Therefore, “with a
cancelled Deed of Trust and a voided amendment,” the Court
determined that “the [Ground Lease] again became the controlling
contract.” The Court ultimately held that the Ground Lease, “in
clear and unambiguous language, plainly provides that the excess
rents were payable to Starmount in the event that the property
was subleased.” Id. at *5. Because Whitehurst was the
successor to Starmount’s interests in the Ground Lease, the
Court reversed the trial court’s order and remanded for entry of
judgment in favor of Whitehurst. Id.
Therefore, the issue of whether HP and NewBridge were the
same legal entity was not necessary to the Court’s determination
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in the First Action. NewBridge contends that “[t]he fact that
[NewBridge] and HP were separate entities prevented HP from
asserting [NewBridge’s] rights under the Ground Lease to any
excess payments from the Sublease Agreement, effectively
eliminating [NewBridge’s] ability to be repaid the loan to
[HJBBQ].” We do not find this argument persuasive. The
NewBridge I Court explicitly held that the Ground Lease, “in
clear and unambiguous language, plainly provides that the excess
rents were payable to Starmount in the event that the property
was subleased.” Id. at *5. Thus, the legal relationship
between HP and NewBridge was irrelevant to the Court’s decision.
The result would have been the same regardless of whether HP
could have asserted NewBridge’s rights under the Ground Lease,
because under that document’s “clear and unambiguous language,”
the excess rents were payable to Starmount.
Accordingly, NewBridge has failed to carry its burden of
demonstrating that the possibility of inconsistent verdicts
exists on the issue of whether HP and NewBridge are the same
legal entity. See Heritage Operating, L.P., __ N.C. App. at __,
727 S.E.2d at 314. Thus, because NewBridge cannot show how a
substantial right would be affected without immediate appellate
review, we dismiss its appeal from the trial court’s
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interlocutory order. See id. at __, 727 S.E.2d at 316
(“Although the verdicts may be different, there is no
possibility of a verdict in the instant case being inconsistent
with any previous judicial determinations. Accordingly, we
conclude this appeal does not affect a substantial right and
dismiss it as interlocutory.”).
Conclusion
Because NewBridge has failed to demonstrate how a
substantial right would be lost without immediate review of the
trial court’s interlocutory order, we dismiss the appeal.
DISMISSED.
Judges DILLON and DAVIS concur.