Anderson v. SeaScape at Holden Plantation, LLC

753 S.E.2d 691, 232 N.C. App. 1, 2014 WL 217202, 2014 N.C. App. LEXIS 97

Opinion

STROUD, Judge.

The SeaScape at Holden Plantation Property Owners Association, Inc. appeals from an order entered 24 January 2013 denying its motion to intervene. We reverse and remand.

I. Background

This action concerns a planned community in Brunswick County called SeaScape at Holden Plantation (“SeaScape Community”). The SeaScape Community was developed by SeaScape at Holden Plantation, LLC (“SeaScape LLC”), and its member-manager, Mark Saunders, both defendants here. Plaintiffs claim that the SeaScape Community “derives much of its value from the substantial common elements available for the owners’ use, including a marina, a clubhouse, and ponds and natural areas throughout the property.” Plaintiffs’ claims arise from the construction of some of these common areas, including a marina and two ponds as well as the “failure to construct promised amenities, including without limitation, tennis courts, walking and biking trails, harbormaster house, intracoastal pier with gazebo, and observation towers” and failure to properly construct and maintain roadways and drainage. The developer had some of these common areas constructed and then conveyed them to the SeaScape Property Owners’ Association, Inc. (POA), a non-profit corporation. Plaintiffs are property owners within the SeaScape Community and members of the POA. Under the POA’s articles of incorporation, the developer has the unilateral authority to appoint and remove members of the POA Board of Directors.

On 5 October 2012, plaintiffs filed a verified complaint, motion for temporary restraining order, and motion for preliminary injunction. This initial complaint listed the POA as a defendant. The complaint alleged that two of the common ponds, the marina, and some of the roads had various construction defects resulting in excessive repair costs and diminution of property value, among other damages. Plaintiffs have alleged that the common areas at issue were defectively constructed by several LLCs operated by Mr. Saunders.

The complaint raised claims for breach of contract, breach of implied warranties, unfair and deceptive business practices, and constructive fraud against SeaScape LLC and the construction LLCs allegedly operated by Mr. Saunders, as well as piercing the corporate veil to impose liability on Mr. Saunders individually. Plaintiffs also alleged breach of fiduciary duty, negligence, unfair and deceptive business practices against Mr. Saunders individually. The complaint also raised negligence and breach of contract claims against Cape Fear Engineering, Inc. for its designs of several common elements. Plaintiffs further claimed that the POA Board of Directors and the individual board members had breached their fiduciary duties to plaintiffs and engaged in a civil conspiracy with the developer. Finally, plaintiffs claimed that Brunswick County and several individual inspectors were negligent in their inspections, had engaged in a civil conspiracy with the developer, and acted in a manner that constituted unfair and deceptive business practices.

Before the POA filed an answer, plaintiffs filed an amended complaint on 26 October 2012, which included essentially the same claims but did not include the POA as a defendant. On 27 November 2012, the POA filed a motion to intervene “as a party Plaintiff.” It claimed that it was the owner of the property that plaintiffs have alleged was defectively constructed. It contended that some of the interests asserted by plaintiffs were actually interests owned by the POA. It attached a draft complaint, largely copying plaintiffs’ claims against the developer, the construction companies, Cape Fear, and the Brunswick County defendants. The superior court denied the POA’s motion to intervene by order entered 24 January 2013. The POA filed written notice of appeal to this Court on 13 February 2013.

II. Appellate Jurisdiction

We must first address the issue of appellate jurisdiction. We conclude that the appeal is interlocutory, but that the appealed order affects a substantial right and is therefore immediately appealable. Further, we deny plaintiffs’ motion to dismiss the appeal for lack of subject matter jurisdiction.

The trial court’s order denying the POA’s motion to intervene is interlocutory, as it does not dispose of the entire case. See High Rock Lake Partners, LLC v. North Carolina Dept. of Transp., 204 N.C. App. 55, 60, 693 S.E.2d 361, 366 (“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.” (citation, quotation marks, and ellipses omitted)), disc. rev. denied, 364 N.C. 325, 700 S.E.2d 753 (2010). “Normally, interlocutory orders are not immediately appealable.” Highland Paving Co., LLC v. First Bank,_N.C. App._,_, 742 S.E.2d 287, 290 (2013) (citation omitted). Nevertheless,

an interlocutory order may be immediately 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.

Stinchcomb v. Presbyterian Medical Care Corp., 211 N.C. App. 556, 560, 710 S.E.2d 320, 323, disc. rev. denied, 365 N.C. 338, 717 S.E.2d 376 (2011).

The POA argues that the trial court’s denial of its motion to intervene affects a substantial right. “Whether a party may appeal an interlocutory order pursuant to the substantial right exception is determined by a two-step test. The right itself must be substantial and the deprivation of that substantial right must potentially work injury to [appellant] if not corrected before appeal from final judgment.” Wood v. McDonald’s Corp., 166 N.C. App. 48, 55, 603 S.E.2d 539, 544 (2004) (citations, quotation marks, and brackets omitted).

Under the facts presented here, we conclude that the trial court’s order affects a substantial right of the POA. Cf. United Services Auto. Ass’n v. Simpson, 126 N.C. App. 393, 395, 485 S.E.2d 337, 339 (concluding that an order denying the appellants’ motion to intervene affected a substantial right), disc. rev. denied, 347 N.C. 141, 492 S.E.2d 37 (1997); Alford v. Davis, 131 N.C. App. 214, 216, 505 S.E.2d 917, 919 (1998) (concluding that the denial of a motion to intervene affected a substantial right). This action concerns property owned by the POA. To the extent that the parties contend that there are derivative claims at issue, they were derivative of rights possessed by the POA. Unless it is brought into the action, the POA would lose its ability to challenge plaintiffs’ standing to bring an action on its behalf, which is a major issue in contention here. See Swenson v. Thibaut, 39 N.C. App. 77, 100, 250 S.E.2d 279, 294 (1978) (observing that “certain defenses which are properly asserted before trial on the merits of the action are peculiar to the corporation alone, and may be properly raised only by the nominal defendant who, for purposes of those matters, ceases to be a nominal defendant and becomes an actual party defendant.”), app. dismissed and disc. rev. denied, 296 N.C. 740, 740, 254 S.E.2d 181, 181-83 (1979). We conclude that the order denying the POAs motion to intervene affects a substantial right and is immediately appealable.

Plaintiffs have also filed a motion to dismiss the appeal for lack of subject matter jurisdiction on the basis that the POA lacks authority, and therefore standing, to pursue the appeal. This argument is misplaced. The only action currently pending and the action into which the POA moved to intervene is that filed by plaintiffs. The parties stipulated that the trial court had subject matter jurisdiction over the present action— the action filed by plaintiffs — and we see no reason to conclude otherwise. Therefore, we deny plaintiffs’ motion to dismiss the appeal.

III. Motion to Intervene

The POA argues that the trial court erred in denying its motion to intervene because it had a right to intervene under N.C. Gen. Stat. § 1A-1, Rule 24(a) (2011), and, alternatively, the trial court abused its discretion in denying the POA’s motion to intervene permissively under Rule 24(b). We hold that the POA had a right to intervene as a necessary party under Rule 24(a)(2). Because we conclude that the POA has a right to intervene under Rule 24 (a)(2), we do not address the issue of a statutory right to intervene or permissive intervention.

A. Standard of Review

“We review de novo the trial court’s decision denying intervention under Rule 24(a)(2).” Charles Schwab & Co., Inc. v. McEntee, _N.C. App._,_, 739 S.E.2d 863, 867 (2013) (citation omitted). “Under a de novo review, [this] [CJourt considers the matter anew and freely substitutes its own judgment for that of the trial court.” Johns v. Welker, _ N.C. App.._,_, 744 S.E.2d 486, 488 (2013) (citation, quotation marks, and brackets omitted).

B. Analysis

“Rule 24 of the North Carolina Rules of Civil Procedure determines when a third party may intervene as of right or permissively.” Virmani v. Presbyterian Health Services Corp., 350 N.C. 449, 458, 515 S.E.2d 675, 682 (1999), cert. denied, 529 U.S. 1033, 146 L.Ed. 2d 337 (2000). Under Rule 24, a person has a right to intervene in two circumstances:

(1) When a statute confers an unconditional right to intervene; or (2) When the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.

N.C. Gen. Stat. § 1A-1, Rule 24(a) (2011).

“The prospective intervenor seeking such intervention as a matter of right under Rule 24(a)(2) must show that (1) it has a direct and immediate interest relating to the property or transaction, (2) denying intervention would result in a practical impairment of the protection of that interest, and (3) there is inadequate representation of that interest by existing parties.” Virmani, 350 N.C. at 459, 515 S.E.2d at 683.

When a complete determination of the controversy cannot be made without the presence of a party, the court must cause it to be brought in because such party is a necessary party and has an absolute right to intervene in amending action. Hence, refusal to permit a necessary party to intervene is error.

Strickland v. Hughes, 273 N.C. 481, 485, 160 S.E.2d 313, 316 (1968) (emphasis added). Our Supreme Court held under the prior N.C. Gen. Stat. § 1-73 that a trial court erred in denying the owner of property at issue, a necessary party, the opportunity to participate. Griffin & Vose v. Non-Metallic Minerals Corp., 225 N.C. 434, 436, 35 S.E.2d 247, 249 (1945).¹ Moreover, to the extent that plaintiffs’ claims are derivative, the POA is a necessary party because the derivative claims are brought in its name. Swenson, 39 N.C. App. at 98, 250 S.E.2d at 293.

“A necessary party is one who is so vitally interested in the controversy that a valid judgment cannot be rendered in the action completely and finally determining the controversy without his presence.” Moore Printing, Inc. v. Automated Print Solutions, LLC, _N.C. App. _, _, 718 S.E.2d 167, 172 (2011). The POA is the owner of the property that plaintiffs have alleged was defectively constructed and is in need of repair. Plaintiffs have specifically requested an injunction prohibiting the POA from expending its funds to repair the marina, as plaintiffs assert that the other defendants should be held responsible for these expenses. Plaintiffs assert that several of their claims are derivative claims brought on behalf of the POA. No valid judgment can be entered without the participation of the POA. See Karner v. Roy White Flowers, Inc., 351 N.C. 433, 440, 527 S.E.2d 40, 44 (2000) (concluding that “[a]n adjudication that extinguishes property rights without giving the property owner an opportunity to be heard cannot yield a “valid judgment.”); Swenson, 39 N.C. App. at 98, 250 S.E.2d at 293. Therefore, regardless of whether plaintiffs’ claims axe derivative or individual, valid or inadequate, as a necessary party, the POA has a right to intervene under Rule 24. See Virmani, 350 N.C. at 459, 515 S.E.2d at 683; Strickland, 273 N.C. at 485, 160 S.E.2d at 316; Swenson, 39 N.C. App. at 98, 250 S.E.2d at 293.

We also note that the parties all seem to assume in their briefs that the plaintiffs’ claims at issue are derivative claims brought on behalf of the POA. The only issue which the trial court has ruled upon and which is raised by this appeal is the POA’s right to intervene, and we have addressed only that issue. We express no opinion on the legal sufficiency of plaintiff’s claims or of the POA’s complaint, the assertion that the claims are actually derivative and pled as such, or the POA’s argument that derivative claims were not properly brought. These other legal issues and the proper role of the POA in the action may be addressed by the trial court on remand if and when they are raised by the parties.

IV. Conclusion

For the foregoing reasons, we hold that the POA is entitled to intervene as a matter of right under Rule 24. Therefore, we reverse the trial court’s order denying the POA’s motion to intervene and remand for further proceedings.

REVERSED and REMANDED.

Judges McGEE and BRYANT concur.

1

. Both of these cases were decided before the Rules of Civil Procedure came into effect. However, our Supreme Court has noted that “[t]he rules of intervention as set out in N.C.G.S. § 1A-1 make no substantive change in the rules as previously set out in N.C.G.S. § 1-73.” River Birch Associates v. City of Raleigh, 326 N.C. 100, 128 n.10, 388 S.E.2d 538, 554 n.10 (1990).