Davis v. Davis Funeral Serv., Inc.

2022 NCBC 38

• Court: North Carolina Business Court
• Decided: July 20, 2022
• Docket: 22-CVS-583
• Status: Published

Opinion

Davis v. Davis Funeral Serv., Inc., 2022 NCBC 38.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION UNION COUNTY 22 CVS 583

WESTON DAVIS,

Plaintiff,

v.

DAVIS FUNERAL SERVICE, INC.; ROBERT L. MORGAN, III, President ORDER AND OPINION (as an officer of Davis Funeral Service, Inc.); PHILLIP TILLMAN, ON MOTION TO DISMISS Vice President (individually and as THIRD-PARTY COMPLAINT an officer of Davis Funeral Service, Inc.); and ROBIN H. MORGAN, Secretary (as an officer of Davis Funeral Service, Inc.),

Defendants/Third- Party Plaintiffs,

DEIDRA TEDDER,

Third-Party Defendant.

Brown & Associates, PLLC, by Donald Mitchell Brown, for Plaintiff Weston Davis.

Burns, Gray & Gray, by John T. Burns and Christopher A. Gray, for Defendants Davis Funeral Service, Inc., Robert Morgan, Phillip Tillman, and Robin Morgan.

Villmer Caudill, PLLC, by Bo Caudill, for Third-Party Defendant Deidre Tedder.

Conrad, Judge.

1. This case arises out of a dispute over the management of Davis Funeral

Services, Inc. Weston Davis sued the company and its officers based on allegations

that he was unfairly ousted from his position as president. In response, Davis Funeral Services has counterclaimed and accused Davis of self-dealing. It has also

filed a third-party complaint against Deidre Tedder (mistakenly called “Deidra” in

the pleading). The third-party claims are the subject of this Order.

2. The allegations against Tedder are succinct. She and Davis are supposedly

good friends. He hired her in October 2020 to serve as corporate secretary for Davis

Funeral Services. The two allegedly then began misusing corporate assets for their

personal benefit. According to Davis Funeral Services, Tedder bought one of the

company’s vehicles at a steep discount and paid for her daily meals with company

funds. There are two claims for relief: one for breach of fiduciary duty and another

for embezzlement. (See Third-Party Compl. 9–11, ECF No. 4.)

3. Tedder has moved to dismiss both third-party claims under Rule 12(b)(6) of

the North Carolina Rules of Civil Procedure. (ECF No. 10.) Davis Funeral Services

has not filed a response brief, and the time to do so has passed. By rule, the motion

is deemed “uncontested,” BCR 7.6, and the Court elects to decide it without a hearing,

BCR 7.4.

4. North Carolina remains a notice pleading jurisdiction. All that is required

of a complaint is a “short and plain statement of the claim” being asserted. N.C. R.

Civ. P. 8(a)(1). In deciding whether the third-party complaint states a claim for relief,

the Court must take its allegations as true and view the facts and permissible

inferences in the light most favorable to Davis Funeral Services as the nonmoving

party. See, e.g., Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019). 5. Under this liberal standard, Davis Funeral Services has adequately alleged

its claims. Breach of fiduciary duty requires the existence of a fiduciary duty, a

breach of that duty, and injury proximately caused by the breach. See Green v.

Freeman, 367 N.C. 136, 141 (2013). Embezzlement includes conversion of company

property by a corporate officer. See N.C.G.S. § 14-90(b); see also State v. Speckman,

326 N.C. 576, 578 (1990). Here, Davis Funeral Services alleges that Tedder was its

corporate secretary, owed a fiduciary duty as an officer, and wrongfully took money

and other property received in the course of her employment. (See Third-Party

Compl. 9–11.) These allegations, though not detailed, are minimally sufficient to

state a claim for relief.

6. Each of Tedder’s arguments for dismissal is off target. She relies, for

example, on a document outside the third-party complaint to show that she was an

administrative employee rather than a corporate officer and that she bought the

disputed vehicle from Davis Funeral Services before working there. (See Tedder’s Ex.

A, ECF No. 12.1.) “Perhaps the most fundamental concept of motions practice under

Rule 12 is that evidence outside the pleadings . . . cannot be considered in

determining whether the complaint states a claim on which relief can be granted.”

Jackson/Hill Aviation, Inc. v. Town of Ocean Isle Beach, 251 N.C. App. 771, 775

(2017). The Court therefore does not consider this evidence.

7. Next, Tedder speculates that the company’s bylaws may have altered her

responsibilities and, thus, narrowed any fiduciary duty owed as corporate secretary.

At this stage, however, the Court must take all inferences in favor of Davis Funeral Services, not Tedder. An officer owes statutory duties of loyalty and due care to the

corporation. See N.C.G.S. § 55-8-42(a). Davis Funeral Services has alleged that

Tedder was its corporate secretary and that she therefore owed these duties. It was

not required to describe her responsibilities fully or with particularity. Whether

Tedder held “a title and not an actual office” is a question for discovery and not suited

to a Rule 12(b)(6) motion. Morris v. Scenera Rsch. LLC, 2012 NCBC LEXIS 1, at *31

(N.C. Super. Ct. Jan 4, 2012); see also Addison Whitney, LLC v. Cashion, 2017 NCBC

LEXIS 51, at *13–14 (N.C. Super. Ct. June 9, 2017) (“The Court is unaware of any

case dismissing a breach of fiduciary duty claim against individuals with similar

titles and authority at the 12(b)(6) stage.”).

8. Finally, Tedder argues that Davis authorized her use of company property,

such that it was neither embezzlement nor a breach of fiduciary duty. But the

third-party complaint does not expressly allege that Davis authorized Tedder’s meal

purchases. Rather, it simply alleges that both Davis and Tedder used company funds

for that purpose. And in any event, it is far from clear that Davis’s authorization

would exonerate Tedder. The thrust of the third-party complaint is that both Davis

and Tedder misused company assets for personal gain. Tedder has not explained why

self-dealing by two corporate officials together is any less wrongful than self-dealing

by one alone.

9. For all these reasons, the Court DENIES Tedder’s motion to dismiss. SO ORDERED, this the 20th day of July, 2022.

/s/ Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases