Horne Heating & Air Conditioning Co. v. Horne

2017 NCBC 94

• Court: North Carolina Business Court
• Decided: October 11, 2017
• Docket: 16-CVS-21608
• Status: Published

Opinion

Horne Heating & Air Conditioning Co. v. Horne, 2017 NCBC 94.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 16 CVS 21608

HORNE HEATING & AIR CONDITIONING CO.,

Plaintiff,

v.

PATRICIA S. HORNE and THE ORDER AND OPINION DENYING IN ESTATE OF ELVERSON C. HORNE, JR, PART AND GRANTING IN PART DEFENDANTS’ MOTIONS TO Defendants. DISMISS

1. THIS MATTER is before the Court upon Defendants Patricia S. Horne’s

(“Ms. Horne”) and the Estate of Elverson C. Horne, Jr.’s (“the Estate,” collectively

“Defendants”) separate Motions to Dismiss (the “Motions”) portions of Plaintiff Horne

Heating & Air Conditioning Co.’s (“Plaintiff”) Amended Complaint under Rule

12(b)(6) of the North Carolina Rules of Civil Procedure.

2. Having considered the Motions, the briefs in support of and in opposition to

the Motions, and the arguments of counsel at a September 19, 2017 hearing on the

Motions, the Court hereby DENIES in part and GRANTS in part the Motions to

Dismiss.

Marcellino & Tyson, PLLC, by Matthew Marcellino and Wesley Rainer, for Plaintiff Horne Heating & Air Conditioning Co.

Hull & Chandler, P.A., by Andrew Brendle, for Defendants Patricia S. Horne and The Estate of Elverson C. Horne, Jr.

Bledsoe, Judge. I.

FACTUAL BACKGROUND

3. The Court does not make findings of fact on a Rule 12(b)(6) motion to

dismiss. The following factual summary is drawn from relevant allegations in the

Amended Complaint and the contract that is the subject of the Amended Complaint.

4. Plaintiff is a corporation duly organized and existing under the laws of the

State of North Carolina with an office and principal place of business in Mecklenburg

County, North Carolina. (Am. Compl. ¶ 1, ECF No. 1.) Until March 13, 2016, Plaintiff

had two shareholders: Elverson C. Horne, Jr. (“Mr. Horne”), holder of ninety-nine of

Plaintiff’s one hundred outstanding shares, and his son, Jonathon D. Horne

(“Jonathon Horne”), the holder of the remaining share of Plaintiff’s stock. (Am.

Compl. ¶ 3, 8; Compl. Ex. A, ECF No. 32.)

5. Plaintiff alleges that “[o]n December 20, 1990, Plaintiff caused to be issued

a policy of insurance by [Prudential] bearing number 98 259 072 in the face amount

of $500,000.00 upon the life of [Mr. Horne]” (the “Policy”). (Am. Compl. ¶ 7.) Plaintiff

alleges that “the beneficiary of the Policy was [Plaintiff].” (Am. Compl. ¶ 7.) Plaintiff

asserts that the “purpose of the acquisition of the Policy was to fund the redemption

of [Plaintiff’s] stock upon the death of the shareholder [Mr. Horne] and to provide

additional working capital to Plaintiff.” (Am. Compl. ¶ 8.)

6. Plaintiff also alleges that “on February 13, 1991, Plaintiff, [Mr. Horne] and

[Jonathon Horne] executed a Stock Redemption Agreement” (the “Agreement”). (Am.

Compl. ¶ 9.) According to Plaintiff, the Agreement “provides, inter alia, that Plaintiff shall be the beneficiary of the Policy and for the redemption of all shares of a

stockholder upon his death using the death benefit proceeds, to the extent necessary,

payable under the Policy to Plaintiff.” (Am. Compl. ¶ 9.) Although at issuance the

Policy identified Mr. Horne as the owner, and Plaintiff as the beneficiary, the

Agreement specifically provided that Plaintiff “shall be the owner of any policy or

policies of insurance acquired pursuant to the terms of this Agreement[.]” (Compl.

Ex. A, Art. 6B.) The Agreement further stated that Plaintiff “shall be named as

beneficiary of any such policies.” (Compl. Ex. A., Art. 6B.)

7. Plaintiff contends that in early 2016, and with Mr. Horne’s death imminent,

Mr. and Ms. Horne improperly caused the beneficiary of the Policy to be changed from

Plaintiff to Ms. Horne “without the permission, consent or approval of Plaintiff.” (Am.

Compl. ¶ 14.) Mr. Horne subsequently died on March 13, 2016, and Prudential

thereafter paid the net death benefit of $470,000 to Ms. Horne. (Am. Compl. ¶ 3, 15.)

Plaintiff seeks to recover these funds through this action.

II.

PROCEDURAL BACKGROUND

8. Plaintiff filed its complaint (“Complaint”) on December 2, 2016, asserting

claims against Ms. Horne and the Estate. On May 12, 2017, Plaintiff filed an

Amended Complaint (“Amended Complaint”), adding new allegations and claims and

joining as defendants Greg Sheets, Greg W.C. Sheets & Associates, LLC (the “Sheets

Defendants”), and Prudential Insurance Company of America (“Prudential”).

Plaintiff voluntarily dismissed its claims against the Sheets Defendants on September 18, 2017 and against Prudential on September 19, 2017. Ms. Horne and

the Estate are the only defendants remaining in the case.

9. Among its various claims, Plaintiff seeks to recover against (i) the Estate for

Mr. Horne’s alleged breach of the Agreement, (ii) Ms. Horne for her alleged tortious

interference with that same Agreement, and (iii) Ms. Horne and the Estate for their

alleged conversion of the Policy proceeds. (Am. Compl. ¶¶ 18–23, 42–44.) Ms. Horne

and the Estate moved to dismiss these specific claims through separate Motions to

Dismiss filed on July 13, 2017. (ECF Nos. 15, 16.)

10. The Court held a hearing on the Motions on September 19, 2017, at which

all parties were represented by counsel. At the conclusion of the hearing, the Court

announced that it would enter a written order granting Defendants’ separate Motions

seeking dismissal of Plaintiff’s conversion claim but denying the Estate’s Motion to

Dismiss Plaintiff’s breach of contract claim and denying Ms. Horne’s Motion to

Dismiss Plaintiff’s claim for tortious interference with contract.

11. The Court enters this Order and Opinion to memorialize its oral rulings at

the September 19 hearing.

III.

ANALYSIS

A. Standard of Review

12. In deciding a Rule 12(b)(6) motion, the Court’s inquiry is “whether the

allegations of the complaint, treated as true, are sufficient to state a claim upon which

relief may be granted under some legal theory, whether properly labeled or not.” Enoch v. Inman, 164 N.C. App. 415, 417, 596 S.E.2d 361, 363 (2004); see Sutton v.

Duke, 277 N.C. 94, 98–99, 176 S.E.2d 161, 163 (1970). The Court views the facts

pleaded and permissible inferences in a light most favorable to the non-moving party.

Goodman v. Holmes & McLaurin Attorneys at Law, 192 N.C. App. 467, 473, 665

S.E.2d 526, 531 (2008). In addition, the Court “may properly consider documents

which are the subject of a plaintiff's complaint and to which the complaint specifically

refers[.]” Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60, 554 S.E.2d 840, 847

(2001). Dismissal under Rule 12(b)(6) is proper “(1) when the complaint on its face

reveals that no law supports plaintiff's claim; (2) when the complaint reveals on its

face the absence of fact sufficient to make a good claim; or (3) when some fact disclosed

in the complaint necessarily defeats the plaintiff's claim.” Oates v. JAG, Inc., 314

N.C. 276, 278, 333 S.E.2d 222, 224 (1985).

B. Breach of Contract Against the Estate

13. Plaintiff contends that Mr. Horne breached the Agreement by changing the

Policy beneficiary without Plaintiff’s consent or approval. (Am. Compl. ¶¶ 18–20.)

The Estate argues that Plaintiff’s breach of contract claim should be dismissed

because Plaintiff failed to plead the existence of a valid contract between Plaintiff and

Mr. Horne, and, in particular, failed to use the specific words “valid contract”

anywhere in its Amended Complaint. (Defs.’ Br. Supp. Mot. Dismiss 3–4, ECF No.

17.) The Estate’s argument is without merit.

14. In order to state a claim for breach of contract, a plaintiff must adequately

allege the existence of a valid contract and the breach of the terms of that contract. Charlotte Motor Speedway, LLC v. Cty. of Cabarrus, 230 N.C. App. 1, 6, 748 S.E.2d

171, 175 (2013). In North Carolina, “a valid contract requires (1) assent; (2) mutuality

of obligation; and (3) definite terms.” Id. at 7, 748 S.E.2d at 176; see also Northington

v. Michelotti, 121 N.C. App. 180, 184, 464 S.E.2d 711, 714 (1995) (“It is a well-settled

principle of contract law that a valid contract exists only where there has been a

meeting of the minds as to all essential terms of the agreement.”). Mutual assent is

often understood as a “meeting of the minds,” occurring when the parties demonstrate

an intent to be bound by definite terms. Parker v. Glosson, 182 N.C. App. 229, 232,

641 S.E.2d 735, 737 (2007).

15. Here, Plaintiff specifically alleged that “Plaintiff, [Mr. Horne] and [Jonathon

Horne] executed [the] Stock Redemption Agreement[.]” (Am. Compl. ¶ 9.) Plaintiff

attached the Agreement to the original Complaint and “incorporated it by reference

as if fully set forth herein” in the Amended Complaint.1 (Compl. Ex. A; Am. Compl.

¶ 9.) The Agreement is notarized and signed under seal by Plaintiff, Mr. Horne, and

Jonathon Horne. It contains nine pages of detailed provisions setting forth the

parties’ respective obligations concerning Plaintiff’s purchase of Mr. Horne’s and

Jonathon Horne’s stock upon death as well as the parties’ agreement concerning the

1 Contrary to the Estate’s contention, it is of no consequence on this Motion that Plaintiff inadvertently failed to attach the Stock Purchase Agreement to the Amended Complaint. See, e.g., Shaw v. Gee, 2016 NCBC LEXIS 103, at *2, n.1 (N.C. Super. Ct. Dec. 21, 2016) (concluding consideration of two exhibits attached to original complaint but not to amended complaint did not convert Rule 12(b)(6) motion to one under Rule 56); see also Eastway Wrecker Serv., Inc. v. City of Charlotte, 165 N.C. App. 639, 642, 599 S.E.2d 410, 412 (2004) (“Since the exhibits to the complaint were expressly incorporated by reference in the complaint, they were properly considered in connection with the motion to dismiss as part of the pleadings.”). funding for Plaintiff’s purchase of a deceased shareholder’s stock. As such, the Stock

Purchase Agreement plainly reflects assent, mutuality of obligation, and definite

terms—the required elements of a valid and binding contract.

16. The Estate’s contention that the words “valid contract” must be specifically

pleaded simply has no basis in law. See, e.g., Stellar Ins. Grp., Inc. v. Cent. Cos., LLC,

No. 2:06cv11, 2006 U.S. Dist. LEXIS 75801, at *23 (W.D.N.C. 2006) (holding that

“there are no magic words for pleading [a contract claim under North Carolina law]”)

(citing Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000)); cf. Feltman v.

City of Wilson, 238 N.C. App. 246, 253–54, 767 S.E.2d 615, 621 (2014) (rejecting

“magic words” such as “but for” to plead causation).

17. In paragraphs 19 and 20 of the Amended Complaint, Plaintiff refers to the

Stock Purchase Agreement as a “contract” and alleges that Mr. Horne “breached the

terms and provisions of” that document. Plaintiff’s allegations are sufficient to

withstand a motion to dismiss under Rule 12(b)(6).

C. Tortious Interference with Contract Against Ms. Horne

18. Plaintiff premises its tortious interference claim on its contention that Ms.

Horne induced Mr. Horne to breach the Stock Purchase Agreement by changing the

beneficiary of the Policy from Plaintiff to Ms. Horne. (Am. Compl. ¶¶ 21–23.) Like

the Estate in challenging Plaintiff’s breach of contract claim, however, Ms. Horne

argues that the tortious interference claim must fail because Plaintiff failed to allege

the existence of a valid contract. (Defs.’ Br. Supp. Mot. Dismiss 3–4.) Ms. Horne’s

argument necessarily fails for the same reasons discussed in Section B above. D. Conversion Against the Estate and Ms. Horne

19. Plaintiff’s conversion claim is premised on its contention that Mr. and Ms.

Horne wrongfully caused Ms. Horne to be substituted for Plaintiff as the beneficiary

of the Policy and to thereafter receive the Policy proceeds that would have otherwise

been paid to Plaintiff. (Am. Compl. ¶¶ 42–44.) As pleaded, the interest Plaintiff

contends that Defendants converted was not the Policy’s net death benefit itself, but

rather Plaintiff’s right to recover the Policy’s net proceeds as the Policy’s properly

designated beneficiary. Such an interest is a contract right, which our courts have

deemed an intangible interest under North Carolina law. See Coca-Cola Bottling Co.

Consol. v. Durham Coca-Cola Bottling Co., 141 N.C. App. 569, 583, 541 S.E.2d 157,

166 (2000) (recognizing “intangible assets” include “contract rights”).

20. North Carolina law is clear that “intangible interests such as business

opportunities and expectancy interests” are not subject to a conversion claim.

Norman v. Nash Johnson & Sons’ Farms, Inc., 140 N.C. App. 390, 414, 537 S.E.2d

248, 264 (2000) (holding that “only goods and personal property are properly the

subjects of a claim for conversion”). Accordingly, Plaintiff’s conversion claim

necessarily fails as a matter of law. See, e.g., Gottfried v. Covington, 2014 NCBC

LEXIS 26, at *19 (N.C. Super. Ct. June 25, 2014) (holding that right to receive

royalties under written agreement constitutes an “intangible, contractual

expectancy” that is “not subject to a claim for conversion”). IV.

CONCLUSION

21. WHEREFORE, for the foregoing reasons, the Court hereby GRANTS in

part and DENIES in part Defendants’ Motions as follows:

a. The Estate’s motion to dismiss Plaintiff’s breach of contract claim is

DENIED.

b. Ms. Horne’s motion to dismiss Plaintiff’s tortious interference with

contractual relations claim is DENIED.

c. Defendants’ respective Motions to Dismiss Plaintiff’s conversion claim

are GRANTED, and Plaintiff’s conversion claim against each

Defendant is hereby DISMISSED with prejudice.

SO ORDERED, this the 11th day of October, 2017.

/s/ Louis A. Bledsoe, III Louis A. Bledsoe, III Special Superior Court Judge for Complex Business Cases