K2 Asia Ventures v. Trota

• Court: Court of Appeals of North Carolina
• Decided: August 19, 2014
• Docket: 13-1376
• Status: Unpublished

Opinion

An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of A p p e l l a t e P r o c e d u r e .

NO. COA13-1376

NORTH CAROLINA COURT OF APPEALS

Filed: 19 August 2014

K2 ASIA VENTURES, BEN C. BROOCKS, AND JAMES G. J. CROW, Plaintiffs,

v. Forsyth County No. 09 CVS 2766 ROBERT TROTA, VERONICA TROTA, JOSELITO SALUDO, CAROLYN T. SALUD, ROLAND V. GARCIA, CRISTINA T. GARCIA, JIM FUENTEBELLA, MAVIS FUENTEBELLA, SHARON FUENTEBELLA, MAX’S BACLARAN INC., CHICKENS R US, INC., MAX’S MAKATI INC., MAX’S ERMITA, INC., MAX’S OF MANILA, INC., THE REAL AMERICAN DOUGHNUT COMPANY INC., TROFI VENTURES, INC., AND RUBY INVESTMENT COMPANY HOLDINGS, INC., KRISPY KREME DOUGHNUT CORPORATION, AND KRISPY KREME DOUGHNUTS, INC., Defendants.

Appeal by plaintiffs from order entered 26 July 2013 by

Judge Anderson D. Cromer in Forsyth County Superior Court.

Heard in the Court of Appeals 4 June 2014.

Watts Guerra LLP, by Christopher V. Goodpastor, pro hac vice, and Blanco Tackabery, by Peter J. Juran, for plaintiff-appellants. -2- Bell, Davis & Pitt, P.A., by William K. Davis, Alan M. Ruley, and Bradley C. Friesen, for defendant-appellees.

BRYANT, Judge.

Where the trial court’s order granting a motion to dismiss

for lack of personal jurisdiction is supported by competent

evidence, we affirm.

K2 Asia Ventures is a Cayman Island company with its

principal place of business in Austin, Texas. K2 Asia Ventures

was formed by Ben C. Broocks, a resident of Texas, and James G.

J. Crow, a resident of Wyoming, for the purpose of creating

Krispy Kreme franchises in Asia — specifically, the Philippines,

Hong Kong, and Thailand.

After meeting with Krispy Kreme to discuss franchising

requirements, Broocks approached Carolyn T. Salud about

establishing Krispy Kreme stores in the Philippines. Broocks

chose Salud because she and her extended family operate a large

chain of fried chicken restaurants, known as “Max’s,” in the

Philippines, Canada, and the United States. Salud and her

extended family, including Robert Trota, Veronica Trota,

Joselito Saludo, Roland V. Garcia, Cristina T. Garcia, Jim

Fuentebella, Mavis Fuentebella, and Sharon Fuentebella, also

operate several food service businesses, including Max's -3- Baclaran, Inc., Chickens R Us, Inc., Max's Makati, Inc., Max's

Ermita, Inc., and Max's of Manila, Inc., as well as two

investment and corporate management firms, Trofi Ventures, Inc.,

and Ruby Investment Company Holdings, Inc. With the exception

of Max’s of Manila, a California-based corporation, all of the

Salud family’s businesses are based in the Philippines, and all

members of the Salud family are Philippine citizens.

Carolyn Salud and her family agreed to enter into

negotiations with Broocks to establish Krispy Kreme franchises

in the Philippines. In 2004, Broocks executed a memorandum of

understanding (“MOU”) between K2 Asia Ventures, Max’s Ermita,

Inc., and a group of three individual investors. The MOU

required Broocks, as a member and manager of K2 Asia Ventures, to

work for the creation of a Krispy Kreme franchise agreement for

Max’s Ermita, Inc. Once a franchise was awarded, the MOU

directed the creation of a new Philippine corporation with all

MOU parties recognized as shareholders. The MOU also required

that any disputes arising under its terms would be subject to

the laws of the Philippines.

In 2005, Carolyn Salud signed a confidentiality agreement

with Krispy Kreme on behalf of herself and her family members.

During this same time period, on 26 October 2005, Krispy Kreme -4- and K2 Asia Ventures entered into a letter of intent that

contained provisions concerning the confidentiality agreement.

In her deposition, Carolyn Salud stated that although the

confidentiality agreement referred to the Krispy Kreme / K2 Asia

Ventures letter of intent which was supposedly attached to the

agreement, the letter was never attached nor provided.

In January 2006, a meeting was held in South Korea between

Broocks, Carolyn Salud, Robert Trota, Cristina Garcia, Jim

Fuentebella, Sharon Fuentebella, and several Krispy Kreme

representatives. After the meeting, Krispy Kreme agreed to

award the Salud family a franchise; the Salud family agreed to

retain Broock’s law firm, Jackson Walker, to negotiate the

franchise agreement. The Salud family then created a new

business, The Real American Doughnut Company, to develop and

operate the Krispy Kreme franchise.

Business relations between the Salud family and Broocks

soured after a “heated conference call” in March 2006 between

Carolyn Salud, Jeff Welch of Krispy Kreme, and Patrick Tobin and

Broocks of the Jackson Walker law firm. On 26 April 2006,

Krispy Kreme and The Real American Doughnut Company agreed to a

development agreement for a Krispy Kreme franchise based in the

Philippines. Under the terms of this development agreement, -5- disputes would be first subject to non-binding mediation in

Winston-Salem, North Carolina; binding arbitration would be

conducted in New York City, New York under New York law.

On 7 April 2009, K2 Asia Ventures, Ben C. Broocks, and James

G. J. Crow (“plaintiffs”) filed a complaint against Robert

Trota, Veronica Trota, Joselito Saludo, Carolyn T. Salud, Roland

V. Garcia, Cristina T. Garcia, Jim Fuentebella, Mavis

Fuentebella, Sharon Fuentebella, Max's Baclaran, Inc., Chickens

R Us, Inc., Max's Makati, Inc., Max's Ermita, Inc., Max's of

Manila, Inc., The Real American Donut Company Inc., Trofi

Ventures, Inc., Ruby Investment Company Holdings, Inc., Krispy

Kreme Doughnut Corporation, and Krispy Kreme Doughnuts, Inc.

(“defendants”), alleging various causes of action arising from

an alleged breach of a business agreement between plaintiffs and

defendants. On 19 June and 18 August 2009, defendants Robert

Trota, Veronica Trota, Joselito Saludo, Carolyn T. Salud, Roland

Fuentebella, Sharon Fuentebella, Max's Baclaran, Inc., Chickens

R Us, Inc., Max's Makati, Inc., Max's Ermita, Inc., Max's of

Ventures, Inc., and Ruby Investment Company Holdings, Inc. (the -6- “non-resident defendants”) filed motions to dismiss for lack of

personal jurisdiction.

On 11 August 2009, plaintiffs served their first set of

interrogatories, requests for production of documents, and

requests for admissions on all defendants; plaintiffs then filed

a 10 March 2010 motion to compel depositions. On 19 April 2010,

the trial court granted plaintiffs’ motion to compel

depositions. Defendants appealed to this Court, and on 1 March

2011, this Court dismissed defendants’ appeal as interlocutory.

See K2 Asia Ventures v. Trota, 209 N.C. App. 716, 708 S.E.2d 106

(2010).

While defendants’ appeal to this Court was pending, on 30

April 2010, plaintiffs filed new motions to compel production of

documents from defendants. On 15 June 2010, the trial court

granted plaintiffs’ motions for production of specific

documents. Defendants appealed to this Court, arguing that the

trial court erred in granting plaintiffs’ motions because

defendants’ documents were privileged. This Court affirmed the

trial court’s order, holding that defendants failed to

demonstrate that the requested documents were protected under

either the attorney-client or work product privileges. See K2 -7- Asia Ventures v. Trota, 215 N.C. App. 443, 717 S.E.2d 1, review

denied, 365 N.C. 369, 719 S.E.2d 37 (2011).

On 4 February 2011, plaintiffs filed an amended complaint

against defendants alleging that plaintiff Broocks had expended

time and money for travel and communications between and with

defendants Krispy Kreme Doughnut Corporation and Krispy Kreme

Doughnuts, Inc. (“Krispy Kreme defendants”) “for the purpose of

procuring franchise rights” for plaintiffs and defendants.

Plaintiffs’ amended complaint further asserted claims against

defendants for breach of contract, intentional interference with

contractual relationship and prospective economic advantage,

promissory estoppel, breach of fiduciary duties, unfair and

deceptive trade practices, quantum meruit, and unjust

enrichment.

On 8 April 2011, the non-resident defendants filed a Rule

12(b)(2) motion to dismiss plaintiffs’ amended complaint for

lack of personal jurisdiction. On 16 September, plaintiffs and

the Krispy Kreme defendants filed a joint motion for designation

of case as exceptional; the motion was granted on 23 September.

On 12 September 2012, a hearing was conducted on the non-

resident defendants’ motion to dismiss plaintiffs’ amended

complaint, the Honorable Anderson D. Cromer, Judge presiding. -8- On 26 July 2013, the trial court granted the non-resident

defendants’ Rule 12(b)(2) motion to dismiss for lack of personal

jurisdiction. Plaintiffs appeal.

_________________________________

At the outset we note that although plaintiffs’ appeal is

interlocutory, it is immediately appealable and properly before

this Court. Pursuant to North Carolina General Statutes,

section 1-277, “[a]ny interested party shall have the right of

immediate appeal from an adverse ruling as to the jurisdiction

of the court over the person or property of the defendant or

such party may preserve his exception for determination upon any

subsequent appeal in the cause.” N.C. Gen. Stat. § 1-277(b)

(2013); see also A.R. Haire, Inc. v. St. Denis, 176 N.C. App.

255, 257—58, 625 S.E.2d 894, 898 (2006) (“[M]otions to dismiss

for lack of personal jurisdiction affect a substantial right and

are immediately appealable[.]” (citation omitted)).

_____________________________________

On appeal, plaintiffs contend the trial court erred in

granting the non-resident defendants’ motion to dismiss for lack

of personal jurisdiction. We disagree.

The standard of review to be applied by a trial court in deciding a motion under Rule 12(b)(2) depends upon the procedural context confronting the court. Typically, -9- the parties will present personal jurisdiction issues in one of three procedural postures: (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.

Banc of Am. Sec. LLC v. Evergreen Int'l Aviation, Inc., 169 N.C.

App. 690, 693, 611 S.E.2d 179, 182 (2005).

The non-resident defendants filed a Rule 12(b)(2) motion to

dismiss plaintiffs’ amended complaint for lack of personal

jurisdiction. This motion was supported by first and second

affidavits made by each of the non-resident defendants asserting

a lack of personal jurisdiction. Plaintiffs did not file any

affidavits in response to rebut the non-resident defendants’

motion to dismiss.

[I]f the defendant supplements his motion to dismiss with an affidavit or other supporting evidence, the allegations [in the complaint] can no longer be taken as true or controlling and plaintiff[] cannot rest on the allegations of the complaint. In order to determine whether there is evidence to support an exercise of personal jurisdiction, the court then considers (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). -10-

Id. at 693—94, 611 S.E.2d at 182—83 (citations and quotations

omitted). “Where, as here, the trial court holds an evidentiary

hearing including depositions and arguments of counsel, the

trial court [is] required to act as a fact-finder, and decide

the question of personal jurisdiction by a preponderance of the

evidence.” Berrier v. Carefusion 203, Inc., ___ N.C. App. ___,

___, 753 S.E.2d 157, 161 (citing Deer Corp. v. Carter, 177 N.C.

App. 314, 322, 629 S.E.2d 159, 166 (2006)), cert. denied, 366

N.C. 597, 740 S.E.2d 477 (2014).

When this Court reviews a decision as to personal jurisdiction, it considers only whether the findings of fact by the trial court are supported by competent evidence in the record; . . . [w]e are not free to revisit questions of credibility or weight that have already been decided by the trial court.

Id. at ___, 753 S.E.2d at 161—62 (citation omitted).

Plaintiffs argue that the trial court erred in granting the

non-resident defendants’ motion to dismiss for lack of personal

jurisdiction. In its order granting the non-resident

defendants’ motion to dismiss, the trial court made seventy-nine

findings of fact and seventy-six conclusions of law.

Plaintiffs, in their reply brief, challenge findings of fact 6,

11, 15, 18, 22—24, 28, 36—37, 41—53, 63—64, 66, 71, 72, 73, 75— -11- 79, and conclusions of law 36—44, 49, and 50—54. However, in

their initial brief plaintiffs do not specifically challenge any

of the trial court’s findings of fact or conclusions of law.

Rather, in both briefs plaintiffs present broad arguments

contending the non-resident defendants “failed to controvert a

plethora of [plaintiffs’] evidence regarding [the non-resident

defendants’] contacts with North Carolina” and, thus, the

exercise of personal jurisdiction over the non-resident

defendants would be fair and reasonable, and comport with due

process.

In conducting its hearing, the trial court heard the

arguments of counsel, reviewed numerous pages of documentary

evidence, and saw recordings of depositions. As such, the trial

court served as the fact-finder and made its decision as to

personal jurisdiction accordingly. See id. at ___, 753 S.E.2d

at 161—64. Although plaintiffs now challenge the trial court’s

order on grounds that the trial court’s order was not supported

by competent evidence, we reiterate that

[w]hen this Court reviews a decision as to personal jurisdiction, it considers only whether the findings of fact by the trial court are supported by competent evidence in the record; . . . [w]e are not free to revisit questions of credibility or weight that have already been decided by the trial court. -12-

In its order, the trial court made extensive findings of

fact as to the level of activity, or lack thereof, of the non-

resident defendants in the state of North Carolina. The trial

court concluded that plaintiffs had not met their burden of

showing that the non-resident defendants were engaged in

substantial activity within North Carolina such that the non-

resident defendants would be subject to personal jurisdiction.

Further, the trial court concluded, after numerous and relevant

findings of fact, that the non-resident defendants had not

consented to jurisdiction in North Carolina. Our review of the

record confirms the trial court’s findings of fact were

supported by competent evidence in the record. The record

indicates that both plaintiffs and the non-resident defendants

presented the trial court with an array of evidence regarding

the extent of the agreements, communications, and other forms of

contact between the plaintiffs, the non-resident defendants, and

the Krispy Kreme defendants. Although certain pieces of

evidence were disputed by the parties, the trial court was the

appropriate entity to consider the weight and credibility of

such evidence. Notwithstanding that contrary findings could

have been made, as we have noted previously, the findings made -13- by the trial court to support its ultimate conclusion are

supported by competent evidence in the record. Accordingly,

plaintiffs’ general contention that the trial court erred in not

finding personal jurisdiction as to the non-resident defendants

because both parties presented disputed evidence is without

merit. Therefore, we affirm the trial court’s order granting the

non-resident defendants’ motion to dismiss for lack of personal

jurisdiction.

Affirmed.

Judges CALABRIA and GEER concur.

Report per Rule 30(e).