Mason v. Mason

2020 NCBC 42

• Court: North Carolina Business Court
• Decided: May 26, 2020
• Docket: 17-CVS-1724
• Status: Published

Opinion

Mason v. Mason, 2020 NCBC 42.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION ORANGE COUNTY 17 CVS 1724

JULIE SMITH MASON,

Plaintiff, ORDER AND OPINION ON DEFENDANT RICHARD S. v. MASON’S MOTION TO DISMISS AND, IN THE ALTERNATIVE, RICHARD S. MASON, SET ASIDE ORDERS Defendant.

1. THIS MATTER is before the Court on Defendant Richard S. Mason’s

Motion to Dismiss and, in the Alternative, Set Aside Orders (the “Motion”). (Def.

Richard S. Mason’s Mot. Dismiss, ECF No. 232 [“Mot.”].) The Motion seeks dismissal

pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure (the

“Rule(s)”) of Plaintiff Julie Smith Mason’s claims. In the alternative, the Motion

requests that the Court “[set] aside the scheduling orders and stipulations that assess

liability against Defendant Richard Mason[.]”

2. For the reasons set forth herein, the Court DENIES the Motion.

Sharpless McClearn Lester Duffy, PA, by Pamela S. Duffy and Molly Whitlatch, for Plaintiff Julie Smith Mason.

J.M. Cook, P.A., by J.M. Cook, for Defendant Richard S. Mason.

Robinson, Judge. I. FACTUAL AND PROCEDURAL BACKGROUND

3. The Court does not make findings of fact on a motion to dismiss for failure

to state a claim pursuant to Rule 12(b)(6), but only recites those portions of the factual

and procedural history relevant to its determination of the Motion.

4. Plaintiff Julie Smith Mason 1 (“Plaintiff”) is a citizen and resident of

Alamance County, North Carolina. (Compl. ¶ 1, ECF No. 4.)

5. Defendant Richard S. Mason (“Defendant”) is a citizen and resident of

Orange County, North Carolina. (Compl. ¶ 3.)

6. Plaintiff and Defendant owned the majority of shares of Multiflora

Greenhouses, Inc. (“MGI”). (Compl. ¶¶ 4, 8.) Plaintiff owned approximately 39.65%

of MGI’s outstanding shares, and Defendant owned approximately 39.63% of MGI’s

outstanding shares. (Compl. ¶ 8.) Plaintiff and Defendant acted as the sole directors

of MGI. (Compl. ¶ 9.)

7. At the time this action was initiated, Plaintiff and Defendant were married.

(Compl. ¶ 13.) On October 16, 2017, Plaintiff “left [the] marriage.” (Compl. ¶ 20.)

After Plaintiff left the marriage, Defendant took numerous actions to exclude

Plaintiff from MGI’s operations and otherwise harm MGI. (Compl. ¶¶ 23, 27–29, 41.)

1Julie Smith Mason, LLC is a limited liability company organized under the laws of the State of North Carolina, of which Plaintiff is the sole member. (Compl. ¶ 2.) Julie Smith Mason, LLC is a former plaintiff to this action, which asserted one claim for breach of contract against former defendant Multiflora Greenhouses, Inc (“MGI”). (Compl. ¶¶ 47–51.) However, on April 17, 2019, both Plaintiff and Julie Smith Mason, LLC dismissed all claims against MGI without prejudice. (ECF No. 137.) Therefore, Julie Smith Mason, LLC is no longer a plaintiff in this action and “Plaintiff” as used herein refers only to individual Plaintiff Julie Smith Mason. (See Compl. ¶ 1.) 8. Plaintiff initiated this action by filing the Complaint on December 13, 2017

(the “Complaint”), asserting a claim for dissolution against MGI and a claim for

breach of fiduciary duty against Defendant. (ECF No. 4.)

9. Defendant and MGI filed a joint Answer on January 22, 2018. (Answer,

ECF No. 8.) The Answer represented that as an alternative to dissolution of MGI,

Defendant is willing to purchase Plaintiff’s shares in MGI “at their fair value, in

accordance with such procedures as the Court may provide.” (Answer 2.)

10. The parties submitted their Case Management Report on February 21,

2018. (Case Management Report, ECF No. 9 [“CMR”].) The Case Management

Report represents that “[t]he Defendants have stipulated that Richard Mason intends

to purchase Julie Mason’s shares, such that the issue before the Court is one of

valuation only rather than disputing the right to dissolution.” (CMR ¶ 3.A.)

11. On May 23, 2018, the parties filed the Joint Stipulation Regarding Date of

Valuation of Multiflora Greenhouses, Inc., which provides that the parties

“STIPULATE AND AGREE that the date of valuation of [MGI] for the purpose of

establishing a value for Defendant Richard Mason’s buy out of Plaintiff Julie Mason’s

shares shall be the date of the parties’ marital separation, October 16, 2017.” (ECF

No. 43.)

12. On September 24, 2018, counsel for MGI filed the Suggestion of

Bankruptcy, notifying the Court that MGI filed a voluntary petition for relief under

Chapter 11 of the U.S. Bankruptcy Code. (ECF No. 97.) On February 11, 2019, the

Bankruptcy Court converted the case to a Chapter 7 bankruptcy case and appointed a trustee which ceased operations of MGI and began its liquidation. (Br. 4, ECF No.

233.)

13. Defendant filed the Motion and brief in support thereof on December 19,

2019. (ECF Nos. 232–233.) The Court held a hearing on the Motion on May 14, 2020

at which all parties were represented by counsel. 2 (See ECF No. 257.) The Motion is

ripe for resolution.

II. ANALYSIS

14. Defendant’s Motion comes more than two years after the initiation of this

action. (See ECF Nos. 4, 232.) The parties have filed formal stipulations and

representations with the Court since the filing of the Complaint that Defendant

agrees to purchase Plaintiff’s shares in MGI. (See ECF Nos. 4, 8–9, 43, 80, 115, 137,

155, 244.1.)

15. Notwithstanding these stipulations, Defendant moves pursuant to Rule

12(b)(6) to dismiss all of Plaintiff’s claims (which would result in termination of the

litigation upon resolution of Plaintiff’s Motion for Rule 11 Sanctions) and

alternatively requests that the Court set aside various stipulations and unidentified

orders in an attempt to evade his prior agreements and representations to the Court

regarding purchasing Plaintiff’s shares in MGI. (Br. 1.) For the reasons stated

herein, Defendant’s Motion should be DENIED.

2 At the hearing, the Court also heard arguments from counsel on Plaintiff’s Motion for Rule

11 Sanctions, (ECF No. 131), and Plaintiff’s Motion to Supplement Complaint, (ECF No. 244). However, this Court decides these Motions in separate, forthcoming orders. A. Motion to Dismiss

16. Rule 12(b) clearly provides that a motion for failure to state a claim upon

which relief can be granted “shall be made before pleading if a further pleading is

permitted.” N.C.G.S. § 1A-1, Rule 12(b) (emphasis added). “Therefore, under the

express language of Rule 12(b), a motion to dismiss for failure to state a claim must

be made before filing a responsive pleading.” Johnston v. Johnston Props., Inc., 2018

NCBC LEXIS 119, at *13 (N.C. Super. Ct. Nov. 15, 2018).

17. Defendant and MGI filed their joint Answer on January 22, 2018. (See ECF

No. 8.) The Answer asserts as a first defense “[t]he Defendants move to dismiss the

Plaintiffs’ Complaint pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil

Procedure on the grounds that the Plaintiffs’ Complaint fails to state a claim upon

which relief can be granted.” (Answer 1.) Pursuant to Rule 7.2 of the North Carolina

Business Court Rules (“BCR”), all motions “must be set out in a separate document.”

Therefore, Defendant’s Answer is not a proper motion under BCR 7.2. See New

Friendship Used Clothing Collection, LLC v. Katz, 2017 NCBC LEXIS 72, at *24 (N.C.

Super. Ct. Aug. 18, 2017). A proper motion for failure to state a claim was not before

this Court until the filing of the Motion, which occurred nearly two years after

Defendant filed his Answer. See id. at *24.

18. “[T]his Court’s holding in New Friendship is clear: a motion to dismiss for

failure to state a claim must be filed prior to an answer.” Johnston, 2018 NCBC

LEXIS 119, at *14. As such, Defendant’s Motion, to the extent it seeks dismissal of

Plaintiff’s claims pursuant to Rule 12(b)(6), is untimely. 19. Notably, in New Friendship this Court concluded that reading Rule 12(b)

and Rule 12(h) together, a post-answer Rule 12(b)(6) motion may be considered as a

Rule 12(c) motion for judgment on the pleadings. Id. at *25–26. Defendant’s Motion

comes nearly two years after the filing of his Answer, and Defendant does not request

that the Court consider the Motion under Rule 12(c). Under these factual

circumstances, the Court, in its discretion, declines to treat the Motion as a Rule 12(c)

motion. See Encompass Servs., PLLC v. Maser Consulting P.A., 2019 NCBC LEXIS

67, at *3 (N.C. Super. Ct. Nov. 5, 2019) (declining to treat an untimely Rule 12(b)(6)

motion as a 12(c) motion when the 12(b)(6) motion was filed two months after the

answer and the movant did not request that his motion be considered under Rule

12(c)).

20. For the foregoing reasons, the Court concludes that the Motion is untimely,

and it should therefore be DENIED to the extent that Defendant requests dismissal

of Plaintiff’s claims pursuant to Rule 12(b)(6).

B. Motion to Set Aside Orders

21. In the alternative, Defendant vaguely requests that the Court “[set] aside

the scheduling orders and stipulations that assess liability against Defendant

Richard Mason; and” that the Court set aside any holdings related to the valuation

of MGI stock. (Mot. 6; Br. 3.)

22. Defendant’s Motion fails to identify or cite to any specific court order that

assesses liability against Defendant as it pertains to purchasing MGI’s shares, and

the Court is unaware of any such order. Based upon the Court’s review of the record and consideration of the arguments made at the May 14, 2020 hearing, it is the

Court’s understanding that Defendant is bound to purchase Plaintiff’s MGI shares,

not by court order, but by express agreements and stipulations between the parties.

23. Therefore, to the extent that Defendant requests that the Court set aside

court orders, the Court DENIES the Motion, and for the reasons stated herein, the

Court also DENIES Defendant’s Motion to the extent that it requests the Court set

aside stipulations made by the parties.

24. “It is within the discretion of the court to set aside a stipulation of the

parties[.]” Estate of Carlsen v. Carlsen, 165 N.C. App. 674, 678, 599 S.E.2d 581, 584

(2004). “Application to set aside a stipulation must be seasonably made; delay in

asking for relief may defeat the right thereto.” Norfolk S.R. Co. v. Horton and R.R.

Co. v. Oakley, 3 N.C. App. 383, 389, 165 S.E.2d 6, 10 (1969). Proper justifications for

setting aside a stipulation include: misrepresentation or mistake as to material facts,

undue influence, collusion, duress, fraud, and inadvertence. Lowery v. Locklear

Constr., 132 N.C. App. 510, 514, 512 S.E.2d 477, 479 (1999).

25. Defendant now requests that the Court relieve him of any obligation to

purchase Plaintiff’s MGI’s shares nearly twenty-two months after the parties first

stipulated to litigate over the value of shares instead of dissolution and nearly

nineteen months after the parties stipulated to the relevant date for valuation. (See

ECF Nos. 9, 43.)

26. Defendant argues that due to a substantial change in circumstances since

the initiation of this action, specifically the conversion of MGI’s bankruptcy from Chapter 11 to Chapter 7 and the subsequent liquidation of MGI, requiring Defendant

to purchase Plaintiff’s MGI shares is inappropriate. (Br. 3–5.) Defendant further

argues that the Court “should not allow the Plaintiff to proceed with litigating over

the valuation of stock for a transfer that cannot occur.” (Br. 3.) The Court finds

Defendant’s argument unavailing.

27. Mere change in circumstances or the fact that at the time the stipulations

were made Defendant did not foresee MGI’s liquidation is insufficient to justify

setting aside any stipulation by the parties. See Moore v. Richard W. Farms, Inc.,

113 N.C. App. 137, 142, 437 S.E.2d 529, 532 (1993) (affirming that the plaintiffs were

bound by their stipulation to be bound by a survey, the results of which they did not

know at the time the stipulation was made).

28. When Defendant agreed to purchase Plaintiff’s shares and stipulated to the

date of valuation of the same, Defendant accepted the risk, and the potential benefit,

of the possible future fluctuation of the value of MGI’s shares. If the value of MGI’s

shares increased, Defendant stood to benefit; however, if the value of MGI’s shares

decreased, it would be to Defendant’s detriment. Regardless of the “substantial

change in circumstances” as described by Defendant, the Court declines to relieve

Defendant from the agreement he made, with the advice of counsel, at the inception

of this litigation.

29. In sum, Defendant’s request for relief is not seasonably made and

Defendant fails to establish any proper justification for setting aside the stipulations

made by the parties. See Lowery, 132 N.C. App. at 514, 512 S.E.2d at 479. Accordingly, the Court, in its discretion, DENIES Defendant’s Motion to set aside the

stipulations made by the parties in this litigation.

III. CONCLUSION

30. For the foregoing reasons, the Court hereby DENIES the Motion.

SO ORDERED, this the 26th day of May, 2020.

/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases