IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA18-1308
Filed: 4 August 2020
Wake County, No. 18 CVS 3241
SHEARON FARMS TOWNHOME OWNERS ASSOCIATION II, INC., Plaintiff,
v.
SHEARON FARMS DEVELOPMENT, LLC; DAN RYAN BUILDERS–NORTH CAROLINA, LLC; ABBINGTON HEIGHTS, LLC; JELD-WEN, INC., and JELD- WEN HOLDING, INC., Defendants.
DAN RYAN BUILDERS–NORTH CAROLINA, LLC, Defendant/Third-Party Plaintiff, v.
JP&M ENTERPRISE, INC.; JP&M ENTERPRISE, INC. d/b/a ACE VINYL SIDING; ALPHA OMEGA CONSTRUCTION GROUP OF RALEIGH, INC.; ALPHA OMEGA CONSTRUCTION GROUP OF RALEIGH, INC. d/b/a ALPHA OMEGA CONST. GROUP OF RALEIGH; BMC EAST, LLC; BMC EAST, LLC d/b/a BMC; BMC EAST, LLC f/k/a STOCK BUILDING SUPPLY, LLC d/b/a STOCK BUILDING SUPPLY; BRINLEY’S GRADING SERVICE, INC.; BRINLEY’S GRADING SERVICE, INC. d/b/a BRINLEY’S GRADING SERVICE; GMA SUPPLY INC.; GMA SUPPLY INC. f/k/a GMA SUPPLY LLC d/b/a GMA SUPPLY; LOCKLEAR ROOFING INC.; LOCKLEAR INC.; LOCKLEAR ROOFING INC. d/b/a LOCKLEAR ROOFING; LOCKLEAR INC. d/b/a LOCKLEAR ROOFING; TAYLOR’S LANDSCAPING, INC.; TAYLOR’S LANDSCAPING, INC. d/b/a TAYLOR’S LANDSCAPING INC., Third- Party Defendants.
Appeal by plaintiff from order entered 24 September 2018 by Judge Allen
Baddour in Wake County Superior Court. Heard in the Court of Appeals 7 August
2019.
Jordan Price Wall Gray Jones & Carlton PLLC, by Brian S. Edlin and H. Weldon Jones, III, for plaintiff-appellant. SHEARON FARMS TOWNHOME OWNERS ASS’N II, INC. V. SHEARON FARMS DEV., LLC
Opinion of the Court
Shumaker, Loop & Kendrick, LLP, by Frederick M. Thurman, Jr. and William H. Sturges, and The Sieving Law Firm, A.P.C., by Richard N. Sieving, for defendant-appellee JELD-WEN, Inc.
DIETZ, Judge.
Plaintiff Shearon Farms Townhome Owners Association II, Inc. is a
homeowners’ association in Wake County. In early 2018, some members of the
association noticed that the siding of their homes was warped and distorted and
looked as if it were melting.
After investigating the damage, the association brought tort and warranty
claims against JELD-WEN, Inc., a window manufacturer, alleging that the damage
was the result of defective windows installed in the townhomes. The trial court
dismissed the association’s claims against JELD-WEN after concluding that the
association lacked standing to bring those claims either on its own behalf or on behalf
of its members.
We affirm the dismissal for lack of standing. As explained below, this action
seeks monetary recovery for damage to the exterior surfaces of townhomes owned by
individual members of the association. Under settled standing precedent, those
claims for individual money damages cannot be pursued by a homeowners’
association under theories of associational standing.
Moreover, although the organizational declaration for the association obligates
it to maintain and repair the exterior siding of those townhomes, that contractual
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obligation applies only to upkeep resulting from “normal usage and weathering.” The
declaration expressly excludes maintenance or repair resulting from the sort of
unexpected damage alleged in this complaint.
Accordingly, the trial court properly determined that the association lacked
standing to pursue the claims alleged against JELD-WEN because it had neither
associational standing nor individual standing sufficient to confer a justiciable stake
in the controversy. We therefore affirm the trial court’s order.
Facts and Procedural History
Shearon Farms Townhome Owners Association II, Inc.1 is a non-profit
homeowners’ association incorporated in North Carolina. The association’s members
own townhomes in a community known as “Shearon Farms Townhomes II” within
the Shearon Farms neighborhood in Wake County.
In early 2018, several townhome owners in the neighborhood reported to the
association that the exterior siding on their townhomes was severely damaged, as if
it had melted. The association investigated and determined that this damage was
“due to abnormal reflections of extremely high heat from the windows on townhome
units.” In May 2018, Shearon Farms filed this action against various parties involved
in the construction of the townhomes and against JELD-WEN, Inc., the manufacturer
of the windows installed in the townhomes.
1 For ease of reference, we refer to Plaintiff Shearon Farms Townhome Owners Association II, Inc. as “Shearon Farms.”
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JELD-WEN moved to dismiss the claims against it for lack of standing. After
a hearing, the trial court granted the motion, finding a “lack of standing to pursue
claims against Defendant JELD-WEN, INC. because Plaintiff is not legally entitled
to assert claims pertaining to the windows and because the Plaintiff is not legally
entitled to assert claims for warped, distorted, or melted siding.” Shearon Farms
timely appealed.
Analysis
I. Appealability
Before we address the merits of this appeal, we must address a challenge to
this Court’s jurisdiction. Shearon Farms concedes that the challenged order is not a
final judgment because the order dismissed its claims against JELD-WEN but not its
claims against the other defendants named in the action. See Pratt v. Staton, 147
N.C. App. 771, 772–73, 556 S.E.2d 621, 623 (2001).
“Ordinarily, this Court hears appeals only after entry of a final judgment that
leaves nothing further to be done in the trial court.” Crite v. Bussey, 239 N.C. App.
19, 20, 767 S.E.2d 434, 435 (2015). “The reason for this rule is to prevent fragmentary,
premature and unnecessary appeals by permitting the trial court to bring the case to
final judgment before it is presented to the appellate courts.” Larsen v. Black
Diamond French Truffles, Inc., 241 N.C. App. 74, 76, 772 S.E.2d 93, 95 (2015).
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There is a statutory exception to this general rule when an interlocutory order
deprives the appellant of a substantial right which would be jeopardized absent
immediate appellate review. Jeffreys v. Raleigh Oaks Joint Venture, 115 N.C. App.
377, 379, 444 S.E.2d 252, 253 (1994); N.C. Gen. Stat §§ 1-277(a), 7A-27(b). Shearon
Farms argues that the challenged order is immediately appealable under this
“substantial rights doctrine” because there is a risk of inconsistent verdicts.
The inconsistent verdicts doctrine is a subset of the substantial rights doctrine
and one that is often misunderstood. In general, there is no right to have all related
claims decided in one proceeding. J & B Slurry Seal Co. v. Mid-South Aviation, Inc.,
88 N.C. App. 1, 7, 362 S.E.2d 812, 816 (1987). Thus, the risk that a litigant may be
forced to endure two trials, rather than one, does not by itself implicate a substantial
right, even if those separate trials involve related issues or stem from the same
underlying event.
But things are different when there is a risk of “inconsistent verdicts,” meaning
“a risk that different fact-finders would reach irreconcilable results when examining
the same factual issues a second time.” Denney v. Wardson Constr., Inc., 264 N.C.
App. 15, 19, 824 S.E.2d 436, 439 (2019). Importantly, not all claims involving the
“same factual issues” create a risk of irreconcilable results when tried separately. For
example, a fact may be relevant to two separate claims for two different reasons. In
that circumstance, there is no substantial right to have those fact issues decided
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together. See, e.g., Hamilton v. Mortg. Info. Servs., Inc., 212 N.C. App. 73, 83–84, 711
S.E.2d 185, 192–93 (2011). But when the same fact is determinative of the same issue
in multiple claims, there is a substantial right to have those factual issues determined
by the same jury to avoid the risk that two juries decide that fact differently, leading
to two judgments from the same initial lawsuit with incompatible outcomes.
Davidson v. Knauff Ins. Agency, Inc., 93 N.C. App. 20, 25–26, 376 S.E.2d 488, 491–92
(1989).
Here, Shearon Farms brought claims against both JELD-WEN and a group of
defendants involved in the construction of the townhomes. Many of the claims against
the construction defendants are unrelated to JELD-WEN’s windows. But some of the
claims have overlapping factual allegations. Specifically, at least some claims against
both sets of defendants involve questions of whether the windows are defective and
caused the alleged damage to the siding of neighboring homes. The resolution of those
fact questions is potentially determinative of both the claims against JELD-WEN and
certain claims against other defendants that are still pending in the trial court. Thus,
we agree with Shearon Farms that it has met its burden to show that there is a risk
of inconsistent verdicts. Accordingly, we hold that the challenged order affects a
substantial right and is immediately appealable.
II. Standing
Shearon Farms challenges the trial court’s grant of a motion to dismiss for lack
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of standing. After reviewing the complaint and the recorded declaration attached to
it, the trial court concluded as a matter of law that Shearon Farms lacked standing
to pursue the negligence and warranty claims asserted against JELD-WEN:
Defendant JELD-WEN, INC.’s Motion to Dismiss Plaintiff’s Second Amended Complaint is GRANTED as a consequence of Plaintiff’s lack of standing to pursue claims against Defendant JELD-WEN, INC. because Plaintiff is not legally entitled to assert claims pertaining to the windows and because the Plaintiff is not legally entitled to assert claims for warped, distorted, or melted siding.
At oral argument, Shearon Farms conceded that it understood the ruling to be
one based on lack of standing. But in its briefing, Shearon Farms repeatedly refers to
the standard for review of a Rule 12(b)(6) motion to dismiss for failure to state a claim
on which relief can be granted. This is understandable because JELD-WEN brought
its motion under Rule 12(b)(6) of the Rules of Civil Procedure, although it expressly
asserted that the basis for the motion was that “Plaintiff lacks standing.”
Standing is a question of “subject matter jurisdiction.” Neuse River Found., Inc.
v. Smithfield Foods, Inc., 155 N.C. App. 110, 113, 574 S.E.2d 48, 51 (2002). As a result,
a “standing argument implicates Rule 12(b)(1)” of the Rules of Civil Procedure, which
governs dismissals based on lack of subject matter jurisdiction. Id. at 113–14, 574
S.E.2d at 51. But, to be fair, this Court also has asserted in several cases that “lack
of standing may be challenged by motion to dismiss for failure to state a claim upon
which relief may be granted,” creating confusion in our caselaw concerning the
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category of Rule 12 under which these claims should be pursued. See SRS Arlington
Offices 1, LLC v. Arlington Condo. Owners Ass’n, Inc., 234 N.C. App. 541, 545, 760
S.E.2d 330, 334 (2014).
Ultimately, this is irrelevant because this Court has held that a Rule 12 motion
“is properly treated according to its substance rather than its label” and specifically
has treated a Rule 12(b)(6) motion asserting jurisdictional issues as one brought
under Rule 12(b)(1). Williams v. New Hanover Cty. Bd. of Educ., 104 N.C. App. 425,
428, 409 S.E.2d 753, 755 (1991). Accordingly, in our analysis we treat the trial court’s
ruling as a decision on standing (as the court expressly stated in its order) and not as
a dismissal on the merits for failure to state a claim on which relief can be granted.
We begin with an overview of our State’s standing doctrine. “Standing refers
to whether a party has a sufficient stake in an otherwise justiciable controversy such
that he or she may properly seek adjudication of the matter.” Fed. Point Yacht Club
Ass’n, Inc. v. Moore, 233 N.C. App. 298, 303, 758 S.E.2d 1, 4 (2014). “Standing is a
necessary prerequisite to a court’s proper exercise of subject matter jurisdiction.”
Neuse River Found., 155 N.C. App. at 113, 574 S.E.2d at 51.
Unlike the federal courts, our standing doctrine is not drawn from a
constitutional “case or controversy” requirement. Id. at 114, 574 S.E.2d at 51–52.
Instead, North Carolina’s standing doctrine is grounded in the notion that a plaintiff
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must have suffered some injury sufficient to confer a genuine stake in a justiciable
legal dispute:
The rationale of the standing rule is that only one with a genuine grievance . . . can be trusted to battle the issue. The gist of the question of standing is whether the party seeking relief has alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentations of issues.
Mangum v. Raleigh Bd. of Adjustment, 362 N.C. 640, 642, 669 S.E.2d 279, 282 (2008)
(brackets omitted).
As with other issues of subject matter jurisdiction, standing is a question of
law. Fuller v. Easley, 145 N.C. App. 391, 395, 553 S.E.2d 43, 46 (2001). Where, as
here, the trial court decided the standing question without making jurisdictional
findings of fact, we review the legal question of standing de novo based on the record
before the trial court. Neuse River Found., 155 N.C. App. at 114, 574 S.E.2d at 51.
A. Associational standing of Shearon Farms
Shearon Farms first argues that it has standing under “the test articulated in
Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 97 S.Ct.
2434, 53 L.Ed.2d 383 (1977).” The principle articulated by the U.S. Supreme Court in
Hunt, often referred to as “associational standing,” confers standing on an association
to bring suit on behalf of its members. Our Supreme Court adopted this federal test
for use in North Carolina’s standing doctrine. See River Birch Assocs. v. City of
Raleigh, 326 N.C. 100, 129–30, 388 S.E.2d 538, 555 (1990). As the Supreme Court
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explained in River Birch, the analysis of an associational standing claim involves
three factors:
[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
Id. at 130, 388 S.E.2d at 555.
The third factor of this test ordinarily is satisfied only when the association
seeks declaratory or injunctive relief. This is so because “[w]hen an organization
seeks declaratory or injunctive relief on behalf of its members, it can reasonably be
supposed that the remedy, if granted, will inure to the benefit of those members of
the association actually injured.” Id.
By contrast, this third factor ordinarily cannot be satisfied “where an
association seeks to recover damages on behalf of its members” because individual
damage claims by their nature are “not common to the entire membership, nor shared
by all in equal degree.” Id. Thus, in River Birch, the Supreme Court rejected a
homeowners’ association’s claims for fraud and unfair trade practices on behalf of its
members because those members did not share “the injury in equal degree” but
instead had varying damages depending on how the alleged fraud and deceptive
practices affected their property. Id. at 130–31, 388 S.E.2d at 555–56.
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The same is true here. The association concedes that not all townhomes in the
community suffered damage and that the damages to individual homes are not equal
in degree. Thus, as with the Supreme Court in River Birch, “we cannot conclude that
the damage claims are common to the entire membership.” Id. at 130, 388 S.E.2d at
555.
But Shearon Farms argues that this case is distinguishable because the
association is contractually obligated to repair the damage allegedly caused by JELD-
WEN’s windows and to then spread the costs of those repairs equally among the
members of the association through assessments. Were that true, this would present
a more difficult question of associational standing. But Shearon Farms is not
contractually obligated to repair the damage to individual homeowners’ property
alleged in the complaint. The recorded declaration under which Shearon Farms
contends that this contractual duty arises (and which Shearon Farms attached to its
complaint) refutes this argument.
To be sure, as Shearon Farms contends, Article VIII of the declaration, in a
section titled “Exterior Maintenance,” imposes a contractual obligation on Shearon
Farms to maintain and repair the exterior building surfaces of the individual
townhomes:
Section 1. Exterior Maintenance by Association. In addition to maintenance of the Townhome Common Elements, the Association shall provide exterior maintenance upon each Living Unit which is subject to
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assessment hereunder, as follows: paint, repair, replace and care for all roofs, gutters, downspouts, exterior building surfaces, trees, shrubs, grass, walks, mailboxes, fences installed by Declarant or approved by the Association, exterior post lights (excluding electricity therefor), and other exterior improvements.
(Emphasis added). But Article VIII of the declaration also includes another section
that further defines the type of maintenance for which Shearon Farms is responsible
and expressly excludes damages not caused by “normal usage and weathering”:
Section 4. Casualty Loss Not Included. Maintenance and repairs under this Article arise from normal usage and weathering and do not include maintenance and repairs made necessary by fire or other casualty or damage.
(Emphasis added).
We interpret this language in the declaration under ordinary contract
principles subject only to an additional rule that we must strictly construe the
declaration “in favor of the free use of land whenever strict construction does not
contradict the plain and obvious purpose of the contracting parties.” Armstrong v.
Ledges Homeowners Ass’n, Inc., 360 N.C. 547, 555, 633 S.E.2d 78, 85 (2006). Applying
ordinary contract interpretation principles, the intent of this provision is clear and
unambiguous: Shearon Farms is responsible for maintenance and repairs due to
expected usage and weathering, but not for maintenance or repairs caused by
unexpected damage, such as a fire.
We reach this interpretation by examining the plain language of the provision,
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beginning with the phrase “normal usage and weathering.” The plain meaning of the
word “normal” in this context means “regular, usual.” Normal, Oxford English
Dictionary (2nd ed. 1989). Thus, this first clause in Article VIII, Section 4 obligates
the association to make repairs expected to occur through deterioration over time.
The second clause of Article VIII, Section 4 contrasts with the first by excluding
“maintenance and repairs made necessary by fire or other casualty or damage.” These
three terms—“fire,” “casualty,” and “damage”—all carry with them a meaning that
indicates they are not normal and are not events that one would expect to occur
simply given the passage of time. See, e.g., Fire, Oxford English Dictionary (2nd ed.
1989); Casualty, Oxford English Dictionary (2nd ed. 1989); Casualty, Black’s Law
Dictionary (11th ed. 2019); Damage, Oxford English Dictionary (2nd ed. 1989);
Damage, Merriam-Webster’s Collegiate Dictionary (11th ed. 2003). Thus, these two
clauses draw a distinction between maintenance stemming from normal, expected
“usage and weathering,” and maintenance stemming from unexpected events that
damage the property.
Here, the complaint does not allege any damage resulting from normal usage
and weathering. The exterior surface damage described in the complaint is “melting”
siding that was “severely damaged due to abnormal reflections of extremely high heat
from the windows on townhome units.” (Emphasis added). The claims against JELD-
WEN seek recovery for these “abnormal” damages through various tort and warranty
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theories. Thus, under the plain language of the declaration, the association is not
obligated by contract to repair this alleged damage, which is not due to normal usage
or weathering.
Shearon Farms contends that we should ignore this plain language and instead
interpret the provision to exclude only maintenance and repair costs that would be
covered by the affected homeowners’ standard property insurance policies. To support
this argument, the association points to the phrase “casualty loss” in the subtitle of
Article VIII, Section 4 and then to a separate section of the declaration that requires
homeowners to maintain “casualty” insurance covering fire damage and other similar
hazards. The association contends that, because “[d]efects from workmanship are not
among those perils typically covered” by a standard property insurance policy, this
Court should read these two separate provisions in pari materia and interpret Article
VIII, Section 4 as excluding only property damage that would be covered by standard
property insurance policies and accompanying endorsements.
This argument fails for two reasons. First, there are countless, simple ways to
draft a provision that would exclude from the association’s maintenance obligations
any damage covered by homeowners’ insurance policies. That is not what the plain,
unambiguous language of Article VIII, Section 4 states. Rather than distinguishing
between insured and uninsured damage, Article VIII distinguishes between expected
maintenance and repairs—those resulting from “normal usage and weathering”—and
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unexpected maintenance and repairs resulting from “fire or other casualty or
damage.” We must give meaning to this unambiguous language. Hodgin v. Brighton,
196 N.C. App. 126, 128–29, 674 S.E.2d 444, 446 (2009).
Second, the phrase “casualty loss” is not one used exclusively in the insurance
context. For example, it is generally understood in the tax context to mean “the total
or partial destruction of an asset resulting from an unexpected or unusual event, such
as an automobile accident or a tornado.” Loss, Black’s Law Dictionary (11th ed. 2019)
(emphasis added). And, more importantly, it has a meaning in ordinary English
usage: a loss due to a “serious accident” or other “unfortunate occurrence.” Casualty,
Oxford English Dictionary (2nd ed. 1989). Nothing in the text or structure of Article
VIII indicates that we should apply special meanings exclusive to the insurance field,
rather than applying the plain meaning of the chosen words.
Moreover, the association’s argument downplays the particular phrasing of
Article VIII, which not only fails to mention insurance but also is not limited to the
narrow definition of “casualty loss” that may be found in many homeowners’
insurance policies. Instead, Article VIII broadly excludes from the association’s
maintenance obligations all “maintenance and repairs made necessary by fire or
other casualty or damage.” (Emphasis added). This phrasing indicates that casualty
and damage are not entirely coextensive and that the drafter included both terms to
achieve the desired scope of the provision. The association’s interpretation of that
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provision would read the phrase “or damage” out of the clause, limiting it solely to
“fire” and to “casualty” losses as that term is understood in the property insurance
context. Again, this runs counter to settled principles of contract interpretation,
which require us to give meaning to the phrase “or damage.” Hodgin, 196 N.C. App.
at 128–29, 674 S.E.2d at 446. Accordingly, we reject Shearon Farms’ argument that
Article VIII, Section 4 is limited to losses covered by property insurance.
Finally, the Supreme Court also made a separate observation about the
standing of the homeowners’ association in River Birch that is equally applicable
here: the Court rejected the use of associational standing because it could deprive
individual members of other legal remedies that may be available to them. 326 N.C.
at 131, 388 S.E.2d at 556.
That concern also is present in this case. Homeowners whose siding is damaged
by the windows in their neighbors’ homes may have other claims beyond those
asserted in this action—most notably, potential claims against the neighbors whose
windows are allegedly causing the damage. But the association, which represents all
its members, cannot “be trusted to battle” that dispute. Mangum, 362 N.C. at 642,
669 S.E.2d at 282. Moreover, those claims—some members of the association suing
other members—unquestionably do not “inure to the benefit” of all association
members equally. River Birch, 326 N.C. at 555, 388 S.E.2d at 130. In a case in which
some neighbors contend that the windows of other neighbors’ homes are damaging
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their property, an association representing all those members simply does not have
the necessary stake in the outcome to ensure “concrete adverseness which sharpens
the presentations of issues.” Mangum, 362 N.C. at 642, 669 S.E.2d at 282. We
therefore hold that Shearon Farms has not met its burden to show that it can pursue
its claims based on the doctrine of associational standing described in Hunt and River
Birch.
B. Independent standing of Shearon Farms
Shearon Farms next argues that it has independent legal standing—separate
from principles of standing on behalf of its members—because the association itself
is “obligated to maintain the exterior surfaces of the townhomes” under the terms of
the declaration. As explained above, this argument is meritless. The declaration does
not require the association to maintain or repair the damage to the exterior surfaces
of the individual townhomes that is alleged in the complaint. Additionally, there are
no allegations in the complaint of damage caused by JELD-WEN to any property of
the association itself, such as the common elements of the community.2 Accordingly,
the trial court properly rejected Shearon Farms’ arguments concerning its
independent standing to pursue claims against JELD-WEN.
2 The complaint alleges damage to common elements but those damages are attributed to other defendants named in the complaint. Those defendants are not parties to this appeal, which concerns separate claims against JELD-WEN.
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C. Affidavit evidencing assignment of homeowners’ claims
Lastly, Shearon Farms argues that the trial court erred by declining to accept
an affidavit it submitted in opposition to JELD-WEN’s motion to dismiss. That
affidavit certified the accuracy of several assignments by homeowners who are
members of the association, transferring their rights to causes of action against
JELD-WEN to the association. Shearon Farms contends that this affidavit cured any
defects with respect to standing and that the trial court erred by not considering that
affidavit in its standing analysis.
We reject this argument. “Our courts have repeatedly held that standing is
measured at the time the pleadings are filed.” Quesinberry v. Quesinberry, 196 N.C.
App. 118, 123, 674 S.E.2d 775, 778 (2009). This is so, our Supreme Court has
explained, because of the “basic rule that the jurisdiction of a court depends upon the
state of affairs existing at the time it is invoked.” Sharpe v. Park Newspapers of
Lumberton, Inc., 317 N.C. 579, 585, 347 S.E.2d 25, 30 (1986). The affidavit that
Shearon Farms sought to introduce into the trial record documented assignments
that occurred after it commenced this lawsuit. The trial court properly declined to
consider those assignments because they were not relevant to the question of whether
the association had standing at the time it brought suit.
Conclusion
Plaintiff Shearon Farms Townhome Owners Association II, Inc. lacks standing
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to pursue the claims against JELD-WEN, Inc. asserted in the complaint. We therefore
affirm the trial court’s order dismissing those claims for lack of standing.
AFFIRMED.
Judges BRYANT and STROUD concur.
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