Case Title: Turner v. Hammocks Beach Corp.

Citation: 363 N.C. 555

Docket Number: 450A08

State: north-carolina

Court: North Carolina Supreme Court

Date: 2009-08-28T00:00:00Z

Document:
HARRIETT HURST TURNER and JOHN HENRY HURST v. THE HAMMOCKS BEACH
CORPORATION, NANCY SHARPE CAIRD, SETH DICKMAN SHARPE, SUSAN SPEAR
SHARPE, WILLIAM AUGUST SHARPE, NORTH CAROLINA STATE BOARD OF
EDUCATION, and ROY A. COOPER, III, in his capacity as Attorney
General of the State of North Carolina
No. 450A08 
FILED: 28 AUGUST 2009
1.
Appeal and Error–appealability–denial of motion to dimiss--collateral
estoppel
An appeal from the denial of a motion to dismiss involved a substantial right and
was immediately appealable where the opposing party raised collateral estoppel from a prior
settlement.
2.
Trusts–impractical purpose–termination–prior settlement–more than one
interpretation
The trial court properly denied defendants’ motion to dismiss an action arising
from the termination of a trust where the purpose of the trust had become impossible and a prior
consent judgment dealt with the distribution of assets.  The consent judgment is reasonably
susceptible to a reading that would preserve plaintiffs’ future interests, and collateral estoppel
does not bar litigation of the question of whether the consent judgment was intended to foreclose
all of plaintiffs’ rights in the land.
Appeal pursuant to N.C.G.S. § 7A-30(2) from the
decision of a divided panel of the Court of Appeals, 192 N.C.
App. ___, 664 S.E.2d 634 (2008), reversing an order denying 
defendant’s motion to dismiss entered on 23 August 2007 by Judge
R. Allen Baddour, Jr. in Superior Court, Wake County, and
remanding to the trial court with instructions to grant
defendant’s motion.  Heard in the Supreme Court on 25 February
2009.
The Francis Law Firm, PLLC, by Charles T. Francis, for
plaintiff-appellants.
Hunton & Williams LLP, by Frank E. Emory, Jr., for
defendant-appellee The Hammocks Beach Corporation. 
NEWBY, Justice.
-2-
This case presents two issues.  First we must determine
whether the trial court’s interlocutory order denying defendant’s
motion to dismiss is suitable for immediate appellate review.  If
that order is immediately appealable, we must then decide whether
the trial court erred in denying defendant’s motion to dismiss. 
We hold that the interlocutory order at issue affects a
substantial right of defendant, and we therefore affirm the Court
of Appeals’ conclusion that the order is immediately appealable. 
We further hold that the allegations of the complaint are
sufficient to state a claim upon which relief might be granted,
and thus the trial court properly denied the motion to dismiss.
The controversy at hand arises out of the creation of a
trust, which accompanied a real estate transaction that took
place in 1950.  Dr. William Sharpe owned 810 acres of property in
Onslow County known as “The Hammocks,” and he intended to devise
The Hammocks to his friends John and Gertrude Hurst.  Upon
learning of Dr. Sharpe’s intentions, Ms. Hurst, who had formerly
been a teacher in the then-racially-segregated public school
system, requested that Dr. Sharpe instead make a charitable gift
of the property for the benefit of African-American educators and
youth organizations.  In accordance with Ms. Hurst’s wishes, Dr.
Sharpe deeded The Hammocks to the nonprofit Hammocks Beach
Corporation “in trust for recreational and educational purposes
for the use and benefit of the members of The North Carolina
Teachers Association, Inc. and such others as are provided for in
the Charter of the Hammocks Beach Corporation, Inc.”  That
charter stated that the corporation’s purpose was to administer
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The Hammocks “primarily for the teachers in public and private
elementary, secondary and collegiate institutions for Negroes in
North Carolina . . . and for such other groups as are hereinafter
set forth.”
Anticipating that circumstances might arise making it
impossible or impracticable to use The Hammocks for the trust
purposes, the 1950 deed stated:
IT IS FURTHER PROVIDED AND DIRECTED by
the said grantors, parties of the first part,
that if at any time in the future it becomes
impossible or impractical to use said
property and land for the use as herein
specified and if such impossibility or
impracticability shall have been declared to
exist by a vote of the Majority of the
directors of the Hammocks Beach Corporation,
Inc., the property conveyed herein may be
transferred to The North Carolina State Board
of Education, to be held in trust for the
purpose herein set forth, and if the North
Carolina State Board of Education shall
refuse to accept such property for the
purpose of continuing the trust herein
declared, all of the property herein conveyed
shall be deeded by said Hammocks Beach
Corporation, Inc. to Dr. William Sharpe, his
heirs and descendants and to John Hurst and
Gertrude Hurst, their heirs and descendants;
The Hurst family shall have the mainland
property and the Sharpe family shall have the
beach property . . . .
As of 1987, the North Carolina Attorney General had advised that
the State Board of Education had “no interest in succeeding
Hammocks Beach Corporation as trustee and would not agree to do
so.”  The Attorney General and the State Board of Education thus
moved to be dismissed as parties from the present action, and the
trial court entered an order granting that motion on 24 August
2007.
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In 1986 the Hammocks Beach Corporation filed a
declaratory judgment action seeking to quiet title to The
Hammocks and ensure fulfillment of the purposes of the trust
created by Dr. Sharpe.  According to the complaint in the instant
case, in response to the 1986 request for declaratory relief,
the Sharpe and Hurst heirs contended that
fulfillment of the trust terms had become
impossible or impracticable, that The
Hammocks Beach Corporation had acted
capriciously and contrary to the intent of
the settlor in not declaring its recognition
of such, and that the court should declare
the trust terminated and either mandate a
conveyance of all of the property to the
Sharpe and Hurst families or adjudicate title
in their names.
Prior to trial in the 1986 action, the parties reached a
settlement and signed a consent judgment, which was entered by
the trial court on 29 October 1987 (“the 1987 consent judgment”
or “the consent judgment”).
Plaintiffs brought this action in December 2006,
alleging that “fulfillment of the trust terms has become
impossible or impracticable” and seeking an accounting,
termination of the trust, and damages for breach of fiduciary
duty.  On 5 July 2007, before any discovery in the case,
defendant filed a motion under N.C.G.S. § 1A-1, Rule 12(b)(6) to
dismiss for failure to state a claim upon which relief can be
granted, asserting that the issue of plaintiffs’ rights to the
property now in question (a portion of The Hammocks) had already
been determined by the 1987 consent judgment and that
relitigation is barred by collateral estoppel.  The trial court
entered an order denying defendant’s motion to dismiss on 23
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August 2007.  Defendant sought review, and the Court of Appeals
concluded the order was immediately appealable.  The Court of
Appeals went on to reverse the trial court’s order, holding that
defendant’s motion to dismiss should have been granted.
[1] We begin our review by determining whether the
interlocutory order denying defendant’s motion to dismiss is
immediately appealable.  “Interlocutory orders are those made
during the pendency of an action which do not dispose of the
case, but instead leave it for further action by the trial court
in order to settle and determine the entire controversy.” 
Carriker v. Carriker, 350 N.C. 71, 73, 511 S.E.2d 2, 4 (1999)
(citing Veazey v. City of Durham, 231 N.C. 357, 362, 57 S.E.2d
377, 381 (1950)).  As a general rule, interlocutory orders are
not immediately appealable.  Davis v. Davis, 360 N.C. 518, 524,
631 S.E.2d 114, 119 (2006).  However, “immediate appeal of
interlocutory orders and judgments is available in at least two
instances”:  when the trial court certifies, pursuant to N.C.G.S.
§ 1A-1, Rule 54(b), that there is no just reason for delay of the
appeal; and when the interlocutory order affects a substantial
right under N.C.G.S. §§ 1-277(a) and 7A-27(d)(1).  Sharpe v.
Worland, 351 N.C. 159, 161-62, 522 S.E.2d 577, 579 (1999).
The trial court did not certify for immediate review
its order denying defendant’s motion to dismiss.  Defendant’s
argument in favor of appealability is that the denial of a motion
to dismiss a claim for relief affects a substantial right when
the motion to dismiss makes a colorable assertion that the claim
is barred under the doctrine of collateral estoppel.  We agree. 
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Under the collateral estoppel doctrine, “parties and parties in
privity with them . . . are precluded from retrying fully
litigated issues that were decided in any prior determination and
were necessary to the prior determination.”  King v. Grindstaff,
284 N.C. 348, 356, 200 S.E.2d 799, 805 (1973) (citations
omitted).  The doctrine is designed to prevent repetitious
lawsuits, and parties have a substantial right to avoid
litigating issues that have already been determined by a final
judgment.  We therefore hold that a substantial right was
affected by the trial court’s denial of defendant’s motion to
dismiss, and we proceed to the merits of defendant’s appeal.
[2] The remaining issue before this Court is whether
plaintiffs’ claims for relief are, in fact, barred under the
collateral estoppel doctrine.  To successfully assert collateral
estoppel as a bar to plaintiffs’ claims, defendant
would need to show that the earlier suit
resulted in a final judgment on the merits,
that the issue in question was identical to
an issue actually litigated and necessary to
the judgment, and that both [defendant] and
[plaintiffs] were either parties to the
earlier suit or were in privity with parties.
Thomas M. McInnis & Assocs. v. Hall, 318 N.C. 421, 429, 349
S.E.2d 552, 557 (1986) (citing King, 284 N.C. at 357-60, 200
S.E.2d at 805-08).
We begin our consideration of the merits of defendant’s
collateral estoppel claim by determining whether the issue of
plaintiffs’ remaining rights in the contested land is identical
to an issue already decided by the 1987 consent judgment.  If the
consent judgment fully extinguished all of plaintiffs’ rights in
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the land, then collateral estoppel bars litigation of whether
plaintiffs retain any rights in the property.  We emphasize at
the outset that we are reviewing the trial court’s ruling on a
motion to dismiss under Rule 12(b)(6).  When ruling on such a
motion to dismiss, the trial court is to treat the plaintiff’s
factual allegations as true.  See, e.g., State ex rel. Cooper v.
Ridgeway Brands Mfg., LLC, 362 N.C. 431, 442, 666 S.E.2d 107, 114
(2008) (citing Stein v. Asheville City Bd. of Educ., 360 N.C.
321, 325, 626 S.E.2d 263, 266 (2006)).  Furthermore, “the
complaint is to be liberally construed, and the trial court
should not dismiss the complaint unless it appears beyond doubt
that the plaintiff could prove no set of facts in support of his
claim which would entitle him to relief.”  Id. at 444, 666 S.E.2d
at 116 (internal quotation marks omitted) (quoting Meyer v.
Walls, 347 N.C. 97, 111-12, 489 S.E.2d 880, 888 (1997) (citation
and brackets omitted)).  Thus, in determining whether the consent
judgment foreclosed all of plaintiffs’ rights in the land at
issue here, we view the forecast of evidence in the light most
favorable to plaintiffs, giving them the benefit of every
reasonable inference that can be drawn therefrom.  See Gossett v.
Metro. Life Ins. Co., 208 N.C. 152, 157, 179 S.E. 438, 441
(1935).
“A consent judgment is a court-approved contract
subject to the rules of contract interpretation.”  Walton v. City
of Raleigh, 342 N.C. 879, 881, 467 S.E.2d 410, 411 (1996) (citing
Yount v. Lowe, 288 N.C. 90, 96, 215 S.E.2d 563, 567 (1975)).
[T]he goal of construction is to arrive at
the intent of the parties when the [contract]
-8-
was [executed]. . . .  The various terms of
the [contract] are to be harmoniously
construed, and if possible, every word and
every provision is to be given effect. . . . 
[I]f the meaning of the [contract] is clear
and only one reasonable interpretation
exists, the courts must enforce the contract
as written . . . .
Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500, 505-06, 246
S.E.2d 773, 777 (1978).  However, “if the writing itself leaves
it doubtful or uncertain as to what the agreement was, parol
evidence is competent, not to contradict, but to show and make
certain what was the real agreement between the parties.”  Root
v. Allstate Ins. Co., 272 N.C. 580, 590, 158 S.E.2d 829, 837
(1968) (internal quotation marks omitted) (quoting Hite v.
Aydlett, 192 N.C. 166, 170, 134 S.E. 419, 421 (1926) (citation
omitted)).  Viewing the evidence in the light most favorable to
plaintiffs, we must determine whether the 1987 consent judgment,
on its face, can only reasonably be interpreted as fully
extinguishing plaintiffs’ rights in the land at issue.
As the trial court summarized in the 1987 consent
judgment, the parties to the 1986 declaratory judgment action
agreed that “Hammocks Beach Corporation as trustee would hold
title to an appropriate portion of The Hammocks free of any
claims of the Sharpes and Hursts and with broader administrative
powers, with the remainder of said property being vested in the
Sharpe and Hurst defendants.”  The land now at issue is the
“appropriate portion of The Hammocks” to which defendant holds
title under the consent judgment, and defendant argues that the
consent judgment fully expunged all of plaintiffs’ rights in that
land.  Defendant relies primarily on the consent judgment’s
-9-
statement that the property vested in the Hammocks Beach
Corporation “shall be free and clear of any rights of the heirs
of Dr. William Sharpe or of Gertrude Hurst or of the heirs of
John and Gertrude Hurst.”  (Emphasis added.)  If this were the
consent judgment’s only provision relevant to the extent of the
parties’ interest in the land now in question, we would agree
with defendant that plaintiffs’ future interests were
extinguished.  However, the consent judgment contains additional
language that bears on the issue, and we must strive to give
effect to “every word and every provision.”  Woods, 295 N.C. at
506, 246 S.E.2d at 777.
Most notably, the consent judgment consistently refers
to defendant as “Hammocks Beach Corporation, trustee,” and
declares that defendant holds title to the property now at issue
“subject to the trust terms set forth in the . . . deed dated
August 10, 1950 . . . and in Agreement dated September 6, 1950.” 
In subjecting defendant’s title to the terms of the trust, the
consent judgment does not exclude the trust terms regarding
impossibility or impracticability, and those terms unquestionably
grant future interests to “Dr. William Sharpe, his heirs and
descendants and to John Hurst and Gertrude Hurst, their heirs and
descendants.”  Nor does the consent judgment contain language
that clearly supersedes the terms of the original trust in the
event of impossibility or impracticability.
We also note that the Sharpe and Hurst families’ rights
in the land at issue under the 1950 deed and corresponding
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agreement were apparently not limited to future interests. 
According to the complaint in the instant case:
The terms of the trust Deed from Dr.
Sharpe to The Hammocks Beach Corporation, as
amplified by the simultaneously executed
Agreement, subjected the trust property to
numerous rights of use and possession in the
Sharpe and Hurst families, including the
right to cultivate, to quarry, to raise
livestock, to travel over the land incident
to taking fin fish and shellfish in adjacent
waters, and to reside there.
Although “any” is a strong word, in light of the other
peculiarities of the 1987 consent judgment, the provision that
the property vested in defendant “shall be free and clear of any
rights of the heirs of Dr. William Sharpe or of Gertrude Hurst or
of the heirs of John and Gertrude Hurst” may reasonably be read
as intending only to extinguish plaintiffs’ present rights of use
and possession.  (Emphasis added.)
Finally, as did the Court of Appeals, we observe with
curiosity defendant’s ability under the consent judgment to
encumber the property now at issue and to sell “a portion
thereof.”  It may seem inconsistent with plaintiffs’ retention of
a future interest in the land in question to allow defendant,
without plaintiffs’ consent, to convey interests in that land to
third parties who would not be bound by the trust terms.  We also
point out, however, that the consent judgment only allows
defendant to encumber or sell the property with the court’s
approval and only “for the purpose of generating funds for use in
furtherance of the terms of the trust.”  Indeed, whereas the 1987
consent judgment vests the Sharpe and Hurst descendants “with fee
simple title” to the portions of land they received under that
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judgment, the property now at issue is “vested in Hammocks Beach
Corporation as trustee.”  (Emphasis added.)  Defendant’s limited
ability to encumber and sell the land, therefore, like the rest
of the consent judgment, has ambiguous implications with respect
to whether plaintiffs retain future interests in the land.
In summary, when plaintiffs’ factual allegations are
taken as true and all reasonable inferences are drawn in their
favor, it does not appear “beyond doubt” that plaintiffs are not
entitled to relief.  State ex rel. Cooper, 362 N.C. at 444, 666
S.E.2d at 116 (citations and internal quotation marks omitted). 
Read as a whole and on its face, the 1987 consent judgment is
unclear as to what should happen if adherence to the trust terms
becomes impossible or impracticable, and thus the consent
judgment does not admit “only one reasonable interpretation”
regarding the extent of plaintiffs’ interests in the land at
issue.  Woods, 295 N.C. at 506, 246 S.E.2d at 777.  Because the
consent judgment is reasonably susceptible to a reading that
would preserve plaintiffs’ future interests in the realty,
collateral estoppel does not bar litigation of the question
whether the consent judgment was intended to foreclose all of
plaintiffs’ rights in the land.  We therefore hold that the trial
court properly denied defendant’s motion to dismiss.
We affirm the portion of the Court of Appeals opinion
holding that the trial court’s order is immediately appealable,
and we reverse the Court of Appeals’ holding that the trial court
erred in denying defendant’s motion to dismiss.  This case is
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 Although the Court of Appeals stated that it did not reach
1
all of defendant’s assignments of error, we find the remaining
assignments of error to be sufficiently included in the second
issue resolved by this opinion.  The Court of Appeals is not to
consider defendant’s remaining assignments of error before
remanding this case to the trial court.
remanded to the Court of Appeals for further remand to the trial
court for proceedings not inconsistent with this opinion.1
AFFIRMED IN PART; REVERSED IN PART.