Court Opinion

ID: 2743974
Source: CourtListenerOpinion
Date Created: 2014-10-21 12:04:24.785055+00
Date Added: 2024-06-11T12:41:13.813335
License: Public Domain

NO. COA14-257

                      NORTH CAROLINA COURT OF APPEALS

                          Filed: 21 October 2014

WHITEHURST INVESTMENT PROPERTIES,
LLC,

    Plaintiff,

    v.                                   Guilford County
                                         No. 13 CVS 6888
NEWBRIDGE BANK, and HENRY
PROPERTIES, LLC,

    Defendants.

    Appeal by defendant NewBridge Bank from order entered 22

October 2013 by Judge James M. Webb in Guilford County Superior

Court.   Heard in the Court of Appeals 27 August 2014.

    James, McElroy & Diehl, P.A., by Preston O. Odom, III and
    John R. Buric, for plaintiff-appellee.

    Carruthers & Roth, P.A., by Rachel S. Decker and J. Patrick
    Haywood, for defendant-appellant NewBridge Bank.

    HUNTER, Robert C., Judge.

    Whitehurst    Investment        Properties,    LLC   (“plaintiff”    or

“Whitehurst”)    filed     this     action   against     NewBridge      Bank

(“NewBridge”)   and    Henry   Properties,   LLC    (“HP”)   (collectively

“defendants”), asserting claims for breach of contract, unjust

enrichment, and declaratory judgment.             NewBridge appeals from
                                             -2-
the trial court’s order denying defendants’ motion to dismiss.1

On    appeal,     NewBridge         argues    that   the    trial    court       erred    in

denying     the       motion   to    dismiss    because     the     doctrines      of    res

judicata and collateral estoppel bar plaintiff’s claims.

       After careful review, we dismiss this appeal from the trial

court’s interlocutory order.

                                       Background

       On   5    December      2001,    Starmount     Company      (“Starmount”)         and

Henry James Bar-Be-Que, Inc. (“HJBBQ”) executed a Ground Lease

Agreement (“Ground Lease”).                  Under the Ground Lease, Starmount

assumed     a    landlord      position,       leasing     to    HJBBQ     a    2.28    acre

property (the “property”) in Greensboro, North Carolina.                                 The

Ground      Lease      also    provided      that    if    the    tenant       decided    to

sublease        the     property,      the     Landlord     (Starmount)         would     be

entitled to any excess rent payments.                       HJBBQ contracted with

NewBridge’s predecessor in interest to finance construction of a

building on the property, which was required under the Ground

Lease.      HJBBQ and NewBridge entered into a Leasehold Deed of

Trust (“the Deed of Trust”) as security for the loans made to

HJBBQ.      However, the Deed of Trust provided that NewBridge was

entitled to any excess rents that may be produced by sublease.

1
    HP did not appeal from the trial court’s order.
                                       -3-
NewBridge    entered      into   a   Landlord’s    Consent     agreement       with

Starmount, in which Starmount consented to this amendment to the

Ground Lease.

    Starmount sold the property to Whitehurst in December 2007,

making Whitehurst the successor to all of Starmount’s interests

as landlord under the Ground Lease.                In October and November

2008,    Whitehurst       forwarded     notices    of     lease      default     to

NewBridge.       In August 2009, NewBridge created HP as its wholly

owned   subsidiary.        HJBBQ     then   assigned    its   interest   in    the

Ground Lease to HP through an Assignment in Lieu of Foreclosure,

through which HP assumed every obligation as tenant under the

Ground Lease.

    HP was obligated to pay plaintiff $4,965.84 per month under

the terms of the Ground Lease.               On 20 August 2009, HP executed

a sublease to another restaurant, REFS, LLC.                  Pursuant to the

sublease, REFS agreed to pay HP rent in the amount of $9,500 per

month from 20 December 2009 to 19 April 2010, later increasing

to $14,000 per month from 20 April 2010 to 19 November 2010.

The parties disputed who was entitled to the rent payments in

excess of the $4,965.84 set forth in the Ground Lease.

    On      31   August    2009,     NewBridge    and    HP   sued    Whitehurst

alleging, among other claims, breach of contract (“the First
                                          -4-
Action”).       On 31 December 2009, Whitehurst counterclaimed for a

declaratory      judgment      asserting    its    right      to    the    excess     rent

payment.     Following dismissal of all other claims, Whitehurst’s

declaratory      judgment      counterclaim       was   the      only     matter     still

before the trial court.

    On     14    March    2011,    the   Honorable        John     O.    Craig     entered

judgment in favor of NewBridge and HP.                    This Court reversed on

appeal, holding that the Deed of Trust executed by HJBBQ and

NewBridge was cancelled in exchange for the Assignment in Lieu

of Foreclosure.          See NewBridge Bank v. Kotis Holdings, LLC, No.

COA11-1016, 2012 WL 3570377 (Aug. 21, 2012) (“NewBridge I”).

Therefore,      the   Ground     Lease   became     the    controlling        contract,

which    awarded      any      excess    rent   payment       to        Starmount,     and

therefore Whitehurst, by its plain language.                            On remand, the

trial court granted summary judgment in favor of Whitehurst as

ordered by this Court.

    Whitehurst        thereafter        demanded    payment        of     excess     rent,

which   HP   refused      to    pay.     Whitehurst       commenced        the     current

action against NewBridge and HP on 11 July 2013 for breach of

contract, unjust enrichment, and declaratory judgment.                             In its

complaint, Whitehurst alleged that HP was the legal alter ego of

NewBridge, and therefore, NewBridge was liable for the excess
                                             -5-
rents    paid   to     HP.     On     14    August       2013,      defendants     moved    to

dismiss      plaintiff’s       claims       on     res    judicata        and     collateral

estoppel      grounds,        which       was    denied        on    22   October      2013.

NewBridge filed timely notice of appeal from the trial court’s

order.

                                       Discussion

                       I. Grounds for Appellate Review

      NewBridge        first         contends        that        the      trial     court’s

interlocutory         order     is        immediately          appealable       because      a

substantial right would be deprived without immediate review.

We disagree.

      “An interlocutory order is one made during the pendency of

an action, which does not dispose of the case, but leaves it for

further      action    by     the    trial       court    in     order    to    settle     and

determine the entire controversy.”                       Veazey v. City of Durham,

231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950).                               “Denial of a

motion to dismiss is interlocutory because it simply allows an

action to proceed and will not seriously impair any right of

defendants      that    cannot       be    corrected       upon      appeal     from   final

judgment.”      Baker v. Lanier Marine Liquidators, Inc., 187 N.C.

App. 711, 717, 654 S.E.2d 41, 46 (2007).                            “Generally, there is

no   right    of     immediate       appeal      from     interlocutory         orders     and
                                      -6-
judgments.”      Goldston v. Am. Motors Corp., 326 N.C. 723, 725,

392 S.E.2d 735, 736 (1990).           However, immediate appeal of an

interlocutory order is available where the order deprives the

appellant of a substantial right which would be lost without

immediate review.      See N.C. Dep’t of Transp. v. Page, 119 N.C.

App. 730, 734, 460 S.E.2d 332, 334 (1995);             N.C. Gen. Stat. § 1-

277(a) (2013).

    NewBridge      argues    that    immediate    review     is   appropriate

because the trial court’s order affects a substantial right.

However, at no point in NewBridge’s brief does it attempt to

identify this right or explain how it would be deprived without

immediate    review    of   the   trial     court’s    order.      Rather,    it

provides a conclusory statement that the denial of a motion to

dismiss based on the defenses of              res judicata      or collateral

estoppel “is immediately appealable as affecting a substantial

right.”

    This Court has held that denial of a motion to dismiss

premised    on   res   judicata     and   collateral    estoppel    does     not

automatically affect a substantial right; the burden is on the

party seeking review of an interlocutory order to show how it

will affect a substantial right absent immediate review.                     See

Bockweg v. Anderson, 333 N.C. 486, 491, 428 S.E.2d 157, 161
                                          -7-
(1993)   (“[W]e    hold   that     the    denial     of   a   motion    for    summary

judgment   based    on    the   defense      of   res     judicata     may    affect   a

substantial   right,      making       the   order      immediately     appealable.”

(emphasis added)); see also Williams v. City of Jacksonville

Police Dept., 165 N.C. App. 587, 589–90, 599 S.E.2d 422, 426

(2004)   (stating    that       “the     denial    of     a   motion    for    summary

judgment based on the defense of collateral estoppel may affect

a substantial right[.]” (emphasis added)).                     As this Court has

previously noted:

           We acknowledge the existence of an apparent
           conflict in this Court as to whether the
           denial of a motion for summary judgment
           based on res judicata affects a substantial
           right   and   is    immediately  appealable.
           However, our Supreme Court has addressed
           this issue in Bockweg, and, like the panel
           in [Country Club of Johnston Cnty., Inc. v.
           U.S. Fid. & Guar. Co., 135 N.C. App. 159,
           166, 519 S.E.2d 540, 545 (1999)], “we do not
           read Bockweg as mandating in every instance
           immediate appeal of the denial of a summary
           judgment motion based upon the defense of
           res judicata. The opinion pointedly states
           reliance upon res judicata ‘may affect a
           substantial right.’”

Heritage Operating, L.P. v. N.C. Propane Exch., LLC, __ N.C.

App. __, __, n.2, 727 S.E.2d 311, 314, n.2 (2012).                            Thus, to

meet its burden of showing how a substantial right would be lost

without immediate review, the appealing party must show that

“(1) the same factual issues would be present in both trials and
                                              -8-
(2) the possibility of inconsistent verdicts on those issues

exists.”       Id.      at   __,    727       S.E.2d    at    314     (quotation     marks

omitted).

    First,        we   overrule      NewBridge’s         argument      that    the   trial

court    exposed       defendants        to    the    possibility      of    inconsistent

verdicts when it rejected their argument that plaintiff’s cause

of action is barred by res judicata.                          Res judicata prevents

litigation of the same legal claims, not the same legal issues.

Foreman v. Foreman, 144 N.C. App. 582, 587, 550 S.E.2d 792, 796,

disc. review denied, 354 N.C. 68, 553 S.E.2d 38 (2001); see also

State    ex.    rel.    Tucker     v.    Frinzi,       344 N.C. 411,    413-14,   474
S.E.2d 127, 128 (1996) (“For res judicata to apply, a party must

show that the previous suit resulted in a final judgment on the

merits    [and]      that    the   same       cause    of    action    is    involved[.]”

(emphasis added)).           In the First Action, the sole claim before

the trial court was a request for a declaratory judgment to

determine      which    party      was    entitled      to    excess    rent    payments.

Here, Whitehurst is suing NewBridge and HP in order to collect

those payments after declaratory judgment in the First Action

was entered in its favor.                     Thus, because the claims asserted

here are distinct            from those litigated in the First Action,

NewBridge has failed to demonstrate the existence of the risk of
                                         -9-
an inconsistent verdict and consequently fails to show how a

substantial right would be deprived without immediate appellate

review of the trial court’s order.

    Additionally,           NewBridge      argues       that      Whitehurst      is

collaterally estopped from arguing that NewBridge and HP are the

same legal entity.          Collateral estoppel is a companion doctrine

of res judicata and serves to promote judicial efficiency and to

protect litigants from having to relitigate issues that were

previously decided. Bockweg, 333 N.C. at 491, 428 S.E.2d at 161.

For purposes of collateral estoppel, “the prior judgment serves

as a bar only as to issues actually litigated and determined in

the original action.” City of Asheville v. State, 192 N.C. App.
1, 17, 665 S.E.2d 103, 117 (2008)                   (quotation marks omitted)

(emphasis in original), disc. review denied, 363 N.C. 123, 672
S.E.2d 685 (2009).

    In     support     of     its    argument,      NewBridge    points    to    this

Court’s    opinion     in   NewBridge     I,    where   the     Court   noted    that

“[HJBBQ]     never      transferred           its    leasehold      interest      to

[NewBridge]; rather, the leasehold interest was transferred to

HP, a limited liability company owned wholly by [NewBridge.]”

NewBridge I at *4.          However, the basis of the Court’s holding in

NewBridge    I   was    not    the    legal    relationship      between    HP   and
                                             -10-
NewBridge, but the language of the contracts involved in the

case.    As the Court noted, the Assignment in Lieu of Foreclosure

read: “WHEREAS, in order to avoid foreclosure under the Deed of

Trust, [HJBBQ] has agreed to assign, grant, convey and transfer

to [HP], as the designee of the Bank, all right, title and

interest in and to the Lease and the Property in exchange for,

among other things, the cancellation of the Deed of Trust[.]”

Id.     (emphasis in original).               The Court concluded that “[t]he

language of the assignment is clear and unambiguous” and “in

partial consideration of the assignment, it was agreed the Deed

of    Trust   was    to    be    cancelled.”            Id.         Therefore,    “with     a

cancelled     Deed    of   Trust       and    a     voided    amendment,”        the    Court

determined that “the [Ground Lease] again became the controlling

contract.” The Court ultimately held that the Ground Lease, “in

clear and unambiguous language, plainly provides that the excess

rents were payable to Starmount in the event that the property

was    subleased.”         Id.    at    *5.          Because        Whitehurst    was    the

successor     to    Starmount’s        interests        in    the    Ground   Lease,      the

Court reversed the trial court’s order and remanded for entry of

judgment in favor of Whitehurst.                  Id.

       Therefore, the issue of whether HP and NewBridge were the

same legal entity was not necessary to the Court’s determination
                                             -11-
in the First Action.               NewBridge contends that “[t]he fact that

[NewBridge]      and    HP    were        separate      entities         prevented     HP   from

asserting [NewBridge’s] rights under the Ground Lease to any

excess    payments          from     the     Sublease             Agreement,      effectively

eliminating      [NewBridge’s]            ability       to    be    repaid       the   loan   to

[HJBBQ].”        We    do     not    find        this   argument          persuasive.         The

NewBridge I Court explicitly held that the Ground Lease, “in

clear and unambiguous language, plainly provides that the excess

rents were payable to Starmount in the event that the property

was   subleased.”            Id.    at     *5.      Thus,         the    legal   relationship

between HP and NewBridge was irrelevant to the Court’s decision.

The result would have been the same regardless of whether HP

could have asserted NewBridge’s rights under the Ground Lease,

because under that document’s “clear and unambiguous language,”

the excess rents were payable to Starmount.

      Accordingly, NewBridge has failed to carry its burden of

demonstrating         that    the     possibility            of    inconsistent        verdicts

exists on the issue of whether HP and NewBridge are the same

legal entity.         See Heritage Operating, L.P., __ N.C. App. at __,

727 S.E.2d at 314.             Thus, because NewBridge cannot show how a

substantial right would be affected without immediate appellate

review,     we    dismiss           its     appeal       from           the   trial    court’s
                                        -12-
interlocutory       order.     See      id.    at    __,   727   S.E.2d   at    316

(“Although       the   verdicts      may      be    different,    there   is     no

possibility of a verdict in the instant case being inconsistent

with   any   previous    judicial       determinations.          Accordingly,   we

conclude this appeal does not affect a substantial right and

dismiss it as interlocutory.”).

                                   Conclusion

       Because     NewBridge      has      failed    to    demonstrate    how    a

substantial right would be lost without immediate review of the

trial court’s interlocutory order, we dismiss the appeal.

       DISMISSED.

       Judges DILLON and DAVIS concur.