Court Opinion

ID: 4160869
Source: CourtListenerOpinion
Date Created: 2017-04-18 12:08:39.016564+00
Date Added: 2024-06-11T14:38:14.428451
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                    No. COA16-80

                                 Filed: 18 April 2017

Union County, No. 15 CVS 1449

PROVIDENCE VOLUNTEER FIRE DEPARTMENT, a North Carolina non-profit
corporation, Plaintiff,

             v.

THE TOWN OF WEDDINGTON, a North Carolina municipal corporation,
Defendant.

      Appeal by Defendant from orders entered 25 August 2015 by Judge W. David

Lee in Union County Superior Court. Heard in the Court of Appeals 9 August 2016.

      The Duggan Law Firm, PC, by Christopher Duggan, Henderson, Nystrom,
      Fletcher & Tydings, by Robert E. Henderson and John Fletcher, for Plaintiff-
      Appellee.

      Parker Poe Adams & Bernstein, LLP, by Anthony Fox and Benjamin R.
      Sullivan, for Defendant-Appellant.

      INMAN, Judge.

      A municipality’s motion to dismiss a tort claim based on governmental

immunity is properly denied when the motion does not refute a verified complaint

alleging that the tort occurred when the municipality was engaged in a proprietary

function. A preliminary injunction is inappropriate where a plaintiff has filed a notice

of lis pendens, thereby securing a full, adequate, and complete remedy at law.
            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                    Opinion of the Court

      Providence Volunteer Fire Department, Inc. (“Plaintiff” or “Providence”) owned

a fire station in Union County that needed substantial and cost prohibitive repairs

and improvements. Providence agreed to convey the fire station to the Town of

Weddington (“Defendant” or the “Town”) in exchange for the Town’s agreement to

pay for repairs and improvements. The Town also agreed to lease the improved fire

station back to Providence and to continue to pay for fire suppression and emergency

medical services from Providence for ten years. After the conveyance and completion

of repairs, the Town terminated its relationship with Providence and leased the fire

station to another fire department. Providence filed a law suit against the Town for

breach of contract, fraud, and unfair and deceptive trade practices and filed a notice

of lis pendens in Union County Superior Court.

      The Town appeals from orders (1) granting a motion by Providence to amend

its complaint, (2) denying in part its motion to dismiss Providence’s tort claims based

on governmental immunity, and (3) granting Providence’s motion for a preliminary

injunction. After careful review, we reverse the order granting injunctive relieve and

otherwise affirm the trial court.

                               Factual Background

      From 1954 to 2012, Providence provided fire protection service to the Town and

the surrounding areas in Union and Mecklenburg counties. In May 2012, the Town

Council passed a resolution establishing a Municipal Fire District and taking

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                  Opinion of the Court

responsibility for overseeing and funding this new district. To do so, the Town raised

taxes and entered into various agreements with Providence and two other area fire

departments, the Wesley Chapel Volunteer Fire Department and the Stallings Fire

Department.

      At the heart of this action is a series of agreements between Providence and

the Town stemming from the creation of the new fire district. In October 2013,

Providence and the Town entered into an Interlocal Agreement, which contemplated,

inter alia, that the Town would invest approximately one million dollars in repairs

and improvements to the Hemby Road fire station owned by Providence, and in

exchange, Providence would convey the fire station and the land upon which it rests

(the “Property”) to the Town. In addition to the Interlocal Agreement, the parties

entered into a Fire Suppression Agreement (the “Suppression Agreement”), which

designated Providence as the Town’s primary fire protection and emergency medical

service provider for ten years.

      The Suppression Agreement provided that after the first year of the ten-year

term, the amount of compensation paid to Providence would be “established during

the Town’s annual budget process.” Either party could terminate the Suppression

Agreement for cause, but if the Town terminated the agreement without cause, it was

obligated to pay liquidated damages to Providence:

              If this Agreement is terminated by the Town for a reason
              other than cause or mutual agreement of the parties, the

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             PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                        Opinion of the Court

               Department shall be entitled to $750,000 as liquidated
               damages. . . . Such liquidated damages shall be the sole
               and exclusive remedy of the Department by reason of a
               default by Town under this Agreement, and the
               Department hereby waives and releases any right to sue
               Town, and hereby covenants not to sue Town, for specific
               performance of this Agreement or to prove that the
               Department’s actual damages exceed the amount which is
               herein provided the department as full liquidated
               damages.

       Almost a year later after executing the Interlocal Agreement and the

Suppression Agreement, in August 2014, Providence conveyed the Property by deed1

and the parties entered into a third agreement (the “Lease Agreement”) providing

that the Town would lease the Property to Providence for the same ten-year period

as the term of the Suppression Agreement. The Lease Agreement also provided that

if the Suppression Agreement were terminated early, the Lease Agreement would be

terminated at the same time.

       During the year following the Interlocal and Suppression Agreements and

preceding the Lease Agreement, several new Town Council members were elected.

Providence alleges that the new Town Council members opposed the first two

agreements and that the new council members’ acts and omissions fraudulently

induced Providence to convey the Property to the Town through the Lease Agreement.

       1  The deed is not included in the record on appeal, but the Second Verified Amended Complaint
alleges that the agreement in which the Town purchased and leased back the Property was executed
on 19 August 2014.

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           PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                 Opinion of the Court

      In February 2015, Providence projected a deficit of approximately $70,000 in

its operations budget and requested increased funding from the Town in order to meet

its obligations to provide fire suppression and emergency medical services according

to the standards required by the Suppression Agreement. On 15 April 2015, the Town

notified Providence that unless it could provide documents and information

confirming that it would be able to meet its performance obligations without

increased funding, the Town intended to terminate the Suppression Agreement for

cause. Providence responded with a revised operating budget and other documents.

The Town Council reviewed the documents and voted to terminate the Suppression

Agreement. On 29 April 2015, the Town notified Providence that it was terminating

the Suppression Agreement for cause, effective 29 July 2015, because Providence had

failed to provide adequate assurances that it could meet its ongoing and future

obligations; the Lease Agreement also would terminate on that date.

      The Town then contracted with the Wesley Chapel Volunteer Fire Department

(“Wesley Chapel”) as its new primary fire service provider to begin on 29 July 2015.

The Town and Wesley Chapel signed an agreement requiring Wesley Chapel to use

the Hemby Road fire station and containing a lease for the Property. The agreement

also provided an option for Wesley Chapel to purchase the Property from the Town

for $750,000.

                            Procedural Background

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

      On 4 June 2015, Providence filed a complaint alleging that the Town breached

the Suppression Agreement and seeking $750,000 in liquidated damages. On 10 July

2015, Providence filed a First Verified Amended Complaint, which added claims for

fraud in the inducement and unfair and deceptive trade practices. On the same day,

Providence filed a notice of lis pendens on the Property.

      The Town on 17 July 2015 filed a motion for a preliminary injunction seeking

to force Providence to surrender possession of the fire station. The trial court granted

the motion and ordered Providence to vacate the Property and enjoined Providence

from obstructing or interfering with the Property’s use, occupancy, or possession by

the Town or the Town’s designees.

      On 27 July 2015, Providence filed a motion for a temporary restraining order

and a preliminary injunction seeking to prevent the Town from selling, transferring,

or conveying the Property or any interest therein.           The trial court granted

Providence’s request for a temporary restraining order on 29 July 2015.

      The Town filed a motion to dismiss Providence’s tort claims on 29 July 2015,

asserting complete governmental immunity. On 6 August 2015, Providence filed a

motion to amend the First Verified Amended Complaint.

      The trial court granted Providence’s motion to amend and Providence filed its

Second Verified Amended Complaint on 27 August 2015. The trial court granted the

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                  Opinion of the Court

Town’s motion to dismiss Providence’s unfair and deceptive trade practices claim but

denied the Town’s motion to dismiss Providence’s fraud claim.

       The Town filed a notice of appeal from the orders denying its motion to dismiss

the fraud claim, granting Providence’s motion to amend, and granting Providence’s

motion for a preliminary injunction.

                                       Analysis

       I. Appellate Jurisdiction

       As an initial matter, we address Providence’s motion to dismiss the Town’s

appeal as interlocutory. Because the Town is appealing the trial court’s denial of its

motion to dismiss based in part on a challenge to personal jurisdiction, we hold that

it is properly before us.

       The North Carolina Supreme Court has not directly addressed whether

governmental immunity is an issue of personal jurisdiction or subject matter

jurisdiction, and consequently whether an appeal of a denial of immunity should be

reviewed either as a challenge to personal jurisdiction or subject matter jurisdiction.

However, this Court has classified the issue as one of personal jurisdiction, which

permits an immediate appeal. See, e.g., Can Am S., LLC v. State, 234 N.C. App. 119,

123-24, 759 S.E.2d 304, 308 (2014) (“[B]eginning with Sides v. Hosp., 22 N.C. App.
117, 205 S.E.2d 784 (1974), mod. on other grounds, 287 N.C. 14, 213 S.E.2d 297

(1975), this Court has consistently held that: (1) the defense of sovereign immunity

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

presents a question of personal, not subject matter jurisdiction, and (2) denial of Rule

12(b)(2) motions premised on sovereign immunity are sufficient to trigger immediate

appeal under section 1-277(b).”); Data Gen. Corp. v. Cnty. of Durham, 143 N.C. App.
97, 100, 545 S.E.2d 243, 245-46 (2001) (“[A]n appeal of a motion to dismiss based on

sovereign immunity presents a question of personal jurisdiction rather than subject

matter jurisdiction, and is therefore immediately appealable.”) (citations omitted).

      The Town asserts, citing Church v. Carter, 94 N.C. App. 286, 288, 380 S.E.2d
167, 168 (1989), and N.C. Gen. Stat. § 1-75.4 (2015), that because subject matter

jurisdiction is a prerequisite to personal jurisdiction, our Court may properly review

a challenge to subject matter jurisdiction when there was an accompanying challenge

to personal jurisdiction. Church, 94 N.C. App. at 288, 380 S.E.2d at 168 (holding that

when a defendant challenges both subject matter jurisdiction and personal

jurisdiction, the court was required to “decide the issue [the defendant] ha[d] raised

concerning subject matter jurisdiction”).       The Town’s argument overlooks the

difference in the nature of the Rule 12(b)(1) challenges at issue in Church and in the

present case. In Church, the defendant’s motion to dismiss for lack of subject matter

jurisdiction was not based on sovereign immunity, but rather on the defendant’s

status as a non-North Carolina entity. Id. Here, the Town’s motion to dismiss for

lack of subject matter jurisdiction is based on governmental immunity.

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                  Opinion of the Court

      In Can Am, our Court denied a defendant’s appeal asserting sovereign

immunity as an issue of subject matter jurisdiction as interlocutory, while granting

the defendant’s appeal of the lower court’s denial of the defendant’s motion to dismiss

for sovereign immunity as an issue of personal jurisdiction. 234 N.C. App. at 124,

759 S.E.2d at 308. This case presents a procedural posture in line with that of Can

Am. Because governmental immunity has traditionally been recognized as an issue

of personal jurisdiction and not subject matter jurisdiction, we grant Providence’s

motion to dismiss the Town’s appeal under Rule 12(b)(1) (subject matter jurisdiction)

and deny Providence’s motion to dismiss the Town’s appeal under Rule 12(b)(2)

(personal jurisdiction).

      The remainder of the Town’s appeal—challenging the denial of the motion to

dismiss based on Rule 12(b)(6) and the orders allowing Providence to amend its

complaint and imposing a preliminary injunction—raises issues that generally are

not subject to interlocutory review. We agree that the Town’s appeal based upon

substantive defenses other than governmental immunity do not affect a substantial

right. However, in our discretion, because all of the remaining issues appealed are

closely interrelated, we choose to address the Town’s additional arguments to avoid

“fragmentary appeals.” RPR & Assocs., Inc. v. State, 139 N.C. App. 525, 530-31, 534
S.E.2d 247, 251-52 (2000) (choosing to address the defendant’s additional question on

appeal, despite its interlocutory nature, noting “to address but one interlocutory or

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                     Opinion of the Court

related issue would create fragmentary appeals”). We first address the Town’s appeal

from the trial court’s order allowing a motion by Providence to file a Second Verified

Amended Complaint because that amendment is ultimately dispositive of the Town’s

motion to dismiss the tort claims.

      II. Motion to Amend

      The Town asserts that the trial court erred in granting Providence’s motion to

amend its complaint. We disagree.

      We review a trial court’s decision on a motion to amend the pleadings for abuse

of discretion. Williams v. Owens, 211 N.C. App. 393, 394, 712 S.E.2d 359, 360 (2011)

(citation omitted). “An abuse of discretion occurs when the trial court’s ruling is so

arbitrary that it could not have been the result of a reasoned decision.” Warren v.

Gen. Motors Corp., 142 N.C. App. 316, 319, 542 S.E.2d 317, 319 (2001) (internal

quotation marks and citations omitted).

      “The party opposing the amendment has the burden to establish that it would

be prejudiced by the amendment.” Carter v. Rockingham Cnty. Bd. of Educ., 158 N.C.

App. 687, 690, 582 S.E.2d 69, 72 (2003) (citations omitted). “Reasons justifying denial

of an amendment are (a) undue delay, (b) bad faith, (c) undue prejudice, (d) futility of

amendment, and (e) repeated failure to cure defects by previous amendments.”

Martin v. Hare, 78 N.C. App. 358, 361, 337 S.E.2d 632, 634 (1985) (citations omitted).

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           PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                  Opinion of the Court

      Here, the Town challenges the order allowing Providence’s motion to amend

because counsel for Providence has admitted that it had no factual basis for alleging

waiver of governmental immunity through the purchase of liability insurance and

had not conducted any inquiry into the matter.           As discussed infra, Providence

concedes this issue; however, even with this concession, the record before us does not

establish that the trial court abused its discretion in allowing the motion to amend.

We therefore affirm the trial court.

      Because the Town’s 12(b)(6) motion to dismiss was based primarily on

Providence’s First Verified Amended Complaint and we hold that the trial court did

not err in allowing Providence to amend its complaint, the Town’s 12(b)(6) motion to

dismiss was properly denied. Additionally, we hold that the trial court properly

denied the motion to the extent that the Town’s argument was applicable to

Providence’s Second Verified Amended Complaint. As discussed infra, the Second

Verified Amended Complaint alleged alternative grounds upon which governmental

immunity was unavailable beyond waiver by purchase of liability insurance and to

which the Town did not adequately respond in its initial motion to dismiss or

accompanying affidavit. Therefore, the trial court was proper in denying the Town’s

motion to dismiss based on Rule 12(b)(6).

      III. Governmental Immunity

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

      The Town argues that the trial court erred by denying its motion to dismiss

the fraud claim based on governmental immunity because (1) the Town was acting in

its governmental capacity when it entered into the agreements, (2) waiver of

immunity through contractual agreement does not waive immunity as to tort claims

that may arise out of the contract, and (3) the Town did not have insurance to cover

such claims. We disagree.

      Because we hold that the trial court did not abuse its discretion in allowing

Providence’s motion to amend, the Second Verified Amended Complaint, verified

under oath by Jack E. Parks, Jr., President of the Providence Volunteer Fire

Department, was properly before the trial court as a source of evidence. The trial

court, therefore, was permitted to consider its weight and credibility, along with the

weight and credibility of the affidavit of Peggy Piontek, the Town Clerk of

Weddington, submitted by the Town in support of its motion to dismiss.

      A. Standard of Review

      “The standard of review of an order determining personal jurisdiction is

whether the findings of fact by the trial court are supported by competent evidence

in the record; if so, this Court must affirm the order of the trial court.” Replacements,

Ltd v. MidweSterling, 133 N.C. App. 139, 140-41, 515 S.E.2d 46, 48 (1999) (citations

omitted). However, our review is also “depend[ent] upon the procedural context

confronting the court.” Banc of Am. Secs. LLC v. Evergreen Int’l Aviation, Inc., 169

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

N.C. App. 690, 693, 611 S.E.2d 179, 182 (2005). Three procedural postures are

typical: “(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.” Id.

      In this first category where neither party submits evidence, “[t]he allegations

of the complaint must disclose jurisdiction although the particulars of jurisdiction

need not be alleged.” Bruggeman v. Meditrust Acquisition Co., 138 N.C. App. 612,

615, 532 S.E.2d 215, 217 (2000) (citations omitted).       If, however, the defendant

submits supportive evidence—for example an affidavit—along with the motion to

dismiss, the complaint’s allegations “can no longer be taken as true or controlling and

[the] plaintiff[] cannot rest on the allegations of the complaint.” Id. at 615-16, 532

S.E.2d at 218 (citation omitted). In this instance, the court must consider “(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).” Banc of Am., 169 N.C. App. at 693-94, 611 S.E.2d at 182-

83 (citations omitted).

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              PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                          Opinion of the Court

        In the third category, when the parties submit competing evidence—such as

affidavits or an affidavit and a verified complaint2—“the court may hear the matter

on affidavits presented by the respective parties, but the court may direct that the

matter be heard wholly or partly on oral testimony or depositions.” N.C. R. Civ. P.

43(e) (2015); see also Bruggeman, 138 N.C. App. at 615, 532 S.E.2d at 217 (“If the

exercise of personal jurisdiction is challenged by a defendant, a trial court may hold

an evidentiary hearing including oral testimony or depositions or may decide the

matter based on affidavits.”) (citation omitted). When the trial court decides the

motion on affidavits, “[t]he trial judge must determine the weight and sufficiency of

the evidence [presented in the affidavits] much as a juror.” Fungaroli v. Fungaroli,

51 N.C. App. 363, 367, 276 S.E.2d 521, 524 (1981). Even when the trial court is

required to weigh evidence, it is not required to make findings of fact unless requested

by a party when deciding a motion to dismiss. N.C. R. Civ. P. 52(e) (2015). When the

record contains no findings of fact, “it will be presumed that the judge, upon proper

evidence, found facts sufficient to support his ruling.” Cameron-Brown Co. v. Daves,

83 N.C. App. 281, 285, 350 S.E.2d 111, 114 (1986) (citation omitted). “Where such

presumed findings are supported by competent evidence, they are deemed conclusive

        2  “A verified complaint may be treated as an affidavit if it (1) is made on personal knowledge,
(2) sets forth such facts as would be admissible in evidence, and (3) shows affirmatively that the affiant
is competent to testify to the matters stated therein.” Page v. Sloan, 281 N.C. 697, 705, 190 S.E.2d
189, 194 (1972) (citations omitted).

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

on appeal, despite the existence of evidence to the contrary.” Data Gen., 143 N.C.

App. at 101, 545 S.E.2d at 246.

       In order to deny the Town’s motion to dismiss based on governmental

immunity, the trial court presumably determined that the Town was precluded from

its governmental immunity defense by one of the three following alternatives: (1)

acting in a proprietary capacity, (2) entering into a valid contract thereby implicitly

waiving immunity, or (3) purchasing liability insurance.

      B. Proprietary Function

      Providence’s primary contention on appeal is that the Town was engaged in a

proprietary function when the parties entered into the series of agreements,

particularly the Lease Agreement and the Interlocal Agreement, so that

governmental immunity does not shield the Town from suit for torts related to those

agreements.

      Whether an entity is entitled to governmental immunity can turn on whether

its alleged tortious conduct arose out of an activity that was governmental or

proprietary in nature. Estate of Williams v. Pasquotank Cnty. Parks & Recreation

Dep’t, 366 N.C. 195, 199, 732 S.E.2d 137, 141 (2012) (reviewing the Court of Appeals

analysis of whether a county’s operation of a swimming hole was governmental or

proprietary in nature). A governmental function has long been held as an activity

that is “discretionary, political, legislative, or public in nature and performed for the

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

public good in behalf of the State rather than for itself.” Britt v. City of Wilmington,

236 N.C. 446, 450, 73 S.E.2d 289, 293 (1952). Conversely, a proprietary function is

one that is “commercial or chiefly for the private advantage of the compact

community.” Id. (citations omitted). The reason for this distinction is that “[w]hen a

municipality is acting ‘in behalf of the State’ in promoting or protecting the health,

safety, security or general welfare of its citizens, it is an agency of the sovereign.

When it engages in a public enterprise essentially for the benefit of the compact

community, it is acting within its proprietary powers.” Id. at 450-51, 73 S.E.2d at

293.

       Our Supreme Court recently provided guidance on this often difficult and fact

determinative distinction. In Williams, the Court laid out a three-step procedure

with “the threshold inquiry” being “whether, and to what degree, the legislature has

addressed the issue.” 366 N.C. at 200, 732 S.E.2d at 141-42. This determination

“turns on the facts alleged in the complaint.” Id. at 201, 732 S.E.2d at 143. The Court

remanded the case in Williams to this Court with instructions for further remand to

the trial court “for detailed consideration of the degree of effect, if any, of section

160A-351,” the policy provision of the Recreation Enabling Law providing that

recreation is a governmental function, had on whether the defendant’s operation of a

swimming hole was a governmental or a proprietary endeavor. Id.

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

      The Court in Williams addressed additional considerations necessary when the

legislature has not specifically commented on the function to aid in a court’s

determination of the nature of an activity. Williams, 366 N.C. at 202, 732 S.E.2d at

142. “[W]hen an activity has not been designated as governmental or proprietary by

the legislature, that activity is necessarily governmental in nature when it can only

be provided by a governmental agency or instrumentality.” Id. If, however, as is

increasingly more often the case, the activity may be performed both privately and

publicly, “the inquiry involves consideration of a number of additional factors, of

which no single factor is dispositive.” Id. at 202, 732 S.E.2d at 143. The Court

concluded that “[r]elevant to this inquiry is whether the service is traditionally a

service provided by a governmental entity, whether a substantial fee is charged for

the service provided, and whether that fee does more than simply cover the operating

costs of the service provider.” Id. at 202-03, 732 S.E.2d at 143. Ultimately, “the

proper designation of a particular action of a county or municipality is a fact intensive

inquiry, turning on the facts alleged in the complaint, and may differ from case to

case.” Id. at 203, 732 S.E.2d at 143.

      The Town’s motion to dismiss, but not its supporting affidavit, refutes a theory

of waiver based on proprietary activity underlying the alleged fraud. We therefore

consider whether the complaint contains sufficient allegations to support the court’s

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            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

exercise of jurisdiction on this basis. After a careful review of the pleadings, we hold

that it does.

       Because the trial court did not abuse its discretion in allowing Providence’s

motion to amend, the Second Verified Amended Complaint controls our review. The

Second Verified Amended Complaint alleges that “[t]he Town’s function in entering

into the purchase agreement with lease back dated August 19, 2014 . . . with the

Plaintiff is proprietary in nature and as such the Town can be sued by the Plaintiff

for the causes of action stated herein.” This allegation was unchallenged by the Town

through any evidence submitted in support of its motion. Therefore, we are required

to take this allegation as true. The allegation is sufficient to support the trial court’s

presumed finding that the Town was not entitled to immunity because it was

performing a proprietary function. Accordingly, we hold that the trial court did not

err in denying the Town’s motion to dismiss.

       In affirming the trial court’s denial of the Town’s motion to dismiss based upon

the theory of proprietary activity, we emphasize that our holding addresses only the

sufficiency of the allegations in the Second Verified Amended Complaint that were

not controverted by any evidence produced by the Town.

       On remand should the trial court, at a subsequent procedural posture, base its

jurisdiction over the Town on the ground that the Town was acting in a proprietary

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           PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                  Opinion of the Court

function when it entered into the agreements, the trial court must adhere to the

guidance provided by this opinion and the Supreme Court’s precedent.

      C. Waiver by Contract

      Providence also asserts that the Town waived its immunity by entering into a

valid contract, and based on this waiver, the trial court’s denial of the Town’s motion

to dismiss was proper. Providence relies on two decisions by our Supreme Court,

Smith v. State, 289 N.C. 303, 222 S.E.2d 412 (1976), and Ports Authority v. Fry

Roofing Co., 294 N.C. 73, 82, 240 S.E.2d 345 (1978), rejected on other grounds by

Trustees of Rowan Technical College v. J. Hyatt Hammond Associates, Inc., 313 N.C.
230, 328 S.E.2d 274 (1985), to extend the principles of waiver of governmental

immunity by contract to tort claims arising out of a particular contract—we disagree.

      The Supreme Court held in Smith that “whenever the State of North Carolina,

through its authorized officers and agencies, enters into a valid contract, the State

implicitly consents to be sued for damages on the contract in the event it breaches

the contract.” Smith, 289 N.C. at 320, 222 S.E.2d at 423-24. Smith involved only a

breach of contract claim. Id. at 307-08, 222 S.E.2d at 415-16.     Its holding has not

been extended to tort claims against a government entity. See Dickens v. Thorne, 110
N.C. App. 39, 47, 429 S.E.2d 176, 181 (1993) (rejecting the argument that an

employee’s employment contract with a county was sufficient to trigger a waiver of

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           PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                  Opinion of the Court

governmental immunity for tort liability on a libel claim because the complaint was

not based on a breach of contract).

      Ports Authority established that a tort claim may arise out of a breach of

contract in the following instances:

             (1) The injury, proximately caused by the promisor’s
             negligent act or omission in the performance of his
             contract, was an injury to the person or property of
             someone other than the promisee.

             (2) The injury, proximately caused by the promisor’s
             negligent, or wilful[sic], act or omission in the performance
             of his contract, was to property of the promisee other than
             the property which was the subject of the contract, or was
             a personal injury to the promisee.

             (3) The injury, proximately caused by the promisor’s
             negligent, or wilful[sic], act or omission in the performance
             of his contract, was loss of or damage to the promisee’s
             property, which was the subject of the contract, the
             promisor being charged by law, as a matter of public policy,
             with the duty to use care in the safeguarding of the
             property from harm, as in the case of a common carrier, an
             innkeeper, or other bailee.

             (4) The injury so caused was a wilful[sic] injury to or a
             conversion of the property of the promisee, which was the
             subject of the contract, by the promisor.

Ports Authority, 294 N.C. at 82, 240 S.E.2d at 350-51 (internal citations omitted). But

the holding is limited to the context of an applicable statute of limitations and does

not address governmental immunity. Id. at 81-86, 240 S.E.2d at 350-52.

                                         - 20 -
              PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                    Opinion of the Court

         Providence asks this Court to combine the principles delineated in Smith and

Ports Authority to establish that the Town implicitly waived immunity against tort

claims arising out of a breach of contract claim. Providence contends that because its

claim of fraud in the inducement alleges a willful conversion of the Property, the claim

arises out of the agreements and the Town implicitly waived its immunity to the fraud

claim.

         In light of Dickens and the lack of any precedent extending the holding of Ports

Authority to a governmental immunity case, we decline to do so here. We therefore

reject this theory of waiver asserted by Providence.

         D. Waiver by Insurance

         The parties dispute whether Providence’s Second Verified Amended

Complaint’s allegation concerning the purchase of insurance was properly made on

the basis of personal knowledge.

         During oral argument before this Court, Providence’s counsel conceded that he

was not aware of any factual basis for the allegation in the Second Verified Amended

Complaint that the Town had purchased liability insurance, thereby waiving its

governmental immunity as to the fraud claim. Although the parties agree that this

allegation was unsubstantiated, because we affirm the trial court’s order on an

alternative theory of wavier of governmental immunity, we decline to address the

                                           - 21 -
            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                     Opinion of the Court

Town’s argument that an unfounded allegation contained in a verified complaint may

not be used as evidence for the purposes of a motion to dismiss.

       IV. Preliminary Injunction

       The Town argues that the trial court erred in granting Providence’s motion for

a preliminary injunction because Providence’s filing of a lis pendens provided for an

adequate remedy at law and Providence failed to establish a likelihood of success on

the merits. We agree.

       “A preliminary injunction is an interlocutory injunction which restrains a

party pending trial on the merits.” N.C. Baptist Hosp. v. Novant Health, Inc., 195
N.C. App. 721, 724, 673 S.E.2d 794, 796 (2009) (citing A.E.P. Industries, Inc. v.

McClure, 308 N.C. 393, 400, 302 S.E.2d 754, 759 (1983); N.C. Gen. Stat. § 1A-1, Rule

65 (2007)). “[O]n appeal from an order of superior court granting or denying a

preliminary injunction, an appellate court is not bound by the findings, but may

review and weigh the evidence and find facts for itself.” A.E.P., 308 N.C. at 402, 302

S.E.2d at 760 (citations omitted).

       A preliminary injunction will be issued only “(1) if a plaintiff is able to show

likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain

irreparable loss unless the injunction is issued, or if, in the opinion of the Court,

issuance is necessary for the protection of a plaintiff’s rights during the course of

litigation.” Ridge Cmty. Investors, Inc. v. Berry, 293 N.C. 688, 701, 239 S.E.2d 566,

                                            - 22 -
            PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                   Opinion of the Court

574 (1977) (emphasis omitted) (citations omitted). “Ordinarily, an injunction will not

be granted where there is a full, adequate and complete remedy at law, which is as

practical and efficient as is the equitable remedy.” City of Durham v. Public Serv.

Co. of N.C., Inc., 257 N.C. 546, 557, 126 S.E.2d 315, 323-24 (1962) (citations omitted).

      Our Supreme Court has held that the filing of a lis pendens provides “a full,

complete and adequate remedy at law.” Whitford v. N.C. Joint Stock Land Bank of

Durham, 207 N.C. 229, 232, 176 S.E. 740, 742 (1934). The Court went on to note that

“[b]y complying with these plain statutory provisions [regarding lis pendens] the

plaintiffs can preserve every right they may have under their pleadings; and it is too

well settled in this jurisdiction to require citations of authority that where there is a

full, complete, and adequate remedy at law, the equitable remedy of injunction will

not lie.” Id. at 233, 176 S.E. at 742.

      Here, the record is clear that Providence filed a notice of lis pendens on the

Property. This provided constructive notice to any subsequent purchaser and binds

him to “all proceedings taken after the cross-indexing of the notice to the same extent

as if he were made a party to the action.” N.C. Gen. Stat. § 1-118 (2015). Therefore,

Providence was provided an adequate remedy at law and the issuance of the

preliminary injunction was improper. Accordingly, we reverse the trial court’s grant

of Providence’s motion for a preliminary injunction.

                                         Conclusion

                                            - 23 -
           PROVIDENCE VOLUNTEER FIRE DEP’T V. TOWN OF WEDDINGTON

                                 Opinion of the Court

      For the above reasons, we affirm the trial court’s order granting Providence’s

motion to amend and denying the Town’s motion to dismiss based on governmental

immunity pursuant to Rules 12(b)(2) and (6). We reverse the trial court’s order

granting Providence’s motion for a preliminary injunction. We remand for further

proceedings not inconsistent with this opinion.

      AFFIRMED IN PART, REVERSED IN PART AND REMANDED.

      Judges BRYANT and TYSON concur.

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