Court Opinion

ID: 2728460
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:32:59.660777+00
Date Added: 2024-06-11T12:37:17.238110
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

                               NO. COA13-1325
                       NORTH CAROLINA COURT OF APPEALS

                                Filed: 20 May 2014

KENNETH E. NELSON,
     Plaintiff,

      v.                                      Wake County
                                              No. 11 CVS 3217
ALLIANCE HOSPITALITY MANAGEMENT,
LLC, a Georgia limited liability
company, ROLF A. TWEETEN, and AXIS
HOSPITALITY, INC., an Illinois
corporation,
     Defendants.

      Appeal by plaintiff from order entered 20 August 2013 by

Special Superior Court Judge for Complex Business Cases James L.

Gale in Wake County Superior Court.                  Heard in the Court of

Appeals 8 April 2014.

      Meynardie & Nanney, PLLC, by Joseph H. Nanney, Jr., for
      plaintiff-appellant.

      Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP,
      by Michael W. Mitchell and Jackson Wyatt Moore, Jr.; and
      Leader, Bulso & Nolan, PLC, by Eugene N. Bulso, Jr., pro
      hac vice for defendants-appellees.

      HUNTER, Robert C., Judge.

      Plaintiff Kenneth Nelson (“plaintiff” or “Nelson”) appeals

the order granting defendants’ motion for summary judgment as to
                                          -2-
plaintiff’s claims for damages.                  On appeal, plaintiff argues

that the trial court erred as a matter of law by ruling that:

(1) plaintiff’s damages were too remote; (2) certain damages are

recoverable only in a derivative action; and (3) plaintiff was

not entitled to punitive damages.

      After careful review, we dismiss plaintiff’s appeal because

the trial court’s order is interlocutory and does not affect a

substantial right.

                                     Background

      Defendant Alliance Hospitality (“Alliance”) is a Georgia

LLC that provides hotel management services.                         Defendant Axis

Hospitality       (“Axis”)     is    an   Illinois       corporation,         with     its

principal      place    of   business     in    Wake    County.      Axis     is     owned

solely    by    defendant     Rolf    Tweeten         (“Tweeten”)    (collectively,

Alliance, Axis, and Tweeten are referred to as “defendants”).

Sometime in 2007, Axis purchased a 51% interest in Alliance;

Tweeten     had    hired     plaintiff     as     a    consultant       to    help     him

investigate       and   acquire     the    majority       interest      in    Alliance.

Later, Axis acquired the rest of Alliance.                     Nelson and Tweeten

allegedly reached an oral agreement that Nelson would receive a

ten   percent     interest     in   Alliance;         Nelson   became    an    Alliance

Director and later became CFO of Alliance.                     Nelson remained CFO
                                              -3-
and on the Board of Alliance until January 2011.

      In a separate, yet related, series of events, Nelson had

several judgments entered against him in other jurisdictions.

Specifically, a Tennessee state-court judgment had been entered

against Nelson in favor of Orlando Residence (“Orlando”), an

unrelated third-party (“the Tennessee judgment”).                              In addition,

on 11 September 2012, Orlando obtained a second judgment in

South Carolina against plaintiff in the amount of $4,000,000

(“the   South      Carolina         judgment”).           To    satisfy    the    Tennessee

judgment, Orlando enforced the judgment in Wisconsin and caused

two houses belonging to Mrs. Nelson, plaintiff’s wife, to be

sold.       After entry of the Tennessee judgment and sale of the

Wisconsin houses, Nelson was removed from the Alliance board and

his   CFO    position      was      eliminated.           Alliance      entered     into    an

agreement     to    sell    certain       contracts        to     Interstate      Hotels     &

Resorts (“Interstate”); the sale closed on 1 April 2011.                                   The

sale proceeds from this transaction are central to plaintiff’s

claims.

      Orlando      sought      to    enforce        the   Tennessee       and     the   South

Carolina      judgments        in     North    Carolina.               Judge    Michael     J.

O’Foghludha        in   Wake     County       Superior         Court    entered    charging

orders against Nelson’s interest in Alliance, requiring Alliance
                                                -4-
to pay the distributions of the                       Interstate sale proceeds to

Orlando instead of to Nelson (“the charging orders”).                                 Although

Nelson appealed the enforcement of the Tennessee judgment in

Wisconsin, it was affirmed by the Wisconsin Court of Appeals.

An    order     was    issued       by   Wake    County      Court      in    February      2013

confirming       the       continued     applicability           of    the    2011    charging

order against Nelson.

       On 25 February 2011, Nelson filed suit against defendants,

bringing        claims       for:    (1)       breach       of   fiduciary         duty;     (2)

constructive fraud; (3) judicial dissolution of Alliance; (4) a

declaratory judgment that Nelson owns ten of Alliance’s sixty-

one    outstanding         membership         interest      units;      and   (5)     wrongful

termination.           Plaintiff’s         complaint        is   not     included      in   the

record     on    appeal.            Defendants        filed      counterclaims         against

plaintiff, but these counterclaims were eventually dismissed by

defendants.           On    22   March     2011,      the    matter     was    designated      a

complex       business       case.       On     22    November        2011,   the     wrongful

termination       claim      (claim      no.     5)   was    dismissed        by     the   trial

court.

       Defendants filed two summary judgment motions.                                The first

motion for summary judgment was in regards to plaintiff’s claim

for a declaratory judgment that he is a member of Alliance and
                                              -5-
the extent of his ownership interest in Alliance (claim no. 4).

The    actual       motion   is     not    included      in   the   record      on     appeal;

however, the trial court’s order is included.                            The trial court

denied the motion, concluding that there was a material issue of

fact that precluded determining the issues as a matter of law.

In other words, the trial court concluded that whether Nelson

was a member of Alliance and what his ownership interest was

should be decided by a jury.

       In     the     second       motion,     the       subject    of        this     appeal,

defendants moved for summary judgment with regard to all of

plaintiff’s         claims     for        consequential,        punitive,        and     other

damages.         The grounds for Nelson’s claims are premised on his

contention that had defendants properly distributed the sales

proceeds from the sale of Alliance to Interstate, he would not

have    had    to    sell     his    property       in   Wisconsin       to    satisfy     the

Tennessee judgment.            Furthermore, Nelson claims that had Tweeten

timely distributed the sale proceeds, Nelson could have paid

Orlando     on      time,    and    Orlando    would      not   have     been    forced     to

obtain the South Carolina judgment against him nor enforce it in

North    Carolina.           After    concluding         that   Georgia        law     governs

Nelson’s damage claims, the trial court held that defendants

acts were not the proximate cause of Nelson’s alleged losses;
                                         -6-
instead,    Nelson’s       own    failure     to    pay    his    debts       caused    his

Wisconsin property to be sold at a loss and for Orlando to

obtain a judgment against him in South Carolina.                             Since Nelson

was not entitled to compensatory damages, the trial court also

concluded that he was not entitled to punitive damages.                                  By

granting summary judgment, the trial court dismissed plaintiff’s

claims    for    breach    of     fiduciary    duty       and    constructive       fraud

(claim nos. 1 and 2).             However, plaintiff’s claims for judicial

dissolution of Alliance and for a declaratory judgment (claim

nos. 3 and 4) were not disposed of by the trial court’s order.

Plaintiff appeals from this order.

                                     Discussion

    Initially,       we    must    first     consider      whether       plaintiff      may

appeal    from    the     trial    court’s     interlocutory        order.         It    is

undisputed that the trial court’s order is interlocutory because

plaintiff’s      claims    for    judicial     resolution         and    a    declaratory

judgment    were    not    disposed     of    and    are    still       pending.        See

Liggett Group v. Sunas, 113 N.C. App. 19, 23, 437 S.E.2d 674,

677 (1993) (“A grant of partial summary judgment, because it

does not completely dispose of the case, is an interlocutory

order    from    which    there    is   ordinarily        no     right   of     appeal”).

Defendants contend that plaintiff’s appeal is interlocutory and
                                              -7-
should      be    dismissed      because       the    order    does    not     affect    a

substantial        right.     In       contrast,     plaintiff,      citing    Tinch     v.

Video Industries Services, 347 N.C. 380, 493 S.E.2d 426 (1997),

claims that the legal interdependence of his dismissed claims

and   the    remaining      claims       increases     the    risk    of   inconsistent

verdicts         and   affects     a     substantial        right;    therefore,        the

interlocutory order is immediately appealable.

      “Generally,        there     is    no   right    of    immediate     appeal   from

interlocutory orders and judgments.”                        Goldston v. Am. Motors

Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990).

             There are only two means by which an
             interlocutory order may be appealed: (1) if
             the order is final as to some but not all of
             the claims or parties and the trial court
             certifies there is no just reason to delay
             the appeal pursuant to N.C.R. Civ. P. 54(b)
             or (2) if the trial court’s decision
             deprives the appellant of a substantial
             right which would be lost absent immediate
             review.

Turner v. Norfolk S. Corp., 137 N.C. App. 138, 141, 526 S.E.2d

666, 669 (2000) (internal quotation marks omitted).                           The burden

is on the moving party to show that the “affected right is a

substantial one, and that deprivation of that right, if not

corrected before appeal from final judgment, will potentially

injure the moving party.”                Flitt v. Flitt, 149 N.C. App. 475,

477, 561 S.E.2d 511, 513 (2002).                      Because the trial court’s
                                          -8-
order    does    not    include    a    Rule    54(b)    certification,   we    must

determine whether it affects a substantial right.

       “A substantial right . . . is considered affected if there

are overlapping factual issues between the claim determined and

any    claims    which    have    not    yet    been    determined   because    such

overlap       creates     the     potential       for    inconsistent     verdicts

resulting from two trials on the same factual issues.”                      Sunas,

113 N.C. App. at 24, 437 S.E.2d at 677 (internal quotation marks

omitted).       This Court has repeatedly held that the moving party

must show that “(1) the same factual issues would be present in

both trials and (2) the possibility of inconsistent verdicts on

those issues exists.”            N.C. Dep’t of Transp. v. Page, 119 N.C.

App. 730, 735-36, 460 S.E.2d 332, 335 (1995).

       Here, plaintiff has failed to meet his burden of showing

that the same factual issues would be present in both trials or

that    the     possibility       of    inconsistent      verdicts   in   the   two

proceedings exists.             See id.        Plaintiff’s claims for damages

arise from his contention that because defendants did not make

sufficient distributions from the Interstate sale proceeds, he

suffered damages from the sale of his Wisconsin properties and

the entry and enforcement of the South Carolina judgment against

him.    In contrast, the issues regarding the nature and extent of
                                      -9-
his alleged interest in Alliance and whether Alliance should be

judicially    dissolved     are     predicated     on        various     agreements

between the parties and operating agreements.                     The facts at

issue with regard to claim nos. 3 and 4 have no bearing on the

trial   court’s   determination       that   defendants’       failure     to    make

distributions did not cause his injury.               Thus, there is no risk

of inconsistent verdicts because whether Nelson has an interest

in and, relatedly, how much interest he has in Alliance has no

factual relationship with his claims for damages.                      Furthermore,

plaintiff’s reliance on         Tinch is misplaced.              Tinch    does not

stand for the proposition that a dismissal of damage claims

automatically     constitutes     a   substantial       right;     in     contrast,

Tinch requires the Court determine whether there is a risk of

inconsistent verdicts in determining whether an interlocutory

order affects a substantial right.             Id. at 382, 493 S.E.2d at

428.     As discussed, since the factual bases for plaintiff’s

claims are not intertwined, there is no risk of inconsistent

verdicts.      Therefore,   we    conclude     that     no    substantial       right

would    be   lost   in   denying      plaintiff      an      immediate    appeal;

accordingly, we dismiss this appeal as interlocutory.

                                  Conclusion

       Because plaintiff has failed to establish that the trial
                              -10-
court’s partial grant of summary judgment affects a substantial

right, we dismiss plaintiff’s appeal.

    DISMISSED.

    Judges BRYANT and STEELMAN concur.

    Report per Rule 30(e).