Court Opinion

ID: 4079219
Source: CourtListenerOpinion
Date Created: 2016-10-04 12:08:36.110943+00
Date Added: 2024-06-11T07:45:17.973419
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA16-142

                               Filed: 4 October 2016

Moore County, No. 15 CVS 217

SUSAN J. BALDELLI; TRAVEL RESORTS OF AMERICA, INC.; and TRIDENT
DESIGNS, LLC, Plaintiffs,

            v.

STEVEN R. BALDELLI, individually and as President of Travel Resorts of America,
Inc.; TRAVEL RESORTS OF NORTH CAROLINA, LLC; DERBY INVESTMENT
COMPANY, LLC; and TRIDENT CAPITAL, LLC, Defendants.

      Appeal by Plaintiffs from orders entered 22 October 2015 and 9 December 2015

by Judge James M. Webb in Superior Court, Moore County. Heard in the Court of

Appeals 8 August 2016.

      Poyner Spruill LLP, by Daniel G. Cahill and Caroline P. Mackie, for Plaintiffs-
      Appellants.

      Robinson & Lawing, LLP, by C. Ray Grantham Jr. and L. Bruce Scott, for
      Defendant-Appellee Steven R. Baldelli.

      The Bomar Law Firm, by J. Chad Bomar, for Defendants-Appellees Travel
      Resorts of North Carolina, LLC; Derby Investment Company, LLC; and Trident
      Capital, LLC.

      McGEE, Chief Judge.

      Susan J. Baldelli (“Plaintiff”), together with Travel Resorts of America, Inc.

(“TRA”) and Trident Designs, LLC (“Trident Designs”) (“Plaintiffs”) and Steven R.

Baldelli, (“Defendant”), individually and as president of TRA, together with Travel
                               BALDELLI V. BALDELLI

                                  Opinion of the Court

Resorts of North Carolina (“TNC”), Derby Investment Company, LLC (“Derby”) and

Trident Capital, LLC (“Trident Capital”) (“Defendants”) are parties to this action.

Plaintiff and Defendant were married on 15 September 1979 and separated in 2013.

Both Plaintiff and Defendant filed claims for equitable distribution of their marital

property in District Court, Moore County.       During the course of their marriage

Plaintiff and Defendant incorporated a number of businesses, including those named

above as parties to this action. Along with Plaintiff and Defendant, Trident Capital

and TRA are parties to both the district court action and the present superior court

action. Derby, TNC, and Trident Designs are not named parties in the district court

equitable distribution action. Plaintiff and Defendant are in agreement that TRA

and Trident Designs constitute marital property. Plaintiff contends that Trident

Capital, TNC, and Derby are marital property. Defendant contests this contention.

      Plaintiffs filed the complaint in this action on 23 February 2015, in Superior

Court, Moore County, and filed an amended complaint on 4 May 2015, in which they

set forth five claims: (1) breach of fiduciary duty against Defendant, relative to his

actions as president of TRA; (2) demand for accounting, also related to Defendant’s

role as president of TRA; (3) breach of contract against TNC and Trident Capital; (4)

breach of contract against Derby; and (5) an alternate claim against Derby for

quantum meruit. Defendant moved to dismiss Plaintiffs’ complaint on 8 June 2015,

pursuant to the prior pending action doctrine, arguing that superior court did not

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                               BALDELLI V. BALDELLI

                                  Opinion of the Court

have jurisdiction over the claims because of the ongoing district court action for

equitable distribution which, according to Defendant, encompassed substantially

similar claims and parties. Defendant further asked the trial court to dismiss the

breach of fiduciary duty claim because it was required to be brought as a derivative

action, and Plaintiffs had failed to do so; in the alternative, Defendant asked the

superior court to hold the present action in abeyance until the district court matter

was settled. The remaining Defendants also filed motions to dismiss, based in part

on arguments that the prior pending action doctrine served to divest the superior

court of jurisdiction. Plaintiffs filed a motion to file a second amended complaint on

14 July 2015, requesting that they be allowed to amend the complaint in order to

“assert the breach of fiduciary duty claim directly by TRA against Defendant[.]”

      Defendants’ motions were heard on 16 September 2015 in superior court.

Plaintiffs’ action was dismissed by order entered 22 October 2015, because the

superior court ruled that it “lack[ed] subject matter jurisdiction over the matters

asserted.” The superior court, also by order entered 22 October 2015, further denied

Plaintiffs’ motion to file a second amended complaint as moot. Plaintiffs appeal.

      Plaintiffs argue that the trial court erred by dismissing Plaintiffs’ claims for

lack of subject matter jurisdiction. We agree.

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                                BALDELLI V. BALDELLI

                                  Opinion of the Court

      Specifically, Plaintiffs argue that the trial court “improperly concluded the

prior pending domestic action precluded the [trial court] from considering Plaintiffs’

claims.” This Court has stated:

             The “prior pending action” doctrine involves “essentially
             the same questions as the outmoded plea of abatement,”
             and is, obviously enough, intended to prevent the
             maintenance of a “subsequent action [that] is wholly
             unnecessary” and, for that reason, furthers “the interest of
             judicial economy.” “The ordinary test for determining
             whether or not the parties and causes are the same for the
             purpose of abatement by reason of the pendency of the prior
             action is this: Do the two actions present a substantial
             identity as to parties, subject matter, issues involved, and
             relief demanded?”

Jessee v. Jessee, 212 N.C. App. 426, 438, 713 S.E.2d 28, 37 (2011) (citations omitted).

      In Burgess v. Burgess, 205 N.C. App. 325, 698 S.E.2d 666 (2010), the plaintiff

filed an action in superior court alleging, inter alia, “breach of fiduciary duties,

inspection, and accounting” related to a business, Burgess & Associates, that had

been jointly owned by the plaintiff and her husband (“the defendant”) during their

marriage. Id. at 330-31, 698 S.E.2d at 670. At the time the superior court action was

filed, the plaintiff and the defendant were already involved in an equitable

distribution action involving Burgess & Associates. Id. at 326, 698 S.E.2d at 667.

The defendant moved to dismiss the plaintiff’s action based in part on his argument

that the prior pending action doctrine served to divest the superior court of

jurisdiction because the parties and subject matter of the two actions were

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                                BALDELLI V. BALDELLI

                                   Opinion of the Court

substantially similar. Id. at 326, 698 S.E.2d at 668. This Court held that the superior

court had not erred in ruling that it had jurisdiction to hear the claims of breach of

fiduciary duties, inspection, and accounting. This Court reasoned:

             It is apparent that if plaintiff is successful in her equitable
             distribution action, she can only receive a portion of the
             issued shares of Burgess & Associates, along with any
             other marital or divisible property she may be awarded in
             the trial court’s discretion. Should she prove that she is
             entitled to an unequal distribution, she may, at the most,
             receive a larger portion of marital or divisible property as
             an offset—property which she assisted in contributing to
             the marriage. She would not be entitled to any of [the
             defendant’s] separate property.

             In stark comparison, if plaintiff is successful in prosecuting
             her derivative suit for breach of the duties of good faith and
             due care, she may obtain a judgment against [the
             defendant] in the right of the company in excess of $10,000
             from a jury verdict. The judgment would be against [the
             defendant] in his individual capacity, and Burgess &
             Associates would be able to enforce the judgment against
             [the defendant’s] separate property. Despite the breadth
             and variety of the factors in section 50–20, there is no
             similarity between the relief sought in plaintiff’s equitable
             distribution action and the derivative suit. In particular,
             plaintiff sets out several factual allegations in the
             shareholder suit predating [the defendant’s] and plaintiff’s
             separation. Were we to follow defendants’ suggestion to
             lump the derivative suit here into subsection (11a) of
             N.C.G.S. § 50–20(c), those allegations would not be
             available to plaintiff in the distribution of marital property.
             N.C.G.S. § 50–20(c)(11a) (only waste or neglect occurring
             “during the period after separation of the parties and before
             the time of distribution” considered in making an unequal
             distribution) (emphasis added). Even if pre-separation acts
             could be considered pursuant to N.C. Gen. Stat. § 50–
             20(c)(12) (allowing consideration of “[a]ny other factor

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                                BALDELLI V. BALDELLI

                                  Opinion of the Court

             which the court finds to be just and proper,” the district
             court cannot, as we have already noted, reach [the
             defendant’s] separate property in equitable distribution.

Burgess v. Burgess, 205 N.C. App. 325, 331–32, 698 S.E.2d 666, 671 (2010).

      In Ward v. Fogel, the plaintiff and the defendant were already involved in an

action for equitable distribution when the plaintiff filed a second action in superior

court alleging, inter alia, “(1) fraudulent inducement; (2) constructive fraud; (3) and

breach of fiduciary duty[.]” Ward v. Fogel, 237 N.C. App. 570, 573, 768 S.E.2d 292,

296 (2014), disc. review denied, __ N.C. __, 771 S.E.2d 302 (2015).

      Though this Court held that Florida courts had exclusive jurisdiction, it further

reasoned:

             Even if the North Carolina district court did have
             jurisdiction over the parties, an equitable distribution
             proceeding would not be able to provide plaintiff the relief
             she requests. Plaintiff, like the wife in Burgess, has
             demanded a jury trial, to which she would be denied access
             in district court. Additionally, like the wife in Burgess,
             plaintiff is seeking compensatory damages in excess of
             $10,000.00, in addition to punitive damages, on her claims
             for breach of fiduciary duty, constructive fraud, and
             fraudulent inducement. If she is successful on these
             claims, she may get a judgment which could be enforced
             against Mr. Ward’s separate property. However, in the
             equitable distribution claim, the most that plaintiff would
             be able to win is a favorable distribution of marital or
             divisible assets. Therefore, as in Burgess, the relief
             plaintiff seeks in superior court would be unavailable in
             district court, leading us to conclude that Wake County
             Superior Court has proper jurisdiction to adjudicate these
             matters.

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                                 BALDELLI V. BALDELLI

                                    Opinion of the Court

Ward, 237 N.C. App. at 577–78, 768 S.E.2d at 299 (citation omitted).

       In the case before us, Plaintiffs allege, inter alia, breach of fiduciary duty

against Defendant for which Plaintiffs claim damages in excess of $25,000.00. If

Plaintiffs prevail in this breach of fiduciary duty claim, they will collect from

Defendant’s separate property, which is a remedy not available to them in the district

court equitable distribution action.      Although it is possible that the equitable

distribution action could resolve the issues underlying Plaintiffs’ claim for breach of

fiduciary duty, it is also possible that the equitable distribution action will leave these

issues unresolved or, as stated above, leave Plaintiffs without the full remedy that

would be provided in the superior court action. Further, as in Burgess, at least some

of the acts that Plaintiff contends constituted a breach of Defendant’s fiduciary duties

occurred before the date of separation. These acts will generally not be relevant to

equitable distribution decisions concerning how to divide marital property. Burgess,
205 N.C. App. at 332, 698 S.E.2d at 671. We therefore hold that the prior pending

action doctrine did not serve to divest the superior court of jurisdiction over Plaintiffs’

breach of fiduciary duty claim, and we reverse the order of the trial court and remand

for further action as provided below.

       However, because the parties and subject matter of Plaintiffs’ breach of

fiduciary duty claim are closely related – when not identical – to the parties and the

subject matter to be decided in a portion of the district court action, and because there

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                                BALDELLI V. BALDELLI

                                   Opinion of the Court

is a clear interrelationship between the issues in both actions, we do not believe it is

in the interest of judicial economy or clarity for both of these actions to proceed

simultaneously. To allow both actions to proceed concurrently would be to invite

conflict between the resolution of interrelated issues in the two actions.

             We have addressed a similar situation of potential
             unresolvable conflict between two courts with jurisdiction
             in Jessee v. Jessee, 212 N.C. App. 426, 713 S.E.2d 28 (2011).
             In Jessee, the plaintiff-husband had commenced an action
             in Forsyth County alleging that the defendant-wife had
             fraudulently converted funds to her own use after the
             defendant had filed an action for equitable distribution in
             Alamance County. Because the claims brought in the
             Forsyth County action concerned acts which occurred after
             the date of separation and the equitable distribution action
             would only address what had occurred prior to separation,
             we concluded that the equitable distribution action did not
             deprive the superior court in Forsyth County of jurisdiction
             under the prior pending action doctrine. Nevertheless,
             because of the “clear interrelationship” between the two
             cases, we concluded that “the Forsyth County case should
             be held in abeyance pending resolution of the Alamance
             County domestic relations case.”

Johns v. Welker, 228 N.C. App. 177, 182, 744 S.E.2d 486, 490–91 (2013) (citations

omitted); see also Jessee, 212 N.C. App. at 439, 713 S.E.2d at 38 (citations omitted)

(“[D]espite our belief that . . . the ‘prior pending action’ doctrine [does not] mandate

dismissal of the [superior court] action, there is a clear interrelationship between the

two cases, such that the equitable distribution portion of the [district court] domestic

relations case should be resolved prior to the determination of the [superior court]

case. For that reason, we further conclude that the [superior court] case should be

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                                   BALDELLI V. BALDELLI

                                     Opinion of the Court

held ‘in abeyance pending resolution of the’ [district court] domestic relations case,

and the results of that equitable distribution case taken into consideration in the

resolution of the [superior court] case.”).

       We hold that Plaintiffs’ breach of fiduciary duty claim in this case should be

held in abeyance by the superior court until the district court equitable distribution

action is resolved. Concerning Plaintiffs’ additional superior court claims, they are

similar in that though the underlying issues might be resolved in the equitable

distribution action, we cannot say for certain that unresolved issues would not

remain. Further, the record before us has not been developed to an extent as to

provide this Court full confidence in making a determination on subject matter

jurisdiction.

                The determination of subject matter jurisdiction is a
                question of law and this Court has the “power to inquire
                into, and determine, whether it has jurisdiction and to
                dismiss an action ex mero motu when subject matter
                jurisdiction is lacking.” However, the record is devoid of
                evidence from which we may ascertain whether or not the
                trial court possessed subject matter jurisdiction[.] We
                vacate the order filed 22 October 2002 and remand this
                case for findings of fact based on competent evidence to
                support the trial court’s conclusion of law regarding subject
                matter jurisdiction[.]

In re J.B., 164 N.C. App. 394, 398, 595 S.E.2d 794, 797 (2004) (citations omitted).

Though the record before us is not “devoid” of evidence from which to determine

whether dismissal based upon lack of subject matter was proper, we believe it is

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                                BALDELLI V. BALDELLI

                                   Opinion of the Court

appropriate, based upon the facts before us, to hold all of Plaintiffs’ superior court

claims in abeyance so that the record can be more fully developed through resolution

of the district court action. Following resolution of the equitable distribution action

in district court, Plaintiffs can decide whether to proceed with any unresolved claims

in the present superior court case. If Plaintiffs decide to advance any of their superior

court claims, the superior court, based in part on the resolution of the equitable

distribution action, will then decide which claims, if any, should be allowed to

proceed.

      We further vacate the superior court’s 22 October 2015 order denying

Plaintiffs’ motion for leave to file a second amended complaint as moot. Plaintiffs

may, if needed, file for the superior court’s consideration a motion for leave to file a

second amended complaint at the appropriate time following resolution of the district

court action.

      REVERSED AND REMANDED.

      Judges CALABRIA and STROUD concur.

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