Rivercliff Properties, Inc. v. Certain Interested Underwriters at Lloyd's London Subscribing to Certificate Number AVAC084293 et al
ORDER granting 27 Motion to Dismiss for Failure to State a Claim; granting 29 Motion to Dismiss for Failure to State a Claim. Remaining for adjudication is plaintiffs breach of contract claim against the Lloyd's London defendants. Plaintiff is DIRECTED to file not later than October 14, 2016, an amended complaint which removes paragraph twenty-two of the original complaint. Signed by District Judge Terrence W. Boyle on 10/7/2016. (Stouch, L.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
RIVERCLIFF PROPERTIES, INC.
CERTAIN INTEREST UNDERWRITERS )
AT LLOYDS LONDON SUBSCRIBING )
TO CERTIFICATE AVAC084293, et al., )
This cause comes before the Court on motions to dismiss filed by defendants. Also
before the Court is an agreed motion by the Lloyd's London defendants and plaintiff to strike
pargraph twenty-two of plaintiffs verified complaint. The appropriate responses and replied
have been filed and the matters are ripe for ruling. For the reasons discussed below, the motions
to dismiss and agreed motion to strike are granted.
Plaintiff filed this action in Cumberland County Superior Court alleging claims for
breach of insurance contract, breach of duty of good faith and fair dealing, unfair and deceptive
trade practices, and punitive damages. [DE 1-1]. Plaintiff builds, markets, and sells new homes
in the Fayetteville area. The specific homes at issue are located at 2764, 2776, and 2783
RivercliffRoad. Plaintiff executed a promissory note in favor ofRivercliffRoad NC Trust
(RivercliffTrust) with the 2764 and 2783 homes as collateral. The note was due in full May 1,
2015. Plaintiff alleges that RivercliffTrust also holds the note for the 2776 property. Lloyd's
London issued commercial property and commercial general liability insurance on the 2764 and
2783 properties. The property at 2764 is insured for $480,000 and the property at 2783 is
insured for $470,000. On April21, 2015, three homes owned by plaintiffburned sufficiently
that the City of Fayetteville ordered them demolished- two of the properties that burned were
the subject ofthis suit, located at 2764 and 2783 RivercliffRoad. The 2776 property did not
After plaintiff sought entry of a temporary restraining order (TRO) and preliminary
injunction to enjoin defendant RivercliffTrust from moving forward with foreclosure
proceedings against, transferring, or selling 2764 RivercliffRoad, 2783 RivercliffRoad, and
2776 RivercliffRoad properties in state court, this action was removed to this Court based on its
diversity jurisdiction. [DE 1]. Following a hearing before the undersigned at which counsel for
all parties appeared, the Court denied plaintiffs request for emergency and preliminary
injunctive reliefunder Rule 65 ofthe Federal Rules of Civil Procedure. [DE 26]. The instant
Defendants move to dismiss pursuant to Rule 12(b)(l) and 12(b)(6) of the Federal Rules
of Civil Procedure.
Federal Rule of Civil Procedure 12(b)( 1) authorizes dismissal of a claim for lack of
subject matter jurisdiction. When subject matter jurisdiction is challenged, the plaintiff has the
burden of proving jurisdiction to survive the motion. Evans v. B.F. Perkins Co., 166 F.3d 642,
647-50 (4th Cir. 1999). "In determining whether jurisdiction exists, the district court is to regard
the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the
pleadings without converting the proceeding to one for summary judgment." Richmond,
Fredericksburg & Potomac R.R Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). To this
end, "the nonmoving party must set forth specific facts beyond the pleadings to show that a
genuine issue of material fact exists." /d. (citing Trentacosta v. Frontier Pacific Aircraft Indus.,
813 F.2d 1553, 1558-59 (9th Cir. 1987)). The movant's motion to dismiss should be granted if
the material jurisdictional facts are not in dispute and the movant is entitled to prevail as a matter
A Rule 12(b)(6) motion tests the legal sufficiency ofthe complaint. Papasan v. Allain,
478 U.S. 265,283 (1986).
When acting on a motion to dismiss under Rule 12(b)(6), "the court
should accept as true all well-pleaded allegations and should view the complaint in a light most
favorable to the plaintiff." My/an Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). A
complaint must allege enough facts to state a claim for relief that is facially plausible. Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means that the facts
pled "allow the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged," and mere recitals of the elements of a cause of action supported by
conclusory statements do not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint
must be dismissed if the factual allegations do not nudge the plaintiffs claims "across the line
from conceivable to plausible." Twombly, 550 U.S. at 570.
MOTION TO DISMISS BY LLOYD'S LONDON DEFENDANTS
The Lloyd's London defendants, Certain Interested Underwriters at Lloyd's London
Subscribing to Certificate Number A VAC084293 and Certain Interested Underwriters at Lloyd's
London Subscribing to Certificate Number TMILVAC116757, have moved to dismiss plaintiffs
unfair and deceptive trade practice and punitive damage claims for failure to state a claim upon
which relief can be granted. Fed. R. Civ. P. 12(b)(6). At bottom, the Lloyd's London defendants
contend that plaintiff is attempting recast its breach of contract claim as a tort case in order to
access treble and punitive damages. The Court agrees.
"To prevail on a claim of unfair and deceptive trade practices, a plaintiff must show: ( 1)
defendants committed an unfair or deceptive act or practice; (2) in or affecting commerce; and
(3) that plaintiff was injured thereby." First At!. Mgmt. Corp. v. Dunlea Realty Co., 131 N.C.
App. 242, 252 (1998). A trade practice is unfair if it is immoral, unethical, oppressive, or
substantially injurious. !d. (citation omitted). A trade practice is deceptive when it has "the
tendency or capacity to mislead, or create the likelihood of deception. Gil bane Bldg. Co. v. Fed.
Reserve Bank of Richmond, Charlotte Branch, 80 F.3d 895, 903 (4th Cir. 1996) (alterations and
citation omitted). Only where a breach of contract claim is "surrounded by substantial
aggravating circumstances" will it support an unfair and deceptive trade practice claim. Griffith
v. Glen Wood Co., Inc., 184 N.C. App. 206, 217 (2007). "North Carolina courts are extremely
hesitant to allow plaintiffs to attempt to manufacture a tort action and allege UDTP out of facts
that are properly alleged as a breach of contract claim." Jones v. Harrelson & Smith
Contractors, LLC, 194 N.C. App. 203,229 (2008) affd, 363 N.C. 371 (2009).
Plaintiff alleges that the Lloyd's London defendants' refusal to pay insurance proceeds
was an unfair and deceptive trade practice in violation ofN.C. Gen. Stat. § 75-1.1. In support of
this claim, plaintiff makes bare assertions that the Lloyd's London defendants have acted in bad
faith by refusing to pay the insurance proceeds due. Nothing in plaintiffs complaint would
support a plausible finding that the Lloyd's London defendants acted in an immoral, unethical,
oppressive, or substantially injurious manner, or that the Lloyd's London defendants acted
Plaintiff argues in response to the instant motion that their unfair and deceptive trade
practice claim is based on N.C. Gen. Stat.§ 58-63-15, which governs unfair and deceptive acts
or practices in insurance. However, plaintiff alleges no such claim in its complaint. Section 5863-15(11)(±) provides that failing to attempt in good faith to effectuate prompt and fair settlement
of claims in which liability has become reasonably clear is an unfair claim settlement practice by
an insurer. N.C.Gen. Stat.§ 58-63-15(11)(±). "In North Carolina, a violation of section 58-6315( 11 )(f) of the IUTP A constitutes an unfair or deceptive trade practice under the UDTP A-as a
matter of law-because such conduct is inherently unfair, unscrupulous, immoral, and injurious
to consumers." ABT Bldg. Prod. Corp. v. Nat'/ Union Fire Ins. Co. Of Pittsburgh, 472 F.3d 99,
123 (4th Cir. 2006) (internal quotation marks omitted) (quoting Gray v. N Carolina Ins.
Underwriting Ass'n, 352 N.C. 61,71 (2000)).
Plaintiff alleges that the Lloyd's London defendants, after receiving notice of the loss and
damage, have denied liability or responsibility for any part of the loss and have absolutely
refused to pay plaintiff and defendant Rivercliff Lending Trust. Plaintiff alleges that the Lloyd's
London defendants have alleged that Robert Gore, Jr., the owner and operator of plaintiff,
intentionally burned the subject properties despite having no evidence to support such an
allegation. Plaintiff further alleges that the Lloyd's London defendants have provided no basis in
law or fact as to why they have not paid the insurance proceeds and that said refusal to pay is in
Plaintiff has not alleged that liability in this matter has become reasonably clear, or that
after liability became reasonably clear the Lloyd's London defendants in bad faith refused to
promptly settle plaintiffs claim. Allegations which simply reflect that an insurer has failed to
As plaintiff recognizes, a direct claim under§ 58-63-15(11) may only be brought by the
Commissioner of Insurance.
pay a claim coupled with the bare allegation that doing so was in bad faith are simply insufficient
to allege that the insurer's action was a per se unfair or deceptive trade practice. Plaintiffs
unfair and deceptive trade practices claim is properly dismissed.
Plaintiffs punitive damages claim is also dismissed. Punitive damages are proper where
a defendant is liable for compensatory damages and there is a finding by clear and convincing
evidence that the defendant acted with fraud, malice, or willful and wanton conduct. N.C. Gen.
Stat. § ID-15. "Whether the facts stated in the pleadings are sufficient to bring the case within
the rule allowing punitive damages is a question oflaw." Di Frega v. Pugliese, 164 N.C. App.
499, 508 (2004). "A punitive damages claim is not technically an independent cause of action,
but is instead dependent upon an award of compensatory damages on one of a plaintiffs other
claims." Taylor v. Bettis, 976 F. Supp. 2d 721, 747 (E.D.N.C. 2013).
Punitive damages may not be awarded solely for breach of contract. N.C.Gen. Stat.§
1D-15(d). Because the Court has found dismissal of plaintiffs unfair and deceptive trade
practices claim is appropriate, there are no remaining claims against the Lloyd's London
defendants which could serve as a basis upon which to award punitive damages. Thus, insofar as
it has been alleged as a separate claim for relief, plaintiffs punitive damages claim is dismissed.
AGREED MOTION TO STRIKE
The agreed motion to strike paragraph twenty-two from plaintiffs complaint is
ALLOWED. Paragraph twenty-two of plaintiffs verified complaint is hereby STRICKEN. See
Rabon v. Great Sw. Fire Ins. Co., 818 F.2d 306,309 (4th Cir. 1987).
MOTION TO DISMISS BY RlVERCLIFF ROAD NC TRUST
Defendant Rivercliff Trust moves to dismiss plaintiffs complaint first for lack of subject
matter jurisdiction, arguing that the plaintiffs claims against it are not ripe for review. "The
doctrine of ripeness prevents judicial consideration of issues until a controversy is presented in
'clean-cut and concrete form."' Miller v. Brown, 462 F.3d 312, 318-19 (4th Cir. 2006) (quoting
Rescue Army v. Mun. Court of L.A., 331 U.S. 549, 584 (1947)). The burden of demonstrating
that a claim is ripe falls on the party asserting the claim, id., and in order to determine whether a
claim is ripe a court must "balance the fitness of the issues for judicial decision and the hardship
to the parties of withholding court consideration." Franks v. Ross, 313 F.3d 184, 194 (4th Cir.
2002) (internal quotations and citations omitted). A claim that is ripe is not dependent on future
uncertainties. Charter Fed. Sav. Bank v. Office ofThrift Supervision, 976 F.2d 203, 208 (4th Cir.
1992), as amended (Nov. 2, 1992).
Plaintiff alleges claims for breach of the duty of good faith and fair dealing, unfair and
deceptive trade practices, and punitive damages against RivercliffTrust. Plaintiffs specific
allegations against Rivercliff Trust are that Rivercliff Trust has failed to seek insurance proceeds
from the Lloyd's London defendants, that upon information and beliefRivercliffTrust intends to
foreclose on and sell the 2764 and 2783 properties for below the amount of indebtedness and
then seek a deficiency judgment against plaintiff, and that RivercliffTrust's failure to seek the
amounts owed by the Lloyd's London defendant has been in bad faith and for personal gain.
Much of plaintiffs case against RivercliffTrust is dependent upon RivercliffTrust's
intention to pursue foreclosure sale on the subject properties and seek a deficiency judgment.
Certainly whether Rivercliff Trust will at some point seek a deficiency judgment against plaintiff
is fully dependent on future uncertainties and does not provide a basis for a claim that is ripe for
review by this Court.
However, even ifplaintiffhas sufficiently based its claims on harm already incurred,
plaintiff has simply failed to state a claim against defendant Rivercliff Trust. In response to the
Rule 12(b)(6) motion, plaintiff in essence only argues that it has stated a claim for breach of the
duty of good faith and fair dealing, and the Court thus begins its analysis there.
"In every contract there is an implied covenant of good faith and fair dealing that neither
party will do anything which injures the right of the other to receive the benefits of the
agreement." Bicycle Transit Auth., Inc. v. Bell, 314 N.C. 219,228 (1985) (internal quotation and
citation omitted). Plaintiff has not alleged how RivercliffTrust's election between lawful
remedies in this instance would be sufficient to support a claim of bad faith or failure deal fairly.
See, e.g., Triangle Park Chiropractic v. Battaglia, 139 N.C. App. 201, 204 (2000) (doctrine of
election of remedies "prevents more than one redress for a single wrong" but does not apply to
prevent "co-existing and consistent remedies.") (citations omitted); see also Tech Land Dev., Inc.
v. S. Carolina Ins. Co., 57 N.C. App. 566, 569 (1982) ("When insured property is damaged prior
to foreclosure, courts allow the purchasing mortgagee to retain under the mortgage clause those
[insurance] proceeds amounting to any deficiency after foreclosure. The mortgagor recovers the
remainder of the [insurance] proceeds.") (emphasis in original); State Farm Fire & Cas. Co. v.
Bass, No. 88-725-CIV-5, 1990 WL 15279, at *1 (E.D.N.C. Jan. 2, 1990) (settled law in North
Carolina that mortgagee which forecloses on damaged property and successfully bids full
amount of remaining debt at foreclosure sale loses any claim to insurance proceeds paid as result
Plaintiffs reliance on Robinson v. Deutsche Bank Nat. Trust Co., No. 5:12-CV-590-F,
2013 WL 1452933, at *12 (E.D.N.C. Apr. 9, 2013), is misplaced. The Robinson court held that
the election to pursue foreclosure may amount to commercially unreasonable behavior which
constitutes a breach of the implied duty of good faith and fair dealing. In Robinson, however,
plaintiff specifically alleged that prior to pursuing foreclosure defendants provided her with false
information, told her that no foreclosure was scheduled, and then told her that no foreclosure sale
would take place while her application was pending but proceeded sell the property prior to
taking action on her application. /d. There, the behavior of the defendants altered the
expectations of the parties such that defendant was required act in a commercially reasonable
manner in relation to those expectations. /d. Here, there is no allegation that Rivercliff Trust
engaged in any behavior which altered the expectations of the parties or provided plaintiff with
false or misleading information. Further, as noted above in regard to RivercliffTrust's ripeness
argument, plaintiffs contention that RivercliffTrust will receive both the insurance proceeds as
well as a deficiency judgment rests too heavily on events and alleged injuries which have not yet
occurred. Plaintiff has simply failed to state a claim for violation of the duty of good faith and
fair dealing by Rivercliff Trust.
Plaintiff has similarly failed to state a claim for unfair and deceptive trade practices
against RivercliffTrust. Although plaintiff has alleged that RivercliffTrust has acted and may in
the future act in bad faith, its allegation amounts to little more than a conclusory statement
unadorned by factual support. The complaint as drafted2 simply fails to identify any immoral,
unethical, oppressive, substantially injurious, or deceptive acts by RivercliffTrust which would
state a plausible unfair and deceptive trade practice claim. First At!. Mgmt. Corp., 131 N.C.
App. at 252. Because plaintiff has failed to state a substantive claim for relief against this
defendant, its punitive damages claim necessarily fails. Taylor, 976 F. Supp. 2d at 747.
For the foregoing reasons, defendants' motions to dismiss and agreed motion to strike
[DE 27 & 29] are GRANTED. Plaintiffs third and fourth claims for relief against the Lloyd's
The Court would note that plaintiff has not sought leave to amend its compliant to provide
further factual support for its claims.
London defendants are DISMISSED. Plaintiffs complaint against RivercliffTrust is
DISMISSED in its entirety. Remaining for adjudication is plaintiffs breach of contract claim
against the Lloyd's London defendants. Plaintiff is DIRECTED to file not later than October 14,
2016, an amended complaint which removes paragraph twenty-two of the original complaint.
SO ORDERED, this
_J_ day of October, 2016.
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