Mountain Land Properties, Inc. et al v. Lovell et al

Filing 57

ORDER dismissing all claims asserted by Pltf Mountain Land Properties, Inc. against all Defts; accepting Magistrate Judge's 44 Memorandum and Recommendations, and rejecting Pltfs' 45 Objections; granting in part and denying in part 25 Deft SBCT's Motion to Dismiss; granting 26 Deft Lynn Hickox's Motion to Dismiss as to all of Pltf Diana D.'s claims against her; granting 27 Deft Rodney Hickox's Motion to Dismiss as to all of Pltf Di ana D.'s claims against him; granting 28 Deft Fred Lovell's Motion to Dismiss as to all of Pltf Diana D.'s claims against him. Pltf Diana D. shall have 14 days to decide whether to participate in the Pro Se Settlement Assistance Program and return completed Notice form to the Clerk. Signed by District Judge Martin Reidinger on 9/11/14. (Pro se litigant served by US Mail.) (ejb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
BRYSON CITY DIVISION
CIVIL CASE NO. 2:12-CV-84-MR-DLH

MOUNTAIN LAND PROPERTIES, INC.,
and DIANA D.,

)
)
)
Plaintiffs,
)
)
vs.
)
)
FRED LOVELL, RODNEY HICKOX,
)
LYNN A. HICKOX, and, SCBT, N.A. d/b/a
)
CBT, a division of SCBT, N.A.,
)
)
Defendants.
)
_____________________________________)

ORDER

THIS MATTER is before the Court on Defendants’ Motions to
Dismiss [Docs. 25, 26, 27, and 28]; the Magistrate Judge’s Memorandum
and Recommendation regarding the disposition of those motions [Doc. 44];
and Plaintiffs’ Objections to the Magistrate Judge’s Memorandum and
Recommendation. [Doc. 45].
FACTUAL AND PROCEDURAL BACKGROUND
The dispute underlying this action surrounds Plaintiffs asserted
involvement in the improvement of a parcel of real property in Swain
County, North Carolina, known as the Unahala Road Property. [Doc. 23 at
2]. The Plaintiffs allege that in late 2004 or early 2005, they contemplated

forming a joint venture with Defendants Fred Lovell and Rodney Hickox.
[Id.]. The Plaintiffs claim the purpose of such venture was to develop for
sale the Unahala Road Property whereby Defendants Lovell and Rodney
Hickox would furnish the capital for the project and the Plaintiffs would
provide the labor.

[Id.].

Because Rodney Hickox was an officer of

Community Bank and Trust1 which would be providing the financing for the
project, Plaintiffs assert that “no loans could be procured in Mr. Hickox’s
personal name for the purpose of financing the development venture, but
that he would instead utilize the participation of his wife, Lynn A. Hickox, in
order to procure the loan.”

[Id.].

Further, according to Plaintiffs,

Defendants Lovell, Rodney Hickox, and Lynn Hickox were to pledge as
collateral a certificate of deposit in the amount of $1,000,000 to cover the
loan in the event of default. [Id. at 3]. Plaintiff Mountain Land Properties,
Inc., acting through its president Diana D.,2 became a signatory to the loan
and security documents for the Unahala Road Property.3

[Doc. 25-4].

1

Defendant SCBT, as alleged by Plaintiffs, is the successor by merger to Community
Bank and Trust. [Doc. 23 at 4].
2

Diana D. is not a pseudonym for the purposes of this litigation. Diana D. is the natural
Plaintiff’s full name due to a prior name change proceeding. [Doc. 25-1 at 2 n.1].
3

Plaintiffs do not explain the factual inconsistency between the allegations in the
Amended Complaint that Defendants Lovell and Lynn Hickox were to provide the capital
for the project, not the Plaintiffs [Doc. 23 at 2], and the loan documents themselves
evidencing that Plaintiff Mountain Land Properties, Inc. executed the promissory note
and deed of trust together with Defendants Lovell and Lynn Hickox. [Docs. 25-2; 25-3].
2

Plaintiff Diana D., in her individual capacity, however, does not allege that
she became a member of the joint venture, and she was not a signatory to
the loan and security documents for the Unahala Road Property. [Id.].
Financing for the Unahala Road Property project was secured from
Community Bank and Trust. [Docs. 25-2; 25-3]. Ultimately, the Unahala
Road Property loan went into default and Defendant SCBT, as the holder of
the note, threatened legal action against Plaintiffs. [Doc. 23 at 5]. Plaintiffs
claim, however, that Defendant SCBT had “allowed Defendants Rodney
Hickox and/or Fred Lovell to withdraw, transfer or otherwise diminish funds
from the original, one million dollar certificate of deposit which was in place
to secure the loan transaction execution in connection with the
partnership’s acquisition of the Unahala Road Property. Moreover, at no
time did any of the Defendants ever inform the Plaintiffs of the fact that
these activities had occurred.” [Id.]. Plaintiffs thereafter commenced this
action.
Plaintiffs’ Amended Complaint asserts the following claims: (1)
negligent nondisclosure; (2) fraud and fraudulent inducement; (3) civil
conspiracy; (4) unfair and deceptive trade practices; (5) unjust enrichment;
(6) breach of covenant of good faith and fair dealing; and (7) offset. [Id. at

3

5-9]. Each Defendant filed a motion to dismiss the Plaintiffs’ claims. [Docs.
25, 26, 27, and 28].
Pursuant to 28 U.S.C. § 636(b), the Honorable Dennis L. Howell,
United States Magistrate Judge, was designated to consider Defendants’
motions to dismiss and to submit to this Court a recommendation for the
disposition of these motions. On April 17, 2014, the Magistrate Judge filed
a Memorandum and Recommendation. [Doc. 44]. The M&R recommended
granting the dismissal motion filed by Defendant SCBT as to all of Plaintiff
Diana D.’s claims against it with the exception of her Third claim (unjust
enrichment). [Id. at 12]. The M&R recommended granting in full the
dismissal motions filed by Defendants Lovell, Rodney Hickox, and Lynn
Hickox as to all of Plaintiff Diana D.’s claims against them. [Id. at 29, 32].
The parties were advised that any objections to the Magistrate Judge’s
M&R were to be filed in writing within fourteen days of service. [Id. at 34].
Plaintiffs filed their Objections [Doc. 45] and the Defendants have replied
thereto [Doc. 46, 47, and 48].
On June 24, 2014, counsel for both Plaintiffs filed a motion to
withdraw from representing them further. [Doc. 53].

On August 4, 2014,

the Court entered an Order granting counsel’s motion to withdraw and

4

directing Plaintiff Mountain Land Properties, Inc. to retain new counsel
within ten days of the entry of said Order.

5

STANDARD OF REVIEW
The Federal Magistrate Act requires a district court to “make a de
novo determination of those portions of the report or specific proposed
findings or recommendations to which objection is made.” 28 U.S.C. §
636(b)(1). In order “to preserve for appeal an issue in a magistrate judge’s
report, a party must object to the finding or recommendation on that issue
with sufficient specificity so as reasonably to alert the district court of the
true ground for the objection.” United States v. Midgette, 478 F.3d 616,
622 (4th Cir. 2007). The Court is not required to review, under a de novo
or any other standard, the factual or legal conclusions of the magistrate
judge to which no objections have been raised. Thomas v. Arn, 474 U.S.
140, 150 (1985).

Additionally, the Court need not conduct a de novo

review where a party makes only “general and conclusory objections that
do not direct the court to a specific error in the magistrate’s proposed
findings and recommendations.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th
Cir. 1982).
DISCUSSION
Before discussing the Magistrate Judge’s M&R and Diana D.’s
objections thereto, the Court must address two preliminary matters: (1) the
status of Mountain Land Properties, Inc. as a party to this action and (2) the
6

matters in the M&R to which no objection was lodged by Diana D.
1.

Preliminary Matters.

Pursuant to the Court’s Order entered in this case on August 5, 2014,
counsel for both Plaintiffs was permitted to withdraw. [Doc. 55]. While
Plaintiff Diana D., a natural person, can continue to represent herself in this
matter, Plaintiff Mountain Land Properties, Inc., an artificial person, cannot.
Plaintiff Mountain Land Properties, Inc. was granted ten days from the entry
of the August 5, 2014, Order to retain new counsel and to have such
counsel enter an appearance on its behalf. No new counsel has appeared
for Mountain Land Properties, Inc., and Diana D. has conceded that the
corporation’s claims should be dismissed.4 Accordingly, all claims asserted
by Plaintiff Mountain Land Properties, Inc. against all of the Defendants
should be dismissed and Plaintiff Mountain Land Properties, Inc. should be
terminated as a party plaintiff.
Plaintiff Diana D. has not objected to the Magistrate Judge’s analysis
concerning the Court’s jurisdiction premised upon diversity, the Magistrate
Judge’s discussion of the statutes of limitations applicable to Plaintiff Diana
4

Plaintiff Diana D. served a notice in response to the Court’s August 5, 2014 Order
stating that Mountain Land Properties, Inc. had not retained new counsel and should be
dismissed. “PLANITIFF, Mountain Land Properties, Inc. submits to the Court that [it] has
not found new counsel as of August 14th, 2014 … and requests the court to dismiss
those issues presented to the court by Mountain Land Properties, Inc., without
prejudice.” [Doc. 56 at 1].
7

D.’s various claims, nor the majority of the Magistrate Judge’s meticulous
factual and legal recommendations. The Court, therefore, adopts without
further comment all of the Magistrate Judge’s recommendations not
specifically identified by Plaintiff Diana D. as one of her seven “Specific
Objections” to the M&R she has presented to this Court.
2.

Plaintiff Diana D.’s Specific Objections.
Plaintiff Diana D.’s first objection is directed at the Magistrate Judge’s

conclusion that she lacks standing to assert any tort or contract claims
arising from the lending and security contracts entered into by and among
Mountain Land Properties, Inc., Fred Lovell, and Lynn Hickox on the one
hand, and Community Bank and Trust on the other. [Doc. 45 at 6]. Diana
D. does not dispute that, in her individual capacity, she was not a party to
these contracts. Instead, she argues that she was “intended to be a direct
beneficiary of the property development, as well as any agreements related
thereto, and these allegations are adequately pled in the Complaint[.]” [Id.].
Under North Carolina law,
The question of whether a contract was intended for the benefit
of a third party is generally regarded as one of construction of
the contract. The intention of the parties in this respect is
determined by the provisions of the contract, construed in light
of the circumstances under which it was made and the
apparent purpose that the parties are trying to accomplish.
Johnson v. Wall, 38 N.C.App. 406, 410, 248 S.E.2d 571, 574 (1978).
8

Plaintiff Diana D.’s basic point appears to be that since she was the
owner and the president of Mountain Land Properties, Inc., she was
obviously intended to benefit from any contract entered into by Mountain
Land Properties, Inc. – sort of an “inverse piercing of the corporate veil” or
“inverse alter-ego” theory of recovery. Plaintiff, however, cites no authority
for such a novel concept.
Plaintiff next obliquely argues that she was an intended beneficiary
because she was, personally, a member of the joint venture. The
allegations in the Amended Complaint, however do not bear out this
position. One general allegation in the Amended Complaint points toward
the possibility that Diana D. could have been a principal of the joint venture.
“In November 2004, Defendant Lovell, and in or around February 2005,
Defendant Rodney Hickox, approached Plaintiffs and indicated their
interest in entering into a joint venture partnership with Plaintiffs, whereby
all parties would develop the Unahala Road Property.” [Doc. 23 at 2]. This
general allegation lumping both Plaintiffs together, however, conflicts with
the Amended Complaint’s particular assertion that “Plaintiff Diana D.,
acting on behalf of Plaintiff Mountain Land Properties, Inc. and in her
capacity as the company’s president, moved forward with the
9

development venture by executing the requisite documents to assist in the
procurement of a loan[.]”

[Id. at 3 (emphasis added)].

Diana D., the

individual, was not a signatory to any of the loan or security documents, a
fact she freely admits. [Id. at 8 (“Diana D., who was not a party to the
associated loan transaction, …”)]. Thus, Plaintiffs’ own allegations state
that Diana D. was not a member of the joint venture, as formed.
To survive a motion to dismiss made pursuant to Rule 12(b)(6), a
party’s allegations, treated as true, are required to contain “enough facts to
state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007) (emphasis added).5 The claim need
not contain overly “detailed factual allegations,” Id. at 555, but “a formulaic
recitation of the elements of a cause of action will not do[,]” nor will mere
labels and legal conclusions suffice. Id.

“A claim has facial plausibility

when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The mere possibility
that the defendants acted unlawfully is not sufficient for a claim to survive a
5

The Court notes that Diana D., in her objections to the M&R, has articulated the wrong
standard of review for Fed.R.Civ.P. 12(b)(6) motions. She asserts that Defendants’
dismissal motions should not be granted “unless it appears certain that the claimant can
prove no set of facts that would support its claim for relief.” [Doc. 45 at 8]. This “no set
of facts” standard, originally established by the Supreme Court in Conley v. Gibson, 355
U.S. 41, 45-46 (1957), was explicitly repudiated by the Supreme Court in Twombly, 550
U.S. at 562-63.
10

motion to dismiss. Twombly, 550 U.S. at 570. The touchstone, therefore,
is plausibility and not possibility.

The threadbare allegations in the

Amended Complaint do not plausibly indicate she was a principal in the
joint venture.

The Amended Complaint contains no factual allegations

concerning her individual role in the alleged joint venture, what labor,
services, or materials she individually provided, or what control, authority or
management power she possessed in her individual role in the joint venture
(as opposed to her role as owner and president of Mountain Land
Properties, Inc.). In fact, the allegations in the Amended Complaint
undermine Plaintiff’s argument. Putting aside for the moment the questions
surrounding the exact nature of Diana D.’s business relationship with
Defendants Lynn Hickox and Lovell, if any, the Amended Complaint
contains no allegations whatsoever that Diana D. was an intended thirdparty beneficiary to the development of the Unahala Road Property. For
these reasons Diana D.’s first specific objection is rejected.
Diana D.’s second, third, fourth, and fifth specific objections contest
the Magistrate Judge’s conclusion that the Amended Complaint failed to
allege any fraud claims with particularity as well as failed to allege any facts
supporting Diana D.’s contention that a fiduciary relationship existed
between her and Defendants Lovell, Lynn Hickox, and Rodney Hickox.
11

[Doc. 45 at 6-7]. While Diana D. points the Court to various case citations
that explain the legal relationship among members of a joint venture under
North Carolina law [Id. at 9-11], nowhere does she address the Magistrate
Judge’s conclusion that the Amended Complaint was factually deficient. As
stated supra, Plaintiff fails to allege in the Amended Complaint that she
(rather than Mountain Land Properties, Inc.) was a joint venturer. The
Amended Complaint also fails to set forth any allegations that Defendants
Lovell and Rodney Hickox’s "interest in entering into a joint venture" [Doc.
23 at 2], was ever consummated to create such a business enterprise.
Diana D.’s explanation of North Carolina law, as it pertains to defining the
legal relationships inherent in a joint venture, therefore, is of no moment
because she has failed to assert a sufficient factual basis to give rise to a
fiduciary relationship between the parties. For these reasons, Diana D.’s
second, third, fourth, and fifth specific objections are rejected.
Diana D.’s final two specific objections, numbers six and seven,
contest the Magistrate Judge’s conclusion that her unfair and deceptive
trade practices claim against Defendant SCBT should be dismissed. In
order to make out a prima facie claim for unfair and deceptive trade
practices, as the Magistrate Judge correctly pointed out, Diana D. must
plausibly assert that: (1) Defendant SCBT committed an unfair or deceptive
12

act or practice; (2) that this act or practice was in or affecting commerce;
and (3) that the act or practice proximately caused the Plaintiffs’ injury.
Gray v. N.C. Ins. Underwriting Ass’n, 529 S.E.2d 676, 681 (N.C. 2000).
She claims that Defendant SCBT committed an unfair or deceptive trade
practice when its vice president, Rodney Hickox, and other bank officials,
assured her that there was, and would continue to be, a one million dollar
CD in place to satisfy the underlying loan debt, and such security was
either discharged in secrecy (unfair) or never actually existed in the first
place (deceptive). Further, she states these acts occurred “in the stream of
commerce” because Plaintiffs were consumers of SCBT loans and the
Defendant bank was engaged in selling and servicing credit accounts.
[Doc. 45 at 7].
To begin, Diana D. admitted in the Amended Complaint that she was
not a party to the financial arrangements resulting in the loan made by
Community Bank and Trust. [Doc. 23 at 8]. Further, the Court has
concluded that she was not a third-party beneficiary of this loan either. On
this point, Diana D. recasts her novel “inverse piercing the corporate veil”
theory in the form of a deceptive trade practices claim. For these reasons
alone, Diana D.’s objection to the dismissal of her unfair and deceptive
trade practices claim must be rejected.
13

In addition, the Amended Complaint does not identify any specific
wrongful act or practice committed by Defendant SCBT. It simply states
That the actions of the Defendants, and all of them, were
deceptive, misleading, unfair and/or tended to deceive or
mislead the Plaintiffs, insofar that, as a direct and proximate
result, Defendants are liable for having engaged in unfair and/or
deceptive trade practices as provided under North Carolina
General Statute § 75-1.1, et seq.
[Doc. 23 at 7]. Gray, 529 S.E.2d at 681. Furthermore, since Diana D. fails
to allege any unfair or deceptive act perpetrated by Defendant SCBT, she
has also failed to allege how Defendant SCBT performed such unfair or
deceptive act(s) in commerce or how such act(s) otherwise affected
commerce. Diana D. cannot cure any pleading deficiencies with her post
hoc written objections to the Magistrate Judge’s M&R. Diana D.’s written
objections cannot be used to convert what is a factually deficient pleading
into a well-pleaded complaint.

Accordingly, due to the Amended

Complaint’s factual insufficiencies, Diana D.’s sixth and seventh specific
objections are rejected.
ORDER
IT IS, THEREFORE, ORDERED that all of the claims asserted by
Plaintiff Mountain Land Properties, Inc. against all of the Defendants are
hereby DISMISSED and Plaintiff Mountain Land Properties, Inc. is hereby
TERMINATED as a party to this action.
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IT

IS

FURTHER

ORDERED

that

the

Magistrate

Judge’s

Memorandum and Recommendation [Doc. 44] is ACCEPTED and the
Plaintiffs’ Objections [Doc. 45] thereto are REJECTED. Accordingly:
(1) Defendant SBCT’s Motion to Dismiss [Doc. 25] as to
Plaintiff Diana D.’s First, Second, Third, Fourth, Sixth, and
Seven claims against it is GRANTED and those claims are
DISMISSED. Defendant SBCT’s Motion to Dismiss [Doc. 25]
as to Plaintiff Diana D.’s Fifth claim against it is DENIED;
(2) Defendant Lynn Hickox’s Motion to Dismiss [Doc. 26]
as to all of Plaintiff Diana D.’s claims against her is GRANTED
and all such claims are DISMISSED. Defendant Lynn Hickox is
TERMINATED as a party to this action;
(3) Defendant Rodney Hickox’s Motion to Dismiss [Doc.
27] as to all of Plaintiff Diana D.’s claims against him is
GRANTED and all such claims are DISMISSED. Defendant
Rodney Hickox is TERMINATED as a party to this action; and
(4) Defendant Fred Lovell’s Motion to Dismiss [Doc. 28]
as to all of Plaintiff Diana D.’s claims against him is GRANTED
and all such claims are DISMISSED. Defendant Fred Lovell is
TERMINATED as a party to this action.
15

FINALLY, IT IS ORDERED that the Clerk of Court shall send to the
pro se Plaintiff a Notice of Availability of the Pro Se Settlement Assistance
Program.

Plaintiff Diana D. shall have fourteen (14) days (the “Opt-in

Period”) to decide whether to participate in the Pro Se Settlement
Assistance Program and return the completed Notice form to the Clerk of
Court in Asheville.

The deadline for conducting an initial attorneys’

conference is tolled during this Opt-in Period.
IT IS SO ORDERED.

Signed: September 11, 2014

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