Oliver v. Brown & Morrison, Ltd.

Oliver v. Brown & Morrison, Ltd., 2022 NCBC 13.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG 21 CVS 6678

PERRY L. OLIVER,

Plaintiff,

v.
ORDER AND OPINION ON
BROWN & MORRISON, LTD., a BROWN & MORRISON, LTD.’S AND
North Carolina Business TIMOTHY J. MARKS’S RULE 12(b)(6)
Corporation, and TIMOTHY J. MOTION TO DISMISS
MARKS, as President and Sole
Shareholder of BROWN &
MORRISON, LTD., and
individually, SARA LYNN LITTLE,
CPA, PLLC, a North Carolina
Professional Limited Liability
Company, and EARLE HILTON
“PETE” WARD, CPA, individually,

Defendants.

1. THIS MATTER is before the Court upon the 3 July 2021 filing of

Defendants Brown & Morrison, Ltd.’s and Timothy J. Marks’s Rule 12(b)(6) Motion

to Dismiss (the “Motion”). (ECF No. 19 [“Mot.”].) The Motion seeks to dismiss all

claims brought against Defendants Brown & Morrison, Ltd. (“B&M”) and Timothy J.

Marks (“Marks”) (collectively referred to as the “Moving Defendants”) in Plaintiff

Perry L. Oliver’s (“Oliver”) Complaint. (ECF No. 3 [“Compl.”].)

2. For the reasons set forth herein, the Court hereby GRANTS IN PART and

DENIES IN PART the Motion.
Lake Norman Law Firm, by Rick Ruffin, for Plaintiff Perry L. Oliver.

Erwin, Bishop, Capitano & Moss, P.A., by Anthony Todd Capitano and
Erin Christine Huegel, for Defendants Brown & Morrison, Ltd. and
Timothy J. Marks.

Sharpless McClearn Lester Duffy, PA, by Frederick K. Sharpless, for
Defendants Sara Lynn Little, CPA, PLLC, and Earle Hilton “Pete” Ward,
CPA.

Robinson, Judge.

I. INTRODUCTION

3. The Complaint includes six separate purported causes of action. Moving

Defendants seek to have dismissed the following claims for relief alleged by Oliver in

his Complaint: (1) First Claim for Relief (Breach of Contract), brought against both

B&M and Marks; (2) Second Claim for Relief (Mutual Mistake), brought against

B&M only; (3) Third Claim for Relief (Negligent Misrepresentation), brought against

B&M only; (4) Fourth Claim for Relief (Constructive Fraud), brought against both

B&M and Marks; and (5) Sixth Claim for Relief (Unjust Enrichment), brought against

Marks only. 1

II. FACTUAL BACKGROUND

4. The Court does not make findings of fact on the Motion, but recites only

those facts that are relevant and necessary to the Court’s determination of the

Motion.

1 The Court’s consideration of the validity of the Fifth Claim for Relief (Negligence) is
intentionally omitted from this Opinion as that claim was brought only against Defendants
Sara Lynn Little, CPA, PLLC, a North Carolina Professional Limited Liability Company,
(“Little”), and Earle Hilton “Pete” Ward, CPA, (“Ward”). A separate Motion to Dismiss is
pending filed by Little and Ward which will be the subject of a separate opinion that is
forthcoming. (See Mot. Dismiss Defs. Little and Ward, ECF No. 13.)
5. B&M is a North Carolina corporation. (Compl. ¶ 2.) B&M operates as a

distributor and manufacturer’s representative providing engineering solutions by

offering process equipment products and services for industrial applications. (Compl.

¶ 17.)

6. Oliver joined B&M on 1 January 2015 pursuant to the terms and conditions

of a Memorandum of Understanding and Stock Offer (the “Memorandum”). (Compl.

¶ 15.)

7. The Memorandum, which was allegedly prepared by Defendant Marks,

referred to the Brown & Morrison, Ltd. Stock Partner Agreement and indicated that

a new agreement would need to be executed effective 1 January 2015, between Doug

Jackson (“Jackson”), the former president of B&M, Oliver, and Marks. (Compl. ¶¶ 15,

18, 19.)

8. However, in the Complaint, Oliver states the Stock Partner Agreement was

in reality a stock purchase agreement which outlined B&M’s share ownership, stock

transfer restrictions, terms and conditions for stock transactions, and the formula for

calculating the “Per-Share Purchase Price.” (Compl. ¶¶ 20–21.)

9. B&M utilizes the Accrual-Accounting Method for financial reporting.

(Compl. ¶ 32.)

10. At the time of his dealings with B&M, Oliver owned all the stock of a North

Carolina corporation—Chapman Associates, Inc. (“Chapman”).

11. On 1 January 2015, Oliver purchased a one-third undivided interest in

B&M through the purchase of 100 shares of B&M common, no-par stock, and he
signed a $100,000.00 Promissory Note payable to B&M for the excess consideration

offered by B&M for Oliver’s purchase of B&M Stock and the tendering of assets from

Chapman. (Compl. ¶¶ 33, 35.)

12. B&M and Chapman sales were either direct sales of products B&M had

purchased for resale, or indirect sales through product manufacturers for which

commissions were earned by B&M or Chapman. (Compl. ¶ 38.) At B&M, the

commissions earned from indirect sales through product manufacturers are known

as “Open-Rep Commissions.” (Compl. ¶ 39.)

13. After becoming a shareholder in B&M, Oliver discovered that not all

Accounts Receivables or Commissions Receivables were being included in the accrual-

based accounting records at B&M. (Compl. ¶ 46.)

14. Oliver alleges that the failure to account for Open-Rep Commissions

Receivables by B&M resulted in an understatement of the company’s value. (Compl.

¶ 51.)

15. Oliver alleges that Defendants Little and Ward were aware of and complicit

in these accounting practices. (Compl. ¶¶ 6, 10, 52, 76, 77, 79.)

16. Little provides professional accounting and tax-related services to B&M.

(Compl. ¶ 8.) Ward has been employed by or associated with Little and served in a

fiduciary capacity as the outside accounting, tax reporting contact, and advisor

between Little and B&M at all times relevant to this matter. (Compl. ¶ 12.)

17. Upon discovering the failure to properly account for Open-Rep

Commissions, Oliver immediately requested the inclusion of Open-Rep Commissions
Receivables in B&M’s reported financial information, particularly because internal

practices were not accurately tracking this information. (Compl. ¶¶ 55, 61.)

18. Oliver claims that “Open-Rep Commissions Receivables were a material

portion of the overall B&M value.” (Compl. ¶ 63.)

19. Therefore, the exclusion of the Open-Rep Commissions Receivables in the

financial statements prepared using the Accrual-Accounting Method by B&M

allegedly resulted in both an understatement of company assets, net worth, and Per-

Share Purchase Price of company stock. (Compl. ¶ 87.)

20. On or about 1 January 2019, Jackson sold his 100 shares of B&M stock back

to B&M. (Compl. ¶ 88.)

21. On or about 8 March 2019, Jackson submitted his letter of resignation from

B&M to be effective as of 30 March 2019. (Compl. ¶ 93.) However, per Oliver’s

Complaint, the “Due On A Specific Date Promissory Note” issued by B&M to Jackson

for the repurchase of Jackson’s stock was backdated to 1 January 2019. (Compl.

¶ 94.)

22. Oliver alleges that the “Per-Share Purchase Price Formula” used for

calculating Jackson’s stock value referenced the use of “Accrual basis Net Worth as

of 12/31/2018” as the starting basis. (Compl. ¶ 96.)

23. This transaction left Marks and Oliver as the only remaining B&M

shareholders as of 1 January 2019. (Compl. ¶ 97.) Marks then assumed the position

of president of B&M. (Compl. ¶ 98.)
24. In August 2019, Oliver emailed his outside CPA, Shannon Earp (“Earp”),

copies of B&M tax returns for her review and possible recommendations to reduce

the taxes being paid by B&M shareholders. (Compl. ¶ 101.) Oliver copied Marks and

Vickie Stamey (“Stamey”), B&M’s Controller, on the email. (Compl. ¶ 100.)

25. Also during August 2019, Oliver emailed Ward with several tax questions

relating to being a B&M shareholder. (Compl. ¶ 102.) As alleged, Ward did not

respond to Oliver’s emails, (Compl. ¶ 103), or return Oliver’s phone calls during this

time, (Compl. ¶ 104).

26. Meanwhile, Earp replied to Oliver on 30 August 2019. (Compl. ¶ 106.) Earp

purportedly indicated that the amount of taxes being paid by the B&M shareholders

was “absurd” and Earp was concerned about B&M not including Open-Rep

Commissions Receivables in the company’s financial statements. (Compl. ¶¶ 106,

108.) According to the Complaint, Earp indicated that Little and Ward’s practices

were not in line with good accounting practices. (Compl. ¶ 108.)

27. Oliver discussed Earp’s findings and recommendations with Stamey and

informed Stamey of Oliver’s possible departure from B&M in light of Earp’s findings

and recommendations. (Compl. ¶ 111.) Oliver asked Stamey to relay Oliver’s

concerns to Marks. (Compl. ¶ 112.)

28. On 30 August 2019, Earp and Marks discussed Earp’s findings and

recommendations. (Compl. ¶ 113.)
29. On 16 September 2019, Oliver, Marks, and Stamey held an off-site meeting

to discuss Oliver’s meeting with Earp, Marks’s telephone discussion with Earp, and

Oliver’s potential resignation from B&M. (Compl. ¶ 114.)

30. On 24 September 2019, Marks followed up with Oliver by email for the

purpose of outlining Oliver’s resignation plan; Oliver allegedly reminded Marks that

his resignation was not officially tendered. (Compl. ¶¶ 115–16.)

31. On 10 December 2019, Oliver emailed Marks, Little, Ward, Stamey, and

Earp a copy of a Per-Share Purchase Price calculation that he computed for his sale

of stock back to B&M based on the reported November 2019 financial statements.

(Compl. ¶ 118.) At that time, Oliver had failed to include the Open-Rep Commissions

Receivables in his Per-Share Purchase Price calculation by mistake, but this

oversight was later disclosed. (Compl. ¶ 120.) According to the Complaint, the

inclusion of the Open-Rep Commissions Receivables would significantly increase the

Per-Share Purchase Price to be paid to Oliver. (Compl. ¶ 122.)

32. The B&M “Weekly Financial Information” spreadsheet for the week of 22

December 2019 indicated Open-Rep Commissions Receivables in the amount of

$1,217,516.38 that were not included on the B&M financial statements prepared

according to the Accrual-Accounting Method. (Compl. ¶ 123.)

33. Given that Oliver held 100 shares of the 200 total outstanding shares of

B&M stock, Oliver alleged that the inclusion of the Open-Rep Commissions

Receivables would have resulted in a Per-Share Purchase Price increase of $6,087.58.

(Compl. ¶ 124.)
34. In December 2019, Oliver attended a slew of cardiologist appointments due

to personal health issues. (Compl. ¶ 125.) He was ultimately advised to undergo

coronary bypass surgery. (Compl. ¶ 126.)

35. After allegedly receiving no response from Little or Ward to a 16 December

2019 follow-up email seeking a response, Oliver emailed his letter of resignation to

Marks on 18 December 2019 including an effective date of resignation of 1 January

2020. (Compl. ¶¶ 127–29.)

36. On 27 December 2019, Oliver had coronary bypass surgery. (Compl. ¶ 130.)

37. On 21 February 2020, Marks emailed the Per-Share Purchase Price buyout

calculation prepared by Little and Ward for Oliver’s shares at a rate of $3,950.15 per

share price at close of business 31 December 2019, which did not include Open-Rep

Commission Receivables. (Compl. ¶¶ 134–35.)

38. During this time, Oliver recovered from surgery, and internal email

communications between Oliver and Marks confirm continued debate regarding the

Per-Share Purchase Price calculation. (Compl. ¶¶ 138–39.)

39. Oliver also pointed out to B&M, Little, and Ward that they failed to

properly account for the Promissory Note payable to Jackson for the purchase of

Jackson’s stock in 2019. (Compl. ¶ 140.) Oliver alleged that the subsequent inclusion

of this long-term debt reduced the net worth of B&M for the like amount of the

outstanding debt and further reduced the Per-Share Purchase Price. (Compl. ¶ 142.)
40. On 21 January 2020, the first case of COVID-19 was confirmed in the U.S.,

and the unknowns about the coronavirus pandemic caused great concern for Oliver

due to his health and business affairs facing dramatic changes. (Compl. ¶¶ 146–47.)

41. Oliver contacted Chemineer, Inc. (“Chemineer”), which was “Oliver’s

largest and best product prior to and during his employment with B&M,” to inform

them he was leaving B&M. (Compl. ¶¶ 133, 151.) Per the Complaint, Chemineer

originally asked if Oliver was interested in representing it after his B&M departure;

however, this “offer” was later revoked due to the pandemic’s impact on the business

environment. (Compl. ¶¶ 151–53.)

42. Oliver’s personal tax liability for the 2019 tax year purportedly required a

tax payment in excess of $66,000.00. (Compl. ¶ 155.)

43. Per the Complaint, Oliver approached Marks regarding the possibility of

withdrawing his resignation and remaining with B&M, and Marks declined Oliver’s

offer. (Compl. ¶¶ 156–57.)

44. The stock buyout for Oliver included an initial payment of $100,000.00

upon execution of the Buyout Agreement with the balance of the calculated buyout

amount being secured by a four-year note from B&M to Oliver. (Compl. ¶ 158.)

45. Oliver continued to argue his position regarding the proper calculation of

the Per-Share Purchase Price, including particularly arguing to include the Open-

Rep Commissions Receivables. (Compl. ¶ 160.) B&M and Marks continued to oppose

Oliver’s claims. (Compl. ¶ 161.)
46. Despite his disagreement with the calculations of his Per-Share Purchase

Price, due to his desperate financial situation, Oliver executed the Redemption

Agreement as proposed by B&M and Marks on 22 April 2020. (Compl. ¶ 164.)

47. The Redemption Agreement provided for a total buyout price of

$395,015.00. (Compl. ¶ 165.)

48. Oliver indicated that his treatment at the time of his resignation and stock

sale differ dramatically from the treatment Jackson received from B&M in 2019 when

Jackson sold his shares to the company. (Compl. ¶¶ 167–78.)

49. The Complaint alleges that, in addition to the other errors and omissions

committed by Defendants regarding accounting for Open-Rep Commissions and

calculating his buy-out amount, an incorrect interest rate was applied to the

promissory note for his stock and his subsequent challenges to the incorrect interest

rate were summarily dismissed by B&M, Marks, Little, and Ward as being incorrect.

(Compl. ¶ 179.)

III. PROCEDURAL BACKGROUND

50. The Court sets forth here only those portions of the procedural history

relevant to its determination of the Motion.

51. Oliver filed the Complaint in this action on 22 April 2021.

52. Moving Defendants filed the Motion pursuant to Rule 12(b)(6) on 3 July

2021.

53. The Motion has been fully briefed, (B&M’s and Marks’s Mem. Law Supp.

Rule 12(b)(6) Mot. Dismiss, ECF No. 20 [“Br. Supp.”]; Pl.’s Br. Resp. Def. B&M and
Marks’s Mot. Dismiss, ECF No. 22 [“Resp. Br.”]; and B&M’s and Marks’s Reply Br.

Supp. Rule 12(b)(6) Mot. Dismiss [“Reply Br.”]), and the Court has conducted a

hearing on the Motion and heard arguments from counsel for the parties, (See Not.

Hearing, ECF No. 30).

54. The Motion is now ripe for resolution.

IV. LEGAL STANDARD

55. In ruling on a motion to dismiss pursuant to North Carolina Rule of Civil

Procedure (the “Rules”) 12(b)(6), the Court reviews the allegations in the Complaint

in the light most favorable to the plaintiff. See Christenbury Eye Ctr., P.A. v. Medflow,

Inc., 370 N.C. 1, 5 (2017). The Court’s inquiry is “whether, as a matter of law, the

allegations of the complaint, treated as true, are sufficient to state a claim upon which

relief may be granted under some legal theory[.]” Harris v. NCNB Nat’l Bank, 85

N.C. App. 669, 670 (1987). The Court accepts all well-pleaded factual allegations in

the relevant pleading as true. See Krawiec v. Manly, 370 N.C. 602, 606 (2018). The

Court is therefore not required “to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope

Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274 (2005)

(quoting Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)).

56. Furthermore, the Court “can reject allegations that are contradicted by the

documents attached, specifically referred to, or incorporated by reference in the

complaint.” Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198, 206 (2016)

(quoting Laster v. Francis, 199 N.C. App. 572, 577 (2009)). The Court may consider
these attached or incorporated documents without converting the Rule 12(b)(6)

motion to dismiss into a Rule 56 motion for summary judgment. Id. (citing Schlieper

v. Johnson, 195 N.C. App. 257, 261 (2009)). Moreover, the Court “may properly

consider documents which are the subject of a plaintiff’s complaint and to which the

complaint specifically refers even though they are presented by the defendant.”

Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60 (2001) (citing Robertson v. Boyd,

88 N.C. App. 437, 441 (1988)).

57. Our Supreme Court has noted that “[i]t is well-established that dismissal

pursuant to Rule 12(b)(6) is proper when ‘(1) the complaint on its face reveals that no

law supports the plaintiff’s claim; (2) the complaint on its face reveals the absence of

facts sufficient to make a good claim; or (3) the complaint discloses some fact that

necessarily defeats the plaintiff’s claim.’ ” Corwin v. British Am. Tobacco PLC, 371

N.C. 605, 615 (2018) (quoting Wood v. Guilford Cty., 355 N.C. 161, 166 (2002)). This

standard of review for Rule 12(b)(6) is the standard our Supreme Court “routinely

uses . . . in assessing the sufficiency of complaints in the context of complex

commercial litigation.” Id. at n.7 (citing Krawiec, 370 N.C. at 606 and Christenbury

Eye Ctr., 370 N.C. at 5).

V. ANALYSIS

A. Breach of Contract

58. Moving Defendants first seek dismissal of Oliver’s breach of contract claim

brought against both B&M and Marks.
59. To properly plead a breach of contract claim, the claimant must allege “(1)

[the] existence of a valid contract and (2) [a] breach of the terms of that contract.”

Poor v. Hill, 138 N.C. App. 19, 26 (2000) (citing Jackson v. Cal. Hardwood Co., 120

N.C. App. 870, 871 (1995)). Where each of these elements are alleged, “it is error to

dismiss a breach of contract claim under Rule 12(b)(6).” Woolard v. Davenport, 166

N.C. App. 129, 134 (2004).

60. Under North Carolina law, “a valid contract requires (1) assent; (2)

mutuality of obligation; and (3) definite terms.” Charlotte Motor Speedway, LLC v.

Cty. of Cabarrus, 230 N.C. App. 1, 7 (2013) (citing Schlieper, 195 N.C. App. at 261);

see also Elks v. N. State Ins. Co., 159 N.C. 619, 624 (1912) (“There is no contract unless

the parties thereto assent, and they must assent to the same thing, in the same

sense.” (cleaned up)). Mutual assent is demonstrated by the parties through a

showing of a “meeting of the minds,” evincing an intent to be bound by definite terms.

Parker v. Glosson, 182 N.C. App. 229, 232 (2007) (citing Charles Holmes Mach. Co. v.

Chalkley, 143 N.C. 181, 183 (1906)).

61. Moving Defendants first argue in part that the Motion should be granted

as to the breach of contract claim because it is unclear on the face of the Complaint

what “contract” Oliver alleges was breached. (Br. Supp. 9–13.)

62. During the hearing on 19 August 2021, counsel for Oliver confirmed that,

while not attached to the Complaint when filed to initiate this action, the “contract”

at issue in the breach of contract claim was filed on the Court’s docket at Exhibit A

to the Affidavit of Perry L. Oliver (“Oliver Affidavit”). (ECF No. 32.)
63. The North Carolina Court of Appeals has stated that “a trial court’s

consideration of a contract which is the subject matter of an action does not expand

the scope of a Rule 12(b)(6) hearing and does not create justifiable surprise in the

nonmoving party.” Oberlin Capital, L.P., 147 N.C. App. at 60. The Oberlin Capital

Court further stated that because “the [ ] agreement [was] the subject of [the]

complaint and [was] specifically referred to in the complaint[,] . . . the trial court did

not err in reviewing the [ ] agreement when ruling on the Rule 12(b)(6) motions.” Id.

at 60–61; see also Coley v. N.C. Nat’l Bank, 41 N.C. App. 121, 126 (1979), Robertson

v. Boyd, 88 N.C. App. 437, 140–41 (1988), and Brooks Distr. Co. v. Pugh, 91 N.C. App.

715, 717–18 (1988) (stating that “a trial court’s consideration of a contract which is

the subject matter of the action does not expand the scope of the hearing and should

not create justifiable surprise in the nonmoving party[,]” where the agreements at

issue were presented by defense counsel at a pretrial hearing).

64. Paragraph 181 of the Complaint refers to a contract for B&M’s employment

of Oliver and for issuance of stock ownership to Oliver in accordance with the B&M

Stock Partner Agreement. It appears to the Court that this paragraph of the

Complaint refers to the same contract attached as Exhibit A to the Oliver Affidavit,

which describes Oliver’s role as a Shareholder in B&M and provides a Per-Share

Purchase Price Formula, referring to Paragraph 6 of the Buy-Sell Agreement.

Therefore, the Court may properly review the contract attached to the Oliver

Affidavit and considers it herein as the contract that Oliver alleges was breached.
65. Second, Defendants seek to dismiss the breach of contract claim because,

“[e]ven assuming a prior ‘[c]ontract’ existed providing for redemption of Oliver’s

shares on terms different from those in the Redemption Agreement, the Redemption

Agreement constitutes a novation of any such prior agreement.” (Br. Supp. 13.)

66. “Novation may be defined as a substitution of a new contract or obligation

for an old one which is thereby extinguished[.] . . . [N]ovation implies the

extinguishment of one obligation by the substitution of another.” Bowles v. BCJ

Trucking Servs., Inc., 172 N.C. App. 149, 153–54 (2005) (some alterations in original)

(quoting Tomberlin v. Long, 250 N.C. 640, 644 (1959)). The general requirements for

a novation are: “a previous valid obligation, the agreement of all the parties to the

new contract, the extinguishment of the old contract, and the validity of the new

contract,” and, “to constitute a novation the transaction must have been so intended

by the parties.” Anthony Marano Co. v. Jones, 165 N.C. App. 266, 269 (2004) (quoting

Tomberlin, 250 N.C. at 644).

67. Here, it is not clear to the Court based on the facts alleged in the Complaint,

as opposed to any position argued by Defendants, which is, by definition “outside the

complaint,” that there was an intent by all the parties—including Oliver—that the

second contract (the Redemption Agreement) be substituted for the original contract

(the Stock Partner Agreement). Further, the Redemption Agreement itself does not

express an intent by all the parties, including Oliver, that it was meant to be

substituted for the Stock Partner Agreement.
68. The Redemption Agreement referred to in the Complaint was filed with the

Court by Marks as Exhibit A to his Affidavit. (ECF No. 18.) On a Rule 12(b)(6)

motion, the Court “may properly consider documents which are the subject of a

plaintiff’s complaint and to which the complaint specifically refers even though they

are presented by the defendant.” Oberlin Capital, L.P., 147 N.C. App. at 60 (citing

Robertson, 88 N.C. App. at 441). The Redemption Agreement is mentioned multiple

times in Oliver’s Complaint, (see, e.g., Compl. ¶¶ 163–65), and, therefore, it is proper

to consider the Redemption Agreement although it was presented by Marks.

69. Oliver has properly alleged the facts necessary to sustain, at the 12(b)(6)

stage, a breach of contract claim. The Court finds that neither the facts alleged in

the Complaint nor the language within the four corners of the Redemption Agreement

support Moving Defendants’ contention that all parties agreed to a novation

(including Oliver). As a result, the Motion is denied as to the breach of contract claim.

B. Mutual Mistake

70. Oliver claims that the Redemption Agreement was entered into as a

product of mutual mistake, entitling him to relief. As an initial matter, Oliver does

not specify in the Complaint who he seeks to bring his claim for mutual mistake

against. As Moving Defendants have pointed out, “[t]he circumstances suggest this

is a claim against [B&M] alone.” (Br. Supp. 15.) Oliver does not contest this

proposition. The Court agrees and will analyze the Motion as to the mutual mistake

claim only as to B&M. Regardless of who the claim was brought against (whether
B&M alone, both B&M and Marks, or Marks alone), the Court’s determination would

not vary.

71. “A mutual mistake exists when both parties to a contract proceed ‘under

the same misconception respecting a material fact, the terms of the agreement, or the

provisions of the written instrument designed to embody such agreement.’ ” Smith

v. First Choice Servs., 158 N.C. App. 244, 249 (2003) (quoting Sudds v. Gillian, 152

N.C. App. 659, 662 (2002)). “A party seeking relief from a contract or deed must

generally prove there was a mutual mistake by the parties. . . . That mistake must

occur during the making of the contract.” Stratton v. Royal Bank of Can., 211 N.C.

App. 78, 82 (2011).

72. Oliver alleges that the Redemption Agreement executed in April 2020 is

“invalid” due to mutual mistakes in (1) the calculations of the Per-Share Purchase

Price and (2) an incorrect application of the interest accrual rate on the stock

redemption Promissory Note. (Compl. ¶ 193.) As a result of these alleged mistakes

and the alleged invalidity of the Redemption Agreement, Oliver claims the contract

is unenforceable. (Compl. ¶ 192.) Oliver contends he has suffered damages in excess

of $25,000.00 due to these alleged mistakes. (Compl. ¶ 196.)

73. Moving Defendants first argue that the mutual mistake claim fails because

there can be no cause of action for mutual mistake, standing alone. Indeed, generally

a claim of mutual mistake comes in the form of a request for recission or reformation

of a contract. See, e.g., WNC Holdings, LLC v. Alliance Bank & Trust Co., 2012 NCBC

LEXIS 53, at **47 (N.C. Super. Ct. Oct. 2, 2012) (“In equity, a party may seek
rescission of a contract based on the mutual mistake of the parties.” (citing Marriott

Financial Serv., Inc. v. Capitol Funds, Inc., 288 N.C. 122, 135 (1975))); and TAC Invs.,

LLC v. Rodgers, 2020 NCBC LEXIS 143, at **10–11 (N.C. Super. Ct. Dec. 7, 2020)

(“Reformation is a well-established equitable remedy used to reframe written

instructions where, through mutual mistake . . . the written instrument fails to

embody the parties’ actual, original agreement.” (citing Metro. Prop. & Cas. Ins. Co.

v. Dillard, 126 N.C. App. 795, 798 (1997) (cleaned up))).

74. In some instances, defendants may also attempt to assert mutual mistake

as a defense to contract enforcement. See, e.g., Paradigm Fin. Group, Inc. v. Church,

2014 NCBC LEXIS 33, at **8–10 (N.C. Super. Ct. July 24, 2014).

75. It is questionable whether a claim for relief for mutual mistake stands on

its own, but, even assuming the Court takes Oliver’s statement in the Complaint that

the Redemption Agreement is “invalid” due to mutual mistake as a request for

rescission of the agreement—and further viewed in light of Oliver’s clarification in

his Response Brief to the Motion that he seeks reformation of the Redemption

Agreement, (Br. Opp’n 18)—Oliver’s claim for Mutual Mistake still fails for failure to

allege any “mistake.”

76. Rule 9(b) states that “[i]n all averments of . . . mistake, the circumstances

constituting . . . [the] mistake shall be stated with particularity.” In analyzing

whether the Rule 9(b) particularity requirement had been satisfied in a claim for

mistake, the North Carolina Court of Appeals stated that “[t]he mere statement that

something was or was not done through error, oversight and mutual mistake is not
sufficient to satisfy the minimum requirements for seeking the revision of a contract

because of mistake.” Ragsdale v. Kennedy, 22 N.C. App. 509, 511 (1974) (rev’d on

other grounds, 286 N.C. 130 (1974)).

77. “The party seeking reformation [for mistake] must allege the provision that

was agreed upon, the provision that was written, and that the mistake was mutual.

It is not required that the pleader allege facts as to how and why the mutual mistake

came about.” Huss v. Huss, 31 N.C. App. 463, 467 (1976) (citing Matthews v.

Shamrock Van Lines, Inc., 264 N.C. 722 (1965) (internal citations omitted)).

78. “[O]ur Supreme Court has long held that to satisfy Rule 9(b)’s requirements

[in a fraud claim], a plaintiff must ‘alleg[e the] time, place and content of the

fraudulent representation, identity of the person making the representation and

what was obtained as a result of the fraudulent acts or representations.’ ” Aym

Techs., LLC v. Scopia Capital Mgmt. LP, 2021 NCBC LEXIS 29, at *21 (N.C. Super.

Ct. Mar. 31, 2021) (quoting Terry v. Terry, 302 N.C. 77, 85 (1981)). While this is the

rule for the Rule 9(b) particularity requirement with regard to fraud, a similar rule

has been applied in analyzing the Rule 9(b) particularity requirement in the mistake

context. See Lahrmer v. Norris, 2003 N.C. App. LEXIS 1845, at *9 (2003) (finding

that the plaintiff there had failed to state a claim for mistake regarding the contents

of a deed where “[t]here [was] no allegation in the complaint regarding the

circumstances surrounding the signing of the deed, [nor] what anyone was told

concerning the titling of the property or concerning the deed’s execution[.]”).
79. Here, Oliver has failed to allege any facts tending to indicate that he was

mistaken as to the terms of the Redemption Agreement at the time he executed the

document; in fact, quite the opposite, by Oliver’s own admission, he was fully aware

of the provisions in the agreement that were not in accordance with his

understanding of the terms that should have been included in the contract.

80. As Moving Defendants note, Oliver was fully aware of the alleged

“mistakes” when he entered into the contract, making these provisions in the contract

not mistakes on the part of Oliver. (Compl. ¶¶ 55–56 (as early as January 2015 Oliver

was advocating for inclusion of Open-Rep Commissions in the relevant calculations);

¶ 87 (Oliver was aware that failure to include Open-Rep Commissions affects the Per-

Share Purchase Price); ¶¶ 108–14 (Oliver had his accountants advocating inclusion

of Open-Rep Commissions to increase value); ¶ 118 (in December 2019 Oliver

provided a proposed estimated Per-Share Purchase Price including Open-Rep

Commissions).)

81. Yet, “despite Oliver’s disagreement with the content and manner in which

his Per-Share Purchase Price had been calculated, he executed his Redemption

Agreement on April 22, 2020[.]” (Compl. ¶ 164.)

82. Based on the express statements in his Complaint, the Court can only

conclude that Oliver made no mistake as to the terms of the Redemption Agreement;

rather, he agreed to take less than what he had argued he was owed. Therefore, the
claim for relief for mutual mistake fails and the Motion is granted as to this claim. 2

The mutual mistake claim is dismissed with prejudice. 3

C. Negligent Misrepresentation

83. Oliver’s third claim, for negligent misrepresentation, is brought against

B&M only. As a result, B&M seeks to have the claim dismissed.

84. “It has long been held in North Carolina that ‘the tort of negligent

misrepresentation occurs when (1) a party justifiably relies (2) to his detriment (3) on

information prepared without reasonable care (4) by one who owed the relying party

a duty of care.’ ” Simms v. Prudential Life Ins. Co. of Am., 140 N.C. App. 529, 532

(2000) (quoting Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200,

206 (1988) (cleaned up)). When alleging negligent misrepresentation, a plaintiff must

satisfy the heightened pleading standard for fraud found in Rule 9. N.C.G.S § 1A-1,

Rule 9(b); see also Deluca v. River Bluff Holdings II, LLC, 2015 NCBC LEXIS 12, at

**20–21 (N.C. Super. Ct. Jan. 28, 2015); BDM Invs. v. Lenhil, Inc., 2012 NCBC LEXIS

7, at **56 (N.C. Super. Ct. Jan. 18, 2012); Breedon v. Richmond Cmty. Coll., 171

F.R.D. 189, 198–99 (M.D.N.C. 1997).

2 The Court further doubts whether Oliver has failed to allege that any of the Defendants

were mistaken as to the terms of the Redemption Agreement, which would be another fatal
defect in the mutual mistake claim, but the Court need not reach this issue because Oliver
has failed to allege even his own mistake in entering into the Redemption Agreement.

3 “The decision to dismiss an action with or without prejudice is in the discretion of the trial

court.” First Fed. Bank v. Aldridge, 230 N.C. App. 187, 191 (2013). The Court concludes, in
the exercise of its discretion, that dismissal of the mutual mistake claim (and the negligent
misrepresentation claim, see herein infra) should be with prejudice to Oliver’s right to
attempt to reassert such claim through proper factual allegations by way of a motion to
amend. The Court, based on its review of the facts found in the Complaint, finds that Oliver
cannot properly allege claims for mutual mistake and negligent misrepresentation.
85. B&M claims that Oliver cannot satisfy the “justifiable reliance” element of

a negligent misrepresentation claim because he admits that he knew the true facts

underlying the alleged “misrepresentation.” (Br. Supp. 17–18.) The Court agrees.

86. Raritan River Steel Co. stands for the proposition that, to survive a Rule

12(b)(6) motion, a plaintiff’s complaint must allege facts supporting justifiable

reliance to his detriment on information prepared without reasonable care by

someone who owed a duty of care to the relying party. 322 N.C. at 206. To properly

plead justifiable reliance, “a plaintiff must sufficiently allege that he made a

reasonable inquiry into the misrepresentation and [ ] that he was denied the

opportunity to investigate or that he could not have learned the true facts by exercise

of reasonable diligence.” Austin v. Regal Inv. Advisors, LLC, 2018 NCBC LEXIS 3,

at *31 (N.C. Super. Ct. Jan. 8, 2018) (quoting Rountree v. Chowan Cty., 252 N.C. App.

155, 163 (2017) (emphasis added) (cleaned up)).

87. Here, Oliver admits repeatedly in the Complaint that he knew the true facts

underlying the alleged “misrepresentation.” (See, e.g., Compl. ¶ 164 (“Despite Oliver’s

disagreement with the content and manner in which his Per-Share Purchase Price

had been calculated, he executed his Redemption Agreement on April 22, 2020, in

order to secure the One Hundred Thousand Dollar ($100,000.00) initial stock sale

payment.”).) Oliver cannot properly allege that he justifiably relied on

representations made by B&M while also alleging that he knew the true facts

underlying those alleged misrepresentations.
88. Additionally, even if the Court’s conclusion in this regard is in error, the

Complaint further fails to allege how Oliver, with reasonable diligence, could not have

discovered the true facts prior to executing the agreements in question. This failing,

too, is fatal to Oliver’s claim.

89. Therefore, because Oliver cannot satisfy the justifiable reliance element,

the Motion is granted as to the claim for negligent misrepresentation and that claim

is dismissed with prejudice.

D. Constructive Fraud

90. Oliver’s fourth claim is brought against both B&M and Marks for

constructive fraud.

91. “[A] cause of action for constructive fraud must allege: (1) a relationship of

trust and confidence; (2) that the defendant took advantage of that position of trust

in order to benefit himself; and (3) that plaintiff was, as a result, injured.” White v.

Consol. Planning, Inc., 166 N.C. App. 283, 293 (2004).

92. Constructive fraud and breach of fiduciary duty are similar but separate

claims in North Carolina. Id. The primary difference between the two claims is that

constructive fraud requires that the defendant benefit himself. Id. at 294.

93. Constructive fraud and actual fraud are also similar but separate claims.

A claim of constructive fraud “does not require the same rigorous adherence to

elements as actual fraud.” Forbis v. Neal, 361 N.C. 519, 528 (2007). Further, an

intent to deceive on defendant’s part, required in a claim for actual fraud, is not a

required element for constructive fraud. White, 166 N.C. App. at 294.
94. The Motion as to the constructive fraud claim is based on Oliver’s alleged

failure to properly set out one of the three elements of constructive fraud, namely the

first element, a relationship of trust and confidence. Moving Defendants’ argument

for dismissal of the constructive fraud claim fails. Here, Oliver has properly pled a

constructive fraud claim sufficient to withstand the Motion by alleging sufficient

information to support the contention that Oliver’s injury was unique such that

Oliver can maintain a direct action as a shareholder.

95. “ ‘[T]o maintain a claim for constructive fraud, plaintiffs must show that

they and defendants were in a relation of trust and confidence[.]’ . . . ‘Put simply, a

plaintiff must show (1) the existence of a fiduciary duty, and (2) a breach of that

duty.’ ” Brissett v. First Mt. Vernon Indus. Loan Ass’n, 233 N.C. App. 241, 252 (2014)

(quoting Barger v. McCoy Hillard & Parks, 346 N.C. 650, 666 (1997), and Keener

Lumber Co., Inc. v. Perry, 149 N.C. App. 19, 28 (2002) (cleaned up)).

96. Generally, such a relationship exists “wherever confidence on one side

results in superiority and influence on the other; where a special confidence is reposed

in one who in equity and good conscience is bound to act in good faith and with due

regard to the interests of the one reposing the confidence.” White, 166 N.C. App. at

293 (quoting Vail v. Vail, 233 N.C. 109, 114 (1951)); see also Abbitt v. Gregory, 201

N.C. 577, 598 (1931). These types of relationships generally include a patient and

physician, an attorney and client, a broker and principal, a guardian and ward, and

other such fiduciary relations. Black v. Littlejohn, 312 N.C. 626, 646 (1985); White,

166 N.C. App. at 293.
97. Oliver alleges that a relationship of trust and confidence existed between

him, as a corporate officer and shareholder of B&M, on the one hand, and B&M, on

the other, (Compl. ¶ 212), and between Oliver and Marks as equal shareholders of

B&M, (Compl. ¶ 213). Oliver further contends that Marks, as B&M’s president, owed

Oliver fiduciary duties as a shareholder and that B&M, as a corporation, owed

fiduciary duties to Oliver as a shareholder. (Compl. ¶ 222.)

98. A corporation does not owe a generalized de jure fiduciary duty to an officer

and shareholder. Merrell v. Smith, 2020 NCBC LEXIS 150, at **22 (N.C. Super. Ct.

Dec. 22, 2020). A de facto fiduciary duty may arise in certain situations but is a

demanding standard where the party alleged to owe the duty must figuratively “hold

all the cards.” Beam v. Sunset Fin. Servs., 2019 NCBC LEXIS 55, at *20 (N.C. Super.

Ct. Sept. 3, 2019). Here, Oliver and Moving Defendants were on essentially equal

footing. Oliver and Marks were equal 50% shareholders in B&M and each brought

business knowledge and sophistication to their respective roles, notably including

Oliver’s prior experience at his company, Chapman, which offered similar products

and services as B&M. (Compl. ¶¶ 34–35, 117.)

99. Further, shareholders generally “do not owe a fiduciary duty to each other

or to the corporation.” Freese v. Smith, 110 N.C. App. 28, 37 (1993). There is an

exception that majority shareholders owe duties to minority shareholders, but that

exception is inapplicable here where Marks and Oliver were equal shareholders of

B&M. Gaines v. Long Mfg. Co., 234 N.C. 340, 344 (1951); see also Corwin, 371 N.C.
at 616 (explaining that only controlling shareholders owe fiduciary duties to other

stockholders).

100. However, to the extent that Oliver alleges that B&M and Marks—as

President of B&M—were functioning in the capacity of fiduciaries to the company’s

shareholders, and that Moving Defendants breached that fiduciary duty as to Oliver

as the only other shareholder in B&M, Oliver’s allegations are sufficient to withstand

the Motion based on a unique injury. (Compl. ¶ 222.)

101. As established above, a corporation does not owe generalized fiduciary

duties to its shareholders. Merrell, 2020 NCBC LEXIS 150, at **22. Officers,

however, do owe fiduciary duties to the company but not directly to its shareholders.

Raymond James Capital Partners, L.P. v. Hayes, 248 N.C. App. 574, 577 (2016). As

a result, shareholders rarely successfully bring claims in their individual capacities

directly against officers of a corporation. Id. at 580.

102. A shareholder may only bring an individual action against a third party for

an injury that directly affects the shareholder under two circumstances: (1) where the

third party owed the shareholder a special duty; or (2) where the shareholder suffered

a separate and distinct personal injury from the injury sustained by other

shareholders or the corporation itself. Id. at 578. Oliver need only show that he was

owed a special duty or that he sustained a separate and distinct injury, not both.

White v. Hyde, 2016 NCBC LEXIS 74, at **18 (N.C. Super. Ct. Oct. 4, 2016). Here,

Oliver has alleged enough to withstand the Motion by alleging that he suffered a

separate and distinct personal injury.
103. The North Carolina Court of Appeals has stated that “a fifty-percent

shareholder of a closely held corporation ‘cannot maintain an action against

defendants for her individual recovery absent a showing that she has sustained a loss

peculiar to herself by reason of some special circumstances or special relationship to

defendants.’ ” Grasinger v. Perkins, 2016 N.C. App. LEXIS 1040, at *9–10 (2016)

(quoting Aubin v. Susi, 149 N.C. App. 320, 326 (2002) (cleaned up)); see also Copeland

v. Winters, 2019 NCBC LEXIS 20, at *8–9 (N.C. Super. Ct. Mar. 18, 2019) (“The North

Carolina Court of Appeals . . . has consistently held that absent extraordinary unique

circumstances . . . a fifty percent owner of a corporate entity does not owe fiduciary

duties to the other fifty percent owner.”), and Outen v. Mical, 118 N.C. App. 263, 266–

67 (1995) (dismissing the argument that a fifty percent shareholder relationship

created a special relationship sufficient to establish individual standing).

104. To establish the unique injury, Oliver must demonstrate that he suffered a

“loss peculiar to himself.” Copeland, 2019 NCBC LEXIS 20, at *10 (quoting Outen,

118 N.C. App. at 266) (internal citations omitted). “ ‘Specifically, a plaintiff must

show that its particular injury was separate and distinct from the injury sustained

by the other shareholders or the corporation itself.’ ” White, 2016 NCBC LEXIS 74,

at **23–24 (quoting Raymond James Capital Partners, L.P., 248 N.C. App. at 581

(cleaned up)); see also Howell v. Fisher, 49 N.C. App. 488, 498 (1980) (stating that

plaintiff may maintain an individual action where he suffered damages “distinct from

any damage suffered by the corporation”).
105. Here, based solely on the allegations of the Complaint, the Court concludes

that Oliver has alleged sufficient facts to demonstrate that his injuries were unique

from any other shareholders and from B&M. Firstly, B&M actually stood to benefit

rather than be injured from the reduced Per-Share Purchase Price paid to Oliver.

Secondly, Oliver alleges that his treatment at the time of his resignation and stock

sale differed dramatically from the treatment Jackson, another shareholder, received

from B&M in 2019 when Jackson sold his shares to the company. (Compl. ¶¶ 167–

78.) Therefore, the Court finds that Oliver has done enough in the Complaint to

allege that his injuries were unique based on his agreements with B&M—the

Redemption Agreement and the Stock Partner Agreement—and the Per-Share

Purchase Price paid by B&M for Oliver’s shares.

106. Therefore, because Oliver has alleged enough to withstand the Motion by

alleging a unique injury as a shareholder, and given that Marks, as the president of

B&M, owed B&M a duty as its chief executive officer to properly manage the entity,

the Court hereby denies Moving Defendants’ motion to dismiss as to the constructive

fraud claim.

E. Unjust Enrichment

107. The sixth claim, for unjust enrichment, is brought against Marks only.

Marks seeks dismissal of this claim.

108. “A claim for unjust enrichment ‘is neither in tort nor contract but is

described as a claim in quasi contract or a contract implied in law.’ ” Cty. of Wake
PDF Elec. & Supply Co., LLC v. Jacobsen, 2020 NCBC LEXIS 103, at *28 (N.C. Super.

Ct. Sept. 9, 2020) (quoting Booe v. Shadrick, 322 N.C. 567, 570 (1988)).

109. “The general rule of unjust enrichment is that where services are rendered

and expenditures made by one party to or for the benefit of another, without an

express contract to pay, the law will imply a promise to pay a fair compensation

therefor.” Atlantic C. L. R. Co. v. State Highway Comm'n, 268 N.C. 92, 95–96 (1966)

(citing Beacon Homes, Inc. v. Holt, 266 N.C. 467 (1966), and Dean v. Mattox, 250 N.C.

246 (1959)). “The claim is not based on a promise but is imposed by law to prevent

an unjust enrichment. If there is a contract between the parties [then] the contract

governs the claim and the law will not imply a contract.” Booe, 322 N.C. at 570.

110. “In North Carolina, to recover on a claim of unjust enrichment, Plaintiff

must prove: (1) that it conferred a benefit on another party; (2) that the other party

consciously accepted the benefit; and (3) that the benefit was not conferred

gratuitously or by an interference in the affairs of the other party.” Cty. of Wake PDF

Elec. & Supply Co., LLC, 2020 NCBC LEXIS 103, at *29 (citing Southeastern Shelter

Corp. v. BTU, Inc., 154 N.C. App. 321, 330 (2002)).

111. Marks’s first argument in favor of dismissal of the unjust enrichment claim

is that Oliver alleges that a benefit was conferred on B&M, but the benefit only

indirectly redounded to Marks as the remaining shareholder in B&M. (Br. Supp. 23–

24.) This argument fails.

112. North Carolina courts as of late have routinely “held that an indirect benefit

can support an unjust enrichment claim.” Lau v. Constable, 2017 NCBC LEXIS 10,
at **14 (N.C. Super. Ct. Feb. 7, 2017); see also New Prime, Inc. v. Harris Transp. Co.,

222 N.C. App. 317 (2012); Metric Constructors, Inc. v. Bank of Tokyo-Mitsubishi, Ltd.,

72 F. App'x 916, 921 (4th Cir. 2003).

113. Marks’s only other argument in favor of dismissal of the unjust enrichment

claim is that it must fail because it was not expressly pled “in the alternative” to the

claims based on the existence of an express contract. (Br. Supp. 24–25.) This

argument for dismissal meets the same fate as the first.

114. A plaintiff is not required to expressly state that the unjust enrichment

claim is being pleaded “in the alternative” to another claim that is based on the

existence of an express contract. See Zagaroli v. Neill, 2017 NCBC LEXIS 103, at

*14–15 (N.C. Super. Ct. Nov. 7, 2017) (“Notwithstanding that Plaintiff ideally should

have pleaded [the unjust enrichment] claim[ ] expressly in the alternative, ‘under

certain facts a plaintiff is not required to identify alternatively pleaded claims

expressly as such, because [Rule] 8(e)(2) does not mandate a particular form for

phrasing alternative claims.’ ” (quoting Kingsdown, Inc. v. Hinshaw, 2016 NCBC

LEXIS 15, at *29 n.9 (N.C. Super. Ct. Feb. 17, 2016) (some alterations in original)));

see also Bandy v. Gibson, 2017 NCBC LEXIS 66, at *12 (N.C. Super. Ct. July 26,

2017) (“The Court is unwilling to prevent [plaintiff’s] unjust enrichment claim from

moving to discovery because it was not specifically pleaded in the alternative to her

breach of contract claim.”); Oxendine v. Bowers, 100 N.C. App. 712, 716 (1990) (Rule

8(e)(2) does not “provide[ ] for any particular form of phrasing alternative claims.”).
115. The Court finds that Marks’s arguments for dismissal of the unjust

enrichment claim are unavailing. Therefore, the Motion is denied as to the claim for

unjust enrichment.

VI. CONCLUSION

116. For the foregoing reasons, the Court hereby GRANTS IN PART and

DENIES IN PART the Motion as follows:

a. the Motion is DENIED as to the breach of contract claim;

b. the Motion is GRANTED as to the mutual mistake claim and that claim

is DISMISSED WITH PREJUDICE;

c. the Motion is GRANTED as to the negligent misrepresentation claim

and that claim is DISMISSED WITH PREJUDICE;

d. the Motion is DENIED as to the constructive fraud claim; and

e. the Motion is DENIED as to the unjust enrichment claim.

IT IS SO ORDERED, this the 3rd day of March, 2022.

/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases