ATKINSON v. LEXINGTON CMTY. ASS'N, 2023 NCBC 58

STATE OF NORTH CAROLINA
MECKLENBURG COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
22 CVS 11238
HENRY ATKINSON and JANE
ATKINSON,
Plaintiffs,
v.
LEXINGTON COMMUNITY
ASSOCIATION, INC.,
Defendant/
Third-Party
Plaintiff,
v.
DARRIN L. RANKIN; HORACE
BRYAN; and BRYAN AND
ASSOCIATES REAL ESTATE, LLC,
Third-Party
Defendants.
ORDER AND OPINION ON
THIRD-PARTY DEFENDANT DARRIN
L. RANKIN’S MOTION FOR PARTIAL
JUDGMENT ON THE PLEADINGS
Law Firm Carolinas, by Harmony W. Taylor, and Clawson and Staubes,
LLC, 	by 	Jeremy 	S. 	Foster, 	for 	Third-Party 	Plaintiff 	Lexington
Community Association, Inc.
Villmer Caudill, PLLC, by Bo Caudill, for Third-Party Defendant Darrin
L. Rankin.
Dickie, McCamey & Chilcote, P.C., by Garry Davis, Michele Eagle, and
Bridget Baranyai, for Third-Party Defendants Horace Bryan and Bryan
and Associates Real Estate, LLC.
Conrad, Judge.
1. 	In February 2022, Henry and Jane Atkinson signed a contract to buy a home
owned by Lexington Community Association, Inc. (“Association”). When the sale fell
through, the Atkinsons sued the Association to recover their earnest money and
diligence costs. 	This simple claim for breach of contract had a cascade effect. 	The
Atkinson v. Lexington Cmty. Ass’n, 2023 NCBC 58.

Association blamed the failed sale on its president, Darrin Rankin, and asserted
third-party claims against him and the real estate agents that he hired to list the
home. 	Rankin, in turn, blamed the Association’s lawyers for failing to clear title to
the property and asserted a so-called “fourth-party claim” for malpractice against
them. He also counterclaimed against the Association.
2. 	Much of this free-for-all has sorted itself out. 	The Atkinsons are no longer
in the case, having settled with the Association. (See ECF No. 71.) Rankin, too, has
settled his claim against the Association’s lawyers. 	(See ECF No. 66.) 	But the
litigation between the Association and Rankin goes on, and their claims and
counterclaims are the subject of this dispute.
3. 	The Association tells a story of a board member gone rogue. As alleged, the
home that the Atkinsons tried to buy was a rental property, which the Association
leased to tenants and had no plans to sell. Without board approval, Rankin canceled
the lease and put the home up for sale. 	The Association believes that he did so for
personal gain. 	Rankin, who works as a real estate agent, hired his employer and a
colleague 	to 	handle 	the 	listing 	and 	supposedly 	arranged 	to 	take 	part 	of 	the
commission 	for 	himself. 	Later, 	when 	the 	Atkinsons 	backed 	out 	because 	the
Association could not convey clear title, Rankin refused to return their earnest
money. 	Based on these allegations, the Association claims that Rankin engaged in
self-dealing and breached his fiduciary duties. (See Ass’n Third-Party Compl. ¶¶ 11–
14, 16–18, 23–26, 40, 42, 46, ECF No. 4.)

4. 	Rankin insists that the Association never should have sued him, both
because its allegations are false and because it had no authority to do so under its
governing declaration. 	The Association’s accusations, he alleges, have ruined his
reputation. 	He asserts counterclaims for defamation, breach of contract, and
declaratory judgment. (See Rankin Countercl. ¶¶ 14, 15, 18, 23, 24, ECF No. 13.)
5. 	After the Association replied to the counterclaims, Rankin moved for partial
judgment on the pleadings under Rule 12(c) of the North Carolina Rules of Civil
Procedure. 	(See ECF No. 54.) 	His motion, which is fully briefed, is limited to the
Association’s third-party claims and his counterclaim for declaratory judgment. The
Court held a hearing on 15 May 2023. The motion is ripe for disposition.
6. 	“A motion for judgment on the pleadings is the proper procedure when all
the material allegations of fact are admitted in the pleadings and only questions of
law remain.” 	Ragsdale v. Kennedy, 286 N.C. 130, 137 (1974). 	The Court may
“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.”
Weaver v. Saint Joseph of the Pines, Inc., 187 N.C. App. 198, 204 (2007) (citation and
quotation marks omitted).
7. 	The premise of Rankin’s motion is that the Association lacked authority to
sue him. 	He points to a provision in the declaration that gives the Association’s
members a say in deciding whether to sue. 	The provision states broadly that “[n]o
judicial or administrative proceeding shall be commenced or prosecuted by the
Association unless approved by” 75% of its members, but it goes on to exempt a few

types of proceedings, including “actions brought by the Association to enforce the
provisions of [the] Declaration” and “counterclaims brought by the Association in
proceedings instituted against it.” 	(Decl. Art. XII § 17, ECF No. 13.1.) 	Because the
Association admits that it did not ask for or get member approval before filing its
third-party complaint, (see Ans. to Countercl. ¶ 14, ECF No. 43), Rankin contends
that it failed to comply with the declaration.
8. 	If Rankin is right that the Association needed to get member approval, then
its failure to do so is a complete bar to its claims against him. 	Our Supreme Court
has held that “a defendant who is a stranger to” a homeowners’ association may not
“invoke the association’s own internal governance procedures as an absolute defense
to” claims asserted “by the association against that defendant.” 	Willowmere Cmty.
Ass’n v. City of Charlotte, 370 N.C. 553, 561 (2018). But a member of the association
(such as Rankin) is “entitled to raise the association’s failure to comply with” a
provision requiring presuit membership approval “as a bar to the plaintiff’s suit.” Id.
at 560; see also Homestead at Mills River Prop. Owners Ass’n v. Hyder, 2018 N.C.
App. LEXIS 622, at *24 (N.C. Ct. App. June 19, 2018) (unpublished) (“[A] member of
an association being sued by that association may assert a lack of standing based on
the association’s alleged violation of provisions in its own articles of incorporation
specifically governing the association’s ability to sue.”); Peninsula Prop. Owner Ass’n
v. Crescent Res., LLC, 171 N.C. App. 89, 97 (2005) (“Without the required vote, the
[plaintiff association] lacked the authority to commence legal proceedings against
[the defendant member] and does not possess standing.”).

9. 	The Association maintains that it had the authority to assert claims against
Rankin without a member vote. It reads the declaration to require member approval
only when it intends to start a new lawsuit from scratch. 	Because the Atkinsons
started this action, it contends, the declaration’s presuit requirements simply don’t
apply.
10. 	This is a misreading of the declaration. Member approval is required in any
“proceeding . . . commenced or prosecuted” by the Association. 	(Decl. Art. XII § 17.)
Yes, this includes starting a brand-new lawsuit. But it is also broad enough to cover
claims asserted and pursued by the Association in lawsuits in which it is a defendant.
Why else would the declaration exempt “counterclaims brought by the Association in
proceedings instituted against it”? (Decl. Art. XII § 17.)
11. 	Moreover, the word “proceeding” is a well-defined legal term that means
“[a]n act or step that is part of a larger action.” Proceeding, Black’s Law Dictionary
(10th ed. 2014). 	Naturally, that includes a third-party proceeding in which a
defendant (the Association) serves a summons and complaint on someone (Rankin)
who is “not a party to the action” as originally filed. N.C. R. Civ. P. 14(a). Before the
Association filed its third-party complaint, Rankin was not a party, and no proceeding
against him existed. 	The Atkinsons may have started this action, but it was the
Association that “commenced” the “proceeding” against Rankin.
12. 	The Association objects that it would be impractical to get member approval
before filing a third-party complaint due to the time constraints set by the Rules of
Civil Procedure. 	Even if that were true, practical difficulties could not override the

plain, unambiguous language of the declaration. 	See Atl. & E. Carolina Ry. Co. v.
Wheatly Oil Co., 163 N.C. App. 748, 752 (2004) (“When the language of a written
contract is plain and unambiguous, the contract must be interpreted as written and
the parties are bound by its terms.” (citation and quotation marks omitted)). In any
event, the concern is overblown. A defendant has 30 days to answer a complaint and
another 45 days to file a third-party complaint after its answer, plus the ability to ask
for an extension if needed. See N.C. R. Civ. P. 12(a)(1), 14(a). There is plenty of time
to seek member approval.
13. 	As a fallback, the Association contends that its claims against Rankin are
exempt from the membership-approval requirement. No exemption applies, though.
The only candidate is the exemption for claims “to enforce the provisions of [the]
Declaration.” 	(Decl. Art. XII § 17.) 	But the claims against Rankin, which are for
breach of fiduciary duty, do not fit. Although the Association’s bylaws have provisions
dealing with duties owed by officers and directors, the declaration does not. Without
citation, the Association argues that the bylaws are part of the declaration so that a
claim to enforce the bylaws is a claim to enforce the declaration. That interpretation
finds no support in the text. 	When the declaration means to refer to the bylaws, it
does so expressly. (See, e.g., Decl. Art. IV § 6; Art. XII §§ 1, 11, 16, 18, 19.) Reading
“Declaration” to mean “Declaration and Bylaws” would render the express references
to the bylaws superfluous and, worse yet, could introduce conflicts where none exist.
(Compare Decl. Art. XII § 4 (establishing rules for amending “this Declaration”), with
Bylaws Art. VI § 4 (establishing distinct rules for amending “these Bylaws”).)

14. 	None of the Association’s other arguments has merit. It points to a statute
that authorizes it to “[i]nstitute . . . litigation . . . on matters affecting the planned
community” 	and 	argues 	that 	the 	statute 	trumps 	the 	declaration. 	N.C.G.S.
§ 47F-3-102(4). 	This gets things backward: the declaration trumps the statute, not
the other way around. See id. § 47F-3-102 (stating that the statute controls “[u]nless
the articles of incorporation or the declaration expressly provides to the contrary”).
The declaration’s limitation on the Association’s ability to sue is a valid and
enforceable departure from the statutory default. See Peninsula Prop. Owner Ass’n,
171 N.C. App. at 97.
15. 	Next, the Association’s reliance on the doctrine of judicial estoppel is far off
base. It has not come close to showing that Rankin has taken “clearly inconsistent”
positions on a question of fact. 	Nor has it shown that this Court or any other court
has accepted a position that Rankin took at an earlier time such that accepting his
current position would threaten “judicial integrity” or lead to “inconsistent court
determinations.” 	Whitacre P’ship v. BioSignia, Inc., 358 N.C. 1, 29 (2004) (citation
and quotation marks omitted).
16. 	And finally, no issues of fact stand in the way of a decision. The declaration
is unambiguous, making its interpretation a question of law. 	See, e.g., Schenkel &
Shultz, Inc. v. Hermon F. Fox & Assocs. P.C., 362 N.C. 269, 273 (2008). Likewise, the
Association’s admission that it did not ask for or get member approval before suing
Rankin has “conclusively established” its failure to comply with the declaration.

Champion v. Waller, 268 N.C. 426, 428 (1966). Whether fact disputes exist as to the
merits of the Association’s claims is beside the point.
17. 	In sum, the declaration required the Association to obtain membership
approval before asserting third-party claims against Rankin. 	The Association did
not; its claims are therefore barred. The Court grants Rankin’s motion for judgment
on the pleadings with respect to all claims asserted against him. 	Because the
Association could obtain member approval in the future and file a new lawsuit, the
Court dismisses its claims against Rankin without prejudice.
18. 	Having 	dismissed 	the 	Association’s 	claims, 	the 	Court 	concludes 	that
Rankin’s claim for declaratory judgment is moot. 	He asks the Court to “enter a
judgment declaring the filing and prosecution of the Association’s Third-Party
Complaint to be in breach of the Declaration and ultra vires” and to issue an
injunction requiring the Association to dismiss its claims. (Rankin Countercl. ¶ 15.)
Because Rankin has received complete relief through the dismissal of the third-party
claims, there is no longer any genuine controversy, and a declaratory judgment would
serve no “useful purpose in clarifying and settling the legal relations at issue.”
Calabria v. N.C. State Bd. of Elections, 198 N.C. App. 550, 554 (2009) (citation and
quotation marks omitted).
19. 	For these reasons, the Court GRANTS in part and DENIES in part the
motion for judgment on the pleadings as follows:
a. 	The 	Court 	DISMISSES 	without 	prejudice 	the 	Association’s 	claims
against Rankin.

b. 	The 	Court 	DENIES 	Rankin’s 	motion 	as 	to 	his 	counterclaim 	for
declaratory 	judgment 	and 	DISMISSES 	that 	counterclaim 	without
prejudice as moot.
20. 	In addition, the Court dissolves the stay of discovery entered in May 2023.
(See ECF No. 70.) Within fourteen days from the date of this Order, the parties shall
jointly file a revised case management report and an amended proposed case
management order.
SO ORDERED, this the 16th day of August, 2023.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases