MARY ANNETTE, LLC v. CRIDER, 2023 NCBC 16

STATE OF NORTH CAROLINA
HAYWOOD COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
21 CVS 1224
MARY ANNETTE, LLC; JORGE
CURE; DANA CURE; TWILIGHT
DEVELOPMENTS, INC.; OZZIE 1,
LLC; MICHAEL WASHBURN; and
CHRISTINE SHEFFIELD,
Plaintiffs,
v.
TERRI LYNN CRIDER; and
MOUNTAIN GIRL VENTURES,
LLC,
Defendants.
ORDER AND OPINION
ON PLAINTIFFS’ MOTION
TO DISMISS DEFENDANTS’
AMENDED COUNTERCLAIMS
1. 	This case arises out of disputes concerning the creation, ownership, and
management of Mary Annette, LLC. 	There are seven Plaintiffs, including Mary
Annette itself, as well as Jorge Cure, Dana Cure, Michael Washburn, Christine
Sheffield, Twilight Developments, Inc., and Ozzie 1, LLC. 	They have moved to
dismiss the counterclaims asserted by Defendants Terri Lynn Crider and Mountain
Girl Ventures, LLC (“Mountain Girl”). For the following reasons, the Court GRANTS
in part and DENIES in part the motion.
McLean Law Firm, P.A., by Russell L. McLean III, for Plaintiffs Mary
Annette, LLC, Jorge Cure, Dana Cure, Twilight Developments, Inc.,
Ozzie 1, LLC, Michael Washburn, and Christine Sheffield.
Smathers & Smathers, by Patrick U. Smathers, for Defendants Terri
Lynn Crider and Mountain Girl Ventures, LLC.
Conrad, Judge.
Mary Annette, LLC v. Crider, 2023 NCBC 16.

I.
BACKGROUND
2. 	The Court does not make findings of fact on a motion to dismiss. 	The
following background assumes that the allegations in the amended counterclaims are
true.
3. 	Mary Annette was formed for the purpose of developing a piece of land in
western 	North 	Carolina. 	The 	company’s 	operating 	agreement 	names 	three
members—Mountain Girl, Twilight Developments, and Ozzie 1—and states that each
has a one-third interest. Crider wholly owns Mountain Girl; the Cures together own
Twilight Developments; and Washburn and Sheffield together own Ozzie 1. (See Am.
Countercls. ¶¶ 2, 3, ECF No. 55;1 Op. Agrmt., ECF No. 31.)
4. 	This case has a complicated procedural history. 	It began as a lawsuit by
Mary Annette against Crider, premised on allegations that Crider improperly held
herself out as an officer and agent of the company and then refused to hand over
company records and accounts. (See generally Compl., ECF No. 2.)
5. 	Later filings greatly expanded the scope of the case. 	Crider asserted
counterclaims, added Mountain Girl as a supposed “Third Party Plaintiff,” and added
the Cures, Washburn, Sheffield, Twilight Developments, and Ozzie 1 as supposed
“Third Party Defendants.” 	Then, Mary Annette and the “Third Party Defendants”
responded with another round of claims, which they referred to as “counterclaims,”
against Crider and Mountain Girl. (See, e.g., ECF Nos. 4, 14.)
1 Defendants’ pleading contains separately numbered sections for their “Answer” and their
“Amended Counterclaims.” The Court refers only to the latter section.

6. 	The case was eventually designated as a complex business case and assigned
to the Business Court. 	Shortly after, the Court questioned the “confusing and
unworkable” alignment of parties and claims, noting that, “among the procedural
oddities, the original plaintiff is purportedly asserting ‘counterclaims’ against the
original defendant.” 	(Order on Predesignation Mots., ECF No. 47.) 	To simplify the
pleadings and more accurately reflect the claimants’ interests, the Court realigned
the parties, identifying Mary Annette, the Cures, Sheffield, Washburn, Twilight
Developments, 	and 	Ozzie 	1 	as 	“Plaintiffs” 	and 	Crider 	and 	Mountain 	Girl 	as
“Defendants.” Following realignment, the Court allowed the parties to replead their
claims for clarity and consistency. (See Scheduling Order, ECF No. 50.)
7. 	Repleading is complete. Plaintiffs filed an amended complaint that includes
eight 	causes 	of 	action. 	Defendants 	answered 	and 	asserted 	seven 	amended
counterclaims. These counterclaims are the subject of the present dispute.
8. 	As alleged in the amended counterclaims, Crider has operated a vacation
rental business on property that she co-owned with her brother. 	At some point, a
dispute arose between the siblings, resulting in litigation. 	In summer 2020, Crider
approached Jorge Cure—her friend and a licensed real estate agent—for help with
buying her brother’s one-third interest in the property and resolving their dispute.
Although Jorge and his wife, Dana, agreed to help, Crider now believes that their
offer was part of a scheme to defraud her. (See Am. Countercls. ¶ 4.)
9. 	According to Crider, Jorge proposed developing part of the property at issue
into a Planned Unit Development comprising cabins and RV lots. 	Once developed,

these units would be marketed and sold to individual buyers. 	To accomplish this,
Jorge and one or more other investors—eventually including Dana, Washburn, and
Sheffield—would jointly contribute $650,000 to buy the interest of Crider’s brother
and another $200,000 toward development costs. 	Crider would retain individual
ownership of several tracts of the property for her vacation rental business. 	Either
individually or through an entity, she would also retain a two-thirds interest in the
portion of the property being developed, and the profits from sales of the cabins and
lots would be split with two-thirds going to Crider and the other one-third to Jorge
and his fellow investors. 	Crider agreed to these terms. 	(See Am. Countercls. ¶¶ 5,
7.)
10. 	Over the fall and winter of 2020, the parties sought local governmental
approval to create the Planned Unit Development. 	They also formed Mary Annette
with Mountain Girl, Twilight Developments, and Ozzie 1 as its only members. (See
Am. Countercls. ¶¶ 2, 3, 8.)
11. 	Although there are few details concerning Crider’s brother, it appears that
he agreed to sell his interest. 	At the closing for that sale, Crider learned that the
Cures, Washburn, and Sheffield did not have the $850,000 in capital that they had
pledged. 	Instead, they intended to borrow the money by mortgaging Crider’s
property. Crider objected that she had never agreed to mortgage her own property to
secure the funds promised by her business partners. Plaintiffs urged her to proceed,
assuring her that all would be well and that there was no other way to buy her

brother’s interest and end the family litigation. 	Crider acquiesced. 	(See Am.
Countercls. ¶ 9.)
12. 	After the closing, Crider reviewed Mary Annette’s operating agreement and
concluded that it did not reflect the parties’ earlier oral agreement. 	Crider believes
that she—or, rather, Mountain Girl in her place—was entitled to a two-thirds
interest. 	But the operating agreement gave equal one-third interests to Mountain
Girl, Twilight Developments, and Ozzie 1. When Crider confronted the others about
it, they took steps to exclude her from the business. (See Am. Countercls. ¶¶ 10, 11.)
13. 	Crider 	and 	Mountain 	Girl 	assert 	seven 	counterclaims: 	(1) intentional
misrepresentation and fraud; (2) breach of fiduciary duty; (3) breach of contract;
(4) reformation and declaratory judgment; (5) unfair or deceptive trade practices
under N.C.G.S. § 75-1.1; (6) quiet title and declaratory judgment; and (7) conversion.
Plaintiffs have moved to dismiss the amended counterclaims. 	The Court held a
hearing on 27 January 2023, at which all parties were represented by counsel. The
motion is ripe for decision.
II.
LEGAL STANDARD
14. 	A motion to dismiss for failure to state a claim “tests the legal sufficiency of
the [counterclaim] complaint.” Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation
and quotation marks omitted). 	Dismissal is proper when “(1) the complaint on its
face reveals that no law supports the . . . 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 . . . claim.” Corwin v. Brit. Am. Tobacco PLC,

371 N.C. 605, 615 (2018) (citation and quotation marks omitted). 	In deciding the
motion, the Court must treat all well-pleaded allegations as true and view the facts
and permissible inferences in the light most favorable to the nonmoving party. See,
e.g., Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019). 	The Court may
also consider documents, such as contracts, that are the subject of the counterclaims.
See, e.g., McDonald v. Bank of N.Y. Mellon Tr. Co., 259 N.C. App. 582, 586 (2018).
III.
ANALYSIS
15. 	Some preliminary observations are needed. 	First, the allegations in the
amended counterclaims are often confusing. References to the parties are especially
confusing. There are references to “Plaintiff” and “Defendant” in the singular without
identifying which Plaintiff or Defendant is intended. 	Likewise, there are many
references to “Third Party Plaintiffs” and “Third Party Defendants” even though no
third-party claims exist following the realignment of the parties.
16. 	Second, it appears that every Defendant asserts every counterclaim against
every Plaintiff. 	This has put some counterclaims in an awkward, potentially
nonsensical posture. The contract-based counterclaims, for example, are asserted by
or against every litigant, including those who are not parties to the disputed
contracts.
17. 	Third, the briefs are full of skeletal and undeveloped arguments. 	Among
other things, although Plaintiffs style their motion as one for dismissal of all
counterclaims, they have not advanced any arguments directed to the counterclaims

for conversion and to quiet title. 	The Court therefore denies the request to dismiss
those counterclaims without further analysis.
18. 	As for the remaining issues, the Court has done its best to construe the
counterclaims liberally without rewriting them, to read each side’s arguments fairly,
and to confine its analysis to arguments actually raised and timely asserted.
A. Breach of Contract
19. 	The Court begins with the counterclaim for breach of contract. 	In their
opening brief, Plaintiffs argue that Crider is not a party to Mary Annette’s operating
agreement and therefore cannot sue for breach; that the Cures, Sheffield, and
Washburn are also not parties to the operating agreement and therefore cannot be
sued for breach; and that the allegations, if true, do not show a breach of the operating
agreement by any other party. But these arguments misconstrue the counterclaim,
which does not concern the operating agreement. Rather, the counterclaim concerns
an alleged oral agreement relating to capital funding and development of the disputed
property. (See Am. Countercl. ¶¶ 5, 20.) Plaintiffs’ arguments, which focus entirely
on the operating agreement, do not address that oral agreement and therefore provide
no basis to dismiss the claim for its breach.
20. 	For the first time in their reply brief, Plaintiffs argue that the operating
agreement’s 	merger 	clause 	extinguished 	any 	preexisting 	oral 	contract. 	That
argument is untimely, and the Court declines to consider it. 	See BCR 7.7 (“[T]he
Court may decline to consider issues or arguments raised by the moving party for the
first time in a reply brief.”). 	Plaintiffs are free to renew the argument at summary
judgment.

21. 	Considering only those arguments that were timely raised, the Court denies
the motion to dismiss the counterclaim for breach of contract.
B. Breach of Fiduciary Duty
22. 	Next is the counterclaim for breach of fiduciary duty. 	“For a breach of
fiduciary duty to exist, there must first be a fiduciary relationship between the
parties.” Dalton v. Camp, 353 N.C. 647, 651 (2001). Plaintiffs argue that this claim
should be dismissed because the allegations supporting the existence of a fiduciary
relationship are inadequate and because the claim is barred by the economic loss rule.
23. 	The key allegation, and the premise of this claim, is that “Plaintiff and Third
Party Defendants, as members, managers, and officers, owe a duty of fidelity and
loyalty to Defendant and Mountain Girl . . . .” 	(Am. Countercls. ¶ 18.) 	On its face,
this sentence is confusing and imprecise. 	For starters, there are no “Third Party
Defendants.” 	Presumably, the phrase “Plaintiff and Third Party Defendants” was
meant to say “Plaintiffs.” 	In addition, the allegation says that these parties are
“members, managers, and officers” but does not say of what. Presumably, the answer
is Mary Annette, though that would mean that Mary Annette is alleged to be a
member, manager, or officer of itself. Thus, however awkward, the allegation appears
to state that Plaintiffs are members, managers, and officers of Mary Annette and, in
those roles, owe fiduciary duties to Mountain Girl as the other member and to Crider
as Mountain Girl’s principal.
24. 	Even with the most charitable reading, this allegation is inadequate to show
that a fiduciary relationship exists. 	Generally, members of an LLC don’t owe
fiduciary duties to each other or to the company, and managers and officers owe

fiduciary duties to the company but not to the members. 	See, e.g., Kaplan v. O.K.
Techs., L.L.C., 196 N.C. App. 469, 473–74 (2009). There is no allegation or argument
that the parties modified these general rules in the operating agreement. 	See
Bourgeois v. Lapelusa, 2022 NCBC LEXIS 111, at *14 (N.C. Super. Ct. Sept. 23, 2022)
(observing that the operating agreement may depart from default rules and establish
member-to-member fiduciary duties).
25. 	In their opposition brief, Defendants point to the rule that an LLC’s
controlling member may, in some circumstances, owe fiduciary duties to minority
members. See Kaplan, 196 N.C. App. at 473. But they cite nothing in their pleading
to support that argument. 	Indeed, it appears that the Cures, Sheffield, and
Washburn are not members at all. And, of course, Mary Annette cannot be a member
of itself. Nor do any allegations tend to show that Twilight Developments and Ozzie
1 are controlling members. 	Rather, the amended counterclaims allege the reverse:
that 	“Defendant”—presumably, 	Mountain 	Girl—“is 	the 	principal 	controlling
member,” not Plaintiffs. (Am. Countercls. ¶ 12.) Furthermore, even if the interests
of Twilight Developments and Ozzie 1 add up to a majority, North Carolina courts
have consistently refused, absent special circumstances not alleged here, to impose a
fiduciary duty on minority members that join together to outvote another member.
See, e.g., Duffy v. Schussler, 2022 N.C. App. LEXIS 912, at *27–28 (N.C. Ct. App. Dec.
20, 2022); see also Vanguard Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *20
(N.C. Super. Ct. Jun. 19, 2019) (collecting cases).

26. 	Defendants 	have 	not 	adequately 	alleged 	a 	fiduciary 	relationship.
Accordingly, the Court dismisses the counterclaim for breach of fiduciary duty.
C. Intentional Misrepresentation and Fraud
27. 	Fraud 	has 	five 	“essential 	elements”: 	(1) 	a 	false 	representation 	or
concealment of a material fact, (2) reasonably calculated to deceive, (3) made with
intent to deceive, (4) that did in fact deceive, and (5) that resulted in damage to the
injured party. Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1, 17 (1992).
The injured party’s reliance on the misrepresentation or concealment “must be
reasonable.” Forbis v. Neal, 361 N.C. 519, 527 (2007).
28. 	A fraud claim must be pleaded with particularity. See N.C. R. Civ. P. 9(b).
Generally, to satisfy the particularity requirement, the claimant needs to plead the
following: the time, place, and content of the fraudulent representation; the identity
of the person making the representation; and what was obtained as a result of the
fraudulent act or representation. 	See, e.g., State ex rel. Stein v. Kinston Charter
Acad., 379 N.C. 560, 585 (2021).
29. 	Plaintiffs’ arguments are scattershot. 	They contend, for example, that
Defendants failed to plead the time and place of false statements by Jorge Cure. But
it is not clear which statements are at issue because Plaintiffs do not cite any specific
allegation to support their argument. See BCR 7.5 (“When a motion or brief refers to
any supporting material, the motion or brief must include a pinpoint citation to the
relevant page of the supporting material whenever possible.”). 	At a minimum, it is
alleged that Jorge falsely represented in summer 2020 that he and others would
invest $850,000 in the disputed property and that he never intended to carry out that

promise. 	(See Am. Countercls. ¶¶ 4, 14.) 	Plaintiffs’ undeveloped argument is
insufficient to show that these allegations lack particularity.
30. 	Plaintiffs’ second argument is unpersuasive for essentially the same reason.
They contend that Defendants failed to allege any misrepresentations by Washburn,
Sheffield, Twilight Developments, and Ozzie 1 that could support a claim for fraud.2
But again, Plaintiffs make only conclusory arguments and do not cite any specific
allegation to support their position, leaving the Court to guess at the issue. The Court
will not dismiss a claim based on arguments that haven’t been made or developed.
31. 	A third argument is that the fraud claim is barred by the economic loss rule
because it relates to contractual obligations imposed by Mary Annette’s operating
agreement. This is a misunderstanding of the fraud allegations, which relate at least
partly to representations made before Mary Annette was formed. 	In any event,
binding appellate precedent holds that “while claims for negligence are barred by the
economic loss rule where a valid contract exists between the litigants, claims for fraud
are not so barred.” 	Bradley Woodcraft, Inc. v. Bodden, 251 N.C. App. 27, 34 (2016).
Thus, the economic loss rule does not bar the counterclaim for fraud.
32. 	A fourth and final argument regarding the fraud claim is that Crider lacks
standing because the alleged injury—the failure to capitalize Mary Annette—is an
injury 	to 	the 	company 	rather 	than 	to 	her 	personally. 	Again, 	this 	is 	a
misunderstanding of the allegations. 	As alleged, Crider transferred her interest in
2 Although Plaintiffs say nothing about Mary Annette, it is also ostensibly a target of the
fraud claim.

the disputed property to Mary Annette in reliance on Plaintiffs’ representations.
That is an injury to Crider personally and one that she can sue to redress.
33. 	For these reasons, the Court denies the motion to dismiss the counterclaim
for fraud.
34. 	One other issue regarding the fraud counterclaim arises from the briefing.
In their opposition brief, Defendants contend that their allegations support a claim
for constructive fraud in addition to actual fraud. 	No claim for constructive fraud
appears in the amended counterclaims, however, and the allegations do not give
notice of such a claim. 	And in any event, constructive fraud requires a relationship
of trust or a fiduciary relationship, which Defendants have not adequately alleged.
See White v. Consol. Plan., Inc., 166 N.C. App. 283, 294 (2004). Accordingly, the Court
concludes that Defendants have not pleaded a claim for constructive fraud either
expressly or implicitly.
D. Reformation
35. 	“Reformation is a well-established equitable remedy used to reframe written
instruments where, through mutual mistake or the unilateral mistake of one party
induced by the fraud of the other, the written instrument fails to embody the parties’
actual, original agreement.” Metropolitan Prop. & Cas. Ins. Co. v. Dillard, 126 N.C.
App. 795, 798 (1997) (citations and quotations omitted). 	Crider and Mountain Girl
allege that, “due to fraud and mistake,” Mary Annette’s operating agreement
misstates the members’ ownership interests. 	They seek to reform the operating
agreement so that Mountain Girl has “a two-thirds ownership interest” and Ozzie 1

and 	Twilight 	Developments 	share 	the 	remaining 	“one-third 	interest.” 	(Am.
Countercls. ¶ 22.)3
36. 	Plaintiffs challenge this counterclaim solely on the ground that Crider is not
a party to the operating agreement and therefore may not seek to reform it. They are
correct, and the Court therefore dismisses Crider’s claim for reformation. See Shipton
v. Barfield, 23 N.C. App. 58, 61 (1974) (“It is established that only the original parties
to a written instrument, or persons claiming under them in privity, have standing to
maintain an action for reformation.”).
37. 	But Plaintiffs raise no arguments as to why Mountain Girl’s claim should
be dismissed. 	Accordingly, the Court denies the motion to dismiss Mountain Girl’s
claim.
E. Section 75-1.1
38. 	The section 75-1.1 counterclaim piggybacks on the other counterclaims. All
that is alleged is that “the foregoing constitutes unfair and deceptive trade practices.”
(Am. Countercls. ¶ 24.) Plaintiffs argue that the alleged conduct is not in or affecting
commerce, as required by section 75-1.1. See N.C.G.S § 75-1.1 (declaring “unlawful”
all “unfair or deceptive acts or practices in or affecting commerce”). 	Defendants
respond that their allegations are sufficient but cite nothing in the amended
counterclaims to support that argument.
3 Crider and Mountain Girl style their claim as one for reformation and declaratory judgment.
The purpose of a declaratory judgment is to provide “declaratory relief.” Brandis v. Trs. of
Davidson Coll., 227 N.C. 329, 331–32 (1947). Yet Crider and Mountain Girl ask the Court to
enter a declaratory judgment that reforms the operating agreement. 	(See Am. Countercls.
¶¶ 21, 22.) This request exceeds the scope of declaratory relief. Thus, the Court construes
the claim as a request for reformation alone.

39. 	The Court agrees with Plaintiffs. 	At bottom, this lawsuit is confined to a
single business entity—Mary Annette. 	All the alleged misconduct concerns either
the capitalization of Mary Annette during its formation or matters of internal
governance afterward. Our Supreme Court has held that “extraordinary events done
for the purpose of raising capital” and matters internal to a single market participant
are not in or affecting commerce and are therefore not covered by section 75-1.1. E.g.,
Nobel v. Foxmoor Grp., 380 N.C. 116, 120–22 (2022) (affirming dismissal of claim
based on misconduct related to capital contribution); see also White v. Thompson, 364
N.C. 47, 53 (2010) (affirming dismissal of claim based on conduct “solely related to
the internal operations” of business).
40. 	Accordingly, the Court grants the motion to dismiss the counterclaim for
violations of section 75-1.1.
IV.
CONCLUSION
41. 	For the foregoing reasons, the Court GRANTS in part and DENIES in part
Plaintiffs’ motion to dismiss as follows:
a. 	The Court DENIES the motion to dismiss the counterclaims for breach
of contract, fraud, conversion, and to quiet title.
b. 	The Court GRANTS the motion to dismiss the counterclaims for breach
of fiduciary duty and for violations of section 75-1.1. These counterclaims
are DISMISSED with prejudice.

c. 	The Court GRANTS the motion to dismiss Crider’s counterclaim for
reformation 	but 	DENIES 	the 	motion 	to 	dismiss 	Mountain 	Girl’s
counterclaim for reformation.
SO ORDERED, this the 23rd day of February, 2023.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases