AUTO PROVISIONS, LLC v. G1.34 HOLDINGS, LLC, 2024 NCBC 64

STATE OF NORTH CAROLINA
WAKE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
24CV010060-910
AUTO PROVISIONS, LLC and
RECON PARTNERS, LLC,
Plaintiffs,
v.
G1.34 HOLDINGS, LLC,
Defendant.
ORDER AND OPINION ON
PLAINTIFFS’ MOTION TO DISMISS
DEFENDANT’S COUNTERCLAIMS
1. 	THIS MATTER is before the Court following the 8 July 2024 filing of
Plaintiffs’ Motion to Dismiss Defendant’s Counterclaims (the “Motion”), filed by
Plaintiffs Auto ProVisions, LLC (“AP”) and Recon Partners, LLC (“RP”; and with AP,
“Plaintiffs”). (ECF No. 25 [“Mot.”].) Pursuant to Rule 12(b)(6) of the North Carolina
Rules of Civil Procedure (the “Rule(s)”), Plaintiffs seek dismissal, in whole or in part,
of most of the counterclaims alleged against them by Defendant G1.34 Holdings, LLC
(“G1.34”). (See Mot.)
2. 	For the reasons set forth herein, the Court GRANTS in part and DENIES
in part the Motion.
Michael Best & Friedrich LLP by Justin G. May and Joseph Lucas
Taylor for Plaintiff Auto ProVisions, LLC.
Wyrick Robbins Yates & Ponton LLP by Charles George for Plaintiff
Recon Partners, LLC.
Parry Law by Alan K. Parry and Jonah Garson for Defendant G1.34
Holdings, LLC.
Robinson, Judge.
Auto Provisions, LLC v. G1.34 Holdings, LLC, 2024 NCBC 64.

I. 	INTRODUCTION
3. 	This case arises from a broken business relationship between two former
friends. RP was created by AP and G1.34 for the purpose of developing and marketing
proprietary software for auto dealerships. 	However, the business relationship
between AP and G1.34 began to fall apart, with G1.34 contending Plaintiffs breached
the Operating Agreement of RP by failing to provide G1.34 necessary documentation,
freezing G1.34 out of RP’s business decisions, failing to provide G1.34 the additional
ownership interest and compensation it was owed as a result of its work done for RP,
and failing to pay back a loan and other funds extended to RP by G1.34.
II. 	FACTUAL BACKGROUND
4. 	The Court does not make findings of fact on a motion to dismiss pursuant
to Rule 12(b)(6), but instead recites only those factual allegations included in the
Counterclaims that are relevant to the Court’s determination of the Motion.
A. 	The Parties
5. 	AP is a North Carolina limited liability company with its principal place of
business in Wake County, North Carolina. (Answer & Countercl. of G1.34 ¶ 2, ECF
No. 8 [“Countercl.”].) Jeff Chapman (“Chapman”) is AP’s principal. (Countercl. ¶ 8.)
6. 	RP is a North Carolina limited liability company with its principal place of
business in Wake County, North Carolina. (Countercl. ¶ 3.) RP is owned by AP and
G1.34, with AP holding a sixty percent (60%) interest and G1.34 holding the

remaining forty percent (40%) interest. 	(See Compl. Ex. 1 at 20,1 ECF No. 3 [“Op.
Agt.”].) Chapman is RP’s named manager. (Countercl. ¶ 8.)
7. 	G1.34 is a North Carolina limited liability company with its principal place
of 	business 	in 	Wake 	County, 	North 	Carolina. 	(Countercl. 	¶ 1.) 	Nicholas
Medendorp, Jr. (“Medendorp”) is G1.34’s principal. (Countercl. ¶ 8.)
B. 	Formation of RP and its Operating Agreement
8. 	Chapman and Medendorp met in 2008, and Medendorp served as a mentor
and professional advisor to Chapman during Chapman’s transition from auto sales
into software sales. (Countercl. ¶ 9.)
9. 	At that time, Chapman owned and controlled a software sales business
known 	as 	Chapman 	Group, 	Inc. 	(the 	“Chapman 	Group”). 	(Countercl. 	¶ 16.)
Medendorp acted as an unpaid consultant to Chapman and helped Chapman refine
his business plan, reviewed contracts, discussed projects, and offered other guidance.
(Countercl. ¶ 18.)
10. 	Chapman and Medendorp agreed to form RP “to develop and market
proprietary software for auto dealerships,” with the intent to “provide [RP’s] software
as a service, partnering with auto dealerships to operate and manage the vehicle
reconditioning process[.]” (Countercl. ¶ 7.)
1 The Operating Agreement is the subject of, and attached to, Plaintiffs’ Complaint and is
specifically referred to in the Counterclaim. 	See Oberlin Capital, L.P. v. Slavin, 147 N.C.
App. 52, 60 (2001) (citations omitted) (“[T]his Court 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”
and that “when ruling on a Rule 12(b)(6) motion, a 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.”)

11. 	Medendorp proposed to Chapman that “he provide [RP] with a no-interest
loan to help get [RP] off the ground, and to pay for software programmers going
forward[.]” (Countercl. ¶ 37.) A framework document memorializing this agreement
was allegedly signed on 7 November 2019, and purportedly states “[Medendorp’s]
capital contributions for the software was to be paid back as a ‘note repayment[.]’ ”
(Countercl. ¶ 37.) 	Chapman later confirmed by email that “[RP’s] initial funding
through a ‘line of credit loan’ from [G1.34] [was] to be treated as a ‘note payable’ by
[RP].” (Countercl. ¶ 38.)
12. 	On 6 December 2019, Chapman, on behalf of AP, and Medendorp, on behalf
of G1.34, signed the Operating Agreement of RP (“Operating Agreement”). (See Op.
Agt.) 	AP and G1.34 are RP’s only members, with membership interests of 60% and
40%, respectively. (Op. Agt. at 20.)
13. 	The Operating Agreement states that RP “shall directly enter into contracts
with programmers for the development of computer software (the “Software”)[.]” (Op.
Agt. at 15.) 	G1.34 was to fund the software development and “immediately remit
payments to [RP] in the amount of any invoices received by [RP] for the Software.”
(Op. Agt. at 15).
14. 	Under the Operating Agreement, G1.34 was responsible for delivering a
“Minimum Viable Product” (“MVP”) of software. 	(See Op. Agt. Ex. A.) 	Once G1.34
had developed the product to reach MVP status in a manner that satisfied the
specifications and requirements set forth in the Operating Agreement, (Op. Agt.
at 15; see also Op. Agt. Ex. A), and RP generated “revenue of at least $10,000.00 from

clients that have contracted to purchase and/or subscribe for such product,” AP would
transfer an additional nine percent (9%) equity interest to G1.34, (Op. Agt. at 15).
C. 	The Business Dynamic of RP
15. 	G1.34 was responsible for “funding and developing [RP’s] principal asset,
its Software,” which included “remitting payments to [RP] in the amount of any
invoices received by the Company for the Software, and delivering a ‘minimum viable
product’ in operational, market-ready enterprise software.” (Countercl. ¶ 39.) G1.34
agreed to “take principal responsibility for attendant risks to [RP] in going about its
business, expressly indemnifying [RP] against losses related to the Software.”
(Countercl. ¶ 40.)
16. 	Conversely, Chapman was to “bring his considerable marketing and sales
skills and industry experience to bear on [RP’s] behalf, and commit a significant
amount of his time and energy to running [RP].” (Countercl. ¶ 44.)
17. 	RP 	allowed 	Chapman 	Group 	“an 	exclusive, 	perpetual, 	irrevocable,
worldwide license to use the Software, allowing Chapman Group clients to use the
Software, as opposed to” other software. (Countercl. ¶ 41.)
18. 	The Operating Agreement provides G1.34 with certain rights, including
“the right to ‘review all material contracts and agreements being considered by [RP]
prior to the execution by [Chapman].’ ” 	(Countercl. ¶ 43.) 	Also, Chapman was
required to “furnish unaudited quarterly financial statements and audited annual
financial statements to each Member.” (Countercl. ¶ 43.)

19. 	G1.34, contributed in various ways to RP, including, but not limited to,
“sourcing, vetting, and interviewing potential contractors for development and
programming of the Software[,]” (Countercl. ¶ 45.a.), coordinating RP’s brand and
website 	design, 	(Countercl. 	¶ 45.b.–c.), 	and 	monitoring 	company 	accounts,
(Countercl. ¶ 45.h.). (See also Countercl. ¶¶ 45.e.–g., i.–j.)
D. 	Events Giving Rise to Litigation
20. 	G1.34 alleges AP failed to contribute to RP, and acted in ways contrary to
RP’s best interests, including “sharing confidential/proprietary information” with
outsiders, “failing to follow up with business leads on behalf of [RP],” “failing to learn
the rudiments of software development and marketing,” and “refusing to do the
marketing and sales for [RP.]” (Countercl. ¶ 47.)
21. 	G1.34 alleges that Chapman, and thus AP, “deliberately distanced himself
from [RP] and obstructed [G1.34’s] efforts,” while simultaneously investing “more
time and resources” into Chapman’s separate enterprise–the Chapman Group.
(Countercl. ¶¶ 48.a.–h.) 	Thereafter, AP was notified that its “continued business
relationship with [unrelated third parties] represented an irreconcilable conflict of
interest.” (Countercl. ¶ 50.)
22. 	By the end of 2022, G1.34 had “fulfilled [its] obligation to deliver the
Software as a ‘minimal viable product.’ ” (Countercl. ¶ 52.)
23. 	In January 2023, while at a company retreat, Chapman represented that
he “had not made cold calls in years” on behalf of RP, “complained about the ‘time
and stress’ of juggling his responsibilities,” complained “about the burden of paying

back the [l]oan,” and informed Medendorp that G1.34 “would have to continue to do
the bulk of the work for [RP] going forward.” 	(Countercl. ¶ 54.) 	Chapman later
repeated these remarks on a phone call with Medendorp. (Countercl. ¶ 56.)
24. 	G1.34 alleges that thereafter AP “began to take steps to freeze [G1.34] out
of [RP],” including transferring various RP accounts; locking Medendorp out of RP’s
email 	accounts, 	software 	development 	platform, 	and 	text 	message 	tools; 	and
“forbidding [G1.34] from having anything to do with [RP’s] Software’s final stages of
development, product launch, and marketing.” (Countercl. ¶ 57, 57.a.–f.)
25. 	Since the filing of this action by Plaintiffs, AP has “failed to deliver audited
annual financial statements to [G1.34] or [RP] tax filings as required under the
Operating 	Agreement,” 	and 	has 	failed 	to 	repay 	any 	money 	to 	G1.34.
(Countercl. ¶ 67.)
III. 	PROCEDURAL BACKGROUND
26. 	On 26 March 2024, Plaintiffs initiated this action upon the filing of their
Complaint, (ECF No. 3), asserting four claims against G1.34.
27. 	On 7 May 2024, G1.34 filed its Answer and Counterclaims. (See Countercl.)
G1.34 asserts nine counterclaims against Plaintiffs, including, at issue in this Motion:
(1) breach of contract against RP (“Counterclaim Two”), (Countercl. ¶¶ 76–82);
(2) breach 	of 	the 	implied 	duties 	of 	good 	faith 	and 	fair 	dealing 	against 	RP
(“Counterclaim Three”), (Countercl. ¶¶ 83–86); (3) unjust enrichment against RP
(“Counterclaim Four”), (Countercl. ¶¶ 87–91); (4) breach of contract against AP
(“Counterclaim Five”), (Countercl. ¶¶ 92–97); (5) breach of the implied duties of good

faith and fair dealing against AP (“Counterclaim Six”), (Countercl. ¶¶ 98–101);
(6) unjust enrichment against AP (“Counterclaim Seven”), (Countercl. ¶¶ 102–06);
and 	(7) conversion 	against 	both 	RP 	and 	AP 	(“Counterclaim 	Eight”),
(Countercl. ¶¶ 107–09).
28. 	On 8 May 2024, this case was designated to the Business Court and
assigned to the undersigned on the same day. (ECF Nos. 1–2.)
29. 	On 8 July 2024, Plaintiffs filed the Motion. Following briefing,2 the Court
held a hearing on the Motion on 18 September 2024 (the “Hearing”), (see ECF No. 40),
at which all parties were represented by counsel.
30. 	The Motion is now ripe for resolution.
IV. 	LEGAL STANDARD
31. 	In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court
reviews the allegations in the Counterclaims in the light most favorable to G1.34. 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 [Counterclaims] . . . 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,
2 Along with the Motion, Plaintiffs filed a supporting brief. (See Br. Supp. Mot., ECF No. 26
[“Br. Supp.”].) Thereafter, G1.34 filed its brief in opposition to the Motion on 5 August 2024.
(See Br. Opp. Mot., ECF No. 37 [“Br. Opp.”].) Plaintiffs did not file a reply brief.

or unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. Dep’t of Health & Human
Servs., 174 N.C. App. 266, 274 (2005) (citation omitted).
32. 	Furthermore, the Court “can reject allegations that are contradicted by the
documents attached, specifically referred to, or incorporated by reference in the
[Counterclaims].” 	Moch v. A.M. Pappas & Assocs., LLC., 251 N.C. App. 198, 206
(2016) (citation omitted). 	The Court may consider these attached or incorporated
documents without converting the Rule 12(b)(6) motion into a motion for summary
judgment. 	Id. (citation omitted). 	Moreover, the Court “may properly consider
documents 	which 	are 	the 	subject 	of 	[the 	Counterclaims] 	and 	to 	which 	the
[Counterclaims] 	specifically 	refer[ 	] 	even 	though 	they 	are 	presented 	by 	the
[Plaintiffs].” Oberlin Capital, L.P., 147 N.C. App. at 60 (2001) (citation omitted).
33. 	Our 	Supreme 	Court 	has 	observed 	that 	“[i]t 	is 	well-established 	that
dismissal pursuant to Rule 12(b)(6) is proper when ‘(1) the [Counterclaims] on [their]
face reveal[ ] that no law supports the [non-movant’s] claim; (2) the [Counterclaims]
on [their] face reveal[ ] the absence of facts sufficient to make a good claim; or (3) the
[Counterclaims] disclose[ ] some fact that necessarily defeats the [non-movant’s]
claim.’ ” 	Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (quoting
Wood v. Guilford Cnty., 355 N.C. 161, 166 (2002)). This standard of review for Rule
12(b)(6) motions is the standard our Supreme Court “routinely uses . . . in assessing
the sufficiency of [Counterclaims] in the context of complex commercial litigation.”
Id. at 615 n.7 (citations omitted).

V. 	ANALYSIS
34. 	The Court first analyzes Plaintiffs’ request for dismissal, in whole or in
part, of Counterclaims Two, Three, Five, and Six, as they are related to G1.34’s claims
of breach of contract and breach of the implied duties of good faith and fair dealing
against both Plaintiffs. Next, the Court considers Plaintiffs’ request for dismissal, in
whole or in part, of Counterclaims Four and Seven related to G1.34’s claims of unjust
enrichment against both Plaintiffs. Finally, the Court reviews Plaintiffs’ request for
dismissal of Counterclaim Eight for conversion asserted against both Plaintiffs.
A. 	Counterclaims Two, Three, Five, and Six: Breach of Contract and
Breach of Implied Duty of Good Faith and Fair Dealing
35. 	G1.34 has asserted Counterclaim Two against RP for breach of contract as
to both the Operating Agreement and the Loan Agreement entered into between RP
and G1.34, (Countercl. ¶¶ 76–82), and a related claim for breach of the implied duties
of good faith and fair dealing, (Countercl. ¶¶ 83–86).
36. 	Additionally, G1.34 has asserted Counterclaim Five against AP for breach
of contract as to the Operating Agreement, (Countercl. ¶¶ 92–97), asserting a related
claim, Counterclaim Six, for breach of the implied duties of good faith and fair
dealing, (Countercl. ¶¶ 98–101).
37. 	To properly plead a breach of contract claim, a plaintiff need only 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). 	When these elements are alleged, “it is
error to dismiss a breach of contract claim under Rule 12(b)(6),” and our appellate
courts routinely reverse trial court orders that require anything more. 	Woolard v.

Davenport, 166 N.C. App. 129, 134 (2004). “[S]tating a claim for breach of contract is
a relatively low bar.” 	Vanguard Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39,
at *11 (N.C. Super. Ct. June 19, 2019).
38. 	If the contract “contains some condition precedent to [plaintiffs’] liability,”
G1.34 must also allege that the condition has been met. 	Beachboard v. S. Ry.
Co., 16 N.C. App. 671, 681 (1972) (citation omitted); see also Rule 9(c). 	“A condition
precedent is a fact or event that must exist or occur before there is a right to
immediate performance, before there is a breach of contract duty.” Mosely v. WAM,
Inc., 167 N.C. App. 594, 600 (2004) (citation omitted).
39. 	Under 	North 	Carolina 	law, 	every 	enforceable 	contract 	contains 	an
underlying, implied covenant of good faith and fair dealing. Bicycle Transit Auth. v.
Bell, 314 N.C. 219, 228 (1985). 	“A claim for breach of this implied covenant arises
when one party ‘wrongfully deprives’ the other of some benefit ‘to which they were
entitled,’ or takes some other action for a ‘wrongful or unconscionable purpose.’ ”
Wadhwania v. Wake Forest Univ. Baptist Med. Ctr., 262 N.C. App. 510 (2018) (citing
Dull v. Mut. Of Omaha Ins. Co., 85 N.C. App. 310, 318 (1987)). In North Carolina:
[a]s a general proposition, where a party’s claim for breach of the implied
covenant of good faith and fair dealing is based upon the same acts as
its claim for breach of contract, we treat the former claim as “part and
parcel” of the latter. Murray v. Nationwide Mut. Ins. Co., 123 N.C. App.
1, 19 (1996), disc. review denied, 345 N.C. 344 (1997); see Suntrust Bank
v. Bryant/Sutphin Props., LLC, 222 N.C. App. 821, 833 (“As the jury
determined that plaintiff did not breach any of its contracts with
defendants, it would be illogical for this Court to conclude that plaintiff
somehow breached implied terms of the same contracts.”), disc. review
denied, 366 N.C. 417 (2012).

Cordaro v. Harrington Bank, FSB, 260 N.C. App. 26, 38–39 (2018). In other words,
if a party “brings a breach of contract claim and a claim for breach of the covenant of
good faith and fair dealing based on the same facts, the two causes of action are
treated as one and the same.” 	Eye Dialogue LLC v. Party Reflections, Inc., 2020
NCBC LEXIS 90, at **19–20 (N.C. Super. Ct. July 28, 2020).
1. 	Counterclaims Two & Three – Breach of Contract and Breach
of Implied Duty of Good Faith and Fair Dealing as to RP
40. 	Plaintiffs contend G1.34 has failed to adequately state a claim as to
Counterclaim Two as it relates to the Loan Agreement. (Br. Supp. 5–7.)
41. 	G1.34 alleges that RP has breached “its express and implied contractual
obligations 	to 	[G1.34] 	under 	the 	Loan 	Agreement” 	by 	“repudiating 	the 	Loan
Agreement and failing to pay amounts due thereunder.” (Countercl. ¶ 80.)
42. 	Plaintiffs contend that nowhere in the Counterclaims “does it set forth what
the terms of the Loan were, and while it refers to the defined term ‘Loan Agreement’
it never defines what it is referring to when it references the ‘Loan Agreement.’ ” (Br.
Supp. 	6.) 	Further, 	Plaintiffs 	contend 	that 	“G1.34’s 	funding 	of 	RP’s 	software
development expenses is not an agreement to advance money in return for a promise
to make payment,” but instead is subject to the requirements set forth in the
Operating Agreement. (Br. Supp. 6.)
43. 	Notwithstanding Plaintiffs’ arguments, the Court concludes that, at this
early stage of the proceeding, G1.34 has adequately pled a claim for breach of contract
based on the Loan Agreement, alleging that it is a “valid and enforceable contract[ ],”
(Countercl. ¶ 77), and that RP has “materially breached its express and implied

contractual obligations to [G1.34]” under the Loan Agreement, (Countercl. ¶ 80). See
Woolard, 166 N.C. App. at 134.
44. 	Therefore, the Motion is DENIED as to Counterclaim Two for breach of
contract against RP.
45. 	The Motion is similarly DENIED as to Count Three for breach of the
implied duties of good faith and fair dealing regarding the Loan Agreement. 	See
Haigh v. Superior Ins. Mgmt. Grp., 2017 NCBC LEXIS 100, at *12–17 (N.C. Super.
Ct. Oct. 24, 2017) (denying motion to dismiss under Rule 12(b)(6) a good faith and
fair dealing claim that was “the same as the claim for” breach of contract where
motion to dismiss breach of contract claim was also denied).
2. 	Counterclaims Five & Six – Breach of Contract and Breach of
Implied Duty of Good Faith and Fair Dealing as to AP
46. 	G1.34 alleges that AP has breached “its express and implied contractual
obligations to [G1.34] under the Operating Agreement” by “failing to transfer an
additional 9% membership interest in [RP] to [G1.34] for [G1.34]’s successful delivery
of the Software as a ‘minimal viable product.’ ” (Countercl. ¶ 95.)
47. 	Plaintiffs contend G1.34 has failed to adequately state a claim as to
Counterclaim Five, arguing that G1.34 has failed to allege that “the product or
delivery met the [Operating] Agreement’s required specifications.” 	(Br. Supp. 5.)
Plaintiffs argue that “without allegations that MVP conformed to the [Operating]
Agreement’s required specifications,” G1.34 failed to sufficiently allege its breach of
contract claim against AP. 	(Br. Supp. 5.) 	Further, Plaintiffs contend that even if
G1.34 did allege that MVP was met, it made no allegation that “RP generated revenue

of at least $10,000.00 from clients to purchase or subscribe for any such product.” (Br.
Supp. 5; see also Op. Agt. at 15.)
48. 	The Court concludes that G1.34 has adequately pled a claim for breach of
contract based on the Operating Agreement, alleging that the Operating Agreement
is a “valid and enforceable contract[ ],” (Countercl. ¶ 93), and that G1.34 has “satisfied
all conditions precedent to recovering the relief sought[,]” (Countercl. ¶ 94). 	G1.34
further alleges that AP “materially breached its express and implied contractual
obligations to [G1.34] under the Operating Agreement[.]” 	(Countercl. ¶ 95.) 	See
Woolard, 166 N.C. App. at 134.
49. 	Therefore, the Motion is DENIED as to Counterclaim Five for breach of
contract against AP.
50. 	G1.34 has similarly alleged breach of the implied duties of good faith and
fair dealing with respect to the Operating Agreement. 	Therefore, the Motion is
similarly DENIED as to Count Six for breach of the implied duties of good faith and
fair dealing. See Haigh, 2017 NCBC LEXIS 100, at *12–17.
B. 	Counterclaims Four & Seven: Unjust Enrichment
51. 	G1.34 has asserted Counterclaim Four against RP for unjust enrichment,
(Countercl. ¶¶ 87–91), and has similarly asserted Counterclaim Seven against AP for
unjust enrichment, (Countercl. ¶¶ 102–06).
52. 	In order to state a claim for unjust enrichment, a party must allege: “(1) it
conferred a benefit on another party; (2) the other party consciously accepted the
benefit; and (3) the benefit was not conferred gratuitously or by an interference in the

affairs of the other party.” 	Worley v. Moore, 2018 NCBC LEXIS 114, at *25 (N.C.
Super. Ct. Nov. 2, 2018) (citing Se. Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 330
(2002)). “The doctrine of unjust enrichment was devised by equity to exact the return
of, or payment for, benefits received under circumstances where it would be unfair
for the recipient to retain them without the contributor being repaid or compensated.”
Collins v. Davis, 68 N.C. App. 588, 591 (1984).
53. 	G1.34 alleges that RP “holds money that in equity and good conscience
belongs to [G1.34].” (Countercl. ¶ 88.) G1.34 further asserts that RP “obtained this
money from [G1.34] in the form of the Loan,” that RP “has now repudiated without
justification,” (Countercl. ¶ 89), and “[RP] would be enriched unjustly if permitted to
retain the benefit of this wrongfully held money,” (Countercl. ¶ 90).
54. 	In addition, G1.34 alleges that AP “holds membership interests in [RP] that
in equity and good conscience belong to [G1.34].” 	(Countercl. ¶ 103.) 	G1.34 also
contends 	that 	“[AP] 	has 	pretextually 	retained 	these 	membership 	interests,”
(Countercl. ¶ 104), and “[AP] would be enriched unjustly if permitted to retain the
benefit of this [sic] wrongfully held membership interests,” (Countercl. ¶ 105).
55. 	Plaintiffs contend G1.34 has failed to adequately state a claim as to
Counterclaims Four and Seven, arguing that “[a]ll parties plead the Operating
Agreement is a ‘valid, binding, and enforceable contract[,]’ ” and therefore, G1.34’s
failure to “plead the absence of an express agreement of the parties” requires
dismissal of Counterclaims Four and Seven. (Br. Supp. 7.)

56. 	First, as to the Operating Agreement, Plaintiffs contend that all parties
agree that the Operating Agreement is a valid and binding contract, (see Br. Supp. 7),
citing to Plaintiffs own Complaint and Answer to G1.34’s Counterclaims, (see Compl.;
Answer, ECF No. 27), to support this contention, which are beyond the scope of the
pending Motion. The Court is limited at the Rule 12(b)(6) stage to consider only the
allegations of the Counterclaims and any documents attached, referred to, or
incorporated by reference therein. See Can-Dev, ULC v. SSTI Centennial, LLC, 2018
NCBC LEXIS 9, at *23 (N.C. Super. Ct. Jan. 25, 2018). Thus, Plaintiffs’ Complaint
and Answer to G1.34’s Counterclaims may not properly be considered without
converting the Motion into a 12(c) motion, which the Court, in its discretion, declines
to do.
57. 	Second, as to the Loan Agreement, it appears to the Court based on the
record before it, along with comments made at the Hearing, that Plaintiffs dispute
the validity of the Loan Agreement.
58. 	Both of G1.34’s unjust enrichment counterclaims are pled in the alternative
to G1.34’s breach of contract counterclaims. 	(See Countercl. at 46, 48.) 	This Court
has on multiple occasions permitted both a breach of contract claim and, in the
alternative, an unjust enrichment claim to proceed at the Rule 12 stage. See Sparrow
Sys., Inc. v. Private Diagnostic Clinic, PLLC, 2014 NCBC LEXIS 70, at *23 n.4 (N.C.
Super. Ct. Dec. 24, 2014) (“[A]lthough Plaintiff will not ultimately be able to recover
under both an express and implied contract [unjust enrichment] theory, Plaintiff is
not 	foreclosed 	from 	properly 	pleading 	these 	claims 	in the 	alternative 	in 	its

Complaint.”); see also Haddock v. Volunteers of Am., Inc., 2021 NCBC LEXIS 8, at *16
(N.C. Super. Ct. Jan. 22, 2021) (“[A] plaintiff may plead unjust enrichment as an
alternative claim to a breach of contract claim ‘even if [the] plaintiff may not
ultimately prevail on both.’ ”) (citation omitted).
59. 	As a result, the Motion is DENIED as to Counterclaims Four and Seven for
unjust enrichment.
C. 	Counterclaim Eight: Conversion
60. 	G1.34 alleges that AP attempted “through various coercive means to
convert the value of [G1.34’s] contributions to [RP], namely the Loan and the value
of the Software developed with [G1.34’s] labor and resources on behalf of [RP], to
itself and its principal.” 	(Countercl. ¶ 72.a.) 	G1.34 also alleges that the acts of RP
and AP “constitute conversion of [G1.34]’s property,” as they have “assumed and
exercised the right of ownership over property and money belonging to [G1.34], to the
exclusion of [G1.34]’s rights to those assets.” (Countercl. ¶ 108.)
61. 	Plaintiffs seek dismissal of Counterclaim Eight for conversion, arguing that
“G1.34 failed to sufficiently plead a wrongful deprivation of any property or money by
AP or RP.” (Br. Supp. 9.)
62. 	Under North Carolina law, “[t]wo essential elements are necessary in a
claim for conversion: (1) ownership in the plaintiff, and (2) a wrongful conversion by
the defendant.” 	Steele v. Bowden, 238 N.C. App. 566, 574 (2014) (cleaned up). 	In
cases where defendant comes into possession of plaintiff’s property lawfully, plaintiff
must show that it made a demand for the return of the property that was refused by

defendant. Hoch v. Young, 63 N.C. App. 480, 483 (1983) (citations omitted). Further,
“ ‘there is no conversion until some act is done which is a denial or violation of the
plaintiff’s dominion over or rights in the property.’ ” 	Bartlett Milling Co. v. Walnut
Grove Auction & Realty Co., 192 N.C. App. 74, 86 (2008) (quoting Lake Mary Ltd.
P’ship. v. Johnston, 145 N.C. App. 525, 532, rev. denied, 354 N.C. 363 (2001)). 	“In
North Carolina, only goods and personal property are properly the subjects of a claim
for conversion.” 	Norman v. Nash Johnson & Sons’ Farms, Inc., 140 N.C. App. 390,
414 (2000).
63. 	G1.34 offers in its brief in opposition that it has alleged “four different,
separate deprivations,” including (1) the Loan funds, (2) the Software, (3) the
additional nine percent equity interest in RP, and (4) funds separate and apart from
the Loan provided to RP by G1.34. (Br. Opp. 21.)
64. 	Upon review of G1.34’s Counterclaims, it appears to the Court that there
are only three categories of assets that G1.34 lists as part of its conversion claim:
(1) the Loan; (2) the value of the Software; and (3) funds separate and apart from the
Loan provided to RP by G1.34. (See Countercl.) As such, the Court limits its analysis
to whether G1.34 has adequately stated a claim for conversion based on these three
categories of assets or interests.
65. 	As an initial matter, G1.34’s conversion claim as to nonpayment of the
Loan balance, and the funds provided to RP separate and apart from the Loan, cannot
serve as a basis for a conversion claim. See Kumar v. Patel, 2024 NCBC LEXIS 36,

at **15 (N.C. Super. Ct. Feb. 28, 2024) (holding that “a mere failure to pay a debt
does not amount to a civil claim for conversion.”).
66. 	As a result, the Motion is GRANTED in part as to Counterclaim Eight for
conversion as it relates to both the Loan and any funds provided to RP separate and
apart from the Loan by G1.34, and that claim is DISMISSED with prejudice to that
extent.
67. 	Next, the Court turns its attention to G1.34’s claim for conversion as it
relates to “the value of the Software developed with [G1.34’s] labor and resources on
behalf of [RP], to itself and its principal[,]” (Countercl. ¶ 72.a.).
68. 	Based on a review of G1.34’s Counterclaims, as well as representations
made by counsel for all parties at the Hearing, the Software is admittedly owned by
RP. As such, G1.34 has no ownership interest in the Software that could, in turn, be
converted by RP, as RP is the rightful owner of the Software. See Comput. Design &
Integration, LLC v. Brown, 2018 NCBC LEXIS 216, at **67 (N.C. Super. Ct.
Dec. 10, 2018) (“Because Plaintiffs did not own the [equipment at issue], it cannot
properly be the subject of a conversion claim.”).
69. 	While RP’s ownership in the Software is dispositive as to G1.34’s conversion
counterclaim, even assuming the value of the Software did belong to G1.34, there are
no allegations within the Counterclaims that G1.34 demanded the return of the
Software, and counsel for G1.34 admitted as much at the Hearing. 	See Stratton v.
Royal Bank of Can., 2010 NCBC LEXIS 1, *20–21 (N.C. Super. Ct. Feb. 5, 2010) (“If
there is no wrongful taking, i.e., if the defendant rightfully comes into possession and

then refuses to surrender the goods, then demand and refusal is necessary for the
tort of conversion to exist.”).
70. 	As a result, the Motion is GRANTED in part as to Counterclaim Eight for
conversion as it relates to the value of the Software, and that claim is DISMISSED
with prejudice.
VI. 	CONCLUSION
71. 	THEREFORE, for the foregoing reasons, the Court hereby GRANTS in
part and DENIES in part the Motion as follows:
a. 	The Motion is GRANTED in part as to Counterclaim Eight for
conversion, and that claim is DISMISSED; and
b. 	Except as expressly granted, the Motion is otherwise DENIED.
SO ORDERED, this the 25th day of September, 2024.
/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases