Am. Mech., Inc. v. Bostic

Am. Mech., Inc. v. Bostic, 2013 NCBC 4.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
RANDOLPH COUNTY 12 CVS 1384

AMERICAN MECHANICAL, INC.,

Plaintiff,

v.

JOSEPH E. BOSTIC, JR., JEFFREY L. ORDER
BOSTIC, MELVIN MORRIS, TYLER
MORRIS and MICHAEL HARTNETT,

Defendants.

McKinney & Tallant, P.A., by Zeyland G. McKinney, Jr., for Plaintiff
American Mechanical, Inc.
Nexsen Pruet, PLLC, by Christine L. Myatt and David S. Pokela for
Defendant Jeffrey L. Bostic.
Ivey, McClellan, Gatton & Talcott, L.L.P., by Edwin R. Gatton for Defendants
Melvin Morris and Tyler Morris.
Smith Moore L.L.P., by Jonathan A. Berkelhammer for Defendant Michael
Hartnett.
Murphy, Judge.
{1} THIS MATTER is before the Court on Defendants Jeffrey L. Bostic
(“Jeff Bostic”), Melvin Morris, Tyler Morris (“Morris Defendants”), and Michael
Hartnett’s (“Hartnett”) Motions to Dismiss pursuant to Rule 12(b)(1) and Rule
12(b)(6), and Jeff Bostic’s alternative Motion for More Definite Statement. After
considering the parties’ motions and briefs, and contentions of counsel made during
a hearing before this Court on January 16, 2013, the Court DENIES in part and
GRANTS in part Defendants’ Motions to Dismiss, and DENIES Jeff Bostic’s Motion
for More Definite Statement.
I. STATEMENT OF FACTS
{2} “‘When reviewing a motion to dismiss for lack of subject matter
jurisdiction pursuant to Rule 12(b)(1), a trial court may consider and weigh matters
outside the pleadings.’” Munger v. State, 202 N.C. App. 404, 410, 689 S.E.2d 230,
235 (2010) (quoting DOT v. Blue, 147 N.C. App. 596, 603, 556 S.E.2d 609, 617
(2001)). “‘However, if the trial court confines its evaluation to the pleadings, the
court must accept as true the plaintiff’s allegations and construe them in the light
most favorable to the plaintiff.’” Id. (quoting Blue, 147 N.C. App. at 603, 556 S.E.2d
at 617). The following facts are taken from Plaintiff’s Complaint and are accepted
as true for the purpose of resolving Defendants’ Motions to Dismiss pursuant to
Rule 12(b)(1). However, the Court does not make findings of fact in connection with
Defendants’ Motions to Dismiss pursuant to Rule 12(b)(6), as such motions do “not
present the merits, but only [determine] whether the merits may be reached.”
Concrete Serv. Corp. v. Investors Group, Inc., 79 N.C. App. 678, 681, 340 S.E.2d
755, 758 (1986). Accordingly, for purposes of the Court’s Rule 12(b)(6) analysis, this
Order recites only those facts from the Complaint that are relevant to the Court’s
legal determinations.
{3} Plaintiff American Mechanical, Inc. (“Plaintiff”) is a corporation
organized under the laws of North Carolina with its principal place of business in
Randolph County, North Carolina. (Compl. ¶ 1.)
{4} The Morris Defendants, Defendant Hartnett, and Defendant Joseph E.
Bostic, Jr., are all citizens and residents of North Carolina. Defendant Jeff Bostic is
a resident of Georgia. (Compl. ¶¶ 5–9.)
{5} From 2002 until 2005, Plaintiff, a subcontractor, rendered services on
construction projects with companies (principally Bostic Construction, Inc. and
Bostic Development, LLC (“Defendants’ Affiliated Companies”)) that were allegedly
under Defendants’ complete dominion and control. (Compl. ¶¶ 3, 12.) Plaintiff
became aware of the “facts necessary to assert these causes of action on December
6, 2005.” (Compl. ¶ 10.)
{6} Throughout the relevant time period alleged by Plaintiff, Defendants
all held official positions of responsibility, such as officer, director, or shareholder,
within Defendants’ Affiliated Companies. (Compl. ¶¶ 14, 20–23.) Plaintiff alleges
that Defendants Jeff Bostic and Melvin Morris used their positions and control over
the Affiliated Companies to create “a relationship wherein the Plaintiff trusted that
the Defendants would use the construction loan proceeds for each project to pay for
the actual costs of each project . . . .” (Compl. ¶ 84.)
{7} Prior to and during Plaintiff’s work on various construction projects
with Defendants’ Affiliated Companies, Defendants used a group of sham
companies to “commingle, misuse, and misappropriate the construction loans
provided to finance the construction projects on which the Plaintiff performed
services.” (Compl ¶ 83.)
{8} Rather than holding loan proceeds to pay off debts for a particular
project, Defendants used the proceeds to advance large sums of money to other
companies owned by Defendants and make preferential payments for their own
benefit. (Compl. ¶¶ 90–91.)
{9} During the time Plaintiff worked with Defendants’ Affiliated
Companies, Bostic Construction was operated in a condition that verged on near or
actual insolvency and constituted dissolution or winding up of the affairs of the
company. (Compl. ¶¶ 92–93.)
{10} For the purposes of evaluating Defendants’ 12(b)(1) Motions, the Court
takes judicial notice that on or about January 17, 2005, an involuntary bankruptcy
petition under Chapter 7 of the Bankruptcy Code was filed against Bostic
Construction. (Def. Hartnett’s Br. Supp. Mot. Dismiss 3.) The Court also takes
judicial notice of an order entered in the Bostic Construction bankruptcy proceeding
approving the settlement agreement between the Chapter 7 Trustee, Defendant
Joseph E. Bostic, Jr., Jeff Bostic and Melvin Morris related to Bostic Construction’s
potential claims for (1) preferential payments under the Bankruptcy Code and (2)
alleged breaches of the fiduciary duties these Defendants owed to Bostic
Construction in their capacities as officers and directors. In re Bostic Construction,
Inc., No. B–05–11199C–7G (Bankr. M.D.N.C. 2005); (Def. Hartnett’s Br. Supp. Mot.
Dismiss Ex. D.)
II. ANALYSIS
{11} In a related case before the Court, another subcontractor of
Defendants’ Affiliated Companies filed an action against these same Defendants
alleging almost identical facts and asserting the same claims along with a claim for
unfair and deceptive trade practices. See Phillips and Jordan, Inc. v. Bostic, 2012
NCBC 34 (N.C. Super. Ct. June 1, 2012), http://www.ncbusinesscourt.net/opinions/
2012_NCBC_34.pdf (order denying in part and granting in part Defendants’
motions to dismiss and denying Defendants’ motion for a more definite statement).
In that action, Defendants brought the same motions to dismiss and motion for
more definite statement asserting the same arguments as those before the Court at
present. Id. Given that, this Court applies the same reasoning from its Order and
Opinion from the Phillips case to the present action, and reaches the same
conclusions on the motions to dismiss the constructive fraud and aiding and
abetting claims pursuant to Rule 12(b)(1) and Rule 12(b)(6). Phillips, 2012 NCBC
34 ¶¶ 15–58. Therefore, for the reasons stated therein, the Court concludes that
Plaintiff has standing to bring the claims in this action. And, further, the Court
concludes that Plaintiff sufficiently stated a claim for constructive fraud, but failed
to allege sufficient facts to support a claim for aiding and abetting constructive
fraud.
III. CONCLUSION
{12} Accordingly, the Court DENIES Defendants’ Motions to Dismiss
pursuant to Rule 12(b)(1); GRANTS in part and DENIES in part Defendants’
Motions to Dismiss pursuant to Rule 12(b)(6). As such, Plaintiff’s claim for aiding
and abetting constructive fraud as to Defendants Jeff Bostic, Melvin Morris, Tyler
Morris, and Michael Hartnett is DISMISSED.
DISMISSED
{13} In light of the foregoing rulings, Defendant’s Motion for More Definite
Statement is DENIED.
DENIED
SO ORDERED,
ORDERED this the 18th day of January, 2013.