Town of Belhaven v. Pantego Creek, LLC

250 N.C.App. 459

793 S.E.2d 711

TOWN OF BELHAVEN, NC; and The North Carolina NAACP State Conference of Branches, The Hyde County NAACP Branch, and The Beaufort County NAACP Branch, Plaintiffs,¹

v.PANTEGO CREEK, LLC; and Vidant Health, Inc., Defendants.

No. COA16–373

Court of Appeals of North Carolina.

Filed: November 15, 2016

Alan McSurely for plaintiffs-appellants the North Carolina NAACP State Conference of Branches, the Hyde County NAACP Branch, and the Beaufort County NAACP Branch.

C. Scott Holmes for plaintiff-appellants Town of Belhaven, NC and Pungo District Hospital Community Board, Inc.

K&L Gates LLP, by Gary S. Qualls, Kathryn F. Taylor, Susan K. Hackney, and Steven G. Pine, for defendant-appellee University Health Systems of Eastern Carolina, Inc. d/b/a Vidant Health, Inc.

Sumrell, Sugg, Carmichael, Hicks and Hart, P.A., by Scott C. Hart, Arey W. Grady, and Frederick H. Bailey, III, for defendant-appellee Pantego Creek, LLC.

ENOCHS, Judge.

The Town of Belhaven, North Carolina, the Pungo District Hospital Community Board, Inc., the NAACP State Conference of Branches, the Hyde County NAACP Branch, and the Beaufort County NAACP Branch (collectively "Plaintiffs") appeal from the trial court's order granting Pantego Creek, LLC's and Vidant Health, Inc.’s (collectively "Defendants") motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. After careful review, we affirm the trial court's order.

Factual Background

On 21 January 1948, the Town of Belhaven ("Belhaven"), located in Beaufort County, North Carolina, recorded a deed granting the Pungo District Hospital Corporation ("PDHC") a 100 foot strip of land ("the 1948 Deed"). The deed provided, in pertinent part, as follows:

THIS DEED, MADE this the 20th day of January, 1948, by Town of Belhaven, a municipal corporation of the State of North Carolina, hereinafter designated as party of the first part, to Pungo District Hospital Corporation, hereinafter designated as party of the second part, WITNESSETH: That the party of the first part, in consideration of the benefits to be derived by the citizens of the Town of Belhaven from the construction and operation of a hospital on the property hereinafter described and pursuant to the authority granted by Chapter 659 of the Session Laws of 1947, has given, granted, bargained, sold and does hereby convey unto the party of the second part that certain lot or parcel of land in the Town of Belhaven, Beaufort County, North Carolina, particularly described as follows:

That portion of Allen Street in said Town of Belhaven 100 feet in width extending from Front or [sic] Water Street Southwardly to Pantego Creek, reference being made to the map made by Norfolk Southern Railroad Company for a more accurate description thereof.

TO HAVE AND TO HOLD the said piece or parcel of land, together with all and singular, the rights, ways, privileges and appurtenances thereto belonging or in anywise appertaining unto the party of the second part, its successors and assigns in fee simple, in as full and ample manner as the party of the first part is authorized and empowered to convey the same.

After recordation, PDHC constructed Pungo District Hospital ("the Hospital") on the land conveyed in the 1948 Deed. PDHC then managed and operated the Hospital until 2011.

In 2011, PDHC entered into an agreement ("the 2011 Agreement") with University Health Systems of Eastern Carolina, Inc., d/b/a Vidant Health, Inc. ("Vidant") and Pantego Creek, LLC ("Pantego Creek")—which was formed on 28 September 2011 by PDHC—transferring full control of PDHC to Vidant. Pursuant to the 2011 Agreement, Pantego Creek was vested with the right to prosecute any breach of the 2011 Agreement by Vidant. The 2011 Agreement also expressly stated that "The Parties agree that this Agreement and all of the Transaction Agreements are not intended to be third party beneficiary agreements."

In September 2013, Vidant announced that it intended to close the Hospital. In response, Belhaven and the NAACP State Conference of Branches, the Hyde County NAACP Branch, and the Beaufort County NAACP Branch (collectively "the NAACP"), publicly denounced closure of the Hospital. Thereafter, the Mayor of Belhaven, the NAACP, and Vidant met on several occasions to discuss concerns surrounding the Hospital's imminent closure.

As a result of these meetings, the NAACP, Belhaven, and Vidant entered into a written agreement ("the Mediation Agreement") charging Belhaven with creating the Pungo District Hospital Community Board, Inc. ("Community Board"). The Mediation Agreement also stated the following: "In the event that the [Community Board] is unable to assume operational responsibility for the hospital for whatever reason on July 1, 2014, the Hospital will be closed[.]"

Belhaven failed to comply with the Mediation Agreement's terms when the Community Board failed to meet the 1 July 2014 deadline. As a result, Vidant closed the Hospital on 1 July 2014 and deeded the associated real property to Pantego Creek (the "2014 Deed").

Plaintiffs filed a complaint and motion for a temporary restraining order on 13 August 2014 in Beaufort County Superior Court. The following day, the Honorable Milton F. Fitch granted Plaintiffs’ motion for a temporary restraining order. The case was thereafter removed to the United States District Court for the Eastern District of North Carolina. On 18 March 2015, the Honorable James C. Dever, III remanded the case to Beaufort County Superior Court on the ground that Plaintiffs had not actually brought a federal civil rights claim under Title VI of the Federal Civil Rights Act of 1964, but rather had alleged civil rights violations under N.C. Gen. Stat. § 99D–1 (2015).

On 6 April 2015, Plaintiffs filed their first amended complaint in Beaufort County Superior Court. The complaint set forth the following six causes of action: (1) breach of contract against Vidant as successor in interest to the 1948 Deed by Belhaven; (2) declaratory judgment against Defendants for breaching the 1948 Deed's terms by Belhaven; (3) fraud against Vidant; (4) unfair and deceptive trade practices against Vidant by Belhaven and the Community Board; (5) breach of fiduciary duty against Pantego Creek by Belhaven; and (6) Section 99D–1 claim against Defendants by the NAACP.

On 30 April 2015, Senior Resident Superior Court Judge Wayland J. Sermons, Jr. sent a formal letter to Chief Justice Mark Martin of the North Carolina Supreme Court, copied to counsel for all parties, recommending that the case be designated as exceptional and that Chief Justice Martin assign a judge to the case in his absolute discretion. On 7 May 2015, Chief Justice Martin entered an order designating the case as exceptional pursuant to Rule 2.1 of the General Rules of Practice for the Superior and District Courts and appointing the Honorable R. Stuart Albright to adjudicate the matter.

On 10 July 2015, Defendants filed a motion to dismiss Plaintiffs’ first amended complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief could be granted. Defendants attached the following documents to their motion: (1) the 2011 Agreement and related documentation thereto; (2) the Mediation Agreement; (3) an email from the president and CEO of Vidant to the Mayor of Belhaven incorporated by reference in Plaintiffs’ complaint; and (4) the 1948 Deed.²

A hearing on Defendants’ motion was held before Judge Albright on 6 October 2015 in Beaufort County Superior Court. On 13 October 2015, Judge Albright entered an order granting Defendants’ motion to dismiss. Plaintiffs entered notice of appeal on 10 November 2015.

Analysis

I. Motion to Dismiss

On appeal, Plaintiffs contend that the trial court erred in granting Defendants’ motion to dismiss. Specifically, they assert that they pled sufficient factual allegations to advance each of their claims. We disagree.

"The standard of review of an order granting a 12(b)(6) motion is whether the complaint states a claim for which relief can be granted under some legal theory when the complaint is liberally construed and all the allegations included therein are taken as true. On a motion to dismiss, the complaint's material factual allegations are taken as true. Dismissal is proper when one of the following three conditions is satisfied: (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. On appeal of a 12(b)(6) motion to dismiss, this Court conducts a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct."

Podrebarac v. Horack, Talley, Pharr, & Lowndes, P.A. , 231 N.C.App. 70, 74, 752 S.E.2d 661, 663–64 (2013) (quoting Burgin v. Owen , 181 N.C.App. 511, 512, 640 S.E.2d 427, 428–29 (2007) ). We address each of Plaintiffs’ claims in turn.

A. Breach of Contract and Declaratory Judgment

Plaintiffs argue that because Defendants were successors in interest to the 1948 Deed they were subject to language included therein which amounted to a reversionary interest held by Belhaven that the granted property be used for the operation of a hospital for the benefit of the citizens of the town. They maintain that the trial court erred in dismissing Belhaven's breach of contract claim against Vidant and by failing to enter declaratory judgment against Vidant and Pantego Creek.

Plaintiffs assert that Article V, Section 3 of the North Carolina Constitution mandates that taxes shall only be levied for public purposes and contend that the subject land conveyed in the 1948 Deed can therefore never be used for anything other than for the operation of a hospital because it was conveyed by the Town of Belhaven—a governmental entity—to PDHC. Consequently, they argue that the...