WLAE, LLC v. Edwards

809 S.E.2d 176

WLAE, LLC, Plaintiff,

v.Robert L. EDWARDS a/k/a Robbie Edwards and Wolf Arbin Weinhold, Defendants.

No. COA17-154

Court of Appeals of North Carolina.

Filed: December 19, 2017

Craig Law Firm, PLLC, Asheville, by Sam B. Craig, and James, McElroy & Diehl, P.A., Charlotte, by Preston O. Odom, III, for plaintiff-appellant.

Prince, Youngblood & Massagee, PLLC, Hendersonville, by Sharon B. Alexander, for defendant-appellee Edwards.

F.B. Jackson and Associates Law Firm, PLLC, Hendersonville, by Frank B. Jackson and Angela S. Beeker, for defendant-appellee Weinhold.

ELMORE, Judge.

Plaintiff WLAE, LLC, appeals from two dismissal orders, one each of which was entered in favor of defendants Robert L. Edwards and Wolf Arbin Weinhold, and both of which were entered pursuant to Rule 12(b)(1) of the North Carolina Rules of Civil Procedure. Because plaintiff lacked standing at the time its complaint was filed, the trial court correctly determined that it did not have subject matter jurisdiction over the proceeding. Accordingly, we affirm the dismissal orders of the trial court.

I. Background

The series of events culminating in this appeal were set in motion more than 20 years ago with the filing of a bankruptcy petition in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division. Upon filing for Chapter 7 bankruptcy in June 1994, defendant Weinhold scheduled as an asset his 80 percent limited partnership interest in a Florida limited partnership known as Wolf's Lair, Ltd. At all relevant times, Wolf's Lair owned approximately 1,400 acres of land in Henderson County, North Carolina (the "property").

In June 1996, the bankruptcy trustee sold defendant Weinhold's 80 percent limited partnership interest in Wolf's Lair to Carolina Preservation Partners, Inc. (CPP), a corporation wholly owned by Mr. Douglas Smith. The bankruptcy case was then closed from June 1998 until October 2000, when creditors moved to reopen it based on a conveyance by defendant Weinhold's brother of a 20 percent general partnership interest in Wolf's Lair to defendant Weinhold shortly after the case was closed. As a result of these events, the trustee filed an adversary proceeding in November 2001 against defendant Weinhold, CPP, and Smith, in which she alleged the 20 percent general partnership interest in Wolf's Lair belonged to the bankruptcy estate and sought to rescind the sale of the 80 percent limited partnership interest to CPP.

Nearly eleven years later, on 21 February 2012, the trustee, CPP, and Smith executed a settlement agreement within the adversary proceeding that attempted to resolve all issues regarding ownership of Wolf's Lair (the "2012 agreement"). The 2012 agreement reserved to the trustee her claim against defendant Weinhold regarding the 20 percent general partnership interest in Wolf's Lair, and it provided for the creation of WLAE, LLC, as an "acquiring entity" to be formed jointly by the trustee and Smith. The 2012 agreement provided further details as follows:

Trustee, Smith and CPP shall quitclaim to [WLAE] all of Trustee's, Smith/CPP's right, title and interest in and to the Property and Wolfs' Lair [sic], excepting and expressly reserving to Trustee, however, Trustee's claims against Weinhold as set forth in the [adversary proceeding] Complaint. [WLAE] shall be a limited liability entity established by CPP, and at the time of Trustee's and CPP/Smith's quitclaims, Trustee and CPP shall enter into a limited liability operating agreement ... for [WLAE] which shall provide that CPP shall be an 80% managing member, and the Trustee shall be a 20% non-managing member.... Trustee makes no representation, warranty or covenant as to the condition of title to the Property or as to the Property's physical condition, and the quitclaim of her interest shall be "as-is, where-is." [WLAE] shall assume all responsibility for the management and control of the Property.

Paragraph 11 of the 2012 agreement is also particularly significant and references the fact that the state of Florida administratively dissolved Wolf's Lair in 2000.

Trustee shall retain all right, title and interest in and to the claims she asserted against Weinhold in the [adversary proceeding] Complaint, including, without limitation, Trustee's rights in Weinhold's purported 20% general partnership interest in Wolfs' Lair [sic] and/or any derivative interest in the Property, including any 20% tenant in common interest that Weinhold may have as a result of the dissolution of Wolf's Lair....

Pursuant to the 2012 agreement, the trustee executed an assignment of her 80 percent limited partnership interest in Wolf's Lair from the trustee to the acquiring entity, WLAE, on 2 March 2012 (the "2012 assignment"). The 2012 assignment, like the 2012 agreement, specifically reserved to the trustee her claim against defendant Weinhold to the 20 percent general partnership interest in Wolf's Lair, stating:

The undersigned ... Trustee ... ("Assignor"), does hereby grant, sell, transfer, assign and convey unto WLAE, LLC, a Delaware limited liability company, all of Assignor's right, title, interest, claim and demand, if any, in and to WOLF'S LAIR, LTD., a Florida limited partnership, excepting and expressly reserving to Assignor, however, Assignor's claims against Wolf Arbin Weinhold as set forth in the [adversary proceeding] Complaint....

On 6 March 2012, the bankruptcy court issued an order confirming final adjudication of the adversary proceeding, approving the trustee's 2012 agreement with CPP and Smith, and acknowledging a verbal agreement between the trustee and defendant Weinhold regarding the 20 percent general partnership interest in Wolf's Lair. The said verbal agreement was announced in open court on 2 March 2012, with defendant Weinhold conceding that the 20 percent general partnership interest belonged to the trustee and had become the property of the bankruptcy estate during the initial phase of the bankruptcy proceeding.

Despite court approval of the 2012 agreement, the trustee, CPP, and Smith continued to be entangled in a dispute from March 2012 to September 2013 regarding the subsequent valuation and transfer of the trustee's 20 percent general partnership interest in Wolf's Lair to the acquiring entity, WLAE. On 23 September 2013, following several motions and orders to enforce the 2012 agreement, Smith executed an assignment of "any and all suits, actions, charges, claims, and choses of action arising from or related to the [North Carolina property]" from Wolf's Lair to WLAE (the "2013 assignment"), with WLAE being described as the "owner of all the partnership interests in Wolf's Lair, Ltd." The 2013 assignment was signed by Smith as manager of WLAE.

On 3 March 2014, the trustee, CPP, and Smith participated in a mediation conference resulting in a settlement agreement (the "2014 agreement") in which CPP and Smith agreed to pay the trustee $400,000.00 for her 20 percent general partnership interest in Wolf's Lair as well as her 20 percent interest in WLAE, the latter of which she had formed with Smith pursuant to the 2012 agreement. Four days after the mediation conference, on 7 March 2014, plaintiff WLAE instituted this action against defendant Weinhold as well as defendant Edwards, who operates a timber purchasing and harvesting business in North Carolina. In its complaint, plaintiff asserted eight claims for relief, all related to timbering activities that had occurred between 2009 and 2011 on the property belonging to Wolf's Lair. Plaintiff specifically alleged that at some point prior to April 2009, defendants "Weinhold and Edwards entered into an agreement by which Edwards would remove and sell some of the timber on the Property and give Weinhold a portion ... of the sales proceeds."

Because the damage occurred to its property, Wolf's Lair solely owned the right to pursue a claim for compensation for the alleged damages. See Woodard v. Marshall , 14 N.C. App. 67, 68-69, 187 S.E.2d 430, 431 (1972) ("[w]here the plaintiff claims damages for unlawful cutting of timber, he is claiming permanent damages to the freehold, or damages to the ownership interest, and his right to recover depends upon his establishing his title to the described lands[.]"). Accordingly, plaintiff's only potential interest in this claim is based on the series of agreements and assignments discussed herein. Plaintiff thus filed a copy of the 2013 assignment along with its complaint, purportedly to show that "Plaintiff WLAE is successor in interest to rights and claims of Wolf's Lair related to matters affecting the Property through an assignment of rights, a copy of which is attached hereto as Exhibit A, and incorporated herein by reference." Like the 2013 assignment, plaintiff's verified complaint was signed by Smith as manager of WLAE, but with WLAE now being described as the "General Partner of Wolf's Lair, Ltd." Notably, Wolf's Lair was not a party to the 2012 agreement or the subsequent assignments, and the only debtor in the bankruptcy proceeding was defendant Weinhold in his individual capacity.

On 26 May 2016, defendant Weinhold moved to dismiss plaintiff's claims for lack of standing pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(1) (2015). In his motion to dismiss, defendant Weinhold essentially argued that neither the 2012 settlement agreement or the subsequent assignments had transferred ownership of the property, or authority to act in this litigation, from Wolf's Lair to WLAE; thus, the trial court had no subject matter jurisdiction over the proceeding. Defendant Edwards likewise moved to dismiss the action for lack of standing on 5 June 2016.

Pursuant to Rule 12(b)(1), the trial court granted defendant Weinhold's motion to dismiss by order entered 17 June 2016, and granted defendant Edwards' motion to dismiss by order entered 31 August 2016. The court found that the trustee and Smith had resolved their remaining issues regarding ownership of Wolf's Lair...