JACKSON v. CAROLINA HARDWOOD CO

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Docket Number

No. COA94-1346

Attorney(S)

The Barrington Jones Law Firm, by Carl A. Barrington, Jr.; and John M. Tyson; for plaintiff-appellant. Reid, Lewis, Deese, Nance Person, by Marland C. Reid, for defendants-appellees.

Judges

WALKER, Judge.

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Smart Summary

Factual and Procedural Background

The plaintiff, Samuel N. Jackson, entered into a written "statement of intent to lease" agreement with W.F. Sledge, President of Carolina Hardwood Company, Inc., for a ten-year lease of land to be used as a golf driving range. Jackson improved the land, and the cost of these improvements was treated as a prepayment of rent for the lease term. Carolina Hardwood conveyed the property to W.F. Sledge individually, who later sold it to Dr. Inad Atassi approximately three years into the lease. Dr. Atassi demanded that Jackson vacate the property, claiming Jackson had no valid lease. Sledge filed an affidavit affirming Jackson was a rightful lessee and no default had occurred. Jackson filed suit alleging breach of contract and unjust enrichment. The trial court dismissed the complaint pursuant to Rule 12(b)(6), and Jackson appealed.

Legal Issues Presented

Whether the trial court erred in granting the defendant's motion to dismiss the complaint under Rule 12(b)(6) for failure to state a claim upon which relief can be granted.
Whether the plaintiff's complaint sufficiently stated claims for breach of an express contract and unjust enrichment.
Whether the doctrine of res judicata barred the plaintiff's claims.
Whether the Court of Appeals could take judicial notice of adjudicative facts from a separate action filed by the defendant against the plaintiff.

Arguments of the Parties

Appellant's Arguments

Jackson alleged that he had a valid express contract entitling him to a ten-year lease, supported by the written "statement of intent to lease" and his substantial improvements to the property as prepayment of rent.
He contended that the conveyance of the property to Dr. Atassi breached this agreement and that he was entitled to relief for breach of contract.
Jackson also asserted a claim for unjust enrichment, arguing that the defendants benefited from his improvements without compensating him, which would be unjust.

Appellees' Arguments

Defendants argued the complaint should be dismissed under Rule 12(b)(6) because the claims were barred by the doctrine of res judicata, referencing a prior separate action to remove Jackson from the property.
They requested the Court of Appeals to take judicial notice of adjudicative facts from that separate action to support their defense.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970)	Standard for motion to dismiss under Rule 12(b)(6): legal sufficiency of the complaint.	Used to explain that the court must accept allegations as true and determine if the complaint states a claim upon which relief can be granted.
Harris v. NCNB, 85 N.C. App. 669, 355 S.E.2d 838 (1987)	Rule that allegations must be taken as true when ruling on a motion to dismiss.	Applied to affirm that the complaint’s allegations are accepted as true at this procedural stage.
Stanback v. Stanback, 297 N.C. 181, 254 S.E.2d 611 (1979)	Complaint should not be dismissed unless it appears plaintiff is not entitled to relief under any facts that could be proved.	Supported the court’s conclusion that the complaint stated a sufficient claim to survive dismissal.
Clouse v. Motors, Inc., 14 N.C. App. 117, 187 S.E.2d 398 (1972)	Standard that dismissal is improper if any set of facts could entitle plaintiff to relief.	Reinforced that the complaint should not be dismissed at this stage.
Booe v. Shadrick, 322 N.C. 567, 369 S.E.2d 554 (1988)	Elements necessary to state a claim for unjust enrichment.	Applied to find plaintiff’s allegations sufficient to state a claim for unjust enrichment.
Brown v. Brown, 21 N.C. App. 435, 204 S.E.2d 534 (1974)	Dismissal under Rule 12(b)(6) is proper if complaint discloses an unconditional affirmative defense.	Referenced in defendant’s argument for dismissal based on res judicata.
State v. Lewis, 63 N.C. App. 98, 303 S.E.2d 627 (1983), aff'd, 311 N.C. 727, 319 S.E.2d 145 (1984)	Definition and application of res judicata (claim preclusion).	Discussed in context of defendant’s res judicata defense.
West v. Reddick, 302 N.C. 201, 274 S.E.2d 221 (1981)	Limits on judicial notice of records from other cases.	Held that the Court of Appeals could not take judicial notice of records from the separate action since it was not an interrelated proceeding with the same parties.
State v. Alston, 307 N.C. 321, 298 S.E.2d 631 (1983)	Appellant’s duty to ensure record is properly compiled and transmitted.	Applied to emphasize that the record on appeal did not include necessary proceedings from the other case, preventing judicial notice.

Court's Reasoning and Analysis

The court analyzed the sufficiency of the complaint under Rule 12(b)(6), accepting all plaintiff allegations as true. It found that the complaint adequately alleged an express contract through the "statement of intent to lease," including terms that improvements made by plaintiff offset rent. The subsequent conveyance of property to a third party who demanded plaintiff vacate was alleged as a breach. Additionally, the complaint stated a claim for unjust enrichment by asserting that the defendants received a benefit (improvements) without compensation, which would be unjust. The court rejected the defendant's res judicata defense because the record lacked the necessary proceedings from the prior separate action to support that defense, and the Court of Appeals could not take judicial notice of facts from that separate case. Consequently, the court concluded that the complaint stated claims upon which relief could be granted and reversed the dismissal.

Holding and Implications

The trial court's dismissal of the complaint under Rule 12(b)(6) was reversed.

The direct effect of this decision is that the plaintiff's claims for breach of an express contract and unjust enrichment survive the motion to dismiss and may proceed further in the trial court. The Court of Appeals did not establish new precedent but reaffirmed existing standards for pleading sufficiency and the limits of judicial notice regarding separate actions absent a proper record.

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SAMUEL N. JACKSON, Appellant v. CAROLINA HARDWOOD COMPANY, INC.; W.F. SLEDGE d/b/a CAROLINA HARDWOOD COMPANY, INC.; W.F. SLEDGE, Indi

1. Contracts § 126 (NCI4th); Quasi Contracts and Restitution § 24 (NCI4th) — sufficiency of complaint to state a claim for relief Plaintiff's complaint was sufficient to state a claim for relief for breach of an express contract and unjust enrichment where plaintiff alleged that he entered into a written ten-year lease of land from the corporate defendant which he improved for use as a golf driving range; the amount he spent on improvements amounted to a prepayment of rent for the entire ten-year period; the corporate defendant conveyed the property to the individual defendant who sold it to a doctor approximately three years into the lease; the individual defendant filed an affidavit stating that plaintiff was a lessee and that no default occurred; and the doctor who bought the land demanded that plaintiff vacate because he had no valid lease.

Am Jur 2d, Contracts § 728; Restitution and Implied Contracts § 85.

2. Evidence and Witnesses § 23 (NCI4th) — judicial notice — facts of separate action — absence of proceedings from record The Court of Appeals could not take judicial notice of the "adjudicative facts" of a separate action filed by defendant against plaintiff which allegedly supported a defense of res judicata where the record failed to include any of the proceedings in the separate action.

Am Jur 2d, Evidence §§ 138, 139.

WALKER, Judge.

[1] The sole issue presented on appeal is whether the trial court erred in granting defendant's motion to dismiss the complaint pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure.

A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970). When ruling on a motion to dismiss, the trial court must consider the allegations to be true. Harris v. NCNB, 85 N.C. App. 669, 670, 355 S.E.2d 838, 840 (1987). The question before the court is whether the allegations in the complaint, if true, are sufficient to state a claim upon which relief may be granted under some legal theory, whether properly labeled or not. Stanback v. Stanback, 297 N.C. 181, 202, 254 S.E.2d 611, 625 (1979). A complaint should not be dismissed unless it appears that the plaintiff is not entitled to relief under any set of facts which could be proved in support of the claim. Clouse v. Motors, Inc., 14 N.C. App. 117, 187 S.E.2d 398 (1972).

Plaintiff's complaint includes a claim for breach of an express contract. In order to state such a claim, plaintiff must demonstrate that a valid contract existed which terms were breached by the defendant. Here, plaintiff alleges that prior to 5 August 1987, he entered into a written agreement entitled "statement of intent to lease" (agreement) with W. F. Sledge (Sledge). The agreement provided that Sledge would lease a portion of a tract of land located on the All-American Expressway in Cumberland County to Jackson for a period of ten years. The agreement also stated that Jackson could offset his monthly rent of $500.00 by the cost of improving the land for a golf driving range. This agreement was signed by Jackson, as the proposed tenant, and Sledge, President of Carolina Hardwood, Inc., as the proposed landlord. Plaintiff further alleged that the proposed agreement constitutes an express contract and that the amount spent by plaintiff to improve the land amounted to a prepayment of rent for the entire 10-year period.

On 6 March 1989, Carolina Hardwood conveyed by deed the entire property to W.F. Sledge, and wife, individually. During November 1990, Sledge sold this property to Dr. Inad Atassi, as evidenced by a deed recorded in Cumberland County.

On 21 June 1991, plaintiff received a letter from Dr. Atassi's attorney demanding that plaintiff vacate the land by 31 July 1991 on the grounds that plaintiff did not have a valid lease in the property. Sledge filed an affidavit stating that plaintiff was "rightly a lessee under the said lease agreement," and that no default occurred.

Plaintiff alleges that his agreement with Sledge is enforceable as between the parties and that the subsequent conveyance to Dr. Atassi was a breach of this agreement. After carefully considering plaintiff's allegations at this stage, we find that the complaint sufficiently states a claim upon which relief may be granted.

The complaint also states a claim for relief under the theory of unjust enrichment. In order to state a claim for unjust enrichment, the plaintiff's allegations must set forth that a benefit was conferred on the defendant, that the defendant accepted the benefit, and that the benefit was not gratuitous. Booe v. Shadrick, 322 N.C. 567, 570, 369 S.E.2d 554, 556 (1988), reh'g denied, 323 N.C. 370, 373 S.E.2d 540 (1988). Here, the complaint alleges that plaintiff made substantial improvements to the land, with defendant's knowledge, upon a good faith belief that he had the exclusive use of the property for ten years. Plaintiff contends that the value of the land has improved substantially and that it would be unjust to allow defendant to retain the benefit of these improvements without paying for them. At this stage of the proceedings we must consider the allegations in plaintiff's complaint to be true. Accordingly, we find that plaintiff's complaint is sufficient to state a claim for unjust enrichment.

[2] In response, defendant argues that the complaint should be dismissed because plaintiff's claims are barred under the doctrine of res judicata. Where the complaint discloses an unconditional affirmative defense which defeats the claim asserted or pleads facts which deny the right to any relief on the alleged claim, the complaint may properly be dismissed by a motion under Rule 12(b)(6). Brown v. Brown, 21 N.C. App. 435, 437, 204 S.E.2d 534, 535 (1974).

"Res judicata, or claim preclusion, prevents a party or one in privity with that party, from suing twice on the same claim or cause of action when a final judgment on the merits was entered in the first suit." State v. Lewis, 63 N.C. App. 98, 102, 303 S.E.2d 627, 630 (1983), aff'd, 311 N.C. 727, 319 S.E.2d 145 (1984). Prior to the filing of this action on 21 June 1994, Dr. Atassi filed suit seeking to have plaintiff removed from his property. In that action, plaintiff joined Sledge individually, and Carolina Hardwood Co., Inc., as third party defendants.

In his brief, defendant requests this Court to take judicial notice of the "adjudicative facts" in that action. However, we are unable to address the merits of defendant's argument because this Court may only take judicial notice of its own records in another interrelated proceeding where the parties are the same, and the interrelated case is referred to in the case under construction. Here, however, we are not being asked to take judicial notice of our records. West v. Reddick, 302 N.C. 201, 202, 274 S.E.2d 221, 223 (1981). Furthermore, it is the duty of the appellant to see that the record is properly compiled and transmitted to the court. State v. Alston, 307 N.C. 321, 341, 298 S.E.2d 631, 644 (1983). Rule 9(a)(1)(e) provides that the record on appeal in civil actions shall contain "so much of the evidence, set out in the form provided in Rule 9(c)(1), as is necessary for an understanding of all errors assigned." N.C. R. App. P. 9(a)(1)(e) (1994). Rule 9(c) further provides that "[t]estimonial evidence, voir dire and other trial proceedings necessary to be presented for review by the appellate court may be included either in the record on appeal in the form specified in Rule 9(c)(1) or by designating the verbatim transcript of proceedings of the trial tribunal as provided in Rule 9(c)(2) and (c)(3)." N.C. R. App. P. 9(c) (1994). Here, the record fails to include any of the proceedings in the Atassi action and we are unable to address defendant's argument in this regard.

In sum, we find that plaintiff's complaint is sufficient to state a claim upon which relief may be granted. Accordingly, the lower court's decision is reversed.

Reversed.

Judges MARTIN, JOHN and McGEE concur.