VILL. AT MOTTS LANDING HOMEOWNERS' ASSOC. v. AFTEW PROPS. LLC, 2023 NCBC 57

Vill. at Motts Landing Homeowners' Assoc. v. Aftew Props. LLC, 2023 NCBC 57.
STATE OF NORTH CAROLINA
NEW HANOVER COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
22 CVS 1693
THE VILLAGE AT MOTTS
LANDING HOMEOWNERS’
ASSOCIATION,
Plaintiff,
v.
AFTEW PROPERTIES, LLC;
ARNOLD SOBOL; FLORENCE
SOBOL; ELLEN SOBOL STEIN;
ROBERT WEINBACH; TERRANCE
S. ANDO; B AND B MARINE
CONSTRUCTION, LLC; PREMIER
HOMES AND PROPERTIES LLC;
PREMIER HOMES AND
COMMUNITIES, LLC; and TMC
TAYLOR CONSTRUCTION, INC.,
Defendants.
ORDER AND OPINION
ON MOTIONS TO DISMISS
1. The Village at Motts Landing is tucked between the Cape Fear River and
the Atlantic Coast in eastern North Carolina. It is a planned community with a mix
of private lots, common areas, and resident amenities. In this action, the Village’s
homeowners’ association (the “Association”) alleges that construction defects plague
both recreational amenities and vital infrastructure, necessitating costly repairs and
maintenance. The Association has sued ten defendants. Among them are its former
board members Arnold Sobol, Florence Sobol, and Ellen Sobol Stein (the “Sobols”), as
well as the community’s developer, Aftew Properties, LLC (“Aftew”).
2. Two motions to dismiss—one by the Sobols and one by Aftew—are pending.
For the following reasons, the Court DENIES the Sobols’ motion and GRANTS in
part and DENIES in part Aftew’s motion.

Reiss & Nutt, PLLC, by W. Cory Reiss and Kyle J. Nutt, for Plaintiff The
Village at Motts Landing Homeowners’ Association.
Shipman & Wright, L.L.P., by Gary K. Shipman, James T. Moore, and
Thomas R. Harvey, for Defendants Aftew Properties, LLC, Arnold Sobol,
Florence Sobol, and Ellen Sobol Stein.
Crossley McIntosh Collier Hanley & Edes, PLLC, by Clay Allen Collier
and Norwood P. Blanchard, III, for Defendants Robert Weinbach,
Terrance S. Ando, Premier Homes and Properties LLC, and Premier
Homes and Communities, LLC.
Cranfill Sumner, LLC, by Rebecca Knudson and Melanie Huffines, for
Defendant TMC Taylor Construction, Inc.
No counsel appeared for B and B Marine Construction, LLC.
Conrad, Judge.
I.
BACKGROUND
3. When considering a motion to dismiss, the Court must take the plaintiff’s
allegations as true. Piecing together the Association’s allegations requires more work
than usual because no single document contains them all. The Association has
amended its complaint three times. The most recent amendment is an abridged
version of the complaint that recites the new and modified allegations while leaving
out the allegations that the Association intended to carry forward unchanged from
earlier amendments. As a result, this background draws from not only the third
amended complaint but also the parts of the first amended complaint that remain
live. (See Am. Compl., ECF No. 4; Third Am. Compl., ECF No. 26.)

4. Aftew filed the declaration for the Village at Motts Landing in 2009.* The
declaration reserves to Aftew a temporary period of control over the Association,
including the right to appoint the board of directors. Aftew appointed the Sobols to
fill three of the five seats. Arnold and Florence are Aftew’s principals; Ellen is their
daughter. (See Am. Compl. ¶¶ 7–11, 26; Aftew Ex. B Art. V, § 1 [“Declaration”], ECF
No. 58.)
5. Developer control is common in the early years of a planned community but
can be a source of tension once the period of control ends. See N.C.G.S. § 47F-3-103(d)
(“The declaration may provide for a period of declarant control of the association,
during which period a declarant . . . may appoint and remove the officers and
members of the executive board.”). That is the case here. When Aftew’s right to
control the Association expired at the end of 2020, members elected a new board,
which soon accused Aftew and the Sobols of abusing their control during the previous
decade. (See Am. Compl. ¶¶ 27, 30.)
6. According to the Association, the common elements are rife with
construction defects. Roads and sidewalks have settled and cracked. The stormwater
system suffers from sediment issues. And the retaining wall abutting the pickleball
courts has bowed. As alleged, Aftew and the Sobols knew about these issues and
others but conveyed the common elements to the Association anyway. (See, e.g., Am.
Compl. ¶¶ 28, 36, 54, 58, 68, 73, 84.)
* More declarations—dozens, in fact—followed over the next decade. Because the parties
agree that each declaration includes the same key terms, the Court cites only the original
declaration.

7. Maintenance and repair costs have devastated the Association’s finances.
Under the declaration, the Association bears responsibility for maintaining any
common element “from the date of completion of its construction or improvement by
the Developer” even if it has not “actually been deeded to the Association.” This
means that the Association’s financial burden began during the period of developer
control. According to the Association, the Aftew-appointed board of directors met that
burden by taking subsidies from Arnold Sobol so that it would not have to impose
assessments on residents. Keeping assessments low helped Aftew market lots to
prospective buyers but deprived the Association of reserves for future maintenance.
The Association must now impose hefty assessments on members to make up the
shortfall. (See Am. Compl. ¶¶ 31, 32, 37, 39–41; Declaration Art. III, § 6.)
8. Aftew has deeded most of the community’s common elements to the
Association. There are a few exceptions, including one parcel marked as a recreation
area. On that parcel, Aftew granted Cape Fear Public Utility Authority a temporary
construction easement in exchange for $30,000. The Association believes that money
should have gone to it. (See Am. Compl. ¶¶ 44, 45.)
9. Presuit discussions between the parties were unproductive. When the
period of developer control ended, the Association’s new board asked Aftew and the
outgoing board for accounting records, plans and specifications, and contracts for the
stormwater system. They refused, and the Association sued. As relevant, the
Association has asserted three related claims against the Sobols for breach of
fiduciary duties owed as officers and directors during the period of developer control.

In addition, the Association has asserted claims against Aftew for breach of contract,
recovery of proceeds related to the easement, negligent construction, breach of the
implied warranty of workmanlike construction, and breach of fiduciary duty. The
Association has also made a demand for books and records against the Sobols and
Aftew. (See, e.g., Am. Compl. ¶¶ 43, 74, 75, 84, 90, 93, 94, 112, 116, 117, 131, 132;
Third Am. Compl. ¶¶ 79, 80, 89, 97–99, 142, 143, 167–70.)
10. The Sobols and Aftew have separately moved to dismiss all claims asserted
against them, other than the demand for books and records. Both motions are fully
briefed, and the Court held a hearing on 13 July 2023. The motions are ripe for
determination.
II.
LEGAL STANDARD
11. A motion to dismiss for failure to state a claim “tests the legal sufficiency of
the complaint.” Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation and quotation
marks omitted). Dismissal is proper when “(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.” Corwin v. Brit. Am. Tobacco PLC, 371 N.C.
605, 615 (2018) (citation and quotation marks omitted). In deciding the motion, the
Court must treat all well-pleaded allegations as true and view the facts and
permissible inferences in the light most favorable to the nonmoving party. See, e.g.,
Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019). The Court may also

consider documents, such as contracts, that are the subject of the complaint. See, e.g.,
McDonald v. Bank of N.Y. Mellon Tr. Co., 259 N.C. App. 582, 586 (2018).
III.
ANALYSIS
12. Because the motions address distinct groups of claims, it makes sense to
consider each separately. The Court will begin with the Sobols’ motion and then turn
to Aftew’s.
A. The Sobols’ Motion
13. During the hearing, the Association’s counsel acknowledged that the three
claims asserted against the Sobols are cumulative of one another. The Court
therefore treats them as a single claim. In short, the complaint alleges that the Sobols
owed fiduciary duties to the Association in their roles as officers and directors and
that they breached those duties by favoring Aftew’s interests over the Association’s.
The breaches include the Sobols’ alleged failure to maintain records, failure to collect
reserve funds, and acceptance of defective common elements conveyed by Aftew.
14. The Sobols contend that the declaration, the Nonprofit Corporation Act, and
the Planned Community Act do not impose an express duty on the officers and
directors of the Association to budget and collect reserve funds or to supervise the
construction of common elements. Even if that is true, though, it is not a basis for
dismissal. The Sobols “were still under a statutory mandate to act in good faith and
not to engage in any self-dealing.” F-L Legacy Owner, LLC v. Legacy at Jordan Lake
Homeowners Ass’n, 2023 NCBC LEXIS 55, at *11 (N.C. Super. Ct. Apr. 3, 2023)
(quoting Freese v. Smith, 110 N.C. App. 28, 38 (1993)) (cleaned up).

15. Much like officers and directors of for-profit corporations, the officers and
directors of homeowners’ associations and other nonprofit corporations owe duties of
care and loyalty. This means that an officer or director must discharge her duties in
“good faith,” exercise the care of an “ordinarily prudent person,” and act in a way that
she “reasonably believes to be in the best interests of the corporation.” N.C.G.S.
§§ 55A-8-30(a), 55A-8-42(a). In general, any “transaction with the corporation in
which a director of the corporation has a direct or indirect interest” must be fair to
the corporation or approved by disinterested directors or members. Id. § 55A-8-31(a),
(c).
16. Construed liberally, the amended complaint alleges that the Sobols had
direct or indirect interests in Aftew; knew that the amenities and infrastructure
conveyed by Aftew to the Association were defective; knew that the Association
needed a reserve budget to repair and maintain the defective elements; chose not to
assess and collect reserves because doing so would have depressed lot prices, lowering
Aftew’s profits; and tried to conceal their actions by failing to maintain records. (See
Am. Compl. ¶¶ 7, 9, 10, 39, 84, 90; Third Am. Compl. ¶ 89.) Put another way, the
amended complaint alleges that the Sobols intentionally took actions to benefit
Aftew—and, thus, themselves—at the Association’s expense. These allegations of
self-interested actions are adequate to state a claim for breach of fiduciary duty. See
F-L Legacy Owner, 2023 NCBC LEXIS 55, at *9–15 (denying motion to dismiss claim
for breach of fiduciary duty against directors of homeowners’ association based on
similar allegations).

17. The Sobols invoke the business judgment rule, but that “rule only protects
directors for ‘(1) an advertent business decision (2) made by disinterested directors
(3) within the scope of their authority (4) in good faith (5) with reasonable care and
(6) not for their own self-interests.’ ” Lee v. McDowell, 2022 NCBC LEXIS 51, at *34
(N.C. Super. Ct. May 26, 2022) (quoting Robinson on North Corporation Law § 14.06).
As alleged, the Sobols’ actions were self-interested—not disinterested—and therefore
not shielded by the business judgment rule.
18. The Court denies the Sobols’ motion to dismiss.
B. Aftew’s Motion
19. Aftew seeks to dismiss all six claims for relief asserted against it.
20. Breach of Fiduciary Duty. As alleged in the amended complaint, Aftew
breached fiduciary duties that it owed to the Association during the period of
developer control from 2009 to 2020. This claim, unlike the claim against the Sobols,
is not based on the statutory fiduciary duties owed by officers and directors. It is
instead based on the common-law rule that a fiduciary relationship exists when a
person places special confidence in a party who “is bound to act in good faith and with
due regard to the interests of the one reposing confidence.” Dallaire v. Bank of Am.,
N.A., 367 N.C. 363, 367 (2014) (citation and quotation marks omitted).
21. Aftew advocates a bright-line rule: as a developer, it did not owe any
fiduciary duties to the Association as a matter of law. But our Court of Appeals has
held, in the analogous condominium context, that whether a developer owes a
fiduciary duty to a homeowners’ association “during the period of declarant control

must necessarily be governed by common law principles.” Trillium Ridge Condo.
Ass’n v. Trillium Links & Vill., LLC, 236 N.C. App. 478, 500 (2014); see also N.C.G.S.
§ 47F-1-108 (“The principles of law and equity . . . supplement the provisions of” the
Planned Community Act.). A developer with the power to control a homeowner’s
association by appointing and removing board members may be in “a position of
dominance” that leaves members “little choice except to rely upon” the developer “to
protect their interests during the period of developer control.” Id. (reversing trial
court order granting summary judgment in favor of developer). In that case, a
fiduciary relationship may exist under the common law.
22. The Association’s allegations are indistinguishable from those at issue in
Trillium Ridge. As pleaded, Aftew retained total control over the Association due to
its power to appoint board members and officers. (See Third Am. Compl. ¶ 167.)
What’s more, the declaration states that “[a]ll the powers and duties of the Board of
Directors of the Association may be exercised by the Declarant.” (Declaration Art. V,
§ 1.) This placed Aftew “in a position of dominance over the Association” so that
“members of the Association had no choice but to rely on Aftew to protect their
interests.” (Third Am. Compl. ¶ 168.) Taken as true, these allegations suffice to
support the existence of a fiduciary relationship.
23. The case on which Aftew primarily relies does not require a different result.
See Conleys Creek Ltd. P’ship v. Smoky Mountain Country Club Prop. Owners Ass’n,
255 N.C. App. 236 (2017). There, the Court of Appeals concluded that the plaintiff’s
allegation of a mere “contractual” relationship with the developer was insufficient to

support the existence of a fiduciary relationship. Id. at 251. The opinion does not
cite or discuss Trillium Ridge. Nor does it suggest that developers are exempt from
common-law rules for fiduciary relationships.
24. Accordingly, the Court denies Aftew’s motion to dismiss the claim for breach
of fiduciary duty.
25. Breach of Contract. The Association alleges that Aftew breached the
declaration by, among other things, failing to supervise its appointees to the board of
directors, hiring unqualified contractors, and constructing and conveying defective
amenities and infrastructure. The Association further alleges that Aftew breached
the implied covenant of good faith and fair dealing. (See Third Am. Compl. ¶ 98.)
26. Aftew does not dispute that the declaration is a valid contract. See Spring
Lake Farm, LLC v. Spring Lake Farm Homeowners Ass’n, Inc., 2020 N.C. App. LEXIS
397, at *18 (N.C. Ct. App. May 19, 2020) (unpublished) (“It is well settled that
Declarations, as covenants that restrict the use of real property, are contracts.”). The
basis for its motion is that its alleged acts are not governed by, and therefore could
not have breached, the declaration.
27. The Court agrees. At no point does the amended complaint identify which
provisions of the declaration were supposedly breached. That is a telling omission.
In its response brief, the Association cites two sections: Section 1 of Article V and
Section 6 of Article III. Neither supports the claim. The former allows Aftew to
appoint board members but does not obligate it to supervise its appointees or to
remove them. (See Declaration Art. V, § 1.) The latter imposes a duty on the

Association to “be responsible for the operation and maintenance of” common
elements but does not impose any corresponding duty on Aftew. (Declaration Art.
III, § 6.) To be sure, the expectation was that Aftew would develop and convey the
common elements; it is the developer after all. But the declaration is not a
construction contract and contains no plans or specifications for common elements.
The Association offers no textual basis to conclude that either Aftew’s failure to
supervise the board of directors or its defective construction of common elements
breached the declaration.
28. Neither has the Association offered any sound basis to conclude that Aftew’s
alleged conduct breached the implied covenant of good faith and fair dealing.
Although the implied covenant requires a contracting party “to make reasonable
efforts to perform his obligations under the agreement,” Weyerhaeuser Co. v. Godwin
Bldg. Supply Co., 40 N.C. App. 743, 746 (1979), it cannot override the contract’s
express terms or impose new terms outside the parties’ bargain, see Pro-Tech Energy
Sols., LLC v. Cooper, 2015 NCBC LEXIS 76, at *21 (N.C. Super. Ct. July 30, 2015).
Moreover, “[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,” so that
the two rise and fall together. Cordaro v. Harrington Bank, FSB, 260 N.C. App. 26,
38–39 (2018) (citation and quotation marks omitted); see also Kelly v. Nolan, 2022
NCBC LEXIS 78, at *19–20 (N.C. Super. Ct. July 19, 2022) (granting motion to

dismiss when basis for alleged breach of implied covenant was “identical to the basis”
for alleged breach of contract’s express terms).
29. The Court grants Aftew’s motion to dismiss the claim for breach of contract.
30. Negligent Construction and Implied Warranty of Workmanlike
Construction. The Association claims that Aftew negligently constructed various
common elements, including roads, pickleball courts, and the stormwater system. In
a separate claim, the Association also asserts that Aftew breached the implied
warranty of workmanlike construction in connection with the pickleball courts.
31. Aftew seeks to dismiss both claims for similar reasons. The claim for
negligent construction must be dismissed, Aftew contends, because it did not build
the common elements, instead hiring contractors to do so. Likewise, it contends, any
implied warranty of workmanlike construction applies only to the contractors who
built the common elements.
32. Usually, a plaintiff claiming negligent construction must assert that claim
directly against the builder. In some circumstances, though, someone other than the
builder may also be liable. Thus, “one who employs an independent contractor is not
liable for the independent contractor’s negligence unless the employer retains the
right to control the manner in which the contractor performs his work.” Woodson v.
Rowland, 329 N.C. 330, 350 (1991). And “any person responsible for supervising a
construction project is subject to being held liable on a negligent construction theory.”
Trillium Ridge, 236 N.C. App. at 489. Comparable rules apply to implied warranties,
which usually exist “only within the context of a builder-vendee relationship,”

Crescent Univ. City Venture, LLC v. AP Atl., Inc., 2019 NCBC LEXIS 46, at *122 (N.C.
Super. Ct. Aug. 8, 2019), but may extend to others who are “actively involved in the
construction,” Burek v. Mancuso, 2008 N.C. App. LEXIS 369, at *9–10 (N.C. Ct. App.
Mar. 4, 2008) (unpublished).
33. Consistent with these precedents, the Association has alleged enough to
state a claim for relief. The amended complaint is replete with allegations that Aftew
“had a duty to design, construct, supervise the construction of, [and] inspect the
construction of” common areas; that it “was negligent . . . in designing, constructing,
supervising the construction of, [and] inspecting the construction of” the common
areas; and that it failed to adequately supervise their construction. (E.g., Am. Compl.
¶¶ 52, 61, 131, 132; Third Am. Compl. ¶ 143.) These allegations support inferences
that Aftew participated in the construction of certain common elements and that it
retained the right to supervise its contractors. At the very least, the Association has
not pleaded itself out of a claim by alleging that Aftew lacked supervisory authority.
Discovery may ultimately support Aftew’s argument that it had no duty to supervise
or right to control any contractors, but that is a question for summary judgment. At
this stage, the Court concludes that the Association’s allegations are sufficient.
34. Next, Aftew argues unpersuasively that the economic loss rule bars these
claims. The economic loss rule limits “recovery in tort” only “when a contract exists
between the parties that defines the standard of conduct” at issue. Akzo Nobel
Coatings, Inc. v. Rogers, 2011 NCBC LEXIS 42, at *47–48 (N.C. Super. Ct. Nov. 3,
2011). The declaration, as Aftew has successfully argued, does not define the

standard of conduct related to construction of the common elements. As a result, the
economic loss rule does not bar the negligence and warranty claims. See USConnect,
LLC v. Sprout Retail, Inc., 2017 NCBC LEXIS 37, at *14 (N.C. Super. Ct. Apr. 21,
2017) (declining to dismiss claim under economic loss doctrine due to “disputes
regarding the application of the contract to the alleged wrongdoing”); Artistic S. Inc.
v. Lund, 2015 NCBC LEXIS 113, at *33 (N.C. Super. Ct. Dec. 9, 2015) (declining to
apply economic loss rule when contractual duties did not exist or had expired).
35. Aftew also points to the statute of repose, which bars any action “brought
more than six years from the later of the specific last act or omission of the defendant
giving rise to the cause of action or substantial completion of the improvement.”
N.C.G.S. § 1-50(a)(5)(a). Aftew contends that all improvements that were supposedly
defective were substantially complete in 2009, well outside that six-year period. But
this argument is premature. As the Court of Appeals has explained, “a plaintiff has
no burden at the pleading stage to allege facts showing that its complaint was filed
within the applicable statute of repose.” Gaston Cnty. Bd. of Educ. v. Shelco, LLC,
285 N.C. App. 80, 84 (2022). “A Rule 12(b)(6) dismissal based on the statute of repose
would only be appropriate if the complaint otherwise alleges facts conclusively
showing that it was not filed within the applicable statute of repose.” Id. Nothing in
the amended complaint conclusively shows that the improvements at issue—roads,
pickleball courts, and the stormwater system—were substantially complete more
than six years before the Association filed this lawsuit.

36. The Court therefore denies Aftew’s motion to dismiss the claims for
negligent construction and breach of the implied warranty of workmanlike
construction.
37. Demand for Easement Proceeds. The amended complaint alleges that
Aftew gave Cape Fear Public Utility Authority a temporary construction easement
on a recreation area in return for $30,000. The Association demands all proceeds
from the easement. (See Am. Compl. ¶¶ 45, 116.)
38. Dismissal of this claim is proper. The Association admits that it does not
own the recreation area. Aftew does. At most, the Association has an expectation
that Aftew will convey the recreation area to it in the future. But that expectation
does not entitle the Association to proceeds from transactions involving common
areas not yet conveyed to it by Aftew.
39. Indeed, the Association points to no valid legal theory—contractual,
statutory, or otherwise—to support its demand for proceeds from the easement. It
complains, for example, that it is responsible for maintaining the recreation area even
though Aftew is the owner. That is true, and arguably, the Association might have
had a claim for damages if the easement had driven up maintenance costs (which the
amended complaint does not allege). Maintenance obligations alone, though, do not
support a claim for proceeds from the easement.
40. The Association also points to statutes that allow homeowners’ associations
to sell or encumber common elements and then retain the proceeds as an asset. See
N.C.G.S. § 47F-3-112(a) (“Proceeds of the sale or financing of a common element

(other than a limited common element) shall be an asset of the association.”). By
their own terms, these statutes apply only to property owned by an association. See
id. § 47F-1-103(4) (defining “Common elements” to include real estate “owned or
leased by the association”). They say nothing about a developer’s right to convey or
encumber its own property.
41. The Court grants Aftew’s motion to dismiss this claim.
IV.
CONCLUSION
42. For these reasons, the Court DENIES the Sobols’ motion to dismiss.
43. In addition, the Court GRANTS Aftew’s motion to dismiss the claims for
breach of contract and demanding the proceeds from the easement given to Cape Fear
Public Utility Authority. In all other respects, the Court DENIES Aftew’s motion.
44. Finally, the Court notes that it has revised the caption to correct an error in
the plaintiff’s name. The parties should use this corrected caption going forward.
SO ORDERED, this the 14th day of August, 2023.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases