Rodgers v. Preferred Carolinas Realty, Inc. et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
ROBERT V. RODGERS,
DEBTOR.
ROBERT V. RODGERS,
Plaintiff,
vs.
PREFERRED CAROLINA REALTY, INC.,
JAMES E. ALLEN, JR., JIM ALLEN GROUP,
INC., HARRY JAMES THORPE, RANDALL
EICHORN, LISA EICHORN, W. SIDNEY
ALDRIDGE, and NICHOLLS & CRAMPTON,
P.A.,
Defendants.
CASE NO. 09-09124-8-JRL
CHAPTER 13
ADVERSARY PROCEEDING
NO. 	10-00171-8-JRL
ORDER
This matter came before the court on certain defendants’ motion for judgment on the
pleadings. A hearing was held on June 16, 2011, in Raleigh, North Carolina. Defendants W.
Sidney Aldridge and Nicholls & Crampton, P.A. (collectively “Aldridge”) move for judgment on
the pleadings in their favor on the allegations of abuse of process, persistence in nonjusticiable
claims, infliction of emotional distress and fraudulent practices by attorneys.
SO ORDERED.
SIGNED this 07 day of July, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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STATEMENT OF FACTS
1. 	In December 2005, Randall and Lisa Eichorn (“the Eichorns”) sought to purchase
a new home.
2. 	The Eichorns entered into an exclusive agency relationship with Preferred
Carolina Realty, Inc. (“PCR”) and James E. Allen, Jr. (“Allen”) to represent them as buyers in
their search for a new home.
4. 	On or about December 8, 2005, Harry James Thorpe (“Thorpe”) and Allen, agents
for PCR, showed the Eichorns property located at 7409 Oriole Drive, Wake Forest, North
Carolina ("the property").
5. 	PCR represented to the Eichorns that the property was owned by Toth Building
Company, who was performing construction on the property. The Eichorns executed a dual
agency addendum to their agency contract with PCR, as PCR also represented the seller of the
property.
6. 	Plaintiff Robert V. Rodgers (“Rodgers”) hired Brandon Toth ("Toth") to oversee
the construction of homes to be built on the property.
7. 	Rodgers was the actual owner of the property—not Toth Building as represented
to the Eichorns by PCR.
8. 	The Eichorns, through PCR, entered into negotiations with Toth and Toth
Building Company for the purchase of the property and the home to be constructed on the
property.
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9. 	On or about December 8, 2005, PCR presented a written contract for the purchase
of the property to the Eichorns and for the construction of a home on the property by Toth
Building. The parties signed the contract.
10. 	Unbeknownst to the Eichorns, PCR modified the contract by “whiting out” the
name of the seller, Toth Building, and replacing it with Rodgers’ name.
11. 	The contract provided for a purchase price of $502,500.00 and a closing date of
April 14, 2006.
12. 	At this time, Rodgers had no knowledge of the contract, nor did PCR inform
Rodgers of the sale contract.
13. 	In late December 2005, Toth informed Rodgers that there was an offer to
purchase the property for $502,500.00.
14. 	Over the next few months, the parties—including Rodgers—discussed and
negotiated additional construction on the property. Disputes arose regarding the quality of
workmanship in the house and the additional construction, prompting Rodgers to demand an
increase in the purchase price. The Eichorns would not agree to the increase.
15. 	Instead of closing on the sale of the property with the Eichorns, Rodgers put the
property back on the market through PCR.
16. 	In early November 2006, the Eichorns, their retained counsel W. Sidney Aldridge
of Nicholls & Crampton, P.A., Toth, and Allen met to finalize and execute an offer to purchase
and contract for Rodgers’ review.
17. 	The Eichorns informed Rodgers that if negotiations failed, the Eichorns would
file a Notice of Lis Pendens against the property.
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18. 	In January 2007, Rodgers informed the Eichorns that he had not accepted their
offer, nor was there a valid contract for the sale of the property to them.
19. 	On March 12, 2007, Aldridge, as counsel to the Eichorns, filed a Notice of Lis
Pendens against the property.
20. 	On July 12, 2007, the Eichorns closed on the sale of their then-current home.
21. 	On July 13, 2007, the Eichorns expected to move into their new home on the
property; however, the house was not completed.
PROCEDURAL HISTORY
1. 	On April 2, 2007, Aldridge, as counsel to the Eichorns, filed a complaint against
Rodgers, PCR, Allen, Rodgers’ business partner, Toth, and Toth Building Company, identified
as Eichorn v. Rodgers, et al, Wake County Superior Court file number 07-CVS-3902.
2. 	The Eichorns only requested specific performance of the sale of the property to
them.
3. 	Rodgers moved to dismiss the Notice of Lis Pendens on May 17, 2007, which
was denied by Superior Court Judge Paul Ridgeway.
4. 	On August 31, 2007, Rodgers filed an amended answer, counterclaims and
crossclaims against the parties. Rodgers later moved for summary judgment on all claims against
him in the complaint, which was denied on April 3, 2008 by Superior Court Judge Leon
Stanback.
5. 	On February 12, 2008, the state court ordered all parties to attend a mediated
settlement conference.
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6. 	On May 1, 2008, the parties entered into a settlement agreement. The terms of
the settlement agreement were as follows:
a. PCR and Allen agreed to pay Rodgers $35,000.00 and waive any claim for a
commission on the sale of the property.
b. The Eichorns agreed to purchase the property for $425,000.00 from Rodgers,
subject to improvements made to the property and the transfer of clear title and with a closing
date set for sixty days following the agreement.
c. Toth and Toth Building Company agreed to pay $15,000.00 to Rodgers.
d. All parties also agreed to file voluntary dismissals of all claims and
counterclaims with prejudice and to execute a mutual release.
7. 	The settlement agreement was signed by the Eichorns as well as Aldridge.
8. 	On May 6, 2008, Rodgers’ attorney notified the Eichorns, PCR, Allen and Toth
that Rodgers did not want to settle the matter according to the terms of the agreement.
9. 	On May 8 and May 9, 2008, the Eichorns, PCR, and Allen each filed motions to
compel compliance with and enforce the settlement agreement.
10. 	On July 3, 2008, Superior Court Judge Carl Fox ordered Rodgers to comply with
the settlement agreement ("the 2008 Order"). The 2008 Order incorporated the settlement
agreement by reference as if fully set forth.
11. 	Rodgers appealed the 2008 Order to the North Carolina Court of Appeals.
12. 	On February 25, 2009, the North Carolina Court of Appeals dismissed Rodgers’
appeal.
13. 	Rodgers still refused to comply with the 2008 Order.
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14. 	On May 13, 2009, the Eichorns again moved to compel Rodgers to comply with
the 2008 Order.
15. 	On August 25, 2009, Judge Fox again ordered Rodgers to comply with the
settlement agreement (“the 2009 Order”). It also specifically incorporated the terms of the 2008
Order.
16. 	Rodgers did not comply with the 2009 Order and filed a Rule 60 motion
requesting relief from the 2008 Order and a Rule 59(a) motion to strike the 2009 Order.
17. 	On October 20, 2009, Rodgers filed a voluntary chapter 13 petition.
18. 	On June 14, 2010, this court entered an order lifting the automatic stay and
allowing foreclosure on the property.
19. 	On July 29, 2010, Rodgers filed an adversary complaint against the state court
parties. Among the allegations, Rodgers asserted claims of abuse of process, persistence of non-
justiciable claims, infliction of emotional distress and fraudulent practices by attorneys against
Aldridge.
20. This court dismissed the claims against PCR and Allen on December 3, 2010 on res
judicata grounds, holding that the 2008 Order, which incorporated the terms of the settlement
agreement, barred the claims against PCR and Allen. The claims against Jim Allen Group, Inc.
and Thorpe were not dismissed because they were not parties to the original action.
STANDARD OF REVIEW
Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, “[a]fter the pleadings are
closed but within such time as not to delay the trial, any party may move for judgment on the
pleadings.” Fed. R. Civ. P. 12(c) (incorporated into Federal Rules of Bankruptcy Procedure by
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1It is unclear whether plaintiff has asserted a claim for intentional or negligent infliction
of emotional distress. Both are discussed infra.
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Fed R. Bankr. P. 7012(c)). The standard of review for a motion for judgment on the pleadings is
identical to that of a motion to dismiss for failure to state a claim under Rule 12(b)(6). McDow
v. Sours (In re Sours), 350 B.R. 261, 265 (Bankr. E.D. Va. 2006). Judgment on the pleadings is
appropriate when there is “‘no issue as to material fact and only matters of law remain.’” Id.
(citations omitted). Similar to reviewing the pleadings in a motion to dismiss, the court reviews
the pleadings of a motion brought under Rule 12(c) by accepting all of the well pleaded
allegations in the complaint as true in the light most favorable to the non-movant. Id.
DISCUSSION
Plaintiff asserts four claims against Aldridge including abuse of process, persistence of
nonjusticiable claims, infliction of emotional distress,1 and fraudulent practices by attorneys, to
which Aldridge responds the plaintiff has failed to allege sufficient facts to assert these claims,
among other arguments.
To state a claim for abuse of process, the plaintiff must assert that “(1) a prior proceeding
was initiated against the plaintiff by the defendant or used by him to achieve an ulterior motive
or purpose; and (2) once the proceeding was initiated, the defendant committed some willful act
not proper in the regular prosecution of the proceeding.” Semones v. Southern Bell Tel. & Tel.
Co., 106 N.C. App. 334, 341 (N.C. Ct. App. 1992). The “willful act” of the second element must
be an act that occurred subsequent to the issuance of process. Id. Aldridge argues he did not file
the Notice of Lis Pendens and complaint against Rodgers with an ulterior motive, but even
taking Rodgers’ assertion that he did as true, Rodgers has not sufficiently pled the second
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element of abuse of process. Rodgers argues the subsequent willful act committed by Aldridge
was the use of the process to coerce Rodgers to give up the property pursuant to a sale contract
that was never valid to begin with.
The court is not persuaded that Rodgers has sufficiently alleged the subsequent willful
act required in an abuse of process claim. Rodgers relies on Austin v. Wilder, 26 N.C. App. 229
(N.C. Ct. App. 1975), for the proposition that the subsequent act in an abuse of process claim can
be “when the plaintiff goes further and wrongfully perverts or abuses the processes of the court
to coerce something for which the process was not intended.” Id. at 233. Rodgers argues
Aldridge used the Notice of Lis Pendens to prevent Rodgers from selling his property for a
higher price or refinancing his construction loan, leading to his financial demise. However, the
facts of Austin are distinguishable. In Austin, the plaintiff sued the defendants on account of a
joint venture on the construction of an apartment complex for which the defendants owed the
plaintiff money. Id. at 230. The parties executed a settlement agreement under which the
defendants agreed to pay the plaintiff on a promissory note. Id. When the defendants failed to
make payments on the note, the plaintiff sued again. Id. As a defense, the defendants responded
that the original suit and lis pendens filed against them was an abuse of process in that the
plaintiff wanted to cloud the title and prevent defendants from obtaining a construction loan that
was pending approval. Without the loan, the defendants would be under financial duress and
“‘accede to [the plaintiff’s] monetary demands.’” Id.
Here, the purpose of the Notice of Lis Pendens and litigation has always been to make
Rodgers sell the property to the Eichorns. Even if maliciously instituted or brought without
grounds, the process was issued for exactly what it was intended to do and nothing more—to
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obtain specific performance of the sale. In Austin, the subsequent act, separate from the issuing
of process itself, was the attempt to block the pending loan and do further economic damage to
the parties.
Rodgers’ claim, if any, is brought more appropriately as one of malicious prosecution.
The difference between an abuse of process claim and one for malicious prosecution is that the
latter is based on malice in causing process to issue, while the former is based on improper use
of process after it is issued. Barnette v. Woody, 242 N.C. 424, 431 (N.C. 1955). A claim for
malicious prosecution exists where a proceeding against the plaintiff is instituted with malice
and want of probable cause, the termination of which was in the plaintiff’s favor. Best v. Duke
University, 337 N.C. 742, 750 (N.C. 1994). Rodgers asserts the purchase contract was invalid
from its supposed execution because the property was not Toth’s to sell and that Aldridge knew
this but proceeded with the Notice of Lis Pendens and complaint in state court regardless. These
allegations seem to fit malicious prosecution; however, because the matter was settled it did not
exactly terminate in Rodgers’ favor. The resolution of the last element—termination in
plaintiff’s favor—is not necessary, because the three-year statute of limitations on a claim for
malicious prosecution began with the filing of the Notice of Lis Pendens on March 12, 2007, and
has since run. See Evans v. Chipps, 56 N.C. App. 232, 235 (N.C. Ct. App. 1982) (citing N.C.
Gen. Stat. 1-52(5)) (overruled on other grounds.). This adversary proceeding was filed
approximately three years and four months after the state court litigation was instituted.
Aside from the fact that Rodgers’ abuse of process claim should fail for lack of a
subsequent willful act, the premise for bringing the claim is not sound. Rodgers harps on the
allegation that Aldridge filed the state court litigation fully aware that the purchase contract was
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2This court is permitted to take judicial notice of public records, such as the orders
denying the motion to dismiss and motion for summary judgment, without converting the
pending motion to a motion for summary judgment. Henson v. CSC Credit Services, 29 F.3d
280, 284 (7th Cir. 1994).
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invalid and that his clients had no grounds to tie up the property with the Notice of Lis Pendens.
If the state court litigation was as baseless and malicious as Rodgers asserts, it would not have
survived the motions to dismiss and for summary judgment in state court.2 The initial motion to
dismiss the complaint was denied a month after filing, and Rodgers’ motion for summary
judgment, filed a year later after discovery was again denied. Such a frivolous and vicious
action would certainly have been rooted out after two levels of review by the Superior Court.
Independently, this supports dismissal of this claim.
There are several issues with the remaining claims asserted against Aldridge. First,
“persistence of nonjusticiable claims” is not an independent action recognized under North
Carolina law. Rodgers cites North Carolina General Statute § 6-21.5 as the basis for this claim.
Section 6-21.5 allows a prevailing party to recover attorney’s fees where, after motion by the
prevailing party, the court finds there was a complete lack of justiciable issues raised by the
losing party in its pleadings. For example, a prevailing defendant could move for attorney’s fees
against a plaintiff who filed a complaint that completely lacked a justiciable issue of law or fact
against him. This type of motion can also be brought at a later stage, such as when a defendant
files a responsive pleading that also lacks justiciable issues, or after a consent order has been
entered and a motion is then filed that is frivolous light of the settlement. Short v. Bryant, 97
N.C. App. 327, 329 (N.C. Ct. App. 1990). Although the statute provides a remedy for
persistence in nonjusticiable issues, the motion is always raised in connection with an underlying
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action and only awards attorney’s fees. The statute does not create an independent claim.
Rodgers might have appropriately filed this claim in state court against the Eichorns, and if,
thereafter, the court made findings that the Eichorns completely lacked any good faith argument
of law, Rodgers could have recovered his reasonable attorney’s fees spent litigating the state
court action. Rodgers cannot, in this separate adversary proceeding, assert a claim for
persistence in nonjusticiable issues apart from the action in which he claims the persistence
occurred. The court suspects Rodgers is grasping for an alternative means of complaining of an
abuse of process on the part of the Eichorns or their attorney, for which, as stated above, Rodgers
has failed to sufficiently state a claim.
Next, the complaint fails to state a claim for either intentional or negligent infliction of
emotional distress. Both claims require the plaintiff to have suffered “severe emotional distress”
and use the same standard in determining this element. N.C. Index (4th ed.) Intentional
Infliction of Emotional Distress § 3. North Carolina law is abundantly clear in requiring that the
victim have suffered “severe emotional distress” which is defined as any “‘emotional or mental
disorder, such as, for example, neurosis, psychosis, chronic depression, phobia, or any other type
of severe and disabling emotional or mental condition that may be generally recognized and
diagnosed by professionals trained to do so.’” Holloway v. Wachovia Bank & Trust Co., N.A.,
339 N.C. 338, 355 (N.C. 1994) (citations omitted). 	No such condition or disorder has been
alleged by Rodgers. 	As to intentional infliction of emotional distress, Aldridge’s conduct did
not go “‘beyond all possible bounds of decency,’” as is required for this claim. Wells v. North
Carolina Dept. of Correction, 152 N.C. App. 307, 322 (N.C. Ct. App. 2002) (citation omitted).
Filing litigation and exchanging stern words during the course of dealings does not approach this
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standard. As to a claim for negligent infliction of emotional distress, the complaint does not
allege a duty of care owed by Aldridge to Rodgers, nor does one exist between the two. Foster
v. Crandell, 181 N.C. App. 152, 169 (N.C. Ct. App. 2007) (stating plaintiff must establish that
defendant breached a duty of care owed to plaintiff).
Lastly, Rodgers has not sufficiently stated a claim for fraudulent practices by attorneys.
Pursuant to North Carolina General Statute § 84-13, an attorney who commits a fraudulent
practice is liable in an action to the party injured, and on the verdict passing against him, for
double damages. Where a plaintiff fails to state a claim for fraud or constructive fraud, “no
derivative claim for double damages arises under N.C. Gen. Stat. § 84-13.” Wilkins v. Safran,
185 N.C. App. 668, 676 (N.C. Ct. App. 2007). Here, there is no claim for constructive fraud, nor
could one stand because such a claim requires a breach of a fiduciary duty or relation of trust and
confidence between Rodgers and Aldridge, and no such relationship exists between a party and
opposing counsel. See Marketplace Antique Mall, Inc. v. Lewis, 163 N.C. App. 596, 599 (N.C.
Ct. App. 2004). There is no viable claim for fraud because Rodgers has not alleged that he
reasonably relied on Aldridge’s statement. See, e.g., Sunset Beach Development, LLC v.
AMEC, Inc., 196 N.C. App. 202, 208 (N.C. Ct. App. 2009) (listing reasonable reliance on the
part of the plaintiff as an element of fraud). Since the commencement of the state court
litigation, Rodgers has argued the sale contract with the Eichorns never existed—he stated this
position in his counterclaim to the Eichorns’ initial complaint. Therefore, it would be
unreasonable for Rodgers to rely on Aldridge’s statements that a contract between his clients and
Rodgers existed.
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An overarching issue, however, is whether all of these claims are barred by the settlement
agreement signed on May 1, 2008 and incorporated into the 2008 and 2009 Orders issued by
Judge Fox. The court next addresses whether the general release in the settlement agreement
applies to the claims against Aldridge. Resolving this issue will also put an end to Rodgers’
continued attempts to skirt the effect of the settlement agreement and the rulings of the state
court. The settlement agreement, which was drafted as a result of the court-mandated mediation,
states that upon completion of the conditions stated (see supra Procedural History para. 6), the
parties are to file stipulations of dismissal of all claims and counterclaims in the action with
prejudice. It next states “Mutual release to be executed by all parties.” The hand-written
settlement agreement is signed by the Eichorns, Aldridge, Allen, PCR, PCR’s attorney, Toth,
Toth’s attorney, Rodgers, and Rodgers’ attorney.
North Carolina law favors settlement of disputes out of court. Penn Dixie Lines, Inc. v.
Grannick, 238 N.C. 552, 557 (1953). Agreements such as mediated settlement agreements are
governed by general principles of contract law. Chappell v. Roth, 353 N.C. 690,692 (2001)
(citations omitted). There is a strong presumption that agreements made pursuant to court-
ordered mediation serve to minimize time and money spent by litigants and the superior courts.
N.C. Gen. Stat. § 7A-38.1(a). The settlement agreement at issue is a valid agreement, as it is in
writing and signed by the parties as required by North Carolina General Statute § 7A-38.1(l).
Rodgers has submitted arguments to this court throughout the adversary proceeding that he
signed the agreement under duress; however, Rodgers had numerous opportunities to make this
argument before the state court. This argument would have been addressed after the Eichorns
filed the first motion to compel and enforce the settlement agreement on May 9, 2008, on appeal
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of the order enforcing the agreement to the North Carolina Court of Appeals, after the second
motion to enforce the settlement agreement on May 13, 2009, and on hearing Rodgers’ Rule 60
motion for relief from the 2008 Order enforcing the settlement agreement and Rule 59(a) motion
to strike the 2009 Order enforcing the settlement agreement. At each juncture the state courts
have or could have heard the duress argument and rejected it.
While the “mutual release to be executed by all parties” clearly applies to any claims
Rodgers might have against the Eichorns, the question remains as to whether it applies to claims
against Aldridge, their agent and employed counsel. A general release is the broadest form of
release and releases any and all claims that have accrued as of the date of the release. 	SOFCO,
LLC v. National Bank of Kansas City, 2010 WL 3039567, at *4 (D. Kan. Aug. 3, 2010) (citing
29 Williston on Contracts § 73.4 (4th ed.)). It is common for release clauses to include not only
the parties involved but their agents, employees, successors, and assigns. The clause at issue
does not include such language.
North Carolina law does not explicitly state whether the release of a principal, such as the
Eichorns, impliedly includes the release of their agent from liability. It does provide that an
agent may not be held liable by a third person for acts done in the scope of his authority for a
disclosed principal. See In re Tetterton, 379 B.R. 595, 600 (Bankr. E.D.N.C. 2007) (citing
Walston v. R. B. Whitley & Co., 226 N.C. 537, 540 (1946)). The filing of the Notice of Lis
Pendens and complaint, the actions taken during the prosecution of the complaint, as well as the
persistence in the supposedly nonjusticiable claims that allegedly led to infliction of emotional
distress, were actions taken by Aldridge, an agent, at the behest of the principals, the Eichorns.
Interpreting the release clause in its narrowest form, Rodgers agreed to release these claims,
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which accrued prior to the date of execution of the settlement agreement, against the Eichorns,
who are ultimately responsible for Aldridge’s acts taken within the scope of his agency.
Under a broader and more appropriate interpretation of the release clause, given the law’s
preference for efficient settlement of disputes, the majority view is that a valid release of either
master or servant from liability for tort operates to release the other. Ericksen v. Pearson, 211
Neb. 466, 478-79 (1982) (citing Geib v. Slater, 320 Mich. 316 (1948); Drinkard v. William Pulte
Inc., 48 Mich. App. 67 (1973); Lackey v. Brooks, Adm’r, 204 Va. 428 (1963); Mayfair Fabrics
v. Henley, 101 N.J. Super. 363 (1968); Mid-Continent Pipeline Co. v. Crauthers, 267 P.2d 568
(Okl. 1954); Spradley v. McCrackin, 505 S.W.2d 955 (Tex. Civ. App. 1974); Smith v. Lincoln,
52 Misc.2d. 66, 275 N.Y.S.2d 74 (1966)). This proposition applies where the theory of liability
is based upon the doctrine of respondeat superior. In addition to being an agent of the Eichorns,
Aldridge is employed by them. See, e.g., Pakulski v. Garber, 6 Ohio St.3d 252, 256 (1983)
(describing law firm as agents and employees of the named releasees in a settlement agreement).
Public policy supports this result. The finality of mediated settlements would be severely
undercut if the participants in a lawsuit who agreed to settle and release all claims are then free
to sue opposing counsel for their conduct in litigation.
CONCLUSION
The court finds the four claims against the defendants are dismissed on their merits.
Moreover, the claims are barred by the settlement agreement signed by the defendants and their
principals. The settlement agreement released the principals of liability, which thereby releases
the agent of liability for actions taken within the scope of his agency.
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Based on the foregoing, the defendants’ motion for judgment on the pleadings is
GRANTED.
END OF DOCUMENT
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