Hedgepeth v. SMCC Clubhouse LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

ASHEVILLE DIVISION

CIVIL CASE NO. 1:22-cv-00041-MR

IN RE: )

)

SMOKY MOUNTAIN COUNTRY )

CLUB PROPERTY OWNERS’ )

ASSOCIATION, INC. )

_______________________________ )

)

RONNIE C. HEDGEPETH, JR., and )

SHIRA HEDGEPETH, ) MEMORANDUM OF

) DECISION AND ORDER

Appellants, )

)

vs. )

)

SMCC CLUBHOUSE, LLC, )

)

Appellee. )

_______________________________ )

THIS MATTER is before the Court on (1) the appeal by Ronnie C.

Hedgepeth, Jr. and Shira Hedgepeth of the Bankruptcy Court’s February 18,

2022 Order, [BK 21-01007, Doc. 31],1 granting SMCC Clubhouse, LLC’s

Motion to Dismiss Ronnie and Shira Hedgepeth’s Counterclaim and (2)

1 Citations to the record herein contain the relevant document number referenced

preceded by either “CV 1:22-cv-00041-MR,” denoting that the document is listed on the

docket in Civil Case No. 1:22-cv-00041-MR; “CV 1:21-cv-00051-MR,” denoting that the

document is listed on the docket in Civil Case No. 1:21-cv-00051-MR; “BK 19-10286,”

denoting that the document is listed on the docket in Lead Bankruptcy Case No. 19-

10286; or “BK 21-01007,” denoting that the document is listed on the docket in Bankruptcy

Adversary Proceeding No. 21-01007.

SMCC Clubhouse LLC’s Motion to Dismiss Appeal [CV 1:22-cv-00041-MR,

Doc. 4].

I. BACKGROUND

Smoky Mountain Country Club (the “Community”) is a planned

community in Swain County, North Carolina that is governed by the North

Carolina Planned Community Act, N.C. Gen. Stat. § 47F-1-101 et seq. [BK

19-10286, Doc. 104 at 3]. The Community is also governed by a Declaration

(the “Declaration”), which was recorded in 1999 by the developer, Conleys

Creek Limited Partnership (“CCLP”), to create covenants, conditions,

restrictions, and reservations of easements in the Community. [Id.]. The

Declaration requires that property owners in the Community (the “Property

Owners”) be members of the Smoky Mountain Country Club Property

Owners’ Association (the “Association”).2 [BK 19-10286, Doc. 304-1 at 25].

The Association is the Debtor in this matter. The Declaration states that

CCLP will construct, manage, and operate a clubhouse, swimming pool, and

two tennis courts in the Community (the “Clubhouse”). [Id. at 7]. The

Declaration grants Property Owners the perpetual nonexclusive right to use

the Community’s clubhouse and its amenities and requires Property Owners

2 The Association is incorporated as the Smoky Mountain Country Club Property Owners

Association, Inc. [BK 19-10286, Doc. 2 at 1].

to pay monthly “Clubhouse Dues” to the Association. [Id. at 16, 23, 30-31].

The Association is charged with the responsibility of assessing, billing, and

collecting the Clubhouse Dues from the Property Owners to pay CCLP. [Id.

at 23, 30-31]. In January of 2013, CCLP assigned its right to receive the

Clubhouse Dues to SMCC Clubhouse, LLC (“SMCC”). [BK 19-10286, Doc.

104 at 4]. SMCC is the Appellee in this matter.

In 2014, the Property Owners gained control of the Association, and

the Association sent written notice informing Property Owners that it would

no longer bill for Clubhouse Dues. [BK 19-10286, Doc. 235 at 3]. While

some of the Property Owners continued to pay Clubhouse Dues directly to

SMCC, others did not pay Clubhouse Dues. [Id. at 16; BK 19-10286, Doc.

283 at 28, 30-31].

On October 13, 2014, CCLP, SMCC, and Marshall Cornblum filed an

action against the Association in the Superior Court of Swain County,

asserting that the Association had breached its contract by failing to collect

and pay the Clubhouse Dues. Conleys Creed Ltd. P’Ship v. Cornblum, No.

14CVS238, 2016 WL 4263835, at *1 (N.C. Super. Jan. 26, 2016). On

January 26, 2016, the trial court granted the Association’s Motion for

Summary Judgment on the breach of contract claim. Id.

On September 5, 2017, the North Carolina Court of Appeals reversed

the trial court’s judgment and remanded the case for further proceedings

because the Court of Appeals concluded that there was a genuine dispute

of material fact as to whether the Association breached its contract. Conleys

Creek Ltd. P’Ship v. Smoky Mountain Country Club Prop. Owners Ass’n,

Inc., 255 N.C. App. 236, 805 S.E.2d 147 (2017). The Court of Appeals did

not determine whether the Property Owners were obligated to pay

Clubhouse Dues. Id. at 248, 805 S.E.2d at 155.

The Court of Appeals also noted that “the Planned Community Act

does allow that when homeowners take control of an association board from

the developer, the association may relieve itself of obligations made on its

behalf by the developer, where it is found that the arrangement was ‘not bona

fide or was unconscionable[.]’” Id. at 244, 805 S.E.2d at 153 (citing N.C.

Gen. Stat. § 47F-3-105). Thus, the Court of Appeals decision left open the

question of whether the Association could void the Declaration by bringing

“forth evidence tending to show that the provisions in the 1999 Declaration

are not ‘bona fide’ or are ‘unconscionable.’” Id. at 250, 805 S.E.2d at 156.

On March 26, 2019, the Association adopted a resolution that terminated its

obligation to pay Clubhouse Dues on the grounds that the Declaration was

unconscionable and was not bona fide under the Planned Community Act.

[BK 19-10286, Doc. 283 at 81].3

A jury trial was subsequently conducted on the breach of contract

claim. [BK 19-10286, Doc. 104 at 4]. The jury returned a verdict against the

Association. [See id.]. Implied in that verdict was that the Declaration was

bona fide and not unconscionable. [See id.]. On May 31, 2019, judgment

was entered against the Association on the breach of contract claim in the

amount of $5,149,921.94, with an additional $1,921,132.52 in prejudgment

interest (the “Judgment”). [Id. at 5]. The Association appealed.4 [BK 19-

10286, Doc. 253 at 4].

On July 26, 2019, the Association filed a bankruptcy petition pursuant

to Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court

for the Western District of North Carolina. [BK 19-10286, Doc. 1]. On

November 18, 2019, the Association and SMCC jointly filed a proposed Plan

of Reorganization (the “Plan”) with the Bankruptcy Court, [BK 19-10286,

Doc. 96], which was amended on December 17, 2019, [BK 19-10286, Doc.

253].

3 Although the Association voided the Declaration, no Court has concluded that the

Declaration was unconscionable or not bona fide under the Planned Community Act.

4 The Association later agreed to dismiss the Appeal as a condition of the Plan of

Reorganization. [BK 19-10286, Doc. 253 at 27].

On December 2, 2019, Property Owners Ronnie Hedgepeth, Shira

Hedgepeth, Robinson Myers, Elizabeth Myers, and “other members of the

Smoky Mountain Country Club community” filed a Motion Requesting Relief

from Automatic Stay, [BK 19-10286, Doc. 116], which was amended on

December 3, 2019, [BK 19-10286, Doc. 136]. Ronnie and Shira Hedgepeth

are the Appellants herein. In their Motion, Ronnie Hedgepeth, Shira

Hedgepeth, Robinson Myers, and Elizabeth Myers “request[ed] that the

Court modify the automatic stay for the limited purpose of allowing the

movants to file an action in state court to enjoin collection of fees against

members until the court has determined if the fees are real or personal

covenants and whether or not it is discharged by the Bankruptcy action.” [BK

19-10286, Doc. 116 at 1; BK 19-10286, Doc. 136 at 1]. On January 21, 2020,

the Bankruptcy Court entered an Order denying the Motion Requesting

Relief from Automatic Stay. [BK 19-10286, Doc. 300].

The previous month, on December 19, 2019, the Bankruptcy Court

entered an Order confirming the Amended Plan, [BK 19-10286, Doc. 260],

over objections filed by Property Owners Robert and Mary Young and

Ronnie and Shira Hedgepeth, [BK 19-10286, Doc. 167; BK 19-10286, Doc.

207 at 6; BK 19-10286, Doc. 216 at 3-6]. Under the Amended Plan, SMCC

agreed to stay the execution of the Judgment, and the Association agreed

to: (1) assess, bill, and collect overdue Clubhouse Dues from the Property

Owners; (2) assess, bill, and collect future Clubhouse Dues from the

Property Owners; (3) pay SMCC $1,500,000 in three annual $500,000

payments to be credited against the principal amount of the Judgment; (4)

assess each of the Property Owners for their share of the $1,500,000; (5)

dismiss the appeal of the Judgment; and (6) reinstate the Declaration that

the Association had terminated on March 26, 2019. [BK 19-10286, Doc. 253

at 18-20, 27]. The Amended Plan specifically provides that, on or about

December 1, 2019, SMCC was to bill Property Owners directly for unpaid

Clubhouse Dues for the period of October 1, 2014 to December 31, 2019.

[Id. at 18-20]. The Amended Plan further provides that, beginning on

January 1, 2020, the Association was to collect future Clubhouse Dues for

payment to SMCC. [Id.]. The Amended Plan also provides that the

Association is to “assess the $1,500,000 to be paid to [SMCC] . . . against

each of the [Property Owners] . . . in the pro rata amount of $9,200.00,

payable in three annual installments of $3,067.67 . . . .” [Id.].

On December 31, 2019, Property Owners Robert Young, Mary Young,

Ronnie Hedgepeth, and Shira Hedgepeth filed a Notice of Appeal of the

Bankruptcy Court’s December 19, 2019 Order confirming the Plan. [BK 19-

10286, Doc. 279]. The Association and SMCC moved to dismiss the appeal.

In re Smoky Mountain Country Club Prop. Owners’ Ass’n, Inc., 622 B.R. 653,

654 (W.D.N.C. Sept. 21, 2020). This Court granted the Association and

SMCC’s Motion to Dismiss on September 21, 2020. Id. at 659. This Court

concluded that Robert Young, Mary Young, Ronnie Hedgepeth, and Shira

Hedgepeth did not have standing to appeal the Bankruptcy Court’s Order

confirming the Plan because the issue of whether they were liable to the

Association had yet to be determined. Id. at 657, 659.

On March 26, 2020, Appellants Ronnie and Shira Hedgepeth also filed

an action (the “State Court Action”) against CCLP and SMCC in the Superior

Court of Swain County “requesting a declaratory judgment on the relative

obligations of the Appellants regarding the clubhouse dues and any

assessment arising from the clubhouse dues.” [CV 1:21-cv-00051-MR, Doc.

4 at 5]. On July 9, 2020, the Superior Court of Swain County issued a final

Order dismissing the Appellants’ State Court Action because it was initiated

“in violation of the automatic stay in 11 U.S.C. § 362(a)(3).” [Id. at 190]. The

Appellants filed a Motion to Reconsider the Superior Court’s Order on July

20, 2020 and, after that motion was denied, filed a Notice of Appeal on July

31, 2020. [Id. at 194-205].

Following the Superior Court’s July 2020 Order dismissing the State

Court Action, the Appellants filed a second Motion Requesting Relief from

Automatic Stay on October 29, 2020. [BK 19-10286, Doc. 381]. There, the

Appellants reiterated their assertion from their December 2, 2019 Motion

Requesting Relief from Automatic Stay and requested relief so that they

could file an action in state court to determine whether they are responsible

for paying Clubhouse Dues. [Id.]. The Appellants also requested relief so

that they could file an action in state court to determine whether the

Association engaged in unfair debt collection practices based on a letter sent

by the Association on August 28, 2020 stating that SMCC billed Property

Owners directly for unpaid Clubhouse Dues for the period of October 1, 2014

through December 31, 2019, notifying Property Owners that the Association

would proceed to collect unpaid Clubhouse Dues, and urging Property

Owners to pay unpaid Clubhouse Dues. [BK 19-10286, Doc. 381-1]. On

December 2, 2020, the Bankruptcy Court denied the Appellants’ October 29,

2020 Motion for Relief from Automatic Stay. [BK 19-10286, Doc. 394]. The

next day, the Appellants filed a Motion to Reconsider, [BK 19-10286, Doc.

396], which was denied on February 11, 2021, [BK 19-10286, Doc. 420].

On February 19, 2021, the Appellants filed a Notice of Appeal in the

Bankruptcy Court appealing the Bankruptcy Court’s denial of the October 19,

2020 Motion Requesting Relief from Automatic Stay and the December 3,

2020 Motion to Reconsider. [BK 19-10286, Doc. 422]. The Association and

SMCC moved to dismiss the appeal. [CV 1:21-cv-00051-MR, Doc. 7]. On

November 2, 2021, this Court dismissed the Appellants’ appeal. [CV 1:21-

cv-00051-MR, Doc. 16].

On September 7, 2021, SMCC initiated this Adversary Proceeding in

the Bankruptcy Court against Appellants Ronnie and Shira Hedgepeth for

willfully violating the automatic stay in the Bankruptcy Proceeding by filing

and failing to dismiss the State Court Action. [BK 21-01007, Doc. 1].

According to SMCC:

In the State Court Action, which names SMCC, but

not [the] Association, as a defendant, [Ronnie and

Shira Hedgepeth] sought a declaratory judgment that

they were not liable for assessments levied by [the]

Association against them in the amount of $9,200.00

for payment of their pro rata share of [the] Judgment

obtained by SMCC against [the] Association, even

though no action had yet been filed against

Defendants for the collection thereof.

[Id. at 2]. SMCC sought sanctions against the Appellants for violating the

automatic stay. [Id. at 12].

On December 15, 2021, Appellants Ronnie and Shira Hedgepeth

asserted a Counterclaim against SMCC in the Adversary Proceeding. [BK

21-01007, Doc. 21 at 22]. In their Counterclaim, the Appellants allege that

they paid Clubhouse Dues until on or about February 2020. [Id. at 32]. The

Appellants further allege that they were unable to sell their property because

a contract for sale “was canceled when the [Hedgepeths] were required to

escrow $96,000 to pay for the [J]udgment which is currently on Appeal

because of the Clubhouse Dues.” [Id. at 36]. The Appellants also presented

an invoice mailed to the Hedgepeths from the Association on December 1,

2019 for the Appellants’ pro rata share of the $1,500,000 the Association

owes SMCC under the Amended Plan. [BK 21-01007, Doc. 21-16]. The

invoice stated the following:

[The Association] has agreed to make principal

payments on the Settlement Agreement Fee of

$1,500,000 to [SMCC] in installments of $500,000

due January 1, 2020, $500,000 due January 1, 2021

and $500,000 due January 1, 2022. The timely

payment of the installments is interest-free. Every

Member’s share of the $1,500,000 is $9,200 per

property owned. $9,200 divided over 3 payments is

$3,066.67 per payment. Enclosed is an invoice from

[the Association] for $3,066.67, representing the first

of three installments, due by January 1, 2020.

[Id. at 2]. A letter sent with the invoice further explained that SMCC prepared

separate invoices for Property Owners who did not pay Clubhouse Dues

from October 2014 to December 2019 and that the Association would begin

billing for Clubhouse Dues in January 2020. [Id. at 2]. The Appellants did

not allege in their Counterclaim that they were subsequently sent a bill

specifically for Clubhouse Dues from either SMCC or the Association or that

either SMCC or the Association threatened to take legal action against them

for failing to pay Clubhouse Dues or their pro rata share of the $1,500,000

amount. [21-01007, Doc. 21 at 22-38].

The Appellants’ Counterclaim asserts that they are entitled to a

declaratory judgment, pursuant to N.C. Gen. Stat. § 1-253 et. seq, stating

the following:

a. For judicial determin[ation] through Declaratory

Judgment of the relative rights of the parties in

regard to the Clubhouse Fee Dues and any

assessment arising from the Clubhouse Dues.

b. The covenants concerning the [Hedgepeths’]

obligation to pay the Association for clubhouse

dues for the benefit of SMCC and CCLP are

unconscionable, and thus, void.

c. The covenants concerning the Clubhouse dues

are Personal Covenants as to [the Hedgepeths].

d. The [Hedgepeths] may terminate their obligation

to pay fees assessed by SMCC and CCLP

through the Association when giving reasonable

notice.

e. The [Hedgepeths] may cancel payment of the

Clubhouse dues as the Association canceled the

contract pursuant to N.C. Gen. Stat. 47F-3-105

between the Association and CCLP and SMCC.

f. That if Clubhouse Dues provisions are not

terminable, to determine whether CCLP and

SMCC has received a reasonable return on their

original investment and the revenues generated

by the covenant exceed the costs of operating

the Clubhouse facilities and whether the court

would be justified in modifying the covenant to

reduce the amount of the Clubhouse dues

payments to cover actual expenses of the

Clubhouse.

g. For the cost of this action, including a reasonable

attorney fee, pursuant to N.C. Gen. Stat. Section

41-10.

h. Issues to be determined at trial.

[Id. at 36-38].

On January 4, 2022, SMCC moved to dismiss the Appellants’

Counterclaim pursuant to Federal Rule of Bankruptcy Procedure 7012(b)

and Federal Rule of Civil Procedure 12(b)(6). [BK 21-01007, Doc. 22]. On

February 18, 2022, the Bankruptcy Court dismissed the Appellants’

Counterclaim. [BK 21-01007, Docs. 30, 31]. On February 22, 2022, the

Appellants filed a Notice of Appeal appealing the Bankruptcy Court’s Order

dismissing their Counterclaim. [CV 1:22-cv-00041-MR, Doc. 1]. SMCC now

moves to dismiss this appeal. [CV 1:22-cv-00041-MR, Doc. 4].

After appealing the Bankruptcy Court’s February 18, 2022 Order, the

Appellants also filed a Motion for Summary Judgment in the Adversary

Proceeding, arguing that they are entitled to summary judgment on SMCC’s

claim for sanctions against them. [BK 21-01007, Doc. 44]. On April 27,

2022, the Bankruptcy Court granted Ronnie and Shira Hedgepeth’s Motion

for Summary Judgment and dismissed the Adversary Proceeding with

prejudice. [BK 21-01007, Docs. 52, 53]. SMCC moved for reconsideration,

and, on June 24, 2022, the Bankruptcy Court reaffirmed its ruling that

sanctions against the Appellants are not warranted. [BK 21-01007, Doc. 61].

II. STANDARD OF REVIEW

Section 158(a)(1) of Title 28 gives federal district courts jurisdiction to

hear appeals “from final judgments, orders, and decrees” entered by

bankruptcy courts. 28 U.S.C. § 158(a)(1). “The Bankruptcy Court’s

conclusions of law are reviewed de novo and its findings of fact are reviewed

for clear error.” Campbell v. Hanover Ins. Co., 457 B.R. 452, 456 (W.D.N.C.

2011); In re Jenkins, 784 F.3d 230, 234 (4th Cir. 2015).

III. DISCUSSION

A. Appellate Jurisdiction

In its Motion to Dismiss, SMCC argues only that appellate jurisdiction

here is not proper because the Bankruptcy Court Order dismissing the

Appellants’ Counterclaim is neither a final order nor an appealable

interlocutory order. [CV 1:22-cv-00041-MR, Doc. 4 at 1].

“The concept of finality in bankruptcy cases has traditionally been

applied in a more pragmatic and less technical way than in other situations.”

In re Computer Learning Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005)

(internal quotations and citations omitted). Despite the flexibility of this

pragmatic approach, the order appealed must necessarily dispose of a

discrete dispute within the larger case. Id. The District Court, nevertheless,

“has discretionary appellate jurisdiction over interlocutory orders.” Robbins

v. Miller Law Grp., P.C., No. 3:16-MC-00001, 2016 WL 675808, at *2 (W.D.

Va. Feb. 17, 2016).

“[A] separate adversary proceeding within the framework of the overall

bankruptcy case is an appropriate ‘judicial unit’ for determining finality” under

§ 158(a). Matter of Moody, 825 F.2d 81, 86 (5th Cir. 1987) (citing 16 C.

Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice and Procedure

§ 3926 (1977 & Supp. 1986)). “In an adversary proceeding there is no final

order and no appellate jurisdiction if the [bankruptcy] court’s order fails to

dispose of all issues raised therein.” Michigan Milk Producers v. Hunter, 786

F.2d 1165 (Table), 1986 WL 16481, at *1 (6th Cir. 1986) (citing In the Matter

of King City Transit Mix, Inc., 738 F.2d 1065, 1066-67 (9th Cir. 1984); In re

Bestmann, 720 F.2d 484 (8th Cir. 1983); Universal Minerals, Inc. v. C.A.

Hughes & Co., 669 F.2d 98 (3d Cir. 1981)); see also Matter of Moody, 825

F.2d at 85-86. Here, the Bankruptcy Court’s February 18, 2022 Order did

not dispose of all of the issues raised in the Adversary Proceeding. Instead,

it only disposed of the Appellants’ Counterclaim. [See BK 21-01007, Docs.

30, 31]. Therefore, the Bankruptcy Court’s February 18, 2022 Order

dismissing the Appellants’ Counterclaim is not a final order.

However, after dismissing the Appellants’ Counterclaim, the

Bankruptcy Court granted the Appellants’ Motion for Summary Judgment on

SMCC’s claim for sanctions against them and dismissed the Adversary

Proceeding with prejudice. [BK 21-01007, Docs. 52, 53]. On June 24, 2022,

the Bankruptcy Court reaffirmed its Order granting summary judgment to the

Appellants. [BK 21-01007, Doc. 61]. Accordingly, because the Bankruptcy

Court has now disposed of all issues in the Adversary Proceeding, the Court

will treat the Bankruptcy Court’s February 18, 2022 Order dismissing the

Appellants’ Counterclaim as a final, appealable order. SMCC’s Motion to

Dismiss for lack of subject matter jurisdiction is, therefore, denied.

B. Declaratory Judgment

The Appellants seek a declaratory judgment pursuant to the North

Carolina Uniform Declaratory Judgment Act (the “Act”).5 [AP 21-01007, Doc.

21 at 36]. The Act grants courts the power to declare the “rights, status, and

5 On appeal, the Appellants now attempt to rely on the Federal Declaratory Judgment Act

(“FDJA”) in addition to the North Carolina Uniform Declaratory Judgment Act. [See CV

1:22-cv-00041-MR, Doc. 3 at 22]. Because the Appellants did not raise the FDJA in the

Adversary Proceeding before the Bankruptcy Court, the Court declines to address that

argument here. See Skipper v. French, 130 F.3d 603, 610 (4th Cir. 1997) (“Ordinarily,

for very good reasons, we do not decide issues on the basis of theories first raised on

appeal.”).

other legal relations” of parties arising under a contract, including questions

regarding its construction or validity. N.C. Gen. Stat. §§ 1-253, 1-254. “[A]

declaratory judgment should issue (1) when [it] will serve a useful purpose in

clarifying and settling the legal relations at issue, and (2) when it will

terminate and afford relief from the uncertainty, insecurity and controversy

giving rise to the proceeding.” Connor v. N.C. Council of State, 365 N.C.

242, 258, 716 S.E.2d 836, 846 (2011) (citation omitted). In order for the

Court to have jurisdiction over a claim for declaratory judgment, the

complaint must demonstrate “the existence of an actual controversy.” State

ex rel. Utilities Comm’n v. Carolina Water Serv., Inc. of N.C., 149 N.C. App.

656, 658, 562 S.E.2d 60, 62 (2002) (citation omitted). An “actual

controversy” is a “jurisdictional prerequisite” to proceeding under the Act.

Gaston Bd. of Realtors, Inc. v. Harrison, 311 N.C. 230, 234, 316 S.E.2d 59,

61 (1984) (citation omitted). “It is not necessary for one party to have an

actual right of action against another for an actual controversy to exist which

would support declaratory relief.” North Carolina Consumers Power, Inc. v.

Duke Power Co., 285 N.C. 434, 450, 206 S.E.2d 178, 189 (1974). The Court,

however, must be “convinced that the litigation appears to be unavoidable.”

Id. at 450, 206 S.E.2d at 189. “Mere apprehension or the mere threat of an

action or a suit is not enough.” Gaston Bd. of Realtors, 311 N.C. at 234, 316

S.E.2d at 62.

“It is mandatory that a complaint brought pursuant to the [Act] set forth

all of the facts necessary to disclose the existence of an actual or real

existing controversy between the parties to an action.” State ex rel. Edmisten

v. Tucker, 312 N.C. 326, 339, 323 S.E.2d 294, 303 (1984). If “the complaint

does not allege an actual, genuine existing controversy, a motion for

dismissal under . . . Rule 12(b)(6) will be granted.” Gaston Bd. of Realtors,

311 N.C. at 234-35, 316 S.E.2d at 62.

In their Counterclaim, the Appellants do not allege that SMCC billed

them for unpaid Clubhouse Dues. [See BK 21-01007, Doc. 21 at 22-38].

Notably, under the Amended Plan, SMCC was to directly bill Property

Owners for unpaid Clubhouse Dues only for the period of October 1, 2014 to

December 31, 2019, [BK 19-10286, Doc. 253 at 18-19], and the Appellants

paid Clubhouse Dues until February 2020, [BK 21-01007, Doc. 21 at 32].

Starting in January 2020, the Association, as the Debtor in this action, began

billing for Clubhouse Dues from January 2020 onward, [BK 19-10286, Doc.

253 at 18-20; BK 21-01007, Doc. 21-16 at 2], and, in August 2020, the

Association began collecting Clubhouse Dues that were not paid to SMCC

for the period of October 1, 2014 to December 31, 2019, [see BK 19-10286,

Doc. 381-1]. Similarly, the Appellants do not allege that SMCC billed them

for their pro rata share of the $1,500,000 to be credited against the principal

amount of the Judgment. [See BK 21-01007, Doc. 21 at 22-38]. Rather, the

Appellants instead allege that the Association mailed them an invoice on

December 1, 2019 seeking to collect the Appellants’ pro rata share of the

$1,500,000 amount, [BK 21-01007, Doc. 21-16], and the Amended Plan

provides that the Association is required to collect that amount from the

Property Owners for payment to SMCC. [BK 19-10286, Doc. 253 at 19-20].

The Appellants also do not allege that SMCC has threatened legal action for

the Appellants’ failure to pay either Clubhouse Dues or their pro rata share

of the $1,500,000 amount.6 [See BK 21-01007, Doc. 21 at 22-38].

Accordingly, there is no “actual controversy” between the Appellants and

SMCC.7 To the extent that the Appellants have any claim regarding the

6 Notably, SMCC presumably has no right of action against the Property Owners, as the

Declaration (1) grants the Association the power to collect assessments or foreclose on

the lien of any assessment and (2) grants the Association and CCLP the right to enforce

covenants under the Declaration. [See BK 19-10286, Doc. 304-1 at 23-24, 51].

7 The Court further notes that this decision, as well as the pleadings and briefing of the

parties, appears to neglect the threshold question of whether the Bankruptcy Court and

this Court have Article III subject matter jurisdiction in this declaratory action. If there is

no constitutional case or controversy in this declaratory action, the Appellants are left to

move for relief from the automatic stay and then file this declaratory action against the

Association in state court. However, proceeding in that manner would presumably lead

all parties right where this decision leaves them, with a holding that the Appellants’ claim

is beyond the scope of N.C. Gen. Stat. § 1-253. Therefore, rather than requiring the

parties to expend additional time and effort litigating the Appellants’ claim, the Court

herein circumvents this process and leaves the parties to address the Appellants’ claim if

or when the Association brings action against the Appellants.

assessment of either the Clubhouse Dues or the $1,500,000 amount, that

claim exists against the Association, as the Debtor in this matter and the

party responsible for assessing those fees under the Amended Plan.

Therefore, the Bankruptcy Court properly dismissed the Appellants’

Counterclaim.

ORDER

IT IS, THEREFORE, ORDERED that SMCC Clubhouse LLC’s Motion

to Dismiss Appeal [CV 1:22-cv-00041-MR, Doc. 4] is DENIED.

IT IS FURTHER ORDERED that the Bankruptcy Court’s February 18,

2022 Order [BK 21-01007, Doc. 31] granting SMCC Clubhouse, LLC’s

Motion to Dismiss Ronnie and Shira Hedgepeth’s Counterclaim is hereby

AFFIRMED.

IT IS SO ORDERED.

Signed: March 30, 2023

20