Court Opinion

ID: 9587618
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:24:19.046294+00
Date Added: 2024-06-11T12:47:56.098146
License: Public Domain

TYSON, Judge,
concurring in part, dissenting in part.
I concur with the majority’s opinion that the trial court properly granted directed verdict in favor of plaintiff for $10,800.00 for defend*582ants’ breach of Article V of the lease. I also concur with the majority’s opinion that the trial court erred in granting a directed verdict in favor of plaintiff in the amount of $370,000.00 for plaintiff’s lost opportunity to purchase the building. However, I respectfully dissent from the majority’s opinion that the trial court properly granted a directed verdict in favor of plaintiff for $159,600.00 in damages for increased rents. I would hold that the jury was entitled to determine whether plaintiff exercised reasonable diligence to mitigate its damages for increased rental payments.
“With respect to the question of mitigation of damages, the law in North Carolina is that the nonbreaching party to a lease contract has a duty to mitigate his damages upon breach of such contract.” Isbey v. Crews, 55 N.C. App. 47, 51, 284 S.E.2d 534, 537 (1981) (citing Weinstein v. Griffin, 241 N.C. 161, 84 S.E.2d 549 (1954); see also, e.g., Harris & Harris Constr. Co. v. Crain & Denbo, Inc., 256 N.C. 110, 121, 123 S.E.2d 590, 598 (1962) (quotation omitted) (“ ‘A party injured by the breach of contract by the other party thereto is required to protect himself from loss if he can do so with reasonable exertion or trifling expense, and ordinarily will be allowed to recover from the delinquent party only such damages as he could not, with reasonable effort, have avoided.’ ”); Monger v. Lutterloh, 195 N.C. 274, 142 S.E. 12, 16 (1928) (quotation omitted) (“ ‘The general principle is fully recognized with us that, in case of contract broken or tort committed, the injured party should do what reasonable care and business prudence requires to minimize the loss.’ ”).
“Imposing such a duty assures that an award of damages will put the injured party in as good a position as if the contract had not been breached while affording the least amount of cost to the defaulting party.” New Towne Limited Partnership v. Pier 1 Imports, Inc., 113 Ohio App.3d 104, 108, 680 N.E.2d 644, 646 (1996).
“Since it is a basic principle of contract law that damages are compensatory and not punitive, North Carolina holds that the non-breaching party to a lease cannot recover damages which he Could have averted by reasonable mitigation activity.” 2 James A. Webster, Jr., Webster's Real Estate Law in North Carolina § 12-28, at 524 (Patrick K. Hetrick & James B. McLaughlin, Jr., eds., 5th ed. 1999). Where the nonbreaching party to a contract fails to use reasonable diligence to mitigate damages, its recovery will be limited to “the difference between what [it] would have received had the lease agreement been performed, and the fair market value of what he could *583have received had [it] used reasonable diligence to mitigate.” Isbey at 51, 284 S.E.2d at 537.
“Generally, the reasonableness of mitigation efforts depends upon the facts and circumstances of the particular case and is a iurv Question except in the clearest of cases.” Smith v. Martin, 124 N.C. App. 592, 600, 478 S.E.2d 228, 233 (1996) (citing Radford v. Norris, 63 N.C. App. 501, 503, 305 S.E.2d 64, 65 (1983)) (emphasis supplied).
The evidence presented at trial established that, prior to the sale of the building to Rumfelt, plaintiff’s rent was $3,200.00 per month. After purchasing the building, Rumfelt wrote a letter to plaintiffs stockholders advising them of his purchase, stating “[i]f you are interested in negotiating a new lease, I look forward to developing a business relationship that will be beneficial to all of us.” Upon receiving the letter, plaintiff offered to buy the building from Rumfelt, who refused. The parties entered into a new lease requiring rental payments of $6,000.00 per month, nearly double the original monthly rental amount.
I would hold plaintiff’s evidence as to this element of damages was not manifest, and that the jury was entitled to determine whether plaintiff exercised the reasonable diligence required by law to mitigate its damages resulting from defendants’ breach. The only “manifest” evidence was that plaintiff agreed to a virtual doubling of its rent less than 3 months after defendants’ sale of the property to Rumfelt. The trial court’s grant of a directed verdict on this issue was error. Accordingly, I respectfully dissent from this portion of the majority’s opinion.
I also disagree with the majority’s opinion that the issue of plaintiff’s mitigation of its increased rental damages is not an issue properly before this Court. In its complaint, plaintiff alleged that Rumfelt informed plaintiff that he had purchased the building, and that Rumfelt stated that “unless Plaintiff signed a new lease with him at a higher rental, he would pursue negotiations with other prospective tenants for the premises leased by Plaintiff.” Plaintiff did not separate its allegations of damages incurred for lost opportunity and for increased rentals in its complaint. Plaintiff merely alleged that it suffered damages as a result of defendants’ breach of the lease. Defendants’ answer denied both that Rumfelt required plaintiff to pay higher rent in order to stay in the building, and that plaintiff suffered damages, including increased rental damages, as a result of defendants’ breach.
*584Contrary to the majority’s colorful assertion that the “law does not permit parties to swap horses between courts in order to get a better mount” on appeal, the record as a whole reflects that defendants continue to ride the same horses they mounted when they filed their answer. Plaintiff did not segregate its claims for damages for lost opportunity and damages for increased rentals. Defendants’ denial of those allegations squarely put those claims in dispute, including the question of fact of whether plaintiff did “what reasonable care and business prudence requires to minimize the loss.” Monger, supra.
A plaintiffs duty to mitigate damages following a defendant’s breach is a duty that arises as a matter of law. See, e.g., Tillis v. Calvine Cotton Mills, Inc., 251 N.C. 359, 367-68, 111 S.E.2d 606, 613 (1959) (citation omitted) (a party is “required by law to exercise reasonable diligence to minimize damages.”); Gibbs v. Western Union Telegraph Co., 196 N.C. 516, 146 S.E. 209, 213 (1929) (citations omitted) (“it is a well-settled rule of law that the party who is wronged is required to use due care to minimize the loss.”). The duty to mitigate “stems from the implied covenant of good faith and fair dealing” inherent in all contracts. See New Towne Limited Partnership, 113 Ohio App.3d at 108, 680 N.E.2d at 646; Barker, Commercial Landlords’ Duty Upon Tenants’ Abandonment — To Mitigate?. 20 J. Corp. L. 627, 644 (1995). See also, Rubin v. Dondysh, 146 Misc.2d 37, 43, 549 N.Y.S.2d 579, 582 (1989), reversed on other grounds, 153 Misc.2d 657, 588 N.Y.S.2d 504 (1991) (duty to mitigate “flows logically from the implied covenant, which exists in any contract, of fair dealing and good faith.”).
Thus, where plaintiff raised the issue of defendants’ liability for plaintiff’s increased rental damages following defendants’ breach, the issue of plaintiff’s duty to mitigate such damages arose as a matter of law. The issue was properly presented to the trial court, and the jury was entitled to review it.
Furthermore, defendants preserved this argument for appeal in their assignments of error to this Court. Defendants’ assignments of error, as enumerated in the record on appeal, include the following: (1) that the trial court’s entry of a directed verdict was inappropriate where, “it appearing from the evidence adduced at trial that there existed an issue of fact as to the amount of damages, if any, which Plaintiff was entitled to recover”; (2) that the trial court’s conclusion that plaintiff was entitled to recover damages for increased rents was *585inappropriate where plaintiff had no obligation to pay the increased rent; and (3) that the trial court’s conclusion that defendants were liable for $159,600.00 in increased rental damages was error where plaintiffs failure to record its lease “was the proximate cause of Plaintiff’s inability to avoid paying a higher lease cost, and that in any event Plaintiff was under no obligation to accept a higher lease cost.”
Defendants also argued in their brief that plaintiff’s duty to mitigate its damages was an issue requiring the jury’s review. Defendants’ arguments were supported by authority. I would hold that because the trial court made no findings of fact or conclusions of law that plaintiff made any efforts to mitigate its damages, the entry of a directed verdict in favor of plaintiff was error on this question of fact.
I concur with the majority’s opinion that the trial court erred in granting a directed verdict for plaintiff for lost opportunity damages in the amount of $370,000.00. The jury did not pass judgment on whether defendants must be accountable for the entire amount of increased rental damages. Evidence of damages for plaintiff’s lost opportunity were based upon Williams’ testimony of the value of the building. Williams’ valuation of the property was based, in part, upon the increased rental amounts that were agreed to after the date of sale. I concur with the majority’s opinion that the credibility of this evidence was not so manifest for the trial court to remove this issue from the jury and grant a directed verdict.
Plaintiff did not separate the allegations of damages for lost opportunity and for increased rentals for breach of Article XVII of the lease in the complaint. The issues of plaintiff’s damages for increased rentals and for lost opportunity are intertwined. It is difficult to separate these elements of damages, where the evidence is manifest in one area of damages, but not manifest in the other. We all agree that lost opportunity damages must be considered by the jury. I believe the issue of damages for increased rentals and plaintiff’s mitigation efforts should also be submitted to the jury.