Court Opinion

ID: 4226453
Source: CourtListenerOpinion
Date Created: 2017-12-06 21:15:22.027196+00
Date Added: 2024-06-11T14:15:50.732976
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA16-1030

                               Filed: 5 December 2017

Orange County, No. 15 CVS 1109

CHAPEL H.O.M. ASSOCIATES, LLC and CHAPEL HILL MOTEL ENTERPRISES,
INC., Plaintiffs,

              v.

RME MANAGEMENT, LLC, Defendant.

      Appeal by plaintiffs from order entered 9 June 2016 by Judge R. Allen

Baddour, Jr. in Orange County Superior Court. Heard in the Court of Appeals 8

March 2017.

      Troutman Sanders LLP, by Ashley H. Story and D. Kyle Deak, for plaintiffs-
      appellants.

      Hedrick Gardner Kincheloe & Garofalo, LLP, by Patricia P. Shields and James
      R. Baker, for defendant-appellee.

      BERGER, Judge.

      Chapel H.O.M. Associates, LLC (“H.O.M.”) and Chapel Hill Motel Enterprises,

Inc. (“Chapel Hill”) (collectively “Plaintiffs”) appeal from an order filed June 9, 2016

granting the motion to dismiss of RME Management, LLC (“Defendant”) made

pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. Plaintiffs

argue the complaint states claims for which relief may be granted, and the trial court

erred by granting Defendant’s motion. We affirm in part and reverse in part.
               CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                    Opinion of the Court

                          Factual & Procedural Background

        H.O.M. entered into a forty-nine year lease on March 17, 1966 for a parcel of

land in Chapel Hill, North Carolina. The lease contained a renewal option for an

additional forty-nine years that, if written notice was given at least six months before

lease termination, would have allowed the renewal lease term to begin on January 1,

2016. Chapel Hill sublet the property from H.O.M. beginning on January 9, 1967 for

the operation and management of a hotel, and after exercising renewal options,

continues to sublet the property.

        While it is unclear when Defendant acquired the subject property from the

original landowner, Defendant was the owner of the property as early as January

2014.    In accordance with the terms of the original lease, the parties began

negotiating renewal of the lease and sublease as early as December 3, 2013 when

Chapel Hill communicated its intent to H.O.M. to extend the sublease, and on

September 16, 2014 when H.O.M. notified Defendant that it intended to renew its

lease. Both parties gave notice to renew well before the six month requirement of the

lease and sublease.

        Negotiations for renewal of the lease broke down because the parties could not

agree on the method by which the price terms for the renewal of the lease would be

set. To establish this price term for the lease contract, the parties were to each

appoint a commercial property appraiser, and these two appraisers would appoint a

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             CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                  Opinion of the Court

third appraiser. These three appraisers would then negotiate to reach an equitable

and fair value of the property and its corresponding lease value to be paid monthly to

RME. However, the parties could not agree on the appraisal methodology, and the

third appraiser was never appointed.

      After renewal negotiations broke down, Plaintiffs filed a complaint in the

United States District Court for the Middle District of North Carolina on September

29, 2014. This complaint was dismissed on jurisdictional grounds. Plaintiffs refiled

their complaint in Orange County Superior Court on August 28, 2015 stating causes

of action for declaratory judgment, equitable estoppel, and unfair and deceptive trade

practices. Defendant filed a motion on October 2, 2015 requesting the case be heard

in the North Carolina Business Court, and seeking to dismiss Plaintiffs’ complaint

for failure to state a claim on which relief could be granted. On October 23, 2015, the

Superior Court refused to designate the case as a complex business case, and so the

case proceeded in Orange County Superior Court. Following a May 31, 2016 hearing

on Defendant’s motion to dismiss, the trial court entered an order on June 9, 2016

granting the motion with prejudice. It is from this order dismissing each of its causes

of action that Plaintiffs have timely appealed.

                                 Standard of Review

      When a trial court considers a Motion to Dismiss under Rule 12(b)(6), the court

must determine “whether, as a matter of law, the allegations of the complaint, treated

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              CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                   Opinion of the Court

as true, are sufficient to state a claim upon which relief may be granted under some

legal theory, whether properly labeled or not.” Leary v. N.C. Forest Prods., Inc., 157
N.C. App. 396, 400, 580 S.E.2d 1, 4 (citation and internal quotation marks omitted),

aff’d per curiam, 357 N.C. 567, 597 S.E.2d 673 (2003). “[A] complaint should not be

dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to

no relief under any state of facts which could be proved in support of the claim.”

Stanback v. Stanback, 297 N.C. 181, 185, 254 S.E.2d 611, 615 (1979) (citation and

internal quotation marks omitted), disapproved of on other grounds by Dickens v.

Puryear, 302 N.C. 437, 448, 276 S.E.2d 325, 332 (1981). “[A]ll the Rules require is a

short and plain statement of the claim that will give the defendant fair notice of what

the plaintiff’s claim is and the grounds upon which it rests.” Sutton v. Duke, 277 N.C.
94, 102, 176 S.E.2d 161, 165 (1970) (citation and internal quotation marks omitted).

                                        Analysis

I. Equitable Estoppel

      In North Carolina, the elements of equitable estoppel are:

             (1) conduct on the part of the party sought to be estopped
             which amounts to a false representation or concealment of
             material facts; (2) the intention that such conduct will be
             acted on by the other party; and (3) knowledge, actual or
             constructive, of the real facts. The party asserting the
             defense must have (1) a lack of knowledge and the means
             of knowledge as to the real facts in question; and (2) relied
             upon the conduct of the party sought to be estopped to his
             prejudice.

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              CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                    Opinion of the Court

Friedland v. Gales, 131 N.C. App. 802, 807, 509 S.E.2d 793, 796-97 (1998) (quoting

Parker v. Thompson-Arthur Paving Co., 100 N.C. App. 367, 370, 396 S.E.2d 626, 628-

29 (1990)). Generally, equitable estoppel is not a cause of action, and may not be used

as a sword in a complaint. See id. at 806, 509 S.E.2d at 796.

      Here, Plaintiffs assert equitable estoppel in their amended complaint as an

affirmative claim for relief. Plaintiffs allege:

             h.     Defendant actively and knowingly engaged in the
                    Lease renewal process and even admittedly engaged
                    an appraiser pursuant to the terms of the Lease to
                    determine the rent payable during the Renewal
                    Term;

             i.     . . . In detrimental reliance thereon, HOM traveled
                    to Atlanta, Georgia on several occasions to negotiate
                    the terms of the extension, HOM has had numerous
                    telephone conferences and correspondence with
                    RME regarding the renewal issues, HOM has
                    engaged and paid for the services of legal
                    counsel . . . ;

                    ....

             l.     Plaintiffs relied to their detriment upon Defendant’s
                    representations concerning the Lease Renewal, and
                    have been damaged thereby.

      Plaintiffs’ allegations are not elements of a legally cognizable claim for relief.

The trial court can conclude to a certainty that Plaintiffs would not recover under

this theory. Therefore, the trial court did not err when it dismissed Plaintiffs’ claim

for equitable estoppel.

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              CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                   Opinion of the Court

II. Unfair and Deceptive Trade Practices

      This Court has stated “[u]nder N.C.G.S. § 75-1.1, a trade practice is unfair if it

is immoral, unethical, oppressive, unscrupulous, or substantially injurious to

[consumers]. A trade practice is deceptive if it has the capacity or tendency to

deceive.” Branch Banking And Trust Co. v. Thompson, 107 N.C. App. 53, 61-62, 418
S.E.2d 694, 700 (citation and internal quotation marks omitted), disc. review denied,

332 N.C. 482, 421 S.E.2d 350 (1992). Claims for unfair and deceptive trade practices

“are distinct from actions for breach of contract.” Id. at 62, 418 S.E.2d at 700. “[A]

mere breach of contract, even if intentional, is not sufficiently unfair or deceptive to

sustain an action under N.C.G.S. § 75-1.1.” Id. (citation omitted).

      In Branch Banking & Trust Co. we adopted the Fourth Circuit Court of

Appeal’s interpretation of North Carolina’s Unfair and Deceptive Trade Practices Act

stating, “a plaintiff must show substantial aggravating circumstances attending the

breach to recover under the Act, which allows for treble damages.” Id. (quoting

Bartolomeo v. S.B. Thomas, Inc., 889 F.2d 530, 535 (4th Cir. 1989)). Our cases finding

sufficient aggravating factors have generally involved forms of forgery or deception.

See Garlock v. Henson, 112 N.C. App. 243, 246, 435 S.E.2d 114, 115 (1993) (finding

substantial aggravating circumstances where the evidence showed “defendant

repeatedly denied the sale of the bulldozer when he knew it had been sold” and

“defendant forged a bill of sale in an attempt to extinguish plaintiff’s ownership

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               CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                      Opinion of the Court

interest in the bulldozer”); see also Talbert v. Mauney, 80 N.C. App. 477, 480-81, 343
S.E.2d 5, 8 (1986) (holding “plaintiffs’ allegations of wrongful and intentional harm

to their credit rating and business prospects” along with allegations defendant told a

potential investor “plaintiffs’ credit documents were ‘probably forged’ ” was sufficient

to state a claim under the Unfair and Deceptive Trade Practices Act); Walker v. Sloan,

137 N.C. App. 387, 395-96, 529 S.E.2d 236, 243 (2000) (holding plaintiffs’ allegations

were sufficient to support a claim where defendant “attempted to break up the

employee group . . . by attempting to bribe the portfolio managers into withdrawing

from the group . . . ; refus[ed] to participate [in negotiations] in good faith . . . ; and . . .

terminat[ed] the plaintiffs [from employment]”).

       Here, Plaintiffs’ complaint merely alleges Defendant “has taken a contrary

position” regarding the rent payable during the Renewal Term. Defendant now

argues the term is void, whereas Defendant previously indicated an intention to abide

by the terms of the lease.         These facts do not allege substantial aggravating

circumstances required to demonstrate a claim for unfair and deceptive trade

practices. Plaintiffs merely allege a claim for breach of contract. Therefore, the trial

court properly dismissed Plaintiffs’ claim for unfair and deceptive trade practices.

III. Declaratory Judgment

       In North Carolina, declaratory judgments are subject to the Uniform

Declaratory Judgment Act (“NCUDJA”). N.C. Gen. Stat. § 1-253 to -267 (2015). See

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             CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                  Opinion of the Court

Augur v. Augur, 356 N.C. 582, 573 S.E.2d 125 (2002). A jurisdictional prerequisite of

a declaratory judgment claim is that a controversy must exist between the interested

parties both at the time of filing the complaint and the time of hearing at which the

matter comes before the trial court for a hearing. Sharpe v. Park Newspapers of

Lumberton, 317 N.C. 579, 584-85, 347 S.E.2d 25, 29 (1986) (citation omitted).

      “To satisfy the jurisdictional requirement of an actual controversy, it must be

shown in the complaint that litigation appears unavoidable. Mere apprehension or

the mere threat of an action or suit is not enough.” Wendell v. Long, 107 N.C. App.
80, 82-83, 418 S.E.2d 825, 826 (1992) (citations omitted). “The courts of this state do

not issue anticipatory judgments resolving controversies that have not arisen.” Id.

at 83, 418 S.E.2d at 826 (citation and internal quotation marks omitted). An actual

controversy must exist to prevent courts from rendering a “purely advisory opinion

which the parties might, so to speak, put on ice to be used if and when occasion might

arise.” Tryon v. Power Co., 222 N.C. 200, 204, 22 S.E.2d 450, 453 (1942) (citations

omitted).

      “A court may refuse to render or enter a declaratory judgment or decree where

such judgment or decree, if rendered or entered, would not terminate the uncertainty

or controversy giving rise to the proceeding[.]” Augur, 356 N.C. at 585, 573 S.E.2d at

128 (brackets omitted) (citing N.C. Gen. Stat. § 1-257 (2001)). Section 1-257 expressly

grants trial courts discretion when evaluating a declaratory judgment remedy

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              CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                   Opinion of the Court

“because trial courts are best positioned to assess the facts bearing on the usefulness

of declaratory relief in a particular case.” Id. at 587, 573 S.E.2d at 130.

      Accordingly, this Court reviews a trial court’s decision under an abuse of

discretion standard when ruling on a motion of declaratory relief. Id. Further, this

Court has previously held that “our courts have jurisdiction to render declaratory

judgments only when the complaint demonstrates the existence of an actual

controversy.” Fabrikant v. Currituck Cty., 174 N.C. App. 30, 45, 621 S.E.2d 19, 29

(2005) (emphasis added) (citation and internal quotation marks omitted). Therefore,

our review is limited to the contents of Plaintiffs’ complaint.

      “When the record shows . . . no basis for declaratory relief, or the complaint

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

G.S. 1A-1, Rule 12(b)(6) will be granted.” Gaston Bd. of Realtors v. Harrison, 311
N.C. 230, 234-35, 316 S.E.2d 59, 62 (1984) (citation omitted). However, “[a] motion

to dismiss for failure to state a claim is seldom appropriate in actions for declaratory

judgments, and will not be allowed simply because the plaintiff may not be able to

prevail.” Morris v. Plyler Paper Stock Co., 89 N.C. App. 555, 557, 366 S.E.2d 556, 558

(1988) (citation and internal quotation marks omitted).

      In Morris, the plaintiffs contended that their declaratory judgment claim was

sufficient to obtain a judicial determination of the validity of lease renewal terms,

and the trial court had erred in granting defendant’s Rule 12(b)(6) motion. Id. at 556,

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             CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                   Opinion of the Court
366 S.E.2d at 557. This Court ruled that the plaintiffs had established a justiciable

controversy over lease renewal terms and that dismissal pursuant to Rule 12(b)(6)

was improper. Id. at 556-57, 366 S.E.2d at 557-58. The Court declined to review the

lease agreement for validity because “[t]he issue is not whether a plaintiff will

ultimately prevail, but whether the claimant is entitled to offer evidence to support

the claims.” Id. at 557, 366 S.E.2d at 558 (citation and internal quotation marks

omitted).

      Our Supreme Court has stated that a motion to dismiss “is allowed only when

the record clearly shows that there is no basis for declaratory relief as when the

complaint does not allege an actual, genuine existing controversy.” Consumers Power

v. Power Co., 285 N.C. 434, 439, 206 S.E.2d 178, 182 (1974) (emphasis added)

(citations omitted). While a “mere difference of opinion between the parties is not

sufficient for purposes of the Declaratory Judgment Act,” Fabrikant, 174 N.C. App at

44, 621 S.E.2d at 29 (citation and internal quotation marks omitted), our Supreme

Court has stated that a sufficient declaratory judgment claim exists when:

             (1) . . . a real controversy exists between or among the
             parties to the action; (2) . . . such controversy arises out of
             opposing contentions of the parties, made in good faith, as
             to the validity or construction of a deed, will or contract in
             writing, or as to the validity or construction of a statute, or
             municipal ordinance, contract, or franchise; and (3) . . . the
             parties to the action have or may have legal rights, or are
             or may be under legal liabilities which are involved in the
             controversy, and may be determined by a judgment or
             decree in the action . . . .”

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             CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                  Opinion of the Court

Power Co., 285 N.C. at 449, 206 S.E.2d at 188 (emphasis added) (quoting Light Co. v.

Iseley, 203 N.C. 811, 820, 167 S.E 56, 60 (1933)).

      In their complaint, Plaintiffs allege:

             16.    Pursuant to the terms of the Lease, the rental
                    payment for the Renewal Term shall be negotiated
                    between the parties, and if not able to be agreed
                    upon each party shall choose an appraiser, who shall
                    in turn chose a third appraiser, and the appraisers
                    shall determine the annual rent to be paid during
                    the Renewal Term.

                    ....

             20.    HOM and RME, however, have been unable to agree
                    upon the rent payable during the Renewal Term,
                    and each party has, respectively, appointed an
                    appraiser pursuant to paragraph 8 of the Lease.

             21.    Subsequent to such appointment, however, the
                    appraiser for RME has taken a position that is
                    contrary to the terms of the Lease and has
                    attempted to create a conflict, thus interfering with
                    the appointment of a third appraiser to set rent for
                    the Renewal Term.

             22.    Plaintiffs submit that the reason why the appraisers
                    have been unable to agree upon a third appraiser is
                    because Defendant has taken a contrary position
                    regarding the manner and method pursuant to
                    which the rent payable during the Renewal Term
                    shall be determined in order to improperly and
                    tortiously attempt to create an ambiguity and
                    argument for voiding the Lease, or in an attempt to
                    extract more monies from Plaintiff.

             23.    Plaintiffs submit that a true and accurate reading of

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             CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                  Opinion of the Court

                   the Lease as a whole and the manner or mechanism
                   by which the rent was originally determined under
                   the terms of the Lease shows that the Property and
                   the rent applicable thereto during the Renewal
                   Term shall be determined by appraising the
                   Property “as is” . . . .

             24.   RME, conversely, takes the position that the
                   Property and the rent applicable thereto during the
                   Renewal Term shall be determined based upon the
                   highest and best use of the Property . . .

                   ....

             28.   An actual controversy exists among HOM and RME
                   as to the rights and obligations with regard to the
                   Lease and the parties’ respective interpretation as to
                   the terms of the Lease with regard to Plaintiffs’
                   exercise of their Renewal Term rights [in Paragraph
                   8] and the rent payable therefore.

             29.   A determination by this Court of the rights, duties,
                   and liabilities as between HOM and RME under the
                   terms of the Lease is necessary.

      Plaintiffs’ claim for declaratory relief was sufficient under the NCUDJA.

Taking the allegations in the complaint as true, Plaintiffs pleaded their claim for

declaratory relief with particularity alleging a genuine controversy between the

parties before the trial court, not a mere disagreement between the parties.

Dismissal was improper at this stage of the litigation, and we therefore reverse the

trial court in regards to the declaratory judgment claim.

                                     Conclusion

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              CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

                                 Opinion of the Court

      The trial court correctly dismissed the claims for equitable estoppel and unfair

and deceptive trade practices, and we affirm that portion of the judgment. The trial

court erred in dismissing the declaratory judgment action, and we therefore reverse

as to that claim.

      AFFIRMED IN PART, REVERSED IN PART.

      Judge CALABRIA concurs.

      Judge HUNTER, JR. concurs with separate opinion.

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 No. COA 16-1030– Chapel H.O.M. Assocs., LLC v. RME Management, LLC

      HUNTER, JR., Robert N., Judge, concurring in separate opinion.

      I agree Plaintiffs’ claims for equitable estoppel and unfair and deceptive trade

practices were properly dismissed. I also agree with the majority’s decision reversing

the trial court’s dismissal of Plaintiffs’ claim for declaratory relief, but I write

separately to address the relief which should be afforded.

      Dismissal of Plaintiffs’ declaratory judgment claim was error, as the rights of

the parties under the contract should have been declared. In Connor v. Harless, this

Court addressed the validity of an option to purchase at a price to be determined in

the future based on at least two appraisals. 176 N.C. App. 402, 626 S.E.2d 755 (2006).

We first noted “[i]t is essential to the formation of any contract that there be mutual

assent of both parties to the terms of the agreement so as to establish a meeting of the

minds.” Id. at 405, 626 S.E.2d at 757 (emphasis in original) (quoting Harrison v. Wal-

Mart Stores, Inc., 170 N.C. App. 545, 550, 613 S.E.2d 322, 327 (2005)). Thus, “as to

the essential and material contractual term of price, there must be a meeting of the

minds.” Id. “[A] contract to enter into a future contract must specify all its material

and essential terms, and leave none to be agreed upon as a result of future

negotiations.” Boyce v. McMahan, 285 N.C. 730, 734, 208 S.E.2d 692, 695 (1974).

      The option to purchase at issue in Connor provided for the price to be an

“amount in cash fair market value at the time of such purchase (based on at least two

appraisals).” Connor, 176 N.C. App. at 406, 626 S.E.2d at 758. We held the term was

void because:
             CHAPEL H.O.M. ASSOCS., LLC V. RME MANAGEMENT, LLC

            HUNTER, JR., Robert N., J., concurring in part and dissenting in part

             [N]o mechanism existed within the agreement to address
             any potential price discrepancies. Specifically, there were
             no additional provisions stating how to proceed if the
             appraisals produced vastly different property values. . . .
             With no specification in the agreement as to how to address
             . . . greatly varying estimates in the value of defendants’
             property, the price term is not, as it must be, certain and
             definite.

 Id. We ultimately held “[b]ecause there was no meeting of the minds as to the

essential term of price, the agreement between plaintiffs and defendants is not an

enforceable contract.” Id.

      This case is distinguishable from Connor in that here, the parties did provide

a solution for resolving potential price discrepancies. Unlike the parties in Connor,

the parties here provided an additional safeguard to address a potential impasse

between the two original appraisers. In the event the two appraisers cannot reach

an agreement, the two shall in turn appoint a third appraiser and the three will

determine the rental term. This provision of the contract evidences mutual assent,

and the parties’ intention to be bound to the terms of the agreement. Thus, the

contract is not void for vagueness. We should reverse the trial court’s dismissal of

this claim and remand the case, in order for the trial court to appoint a third

appraiser. We are confident the three appraisers will be capable of determining the

appropriate price term based upon industry standards.

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