795 S.E.2d 641 (N.C.App. 2017), COA16-596, RME Management, LLC v. Chapel H.O.M. Associates, LLC

Docket Nº:COA16-596
Citation:795 S.E.2d 641
Opinion Judge:ZACHARY, Judge.
Party Name:RME MANAGEMENT, LLC, Plaintiff, v. CHAPEL H.O.M. ASSOCIATES, LLC and CHAPEL HILL MOTEL ENTERPRISES, INC., Defendants
Attorney:Hedrick Gardner Kincheloe & Garofalo, LLP, by Patricia P. Shields and James R. Baker, for plaintiff-appellant. Troutman Sanders LLP, by Ashley H. Story and D. Kyle Deak, for defendants-appellees.
Judge Panel:ZACHARY, Judge. Judges STROUD and McCULLOUGH concur. Judges STROUD and McCULLOUGH concur.
Case Date:January 17, 2017
Court:Court of Appeals of North Carolina
 
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Page 641

795 S.E.2d 641 (N.C.App. 2017)

RME MANAGEMENT, LLC, Plaintiff,

v.

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

No. COA16-596

Court of Appeals of North Carolina

January 17, 2017

Heard in the Court of Appeals, November 3, 2016.

Editorial Note:

This Decision is not final until expiration of the twenty-one day rehearing period. [North Carolina Rules of Appellate Procedure 32(b)]

AFFIRMED.

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

Troutman Sanders LLP, by Ashley H. Story and D. Kyle Deak, for defendants-appellees.

OPINION

Appeal by plaintiff from order entered 7 March 2016 by Judge Lunsford Long in Orange County District Court No. 15 CVD 1471.

ZACHARY, Judge.

Plaintiff RME Management, LLC (RME) appeals an order granting summary judgment in favor of Defendants Chapel H.O.M. Associates, LLC (HOM) and Chapel Hill Motel Enterprises, Inc. (CHME). For the reasons that follow, we affirm.

I. Background

RME and HOM are the assignees of the lessor and the lessee, respectively, of real property located at 1301 Fordham Boulevard in Chapel Hill, North Carolina (the property). The lease was executed on 17 March 1966, and shortly thereafter, the original lessee built a hotel on the property, which is still in operation today. In January 1967, CHME entered into a sublease to operate the hotel. The lease and sublease were assigned to HOM in August 1988. RME became the owner and current lessor of the property in October 2012.

The lease's initial term commenced on 1 January 1966 and was scheduled to terminate on 31 December 2015. However, the lease contained a renewal option that allowed HOM to extend the lease for an additional forty-nine years. HOM exercised the renewal option in September 2014, and the additional forty-nine-year lease term was set to commence on 1 January 2016.

Central to this case, the lease contained two provisions that required HOM, as lessee, to pay taxes assessed against the property. Paragraph 17 of the lease provides, in pertinent part: As a further rental hereunder, the Lessee shall pay all ad valorem and personal property taxes which may be assessed against the demised premises and the improvements thereon and personal property located therein, or any part thereof, for each year of the term of this lease. . . .

Paragraph 19 further provides that: The Lessee expressly agrees to pay all installments of taxes and assessments required to be paid by it hereunder when due, subject to the right of said Lessee to contest such tax or assessment, in good faith, provided the title of the Lessors shall not be placed in jeopardy by forfeiture, foreclosure, sale under tax warrant, or otherwise.

(Emphasis added). Although HOM's obligation to pay property taxes is clear, the lease does not define the term " when due" as it relates to the date by which the taxes must be paid. The lease also contains a default provision: If any default of the Lessee hereunder shall continue uncorrected for thirty (30) days after notice thereof from the Lessors, the Lessors may, by giving written notice to the Lessee, at any time thereafter during the continuance of such default either (a) terminate the lease, or (b) re-enter the demised premises by summary process or otherwise, and expel the Lessee and remove all personal property therefrom and re-let the premises at the best rent obtainable. . . .

Property tax notifications and bills were mailed to CHME (which was obligated to pay property taxes, in full, under the sublease), and HOM appears to have relied on CHME to make all necessary payments. While the subject of considerable dispute on appeal, it appears that RME, HOM, and their predecessors never gave much, if any, attention to when the property taxes were being paid before 2013.

On 23 October 2013, however, RME's attorney, Jonathan Ganz, sent a letter to defendants alleging that they had breached the lease by failing to pay property taxes on or before September 1st in each of the preceding four years. The letter stated that RME had just recently become aware of these circumstances, and further asserted that " [i]n Orange County, real property tax bills for a calendar year are due on September 1 of that year." HOM responded, through its attorney, by sending a letter to RME, asserting that the lease did not require the tenant to pay taxes by September 1st of any fiscal year. Despite the parties' contrary positions on the issue of exactly when property tax payments were to be made, RME took no further action at that time, as Mr. Ganz's letter failed to comply with the technical requirements of the lease's notice and default provisions.

There was no dispute in 2014 as to when the property taxes had to be paid, as CHME appealed the property's valuation, thereby tolling the date on which the taxes were " due" under the lease. However, the 2015 tax bill for the property was issued in July 2015 and defendants did not pay the taxes by 1 September 2015. As a result, on 21 September 2015, RME sent HOM a...

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