Atlantic & E. Carolina Ry. Co. v. Wheatly, COA03-515.

• Decision Date: 20 April 2004
• Docket Number: No. COA03-515.,COA03-515.
• Citation: 594 S.E.2d 425,163 NC App. 748
• Court: North Carolina Court of Appeals
• Parties: ATLANTIC AND EAST CAROLINA RAILWAY COMPANY, Plaintiff, v. WHEATLY OIL CO., INC., Defendant.

594 S.E.2d 425

163 NC App. 748

ATLANTIC AND EAST CAROLINA RAILWAY COMPANY, Plaintiff, v. WHEATLY OIL CO., INC., Defendant.

No. COA03-515.

Court of Appeals of North Carolina.

April 20, 2004.

Sumrell, Sugg, Carmichael, Hicks & Hart, P.A., by James R. Sugg and Arey W. Grady, III, New Bern, for the plaintiff-appellee.

Wheatly, Wheatly, Nobles, Weeks, Valentine & Lupton, P.A., by C.R. Wheatly, Jr. and C.R. Wheatly, III, Beaufort, for defendant-appellant.

Ward and Smith, P.A., by Frank H. Sheffield, Jr., New Bern, for North Carolina Railroad Company, amicus curiae.

HUDSON, Judge.

On 24 May 2002, Atlantic and East Carolina Railway ("Railway") filed a complaint seeking summary ejectment of Wheatly Oil Company, Inc. ("Wheatly") from property located at 2506 Arendall Street in Morehead City. Railway alleged that it owned a leasehold interest in the property, which it had sublet to Southern Outdoor Advertising, Inc. ("SOA"), which in turn had sublet the property to Wheatly. Railway alleged that as a result of the termination of the lease between it and SOA, and by virtue of a judgment entered in litigation between Wheatly and SOA, Railway was entitled to be put in immediate possession of the property and Wheatly should be ejected.

On 18 July 2002, after Wheatly filed its answer and raised various defenses and counterclaims, Railway moved for summary judgment, filing supporting affidavits and memoranda of law. The court heard the motion 29 July 2002, and granted summary judgment to Railway 2 December 2002. Wheatly appeals. For the reasons discussed below, we affirm.

Background

The property at issue here was originally leased by Railway's predecessor in interest under a lease which expired in 1994. On expiration of that lease, however, the owner of the property, the North Carolina Railroad Company ("NCRR"), specifically negotiated Railway's continued use and occupation of the property for an indefinite time. Railway then leased the property to SOA on 15 November 1984, with terms allowing SOA to renew the lease through 14 November 2014. Also on 15 November 1984, SOA sublet the property to Wheatly, with provisions that also extended through 14 November 2014. A Consent to Sublease ("consent contract") executed among Railway, SOA and Wheatly specified that Wheatly's "right to use [the property] shall terminate at all events upon the termination in any manner of [the Railway/SOA lease]."

In 1999, SOA sued Wheatly regarding the property, resulting in a judgment entered 17 October 2001 providing that Wheatly pay damages to SOA for unpaid rent, that SOA pay damages to Wheatly for unfair trade practices, and that SOA be put in possession of the property and Wheatly be removed from it. Neither party appealed. In late 2001, SOA terminated its lease with Railway, who subsequently demanded possession of the property. In November 2001, Wheatly tendered a rental payment to Railway, as specified under the lease between SOA and Railway. Railway refused payment, stating that SOA was a holdover tenant and that there was no privity between Wheatly and Railway. This action ensued.

Analysis

The standard of review on appeal of a grant of summary judgment is well established:

Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen.Stat. § 1A-1, Rule 56(c) (2003) (emphasis added). A party moving for summary judgment satisfies its burden of proof (1) by showing an essential element of the opposing party's claim is nonexistent or cannot be proven, or (2) by showing through discovery that the opposing party cannot produce evidence to support an essential element of his or her claim. Once the movant satisfies its burden of proof, the burden then shifts to the non-movant to set forth specific facts showing there is a genuine issue of material fact as to that essential element.

Belcher v. Fleetwood Enters., ___ N.C.App. ___, ___, 590 S.E.2d 15, 18 (2004) (internal citations omitted).

Wheatly first contends that the court erred in granting summary judgment because there was a genuine issue of material fact as to whether Railway was the real party in interest. We disagree.

Wheatly contends that Railway had no leasehold interest in the property because Railway's original lease with NCRR had expired in 1994. However, "[t]he general rule denies a tenant in possession any right to challenge his landlord's title to the property...." Turner v. Weber, 16 N.C.App. 574, 579, 192 S.E.2d 601, 605 (1972), cert. denied 282 N.C. 584, 193 S.E.2d 747 (1973). Wheatly cites case law discussing an exception when a landlord's own title has ceased. See Lassiter v. Stell, 214 N.C. 391, 392, 199 S.E. 409, 410 (1938) ("While the rule that a tenant is estopped to deny the title of his landlord is too well settled to require citation of authority, this rule applies to the title of the landlord as it existed at the time he entered into the lease with the tenant under which the tenant entered the premises, and does not preclude the tenant from showing that during the tenancy the landlord's title had terminated or had been extinguished, and the former landlord was therefore without authority to maintain a proceeding in summary ejectment against his former tenant.") However, the record here contains affidavits filed by Railway's counsel and by the president of NCRR, stating that, by agreement of NCRR, Railway was entitled to continue in possession of the property indefinitely, until NCRR demanded its return. Thus, Railway's right to possession had not ceased and Wheatly was estopped from challenging its title.

Wheatly next argues that it should have been granted summary judgment because it was an assignee rather than a sublessor, and that Railway was thus estopped from bringing this ejectment action. For the reasons discussed below, we disagree.

Wheatly contends in its brief that because its sublease from SOA was co-terminus with the sublease between Railway and SOA, Wheatly was actually an assignee. Krider v. Ramsay, 79 N.C. 354, 357 (1878). "Where a lessee for a term of years parts with his whole term to a third party, it is called an assignment, and the assignee thereby becomes the tenant of the original lessor and subject to all the covenants in the lease, which run with the land, just as the lessee was. The privity of estate and privity of contract still subsist between the lessor and assignee, as it did between the lessor and lessee." Id. In Krider, the lessee surrendered its lease to the lessor (as here SOA surrendered its lease to Railway) and then the lessor attempted to take possession of the property from the sublessee. Id. at 356. The court held that the lessor could not, in these circumstances, eject the sublessee from the property. "A surrender is never allowed to operate injuriously upon the right of third parties, or to affect the estate of the underlessee." Id. at 358. The facts here, however, differ from those in Krider in two important respects which make that case inapplicable.

First, the Consent to Sublease signed by Railway, SOA and Wheatly clearly and explicitly states that Wheatly's "right to use [the property] shall terminate at all events upon the termination in any manner of [the Railway/SOA lease]." Thus, the plain language of the consent contract specifies that Wheatly's right to the property cannot continue after SOA's lease is ended for any reason. At the moment that SOA surrendered its lease, Wheatly's right to possession of the property ended. In Krider, the Court stated, "[i]t was the fault of the lessor in making the lease to Dyson that he did not insert a covenant against underletting, and in accepting the surrender of the lease; it was again his fault that he made no provision to meet a contingency like this." Id. at 359 (emphasis added). In the consent contract here, however, Railway did provide to meet the contingency in which SOA terminated its sublease...