Chapel H.O.M. Associates, LLC v. RME Management, LLC

• Decision Date: 05 December 2017
• Docket Number: No. COA16-1030,COA16-1030
• Citation: 256 N.C.App. 625,808 S.E.2d 576
• Parties: CHAPEL H.O.M. ASSOCIATES, LLC and Chapel Hill Motel Enterprises, Inc., Plaintiffs, v. RME MANAGEMENT, LLC, Defendant.
• Court: North Carolina Court of Appeals

256 N.C.App. 625

808 S.E.2d 576

CHAPEL H.O.M. ASSOCIATES, LLC and Chapel Hill Motel Enterprises, Inc., Plaintiffs,

v.RME MANAGEMENT, LLC, Defendant.

No. COA16-1030

Court of Appeals of North Carolina.

Filed: December 5, 2017

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

Hedrick Gardner Kincheloe & Garofalo, LLP, Raleigh, 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.

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 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 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.

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.

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 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"...