Lake Mary Ltd. Partnership v. Johnston

• Decision Date: 21 August 2001
• Docket Number: No. COA00-837.,COA00-837.
• Citation: 145 NC App. 525,551 S.E.2d 546
• Court: North Carolina Court of Appeals
• Parties: LAKE MARY LIMITED PARTNERSHIP, Plaintiff, v. Hugh W. JOHNSTON and Audrey S. Johnston, Defendants.

551 S.E.2d 546

145 NC App. 525

LAKE MARY LIMITED PARTNERSHIP, Plaintiff, v. Hugh W. JOHNSTON and Audrey S. Johnston, Defendants.

No. COA00-837.

Court of Appeals of North Carolina.

August 21, 2001.

Tuggle Duggins & Meschan, P.A., by Kenneth J. Gumbiner, J. Reed Johnston, Jr. and Amanda L. Fields, Greensboro, for plaintiff-appellant.

Poyner & Spruill, L.L.P., by Parmele Calame and Cecil Harrison; James, McElroy & Diehl, P.A., by Edward T. Hinson, Jr. and Fred B. Monroe, Charlotte, for defendant-appellants.

HUNTER, Judge.

Plaintiff Lake Mary Limited Partnership ("Lake Mary"), and defendants Hugh and Audrey Johnston (hereinafter, collectively "the Johnstons") appeal from the trial court's judgment on Lake Mary's breach of contract, conversion, and unfair and deceptive practices claims against the Johnstons, on the Johnstons' breach of contract counterclaim against Lake Mary, and denying both parties' motions for attorney fees. After a careful review of the record, briefs, and argument of counsel, we affirm the judgment in part; and we reverse and remand in part as to the directed verdict in Audrey Johnston's favor barring Lake Mary's claims of breach of contract and unfair and deceptive practices against her.

This matter arises out of Hugh and Audrey Johnstons' (husband and wife, respectively) sale of Dixie Village Shopping Center ("Dixie Village"), located in Gastonia, North Carolina, to Equity Investment Group, L.L.C. ("Equity"). On 12 August 1997, the parties entered into a purchase and sale agreement, whereby the Johnstons agreed to sell Dixie Village for $6,250,000.00 (later reduced to $6,080,000.00) to Equity, which subsequently transferred its contractual rights to Lake Mary. Thereafter, on 31 October 1997, the closing on Dixie Village took place at the Johnstons' attorney's office. Pursuant to the purchase and sale agreement, the Johnstons had the obligation at closing to deliver to Lake Mary "[e]xecuted copies of a notice to tenants relating to the Assignment of Leases to [Lake Mary] and a general direction relating to the payment of rent...." However, the Johnstons did not provide the tenant notice letter.

At approximately 3:00 p.m. on 31 October, the parties came to a final agreement, and Lake Mary notified Commonwealth Land Title Company of North Carolina—the company handling all the title work and document recording for Dixie Village—to disburse $1,250,000.00 to the Johnstons' attorney's trust account. Since the funds were not transferred before 2:00 p.m., the funds could not be credited to the Johnstons' attorney's trust account until the next business day, 3 November 1997. On 3 November, the Johnstons' attorney withdrew the $1,250,000.00 from his trust account and issued checks to the Johnstons for $450,000.00 and $800,000.00.

After the closing on the property, Hugh Johnston became concerned that Lake Mary would not fulfill its post-closing obligations. Thus, he kept November, December, and January rent checks that he received from the tenants of Dixie Village. In all, Hugh Johnston kept thirty-two tenant rent checks, totaling approximately $96,624.16, and he deposited these checks into an account that he previously used for Dixie Village business (Hugh Johnston transferred the funds to his attorney to hold in trust; however, his attorney later returned the funds back to him). As a result of Hugh Johnston's taking of the tenant rent checks, Lake Mary refused to fulfill some of its post-closing obligations under the purchase and sale agreement, including (1) reimbursing the Johnstons for overage rent (several Dixie Village tenants had leases which computed a portion of their rent obligation to a percentage of sales) for Dixie Village tenants Goodwill and Radio Shack, (2) billing and collecting tax reimbursements from Dixie Village tenants and reimbursing the Johnstons, and (3) billing and collecting common area maintenance (CAM) charges (a pro-rata share of the expenses incurred by the landlord in maintaining the shopping center) from Dixie Village tenants and forwarding them to the Johnstons.

On 4 March 1998, Lake Mary instituted this action against the Johnstons alleging conversion, breach of contract, and unfair and deceptive practices under N.C. Gen.Stat. § 75-1.1 (1999), arising from the retention of the tenant rent checks, failure to provide the tenant notice letter, and use of the Dixie Village name and letterhead after closing. Subsequently, the Johnstons answered, and asserted a counterclaim for breach of contract, inter alia, against Lake Mary, arising from its failure to fulfill its post-closing obligations.

At the conclusion of all the evidence at trial, upon the motion of the parties, the trial court (1) granted a directed verdict in favor of Audrey Johnston and against Lake Mary as to its breach of contract, conversion, and unfair and deceptive practices claims arising from the retention of tenant rent checks, (2) granted a directed verdict in favor of Lake Mary and against Hugh Johnston for conversion, breach of contract, and unfair and deceptive practices arising from the retention of tenant rent checks, (3) awarded Lake Mary $96,624.16 in compensatory damages from Hugh Johnston, with interest to run from the date the checks were deposited or converted, for his conversion and breach of contract, and (4) granted a directed verdict in favor of Lake Mary and against Hugh Johnston for breach of contract arising from his use of the Dixie Village name and letterhead after closing. Additionally, the trial court ruled as a matter of law that (1) the method used by Lake Mary to calculate the pro-rata share of taxes due from each tenant was acceptable under the contract, (2) the closing of the sale of Dixie Village took place on 31 October 1997, and the Johnstons were not entitled to any rental payments after that date, (3) the Johnstons were entitled to judgment in the amount of $1,086.00 plus interest for overage rent collected from Dixie Village tenant Radio Shack, and (4) the Johnstons were due a tax refund for overpayment of property taxes from Lake Mary in the amount of $3,855.46 plus interest.

After issuing its directed verdicts and various rulings, the trial court submitted nine issues to the jury. Then, after the jury returned with its verdict, the trial court, based on its directed verdict rulings, rulings as a matter of law, and the jury's verdict, entered judgment (1) in favor of Lake Mary and against the Johnstons, jointly and severally, in the amount of $5,100.00 plus interest for breach of contract arising from their failure to provide a tenant notice letter to Lake Mary at closing, (2) in favor of Lake Mary and against Hugh Johnston in the amount of $289,875.48 ($96,625.16 trebled as per N.C. Gen.Stat. § 75-16 (1999)) plus interest for his unfair and deceptive practices, (3) in favor of the Johnstons and against Lake Mary in the amount of $68,224.70 ($52,123.94 for failure to bill and collect tax reimbursements; $6,144.64 for failure to bill, collect, and forward CAM charges; $5,014.10 for overage rent for Goodwill; $3,855.46 tax refund for overpayment of property taxes; $1,086.00 for overage rent for Radio Shack; and $1.00 for Hugh Johnston's use of the Dixie Village name) plus interest for Lake Mary's breach of contract, and (4) denying both parties' motions for attorney fees. All of the parties subsequently moved for a judgment notwithstanding the verdict (JNOV), which motions were denied by the trial court. Both Lake Mary and the Johnstons now appeal.

In the Johnstons' first and second assignments of error, Hugh Johnston contends that the trial court committed reversible error by granting Lake Mary's motion for a directed verdict for conversion and unfair and deceptive practices against him. We disagree.

It is well-settled that:

A motion for directed verdict tests the sufficiency of the evidence to take the case to the jury. In making its determination of whether to grant the motion, the trial court must examine all of the evidence in a light most favorable to the nonmoving party, and the nonmoving party must be given the benefit of all reasonable inferences that may be drawn from that evidence....

Abels v. Renfro Corp., 335 N.C. 209, 214-15, 436 S.E.2d 822, 825 (1993) (citations omitted). "A directed verdict is properly granted where it appears, as a matter of law, that the nonmoving party cannot recover upon any view of the facts which the evidence reasonably tends to establish." Beam v. Kerlee, 120 N.C.App. 203, 210, 461 S.E.2d 911, 917 (1995). Likewise, "[a] JNOV motion constitutes renewal of an earlier motion for directed verdict, and similarly tests the legal sufficiency of the evidence to take the case to the jury." Poor v. Hill, 138 N.C.App. 19, 26, 530 S.E.2d 838, 843 (2000) (citation omitted). "[T]he test for determining sufficiency of the evidence is the same under both motions." Id.

First, Hugh Johnston challenges the trial court's grant of a directed verdict against him for conversion. "The tort of conversion is well defined as `an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of an owner's rights.'" Peed v. Burleson's, Inc., 244 N.C. 437, 439, 94 S.E.2d 351, 353 (1956) (quoting 89 C.J.S., Trover & Conversion, sec. 1). Moreover:

"The essence of conversion is not the acquisition of property by the wrongdoer, but a wrongful deprivation of it to the owner ... and in consequence it is of no importance what subsequent application was made of the converted property, or that defendant derived no benefit from the act." 89 C.J.S. Trover and Conversion § 3, pp. 533-34. "[T]he general rule is that there is no conversion until some act is done which is a denial or violation of the plaintiff's dominion over or rights in the property." 18 Am.Jur.2d, Conversion, § 1, p. 158. It is clear then that two essential elements are necessary

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