Phoenix Ltd. P'Ship of Raleigh v. Simpson

• Decision Date: 22 December 2009
• Docket Number: No. COA07-1333-2.,COA07-1333-2.
• Citation: 688 S.E.2d 717
• Court: North Carolina Court of Appeals
• Parties: PHOENIX LIMITED PARTNERSHIP OF RALEIGH, Plaintiff, v. Sarah W. SIMPSON, Robert T. Simpson, Edna Jacquelyn Steed Wray, Individually and as Executrix of the Estate of Charles W. Wray, and SHW, LLC, Defendants.

688 S.E.2d 717

PHOENIX LIMITED PARTNERSHIP OF RALEIGH, Plaintiff, v. Sarah W. SIMPSON, Robert T. Simpson, Edna Jacquelyn Steed Wray, Individually and as Executrix of the Estate of Charles W. Wray, and SHW, LLC, Defendants.

No. COA07-1333-2.

Court of Appeals of North Carolina.

December 22, 2009.

Appeal by defendants from order entered 6 June 2007 by Judge Howard E. Manning, Jr. in Wake County Superior Court. Heard in the Court of Appeals 29 April 2008. Petition for rehearing allowed 1 May 2009. The following opinion supersedes and replaces the opinion filed 3 March 2009.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by Peter J. Marino and Scott A. Miskimon, Raleigh, for plaintiff-appellee.

Thomas W. Steed, Jr., Raleigh, for defendants-appellants.

GEER, Judge.

This litigation arises out of defendants' exercise of an option to sell certain property to plaintiff. The parties did not close on the property by 13 March 2001, the date specified in the contract for closing. Plaintiff subsequently brought suit when defendants declined to close in the fall of 2004. Defendants have appealed from the trial court's order granting partial summary judgment to plaintiff on plaintiff's breach of contract claim and ordering that defendants specifically perform the contract by executing and delivering a general warranty deed transferring the property at issue to plaintiff.

While defendants correctly point out that the contract containing the option included a "time is of the essence" provision applicable to the contract's specified closing date of 13 March 2001, we agree with plaintiff that the undisputed facts establish that defendants waived that provision, and, therefore, plaintiff was not required to close on the property by the date specified in the contract. Generally, in the absence of a "time is of the essence" provision, the parties must perform within a reasonable amount of time of the date set for closing. In Fletcher v. Jones, 314 N.C. 389, 333 S.E.2d 731 (1985), however, our Supreme Court held that when the seller waived the original closing date, but indicated he still intended to perform once the condition to his performance was satisfied, the buyer's reasonable time for performance ran from the date the seller notified the buyer he was ready and able to close.

Here, the evidence is undisputed that defendants indicated to plaintiff they still intended to perform after waiving the original closing date, but that they never notified plaintiff they were ready and able to close. Therefore, under Fletcher, plaintiff was justified in waiting to tender its performance until it received such notice. Because defendants instead repudiated the contract, we affirm the trial court's grant of partial summary judgment on plaintiff's breach of contract claim and its order of specific performance.

Facts

The undisputed facts are as follows. On 1 October 1995, plaintiff and defendants entered into a five-year lease agreement ("the contract"), pursuant to which defendants leased to plaintiff property located at 417 and 419 South McDowell Street in Raleigh ("the McDowell Street property"). Plaintiff owned an office building nearby and used the McDowell Street property as a surface parking lot for its tenants.

The contract contained a call option that granted plaintiff an option to purchase the McDowell Street property and a put option that granted defendants an option to require plaintiff to purchase the McDowell Street property. The contract also stated that upon exercise of either option, the purchase price would be the greater of $853,781.60 or the fair market value of the McDowell Street property as of the date the option was exercised. Absent an agreement by the parties, the fair market value was to be determined based on the opinions of three appraisers. Plaintiff and defendants would each select one appraiser and those two appraisers would then select the third appraiser. The fair market value would be the average of the two closest appraisals from the three appraisers.

The contract required that the closing take place on the date 180 days following the date the option was exercised. The contract contained a "time is of the essence" provision that stated: "With respect to the performance of the obligations and duties in this Section [relating to the options], time is of the essence." At closing, defendants were required to deliver a general warranty deed conveying the McDowell Street property to plaintiff, an affidavit stating that defendants were not foreign persons within the meaning of the Internal Revenue Code, a title insurance policy, a closing statement, and possession of the McDowell Street property.

On 13 September 2000, defendants provided plaintiff with written notice that they were exercising the put option. Pursuant to the terms of the contract, the deadline for the closing was 13 March 2001. The parties followed the appraisal process for selection of the appraisers. On 6 December 2000, at the request of two of the appraisers, the parties agreed to allow an additional 30 days for completion of the appraisals. On 8 December 2000, a Phase I Environmental Site Assessment reported the existence of multiple environmental problems, and, as a result, plaintiff requested a Limited Phase II Environmental Site Assessment.

In the meantime, the appraisers issued a report estimating the fair market value of the McDowell Street property at $947,500.00. The report also stated, "We are aware that a Phase II environmental analysis is being conducted. As such, the foregoing value may require a downward adjustment in the event contaminants are found in, on, or near the subject site."

No closing occurred on or before 13 March 2001. On 26 March 2001, however, defendants executed a general warranty deed. That deed was delivered to Stephen D. Lowry, plaintiff's attorney. The deed was stamped "copy" and did not contain a notary seal or stamp.

The Limited Phase II Environmental Site Assessment dated 17 April 2001 reported that the groundwater contained traces of "VOCs exceeding the laboratory quantitation limits." Soil gas samples were also submitted for testing, and the laboratory analysis indicated "the presence of chlorinated VOCs and BTEX compounds." The environmental company, which conducted the tests, recommended that defendants, as the McDowell Street property owners, contact the North Carolina Department of Environment and Natural Resources ("NCDENR") to inform them of the site conditions. The company also stated that remedial measures might be necessary in order to be able to use the McDowell Street property depending on "the specific regulatory requirements applied."

On 26 April 2001, plaintiff and defendants met to discuss the status of the transaction. The parties talked about the purchase price, the effect of the environmental problems on the McDowell Street property's value, the ability to develop the McDowell Street property and obtain financing, and the need to clean up the McDowell Street property. The parties disagree regarding what precisely was said during the meeting and what the outcome of the meeting was.

On 12 July 2001, defendants' realtor notified plaintiff that defendants had retained their own company to conduct further environmental tests to determine the source of the contamination. The letter specified that the company was in the process of gathering information and would prepare a reply to the environmental report obtained by plaintiff. In his letter, the realtor stated, "We will communicate with you as time goes by."

In a letter dated 21 December 2001, defendants' realtor informed plaintiff that the investigation conducted by their environmental company indicated that "former dry cleaning activities conducted at the property are in part a likely source of the detected ground water contamination." The letter also notified plaintiff that "there is sufficient information to enter the property into the North Carolina Dry-Cleaning Solvent Act [] program to provide financial assistance and limited third party liability protection." The realtor stated that defendants intended to enter the McDowell Street property into the North Carolina Dry-Cleaning Solvent Act program ("the dry cleaning program").

There was no further communication between the parties until 18 August 2004 when plaintiff's attorney sent a letter to defendants inquiring about the status of the McDowell Street property. In defendants' response on 23 September 2004, they informed plaintiff that the McDowell Street property had been listed for sale at a price of $40.00 per square foot and advised plaintiff to contact them if plaintiff was interested in learning more about the McDowell Street property. On 21 January 2005, defendants entered into an agreement to sell the McDowell Street property to the Persimmon Group, LLC for $1,352,560.00.

Plaintiff filed this action on 3 February 2005 seeking specific performance of the contract. Defendants filed their answer along with motions to dismiss. In their answer, defendants asserted the affirmative defenses of repudiation, nonperformance, waiver, abandonment/rescission, unclean hands/estoppel, and laches. Defendants also included counterclaims for intentional interference with contract and breach of contract.

On 23 September 2005, plaintiff filed a motion for partial summary judgment with respect to defendants' affirmative defenses and their counterclaim for breach of contract. On 19 December 2005, the trial court entered an order ruling that plaintiff was entitled to partial summary judgment on the affirmative defenses of abandonment, waiver, rescission, and anticipatory repudiation. The court further ruled:

Because there has been no "closing" and no final adjustment of the contract purchase price according to the terms of the contract, summary judgment on Phoenix's claim for specific performance and the Defendants' claim for breach of contract and issues...