Pleasant Valley Promenade v. Lechmere, Inc.

• Decision Date: 07 November 1995
• Docket Number: 9410SC49,Nos. 9310SC1016,s. 9310SC1016
• Citation: 464 S.E.2d 47,120 N.C.App. 650
• Parties: PLEASANT VALLEY PROMENADE, a California limited partnership, Plaintiff-Appellant, v. LECHMERE, INC., Lechmere Realty Limited Partnership, and AEW Partners, L.P., Defendant-Appellees/Cross-Appellants.
• Court: North Carolina Court of Appeals

Page 47

464 S.E.2d 47

120 N.C.App. 650

PLEASANT VALLEY PROMENADE, a California limited partnership Plaintiff-Appellant, v. LECHMERE, INC., Lechmere Realty Limited Partnership, and AEW Partners, L.P., Defendant-Appellees/Cross-Appellants.

Nos. 9310SC1016, 9410SC49.

Court of Appeals of North Carolina.

Nov. 7, 1995.

Parker, Poe, Adams & Bernstein by Fred T. Lowrance and John J. Butler, Charlotte, for plaintiff-appellant.

Womble Carlyle Sandridge & Rice by Pressly M. Millen, and Young, Moore, Henderson & Alvis, P.A. by Jerry S. Alvis, Raleigh, for defendant-appellee/cross-appellant Lechmere, Inc.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. by Michael E. Weddington and Susan M. Parker, Raleigh, for defendant-appellee/cross-appellant Lechmere Realty Limited Partnership.

Maupin Taylor Ellis & Adams, P.A. by John C. Cooke and Ronald R. Rogers, Raleigh, for defendant-appellee/cross-appellant AEW Partners, L.P.

MARK D. MARTIN, Judge.

This case involves an appeal by plaintiff Pleasant Valley Promenade (Pleasant Valley), and cross-appeals by defendants Lechmere, Inc. (Lechmere), Lechmere Realty Limited Partnership (LRLP), and AEW Partners, L.P. (AEW). The parties have presented numerous assignments of error for our consideration.

We consolidate the primary assignments of error into five issues--whether the trial court erred by: (1) directing verdicts in favor of AEW and LRLP on Pleasant Valley's fraud, unfair and deceptive trade practices, civil conspiracy, and tortious interference with contract claims; (2) excluding certain evidence offered at trial by Pleasant Valley; (3) denying AEW's motion for attorney's fees and Rule 11 sanctions against Pleasant Valley; (4) ruling in favor of Pleasant Valley on the issue of Lechmere's liability for breach of contract during the pre-trial conference; and (5) granting Lechmere's motion for judgment notwithstanding the verdict.

After an exhaustive review of these questions, we reverse the trial court's entry of judgment notwithstanding the verdict, remand for reconsideration of AEW's motion for sanctions and a new trial on damages, and otherwise affirm the trial court's extensive rulings in all other respects.

This controversy arose out of the March 1990 closing of the Lechmere store at Pleasant Valley Promenade Shopping Center in Raleigh, North Carolina. The record indicates on 2 February 1987, Lechmere, a chain of department stores, entered into an Operation and Reciprocal Easement Agreement (the Agreement) with Schurgin Development (Schurgin), the developer of the Pleasant Valley Promenade Shopping Center (the Center). The Agreement contained restrictive covenants requiring Lechmere to open and operate a Lechmere store in the Center for a period of seven years. Before Lechmere entered the Agreement, Schurgin sold Lechmere the land on which its store was to be located. In April 1987 Schurgin transferred the Agreement and the Center, less the tract owned by Lechmere, to Pleasant Valley Partners, a limited partnership in which Schurgin was a general partner. In September 1987 the Lechmere store opened.

In the fall of 1989, Pleasant Valley began hearing rumors Lechmere's parent corporation planned to sell Lechmere to a group consisting of AEW and selected members of Lechmere's management. Lechmere responded to Pleasant Valley's repeated inquiries into the plans for the Raleigh store by affirming its intention to honor the Agreement.

On 26 September 1989 Lechmere hired the Sam Nassi Company, a California corporation, to plan the advertising, marketing, and sales promotions for the upcoming liquidation/clearance sales in its southeastern stores.

In late 1989 Lechmere's parent corporation, the Dayton-Hudson Corporation, sold Lechmere to a group including AEW. In conjunction with the sale, LRLP purchased from and immediately leased back to Lechmere the realty encompassing the Raleigh store. To finance the purchase of the realty, LRLP obtained loans from AEW pursuant to a leveraged buy-out (LBO) agreement. In accordance with the LBO, Lechmere was to sell all of its southeastern stores, including the Raleigh store, and the funds would be used to pay AEW's fees and repay AEW's loans. Subsequently, Lechmere began to look for new retail tenants for its stores.

In November 1989 Pleasant Valley borrowed $7.0 million from Chase Manhattan Bank for site improvements, leasing operations, and interest payments.

On 20 November 1989 Pleasant Valley received notice of the "sell and lease back" arrangement between Lechmere and LRLP. On 22 February 1990 Lechmere notified Pleasant Valley it intended to close the Raleigh store and lease the space to Phar-Mor, a discount pharmacy chain. Six days later LRLP terminated its lease with Lechmere and executed a lease with Phar-Mor, thereby transferring the possessory interest of the space within the Center to Phar-Mor. Lechmere closed on 9 March 1990.

Pleasant Valley filed its complaint on 14 March 1990 seeking recovery from defendants Lechmere and LRLP for breach of contract, fraud, and unfair trade practices. The complaint also named AEW as defendant. On 18 May 1990 Lechmere and LRLP filed an answer and counterclaim against Pleasant Valley. Pleasant Valley amended the complaint on 26 September 1991 to add claims against AEW for tortious interference with contract, civil conspiracy, unfair trade practices, and aiding and abetting.

The action was tried during the 9 November 1992 Session of Wake County General Court of Justice, Superior Court Division. At the pre-trial conference the trial court determined the restrictive covenants contained in the Agreement between Schurgin and Lechmere ran with the land and, therefore, Pleasant Valley could enforce the covenants in the Agreement. The trial court also ruled Lechmere breached the Agreement requiring Lechmere to operate a store at the Center for seven years.

On 2 December 1992, at the close of Pleasant Valley's evidence, the trial court directed verdicts in favor of LRLP and AEW on all of Pleasant Valley's claims and granted a partial directed verdict in favor of Lechmere on Pleasant Valley's fraud and unfair and deceptive trade practices causes of action. Thus, the trial proceeded solely on the issue of damages arising from Lechmere's breach of the Agreement.

On 11 December 1992 the jury returned a verdict awarding Pleasant Valley $8.0 million in damages for Lechmere's breach of the Agreement. Lechmere moved for judgment notwithstanding the verdict, which the court granted on 30 December 1992. In setting aside the jury verdict, the trial court entered judgment against Lechmere for $1.00 in nominal damages, plus costs. At the conclusion of the trial, defendant AEW moved for attorney's fees, which the trial court denied. From this judgment Pleasant Valley appeals and AEW, LRLP, and Lechmere cross-appeal.

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PLEASANT VALLEY'S CLAIMS AGAINST AEW

Pleasant Valley asserts AEW was inextricably involved in the breach of the Agreement, and thus the court erred in directing a verdict for AEW on plaintiff's civil conspiracy, tortious interference with contract, and unfair trade practices claims. In support of this contention, Pleasant Valley alleges: (1) AEW knew about the existence of the Agreement; (2) AEW was aware of a dispute over the Agreement; (3) AEW assisted in developing a plan to close the southeastern Lechmere stores and, specifically, to sell the inventory and real estate at the Raleigh location; (4) AEW participated in the lease to Phar-Mor; and (5) AEW received proceeds from the closing of the southeast stores.

When ruling on a motion for directed verdict, "the trial court must determine whether the evidence, when considered in the light most favorable to the nonmovant, is sufficient to take the case to the jury." Southern Bell Telephone and Telegraph Co. v. West, 100 N.C.App. 668, 670, 397 S.E.2d 765, 766 (1990), aff'd, 328 N.C. 566, 402 S.E.2d 409 (1991). Further, "[t]he testimony of plaintiff's witnesses must be accepted at face value" because credibility is an issue for the jury. McCollum v. Grove Mfg. Co., 58 N.C.App. 283, 286, 293 S.E.2d 632, 635 (1982), aff'd, 307 N.C. 695, 300 S.E.2d 374 (1983). "If there is more than a scintilla of evidence supporting each element of the nonmovant's case, the motion for directed verdict should be denied." Snead v. Holloman, 101 N.C.App. 462, 464, 400 S.E.2d 91, 92 (1991).

On appeal, the scope of review is limited to those grounds asserted by the moving party before the trial court. Southern Bell, 100 N.C.App. at 670, 397 S.E.2d at 766. Nonetheless, the reviewing court is confronted with the identical task as the trial court--"to determine whether the evidence, when considered in the light most favorable to the nonmovant, was sufficient to have been submitted to the jury." Harshbarger v. Murphy, 90 N.C.App. 393, 395, 368 S.E.2d 450, 451 (1988).

A.

A civil conspiracy requires: (1) an agreement between two or more persons to do a wrongful act; (2) an overt act committed in furtherance of the agreement; and (3) damage to the plaintiff. Nye v. Oates, 96 N.C.App. 343, 347, 385 S.E.2d 529, 531-532 (1989). Direct evidence of a conspiracy agreement is not necessary and often does not exist. State v. Whiteside, 204 N.C. 710, 712-713, 169 S.E. 711, 712 (1933). However, to submit the case to the jury, the circumstantial evidence must amount to more than mere suspicion or conjecture. Dickens v. Puryear, 302 N.C. 437, 456, 276 S.E.2d 325, 337 (1981). We do not find sufficient evidence showing an agreement between AEW and Lechmere to commit a wrongful act. Rather, the evidence shows the closing of the Lechmere store was an operational decision made by Lechmere.

B.

To support a tortious interference with contract claim, Pleasant Valley must have presented evidence showing: (1) the Agreement was a valid contract between Pleasant Valley and Lechmere; (2) AEW had knowledge of the Agreement; (3) AEW intentionally induced...