Sylva Shops Ltd. Partnership v. Hibbard

• Decision Date: 17 January 2006
• Docket Number: No. COA04-1485.,COA04-1485.
• Citation: 623 S.E.2d 785
• Parties: SYLVA SHOPS LIMITED PARTNERSHIP, Plaintiff, v. Loanne G. HIBBARD, Stanley L. Hibbard, and Linda Gedney, Defendants.
• Court: North Carolina Supreme Court

623 S.E.2d 785

SYLVA SHOPS LIMITED PARTNERSHIP, Plaintiff, v. Loanne G. HIBBARD, Stanley L. Hibbard, and Linda Gedney, Defendants.

No. COA04-1485.

Court of Appeals of North Carolina.

January 17, 2006.

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Appeal by plaintiff and cross-appeal by defendants from order entered 29 September 2003 by Judge James U. Downs and judgment entered 13 August 2004 by Judge Zoro J. Guice, Jr. in Jackson County Superior Court. Heard in the Court of Appeals 11 May 2005.

Howard, Stallings, From & Hutson, P.A., by John N. Hutson, Jr., Raleigh, for plaintiff.

Ridenour, Lay & Earwood, PLLC, by Eric Ridenour, Sylva, for defendants.

GEER, Judge.

This appeal arises out of a suit for unpaid rent after defendants Loanne G. Hibbard, Stanley L. Hibbard, and Linda Gedney were forced to close their bagel shop in a shopping center of plaintiff Sylva Shops Limited Partnership. Both plaintiff and defendants have appealed from the jury verdict and judgment awarding plaintiff $13,110.00. Defendants do not contest their liability for rent under their lease with plaintiff, but contend that plaintiff failed to mitigate its damages — a contention with which the jury agreed. Plaintiff, on the other hand, argues that the trial court erred in not enforcing a clause in the parties' lease specifying that plaintiff "shall have no obligations to mitigate Tenant's damages by reletting the Demised Premises." We hold that this clause, in a commercial lease, is not contrary to law or public policy and was, therefore, enforceable. Accordingly, we vacate the judgment below and remand for entry of judgment in the amount of $35,511.70, the amount properly determined by the trial court to be plaintiff's total damages prior to any set-off for a failure to mitigate.

Facts

On 2 January 2002, defendants entered into a lease agreement for space at plaintiff's Sylva Shopping Center, a Wal-Mart shopping center located in Sylva, North Carolina. Defendants planned to open a bagel shop and, based upon the advice of a consultant, signed a five-year lease for an out-parcel space that had good visibility from the road. An out-parcel space is normally more expensive than other locations in the rest of the shopping center.

Defendants opened their business, The Bagel Bin and Sandwich Shop, in April 2002. Initially, the shop was quite successful, but when summer came and the local college students left, there was a sharp decline in sales. Defendants were forced to close the shop on 30 September 2002 with four and a half years remaining on their lease with plaintiff.

Shortly after the bagel shop closed, plaintiff began to look for a new tenant using a leasing agent, Ann Smith. Smith testified that she placed a "For Lease" sign in the window of the space, sent mailings to national tenants, and called other local businesses about leasing the space. Smith ultimately negotiated with a Mexican restaurant, but the restaurant never signed a lease for the space. Eventually, the space was rented to a sandwich restaurant. Defendants contended below that plaintiff's difficulties in re-leasing the space were the result of plaintiff's unwillingness to agree to a lower rent.

On 16 January 2003, plaintiff filed a complaint against defendants for unpaid rent, late fees, common area maintenance fees, insurance, and taxes in the amount of $14,170.00, together with interest and attorneys' fees. Defendants filed an answer on 27 March 2003, denying that they were in breach of contract or that they owed the amount sought by plaintiff.

Plaintiff subsequently served a motion for summary judgment on 27 August 2003, attaching an affidavit indicating that plaintiff's damages totaled $35,511.70.¹ Following a hearing on 15 September 2003, Judge James U. Downs entered partial summary judgment in favor of plaintiff on 29 September 2003. The court found that defendants admitted the execution and validity of the lease, that defendants had "not disputed the Plaintiff's calculation of the amounts due from the Defendants under the Lease in either an affidavit or in oral argument," and that plaintiff had "presented affidavits and arguments which raise an issue of fact as to whether the Plaintiff has acted properly to mitigate its damages." The court then concluded that defendants were indebted to plaintiff in the amount of $35,511.70 as of 15 September 2003, but that defendants were "entitled to claim at trial that they are entitled to an offset from the above amount based on their claim that the Plaintiff failed to act reasonably in mitigating its damages."

The case proceeded to trial on 2 August 2004, with Judge Zoro J. Guice, Jr. presiding. Following the close of the evidence, plaintiff moved for a directed verdict, arguing that (1) because there was a clause in the lease that relieved plaintiff from the duty to mitigate damages, plaintiff was entitled to judgment as a matter of law; and (2) even if the court considered the mitigation issue, defendants had offered insufficient evidence that plaintiff failed to mitigate its damages. The court denied plaintiff's motion, and the jury ultimately determined that plaintiff had failed to use ordinary care to mitigate the consequences of defendants' breach of contract and that plaintiff could reasonably have avoided $22,401.70 in damages had it properly mitigated its damages.

Plaintiff moved for judgment notwithstanding the verdict on the same grounds made in its directed verdict motion. After denying the motion, the court, on 13 August 2004, entered judgment against defendants in the sum of $13,110.00, consistent with the jury verdict. Plaintiff filed a notice of appeal on 8 September 2004, while defendants filed a notice of appeal on 15 September 2004.

Plaintiff's Appeal

Plaintiff contends that the trial court erred in not granting its motion for a directed verdict or later its motion for judgment notwithstanding the verdict because the lease entered into by the parties contained the following clause:

In no event shall Landlord's termination of this Lease and/or Tenant's right to possession of the Premises abrogate Tenant's agreement to pay rent and additional charges due hereunder for the full term hereof. Following re-entry of the Demised Premises by Landlord, Tenant shall continue to pay all such rent and additional charges as same become due under the terms of this Lease, together with all other expenses incurred by Landlord in regaining possession until such time, if any, as Landlord relets same and the Demised Premises are occupied by such successor, it being understood that Landlord shall have no obligations to mitigate Tenant's damages by reletting the Demised Premises.

(Emphasis added.) Defendants argue, however, that this clause is unenforceable. The question for this Court is whether parties to a commercial lease may, in this State, validly contract away the landlord's duty to mitigate damages.

We first observe that because one superior court judge may not overrule another superior court judge, Judge Guice could not revisit Judge Downs' determination that defendants were "entitled to claim at trial that they are entitled to an offset from the above amount based on their claim that the Plaintiff failed to act reasonably in mitigating its damages." See State v. Woolridge, 357 N.C. 544, 549, 592 S.E.2d 191, 194 (2003) ("[I]t is well established in our jurisprudence that no appeal lies from one Superior Court judge to another; that one Superior Court judge may not correct another's errors of law; and that ordinarily one judge may not modify, overrule, or change the judgment of another Superior Court judge previously made in the same action." (internal quotation marks omitted)). Plaintiff has, however, properly appealed from the denial of its motions for a directed verdict and judgment notwithstanding the verdict since our Supreme Court has held that denial of a motion for summary judgment is not reviewable following a trial on the merits:

The purpose of summary judgment is to bring litigation to an early decision on the merits without the delay and expense of a trial when no material facts are at issue. After there has been a trial, this purpose cannot be served. Improper denial of a motion for summary judgment is not reversible error when the case has proceeded to trial and has been determined on the merits by the trier of the facts, either judge or jury.

Harris v. Walden, 314 N.C. 284, 286, 333 S.E.2d 254, 256 (1985) (internal citations omitted).

The right to enter into a binding contract, such as a lease, belongs to every person not under a legal disability. Chambers v. Byers, 214 N.C. 373, 377, 199 S.E. 398, 401 (1938). As a result, courts will rarely inquire into the soundness of the bargain itself: "Liberty to contract carries with it the right to exercise poor judgment as well as good judgment. It is the simple law of contracts that as a man consents to bind himself, so shall he be bound." Troitino v. Goodman, 225 N.C. 406, 414, 35 S.E.2d 277, 283 (1945) (internal citation and quotation marks omitted). As a result, when parties contract at arm's length, the provisions in the parties' contract are "the law of their case," and courts are without power to revise the contract. Suits v. Old Equity Life Ins. Co., 249 N.C. 383, 386, 106 S.E.2d 579, 582 (1959) (refusing to strike a provision in a disability insurance policy that precluded the totally-disabled plaintiff from receiving benefits even though other states had struck the clause). So long as the contract itself and the terms within that contract are not "contrary to public policy or prohibited by statute," parties are free to contract as they deem appropriate. Hlasnick v. Federated Mut. Ins. Co., 353 N.C. 240, 242-43, 539 S.E.2d 274, 276 (2000).

Defendants first argue that a clause relieving a landlord of its duty to mitigate damages is contrary to the law of this State, citing Isbey v. Crews, 55 N.C.App. 47, 284 S.E.2d 534 (1981). In Isbey, this Court he...