Wal-Mart Stores, Inc. v. INGLES MARKETS

• Decision Date: 17 June 2003
• Docket Number: No. COA02-896.,COA02-896.
• Citation: 581 S.E.2d 111,158 NC App. 414
• Court: North Carolina Court of Appeals
• Parties: WAL-MART STORES, INC., Plaintiff, v. INGLES MARKETS, INCORPORATED, E.H. Properties, L.P., and Horne Properties, Inc., Defendants.

581 S.E.2d 111

158 NC App. 414

WAL-MART STORES, INC., Plaintiff, v. INGLES MARKETS, INCORPORATED, E.H. Properties, L.P., and Horne Properties, Inc., Defendants.

No. COA02-896.

Court of Appeals of North Carolina.

June 17, 2003.

Smith, Debnam, Narron, Wyche, Story & Myers, L.L.P., by Bettie Kelley Sousa and Ashley H. Story, Raleigh, for plaintiff-appellee.

Hunton & Williams, by Matthew P. McGuire, Raleigh, and Hartman, Simons, Spielman & Wood, by David L. Pardue, Atlanta, GA, for defendant-appellant Ingles Markets, Inc.

Robinson, Bradshaw & Hinson, P.A., by D. Blaine Sanders, Charlotte, for defendant-appellant E.H. Properties, L.P.

LEVINSON, Judge.

Defendants (Ingles Markets, Inc., and E.H. Properties, L.P.) appeal from an order granting summary judgment in favor of plaintiff (Wal-Mart Stores, Inc.). For the reasons discussed below, we affirm the trial court.

The factual and procedural background may be summarized as follows: In 1987, defendant Ingles leased space in the Stanly County Shopping Plaza (the shopping center), in Albemarle, for operation of a grocery store. Ingles and defendant Horne, then the owner of the shopping center, executed a lease setting out the terms of the rental. An abbreviated Memorandum of Lease (Memorandum) was subsequently recorded in Stanly County. Memorandum § 6 set out a radius restriction by which the landlord (then defendant Horne) generally promised not to occupy, rent, or sell property for use as a grocery store either in, or within five miles of, the shopping center. In 1991, plaintiff bought a small section of the shopping center parking lot (the parking lot tract) from defendant Horne. This tract did not include any of the property that Ingles rented for its grocery store, and plaintiff did not become Ingles' landlord. The deed for the parking lot tract included a restrictive covenant requiring plaintiff to "comply with the terms, covenants, and restrictions" of § 6 of the memorandum. Plaintiff did not sign the deed.

About ten years later, plaintiff began planning construction of a large Wal-Mart Supercenter, in which plaintiff planned to include a grocery department. The property plaintiff acquired for this project was not identified in the 1987 lease between Ingles and Horne, nor in the 1991 deed of the parking lot tract. Further, the proposed Supercenter property was not located in the shopping center, although it was within five miles of the shopping center. In June, 2001, plaintiff wrote defendants asking them to acknowledge that the provisions of the 1991 deed for the parking lot tract would not prohibit or restrict its planned Supercenter. Defendants would not agree to this, and on 4 September 2001, plaintiff filed a complaint seeking a declaratory judgment that its planned Supercenter would not violate the restrictive covenant in the 1991 Horne/Wal-Mart deed. Plaintiff's complaint named three defendants: Ingles, Horne, Inc., and E.H. Properties, L.P. (E.H.), Horne's successor in interest and Ingles' landlord.

On 15 November 2001, defendant Ingles filed a motion for summary judgment. E.H. joined Ingles' motion for summary judgment on 27 November 2001. Plaintiff filed its own motion for summary judgment on 19 November 2001. On 19 March 2002, the trial court entered summary judgment for plaintiff. The court's order stated in relevant part that:

3. The covenants contained in the deed from Horne Properties, Inc. to Wal-Mart Stores, Inc. dated October 4, 1991, ... do create a valid, enforceable covenant, running with the land, which prohibits the plaintiff, Wal-Mart Stores, Inc. from using any portion of the lands conveyed in that deed for a term of twenty years commencing on April 21, 1987 for [the sale of groceries].... This covenant is enforceable by the defendant, Ingles Markets, Incorporated.

4. The covenants in the deed from Horne Properties, Inc. to Wal-Mart Stores, Inc., dated October 4, 1991, ... do not create a valid, enforceable covenant that would prohibit the plaintiff, Wal-Mart Stores, Inc., from operating a "Supercenter" containing a grocery store, on a tract of land (other than the property described in [the 1991 deed]) located within five miles of the Stanly County Plaza Shopping Center.

From this order, defendants E.H. and Ingles have appealed. Defendant Horne did not respond to the complaint, and has not appealed the trial court's summary judgment order.

Standard of Review

Defendants appeal from the entry of summary judgment. Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C.G.S. § 1A-1, Rule 56(c) (2001). In the instant case, each party claims entitlement to summary judgment based on its proposed interpretation of the terms of the same documents: the 1987 Horne-Ingles lease, the 1987 Horne-Ingles Memorandum of Lease, and the 1991 Horne/Wal-Mart deed. Thus:

[e]ach party based its claim upon the same sequence of events.... Neither party has challenged the accuracy or authenticity of the documents establishing the occurrence of these events. Although the parties disagree on the legal significance of the established facts, the facts themselves are not in dispute. Consequently, we conclude that `there is no genuine issue as to any material fact' surrounding the trial court's summary judgment order.

Adams v. Jefferson-Pilot Life Ins. Co., 148 N.C.App. 357, 359, 558 S.E.2d 504, 507, disc. review denied, 356 N.C. 159, 568 S.E.2d 186 (2002). "`A deed is to be construed by the court, and the meaning of its terms is a question of law, not of fact.'" Elliott v. Cox, 100 N.C.App. 536, 538, 397 S.E.2d 319, 320 (1990) (quoting Mason v. Andersen, 33 N.C.App. 568, 571, 235 S.E.2d 880, 882 (1977)); see also Alchemy Communications Corp. v. Preston Dev. Co., 148 N.C.App. 219, 222, 558 S.E.2d 231, 233,

disc. review denied, 356 N.C. 432, 572 S.E.2d 421 (2002) (plaintiff's claim that defendant violated lease presented "a matter of contract interpretation and thus, a question of law") (citing Harris v. Ray Johnson Constr. Co., Inc., 139 N.C.App. 827, 534 S.E.2d 653 (2000)).

We conclude that "there is no genuine issue as to any material fact" surrounding the trial court's summary judgment order. Rule 56(c). We next consider whether the trial court correctly determined that plaintiff is entitled to a judgment as a matter of law.

The central issue presented in this appeal is the proper construction of the restrictive covenant in the 1991 deed to the parking lot tract. Defendants contend that the restrictive covenant imposes upon plaintiff the radius restriction found in Memorandum § 6, thus prohibiting plaintiff from operating a grocery or food store within five miles of the shopping center. We disagree.

The restrictive covenant in the 1991 deed states in relevant part:

The property conveyed hereby has been transferred subject to the following covenants running with the land:

(i) The Grantee and any person(s) or entity hereinafter owning or leasing an interest in the Property shall comply with the terms, covenants, and restrictions found in Section Six (6) of the Memorandum of Lease ... between Ingles Markets, Incorporated and the Grantor....

(emphasis added). Thus, the question before us is the correct interpretation of plaintiff's agreement to "comply with the terms, covenants, and restrictions found in Section Six (6) of the Memorandum of Lease."

The memorandum was authorized by a provision in the lease allowing either party to prepare and record a "short form or memorandum of this Lease in a form acceptable to Tenant[.]" Memorandum § 6, referenced in the restrictive covenant, states in pertinent part:

6. The lease provides that during its term, Landlord covenants and agrees not to lease, rent, occupy, or suffer or permit to be occupied, any part of the Shopping Center or any other area owned or controlled,... by Landlord, its successors, heirs or assigns, or Landlord's principal owners, stockholders, directors, or officers, or their assignees (hereinafter sometimes referred to as the "Owners"), which is within five (5) miles of the Shopping Center for the purpose of conducting therein or for use as, [a] supermarket, [or] food store, ... and further, that if Landlord or Owners own any land, or hereinafter during the term of the Lease Landlord or Owners acquire any land within such distance of the Shopping Center, neither will convey the same (other than the Wal-Mart Premises as defined in the Lease) without imposing thereon a restriction for a period of twenty (20) years which secures compliance with the terms of the Lease. This Section 6 shall not be applicable to the portion of the Shopping Center to be purchased by Wal-Mart Properties, Inc.

(emphasis added).

Preliminarily, we observe that Memorandum § 6 states broadly that any property sold by the landlord within five miles of the shopping center will be conveyed subject to a restrictive covenant "which secures compliance with the terms of the Lease." Taken literally, the restrictive covenant in the 1991 deed stating that the property was conveyed "subject to" compliance with Memorandum § 6 would require plaintiff to, e.g., maintain the shopping center's common areas, purchase fire insurance, or pay rent on the Ingles property, all of which are "terms of the lease." We conclude that § 6 is written so expansively that it cannot be read at face value. We are, therefore, required to determine the meaning of Memorandum § 6 by reference to established principles of contract interpretation.

"A lease is a contract which contains both property rights and contractual rights." Strader v. Sunstates Corp., 129 N.C.App. 562, 570, 500 S.E.2d 752, 756, disc. review denied, 349 N.C. 240, 349 N.C. 240, 514 S.E.2d 274 (1998). Thus, the provisions of a lease are interpreted according to...