256 N.C. App. 625
N.C. Ct. App.2017Background
- H.O.M. entered a 49-year lease in 1966 with a 49-year renewal option requiring written notice at least six months before termination; Chapel Hill sublet and operated a hotel under that lease/sublease.
- Plaintiffs (H.O.M. and Chapel Hill) timely notified their intent to renew; RME owned the property by 2014 and also signaled intent to renew.
- The lease sets rent for the renewal term by each party appointing an appraiser; those two appraisers then appoint a third appraiser to fix rent if they disagree. The parties disputed appraisal methodology and never appointed a third appraiser.
- Plaintiffs sued in federal court in 2014 (dismissed for jurisdiction), then refiled in Orange County Superior Court in 2015 asserting claims for declaratory judgment, equitable estoppel, and unfair and deceptive trade practices (UDTPA).
- Defendant moved to dismiss under Rule 12(b)(6). The trial court granted dismissal with prejudice as to all claims; Plaintiffs appealed.
- The Court of Appeals affirmed dismissal of equitable estoppel and UDTPA claims but reversed dismissal of the declaratory judgment claim, finding a justiciable controversy under the NCUDJA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable estoppel is pleaded as a viable cause of action | Plaintiffs claimed RME induced reliance by participating in renewal negotiations and hiring an appraiser, causing them to incur expense and rely to their detriment | RME argued Plaintiffs plead only estoppel (usually a defense), and allegations do not state the elements of an equitable estoppel claim | Dismissed — Plaintiffs did not plead a legally cognizable equitable estoppel cause of action |
| Whether UDTPA claim stands given contract dispute | Plaintiffs alleged RME took a contrary position to induce ambiguity and extract more money, amounting to deceptive/unfair practices | RME contended this is a mere breach/contract dispute without substantial aggravating circumstances required under § 75-1.1 | Dismissed — allegations only show a contract dispute, no substantial aggravating circumstances alleged |
| Whether a declaratory judgment claim presents an actual justiciable controversy | Plaintiffs alleged opposing, good-faith contentions about how rent is to be determined ("as is" vs. "highest and best use") and inability to appoint a third appraiser — requesting construction of the lease | RME argued no ripe controversy or that the contract term is void/ambiguous so declaratory relief is improper | Reversed dismissal — complaint alleges a genuine, justiciable controversy under NCUDJA and dismissal at Rule 12(b)(6) stage was improper |
| Appropriate remedy on remand for resolving appraisal impasse | Plaintiffs sought declaratory relief to have court construe lease and enforce appraisal mechanism | RME maintained contractual uncertainty or other defenses that could render the term void | Court remanded the declaratory claim for further proceedings; concurring opinion urged appointment of a third appraiser to resolve rent if appropriate |
Key Cases Cited
- Branch Banking And Trust Co. v. Thompson, 107 N.C. App. 53 (N.C. Ct. App.) (distinguishes UDTPA from contract claims; requires substantial aggravating circumstances for treble damages)
- Bartolomeo v. S.B. Thomas, Inc., 889 F.2d 530 (4th Cir.) (adopted standard that UDTPA recovery requires substantial aggravating circumstances)
- Morris v. Plyler Paper Stock Co., 89 N.C. App. 555 (N.C. Ct. App.) (declaratory judgment should not be dismissed at pleading stage when a justiciable controversy over lease terms is alleged)
- Connor v. Harless, 176 N.C. App. 402 (N.C. Ct. App.) (contract void for indefiniteness where price term lacked a mechanism to resolve appraisal discrepancies)
- Augur v. Augur, 356 N.C. 582 (N.C.) (trial court has discretion under NCUDJA; courts must find an actual controversy to grant declaratory relief)