215 N.C. App. 66
N.C. Ct. App.2011Background
- Fairfield Harbour is a Craven County residential community with amenities including two golf courses, funded by amenity fees charged to all residents.
- Defendant Midsouth Golf LLC bought the community amenities in 2000 and was obligated to operate and maintain the golf courses per 1993 covenants.
- In 2004-2006, timeshare owners were required to pay amenity fees; a 2006 ruling found their fees unenforceable, prompting boycott activity and course closure.
- Plaintiff FHPOA sued in 2008 alleging Defendant breached covenants by closing Shoreline Golf Course and sought damages, while Defendant asserted defenses including frustration of purpose.
- The trial court granted partial summary judgment on breach and dismissed most defenses except frustration of purpose; it later granted Plaintiff’s directed verdict on frustration of purpose; damages issues remained for trial.
- On appeal, the court addressed standing, several contract defenses, and whether the directed verdict and damages rulings were correct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to enforce covenants | FHPOA has enforcement authority under the covenants. | FHPOA lacks standing to sue for enforcement. | FHPOA has standing; covenants authorize enforcement. |
| Radical change and contract enforceability | No radical change destroying purpose. | Radical changes destroyed essential objects; covenants unenforceable. | No radical change; covenants enforceable. |
| Failure of consideration | Consideration adequate; original contract valid. | Failure of consideration due to timeshare decision. | Sufficient consideration supported covenants. |
| Lack of reciprocal benefits/bad faith | No bad faith; enforcement rights not contingent on reciprocal benefits. | Without reciprocal benefits, covenant unenforceable; bad faith present. | No genuine issue of material fact on bad faith. |
| Frustration of purpose (directed verdict) | Frustration not established. | Frustration may excuse performance due to changed conditions. | Directed verdict for FHPOA affirmed; frustration of purpose not shown. |
| Damages evidence and in limine | Damages properly recoverable under covenant enforcement. | Damages evidence should have been limited. | Trial court properly admitted damages evidence; in limine issue rejected. |
Key Cases Cited
- Yorke v. Novant Health, Inc., 192 N.C.App. 340, 666 S.E.2d 127 (2008) (jurisdictional review under § 1-278 when order is merits-involving and timely objected to)
- Veazey v. Durham, 231 N.C. 357, 57 S.E.2d 377 (1950) (definition of interlocutory order and its appealability)
- Liggett Group v. Sunas, 113 N.C.App. 19, 437 S.E.2d 674 (1993) (interlocutory partial summary judgment and appealability)
- Dixon v. Hill, 174 N.C.App. 252, 620 S.E.2d 715 (2005) (test for appellate review of interlocutory orders)
- Page v. Bald Head Ass'n, 170 N.C.App. 151, 611 S.E.2d 463 (2005) (enforcement of restrictive covenants and related remedies)