IHFC Properties, LLC v. Whalen Furniture Manufacturing, Inc. ( 2015 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1484
IHFC PROPERTIES, LLC,
Plaintiff - Appellee,
v.
WHALEN FURNITURE MANUFACTURING, INC.,
Defendant - Appellant,
and
APA MARKETING, INC.,
Defendant.
No. 14-1536
IHFC PROPERTIES, LLC,
Plaintiff - Appellant,
v.
WHALEN FURNITURE MANUFACTURING, INC.,
Defendant - Appellee,
and
APA MARKETING, INC.,
Defendant.
Appeals from the United States District Court for the Middle
District of North Carolina, at Greensboro. Thomas D. Schroeder,
District Judge. (1:10-cv-00568-TDS-LPA)
Submitted: April 27, 2015 Decided: June 11, 2015
Before GREGORY and HARRIS, Circuit Judges, and DAVIS, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Randal S. Waier, LAW OFFICES OF RANDAL S. WAIER, Newport Beach,
California, for Appellant. Andrew S. Lasine, KEZIAH GATES LLP,
High Point, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Following a bench trial, the district court concluded that
Whalen Furniture Manufacturing, Inc. (“Whalen Furniture”), was
estopped from asserting a statute of frauds defense and awarded
IHFC Properties, LLC (“IHFC”), $172,470.51, which represented
the base rent, common area maintenance (“CAM”) charges, Consumer
Price Index (“CPI”) escalation charges, and showroom taxes
remaining under the lease that IHFC was unable to mitigate after
Whalen Furniture vacated IHFC’s property.
Whalen Furniture appeals, arguing that it should not be
estopped from asserting a statute of frauds defense;
alternatively, Whalen Furniture contends that it was at most a
sublessee of APA Marketing, Inc. (“APA Marketing”), which signed
the original lease, and therefore IHFC lacked privity of estate
to enforce the contract against it. Whalen Furniture also
challenges the district court’s damages calculation, asserting
that it cannot be held liable for the CAM charges and CPI
escalation charges because it was not on notice of these
charges. IHFC cross-appeals, arguing that the district court
should have awarded contractual prejudgment interest and
attorney’s fees, or, alternatively, statutory prejudgment
interest. Finding no reversible error, we affirm.
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I.
“[W]e review judgments stemming from a bench trial under a
mixed standard: factual findings are reviewed for clear error,
whereas conclusions of law are reviewed de novo.” Makdessi v.
Fields, ___ F.3d ____, 2015 WL 1062747 at *4 (4th Cir. Mar. 12,
2015) (citation and internal quotation marks omitted). “In
cases in which a district court’s factual findings turn on
assessments of witness credibility or the weighing of
conflicting evidence during a bench trial, such findings are
entitled to even greater deference.” Helton v. AT&T, Inc., 709
F.3d 343, 350 (4th Cir. 2013). Because the district court was
exercising its diversity jurisdiction, North Carolina
substantive law governed. Erie R.R. Co. v. Tompkins, 304 U.S.
64, 78-80 (1938).
II.
Whalen Furniture first contends that it was not estopped
from asserting a statute of frauds defense because it did not
take inconsistent positions regarding a written document to
which it was a party. “Under a quasi-estoppel theory, a party
who accepts a transaction or instrument and then accepts
benefits under it may be estopped to take a later position
inconsistent with the prior acceptance of that same transaction
or instrument.” Whitacre P’ship v. Biosignia, Inc., 591 S.E.2d
870, 881-82 (N.C. 2004). “[T]he essential purpose of quasi-
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estoppel . . . is to prevent a party from benefitting by taking
two clearly inconsistent positions.” B & F Slosman v.
Sonopress, Inc., 557 S.E.2d 176, 181 (N.C. Ct. App. 2001).
Quasi-estoppel, an equitable doctrine, is “inherently flexible
and cannot be reduced to any rigid formulation.” Whitacre
P’ship, 591 S.E.2d at 882.
We conclude that Whalen Furniture was estopped from
asserting an affirmative defense based on the statute of frauds.
Whalen Furniture accepted the lease, with knowledge of the
material terms, when its president informed IHFC’s vice
president for leasing that Whalen Furniture would take care of
the rent after confirming that Whalen Furniture had purchased
either APA Marketing or its assets, and paid the rent for the
showroom for the October 2008 and April 2009 markets. Whalen
Furniture then accepted benefits under the lease beyond mere
occupation of the premises when it conducted a private showing
for a customer during an off-market time, a privilege only
extended to leased tenants.
Whalen Furniture argues that its failure to sign a written
lease is fatal to the district court’s quasi-estoppel analysis,
asserting that this case is virtually identical to B & F
Slosman. In B & F Slosman, the defendant occupied space within
the plaintiff’s property while negotiating for additional space
within the property. 557 S.E.2d at 178-79. The parties were
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unable to reach an agreement, and the defendant vacated the
premises. Id. When the plaintiff sued, seeking to hold the
defendant to its proposed lease term, the North Carolina Court
of Appeals concluded that quasi-estoppel was not appropriate
because “[t]he fact that defendant occupied the additional space
during the negotiation process and agreed to pay a monthly rent
[did] not result in defendant’s taking two inconsistent
positions.” Id. at 181. Here, however, the district court
found that Whalen Furniture accepted the terms of the lease and
enjoyed the benefits of the lease for nearly one year.
Therefore, its assertion of the statute of frauds is
inconsistent with its representations that it would honor the
lease and its acceptance of benefits available only to a
leaseholder. We therefore conclude that Whalen Furniture was
estopped from asserting the statute of frauds.
Next, Whalen Furniture asserts that it was at most a
sublessee of APA Marketing because APA Marketing retained a
reversionary interest in the showroom. IHFC contends that there
is no evidence of a subleasing agreement between APA Marketing
and Whalen Furniture and that the district court properly found
that Whalen assumed the lease through an oral agreement with
IHFC.
Under North Carolina law, “a conveyance is an assignment if
the tenant conveys his entire interest in the premises, without
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retaining any reversionary interest in the term itself. A
sublease . . . is a conveyance in which the tenant retains a
reversion in some portion of the original lease term, however
short.” Christensen v. Tidewater Fibre Corp., 616 S.E.2d 583,
587 (N.C. Ct. App. 2005).
We agree with the district court that there was no evidence
presented demonstrating that Whalen Furniture was a sublessee of
APA Marketing. Whalen Furniture’s witnesses testified that it
paid the rent APA Marketing owed on APA Marketing’s behalf, not
because Whalen Furniture had agreed to sublet the showroom from
APA Marketing. Moreover, the district court did not find, as
Whalen Furniture asserts, that APA Marketing retained a
reversionary interest in the lease; instead, it found that APA
Marketing had no need for the IHFC showroom after the asset sale
to Whalen Furniture because APA Marketing had no more product to
sell.
III.
Finally, Whalen Furniture challenges the district court’s
damages calculation, arguing that IHFC did not discuss the
calculation of CAM charges and CPI escalation charges with
Whalen Furniture and therefore the court erroneously awarded
IHFC damages for those charges. To the extent that Whalen
Furniture is challenging the district court’s factual finding to
the contrary, we discern no clear error. IHFC’s vice president
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testified that he informed Whalen Furniture’s president about
the outstanding balance for the April 2008 invoice, which
included CAM and CPI escalation charges, and discussed the
length of the lease, payment due dates, the termination date of
the lease, and the rate per square foot. He further stated that
it was his usual practice to discuss CPI escalation charges with
tenants, which IHFC understood Whalen Furniture would be,
because they were part of the payment terms. Moreover, Whalen
Furniture received a copy of the April 2008 invoice, which
included CAM charges in “rent” and listed the CPI escalation
charge for 2008. As the district court noted, Whalen Furniture
paid these charges without complaint while occupying the
showroom. On these facts, we discern no clear error.
IV.
In its cross-appeal, IHFC argues that the district court
erred when it refused to award prejudgment interest at the
contract rate and attorney’s fees under the contract, contending
that the knowledge of these terms by APA Marketing’s principals,
who became Whalen Furniture employees, should be imputed to
Whalen Furniture. Alternatively, IHFC argues that the district
court should have awarded statutory prejudgment interest.
Whalen Furniture responds that IHFC waived these arguments by
failing to raise them below.
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It is a “settled rule” that this court will not consider
issues raised for the first time on appeal absent “fundamental
error or a denial of fundamental justice.” In re Under Seal,
749 F.3d 276, 285-86 (4th Cir. 2014). “Fundamental error is
more limited than the plain error standard that [this court]
appl[ies] in criminal cases.” Id. at 285. Thus, this court has
used the plain error standard “as something of an intermediate
step in a civil case.” Id. at 286. “[W]hen a party in a civil
case fails to meet the plain-error standard, we can say with
confidence that he has not established fundamental error.” Id.
To establish plain error, IHFC must demonstrate “that the
district court erred, that the error was plain, and that it
affected [its] substantial rights.” United States v. Robinson,
627 F.3d 941, 954 (4th Cir. 2010) (internal alterations and
quotation marks omitted). An error affects substantial rights
if it “affected the outcome of the district court proceedings.”
United States v. Olano, 507 U.S. 725, 734 (1993). We have
discretion to correct such error only if it “seriously affect[s]
the fairness, integrity or public reputation of judicial
proceedings.” Id. at 736 (internal quotation marks and
alteration omitted).
We have refused, however, to undertake plain error review
where the party “failed to make its most essential argument in
its briefs or at oral argument: it never contended that the
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district court fundamentally or even plainly erred.” In re
Under Seal, 749 F.3d at 292; see Makdessi, 2015 WL 1062747, at
*4. Here, IHFC fails to argue in its briefs that the district
court fundamentally erred or that the elements of plain error
review are satisfied here. Thus, IHFC has abandoned these
claims and its “failure to argue for plain error and its
application on appeal surely marks the end of the road for its
argument for reversal not first presented to the district
court.” In re Under Seal, 749 F.3d at 292 (internal alterations
omitted).
V.
Accordingly, we affirm the district court’s judgment. We
dispense with oral argument because the facts and legal
contentions are adequately presented in the material before this
court and argument will not aid the decisional process.
AFFIRMED
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