GRE Properties Thomasville LLC v. Libertywood Nursing Center, Inc.

NO. COA13-1180
NORTH CAROLINA COURT OF APPEALS
Filed: 5 August 2014
GRE PROPERTIES THOMASVILLE LLC,
Plaintiff-Appellee,
v. Davidson County
No. 10CVD1417
LIBERTYWOOD NURSING CENTER, INC.,
Defendant-Appellant.
Appeal by defendant from judgment entered 28 December 2012
by Judge April C. Wood in Davidson County District Court.
Cross-appeal by plaintiff from order entered 28 January 2013 by
Judge Mary F. Covington in Davidson County District Court.
Heard in the Court of Appeals 19 March 2014.
Robinson Bradshaw & Hinson, P.A., by Julian H. Wright, Jr.,
and Cary B. Davis, and Barnes, Grimes, Bunce & Fraley,
PLLC, by D. Linwood Bunce, II, for plaintiff-appellee and
cross-appellant.
Nexsen Pruet, PLLC, by David S. Pokela, for defendant-
appellant and cross-appellee.
McCULLOUGH, Judge.
Libertywood Nursing Center, Inc. (“defendant”), appeals
from the judgment in favor of GRE Properties Thomasville LLC
(“plaintiff”) in this summary ejectment action. Plaintiff
cross-appeals from the order denying its motion for summary
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judgment. For the following reasons, we find no error.
I. Background
This case arises out of plaintiff’s lease of a premises
located at 1028 Blair Street in Thomasville, North Carolina, to
defendant for the operation of a nursing home. The lease, dated
25 August 2000 and executed by plaintiff’s predecessor in
interest, Ganot Corporation, and defendant, provided for an
initial ten year term commencing 1 October 2000 with options for
defendant to extend the lease for two additional five year
terms.
Particularly relevant to this appeal, the lease contained
the following provisions:
SECTION 5.5 Waste Lessee shall not commit,
or suffer to be committed, any waste on the
Leased Premises nor shall Lessee maintain,
commit or permit the maintenance or
commission of any nuisance on the Leased
Premises or use the Leased Premises for any
unlawful purpose. For purposes of the
Article 5.5 “waste” as used herein includes,
but is not limited to, loss, or serious and
imminent threat of loss as reasonably
determined in good faith by Lessor,
Regarding: (i) the license to operate the
leased premises as a nursing home; (ii) any
certificate of need rights; or (iii) any
other governmental license or certification
material to the operation of the Leased
Premises as a nursing home, including but
not limited to, certification for
participation in the Medicare and/or
Medicaid Programs under Titles XVIII and XIX
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of the Social Security Act, as amended. . .
.
SECTION 8.1 Lessee assumes the full and sole
responsibility for the condition,
furnishing, operation, repair and
maintenance of the Demised Premises and
every portion thereof from and after the
Commencement Date of the Term of this Lease
and (except as expressly set forth in
Section 2.1) Lessor shall not under any
circumstances be responsible for the
performance of any repairs, replacements,
changes or alterations whatsoever or the
furnishing of any services in or to the
Demised Premises or the Buildings and Lessor
shall not be liable for the cost thereof.
Lessee and Lessor agree that, throughout the
Term of this Lease, Lessee, at Lessee’s sole
cost and expense, shall maintain and repair
the Demised Premises, the Buildings, and the
sidewalks and curbs adjacent or appurtenant
thereto, and shall keep or cause the same to
be maintained in good order and condition,
and promptly at Lessee’s own cost and
expense, make all necessary repairs,
replacements thereto, interior and exterior,
structural and non-structural, ordinary as
well as extraordinary, foreseen as well as
unforeseen, and shall keep and maintain all
portions of the Demised Premises and the
Buildings and the sidewalks adjoining the
same in a clean and orderly condition, free
of accumulation of dirt, rubbish, snow and
ice. When used in this Article VIII or in
Article IX, the Term “repairs” shall include
all necessary replacements, renewals,
alterations, additions and betterments. All
repairs made by Lessee shall be at least
equal in quality and class to the original
work. The necessity for and adequacy of
repairs to the Buildings pursuant to this
Section 8.1 shall be measured by the
standard which is appropriate for buildings
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of similar construction, use, class and
location, provided that Lessee shall in any
event make all repairs necessary to avoid
any structural damage or injury thereto.
SECTION 19.1 If during the Term of this
Lease Lessee shall:
. . . .
(c) default in fulfilling any of the
covenants of this Lease (other than the
covenants for the payment of Basic
Rent, additional rent and other charges
payable by Lessee hereunder), and
Lessee shall not within twenty (20)
days after the giving to Lessee by
Lessor of written notice of such
default, have cured such default (or,
in the case of default which cannot
with due diligence be cured by Lessee
within such twenty (20) day period,
then provided Lessee in good faith
commences such curing within said
twenty (20) day period, within such
extended period as may be necessary to
complete the curing of same with all
due diligence); . . . .
. . . .
Lessor, at its option, may give to Lessee a
notice of intention to Terminate this Lease,
effective as of the date of the occurrence
of an Event of Default, whereupon this Lease
and all right, title and interest of Lessee
hereunder shall Terminate as fully and
completely as if that day were the date
herein specifically fixed for the expiration
of the Term, and Lessee will then quit and
surrender the Demised Premises to Lessor,
but Lessee shall remain liable as
hereinafter provided.
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When defendant took possession of the premises, it did so
“as is” with the roof in poor condition and in need of repair.
As leaks occurred, defendant would repair them. However, in
2009 defendant began receiving complaints from plaintiff about
the condition of the premises. Specifically, on 19 November
2009, defendant received a letter from plaintiff requesting
defendant provide a plan to address alleged violations of
Article VIII of the lease. These alleged violations included “a
number of roof leaks” and “moisture in the walls” that could
“develop into serious damage to the building[,]” “deficiencies
noted in recent surveys[,]” repairs needed to the parking and
roadway, and repairs to the brick veneer. Defendant then
received a follow-up letter from plaintiff on 10 December 2009
that noted the dreadful condition of the premises. In the
second letter, plaintiff stated the following:
Within thirty days the roof must be renewed
as well as the gutters and downspouts.
All asphalt must be renewed in thirty days.
Also a suitable scheduled replacement of all
the worn-out furnishings must be approved.
You must diligently tend to a possible mold
problem. Brick mortar must be replaced
where required as does caulking around
windows and doors.
To end the letter, plaintiff noted it “look[ed] forward to
[defendant’s] response before January 10, 2010.”
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On 2 February 2010, counsel for plaintiff sent defendant a
notice of default. The notice also informed defendant of an
inspection and offered defendant the opportunity to submit and
implement a plan to cure the defaults and bring the premises
into compliance with the terms of the lease. On 23 February
2010, defendant gave notice to plaintiff of its intent to extend
the lease for an additional five year term and, on 18 March
2009, responded through counsel to plaintiff’s 2 February 2010
notice of default. In defendant’s response, defendant denied it
was in default of the lease.
By letter dated 1 April 2010, plaintiff terminated the
lease and demanded that defendant immediately vacate the
premises.
When defendant did not vacate the premises, plaintiff
initiated this summary ejectment action to remove defendant from
the premises. Plaintiff filed its Complaint in Summary
Ejectment in Davidson County Small Claims Court on 14 April
2010. Following a hearing, the magistrate entered a Judgment in
Action for Summary Ejectment in favor of plaintiff on 22 April
2010. Defendant appealed that judgment to District Court.
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Once in District Court, defendant filed an Answer &
Counterclaim on 14 May 2010 to which plaintiff replied on 11
June 2010.
Following a period of discovery, on 11 July 2012, plaintiff
moved for summary judgment. In both the motion and a brief
filed in support of the motion, plaintiff argued defendant was
in default of Section 5.3 of the lease when it gave notice of
its intention to exercise the renewal option on 23 February
2010. Thus, plaintiff argued the notice was void and without
effect, resulting in the expiration of the lease at the end of
the initial 10 year term on 31 October 2010. On 29 August 2012,
plaintiff’s motion for summary judgment came on for hearing in
Davidson County District Court before the Honorable Mary F.
Covington, who announced her decision to deny the motion at the
conclusion of the hearing.
By Notice of Voluntary Dismissal filed 20 November 2012,
defendant dismissed its counter-claim against plaintiff.
On 26 November 2012, the case came on for a pre-trial
hearing, during which the court considered a motion in limine by
plaintiff to strike the deposition testimony of Mr. John M.
Underwood, a former employee of plaintiff’s parent company who
was deposed in both his individual capacity and as plaintiff’s
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corporate designee pursuant to N.C. Gen. Stat. § 1A-1, Rule
30(b)(6). At the conclusion of the hearing, the trial court
denied plaintiff’s motion in limine and entered a Final Order on
Pre-trial Conference.
The following day, 27 November 2012, the case was called
for jury trial in Davidson County District Court, the Honorable
April C. Wood, Judge presiding.
At the conclusion of the trial on 12 December 2012, the
jury returned verdicts in favor of plaintiff finding: (1)
defendant violated provisions of the lease and failed to cure
those violations after being provided written notice and an
opportunity to cure; and (2) plaintiff did not waive defendant’s
defaults. The trial court then entered judgment for plaintiff
ordering defendant be removed from and plaintiff be put in
possession of the premises.
On 4 January 2013, defendant filed post-trial motions for
judgment notwithstanding the verdict and, alternatively, a new
trial. Those motions were denied by order of the trial court
filed 18 January 2013. An additional order memorializing the
prior denial of plaintiff’s 11 July 2012 motion for summary
judgment was subsequently filed on 28 January 2013.
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Defendant filed Notice of Appeal on 8 February 2013.
Plaintiff filed Notice of Cross-Appeal shortly thereafter on 13
February 2013.
II. Discussion
On appeal, defendant contends the trial court erred in (1)
failing to instruct the jury that a breach of a commercial lease
must be material to warrant forfeiture of the lease and
ejectment; and (2) denying it the right to call plaintiff’s
counsel as witnesses at trial. On cross-appeal, plaintiff
contends the trial court erred in denying its motion for summary
judgment prior to the jury trial. We address these issues in
order.
Jury Instruction
During the charge conference, the parties agreed that the
trial judge should instruct the jury pursuant to N.C.P.I.--Civil
845.00, the pattern instruction for summary ejectment when there
has been a violation of a provision in a lease. Defendant,
however, proposed that the trial judge add the following
instruction on materiality to the pattern instruction:
Fifth, that [d]efendant’s default under
Section 19.1(c), Section 8.1 and/or Section
5.5 of the Lease was so material that it
justified a termination of the Lease[.]
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Upon considering defendant’s request, the trial judge declined
to include the special instruction and noted defendant’s
objection to the omission prior to instructing the jury. The
trial judge then proceeded to issue the following instructions
to the jury:
The first issue reads, is the landlord, GRE,
entitled to possession of the leased
premises on the ground tenant, Libertywood,
violated provisions of the lease and failed
to cure those violations after being
provided written notice by GRE and an
opportunity to cure.
On this issue the burden of proof is on GRE.
This means that GRE must prove by the
greater weight of the evidence several
things. First, that Libertywood took
possession of the premises under a lease
with GRE. A lease is a contract for the
exclusive possession of a premises. A lease
may be written or verbal. Second, that the
parties agreed that as part of the lease
tenant, Libertywood, . . . A. [w]ould . . .
maintain[] the premises and make all
necessary repairs and replacements in
accordance with section eight point one
(8.1) of the lease, and B. would not permit
waste as set forth [in] section five point
five (5.5) of the lease.
Third, that the parties agreed that the
lease would terminate in the event the
tenant, Libertywood, violated – sections
eight point one (8.1) or five point five
(5.5) of the lease and the[n] failed to cure
or commence in good faith to cure the
violations within twenty days after
receiving written notice from GRE as
required by section nineteen point one
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(19.1) of the lease.
Four, that Libertywood violated sections
eight point one (8.1), and five point five
(5.5) of the lease an[d] failed to cure or
commence in good faith to cure the
violations within twenty days after
receiving written notice from GRE.
Fifth, that GRE terminated the lease as
provided by the lease by giving Libertywood
written notice of termination on April the
first, two thousand ten (4/1/2010) and
Libertywood did not vacate the premises.
Finally, as to this issue on which GRE has
the burden of proof, if you find that by the
greater weight of the evidence, that the
landlord is entitled to possession of the
leased premises then it would be your duty
to answer this issue yes in favor of GRE.
If, on the other hand, you fail to so find
then it would be your duty to answer this
issue no, in favor of Libertywood.
These instructions closely mirror N.C.P.I.--Civil 845.00 and
exclude an instruction on materiality.
Now, on appeal, defendant first argues the trial court
erred in failing to issue the requested instruction on
materiality.
This Court has recognized a four part test to determine if
the trial court erred in refusing to give a requested
instruction.
A specific jury instruction should be given
when “(1) the requested instruction was a
correct statement of law and (2) was
supported by the evidence, and that (3) the
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instruction given, considered in its
entirety, failed to encompass the substance
of the law requested and (4) such failure
likely misled the jury.”
Outlaw v. Johnson, 190 N.C. App 233, 243, 660 S.E.2d 550, 559
(2008) (quoting Liborio v. King, 150 N.C. App. 531, 534, 564
S.E.2d 272, 274, disc. review denied, 356 N.C. 304, 570 S.E.2d
726 (2002)). In addition, “[f]ailure to give a requested and
appropriate jury instruction is reversible error [only] if the
requesting party is prejudiced as a result of the omission.”
Id.Defendant first contends the law requires breaches of a
lease to be material to justify summary ejectment. Thus, in
accordance with the test set forth in Outlaw, defendant asserts
the requested instruction on materiality was a correct statement
of the law. In support of its argument, defendant cites this
Court’s decision in Loomis v. Hamerah, 140 N.C. App. 755, 538
S.E.2d 593 (2000), as well as cases and treatises that are not
binding on this Court.
In Loomis, this Court reviewed the trial court’s grant of
summary judgment in favor of a landlord who brought a summary
ejectment action. As this Court explicitly stated in the
opinion, the dispositive issue in Loomis was “whether there
[was] a genuine issue of material fact as to [the d]efendant’s
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breach of the [l]ease[.]” Loomis, 140 N.C. App. at 760, 538
S.E.2d at 596. Upon review, this Court agreed with the tenants
and held genuine issues of material fact existed as to whether
the tenants breached the lease. Id. at 761, 538 S.E.2d at 596-
97. As a result, this Court reversed the grant of summary
judgment in favor of the landlord and remanded the case to the
trial court. Id. at 761, 538 S.E.2d at 597.
In citing Loomis, defendant relies on the following
language that this Court reduced to a footnote:
To the extent there has been a breach of any
provision of the [l]ease, not every breach
“justifies a cancellation and rescission” of
the contract. Childress v. Trading Post,
247 N.C. 150, 156, 100 S.E.2d 391, 395
(1957). To justify termination of a lease,
the breach “must be so material as in effect
to defeat the very terms of the contract.”
Id. (citations omitted)[.]
Id. at 761 n.3, 538 S.E.2d at 597 n.3. Upon review of the
Loomis opinion, it is clear to us that the above footnoted
language was merely dicta and unnecessary to the Court’s
determination that genuine issues of material fact existed as to
whether the tenants breached the lease. Thus, the language is
not authoritative. Moreover, we note the case cited in the
footnote in Loomis is not a summary ejectment case resulting
from a breach of a lease, but a construction contract case
involving alleged breaches of and variations from an agreement
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between builder and owner. See Childress, 247 N.C. at 156, 100
S.E.2d at 395 (“Not every breach of a contract justifies a
cancellation and rescission. The breach must be so material as
in effect to defeat the very terms of the contract.”).
Upon review of Loomis, Childress, and the other non-binding
authorities cited by defendant, we are not persuaded the trial
court erred in refusing to issue the requested instruction on
materiality.
In North Carolina, “[s]ummary ejectment proceedings are
purely statutory[.]” Marantz Piano Co., Inc. v. Kincaid, 108
N.C. App. 693, 696, 424 S.E.2d 671, 672 (1993). Among other
events, North Carolina’s General Statutes allow for summary
ejectment “[w]hen the tenant or lessee . . . has done or omitted
any act by which, according to the stipulations of the lease,
his estate has ceased.” N.C. Gen. Stat. § 42-26(a)(2) (2013).
“Under [N.C. Gen. Stat. § 42-26(a)(2)], a breach of the lease
cannot be made the basis of summary ejectment unless the lease
itself provides for termination by such breach or reserves a
right of reentry for such breach.” Stanley v. Harvey, 90 N.C.
App. 535, 537, 369 S.E.2d 382, 384 (1988). In the present case,
Section 19.1 of the lease provided for termination of the lease
upon breach of Sections 5.5 and 8.1.
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Upon review of the pattern instructions and the
instructions provided in this case, stated above, we hold
N.C.P.I.--Civil 845.00, as applied in this case, sufficiently
addressed the required elements for summary ejectment under
North Carolina law. Therefore, the trial court did not err in
denying defendant’s request to add a special instruction on
materiality.
Moreover, assuming arguendo the trial court erred in
failing to issue defendant’s requested instruction on
materiality, we are not convinced that defendant was prejudiced.
The instructions to the jury specifically identified Sections
5.5 and 8.1 as the relevant provisions for deciding whether a
breach of the lease occurred. Upon review of the lease, it is
clear that Sections 5.5 and 8.1 are not insignificant to the
agreement between plaintiff and defendant; thus, we find it
unlikely that a breach of either section would be immaterial.
Accordingly, even if the requested instruction on materiality
was a correct statement of North Carolina law, defendant was not
prejudiced by the omission and the error does not amount to
reversible error.
Counsel as a Witness
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As noted in the background, during discovery Mr. Underwood,
the former director of construction and development for
plaintiff’s parent company, was deposed in both his individual
capacity and as plaintiff’s corporate designee pursuant to N.C.
Gen. Stat. § 1A-1, Rule 30(b)(6). Certain portions of Mr.
Underwood’s testimony were favorable to defendant.
Although plaintiff did not raise concerns about Mr.
Underwood’s competence during the deposition held in October
2010, months later, after learning Mr. Underwood had been
diagnosed with a neurological condition affecting his memory,
plaintiff filed a motion in limine pursuant to N.C. Gen. Stat. §
8-81 to exclude his deposition testimony from trial. In support
of its motion, plaintiff argued unfair prejudice and lack of
personal knowledge under Rules 403 and 602 of the North Carolina
Rules of Evidence. Upon considering arguments made during a 26
November 2012 pre-trial hearing, the trial court denied
plaintiff’s motion in limine.
Thereafter, defendant introduced Mr. Underwood’s deposition
testimony into evidence at trial and read portions of the
testimony to the jury. In response, plaintiff introduced the
deposition testimony of Mr. Underwood’s neurologist into
evidence in order to attack the credibility of Mr. Underwood’s
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deposition testimony. Portions of the deposition testimony by
Mr. Underwood’s neurologist called Mr. Underwood’s memory at the
time his deposition was taken into question. Specifically, Mr.
Underwood’s neurologist stated he believed Mr. Underwood was
suffering from mild dementia in October 2010.
In order to rebut plaintiff’s assertions that Mr. Underwood
was not competent at the time of his deposition, during
discussions in chambers, defendant requested it be able to call
Julian Wright and Cary Davis, counsel for plaintiff, to testify
regarding their preparation of Mr. Underwood for his deposition.
The trial judge, however, denied the request in chambers. As a
result, defendant was not able to question plaintiff’s counsel
on Mr. Underwood’s competence. Defendant did, however, attempt
to make an offer of proof to preserve its right to appeal.
Now, on appeal, defendant argues the trial court erred in
denying its request to call plaintiff’s counsel as witnesses of
Mr. Underwood’s competence in order to bolster Mr. Underwood’s
deposition testimony. Yet, defendant cites only State v. Kirby,
206 N.C. App. 446, 456, 697 S.E.2d 496, 503 (2010), for the
proposition that issues of relevance are reviewed de novo and
fails to cite any further legal authority in support of its
argument. As a result, we find defendant has abandoned this
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argument. See N.C. R. App. P. 28(b)(6) (2014) (“The body of the
argument and the statement of applicable standard(s) of review
shall contain citations of the authorities upon which the
appellant relies.”) (emphasis added).
Although defendant’s argument is abandoned, we take this
opportunity to note
[t]here is . . . a natural reluctance to
allow attorneys to appear in a case as both
advocate and witness. Therefore, the
decision of whether to permit [it] is within
the discretion of the trial court. The
circumstances under which a court will
permit a lawyer for a party . . . to take
the witness stand must be such that a
compelling reason for such action exists.
State v. Simpson, 314 N.C. 359, 373, 334 S.E.2d 53, 62 (1985)
(citations omitted).
Where other witnesses could testify to Mr. Underwood’s
competence, the trial court did not abuse its discretion in
denying defendant’s request to call plaintiff’s counsel as a
witness.
Directed Verdict
In addition to responding to defendant’s arguments on
appeal, plaintiff asserts, as an alternative basis in the law
supporting the judgment, that the trial court erred in denying
its motion for a directed verdict. Because we find no error in
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the trial below, we do not address plaintiff’s alternative
argument.
Summary Judgment
In the event we reversed the judgment based on the jury’s
verdict, plaintiff filed a cross-appeal contending the trial
court erred in denying its motion for summary judgment. Because
the judgment based on the jury’s verdict stands, we do not
address plaintiff’s cross-appeal. Furthermore, an appeal of a
denial of summary judgment is ordinarily not reviewable on
appeal from a final judgment rendered in a trial on the merits.
See Harris v. Walden, 314 N.C. 284, 286-87, 333 S.E.2d 254, 256
(1985).
III. Conclusion
For the reasons discussed, we find no error in the trial
below.
No error.
Judges ELMORE and DAVIS concur.