Cary Crossroads Assoc. v Atlanta Bread, (02-1178) 08/05/2003

Appeal by plaintiff from an order entered 8 April 2002 by Judge David Q. LaBarre in Superior Court, Wake County. Heard in the Court of Appeals 22 May 2003.

Womble Carlyle Sandridge & Rice, PLLC, by Christine Carlisle Odom and Eric M. Braun, for plaintiff-appellant.

Boyce & Isley, PLLC, by Philip R. Isley; Troutman Sanders LLP, by Mark S. VanderBroek, for defendants-appellees.

    McGEE, Judge.

    Cary Crossroads Associates, L.P. (plaintiff) filed an amended complaint against Atlanta Bread Company International, Inc. (Atlanta Bread), Europan, Inc. (Europan), and J.P. Ruley, Inc., doing business as Atlanta Bread Company (Ruley), on 12 December 2001. Atlanta Bread and Europan (defendants) filed a motion todismiss for failure to state a claim, pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) on 13 February 2002. A hearing on defendants' motion was held on 27 March 2002 and the trial court granted defendants' motion to dismiss plaintiff's claim in an order filed 8 April 2002. Defendant Ruley failed to file an answer or otherwise respond to plaintiff's complaint and a default judgment was entered against him on 3 July 2002. Plaintiff appeals the 13 February 2002 order granting defendants' Rule 12(b)(6) motion to dismiss.
    Plaintiff and defendant Ruley signed a ten year lease agreement for retail space for a restaurant in Cary, North Carolina on 29 October 1998, with plaintiff as the landlord and defendant Ruley as the tenant. When defendant Ruley and plaintiff signed the lease agreement, defendant Ruley was a franchisee of Atlanta Bread and he leased the retail space from plaintiff to operate his restaurant franchise.
    Plaintiff alleged in its complaint that defendant Ruley entered the leased retail space and commenced operations in 1999. In early May 2001, defendant Ruley requested in writing that Atlanta Bread assume the lease and take over operation of the leased premises. Defendant Ruley notified plaintiff of the request he made to Atlanta Bread. Atlanta Bread entered the retail space in May 2001, changed the locks, and orally notified plaintiff of its actions. Atlanta Bread, through its operating company, Europan, operated the restaurant from 18 May 2001 through 7 August 2001. Plaintiff alleges that Atlanta Bread notified plaintiff ofa transfer of ownership and assignment of rights and obligations. Atlanta Bread notified plaintiff in writing that the store ownership had been transferred to Atlanta Bread and that Atlanta Bread was assuming the operations through its operating company, Europan, and provided Europan's address as the new billing address.
    Plaintiff's complaint further alleged that Atlanta Bread, through Europan, made rental payments for June and July 2001 and that plaintiff accepted and deposited these payments. Atlanta Bread and Europan failed to make monthly rental and other payments from August through December 2001. The complaint alleged defendants have failed to continuously operate the business since 7 August 2001, have abandoned the premises, and breached the lease.
    A copy of the lease agreement contained in the record includes three key provisions:
        1. Lease Agreement section 12.01:
        Landlord's consent shall not be required for any of the following transfers . . . (iii) a transfer to [Atlanta Bread] in the event of a sale of the business back to [Atlanta Bread], Lease default or termination of the Franchise agreement. Tenant, as Franchisor, shall bear no responsibility except and unless [Atlanta Bread] becomes Tenant and only, in such instance during such period while Franchisor is Tenant.
        2. Lease Agreement section 12.03:
        No occupancy by any party other than [defendant Ruley] or collection of Rent therefrom by [plaintiff] will be deemed (i) a waiver of the provisions of this Article 12; or (ii) the acceptance of the assignee, subtenant or occupant as tenant, or (iii) a release of [defendant Ruley] from the further performance by [defendant Ruley] of covenantson the part of [defendant Ruley] contained in this Lease.

     3. Lease Agreement section 20.01:
        [Plaintiff] agrees that (i) in the event of a default by [defendant Ruley] under the terms of the Lease, before terminating the Lease, or (ii) in the event that [Atlanta Bread] notifies [plaintiff] in writing that [defendant Ruley's] Franchise Agreement has been terminated, [plaintiff] shall provide written notice of [defendant Ruley's] default to [Atlanta Bread] . . . . [Atlanta Bread] shall be permitted the same period of time as [defendant Ruley] to cure any such default, but shall not be obligated to cure any such default, and further, provided [Atlanta Bread] . . . cures such default, [Atlanta Bread] may elect to take possession of the Premises and assume all obligations of [defendant Ruley] by notifying [plaintiff] within said cure period, provided that [Atlanta Bread] assumes all of [defendant Ruley's] Lease obligations hereunder pursuant to a written instrument reasonably acceptable to [plaintiff].
    The record contains a copy of a letter that Atlanta Bread mailed plaintiff on 3 July 2001 stating that the Cary, North Carolina Atlanta Bread location had "changed to a Company owned store from a Franchised location." The letter stated that the ownership had changed to Europan, Inc. d/b/a Atlanta Bread and gave Europan's address as the new billing address. The letter was signed by the controller of Atlanta Bread and was written on Atlanta Bread letterhead.
    Plaintiff first argues that the trial court erred in dismissing plaintiff's complaint for failure to state a claim for which relief could be granted.
            In determining whether a complaint is sufficient to survive a motion to dismiss under G.S. § 1A-1, Rule 12(b)(6), the questionpresented is "whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory." "A complaint may be dismissed pursuant to Rule 12(b)(6) if no law exists to support the claim made, if sufficient facts to make out a good claim are absent, or if facts are disclosed which will necessarily defeat the claim."

Shell Island Homeowners Ass'n v. Tomlinson, 134 N.C. App. 217, 225, 517 S.E.2d 406, 413 (1999) (citations omitted). However, "[i]f on a [Rule 12(b)(6)] motion . . . to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment." N.C. Gen. Stat. § 1A-1, Rule 12 (2001). In such instances, the motion to dismiss is usually converted into a Rule 56 motion for summary judgment. Schnitzlein v. Hardee's Food Sys., Inc., 134 N.C. App. 153, 157, 516 S.E.2d 891, 893, disc. review denied, 351 N.C. 109, 540 S.E.2d 365 (1999); Ryles v. Durham County Hospital Corp., 107 N.C. App. 455, 458, 420 S.E.2d 487, 489, disc. review denied, 332 N.C. 667, 424 S.E.2d 406 (1992).
    In the case before us, defendants submitted a brief and supporting documents to the trial court in support of their motion to dismiss. The supporting documents consisted of a copy of the lease agreement and the letter allegedly notifying plaintiff of the change in ownership. The transcript of the hearing clearly shows that the trial court considered not only the pleadings but also these supporting documents in determining the motion to dismiss. The transcript shows that the trial court asked counsel theirinterpretation of the letter. Since these supporting documents were not incorporated by reference into the pleadings pursuant to N.C. Gen. Stat. § 1A-1, Rule 10(c) (2001), these supporting documents are outside the pleadings. The trial court's consideration of these supporting documents converted the motion to dismiss into a summary judgment motion. See Richland Run Homeowners Assn v. CHC Durham Corp., 123 N.C. App. 345, 347, 473 S.E.2d 649, 651 (1996), rev'd on other grounds, 346 N.C. 170, 484 S.E.2d 527 (1997). We therefore apply the standard of review for summary judgment in reviewing plaintiff's argument.
            Summary judgment should be rendered only when the pleadings, depositions, answers to interrogatories, admissions, and affidavits disclose no genuine issue of material fact entitling the moving party to judgment as a matter of law. If an issue of material fact exists, then the trial court should not grant summary judgment. The party moving for summary judgment has the burden of establishing the absence of any triable issue of fact.

Thomco Realty, Inc. v. Helms, 107 N.C. App. 224, 226, 418 S.E.2d 834, 835-36, disc. review denied, 332 N.C. 672, 424 S.E.2d 407 (1992) (citation omitted).
        "The movant may meet this burden by proving that an essential element of the opposing party's claim is nonexistent, or by showing through discovery that the opposing party cannot produce evidence to support an essential element of his claim or cannot surmount an affirmative defense which would bar the claim."

Id. at 228, 418 S.E.2d at 837 (quoting Roumillat v. Simplistic Enterprises, Inc., 331 N.C. 57, 63, 414 S.E.2d 339, 342 (1992)). On appeal from summary judgment, we consider the evidence in thelight most favorable to the nonmoving party. Raritan River Steel Co. v. Cherry, Bekaert & Holland, 329 N.C. 646, 650, 407 S.E.2d 178, 181 (1991).
    After reviewing the pleadings and evidence contained in the record, we hold that the trial court erred in dismissing plaintiff's claim. "[A]n enforceable lease or conveyance of land need not be set out in a single instrument, but may arise from a series of separate but related letters or other documents signed by the person to be charged or his authorized agent." Satterfield v. Pappas, 67 N.C. App. 28, 35, 312 S.E.2d 511, 516, disc. review denied, 311 N.C. 403, 319 S.E.2d 274 (1984). "The terms of a lease, like the terms of any contract, are construed to achieve the intent of the parties at the time the lease was entered into." Lexington Ins. Co. v. Tires Into Recycled Energy and Supplies, Inc., 136 N.C. App. 223, 225, 522 S.E.2d 798, 800 (1999), disc. review denied, 351 N.C. 642, 543 S.E.2d 872 (2000). Additionally, North Carolina law does not allow a party to accept benefits arising from certain terms of a contract while denying the effect of other terms of the same contract. Advertising, Inc. v. Harper, 7 N.C. App. 501, 505, 172 S.E.2d 793, 795 (1970).
    Plaintiff's complaint alleged that defendants breached a lease agreement by abandoning the premises and refusing to make payments pursuant to the lease agreement after August 2001. Plaintiff's complaint contends that defendants' transfer of ownership constituted an assignment of the lease and all rights and obligations therein. Defendants contend that they did not sign theoriginal lease agreement and that no other written lease agreement exists between plaintiff and defendants. Defendants further contend that they never expressed a "clear intent" to assume defendant Ruley's lease obligations and that plaintiff cannot produce a written agreement or signed document in which defendants assumed or accepted assignment of defendant Ruley's lease obligations. Defendants also argue that the lease agreement precludes plaintiff from any recovery as a matter of law because defendants did not assume the lease obligations.
    Both plaintiff and defendants submitted memoranda of law in arguing defendants' motion to dismiss for failure to state a claim. Defendants' memorandum of law included supporting documents that included a copy of the lease and a letter from Atlanta Bread to plaintiff dated 3 July 2001. The letter from Atlanta Bread to plaintiff stated in part:
        On May 21, 2001 the Cary, NC, Atlanta Bread Company location changed ownership. This location has changed to a Company owned store from a Franchised location. The new ownership has changed to Europan, Inc. dba Atlanta Bread Company. The FEIN number for Europan, Inc. is 58-2099652.

        . . . .

        The billing address will be as follows:

        Europan, Inc.
        Dba Atlanta Bread Company-Chattanooga
        Attn: Wendy Kleefold
        1200 A Wilson Way
        Suite 100
        Smyrna, GA 30082
    The contents of Atlanta Bread's letter to plaintiff creates an issue of material fact regarding defendants' intent to assume thelease obligations. The letter clearly indicates a transfer in ownership from defendant Ruley to Europan, Atlanta Bread's operating company. The letter also provides a new address to plaintiff for billing purposes. However, defendants' intent regarding the alleged assumption of the lease obligations cannot be determined from the mere contents of the letter. While the letter, as contended by defendants, could evidence a lack of intent by defendants to assume the lease obligations, the letter, as contended by plaintiff, could also have been intended to provide notification of the assumption of the lease obligations by defendants. For the purposes of reviewing a trial court's grant of summary judgment, this Court considers the evidence in the light most favorable to the nonmoving party. See Raritan, 329 N.C. at 650, 407 S.E.2d at 181. Accordingly, the intent of the letter and any resulting existence of a lease agreement is an issue of material fact to be resolved at trial. We hold the trial court erred in dismissing plaintiff's complaint and we reverse and remand.
    Having determined there is a genuine issue of material fact for trial, we decline to address plaintiff's remaining arguments.     The judgment of the trial court is reversed and remanded.
    Reversed and remanded.
    Judges McCULLOUGH and CALABRIA concur.
    Report per Rule 30(e).

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