Appeal by defendant from an order entered 9 December 2002 by
Judge David S. Cayer in Mecklenburg County District Court. Heard
in the Court of Appeals 14 January 2004.
Kennedy Covington Lobdell & Hickman, L.L.P., by John H.
Capitano and Amy P. Williams, for plaintiff-appellee.
Horack, Talley, Pharr & Lowndes, P.A., by Henry N. Pharr, III,
for defendant-appellant.
HUNTER, Judge.
Lake Norman Castaldi's, LLC
(See footnote 1)
(“defendant”) appeals from an
order filed 9 December 2002 granting summary judgment in favor of
Northcross Land and Development, L.P. (“plaintiff”) in a summary
ejectment action. Because plaintiff is not equitably estopped from
acting upon defendant's default on a commercial lease and has not
waived its right to enforce the bankruptcy default provision of the
lease, we affirm. The undisputed facts of the case reveal that on 7 January 1998
defendant entered into a ten-year commercial lease with plaintiff
to rent space for a restaurant in the Northcross Shopping Center in
Mecklenburg County, North Carolina.
(See footnote 2)
The lease included a default
provision, which defendant could trigger by non-payment of rent or
by filing for bankruptcy. Defendant failed to pay the rent in
March 2001, and on 11 April 2001, filed for bankruptcy in the
United States Bankruptcy Court for the Eastern District of
Michigan, Southern Division. The parties entered into a stipulated
order in the bankruptcy action on 4 April 2002, whereby defendant
agreed to pay $45,000.00 in arrears to plaintiff prior to 29 May
2002. By 16 May 2002, defendant had paid $30,000.00, and
subsequently requested additional time to pay the remaining
$15,000.00. On 21 May 2002, the parties through counsel agreed to
an extension of the payment deadline until 24 June 2002. An “Order
Confirming Plan” was filed in the bankruptcy action on 25 June
2002, which gave defendant until 24 June 2002 to pay the remaining
arrearage.
(See footnote 3)
Defendant received a “Late Notice” from plaintiff on 22 June
2002, which reflected a balance due of $21,213.16. Defendant didnot telephone plaintiff to inquire about the late notice and the
specifics of the amount and request an itemized statement until 25
June 2002. Defendant was not informed by plaintiff's
representative at any time during this telephone conversation that
the failure to make payment by 24 June 2002 would constitute a
default under the parties' agreement in the stipulated order.
Defendant, in fact, asserts that plaintiff stated that it would
“look[] forward” to receiving payment by 28 June 2002.
Defendant's payment was received by plaintiff on 28 June 2002,
but the payment was rejected by plaintiff on 2 July 2002. On 9
July 2002, plaintiff filed this summary ejectment action and on 25
July 2002, the bankruptcy action was dismissed based upon
defendant's default under the lease, stipulated order, and the
“Order Confirming Plan.” On 9 December 2002, the trial court
granted summary judgment in favor of plaintiff on the grounds that
defendant had defaulted under the lease both by non-payment of rent
and by filing for bankruptcy, and ordered defendant to vacate the
premises.
The issues are whether: (I) plaintiff is equitably estopped
from enforcing the default provisions of the lease, stipulated
order, and “Order Confirming Plan” for non-payment, and (II)
plaintiff has waived its right to enforce the bankruptcy default
provision of the lease.
I.
Defendant first contends that plaintiff is equitably estopped
from enforcing the default provisions of the lease, stipulatedorder, and “Order Confirming Plan” by its representations that
payment should be made by 28 June 2002, even though the “Order
Confirming Plan” required payment by 24 June 2002 and by demanding
a higher amount than agreed upon in the stipulated order.
“[T]he essential elements of an equitable
estoppel as related to the party estopped are:
(1) Conduct which amounts to a false
representation or concealment of material
facts, or, at least, which is reasonably
calculated to convey the impression that the
facts are otherwise than, and inconsistent
with, those which the party afterwards
attempts to assert; (2) intention or
expectation that such conduct shall be acted
upon by the other party, or conduct which at
least is calculated to induce a reasonably
prudent person to believe such conduct was
intended or expected to be relied and acted
upon; (3) knowledge, actual or constructive,
of the real facts. . . .”
Meachan v. Board of Education, 47 N.C. App. 271, 277-78, 267 S.E.2d
349, 353 (1980) (citation omitted). Further, the party asserting
equitable estoppel must show “'(1) lack of knowledge and the means
of knowledge of the truth as to the facts in question; (2) reliance
upon the conduct of the party sought to be estopped; and (3) action
based thereon of such a character as to change his position
prejudicially.'”
Id. at 278, 267 S.E.2d at 353 (citation omitted).
In this case, as to the amount owed by defendant, defendant
does not contend the amount claimed was a false representation, and
in fact after its own investigation, tendered payment of the amount
stated in the “Late Notice.” As to the representations that
payment could be made by 28 June 2002, defendant should have been
aware that the payment deadline had been extended until 24 June
2002 because that was the date agreed to by the parties asreflected in the “Order Confirming Plan.” Any confusion over the
date of the revised deadline was due only to mis-communication
between defendant and its counsel in the bankruptcy action.
Furthermore, even if defendant reasonably relied on the statement
by plaintiff's representative that plaintiff would “look[] forward”
to receiving payment by 28 June 2002, this did not result in
defendant changing its position prejudicially, because the
telephone conversation did not occur until 25 June 2002, the day
after the agreed upon deadline for making payment. Thus, the 25
June 2002 telephone conversation was immaterial to defendant's
failure to meet the 24 June 2002 deadline. Therefore, plaintiff
was not equitably estopped from rejecting defendant's late payment.
II.
Nevertheless, even if plaintiff should be equitably estopped
from acting upon defendant's default for non-payment, the trial
court also granted summary judgment under the bankruptcy default
provision of the lease. Defendant argues that the bankruptcy
default provision of the lease was waived by plaintiff's apparent
assent to the bankruptcy action and the orders entered therein and
its subsequent and allegedly inconsistent demand for payment.
This Court has previously recognized that although a
bankruptcy default provision in a lease is unenforceable during the
pendency of the bankruptcy action, the dismissal of the bankruptcy
action for a failure to comply with orders of the bankruptcy court
“returned the parties to the same status which they had before the
commencement of the case and the protection from the bankruptcytermination clause . . . was lost.”
Miller v. Parlor Furniture, 79
N.C. App. 639, 641, 339 S.E.2d 804, 805 (1986). Thus, since
defendant's bankruptcy action was dismissed based upon its failure
to comply with the orders of the bankruptcy court, the parties were
restored to the same status as prior to that action, and the
bankruptcy default provision of the lease was rendered enforceable.
Thus, the trial court did not err in granting summary judgment for
plaintiff.
Affirmed.
Judges McGEE and GEER concur.
Report per Rule 30(e).
Footnote: 1