Branch Banking And Tr. Co. v. The Harrelson Bldg., LLC

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An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure. NO. COA14-512 NORTH CAROLINA COURT OF APPEALS Filed: 31 December 2014 BRANCH BANKING and TRUST COMPANY, Plaintiff, v. THE HARRELSON BUILDING, LLC, Defendant New Hanover County No. 14 CVS 423 Removed from Forsyth County 13-CVS-6326 Appeal by plaintiff from order entered 27 January 2014 by Judge L. Todd Burke in Forsyth County Superior Court. Heard in the Court of Appeals 9 October 2014. Bell, Davis & Pitt, P.A., by Kevin G. Williams and Andrew A. Freeman, for Plaintiff-Appellant. Brooks, Pierce, McLendon, Humphrey Charnanda T. Reid and S. Leigh Defendant-Appellee. & Leonard, LLP, by Rodenbough IV, for BELL, Judge. Plaintiff Branch Banking and Trust appeals from the trial court’s order granting Defendant’s motion to change venue as a matter of right pursuant to Rule 12(b)(3) of the North Carolina -2Rules of Civil Procedure and N.C. Gen. Stat. §§ 1-76 and 1-83 in a declaratory judgment action concerning a purported lease for office space. On appeal, Plaintiff contends that the trial court erred in concluding that the action was local and not transitory in nature. After careful review of the parties’ arguments in light of the record and the applicable law, we affirm the trial court’s order. I. Factual Background A. Substantive Facts On 6 agreement December with 2000, Defendant Plaintiff for office entered space in into The a lease Harrelson Building, located at 115 West Third Street, Wilmington, North Carolina, which is located in New Hanover County. The lease between the parties was amended and supplemented in 2005, 2007, and 2010. On 16 November 2012, Plaintiff submitted a Request for Proposal (“RFP”) to Defendant, inviting a proposal for renewal of the lease at The Harrelson Building. Plaintiff informed Defendant that the request did “not create any liabilities or obligations” between the parties and did not “constitute agreement to enter into a legally binding agreement.” attached a questionnaire modifications and terms to its RFP, to be which set out addressed in any an Plaintiff specific proposal -3submitted by Defendant. The questionnaire also indicated that although the existing lease term did not expire until November 2015, any lease agreed upon would be for a term of ten years beginning on 1 December 2013, a practice referred to as “blend and extend.” On 6 March 2013, Defendant submitted a lease renewal proposal to Plaintiff that incorporated the terms set out in Plaintiff’s RFP and questionnaire, including committing to a ten-year lease term commencing on 1 December 2013, prior to the original 15 November 2015 expiration of the lease. Plaintiff agreed to consider the response, which would require approval from its resource allocation committee, while maintaining its position that the response did not create any liabilities or obligations on the part of Plaintiff. On 20 March 2013, under an acceptance line on the document that read “Please acknowledge the acceptance of this proposal by signature below,” an agent for Plaintiff signed Defendant’s proposal. Defendant’s inquiring as transaction,” agent to wrote to “the bank why stating that the Plaintiff on want[ed] transaction 13 to June delay “need[ed] to 2013 th[e] move forward in the month of June as was promised by [Plaintiff],” and requesting decision with to speak th[e] to lease someone that renewal.” could The make a “firm following day, -4Plaintiff lease informed renewal Defendant had not yet by been telephone that approved and should not assume that it would be approved. sent a letter to Plaintiff on 24 June the that proposed Defendant Defendant’s agent 2013 summarizing its understanding of the parties’ respective positions with regard to the communication that had transpired between them since 20 March 2013. Defendant continued to Plaintiff until 6 September Defendant that its Resource approve [Defendant’s] response request 2013, when Allocation to status updates Plaintiff Committee [Plaintiff’s] from informed “did not Request for Proposal” and that it “[was] not prepared to act on the letter of intent at [that] time.” Defendant responded by letter on 16 September 2013, asserting, in pertinent part, as follows: On March 20, 2013, . . .[Plaintiff] executed an agreement which amended and renewed the . . . Lease . . . . Your September 6, 2012 1 letter . . . conveniently re-characterizes the Renewal Agreement as nothing more than a response to a Request for Proposal . . . . As you know, the Renewal Agreement sets forth all of the material terms of our mutual understanding . . . . Those terms include, without limitation, the new lease 1 This is clearly a typographical error, as the parties did not begin negotiations until November 2012, and the letter referenced by Defendant, which was included in the record, is dated September 6, 2013. -5term commencement date [and] the length of the lease term . . . . * * * In short, our position is [that] . . . The Renewal Agreement is a legally enforceable contract . . . . B. Procedural History Plaintiff filed the present action on 2 October 2013 in the Forsyth County Superior Court seeking a declaration by the court that Defendant’s RFP response was “non-binding and impose[d] no liabilities or obligations on [Plaintiff] and that the lease for space in the Harrelson Building was not renewed, extended, or otherwise amended by the RFP Response.” On 13 December 2013, Defendant filed a motion to dismiss for improper venue pursuant to Rule 12(b)(3) or, in the alternative, to remove the action as a matter of right to New Hanover County pursuant to N.C. Gen. Stat. §§ 1-76(1) and 1-83(1). The trial court entered an order on 27 January 2014 denying Defendant’s motion to dismiss but granting its motion to change venue. Plaintiff appealed to this Court. II. Legal Analysis A. Appealability and Standard of Review Preliminarily, disposing of [a we note motion to that “[a]n change appeal venue as of of an order right] interlocutory because it ‘does not dispose of the case.’” is Snow -6v. Yates, 99 N.C. App. 317, 319, 392 S.E.2d 767, 768 (1990) (quoting DesMarais v. Dimmette, S.E.2d 887, 888 (1984)). 70 N.C. App. 134, 135, 318 While parties generally have “no right of immediate appeal from interlocutory orders and judgments,” Goldston v. Am. Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990), a “grant or denial of a motion asserting a statutory right to venue affects a substantial right and is immediately appealable.” Snow, 99 N.C. App. at 319, 392 S.E.2d at 768; see also N.C. Gen. Stat. § 1-277(a) (providing that “[a]n appeal may be taken from every judicial order or determination of a judge of a superior or district court . . . which affects a substantial right claimed in any action or proceeding”). “[I]t is well established that ‘the trial court has no discretion in ordering a change of venue if demand is properly made and it appears that the action has been brought in the wrong county.’” Stern v. Cinoman, __ N.C. App. __, __, 728 S.E.2d 373, 374 (quoting Swift & Co. v. Dan–Cleve Corp., 26 N.C. App. 494, 495, 216 S.E.2d 464, 465 (1975)), disc. review denied, 366 N.C. 245, 731 S.E.2d 145 (2012). “A determination of venue under N.C. Gen. Stat. § 1–83(1) is, therefore, a question of law that we review de novo.” Id. “For purposes of determining venue, i.e., for determining whether [N.C. Gen. Stat. §] 1-76 applies, ‘consideration is limited to the allegations in -7plaintiff’s complaint.’” Wellons Const., Inc. v. Landsouth Properties, LLC, 168 N.C. App. 403, 405, 607 S.E.2d 695, 697 (2005) (quoting McCrary Stone Service, Inc. v. Lyalls, 77 N.C. App. 796, 799, 336 S.E.2d 103, 105 (1985)). B. Substantive Legal Analysis On appeal, Plaintiff argues that the trial court erred by granting Defendant’s motion to change venue. Specifically, Plaintiff seeks to persuade this Court that its lawsuit against Defendant was transitory because the complaint prayed that the court “declare and enforce the terms of the continuing Lease between the parties,” and did not involve an interest in real property. We disagree and affirm the trial court’s order. “As a practical matter, the plaintiff generally gets to make an initial choice as to the venue in which a particular civil action should be litigated.” Carolina Forest Ass'n, Inc. v. White, 198 N.C. App. 1, 10, 678 S.E.2d 725, 731 (2009). general principal, [an] action must be tried in the county in which the plaintiffs or the defendants, or any of them, reside at its commencement, or if none of the defendants reside in the State, then in the county in which the plaintiffs, or any of them, reside; and if none of the parties reside in the State, then the action may be tried in any county which the plaintiff designates in the plaintiff’s summons and complaint, subject to the power of the court to change the As a -8place of statute. trial, N.C. Gen. Stat. § 1-82. in the cases provided by However, actions for the “[r]ecovery of real property, or of an estate or interest therein, or for the determination in any form of such right or interest” “must be tried in the county in which the subject of the action, or some part thereof, is situated.” N.C. Gen. Stat. § 1-76(1). “The [trial] court may change the place of trial . . . [w]hen the county designated for that purpose is not the proper one.” Gen. Stat. § 1-83(1). N.C. “[W]hen [N.C. Gen. Stat.] § 1-76 controls an action’s venue, the venue is considered ‘local’ because the action must be tried in the county which is the situs of land whose title is affected by the action.” Snow, 99 N.C. App. at 320, 392 S.E.2d at 769 (emphasis added). “Conversely, an action is ‘transitory’ when it does not directly affect title to land and it must be tried in the county in which at least one of the parties resides when plaintiff commences suit.” This Court has long held that the Id. termination of an existing lease affects an “estate or interest” in real property.2 2 In a footnote in its brief, and in reference to this Court’s holding in Sample that a lease vests a tenant with an estate or interest in real property, Plaintiff states that this “often relied upon statement in Sample” was made “without citation to any legal authority” and “appears to be at odds with decisions of the North Carolina Supreme Court.” Plaintiff cites to -9Sample v. Towe Motor Co., 23 N.C. App. 742, 743, 209 S.E.2d 524, 525 (1974) This Court has also held that N.C. Gen. Stat. § 1-76 controls venue when the parties seek to declare the nonexistance of a lease. Snow, 99 N.C. App. at 318, 392 S.E.2d at 768. In Snow, this Court held: It is irrelevant that plaintiff’s action is to the thrust of have the court Kavanau Real Estate Trust v. Debnam, 299 N.C. 510, 512-13, 263 S.E.2d 595, 597 (1980), where our Supreme Court identified a “lease[,] which is a chattel real” as being “personal property for purposes of the anti-deficiency statute.” This Court concluded likewise. First S. Sav. Bank v. Tuton, 114 N.C. App. 805, 807-08, 443 S.E.2d 345, 346 (1994) (holding that, in the context of deficiency judgments, “[a] leasehold interest in real property is a chattel real and as such is subject to rules of law applicable to personal property”). Outside the context of deficiencies, however, our courts and statutes have treated a leasehold as an estate or interest in real property. E.g., N.C. Gen. Stat. § 40A-2(7) (defining “property” as “any right, title, or interest in land, including leases”); Reese v. Mecklenburg Cnty., 200 N.C. App. 491, 503, 685 S.E.2d 34, 41 (2009) (holding that “[a] leasehold is an interest in land”); Strader v. Sunstates Corp., 129 N.C. App. 562, 570, 500 S.E.2d 752, 756 (holding, “[a] lease is a contract which contains both property rights and contractual rights”), disc. review denied, 349 N.C. 240, 514 S.E.2d 274 (1998). While, “[u]nder the original feudal law, no estate of less than free hold was recognized as an interest in land,” meaning, “if a lessor evicted the tenant, there was no recourse against the lessor except an action for damages for breach of contract,” “[t]he lessee [eventually] came to be recognized as having a direct interest in the land itself.” 1 James A. Webster, Jr., Webster's Real Property Law in North Carolina § 6.01 (6th ed. 2013). Therefore, we do not find Plaintiff’s assertion that Sample is “at odds” with decisions of the North Carolina Supreme Court to be accurate, as we find that, outside the context of deficiency litigation, our courts have held that a lease creates an interest in real property, at least for venue purposes. -10declare the nonexistence of his leasehold interest, rather than its existence. Our focus is on the effect of the potential judgment on the estate or interest and not on the manner in which the parties achieve the effect. The court’s judgment adjudicating the existence or nonexistence of the lease will directly and primarily affect defendant-lessors’ vested interest in the leasehold. Id. (emphasis added). In order to determine if an action directly affects the title to property, we Plaintiff’s complaint. must look to the principal object of Rose's Stores, Inc. v. Tarrytown Center, Inc., 270 N.C. 201, 154 S.E.2d 320 (1967). “It is the principal object involved in the action which determines the question, and if title is principally involved or if the judgment or decree operates directly and primarily on the estate or title, and not alone in personam against the parties, the action will be held local.” Id. at 206, 154 S.E.2d at 323 (quoting 92 C.J.S., Venue, § 26, pp. 723, 724). Plaintiff contends that the principal object of its declaratory judgment action was interpretation and enforcement of the terms of an existing lease and suggests that the facts of this case are more analogous to those found in Rose's Stores, Inc. and others in which the plaintiff sought to enforce a right under the contract. E.g., Kirkland's Stores, Inc. v. Cleveland Gastonia, LLC, __ N.C. App. __, __, 733 S.E.2d 885, 887 (2012) -11(where the tenant sued the landlord for breach of contract for constructing a drive-through in a location that would interfere with the plaintiff’s freight access in violation of the agreement); McCrary Stone Service, Inc., 77 N.C. App. at 799, 336 S.E.2d at 105 (an action involving “whether [the plaintiff was] obligated to make rental payments for rock quarried from land adjacent to the leased premises”); Pierce v. Associated Rest & Nursing Care, Inc., 90 N.C. App. 210, 212-13, 368 S.E.2d 41, 42 (1988) (where the plaintiff sought to determine whether a statutory provision required a Properties v. Oil 110 Spruill Co., rent increase); N.C. App. Roanoke 443, 447, 429 S.E.2d 752, 754 (1993) (where, although the plaintiff alleged that the recording of the agreement between the parties created a cloud on the title, the purpose of the lawsuit was to determine whether the plaintiff had to purchase fuel exclusively from the defendant); Goodyear Mortg. Corp. v. Montclair Dev. Corp., 2 N.C. App. 138, 142, 162 S.E.2d 623, 626 (1968) (where the title to the real estate would not have been affected by a judgment). Although than lease expenses, support Plaintiff duration; property its points to to wit: improvements, position that the four rent, and disputed terms, payment of broker “principal other operating compensation, object” of to its -12complaint is “interpretation and enforcement” of a contract, we conclude from a careful reading of Plaintiff’s complaint and attachments thereto that the principal object was to determine the parties’ rights to and interest in real property from 1 December 2013 through 30 November 2023, the “blend and extend” provision of the RFP response. Specifically, Defendant contends that the parties have a binding lease agreement in place through 2023; Plaintiff contends they do not. Our review of the record indicates that Plaintiff did not take issue with any specific terms of the RFP response. Rather, Plaintiff’s position prior to litigation was that it did not accept Defendant’s RFP response in its entirety and were not prepared to Defendant act that on the letter prompted the of intent. litigation The stated letter from Defendant’s position that the lease between the parties had been renewed. Plaintiff’s response complaint was requests “non-binding and a declaration impose[d] no that the liabilities RFP or obligations” on Plaintiff and that the lease was not “renewed, extended, or otherwise amended.” When applying the “principal object” test, courts are to consider the practical effect of rendering a judgment in favor of the plaintiff. See Snow, 99 N.C. App. at 321, 392 S.E.2d at 769 (holding that it was “irrelevant that the thrust of [the] -13plaintiff's action nonexistence of [was] his to have leasehold the court interest, declare rather the than its existence” and that the “focus is on the effect of the potential judgment on the estate or interest”). In the present case, if the trial court declares that the RFP response is a binding agreement, Plaintiff will property until 2023. declares binding that and Plaintiff’s 2015. the a leasehold estate in the On the other hand, if the trial court RFP response impose[d] leasehold have no is merely liabilities estate in the or a proposal, “non- obligations”, property will the expire in Put simply, the existence of Plaintiff’s leasehold in the property beyond November of 2015 is completely dependent upon the outcome of Plaintiff’s litigation. conclude that Plaintiff’s litigation Therefore, we do not will operate “alone in personam” and hold that Plaintiff’s “action [should be] held local” as it is clear that “title to real estate may be affected by [the] action.” Rose's Stores, Inc., 270 N.C. at 203, 206, 154 S.E.2d at 321, 323. III. Conclusion For the Plaintiff’s reasons action was set forth for the above, we determination conclude of a that right or interest in real property and falls under the purview of N.C. -14Gen Stat. § 1-76. Therefore, the affirmed. AFFRIMED. Judges GEER and STROUD concur. Report per Rule 30(e). trial court’s order is

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