Opinion
No. COA15-1110
06-21-2016
LCA DEVELOPMENT, LLC, Plaintiff, v. WMS MANAGEMENT GROUP, LLC, Defendant.
Jordan Price Wall Gray Jones & Carlton, by Paul T. Flick and Lori P. Jones, for the Plaintiff-Appellant. Lanier, King & Paysour, PLLC, by Steven F. Johnson, II, for the Defendant-Appellee.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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. Pitt County, No. 12 CVS 3376 Appeal by Plaintiff from order entered 30 September 2013 by Judge Alma L. Hinton and order entered 5 June 2015 by Judge Marvin K. Blount, III, in Pitt County Superior Court. Heard in the Court of Appeals 24 February 2016. Jordan Price Wall Gray Jones & Carlton, by Paul T. Flick and Lori P. Jones, for the Plaintiff-Appellant. Lanier, King & Paysour, PLLC, by Steven F. Johnson, II, for the Defendant-Appellee. DILLON, Judge.
Plaintiff LCA Development, LLC ("Owner") appeals two orders related to a contract dispute with Defendant WMS Management Group, LCC ("Manager"). We affirm.
I. Background
Owner owns two residential apartment complexes in Pitt County. Manager is a North Carolina company that specializes in property management. Owner and Manager entered into two exclusive property management agreements (the "Agreements"), wherein Manager agreed to manage two properties (the "Properties") owned by Owner in exchange for ten percent (10%) of the gross rental income collected annually. The Agreements were for a term of one year (expiring in December 2012), but contained a provision allowing for early termination in case of an uncured default:
[T]he non-defaulting party shall have the right to terminate this Agreement if, within thirty [30] days after providing the defaulting party with written notice of the default and the intent to terminate, the default remains uncured.
In October 2012 (before the end of the Agreements' term), Owner terminated Manager as its property manager without any written notice of a default or an opportunity for Manager to cure. Owner then brought suit for breach of contract, seeking damages for Manager's alleged failure to perform under the Agreements. Owner specifically alleged that Manager failed to adequately manage the property and failed to collect rent as required by the Agreements. In its responsive pleading, Manager asserted counterclaims, alleging that Owner had breached the Agreements.
Both parties moved for judgment on the pleadings. After a hearing on the matter, the trial court dismissed Owner's claim for breach of contract with prejudice and granted Manager judgment on the pleadings, concluding that Owner breached the Agreements. Manager then filed a motion for summary judgment, contending that there was no issue of material fact as to the amount of damages suffered due to Owner's breach. The trial court granted Manager's summary judgment motion and awarded Manager $3,604.80 in damages. Owner timely appealed.
II. Standard of Review
We review a trial court's grant of a motion for judgment on the pleadings de novo. Carpenter v. Carpenter, 189 N.C. App. 755, 757, 659 S.E.2d 762, 764 (2008). Judgment on the pleadings is appropriate "when all the material allegations of fact are admitted in the pleadings and only questions of law remain." Id. at 757, 659 S.E.2d at 765. "Judgments on the pleadings are disfavored in law, and the trial court must view the facts and permissible inferences in the light most favorable to the nonmoving party." Id.
"Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows that 'there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.' " In re Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008).
III. Analysis
On appeal, Owner contends that the trial court erred in (1) entering judgment on the pleadings, (2) dismissing its breach of contract claim, and (3) calculating the damage award. We consider each argument in turn.
A. Judgment on the Pleadings
Owner first argues that the trial court erred in entering judgment on the pleadings.
Owner's allegations, taken as true, tend to show as follows: Owner and Manager entered into the Agreements, under which Manager was obligated to manage the Properties and to "collect all rentals and other charges and amounts due under tenant leases." Owner alleged that Manager failed to perform these duties and failed to collect sums owed to Manager by tenants of the Properties. This failure resulted in damage to Owner.
The elements of a claim for breach of contract are (1) the existence of a valid contract, and (2) breach of the terms of that contract. Lake Mary Ltd. Partnership v. Johnston, 145 N.C. App. 525, 536, 551 S.E.2d 546, 554 (2001). The parties do not dispute that the Agreements constitute valid contracts. Additionally, Owner admitted in its answer to Manager's counterclaim that it did not provide written notice of default, nor allow Manager time to cure the alleged default.
As Owner states in its brief, "partial breach by one party . . . does not justify the other party's subsequent failure to perform[.]" Kinnard v. Mecklenburg Fair, Ltd., 46 N.C. App. 725, 730, 266 S.E.2d 14, 17 (1980). Even assuming that Manager was in default under the Agreements, this default was not yet a material breach permitting Owner to unilaterally end its obligations under the contract. Because the contract contained a provision permitting the opportunity to cure the default, the default could not be a material breach until after Manager was given notice and an opportunity to cure - were it otherwise, the cure provision in the contract would be meaningless. Thus, Manager's partial default, without an opportunity to cure under the contract, did not relieve Owner of its obligations to provide Manager with notice of default and an opportunity to cure. Owner's failure to do so is clearly a breach of the Agreements' terms. Accordingly, we hold that the trial court properly concluded that Owner breached the Agreements.
B. Dismissal of Contract Claim
Owner also challenges the trial court's dismissal of its breach of contract claim against Manager. Specifically, Owner argues that even though it breached a term of the contract by failing to give Manager notice and opportunity to cure, its breach did not warrant dismissal of its claim in light of the fact that it had alleged prior breach of the Agreements by Manager.
Generally, if either party to a bilateral contract commits a material breach of the contract, "the non-breaching party is excused from the obligation to perform further." McClure Lumber Co. v. Helmsman Const., Inc., 160 N.C. App. 190, 198, 585 S.E.2d 234, 239 (2003). A material breach is one "going to the very heart of the instrument[.]" Wilson v. Wilson, 261 N.C. 40, 43, 134 S.E.2d 240, 242 (1964). "Whether a breach is material or immaterial is ordinarily a question of fact." McClure Lumber Co., 160 N.C. App. at 198, 585 S.E.2d at 239.
Here, it is clear that Owner's failure to give notice and opportunity to cure prior to termination, as required by the contract, was a material breach. Without providing such notice, Owner did not have the right to terminate the contract at all and deprive Manager of the ability to collect the rent the Owner alleges that Manager had failed to collect. Owner cannot now recover damages for any failure of Manager to collect rent that was due (or perform other management tasks) when Owner deprived Manager of the benefits promised under the Agreement, to allow Manager additional time to collect said rents (and perform other tasks) after written notice from Owner of deficient management. Owner did not allege that it suffered any damage that would not have been able to be mitigated had Manager been allowed to cure. See Harwood v. Shoe, 141 N.C. 161, 163, 53 S.E. 616, 616 (1906) (stating the doctrine of prevention that "[i]t is a salutary rule of law that one who prevents the performance of a condition, or makes it impossible by his own act, will not be permitted to take advantage of the non-performance"); see also Propst. Constr. v. N.C. Dep't. of Transp., 56 N.C. App. 759, 762, 290 S.E.2d 387, 389 (1982). Accordingly, we believe that the trial court properly dismissed Owner's breach of contract claim on the pleadings.
C. Damage Award
Finally, Owner challenges the trial court's calculation of damages in its order granting summary judgment in favor of Manager. The only argument Owner makes on this point is that the damages should have been limited to ten percent (10%) of rental collections collected within "the thirty (30) days' notice period which [Owner] failed to provide prior to termination." That is, Owner argues that Manager should only be entitled to the fee it would have collected for the 30-day period it should have had to cure the default. However, Owner's argument ignores that Manager also lost out on fees it would have potentially earned for the remainder of the term of the Agreements (past the 30-day cure period).
In actions for breach of contract, "[t]he injured party is entitled to full compensation for [its] loss, and to be placed as near as may be in the condition which [it] would have occupied had the contract not been breached." Troitino v. Goodman, 225 N.C. 406, 412, 35 S.E.2d 277, 281 (1945). The measure of damages is generally the "amount that would have been received if the contract had been kept." Id.
We believe that the trial court was correct in its decision to base the damage award on the gross rental collections through the entire remaining contract term. The Agreements provided for Manager's compensation - ten percent (10%) of gross rental income received by Owner during the term of the Agreements. There is no provision that otherwise allowed Owner to terminate the Agreements unilaterally before the end of the one-year term by giving thirty (30) days' notice, only that Owner could terminate at the end of the one-year term by giving thirty (30) days' notice of its intent not to renew. The parties stipulated that Owner received $36,047.95 in gross rental income from the time of Owner's termination until the expiration of the Agreements' term a few months later. Therefore, there is no genuine issue of material fact regarding Owner's argument on appeal.
Owner certainly could have made other arguments regarding the amount of damages (e.g., that the calculation of damages should include some offset for the expenses that Manager would have incurred, but did not have to incur, in managing the Properties for the remainder of the term of the Agreements). However, Owner made no other argument on this issue. See Highland Paving Co. v. First Bank, 227 N.C. App. 36, 46, 742 S.E.2d 287, 294 (2013) (Steelman, J., concurring) (stating that "[i]t is not the duty of this Court to construct arguments for the parties on appeal"). Accordingly, we affirm the trial court's 5 June 2015 order finding that Manager is entitled to judgment as a matter of law and setting the amount of damages at $3,604.80.
AFFIRMED.
Judges CALABRIA and DIETZ concur.
Report per Rule 30(e).