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Strader v. Sunstates Corp.

June 02, 1998


The opinion of the court was delivered by: Lewis, Judge.

Appeal by defendants from judgment entered 12 June 1996 by Judge William C. Griffin, Jr. in Washington County Superior Court. Heard in the Court of Appeals 20 August 1997.

Plaintiff-lessor instituted this action seeking damages for the breach of a lease which resulted in the foreclosure of the lessor's property. The trial court awarded plaintiff damages including the present value of lost rent and of his reversionary interest. Defendants appeal. We affirm.

On 26 September 1996 plaintiff Jack Strader granted a commercial ground lease to defendant Crossroad Development Company ("Crossroad"), for a portion of undeveloped land known as Phase II. The terms of the lease permitted but did not require Crossroad to develop the land for a shopping center with an Ames Department Store. In the event that Crossroad did choose to develop the land, Strader agreed to subordinate his interest in the property so Crossroad could acquire financing for construction and development. Under the terms of the lease, the initial rent was $500 per month, but would increase to $1666.67 per month when the Ames store opened. The term of the lease was twenty years but Crossroad retained the option to renew for five additional five-year terms. Pursuant to the lease, any construction or improvements on the land would become the property of Strader upon termination of the lease.

Crossroad chose to develop the land and, after obtaining a preliminary construction lien, secured Ames on a sublease. On 28 August 1987, Crossroad obtained financing from Lafayette Life Insurance Company in exchange for a $1.1 million note and deed of trust. As agreed, Strader signed the instrument, subordinating his interest to Lafayette. However, Strader did not sign the promissory note and thus was not personally, or primarily, liable for the debt.

During 1990, the parent company of Ames filed for bankruptcy and Ames vacated the premises in August of that year. For the next several months, Crossroad unsuccessfully sought a replacement subtenant. Crossroad ceased making the financing payments to Lafayette and thus defaulted on the loan. Strader was notified of the default, and on 22 March 1991 Lafayette's trustee foreclosed on the property. Lafayette purchased the property at the foreclosure sale for $1,127,060.03. Crossroad had made all rental payments to Strader until the time of the foreclosure, but none since.

The trial Judge, sitting without a jury, first determined that the lease contained an implied provision that Crossroad would make all necessary financing payments to any creditor. The Judge then concluded that Crossroad breached the lease by (1) defaulting on the Lafayette loan and (2) failing to make rental payments to Strader for the remainder of the lease term. The trial court awarded Strader the present value of lost income stemming from the breach, which amounted to $132,299. In addition, after concluding that the value of the property on 8 May 2007, when it would revert to Strader, would be $1,143,000, the trial court awarded Strader $122,530 as the present value of the reversionary interest in the land and improvements. Thus, the court entered judgment against Sunstates Corporation (the corporate successor to Crossroad) in the total amount of $254,829. From this judgment, Sunstates Corporation appeals.

Before reaching the merits of this appeal, we address two procedural arguments raised by appellee Strader. First, Strader argues that the appeal should be dismissed for failure to appeal by a real party in interest. We disagree.

Strader initially sued Acton Corporation, Crossroad Development Company, Sunstates Development Company, Moratok Village Shopping Center Venture, and Sunstates Properties, Inc. During the course of the proceedings below, Acton Corporation changed its name to Sunstates Corporation. In its order, the court found that Sunstates Development had merged into Sunstates Properties which had merged into Acton which had changed its name to Sunstates Corporation. Moratok was dissolved and Strader had filed a voluntary dismissal as to Crossroad. The trial court entered judgment against Sunstates Corporation. Notice of appeal was filed by Acton, Sunstates Development, Moratok, and Sunstates Properties.

Sunstates Corporation argues that the trial court erred in entering judgment against Sunstates Corporation because it was never joined as a party to the action. Strader argues that because judgment was entered against Sunstates Corporation only and Sunstates Corporation is not mentioned in the notice of appeal, the appeal should be dismissed because it was not brought in the name of a real party in interest. We find both arguments unpersuasive.

Sunstates Corporation was made a party to this action by order entered 18 March 1996 allowing Strader's motion to amend and supplement his complaint. The amended complaint added Sunstates Corporation's name to the caption and included amended allegations regarding Sunstates Corporation.

When a party's interest has been transferred to a non-party, the action may continue in the original party's name or, upon motion of any party, the transferee may be joined. N.C.R. Civ. P. 25(d). In this case, the interest of the remaining original parties was transferred to a new corporation, Sunstates Corporation. Although Strader's motion to amend does not specifically cite Rule 25(d) or state that its purpose is to join Sunstates Corporation, we believe that the amended complaint is sufficient to do so and that the trial court correctly allowed such an amendment. Cf. Coffey v. Coffey, 94 N.C. App. 717, 721, 381 S.E.2d 467, 470 (1989), review dismissed by 326 N.C. 586, 391 S.E.2d 40 (1990) (stating that, where the essence of a motion to amend a pleading is to join a party, consideration of the Rules of Civil Procedure regarding joinder is necessary). Sunstates Corporation's argument that the trial court erred in entering judgment against it is without merit.

Sunstates Corporation is not named as a party in the notice of appeal filed 9 July 1996. We assume that this omission was not an oversight but resulted from Sunstates Corporation's belief that it had never been joined as a party. Proper notice of appeal is required for this court to have jurisdiction over the matter. However, we treat the notice of appeal in this case as a petition for writ of certiorari, which we grant. We will hereafter refer to the appellant in this action only as "Sunstates."

In Strader's second procedural argument, he asserts that Sunstates' appeal is subject to dismissal because Sunstates' brief does not set out assignments of error following the subject headings. We agree but suspend the requirement pursuant to our authority under Rule 2 of the North Carolina Rules of Appellate Procedure.

Rule 28 states, "Assignments of error not set out in the appellant's brief, or in support of which no reason or argument is stated or authority cited, will be taken as abandoned." N.C.R. App. P. 28(b)(5). We read this rule as setting out two scenarios under which an appeal may be deemed abandoned, (1) assignments of error are not set out in the appellant's brief, or (2) in support of which no reason or argument is stated or authority cited. The first requires the party to direct the court to the appropriate assignment of error in the record and the second requires the party to cite authority or to make a legal argument for the extension or modification of the law.

We are cognizant of the dicta in State v. Watson that the rule is to be read in the disjunctive, giving a party three ways to preserve exceptions in his or her brief. 80 N.C. App. 103, 109-110, 341 S.E.2d 366, 371 (1986). In Watson, the State argued that because the defendant had not cited any authority in support of his positions, that he had abandoned his assignments of error pursuant to Rule 28(b)(5). We agree with the reasoning of the Watson court that such a reading of the rule would inhibit the ability of parties to bring cases of first impression before the appellate courts. However, we do not agree that Rule 28(b)(5) gives parties three independent means of preserving assignments of error. This language of Watson is merely dicta which neither has appeared in prior cases nor been adopted by subsequent cases. See In re Appeal of Parsons, 123 N.C. App. 32, 38, 472 S.E.2d 182, 186 (1996); Hines v. Arnold, 103 N.C. App. 31, 37, 404 S.E.2d 179, 183 (1991); Stanley v. Nationwide Mut. Ins. Co., 71 N.C. App. 266, 268, 321 S.E.2d 920, 922 (1984); Hotel Corp. v. Foreman's Inc., 44 N.C. App. 126, 128, 260 S.E.2d 661, 663, review denied, 299 N.C. 544, 265 S.E.2d 404 (1980).

Sunstates has provided this Court with a listing of its assignments of error by argument heading in a reply brief. We decide, in our discretion, to hear this appeal on its merits.

Sunstates argues that the trial court erred in awarding damages to Strader for breach of a lease which resulted in the foreclosure of ...

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