in the Court of Appeals 2 May 2017.
by defendants from order entered 26 July 2016 by Judge Yvonne
M. Evans in Mecklenburg County No. 15 CVS 16030 Superior
Redding Jones, PLLC, by Joseph R. Pellington and David G.
Redding, for plaintiff-appellee.
& Chandler, P.A., by Nathan M. Hull and Andrew S.
Brendle, for defendants-appellants.
case requires us to consider whether a promissory note is
unenforceable where a failure to abide by the statute of
frauds invalidated the consideration intended to support the
note. Defendants Helmi L. Felfel and Laura C. Felfel (the
"Felfels") appeal from the trial court's order
denying their motion for judgment notwithstanding the verdict
following a jury verdict finding that the Felfels breached
their obligations under the note. Because we conclude that
the promissory note was unenforceable for lack of
consideration, we reverse.
and Procedural Background
2007, the Felfels were living in their home on Bay Harbour
Road in Mooresville, North Carolina (the "Bay Harbour
Property"). At the time, Plaintiff Jason Kyle owned a
home on Jetton Road in Cornelius, North Carolina (the
"Jetton Property"). At some point during that year,
the Felfels and Kyle were introduced to each other through a
mutual friend. The Felfels and Kyle ultimately engaged in
discussions about a possible "house swap." The
Felfels wanted to sell the Bay Harbour Property and move to
the Jetton Property so that Mr. Felfel could live closer to
his place of employment. Kyle wished to sell the Jetton
Property and live elsewhere.
decided to structure a transaction whereby the Felfels would
rent the Jetton Property for five years and Kyle would rent
the Bay Harbour Property. As part of this agreement, the
Felfels were to give Kyle a promissory note in the amount of
$200, 000 that was intended to serve as partial consideration
for their receipt of an option to purchase the Jetton
Property at the end of the lease period.
upon the parties' agreement, the Felfels moved into the
Jetton Property in 2008. In 2010, the parties sought to
memorialize their agreement through the execution of two
written instruments: (1) a document titled "Amended and
Restated Lease Agreement" (hereinafter the "2010
Lease Document"); and (2) a promissory note dated 1
February 2010 (hereinafter the "Note") executed by
the Felfels in Kyle's favor.
2010 Lease Document provided the terms of the Felfels'
rental of the Jetton Property and contained a provision
stating that the lease would run from 1 January 2010 until 30
November 2014. The 2010 Lease Document also contained the
following language in paragraph 21 purporting to grant an
option (hereinafter the "2010 Option") giving the
Felfels the right to purchase the Jetton Property during the
21. OPTION TO PURCHASE. [The Felfels] shall have an Option .
. . to purchase the [Jetton Property] during the term of this
lease including any extensions or renewals hereof. If [the
Felfels] fail[ ] to exercise this option in the manner
described, then the Option shall automatically cease and be
of no further force and effect.
undisputed that the 2010 Lease Document was signed by the
Felfels on 1 February 2010 - the same date that they signed
the Note - as evidenced by a copy of the document entered
into evidence at trial. However, no copy of the 2010 Lease
Document bearing Kyle's signature was ever
produced during discovery or at trial.
Note, which was in the amount of $200, 000 and carried a nine
percent interest rate, was secured by a deed of trust to the
Bay Harbour Property. The Note stated that it was "[d]ue
and payable upon the earlier of (i) an Event of Default under
the Lease by [the Felfels], (ii) the termination of the
Lease, or (iii) November 30, 2014." The Note also
contained the following provision:
Note is being given as partial consideration for the
undersigned's receipt from Jason Kyle of an option to
purchase that certain property located at . . . Jetton Road,
Cornelius, North Carolina pursuant to the terms of that
certain Amended and Restated Lease Agreement between the
parties of even date herewith[.] (Emphasis added.) The
Note was signed by both of the Felfels on 1 February
2011, the parties entered into a new instrument - also
entitled "Amended and Restated Lease Agreement"
(hereinafter the "2011 Lease") - that adjusted the
amount of monthly rent the Felfels were to pay Kyle for the
Jetton Property and extended the lease term to 31 May 2015.
The 2011 Lease also stated, in pertinent part, the following:
[Kyle] previously granted to [the Felfels] an option to
purchase the [Jetton Property] under Paragraph 21 of the
Original Lease. Said purchase option is hereby terminated
and replaced in full with the following Option . . .
hereby granted to [the Felfels] to purchase the [Jetton
Property] during the term of this Lease, including any
extensions or renewals hereof. The Option is being given
in consideration of [the Felfels'] agreement to enter
into this Lease. If [the Felfels] fail[ ] to exercise
this option in the manner described, then the Option shall
automatically cease and be of no further force and effect.
the 2011 Lease contained a new option (hereinafter the
"2011 Option"). A copy of the 2011 Lease entered
into evidence at trial shows that it was signed by the
Felfels on 10 January 2011 and by Kyle on 15 February 2011.
Thus, unlike the 2010Lease ...