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Kyle v. Felfel

Court of Appeals of North Carolina

August 1, 2017

JASON KYLE, Plaintiff,
v.
HELMI L. FELFEL and LAURA C. FELFEL, Defendants.

          Heard in the Court of Appeals 2 May 2017.

         Appeal by defendants from order entered 26 July 2016 by Judge Yvonne M. Evans in Mecklenburg County No. 15 CVS 16030 Superior Court.

          Redding Jones, PLLC, by Joseph R. Pellington and David G. Redding, for plaintiff-appellee.

          Hull & Chandler, P.A., by Nathan M. Hull and Andrew S. Brendle, for defendants-appellants.

          DAVIS, Judge.

         This 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.

         Factual and Procedural Background

         In 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.

         They 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.

         Based 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.

         The 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 lease period:

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.

         It is 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.

         The 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:

         This 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 2010.[1]

         In 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.

(Emphasis added.)

         Thus, 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 ...


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