ANDREA MORRELL, G. PONY MORRELL, and THE PASTA WENCH, INC., Plaintiffs,
HARDIN CREEK, INC., JOHN SIDNEY GREENE, and HARDIN CREEK TIMBERFRAME AND MILLWORK, INC., Defendants.
in the Court of Appeals 22 March 2017.
by Plaintiffs from order entered 27 April 2016 by Judge
William Coward in Watauga County, No. 14 CVS 625 Superior
Law Firm, P.A., by Paul A. Capua and Genevieve A. Mente, for
Babcock LLP, by Joseph T. Carruthers and Lee D. Denton, for
N. HUNTER, JR. JUDGE.
Morrell ("Andrea"), G. Pony Morrell
("Morrell"), and The Pasta Wench, Inc. ("The
Pasta Wench") (collectively "Plaintiffs")
appeal the 27 April 2016 order by Judge William Coward
granting summary judgment in favor of Hardin Creek, Inc.
("Hardin Creek"), John Sidney Greene ("S.
Greene"), and Hardin Creek Timberframe and Millwork,
Inc. ("Timberframe") (collectively
"Defendants"), and dismissing Plaintiff's third
party complaint against John Ellis Greene ("E.
Greene") with prejudice. After review, we reverse the
trial court's order and remand for further proceedings.
Facts and Background
forecast of the evidence tends to show the following. Andrea
and Morrell are the founders and officers of The Pasta Wench.
The Pasta Wench manufactures and distributes "specialty
food products including homemade, organic raviolis and other
pasta products." Hardin Creek is a commercial landlord.
Timberframe is a timber manufacturing and construction
company that builds and remodels residential and commercial
buildings. S. Greene is the president of Hardin Creek, and
the general contractor for Timberframe. E. Greene is S.
Greene's father and owner of the property in question.
and Morrell started The Pasta Wench in April 2010. After
experiencing success in local markets in Boone, North
Carolina, Plaintiffs expanded to distribute their product
across western North Carolina. Plaintiffs later contracted
with Harris Teeter for regional distribution across North and
February 2011, Plaintiffs entered into a commercial lease
("the lease") with Hardin Creek for two units of a
steel building located in Boone ("the premises").
Plaintiffs operated their business from the premises, and
used the units as a kitchen and a pasta drying room. The
lease contained several provisions concerning Plaintiffs'
responsibility to obtain liability and property insurance and
to indemnify Hardin Creek for damages. The relevant lease
paragraphs are as follows:
5. Alterations. . . . . . . .
(b) Tenant's Neglect. Subject to the provisions set forth
in the following sentence, Tenant shall pay for the cost of
any repairs or damage resulting from negligence or the
wrongful acts of his employees, representatives or visitors.
However, and notwithstanding any other provision of this
lease to the contrary, Landlord and Tenant and all parties
claiming under them agree and discharge each other from all
claims and liabilities arising from or caused by any hazard
covered by insurance on the leased premises, or covered by
insurance in connection with the property owned or activities
conducted on the leased premises, regardless of the cause of
the damage or loss, provided that such cause does not prevent
payment of insurance proceeds to Landlord under the
provisions of the applicable policy.
. . . .
8. Insurance: Tenant shall maintain insurance in accordance
with the provisions of subparagraphs (a) and (b) of this
paragraph, and Tenant shall indemnify Landlord in accordance
with the provisions of sub-paragraph (c).
(a) Property Insurance: Tenant shall hold Landlord harmless
for loss or damage by fire with regard to all of Tenant's
furniture, fixtures, and equipment about or within the leased
(b) Liability Insurance: Tenant shall provide and keep in
force for the protection of the general public and Landlord
liability insurance against claims for bodily injury or death
upon or near the leased premises and the sidewalks, streets
and service and parking areas adjacent thereto to the extent
of not less than $500, 000.00 in respect to bodily injuries
or death to any one person and the extent of not less than
$500, 000.00 for bodily injuries or death to any number of
persons arising out of one accident or disaster, and property
damage with limits of not less than $100, 000.00. The Tenant
shall furnish Landlord with satisfactory evidence of such
insurance within thirty (30) days of execution of this lease.
the opening paragraph's language, Paragraph 8 contains no
early 2012, the North Carolina Department of Agriculture and
Consumer Services ("NCDA&CS") inspected the
premises. The NCDA&CS determined the interior required
modification to accommodate food production. The NCDA&CS
particularly required "the open layout of the kitchen in
Unit B-four conventionally framed walls exposed to the domed,
steel roof trusses and insulation approximately 25 feet
above-to be enclosed with an interior kitchen ceiling."
and Hardin Creek agreed to extend the lease by five years. As
part of this agreement, S. Greene agreed to modify the
premises consistent with the NCDA&CS's
requirements. In addition to building a new kitchen
ceiling, S. Greene raised the kitchen's interior walls so
the new kitchen ceiling was level with the drying room's
ceiling. S. Greene also lowered the sprinkler system's
shower heads so they protruded through the new ceiling. S.
Greene expanded the sprinkler system to cover the area over a
walk-in cooler, and constructed a ladder to access the top of
January 2014, the temperature in Boone dropped into the
single digits. The cold temperature froze the water in
Plaintiffs' sprinkler system. Plaintiffs alleged the
pipes froze because Defendants "created two separate
heating zones between the newly enclosed kitchen and the open
area above it, rendering the HVAC thermostat in the kitchen
useless for regulating air temperature above the kitchen
ceiling where the fire sprinkler system pipes were
located." Plaintiffs also alleged Defendants'
workers negligently left a vent near the apex of the roof
open after performing repairs in December 2013.
sought monetary damages for negligence and breach of the
implied warranty of workmanlike performance against all
Defendants. Plaintiffs also sought monetary damages for
constructive eviction and breach of the covenant of quiet
enjoyment against Hardin Creek, Inc. Finally, Plaintiffs
alleged unfair and deceptive trade practices against S.
Greene and Hardin Creek, Inc. Plaintiffs additionally sought
treble damages and attorneys' fees under the unfair and
deceptive trade practices claim, and sought punitive damages
"as a result of Defendants' willful and wanton
conduct and indifference to [Plaintiffs'] rights."
Plaintiffs attached copies of the lease and the lease
extension agreement to their complaint.
March 2015, Defendants answered Plaintiffs' complaint as
moving to dismiss Plaintiffs' claims. Defendants
contended the lease was only between Hardin Creek and
Plaintiffs. Defendants therefore asked the trial court to
dismiss Plaintiffs' claims against Timberframe and S.
Greene pursuant to Rule 12(b)(6). Defendants also moved to
dismiss Plaintiffs' negligence, constructive eviction,
and unfair and deceptive trade practices claims pursuant to
Rule 12(b)(6). Defendants asserted the following affirmative
defenses: (1) Plaintiffs were contributorily negligent in
leaving the roof vent open; (2) Plaintiffs' assumption of
the risk; (3) Plaintiffs' failure to mitigate damages;
and (4) the damages were beyond the parties' reasonable
expectation and are therefore barred by the economic loss
order filed on 15 October 2015, the trial court set a case
management conference and a discovery scheduling order
("scheduling order"). Both parties consented to the
scheduling order which set the discovery deadline for 15
April 2015. The parties consented to an amended scheduling
order on 25 January 2016. This amended scheduling order
required the trial court to hear all dispositive motions not
more than thirty days before the trial date, which the trial
court set for the session beginning 6 June 2016.
March 2016, Defendants amended their answer and filed two
counterclaims. First, Defendants alleged Plaintiffs
negligently left the roof vent open and breached their duty
to maintain the premises. Second, Defendants claimed breach
of contract. Under this second claim, Defendants alleged the
lease obligated Plaintiffs to pay for repairs or damage due
to Plaintiffs' negligence. Defendants sought monetary
damages for each of these claims.
April 2016, Defendants moved for summary
judgment. Defendants contended the trial court
should dismiss Plaintiffs' claims against Timberframe and
S. Greene since only Hardin Creek was responsible for the
premises' modifications. Defendants contended (1) the
lease was only between Plaintiffs and Hardin Creek; (2) S.
Greene only interacted with Plaintiffs on Hardin Creek's
behalf, not Timberframe; and (3) any work Timberframe
performed on the premises was done on Hardin Creek's
behalf. Defendants also contended a lack of privity of
contract to support Plaintiffs' claim against either
Timberframe or S. Greene for breach of implied warranty of
workmanlike performance. As to Plaintiffs' constructive
eviction claim and breach of the covenant of quiet enjoyment
claim, Defendants alleged Plaintiffs caused the flooding
since Plaintiffs left the roof vent open. Also, Defendants
alleged Plaintiffs quit the lease despite Hardin Creek's
willingness to restore the premises within ninety days of the
incident. Finally, Defendants contended the lease discharged
Hardin Creek "from all claims and liabilities arising
from or caused by any hazard covered by insurance . . .
regardless of the cause of the damage or loss . . ."
pursuant to Paragraph 5(b) of the lease.
April 2016, Plaintiffs filed a motion to amend their
complaint to add E. Greene as a party defendant. Plaintiffs
alleged negligence and breach of the implied warranty of
workmanlike performance. Plaintiffs also alleged they learned
through discovery E. Greene "operated and oversaw
property management and supervised the construction
activities on the property that [gave] rise to this
15 April 2016, Plaintiffs filed a motion to continue the
hearings and to enlarge the scheduling order deadlines.
Plaintiffs alleged Defendants purposely delayed discovery,
and Plaintiffs were still taking depositions and reviewing
transcripts. Plaintiffs contended Defendants' motion for
summary judgment was "premature and prejudicial, "
and requested more time "to prepare and present their
case" before the trial court heard arguments on the
April 2016, Plaintiffs filed a third party complaint against
E. Greene. This brought all five claims Plaintiffs alleged in
their original complaint against E. Greene. On 25 April 2016,
the trial court heard Plaintiffs' and Defendants'
motions, as well as Plaintiffs' third party complaint. On
27 April 2016, the trial court granted summary judgment in
favor of Defendants. The trial court found Plaintiffs
presented "no plausible reasons why further discovery
would shed any light on paragraph 5(b) in the Lease[.]"
The trial court also found "paragraph 5(b) in the lease
is not ambiguous and is a complete defense to the claims
raised in the Complaint[.]"The trial court also sua
sponte granted summary judgment in favor of Plaintiffs
as to Defendants' counter claims. The trial court
dismissed Plaintiffs' third party compliant against E.
Green with prejudice, and dismissed Plaintiffs' motions
to amend and continue as moot.
May 2016, Plaintiffs filed notice of appeal. Plaintiffs
appealed the trial court's 27 April 2016 order and
"all rulings and statements of the trial court that
contributed to, served as predicate for, or were encompassed
by the foregoing Order, including all statements and rulings
made in Court during the hearing held April 25, 2016, and
decision communicated April 27, 2016, to not hold further
hearings." Pursuant to Rule 10(c) of the Rules of
Appellate Procedure, Defendants notified Plaintiffs and this
Court of its intent to appeal the trial court's grant of