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Propst Bros. Dists., Inc. v. Shree Kamnath Corp.

Court of Appeals of North Carolina

January 2, 2019

PROPST BROS. DISTS., INC., Plaintiff,
v.
SHREE KAMNATH CORP., Defendant, and McDONALD'S CORP., Third Party Intervenor.

          Heard in the Court of Appeals 15 October 2018.

          Appeals by Defendant and Third Party Intervenor from declaratory judgment entered 5 February 2018 by Judge Martin B. McGee in Superior Court No. 17 CVS 2387, Cabarrus County.

          Smith Moore Leatherwood LLP, by Matthew Nis Leerberg and Kip D. Nelson, for Plaintiff-Appellee.

          Helms Robison Lee & Bennett, P.A., by R. Kenneth Helms, Jr. and Stephen M. Bennett, for Defendant-Appellant.

          Womble Bond Dickinson (US) LLP, by Mark P. Henriques and Michael A. Ingersoll, for Third Party Intervenor.

          MCGEE, CHIEF JUDGE.

         I. Factual and Procedural History

         Central Distributing Company sold a 6.31-acre tract of real property (the "Tract"), located in Cabarrus County, to Catawba Oil Company, Inc. ("Catawba Oil"), on 8 June 1990. The Tract was located directly northeast of the intersection of North Carolina Highway 73 and Interstate 85. Catawba Oil subdivided the Tract in February 1998, which resulted in three separate lots: Lot 1, consisting of 3.06 acres; Lot 2, consisting of 2.55 acres; and Lot 3, consisting of 0.67 acres. The Tract is bisected by a non-exclusive private right-of-way granted to a landowner whose property borders the north end of the Tract. Lots 2 and 3 are on the western side of the right-of-way, while Lot 1 is on the eastern side. Lot 3 is adjacent to Lot 2, and makes up the easterly part of the southern border of Lot 2. The southern border of Lot 3 adjoins Highway 73. The 1998 survey of the subdivision of the Tract indicates that Propst Brothers Distributors, Inc. ("Propst") owned property adjoining the western border of Lot 3 and the southern border of Lot 2 at that time.

         Catawba Oil conveyed the entirety of Lot 3 to Hillcrest Foods, Inc. ("Hillcrest") on 23 February 1998. The general warranty deed conveying Lot 3 to Hillcrest included two restrictive covenants (the "Deed Restrictions"):

Grantee, or Waffle House, Inc., . . . or any subsequent grantee of theirs may not operate a drive-thru type food service restaurant on the real property granted by this deed so long as Grantor, or its successors, operates a drive-thru type food service restaurant in its convenience store on the tract adjacent to this property [Lot 1].
No motor vehicle fuels may be sold or disposed from this real property so long as Grantor or any Grantee of Grantor sells or disposes motor vehicle fuels on [Lot 1.[1]

         At the time Lot 3 was conveyed to Hillcrest, Catawba Oil was operating a drive-thru type restaurant in a convenience store and selling motor vehicle fuels on Lot 1. A Waffle House was built on Lot 3 and operated for a number of years. Hillcrest then conveyed Lot 3 to the North Carolina Department of Transportation ("DOT") on 2 October 2013, and a portion of the southernmost part of Lot 3 was used by DOT for a "new right of way," and a "permanent utility easement for [a] N.C. Highway Project" involving Highway 73 and I-85. At some point in time, the Waffle House building and all related structures were razed.

         Catawba Oil conveyed Lot 1 to Shree Kamnath Corp. ("Shree") on 10 March 2015. Shree operates a convenience store that sells motor vehicle fuels and includes a McDonald's Corporation ("McDonald's") restaurant franchise on Lot 1.

         Catawba Oil conveyed Lot 2 to Propst on 28 May 2015. Catawba Oil did not add any restrictive covenants to the general warranty deed conveying Lot 2 to Propst. DOT conveyed the remaining portion of Lot 3 to Propst on 13 June 2017-being 0.434 acres that was not used for the "Highway Project." Therefore, at the time of this action, Propst owned all of the Tract on the western side of the private right-of-way. Propst anticipated that development of Lot 2 would involve construction of a "QuickTrips" convenience store and gas station, which might include a "QT Kitchen" ("QT")-a walk-in made-to-order food service business located inside the convenience store.[2] Although the QuickTrips would be located entirely on Lot 2, a portion of Lot 3 would be used for ingress and egress, and include some parking spaces for QuickTrip's use.

         Propst filed a complaint for declaratory judgment on 9 August 2017, seeking a declaration that its proposed uses of Lot 3-the construction of a driveway and parking spaces to service the QuickTrip on Lot 2-would not violate the Deed Restrictions. Shree filed an answer and counterclaim on 25 September 2017 seeking a declaratory judgment that the Deed Restrictions prohibited Propst's proposed uses of Lot 3. McDonald's alleged that, as a tenant of Lot 1, it had a substantial legal interest in the proceeding, and was allowed to intervene in this action with the consent of Propst and Shree. The matter was heard on 9 October 2017. The trial court entered a declaratory judgment on 5 February 2018, ruling that the Deed Restrictions did not prohibit Propst's proposed uses of Lot 3. Shree and McDonald's appeal.

         II. Standard of Review

         "Our standard of review of a declaratory judgment is the same as in other cases." Calhoun v. WHA Med. Clinic, PLLC, 178 N.C.App. 585, 596, 632 S.E.2d 563, 571 (2006) (citing N.C. Gen. Stat. § 1-258). "Accordingly, in a declaratory judgment action where the trial court decides questions of fact, we review the challenged findings of fact and determine whether they are supported by competent evidence. . . . . We review the trial court's conclusions of law de novo." Id. at 596-97, 632 S.E.2d at 571 (citations omitted). In the present case, the relevant facts have been stipulated to by Propst, Shree, and McDonald's.

         III. Shree's Appeal

         Shree's sole argument is that Propst's "proposed use of Lot 3 as access and parking to serve the sale or disposal of motor vehicle fuels on Lot 2 violates the Deed Restrictions" and, therefore, the trial court erred in ruling otherwise in the declaratory judgment. We disagree.

         It is undisputed that the Deed Restrictions apply to Lot 3. Therefore, our review is limited to whether the Deed Restrictions prevent the intended use of Lot 3. The Deed Restriction relevant to Shree's appeal reads as follows: "No motor vehicle fuels may be sold or disposed from [Lot 3] so long as Grantor or any Grantee of Grantor sells or disposes motor vehicle fuels on [Lot 1]" (the "Fuel Restriction"). Shree has stipulated that "[t]he intended construction on Lot 3 by Propst [] will only establish parking and egress for Lot 2." Therefore, the intended uses of Lot 3- parking, ingress, and egress-standing alone, do not violate the Fuel Restriction. Propst intends to sell "motor vehicle fuels" ...


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