Appeal by defendant from judgment entered 31 August 1999 by
Judge Cy A. Grant in Pasqoutank County Superior Court. Originally
heard in the Court of Appeals 15 February 2001. An opinion
reversing and remanding the judgment of the trial court was filed
by this Court on 19 June 2001. Pursuant to N.C. Gen. Stat. § 7A-
30(2), plaintiff appealed to the Supreme Court. Heard in the
Supreme Court 15 October 2001. An opinion reversing the Court of
Appeals and remanding for consideration of issues not previously
addressed by this Court was filed by the Supreme Court on 1
February 2002.
Trimpi, Nash & Harman, L.L.P., by John G. Trimpi, for
plaintiff appellant.
The Twiford Law Firm, L.L.P., by Branch W. Vincent, III, for
defendant appellee.
TIMMONS-GOODSON, Judge.
Carolina Construction Corporation (“defendant”) appeals from
a judgment by the trial court awarding monetary damages to Rich,
Rich & Nance (“plaintiff”) for breach of a real estate sales
contract. For the reasons set forth herein, we affirm the judgment
of the trial court. The pertinent facts of this appeal are as follows: Plaintiff,
a North Carolina general partnership, owned an 11.89-acre parcel of
land known as “Walking Horse Subdivision” in Elizabeth City, North
Carolina. On 29 August 1994, plaintiff entered into a contract
with LFM Properties (“LFM”) to sell this parcel. Based on
discussions by the parties regarding the eventual use of the
property, plaintiff anticipated that at some date in the future,
LFM would convey its interest in the property to defendant, which
would ultimately subdivide and develop the property into thirty-
seven single-family residential lots. Accordingly, on 29 August
1994, plaintiff, LFM, and defendant executed the following addendum
to the contract:
At the close of each of the 37 (thirty
seven) lots of Walking Horse subdivision, LFM
Properties and or Carolina Construction
Corporation, whomever is owner, agrees to pay
to Rich, Rich and Nance the sum of $600.00
(Six Hundred Dollars) per lot as an
availability fee. These fees shall survive
any and all listing agreements and shall
remain as a lien against the lots until they
are paid. The sale or transfer of these lots
from LFM Properties to Carolina Construction
Corporation is exempt from the fee until such
time as Carolina Construction Corporation
sells the property improved or unimproved.
A further addendum provided that:
Upon the subject property being developed
by LFM Properties, or its successor in
interest, a Declaration of Restrictive
Covenants shall be recorded with the
subdivision plat. The Declaration shall refer
to the above-mentioned fee agreement and
provide record notice thereof.
Lucien O. Morrisette (“Morrisette”), a principal stockholder of LFM
and defendant, signed the addendum on behalf of LFM and defendant. Plaintiff thus anticipated a total payment of $97,200.00:
$75,000.00 at the closing and, based on the addendum agreement,
$22,200.00 to be paid over time as the lots in the subdivision were
sold.
The parties subsequently modified the sales contract in terms
of the acreage conveyed and responsibilities in connection with the
drainage. The $75,000.00 purchase price and the $600.00 per lot
availability fee remained unchanged, however. Plaintiff and LFM
closed the sale of the property on 28 April 1995 and thereafter
recorded the deed.
On 30 May 1997, LFM conveyed the property to defendant as
contemplated by the parties. Defendant thereafter subdivided the
property into thirty-eight lots and renamed the development
“Carolina Village.” On 22 April 1998, defendant sold the first lot
in Carolina Village, but failed to pay plaintiff the $600.00
availability fee, as required by the addendum. When plaintiff
thereafter demanded the fee payment, defendant refused, indicating
that it was not bound, and therefore, would not honor the agreement
contained in the addendum.
Plaintiff filed an action against defendant for breach of
contract and sought $600.00 in damages. The complaint further
alleged anticipatory repudiation of the contract and sought the
balance due of $22,200.00. The matter came before the trial court
on 2 August 1999. At the time of trial, only twelve lots had been
platted, and defendant had sold nine lots in the subdivision
without paying any of the availability fees. Approximately 6.9acres remained undivided.
After considering all of the evidence, the trial court entered
judgment for plaintiff in the amount of $5,400.00, the fees due for
the nine lots sold. The court further ordered defendant to “pay
the balance of $16,800.00 when and as each of the 28 additional
lots in Carolina Village are sold by paying to plaintiff the sum of
$600.00 upon the closing of each lot sale[.]” Additionally, the
judgment provided that “[i]n the event defendant sells the entire
tract without selling each of the 28 remaining lots, then the
entire balance then due would become immediately payable.”
Defendant moved pursuant to Rules 59 and 60 of the Rules of Civil
Procedure for reconsideration and for relief from the court's
decision, which motions the court denied.
On appeal by defendant, a divided panel of this Court held
that the rule against perpetuities prevented enforcement of the
addendum and accordingly reversed the trial court. Plaintiff
appealed to the Supreme Court, which held that the rule against
perpetuities did not apply and thus would not bar enforcement of
the contractual rights in the addendum. The Supreme Court
therefore reversed the opinion of the Court of Appeals and remanded
the case for further consideration of issues previously raised by
the parties but unaddressed by this Court.
___________________________________________________
Defendant presents five issues on appeal, arguing that the
availability fee contained in the addendum is unenforceable in that
(1) one of the principals of the defendant corporation did not signthe addendum; (2) plaintiff waived its right to the availability
fee; (3) plaintiff breached the covenant against encumbrances; and
(4) a second contract superseded the parties' original agreement.
Defendant further argues that the trial court erred when it (5)
ordered that, if defendant sold the entire property without selling
the twenty-eight remaining lots, the entire balance then due to
plaintiff would become immediately payable. For the reasons stated
herein, we affirm the judgment of the trial court.
On appeal from a judgment of the trial court, we are bound by
the trial court's findings of fact where they are supported by
competent evidence, even where there may be evidence to the
contrary. See Barnhardt v. City of Kannapolis, 116 N.C. App. 215,
217, 447 S.E.2d 471, 473, disc. review denied, 338 N.C. 514, 452
S.E.2d 807 (1994). Where such findings are supported by competent
evidence, we may reverse the judgment only for erroneous
conclusions of law. See id.
By its first assignment of error, defendant argues that it is
not bound by the addendum because Robert D. Saunders (“Saunders”)
did not sign the contract. Saunders is vice-president, secretary
and treasurer of defendant corporation and owns fifty percent of
the outstanding shares of stock. Defendant asserts that Saunder's
signature was necessary to the contract, and that plaintiff was
aware of such necessity. Defendant therefore argues that the
addendum is unenforceable. We disagree on several grounds.
First, the trial court found that “Defendant executed the
Addendum[,]” a finding defendant does not dispute in its argument. Defendant is therefore bound by such a finding. See Koufman v.
Koufman, 330 N.C. 93, 97, 408 S.E.2d 729, 731 (1991). Moreover,
defendant similarly admitted in its answer to plaintiff's complaint
that it was a party to the addendum. An admission by a party in
its pleading is conclusive and binding upon the parties. See
Crowder v. Jenkins, 11 N.C. App. 57, 62, 180 S.E.2d 482, 485
(1971). Further, the addendum was signed by Morrisette, who is
president and fifty-percent shareholder of the defendant
corporation. Although defendant's brief cites extensive authority
concerning the concept of agency, defendant does not argue that
Morrisette lacked the proper authority to enter into the contract
on behalf of the defendant corporation. Defendant likewise offers
no authority or other basis for its assertion that Saunder's
signature was necessary to the contract. We therefore overrule
this assignment of error.
By its next two assignments of error, defendant contends that
plaintiff waived its rights in the addendum by failing to identify
the availability fee contained therein as an exception to title in
the general warranty deed. Defendant asserts that the availability
fee represents a lien on the real property and that therefore,
plaintiff's failure to identify the availability fee in the general
warranty deed breached the covenant against encumbrances. We
disagree.
As defendant recognizes in its brief, the covenant against
encumbrances is a personal covenant and does not run with the land.
See Lockhart v. Parker, 189 N.C. 138, 143, 126 S.E. 313, 315(1925); Commonwealth Land Title Ins. Co. v. Stephenson, 101 N.C.
App. 379, 381, 399 S.E.2d 380, 381 (1991). A claim for breach of
the covenant against encumbrances may be brought only by the
immediate covenantee, not a subsequent purchaser. See Lockhart,
189 N.C. at 142, 126 S.E. at 315; Commonwealth, 101 N.C. App. at
381, 399 S.E.2d at 381. The immediate covenantee in the instant
case was LFM and not defendant. As a subsequent purchaser,
defendant has no right to bring a claim for breach of the covenant
against encumbrances.
Furthermore, we perceive no grounds for waiver by plaintiff of
its rights in the addendum. Waiver is the “'intentional
relinquishment of a known right.'” Clement v. Clement, 230 N.C.
636, 639, 55 S.E.2d 459, 461 (1949) (quoting Johnson v. Zerbst, 304
U.S. 458, 464, 82 L. Ed. 1461, 1466 (1938)). The parties agreed in
the instant case that defendant “would acquire the property from
LFM Properties and build residential houses[.]” Further,
“defendant agreed to refer to the $600.00 per lot fee arrangement
in a declaration of restrictive covenants for the subdivision which
would be created and placed of record at a later time.” Clearly,
plaintiff expected and relied upon defendant to honor its agreement
to refer to the availability fees in a future set of restrictive
covenants. Plaintiff's reliance upon defendant to perform as
agreed to by the parties in their contract in no way constitutes an
“intentional relinquishment” of its rights in the availability
fees. We overrule these assignments of error.
Defendant next argues that the addendum cannot be enforcedbecause it was superseded by a subsequent agreement between the
parties.
(See footnote 1)
Specifically, defendant contends that the original offer
to purchase and contract was “not the same contract underlying the
conveyance of real property on April 28, 1995.” Defendant asserts
that this second contract contained no availability fees and
superseded any rights of plaintiff contained in the original
contract. Defendant's argument has no merit.
Defendant's only support for its argument that the parties
formed a new contract is that “the acreage under contract was
reduced by 2 acres” and that defendant was “required to spend
substantial sums of money when the drainage easement was signed.”
Defendant provides no other evidence to contradict the trial
court's finding that the parties “modified the contract in terms of
the acreage being conveyed and responsibilities in connection with
drainage but did not change the purchase price or the $600.00 per
lot deferred fee.” There was substantial evidence to support the
trial court's finding that the changes to the original contract
represented a modification and not a new contract. We overrule
this assignment of error.
By its final assignment of error, defendant contends that the
trial court erred when it ordered that “[i]n the event defendant
sells the entire tract without selling each of the 28 remaining
lots, then the entire balance then due would become immediatelypayable.” Defendant argues that the trial court's order is
contrary to the intent of the parties as expressed in the contract
and at trial. We do not agree.
Where the language of a contract is plain and unambiguous, the
construction of the agreement is a matter of law for the court.
See Kent Corporation v. Winston-Salem, 272 N.C. 395, 401, 158
S.E.2d 563, 567-68 (1968); Ins. Co. of North America v. Aetna Life
& Casualty Co., 88 N.C. App. 236, 240, 362 S.E.2d 836, 839 (1987),
disc. review denied, 321 N.C. 743, 366 S.E.2d 860 (1988). The
addendum to the contract in the instant case states that “[t]he
sale or transfer of these lots from LFM Properties to Carolina
Construction Corporation is exempt from the fee until such time as
Carolina Construction Corporation sells the property improved or
unimproved.” From the plain language of the addendum, the parties
clearly contemplated that defendant might sell the unimproved tract
as a whole, without selling the individual lots. It is equally
clear that the parties did not intend for this possibility to
negate plaintiff's interest in the availability fees. Instead, the
parties agreed that defendant would not have to pay the
availability fees until it sold the property.
Moreover, it is clear from the evidence at trial that the
parties intended for the availability fees to operate as a form of
creative financing for the sale of the property. Plaintiff
characterized the money owed from the addendum as a deferred
portion of the purchase price, an accommodation to the buyer and an
interest-free loan until the lots were sold. Morrisette testifiedat trial that when he signed the addendum on behalf of defendant,
he believed that the corporation was obligated to pay the $600.00
per lot fee.
We conclude that the trial court's order is consistent with
the intent of the parties, as expressed by the language of the
contract and the evidence at trial. The trial court therefore did
not err in its order, and we overrule defendant's final assignment
of error.
The judgment of the trial court is hereby
Affirmed.
Judges MARTIN and TYSON concur.
Footnote: 1
