Opinion
No. COA09-1563
Filed 18 January 2011 This case not for publication
Appeal by Defendant from judgment entered 19 March 2009 by Judge Robert B. Rader in Wake County District Court. Heard in the Court of Appeals 18 August 2010.
No brief for Plaintiffs-Appellees. Douglass Douglass, by Thomas G. Douglass, for Defendant-Appellant.
Wake County No. 08-CVD-21331.
Factual and Procedural Background
On 3 July 2007, Plaintiff Armando O. Santos ("Santos") and Defendant Maria Teresa Hernandez Briones ("Defendant") entered into a written agreement for Defendant's sublease of the commercial premises located at 3030 and 3032 Capital Boulevard in Raleigh, North Carolina. By the terms of the sublease agreement, Defendant would operate a tire business and make rental payments of $5,000 per month to Santos for the 3032 lot. This rental amount would increase each year by the terms set forth in the lease.
The issues before this Court concern only the 3032 lot.
Between January and May 2008, Santos and Defendant carried on a romantic relationship, during which Santos operated the tire business. In June 2008, following a dispute in which Defendant accused Santos of stealing from the tire business, Defendant assumed operation of the business.
Between July and October 2008, Defendant made only partial rental payments on both properties. According to Santos, the total amount of unpaid rent in that period was $12,850.
On 5 November 2008, Santos sent a letter to Defendant, notifying her that she was in default under the sublease agreement and informing her that "failure to pay all sums due and owning [sic] within ten (10) days of the date of this letter" would result in Santos exercising any of his available remedies under Paragraph 11 of the sublease agreement. Paragraph 11 of the sublease agreement provides that Santos may terminate the sublease or re-enter the premises if Defendant breaches a covenant in the lease and that breach continues for ten days after Defendant receives written notice from Santos.
Upon receipt of the 5 November 2008 letter, Defendant tendered to Santos two checks, one for $5,350, the November 2008 rental amount for the 3032 lot, and one for $6,000, the November 2008 rental amount for the 3030 lot. On each of these checks Defendant indicated that the money was tendered as payment for the November 2008 rent. However, upon receipt of these checks, Santos made a note on the 5 November 2008 letter indicating he was applying the amounts from the checks to the balance of prior unpaid rent. Santos received no other payments from Defendant at that time.
On 18 November 2008, Santos filed a Complaint in Summary Ejectment in the Small Claims Division of Wake County District Court; the complaint was amended on 19 November 2008. The original and amended complaints were filed on an Administrative Office of the Courts ("AOC") "Complaint in Summary Ejectment" form. In the amended complaint, Santos alleged that Defendant failed to pay the $11,750 rent due on 1 November 2008 for both lots, and that Santos made a demand for the rent and waited the 10-day grace period before filing the complaint. The amended complaint further alleged that Defendant owed Santos $12,850 in past-due rent. In her answer to Santos' complaint, Defendant denied the allegations in the complaint.
On 8 December 2008, the case was heard before a magistrate, who dismissed the action with prejudice. Santos appealed to Wake County District Court. On 18 March 2009, the case was heard at a bench trial before the Honorable Robert B. Rader, Wake County District Court Judge.
At the trial, over objection by Defendant's counsel, Judge Rader allowed Santos to present evidence showing that Defendant failed to pay the full monthly rental amount between July and December 2008. Subsequently, Defendant testified that she had indeed paid less than the full rental amount during those months.
Following the trial, Judge Rader entered judgment in favor of Santos, making the following pertinent findings of fact and conclusions of law:
FINDINGS OF FACT
. . . .
13. That the Defendant made regular rent payments as required under the terms of the lease until July 2008, when she [began] to make partial payments.
14. That as a result of the Defendant's failure to make full rental payments, the following rent was still due and owing at the time of filing this action[:]July 2008 $1,350.00 Aug. 2008 $1,350.00 Sept. 2008 $1,723.00 Oct. 2008 $1,723.00
15. That the Plaintiff, Armando Santos, notified the Defendant in writing on November 5, 2008, that she was in default of the sublease agreement for failure to pay rent in a timely manner and that her failure to pay all sums due and owing within 10 days would result in his exercising his remedies under Paragraph 11 of the sublease agreement. (Defendant's Exhibit #1)
16. That the Defendant during her testimony admitted that she had not paid all of the rent for the months of July through October of 2008 and subsequently attributed failure to pay the rent to the fact that she had "a lot of bills due."
. . . .
18. That despite the demands of the Plaintiff, Armando Santos, the Defendant has not paid the aforementioned past due rent for the months of July, August, September and October of 2008.
. . . .
22. That the Plaintiff, Armando Santos, represented to the court that he is seeking only possession of the premises at 3032 Capital Boulevard, Raleigh, North Carolina 27604 and no other relief.
. . . .
CONCLUSIONS OF LAW
. . . .
3. That Defendant's failure to pay rent in full for the months of July, August, September and October of 2008 constitutes a breach of the sublease agreement.
4. That the Plaintiff, Armando Santos, is entitled to recover possession of the premises from the Defendant.
Following the trial court's judgment, Defendant filed a motion to set aside the judgment and a motion for a new trial. Upon Judge Rader's denial of both motions, Defendant appealed the District Court's judgment to this Court.
Discussion I. Admission of Evidence of Unpaid Rent
Defendant's first argument on appeal concerns the trial court's consideration of Santos' evidence of unpaid rent between July and October 2008. Defendant contends the trial court erred in failing to sustain Defendant's objection to this evidence on the grounds that such evidence was not within the issues raised by the pleadings. Defendant's contention is based on the premise that Santos' complaint sought ejectment based solely on Defendant's failure to pay the full monthly rental amount for November 2008. Based on this "material and fatal variance between pleading and proof," Defendant argues that the trial court should have sustained Defendant's objection, and that failure to do so prejudiced Defendant.
Traditionally, the North Carolina rule was that "[t]he plaintiff must make out her case secundum allegata [( i.e., according to the allegations)] and the court cannot take notice of any proof unless there be a corresponding allegation." Whichard v. Lipe, 221 N.C. 53, 54, 19 S.E.2d 14, 15 (1942); see also Lucas v. White, 248 N.C. 38, 42, 102 S.E.2d 387, 390 (1958) (holding that "where there is a material variance between the allegation and proof, such defect may be taken advantage of by motion for judgment as of nonsuit"). The purpose of the variance rule was to ensure that "defendants will not be left in doubt as to how to answer and what defense to make." Bowen v. Darden, 233 N.C. 443, 446, 64 S.E.2d 285, 287 (1951).
However, Rule 15(b) of the North Carolina Rules of Civil Procedure added significant flexibility to the traditional doctrine of variance. See Roberts v. Memorial Park, 281 N.C. 48, 58, 187 S.E.2d 721, 726 (1972) (noting that "[t]he thrust of [Rule 15(b)] seems to destroy the former strict code doctrine of variance by allowing issues to be raised by liberal amendments to pleadings and, in some cases, by the evidence"). Specifically, N.C. Gen. Stat. § 1A-1, Rule 15(b) provides as follows:
The North Carolina Rules of Civil Procedure were enacted in 1967, Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970), with the underlying philosophy that "[t]echnicalities and form are to be disregarded in favor of the merits of the case." Lemons v. Old Hickory Council, Boy Scouts, Inc., 322 N.C. 271, 275, 367 S.E.2d 655, 657, reh'g denied, 322 N.C. 610, 370 S.E.2d 247 (1988).
If evidence is objected to at the trial on the ground that it is not within the issues raised by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be served thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.
N.C. Gen. Stat. § 1A-1, Rule 15(b) (2009).
Presumably, Defendant would have had the trial court sustain her objection to the evidence and either (1) proceed with the trial solely on the issue of the November 2008 rent, or (2) allow the pleadings to be amended and grant a continuance to enable Defendant to meet the allegations of unpaid rent between July and October 2008. However, although Defendant appropriately raised her objection under Rule 15(b), we are not convinced that evidence of the unpaid rent between July and October 2008 was not "within the issues raised by the pleadings."
Santos filed his amended complaint in this case on an AOC summary ejectment complaint form. The statutes that provide for the creation of this type of form complaint contemplate a small claim complaint marked by "simplicity and brevity." N.C. Gen. Stat § 7A-216 (2009); N.C. Gen. Stat § 7A-232 (2009). The AOC complaint form provides empty boxes in which a complainant can enter information regarding the subject premises of the complaint, the rate and due date of rent, and the total amount due to the complainant. The form complaint also contains preprinted wording referencing the various boxes. The pre-printed wording, read together with the information entered by the complainant, forms the substance of the complaint. The resulting substance of Plaintiff's complaint is paraphrased below:
1. The defendant is a resident of Wake County.
2. The defendant entered into possession of "Tire Shop, 3030, 3032 Capital Blvd. Raleigh, NC 27604" as a lessee of Santos.
3. The defendant failed to pay the "$11,750 per month" rent due on "11-01-2008" and Santos made demand for the rent and waited the 10-day grace period before filing the complaint.
4. Santos has demanded possession of the premises from the defendant, who has refused to surrender it, and Santos is entitled to immediate possession.
5. The defendant owes the plaintiff "$12,850.00, the amount of rent past due."
6. Santos demands to be put in possession of the premises and to recover "$12,850" and daily rental until entry of judgment plus interest and reimbursement for court costs.
In her answer to the amended complaint, Defendant stated: "The allegations contained in the Complaint are denied."
Accordingly, our determination of whether the evidence of unpaid rent between July and October 2008 was "within the issues raised by the pleadings" is limited to consideration of the six above-quoted allegations from the amended complaint and Defendant's denial of those six allegations.
Defendant contends that the amended complaint raised only the issue of unpaid rent for November 2008 as the basis for summary ejectment. We disagree. In doing so, we observe that, although paragraph 3 of the amended complaint alleged only that Defendant failed to pay the $11,750 rental amount in November 2008, paragraph 5 further alleged that Defendant owed Santos $12,850 in past-due rent. The disparity in the figures in the two paragraphs leads to the conclusion that the two paragraphs alleged separate payment failures. Accordingly, we read the amended complaint to have asserted both nonpayment of rent in November (in the amount of $11,750) and nonpayment of rent for some unspecified period (in the amount of $12,850) as dual bases for Plaintiff's summary ejectment claim. We conclude that these allegations sufficiently raised the issue of unpaid rent between July and October 2008.
Informing our decision is the North Carolina practice of "notice pleading," which eliminates any requirement that a plaintiff allege in her complaint "detailed factual allegations to raise issues." S. of Rocky Mt., Inc. v. Woodward Specialty Sales, Inc., 52 N.C. App. 549, 553, 279 S.E.2d 32, 34 (1981). Rather, as stated in Rule 8 of the North Carolina Rules of Civil Procedure, an adequate complaint need only contain
[a] short and plain statement of the claim sufficiently particular to give the court and the parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved showing that the pleader is entitled to relief. . . .
N.C. Gen. Stat. § 1A-1, Rule 8(a)(1) (2009).
In our determination, the allegation of $12,850 of unpaid rent in an unspecified period was sufficiently particular to have given Defendant notice of the series of occurrences that Santos intended to prove to show that he was entitled to relief.
Although by her own admissions at trial, Defendant purposefully made only partial rental payments during the months between July and October 2008, and intentionally failed to pay any rent other than the November 2008 rent upon receipt of Santos' 5 November 2008 letter, Defendant argues on appeal that she was unaware of the amount of unpaid rent between July and October 2008. Therefore, Defendant argues, she could not have made the connection that the $12,850 figure represented the unpaid rent between July and October 2008. The logical conclusion of this argument is that Defendant was not actually on notice that Santos was asserting the nonpayment of rent between July and October as a basis for summary ejectment.
We find Defendant's line of reasoning unpersuasive and irrelevant. By his own admissions, Santos sought only possession of the premises, not recovery of unpaid rent. Therefore, the only necessary facts in the complaint that would entitle Santos to relief were that Defendant breached the sublease agreement by failing to pay rent, and that the sublease provides for termination of the sublease in the event of such a breach. See Stanley v. Harvey, 90 N.C. App. 535, 537, 369 S.E.2d 382, 384 (1988) (holding that under the summary ejectment statute, N.C. Gen. Stat § 42-26, the breach of a lease may be made the basis of summary ejectment so long as "the lease itself provides for termination by such breach or reserves a right of reentry for such breach").
The amended complaint asserted that Santos was entitled to summary ejectment relief based on Defendant's failure to pay $12,850 of rent during some period of the lease. This allegation should have put Defendant on notice that alleged occurrences of nonpayment of rent would be at issue in the trial. The number of occurrences and the actual amount of unpaid rent would have been secondary issues. Therefore, the allegation was sufficient to allow Defendant to meet Santos' claims at trial with her own proof that Defendant paid all rent when due, such that the absence of any breach by Defendant would have proven that Santos was not entitled to relief. Cf. Pyco Supply Co. v. Am. Centennial Ins. Co., 321 N.C. 435, 444, 364 S.E.2d 380, 385 (1988) (stating that "the primary function of pleadings is to give sufficient notice of the events or transactions which produced the claim with sufficient precision to enable the adverse party to understand the nature and basis of it and allow the opponent to prepare").
Based on the foregoing, we conclude that the allegation of $12,850 of unpaid rent contained in Santos' amended complaint sufficiently raised the issue of unpaid rent between July and October 2008. Accordingly, the evidence presented at trial of unpaid rent between July and October 2008 was within the issues raised by the pleadings and, therefore, the trial court did not err in admitting such evidence.
II. Entry of Judgment
Defendant next contends that the trial court's entry of judgment for Santos was error because there was insufficient evidence to support the trial court's findings of fact and conclusions of law. Specifically, Defendant argues that the evidence "materially varied from [Santos'] complaint allegation" and that there was insufficient proof of Santos' "compliance with his burden of providing Defendant with written notice of default." As discussed supra, we hold that the evidence presented at trial did not "materially vary" from the complaint. Therefore, we only address Defendant's contention that because the trial court's finding of fact on the issue of notice was not supported by competent evidence, the trial court's conclusions of law and judgment in favor of Santos were error.
"The standard of appellate review for a decision rendered in a non-jury trial is whether there is competent evidence to support the trial court's findings of fact and whether the findings support the conclusions of law and ensuing judgment." Sessler v. Marsh, 144 N.C. App. 623, 628, 551 S.E.2d 160, 163, disc. review denied, supersedeas denied, 354 N.C. 365, 556 S.E.2d 577 (2001).
[A] trial court's findings of fact in a bench trial have the force of a jury verdict and are conclusive on appeal if there is competent evidence to support them, even though there may be evidence that would support findings to the contrary. However, conclusions of law reached by the trial court are reviewable de novo.
Lincoln Terrace Assocs., Ltd. v. Kelly, 179 N.C. App. 621, 623, 635 S.E.2d 434, 435-36 (2006) (internal quotation marks and citations omitted, bracket in original).
The trial court's finding of fact on the issue of notice states as follows:
15. That the Plaintiff, Armando Santos, notified the Defendant in writing on November 5, 2008, that she was in default of the sublease agreement for failure to pay rent in a timely manner and that her failure to pay all sums due and owing within 10 days would result in his exercising his remedies under Paragraph 11 of the sublease agreement.
Defendant argues there was insufficient evidence in the record to support the trial court's finding that Santos provided Defendant with written notice of a breach of the sublease as required by the terms of the lease. Based upon our review of the record, we are unpersuaded by Defendant's argument.
Paragraph 11 of the parties' sublease provides as follows:
[I]f the Lessee shall fail to pay any installment of rent when due and payable . . . and if such default or defaults shall continue for a period of ten (10) days after written notice by the Lessors to the Lessee, the Lessors may at their option (but without any obligation so to do) terminate this lease, or they may without termination of this lease, enter into the said leased premises. . . .
According to the terms of the sublease, to support a finding that the sublease notice requirement was satisfied, there must be competent evidence to show (1) that Defendant failed to pay rent when due and payable, and (2) that Defendant's default continued for a period of ten days after written notice by Santos to Defendant.
Regarding the first issue, the sublease does not indicate when the rental payment is due. Rather, the sublease provides only that "the lessee agrees to Pay to the lessors the sum of five thousand dollars (5000) per month." Although the sublease agreement does not set a specific date beyond which rent is late, our review of the record leads us to interpret the sublease agreement as requiring the rent to be paid in monthly installments.
"Whenever a court is called upon to interpret a contract its primary purpose is to ascertain the intention of the parties at the moment of its execution." Lane v. Scarborough, 284 N.C. 407, 409-410, 200 S.E.2d 622, 624 (1973). Further, the intention of the parties "is to be ascertained from the expressions used, the subject matter, the end in view, the purpose sought, and the situation of the parties at the time." Id.
We ascertain that the intention of the parties in this case was that the $5,000 in monthly rent was to be paid monthly. The sublease agreement provides that the term of the sublease shall be for a period of fifty-eight months. The fact that the term of the sublease is stated in months, along with the fact that the term is for a period of months not divisible into full years, precludes a conclusion that the rent would be due in any periodic installment other than monthly. This conclusion is further supported by the situation of the parties at the time of execution, notably that Santos was the lessee of the property under another lease, the terms of which required Santos, as lessee, to pay rent to his lessor in monthly installments.
In Smith v. House of Kenton Corp., 23 N.C. App. 439, 443-44, 209 S.E.2d 397, 400, cert. denied, 286 N.C. 337, 211 S.E.2d 213 (1974), this Court held that the phrase "$400.00 per month" did not sufficiently imply the time and manner of rent payments, such that the contract to execute a future lease was not binding because it left material issues open to future negotiations. That decision relied on the premise that "[a]n offer to enter into a contract in the future must, to be binding, specify all of the essential and material terms and leave nothing to be agreed upon as a result of future negotiations." Id. at 442, 209 S.E.2d at 399. Because this sublease agreement is an executed lease, rather than a contract to execute a lease in the future, we find the holding in Smith to be inapposite. Regardless, the intentions of the parties in this case clearly indicate that the parties' minds met on the issues of time and manner of payment of rent, such that the sublease agreement is binding.
Finally, support for the sublease interpretation that requires rent payments to be made in monthly installments comes from the fact that, both at trial and on appeal, Defendant treated the sublease as containing such a requirement.
Therefore, because Defendant testified at trial that she made only partial rental payments between July and October, and because the lease requires that full rental payments be made every month, the evidence establishes that Defendant did default under the sublease agreement when she failed to pay, when due, the full rental amount between July and October 2008.
Further, to support a finding that the sublease notice requirement was satisfied, the evidence must show that Defendant's default continued for a period of ten days after Defendant received written notice regarding her default. This requires that the evidence show both that Santos gave written notice, and that the default continued for ten days after the notice was received.
The 5 November 2008 letter from Santos to Defendant reads as follows:
This letter is written pursuant to . . . Paragraph 11 of the sublease agreement dated 1 September 2006. You are in default of [that] agreement[] for failure to pay rent when due and owing. You are hereby notified that your failure to pay all sums due and owning [sic] within ten (10) days of the date of this letter will result in my exercising my remedies under Paragraph 11 of [that] sublease agreement[].
Although the agreement recited the date of the agreement as 1 September 2006, the agreement was not signed until 3 July 2007.
This letter constitutes competent evidence that Santos gave Defendant written notice as required by the sublease agreement. However, Defendant argues the letter could not have served as written notice because it did not contain the precise amount of unpaid rent due to Santos.
In support of this argument, Defendant cites Price v. Conley, 12 N.C. App. 636, 640, 184 S.E.2d 405, 408 (1971), a case in which this Court held that a plaintiff-lessor who had been accepting rent that was less than the lease amount waived his right to terminate the lease based on the past defaults ( i.e., payment of less than full rent) until the lessor made a demand upon the tenant to pay the amount by which the tenant was in arrears. Defendant further supports her argument with reference to the following principle:
As a general rule, the demand for rent, for the nonpayment of which the lessor may declare the lease forfeited, must be for the precise amount of rent due, and if an excessive amount is demanded the demand will be ineffectual."
Based on Price and the above-quoted principle, Defendant contends that Santos' 5 November 2008 letter must have contained the precise amount of past-due rent in order to have provided effective notice under the sublease agreement. We disagree.
Defendant cites "49 Am. Jur. 2d., Landlord and Tenant, s. 303, p. 277" as the source of that rule. However, that citation leads to a rule covering rights of first refusal. A principle similar to that asserted by Defendant appears at 49 Am. Jur. 2d Landlord and Tenant § 848 (2010).
The language of the sublease agreement provides only that Santos may terminate the lease or re-enter the premises if the failure to pay rent shall continue for ten days after "written notice" by Santos to Defendant. This Court has held in similar cases, "[w]hen termination of a lease depends upon notice, the notice must be given in strict compliance with the contract as to both time and contents." Lincoln Terrace, 179 N.C. App. at 623, 635 S.E.2d at 436.
In this case, the sublease's only requirements of the notice are that it be written and be "by the Lessors to the Lessee." Because the 5 November 2008 letter was given to Defendant by Santos and informed Defendant that she was in breach of the sublease, we conclude that the letter serves as competent evidence of Santos' satisfaction of the notice requirement of the sublease agreement, regardless of the fact that the letter did not state the precise amount of rent past due.
Paragraph 15(a) of the sublease states that any notice required to be given pursuant to the terms of the sublease "may be given by certified or registered mail." We find that the use of the word "may" rather than "shall" indicates that any method of notice is sufficient under the terms of the lease.
The evidence presented at trial also tended to show that Defendant's default continued for ten days after Defendant's receipt of written notice. Defendant testified that she did not pay full rent between July and October 2008. No other evidence was presented that showed Defendant had paid the past-due rent. Rather, Defendant argued no rent was due because Santos stole money from Defendant's tire business. However, this evidence was contradicted by testimony from Miguel Montiel, an associate of Santos, which tended to show that Santos ran the tire business honestly.
Based on the foregoing, we conclude that there is competent evidence showing that Defendant's default continued for ten days after Defendant received Plaintiff's written notice of default. Further, because the notice requirements of Paragraph 11 of the sublease agreement were satisfied, we conclude that the trial court's finding that Santos notified Defendant that she was in default of the sublease agreement is supported by competent evidence and that the trial court's findings of fact support its conclusion of law that "Plaintiff, Armando Santos, is entitled to recover possession of the premises from the Defendant."
AFFIRMED.
Judge STEELMAN AND HUNTER concur. Report per Rule 30(e).