Real Property Issues

N.C. Court of Appeals Reviews Commercial and Residential Summary Ejectment Cases

This week, the North Carolina Court of Appeals waded in waters it doesn’t often visit: the back pools of summary ejectment.

Summary ejectment, for those who don’t know, is a statutory procedure for residential or commercial eviction in North Carolina.  The unique process is governed by Chapter 42, Article 3 of the North Carolina General Statutes.

Two cases are on today’s docket: (1) a commercial case involving the question as to whether a breach must be “material” to justify ejectment irrespective of lease language, and (2) a residential case involving the question as to whether the District Court (the appellate court for statutory summary ejectment cases) has jurisdiction to hear an appeal as to a defendant tenant’s counterclaims, where the defendant tenant was successful at the ejectment stage.

Commercial Case
In GRE Properties Thomasville, LLC v. Libertywood Nursing Center, LLC COA 13-1180 (August 5, 2014), the Court considered the defendant’s argument that North Carolina law “requires breaches of a lease to be material to justify summary ejectment” and defendant’s demand that a jury instruction include such a requirement.

The GRE Properties Court affirmed the trial court’s refusal to include the “material breach” requirement in an instruction, declining to read such a requirement into the “purely statutory” paradigm of summary ejectment.  Rather, the Court states the law that “a breach of the lease cannot be made the basis of summary ejectment unless the lease itself provides for termination by such breach or reserves a right of reentry for such breach”.  In applying that law to the facts, the Court swiftly notes that “Section 19.1 of the lease provided for termination of the lease upon breach of Sections 5.5 and 8.1”.

The terms of the lease and State statutory law prevail, in terms of what will permit eviction.  A breach need not be “material” if the landlord and tenant agreed to landlord’s reentry and repossession in its event.

Residential Case
In 4U Homes & Sales, Inc. v. McCoy, COA 13-1450 (August 5, 2014), the Court considered cross appeals from plaintiff landlord and defendant tenant regarding judgment in defendant tenant’s favor as to her counterclaims.

The facts of this case are involved and sordid, as they often are in residential eviction cases, and are not especially relevant to what we’re discussing here.  Rather, procedural posture is what interests us today.

The procedural posture is as follows: (1) plaintiff landlord filed an ejectment action in small claims court, (2) defendant tenant answered in small claims court, denying the ejectment action’s allegations and asserting counterclaims, (3) the magistrate judge dismissed plaintiff’s summary ejectment suit and entered judgment in defendant’s favor as to all of her counterclaims, awarding the jurisdictional maximum of $5,000.00 in rental abatement to defendant, and (4) on appeal from small claims court, the district court entered a judgment dismissing Plaintiff’s claim for summary ejectment, finding in plaintiff landlord’s favor with respect to defendant tenant’s counterclaims for unfair debt collection and unfair
and deceptive trade practices, and awarding defendant tenant $3,705.00 in compensatory damages for plaintiff landlord’s breach of the implied warranty of habitability.

The parties both appealed, though plaintiff landlord did not appeal the dismissal of its ejectment suit.  Rather, plaintiff landlord appealed the judgment as to defendant tenant’s counterclaims and the defendant tenant appealed the same.

The 4U Homes Court outlines the two options available to a summary ejectment litigant wishing to assert counterclaims that exceed the $10,000.00 jurisdictional amount: (1) counterclaimants “may either assert their claims on appeal to the District Court from an adverse decision by the magistrate”, or (2) counterclaimants may “assert those claims in an entirely separate action”.

The 4U Homes Court vacated the District Court’s judgment in defendant tenant’s favor, which resulted from an appeal from the small claims court, because defendant tenant “received the maximum amount of relief available in that [small claims] forum” such that the appellate court is “unable to see how any of her legal rights were adversely affected” such that defendant landlord had the right to appeal to the District Court.  Essentially, the defendant tenant is limited to the judgment entered at the small claims court level by the magistrate judge, and she is certainly not an “aggrieved party” able to appeal the limited judgment.  Defendant tenant’s failure to avail itself of the two options noted above with respect to a counterclaim exceeding the jurisdictional amount limits her recovery.

“I guess we can call this ‘deconstructive eviction’.”

Mike Thelen practices in Womble, Carlyle’s Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and “like” us on Facebook here.

Categories: Real Property Issues

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