GreaseOutlet.com, LLC v. MK S. II

CourtCourt of Appeals of North Carolina
DecidedAugust 1, 2023
Docket22-648
StatusPublished

This text of GreaseOutlet.com, LLC v. MK S. II (GreaseOutlet.com, LLC v. MK S. II) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
GreaseOutlet.com, LLC v. MK S. II, (N.C. Ct. App. 2023).

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA22-648

Filed 01 August 2023

Wake County, No. 21 CVS 4234

GREASEOUTLET.COM, LLC, Plaintiff,

v.

MK SOUTH II, LLC, Defendant.

Appeal by plaintiff from order entered 24 February 2022 by Judge Rebecca W.

Holt in Wake County Superior Court. Heard in the Court of Appeals 22 February 2023.

Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Gary S. Parsons and Sarah M. Saint, for Plaintiff-Appellant.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, by Scott A. Miskimon and Jang H. Jo, for Defendant-Appellee.

DILLON, Judge.

Plaintiff appeals from an order granting Defendant’s motion to dismiss all claims

alleged in Plaintiff’s complaint pursuant to Rule 12(b)(6). We affirm.

I. Standard of Review

We review a trial court’s dismissal pursuant to Rule 12(b)(6) de novo, deciding

whether the allegations of the complaint, treated as true, state a claim upon which

relief can be granted. Sykes v. Health Network, 372 N.C. 326, 332, 828 S.E.2d 467, 471

(2019). Dismissal under Rule 12(b)(6) is proper when the complaint on its face reveals

either that no law supports the plaintiff’s claim, the absence of facts sufficient to make GREASEOUTLET.COM, LLC V. MK SOUTH II, LLC

Opinion of the Court

a good claim, or some fact that necessarily defeats the plaintiff’s claim. Wood v.

Guilford County, 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002).

II. Background

This appeal concerns a dispute between a landlord and its tenant over whether

the landlord must honor the commercial lease amendment entered into by the tenant

with the landlord’s predecessor in title, including a provision granting the tenant

options to renew. The allegations in Plaintiff’s amended complaint show as follows:

Plaintiff Greaseoutlet.com, LLC, (“Tenant”) operates an environmentally

sensitive business, processing grease trap effluent generated by restaurants. To

operate its business, Tenant must obtain certain permitting from the State.

In the Spring of 2016, Tenant entered into an agreement (the “Lease”) to lease

certain industrial property in Raleigh (the “Property”) from the Property’s then-owner

(“Former Owner”) for a term of five years, to expire on 30 April 2021. In August 2021,

a memorandum executed by Former Owner that outlined certain Lease provisions,

including that the term was for five years, was recorded in the Wake County Registry.

Four months later, in December 2016, Tenant and Former Owner entered an

agreement amending certain provisions of the Lease (the “Amendment”). This

Amendment contained a provision granting Tenant the option to renew the Lease term

past 30 April 2021 for two successive five-year terms. However, no new memorandum

regarding this Amendment was recorded in the Wake County Registry.

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In December 2018, Tenant secured the necessary State permit to continue

operating its business on the Property through 30 April 2021, coinciding with the

original Lease term. As part of Tenant’s permit application, Former Owner signed a

landlord authorization form required by the State to issue the permit.

A year later, in December 2019, Former Owner sold the Property to Defendant

MK South II, LLC, (“Current Owner”). Current Owner purchased the Property with

plans to combine it with other properties for future redevelopment. Prior to purchasing

the Property, Current Owner conducted due diligence. During the due diligence period,

Current Owner received a copy of the Lease and of the Amendment. Also, during the

due diligence period, Tenant signed a tenant estoppel certificate (the “Estoppel

Certificate”) directed to Current Owner, acknowledging, among other things, that it

was currently a tenant under a lease, that neither it nor Former Owner were in default,

and that it had not prepaid any rent to Former Owner.

In early 2020, Current Owner told Tenant that Tenant needed to vacate the

Property at the end of the current five-year term, ending in April 2021. Tenant

essentially responded that it would be too expensive to move its business.

In August 2020, Tenant notified Current Owner that it was exercising its option

(as contained in the unregistered Amendment) to renew the lease for a new five-year

term, to begin on 1 May 2021. In October 2020, Tenant sent a check, prepaying the

rent for all of 2021, which included rent for the last four months of the initial term and

the first eight months of the new term. Current Owner deposited the check. During

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this time, however, Current Owner was working towards gaining approvals to

repurpose its assembled tracts, including the Property, for redevelopment, gaining

rezoning approval in December 2020. Also, in November 2020, when Tenant asked

Current Owner to sign a new landlord authorization required as part of Tenant’s

application with the State to renew Tenant’s permit to operate its business beyond

April 2021, Current Owner refused to sign. Instead, the parties discussed an extension

of Tenant’s leasehold beyond April 2021. In January 2021, Current Owner notified

Tenant it would sign the landlord authorization required for Tenant’s permit renewal

and agree to allow Tenant to extend its leasehold for five years (through April 2026) if

Tenant agreed that Landlord could unilaterally terminate the Lease after two years

into the renewal term (April 2023). Tenant refused this offer.

In March 2021, Current Owner notified Tenant that it did not consider itself

bound by the Amendment and that Tenant’s leasehold would terminate at the end of

the next month (30 April 2021). Current Owner sent a check to reimburse Tenant for

the prepaid rent for the last eight months of 2021. Tenant has not deposited or

otherwise accepted this reimbursement. Rather, Tenant attempted to exercise its

option to renew the Lease term as contained in the Amendment. However, Current

Owner refused to honor Tenant’s option as contained in the Amendment.

Tenant commenced this action against Current Owner, alleging six claims based

on Current Owner’s actions and inactions regarding the Lease and Amendment,

including its failure to honor Tenant’s right to renew the lease term.

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In February 2022, after a hearing on the matter, the trial court granted Current

Owner’s Rule 12(b)(6) motion to dismiss Tenant’s claims. Tenant appeals.

III. Analysis

Tenant’s arguments on appeal turn on whether Current Owner’s fee simple

interest is subject to Tenant’s leasehold interests beyond April 2021.

Specifically, in the Spring of 2016, Tenant acquired a leasehold interest in the

Property ending in April 2021 when Former Owner executed the Lease. In December

2021, Tenant acquired a new interest in the Property, specifically the option to extend

its leasehold beyond April 2021 for two five-year terms when Former Owner executed

the Amendment.1

Three years later, in December 2019, Current Owner acquired a fee simple

interest in the Property when Former Owner executed a deed conveying the same to

Current Owner.

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GreaseOutlet.com, LLC v. MK S. II, Counsel Stack Legal Research, https://law.counselstack.com/opinion/greaseoutletcom-llc-v-mk-s-ii-ncctapp-2023.