IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA14-380
Filed: 2 June 2015
Orange County, No. 11 CVS 1428
JONATHAN WILNER, et. al., and ALL OTHERS SIMILARLY SITUATED,
Plaintiffs,
v.
THE CEDARS OF CHAPEL HILL, LLC, et. al., Defendants.
Appeal by defendants from order entered 10 January 2014 by Judge William
R. Pittman in Orange County Superior Court. Heard in the Court of Appeals 20
November 2014.
Ragsdale Liggett PLLC, by Benjamin R. Kuhn, Amie C. Sivon, and R. Michael
Pipkin, for plaintiff-appellees.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by James T.
Williams, Jr., Jennifer K. Van Zant, and D.J. O’Brien III, for defendant-
appellants.
Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene and Tobias S.
Hampson, and Barringer & Sasser, LLP, by Brent D. Barringer and Robert H.
Sasser, III, for amici curiae The Cypress of Charlotte and The Cypress of
Raleigh.
STEELMAN, Judge.
Where the provisions of an agreement between condominium residents and a
continuing care retirement community were not unconscionable, and did not violate
the prohibition against transfer fees in Chapter 39A of the North Carolina General
WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
Statutes, or the provisions of the Marketable Title Act, Chapter 47B of the North
Carolina General Statutes, the trial court erred in finding the agreements
unenforceable. Where plaintiffs agreed to the payment of fees in a contract, the trial
court erred in holding them unenforceable pursuant to an analysis of covenants
running with the land. The trial court erred in entering an injunction without
describing with particularity the acts being enjoined.
I. Factual and Procedural Background
The Cedars of Chapel Hill, LLC (the Cedars) is a continuing care retirement
community (CCRC) located in Chapel Hill, North Carolina. Residents at the Cedars
purchase individual condominium units within the community, and pay an additional
membership fee. This fee is calculated as ten percent of the gross purchase price of a
housing unit, and is paid at closing as part of the purchase price. If a resident inherits
the unit or receives it as a gift, the resident pays the fee, calculated as ten percent of
the unit’s fair market value. If the unit is resold, the ten percent fee is deducted from
the gross sales price and paid at closing. The payment of this fee is clearly set forth
in the membership agreement. Membership entitles residents to access to the
common property of the Cedars, including a clubhouse and health center. Residents
who become incapable of independent living may move into the health center, and
remain eligible to use the facilities for the remainder of their lives.
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
In addition to the initial membership fee, members make monthly payments
to the Cedars Club (the Club), which cover the cost of various amenities. These
monthly payments include a payment to the Cedars for overhead expenses, which is
described in the membership agreement, disclosure statements, declaration, and
bylaws of the condominium association.
On 29 June 2011, Jonathan Wilner and Diane Wilner filed this lawsuit
seeking: (1) a declaratory judgment that the covenants requiring membership and a
membership fee, and requiring payment of an overhead fee, do not run with the land,
and are therefore unenforceable; (2) a declaratory judgment that the preliminary
membership fee is a “transfer fee” prohibited under N.C. Gen. Stat. § 39A-3; (3) a
judgment that the preliminary membership fee violates the Marketable Title Act,
N.C. Gen. Stat. § 47B; and (4) a temporary restraining order and preliminary
injunction to prohibit the collection of the membership fee and overhead payment.1
On 23 August 2011, the Wilners filed an amended complaint, joining as plaintiffs
Edwin B. Hoel, Per Ole Hoel, and Linda Leekley (with Jonathan Wilner and Diane
Wilner, plaintiffs). Plaintiffs’ amended complaint included additional factual
allegations, and an additional cause of action for breach of the declaration and bylaws
of the condominium association. On 7 November 2011, plaintiffs filed a motion for
1 Plaintiffs brought additional claims, but dismissed them two days before the hearing on their
motion for class certification.
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
class certification. On 24 August 2012, the trial court granted plaintiffs’ motion to
certify a class.2
The parties each filed motions for summary judgment. Plaintiffs’ summary
judgment motion also included new language not previously used in their complaint,
alleging that the membership agreements were unconscionable, and seeking a
permanent injunction.
On 10 January 2014, the trial court granted summary judgment in favor of
plaintiffs as to plaintiffs’ claims asserting that the covenants were unenforceable,
that they violated Chapter 39A of the North Carolina General Statutes, and that they
violated N.C. Gen. Stat. § 47B, the Real Property Marketable Title Act, and plaintiffs’
request for a temporary restraining order and preliminary injunction. The trial court
denied defendants’ motions for summary judgment. This order did not address the
unconscionability language contained in plaintiffs’ motion for summary judgment.
Defendants appeal. On 28 January 2014, the trial court granted defendants’
motion to stay judgment pending appeal, and certified its order to this Court
pursuant to Rules 54 and 62 of the North Carolina Rules of Civil Procedure.
II. Standard of Review
“Our standard of review of an appeal from summary judgment is de novo; such
judgment is appropriate only when the record shows that ‘there is no genuine issue
2 The class action is not the subject of this appeal.
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
as to any material fact and that any party is entitled to a judgment as a matter of
law.’” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting
Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007)).
III. Enforceability of Membership Agreement
In their first argument, defendants contend that the trial court erred in ruling
that the membership fee and overhead payments were unenforceable. We agree.
Because the order did not specify the basis by which the trial court held the fee
and payments unenforceable, we examine in turn each of the various arguments
made by plaintiffs at the summary judgment hearing before the trial court.
A. Unconscionability
Plaintiffs alleged in their motion for summary judgment that the contracts
they signed were unconscionable. In order to establish unconscionability, plaintiffs
had to show both procedural unconscionability and substantive unconscionability.
Westmoreland v. High Point Healthcare Inc., 218 N.C. App. 76, 80, 721 S.E.2d 712,
717 (2012).
Procedural unconscionability involves “bargaining naughtiness in the form of
unfair surprise, lack of meaningful choice, and an inequality of bargaining power.”
Id. at 81, 721 S.E.2d at 717 (quotations and citations omitted). Plaintiffs, raising this
argument in their motion for summary judgment, contended that:
[T]he bargaining power between the Plaintiffs and
Defendants . . . was unquestionably unequal in that the
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
Plaintiffs as a whole are relatively unsophisticated in
terms of the complex real estate and financial
machinations at play while contracting with the
Defendants who engaged counsel experienced in complex
real property transactions and condominium governance to
draft the covenant clauses requiring payment of the
Challenged Fees, along with the numerous other
documents such as Condo Bylaws, Membership
Agreements, Purchase and Sale Agreements, Resale
Purchase and Sale Agreements, Guarantees, Indemnities,
each of which include detailed provisions as to the payment
and collection of the Challenged Fees.
We find that these contentions were insufficient to establish procedural
unconscionability. The contracts at issue were signed at a real estate closing,
meaning that plaintiffs had counsel present. The contracts had detailed, bolded notes
in the margins, explaining what each contract provision entailed. Plaintiffs did not
allege that they were rushed through the process, nor that they were tricked or
deprived of opportunity to speak with counsel or consider their options; plaintiffs
alleged only that defendants were more sophisticated and drafted the contracts to
their own benefit. This alone does not rise to the level of procedural
unconscionability. We held in Westmoreland that “bargaining inequality alone
generally cannot establish procedural unconscionability. Otherwise, procedural
unconscionability would exist in most contracts between corporations and
consumers.” Id.
Substantive unconscionability “refers to harsh, one-sided, and oppressive
contract terms.” Id. at 84, 721 S.E.2d at 719 (quotations and citations omitted). The
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Opinion of the Court
terms must be “so oppressive that no reasonable person would make them on the one
hand, and no honest and fair person would accept them on the other.” Brenner v.
Little Red Sch. House Ltd., 302 N.C. 207, 213, 274 S.E.2d 206, 210 (1981). Plaintiffs,
in raising this issue, contended that the fees in question were “exorbitantly high,”
that the documents at issue were “decidedly one-sided in favor of the Company,” and
that plaintiffs lacked “ability . . . to negotiate any of the terms of the covenants and
conditions in question in this case.” Plaintiffs further noted that the market for
CCRCs in Chapel Hill is very small, leaving few alternatives.
Again, we find plaintiffs’ arguments unavailing. We recently held that “the
times in which consumer contracts were anything other than adhesive are long past.”
Torrence v. Nationwide Budget Fin., ___ N.C. App. ___, ___, 753 S.E.2d 802, 812
(quoting AT&T Mobility LLC v. Concepcion, ___ U.S. ___, ___, 179 L.Ed.2d 742, 755
(2011)), review denied, cert. denied, ___ N.C. ___, 759 S.E.2d 88 (2014). The mere fact
that plaintiffs lacked the ability to negotiate contract terms does not create
substantive unconscionability, nor does the fact that defendants were among the only
providers of CCRC facilities. We hold that plaintiffs did not adequately demonstrate
unconscionability as a matter of law, and that a genuine issue of material fact existed
as to unconscionability, which precluded summary judgment.
B. Transfer Fees
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
Plaintiffs also alleged that the membership fee constituted an unlawful
transfer fee. Chapter 39A of the North Carolina General Statutes provides that a
transfer fee violates North Carolina’s public policy in favor of the alienability of real
property “by impairing the marketability of title to the affected real property and
constitutes an unreasonable restraint on alienation and transferability of property,
regardless of the duration of the covenant or the amount of the transfer fee set forth
in the covenant.” N.C. Gen. Stat. § 39A-1(b) (2013). Chapter 39A defines a transfer
fee as “a fee or charge payable upon the transfer of an interest in real property or
payable for the right to make or accept such transfer, regardless of whether the fee
or charge is a fixed amount or is determined as a percentage of the value of the
property, the purchase price, or other consideration given for the transfer.” N.C. Gen.
Stat. § 39A-2(2).
However, there exists an exception to the provisions in Chapter 39A. Chapter
58, Article 64 of the North Carolina General Statutes deals with CCRCs. According
to N.C. Gen. Stat. § 58-64-85:
Facilities and providers licensed under this Article that
also are subject to the provisions of the North Carolina
Condominium Act under Chapter 47C of the General
Statutes shall not be subject to the provisions of Chapter
39A of the General Statutes, provided that the facility's
declaration of condominium does not require the payment
of any fee or charge not otherwise provided for in a
resident's contract for continuing care, or other separate
contract for the provisions of membership or services.
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
N.C. Gen. Stat. § 58-64-85(b) (2013) (emphasis added). The specific provision of this
statute overrules the general provision of Chapter 39A. Provided that the
condominium declaration requires only fees outlined in other contracts signed by the
resident, those fees are not barred by the provisions of Chapter 39A, even though they
might otherwise be considered transfer fees.
In the instant case, all fees, including the membership fee, were described in
detail in contracts and agreements signed by all residents of the Cedars. Because the
declaration required only those fees which were provided for in contracts signed by
the residents, they are exempt from the provisions of Chapter 39A prohibiting
transfer fees.
C. Marketable Title Act
Plaintiffs also alleged that the agreements at issue violate the Marketable
Title Act. Chapter 47B of the North Carolina General Statutes codifies North
Carolina policy in favor of quieting title when a person can demonstrate 30 years of
continuous ownership of real property. See N.C. Gen. Stat. § 47B-1 et seq (2013).
The Marketable Title Act deals with actions to quiet title. In the instant case,
there is no issue as to who owns the various units and common elements of the Cedars
CCRC; these issues of ownership are explicitly detailed in the ownership agreements
signed by the parties. The Act does not authorize a cause of action where, as here,
parties are under a contractual obligation to pay fees pursuant to contract.
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
IV. Enforceability of Covenants
In their second argument, defendants contend that the trial court erred in
finding the challenged covenants unenforceable. We agree.
All purchasers of property at the Cedars are required to sign a membership
agreement, a separate document that is part of the purchase and sale agreement, at
the time of closing. This agreement provides that all residents must be members,
that membership is non-transferable, and that the membership fee is included in and
deducted from the purchase price of a unit. Plaintiffs, in their initial complaint,
which was incorporated by reference in their amended complaint, contend that they
represent all persons who purchase, sell, or own a Unit at the Cedars, all who enter
into a membership agreement with the Cedars, and all who are currently or may in
the future enter into a membership agreement with the Cedars. We note that any
such plaintiff, including the named plaintiffs in the instant case, would have in
common the fact that either they or their buyers would have signed the membership
agreement providing for the deduction of membership fees from the purchase price of
a unit.
Plaintiffs contend that the covenants at issue do not run with the land, and are
therefore unenforceable against subsequent purchasers. In Runyon v. Paley, the
seminal case on covenants running with the land in North Carolina, our Supreme
Court held that a party seeking to enforce a covenant as one running with the land
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
had to prove that the covenant in question “touches and concerns” the land, the
existence of both horizontal and vertical privity of estate, and the intent of the
original parties to create a covenant running with the land. 331 N.C. 293, 416 S.E.2d
177 (1992). Black’s Law Dictionary defines a covenant running with the land as “[a]
covenant ultimately and inherently involved with the land and therefore binding
subsequent owners and successor grantees indefinitely.” Black’s Law Dictionary 421
(9th ed. 2009). It further notes that “[t]he most important consequence of a covenant
running with the land is that its burden or benefit will thereby be imposed or
conferred upon a subsequent owner of the property who never actually agreed to it.
Running covenants thereby achieve the transfer of duties and rights in a way not
permitted by traditional contract law.” Id. (quoting Roger Bernhardt, Real Property
in a Nutshell 212 (3rd ed. 1993)). It is this feature, the fact that a covenant running
with the land can bind subsequent owners who did not agree to it, that distinguishes
this type of covenant from a traditional contract.
Despite plaintiffs’ contentions, the issue in this case is not one of a covenant
running with the land. In the instant case, any potential buyer is required to sign a
contract obligating himself to the payment of membership fees. As a result, this
matter falls within the realm of traditional contract law, not the law of covenants
running with the land. Under traditional contract law, parties that agree to contracts
are bound by them. Plaintiffs, or their buyers, would be obligated to pay the
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
membership fees, not because of some covenant running with the land, but because
they signed a document agreeing to pay the membership fees. Plaintiffs’ contentions
that the fees, once collected, need not be spent on improving or maintaining the
physical facilities is irrelevant. Plaintiffs’ contentions that these fees do not touch
and concern the land, and that the fees are therefore an unenforceable covenant
running with the land, are without merit.
V. Entry of Injunction
In their third argument, defendants contend that the trial court’s summary
judgment order, which grants an injunction, violated Rule 65(d) of the North Carolina
Rules of Civil Procedure. We agree.
Rule 65 of the North Carolina Rules of Civil Procedure provides, in relevant
part:
Every order granting an injunction and every restraining
order shall set forth the reasons for its issuance; shall be
specific in terms; shall describe in reasonable detail, and
not by reference to the complaint or other document, the
act or acts enjoined or restrained; and is binding only upon
the parties to the action, their officers, agents, servants,
employees, and attorneys, and upon those persons in active
concert or participation with them who receive actual
notice in any manner of the order by personal service or
otherwise.
N.C. R. Civ. P. 65(d). This requirement is explicit and unambiguous; a trial court
may not issue an injunction or restraining order without providing specific terms, “in
reasonable detail, . . . the act or acts enjoined or restrained[.]” In the instant case,
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WILNER V. THE CEDARS OF CHAPEL HILL, LLC
Opinion of the Court
the trial court entered a summary judgment order, granting summary judgment on
four of plaintiff’s claims, including its motion for an injunction, with no further
explanation given. Specifically, the trial court’s order as to plaintiffs’ claims stated:
Plaintiffs' motion for partial summary judgment is, allowed
as to Plaintiffs' First, Third, Eighth and Tenth Claims for
Relief as set forth in paragraphs numbered one through
five in Plaintiff's motion.
In their motion for summary judgment, plaintiffs alleged with respect to their
tenth claim for relief:
Plaintiffs' Tenth Claim for Relief for Permanent Injunction
enjoining and stopping, forever, the Defendants' past,
present, and future efforts to implement and enforce
certain affirmative covenants in the Declaration of
Condominium of The Cedars of Chapel Hill requiring that
Plaintiffs pay Defendants certain Challenged Fees,
including but not limited to a Transfer Fee (aka the
"Membership Fee"), the Corporate Overhead Payment Fee,
and the Litigation Fee, in order that this Court may
prevent the irreparable harm that the Plaintiffs have
suffered, are suffering, and will continue in the future to
suffer if a Permanent Injunction is not entered stopping the
Defendants from collecting and enforcing their claimed
right to such fees[.]
Plaintiffs’ motion for summary judgment sought an expansive injunction, and
the trial court’s cursory handling of that issue did not meet the standard of
“reasonable detail” concerning “the act or acts enjoined or restrained[.]” We hold that
the trial court erred in granting an injunction in such a cursory manner.
VI. Failure to Make Allegations Against Defendants
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Opinion of the Court
In their fourth argument, defendants contend that the trial court erred in
entering its summary judgment order where plaintiffs had failed to make allegations
against multiple defendants. Because we have held above that the trial court erred
in entering summary judgment, we need not address this contention.
VII. Conclusion
We hold that the trial court erred in determining, as a matter of law, that the
contracts at issue were unconscionable, and that they violated the provisions of
Chapter 39A and the Marketable Title Act. We further hold that the trial court erred
in finding the covenants unenforceable. The trial court also erred in entering its
injunction in a cursory manner, in violation of Rule 65 of the North Carolina Rules of
Civil Procedure. We vacate the order granting summary judgment and the
injunction, and remand this matter to the trial court for a trial by jury.
VACATED AND REMANDED.
Judges GEER and STEPHENS concur.
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