## Facts

- A landowner leased commercial property under a base lease with rent increases tied to an index.
- A later amendment substituted a developer as lessee and suspended the base lease’s rent increases for a period.
- The amendment conditioned continued lower fixed rent on the developer having “developed” all subdivision lots by a specified deadline; failure triggered retroactive rent escalation under the base lease formula.
- By the deadline, the developer had subdivided the tract, installed utilities and access infrastructure, and constructed buildings on all but one lot; the remaining lot had site preparation and utilities but no building.
- The parties disputed the meaning of “developed”: the landowner claimed it required completed building construction on every lot by the deadline, while the developer claimed it meant readiness for construction (subdivision, grading, utilities, access).
- The case proceeded through summary judgment, an appellate remand for factfinding due to ambiguity, and a bench trial where the trial court found no mutual assent on the disputed term but awarded the landowner additional rent by construing the ambiguity against the developer.

## Issues

1. Whether competent evidence supported the trial court’s finding that the parties lacked a meeting of the minds on the rent-escalation condition, particularly the meaning of “developed.”
2. Whether admitting testimony about a party’s subjective understanding of the disputed term required reversal in a bench trial.
3. Whether the trial court properly resolved the ambiguity by construing the provision against the drafter (contra proferentem) given the parties’ equal bargaining posture and uncertainty about authorship.
4. What standard governs when each party reasonably attaches a different meaning to an ambiguous term, including whether one party knew or had reason to know the other’s meaning.
5. Whether the action was barred by the Statute of Frauds based on the manner the lease documents were handled at trial.

## Decision

- The court affirmed the finding that the parties did not reach mutual assent on the meaning of the rent-escalation condition; the finding was supported by competent evidence.
- The court held that admission of subjective-intent testimony was not reversible error in a nonjury trial where the judge is presumed to disregard incompetent evidence and other evidence supported the findings.
- The court reversed the judgment to the extent it relied on construing ambiguity against the drafter and remanded for additional findings applying the Restatement “reason to know” approach to mutual misunderstanding.
- The court rejected dismissal under the Statute of Frauds, noting stipulations as to the documents and the failure to plead the defense.

## Legal Principles

- A trial court’s findings of fact are binding on appeal if supported by competent evidence.
- When contractual language is ambiguous and the parties reasonably attach different meanings, the proper inquiry is whether one party knew or had reason to know the meaning attached by the other.
- If one party had reason to know the other’s meaning and the other lacked reason to know the first party’s meaning, the contract is enforced in accordance with the meaning of the party lacking such knowledge.
- If neither party had reason to know the other’s meaning and both meanings are reasonable, there is no mutual assent on that term, and a claim dependent on that term fails.
- Contra proferentem is a residual rule of construction and is not a substitute for determining whether mutual assent existed, especially where the parties negotiated at arm’s length with comparable sophistication and authorship is unclear.
- The Statute of Frauds is an affirmative defense that must be pleaded; stipulations and undisputed contract content can defeat a late-raised Statute of Frauds dismissal request.

## Conclusion

The court upheld the trial court’s determination that the parties never mutually assented to a single meaning of “developed” in a rent-escalation condition, but it rejected resolving that ambiguity by automatically construing it against an alleged drafter and required, on remand, findings under the Restatement “reason to know” framework to determine whether the disputed term could be enforced or the claim must fail.


Joyner v. Adams, 361 S.E.2d 902 (N.C. Ct. App. 1987)