Cabrera v. Hensley,
2012 NCBC 41.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF
JUSTICE
COUNTY OF McDOWELL SUPERIOR COURT DIVISION
09 CVS 544
PERLA CABRERA, et al;
Plaintiffs,
v. ORDER & OPINION
JILL T. HENSLEY, et al;
Defendants.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF
JUSTICE
COUNTY OF McDOWELL SUPERIOR COURT DIVISION
09 CVS 1062
BRIAN and NICOLE MARK, et al,
Plaintiffs,
v.
CHRISTOPHER VAN DYKE, et al,
Defendants.
Brooks, Pierce, McLendon, Humphrey & Leonard, LLP by John S. Buford for
Defendants Christopher Van Dyke and Jill T. Hensley.
Cogburn & Brazil, P.A. by William O. Brazil, III for Defendant Molly
Oakman.
Cranfill, Sumner & Hartzog, LLP by Todd King for Defendant Charles B.
Highsmith.
Roberts & Stevens, P.A. by Mark C. Kurdys and Stephen L. Cash for
Defendants Nelson Eide and R. Keith Hollifield.
Teague Campbell Dennis & Gorham by Jacob H. Wellman, Brad G. Inman,
and Christopher G. Lewis for Defendants Eric L. Ross, Douglas Elliott, James
Gibbs, and Gerald F. Wright.
Murphy, Judge.
{1} THIS MATTER is before the Court on Defendants Christopher Van
Dyke (“Van Dyke”), Jill T. Hensley (“Hensley”), Molly Oakman (“Oakman”), Charles
B. Highsmith (“Highsmith”), Nelson Eide (“Eide”), R. Keith Hollifield (“Hollifield”),
Eric L. Ross (“Ross”), Douglas Elliot (“Elliot”), James Gibbs (“Gibbs”), and Gerald F.
Wright’s (“Wright”) (collectively the “Defendants” or “appraisers”) Motions for
Summary Judgment (“Defendants’ Motions”). After considering the parties’
motions and briefs, and the arguments made by counsel during a hearing before
this Court on October 5, 2011, the Court GRANTS Defendants’ Motions.
I.
PROCEDURAL HISTORY
{2} This action is a consolidation of two cases filed in McDowell County,
North Carolina that deal with Plaintiffs’1 purchases of real estate in the residential
development known as Wild Ridges at Morgan Creek (“Wild Ridges”).
{3} The first case (“Cabrera Case”), 09 CVS 544, was filed on June 23,
2009; designated as a mandatory complex business case on July 28, 2009; and
assigned to this Court on July 29, 2009. (Compl. p. 29; Desig. Order 1; Assign.
Order 2.) The second case (“Mark Case”), 09 CVS 1062, was filed on November 16,
2009; designated as a mandatory complex business case on December 17, 2009;
assigned to the Honorable Ben F. Tennille on December 18, 2009; and reassigned to
this Court on February 23, 2010. (Compl. p. 18; Desig. Order 1; Assign. Order 2.)
{4} Plaintiffs’ initial Complaints alleged claims against the developer of
Wild Ridges, the lenders that extended financing to each Plaintiff (Bank of America
Corp.; Branch Banking & Trust Company; Fifth Third Bank , N.A., as successor in
interest to First Charter Bank, N.A.; United Community Bank, N.A.; Wachovia
Bank, N.A.; and Flagstar Bank, F.S.B. (collectively the “lenders”)), and the
appraisers who performed appraisals on lots financed by the lenders and purchased
by Plaintiffs (Defendants Hensley, Ross, Eide, Van Dyke, Oakman, Highsmith,
Wright, and Unknown Appraisers 1–7).
1 Unless indicated otherwise, the Court’s reference to “Plaintiffs” refers to all Plaintiffs in
both the 09 CVS 544 action and the 09 CVS 1062 action.
{5} Defendants Gibbs, Elliott, and Hollifield were not added as Defendants
in the Cabrera Case until Plaintiffs properly filed an Amended Complaint on July 6,
2010.
{6} Shortly after these cases were designated to the Business Court, the
Chapter 7 Bankruptcy Trustee for Wild Ridges filed a Suggestion of Bankruptcy for
the developer of Wild Ridges. As a result, Plaintiffs’ claims against the developer
were stayed, and the Court proceeded with Plaintiffs’ claims against the lenders
and the Defendants. On January 26, 2010, and March 22, 2010, the Court entered
Orders in the Cabrera and Mark Cases respectively, that dismissed all of Plaintiffs’
claims against the lenders, leaving open only the claims against the appraisers.
Cabrera v. Hensley, No. 09 CVS 544 (N.C. Super. Ct. Jan. 26, 2010) (order granting
lender defendants’ motions to dismiss); Mark v. Wachovia Bank, N.A., 09 CVS 1062
(N.C. Super. Ct. Mar. 22, 2010) (order granting lender defendants’ motions to
dismiss).
{7} On March 23, 2010, the Court entered an Order consolidating the
Cabrera Case and the Mark Case for all purposes including discovery, pre-trial
motions, and trial. The parties proceeded with discovery, and Defendants’ Motions
were filed prior to the Court’s May 2, 2011, post-discovery deadline. Plaintiffs filed
responses to Defendants’ Motions, and all Defendants, except Defendant Gibbs,
filed Replies in Support of Defendants’ Motions. This Court held a hearing on
Defendants’ Motions on October 5, 2011.
II.
FACTUAL BACKGROUND
{8} Summary judgment is improper where findings of fact are necessary to
resolve an issue of material fact. Collier v. Collier, 204 N.C. App. 160, 161–162,
693
S.E.2d 250, 252 (2010) (citing Hyde Ins. Agency v. Dixie Leasing Corp.,
26 N.C. App.
138, 142,
215 S.E.2d 162, 164–165 (1975)). However, for the aid of the parties and
the courts, the trial court may provide a summary of material facts that it finds to
be uncontroverted in deciding the motion.
Id. The following facts are undisputed in
the record.
{9} Land Resource Group, Inc. (“Land Resources Group”), a Georgia
corporation with its registered offices in Raleigh, North Carolina, developed and
marketed Wild Ridges through its various affiliates and collected real estate
commissions from the sale of lots to Plaintiffs. (Am. Compl. ¶¶ 35–36.)
{10} Wild Ridges was planned and marketed as an upscale gated
residential community that would include common amenities such as an exclusive
clubhouse, hot tub facilities, swimming pool, resident gardening areas, hiking trails,
and other luxury common areas. (Am. Compl. ¶¶ 62–63.)
{11} When Plaintiffs purchased their lots in Wild Ridges, roads were
beginning to be cut, paving had not begun, few lots had been cleared, and the
interior of the development was largely inaccessible except by all-terrain vehicle.
(Defs. Van Dyke and Hensley’s Br. Supp. Mot. Summ. J. 3; see e.g., D. Nelson Dep.
at 17:9–13, 20:14–21:22, 34:24–35:4.) Many of the Plaintiffs were entertained by
the developer in nearby Asheville, North Carolina, and taken for tours of the
undeveloped Wild Ridges property. (Defs. Van Dyke and Hensley’s Br. Supp. Mot.
Summ. J. 3; see e.g., Dawn Blitsch Dep. at 37:16–38:12.)
{12} Each Plaintiff executed a purchase agreement with the developer for
the purchase of a lot at Wild Ridges. Only Plaintiffs Richard and Jeri Skelton’s
purchase agreement contained a financing and appraisal contingency that would
have relieved the Skeltons of thier obligation to complete the purchase of their Wild
Ridges lot if they were unable to secure financing through a lender, or if the lot
appraised below a predetermined amount. (R. Skelton Dep. at 46:11–15, 47:19–
21.)2
{13} After the purchase agreements were executed, Plaintiffs secured,
through lenders of their choice, financing for the purchase of lots at Wild Ridges.
Plaintiffs’ lenders contracted with the Defendants to perform appraisals for the
benefit of the lenders. (Defs. Van Dyke and Hensley’s Br. Supp. Mot. Summ. J. 4.)
Plaintiffs do not contend that Defendants’ appraisals were for the direct benefit of
2 Plaintiffs Richard and Jeri Skelton voluntarily dismissed their claims with prejudice on
June 30, 2011. (Pls. Richard and Jeri Skelton’s Notice of Vol. Dismissal with Prej. 1–2.)
anyone other than the lenders. Each Defendant included representations in their
appraisals, testified at deposition, or contended by way of affidavit that the lender
was the only intended user of the appraisal. (Van Dyke Dep. at 97:1–98:13; Hensley
Dep. at 44:4–45:2; R. Keith Hollifield Dep. at 9:3–12; Nelson Eide Dep. at 45:3–19;
James H. Gibbs Dep. at 9: 5–12; Defs. Ross and Elliott’s Mot. Summ. J. Ex. 11–12;
Def. Wright’s Mot. Summ. J. Ex. 5; Defs. Highsmith and Oakman’s Mot. Summ J.
Aff. A & B ¶ 6.)
{14} Plaintiffs did not review, or have access to, the final appraisals of their
lots prior to signing purchase agreements to buy property in Wild Ridges, and only
two Plaintiffs received copies of the appraisals of their property prior to closing.3 In
fact, some Plaintiffs did not see the appraisal of their property, or learn of the
appraised value, until giving their pre-trial deposition. (E.g., Darren Blitsch Dep.
at 15:10–14, 16:7–14; Dawn Blitsch Dep. at 94:17–25; S. Cecchin Dep. at 52:8–16; T.
Cecchin Dep. at 32:6–11; Lendin Dep. at 31:16–32:2; Mallett Dep. at 60:4–6; B.
Nelson Dep. at 18:23–19:1; Perla Dep. at 59:11–16; Sherman Dep. at 77:1–10,
77:22–78:7; J. Skelton Dep. at 24:24–25:2.)
{15} In late 2008, the development of Wild Ridges stopped, Land Resources
Group closed its sales office and shut down operations, and to date, no further
development or construction has occurred in Wild Ridges. (Am. Compl. ¶ 73.)
{16} Plaintiffs assert claims for professional negligence, fraud in the
inducement, and unfair and deceptive trade practices against Defendants. (Am.
Compl. 29–31.)
III.
STANDARD OF REVIEW
{17} The purpose of summary judgment is to determine whether any issues
of material fact exist, and if there are none, to eliminate the necessity of a full trial
where only questions of law are involved. Strickland v. Lawrence, 176 N.C. App.
3 Plaintiffs Christopher and Sophie Ondrus (“Ondrus Plaintiffs”) testified at deposition that
they received a copy of the appraisal prior to closing and briefly reviewed the report.
Plaintiffs do not present, nor forecast the presentation of, any evidence showing that the
Ondrus Plaintiffs received the appraisal prior to their execution of the purchase agreement.
656, 661,
627 S.E.2d 301, 305, disc. rev. denied,
360 N.C. 544,
633 S.E.2d 472 (2006)
(citing Foster v. Winston-Salem Joint Venture,
303 N.C. 636, 641–42,
281 S.E.2d 36,
40 (1981)). “The movant has the burden of establishing the absence of any triable
issues of fact.”
Id. This burden can be met in one of two ways: “(1) ‘by proving an
essential element of the opposing party’s claim does not exist, cannot be proven at
trial, or would be barred by an affirmative defense’; or (2) ‘by showing through
discovery that the opposing party cannot produce evidence to support an essential
element of her claim.’”
Id. (quoting Dobson v. Harris,
352 N.C. 77, 83,
530 S.E.2d
829, 835 (2000)).
{18} “In ruling on a motion for summary judgment, ‘the court may consider
the pleadings, depositions, admissions, affidavits, answers to interrogatories, oral
testimony[,] and documentary materials.’” Id. (quoting Dendy v. Watkins,
288 N.C.
447, 452,
219 S.E.2d 214, 217 (1975)).
IV.
ANALYSIS
A.
STATUTE OF LIMITATIONS
{19} Defendants Hollifield, Elliott, and Gibbs all argue that certain
Plaintiffs who brought claims against them for professional negligence are barred
by the applicable statute of limitations.4 The varying procedural postures of each
Plaintiff prompt the Court to address Plaintiffs’ claims individually.
1.
LEGAL STANDARD
{20} North Carolina has established a three-year statute of limitations for
claims of professional negligence. N.C. GEN. STAT. §§ 1–52(1)-(5) (2012). “A cause of
action based on negligence accrues when the wrong giving rise to the right to bring
suit is committed, even though the damages at that time be nominal and the
4 Defendant Hollifield argues that Plaintiffs David and Daiva Stratton (“Stratton
Plaintiffs”) are barred by the statute of limitations, Defendant Elliot argues that Plaintiff
Rita Bhat (“Bhat”) is barred by the statute of limitations, and Defendant Gibbs argues that
Plaintiffs Barry and Deborah Nelson (“Nelson Plaintiffs”) are barred by the statute of
limitations.
injuries cannot be discovered until a later date.” Harrold v. Dowd, 149 N.C. App.
777, 781,
561 S.E.2d 914, 918 (2002) (citing Pierson v. Buyher,
101 N.C. App. 535,
537,
400 S.E.2d 88, 90 (1991)).
{21} Claims included in an amended pleading relate back to the filing of the
original pleading when the original pleading gives sufficient “notice of the
transactions, occurrences, or series of transactions or occurrences, to be proved
pursuant to the amended pleading.” N.C. R. Civ. P. 15(c).
{22} Rule 15(c) deals with the relation back of claims, not parties:
Nowhere in the rule is there a mention of parties. It speaks of claims
and allows the relation back of claims if the original claim gives notice
of the transactions or occurrences to be proved pursuant to the
amended pleading. When the amendment seeks to add a party-defendant or substitute a party-defendant to the suit, the required
notice cannot occur. As a matter of course, the original claim cannot
give notice of the transactions or occurrences to be proved in the
amended pleading to a defendant who is not aware of his status as
such when the original claim is filed. We hold that [Rule 15(c)] does
not apply to the naming of a new party-defendant to the action. It is
not authority for the relation back of a claim against a new party.
Crossman v. Moore, 341 N.C. 185, 187,
459 S.E.2d 715, 717 (1995) (emphasis
added).
{23} “An action may be commenced by ‘filing a complaint with the
court’ or by ‘the issuance of a summons’ and an order extending permission to
file.” Beall v. Beall, 156 N.C. App. 542, 547,
577 S.E.2d 356, 360 (2003)
(citing N.C. R. Civ. P. 3(a)) (emphasis in original).
2.
CLAIM FOR PROFESSIONAL NEGLIGENCE BROUGHT BY DAVID AND DAVIA
STRATTON
{24} David and Davia Stratton (“Stratton Plaintiffs”) attempted to add
Defendant Hollifield as a party to this case on May 27, 2010, by filing an Amended
Complaint without the Court’s permission. Hensley, No. 09 CVS 544 (N.C. Super.
Ct. Aug. 24, 2010) (order granting Defendant Hollifield’s motion to dismiss).
Eventually, the Stratton Plaintiffs filed a proper motion for leave to file an amended
complaint, and the Court granted the motion on July 1, 2010. An effective
Amended Complaint was filed on July 6, 2010. (Cabrera Am. Compl. pg. 32.)
{25} The facts alleged against Defendant Hollifield in the Amended
Complaint focus on Hollifield’s appraisal of Lot # 162. The Stratton Plaintiffs (the
parties who purchased Lot # 162) allege, and Defendant Hollifield agrees, that
Hollifield performed the appraisal of Lot # 162 on June 22, 2007. (Am. Compl. ¶
173; Defs. Eide and Hollifield’s Br. in Supp. Mot. Summ. J. 11.) Defendant
Hollifield argues that because the Stratton Plaintiffs’ case against him did not
commence until the civil summons was issued on September 22, 2010, their claim
for professional negligence is barred by the applicable statute of limitations. In
their response, the Stratton Plaintiffs do not contest the issuance date of the
summons, therefore, the Court accepts Defendant’s assertion as an undisputed fact.
(See Pls.’ Resps. Defs.’ Mots. Summ. J.)
{26} The Stratton Plaintiffs were parties to the original Cabrera Case filed
on June 23, 2009, and alleged in the Complaint a claim for professional negligence
against “Unknown Appraiser #5.” (Compl. ¶ 211.) The substitution of Defendant
Hollifield in the Amended Complaint for “Unknown Appraiser # 5” attempts to
identify the previously unknown appraiser, and to have the professional negligence
claim relate back to the date when Plaintiffs filed the original Complaint.
{27} A cause of action for professional negligence would have accrued “when
the wrong giving rise to the right to bring suit [wa]s committed, even though the
damages at that time [were] nominal and the injuries [could not] be discovered until
a later date.” Harrold, 149 N.C. App. at 781,
561 S.E.2d at 918 (citation omitted).
In this case, the “wrong” would have been the negligent appraisal of Lot # 162. The
Amended Complaint alleges that Defendant Hollifield’s negligent appraisal of Lot #
162 was performed on June 22, 2007. (Am. Compl. ¶ 173.) Accordingly, at the
latest, the alleged “wrong” by Defendant Hollifield would have been completed by
June 22, 2007. With the Stratton Plaintiffs’ cause of action for professional
negligence accruing on June 22, 2007, a claim must have been commenced against
Defendant Hollifield by June 22, 2010. N.C. GEN. STAT. §§ 1–52(1)-(5) (establishing
a three-year statute of limitations for claims of negligence).
{28} The Court finds the Stratton Plaintiffs’ argument that Rule 15(c)
controls the relation back of parties, and allows for their professional negligence
claim to relate back to the initial filing of Plaintiffs’ original Complaint, to be
unpersuasive. As the North Carolina Supreme Court has repeatedly held, Rule 15
“does not apply to the naming of a new party-defendant to the action. It is not
authority for the relation back of a claim against a new party.” Crossman, 341 N.C.
at 187,
459 S.E.2d at 717; Estate of Fennell v. Stephenson,
354 N.C. 327, 334–35,
554 S.E.2d 629, 633–34 (2001); Brown v. Kindred Nursing Ctrs. East, LLC,
364
N.C. 76, 81–82,
692 S.E.2d 87, 91 (2010).
{29} As stated above, the court in Crossman held that:
[w]hen the amendment seeks to add a party-defendant or substitute a
party-defendant to the suit, the required notice cannot occur. As a
matter of course, the original claim cannot give notice of the
transactions or occurrences to be proved in the amended pleading to a
defendant who is not aware of his status as such when the original
claim is filed.
Crossman, 341 N.C. at 187,
459 S.E.2d at 717.
{30} Here, Plaintiffs did not commence their action against Defendant
Hollifield until they filed a proper Amended Complaint on July 6, 2010. Beall, 156
N.C. App. at 547,
577 S.E.2d at 360 (citing N.C. R. Civ. P. 3(a)). Because Plaintiffs
did not commence their action against Defendant Hollifield by June 22, 2010, their
claim for professional negligence is barred by the applicable statute of limitations.
Accordingly, Defendant Hollifield’s Motion for Summary Judgment as to the
Stratton Plaintiffs’ claim for professional negligence is GRANTED and the Stratton
Plaintiffs’ claim for professional negligence is hereby DISMISSED with prejudice.
3.
CLAIM FOR PROFESSIONAL NEGLIGENCE BROUGHT BY RITA BHAT
{31} Plaintiffs attempted to add Defendant Elliott as a party to this case on
May 27, 2010, by filing an Amended Complaint without the Court’s permission. In
an Order entered September 1, 2010, this Court dismissed Plaintiffs’ claims against
Defendant Elliott for insufficiency of process, but without prejudice for Plaintiffs to
attempt to make timely service on Defendant Elliott. Hensley, No. 09 CVS 544
(N.C. Super. Ct. Sept. 1, 2010) (order granting Defendant Elliott’s motion to
dismiss). Eventually Plaintiffs filed an effective Amended Complaint and
Defendant Elliot was added as a party to this case.
{32} In the Amended Complaint filed July 6, 2010, Plaintiff Bhat alleges
that on or about June 28, 2007, Defendant Elliott negligently performed an
appraisal of Wild Ridges Lot # 225. (Am. Compl. ¶ 178.) A three-year statute of
limitations applies to claims of professional negligence, N.C. GEN. STAT. § 1–52(5),
and a cause of action for professional negligence accrues “when the wrong giving
rise to the right to bring suit [wa]s committed, even though the damages at that
time [were] nominal and the injuries [could not] be discovered until a later date.”
Harrold, 149 N.C. App. at 781,
561 S.E.2d at 918 (citation omitted). In this case,
the “wrong” would have been the negligent appraisal of Lot # 225.
{33} Plaintiffs allege that Defendant Elliott was professionally negligent in
his appraisal of Lot # 225. Accordingly, Plaintiffs were required to bring any claim
for professional negligence against Defendant Elliot within three-years of June 28,
2007, when Defendant Elliott allegedly performed the appraisal. Because Plaintiffs’
attempted amendment of the Complaint was ineffective, Defendant was not
properly made a party to this action until Plaintiffs filed an effective Amended
Complaint on July 6, 2010. Because Plaintiffs’ Amended Complaint was filed more
than three-years after the date on which the alleged wrong giving rise to Plaintiff
Bhat’s claim occurred, Plaintiffs’ claim is barred by the applicable statute of
limitations.
{34} As discussed above, the Court finds unpersuasive Plaintiffs’ argument
that Rule 15(c) allows for the claims brought against Defendant Elliott to relate
back to the date on which Plaintiffs initially filed their Complaint. Because
Plaintiffs’ claim for professional negligence is barred by the applicable statute of
limitations, Defendant Elliott’s Motion for Summary Judgment as to Plaintiff
Bhat’s claim for professional negligence is GRANTED and Plaintiff Bhat’s claim for
professional negligence is DISMISSED with prejudice.
4.
CLAIM FOR PROFESSIONAL NEGLIGENCE BROUGHT BY PLAINTIFFS KEITH AND
DIANE NELSON (“NELSON PLAINTIFFS”)
{35} The Nelson Plaintiffs attempted to add Defendant Gibbs to this action
by amending their Complaint on May 27, 2010. In an Order entered on September
9, 2010, the Court held that the attempted amendment was ineffective because
Plaintiffs had failed to seek leave from the Court to amend their complaint.
Hensley, No. 09 CVS 544 (N.C. Super. Ct. Sept. 9, 2010) (order granting Defendant
Gibbs’ motion to dismiss). As a result, the Court dismissed Plaintiffs’ claims
against Defendant Gibbs, but without prejudice to Plaintiffs to attempt proper
amendment and service. Plaintiffs eventually filed an effective Amended Complaint
on July 6, 2010, and a summons was issued for Defendant Gibbs on September 22,
2010.
{36} In the Amended Complaint, the Nelson Plaintiffs allege that on or
about June 29, 2007, Defendant Gibbs negligently performed an appraisal of Lot #
155. (Am. Compl. ¶ 113.) A cause of action for professional negligence accrues
“when the wrong giving rise to the right to bring suit [wa]s committed, even though
the damages at that time [were] nominal and the injuries [could not] be discovered
until a later date.” Harrold, 149 N.C. App. at 781,
561 S.E.2d at 918 (citations
omitted). In this case, the “wrong” would have been the negligent appraisal of Lot #
155. In North Carolina there is a three-year statute of limitations for claims of
professional negligence. N.C. GEN. STAT. § 1–52(5).
{37} Plaintiffs allege that Defendant Gibbs was professionally negligent in
his appraisal of Lot # 155. Accordingly, Plaintiffs must have brought a claim for
professional negligence within three-years of June 29, 2007, when Defendant Gibbs
allegedly performed the appraisal. Because Plaintiffs attempted amendment was
ineffective, Defendant Gibbs was not properly made a party to this action until
Plaintiffs filed an effective Amended Complaint on July 6, 2010. Plaintiffs’ Amended
Complaint was filed more than three years after the date on which the alleged
wrong giving rise to the Nelson Plaintiffs’ claim occurred. Accordingly, Plaintiffs’
claim is barred by the applicable statute of limitations.
{38} As previously stated, the Court finds unpersuasive the Nelson
Plaintiffs’ argument that Rule 15(c) allows for the claims brought against
Defendant Gibbs to relate back to the date on which Plaintiffs initially filed their
Complaint. Because Plaintiffs’ claim for professional negligence is barred by the
applicable statute of limitations, Defendant Gibbs’ Motion for Summary Judgment
as to the Nelson Plaintiffs’ claim for professional negligence is GRANTED and their
claim for professional negligence is DISMISSED with prejudice.
B.
PROFESSIONAL NEGLIGENCE
{39} Defendants advance three arguments for why they are entitled to
summary judgment on Plaintiffs’ remaining claims for professional negligence.
First, Defendants argue that under established case law they did not owe a legally
recognized duty to any of the Plaintiffs. Second, Defendants argue in the
alternative, that even if Defendants owed a duty to Plaintiffs, a claim for
professional negligence requires that the Plaintiffs reasonably rely on the
Defendants’ representations, and that in this case, none of the Plaintiffs actually or
justifiably relied on any of the Defendants’ appraisals. Lastly, Defendants Van
Dyke and Wright argue that the Plaintiffs who asserted claims for professional
negligence against them were contributorily negligent, and thus barred from
recovery.
{40} Plaintiffs respond that the Defendant appraisers did owe a duty to
third parties who might have relied on their appraisals, and that, with regard to
reliance, Plaintiffs need only show that “a defendant’s words or conduct possessed
‘the tendency or capacity to mislead’ or create the likelihood of deception.” (Pls.’
Mem. in Opp’n Defs. Van Dyke & Hensley’s Mot. for Summ. J. 8 (citations omitted).)
1.
LEGAL STANDARD
{41} For claims of negligence alleging that the Defendants made negligent
misrepresentations, North Carolina imposes on appraisers the standard of liability
espoused in Restatement of Torts (Second) § 552. Ballance v. Rinehart, 105 N.C.
App. 203, 206–08,
412 S.E.2d 106, 108–09 (1992) (stating that “[section] 552 . . . is
the appropriate standard under which to assess a real estate appraiser’s liability.”);
Williams v. United Cmty. Bank, No. COA11–532,
2012 N.C. App. LEXIS 209, at
*16–17,
724 S.E.2d 543, 550 (N.C. App. 2012) (stating that when evaluating
negligence claims brought against appraisers by third parties, the North Carolina
Court of Appeals “expressly adopt[s] the approach for determining negligence by
accountants as set forth by our Supreme Court in Raritan River Steel Co. v. Cherry,
Bekaert & Holland,
322 N.C. 200, 201,
367 S.E.2d 609, 610 (1988).”); Anderson v.
Costal Cmtys. at Ocean Ridge Plantation, Inc.,
2012 NCBC 33 ¶¶ 47–63 (N.C.
Super. Ct. May 30, 2012) (applying the standard of liability established in Ballance
and Raritan to evaluate plaintiffs’ claims for negligent misrepresentation against
appraisers).
{42} The standard stated in section 552 was adopted by the North Carolina
Supreme Court in Raritan as the standard of liability for accountants, and provides
that:
Information Negligently Supplied for the Guidance of Others
(1) One who, in the course of his business, profession or employment,
or in any other transaction in which he has a pecuniary interest,
supplies false information for the guidance of others in their business
transactions, is subject to liability for pecuniary loss caused to them by
their justifiable reliance upon the information, if he fails to exercise
reasonable care or competence in obtaining or communicating the
information.
(2) . . . [T]he liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit
and guidance he intends to supply the information or knows that the
recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the
information to influence or knows that the recipient so intends or in a
substantially similar transaction.
Restatement (Second) of Torts § 552 (1977).
{43} In applying this more limited standard of liability to real estate
appraisers, North Carolina’s courts recognized the potentially excessive liability
that might result if a reasonable forseeability test were applied to appraisers
because “[l]ike an accountant, real estate appraisers have no control over the
distribution of their reports once rendered and therefore cannot limit their potential
liability.” Ballance, 105 N.C. App. at 207,
412 S.E.2d at 109.
{44} Even when the requisite relationship is present between plaintiff and
defendant, section 552 also requires the plaintiff to show reliance on the negligently
provided information. Restatement (Second) of Torts § 552(1). “One who, in the
course of his business, . . . supplies false information for the guidance of others in
their business transactions, is subject to liability for pecuniary loss caused to them
by their justifiable reliance upon the information.” Id. at § 552(1) (emphasis added).
Justifiable reliance requires that the plaintiff actually relied on the information.
Raritan, 322 N.C. at 206,
367 S.E.2d at 612 (“A party cannot show justifiable
reliance on information . . . without showing that he relied upon the actual . . .
statements themselves to obtain this information.”); Anderson,
2012 NCBC 33 at ¶
62 (“[D]irect reliance is precisely what is required to state a claim against Appraiser
Defendants.”)
2.
DUTY
{45} In evaluating Defendants’ first argument, the Court must first
determine whether Defendants owed a duty to Plaintiffs. Under section 552,
liability can be imposed on those who “in the course of [their] business, profession or
employment, . . . suppl[y] false information for the guidance of others in their
business transactions . . . .” Restatement (Second) of Torts § 552(1). However, this
liability is limited to loss suffered “by the person or one of a limited group of persons
for whose benefit and guidance [the appraiser] intends to supply the information or
knows that the recipient intends to supply it . . . .” Id. at § 552(2)(a) (emphasis
added). Stated plainly, an appraiser owes a duty to those who he intends to be the
recipients of an appraisal and those to whom he knows the intended recipient also
intends to supply the appraisal. See id.
{46} This interpretation of section 552’s limit on liability is bolstered by the
comments to the section that discuss to whom a surveyor of property would be liable
for providing a negligent survey of real estate.
In 1934, [Company A], a firm of surveyors, contracts with B to make a
survey and description of B’s land. [Company A] is not informed of any
intended use of the survey report but knows that survey reports are
customarily used in a wide variety of real estate transactions and that
it may be relied upon by purchasers, mortgagees, investors and others.
The survey is negligently made and misstates the boundaries and
extent of the land. In 1958 C, relying upon the report that B exhibits
to him, purchases the land from B, and in consequence suffers
pecuniary loss. [Company A] is not liable to C.
Restatement (Second) of Torts § 552 cmt. h, illus. 12 (emphasis added); see also
Howell v. Betts, 211 Tenn. 134,
362 S.W.2d 924 (1962) (stating the factual and legal
underpinnings for illustration twelve’s result). “It is not enough that the maker
merely knows of the ever-present possibility of repetition to anyone, and the
possibility of action in reliance upon it, on the part of anyone to whom it may be
repeated.”
Id. at cmt. h.
{47} It is undisputed in this case that each of the Defendants was hired by
the lending institution engaged by each Plaintiff to finance the purchase of property
at Wild Ridges. In addition, the appraisals themselves indicate that the lending
institution was the “client/lender.” (See e.g., Summ. Appraisal Report Lot 81 p. 1;
Summ. Appraisal Report Lot 129 p. 1; Summ. Appraisal Report Lot 11 p. 1; Summ.
Appraisal Report Lot 126 p. 1; Summ. Appraisal Report Lot 75 p. 1; Summ.
Appraisal Report Lot 42 p. 1.) In addition, each Defendant testified at deposition,
or offered by way of affidavit, that the lending institution was the only intended
user of the appraisal. (Van Dyke Dep. at 97:1–98:13; Hensley Dep. at 44:4–45:2; R.
Keith Hollifield Dep. at 9:3–12; Nelson Eide Dep. at 45:3–19; James H. Gibbs Dep.
at 9:5–12; Defs. Ross and Elliott’s Mot. Summ. J. Ex. 11–12; Def. Wright’s Mot.
Summ. J. Ex. 5; Defs. Highsmith and Oakman’s Mot. Summ J. Aff. A & B ¶ 6.)
{48} Plaintiffs do not argue that they were the intended recipients of the
appraisals performed by Defendants, rather “that a reasonably foreseeable Plaintiff
is known to the Defendant.” (Pls.’ Mem. Law Opp’n. Defs. Van Dyke and Hensley’s
Mots. Summ. J. 7.) Plaintiffs contend that the Court should apply the duty
enunciated by the North Carolina Court of Appeals in Alva v. Cloninger, and hold
“that the appraiser’s duty to third parties include [sic] a prospective buyer,
regardless of privity, who reasonably relies upon the outcome of the appraisal.”
(Pls.’ Mem. Law Opp’n. Defs. Van Dyke and Hensley’s Mots. Summ. J. 3 (citing Alva
v. Cloninger, 51 N.C. App. 602,
277 S.E.2d 535 (1981).)
{49} In Alva, the court cited to section 552 to support its holding that the
appraiser defendants could be found liable because “plaintiffs’ reliance upon the
appraisal was, or should reasonably have been, expected by defendant.” Alva, 51
N.C. App. at 611,
277 S.E.2d at 541. However, the Alva court failed to quote section
552 in its entirety. While section 552 does ask whether plaintiffs’ reliance should
have been reasonably expected by the defendant, it also limits a defendant’s liability
to “the person or one of a limited group of persons for whose benefit and guidance
[the appraiser] intends to supply the information or knows that the recipient
intends to supply it . . . .” Restatement (Second) of Torts § 552(2)(a) (emphasis
added). In Raritan, the North Carolina Supreme Court clarified the above-stated
limits on liability under section 552, by rejecting the reasonable forseeability test
adopted in Alva, and the North Carolina Court of Appeals subsequently applied
Raritan’s limits on liability to appraisers in both Ballance and Williams. Marcus
Bros. Textiles, Inc. v. Price Waterhouse, LLP,
350 N.C. 214, 219,
513 S.E.2d 320,
324 (1999) (stating that the “Raritan . . . Court ‘rejected as too expansive the
position that extends liability to all persons the accountant should reasonably
foresee might obtain and rely on the information generated.’” (quoting David A.
Logan & Wayne A. Logan, North Carolina Torts § 25.30, at 549 (1996))).
Accordingly, this Court can not conclude that the reasoning or holdings articulated
in Alva regarding forseeability represent the current law of North Carolina to be
applied to this case.
{50} Even if the North Carolina Supreme Court had not clarified the limits
of liability in Raritan, Plaintiffs’ argument, that “a reasonably foreseeable Plaintiff
is known,” (Pls.’ Mem. Law Opp’n. Defs. Van Dyke and Hensley’s Mots. Summ. J.
7.), is irreconcilable with section 552 and its accompanying comments. Comment h
to section 552 provides:
[i]t is enough that the maker of the representation intends it to reach
and influence either a particular person or persons, known to him, or a
group or class of persons, distinct from the much larger class who
might reasonably be expected sooner or later to have access to the
information and foreseeably to take some action in reliance upon it.
Restatement (Second) of Torts § 552 cmt. h (emphasis added). While comment h
addresses section 552(2)(a)’s limit on liability to those whom the maker of a
representation intended to supply the information, its distinction between those
who are known and intended to rely on the information, and those who are part of
“the much larger class who might reasonably be expected sooner or later to have
access to the information and foreseeably . . . take some action in reliance upon it,”
suggests that those who are reasonably foreseeable are not the same as those who
are known. See id.
{51} Taken to its logical conclusion, Plaintiffs’ argument—that those who
are reasonably foreseeable to the maker of a representation are also known to the
maker—would eviscerate the limits on liability enunciated by the Court in Raritan.
A Defendant would not have to “know that the recipient intends” to supply another
with the information, rather, liability would be extended to all reasonably
foreseeable individuals that the intended recipient, unbeknownst to the Defendant,
intended to supply the information. This interpretation would effectively write out
the knowledge requirement from section 552.
{52} Looking to the undisputed facts of this case, the Court finds that no
evidence has been presented, nor have Plaintiffs argued, that they were the
intended recipients of the appraisals. Accordingly, under section 552, to establish
that Defendants owed a duty, the Court must find that there exists some evidence
that Defendants knew the intended recipients (in this case the lending institutions
that hired Defendants to perform the appraisals) intended to supply Plaintiffs with
the appraisals for Plaintiffs’ use in the transaction for which Defendants were hired,
or a substantially similar transaction. See § 552(2)(a)-(b). Such evidence, however,
is nowhere to be found. At best, Plaintiffs argue that because “each and every
appraisal performed by the Defendants identifies the individual Plaintiffs as
prospective borrowers[,] . . . each Plaintiff herein was a forseeably [sic] affected by
the appraisals.” (E.g., Pls.’ Mem. Law Opp’n. Mots. Summ. J of Defs. Eide and
Hollifield 7 (emphasis in original).) Raritan, Ballance, and Williams all establish
that reasonable forseeability is not the test for determining liability under section
552. In addition, there is no evidence before the court demonstrating that
Defendants knew the intended recipients (the lenders) intended to supply Plaintiffs
with the appraisals. Accordingly, Defendants have met their burden of showing
that there is no evidence to support the duty element of Plaintiffs’ remaining claims
for professional negligence.
3.
RELIANCE
{53} Defendants’ second argument contends that even if Defendants owed a
duty to Plaintiffs, Plaintiffs must show that they reasonably relied on the
Defendants’ representations to prove their claim of professional negligence.
“Justifiable reliance is an essential element of both fraud and negligent
misrepresentation.” Helms v. Holland, 124 N.C. App. 629, 635,
478 S.E.2d 513, 517
(1996) (citing C.F.R. Foods, Inc. v. Randolph Dev. Co.,
107 N.C. App. 584, 588,
421
S.E.2d 386, 389, disc. rev. denied,
333 N.C. 166,
424 S.E.2d 906 (1992). The
“question of justifiable reliance is analogous to that of reasonable reliance in fraud
actions,” Marcus Bros. Textiles, Inc.,
350 N.C. at 224,
513 S.E.2d at 327 (citation
omitted), which is normally “a question for the jury, unless the facts are so clear
that they support only one conclusion.” Forbis v. Neal,
361 N.C. 519, 527,
649
S.E.2d 382, 387 (2007) (citing Marcus Bros. Textiles, Inc.,
350 N.C. at 225,
513
S.E.2d at 327). “Justifiable reliance requires actual reliance. Raritan,
322 N.C. at
206,
367 S.E.2d at 612. North Carolina’s Pattern Jury Instructions recite, that
“‘[a]ctual reliance is direct reliance upon false information.’” Walker v. Town of
Stoneville, No. COA10–278,
2011 N.C. App. LEXIS 709, *15 (N.C. App. 2011)
(quoting N.C.P.I. - Civil 800.10 (1992)) (alteration in original). “[A] party cannot
show justifiable reliance on information contained in [an appraisal] without
showing that he relied upon the actual [appraisal itself] to obtain this information.”
Raritan,
322 N.C. at 206,
367 S.E.2d at 612.
{54} After reviewing the pleadings, contentions of counsel, and all the
evidence presented to the Court in support of, and opposition to, Defendants’
Motions, the Court finds it undisputed that Plaintiffs did not rely on the
Defendants’ appraisals when they entered into their respective purchase
agreements to purchase property at Wild Ridges. The evidence instead shows that
each Plaintiff executed a purchase agreement to buy a lot at Wild Ridges prior to
securing financing, and before an appraisal was performed on the purchased lot.5
see Darren Blitsch Dep. at 15:10–14 (stating that Plaintiff never reviewed the appraisals
5 (
performed on either of the lots he purchased); Dawn Blitsch Dep. at 94:17–25 (stating that
Plaintiff never reviewed the appraisal performed on the lot purchased by Plaintiff);
Cunningham Dep. at 49:24–50:12, 53:7–18 (stating that Plaintiff never saw the appraisal
prior to closing); S. Cecchin Dep. at 52:4–54:8 (stating that Plaintiff never saw the appraisal
performed on the lot purchased by Plaintiff); T. Cecchin Dep. at 32:6–11 (stating that
Plaintiff never saw the appraisal performed on the lot purchased by Plaintiff); Lendin Dep.
at 31:13–32:11 (stating that Plaintiff never saw the appraisal before closing); Mallett Dep.
at 60:1–11 (stating that Plaintiff did not recall ever reading the appraisal); D. Nelson Dep.
at 127:12–16, 127:24–128:3, 129:18–22 (stating that Plaintiff had no recollection of when
she received the appraisal); Perla Dep. at 59:4–16 (stating that Plaintiff never saw the
appraisal); K. Reid Dep. at 39:3–14, 39:21–40:11 (stating that Plaintiff had not received an
appraisal prior to April 2009); R. Reid Dep. at 32:16–33:11 (stating that Plaintiffs had not
requested a copy of the appraisal until after they obtained counsel); J. Sauchak Dep. at
50:8–51:2, 51:21–52:3, 77:25–78:4 (stating that Plaintiff did not remember receiving the
appraisal before signing the lot purchase agreement); L. Sauchak Dep. at 53:17–54:7
(stating that Plaintiff received the appraisal for the first time after closing); Jacobson Dep.
at 41:18–42:5 (stating that Plaintiff had not seen the appraisal prior to closing); Selkowitz
Dep. at 50:23–51:20 (stating that Plaintiff did not know when he received the appraisal);
Sherman Dep. at 77:1–10, 77:22–78:3 (stating that Plaintiff did not recall ever receiving the
appraisal); R. Skelton Dep. at 90:3–16, 92:6–15 (stating that Plaintiff thought that he
Thus, at the time each lot was appraised, Plaintiffs were already contractually
obligated to purchase the property and the appraisals could have played no role in
Plaintiffs’ decisions to purchase their respective lots at Wild Ridges.
{55} Plaintiffs argue Defendants’ Motions should be denied because
“Plaintiffs have made the point many times over in depositions that, although they
didn’t necessarily see the appraisals prior to having closed, at the very least they
knew that they were performed as a predicate to financing.” (E.g., Pls.’ Resp. Mots.
Summ. J. of Defs. Eide and Hollifield 9.) This argument fails for two primary
reasons. First, Plaintiffs were obligated to purchase their respective lots after they
executed their purchase agreement, not when they closed. Williams, 2012 N.C.
App. LEXIS 209, at *15,
724 S.E.2d at 550 (holding that because there were no
contingency clauses in the purchase agreements “[e]ven had the [defendants]
received the appraisal “about the time I was working on my assessment appeal.”);
Stetkewicz Dep. at 55:13–56:17 (stating that Plaintiff never received an appraisal); B.
Tebbitt Dep. at 19:21–21:9, 28:6–20 (stating that Plaintiff did not have the appraisal as of
January 9, 2009); G. Tebbitt Dep. at 38:25–39:8, 40:7–10 (stating that Plaintiff did not
recall receiving the appraisal prior to closing); Narayanan Dep. at 65:11–22 (stating that
Plaintiff did not recall ever seeing the appraisal report); L. Van Dyke Dep. at 11:6–13
(stating that Plaintiff took no efforts to ascertain the value of the lot prior to execution of an
agreement to buy); Pavia Dep. at 42:20–25 (stating that the appraisal was not provided to
Plaintiff prior to closing); David Stratton Dep. at 28:2–35:1 (stating that Plaintiff never saw
the appraisal); Daiva Stratton Dep. at 16:16–18 (stating that Plaintiff did not remember
looking to see what the appraisal of the property was); Cabrera Dep. at 97:2–11 (stating
that Plaintiff received the appraisal from the lender after closing); R. McCormick Dep. at
119:12–120:10 (stating that Plaintiff did not recall when he received the appraisal); C.
McCormick Dep. at 43:18–25 (stating that Plaintiff thought that she received the appraisal
with the closing paperwork); Bhat Dep. at 115:7–24 (stating that Plaintiff did not receive
the appraisal until after closing); K. Nelson Dep. at 36:19–37:5 (stating that Plaintiff never
received a copy of the appraisal prior to closing and did not receive the appraisal until
sometime in 2010); D. Nelson Dep. at 26:9–16 (stating that Plaintiff didn’t receive appraisal
until sometime in 2010); C. Ondrus Dep. at 87:1–3 (stating that Plaintiff did not see the
appraisal until closing); S. Ondrus Dep. at 25:22–28:3 (stating that Plaintiff did not see the
appraisal until closing); C. Lavin Dep. at 44:19–24 (stating that Plaintiff had only seen the
documents that she signed prior to her husband passing in 2009); Barnes Dep. at 59:16–22
(stating that Plaintiff never received a copy of the appraisal); C. Best Dep. at 56:6–11
(stating that Plaintiff thought that he received the appraisal after closing); L. Best Dep. at
19:21–20:6 (stating that Plaintiff did not know when she received the appraisal and that
she never looked at it).)
appraised the lots differently, [p]laintiffs would still have been obligated to
purchase them at the prices agreed to in the purchase contracts.”)
{56} Secondly, Plaintiffs’ argument indicates that, in addition to
overemphasizing the significance of the closing process, they also relied on the
actions of the bank, rather than the appraisals, to determine whether to proceed
with purchasing the property, i.e., with closing. Plaintiffs stated in their responses
that the appraisals:
were performed as a predicate to financing, and [that Plaintiffs] would
not have gone through with these transactions in each instance had in
[sic] not been for the appraisals. . . . Thus, at the most fundamental
level of intuition, there are no lender financed real estate closings at
all without supporting appraisals. And without financing, there is no
closing. . . . [T]his is a matter of general knowledge to the layperson,
and it follows that [Plaintiffs] would never have incurred the massive
debt each owes had it not been for the appraisals.
(E.g., Pls.’ Resp. Mots. Summ. J. of Defs. Eide and Hollifield 9–10.) Essentially,
Plaintiffs argue that if they had not received lender financing, then they would not
have incurred the debt that they now owe.
{57} Ignoring for a moment that Plaintiffs were obligated to pay upon
execution of their respective purchase agreements, Plaintiffs’ argument suggests
that because the appraisals indicated an artificially inflated value of the property,
the banks believed they had sufficient collateral to finance the loans they eventually
approved, and because the banks financed Plaintiffs’ loans, Plaintiffs decided to
close on their property purchases. Plaintiffs’ argument is that in reaching a
decision about whether the property was a good investment or was properly
appraised, Plaintiffs used the banks as a proxy and relied on the banks’ decisions to
approve financing rather than the appraisals. This is exactly the type of indirect
reliance that the North Carolina Supreme Court rejected in Raritan, “[A] party
cannot show justifiable reliance on information contained in [an appraisal] without
showing that he relied upon the actual [appraisal itself] to obtain this information.”
Raritan, 322 N.C. at 206,
367 S.E.2d at 612. Accordingly, the Court holds that
Plaintiffs’ self-proclaimed reliance on the actions of the banks rather than the
content of the appraisals, is insufficient to meet the justifiable reliance element of
negligent misrepresentation. Id.; see also Brinkman v. Barrett Kays & Assocs.,
P.A.,
155 N.C. App. 738, 743,
575 S.E.2d 40, 44 (2003) (stating that plaintiffs’
reliance on a governmental agency’s decision to issue a permit was not the kind of
actual reliance required by law when there was no evidence to show that the
representations were made to plaintiffs).
{58} Because the Court holds that: (1) Defendants did not owe a duty to
Plaintiffs and (2) Plaintiffs did not justifiably rely on Defendants’ appraisals,
Defendants’ Motions for Summary Judgment as to this claim must be GRANTED
and Plaintiffs’ claim for professional negligence is hereby DISMISSED with
prejudice.
{59} Having held that there was no duty or justifiable reliance, the Court
does not reach Defendants’ arguments that certain Plaintiffs were contributorily
negligent.
C.
FRAUD IN THE INDUCEMENT
{60} Defendants offer a number of arguments in support of their Motions
for Summary Judgment as to Plaintiffs’ claim for fraud in the inducement.
Specifically, Defendants argue that they are entitled to summary judgment because:
(1) no evidence has been produced to show that Defendants intended to deceive
Plaintiffs, (2) Plaintiffs cannot show that the alleged misrepresentations were
material facts, (3) Plaintiffs could not have reasonably relied on Defendants’
appraisals because there was no actual reliance, (4) Defendants did not make any of
the alleged misrepresentations at issue in this case to any of the Plaintiffs, and (5)
there was no evidence that Plaintiffs were actually deceived. (Br. Supp. Mot for
Summ. J. of Defs. Van Dyke and Hensley 7–10, 11–13; Defs. Eide and Hollifield’s
Mem. Supp. Summ. J. 12–13; Defs. Highsmith and Oakman’s Mem. Law Supp. Mot.
Summ. J. 9–14; Def. Wright’s Mem. Law Supp. Mot. Summ. J. 11–14; Defs. Ross
and Elliott’s Mem. Law Supp. Mot. Summ. J. 13–15; Def. Gibbs’ Mem. Law Supp.
Mot Summ. J. 14–16.)
{61} Plaintiffs respond to some of Defendants’ arguments, but not all.
Ignoring arguments 1, 4, and 5, Plaintiffs instead argue that Defendants’ Motions
for Summary Judgment should be denied because: (a) (in response to Defendants’
second argument) statements of opinion that are known to be contrary to the facts
may be actionable, Defendants are licensed by the state and subject to the Uniform
Standards of Appraisal Practice, and Defendants were not able to produce any
examples of “nixed real-estate closings”; and (b) (in response to Defendants’ third
argument) that reliance is a factual issue to be determined by the jury rather than
at summary judgment. (E.g., Pls.’ Mem. Opp’n. Mots. Summ. J. of Defs. Eide and
Hollifield 2, 10–11.)
{62} “‘The essential elements of fraud [in the inducement] are: (1) [f]alse
representation or concealment of a material fact, (2) reasonably calculated to
deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting
in damage to the injured party.’” Media Network, Inc. v. Long Haymes Carr, Inc.,
197 N.C. App. 433, 453,
678 S.E.2d 671, 684 (2009) (quoting Rowan County Bd. of
Educ. v. U.S. Gypsum Co.,
332 N.C. 1, 17,
418 S.E.2d 648, 658 (1992)) (alteration in
original) (adopting the elements of fraud as the elements for fraud in the
inducement). In addition, “[j]ustifiable reliance is an essential element of both
fraud and negligent misrepresentation.” Helms v. Holland,
124 N.C. App. at 635,
478 S.E.2d at 517 (citing C.F.R. Foods, Inc.,
107 N.C. App. at 588,
421 S.E.2d at 389
(stating that a plaintiff’s reliance must be reasonable to prove fraud)).
{63} The “question of justifiable reliance is analogous to that of reasonable
reliance in fraud actions,” Marcus Bros. Textiles, Inc., 350 N.C. at 224,
513 S.E.2d
at 327, which is normally “a question for the jury, unless the facts are so clear that
they support only one conclusion.” Forbis,
361 N.C. at 527,
649 S.E.2d at 387 (citing
Marcus Bros. Textiles, Inc.,
350 N.C. at 225,
513 S.E.2d at 327). “Justifiable
reliance requires actual reliance. Raritan,
322 N.C. at 206,
367 S.E.2d at 612.
North Carolina’s Pattern Jury Instructions recite that ‘[a]ctual reliance is direct
reliance upon false information.’” Walker,
2011 N.C. App. LEXIS 709, *15 (2011)
(quoting N.C.P.I. - Civil 800.10 (1992)) (alteration in original). “[A] party cannot
show justifiable reliance on information contained in [an appraisal] without
showing that he relied upon the actual [appraisal itself] to obtain this information.”
Raritan,
322 N.C. at 206,
367 S.E.2d at 612. In addition, “an essential element of
actionable fraud is that the false representation or concealment be made to the
party acting thereon.” Hospira Inc. v. AlphaGray Corp.,
194 N.C. App. 695, 699,
671 S.E.2d 7, 11 disc. review denied,
363 N.C. 581,
682 S.E.2d 210 (2009) (stating
that, absent an agency or fiduciary relationship, summary judgment was
appropriate when the only evidence presented showed that defendant made
representations to a third-party and not plaintiff.) (emphasis in original).
{64} Generally, the Court must also find that the representation upon
which a fraud claim rests is “definite and specific,” and involves “[a] subsisting or
ascertainable fact, as distinguished from a matter of opinion or representation
relating to future prospects[.]” Ragsdale v. Kennedy, 286 N.C. 130, 139,
209 S.E.2d
494, 500 (1974) (citing Berwer v. Ins.,
214 N.C. 554,
200 S.E. 1 (1938)). However,
the general rule that liability is not imposed for an expression of opinion is:
“not a hard and fast rule; . . . it does not apply to the dishonest
expression of an opinion not actually entertained. . . . [Thus,] a
statement purporting to be opinion may be the basis for fraud if, at the
time it is made, the maker of the statement holds an opinion contrary
to the opinion he or she expresses, and the maker also intends to
deceive the listener.”
Leftwich v. Gaines, 134 N.C. App. 502, 508–09,
521 S.E.2d 717, 723 (1999) (quoting
37 C.J.S. Fraud § 13, at 190 (1997)) (first two alterations in original).
{65} After reviewing the pleadings, contentions of counsel, and all of the
evidence which was presented to the Court in support of, and in opposition to,
Defendants’ Motions for Summary Judgment, the Court finds that: (1) it is
undisputed that Plaintiffs did not rely on the Defendants’ appraisals when they
entered into their respective purchase agreements to purchase property at Wild
Ridges, and (2) none of the representations at issue in this case were made by
Defendants to any of the Plaintiffs.
{66} As previously noted, Plaintiffs all executed purchase agreements to
buy their lots at Wild Ridges prior to securing financing and before appraisal of the
lots were performed. Thus, at the time each lot was appraised, Plaintiffs were
contractually obligated to purchase the property, and the appraisals could not have
played a role in Plaintiffs’ decisions to purchase.
{67} Plaintiffs argue that Defendants’ Motions should be denied because
“Plaintiffs have made the point many times over in depositions that, although they
didn’t necessarily see the appraisals prior to having closed, at the very least they
knew that they were performed as a predicate to financing.” (E.g., Pls.’ Resp. Mots.
Summ. J. of Defs. Eide and Hollifield 9 (emphasis added).)6 For the reasons stated
above in the Court’s analysis of reliance as to Plaintiffs’ professional negligence
claims, the Court finds Plaintiffs’ argument unpersuasive. Even if the Court found
justifiable reliance, Defendants have satisfied the Court that Plaintiffs have neither
demonstrated nor forecast any evidence that the Defendants made any of the
alleged misrepresentations directly to Plaintiffs as required by Hospira Inc., 194
N.C. App. at 699,
671 S.E.2d at 11. Accordingly, the Court GRANTS Defendants’
Motions for Summary Judgment as to Plaintiffs’ claim for fraud in the inducement.
Plaintiffs’ claim is hereby DISMISSED with prejudice. The Court finds it
unnecessary to address Defendants’ remaining arguments in support of Defendants’
Motions for Summary Judgment as to Plaintiffs’ claim for fraud in the inducement.
D.
UNFAIR AND DECEPTIVE TRADE PRACTICES
{68} “North Carolina provides a private cause of action for persons injured
by a violation of the Unfair and Deceptive Trade Practices Act (“UDTPA”).”
Brinkman, 155 N.C. App. at 743,
575 S.E.2d at 44 (citing N.C. GEN. STAT. § 75–16
(2001)). “The elements of [a UDTPA] claim are: ‘(1) an unfair or deceptive act or
practice, or an unfair method of competition, (2) in or affecting commerce, (3) which
proximately caused actual injury to the plaintiff or to his business.’” Id. (quoting
6 See note 4 supra.
Spartan Leasing v. Pollard,
101 N.C. App. 450, 460–61,
400 S.E.2d 476, 482 (1991)).
“‘Where an unfair or deceptive practice claim is based upon an alleged
misrepresentation by the defendant, the plaintiff must show ‘actual reliance’ on the
alleged misrepresentation in order to establish that the alleged misrepresentation
‘proximately caused’ the injury of which plaintiff complains.’” Hospira Inc.,
194
N.C. App. at 702,
671 S.E.2d at 12 (quoting Tucker v. Blvd. at Piper Glen L.L.C.,
150 N.C. App. 150, 154,
564 S.E.2d 248, 251 (2002)).
{69} For the reasons stated in the Court’s discussion of Defendants’ Motions
for Summary Judgment as to Plaintiffs’ claim for professional negligence and fraud
in the inducement supra, the Court finds that no evidence has been presented or
forecast that Plaintiffs actually relied on the alleged misrepresentations included in
the appraisals prepared by Defendants. Thus, Defendants’ Motions for Summary
Judgment are GRANTED as to this claim, and Plaintiffs’ UDTPA claim is hereby
DISMISSED with prejudice. The Court does not reach Defendants’ alternative
arguments in support of Defendants’ Motions for Summary Judgment as to
Plaintiffs’ UDTPA claim.
V.
CONCLUSION
{70} For the reasons stated above, Defendants’ Motions for Summary
Judgment are GRANTED.
GRANTED Plaintiffs’ claims for negligent misrepresentation, fraud
in the inducement, and unfair and deceptive trade practices are hereby
DISMISSED with prejudice.
ORDERED this the 16th day of July, 2012.
SO ORDERED,
