Fazzari v. Infinity Partners, LLC , 235 N.C. App. 233 ( 2014 )

NO. COA13-1303
NORTH CAROLINA COURT OF APPEALS
Filed: 5 August 2014
JOSEPH FAZZARI, et al.,
Plaintiffs,
v. Mecklenburg County
Nos. 08 CVS 27336, 09 CVS 18264
INFINITY PARTNERS, LLC, et al.,
Defendants.
Appeals by Plaintiffs1 from orders entered 8 and 22 March
2012 by Judge W. Erwin Spainhour in Mecklenburg County Superior
Court. Heard in the Court of Appeals 7 May 2014.
Ellis & Parker PLLC,2 by L. Neal Ellis, Jr., and Nathaniel
Parker, for Plaintiffs.
McGuireWoods LLP, by H. Landis Wade, Jr., and Steven N.
Baker, for Defendant Fifth Third Bank.
Robinson Bradshaw & Hinson, P.A., by Douglas M. Jarrell and
Ty E. Shaffer, for Defendant Wachovia Bank, N.A., now known
as Wells Fargo Bank, N.A.
STEPHENS, Judge.
1
The specific plaintiffs appealing from each order are
identified in our discussion of the procedural history of this
case.
2
Plaintiffs’ brief styles their appellate counsel as “Ellis &
Anthony” while their reply brief lists “Ellis & Parker, PLLC[.]”
Both briefs name the same two individual attorneys.
-2-
Procedural History and Factual Background
This appeal arises from the 2007 failure of Grandfather
Vistas, a real estate development located in Caldwell County.
In 2006, approximately 1,000 acres of land in Caldwell County
was purchased for $10.9 million, which Defendants Infinity
Partners, LLC; Infinity Real Estate Partners, LLC; Source One
Communities LLC; Prudential Source One, LLC; and Peerless Real
Estate Services, Inc.,3 planned to develop. The purchase was
financed through a “land banking” program in which the
developers sold approximately sixty ten-acre lots for $500,000
each (“the founders’ lots”), with “buyback” contracts that
guaranteed the developers would repurchase each lot for $625,000
within one year. The purchase contracts for the founders’ lots
also included provisions for the developers to pay the
purchasers’ interest from closing until the repurchase. The
purchase contracts stated that purchasers would obtain fixed
rate financing on a thirty-year term at an initial interest rate
not to exceed 7.5% per annum with a loan-to-value ratio of at
3
The defendants noted here are referred to collectively as “the
developers.”
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least 90%.4 Following repurchase of the founders’ lots, the
developers planned to subdivide the lots into one-acre retail
parcels for resale. Defendant Blue River Ridge at Blowing Rock,
LLC was formed by Peerless and Source One to purchase, own, and
develop Grandfather Vistas and to eventually buy back the
founders’ lots.
The developers used a real estate company to market the
founders’ lots, and the real estate company, in turn, created a
marketing plan that relied on preferred lender arrangements with
First Charter Bank of North Carolina;5 Wachovia Bank, N.A.;6 and
SunTrust Banks, Inc.7 (collectively, “the lenders”). Beginning
in May 2006, the developers began selling founders’ lots, and
4
However, as discussed herein, no Plaintiff obtained a loan on
these terms. Rather, all of their loans for purchase of the
founders’ lots were of much shorter terms, many for as little as
two years.
5
First Charter Bank was acquired by Fifth Third Bank, N.A.,
which, following a merger on 30 September 2009, became known as
Fifth Third Bank. Throughout this opinion, unless otherwise
specified, defendants Brian Kiser and Jeff Collins, former loan
officers with what was then First Charter Bank, are included in
all references to “Fifth Third” or “the lenders.”
6
Wachovia Bank, N.A., was a subsidiary of Wachovia Corporation.
On 31 December 2008, Wachovia Corporation merged with Well Fargo
& Company. We refer to this defendant hereafter as “Wells
Fargo.”
7
The proper party was actually SunTrust Mortgage, Inc., a wholly
owned subsidiary of SunTrust Banks, Inc.
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Plaintiffs were among the purchasers. SunTrust and Fifth Third
used Defendant A. Greg Anderson, d/b/a Anderson & Associates,
(“Anderson”) exclusively to perform appraisals of the founders’
lots in connection with those sales. Wells Fargo did not employ
Anderson for any appraisals at issue in this appeal, using
several other appraisers instead (“the Wells Fargo appraisers”).
Anderson and the Wells Fargo appraisers valued every founder’s
lot at $500,000, regardless of the lot’s specific qualities or
location in Grandfather Vistas. That value was the exact
minimum amount needed in order to meet the loan-to-value
provision of the purchase contracts. The actual value of the
lots ranged from $40,000 to $81,000.8
Little of the money raised through sales of the founders’
lots was invested in Grandfather Vistas, and by 2007, all
8
Anderson was later suspended by the North Carolina Appraisal
Board because of his involvement in another land development
scheme gone awry which likewise resulted in lawsuits and
subsequent appeals to this Court. This Court affirmed summary
judgment for Anderson and another appraiser in that matter. See
Williams v. United Cmty. Bank, __ N.C. App. __, 724 S.E.2d 543(2012). Fifth Third, Peerless, and several of the individual
developer defendants were also involved in that land
development/investment scheme. In an opinion filed 6 December
2011, this Court affirmed summary judgment in favor of Fifth
Third against the Williams plaintiffs on, inter alia, Chapter 75
claims. See In re Fifth Third Bank, N.A., 217 N.C. App. 199,
719 S.E.2d 171 (2011), cert. denied, 366 N.C. 231, 731 S.E.2d
687 (2012).
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development activity had ceased. None of the founders’ lots
were ever repurchased from Plaintiffs. As a result, on 16
December 2008, Plaintiffs initiated a lawsuit in file number 08
CVS 27336 against various defendants, including, inter alia, the
developers, the lenders, and Anderson. Plaintiffs’ complaint
included claims against the lenders for fraud, fraud in the
inducement, negligence, negligent misrepresentation, conversion,
civil conspiracy, and unfair and deceptive trade practices
(“UDTP”) pursuant to Chapter 75 of our General Statutes.9 Claims
brought against Anderson included fraud, fraud in the
inducement, negligence, negligent misrepresentation, conversion,
civil conspiracy, and UDTP.10 The lenders filed answers in
February and March 2009, asserting various defenses and
9
Plaintiffs did not bring claims for fraud, fraud in the
inducement, or UDTP against Wells Fargo or SunTrust Bank.
10
On 19 May 2009, the Chief Justice designated the case in file
number 08 CVS 27336 and a related case in file number 09 CVS
6239 as exceptional pursuant to Rule 2.1 of the General Rules of
Practice for the Superior and District Courts. The Honorable
Timothy L. Patti, resident Superior Court Judge in Gaston
County, was designated to preside over the cases. The case in
09 CVS 6239 appears to involve a lawsuit by two additional
purchasers of founders’ lots against Anderson, the lenders, the
developers and others involved in the investment scheme.
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counterclaims, including default by Plaintiffs on promissory
notes securing their loans.11
On 15 July 2011, Anderson moved for summary judgment on all
remaining claims against him,12 asserting, inter alia, that
Plaintiffs could not show reliance on any of his alleged
misrepresentations. On the same date, the lenders filed motions
for summary judgment as to all remaining claims against them,13
on their counterclaims against Plaintiffs, and for attorneys’
fees. On 16 February 2012, the court14 entered summary judgment
in favor of Anderson on all claims against him (“the Anderson
11
By order entered 27 July 2009, Plaintiffs were permitted to
file an amended complaint, and the lenders filed amended
responsive pleadings thereafter.
12
From our review of the extraordinarily extensive record in
these appeals, it appears that some of the original plaintiffs
settled or withdrew their claims, or otherwise dropped out of
the case before the lenders and Anderson filed their motions for
summary judgment.
13
In the motions, Wells Fargo listed Plaintiffs’ remaining
claims against it as negligence, negligent misrepresentation,
conversion, and civil conspiracy.
14
As noted supra, the Chief Justice designated Judge Patti to
preside over the matter. Judge Patti signed orders entered in
the matter through September 2010. Following Judge Patti’s
retirement, the Honorable W. Erwin Spainhour presided over the
matter and signed all orders entered by the court from July 2011
on, including the lenders’ summary judgment order and Anderson’s
summary judgment order.
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summary judgment order”). On 8 March 2012, the trial court
entered an order which (1) granted the lenders’ motions for
summary judgment, (2) dismissed with prejudice all remaining
claims against the lenders, (3) denied Plaintiffs’ motion to
amend their complaint to add UDTP claims against Wells Fargo and
SunTrust,15 and (4) taxed costs against Plaintiffs (“the lenders’
summary judgment order”). On the same day, the court entered
judgments in favor of the lenders on their counterclaims against
Plaintiffs Joseph Fazzari (Fifth Third); Danuta K. McIvor (Fifth
Third); Scott W. McQuay (Fifth Third); Charles H. Owens (Fifth
Third); William Decker (Fifth Third); Carol H. Harris (Wells
Fargo); Roscoe E. Harris (Wells Fargo); Renee C. Miller, as
Trustee of Renee C. Miller Living Trust (Wells Fargo); Darryl
Strack (Wells Fargo); Kathryn M. Strack (Wells Fargo); Christa
S. Tighe (Wells Fargo); and James K. Tighe, Jr. (Wells Fargo).
On 19 March 2012, the court entered an order allowing Anderson’s
verified bill of costs. On 22 March 2012, the court entered
orders allowing the lenders’ verified bills of costs.
In June 2013, Plaintiffs filed a motion for default
judgment against Defendants Kevin J. Foster, Neil O’Rourke, and
15
See footnote 9, supra.
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Anthony Porter. Orders of default had previously been entered
against these defendants, who had key roles in managing
Peerless, one of the Grandfather Vistas development entities.
The motion also sought voluntary dismissals with prejudice of
the remaining claims against Defendants P. Marion Rothrock;
Rothrock Engineering; Blue River Ridge at Blowing Rock, LLC;
Grandfather Vistas, LLC; Infinity Partners, LLC; and Infinity
Real Estate Partners, LLC. On 10 July 2013, the trial court
entered a final order in the matter which (1) granted
Plaintiffs’ motion for default judgment jointly and severally
against Foster, O’Rourke, and Porter in the amount of
$22,588,156.07, and (2) granted Plaintiffs’ motion to
voluntarily dismiss with prejudice and without costs the other
remaining defendants.
On 8 August 2013, Plaintiffs Joseph Fazzari; K. Scott
Fischer; Thomas L. Barnhardt; Kimberly Barnhardt; Windspirit
Properties, LLC; William Decker; Douglas M. Ellis; Kelly Ellis;
Lynn Falero; Ralph Falero; Kenneth Fischer; Carol H. Harris;
Roscoe E. Harris; Scott W. McQuay; Renee C. Miller, as Trustee
of Renee C. Miller Living Trust; Charles H. Owens; Danuta K.
McIvor; Darryl Strack; and James K. Tighe, Jr., gave notice of
appeal from the 8 March 2012 lenders’ summary judgment order and
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the 22 March 2012 lenders’ cost orders.16 On the same date,
Plaintiffs Joseph Fazzari; Danuta K. McIvor; Scott W. McQuay;
Charles H. Owens; William B. Decker; Carol H. Harris; Roscoe E.
Harris; Renee C. Miller; Darryl J. Strack; Kathryn M. Strack;17
Christa S. Tighe; and James K. Tighe, Jr., gave notice of appeal
from the 8 March 2012 judgments entered against them on the
various lenders’ counterclaims.18
On 16 December 2013, Wells Fargo moved to dismiss the
appeals in COA13-1303 of Darryl Strack; James K. Tighe, Jr.;
16
On 5 March 2014, Plaintiffs’ counsel notified this Court that
K. Scott Fischer and Kenneth Fischer, the only remaining
appellants as to SunTrust, had reached a final settlement of all
matters at issue in this appeal, and moved to dismiss SunTrust
from the appeal. That motion was allowed by order of this Court
entered 7 March 2014. Accordingly, in the discussion section of
this opinion, “the lenders” refers only to Wells Fargo and Fifth
Third.
17
Kathryn M. Strack withdrew her notice of appeal on 26
September 2013.
18
On 8 August 2013, in COA13-1304, various plaintiffs gave
notice of appeal from the 16 February 2012 Anderson summary
judgment order and the 19 March 2012 cost order. On 18 November
2013, some of those plaintiff-appellants gave notice that they
were withdrawing their appeals as to the Anderson summary
judgment order, but did not withdraw their appeals from the cost
order. However, on 30 April 2014, the remaining plaintiff-
appellants gave notice to this Court that they had reached a
final settlement of all claims against Anderson, rendering the
appeal in COA13-1304 moot. They moved to dismiss that appeal,
and this Court granted that motion and dismissed the appeal in
COA13-1304 by order entered 30 April 2014.
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Christa S. Tighe; and Renee Miller (collectively, “the
bankruptcy appellants”). The motion was referred to this panel
by order entered 6 January 2014. In June and July 2012, the
bankruptcy appellants filed cases under Chapter 7 of the United
States Bankruptcy Code. In September and October 2012, all of
the bankruptcy appellants’ obligations to Wells Fargo arising
from the costs order and the judgments on Wells Fargo’s
counterclaims were discharged. Wells Fargo asserts that the
bankruptcy appellants could recover a windfall if this Court
resolves this appeal in Plaintiffs’ favor. In light of the
result reached in this matter, resolving all issues in favor of
the lenders as discussed below, we dismiss as moot Wells Fargo’s
motion to dismiss.
Discussion
Plaintiffs argue that the trial court erred in granting the
lenders’ motion for summary judgment on the claims for (1)
negligence and negligent misrepresentation and (2) UDTP.19 We
affirm.
I. Standard of review
19
Plaintiffs have abandoned their appeals as to the trial
court’s grant of summary judgment on their claims for fraud and
civil conspiracy by failing to argue them in their brief. See
N.C.R. App. P. 28(a).
-11-
It is well settled that summary judgment is
appropriate only if the pleadings,
depositions, answers to interrogatories, and
admissions on file, together with the
affidavits, if any, show that there is no
genuine issue as to any material fact and
that any party is entitled to a judgment as
a matter of law. The movant must clearly
demonstrate the lack of any triable issue of
fact and entitlement to judgment as a matter
of law. The record is considered in the
light most favorable to the party opposing
the motion.
Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP, 350 N.C.
214, 219-20, 513 S.E.2d 320, 324 (1999) (citations, internal
quotation marks, and emphasis omitted).
II. Negligence and negligent misrepresentation claims
Plaintiffs first contend that the trial court erred in
granting summary judgment on their negligence and negligent
misrepresentation claims against the lenders. We disagree.
North Carolina expressly recognizes a cause
of action in negligence based on negligent
misrepresentation. It has long been held in
North Carolina that the tort of negligent
misrepresentation occurs when (1) a party
justifiably relies, (2) to his detriment,
(3) on information prepared without
reasonable care, (4) by one who owed the
relying party a duty of care.
Walker v. Town of Stoneville, 211 N.C. App. 24, 30, 712 S.E.2d
239, 244 (2011) (citations and internal quotation marks
omitted).
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In general, “a lender is only obligated to perform those
duties expressly provided for in the loan agreement to which it
is a party.” Camp v. Leonard, 133 N.C. App. 554, 560, 515
S.E.2d 909, 913 (1999) (holding lender owed no duty to borrower
with respect to inspection or appraisal of its collateral); see
also Lassiter v. Bank of N.C., 146 N.C. App. 264, 268, 551
S.E.2d 920, 923 (2001) (holding lender owed borrower no duty to
inspect house being built with loan proceeds); Perry v. Carolina
Builders Corp., 128 N.C. App. 143, 150, 493 S.E.2d 814, 818
(1997) (holding lender owed no duty to ensure loan proceeds were
used for a specific purpose in the absence of an express
contract provision); Wells v. N.C. Nat’l Bank, 44 N.C. App. 592,
596, 261 S.E.2d 296, 298 (1980) (holding lender had no duty “to
attend to details of the plaintiff’s [land] purchase other than
the financial services it offered”).
Plaintiffs acknowledge that the lenders did not violate any
duties expressly provided for in their loan agreements, but
contend that the lenders owed them duties which “flow from at
least two sources: [(1)] a common law negligence duty and [(2)]
the Mortgage Lending Act.” We are unpersuaded by either
contention.
A fiduciary duty arises when there has been
a special confidence reposed in one who in
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equity and good conscience is bound to act
in good faith and with due regard to the
interests of the one reposing confidence.
However, an ordinary debtor-creditor
relationship generally does not give rise to
such a special confidence: the mere
existence of a debtor-creditor relationship
between the parties does not create a
fiduciary relationship. This is not to say,
however, that a bank-customer relationship
will never give rise to a fiduciary
relationship given the proper circumstances.
Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 60-61,
418 S.E.2d 694, 699 (citations, internal quotation marks, and
brackets omitted), disc. review denied, 332 N.C. 482, 421 S.E.2d
350 (1992).
Plaintiffs cite this Court’s opinion in Dallaire v. Bank of
Am., N.A., for the proposition that, “when a financial
institution undertakes to provide a customer with a service
beyond that inherent in the creditor-debtor relationship, it
must do so reasonably and with due care.” __ N.C. App. __, __
n.5, 738 S.E.2d 731, 735 n.5 (2012) (emphasis added). In
Dallaire, we reversed and remanded a grant of summary judgment
in favor of the bank because there existed a question of fact
“as to whether or not [the lender] sought to give legal advice
to [the investment purchasers].” Id. Likewise, Plaintiffs
assert that the lenders here went beyond the role of commercial
lending when they acted as “cheerleaders” and “promoters” of
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Grandfather Vistas by using Anderson and other appraisers to
“churn[] out ‘cookie cutter’ appraisals,” “interfered with the
usual appraisal process,” and “falsified loan documents and
concealed the true purpose of the loans from underwriters[.]”20
However, our Supreme Court has recently reversed this
Court’s decision in Dallaire, reaffirming that, “[g]enerally,
the home loan process is regarded as an arm’s length transaction
between parties of equal bargaining power and, absent
20
As noted supra, Anderson performed all the appraisals of
founders’ lots for SunTrust and Fifth Third, but Wells Fargo
used other appraisers in its underwriting process and did not
employ Anderson. In his appraisals, Anderson used only other
lots within Grandfather Vistas as comparable properties, or
“comps,” a crucial part of the valuation process. Plaintiffs
assert that the lenders withheld information about the buyback
and other provisions in the purchase contracts in an effort to
manipulate the appraisal process to ensure inflated values.
Plaintiffs also argue that Anderson’s use of other Grandfather
Vistas’ lots as comps shows that the appraisal process was
“rigged” toward inflated values. However, at least two of the
Wells Fargo appraisers testified that they were aware of the
buyback provision and considered the provision in performing
their appraisals. One of those appraisers took the further step
of using properties located from 16 to 23 miles outside of
Grandfather Vistas as comps in his appraisal. The Wells Fargo
appraisers still valued each founder’s lot at $500,000.
Accordingly, even if there were a cause of action for negligent
underwriting of loans for the purchase of real estate,
Plaintiffs would be unlikely to prevail since the actions
complained of (concealment of contract agreement provisions and
the use of Anderson for numerous appraisals) do not appear to
have had any impact on the appraised values of the founders’
lots.
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exceptional circumstances, will not give rise to a fiduciary
duty.” Dallaire v. Bank of Am., N.A., __ N.C. __, __, __ S.E.2d
__, __ (2014), available at 2014 N.C. LEXIS 408. The Supreme
Court went on to hold that, even in an exceptional circumstance
where a loan officer owes a borrower some duty beyond the terms
of the loan agreement, “a borrower cannot establish a claim for
negligent misrepresentation based on a loan officer’s statements
. . . if the borrower fails to make reasonable inquiry into the
validity of those statements.” Id. at __, __ S.E.2d at __.
Thus, where the borrowers
put forth no evidence that they made [such
an] inquiry or were prevented from doing so,
they have failed to demonstrate the
justified reliance necessary to support
their negligent misrepresentation claim. . .
. [and] the trial court [does] not err in
granting summary judgment for [the lender on
the borrowers’] negligent misrepresentation
claim.
Id. at __, __ S.E.2d at __.
Here, far from being exceptional circumstances outside the
normal creditor-debtor relationship, appraisals and underwriting
are integral parts of the commercial lending process.
Plaintiffs cite no case from this State in which courts have
found that a lender had a common law duty to the borrower
regarding the manner in which the lender undertook appraisals or
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underwriting in connection with making loans. To the contrary,
our State’s case law is clear that such appraisals and
underwriting are for the benefit of the lenders, not for the
borrowers. See, e.g., Camp, 133 N.C. App. at 559, 515 S.E.2d at
913. Simply put, in North Carolina, there is no cause of action
for negligent underwriting of loans for the purchase of real
estate. Further, even were there such a claim under the law of
this State, Plaintiffs have forecast no evidence that they
undertook their own independent inquiries into the values of the
lots (such as obtaining their own independent appraisals) or
were prevented from doing so. Accordingly, Plaintiffs could not
demonstrate the justified reliance necessary to support a
negligent misrepresentation claim.
We find Plaintiffs’ reliance on the lenders’ alleged
violations of the Mortgage Lending Act (“MLA”)21 equally
unavailing. Plaintiffs cite Guyton v. FM Lending Servs., Inc.,
for the proposition that the MLA provides a source of duties for
tort-based causes of action because “the relevant statutory
language [of the MLA] expressly prohibits misrepresentation or
concealment of the material facts likely to influence, persuade,
21
The MLA was repealed effective 31 July 2009. N.C. Sess. Laws
2009-374, s. 1.
-17-
or induce an applicant for a mortgage loan or a mortgagor to
take a mortgage loan.” 199 N.C. App. 30, 43, 681 S.E.2d 465,
475 (2009) (citations, internal quotation marks, ellipsis, and
some brackets omitted)). In Guyton, the plaintiffs alleged that
the lender defendant “actively and intentionally withheld the
information that the property lay in a flood plain — including
retention of surveys and certifications that contained relevant
information and affirmative obstruction of [the p]laintiffs’
access to important information — in order to induce [the
p]laintiffs to purchase the property.” Id. at 42-43, 681 S.E.2d
at 475.
We reject Plaintiffs’ reliance on the MLA on two bases.
First, the MLA applied only to loans taken by natural persons
“primarily for personal, family, or household use, primarily
secured by either a mortgage or deed of trust on residential
real property located in North Carolina.” N.C. Gen. Stat. § 53-
243.01(15) (2005) (emphasis added). Here, it is undisputed that
the loans taken out by Plaintiffs were to finance the purchase
of founders’ lots as investments and not for residential use by
the investment purchasers. The founders’ lots were explicitly
marketed as investment vehicles. The evidence in the record is
that no Plaintiff took out a loan to purchase a founder’s lot
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“primarily for personal, family, or household use[.]” Id.Plaintiffs’ own complaint describes the sale of the founders’
lots as an “Investment Scheme” and consistently refers to the
investment purchasers as “investors.” The investment
purchasers, who purchased the founders’ lots explicitly and
intentionally for investment purposes, cannot now claim the
protection of a statutory scheme explicitly intended to govern
residential rather than investment real estate mortgages.
Despite the fact that the loans were indisputably for
investment purposes, Plaintiffs urge that the lenders are
estopped from avoiding the applicability of the MLA on this
basis because “[t]he lenders treated the loans as residential or
home loans in order to avoid their own commercial/investment
guidelines which would have prevented these loans from meeting
the 90% [loan-to-value] financial condition in the purchase
contracts. The lenders’ guidelines for investment loans would
permit loans only in the range of 65% to 80% [loan-to-value].”
Plaintiffs defeat their own argument on this point. The
lenders’ internal guidelines regarding permitted loan-to-value
ratios for various types of loans are not intended to protect
Plaintiffs or any other borrowers. Rather, those policies are
intended to protect the lenders and presumably reflect an
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assessment of the relative riskiness of residential versus
commercial real estate loans. The MLA applied to residential
loans and was intended to protect residential borrowers. See
N.C. Gen. Stat. § 53-243.01(15). As noted supra, Plaintiffs
were not residential borrowers and their loans were not, in
fact, residential loans. No labeling or treatment by the
lenders in their internal underwriting process altered the
loans’ true nature so as to bring them under the ambit of the
MLA.
Second, as discussed supra, even if the MLA did apply to
Plaintiffs’ loans such that it could be the source of duties for
their negligence-based causes of action, for the reasons
previously stated, Plaintiffs could not demonstrate the
justified reliance required to prevail on those claims. In sum,
we reject both of Plaintiffs’ arguments and conclude that the
trial court did not err in granting summary judgment for the
lenders on the negligence-based claims.
III. UDTP claims
Plaintiffs Decker, Fazzari, McIvor, McQuay, and Owens22
(collectively, “the Fifth Third plaintiffs”) also contend that
22
Plaintiffs did not assert any claims under Chapter 75 against
Wells Fargo. In addition, the appeal in COA13-1303 as to
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the trial court erred in granting summary judgment on their UDTP
claims against Fifth Third. We disagree.
It is well established that
[a] claim for unfair and deceptive trade
practices under N.C. Gen. Stat. § 75.1-1must allege that: (1) the defendant
committed 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 the plaintiff’s
business. 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 [the]
plaintiff complains.
Sunset Beach Dev., LLC v. Amec, Inc., 196 N.C. App. 202, 211,
675 S.E.2d 46, 53 (2009) (citations, internal quotation marks,
and brackets omitted). “Actual reliance is demonstrated by
evidence [the] plaintiff acted or refrained from acting in a
certain manner due to [the] defendant’s representations.”
Pleasant Valley Promenade v. Lechmere, Inc., 120 N.C. App. 650,
663, 464 S.E.2d 47, 57 (1995) (citation omitted). Where a
plaintiff cannot forecast evidence of actual reliance, summary
SunTrust was dismissed by order of this Court entered 7 March
2014. The five plaintiffs named here are the only Fifth Third
borrowers remaining in this appeal.
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judgment for the defendants is proper. Sunset Beach Dev., LLC,
196 N.C. App. at 212, 675 S.E.2d at 54.
On appeal, the Fifth Third plaintiffs allege that they
relied on misrepresentations by Fifth Third and the appraisals
by Anderson in making their decisions to take out the loans on
which they later defaulted. The Fifth Third plaintiffs also
assert that Fifth Third wrongfully withheld the buyback
agreements from their underwriters and Anderson in an effort to
inflate the appraisals.
As for the alleged misrepresentations, our review of the
record reveals that Decker, Fazzari, McIvor, and McQuay all
testified that Fifth Third did not make any misrepresentations
to them in regard to their loans. Owens testified that an
employee of Fifth Third told him that Grandfather Vistas was
“beautiful, that it should do well” and vouched that the
developers were the “real deal.”23 However, even if these
statements could be construed as factual misrepresentations as
opposed to mere expressions of opinion, the remarks were made
after Owens signed the purchase agreement, and, not
23
The Fifth Third plaintiffs quote an additional alleged
affirmative misrepresentation made by an agent of the bank to
another borrower, but that borrower is not a party to this
appeal. Accordingly, the statement is irrelevant in resolving
the appeal of the Fifth Third plaintiffs.
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surprisingly, Owens testified that he did not rely on the
statements in deciding whether to buy his lot.
In regard to the assertion that Fifth Third withheld the
buyback agreements from Anderson, the Fifth Third plaintiffs
fail to note that Anderson testified to having a copy of at
least one contract which included the buyback agreement.
Further, as noted in footnote 20 supra, appraisers for Wells
Fargo who were provided with copies of the buyback agreement
still reached a value of $500,000 for each of the founders’ lots
they appraised.
As for the Fifth Third plaintiffs’ alleged reliance on
Anderson’s appraisals, we find this appeal governed by the same
reasoning employed in In re Fifth Third Bank, N.A., and
Williams, and in light of the virtually identical facts
presented here, we reach the same result. As noted supra, those
appeals involved, inter alia, UDTP claims by investors who took
out loans from Fifth Third to purchase lots in a development
called the Villages of Penland as part of an investment scheme.24
In re Fifth Third Bank, N.A., 217 N.C. App. at 202, 719 S.E.2d
24Williams was an appeal from the grant of summary judgment in
favor of Anderson, while In re Fifth Third Bank, N.A., arose
from a summary judgment order in favor of the lender. We refer
to the appeals collectively as “the Penland cases.”
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at 173-74. In the Penland cases, as here, the plaintiffs were
purchasers of lots in another real estate investment scheme in
which Anderson (and another appraiser) appraised a large of
number of lots at an identical, inflated value to meet the loan-
to-value conditions required to obtain bank loans. Id. at 207-
08, 719 S.E.2d at 177. The Penland scheme, like that here,
involved contracts that promised repurchase of lots with a
guaranteed profit for the investors. Id. at 207, 719 S.E.2d at
177. As with Grandfather Vistas, the development was never
completed, and investors were left with large loans and lots
worth only a fraction of their appraised values. Id. at 202,
719 S.E.2d at 174.
In Williams, we noted that, “[w]here a plaintiff cannot
forecast evidence of actual reliance, summary judgment for the
defendants is proper[,]” __ N.C. App. at __, 724 S.E.2d at 549
(citation omitted), and then observed:
All of the evidence shows that [the
p]laintiffs made their decisions to invest
in the development and contracted to do so
without any awareness of, much less reliance
on, the Anderson[] appraisals. Even had .
. . Anderson[] appraised the lots
differently, [the p]laintiffs would still
have been obligated to purchase them at the
prices agreed to in the purchase contracts.
[The p]laintiffs cannot have relied on
information they did not see and did not
know existed (some of which did not, in
-24-
fact, yet exist) at the time of their
decisions. Because [the p]laintiffs
forecast no evidence that they actually
relied on the appraisals in deciding to make
their investments, the trial court properly
granted summary judgment to . . .
Anderson[].
Id. at __, 724 S.E.2d at 550. Likewise, in In re Fifth Third
Bank, N.A., in considering summary judgment for Fifth Third on
UDTP claims, we concluded that “no evidence tend[ed] to show
that [the p]laintiffs’ decision to invest . . . bore any
relation to the appraised value of the lots which they purchased
or that [the p]laintiffs relied in any way upon the allegedly
defective appraisals which [Fifth Third] procured when they
decided to invest . . . .” 217 N.C. App. at 211, 719 S.E.2d at
179. As a result, we affirmed summary judgment in favor of
Fifth Third on the plaintiffs’ UDTP claims. Id. at 213, 719
S.E.2d at 180.
Here, just as in the Penland cases, the purchase contracts
were not subject to any appraisal contingencies.25 Just as in
25
The Fifth Third plaintiffs assert that the purchase agreements
did contain an appraisal contingency condition, to wit, language
stating that a buyer “must be able to obtain a conventional loan
at a fixed rate in the principal amount of 90% [loan-to-value]
for a term of 30 years at an initial interest rate not to exceed
7.5% per annum . . . .” However, none of the purchasers
obtained 30-year conventional loans on the terms specified in
this language. Rather, each of the loans involved much shorter
-25-
the Penland cases, the Fifth Third plaintiffs signed their
purchase contracts, obligating them to go forward with the
purchase of the founders’ lots, before Anderson had even
performed the appraisals in question. Thus, just as in the
Penland cases, the Fifth Third plaintiffs “cannot have relied on
information they did not see and did not know existed (some of
which did not, in fact, yet exist) at the time of their
decisions” to sign the purchase contracts.26 See Williams, __
terms and higher rates of interest.
26
As in the Penland cases, the Fifth Third plaintiffs’ lack of
reliance on the appraisals is not surprising since neither the
developers nor the purchasers of the lots were concerned about
the actual value of the founders’ lots. The purchase of the
lots by the Fifth Third plaintiffs was simply a necessary step
in an investment scheme which they believed would guarantee them
a quick $125,000 profit. Under the scheme, the profit for the
Fifth Third plaintiffs had nothing to do with the value of the
lots themselves; all that mattered was the promise in the
purchase contract for the developers to (1) pay the interest on
the purchase loans and (2) repurchase each lot for $125,000 more
than the sales price in one year. Indeed, it is unclear whether
the sales of the founders’ lots were more accurately
characterized as securities transactions, which fall outside the
provisions of Chapter 75. See In re Fifth Third, N.A., 217 N.C.
App. at 211 n.6, 719 S.E.2d at 179 n.6 (“The fact that the
purchase price that [the p]laintiffs paid for the lots in
question was identical and bore no apparent relation to the
actual value of the relevant lots in their undeveloped state may
cut against, instead of in favor of, [the p]laintiffs’ position.
The fact that each lot was appraised and priced at the same
value may suggest that the investments in question amounted to a
securities transaction not subject to the UDTP [Act], rather
than a loan.”) (citations omitted).
-26-
N.C. App. at __, 724 S.E.2d at 550. We are utterly unable to
distinguish the relevant circumstances here from those presented
in the Penland cases, and thus we reach the same result. See In
re Appeal from Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30,
37 (1989) (holding that “[w]here a panel of the Court of Appeals
has decided the same issue, albeit in a different case, a
subsequent panel of the same court is bound by that precedent,
unless it has been overturned by a higher court”). In light of
the Fifth Third plaintiffs’ inability to show either
misrepresentations or reliance on the allegedly negligent
appraisals, the trial court properly granted summary judgment on
their UDTP claims. Accordingly, the Fifth Third plaintiffs’
UDTP arguments are overruled.
AFFIRMED.
Judges STROUD and MCCULLOUGH concur.