Odom v. Little Rock & I-85 Corp.

261 S.E.2d 99 (1980) 299 N.C. 86

T. LaFontine ODOM, Trustee, Henry C. Rhyne, Individually and as Executor under the Last Will and Testament of Daniel P. Rhyne, Sr., deceased, and as beneficiary under said instrument; William M. Rhyne and Daniel P. Rhyne, Jr., both Individually and as beneficiaries under the Last Will and Testament of Daniel P. Rhyne, Sr.
v.
LITTLE ROCK & I-85 CORPORATION, a corporation, NCNB Mortgage Corporation, a corporation; Edward W. Largen, Trustee; Tim, Inc., a corporation, Trustee; S. Dean Hamrick, Trustee; Southern National Bank of North Carolina, a corporation; and David M. McConnell.

No. 70.

Supreme Court of North Carolina.

January 8, 1980.

Wade & Carmichael by J. J. Wade, Jr., Charlotte, for plaintiffs-appellants.

Cansler, Lockhart, Parker & Young, by Sarah Elizabeth Parker, Charlotte, for defendants-appellees.

BROCK, Justice.

The sole question facing this Court is the propriety of the summary judgment granted in favor of the defendant NCNB Mortgage Corporation, affirmed by the Court of Appeals at 40 N.C.App. 242, 252 S.E.2d 217 (1979). In Page v. Sloan, 281 N.C. 697, 704, 190 S.E.2d 189, 193 (1972) this Court held that:

". . . [T]he party moving for summary judgment has the burden of `clearly establishing the lack of any triable issue of fact by the record properly before the court. His papers are carefully scrutinized; and those of the opposing party are on the whole indulgently regarded.' (Citations omitted.) Rendition of summary judgment is, by the rule itself, conditioned upon a showing by the movant (1) that there is no genuine issue as to any material fact, and (2) that the moving party is entitled to a judgment as a matter of law. (Citations omitted.) See also Pitts v. Pizza, Inc., 296 N.C. 81, 249 S.E.2d 375 (1978)."

Plaintiffs' complaint alleges that the defendant NCNB Mortgage Corporation fraudulently misrepresented material facts at the December 28, 1973 real estate closing involving plaintiffs and the defendant Little Rock Corporation. They alleged NCNB Mortgage Corporation intentionally misrepresented that loan funds provided by NCNB Mortgage Corporation were to be used for improvements to be made on the property plaintiffs were selling to defendant Little Rock Corporation rather than for land acquisition which was the true purpose of the loan. Plaintiffs contend this fraudulent misrepresentation induced them to subordinate their purchase money deed of trust to a supposed construction loan deed of trust held by defendant NCNB Mortgage Corporation. Plaintiffs allege that the subordination agreement would not have been entered into had they realized they were subordinating their interest to a land acquisition deed of trust.

Relying onFoster v. Snead, 235 N.C. 338, 69 S.E.2d 604 (1952) the Court of Appeals held that the plaintiffs in their affidavits in opposition to the defendants' motion for summary judgment made no showing of the essential elements necessary to make out a prima facie case of fraud and thus summary judgment was properly granted for the defendants. To make out an actionable case of fraud plaintiff must show: (a) that the defendant made a representation relating to some material past or existing fact; (b) that the representation was false; (c) that when he made it defendant knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion; (d) that the defendant made the false representation with the intention that it should be acted on by the plaintiff; (e) that the plaintiff reasonably relied upon the representation and acted upon it; and (f) that the plaintiff suffered injury. 235 N.C. at 339, 340, 69 S.E.2d at 606. The Court of Appeals correctly noted that in order for the case to get to the jury plaintiffs as the parties alleging fraud bore the burden of proof to show that the essential elements as enumerated in Foster, supra, existed. However it appears that the Court of Appeals failed to consider that the defendants as the parties moving for summary judgment were faced with the initial burden of first showing that there were no contested factual issues surrounding the alleged fraud, and secondly, that they (defendants) were entitled to judgment as a matter of law.

For the reasons that follow we hold that the defendants as movants for summary judgment failed to show that there were no material factual issues remaining, and we therefore reverse the Court of Appeals' upholding of summary judgment for NCNB Mortgage Corporation.

In the motion for summary judgment defendants rely partly on the affidavits of T. LaFontine Odom, Robert Blythe, and E. A. Westmoreland. In reading these affidavits, and giving plaintiffs the benefit of every inference to be drawn from the facts contained therein, these affidavits clearly create questions of fact sufficient to withstand defendants' motion for summary judgment.

From the actions of counsel for defendant NCNB Mortgage Corporation in invoking the attorney-client privilege to prevent attorney Blythe from answering questions concerning the land transaction with Little Rock Corporation, and the affidavits of attorney Blythe and E. A. Westmoreland, an employee of NCNB Mortgage Corporation, there can be no question that attorney Blythe was representing the interests and acting in behalf of NCNB Mortgage Corporation at the land closing between the defendant Little Rock Corporation and plaintiffs Rhynes.

Defendant NCNB Mortgage Corporation in advancing $150,000 to David McConnell was cognizant that the money was being advanced for acquisition of the Rhynes' property and not for the purposes of construction financing. This awareness of the purpose of the loan is evident from the contents of the commitment letter of December 27, 1973 between defendant McConnell and defendant NCNB Mortgage Corporation where the supplement to that letter specifically provided that the money was to be advanced for acquisition purposes. Robert Blythe as closing attorney representing NCNB Mortgage Corporation states in his deposition that he was also aware that the money was to be used for land acquisition and not for construction of improvements on the property.

In his deposition, which for the purpose of determining the correctness of defendants' motion for summary judgment must be taken as true, plaintiff T. LaFontine Odom stated that at the time of the closing, Robert Blythe indicated to him that NCNB Mortgage Corporation was going to make a construction loan with regard to improvements that would be made to the property purchased from the Rhynes by defendant David McConnell and defendant Little Rock Corporation. Odom states that he was shown a single NCNB Mortgage Corporation form document entitled "Deed of Trust-Construction Loan" which referred to $150,000 "made or to be made" for improvements to the property. This construction loan deed of trust referred to a "Construction Loan Agreement" and incorporated it by reference. Plaintiff Odom did not ask to see this "Construction Loan Agreement." In his deposition Odom states that attorney Blythe handed him the "Deed of Trust-Construction Loan" and at this point Odom assumed Blythe was representing both NCNB Mortgage Corporation and Little Rock Corporation. Odom stated Blythe indicated that there were no other documents in existence because the transaction between NCNB Mortgage Corporation and Little Rock Corporation had not been completed. Later in his deposition plaintiff Odom again states that Blythe indicated the loan agreements were not complete and no money had been advanced for NCNB Mortgage Corporation and Little Rock Corporation were unsure as to the exact amount of the final construction loan. Odom stated also that attorney Blythe indicated that the construction loan would be made at a later date and that nothing had been finalized as of the Rhynes-McConnell' closing.

According to his deposition, at Blythe's request, plaintiff Odom allowed Blythe to record the "construction loan" deed of trust first, so as to avoid the necessity of a later subordination agreement between the Rhynes and NCNB Mortgage Corporation. Odom also alleges that he advised the Rhynes to subordinate the lien of their purchase money deed of trust to the lien of the "construction loan" deed of trust from Little Rock Corporation to NCNB Mortgage Corporation. He alleges that he did this on the basis of Blythe's representation that NCNB Mortgage Corporation was going to make the "construction loan" to Little Rock Corporation after the construction plans were completed, and that the tendered "construction loan" deed of trust was currently unfunded.

In contrast to plaintiff Odom's deposition attorney Robert Blythe in his deposition made the following statements: "I do not recall any specific conversation with Mr. Odom at the closing at all . . . . I do not recall making any representation to Mr. Odom or to the Rhynes at the closing of the Rhyne transaction that the $150,000 NCNB Mortgage loan would be used solely for improvements." These statements are in direct conflict with those of plaintiff Odom. Such conflict creates a factual controversy over the possible misrepresentations of the loan agreement which led to plaintiffs' willingness to subordinate their purchase money deed of trust.

Here the facts advanced by plaintiff Odom could be found by a jury to show that the defendant NCNB Mortgage Corporation through their attorney, and by mislabled loan documents, made an intentional misrepresentation of the type of loan which they were advancing to the defendants; that they made this misrepresentation with the intent that plaintiffs would rely upon it and subordinate their purchase money deed of trust to the deed of trust held by NCNB Mortgage Corporation as security for money advanced for land acquisition; that plaintiffs relied on defendant NCNB Mortgage Corporation's misrepresentation of the land acquisition loan as a construction loan, and for that reason subordinated their interest causing the plaintiffs to lose priority of their purchase money deed of trust, and thereby suffer monetary damages.

Plaintiffs by their affidavits offered in opposition to defendants' motion for summary judgment have created material issues of fact as to all the essential elements needed to establish fraud. Plaintiffs having done so, the defendants' motion for summary judgment should have been denied.

The decision of the Court of Appeals is reversed and this cause is remanded to the Court of Appeals for further remand to the Superior Court, Mecklenburg County, for appropriate proceedings.

Reversed and remanded.

COPELAND, J., took no part in the consideration or decision of this case.