Helms v. Holland

478 S.E.2d 513 (1996)

Phyllis A. HELMS and Mary B. Moslak, Plaintiffs,
v.
Joyce W. HOLLAND, Prudential Residential Services, a North Carolina Limited Partnership, Greater Carolinas Real Estate Services, Inc. d/b/a Prudential Triangle Real Estate, Betty Johnson and George White d/b/a George White Realty, Defendants.

No. COA95-676.

Court of Appeals of North Carolina.

December 3, 1996.

Wilson & Waller, P.A. by Brian E. Upchurch and Betty S. Waller, Raleigh, for plaintiff-appellant/appellees.

Young Moore and Henderson, P.A. by John N. Fountain and R. Christopher Dillon, Raleigh, for defendant-appellee/appellants Joyce W. Holland, Prudential Residential Services and Greater Carolinas Real Estate Services, Inc.

Maupin Taylor Ellis & Adams, P.A. by Elizabeth D. Scott, Raleigh, for defendant-appellee/appellants Betty Johnson and George White Realty.

McGEE, Judge.

In the spring of 1990 plaintiffs, who were in the family care facility business, made an offer to purchase a piece of real property for use as a family care facility. Paragraph 6 of the Offer to Purchase and Contract included a hand-written provision which stated, "B. Property must pass state inspection for family care home guidelines." Paragraph 8 of the Standard Provisions stated, "RECOMMENDATION: Buyer should have any inspections made prior to incurring expenses for closing." On 4 April 1990, plaintiffs purchased the property for the contract price of $106,900.00. In the process of obtaining approval from the Wake County Department of Health, plaintiffs learned the septic system had previously malfunctioned and that the Department of Health had determined the system was not subject to repair and therefore the property was not suitable for use as a family care facility.

Plaintiffs filed an action against the owners of the property seeking compensatory and punitive damages (Action I). The case went to trial and a unanimous jury rendered a verdict in favor of plaintiffs answering, as follows, "[the owners] fraudulently represent[ed] to the plaintiffs, Phyllis A. Helms and Mary B. Maslak [sic], that all problems with the septic system had been fully corrected and that the septic system was suitable for use as a family care home." Consequently, the jury determined plaintiffs were entitled to recover $22,900.00 by reason of this false representation. Before judgment was entered, the parties reached a settlement, signed a release agreement and plaintiffs filed a voluntary dismissal with prejudice of their action against the owners.

In the spring of 1991, plaintiffs initiated a lawsuit against the owners' real estate agent, Joyce W. Holland (Holland) and the company she represented, Prudential Residential Services and Greater Carolinas Real Estate Services, Inc. d/b/a Prudential Triangle Real Estate (Prudential) for compensatory, treble and punitive damages (Action II). Defendants Holland and Prudential filed an answer and a third-party complaint against plaintiffs' real estate agent, Betty Johnson (Johnson) and the company she represented, George White d/b/a George White Realty (White Realty). On 8 March 1993, plaintiffs filed a voluntary dismissal of this lawsuit without prejudice.

On 3 March 1994, plaintiffs filed this third action against Holland, Prudential, Johnson and White Realty alleging fraud and in the alternative, negligent misrepresentation as well as unfair and deceptive trade practices and punitive damages (Action III). All defendants timely filed responsive pleadings and all moved (1) for dismissal of plaintiffs' complaint pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) and (2) for judgment on the pleadings under N.C. Gen.Stat. § 1A-1, Rule 12(c). Defendants' motions were heard 16 November 1994. Judge Donald Stephens denied defendants' Rule 12(b)(6) motions, allowed the Rule 12(c) motion for judgment on the pleadings as to all claims for compensatory and treble damages, but denied defendants' motions as to plaintiffs' claims for punitive damages.

Following completion of discovery, defendants moved for summary judgment on plaintiffs' remaining claim for punitive damages and on 24 February 1995, Judge Robert Farmer granted defendants' motion for summary judgment. Plaintiffs timely filed a notice of appeal to this Court from the order allowing partial judgment on the pleadings as well as the summary judgment order. Defendants filed a notice of cross-appeal from the denial of defendants' motions for judgment on the pleadings as to the issue of punitive damages.

Conversion to Summary Judgment

G.S. § 1A-1, Rule 12(c), in part, states that where matters outside the pleadings are received and not excluded by the trial court, a motion for judgment on the pleadings should be treated as a motion for summary judgment and disposed of in the manner and under the conditions set forth in Rule 56 of the North Carolina Rules of Civil Procedure. G.S. § 1A-1, Rule 12(c). Only the pleadings and exhibits which are attached and incorporated into the pleadings may be considered by the trial court. Minor v. Minor, 70 N.C.App. 76, 78, 318 S.E.2d 865, 867, disc. review denied, 312 N.C. 495, 322 S.E.2d 558 (1984). "No evidence is to be heard, and the trial judge is not to consider statements of fact in the briefs of the parties or the testimony of allegations by the parties in different proceedings." Id. Included with the pleadings in this case was the 1990 deposition of defendant Holland taken in Action I against the owners of the real property. Additionally, the trial court's order granting partial judgment on the pleadings indicates the court considered "the pleadings in the file and the briefs and arguments of counsel." Because matters outside the pleadings were considered by the court in reaching its decision on the judgment on the pleadings, the motion will be treated as if it were a motion for summary judgment. Id.

Having converted defendants' Rule 12(c) judgment on the pleadings into a Rule 56 motion for summary judgment, the question on appeal is whether there is a genuine issue as to a material fact and whether defendants are entitled to judgment as a matter of law. N.C. Gen.Stat. § 1A-1, Rule 56(c). This Court must consider the evidence in a light most favorable to the non-moving party, allowing the non-moving party a trial upon a favorable inference as to the facts. Moye v. Thrifty Gas Co., 40 N.C.App. 310, 314, 252 S.E.2d 837, 841, disc. review denied, 297 N.C. 611, 257 S.E.2d 219 (1979). In order to prevail under the summary judgment standard, defendants must demonstrate an essential element of plaintiffs' claim is nonexistent or that plaintiffs are unable to produce evidence which supports an essential element of their claim. Clark v. Brown, 99 N.C.App. 255, 260, 393 S.E.2d 134, 136-37, temp. stay allowed, 394 S.E.2d 167, disc. review denied and stay dissolved, 327 N.C. 426, 395 S.E.2d 675 (1990). Assuming, arguendo, res judicata and the statute of limitations are not bars to this action, we conclude defendants were entitled to summary judgment because plaintiffs failed to support essential elements of the claims of fraud, negligent representation, as well as unfair and deceptive trade practices.

Fraud

As plaintiffs point out, the elements of fraud are well-established: "(1) [f]alse representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with the intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party." Carver v. Roberts, 78 N.C.App. 511, 513, 337 S.E.2d 126, 128 (1985). "A broker who makes fraudulent misrepresentations or who conceals a material fact when there is a duty to speak ... is personally liable to the purchaser notwithstanding that the broker was acting in the capacity of agent for the seller." Johnson v. Beverly-Hanks & Assoc., 328 N.C. 202, 210, 400 S.E.2d 38, 43 (1991)(quoting P. Hetrick & J. McLaughlin, Webster's Real Estate Law in North Carolina § 132, at 165 (3rd ed.1988)). However, this duty applies only to "material facts known to the broker and to representations made by the broker." Clouse v. Gordon, 115 N.C.App. 500, 508, 445 S.E.2d 428, 432-33 (1994). The record in this case is devoid of any showing that defendants (1) intended to deceive plaintiffs or (2) knew at the time of the sale that the Health Department had already disapproved the property as a family care facility because of the condition of the septic system. While there was evidence the owners had received a letter from the Health Department concluding the property was unfit as a family care facility, nothing in the record supports plaintiffs' conclusory statements that defendants were also aware of this decision. The evidence in the record indicates the owners advised defendant Holland that the property had experienced septic system problems due to tremendous rain and overuse by teenagers, but these problems had been resolved. However, there is no evidence Holland or any of the other defendants were aware of the Health Department's letter disapproving the property for use as a family care facility.

Negligent Misrepresentation

Plaintiffs' alternative claim for negligent misrepresentation also fails. In Powell v. Wold, 88 N.C.App. 61, 67, 362 S.E.2d 796, 799, (1987), this Court stated North Carolina has adopted the Restatement of Torts definition and requirements for negligent misrepresentation:

"One who in the course of his business or profession supplies information for the guidance of others in their business transactions is subject to liability for harm caused to them by their reliance upon information if

(a) he fails to exercise that care and competence in obtaining and communicating the information which its recipient is justified in expecting, and

(b) the harm is suffered

(i) by the person or one of the class of persons for whose guidance the information was supplied, and

(ii) because of his justifiable reliance upon it in a transaction in which it was intended to influence his conduct or in a transaction substantially identical therewith."

Id. (quoting Restatement (Second) of Torts § 552 (1977)(emphasis added)). Nothing in the record shows defendants negligently informed plaintiffs about the property. As we have already noted, the evidence indicates the owners never advised their agent, Holland, of the severity of the septic system problems. They simply told Holland the problem had been remedied and this information was communicated to plaintiffs at least by the closing date.

Even assuming, arguendo, defendants made intentional or negligent misrepresentations to plaintiffs regarding the property, we conclude that under the circumstances, plaintiffs' reliance upon this information was unreasonable and therefore plaintiffs' claims must fail. Justifiable reliance is an essential element of both fraud and negligent misrepresentation. C.F.R. Foods, Inc. v. Randolph Development Co., 107 N.C.App. 584, 588, 421 S.E.2d 386, 389, disc. review denied, 333 N.C. 166, 424 S.E.2d 906 (1992)(stating that a plaintiff's reliance must be reasonable to prove fraud); APAC-Carolina, Inc. v. Greensboro-High Point Airport Authority, 110 N.C.App. 664, 680, 431 S.E.2d 508, 517, disc. review denied, 335 N.C. 171, 438 S.E.2d 197 (1993)("Justifiable reliance is an element of negligent misrepresentation in North Carolina.")

The Offer to Purchase and Contract specifically contained a hand-written provision stating the "[p]roperty must pass the state inspection for family care home guidelines." One of the standard contract provisions included the recommendation that the "buyer should have any inspections made prior to incurring expenses for closing." We note plaintiffs were already in the business of operating family care facilities and were familiar with the regulations governing such homes. Had plaintiffs complied with the state inspection provision which they added to the Offer to Purchase and Contract, the septic system deficiencies would have been revealed. Under these facts, we cannot conclude that plaintiffs would have been justified in relying upon a fraudulent or negligent misrepresentation of defendants as to this issue. See APAC, 110 N.C.App. at 681-82, 431 S.E.2d at 518 (concluding reliance was unjustified where the contract placed upon plaintiffs the burden of a full inspection and the evidence indicated the inspection would have revealed the problem of undercut work); C.F.R. Foods, Inc., 107 N.C.App. at 588-89, 421 S.E.2d at 389 (Plaintiff's reliance was unreasonable where plaintiff requested and received a topographical map which served to put plaintiff on notice that further inspection of the soil was advisable before beginning construction.) For the foregoing reasons, plaintiffs' assignments of error as to fraudulent and negligent misrepresentation are overruled.

Based on our review of the record, we find plaintiffs' claim for unfair and deceptive trade practices pursuant to N.C. Gen.Stat. § 75-1.1 is without merit and we overrule this assignment of error.

Plaintiffs' final argument is that the trial court erred in allowing defendants' motion for summary judgment on the issue of punitive damages. However, plaintiffs' statement that "it would be an exercise in futility to analyze the trial court's error in allowing the summary judgment" coupled with the absence of an argument or authority on the question of the propriety of the summary judgment motion cause us to conclude this issue has been abandoned pursuant to Rule 28 of the North Carolina Rules of Appellate Procedure.

Because of our decision on plaintiffs' appeal, we need not address defendants' cross appeal in this matter.

Based on the foregoing, we affirm the orders of the trial court.

AFFIRMED.

JOHNSON and JOHN C. MARTIN, JJ., concur.

JOHNSON, J., participated in this opinion prior to his retirement on 1 December 1996.