Harbach v. Lain and Keonig, Inc.

326 S.E.2d 115 (1985)

Jeanne S. HARBACH and husband, Dr. Francis Harbach
v.
LAIN AND KEONIG, INC., John Koenig, Clarence Hemminger, Vip Real Estate, Inc., Monika Perry, and Roxanne Chamness.

No. 834SC1194.

Court of Appeals of North Carolina.

March 5, 1985.

Holland & Poole by B.L. Poole, Clinton, for plaintiffs-appellees.

McCoy, Weaver, Wiggins, Cleveland & Raper by Richard M. Wiggins and E.R. Zumwalt, III, Fayetteville, for defendants-appellants Lain and Koenig, Inc. and Clarence Hemminger.

PHILLIPS, Judge.

The first error assigned by defendant appellants is the denial of their motion for summary judgment. This assignment is overruled without discussion because the record does not show what evidence, if any, was presented to the court in support of the motion. Though the motion states that it is supported by "depositions, answers to interrogatories and admissions of fact, together with the affidavits attached hereto," no such documents are in the record before us; thus we have no basis for concluding that the evidence presented established that no material issue of material fact existed, as the motion alleges. It was incumbent on the appellants to show that their motion had merit; this they have failed to do. Rule 56, N.C. Rules of Civil Procedure; Singleton v. Stewart, 280 N.C. 460, 186 S.E.2d 400 (1972).

The next two errors assigned by the appellants are the denial of their motions for a directed verdict and for judgment notwithstanding the verdict. These two assignments, in effect, raise but one question—whether the evidence was sufficient to establish plaintiffs' claim that they were damaged by the fraud of the appellants— and we will discuss them together. See Harvey v. Norfolk Southern Railway, 60 N.C.App. 554, 299 S.E.2d 664 (1983). When the evidence recited above is viewed in the light most favorable for the plaintiffs, as the law requires, Wallace v. Evans, 60 N.C.App. 145, 298 S.E.2d 193 (1982), it is plainly sufficient, we think, to establish that plaintiffs were damaged by the actionable fraud of the appellants, and these assignments are overruled.

It is axiomatic in our law that for a plaintiff to prevail in a case of actionable fraud he must show: (1) That the defendant made a false representation to him as to an existing or past fact which was material to the transaction involved; (2) that defendant either knew the representation was false when it was made or made it recklessly without knowing whether it was true or not; (3) the representation was made with the intention that plaintiff should rely on it; and (4) plaintiff did reasonably rely upon it; and (5) was damaged thereby. Johnson v. Phoenix Mutual Insurance Co., 300 N.C. 247, 266 S.E.2d 610 (1980). In this case plaintiffs have shown by detailed categorical evidence that appellants falsely represented that the house they were selling them had a facility of great utility and value which it did not have, namely, a sprinkler system in every room, and plaintiffs were substantially damaged by the absence of this costly asset; thus the elements of falsity, materiality and damage, which are not mentioned in appellants' brief, require no further discussion.

The elements of fraud that appellants contend were insufficiently proved in the trial below are those that concern their own mental state and plaintiffs' reliance. They argue that no evidence was presented which tends to show either that they knew that their representation about the house having a sprinkler system in every room was false or that they made the representation recklessly or that they intended for plaintiffs to rely on it and be deceived by it. While it is true that the evidence does not affirmatively show that appellants knew that their representation about the sprinkler system was false, it also shows that though the house had no sprinkler system they nevertheless positively represented that it did in selling the house for $30,000 more than it was worth. Falsehoods are usually told for a purpose and that appellants went to the trouble to write one out and use it in the setting that existed warrants the inference that the representation was recklessly made without regard for its truth and with the intention of deceiving plaintiffs by it. Zager v. Setzer, 242 N.C. 493, 88 S.E.2d 94 (1955). And, of course, the inference that appellants meant to deceive the plaintiffs from the outset is further supported by appellants' later conduct in distributing the "pre-closing" escrow funds to the fraudulent seller after promising to use them to pay for any defects discovered or repairs needed.

As to the element of reliance, appellants argue that the evidence shows that plaintiffs did not rely upon their false representation, and if they did it was unreasonable for them to do so. In support of this argument appellants point to plaintiffs' visits to the premises, their inquiry of Ms. Chamness concerning the button-like objects on the ceilings and her response that they were part of the sprinkler system. But this evidence does not necessarily mean, as appellants argue, that plaintiffs relied on Ms. Chamness or their own observations, or that their failure to notice that the house had no sprinkler system was unreasonable and due to their own inattention. The evidence plainly shows that plaintiffs were first attracted to the property by the appellants' representations about it, and that those representations were apparently based on their own expert and superior knowledge as real estate agents. Under the circumstances recorded, who, if anybody, the plaintiffs relied upon in buying the property, and whether they acted reasonably were questions of fact for the jury, rather than questions of law for the court. Certainly, we cannot state as a matter of law that the evidence shows that plaintiffs did not rely on the appellants' written declaration that the house had a sprinkler system. Nor, in our opinion, does the evidence unerringly show that plaintiffs had no right to rely on appellants' representation because they should have observed that the house had no sprinkler system. Plaintiffs' own real estate agent, Monika Perry, much more experienced in such matters than plaintiffs were, inspected the premises and was also deceived. We do not believe that the law required plaintiffs to be more knowledgeable or discerning.

Appellants cite as dispositive on the question of reliance several decisions of our Supreme Court and this Court in each of which a buyer of real estate was denied redress even though the owner or agent had materially misrepresented the extent or condition of the property involved. But in each of the cases relied upon, the buyer's evidence clearly established that he did not rely upon the false representations, whereas plaintiffs' evidence made no such showing. For example: In Russo v. Mountain High, Inc., 38 N.C.App. 159, 247 S.E.2d 654 (1978), where the tract bought contained only 1,589.49 acres instead of the 4,271.4 represented, the evidence showed that plaintiff was truthfully told by the agent that the acreage representation was based upon his file and that this second-hand information was acceptable to plaintiff. In Harding v. Southern Loan & Insurance Co., 218 N.C. 129, 10 S.E.2d 599 (1940), the evidence showed that plaintiff knew that the representations of defendant's agent as to the condition of the hotel being sold were based upon statements and reports that the agent had received from a contractor and others. And in both Peyton v. Griffin, 195 N.C. 685, 143 S.E. 525 (1928) and Tarlton v. Keith, 250 N.C. 298, 108 S.E.2d 621 (1959), the evidence showed that each buyer knew that the boundary lines that were incorrectly pointed out to him by the agent had been pointed out to the agent by the owner and that the agent did not purport to know for a fact where the lines were. But the evidence in this case does not purport to show that appellants either obtained their information about the sprinkler system from someone else or that they notified plaintiffs that was the case.

The appellants' other assignments of error, supported by neither argument nor citations of authority, are likewise without merit, in our opinion.

No error.

WEBB and JOHNSON, JJ., concur.