Russo v. Mountain High, Inc.

247 S.E.2d 654 (1978) 38 N.C. App. 159

Edmund P. RUSSO, trustee, Tobias Simon, successors trustee, for E. Peter Goldring and Carlos Urrella
v.
MOUNTAIN HIGH, INC., H. D. Boyles, Earl E. Boyles, Joe P. Warren, trustee, and John Hancock Mutual Life Insurance Company.

No. 7724SC985.

Court of Appeals of North Carolina.

October 3, 1978.

Holshouser & Lamm by Charles C. Lamm, Jr., Boone, for plaintiff appellants.

Womble, Carlyle, Sandridge & Rice by H. Grady Barnhill, Jr. and Jimmy H. Barnhill, Winston-Salem, for defendant appellees Joe P. Warren, Trustee, and John Hancock Mut. Life Ins. Co.

ERWIN, Judge.

Plaintiffs' sole assignment of error is that the trial court erred in allowing the motion by defendants Warren and John Hancock for summary judgment. We do not agree and accordingly affirm the judgment of the trial court.

In arguing that the trial court committed error, plaintiffs rely heavily on the 2 July 1969 telephone call from Goldring and Fewell to defendant Warren. They assert that in the course of this conversation, Warren misrepresented the acreage when Warren was either aware of the true acreage or "recklessly ignorant" as to the true acreage.

Plaintiffs rely on Parker v. Bennett, 32 N.C.App. 46, 231 S.E.2d 10 (1977), cert. denied, 292 N.C. 266, 233 S.E.2d 393 (1977), in support of their contention that summary judgment herein was improperly granted. In that case, this Court did hold that summary judgment was improperly granted for defendants therein in an action for fraud involving an alleged misrepresentation of the acreage in a farm. First, we do not believe that Parker stands for the proposition that summary judgment is never appropriate in an action for fraud. Rather, the case simply held that defendant-movants in that case had failed to carry their burden under G.S. 1A-1, Rule 56(c), of showing the lack of a genuine issue as to a material fact and that they were entitled to judgment as a matter of law. This Court noted:

"On the motion for summary judgment, if the material offered by defendants in support of their motion fails to affirmatively negate any one or more of the essential elements of fraud they have failed to bear the burden of ``clearly establishing the lack of any triable issue of fact by the record properly before the court.'" Parker v. Bennett, supra at 54, 231 S.E.2d at 15.

We recognize that the quoted sentence is susceptible to being misunderstood. Clearly, if the defendant moving for summary judgment in a fraud case presents material which effectively negates even one of the essential elements of fraud, summary judgment in defendant's favor should be allowed. It is not necessary that defendant's material negate all of the essential elements, and any implication to that effect which may be contained in the language above quoted from Parker v. Bennett, supra, is not approved.

While our courts have been hesitant to formulate an all-embracing definition of fraud, the Supreme Court has stated the following elements of actionable fraud in Ragsdale v. Kennedy, 286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974): "(1) False 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."

The materials before the trial court upon the motion for summary judgment tend to show that John Hancock believed the tract consisted of 4,271 acres and relied thereon. Such belief was supported by the Peterson "survey" and Peterson's affidavit. There is no support for any contention that John Hancock or its agents procured the purported "survey" or participated in any way in its completion. In fact, John Hancock loaned a substantial sum of money secured by a deed of trust on 4,271 acres. There is no inference that either defendant directly participated in securing the affidavit from Peterson, in obtaining the "Surveyor's Report," or in having the map recorded. Again, it appears that John Hancock relied thereon. John Hancock's reliance was such that it made two loans on the property.

The record also reveals that plaintiffs developed an interest in the property through their own agents and the Boyleses, not as a result of any efforts by John Hancock or Warren. Plaintiffs possessed copies of the "survey" as well as copies of other pertinent documents prior to the July 1969 telephone conversation, and Goldring and Fewell had visited the property.

As to the 2 July 1969 phone conversation, Goldring and Fewell called Warren to discuss the matter of partial releases from the deed of trust. The assumption was made by all parties to the conversation that they were talking about a 4,200-acre tract. Further, the depositions of Fewell and Goldring, as well as Warren, indicate that what Warren was saying was based upon his file and that he was not making a specific representation:

Fewell: "[I]t is true that Mr. Goldring was asking Mr. Warren as to the acreage in the Mitchell County property, and Mr. Warren was saying that on the basis of his file and the survey and the inspection by his fieldman, that John Hancock Mutual Life Insurance Company was satisfied that there was 4,271 acres in the property and that it was a good piece of land."

Goldring: "It would be right to say that Mr. Warren said in words or effect: ``Our file reflects that there are 4,200 acres in that tract.'

[I] would say that Mr. Warren's statements to me in each instance related to information which was in his file and was based on information which was in his file. As to whether he ever told me that he knew of his independent knowledge that there were 4,271 acres on the property, he didn't say a word independent of it on his own knowledge. . ."

Warren: "[I] told Mr. Goldring that all I could tell him was what was in my file, that I had never seen the property, that the file indicated that it was good security. . . ."

A portion of our Supreme Court's opinion in Harding v. Insurance Co., 218 N.C. 129, 135, 10 S.E.2d 599, 602 (1940), is relevant here:

"There is no sufficient evidence that the representation, if made, was made with knowledge of its falsity or in culpable ignorance of its truth. Plaintiff knew that Gaither was speaking ``second-hand' and was relying on information received from others. There is no evidence that the contractor was not reliable or that he, to the knowledge of Gaither, made the statements contained in his letter without a bona fide and adequate examination of the building. . . ."

Plaintiffs' attorney wrote plaintiff Russo prior to plaintiffs' purchase of the property that the Peterson "survey" "was apparently not a physical survey." Further, the record shows that John Hancock continued to rely on its belief that the tract contained 4,271 acres by releasing from the deed of trust 764.78 acres, almost one-half the actual acreage. This occurred in September 1971 at a release price of $76,478.

In summary, we conclude that defendants John Hancock and Warren successfully carried the burden of negating an element of fraud by showing that any representations on their part as to acreage in the tract were neither made with knowledge of their falsity nor in culpable ignorance of their truth. Plaintiffs have failed to rebut this showing by setting forth specific facts establishing a genuine issue for trial as required by Rule 56(e). Further, we think that all the materials before the trial court show that Warren was not making any specific representation as to the acreage, but simply responded to questioning that his file indicated there were approximately 4,200 acres in the tract. John Hancock relied upon that figure, but events regrettably revealed to all parties involved that such reliance was misplaced. Plaintiffs apparently felt that what was sufficient for John Hancock was good enough for them. In so thinking, they erred, but such error has not been shown by this record to be due to any actionable fraud on the part of defendants Warren or John Hancock. The trial court properly allowed the motion for summary judgment by defendants Warren and John Hancock.

The judgment of the trial is

Affirmed.

PARKER and CLARK, JJ., concur.

Chief Judge BROCK and Judge VAUGHN concur in this opinion for the purpose of clarifying the decision in Parker v. Bennett, 32 N.C.App. 46, 231 S.E.2d 10 (1977).