Overstreet v. Brookland, Inc.

279 S.E.2d 1 (1981)

Lawrence Edward OVERSTREET, Jr., and wife, Rita Porterfield Overstreet
v.
BROOKLAND, INCORPORATED.

No. 809SC970.

Court of Appeals of North Carolina.

June 16, 1981.

Watson, King & Hofler by Wilfred F. Drake and R. Hayes Hofler, III, Durham, for plaintiffs-appellants.

Ramsey, Hubbard & Galloway by James E. Ramsey, Roxboro, for defendant-appellee.

WELLS, Judge.

This appeal presents questions as to whether plaintiffs' evidence was sufficient to go to the jury on any of four causes of action: one, on breach of residential subdivision restrictive covenants; two, on breach of a contract to construct and maintain a residential subdivision street; three, on fraud in the inducement of the sale and purchase of a residential lot; and four, on unfair and deceptive trade practices in selling a residential lot.

Plaintiffs' evidence, viewed in the light most favorable to plaintiffs and giving plaintiffs the benefit of every reasonable inference which can be drawn from it, Home Products Corp. v. Motor Freight, Inc., 46 N.C.App. 276, 264 S.E.2d 774 (1980), disc. rev. denied, 300 N.C. 556, 270 S.E.2d 105 (1980), tends to show the following. Defendant, the owner of the Brookland Subdivision, sold plaintiffs lot number ten on 9 May 1977. Prior to and at the time of agreement to purchase, defendant represented to plaintiffs that the subdivision would be restricted to residential use only and that the land could be used for no other purpose. These restrictions were not included in plaintiffs' deed, but were later entered into between defendant and plaintiffs, signed by plaintiffs and recorded on 12 August 1977. Before plaintiffs purchased their lot, plaintiff Lawrence Edward Overstreet went with defendant's agents to visit the property. To get to the property, they traveled along a state road for about 1/10 of a mile and then emerged onto an old farm path. Defendant's agents informed Overstreet that the old farm path was being used by the Oakleys to come onto the Brookland property to harvest crops, but that after the crops were out of the fields, the property would be restricted, no more farming would take place and the path would be closed off from the subdivision street so that Brunswick Lane would be a dead-end street. The restrictive covenants include a restriction that "[n]o lot shall be used except for residential purposes" and a provision that "[n]o noxious or offensive trade shall be carried on upon any lot, nor shall any other occupant of any portion of the premises undertake any activity which may be or become any annoyance or nuisance to the neighborhood." The restrictions also included a paragraph as follows:

Enforcement. If the parties hereto or any of them or their heirs, successors or assigns shall violate or attempt to violate any of the covenants and restrictions herein set forth before June 15, 1997, it shall be lawful for any person or persons owning any other portions of the premises in said development or subdivision to promote any proceeding at law or in equity against the person or persons violating or attempting to violate any such covenants or restrictions, and either to prevent the violator from doing so or to recover damages or other dues for such violation.

After plaintiffs bought their lot, Mr. Overstreet met Harry Lee Oakley, who inquired if plaintiffs had bought lot number ten. When Overstreet replied in the affirmative, Oakley informed him that Oakley's father owned property beside lot ten, that they had a gate there and would like to continue to come through the property. Mr. Overstreet informed Oakley that defendant had agreed that Brunswick Lane would be closed off. Oakley was not satisfied with that, was still determined to come through the area, and intended to talk to defendant about the matter. Approximately three days after plaintiffs bought their lot, Oakley bulldozed a path from the Oakley farm across a corner of plaintiffs' lot into Brunswick Lane. Mr. Overstreet complained to defendant's agents, who informed him that Oakley had not been given permission by them to come into Brunswick Lane. As Oakley continued to come through plaintiffs' lot, plaintiffs erected a blockade. Later, on 25 May 1978, Harry Lee Oakley purchased lot number nine in the subdivision and subsequently cut a roadway through lot nine to Brunswick Lane. Lot nine lies directly across Brunswick Lane from plaintiffs' lot. Oakley is using the path across lot nine as an access road to his farm property and continues to use Brunswick Lane for farm traffic. When Mr. Overstreet complained about this to defendant's agents, Overstreet was told by defendant's agents that defendant would agree to let Oakley come through the area and they would see how things worked out. Mr. Overstreet stated that he could not agree to these conditions and circumstances, whereupon defendant's agents told him that plaintiffs and Harry Lee Oakley would have to learn to get along.

Defendant orally represented to plaintiffs that it would cut a sixty foot right-of-way to plaintiffs' lot, and would properly ditch, gravel and maintain a road to plaintiffs' lot. After plaintiffs purchased their lot, defendant confirmed their promise to maintain the road in a letter to Home Savings and Loan Association, the lender from whom plaintiffs borrowed the funds to construct their residence. Defendant has not maintained the road as promised, and in bad weather, the road becomes practically impassable for automobile traffic.

We first consider plaintiffs' cause of action for breach of the restrictive covenants. Restrictive covenants such as the ones under consideration here are servitudes imposed on the various lots or parcels of land in the subdivision and as such are treated as easements appendant or appurtenant to the lots or parcels within the subdivision. Craven County v. Trust Co., 237 N.C. 502, 512, 75 S.E.2d 620, 628 (1953); Shipton v. Barfield, 23 N.C.App. 58, 62, 208 S.E.2d 210, 213, cert. denied, 286 N.C. 212, 209 S.E.2d 316 (1974). The effect of such negative easements created by such covenants is that, in the legal sense, each lot owes to all the other lots in the subdivision the burden of observing the covenants and each of the lots is invested with the benefits imposed by the burdens upon the others. Craven County v. Trust Co., supra. The law treats each landowner as a promisor, promising to abide by the restrictions for the benefit of the other landowners in the subdivision, giving them the right to sue inter se, but does not recognize a remedy against the subdivider unless he has expressly or impliedly undertaken responsibility for the enforcement of the various covenants. Shipton v. Barfield, supra. There are no provisions in the covenants under consideration here which impose a duty upon defendant to enforce them on behalf of plaintiffs against any other landowner in the subdivision. The evidence presented by plaintiffs shows no use by defendant of other lots or parcels in the subdivision in violation of the covenants. These circumstances compel us to conclude, and we so hold, that the trial court properly granted defendant's motion for a directed verdict as to plaintiffs' First and Second Causes of Action.

We next reach plaintiffs' cause of action based upon defendant's alleged fraudulent acts or representations inducing plaintiffs to buy lot number ten. Plaintiffs' evidence shows that defendant represented to them — promised to them — that the subdivision would be subject to covenants restricting it to residential use, that Oakley's farming operation would not affect Brunswick Lane, that Brunswick Lane would be and remain a dead-end street, and that the old farm path would be closed off. Soon after plaintiffs purchased their lot, the Oakleys started using Brunswick Lane for farm equipment traffic. Harry Lee Oakley later approached Mr. Overstreet and told Overstreet that they (the Oakleys) would like to continue to come through the property. Mr. Overstreet informed Oakley that before plaintiffs had bought their property, defendant had agreed that "the road would be closed off". Overstreet testified that "Oakley was not satisfied with that, was still determined to come through the area, and said he would talk with the realtors", i. e., the defendant's representatives. Soon thereafter, Oakley cut a path from the old farm road to Brunswick Lane. Oakley was in dispute with defendant about his rights to continue to use the old farm path, and about a year later, he purchased lot nine to use for a connector road between his property and Brunswick Lane. Before purchasing lot nine Oakley informed defendant that he would continue to drive on those portions of the old farm path which ran across lot nine. This evidence would establish facts from which a jury could reasonably infer that defendant promised that Brunswick Lane would remain a dead-end street, that no part of the subdivision would be used for non-residential purposes, and that at about a year after these promises were made, defendant sold a lot to Oakley which they knew he intended to use for non-residential purposes, Realty Co. v. Hobbs, 261 N.C. 414, 135 S.E.2d 30 (1964); Franzle v. Waters, 18 N.C.App. 371, 197 S.E.2d 15 (1973), the intended use of which would have the effect of making Brunswick Lane a through street. It thus becomes clear that plaintiffs have not shown that defendant misrepresented to them a subsisting fact, as distinguished from a representation relating to future prospects. Ragsdale v. Kennedy, 286 N.C. 130, 139, 209 S.E.2d 494, 500 (1974). Our Supreme Court has held that while the general rule is that mere unfulfilled promises cannot be made the basis of an action for fraud, if a promise is made fraudulently — that is, with no intention to carry it out — such is a misrepresentation of the state of the promisor's mind at the time of the promise, i. e., a pre-existing material fact. Williams v. Williams, 220 N.C. 806, 810-11, 18 S.E.2d 364, 366-67 (1942); see also, Johnson v. Insurance Co., 300 N.C. 247, 255, 266 S.E.2d 610, 616 (1980) and cases cited therein; Hoyle v. Bagby, 253 N.C. 778, 781, 117 S.E.2d 760, 762 (1961); Davis v. Davis, 236 N.C. 208, 211, 72 S.E.2d 414, 415 (1952). Cf., Harding v. Insurance Co., 218 N.C. 129, 10 S.E.2d 599 (1940); Whitley v. O'Neal, 5 N.C.App. 136, 168 S.E.2d 6 (1969). Plaintiffs' evidence in this case does not establish facts upon which a jury could reasonably infer that at the time defendant sold plaintiffs their lot, defendant had no intent of restricting the subdivision to residential use and purpose or no intent that Brunswick Lane would be and continue to be a dead-end street. The trial judge properly granted defendant's motion for a directed verdict of this cause of action.

We find that our decision as to the issue of fraud in this case is substantially dispositive of plaintiffs' alleged cause of action based upon unfair or deceptive trade practices in violation of G.S. 75-1.1.^[1] While our Supreme Court has held that to succeed under G.S. 75-1.1, it is not necessary for the plaintiff to show fraud, bad faith, deliberate or knowing acts of deception, or actual deception, plaintiff must, nevertheless, show that the acts complained of possessed the tendency or capacity to mislead, or created the likelihood of deception. Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981). A trade practice is actionable if it is unfair, and "[t]he concept of ``unfairness' is broader than and includes the concept of ``deception'." Johnson v. Insurance Co., supra, at 263, 266 S.E.2d at 621. "A practice is unfair when it offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers." Marshall v. Miller, supra, 302 N.C. at ___, 276 S.E.2d at 403. We do not find that plaintiffs have shown that defendant's acts in this case meet any of these criteria, and therefore, we hold that the trial judge properly granted defendant's motion for a directed verdict on this cause of action.

Finally, we consider plaintiffs' cause of action for breach of defendant's promise to properly construct and maintain a road to plaintiffs' lot. As indicated in the factual summary, the trial court dismissed this cause on the grounds that defendant's promise came within the statute of frauds,^[2] that it was not in writing when plaintiffs purchased their lot, and that the written confirmation of the promise having been made subsequent to plaintiffs' purchase, was a separate agreement which would not sustain the original oral agreement. We hold that the trial court erred in this aspect of the case. The pleadings disclose that plaintiffs alleged and defendant admitted that plaintiffs' deed contained a reference to the subdivision plat on which Brunswick Lane is shown as a street and that subdivision plat was duly recorded in the Person County Registry. Thus, plaintiffs obtained an easement in the streets shown on that plat leading to plaintiffs' lot, Wofford v. Highway Commission, 263 N.C. 677, 683, 140 S.E.2d 376, 381 (1965), cert. denied, 382 U.S. 822, 86 S. Ct. 50, 15 L. Ed. 2d 67 (1965); Realty Co. v. Hobbs, supra, at 421, 135 S.E.2d at 35-36, and it is clear that plaintiffs are not seeking through the promise as to maintenance of the road to establish or enforce an easement, which would of course fall within the statute of frauds, but are seeking only to enforce defendant's promise to construct and maintain the road, which does not involve a contract to sell or convey land or any interest in land. Defendant's promise to construct and maintain the road does not come within the statute of frauds. See, Baucom v. Bank, 203 N.C. 825, 167 S.E. 72 (1933). Plaintiffs' evidence was clearly sufficient to take this cause of action to the jury. On this cause, the judgment of the trial court allowing defendant's motion for a directed verdict is reversed. Our decision makes it unnecessary to reach plaintiffs' argument that the subsequent written memorandum (letter) was sufficient to meet the requirement of the statute of frauds.

Affirmed in part, reversed in part.

VAUGHN and CLARK, JJ., concur.

NOTES

[1] Methods of competition, acts and practices regulated; legislative policy. — (a) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.

(b) For purposes of this section, "commerce" includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession.

[2] G.S. 22-2. Contract for sale of land; leases. — All contracts to sell or convey any lands, tenements or hereditaments, or any interest in or concerning them, and all leases and contracts for leasing land for the purpose of digging for gold or other minerals, or for mining generally, of whatever duration; and all other leases and contracts for leasing lands exceeding in duration three years from the making thereof, shall be void unless said contract, or some memorandum or note thereof, be put in writing and signed by the party to be charged therewith, or by some other person by him thereto lawfully authorized.