8.
Seller's Representations and Warranties.
Seller makes the following representations and
warranties which shall survive the
Closing...(d) To the best of Seller's
knowledge, there are no underground storage
tanks on the Property, and no portion of the
Property has been used as a landfill or for
the production, storage or disposal of any
petroleum, petroleum byproduct, natural or
synthetic gas, or any regulated substance,
waste, pollutant, contaminant, toxic or
hazardous materials (collectively, “Hazardous
Materials”) of any kind as defined under
Applicable Laws.
The contract of sale further provided plaintiff with the right to
conduct surveys, tests and an environmental audit on the property.
The original closing date on the contract of sale was 31 October
1996.
In January 1997, Coharie, the Rays and Ms. Jones executed an
amendment to the contract of sale assigning all of Coharie's rights
to State Properties, LLC (plaintiff). Plaintiff subsequently
executed an agreement with the Rays and Ms. Jones which reaffirmed
the representations made in the contract of sale and required
defendants to remove all personalty from the property within thirtydays of the amended closing date of 15 December 1997 (closing).
Plaintiff planned to develop one-half of the property for a Winn-
Dixie store and a parking lot (Winn-Dixie parcel), reserving the
remainder (outparcel) for “future development” and sale. Issues
relating to the condition of the outparcel are the subject of this
action.
Before the original closing date, Ted Royall (Royall), a
managing member of Coharie and of State Properties, inspected the
property from his vehicle and observed various “junk” and debris
scattered on the property. Royall testified that he inquired about
the debris and was informed by Mr. Ray that the debris would be
cleaned up and removed.
At one of several meetings with the Rays before the closing,
Mrs. Ray showed Royall an article from the
Triangle Business
Journal (
TBJ) stating that Midland Group had aborted its planned
purchase of the property due to “environmental problems” requiring
“costly clean-up.” Royall testified that Mrs. Ray told him the
article was “a lie” because the Rays “had owned the land for such
a long period of time and knew that no one had buried anything on
the site.” The Rays made similar statements indicating that
nothing was buried on the property at subsequent meetings with
Royall. Royall also contacted the
TBJ article's author, who
admitted that he had no evidence regarding the environmental
problems referenced in the article.
In connection with the sale of the property, the Rays provided
Royall with a topographical survey and other maps of the property. However, Royall testified that before the closing, the Rays did not
give him a North Carolina Department of Transportation road
construction plan (D.O.T. plan) showing a “drained pond, debris
filled” on the outparcel. He also testified that none of the other
maps provided to him showed the “debris pond.” Royall testified
that, before the closing, the Rays did not provide him with either
the Phase I Environmental Assessment (Phase I) performed by ENSCI
Environmental, Inc. in 1994 or the Phase I performed by Smith
Environmental Technologies Corporation for the Midland Group in
1995, both of which indicated potential surface or subsurface
contamination of the property. Furthermore, he testified that he
would have conducted additional environmental investigations of the
outparcel before the closing if he had been given the ENSCI Phase
I report and that he would not have purchased the property if he
had been aware of the Smith Phase I report or the D.O.T. plan
showing the “debris pond.” However, Royall testified on cross-
examination that the Rays never encouraged him not to perform
surveys and environmental tests on the property.
After the contract of sale was executed in September 1996,
plaintiff hired GeoTechnologies, Inc. (GeoTechnologies) to perform
a Phase I on the property. As evidence introduced at trial showed,
a Phase I involves an examination of environmental records, an
interview with the property owner and a visual inspection of the
property but does not include any investigation into the property's
subsurface conditions. David Israel (Israel), a GeoTechnologies engineer, testified
that he observed old vehicles, appliances, metal drums, concrete
debris, asphalt and other material scattered throughout the
property when he performed the Phase I for plaintiff. He testified
that he did not observe any leaking or staining on the ground
around the metal drums. Israel further testified that during the
Phase I interview, Mr. Ray told him that he was unaware of any
environmental problems on the property and that nothing had been
buried there. He also testified that, if the Rays had shown him
the D.O.T. plan, he would have recommended soil borings for the
outparcel.
The GeoTechnologies Phase I report, dated 10 September 1996,
stated that “significant grading activities have occurred on the
site in the past which may have partially covered some debris or
old waste related problems.” However, the report did not recommend
any additional environmental testing of the property.
In August 1997, Ed Hearn (Hearn), another engineer with
GeoTechnologies, conducted a subsurface investigation and
geotechnical study of the Winn-Dixie parcel for plaintiff. A
geotechnical study involves taking soil borings and analyzing the
composition of subsurface soil and rock to determine whether the
property is suitable for and can support a certain structure. Soil
borings typically are taken only on property for which a “known
structure” is planned.
Some of the soil borings taken by GeoTechnologies on the Winn-
Dixie parcel revealed “fill material” and “buried organics” up todepths of five feet. Hearn's report on the geotechnical study
stated that the Winn-Dixie parcel was “covered with large amounts
of miscellaneous metal, organic, and construction debris.” The
report further stated that “buried pits containing organic
materials and other construction rubble” were found on the Winn-
Dixie parcel. The report concluded that subsurface conditions were
suitable for the proposed development.
David McPherson (McPherson), the grading foreman, testified
that in January 1998, he observed car parts, underground storage
tanks and construction debris on the property. He testified that
tires, rims, metal, brush and wire were also visible on the surface
of the outparcel at that time. McPherson further testified that
while he and a co-worker were clearing the outparcel to lay storm
piping, they unearthed debris, tree stumps and metal, which delayed
their work. He testified that the buried debris was similar to
debris found on or near the surface of the outparcel.
In December 1999, Withers & Ravenel Engineering & Surveying,
Inc. (W&R) discovered scrap metal, concrete and asphalt mixed with
“organic rich soil” on the outparcel, as well as a motor oil stain
under a crushed metal drum while installing subsurface utilities.
This discovery prompted W&R to take soil samples on the outparcel,
revealing contamination from petroleum and diesel fuel and other
contaminants which affected the groundwater. W&R's report of its
findings was introduced into evidence.
On cross-examination, Hearn testified that plaintiff did not
seek his opinion as to whether a subsurface investigation of theoutparcel was advisable. Further, Royall admitted on cross-
examination that if 20-foot borings on the outparcel had been
performed, plaintiff would have discovered the petroleum
contamination prior to closing. Another of plaintiff's experts,
Cameron Patterson, testified on cross-examination that he could not
be certain that the subsurface debris problem would have been
revealed even if soil borings had been taken on the outparcel but
admitted it was possible. He also testified that if borings had
been performed, they would have revealed the outparcel did not
contain native soil.
Robert “Roddy” Jones, one of the principles in plaintiff, was
called as an adverse witness by the Rays. He testified that the
soil boring on the Winn-Dixie parcel, which showed top soil
extending to a depth of five feet, indicated to him something had
been buried at the particular location of that boring.
Ben Wilson (Wilson), the Rays' expert, specializing in
subsurface environmental investigations, testified that he would
have recommended performing one to two soil borings extending
fifteen to twenty feet deep on the outparcel based on the presence
of a creek near that portion of the property. He further testified
that if soil borings had been performed on the outparcel, they
would have revealed fill material. Wilson testified that the
execution of both the Phase I and geotechnical study by
Geotechnologies met the standard of care for such investigations.
He also testified that the W&R report contained insufficient data
regarding the extent of the alleged soil contamination because onlyone to three percent of the excavated materials had been tested for
contamination. Wilson testified that the limited scope of the W&R
investigation rendered it an inadequate basis for determining the
amount of soil and debris that would need to be removed to a
landfill for disposal.
Regarding plaintiff's damages claim, Tim Fitzgerald, its
witness experienced in construction costs, testified that the total
cost related to the discovery of the buried debris and soil
contamination on the property amounted to $1,031,501.13.
Fitzgerald estimated that $538,749.00 of this total would be
incurred in the future for loading, transporting and disposing of
the debris and contaminated soil. He also testified that, although
the W&R report on soil borings was the primary basis for his cost
estimate, he consulted drawings and other documents provided by
plaintiff and further verified the estimate with waste disposal
experts.
Based on the discovery of buried debris and soil contamination
on the outparcel, plaintiff sued defendants for negligent
misrepresentation, breach of contract, fraud, unfair and deceptive
trade practices under N.C. Gen. Stat. § 75-1.1 (2001), violation of
the North Carolina Oil Pollution Control and Hazardous Substances
Act, N.C. Gen. Stat. § 143-215.75_143-215.104U (2001), and punitive
damages.
On 16 February 2001, the trial court denied the parties'
cross-motions for summary judgment. At the close of plaintiff's
evidence, defendants moved for directed verdict on all plaintiff'sclaims. The trial court entered a directed verdict dismissing all
claims against defendant Estate of Beatrice Jones but denied the
Rays' motion for a directed verdict. At the close of all evidence,
the Rays renewed their motion for a directed verdict, and the trial
court dismissed plaintiff's negligent misrepresentation claim.
Plaintiff's claim under the North Carolina Oil Pollution Control
and Hazardous Substances Act likewise was dismissed.
After denying the plaintiff's request for jury instructions on
unfair and deceptive trade practices, the trial court instructed
the jury on fraud and breach of contract. On 10 May 2001, the jury
returned a verdict for plaintiff and awarded damages in the amount
of $304,982.00 for breach of contract. Damages in the amount of
$295,971.00 were awarded for the fraud claim. The trial court
found the Rays committed unfair and deceptive trade practices based
on the jury's finding of fraud and trebled the fraud damages award
under N.C. Gen. Stat. § 75-16 (2001).
On 31 May 2001, the Rays filed a motion for judgment
notwithstanding the verdict (JNOV). Following a hearing on this
motion, the trial court granted JNOV on the fraud and unfair and
deceptive trade practices claims and denied JNOV on the breach of
contract claim. Plaintiff appealed and the Rays cross-appealed the
order and judgment.
Plaintiff first contends the trial court erred in granting
JNOV on its fraud claim because it presented sufficient evidence on
each element of fraud to survive a directed verdict motion. The
Rays argue, however, that plaintiff failed to present sufficientevidence that it reasonably relied on the Rays' alleged
misrepresentations or that it exercised reasonable diligence in its
investigation of the property, thus justifying JNOV on the fraud
claim.
A motion for JNOV is essentially a renewal of a motion for a
directed verdict.
Couch v. Private Diagnostic Clinic, 133 N.C.
App. 93, 515 S.E.2d 30,
aff'd, 351 N.C. 92, 520 S.E.2d 785 (1999).
The standard to be employed by a trial judge
in determining whether to grant a judgment
notwithstanding the verdict is the same
standard employed in ruling on a motion for a
directed verdict. The judge must consider the
evidence in the light most favorable to the
nonmovant and may grant the motion only if, as
a matter of law, the evidence is insufficient
to justify a verdict for the nonmovant. All
conflicts in the evidence are to be resolved
in the nonmovant's favor, and he must be given
the benefit of every inference reasonably to
be drawn in his favor.
Williams v. Jones, 322 N.C. 42, 47-48, 366 S.E.2d 433, 437 (1988)
(citations omitted). If, under this standard, there is more than
a scintilla of evidence to support each element of the non-movant's
claim, the motion for JNOV should be denied.
Couch,
supra.
It is well-settled that an actionable claim for fraud must
include the following elements: “'(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.'”
Helms v. Holland, 124 N.C. App. 629, 634, 478 S.E.2d 513, 516
(1996) (citation omitted). Additionally, reliance on alleged false
representations must be reasonable.
Johnson v. Owens, 263 N.C.754, 140 S.E.2d 311 (1965),
C.F.R. Foods, Inc. v. Randolph
Development Co., 107 N.C. App. 584, 421 S.E.2d 386,
disc. review
denied, 333 N.C. 166, 424 S.E.2d 906 (1992). Reliance is not
reasonable if a plaintiff fails to make any independent
investigation,
Calloway v. Wyatt, 246 N.C. 129, 97 S.E.2d 881
(1957), or if plaintiff is informed of the true condition of the
property,
Jay Group, Ltd. v. Glasgow, 139 N.C. App. 595, 534 S.E.2d
233,
disc. review denied, 353 N.C. 265, 546 S.E.2d 100 (2000). The
reasonableness of a party's reliance is a question for the jury,
unless the facts are so clear that they support only one
conclusion.
Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP,
350 N.C. 214, 513 S.E.2d 320 (1999).
Further, this Court has held that, to support a fraud claim,
a plaintiff must demonstrate it was denied the opportunity to
investigate the property or could not discover the truth about the
property's condition by exercise of reasonable diligence.
Hudson-
Cole Dev. Corp. v. Beemer, 132 N.C. App. 341, 511 S.E.2d 309
(1999). A plaintiff also must show that it was induced to forego
additional investigation by the defendant's misrepresentations.
Hearne v. Statesville Lodge No. 687, 143 N.C. App. 560, 546 S.E.2d
414 (2001).
Plaintiff's evidence tended to show that the Rays lived near
the property for a number of years before they acquired title to
their tract in 1966. The Rays represented in the contract of sale
that the property had not been used as a landfill or for the
storage or disposal of hazardous materials. Evidence also showedthat the Rays orally misrepresented to Royall and Israel that
nothing had been buried on the property. Provisions of the
contract of sale further required the Rays to turn over to
plaintiff all pertinent information regarding the property.
However, additional evidence showed that the Rays failed to apprise
plaintiff of the existence of the D.O.T. plan showing a “debris
pond” or the Phase I reports indicating potential soil
contamination on the outparcel.
Further, plaintiff's evidence showed that it conducted an
independent investigation of the property prior to the closing.
With respect to plaintiff being induced to forego additional
investigation, Royall testified that he would have conducted more
environmental tests on the outparcel if he had been provided with
the ENSCI Phase I report. Although there was conflicting evidence
as to whether plaintiff should have performed soil borings on the
outparcel and whether these additional borings would have revealed
buried debris and soil contamination, it was for the jury to
resolve the conflicting evidence.
In denying the Rays' motion for a directed verdict on the
fraud claim at the close of plaintiff's evidence, the trial court
noted that the determination as to the reasonableness of
plaintiff's reliance and its investigation was an issue for the
jury. At the close of all evidence, the trial court again denied
the Rays' motion for a directed verdict on the fraud claim, finding
that plaintiff had produced sufficient evidence to send the
question to the jury. Further, the trial court properly instructedthe jury on the elements of fraud as relating to the reasonableness
of plaintiff's conduct.
Based on the foregoing evidence, we conclude plaintiff met its
burden of producing sufficient evidence to withstand the Rays'
motion for a directed verdict. Thus, we hold that the Rays' motion
for JNOV was granted improvidently and remand this matter to the
trial court for reinstatement of the jury's verdict on the fraud
claim.
Plaintiff next argues that the trial court erred in failing to
instruct the jury and in granting JNOV on its unfair and deceptive
trade practices claim. Our Supreme Court has held that
N.C.G.S. § 75-1.1 declares unlawful “[u]nfair
methods of competition in or affecting
commerce.” The case law applying Chapter 75
holds that a plaintiff who proves fraud
thereby establishes that unfair or deceptive
acts have occurred. “Proof of fraud would
necessarily constitute a violation of the
prohibition against unfair and deceptive
acts....” If a violation of Chapter 75 is
found, treble damages must be awarded.
Bhatti v. Buckland, 328 N.C. 240, 243, 400 S.E.2d 440, 442 (1991)
(citations omitted). This Court recently held that, in a claim for
unfair and deceptive trade practices, “[t]he jury decides whether
the defendant has committed the acts complained of. If it finds
the alleged acts have been proved, the trial court then determines
as a matter of law whether those acts constitute unfair or
deceptive practices in or affecting commerce.”
Durling v. King,
146 N.C. App. 483, 487-88, 554 S.E.2d 1, 4 (2001) (citations
omitted). Here, we have held that the trial court improvidently
granted JNOV on plaintiff's fraud claim and have ordered thereinstatement of the jury's fraud verdict accordingly. Because a
finding of fraud constitutes a violation of N.C. Gen. Stat. § 75-
1.1, we need not address either plaintiff's contention that it has
an independent claim for unfair and deceptive trade practices or
that the trial court erred in denying plaintiff's requested jury
instruction on that claim.
In their cross-appeal, the Rays contend that the trial court
erred in denying their motion for a directed verdict and their
motion for JNOV on plaintiff's breach of contract claim. In
support of this contention, the Rays argue that plaintiff's
knowledge of the buried materials on the property prior to closing
is fatal to the allegations of misrepresentation and non-disclosure
which provide the basis for the breach of contract claim.
The Rays rely primarily on
Calloway v. Wyatt,
supra, to
support their contention that plaintiff cannot avail itself of a
breach of contract claim premised on the Rays' alleged
misrepresentations. In
Calloway, our Supreme Court held that the
buyers could not rely on the seller's alleged misrepresentations
because they had failed to make any independent investigation of
the property despite evidence which should have aroused their
suspicion that the representations were false.
Calloway,
supra,
246 N.C. at 135, 97 S.E.2d at 886;
see also Hearne,
supra, 143 N.C.
App. at 562, 546 S.E.2d at 415 (holding that plaintiffs could not
rely upon representations when they “failed to make any independent
investigation of the property”),
Libby Hill Seafood Restaurants,
Inc. v. Owens, 62 N.C. App. 695, 303 S.E.2d 565 (affirming directedverdict for defendant where plaintiff knew the property had been
used as a trash dump but conducted no independent investigations),
disc. review denied, 309 N.C. 321, 307 S.E.2d 164 (1983).
Here, the contract of sale in paragraph five quoted above
requires the Rays to provide to plaintiff all information pertinent
to the property. Obviously, the D.O.T. plan showing a “debris
pond” and the ENSCI and Smith Phase I reports indicating potential
soil contamination on the outparcel, which the Rays did not provide
to plaintiff, were pertinent pieces of information about the
property.
Also, in paragraph eight of the contract of sale, the Rays
made certain representations and warranties regarding the property.
There was ample evidence before the jury that the Rays breached
this provision of the contract of sale in failing to disclose and
in failing to deliver the property as warranted. Although
plaintiff had some knowledge prior to closing of debris and fill
materials on the property, it conducted an independent
investigation of the property's condition, unlike the
Calloway
plaintiffs. Because plaintiff presented evidence that the Rays
violated the provisions of the contract of sale, we hold the trial
court properly denied the directed verdict and JNOV motions on the
breach of contract claim.
The Rays further contend the breach of contract damages award
should be reduced because plaintiff failed to prove future damages
to a reasonable certainty. The Rays argue that plaintiff's witness
based his cost projection on speculation. The party seeking damages bears the burden of proving them in
a manner that allows the fact-finder to calculate the amount of
damages to a reasonable certainty.
Olivetti Corp. v. Ames Business
Systems, Inc., 319 N.C. 534, 356 S.E.2d 578 (1987). While the
claiming party must present relevant data providing a basis for a
reasonable estimate, proof to an absolute mathematical certainty is
not required.
Whiteside Estates, Inc. v. Highlands Cove, L.L.C.,
146 N.C. App. 449, 553 S.E.2d 431 (2001),
disc. review denied, 356
N.C. 315, 571 S.E.2d 220 (2002). Further, if a party seeks
prospective damages arising out of a breach of contract, it may
recover without proving the amount to an absolute certainty, as
long as a reasonable showing has been made.
Pipkin v. Thomas &
Hill, Inc., 298 N.C. 278, 258 S.E.2d 778 (1979). “Challenges to
the quality of the data upon which an expert witness based his
opinion go to the weight to be accorded that opinion, but are not
generally grounds for its exclusion.”
Horne v. Roadway Package
Systems, Inc., 129 N.C. App. 242, 244, 497 S.E.2d 436, 438 (1998)
(
citing Rutherford v. Bass Air Conditioning Co., 38 N.C. App. 630,
248 S.E.2d 887 (1978),
disc. review denied, 296 N.C. 586, 254
S.E.2d 34 (1979)).
Plaintiff's witness, Fitzgerald, expressed the opinion that
the future cost of disposing of contaminated soil and debris found
on the outparcel would amount to $538,749.00. Fitzgerald testified
that he based this projection on his experience in past
remediations, the W&R report on soil borings revealing significant
contamination, consultations with waste disposal experts anddrawings and other documents relating to the property provided to
him by plaintiff. He also testified that all of the soil in the
portion of the outparcel found to be contaminated would need to be
removed. The Rays' expert, Wilson, testified that the W&R report
did not contain sufficient data to determine how much soil would
need to be removed in order to estimate future costs associated
with remediation.
The trial court properly instructed the jury that it should
weigh the damages evidence introduced by both parties and that
plaintiff had the burden of proving damages to a reasonable
certainty, not a mathematical certainty. In the original judgment
dated 10 May 2001, the trial court noted the jury's close
examination of plaintiff's damages evidence and stated that “it is
crystal clear and unequivocal which items of damage claimed by
State Properties, line by line, were awarded on the fraud claim and
on the contract claim as well as which items were rejected by the
jury in their entirety.”
We conclude that plaintiff's evidence on damages was not so
speculative to be inadmissible. We further conclude that plaintiff
presented sufficient evidence to provide a basis for the jury's
calculation of prospective damages to a reasonable certainty.
Thus, we hold the trial court did not err in refusing to grant the
Rays' motions for a directed verdict and JNOV.
We have carefully reviewed plaintiff's and the Rays' remaining
assignments of error and find them to be without merit. In summary, we reverse the trial court's granting of the Rays'
motion for JNOV on the fraud claim. The trial court's amended
judgment denying the Rays' motion for JNOV on the breach of
contract claim is affirmed. We remand this case to the trial court
for reentry of the original judgment entered 10 May 2001.
Affirmed in part, reversed and remanded in part.
Judges McCULLOUGH and TYSON concur.
*** Converted from WordPerfect ***