1. Agency_real estate seller_liable for agent's acts
A real estate seller was liable as the principlal for the actions of the agent, even though
the claims arose from the delivery of a survey to plaintiffs.
2. Fraud_real estate sale_fraudulent misrepresentation_negligent
misrepresentation_summary judgment
Summary judgment was properly granted for defendant seller and defendant real estate
agent on a fraudulent misrepresentation claim arising from a real estate sale based upon
defendants' representation to the buyers that none of the property was in a flood zone where
defendants' affidavits that they did not know the property was in a flood zone negated the
element of intent to deceive, and plaintiffs did not produce conflicting evidence. Furthermore,
summary judgment was also properly entered for defendants on plaintiffs' negligent
misrepresentation claim where defendants' affidavits showed that they relied upon a survey of
the property which stated that the property was not in a flood zone.
3. Contracts_real property sales_mistake of fact_flood zone
The trial court incorrectly granted defendant Gore's motion for summary judgment on a
mistake of fact claim rising from the sale of land in a flood zone. Plaintiff's allegation of mistake
of fact based on the representations of the seller and his agents was sufficient to state a claim, and
there were genuine issues of material fact such as whether the mistake was unilateral or mutual
and whether it affected the essence of the contract.
Jeffcoat, Pike & Nappier, L.L.C., by Joel T. Gibson, III, for
plaintiffs-appellants.
Hedrick & Morton, L.L.P., by B. Danforth Morton, for
defendants-appellees Bay Circle Realty and Wilma Murphy.
William E. Wood, for defendant-appellee L.R. Gore.
CALABRIA, Judge.
Robert Taylor and Serina A. Taylor (“plaintiffs”) appeal the
16 and 17 September 2002 orders granting summary judgment for
defendants Bay Circle Realty, Wilma Murphy (“Murphy”) and L.R. Gore
(“Gore”) (collectively “defendants”). Plaintiffs assert defendants
failed to show there is no genuine issue of material fact, and
therefore the trial court erred in granting their motions for
summary judgment. We affirm the summary judgment for defendants
Bay Circle Realty and Murphy, and reverse as to defendant Gore.
In April 1999, plaintiffs purchased a 15.26 acre plot of land
from Gore. Murphy, on behalf of Bay Circle Realty, served as
Gore's real estate agent. Prior to the sale, Murphy gave
plaintiffs a survey of the property that stated “SUBJECT PROPERTY
IS NOT IN A FEDERAL (HUD) DESIGNATED FLOOD HAZARD AREA.” In July
2001, plaintiffs sought to develop the land and discovered it was
not suitable because a portion of the property was, in fact,
located in a flood zone.
In February 2002, plaintiffs filed suit against defendants.
Plaintiffs alleged the contract was based on a mistake of fact that
the property was not located in a flood zone, and since this
mistake is substantial and affects the essence of the contract, the
contract should be rescinded. Plaintiffs further alleged
defendants Murphy and Bay Circle Realty breached their duty to
communicate truthful information by providing plaintiffs with an
incorrect survey indicating the property was not in a flood zone,
and by failing to advise plaintiffs to acquire their own survey
because of the hazards of relying on any survey supplied by a
seller. Finally, plaintiffs alleged defendants failed to disclosethat the property was in a flood zone and misrepresented that it
was not in a flood zone.
(See footnote 1)
Defendants moved for, and obtained, summary judgment by
relying on affidavits of Murphy and Gore stating that prior to the
sale they did not know, nor was it suggested, that the property was
in a flood zone, and had they known they would have communicated
the information to plaintiffs. Plaintiffs moved to set aside the
judgment, which the court denied. Plaintiffs appeal asserting
defendants were not entitled to summary judgment because lack of
actual knowledge does not establish a lack of a genuine issue of
material fact for either the misrepresentation claims or the mutual
mistake claim.
Summary judgment is proper when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that any party is entitled to a judgment as
a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2001). The
evidence is considered in the light most favorable to the non-
moving party, and the moving party bears the burden of establishing
no triable issue of material fact remains. Bunn Lake Prop. Owner's
Ass'n, Inc. v. Setzer, 149 N.C. App. 289, 295, 560 S.E.2d 576, 580
(2002).
I. Misrepresentation Claims
[1] First, we note that Gore, as Murphy's principal, is liable
for Murphy's actions. MacKay v. McIntosh, 270 N.C. 69, 72-73, 153S.E.2d 800, 803 (1967) (“'[a principal] is bound by the agent's
material representations of fact to the same extent as if he had
made them himself.'”). Accordingly, although the claims stem from
Murphy's delivery of the survey to plaintiffs, Gore is liable for
Murphy's actions and representations. Therefore, we address these
defendants jointly.
[2] To prove a claim of fraudulent misrepresentation, “the
party asserting it must show (i) false representation or
concealment of a material fact, (ii) reasonably calculated to
deceive, (iii) made with intent to deceive, (iv) which does in fact
deceive, (v) resulting in damage to the injured party.” Deans v.
Layton, 89 N.C. App. 358, 366-67, 366 S.E.2d 560, 565-66 (1988).
“A defendant cannot 'be liable for concealing [or falsely
representing] a fact of which it was unaware.'” Forbes v. Par Ten
Group, Inc., 99 N.C. App. 587, 594, 394 S.E.2d 643, 647 (1990)
(quoting Ramsey v. Keever's Used Cars, 92 N.C. App. 187, 190, 374
S.E.2d 135, 137 (1988)). “If a defendant presents evidence that it
did not know of the fact in issue, 'the burden shifts to plaintiff
to prove that defendant knew or had reason to know' the fact.” Id.,
(quoting Ramsey, 92 N.C. App. at 191, 374 S.E.2d at 137).
Plaintiffs' claim fails because defendants' affidavits negate the
element of “intent to deceive” by providing “[i]f part of the
property is in a special flood zone, this information was not known
to me nor was the possibility that any part of the property was
located in a special flood zone even suggested to me. . . .”
Plaintiffs did not produce conflicting evidence and failed to meettheir burden of showing defendants “knew or had reason to know” the
survey was incorrect.
To prove a claim of negligent misrepresentation, plaintiffs
must show: (1) “'in the course of a business or other transaction
in which an individual has a pecuniary interest,'” (2) defendants
“'supplie[d] false information for the guidance of others[,]'” (3)
“'without exercising reasonable care in obtaining or communicating
the information.'” Everts v. Parkinson, 147 N.C. App. 315, 328,
555 S.E.2d 667, 676 (2001) (quoting Fulton v. Vickery, 73 N.C. App.
382, 388, 326 S.E.2d 354, 358 (1985)). Defendants' affidavits
demonstrate they relied on the validity of the survey, believing it
accurately stated the property was not in a flood zone. Plaintiffs
did not allege such reliance was unreasonable. Moreover, we have
previously held a seller's agent not liable because she had “no
reason to question [the surveyor's] affirmative representation and
make her own independent investigation when [the surveyor's]
expertise was specifically in the area of conducting surveys and
when he was paid to specifically conduct such survey.” Clouse v.
Gordon, 115 N.C. App. 500, 509, 445 S.E.2d 428, 433 (1994). We
apply this same rule to the seller. Accordingly, we hold the trial
court properly granted defendants' motion for summary judgment on
the basis of misrepresentation.
II. Mistake Claim
[3] Plaintiffs also assert the trial court erred in granting
defendant Gore's motion for summary judgment of plaintiffs' claim
that the contract was based on a substantial mistake of fact
affecting the essence of the contract. We agree. “'[I]t is well established that the existence of a mutual
mistake as to a material fact comprising the essence of the
agreement will provide grounds to rescind a contract.'” N.C.
Monroe Constr. Co. v. State, 155 N.C. App. 320, 330, 574 S.E.2d
482, 489 (2002), disc. rev. denied, 357 N.C. 165, 580 S.E.2d 370
(2003) (quoting Lancaster v. Lancaster, 138 N.C. App. 459, 465, 530
S.E.2d 82, 86 (2000)). It is also established that “'[t]he mistake
of one party is sufficient to avoid a contract when the other party
had reason to know of the mistake or caused the mistake.'” Creech
v. Melnik, 347 N.C. 520, 528, 495 S.E.2d 907, 912 (1998) (quoting
Howell v. Waters, 82 N.C. App. 481, 487-88, 347 S.E.2d 65, 69
(1986)). Accordingly, despite defendant Gore's assertion to the
contrary, plaintiffs may assert a claim of mutual mistake as well
as a claim of unilateral mistake because Gore supplied the flawed
survey.
We note there are genuine issues of material fact regarding
the claim of mistake, including, inter alia, whether the mistake
was mutual or unilateral and whether the mistake affected the
essence of the contract. Despite these issues, we consider that
“[North Carolina] Supreme Court decisions have raised questions
regarding application of the doctrine of mutual mistake to executed
real estate contracts.” Howell, 82 N.C. App. at 489, 347 S.E.2d at
70 (citing Hinson v. Jefferson, 287 N.C. 422, 215 S.E.2d 102
(1975); Financial Services v. Capitol Funds, 288 N.C. 122, 217
S.E.2d 551 (1975)). However, the Supreme Court recognized “certain
mistakes will justify the rescission of an executed real estate
contract; [and, this Court reasoned,] a mistake induced by amisrepresentation is as persuasive a case for rescission as any.”
Id., 82 N.C. App. at 491, 347 S.E.2d at 71. Accordingly, this
Court held “dispositive” the distinction that the mistake in
Hinson and Financial Services was premised upon mistaken
assumptions of the parties, and the mistake in Howell was based
upon misrepresentation by the seller. Id. Therefore, although
some uncertainty exists regarding the applicability of mistake to
real estate contracts because “we jealously guard the stability of
real estate transactions,” precedent permits plaintiffs' claim
against defendant Gore because it is based upon a mistake caused by
a misrepresentation and not a mutual mistaken assumption.
Financial Services, 288 N.C. at 139, 217 S.E.2d at 562.
Defendant Gore asserts he is entitled to summary judgment on
the claim of mutual mistake because “[n]owhere in their pleadings
have they alleged that there was a mutual mistake.” However,
“[t]he most fundamental tenet of modern pleading rules is that the
pleadings should give 'sufficient notice of the claim asserted “to
enable the adverse party to answer and prepare for trial . . . and
to show the type of case brought.”'” Holloway v. Wachovia Bank &
Trust Co., 339 N.C. 338, 347, 452 S.E.2d 233, 238 (1994) (quoting
Sutton v. Duke, 277 N.C. 94, 102, 176 S.E.2d 161, 165 (1970)
(citation omitted)). We find plaintiffs' allegation that the
contract “was based on a mistake of fact. . . based on the
representations of L.R. Gore and his agents, the land was not in a
flood zone” is sufficient to state a claim for mistake. We find no
merit in defendant Gore's argument. Accordingly, Gore failed to
establish a lack of a genuine issue of material fact, or that theclaim was barred by precedent, or insufficient pleading, and
therefore the trial court improperly granted Gore's motion for
summary judgment. We reverse.
In sum, we affirm the order of the trial court granting
summary judgment on the misrepresentation claims, but reverse the
order of the trial court granting summary judgment for defendant
Gore on the claim of mistake.
Affirmed in part, reversed in part.
Judges McGEE and HUNTER concur.
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