1. Real Property_buyer's agents_evidence of agency
There was sufficient evidence to support findings that defendants Swett and Abeers
Realty were dual buyer's agents in the purchase of land by plaintiffs.
2. Fraud_purchase of land_broker secretly selling
The evidence supported findings that defendants Swett and Abeers Realty (buyer's
agents) committed fraud in plaintiffs' purchase of land secretly owned by Swett. A broker can
neither purchase from nor sell to the principal unless the latter expressly consents with full
knowledge; moreover, fraud is presumed when property is transferred between the fiduciary and
the principal.
3. Damages and Remedies_monetary damages and rescission_return of plaintiff to
status quo
The trial court did not err by granting both the remedies of rescission and damages in an
action arising from the fraudulent sale of land. While plaintiffs must generally elect their
remedies, in this case rescission alone could not return plaintiffs to their prior position;
moreover, they are entitled to the benefit of any bargain taken by defendants.
4. Mortgages and Deeds of Trust_declaring null and void_trustee as active party
The trial court did not err by relying on Virginia Carolina Laundry Supply Corporation v.
Scott, 267 N.C. 145, to declare a deed of trust null and void where the trustee was an active party
to the lawsuit but the known beneficiary was not a party. The rule remains the same whether the
identity of the beneficiary is known or unknown.
5. Unfair Trade Practices_sale of real estate_within commerce_proof of fraud
A person engaged in the sale of real estate is engaged in commerce within the meaning of
the Unfair and Deceptive Trade Practices statute, and proof of fraud establishes that the an unfair
trade practices violation has taken place.
Hatch, Little & Bunn, L.L.P., by John N. McClain, Jr. and
Phillip L. Whitson, for defendants-appellants.
Di Santi Watson Capua & Wilson, by Frank C. Wilson, III, for
plaintiffs-appellees.
ELMORE, Judge.
Samuel P. Swett (defendant Swett) owns and operates Abeers
Realty and Marketing, Inc. (Abeers Realty) and is the president and
broker in charge. The record evidence tends to show that prior to
25 April 2000, defendant Swett informed Guvantpari B. Gosai
(plaintiff) that he had a friend who owned a piece of property
located at 151 Parkway Forest Drive, Boone, North Carolina (the
property) that was for sale and asked if plaintiff wanted to see
the property. In fact, the property had been previously purchased
by defendant Swett for $29,000.00 and placed in the name of a third
party, John Jordan. Defendant Swett did not reveal his ownership
interest in the property to plaintiff. At this point, plaintiff
expressed an interest in purchasing the property. Defendant Swett
took plaintiff to see the property, which had been condemned.
Plaintiff testified that he considered Swett to be acting as his
agent. At no time while plaintiff and defendant Swett were at the
property or thereafter did Swett inform plaintiff of his ownership
interest in the property or the condemnation of the property.
On or about 25 April 2000, defendant Swett prepared an Offer
to Purchase and Contract for the property between the third party,
or his assigns, and plaintiff and his wife, Lattaben G. Goasi, for
a purchase price of $130,000.00. On the face of the contract,defendant Swett and Abeers Realty are designated as dual agents in
the property transaction.
On 8 June 2000, John Jordan executed a Warranty Deed
transferring the property to Abeers Realty for a purchase price of
$30,000.00. At trial, defendant Swett testified that no money was
actually paid to John Jordan for the property.
On 19 June 2000, Abeers Realty executed a Warranty Deed
transferring the property to plaintiff and his wife for a purchase
price of $130,000.00. Plaintiff paid $25,000.00 down on the
property and executed a Deed of Trust and Note to Abeers Realty for
the balance of the purchase price. Between 19 July 2000 and 14
June 2002, plaintiff paid $17,000.00 in interest on the Note. On
25 July 2002, plaintiff filed suit against defendants seeking
rescission of the Deed of Trust and Note and damages for fraud and
unfair and deceptive trade practices arising out of defendant
Swett's failure to disclose the condemnation of the property and
his ownership of the property. On 31 March 2003, following a bench
trial before the Honorable Richard Doughton, judgment was entered
in favor of plaintiffs, from which defendants now appeal. For the
reasons stated herein, we affirm.
[1] Defendants first assign error to the trial court's finding
that defendants Swett and Abeers Realty were the plaintiff's agent
during the subject transaction. In his role as fact finder, Judge
Doughton made the following pertinent finding:
6. On or about April 25, 2000 Samuel P. Swett prepared an
Offer to Purchase and Contract for the Property between
John Jordan, or assigns as seller and the Plaintiffs as
Buyer for a purchase price of $130,000. The Offer toPurchase and Contract shows on its face that Sam Swett
and Abeers Realty, Inc. are acting as dual agents. The
Court finds that Samuel P. Swett and Abeers Realty, Inc.
according to all evidence presented to the Court, were
the buyer's agent for the Plaintiffs at all relevant
times during this transaction.
“Findings of fact made by the court in a nonjury trial have
the force and effect of a jury verdict and are conclusive on appeal
if there is evidence to support them, although the evidence might
have supported findings to the contrary.” Curl v. Key, 311 N.C.
259, 260, 316 S.E.2d 272, 273 (1984)(citations omitted). We have
carefully reviewed the record and conclude that it contains ample
evidence to support the trial court's finding that defendants Swett
and Abeers Realty were the buyer's agent for the plaintiff. On its
face, the contract designates defendants Swett and Abeers Realty as
dual agents. Defendant testified that he had previously acted as
buyer's agent for plaintiff in another property transaction.
Defendant also testified that he told plaintiff about the property,
took plaintiff to the property, and completed the Offer to Purchase
at the request of plaintiff. Agency may be proven by written
instruments or circumstances. “It may be inferred from previous
employment in similar acts or transactions, or from acts of such
nature and so continuous as to furnish a reasonable basis of
inference that they were known to the principal, and that he would
not have allowed the agent so to act unless authorized.” Smith v.
Kappas, 218 N.C. 758, 766, 12 S.E.2d 693, 698 (1941). As such,
this assignment of error is without merit. [2] Next, defendants assign error to the trial court's
conclusion of law that the defendants Swett and Abeer's Realty
committed fraud. Our standard of review for this issue is whether
there was competent evidence to support the trial court's findings
of fact and whether its conclusions of law were proper in light of
such facts. “It is well settled in this jurisdiction that when the
trial court sits without a jury, the standard of review on appeal
is whether there was competent evidence to support the trial
court's findings of fact and whether its conclusions of law were
proper in light of such facts.” Shear v. Stevens Buliding Co., 107
N.C. App. 154, 160, 418 S.E.2d 841, 845 (1992).
In the case sub judice, the trial court made the following
relevant findings of fact:
8. Samuel Swett purchased the Property for $29,000.00 on
or about March 22, 2000, and placed the deed in the name
of John C. Jordan.
9. At no time prior to the April 25, 2000 Offer to
Purchase and Contract did Samuel Swett or any
representative of Abeers Realty, Inc. disclose to
Plaintiffs that Samuel Swett and not John Jordan, had
actually bought the Property for $29,000.00 and was
selling it to Plaintiffs for $130,000.00.
10. After the Offer to Purchase and Contract was entered
into on April 25, 2000 on June 8, 2000, John Jordan, as
Grantor, executed a Warranty Deed for the Property to
Abeers Realty, Inc., as Grantee; the deed stamps paid on
that deed reflects that the conveyance was for $30,000,
but Abeers Realty, Inc. did, in fact not pay anything to
John Jordan at that time.
11. That the transaction closed on June 19, 2000 and at
that time a Warranty Deed dated June 14, 2000 from Abeers
Realty, Inc. as Grantor to the Plaintiffs as Grantees was
delivered to the office of Plaintiff's closing attorney;the Plaintiffs saw the Deed at closing and were aware at
that time that Abeers Realty, Inc. was, in fact, the
seller.
12. Up and through the closing, Plaintiffs were never
told by Samuel P. Swett or any representative of Abeers
Realty, Inc. that the said Defendants were going to make
a profit of $100,000.00 in this transaction.
13. Plaintiffs paid $25,000.00 down for the Property at
closing and executed a Deed of Trust and Note for
$105,000 to Abeers Realty, Inc. for the balance of the
purchase price.
14. The Court finds by the preponderance of the evidence
that Defendant Samuel P. Swett knew that the Property had
been condemned because of the falling away of its chimney
but did not inform Plaintiffs at any time prior to
closing of that material fact.
15. Plaintiff would not have purchased the Property if
Samuel Swett had told them that he and/or Abeers Realty,
Inc. was making $100,000.00 profit in the transaction or
that the Property had been condemned.
As discussed above, these findings are supported by competent
evidence in the record and are therefore binding on this Court.
Based on the findings, the trial court made the following
conclusion of law:
2. In this case, Plaintiffs were principals and Abeers
Realty, Inc and Samuel P. Swett were the buyer's agent
for the Plaintiffs. In selling property that he owned
without disclosing fully everything about it, the Court
finds by a preponderance of the evidence, that Samuel P.
Swett and Abeers Realty, Inc. have committed fraud and
unfair and deceptive trade practices.
A broker can neither purchase from nor sell to the principal
unless the latter expressly consents thereto with full knowledge of
all the facts and circumstances. Real Estate Licensing Bd. v.Gallman, 52 N.C. App. 118, 277 S.E. 2d 853 (1981). Moreover, when
property is transferred between a fiduciary and his principal fraud
does not have to be established by direct evidence, it is presumed.
2 Brandis N.C. Evidence Sec. 225 (1982). “After a prima facie case
of constructive fraud is made out against a fiduciary by evidence
showing a course incompatible with his duty, the fiduciary has the
burden of showing that he did not take advantage of his principal
and acted throughout in a fair, open and honest manner.” Spence
v. Spaulding & Perkins, Ltd., 82 N.C. App. 665, 667-668, 347 S.E.2d
864, 866 (1986)(citations omitted). In the case sub judice,
defendants do not contend that they acted in a fair, open and
honest manner. Rather, defendants contend that they had no duty to
inform plaintiffs of their ownership interest in the subject
property or profit margin. Because we hold that the trial court
properly concluded that defendants were the agent of plaintiff,
this contention finds no support in the law. As such, this
assignment of error is overruled.
[3] Defendants also assign error to the remedies granted by
the trial court. Defendants contend that the trial court erred in
granting both monetary damages and rescission of the note and deed
of trust to the plaintiffs, rather than requiring the plaintiffs to
choose a single remedy. Generally, a plaintiff must “elect between
[an] action to rescind, and [the] alternative and inconsistent
action for damages.” F. E. Lykes & Co. v. Grove, 201 N.C. 254,
257, 159 S.E. 360, 362 (1931). However, “[t]he rule is, if
rescission of the contract does not place the injured party instatu quo, as where he has suffered damages which cancellation of
the contract cannot repair, there is no principle of law which
prevents him from maintaining his action for damages caused by the
other party's fraud.” Kee v. Dillingham, 229 N.C. 262, 265, 49
S.E.2d 510, 512 (1948). In this case and in accordance with the
law, the trial court rescinded the note and deed of trust and
awarded plaintiffs damages of $117,000.00; $17,000.00 of which
represented the amount paid by plaintiffs to defendants in interest
on the note and deed of trust and $100,000.00 of which represented
the profit made by defendants in the subject transaction. Under
the facts of this case, rescission alone could not return
plaintiffs to their prior position. Moreover, plaintiffs are
entitled to obtain any bargain that became available and was taken
by defendants, their agents. Spence v. Spaulding & Perkins, Ltd.,
82 N.C. App. 665, 668, 347 S.E.2d 864, 868 (1986). Therefore, this
assignment of error is without merit.
[4] Defendants also assign error to the trial court's reliance
on Virginia Carolina Laundry Supply Corporation v. Scott, 267 N.C.
145, 148 S.E.2d 1 (1966), to set aside, satisfy of record and
declare null and void the deed of trust when the beneficiary, whose
identity was known, was not a party to the lawsuit. In Virginia
Carolina, our Supreme Court held that where the trustee was a party
to the lawsuit and participated actively in its defense, the
beneficiary, whose identity was unknown, “cannot be deemed a
necessary party to the action to set aside the deed of trust[.]”
Id. at 150, S.E.2d at 4. Whether the identity of the beneficiaryis known or unknown, the rule of law remains the same. In this
case, the trial court did not err in relying on Virginia Carolina
to set aside, satisfy of record and declare null and void the note
and deed of trust when the trustee was an active party to the
lawsuit.
[5] Finally, defendants assign as error the trial court's
conclusion that defendants Swett and Abeers Realty committed unfair
and deceptive trade practices. Defendants contend that the subject
transaction was not “in or affecting commerce.” N.C. Gen. Stat. §
75-1.1 (2003) declares unlawful “unfair and deceptive acts or
practices in or affecting commerce.” This Court has stated that
“[t]he purpose of G.S. 75-1.1 is to provide a civil means to
maintain ethical standards of dealings between persons engaged in
business and the consuming public within this State and applies to
dealings between buyers and sellers at all levels of commerce.”
United Virginia Bank v. Air-Lift Associates, 79 N.C. App. 315, 320,
339 S.E.2d 90, 93 (1986). Except for certain limited exemptions
set forth in the statute, commerce includes “all business
activities, however denominated.” N.C. Gen. Stat. § 75-1.1(b)
(2003). Specifically, a person engaged “in the sale of real estate
is engaged in commerce within the meaning of G.S. 75-1.1.”
Rosenthal v. Perkins, 42 N.C. App. 449, 454, 257 S.E.2d 63, 67
(1979). Moreover, “a plaintiff who proves fraud thereby
establishes that unfair and deceptive trade practices have
occurred.” Davis v. Sellers, 115 N.C. App. 1, 9, 443 S.E.2d 879,
884 (1994). The trial court's finding of unfair and deceptivetrade practices is well supported by the evidence and was not
error.
Affirmed.
Judges MCCULLOUGH and BRYANT concur.
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