Appeal by plaintiff from judgment entered 24 October 2005 by
Judge Benjamin G. Alford in Superior Court, Craven County. Heard
in the Court of Appeals 6 March 2007.
Harvell and Collins, P.A., by Wesley A. Collins and Amy C.
Shea, for Plaintiff-appellant.
Harris, Creech, Ward and Blackerby, P.A., by Thomas M. Ward,
Charles E. Simpson, Jr., and Jay C. Salsman, for Defendant-
appellee.
WYNN, Judge.
In this matter, home buyer, Eleanor S. MacFadden (Plaintiff)
brought an action against the home seller, Dorothea S. Louf
(Defendant), for alleged undisclosed defects in the property.
(See footnote 1)
After considering the pleadings and evidence presented by the
parties, the trial court granted summary judgment in favor of
Defendant. Plaintiff appeals, contending the trial court erred by
granting summary judgment on her claims for (I) unfair and
deceptive trade practices, and (II) fraud and negligent
misrepresentation. We affirm and will present additional relevant
facts in our discussion of these issues.
On appeal, we acknowledge that in ruling on a motion for
summary judgment, a trial court may not resolve issues of fact and
must deny the motion if there is a genuine issue as to any material
fact.
Singleton v. Stewart, 280 N.C. App. 460, 464, 186 S.E.2d
400, 403 (1972).
Thus, we review summary judgments to determine if
there was a genuine issue as to any material fact and whether the
movant is entitled to judgment as a matter of law.
I.
[1] Plaintiff first argues that the trial court erred by
granting summary judgment on her claim for unfair and deceptive
trade practices. We disagree because the record shows that in
selling her private residence, Defendant was not engaged in
commerce.
Under section 75-1.1 of the North Carolina General Statutes,
“unfair or deceptive acts or practices in or affecting commerce,
are declared unlawful.” N.C. Gen. Stat. § 75-1.1 (2005). Thus, to
prevail on a cause of action for unfair and deceptive trade
practices, a plaintiff must show that the matter was in or
affecting commerce. It is well established in North Carolina that “. . .private
homeowners selling their private residences are not subject to
unfair and deceptive practice liability.”
Davis v. Sellers, 115
N.C. App. 1, 7, 443 S.E.2d 879, 883 (1994);
see also
Stolfo v.
Kernodle, 118 N.C. App. 580, 455 S.E.2d 869 (1995);
Robertson v.
Boyd, 88 N.C. App. 437, 363 S.E.2d 672 (1988);
Rosenthal v.
Perkins, 42 N.C. App. 449, 257 S.E.2d 63 (1979).
Here, the
undisputed evidence shows that the house sold to Plaintiff was
Defendant's private residence.
Nonetheless, Plaintiff contends that under
Bhatti v. Buckland,
the “homeowner exception” to unfair and deceptive practice
liability does not apply to Defendant because she “has purchased
four homes, rented one and resold three.” However, in
Bhatti,
the
Court found that the defendant had failed to establish that he was
a “private party engaged in the sale of a residence.”
Bhatti v.
Buckland, 328 N.C. 240, 246, 400 S.E.2d 440, 444 (1991) (internal
quotations and citations omitted). Indeed, the Court in
Bhatti
found that,
[s]o far as the record here reveals, the
transaction at issue was indisputably a
commercial land transaction that affected
commerce in the broad sense. Defendant's
advertising of this property explicitly
appealed to “Investors [and] Speculators” as
well as “Homeseekers.” The more probable
inference from this evidence is that the sale
was not of residential property. This
probability is further advanced by defendant's
assertion in his counterclaim that plaintiff's
failure to pay “the agreed upon Purchase
Price” required defendant “to sell his home.”
This pleading does nothing to advance the
proposition that defendant was selling
residential property, but suggests insteadthat his residence and property sold were
discrete entities.
Id. at 246, 400 S.E.2d at 444.
In contrast, the evidence here shows indisputably that
Defendant was a private party engaged in the sale of her residence.
Nothing in the record suggests that this was a commercial land
transaction of the type in Bhatti.
Accordingly, we hold that the
trial court properly granted summary judgment for Defendant on the
claim of unfair and deceptive trade practices.
[2] We likewise reject Plaintiff's contentions that the trial
court erred by granting summary judgment for Defendant on the claim
of fraud because the evidence fails to show “reasonable reliance”
by Plaintiff.
In
RD & J Props.,
this Court restated the elements for a fraud
cause of action:
The essential elements of actionable fraud
are: (1) [f]alse 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.
Additionally, plaintiff's reliance on any
misrepresentations must be reasonable.
RD & J Props. v. Lauralea-Dilton Enters., LLC., 165 N.C. App 737,
744, 600 S.E.2d 492
, 498
(2004)(internal quotations and citations
omitted).
Moreover, this Court held,
With respect to the purchase of property,
"[r]eliance is not reasonable if a plaintiff
fails to make any independent investigation"
unless the plaintiff can demonstrate: (1) "it
was denied the opportunity to investigate the
property," (2) it "could not discover thetruth about the property's condition by
exercise of reasonable diligence," or (3) "it
was induced to forego additional investigation
by the defendant's misrepresentations."
Id. at 746, 600 S.E.2d at 499 (
quoting State Properties, LLC., v.
Ray, 155 N.C. App. 65, 73, 574 S.E.2d 180, 186 (2002), disc.
review denied, 356 N.C. 694, 577 S.E.2d 889 (2003)).
“In an arm's-length transaction, when a purchaser of property
has the opportunity to exercise reasonable diligence and fails to
do so, the element of reasonable reliance is lacking and the
purchaser has no action for fraud.”
Id. at 746, 600 S.E.2d at 499
(
citing Calloway v. Wyatt, 246 N.C. 129, 134, 97 S.E.2d 881, 885-86
(1957)). “While the reasonableness of a party's reliance is
usually a question for the jury, a court may grant summary judgment
when the facts are so clear that they support only one conclusion.”
Id. (
citing State Properties, 155 N.C. App. at 73, 574 S.E.2d at
186).
Here, Plaintiff failed to establish that her reliance was
justifiable because she conducted a home inspection before closing
and that inspection report put her on notice of potential problems
with the home. The inspection commissioned by Plaintiff instructed
her to have a roofing contractor inspect the roof because there was
potential for water to pond above the kitchen/breeze-way area.
Additionally, the report noted water staining to the chimneys from
the attic area; previous water leakage at the rear porch; gutters
were rusted, leaked, damaged and not functional; sagging,
deflection, and general unevenness was observed at various portionsof the floor system; exterior wood siding and trim exhibited some
general peeling paint; some of the doors were out of level; the
foundation was supported by wood girders and mental house jacks
below the first right foyer and below the rear kitchen floor
system; there was evidence of previous moisture/pest infestation at
several floor system locations when viewed from the crawl space;
and water penetration was expected into the basement area and near
exterior entry after periods of heavy rain.
Despite the findings of the home inspection report, Plaintiff
argues that she relied on the Residential Disclosure Statement
completed by Defendant; and a letter from Steve Bengal, of R.E.
Bengal Sheet Metal Company, to Mr. John L. Hood Jr., a previous
potential buyer which stated that there were no leaks in the home.
Plaintiff contends that this letter was in a packet of documents at
her first viewing of the home. However, any reliance on these
items would have been unreasonable in light of her own home
inspection report which recommended that she have the roof
evaluated by a roofing contractor and that she inquire or monitor
the other problem areas.
Moreover, Plaintiff offered no evidence to show that the
letter referencing no leaks existed, even though two other letters
from Mr. Bengal to Mr. Hood were produced and these letters
indicated that there were leaks in the roof. In order to explain
the absence of this letter, Plaintiff argues that the missing
letter was a forged document which was destroyed by Defendant.
However, as pointed out earlier, even assuming
arguendo that thisletter did exist, Plaintiff could not have reasonably relied upon
the letter in light of her own home inspection report outlining all
of the problems with the home. Notwithstanding the recommendations
of her own inspection report, Plaintiff elected to forego any
further inquiry and consummated the contract.
In sum, the undisputed evidence shows that while Plaintiff
contends that she was provided a “false roof report”, she failed to
introduce the alleged report or any evidence of it other than her
own uncorroborated statements. Second, there is no evidence in the
record to show that Defendant “took affirmative steps to mislead
[Plaintiff].” Third, there is no evidence to support Plaintiff's
contention that Defendant “induced her to forego further inquiry.”
To the contrary, the record shows Defendant recommended Plaintiff
to make additional inspections of the property but she declined to
do so. Indeed, a disclosure statement explicitly encouraged Ms.
MacFadden to obtain an inspection stating that “it is not a
substitute for any inspections they may wish to obtain” and the
purchasers are “encouraged to obtain their own inspection from a
licensed home inspector or other professional.”
As we find the evidence fails to establish reasonable
reliance, we uphold the trial court's grant of summary judgment on
the claim of fraud. Likewise, because reliance is an element of
negligent misrepresentation, we uphold the grant of summary
judgment on that claim.
See Marcus Bros. Textiles, Inc. v. Price
Waterhouse, LLP, 350 N.C. 214, 224, 513 S.E.2d 320, 327 (1999)
(providing that the question of justifiable reliance in an actionfor negligent misrepresentation is "analogous to that of reasonable
reliance in fraud actions”) (internal quotation omitted); Helms v.
Holland, 124 N.C. App. 629, 635, 478 S.E.2d 513, 517 (1996)
(providing that “[j]ustifiable reliance is an essential element of
both fraud and negligent misrepresentation.”)
Affirmed.
Judges STEELMAN and JACKSON concur.
Footnote: 1