STEPHENS, Judge.
This appeal arises from the 2007 failure of Grandfather Vistas, a real estate development located in Caldwell County. In 2006, approximately 1,000 acres of land in Caldwell County was purchased for $10.9 million, which Defendants Infinity Partners, LLC; Infinity Real Estate Partners, LLC; Source One Communities LLC; Prudential Source One, LLC; and Peerless Real Estate Services, Inc.,
The developers used a real estate company to market the founders' lots, and the real estate company, in turn, created a marketing plan that relied on preferred lender arrangements with First Charter Bank of North Carolina;
On 15 July 2011, Anderson moved for summary judgment on all remaining claims against him,
In June 2013, Plaintiffs filed a motion for default judgment against Defendants Kevin
On 8 August 2013, Plaintiffs Joseph Fazzari; K. Scott Fischer; Thomas L. Barnhardt; Kimberly Barnhardt; Windspirit Properties, LLC; William Decker; Douglas M. Ellis; Kelly Ellis; Lynn Falero; Ralph Falero; Kenneth Fischer; Carol H. Harris; Roscoe E. Harris; Scott W. McQuay; Renee C. Miller, as Trustee of Renee C. Miller Living Trust; Charles H. Owens; Danuta K. McIvor; Darryl Strack; and James K. Tighe, Jr., gave notice of appeal from the 8 March 2012 lenders' summary judgment order and the 22 March 2012 lenders' cost orders.
On 16 December 2013, Wells Fargo moved to dismiss the appeals in COA13-1303 of Darryl Strack; James K. Tighe, Jr.; Christa S. Tighe; and Renee Miller (collectively, "the bankruptcy appellants"). The motion was referred to this panel by order entered 6 January 2014. In June and July 2012, the bankruptcy appellants filed cases under Chapter 7 of the United States Bankruptcy Code. In September and October 2012, all of the bankruptcy appellants' obligations to Wells Fargo arising from the costs order and the judgments on Wells Fargo's counterclaims were discharged. Wells Fargo asserts that the bankruptcy appellants could recover a windfall if this Court resolves this appeal in Plaintiffs' favor. In light of the result reached in this matter, resolving all issues in favor of the lenders as discussed below, we dismiss as moot Wells Fargo's motion to dismiss.
Plaintiffs argue that the trial court erred in granting the lenders' motion for summary judgment on the claims for (1) negligence and negligent misrepresentation and (2) UDTP.
Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP, 350 N.C. 214, 219-20, 513 S.E.2d 320, 324 (1999) (citations, internal quotation marks, and emphasis omitted).
Plaintiffs first contend that the trial court erred in granting summary judgment on their negligence and negligent misrepresentation claims against the lenders. We disagree.
Walker v. Town of Stoneville, 211 N.C. App. 24, 30, 712 S.E.2d 239, 244 (2011) (citations and internal quotation marks omitted).
In general, "a lender is only obligated to perform those duties expressly provided for in the loan agreement to which it is a party." Camp v. Leonard, 133 N.C. App. 554, 560, 515 S.E.2d 909, 913 (1999) (holding lender owed no duty to borrower with respect to inspection or appraisal of its collateral); see also Lassiter v. Bank of N.C., 146 N.C. App. 264, 268, 551 S.E.2d 920, 923 (2001) (holding lender owed borrower no duty to inspect house being built with loan proceeds); Perry v. Carolina Builders Corp., 128 N.C. App. 143, 150, 493 S.E.2d 814, 818 (1997) (holding lender owed no duty to ensure loan proceeds were used for a specific purpose in the absence of an express contract provision); Wells v. N.C. Nat'l Bank, 44 N.C. App. 592, 596, 261 S.E.2d 296, 298 (1980) (holding lender had no duty "to attend to details of the plaintiff's [land] purchase other than the financial services it offered").
Plaintiffs acknowledge that the lenders did not violate any duties expressly provided for in their loan agreements, but contend that the lenders owed them duties which "flow from at least two sources: [(1)] a common law negligence duty and [(2)] the Mortgage Lending Act." We are unpersuaded by either contention.
Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 60-61, 418 S.E.2d 694, 699 (citations, internal quotation marks, and brackets omitted), disc. review denied, 332 N.C. 482, 421 S.E.2d 350 (1992).
Plaintiffs cite this Court's opinion in Dallaire v. Bank of Am., N.A., for the proposition that, "when a financial institution undertakes to provide a customer with a service beyond that inherent in the creditor-debtor relationship, it must do so reasonably and with due care." ___ N.C.App. ___, ___ n. 5, 738 S.E.2d 731, 735 n. 5 (2012) (emphasis added). In Dallaire, we reversed and remanded a grant of summary judgment in favor of the bank because there existed a question of fact "as to whether or not [the lender] sought to give legal advice to [the investment purchasers]." Id. Likewise, Plaintiffs assert that the lenders here went beyond the role of commercial lending when they acted as "cheerleaders" and "promoters" of Grandfather Vistas by using Anderson and other appraisers to "churn[] out `cookie cutter' appraisals," "interfered with the usual appraisal process," and "falsified
However, our Supreme Court has recently reversed this Court's decision in Dallaire, reaffirming that, "[g]enerally, the home loan process is regarded as an arm's length transaction between parties of equal bargaining power and, absent exceptional circumstances, will not give rise to a fiduciary duty." Dallaire v. Bank of Am., N.A., ___ N.C. ___, ___, 760 S.E.2d 263, 264 (2014). The Supreme Court went on to hold that, even in an exceptional circumstance where a loan officer owes a borrower some duty beyond the terms of the loan agreement, "a borrower cannot establish a claim for negligent misrepresentation based on a loan officer's statements... if the borrower fails to make reasonable inquiry into the validity of those statements." Id. at ___, 760 S.E.2d at 264. Thus, where the borrowers
Id. at ___, 760 S.E.2d at 268.
Here, far from being exceptional circumstances outside the normal creditor-debtor relationship, appraisals and underwriting are integral parts of the commercial lending process. Plaintiffs cite no case from this State in which courts have found that a lender had a common law duty to the borrower regarding the manner in which the lender undertook appraisals or underwriting in connection with making loans. To the contrary, our State's case law is clear that such appraisals and underwriting are for the benefit of the lenders, not for the borrowers. See, e.g., Camp, 133 N.C.App. at 559, 515 S.E.2d at 913. Simply put, in North Carolina, there is no cause of action for negligent underwriting of loans for the purchase of real estate. Further, even were there such a claim under the law of this State, Plaintiffs have forecast no evidence that they undertook their own independent inquiries into the values of the lots (such as obtaining their own independent appraisals) or were prevented from doing so. Accordingly, Plaintiffs could not demonstrate the justified reliance necessary to support a negligent misrepresentation claim.
We find Plaintiffs' reliance on the lenders' alleged violations of the Mortgage Lending Act ("MLA")
We reject Plaintiffs' reliance on the MLA on two bases. First, the MLA applied only to loans taken by natural persons "primarily for personal, family, or household use, primarily secured by either a mortgage or deed of trust on residential real property located in North Carolina." N.C. Gen.Stat. § 53-243.01(15) (2005) (emphasis added). Here, it is undisputed that the loans taken out by Plaintiffs were to finance the purchase of founders' lots as investments and not for residential use by the investment purchasers. The founders' lots were explicitly marketed as investment vehicles. The evidence in the record is that no Plaintiff took out a loan to purchase a founder's lot "primarily for personal, family, or household use[.]" Id. Plaintiffs' own complaint describes the sale of the founders' lots as an "Investment Scheme" and consistently refers to the investment purchasers as "investors." The investment purchasers, who purchased the founders' lots explicitly and intentionally for investment purposes, cannot now claim the protection of a statutory scheme explicitly intended to govern residential rather than investment real estate mortgages.
Despite the fact that the loans were indisputably for investment purposes, Plaintiffs urge that the lenders are estopped from avoiding the applicability of the MLA on this basis because "[t]he lenders treated the loans as residential or home loans in order to avoid their own commercial/investment guidelines which would have prevented these loans from meeting the 90% [loan-to-value] financial condition in the purchase contracts. The lenders' guidelines for investment loans would permit loans only in the range of 65% to 80% [loan-to-value]." Plaintiffs defeat their own argument on this point. The lenders' internal guidelines regarding permitted loan-to-value ratios for various types of loans are not intended to protect Plaintiffs or any other borrowers. Rather, those policies are intended to protect the lenders and presumably reflect an assessment of the relative riskiness of residential versus commercial real estate loans. The MLA applied to residential loans and was intended to protect residential borrowers. See N.C. Gen.Stat. § 53-243.01(15). As noted supra, Plaintiffs were not residential borrowers and their loans were not, in fact, residential loans. No labeling or treatment by the lenders in their internal underwriting process altered the loans' true nature so as to bring them under the ambit of the MLA.
Second, as discussed supra, even if the MLA did apply to Plaintiffs' loans such that it could be the source of duties for their negligence-based causes of action, for the reasons previously stated, Plaintiffs could not demonstrate the justified reliance required to prevail on those claims. In sum, we reject both of Plaintiffs' arguments and conclude that the trial court did not err in granting summary judgment for the lenders on the negligence-based claims.
Plaintiffs Decker, Fazzari, McIvor, McQuay, and Owens
It is well established that
Sunset Beach Dev., LLC v. AMEC, Inc., 196 N.C. App. 202, 211, 675 S.E.2d 46, 53 (2009) (citations, internal quotation marks, and brackets omitted). "Actual reliance is demonstrated by evidence [the] plaintiff acted or refrained from acting in a certain manner due to [the] defendant's representations." Pleasant Valley Promenade v. Lechmere, Inc., 120 N.C. App. 650, 663, 464 S.E.2d 47, 57 (1995) (citation omitted). Where a plaintiff cannot forecast evidence of actual reliance, summary judgment for the defendants is proper. Sunset Beach Dev., LLC, 196 N.C.App. at 212, 675 S.E.2d at 54.
On appeal, the Fifth Third plaintiffs allege that they relied on misrepresentations by Fifth Third and the appraisals by Anderson in making their decisions to take out the loans on which they later defaulted. The Fifth Third plaintiffs also assert that Fifth Third wrongfully withheld the buyback agreements from their underwriters and Anderson in an effort to inflate the appraisals.
As for the alleged misrepresentations, our review of the record reveals that Decker, Fazzari, McIvor, and McQuay all testified that Fifth Third did not make any misrepresentations to them in regard to their loans. Owens testified that an employee of Fifth Third told him that Grandfather Vistas was "beautiful, that it should do well" and vouched that the developers were the "real deal."
In regard to the assertion that Fifth Third withheld the buyback agreements from Anderson, the Fifth Third plaintiffs fail to note that Anderson testified to having a copy of at least one contract which included the buyback agreement. Further, as noted in footnote 20 supra, appraisers for Wells Fargo who were provided with copies of the buyback agreement still reached a value of $500,000 for each of the founders' lots they appraised.
As for the Fifth Third plaintiffs' alleged reliance on Anderson's appraisals, we find this appeal governed by the same reasoning employed in In re Fifth Third Bank, N.A., and Williams, and in light of the virtually identical facts presented here, we reach the same result. As noted supra, those appeals involved, inter alia, UDTP claims by investors who took out loans from Fifth Third to purchase lots in a development called the Villages of Penland as part of an investment scheme.
In Williams, we noted that, "[w]here a plaintiff cannot forecast evidence of actual reliance, summary judgment for the defendants is proper[,]" 218 N.C.App. at 368, 724 S.E.2d at 549 (citation omitted), and then observed:
Id. at 369, 724 S.E.2d at 550. Likewise, in In re Fifth Third Bank, N.A., in considering summary judgment for Fifth Third on UDTP claims, we concluded that "no evidence tend[ed] to show that [the p]laintiffs' decision to invest ... bore any relation to the appraised value of the lots which they purchased or that [the p]laintiffs relied in any way upon the allegedly defective appraisals which [Fifth Third] procured when they decided to invest. ..." 217 N.C.App. at 211, 719 S.E.2d at 179. As a result, we affirmed summary judgment in favor of Fifth Third on the plaintiffs' UDTP claims. Id. at 213, 719 S.E.2d at 180.
Here, just as in the Penland cases, the purchase contracts were not subject to any appraisal contingencies.
AFFIRMED.
Judges STROUD and McCULLOUGH concur.
