Opinion
No. COA10-928
Filed 3 May 2011 This case not for publication
Appeal by Defendants from judgment and order entered 3 February 2010 by Judge John M. Britt in Nash County District Court. Heard in the Court of Appeals 15 December 2010.
Etheridge Hamlett, LLP, by William D. Etheridge, and Battle, Winslow, Scott Wiley, P.A., by M. Greg Crumpler, for Plaintiff. Thomas W. King, Attorney at Law, by Rakesh K. Sehgal, for Defendants.
Nash County No. 07 CVD 1648.
Factual and Procedural Background
On 4 September 2007, Plaintiff Stoneworx, Inc. ("Stoneworx"), a North Carolina Corporation owned by Frank Hunt ("Hunt") and Bette Sue Hunt, filed a complaint against Defendants Alice Alford Robbins and James D. House ("House") (collectively, "Defendants") in Nash County District Court. The complaint set forth various claims for relief (breach of contract, fraud, misrepresentation, and unfair trade practices) arising out of the negotiation and execution of an April 2007 lease agreement between the parties. On 2 November 2007, Defendants filed their answer, asserting the defenses of lack of privity and lack of breach, as well as counterclaiming for the cost of repair of the leased premises. The case was tried without a jury on 21 May 2009 in Nash County District Court, the Honorable John M. Britt presiding.
The evidence presented at trial tended to show that in early 2007, Stoneworx, a company which manufactures residential and commercial countertop products, was in the process of moving its manufacturing facility in Rocky Mount, North Carolina, to a new location. Stoneworx was contacted by Gateway Partnership, a partnership that helps small businesses purchase larger facilities, which indicated to Stoneworx that a property located at 720 South Boddie Street in Nashville, North Carolina (the "property") "would work for [their] operation." The property was then owned by Defendants, who had obtained the property by deed in March 2006 and had been using the property for storage and as a warehouse.
In early 2007, Hunt toured the property with House. During the tour, Hunt described his business and building requirements to House. Subsequently, Hunt allowed House to visit Stoneworx' Rocky Mount manufacturing facility and explained to House about the work performed and the equipment used in the manufacturing process. After his visit to Stoneworx' manufacturing facility, House informed Hunt that the property had previously been used by a welding business and House assured Hunt that the property was suitable for Stoneworx' manufacturing process.
Despite House's representations as to the property's prior use and its suitability for Stoneworx' contemplated use, the record indicates that in May 2006, House met with James Harrell ("Harrell"), a Nash County Inspection Department ("Inspection Department") Code Enforcement Officer, and informed Harrell that the property was used for storage and "wouldn't be anything else but storage." During this meeting, Harrell informed House that the Inspection Department needed to be notified if the property was going to be used for any purpose other than storage and that a contractor or new occupant would need to contact the Inspection Department if there was going to be a change in use of the property.
In early April 2007, following House's tour of Stoneworx' Rocky Mount facility, House and Hunt negotiated a lease agreement for the property. The written lease agreement, which was signed by Robbins and delivered to Hunt, but never signed by a representative of Stoneworx, indicated that the lease was for a term of five years. After Hunt informed House that the lease agreement was agreeable, subject to the approval of a relocation loan and certain floor, plumbing, and electrical modifications to the property, House gave Hunt the keys to the property and stated that he wanted the lease to begin as soon as possible.
On 11 April 2007, House secured a plumbing permit to allow for the addition of two lavatories and two water closets. On 24 April 2007, Hunt, on behalf of Stoneworx, filed a Zoning Compliance Application with the town of Nashville, which indicated that the property would be used for manufacturing. The box "change the use" was checked on the application. The application categorized the proposed work as "MFG" and listed the zoning as "Manufacturing." On 7 May 2007, Hunt applied for a zoning variance from the town of Nashville. The purpose of this variance application was to alter the setback regulations, as they applied to the property, to allow for more employee and customer parking. The variance was approved on 7 June 2007.
Stoneworx paid the first installment of rent in early August 2007 and, on 16 August 2007, Stoneworx began production in the new property. However, on 2 7 August 2 007, J. Braxton Tanner ("Tanner"), the Chief Code Enforcement Officer for the Inspection Department, informed Hunt that he was required to obtain a certificate of occupancy before Stoneworx could occupy the property; Tanner further informed Hunt that the electrical modifications would have to be inspected. Tanner also told Hunt that the business was classified "factory industrial-moderate hazard" and that the property was not suitable for such a business.
On 29 August 2007, Tanner sent a cease and desist letter to Stoneworx, notifying Stoneworx that it was in violation of building codes and would have to cease operations until the building was brought up to code or the permit and zoning issues were resolved. On 30 August 2007, power to the property was shut off and Stoneworx ceased its operations.
Following the presentation of evidence, Judge Britt issued an order concluding that (1) the parties operated under an oral lease which was breached by Defendants; (2) the Defendants pushed Stoneworx to get into the building based on fraudulent misrepresentations of the suitability of the building; and (3) Defendants were jointly liable to Stoneworx in the amount of $30,344.37. On 7 January 2010, Stoneworx filed a motion for treble damages and attorney fees pursuant to N.C. Gen. Stat. § 75-1.1, which motion was granted by Judge Britt, who amended his order on 3 February 2010 to reflect his findings that (1) Defendants' misrepresentations and fraud constituted unfair and deceptive trade practices; and (2) such practices were in the course of commerce and were the proximate cause of Stoneworx' injury. Judge Britt's amended order awarded Stoneworx treble damages and attorney fees. Defendants appeal.
Discussion
"The standard of review on appeal from a judgment entered after a non-jury trial is whether there is competent evidence to support the trial court's findings of fact and whether the findings support the conclusions of law and ensuing judgment." Cartin v. Harrison, 151 N.C. App. 697, 699, 567 S.E.2d 174, 176, disc. review denied, 356 N.C. 434, 572 S.E.2d 428 (2002) (internal quotation marks omitted). "Findings of fact are binding on appeal if there is competent evidence to support them, even if there is evidence to the contrary." Sessler v. Marsh, 144 N.C. App. 623, 628, 551 S.E.2d 160, 163, disc. review denied, supersedeas denied, 354 N.C. 365, 556 S.E.2d 577 (2001). Furthermore, "[w]here no exception is taken to a finding of fact by the trial court, the finding is presumed to be supported by competent evidence and is binding on appeal." Koufman v. Koufman, 330 N.C. 93, 97, 408 S.E.2d 729, 731 (1991).
Defendants first argue that the trial court erroneously concluded that Defendants' statements regarding the suitability of the building were representations. Defendants contend that such statements were merely opinions and, thus, could not be fraudulent misrepresentations serving as the basis for Stoneworx' unfair and deceptive trade practices claim. We are unconvinced.
To prevail on a claim for unfair and deceptive trade practices, a plaintiff must prove that the defendant "committed an unfair or deceptive act or practice." Phelps-Dickson Builders, L.L.C. v. Amerimann Partners, 172 N.C. App. 427, 439, 617 S.E.2d 664, 671 (2005). Proof of fraud "necessarily constitute[s] a violation of the prohibition against unfair and deceptive acts." Hardy v. Toler, 288 N.C. 303, 309, 218 S.E.2d 342, 346 (1975). In order to prove fraud, the plaintiff must prove, inter alia, that the defendant made a statement of fact that is specific and definite in nature. Rosenthal v. Perkins, 42 N.C. App. 449, 451-52, 257 S.E.2d 63, 65 (1979). Although generally a mere expression of opinion does not constitute fraud, a statement purporting to be an opinion may constitute the basis for fraud if, at the time it was made, the maker of the statement holds an opinion contrary to the opinion expressed, and the maker intends to deceive the listener. Leftwich v. Gaines, 134 N.C. App. 502, 508-509, 521 S.E.2d 717, 722-23, disc. review denied, 351 N.C. 357, 541 S.E.2d 714 (1999).
In this case, Bette Sue Hunt testified at trial that House told her the property "was suitable for [Stoneworx'] needs." Furthermore, Hunt testified that after House viewed Stoneworx' then-current facility, House stated that "[h]e didn't feel like there would be any problem with what we were manufacturing and that [the property] would work."
In our view, House's statement to Bette Sue Hunt is not an opinion, but rather is a representation of fact. House observed Stoneworx' operations and was aware it was not merely a large-scale storage operation. House knew that the property, in its then-current condition, was only to be used for storage. Nevertheless, House informed Stoneworx' representative that the property was suitable for Stoneworx' operation.
In this context, the question of suitability refers to whether certain activities could have been undertaken on the property based on the circumstances as they existed at the time. The answer to the question is finite — either the property is suitable or it is not — and one cannot expect the answer to vary, as one could with a matter of opinion, depending on who is giving the answer. In this case, House knew that the property, as it was, was unsuitable for Stoneworx' operations. Yet he represented to Bette Sue Hunt that it was suitable. House's statement was a clear misrepresentation and, as such, the statement properly served as the basis for Stoneworx' unfair and deceptive trade practices claim.
Regarding House's statement to Hunt that House "didn't feel like there would be any problem with what we were manufacturing and that [the property] would work," this statement is couched in terms of an opinion. However, despite the prefatory language regarding House's "feeling," the substance of the statement-that manufacturing on the property would work without problem-leads to the conclusion that the statement is a representation of fact. Like House's statement regarding suitability, the statement that the property would work without any problem is an objective statement as to the nature of the property and is not a subjective reflection of the speaker's opinion. Accordingly, we conclude that House's statement to Hunt was a representation of fact rather than an opinion.
Nevertheless, were we to conclude that House's statements were not representations in that they were based solely on House's opinion, the statements would still sufficiently constitute fraud because they were contrary to the opinions held by House and were intended to deceive Stoneworx. See Leftwich, 134 N.C. App. at 508-09, 521 S.E.2d at 722-23. At trial, Harrell testified as to a conversation he had with House informing House that the building's use could not be changed without contacting Harrell's office and that new renters needed to contact their office to ensure compliance as well. This evidence clearly shows House told Stoneworx that the building would be suitable for its use despite having been told that a new inspection would be needed and that new tenants had to contact Harrell before moving in. Even if House was not aware of the exact paperwork required to be completed by Stoneworx, he was informed that some action was necessary and did not disclose this information to Stoneworx. Accordingly, we conclude that the statements by House were not mere opinions, but were representations sufficient to serve as the basis for the fraud underlying Stoneworx' unfair and deceptive trade practices claim.
Defendants further argue that even if House's statements are representations, the trial court erred in concluding that Stoneworx "relied on these statements and exercised due diligence in trying to comply with the law." We disagree.
"The reasonableness of a party's reliance is a question for the [fact-finder], unless the facts are so clear that they support only one conclusion." State Properties, L.L.C. 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). Although a plaintiff has no right to rely upon a defendant's statements when the parties are on equal footing and have equal means of knowing the truth, Libby Hill Seafood Restaurants, Inc. v. Owens, 62 N.C. App. 695, 699-700, 303 S.E.2d 565, 569, disc. review denied, 309 N.C. 321, 307 S.E.2d 164 (1983), "where material facts are available to the vendor alone, he or she must disclose them." Id. at 698, 303 S.E.2d at 568 (emphasis in original). "[E]ven if there is no duty to disclose information, if a seller does speak then he must make a full and fair disclosure of the matters he discloses." Freese v. Smith, 110 N.C. App. 28, 35, 428 S.E.2d 841, 846 (1993).
In this case, the evidence shows that House's misrepresentations regarding the suitability of the property and his failure to make fair and full disclosures of the matters he did disclose were enough to lead Stoneworx to abandon investigations it may otherwise have conducted into the reliability of House's statements. Although the evidence does not show that Stoneworx conducted an investigation into the claims made by Defendants, the evidence indicates that House repeatedly assured Stoneworx of the property's suitability while failing to fully disclose matters relating to an inspection required before the building's use could be changed. This evidence was sufficient to support the trial court's conclusion that Stoneworx reasonably relied upon Defendants' misrepresentations. Accordingly, the trial court did not erroneously conclude that Stoneworx reasonably relied upon Defendant House's representations.
Nevertheless, Defendants contend that
[t]he court must hold commercial purchasers/lessees accountable for their own carelessness and failure to investigate the premises. To do otherwise would amount to an implied warranty of compliance with any and all relevant building codes for whatever specific purpose the purchaser/lessee intended, even if the seller/lessor is unfamiliar with any problems.
However, as shown by the evidence before the trial court, Defendants were familiar with the problem and made an express representation as to the suitability of the property with knowledge that such representation was false. The intended use of the property by Stoneworx was known to Defendants, and when asked about the suitability of the property, Defendants represented that it "would work" and "was suitable for [Stoneworx'] needs."
Furthermore, we note that this Court has previously held that
[e]ven where a plaintiff's reliance is unreasonable, in close cases, sellers [who] intentionally and falsely represent[] material facts so as to induce a party to action should not be permitted to say in effect, "You ought not to have trusted me. If you had not been so gullible, ignorant, or negligent, I could not have deceived you."
Willen v. Hewson, 174 N.C. App. 714, 719, 622 S.E.2d 187, 191 (2005) (internal quotations omitted) (brackets in original), disc. review denied, 360 N.C. 491, 631 S.E.2d 520 (2006). In this case, in response to the question "[w]ouldn't you do anything, concealment or whatever, to get these people to move in and pay you — start paying you $2,500?", House answered, "If that's the only way I could get a dollar." Defendants' willingness to intentionally and falsely represent material facts is quite clear. Thus, even were this Court to find that Stoneworx' reliance upon Defendants' statements was unreasonable, we would not allow Defendants to say, "You ought not to have trusted me. If you had not been so gullible, ignorant, or negligent, I could not have deceived you.'" Id. at 719, 622 S.E.2d at 191. In view of the foregoing, we hold that the trial court did not err in concluding that Stoneworx reasonably relied upon Defendants' representations. Defendants' argument is overruled.
Finally, Defendants argue that the trial court erred in concluding that Defendants' statements constituted unfair and deceptive trade practices. In support of this argument, Defendants first contend that the parties were equal in terms of bargaining power and level of sophistication, and, thus, Defendants could not be guilty of an unfair act or practice. Defendants' contention relies upon this Court's prior statement that "a party is guilty of an unfair act or practice when it engages in conduct that amounts to an inequitable assertion of its power or position." Libby Hill, 62 N.C. App. at 700, 303 S.E.2d at 569.
However, the inequitable assertion of power or position is not the only means by which a party may be guilty of an unfair act or practice. Proof of fraud constitutes a violation of the prohibition against unfair and deceptive acts. Hardy, 288 N.C. at 309, 218 S.E.2d at 346. Accordingly, even in the absence of an inequitable assertion of power, Defendants' fraud in this case may be the basis for the finding of an unfair or deceptive trade practice. We are therefore not persuaded that the trial court erroneously concluded that Defendants' conduct constituted unfair and deceptive trade practices solely because there was no inequitable assertion of power.
Defendants further contend that the trial court's conclusion that Defendants' statements constituted unfair and deceptive trade practices was error because it was based on conclusion of law two — that Defendants were aware that a new certificate of occupancy was necessary before a new tenant could occupy the building — which itself was unsupported by the trial court's findings of fact. Assuming conclusion of law two is not supported by adequate findings of fact, there was sufficient evidence to support the trial court's findings of fact regarding Defendants' fraudulent misrepresentations as to Defendants' knowledge of the Inspection Department's requirements and the suitability of the property for Stoneworx' use. These findings supported the court's conclusion that Defendants committed unfair and deceptive trade practices by fraudulently inducing Stoneworx to enter into a lease for the property. Accordingly, we conclude that the trial court did not err in concluding that Defendants' conduct constituted unfair and deceptive trade practices.
Based on the foregoing, we hold that the trial court's conclusions of law were supported by the court's findings of fact, which themselves were supported by competent evidence. As such, the judgment of the trial court is
AFFIRMED.
Judges STEELMAN and HUNTER, ROBERT N., JR. concur.
Report per Rule 30(e).