Guyton v. Fm Lending Services, Inc.

• Decision Date: 18 August 2009
• Docket Number: No. COA08-614.,COA08-614.
• Citation: 681 S.E.2d 465
• Parties: John and Sylvia GUYTON, Plaintiffs, v. FM LENDING SERVICES, INC., Defendant.
• Court: North Carolina Court of Appeals

681 S.E.2d 465

John and Sylvia GUYTON, Plaintiffs, v. FM LENDING SERVICES, INC., Defendant.

No. COA08-614.

Court of Appeals of North Carolina.

August 18, 2009.

Appeal by Plaintiffs from order entered 13 March 2008 by Judge Ripley E. Rand in Wake County Superior Court. Heard in the Court of Appeals 13 January 2009.

The Law Offices of Michele A. Ledo, by Michele A. Ledo, Esquire, Raleigh, for Plaintiffs-Appellants.

Manning, Fulton & Skinner P.A., by William C. Smith, Jr., Raleigh, for Defendant-Appellee.

ERVIN, Judge.

John and Silvia Guyton (Plaintiffs) appeal from an order entered by the trial court on 13 March 2008 granting a motion to dismiss filed by FM Lending Services, Inc. (Defendant), pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6). After careful consideration of the record and the applicable law, we conclude that the trial court's order is reversed in part.

In their complaint,¹ Plaintiffs allege that they applied for a loan from Defendant on 22 October 2003 in order to purchase a tract of real property located at 4812 Winterlochen Road in Raleigh, North Carolina. The Federal Emergency Management Administration (FEMA), which is part of the United States Department of Homeland Security, identifies property located within the one-hundred year flood plain and designates these properties as special flood hazard areas (SFHA). On 23 October 2003, Defendant obtained a flood certification from First American Flood Data Services which stated that the property was located in a FEMA-designated SFHA. Defendant also obtained, prior to closing, a copy of a survey which contained the same information. Defendant did not, however, disclose the fact that the property was located in an SFHA to Plaintiffs at that time. In addition, Defendant failed to provide Plaintiffs with copies of either the flood certification or the survey prior to closing.

On 27 October 2003, Plaintiffs closed on the purchase of the property without ever learning that it was located in a FEMA-designated flood plain. Subsequently, Defendant informed Plaintiffs that the property was located in an SFHA. On 14 November 2003, Defendant provided Plaintiffs with a copy of the flood certification upon which the date that Defendant received the document— 23 October 2003—had been whited out. Defendant also gave Plaintiffs an incomplete copy of the survey.

As a result of the fact that the property was located in an SFHA, Plaintiffs were obligated to procure flood insurance for the life of their thirty year mortgage. The initial cost of the required flood insurance was $1,600.00 per year. By the time that Plaintiffs filed their complaint, they were paying $2,200.00 per year in flood insurance costs and anticipated future cost increases.

Plaintiffs initially filed a complaint against Defendant with the Commissioner of Banks. In response, Defendant affirmatively stated that it did not receive the flood certification report until the date of closing, 27 October 2003, and that the flood certification that it received at that time was incomplete. In addition, Defendant represented to the Commissioner that the information in its possession prior to closing indicated that the property was not located in an SFHA. Based on this evidence, the Commissioner found no evidence of any violation of law by Defendant.

Plaintiffs then filed a complaint in Wake County Superior Court asserting claims for breach of contract and negligence against Defendant. Plaintiffs voluntarily dismissed this complaint without prejudice on 15 November 2004.

After the dismissal of Plaintiffs' original civil action, Defendant's Senior Vice President of Operations, Kathleen Sue Carpenter (Carpenter), was deposed in related litigation. At that time, Carpenter revealed that Defendant altered the flood plain certification to conceal the date upon which it had been received by Defendant. Carpenter's deposition testimony represented the first occasion on which Plaintiffs learned that Defendant was aware, prior to closing, that the property was located in an SFHA without disclosing this information to Plaintiffs.

After gaining this additional information, Plaintiffs filed a second complaint against Defendant in the Wake County Superior Court asserting fraud, negligent misrepresentation, and unfair and deceptive practices claims. On 16 November 2007, Defendant filed a motion to dismiss Plaintiffs' claims pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6). Defendant's motion was heard on 18 February 2008. On 13 March 2008, the trial court entered an order granting Defendant's dismissal motion in which it stated that "Plaintiffs have not stated a claim upon which relief could be granted and ... judgment as a matter of law at this stage in the proceedings is appropriate." From this order, Plaintiffs appealed to this Court.

I: Standard of Review

"The standard of review of an order granting a 12(b)(6) motion is whether the complaint states a claim for which relief can be granted under some legal theory when the complaint is liberally construed and all the allegations included therein are taken as true." Burgin v. Owen, 181 N.C.App. 511, 512, 640 S.E.2d 427, 429 (2007). "On a motion to dismiss, the complaint's material factual allegations are taken as true." Owen, 181 N.C.App. at 512, 640 S.E.2d at 429. Legal conclusions, however, are not entitled to a presumption of validity. Peterkin v. Columbus County Bd. of Educ., 126 N.C.App. 826, 828, 486 S.E.2d 733, 735 (1997). "Dismissal is proper `when one of the following three conditions is satisfied: (1) the complaint on its face reveals that no law supports the plaintiff's claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff's claim.'" Owen, 181 N.C.App. at 512, 640 S.E.2d at 429.

II: Voluntary Dismissal: N.C. Gen.Stat. § 1A-1, Rule 41

First, we address Defendant's contention that Plaintiffs' claims are barred by N.C. Gen.Stat. § 1A-1, Rule 41(a), given that Plaintiffs failed to re-file their second complaint within one year after voluntarily dismissing their first complaint on 15 November 2004. We conclude that Plaintiffs' claims are not barred by N.C. Gen.Stat. § 1A-1, Rule 41(a).

N.C. Gen.Stat. § 1A-1, Rule 41(a)(1), provides, in pertinent part, as follows:

Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice, except that a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of this or any other state or of the United States, an action based on or including the same claim. If an action commenced within the time prescribed therefor, or any claim therein, is dismissed without prejudice under this subsection, a new action based on the same claim may be commenced within one year after such dismissal unless a stipulation filed under (ii) of this subsection shall specify a shorter time.

Id. (emphasis added). Defendant contends that, since the record clearly indicates that Plaintiffs voluntarily dismissed their first complaint on 15 November 2004 and did not file the current complaint until 16 October 2007, Plaintiffs' second complaint against Defendant is barred by N.C. Gen.Stat. § 1A-1, Rule 41(a).

This Court stated in Whitehurst v. Virginia Dare Transportation Co., 19 N.C.App. 352, 198 S.E.2d 741 (1973), that:

It was the opinion of writers at the time of the adoption of Rule 41 that the provisions of that rule follow G.S. 1-25 without change, and the wording of the rule would so indicate.... It has long been held that G.S. 1-25 did not apply when the party would not otherwise be barred from his right of action by the lapse of time prescribed by the statute of limitation relating to the cause of action. When the General Assembly adopted the provisions of G.S. 1-25 into Rule 41(a)(1), it is our opinion that it adopted also that body of case law interpreting G.S. 1-25, the effect being that it is an extension of time beyond the general statute of limitation rather than a restriction upon the general statute of limitation. In other words, a party always has the time limit prescribed by the general statute of limitation and in addition thereto they get the one year provided in Rule 41(a)(1). But Rule 41(a)(1) shall not be used to limit the time to one year if the general statute of limitation has not expired.

Whitehurst, 19 N.C.App. at 355-56, 198 S.E.2d at 742 (citations omitted). Thus, it is important to note that, under N.C. Gen.Stat. § 1A-1, Rule 41(a), a plaintiff may "dismiss an action that originally was filed within the statute of limitations and then refile the action after the statute of limitations ordinarily would have expired." Clark v. Visiting Health Prof'ls, Inc., 136 N.C.App. 505, 508, 524 S.E.2d 605, 607 (2000). On the other hand, as noted in Whitehurst, N.C. Gen.Stat. § 1A-1, Rule 41(a), does not operate to shorten the applicable statute of limitations. Therefore, Defendant's argument that Plaintiffs' claims are time-barred by virtue of N.C. Gen.Stat. § 1A-1, Rule 41(a), because more than one year has passed since they voluntarily dismissed their first complaint against Defendant necessarily fails. As a result, the extent to which Plaintiffs' claims are time barred depends on the proper application of the relevant statute of limitations rather than upon the operation of N.C. Gen.Stat. § 1A-1, Rule 41(a).

III: Statute of Limitations

Next, we address whether Plaintiff's claims are time-barred pursuant to the operation of the statute of limitations applicable to claims of fraud and negligent misrepresentation.² After careful consideration of the record in light of the relevant legal principles, we conclude that neither Plaintiffs' fraud nor negligent misrepresentation claims are barred by the applicable statute of limitations.

The statute of limitations applicable to negligent...