Johnson v. Phoenix Mut. Life Ins. Co.

• Decision Date: 03 June 1980
• Docket Number: No. 68,68
• Citation: 300 N.C. 247,266 S.E.2d 610
• Court: North Carolina Supreme Court
• Parties: Roy H. JOHNSON, W. Connette Johnson, Forest H. Harmon, Lewis E. Lamb, Jr., and Alvin A. Sturdivant, Jr., d/b/a Kerners Village Company v. PHOENIX MUTUAL LIFE INSURANCE COMPANY and Cameron-Brown Company.

Page 610

266 S.E.2d 610

300 N.C. 247

Roy H. JOHNSON, W. Connette Johnson, Forest H. Harmon, Lewis E. Lamb, Jr., and Alvin A. Sturdivant, Jr., d/b/a Kerners Village Company v. PHOENIX MUTUAL LIFE INSURANCE COMPANY and Cameron-Brown Company.

No. 68.

Supreme Court of North Carolina.

June 3, 1980.

Cansler, Lockhart, Parker & Young, Charlotte, for Phoenix Mutual Life ins. co.

Badgett, Calaway, Phillips, Davis & Montaquila by Chester C. Davis, Winston-Salem, for plaintiffs-appellees, Johnson.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan by John L. Jernigan, Carl N. Patterson Jr., Raleigh, for defendant-appellant Cameron-Brown.

BRITT, Justice.

Cameron-Brown argues that it is entitled to summary judgment as to each of plaintiffs' claims for relief as a matter of law. The Court of Appeals disagreed, holding that the materials presented at the summary judgment hearing in support of the motions provided a sufficient forecast of evidence that Cameron-Brown, through its agent Mullins, could have deceived and misled plaintiffs. Our deliberations dictate the conclusion that summary judgment was properly entered in favor of Cameron-Brown. Accordingly, we reverse the Court of Appeals.

We note initially that we do not reach the issue of whether plaintiffs' complaint sufficiently alleges a claim for relief sounding in fraud. While it is unquestioned that the Rules of Civil Procedure, G.S. 1A-1, envision the notice theory of pleading, see Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970), Rule 9(b) requires that the circumstances constituting fraud shall be stated with particularity. Mangum v. Surles, 281 N.C. 91, 187 S.E.2d 697 (1972). In disposing of this appeal, we assume, without deciding, that plaintiffs' complaint was sufficient to withstand a challenge to its particularity of averment. Nor do we reach the issue of whether plaintiffs' claims are barred by the statute of limitations. We assume, arguendo, that plaintiffs filed their complaint within its parameters.

The issue thus turns on the sole question of whether Cameron-Brown is entitled to summary judgment as a matter of law as to all of plaintiffs' claims for relief. The resolution of this issue requires that plaintiffs' allegations of fraud, as well as unfair and deceptive trade practices, be examined in light of the nature of summary judgment and the standard by which it is to be applied.

Summary judgment is the device whereby judgment is rendered if the pleadings, depositions, interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law. N.C.R.Civ.P. 56; see 10 C. Wright & A. Miller, Federal Practice and Procedure § 2711 (1973). The party moving for summary judgment has the burden of clearly establishing the lack of any triable issue of material fact by the record properly before the court. Caldwell v. Deese, 288 N.C. 375, 218 S.E.2d 379 (1975); Page v. Sloan, 281 N.C. 697, 190 S.E.2d 189 (1972); 10 C. Wright & A. Miller, supra § 2727.

Summary judgment may not be imposed in a vacuum. The examination of the propriety of its entry must not conclude with the determination that there are no genuine issues of material fact. The very terms of Rule 56 require that it also be established that the movant be entitled to judgment as a matter of law. The second prong of the test may be effected only when the evidence which is offered in support of the motion is examined in light of the substantive rules of law as they relate to a plaintiff's claim for relief. In the case at bar, plaintiffs sought relief alleging fraud as well as unfair and deceptive trade practices on the part of defendant Cameron-Brown. Our inquiry must now turn to a consideration of the essential elements which must be shown to support a recovery on causes of action which are founded upon such allegations.

To make out a case of actionable fraud, plaintiffs must show: (a) that defendant made a representation relating to some material past or existing fact; (b) that the representation was false; (c) that defendant knew the representation was false when it was made or made it recklessly without any knowledge of its truth and as a positive assertion; (d) that defendant made the false representation with the intention that it should be relied upon by plaintiffs; (e) that plaintiffs reasonably relied upon the representation and acted upon it; and (f) that plaintiffs suffered injury. E. g., Ragsdale v. Kennedy, 286 N.C. 130, 209 S.E.2d 494 (1974); see also Odom v. Little Rock & I-85 Corp., 299 N.C. 86, 261 S.E.2d 99 (1980).

Using the Ragsdale case as a point of departure, we now turn our attention to an examination of the affidavits and other materials which were presented at the hearing on the motion for summary judgment.

In support of its motion for summary judgment, Cameron-Brown presented the depositions of each of the partners in KVC, as well as the deposition of Frederick A. Osmers, a real estate investment officer with Phoenix, and the deposition and affidavit of Mullins, Cameron-Brown's agent. In addition, the trial court had before it numerous exhibits, consisting of agreements, letters, and memoranda which related to the development and financing of the proposed shopping center. Though the depositions and exhibits are voluminous, detailing the complex series of events which surrounded the activities of the partnership as it sought to develop the project, resolution of the issue before us depends on a consideration of the statements by Mullins of Cameron-Brown concerning the substitution of tenants.

In May 1973, KVC entered into a contract with Cameron-Brown which gave Cameron-Brown the exclusive right to negotiate a permanent mortgage loan for the partnership in the amount of $1,350,000 with an interest rate of 81/2 percent. At the time of this authorization, KVC had already negotiated four leases with tenants for the proposed shopping center: Lowe's, Mack's, Revco, and Goodyear.

Though they disagree as to the date of the meeting, Roy H. Johnson and Troy N. Wood, through their depositions, and Mullins, through his affidavit, agree that sometime in late July 1973, the partners in KVC met with Mullins at Cameron-Brown's Raleigh office. At that time, Mullins and the partners went over the loan commitment from Phoenix that was embodied in a letter dated 20 July 1973. The commitment provided, inter alia, that at the time of closing there were to be leases in effect to certain specified tenants including the four mentioned above, as well as to Sears and the Bank of North Carolina.

According to Mullins' affidavit, the partners asked a number of questions at the meeting, one of which was the possible consequence of their failure to secure a lease from Sears. Mullins replied that "(he) thought they would be allowed to substitute another credit tenant so long as Phoenix was satisfied that the substitute tenant had an equal credit rating and would contribute comparable income to the center." In his deposition, Johnson agrees that the subject of substitution came up at the meeting. It was his recollection that "(Mullins) led us to believe that there was no problem (about substitution)." Although he was not a partner in KVC at the time of the meeting, Alvin A. Sturdivant noted in his deposition that he had been told by Johnson that Mullins had assured him that "substitutions would be no problem." In his deposition, Lewis E. Lamb, Jr., stated that Mullins told his partners that it did not make any difference if Sears entered into a lease. The group did not sign the commitment at that time because the partners wanted to review it further. Thereafter, the partners signed the commitment letter of 20 July 1973 to acknowledge their acceptance of its terms and delivered it to Cameron-Brown's office in Raleigh.

Though the depositions and the affidavit differ in their formulation of what Mullins actually said to the partners as they reviewed the terms of the commitment, the substance of the statement is clear: Mullins did not think that substituting another tenant for Sears would pose a problem. The essence of plaintiffs' argument is that this statement amounts to a fraudulent misrepresentation. We do not find this argument persuasive.

As a general rule, a mere promissory representation will not be sufficient to support an action for fraud. Pierce v. American Fidelity Fire Ins. Co., 240 N.C. 567, 83 S.E.2d 493 (1954); McCormick v. Jackson, 209 N.C. 359, 183 S.E. 369 (1936). A promissory misrepresentation may constitute actionable fraud when it is made with intent to deceive the promisee, and the promisor, at the time of making it, has no intent to comply. Ragsdale v. Kennedy, supra; Vincent v. Corbett, 244 N.C. 469, 94 S.E.2d 329 (1956). A mere recommendation or statement of opinion ordinarily cannot be the basis of a cause of action for fraud. Myrtle Apartments, Inc. v. Lumberman's Mut. Casualty Co., 258 N.C. 49, 127 S.E.2d 759 (1962); Lester v. McLean, 242 N.C. 390, 87 S.E.2d 886 (1955).

While there is some variation among the depositions and the affidavit as to what Mullins actually said regarding the substitution of tenants, we do not think that the character of the representations is determinative of this case. Assuming, arguendo, that the statements amount to more than promissory representations or opinions, they are insufficient to serve as a foundation of a claim for relief which sounds in fraud. Though the statements are sufficient to support an inference that they are definite and specific representations which relate to some material past or existing fact, the evidence adduced at the hearing on the motion for summary judgment establishes that the statements complained of were in fact truthful.

The evidence is uncontroverted that during September 1973, McAuliffe and Associates, KVC's leasing agent for the shopping center, informed the...