Mitchell v. Linville

• Decision Date: 28 December 2001
• Docket Number: No. COA00-1485.,COA00-1485.
• Parties: William E. MITCHELL, Robin P. Mitchell, and Ruby P. Parsons, Plaintiffs, v. John Paul LINVILLE, Joyce Griffin Linville, and Linville Home Builders, Inc., Defendants.
• Court: North Carolina Court of Appeals

557 S.E.2d 620

148 NC App. 71

William E. MITCHELL, Robin P. Mitchell, and Ruby P. Parsons, Plaintiffs, v. John Paul LINVILLE, Joyce Griffin Linville, and Linville Home Builders, Inc., Defendants.

No. COA00-1485.

Court of Appeals of North Carolina.

December 28, 2001.

Craige, Brawley, Liipfert & Walker, L.L.P., by William W. Walker, Winston-Salem, for plaintiff-appellees.

Sharpless & Stavola, P.A., by Frederick K. Sharpless and Eugene E. Lester, III, Greensboro, for defendant appellants.

TIMMONS-GOODSON, Judge.

John Linville, his wife, Joyce Linville ("the Linvilles") and their construction company, Linville Home Builders, Inc. ("Home Builders") (collectively "defendants"), appeal from the trial court's judgment finding them liable for unfair and deceptive trade practices. On 30 December 1997, William Mitchell and his wife, Robin Mitchell ("plaintiffs"), filed a complaint against defendants alleging negligence, breach of contract, and unfair and deceptive trade practices in the sale and construction of plaintiffs' home. The trial court heard the matter on 26 April 1999, at which time the following evidence pertinent to this appeal was presented:

Plaintiffs entered into an agreement with the Linvilles in May of 1994 for the purchase of a lot and construction of a residence in Kernersville, North Carolina. In the contract, the Linvilles agreed to construct plaintiffs' residence, although neither of the Linvilles held a general contractor's license. The contract did not refer to Home Builders, nor did the Linvilles inform plaintiffs that such corporation existed. Thus, plaintiffs knew of no involvement by Home Builders in the construction of plaintiffs' residence at the time they signed the contract.

The completion date for the residence was 17 January 1995. On 30 December 1994, the Linvilles conveyed to Home Builders by general warranty deed the lot and the residence, the construction of which was nearly completed. On 11 January 1995, the Linvilles and plaintiffs entered into a second agreement to purchase and contract. Plaintiffs understood that a second contract was necessary because the lot upon which plaintiffs' house stood had been re-numbered, and subsequently, the first contract no longer recited the correct lot number. The second contract listed Home Builders at the top of the document.

Plaintiffs closed on the residence on 16 January 1995. The documents signed by plaintiffs at the closing referred to the seller and contractor as Home Builders. After moving into the residence, plaintiffs discovered numerous and substantial defects in the property.

Upon reviewing the evidence, the trial court concluded that defendants had breached the implied warranty of habitability for plaintiffs' residence and had committed unfair and deceptive trade practices. The trial court therefore trebled plaintiffs' damages and awarded attorneys' fees to plaintiffs. Defendants now appeal to this Court.

Defendants present three questions for review, contending that the trial court erred by (1) concluding that defendants committed unfair and deceptive trade practices; (2) finding the Linvilles individually liable; and (3) awarding attorneys' fees. For the reasons set forth herein, we reverse the judgment of the trial court in part.

I. Unfair and Deceptive Trade Practices

Defendants contend that the trial court's findings do not support its conclusion that defendants committed unfair and deceptive trade practices. After careful review of the trial court's findings, we agree with defendants.

North Carolina General Statutes section 75-1.1 declares unlawful "unfair or deceptive acts or practices in or affecting commerce." N.C. Gen.Stat. § 75-1.1 (1999). "To prevail on a claim of unfair and deceptive trade practice a plaintiff must show (1) an unfair or deceptive act or practice, or an unfair method of competition, (2) in or affecting commerce, (3) which proximately caused actual injury to the plaintiff or to his business." Spartan Leasing v. Pollard, 101 N.C.App. 450, 460-61, 400 S.E.2d 476, 482 (1991). Whether a trade practice is unfair or deceptive "depends upon the facts of each case and the impact the practice has in the marketplace." Johnson v. Insurance Co., 300 N.C. 247, 262-63, 266 S.E.2d 610, 621 (1980). The language of the statute sets forth two distinct grounds for relief. See id. at 262, 266 S.E.2d at 621. If a practice has the capacity or tendency to deceive, it is deceptive for the purposes of the statute. See id. at 265, 266 S.E.2d at 622. "Unfairness" is a broader concept than and includes the concept of "deception." See id. at 263, 266 S.E.2d at 621. "A practice is unfair when it offends established public policy, as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers." Id. Neither an intentional breach of contract nor a breach of warranty, however, constitutes a violation of Chapter 75. See Branch Banking and Trust Co. v. Thompson, 107 N.C.App. 53, 62, 418 S.E.2d 694, 700,

disc. review denied, 332 N.C. 482, 421 S.E.2d 350 (1992); Trust Co. v. Smith, 44 N.C.App. 685, 691, 262 S.E.2d 646, 650,

disc. review denied, 300 N.C. 379, 267 S.E.2d 685 (1980), overruled on other grounds, Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981).

In the instant case, the trial court's findings regarding unfair and deceptive trade practices concern two basic issues: (1) construction deficiencies in the home and the failure of defendants to properly address such deficiencies, and (2) the failure of the Linvilles to list Home Builders on the first contract or otherwise inform plaintiffs of the corporation's existence. We address each of these grounds in turn.

The trial court recited the following facts concerning construction deficiencies in plaintiffs' residence in support of its conclusion that defendants committed unfair and deceptive trade practices:

84. Defendants installed inferior cabinets that had markedly different shades and were poorly constructed. When given notice of the problems, defendants promised, but then failed to remedy the defects and then refused to replace or repair the cabinets further, although they had the means to do so. The Agreement signed on January 16, 1995, shows plaintiffs' serious concerns about the cabinets and confirms that defendants promised plaintiffs before closing that their concerns would be met. Plaintiffs relied on defendants' assurances as to the cabinets; and plaintiffs would not have closed but for those assurances. This behavior by defendants caused plaintiffs to suffer damages of $18, 144.90.

85. The construction of plaintiffs' house required substantial repairs, and had negative effect on the fair market value of plaintiffs' house. The house as purchased by plaintiffs contained at least six deficiencies that were violations of the North Carolina Building Code. The basement shows signs of settlement, the bay window is pulling away from the house and [affecting] the use of the kitchen floor, and the gas logs were left in an unsafe condition.

86. .... The defendants [misled] plaintiffs as to the availability of a truss system for the first floor. Defendants misled plaintiffs as to the need for support timbers in their basement. Defendants failed and refused to seriously address and deal with punch list items presented to them on numerous [occasions] by plaintiffs. Defendants failed and refused to pay plaintiffs for damage to the vinyl kitchen floor even though it was agreed by all concerned that the floor needed to be replaced.

As indicated supra, "actions for unfair or deceptive trade practices are distinct from actions for breach of contract, and... a mere breach of contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action under N.C.G.S. § 75-1.1." Branch Banking and Trust Co.,107 N.C.App. at 62,418 S.E.2d at 700 (citation omitted). "`[S]ubstantial aggravating circumstances' " must attend the breach in order to recover under the Act. Id. (quoting Bartolomeo v. S.B. Thomas, Inc., 889 F.2d 530, 535 (4th Cir.1989)). A violation of Chapter 75 is unlikely to occur during the course of contractual performance, as these types of claims are best resolved by simply determining whether the parties properly fulfilled their contractual duties. See Eastover Ridge, L.L.C. v. Metric Constructors, Inc., 139 N.C.App. 360, 368, 533 S.E.2d 827, 833,

disc. review denied, 353 N.C. 262, 546 S.E.2d 93 (2000); Stone v. Homes, Inc., 37 N.C.App. 97, 105-06, 245 S.E.2d 801, 807-08,

disc. review denied, 295 N.C. 653, 248 S.E.2d 257 (1978).

In Stone, the plaintiffs instituted an action seeking damages for breach of express and implied warranties and for fraud in the sale of a house that was under construction when the plaintiffs purchased it from the defendant corporation. The evidence showed that the defendant repeatedly assured the plaintiffs that their house would be completed in the manner requested by the plaintiffs. Relying upon these assurances, the plaintiffs moved into the home only to discover that the windows leaked, various lighting circuits were inoperable, and "the septic tank drain field was inadequate so that sewage was released in the backyard which became a breeding ground for rattail maggots." Stone, 37 N.C.App. at 99, 245 S.E.2d at 804. The defendant refused to complete construction on the home, moreover, leaving portions of the interior unfinished. Within six months, numerous cracks appeared in the walls and chimney of the home, and substantial defects in the doors and kitchen cabinets materialized. Further, "plaintiffs discovered that the land on which the house was constructed had been filled with vegetable debris." Id. The jury awarded the plaintiffs $16,000.00 in damages arising from the structural defects, and $3,500.00 in damages due to the defendant's fraudulent concealment of the vegetable debris beneath the house.

On appeal, this Court agreed that such construction...