Sain v. Adams Auto Grp., Inc.

• Decision Date: 05 January 2016
• Docket Number: No. COA15–813.,COA15–813.
• Citation: 781 S.E.2d 655,244 N.C.App. 657
• Court: North Carolina Court of Appeals
• Parties: Lisa G. SAIN and James W. Sain, Plaintiffs, v. ADAMS AUTO GROUP, INC. and Capital One Auto Finance, Inc., Defendants.

244 N.C.App. 657

781 S.E.2d 655

Lisa G. SAIN and James W. Sain, Plaintiffs,

v.ADAMS AUTO GROUP, INC. and Capital One Auto Finance, Inc., Defendants.

No. COA15–813.

Court of Appeals of North Carolina.

Jan. 5, 2016.

Law Offices of Jason E. Taylor, PC, by Lawrence B. Serbin and Jason E. Taylor, Hickory, for plaintiffs-appellants.

Meier Law, P.L.L.C., Charlotte, by Stephen W. Kearney, for defendant-appellee Adams Auto Group, Inc.

McGuire Woods LLP, Charlotte, by Amanda W. Abshire and Terrence M. McKelvey, for defendant-appellee Capital One, N.A.

TYSON, Judge.

Lisa G. Sain and James W. Sain ("Plaintiffs") appeal from order allowing the motions to dismiss of Adams Auto Group, Inc. and Capital One, N.A. (collectively, "Defendants"). We affirm in part, reverse in part, and remand.

I. Factual Background

Plaintiffs purchased a used 2010 Honda Civic automobile ("the vehicle") from defendant, Adams Auto Group ("Adams") on 18 January 2013. The vehicle was previously owned by the Freemans, who are not a party to this action. The Freemans had financed their purchase of the vehicle through defendant, Capital One. The vehicle was involved in a collision in June 2012. Capital One subsequently repossessed the vehicle after the Freemans declined to retake possession of the vehicle after it was repaired.

Capital One sold the vehicle to Adams at an Automotive Dealer Exchange Services of America ("ADESA") auction in Charlotte, North Carolina on 20 September 2012. It was announced during the auction, and prior to sale, that the vehicle had sustained frame damage.

Plaintiffs purchased the vehicle from Adams for $15,843.70. The salesperson purportedly told Plaintiffs, to the best of his knowledge, the vehicle had not been involved in a collision or other occurrence to the extent that the cost of repairs exceeded 25% of the vehicle's fair market value. Adams also provided a "Carfax report," which stated the vehicle had two previous owners and no accident or damage had been reported to Carfax. Plaintiffs signed a Buyer's guide "As Is—No Warranty" disclosure and agreement as part of their sales contract to purchase the vehicle.

The vehicle began to experience various mechanical problems sometime after the date of purchase. Plaintiffs took the vehicle to Hickory Used Car Superstore to explore trading it in for another vehicle. Plaintiffs allegedly first learned the vehicle had previously sustained frame damage through an " AutoCheck report" at this time.

Plaintiffs brought the vehicle to Hendrick Honda for repairs, where it was discovered a motor mount and an antilock braking system ("ABS") modulator valve were broken. Plaintiffs contacted their insurance agent, who produced an auto loss history report on the vehicle. According to the report, a claim on the policy covering the vehicle was filed on 22 June 2012 and $7,539.00 had been paid out for property damages on that claim. The specific cost of actual repairs to the vehicle itself was not disclosed.

Plaintiffs filed a complaint against Adams on 13 March 2014. Plaintiffs alleged claims against Adams for: (1) fraud; (2) tortious breach of contract; (3) civil conspiracy; (4) unfair and deceptive trade practices, pursuant to N.C. Gen.Stat. § 75–1.1 (2013) ("the UDTPA"); and (5) negligence.

On 4 December 2014, Plaintiffs filed an amended complaint, in which they added Capital One as a party-defendant to all claims, except for tortious breach of contract. Plaintiffs averred Capital One had failed to disclose the condition of the vehicle prior to selling it to Adams at auction.

Defendant Adams filed an answer to Plaintiffs' claims. Capital One did not answer Plaintiffs' complaint. Capital One and Adams each filed separate motions to dismiss all pending claims pursuant to the North Carolina Rules of Civil Procedure, Rule 12(b)(6) on 20 January 2015 and 2 February 2015, respectively.

Defendants' motions to dismiss were heard on 16 March 2015. During the hearing, counsel for Plaintiffs contended it was "reasonable that a person would rely on a chain of title or a damage history that's created by the chain of title when purchasing a car, especially if they're buying it ‘as-is,’ which is what happened here." The trial court asked, "And did the Sains purchase this car ‘as-is'? Was it denoted on the purchase sticker?" Counsel for Plaintiffs responded, "I believe so, Your Honor, yes, sir." The trial court also asked Adams' counsel whether he had any knowledge about the vehicle being purchased "as-is."

Counsel for Adams stated he was aware of this fact, as evidenced by a document entitled "Buyer's Guide," acquired during the discovery phase of the original complaint. Adams' counsel offered to show the trial court a copy of this document. Plaintiffs' counsel made no objection.

The trial court entered an order allowing both Defendants' motions to dismiss, and dismissed all of Plaintiffs' claims with prejudice. The trial court made the following pertinent conclusions of law in its order:

1. There is no direct reliance on any misrepresentations of Defendant Capital One and Defendant Adams Auto Group by Plaintiffs Lisa G. Sain and James W. Sain.

2. Defendants Capital One and Adams Auto Group did not enter into an agreement, or conspire, to commit any wrongful overt acts to injure future purchasers of the Honda Civic.

3. Plaintiffs cannot assert an Unfair or Deceptive Trade Practice Act (UDTPA) claim against Defendant Capital One based on Defendant Adams Auto Group's purported refusal to redress Plaintiffs' alleged grievances.

4. Plaintiffs' Amended Complaint fails to appropriately allege a duty owed by either Defendant Adams Auto Group or Defendant Capital One on each of Plaintiffs' claims or causes of action. Where there is no duty there can be no liability of Defendants Adams Auto Group and/or Defendant Capital One to Plaintiffs Lisa G. Sain and James W. Sain.

Plaintiffs gave timely notice of appeal to this Court.

II. Issues

Plaintiffs argue the trial court erred by: (1) allowing Capital One's motion to dismiss based on a lack of privity; (2) dismissing Plaintiffs' claim for civil conspiracy by improperly testing the facts of the case; (3) allowing Adams' motion to dismiss based on Plaintiffs' lack of direct reliance on any misrepresentation by Adams, and a lack of any duty owed to Plaintiffs; and, (4) dismissing Plaintiffs' claim for tortious breach of contract based on the trial court's consideration of a document outside the pleadings.

III. Standard of Review

On a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, the standard of review is whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory.

The complaint must be liberally construed, and the court should not dismiss the complaint unless it appears beyond a doubt that the plaintiff could not prove any set of facts to support his claim which would entitle him to relief.

Holleman v. Aiken, 193 N.C.App. 484, 491, 668 S.E.2d 579, 584–85 (2008) (citation and quotation marks omitted).

"Dismissal is warranted (1) when the face of the complaint reveals that no law supports plaintiffs' claim; (2) when the face of the complaint reveals that some fact essential to plaintiffs' claim is missing; or (3) when some fact disclosed in the complaint defeats plaintiffs' claim." Walker v. Sloan, 137 N.C.App. 387, 392, 529 S.E.2d 236, 241 (2000) (citation and internal quotation marks omitted).

"[T]he trial court regards all factual allegations of the complaint as true. Legal conclusions, however, are not entitled to a presumption of truth." Id. (citations omitted). This Court "conducts a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct." Podrebarac v. Horack, Talley, Pharr, & Lowndes, P.A., 231 N.C.App. 70, 74, 752 S.E.2d 661, 663–64 (2013) (citation omitted).

III. Analysis

A. Capital One's Motion to Dismiss

Plaintiffs argue the trial court erred by allowing Capital One's motion to dismiss. They assert the trial court wrongfully concluded Capital One did not make any misrepresentations to Plaintiffs directly, nor did Plaintiffs have any direct dealing with Capital One. Plaintiffs contend the trial court erroneously concluded privity was required for Plaintiffs to have any viable claims against Capital One. Plaintiffs also argue the trial court erred by concluding Capital One did not owe a duty to Plaintiffs. We disagree.

1. Fraud and Violation of the UDTPA

It is well-established to state a claim for fraud, a plaintiff must allege: "(1) [f]alse representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party." Ragsdale v. Kennedy, 286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974) (citations omitted). "An essential element of actionable fraud is that the false representation or concealment be made to the party acting thereon. " Hospira Inc. v. Alphagary Corp., 194 N.C.App. 695, 699, 671 S.E.2d 7, 11 (emphasis in original) (citation omitted), disc. review. denied, 363 N.C. 581, 682 S.E.2d 210 (2009).

A plaintiff who brings a claim under N.C. Gen.Stat. § 75–1.1 (2013) must allege: "(1) the defendant committed an unfair or deceptive act or practice, (2) the action in question was in or affecting commerce, and (3) the act proximately caused injury to the plaintiff."

Capital Resources, LLC v. Chelda, Inc., 223 N.C.App. 227, 239, 735 S.E.2d 203, 212 (2012) (citation and quotation marks omitted), disc. review dismissed and cert. denied, – –– N.C. ––––, 736 S.E.2d 191 (2013).

"Where an unfair or deceptive practice claim is based upon an alleged misrepresentation by the defendant, the plaintiff must show ‘actual reliance’ on the alleged misrepresentation in order to establish that the alleged misrepresentation ...