Title: DocRx, Inc. v. EMI Servs. of N.C., LLC

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

NO. COA12-626 
NORTH CAROLINA COURT OF APPEALS 
Filed: 18 December 2012 
 
 
JACQUES A. DALLAIRE and FERNANDE 
DALLAIRE, 
Plaintiffs, 
 
 
 
 
v. 
 
Cabarrus County 
No. 10 CVS 4366 
BANK OF AMERICA, N.A., HOMEFOCUS 
SERVICES, LLC, and LANDSAFE 
SERVICES, LLC 
Defendants. 
 
 
 
Appeal by Plaintiffs from judgment entered 14 February 2012 
by Judge W. David Lee in Cabarrus County Superior Court.  Heard 
in the Court of Appeals 29 November 2012. 
 
Ferguson, Scarbrough, Hayes, Hawkin & DeMay, P.A., by James 
E. Scarbrough, for the Plaintiff-Appellants. 
 
McGuire Woods, LLP, by Lia A. Lesner and Robert A. 
Muckenfuss, for Defendant-Appellees. 
 
Jerome N. Frank Legal Services Organization, by J.L. 
Pottenger, Jr., Amicus Curiae. 
 
 
BEASLEY, Judge. 
 
 
Jacques and Fernande Dallaire (Plaintiffs) appeal from the 
trial court’s entry of summary judgment in favor of Defendants.  
For the following reasons, we affirm in part and reverse and 
remand in part. 
-2- 
 
 
In 2005, Plaintiffs filed Chapter 7 bankruptcy to relieve 
their personal liability on their debts.  Through the bankruptcy 
proceedings, 
Plaintiffs 
were 
relieved 
of 
their 
personal 
liability on three mortgage liens held by two lenders against 
Plaintiffs’ home.  Defendant Bank of America held two of these 
liens: one, a deed of trust on a mortgage note in first priority 
status, in the original amount of $138,900 and a second, an 
equity line deed of trust in second priority status, in the 
original amount of $25,000.  The third lien secured a business 
loan and was held by Branch Banking & Trust (BB&T) in the 
original amount of $241,449.37 in third priority status.  All 
liens remained valid as against the property.   
In July 2007, Plaintiffs responded to Defendant’s mailing 
solicitations for refinancing home mortgages and went to 
Defendant Bank of America’s local branch to discuss a refinance 
mortgage for their home.  Plaintiffs allege that they informed 
Defendant’s agent fully with respect to their bankruptcy and 
remaining liens.  Plaintiffs also allege that Defendant Bank of 
America’s agent repeatedly assured them that a new refinancing 
loan would receive first priority status and advised them to 
increase the amount of the loan to pay off two car notes.  
Relying on this assurance and advice, and without seeking 
-3- 
 
 
outside counsel, Plaintiffs applied for a refinancing loan in 
the amount of $166,000.  They were approved and received roughly 
$24,000 in cash from the loan to repay their car notes.  
Overall, their monthly expenses were reduced.   
The Plaintiffs’ loan application was for a first-mortgage 
lien.  On the application, Plaintiffs disclosed that they had 
“been obligated on [a] loan which resulted in foreclosure, 
transfer of title in lieu of foreclosure, or judgment[.]”  
However, Plaintiffs checked “No” next to the disclosure asking 
whether they had “been declared bankrupt within the past 10 
years[.]”   
Following the application and in accordance with general 
procedure, Defendant Bank of America ordered a “title search” 
from 
its 
subsidiary, 
Defendant 
HomeFocus 
(now 
Landsafe 
Services).1  This “title search” showed the three liens held 
against Plaintiffs home.  Defendant Bank of America employed LSI 
Title Agency (LSI), upon which Defendant employed to do 
“curative title work[,]” to assess the validity of the BB&T 
lien.  LSI gathered information from Plaintiffs and noted that 
                     
1 In their briefs, both parties refer to the research performed by 
Defendant HomeFocus (now LandSafe Services) as a “title search.”  We 
have placed this language in quotations because a title search in 
North Carolina is an act which constitutes the practice of law as 
defined by N.C. Gen. Stat. § 84-2.1 (2011).  We also note that 
corporations are prohibited from practicing law.  See N.C. Gen. Stat. 
§ 84-5 (2011). 
-4- 
 
 
Plaintiffs advised LSI that the BB&T lien was discharged.  LSI 
advised Defendant Bank of America that it was secure in moving 
forward with the loan.  Defendant Bank of America did not have 
an attorney review the information and handled the full 
refinance process itself.   
In 2010, Plaintiffs attempted to sell their home and 
conducted a title search.  The search revealed the priority 
status of the liens on the home: the BB&T lien now held first 
priority and the new Bank of America lien held second priority.   
On 15 December 2010, Plaintiffs filed the instant action.  
Plaintiffs alleged negligent misrepresentation, negligent title 
search, breach of contract, breach of fiduciary duty, and 
statutory violations.  On 18 January 2011, Defendants filed a 
motion to dismiss for failure to state a claim.  The trial court 
denied this motion on 21 February 2011.  On 19 December 2011, 
Plaintiffs moved to join LSI Title Agency as an additional 
defendant.  On 29 December 2011, Defendants filed a motion for 
summary judgment.  On 14 February 2012, the trial court heard 
both motions and granted Defendants’ motion for summary judgment 
but dismissed the action without prejudice as to the non-party 
LSI Title Agency.  Plaintiffs appeal the dismissal. 
-5- 
 
 
“Our standard of review of an appeal from summary judgment 
is de novo; such judgment is appropriate only when the record 
shows 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.’”  In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 
576 (2008)(quoting Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 
382, 385 (2007)). 
We first note that Plaintiffs attribute no breach of duty, 
negligent act, or legal wrong to Defendant Landsafe Services 
(formerly HomeFocus Services).  The entirety of Plaintiffs’ 
brief is dedicated to allegations against Defendant Bank of 
America.  Consequently, we affirm summary judgment with respect 
to Landsafe Services (formerly HomeFocus Services).2  We also 
note that Plaintiffs did not argue that the trial court erred in 
granting summary judgment on the claim of negligent title 
search.  “Issues not presented in a party’s brief, or in support 
of which no reason or argument is stated, will be taken as 
abandoned.”  N.C. R. App. P. 28(b)(6).  This argument is thus 
abandoned. 
I. Breach of Contract Claim 
 
                     
2 Because this leaves only Defendant Bank of America as a defendant in 
this action, this opinion will use the term “Defendant” moving forward 
to reference Defendant Bank of America. 
-6- 
 
 
Plaintiffs first argue that the trial court erred in 
granting Defendants’ motion for summary judgment because a 
genuine issue of material fact exists as to whether Defendant 
Bank of America owed Plaintiffs a contractual duty to provide a 
first mortgage loan.  We disagree. 
“The elements of a claim for breach of contract are (1) 
existence of a valid contract and (2) breach of the terms of 
that contract.”  Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 
838, 843 (2000)(citation omitted).   
Here, Plaintiffs make no clear allegations in their brief 
that a contract existed outside of the signed note and deed of 
trust to secure the loan.3  Thus, to establish a breach of 
contract, Plaintiffs must show that Defendant breached the duty 
undertaken in the express terms of the written loan contract 
between the parties.  The terms of deed of trust include the 
following duties: 
Borrower shall promptly discharge any lien 
which 
has 
priority 
over 
this 
Security 
Instrument unless Borrower: (a) agrees in 
writing to the payment of the obligation 
secured by the lien in a manner acceptable 
to Lender, but only so long as Borrower is 
performing such agreement; (b) contests the 
                     
3 Plaintiffs allude to the possibility that Defendant’s refinancing 
solicitations or subsequent negotiations constituted an offer but 
provide nothing specific allowing this Court to determine that a clear 
and definite offer was made or accepted prior to the written contract 
signed by the parties.  
-7- 
 
 
lien in good faith by, or defends against 
enforcement 
of 
the 
lien 
in, 
legal 
proceedings 
which 
in 
Lender’s 
opinion 
operate to prevent the enforcement of the 
lien while those proceedings are pending, 
but 
only 
until 
such 
proceedings 
are 
concluded; or (c) secures from the holder of 
the lien an agreement satisfactory to Lender 
subordinating the lien to this Security 
Instrument.  If Lender determines that any 
part of the Property is subject to a lien 
which can attain priority over this Security 
Instrument, 
Lender 
may 
give 
Borrower 
a 
notice identifying the lien.  Within 10 days 
of the date on which that notice is given, 
Borrower shall satisfy the lien or take one 
or more of the actions set forth above in 
this Section 4.  
 
(emphasis added).  Thus, the terms of the contract designate the 
affirmative duty to assure that this lien has and maintains 
first priority to Plaintiffs as the borrowers.  The only duty 
assumed by Defendant is a discretionary one in which Defendant 
may choose to notify Plaintiffs if it learns that this lien does 
not have first priority, but Defendant does not have to perform 
this action.  Therefore, Plaintiffs can establish no affirmative 
duty on the part of Defendant to inform Plaintiffs that the lien 
held second priority status.4 
II. Tort Claims 
                     
4 Although Plaintiffs’ complaint alleges in the alternative that they 
were intended third-party beneficiaries of the contract between 
LandSafe and Bank of America, Plaintiffs do not advance this argument 
on appeal.  Accordingly, we need not address it. 
-8- 
 
 
Plaintiffs next argue that the trial court erred in 
granting summary judgment because a genuine issue of material 
fact exists as to whether a duty existed with respect to 
Plaintiffs’ tort claims.  We agree. 
A. Breach of Fiduciary Duty 
A fiduciary relationship “may exist under a variety of 
circumstances; it exists in all cases where there has been a 
special confidence reposed in one who in equity and good 
conscience is bound to act in good faith and with due regard to 
the interests of the one reposing confidence.” Abbitt v. 
Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931).  Beyond 
the usual occurrence, such as that found between a lawyer and 
client, the relationship “extends to any possible case in which 
a fiduciary relation exists in fact, and in which there is 
confidence reposed on one side, and resulting domination and 
influence on the other.”  Id. (citation omitted)(internal 
quotation marks omitted).  “Whether such a relationship exists 
is generally a question of fact for the jury.”  Carcano v. JBSS, 
LLC, 200 N.C. App. 162, 178, 684 S.E.2d 41, 53 (2009)(citation 
omitted). 
-9- 
 
 
While uncommon, North Carolina law does leave room for the 
recognition of a fiduciary relationship between lender and 
borrower. 
[A]n ordinary debtor-creditor relationship 
generally does not give rise to such a 
special confidence: [t]he mere existence of 
a debtor-creditor relationship between [the 
parties 
does] 
not 
create 
a 
fiduciary 
relationship.  This is not to say, however, 
that a bank-customer relationship will never 
give rise to a fiduciary relationship given 
the proper circumstances.  Rather, parties 
to a contract do not thereby become each 
others’ fiduciaries; they generally owe no 
special duty to one another beyond the terms 
of the contract and the duties set forth in 
the U.C.C. 
  
Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 60-61, 
418 S.E.2d 694, 699 (1992)(second and third alteration in 
original)(citations omitted)(internal quotation marks omitted).  
In Branch Banking & Trust Co., this Court found that no 
fiduciary duty existed where the borrowers relied on outside 
counsel and advice in addition to the representations of the 
lender.  Id. 
Here, Plaintiffs argue that special circumstances were 
present to give rise to a fiduciary relationship where the facts 
suggest that Defendant advised Plaintiffs that a first priority 
lien was possible and being provided.  Plaintiffs allege that 
they openly discussed their circumstances with Defendant and 
-10- 
 
 
that Defendant assured them they could obtain a first priority 
lien mortgage loan.  We find this case distinguishable from 
Branch Banking & Trust Co. because Plaintiffs did not receive 
outside advice.  Id.  When the facts are viewed in the light 
most favorable to Plaintiffs, we find that there is a question 
of fact as to whether or not the circumstances of the parties’ 
interaction prior to signing the loan give rise to a fiduciary 
relationship and consequently created a fiduciary duty for 
Defendant.5   
B. Negligent Misrepresentation 
Plaintiffs argue that Defendant negligently misrepresented 
that the new loan would receive first priority status.  “The 
tort 
of 
negligent 
misrepresentation 
occurs 
when 
a 
party 
justifiably relies to his detriment on information prepared 
without reasonable care by one who owed the relying party a duty 
of care.”  Raritan River Steel Co. v. Cherry, Bekaert & Holland, 
322 N.C. 200, 206, 367 S.E.2d 609, 612 (1988)(citations 
omitted).  In addition, “parties to a contract impose upon 
themselves the obligation to perform it; [however,] the law 
                     
5 Specifically, a question of fact exists as to whether or not 
Defendant sought to give legal advice to Plaintiffs.  In either 
event, when a financial institution undertakes to provide a 
customer with a service beyond that inherent in the creditor-
debtor relationship, it must do so reasonably and with due care.      
-11- 
 
 
[also] imposes upon each of them the obligation to perform it 
with ordinary care . . . .”  See Toone v. Adams, 262 N.C. 403, 
407, 137 S.E.2d 132, 135 (1964).       
Given our decision to remand on the issue of whether a 
fiduciary duty existed, we remand on this issue as well to 
determine, if a duty existed, whether Defendant negligently 
misrepresented the priority the loan would receive. 
III. The Secure and Fair Enforcement Mortgage Licensing Act 
Plaintiffs argue that the trial court erred in dismissing 
the statutory claims under § 53-244.110 of the Secure and Fair 
Enforcement Mortgage Licensing Act (the S.A.F.E. Act), N.C. Gen. 
Stat. § 53-244.110 (2011), and its predecessor the Mortgage 
Lending Act (MLA), N.C. Gen. Stat. §§ 53-243.01 to -543.18 
(2001)(repealed 2009).  We disagree. 
“It is a well-established rule of construction in North 
Carolina that a statute is presumed to have prospective effect 
only and should not be construed to have a retroactive 
application unless such an intent is clearly expressed or arises 
by necessary implication from the terms of the legislation.”  
State v. Green, 350 N.C. 400, 404, 514 S.E.2d 724, 727 
(1999)(citation omitted).  “The application of a statute is 
deemed ‘retroactive’ or ‘retrospective’ when its operative 
-12- 
 
 
effect is to alter the legal consequences of conduct or 
transactions completed prior to its enactment.” Gardner v. 
Gardner, 300 N.C. 715, 718, 268 S.E.2d 468, 471 (1980).  For 
example, in Estridge v. Ford Motor Co., 101 N.C. App. 716, 718-
19, 401 S.E.2d 85, 87 (1991), this Court refused to apply the 
North Carolina “Lemon Law” under the New Motor Vehicles 
Warranties Act, N.C. Gen. Stat. §§ 20-351 to -351.10 (1990), to 
a plaintiff’s vehicle lease where “the rights and obligations 
involved in the plaintiff’s claim [arose] out of the lease 
contract which was executed . . . prior to the time when the 
statute came into effect in North Carolina” and there was no 
indication that the legislature intended such retroactive 
application.  Estridge, 101 N.C. App. at 718, 401 S.E.2d at 86. 
Here, it is not proper to retroactively apply the S.A.F.E. 
Act to the circumstances of Plaintiffs’ loan with Defendant.  
The S.A.F.E. Act was enacted in July of 2009.  Secure and Fair 
Enforcement Mortgage Licensing Act, ch. 374, 2009 N.C. Sess. 
Laws 681 (codified at N.C. Gen. Stat. § 53-244.010 to 53-244.121 
(2011)).  The legislature expressed clear intent that it be 
applied prospectively:  
Except as otherwise provided by Section 5 of 
this 
act 
[(pertaining 
to 
individuals 
licensed under the old requirements and the 
effect 
of 
the 
Act 
on 
their 
licensure 
-13- 
 
 
status)], this act becomes effective July 
31, 2009, and applies to all applications 
for licensure as a mortgage loan originator, 
mortgage 
lender, 
mortgage 
broker, 
or 
mortgage servicer filed on or after that 
date. 
 
ch. 374, § 6, 2009 N.C. Sess. Laws at 709.  As in Estridge, 
Plaintiffs’ claims arise out of the negotiations and contract 
executed prior to the enactment of this statute.  In fact, 
Plaintiffs signed the contract in 2007, two years before the 
S.A.F.E. Act came into existence.  Thus, it is inapplicable to 
the facts of this case and the trial court properly dismissed 
the claim that Defendant violated this Act. 
With respect to Plaintiffs’ reliance on the MLA, we find 
Plaintiffs’ claim abandoned.  “Issues not presented in a party’s 
brief, or in support of which no reason or argument is stated, 
will be taken as abandoned.”  N.C. R. App. P. 28(b)(6).  
Plaintiffs fail to provide any provision of the MLA that creates 
a statutory duty applicable to the case sub judice.  Plaintiffs’ 
brief merely alleges that the MLA had a similar purpose to the 
S.A.F.E. 
Act 
in 
protecting 
consumers 
in 
mortgage 
loan 
transactions.  In order to vaguely establish that the MLA 
created duties of disclosure, Plaintiffs brief then cites Guyton 
v. FM Lending Servs., Inc., 199 N.C. App. 30, 681 S.E.2d 465 
(2009), where this Court found the MLA created a duty for a 
-14- 
 
 
lender’s to notify the borrower that the property was in a flood 
plain.  Id. at 39-44, 681 S.E.2d at 473-76.  However, Plaintiffs 
fail to provide any argument as to how that case or the MLA 
itself directly apply to the case sub judice.  Plaintiffs’ mere 
statement that “issues of material fact exist as to whether 
[Defendant] violated its statutory standards of conduct” is 
insufficient where there is no argument as to what that 
statutory standard is or how it was violated.  This Court will 
not make the argument for Plaintiffs.   
Affirmed in part, Reversed and Remanded in part. 
Judges STROUD and HUNTER, JR. concur.