Court Opinion

ID: 218381
Source: CourtListenerOpinion
Date Created: 2011-06-08 19:04:37+00
Date Added: 2024-06-11T17:28:35.943363
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 10-1656

GEO PLASTICS; MICHAEL MORRIS,

                Plaintiffs - Appellants,

           v.

BEACON DEVELOPMENT COMPANY; SOUTHCROSS LLC,

                Defendants - Appellees.

Appeal from the United States District Court for the District of
South Carolina, at Rock Hill. Joseph F. Anderson, Jr., District
Judge. (0:09-cv-01181-JFA)

Argued:   March 22, 2011                      Decided:   June 8, 2011

Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.

Affirmed by unpublished opinion. Judge Diaz wrote the opinion,
in which Judge Wilkinson and Judge Keenan joined.

ARGUED:   Joshua D. Davey, MCGUIRE WOODS, LLP, Charlotte, North
Carolina, for Appellants.    Scott M. Tyler, MOORE & VAN ALLEN,
Charlotte, North Carolina, for Appellees. ON BRIEF: Irving M.
Brenner, MCGUIRE WOODS, LLP, Charlotte, North Carolina, for
Appellants. Wm. Howell Morrison, MOORE & VAN ALLEN, Charleston,
South Carolina, for Appellees.

Unpublished opinions are not binding precedent in this circuit.
DIAZ, Circuit Judge:

        Geo    Plastics           and       its        sole    shareholder          Michael          Morris

(collectively “Geo”) appeal a decision of the district court

granting      summary        judgment             to    Beacon       Development          Company      and

SouthCross LLC (collectively “Beacon”).                                In the diversity action

giving rise to this appeal, Geo asserted several claims against

Beacon      stemming        from        a    failed           attempt    by     Geo       to    purchase

commercial real estate from Beacon.                                 The district court granted

summary judgment to Beacon on all of Geo’s claims.                                       We affirm.

                                                       I.

                                                       A.

        Appellant          Geo     Plastics             is     a     California       company         that

manufactures         plastic        components                for    industrial          and    consumer

uses.         Appellee           Beacon       Development             Company       is    a     property

management      company           headquartered               in    Charlotte,      North       Carolina

that     leases        and        sells       commercial              properties.               Appellee

SouthCross LLC is an affiliate of Beacon Development Company

established to manage and develop certain property located at

the SouthCross Corporate Center in Rock Hill, South Carolina

(“Property”).         Beacon purchased the Property in 2006.

       At     all    relevant           times,         the     Property       was     subject         to   a

Reciprocal          Easement        Agreement                (“Easement”)       restricting            the

acceptable          uses     of     the       Property.               Specifically,            the    “Use

                                                        2
Restriction” provided that “[n]o portion of the Entire Tract may

be    leased,     used     or     occupied        as        [sic]    . . .        industrial

manufacturing.”           J.A.    711.           The    Easement       did       not   define

industrial      manufacturing.           Michael        Harrell,      the       Beacon    Vice

President responsible for the SouthCross development, received

and reviewed a copy of the Easement as part of Beacon’s due

diligence for the purchase of the Property.

      In   November      2007,    Geo    hired     a    real       estate       broker,   Doug

Wynne, to locate a suitable property to satisfy Geo’s need for a

manufacturing location near Charlotte.                      Beacon sales agent Scott

Dumler     responded      to     an     email      solicitation            by     Wynne    and

recommended the Property.             Following the initial contact, Beacon

and Geo continued discussions about the Property from late 2007

through 2008.      During this period, Morris and Wynne visited the

Property and met with Dumler.

      Morris discussed Geo’s intended use for the Property with

Dumler and Wynne and sought assurances that it would be suitable

for the manufacturing of plastic components.                               Wynne recalled

Dumler saying that Geo’s intended use “wouldn’t be a problem.”

Id. 1437.       In December 2007, Dumler submitted a sales proposal

offering     to    sell     the       Property         to    Geo     and        touting     the

availability of tax credits for manufacturing companies.                               As the

parties came closer to reaching an agreement in early 2008, Geo

had   several     discussions         with   Beacon         regarding       whether       Geo’s

                                             3
intended use complied with local zoning laws and ordinances.                  In

one exchange, Dumler indicated that “[t]here should not be any

issues with [Geo] installing silos” and offered to “work with

[Geo] during the due diligence period to confirm [the zoning

issues].”     Id. 799.     In a subsequent discussion about zoning,

however, Dumler suggested that Geo “get written approval for

everything.”    Id. 861.

     No one from Beacon ever informed Geo of the Easement and

its restriction on industrial manufacturing.                Harrell, who had

previously reviewed the Easement during Beacon’s purchase of the

Property, testified via deposition that the Easement “[n]ever

came to mind” during his discussions with Geo and that “at the

time” he “had forgotten it.”        Id. 1879–80.         Dumler, on the other

hand, testified that he was unaware of the Easement when he

marketed the Property to Geo.

     On June 30, 2008, Geo and Beacon entered into a written

agreement     for    the   purchase       and     sale     of     the    Property

(“Agreement”).       The agreed upon purchase price was $2,504,128.

Following execution of the Agreement, Geo shipped manufacturing

equipment     from   Germany   to   South       Carolina    for    use   at   the

Property. 1

     1
       The Agreement required Beacon to construct an opening in
the building and a ramp within thirty days of the contract date.
(Continued)
                                      4
        The Agreement required Geo to make a $50,000 earnest money

deposit and provided Geo a sixty-day examination period for due

diligence.        Important to this appeal, the Agreement also stated

that     Geo     “shall”     perform      a        title    examination          during      the

examination period.           Id. 36.         If Beacon did not cure any title

defects within thirty days, Geo had the right to terminate the

Agreement       and    receive    a    return       of     its   earnest     money.          The

parties also agreed that if Beacon defaulted and the parties

failed to consummate the sale of the Property, then Geo’s “sole

and exclusive remedy” was either to terminate the Agreement and

recoup its earnest money or to seek specific performance.                                    Id.

44.

                                              B.

        Geo retained an attorney, Paul Dillingham, to conduct the

title     examination        required         by    the     Agreement.            Dillingham

previously       represented      the     title       insurance          company,      Chicago

Title Company, during Beacon’s purchase of the Property in 2006.

In    that     role,   Dillingham       listed       the    exceptions      to    title      and

ensured      that      the   exceptions        properly          reflected       the    public

record.         The     limited       scope    of     that       prior    representation,

According to Morris, the purpose of this improvement                                   was    to
accommodate delivery of the manufacturing equipment.

                                               5
however, did not require Dillingham to examine the underlying

documents.    Thus, although Dillingham had a copy of the Easement

in   his   files,    he   did    not   recall   the    specifics    of     the   use

restriction in the Easement when Geo engaged him to conduct the

title examination.

      On August 19, 2008, Geo first learned of the Easement from

a representative of Bank of America, the bank from which Geo

sought financing for its purchase of the Property.                  At the time,

Dillingham had not begun his title examination on behalf of Geo

and was unaware of the use restriction.               Geo raised the issue of

the Easement with Dumler, who responded via email, “We reviewed

this provision during our initial due diligence period and was

[sic] confident enough with it to move forward with investing

nearly 10 million dollars to acquire and develop the project.”

J.A. 875. 2

      Following discovery of the Easement, Geo and Beacon agreed

to extend the examination period for fifteen days to attempt to

resolve the issue of the use restriction.                 Beacon also offered

to   indemnify      Geo   up    to   $250,000   to    cover   the   risk    of   the

industrial manufacturing restriction in the Easement.                      Despite

      2
       Dumler testified that he was previously unaware of the
Easement and had not participated in the due diligence for
Beacon’s purchase of the Property. According to Dumler, he used
“we” in his email to Geo to refer to Beacon as an organization.
Id. 632.

                                         6
Beacon’s indemnity offer, Geo’s title insurer would not insure

over the Easement.            On October 13, 2008, Geo provided written

notice to Beacon terminating the Agreement.                       In response, Beacon

directed    the     escrow     agent    to       release      Geo’s         earnest    money.

Immediately after the termination, Geo shipped its manufacturing

equipment   from     South     Carolina       to     its   California          facility      in

order to place the equipment into service prior to expiration of

the manufacturer’s warranty.

                                          C.

     Geo sued Beacon in the U.S. District Court for the Central

District of California, which dismissed Geo’s complaint without

prejudice for lack of personal jurisdiction.                            Geo then filed

this action in the U.S. District Court for the District of South

Carolina.     In the complaint, Geo asserted four claims against

Beacon:       (1)     fraud,      (2)    negligent          misrepresentation,              (3)

violation   of      the   North      Carolina        Unfair      and    Deceptive       Trade

Practices   Act,     N.C.     Gen.     Stat.     §      75-1.1    (“UDTPA”),          and   (4)

breach of contract.           Geo alleged that it incurred hundreds of

thousands     of    dollars     in     costs       to    prepare       to    purchase       the

Property, including the shipment and storage of equipment.

     Beacon    filed      a   motion     for       summary       judgment,       which      the

district court granted in full.                      The district court resolved

Geo’s fraud and misrepresentation claims together, holding that

                                             7
it was not reasonable for Geo to rely on any misrepresentations

made by Beacon.      With respect to the UDTPA claim, the district

court ruled that Geo failed to set forth evidence creating a

genuine issue of material fact.           Finally, the district court

concluded that Beacon was entitled to judgment as a matter of

law on the breach of contract claim because Geo received its

sole and exclusive remedy under the Agreement when it received

its earnest money.    Geo timely appealed.

                                    II.

        Geo contends that the district court erroneously granted

summary judgment to Beacon on each of its claims.              We review a

district court’s decision to grant summary judgment de novo,

“applying the same standard as the district court.”               Homeland

Training Ctr., LLC v. Summit Point Auto. Research Ctr., 594 F.3d

285, 290 (4th Cir. 2010).         Summary judgment is appropriate “if

the movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter

of law.”    Fed. R. Civ. P. 56(a).

        In a case premised on diversity jurisdiction, we apply the

law that the forum state would have applied if it had heard the

case.     Homeland, 594 F.3d at 290–91.      The parties do not dispute

that     North   Carolina   law    governs    Geo’s   fraud,     negligent

                                     8
misrepresentation, and UDTPA claims, while South Carolina law

governs the breach of contract claim.

                                         A.

      We first consider whether it was reasonable for Geo to rely

on any misrepresentations made by Beacon.                The district court’s

conclusion on reasonable reliance formed the foundation for its

decision to award summary judgment to Beacon on Geo’s fraud and

negligent misrepresentation claims.              As such, we consider these

claims together.

      Under North Carolina law, fraud requires proof of “(1) [a]

[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 injur[ed] party.”             Ragsdale v. Kennedy, 209 S.E.2d 494,

500   (N.C.    1974).       A    claim    of    negligent      misrepresentation

requires the plaintiff to demonstrate (1) that he justifiably

relied (2) to his detriment (3) on information prepared without

reasonable care (4) by a defendant who owed a duty of care.

Hospira Inc. v. AlphaGary Corp., 671 S.E.2d 7, 12 (N.C. Ct. App.

2009).

      Claims    of    fraud      and   negligent       misrepresentation        both

require that the plaintiff’s reliance on any misrepresentations

be reasonable.       MacFadden v. Louf, 643 S.E.2d 432, 435 (N.C. Ct.

                                         9
App.   2007).         A    purchaser       of    property       asserting       a    claim     for

losses incurred based on reliance on a false representation “may

not be heard to complain if the parties were on equal terms and

[the     purchaser]        had       knowledge        of    the    facts       or     means     of

information     readily         available        and    failed     to    make       use   of   his

knowledge or information, unless prevented by the seller.”                                     Fox

v. S. Appliances, Inc., 141 S.E.2d 522, 526 (N.C. 1965).

       North    Carolina         courts     have       explained      the      reasonableness

requirement as follows:

       [R]eliance is not reasonable if a plaintiff fails to
       make   any   independent   investigation  unless  the
       plaintiff can demonstrate:      (1) it was denied the
       opportunity to investigate the property, (2) it could
       not discover the truth about the property’s condition
       by exercise of reasonable diligence, or (3) it was
       induced to forego additional investigation by the
       defendant’s misrepresentations.

MacFadden,      643       S.E.2d     at    434    (internal        quotations         omitted).

Although reasonable reliance is typically a question for the

jury, summary judgment is appropriate in a situation in which

“ ‘the     facts      are       so     clear      that      they      support        only      one

conclusion.’ ”            Id.    (quoting        State     Props.,       LLC    v.    Ray,     574

S.E.2d 180, 186 (N.C. Ct. App. 2002)).

       The evidence in this case, even when viewed in the light

most favorable to Geo, shows that Geo had the means available to

identify    the    restriction            contained        in   the     Easement.         First,

Dillingham, Geo’s attorney, had a copy of the Easement in his

                                                 10
files from his prior representation of Chicago Title Company.

Second, even though Dillingham had no independent recollection

of the terms of the Easement, he acknowledged that he would have

discovered      the    restriction    as    part    of   the     title    examination

required by the Agreement.

     Geo contends that it acted reasonably in investigating the

suitability of the Property for its intended use by hiring an

experienced real estate broker to assist in its search, asking

Beacon about the acceptable uses of the Property, and hiring an

attorney to conduct a title examination.                      The conduct that Geo

cites    as    its    independent    investigation,           however,    amounts    to

little   more    than    the    preparation        for   an    investigation.         We

conclude that such steps did not give Geo reasonable grounds to

expend   the    shipping      and   other    pre-closing       costs     that   it   now

seeks to recover as tort damages in this case.

     The      bottom   line    is   that    Geo    and   Beacon    were    commercial

parties, each represented by legal counsel, engaged in a $2.5

million real estate transaction.                   In these circumstances, we

hold that an independent investigation by the buyer as to the

suitability of the property for its intended commercial use--at

least as a prelude to asserting claims for fraud and negligent

misrepresentation--requires           more        than   discussions       with      the

seller and the retention of a real estate broker and a lawyer.

See RD & J Props. v. Lauralea-Dilton Enters., 600 S.E.2d 492,

                                           11
499   (N.C.     Ct.    App.   2004)       (affirming       summary       judgment       where

plaintiff      failed    to   forecast        evidence         that    its    reliance      was

reasonable and emphasizing that the parties were sophisticated

businesspersons         dealing     at   arm’s       length).          Rather,     when     the

purchaser of property in an arm’s length transaction, like the

one between Geo and Beacon, “has the opportunity to exercise

reasonable      diligence     and        fails     to     do    so,     the    element       of

reasonable reliance is lacking and the purchaser has no action

for   fraud”     or   negligent      misrepresentation.                 See    id.    at    499

(citing Calloway v. Wyatt, 97 S.E.2d 881, 885–86 (N.C. 1957));

see   also     MacFadden,     643    S.E.2d        at   434–35        (affirming      summary

judgment on negligent misrepresentation claim).

      Having failed to conduct an independent investigation, Geo

could    not    reasonably     rely      on    any      misrepresentations           made    by

Beacon   to    incur     substantial       pre-closing          costs,       unless    Beacon

either denied Geo the opportunity to investigate or induced Geo

to forgo investigation.             See id. at 434.              There is no evidence

to support either contention.                  To the contrary, the undisputed

evidence is that the Agreement required Geo to conduct a title

examination and that Geo would have discovered the restriction

on    industrial      manufacturing        as      part    of     that       investigation.

Accordingly, Geo’s reliance on any misrepresentations by Beacon

prior to incurring the alleged damages was not reasonable as a

matter of law.

                                              12
     We quickly address Geo’s contention that the district court

improperly resolved several factual disputes in favor of Beacon.

On appeal, Geo points to three such conclusions by the district

court:      (1)      Geo    made    no     independent          investigation         of     the

suitability     of    the    Property      for      its    use    and    relied       only    on

Dumler’s     statement       that    its      use     would       be     acceptable;         (2)

Dillingham      had     previously        searched        the    title       on    behalf     of

SouthCross and had the ability and opportunity to discover the

restrictive easement; and (3) only Harrell at Beacon knew of the

Easement, he forgot about it, and there is no evidence that

Beacon    negligently        or    intentionally           failed       to    disclose       the

Easement’s existence to Geo.

     The district court was at least partially correct in its

analysis of the facts.              Viewed in the light most favorable to

Geo, the evidence shows that Geo in fact failed to conduct an

independent       investigation        and    that        it    had     the       ability    and

opportunity to discover the Easement.                           Because the undisputed

facts     are   fatal       to    Geo’s      claims       of     fraud       and    negligent

misrepresentation, we need not decide whether the district court

erred in resolving the other alleged factual disputes identified

by Geo.

     To summarize, the undisputed facts are that Geo and Beacon

were commercial parties engaged in a $2.5 million real estate

transaction,      the      Agreement      required        Geo     to    conduct       a    title

                                             13
examination,     such    an     examination    would    have   revealed    the

restriction on industrial manufacturing, and Beacon did nothing

to prevent or discourage Geo’s investigation.               These undisputed

facts   in     turn     demonstrate     that   Geo’s     reliance     on   any

misrepresentations       was    not   reasonable   as   a   matter    of   law.

Accordingly, we agree with the district court that Geo failed to

raise a genuine issue of material fact in support of its fraud

and negligent misrepresentation claims.

                                       B.

     We next consider whether Geo set forth evidence raising a

genuine issue of material fact in support of its UDTPA claim.

The elements of a UDTPA claim are (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.          Gray v. N.C. Ins. Underwriting Ass’n,

529 S.E.2d 676, 681 (N.C. 2000).

     A UDTPA claim does not require proof of fraud, bad faith,

or actual deception.          RD & J, 600 S.E.2d at 500–01.         Instead, a

plaintiff need only show that the defendant’s acts “possessed

the tendency or capacity to mislead or created the likelihood of

deception.”    Id. at 501.       While it is a question of fact whether

a defendant performed the acts alleged by the plaintiff, it is a

                                       14
question of law whether those acts constitute a UDTPA violation.

Gray, 529 S.E.2d at 681.

      North      Carolina     courts       have      routinely      granted    summary

judgment on UDTPA claims where, as here, the plaintiff could not

reasonably rely on the defendant’s misrepresentations.                           E.g.,

Sunset Beach Dev., LLC v. AMEC, Inc., 675 S.E.2d 46, 53–54 (N.C.

Ct.   App.    2009)   (affirming          summary    judgment    on     the   issue   of

reasonable       reliance);      RD   &   J,   600   S.E.2d    at   501    (“[S]ummary

judgment was proper on [UDTPA] claim for the same reasons that

the court had previously found any reliance on representations

to be unreasonable.”) (construing Spartan Leasing Inc. of N.C.

v. Pollard, 400 S.E.2d 476, 482 (N.C. Ct. App. 1991)).                                As

discussed in the preceding section, Geo could not reasonably

rely on any misrepresentations made by Beacon.                            Accordingly,

even when viewing the evidence in the light most favorable to

Geo, Beacon’s acts do not constitute a violation of the UDTPA.

We therefore agree with the district court that Geo failed to

raise a genuine issue of material fact in support of its UDTPA

claim.

                                            C.

      Finally, we address whether the district court erred in its

conclusion that Beacon was entitled to judgment as a matter of

law   on   the    breach    of    contract       claim.       Summary     judgment    is

                                            15
appropriate       in      breach      of     contract       cases       if   the     parties’

intentions are clear based on the plain and unambiguous language

of the contract.            M & M Grp., Inc. v. Holmes, 666 S.E.2d 262,

266 (S.C. Ct. App. 2008); see also Laser Supply and Servs., Inc.

v. Orchard Park Assocs., 676 S.E.2d 139, 143 (S.C. 2009) (“When

the    language      of    a     contract        is    clear      and   unambiguous,       the

determination of the parties’ intent is a question of law for

the court.”).

       Geo    contends         that    Beacon         breached     section      15   of    the

Agreement, which states as follows:

       To Seller’s actual knowledge . . . (ii) performance of
       the Agreement will not result in the breach of . . .
       any agreement or other instrument . . . by which . . .
       the Property is bound; and (iii) there are no legal
       actions, suits or other legal or administrative
       proceedings   pending   or   threatened  against   the
       Property, and Seller is not aware of any facts which
       might result in any such action, suit or other
       proceeding.

J.A.    39.      Geo      argues      that      Beacon’s    representations          in    this

section were false because Beacon had knowledge of the Easement

and    knew   that     performance         of    the    Agreement       would   breach     the

Easement.        Beacon responds that Geo offered no evidence that

Beacon had actual knowledge of the Easement during the relevant

time    period    and     that     performance         of   the    Agreement       would   not

violate the Easement.

       We need not resolve the issue of whether Beacon breached

section 15, however, because--as the district court correctly

                                                16
concluded--Geo received its sole and exclusive remedy for any

such breach after terminating the Agreement.                   Paragraph 12 of

the Addendum to the Agreement provides as follows:

      [I]f   the   sale   and  purchase   of  the   Property
      contemplated by this Agreement is not consummated
      because Seller defaults hereunder, then Buyer may, as
      its sole and exclusive remedy, either (i) terminate
      this Agreement and upon such termination, the Seller
      shall take such action as to cause the Escrow Agent to
      release the Earnest Money to Buyer or (ii) seek
      specific performance of this Agreement.

Id. 44.

      The    terms    of   the    Agreement       providing      Geo’s   remedies

following any breach by Beacon are clear and unambiguous. 3                    As

its   sole   and   exclusive     remedy,    Geo   may   either    terminate   the

Agreement    and     recoup    its   earnest      money   or      seek   specific

performance.       The undisputed facts show that Geo terminated the

Agreement because Beacon failed to cure title defects and that

Beacon directed the escrow agent to return Geo’s earnest money

following the termination.           Even assuming that Beacon’s alleged

misrepresentations regarding knowledge of the Easement breached

the Agreement, the undisputed facts show that Geo received its

      3
       Geo contends that paragraph 12 does not apply here because
it is implicated only in the event of a “default.”     Geo argues
that Beacon’s conduct breached the Agreement but did not result
in a default.    Geo’s attempt to draw a distinction between a
default and a breach is unsupported by the Agreement, as well as
the plain meaning of the two terms.     We find no ambiguity and
hold that paragraph 12 provides Geo’s exclusive contractual
remedy.

                                       17
contractual   remedy   when   it    recouped   its   earnest    money.

Accordingly, we agree with the district court that Beacon is

entitled to summary judgment on the breach of contract claim.

                               III.

     For these reasons, we affirm the district court’s order

granting summary judgment in favor of Beacon.

                                                               AFFIRMED

                                   18