Court Opinion

ID: 2969080
Source: CourtListenerOpinion
Date Created: 2015-09-22 09:13:49.122261+00
Date Added: 2024-06-11T15:29:18.701057
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 14-1163

SYNOVUS BANK; NATIONAL BANK OF SOUTH CAROLINA,

                Plaintiffs - Appellees,

          v.

KEVIN J. TRACY; PATRICIA M. TRACY,

                Defendants – Appellants,

          and

BENJAMIN W. ATKINSON; DANIEL        S.   HINKSON;   KATHERINE   H.
WILLIAMS; ANTHONY J. BARBIERI,

                Defendants.

Appeal from the United States District Court for the Western
District of North Carolina, at Asheville. Martin K. Reidinger,
District Judge. (1:10-cv-00172-MR-DLH)

Submitted:   January 30, 2015                Decided:   March 2, 2015

Before WILKINSON, NIEMEYER, and AGEE, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Edward L. Bleynat, Jr., H. Gregory Johnson, FERIKES & BLEYNAT,
PLLC, Asheville, North Carolina, for Appellants. Thomas William
McGee, III, A. Mattison Bogan, Sarah B. Nielsen, Tara C.
Sullivan, NELSON MULLINS RILEY & SCARBOROUGH LLP, Columbia,
South Carolina, for Appellees.

Unpublished opinions are not binding precedent in this circuit.

                                 2
PER CURIAM:

              Kevin     Tracy      and        his       mother,         Patricia      Tracy

(collectively “Appellants”), appeal the district court’s order

dismissing Patricia Tracy’s counterclaims and dismissing in part

Kevin    Tracy’s      counterclaims        as      well     as    the     final    amended

judgment in favor of the National Bank of South Carolina and its

successor-in-interest,           Synovus      Bank      (the     “Bank”).          Patricia

contends      that    the     release    of       her   claims     was     unenforceable

because it was obtained through unequal bargaining power and is

contrary to public policy.              Kevin argues that the district court

erroneously dismissed his claims under the Interstate Land Sales

Full Disclosure Act, 15 U.S.C. §§ 1701 to 1720 (2012) (“ILSA”)

and     his   state-law       negligent       misrepresentation           claims.        He

further contends that summary judgment was inappropriate on his

state-law      claims    of    common     law       fraud    and    under     the    North

Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen.

Stat. §§ 75-1 to 75-145 (2014) (“UDTPA”).                        Finally, Appellants

argue that the Bank was precluded from enforcing the promissory

notes due to fraud and a failure to act in good faith.                               After

careful review of the record, we affirm.

                                           I.

              We review de novo a district court’s order dismissing

a complaint for failure to state a claim, assuming that all

well-pleaded nonconclusory factual allegations in the complaint

                                              3
are true.     Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir.

2011).     While we must accept the material facts alleged in the

complaint as true, statements of bare legal conclusions “are not

entitled to the assumption of truth” and are insufficient to

state a claim.         Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see

also Francis v. Giaconnelli, 588 F.3d 186, 193 (4th Cir. 2009).

            Appellants first challenge the district court’s order

dismissing Patricia’s claims based on the release signed as part

of   her   loan    modification       agreement,      arguing   that    the   Bank

secured the release by exploiting its unequal bargaining power

and that the release is contrary to public policy.                    Under North

Carolina law, “an exculpatory contract will be enforced unless

it   violates      a    statute,      is   gained     through   inequality     of

bargaining    power,      or     is   contrary   to    a   substantial     public

interest.”      Fortson v. McClellan, 508 S.E.2d 549, 551 (N.C. Ct.

App. 1998).       In applying the unequal bargaining power exception,

a court must consider “whether one of the parties . . . must

either accept what is offered or forego the advantages of the

contractual relation in a situation where it is necessary for

him to enter into the contract to obtain something of importance

to   him   which    for    all    practical    purposes    is   not    obtainable

elsewhere.”       Hall v. Sinclair Ref. Co., 89 S.E.2d 396, 398 (N.C.

1955).     “An activity falls within the public policy exception

when the activity is extensively regulated to protect the public

                                           4
from danger, and it would violate public policy to allow those

engaged in such an activity to absolve themselves.”                                        Hyatt v.

Mini Storage on Green, 763 S.E.2d 166, 171 (N.C. Ct. App. 2014)

(internal quotation marks omitted).

               We conclude that the release is an enforceable waiver

of Patricia’s claims.                Patricia purchased the property as an

investment and was not unable to walk away from the transaction

at the time she modified the original loan.                              Although she claims

the    Bank    used    high-pressure         tactics          to       convince      her    to    re-

finance, she has not identified what these tactics were or how

they   resulted       in     unequal      bargaining          power.        Finally,         as   the

district court concluded, allowing two contracting parties to

agree to this release in a contract involving refinancing on

investment properties does not implicate a substantial public

interest.

               Next, Kevin argues that the district court erred when

it    concluded       that    the    Bank    was    not       a     developer        under    ILSA.

Congress       enacted       ILSA    “to    ensure           that      prior    to      purchasing

certain       types    of    real    estate,        a    buyer         is   apprised        of    the

information needed to make an informed decision.”                                    Nahigian v.

Juno-Loudoun, 677 F.3d 579, 587-88 (4th Cir. 2012) (alteration

and    internal       quotation      marks        omitted).             “[T]he       language     of

[ILSA]     should      be     read       broadly        to    effectuate          its      goal   of

protecting       purchasers         of     land    which          is     part     of    a    common

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promotional scheme.”                   In re Total Realty Mgmt., 706 F.3d 245,

251 (4th Cir. 2013) (alteration and internal quotation marks

omitted).

               A     developer,         for     purposes     of     ILSA,       includes     “any

person who, directly or indirectly, sells or leases, or offers

to sell or lease, or advertises for sale or lease any lots in a

subdivision.”              15 U.S.C. § 1701(5) (2012).                     ILSA prohibits a

developer from “employ[ing] any device, scheme, or artifice to

defraud” or “engag[ing] in any transaction, practice, or course

of business which operates or would operate as a fraud or deceit

upon a purchaser” in relation to the sale or lease of a covered

lot.    15 U.S.C. § 1703(a)(2)(A), (C) (2012).                             These provisions

“encompass[] entities that participated in the advertising and

promotion          efforts        leading        to    a     challenged          real       estate

transaction,         even        if    they   ultimately         were    not    party   to    the

transaction.”            In re Total Mgmt., 706 F.3d at 253.

               We conclude that Kevin failed to sufficiently allege

that    the    Bank        was    a    developer.          The    facts     alleged     in    the

complaint          state    simply       that     a   loan       officer       with   the    Bank

participated         in     events       related      to   the    sale     of    lots   in    the

development and that loan officer informed Kevin that purchasing

the    lot    was     a    “good       investment.”        The     conversations        between

Kevin    and       the     loan       officer    focused     on    the     Bank’s     lot    loan

program; the officer’s isolated statement, without more, does

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not    indicate       that   the   Bank    was     sufficiently        involved    in    the

advertising or sale of the lots such that it is subject to ILSA.

                 Finally,     Kevin     challenges         the     district        court’s

dismissal of his negligent misrepresentation claim.                            Under North

Carolina law, 1 “the tort of negligent misrepresentation occurs

when       (1)   a   party   justifiably       relies,     (2)    to     his    detriment,

(3) on information prepared without reasonable care, (4) by one

who owed the relying party a duty of care.”                        Walker v. Town of

Stoneville, 712 S.E.2d 239, 244 (N.C. Ct. App. 2011) (alteration

and internal quotation marks omitted).                    “A duty is defined as an

obligation,          recognized    by   the       law,   requiring       the    person    to

conform to a certain standard of conduct, for the protection of

others against unreasonable risks.”                      Oberlin Capital, L.P. v.

Slavin, 554 S.E.2d 840, 846 (N.C. Ct. App. 2001).                         However, “the

home loan process is regarded as an arm’s length transaction

between          parties     of    equal      bargaining         power     and,     absent

exceptional circumstances, will not give rise to a fiduciary

duty.”       Dallaire v. Bank of Am., N.A., 760 S.E.2d 263, 264 (N.C.

2014); see Fazzari v. Infinity Partners, 762 S.E.2d 237, 242

(N.C. Ct. App. 2014).

       1
       In light of the district court’s diversity jurisdiction,
North   Carolina  substantive   law  governs Kevin’s  negligent
misrepresentation, fraud, and UDTPA claims.   Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78-80 (1938).

                                              7
            We     conclude   that       Kevin’s      allegations        failed      to

establish the exceptional circumstances necessary to create a

duty of care.       The isolated statements that the purchase was a

“good investment,” made during conversations about the Bank’s

loan terms and the incentive program offered by the Bank, are

insufficient to establish that the loan officer stepped outside

the   normal     creditor-debtor     relationship         to   create    a   duty    of

care.   Furthermore, North Carolina courts have rejected similar

claims in related circumstances.             See Dallaire, 760 S.E.2d t 267

(“A loan officer’s mere assertion [regarding the priority of the

potential      loan]    is    insufficient           to    take    the       parties’

relationship out of the borrower-lender context.”); Fazzari, 762

S.E.2d at 242-43 (holding that allegations that “the lenders

. . . went beyond the role of commercial lending when they acted

as ‘cheerleaders’ and ‘promotors’” through falsified appraisals

and loan documents were insufficient to establish “exceptional

circumstances outside the normal creditor-debtor relationship”).

                                      II.

            We review de novo whether a district court erred in

granting summary judgment, viewing the facts and drawing all

reasonable       inferences   in   the       light    most     favorable     to     the

nonmoving party.        Glynn v. EDO Corp., 710 F.3d 209, 213 (4th

Cir. 2013).       Summary judgment is properly granted “if the movant

shows that there is no genuine dispute as to any material fact

                                         8
and the movant is entitled to judgment as a matter of law.”

Fed.       R.    Civ.    P.     56(a).           If       the    moving    party     sufficiently

supports its motion for summary judgment, the nonmoving party

must       demonstrate         “that    there         are       genuine    issues    of    material

fact.”          Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008).

                  Kevin first argues that the district court erroneously

granted         the    Bank’s    motion      for          summary    judgment       on    his   fraud

claim,          asserting       that     the      loan          officer’s     statements         were

actionable            fraud.      Under      North          Carolina      law,     the    essential

elements of fraud are:                 “(1) false 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.    Additionally,

plaintiff's             reliance       on        any        misrepresentations            must     be

reasonable.”            Folmar v. Kesiah, 760 S.E.2d 365, 368 (N.C. Ct.

App. 2014) (alteration omitted).                                Generally, a “statement of

opinion . . . cannot be the basis of a cause of action for

fraud.”          Leftwich v. Gaines, 521 S.E.2d 717, 722 (N.C. Ct. App.

1999) (internal quotation marks omitted).                                 Such a statement can

support a fraud claim, however, “if, at the time it is made, the

maker of the statement holds an opinion contrary to the opinion

he or she expresses, and . . . intends to deceive the listener.”

Id. at 723.

                                                      9
            We conclude that the loan officer’s statements were

statements    of    opinion         that   were       not   actionable,      and    that    no

reasonable fact finder could conclude that Kevin relied on these

statements.       The loan officer’s beliefs about the propriety of

Kevin’s     investment         reflect        his      opinion     thereof,        and     the

undisputed evidence shows that he believed the statements to be

true at the time they were made.                      Further, Kevin concluded that

the   development        was    a     high-end        development      in    a     desirable

location    after       researching        the     area,    reviewing       the    marketing

material, and viewing pictures of the development; no reasonable

fact finder could have concluded that he decided to invest based

upon the loan officer’s opinion.

            Kevin next argues that the district court improperly

granted the Bank summary judgment on his UDTPA claims.                             In order

to    establish     a     claim      under       the    UDTPA,     a    plaintiff        must

demonstrate:        “(1)       an    unfair      or    deceptive    act     or     practice,

(2) in or affecting commerce, and (3) which proximately caused

injury to plaintiff[].”               In re Fifth Third Bank, Nat’l Ass’n—

Vill. of Penland Litig., 719 S.E.2d 171, 176 (N.C. Ct. App.

2011).     A plaintiff is not required to prove “fraud, bad faith,

deliberate acts of deception or actual deception, but must show

that the acts had a tendency or capacity to mislead.”                               Spartan

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

However, “only practices involving ‘some type of egregious or

                                              10
aggravating      circumstances’         are    sufficient      to     violate      the

[UDTPA].”      S. Atl. Ltd. P’Ship of Tenn. v. Riese, 284 F.3d 518,

535   (4th     Cir.    2002)    (internal      alteration     omitted)       (quoting

Dalton v. Camp, 548 S.E.2d 704, 711 (N.C. 2001)).

             We conclude that summary judgment was proper.                    First,

Kevin’s      fraud-based       UDTPA    claims      failed    for     the    reasons

discussed above.        Next, he has failed to establish any egregious

or aggravating circumstances for his remaining claim based on

the   Bank’s     relationship      with    the     development.        The    Bank’s

advertisement highlighted the benefits of seeking a lot loan and

eventual mortgage through the Bank and its affiliate company.

             Finally,     Appellants      contend    that     the    Bank    was   not

entitled to enforce the promissory notes because it failed to

perform its contractual duties in good faith and fraudulently

induced Appellants to execute the notes.                   Under South Carolina

law, 2 “[e]very contract or duty within the Uniform Commercial

Code imposes an obligation of good faith in its performance and

enforcement.”         S.C. Code Ann. § 36-1-304 (2014).               This section

imposes an obligation to act in good faith when a party to the

contract “perform[s] or enforce[s] . . . a specific duty or

obligation under the contract.”               Id. § 36-1-304 official cmt. 1.

      2
        The     promissory      notes     stated    that     South   Carolina      law
governed.

                                          11
While    Appellants      generally     assert     that    the   Bank’s       fraudulent

actions    were    the      antithesis      of    good    faith,      they    have    not

identified how the Bank acted in bad faith in its performance

and    enforcement     of    the    notes.         Further,     Appellants’          fraud

defenses fail for the reasons discussed above.                          Accordingly,

because Appellants have not disputed that the Bank established

that the promissory notes were correctly presented and in its

possession; that they executed the documents; and that they were

in    default,    we   conclude      that     summary     judgment      was   properly

awarded in favor of the Bank.

                                         III.

            Accordingly, we affirm the district court’s orders and

judgment.    We dispense with oral argument because the facts and

legal    contentions      are     adequately       presented     in    the     material

before    this    court     and    argument      will    not   aid    the    decisional

process.

                                                                             AFFIRMED

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