Julian v. Wells Fargo Bank, N.A.

Julian v. Wells Fargo Bank, N.A., 2012 NCBC 30.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF
JUSTICE
MECKLENBURG COUNTY SUPERIOR COURT DIVISION
11 CVS 11299

WILLIAM L. JULIAN and DENISE G.
JULIAN,

Plaintiffs,

v.
ORDER & OPINION
WELLS FARGO BANK, N.A., a
successor by merger to WACHOVIA
BANK, N.A.; and SOUTHEASTERN
WATERFRONT MARKETING, INC.,

Defendants.

John F. Hanzel, P.A. by John F. Hanzel for Plaintiffs.

Yates, McLamb & Weyher, LLP by Dan J. McLamb, Samuel G. Thompson, Jr., and
Andrew C. Buckner for Defendant Southeastern Waterfront Marketing, Inc.

Womble Carlyle Sandridge & Rice, LLP by W. Clark Goodman and Amanda W.
Anders for Defendant Wells Fargo Bank, N.A., as successor to Wachovia Bank, N.A.

Murphy, Judge.
THIS MATTER is before the Court on Defendant Wells Fargo Bank, N.A.’s
(“Wells Fargo,” as successor to Wachovia Bank, N.A., “Wachovia”) Motion to
Dismiss Plaintiffs’ Complaint and Defendant Southeastern Waterfront Marketing,
Inc.’s (“Southeastern”) Motion to Dismiss, both pursuant to Rule 9(b) and Rule
12(b)(6) of the North Carolina Rules of Civil Procedure.
Having considered Plaintiffs’ Complaint and the parties’ briefs, the Court
GRANTS Wells Fargo’s Motion to Dismiss and GRANTS Southeastern’s Motion to
Dismiss.
I.
PROCEDURAL HISTORY
{1} On June 10, 2011, Plaintiffs William L. and Denise G. Julian filed
their Complaint in this matter alleging claims of fraud, fraud in inducement,
negligent misrepresentation, unfair and deceptive trade practices, civil conspiracy,
and punitive damages against Defendants Wells Fargo, Southeastern, and
Maryville Partners, Inc. (“Maryville”).1
{2} The case was designated as a mandatory complex business case on
July 13, 2011, and assigned to this Court on July 15, 2011. On August 12, 2011,
Wells Fargo and Southeastern filed their respective Motions to Dismiss with
supporting memoranda. Plaintiffs filed their opposition briefs on September 6,
2011, with Wells Fargo filing a reply memorandum on September 19, 2011.
{3} On December 9, 2011, Wells Fargo submitted its Suggestion of
Subsequently Decided Authority citing a recent opinion of the North Carolina Court
of Appeals: In re Fifth Third Bank, Nat’l Ass’n – Village of Penland Litig., 719
S.E.2d 171 (N.C. Ct. App. 2011).
II.
FACTUAL BACKGROUND
{4} While ordinarily the Court does not make findings of fact in connection
with motions to dismiss, as such motions do “not present the merits, but only
[determine] whether the merits may be reached,” Concrete Serv. Corp. v. Investors
Group, Inc., 79 N.C. App. 678, 681, 340 S.E.2d 755, 758 (1986) (citation omitted), for
purposes of this Order and Opinion, the Court recites those facts from Plaintiffs’
Complaint that are relevant to the Court’s legal determinations.
{5} This matter arises from a plan by Defendant Maryville to develop a 75-
acre tract of waterfront property in Georgetown County, South Carolina into a
subdivision known as Cravens Grant. Maryville acquired title to the property in
April 2006. (Compl. ¶¶ 13–15.)

1 Plaintiffs filed a voluntary dismissal with prejudice of all claims against Maryville on

August 12, 2011.
{6} The gravamen of Plaintiff’s complaint is that Maryville and its agent,
Southeastern Waterfront Marketing, Inc. (Southeastern), developed and
implemented a plan to “rapidly and artificially inflate the price of real estate [in the
subdivision] and sell it to unsuspecting consumers,” (Compl. ¶ 10) and that
Wachovia Bank, Defendant Wells Fargo’s predecessor, “knowingly and willfully
ignored” the “considerably and artificially inflated” appraisal of Plaintiff’s lot that
the bank ordered. (Compl. ¶¶ 27–28).
{7} Maryville retained Southeastern as a sales agent. Plaintiffs allege
that Southeastern “aggressively marketed” Cravens Grant property to Plaintiff
William Julian, “touting the near certainty of the property going up in value and
being a sound investment.” (Compl. ¶ 22.) Plaintiffs describe Southeastern’s sales
pitch as “compelling,” noting that “properties in Cravens Grant had already begun
to sell at artificially inflated values.” (Compl. ¶ 23.) Plaintiffs allege that they
decided to purchase property in Cravens Grant “as an investment” in reliance on
Southeastern’s representations. (Compl. ¶ 24.) Plaintiffs agreed to purchase
Cravens Grant Lot 151 for $279,880. (Compl. ¶ 25.)
{8} Plaintiffs paid a $60,000 deposit for Lot 151 and approached a banker
at Wachovia for financing. (Compl. ¶ 26.) Wachovia ordered an appraisal of Lot
151 that Plaintiffs assert was “considerably and artificially inflated,”2 a fact
Plaintiffs allege Wachovia “knowingly and willfully ignored, to the detriment of
Plaintiffs.” (Compl. ¶ 28.) Although the “appraisal did not fit within Wachovia’s
acceptable underwriting guidelines, . . . Wachovia went . . . ahead with the loan for
the sole purpose of charging interest and fees without regard for whether the
collateral was sufficient to secure the loan.” (Compl. ¶ 38.) Plaintiffs further allege
that Wachovia “knew or should have known that Lot 151 was grossly overvalued

2 Plaintiffs’ Complaint sets forth allegations regarding comparable properties (“comps”)

used by Wachovia’s appraiser (now deceased, and not a party to this litigation) which,
taken as true, suggest that Lot 151 was appraised according to incorrect comps; adjusted
upward in price because of the “inferior view” of similar-sized comps within Cravens Grant;
and priced similarly to a comp with a “similar view” that was forty-two percent larger than
Lot 151. (Compl. ¶¶ 31–36.)
given the transaction history of the area and the number of loans it provided in the
area.” (Compl. ¶ 39.)
{9} Plaintiffs allege that “[a]lmost immediately” after closing3 Mr. Julian
sought, without success, to sell Lot 151 “hoping to capitalize on the returns
promised by Maryville through its agent [Southeastern].” (Compl. ¶ 41.) It was not
until “late Summer 2008” that Plaintiffs learned of problems with similar properties
marketed by Southeastern in North Carolina, and that “[i]t slowly became clear
that the[se] problems . . . were present in Cravens Grant.” (Compl. ¶¶ 43–44.)
Plaintiffs allege that only then (i.e., in the second half of 2008) did they discover
that the value of Lot 151 was “grossly overinflated.” (Compl. ¶ 45.)
{10} A substantial number of foreclosures in Cravens Grant followed in
2009 and 2010, “further depressing property values and stigmatizing the
development.” (Compl. ¶ 46.) Unable to sell Lot 151, Plaintiffs defaulted on their
Wachovia loan. (Compl. ¶ 48.)
{11} In support of its Motion to Dismiss, Wells Fargo submits evidence that
it obtained a judgment against Plaintiffs in Mecklenburg County Superior Court for
the outstanding value of the Wachovia loan, along with attorney fees and post-
judgment interest, on June 20, 2011. (Wells Fargo’s Br. Supp. Mot. Dismiss Ex. 2.)4
III.
LEGAL STANDARD
{12} The appropriate inquiry on a motion to dismiss pursuant to Rule
12(b)(6) 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, whether properly labeled or not.’” Crouse v. Mineo, 189 N.C. App. 232,
237, 658 S.E.2d 33, 36 (2008) (quoting Harris v. NCNB Nat’l Bank, 85 N.C. App.
669, 670, 355 S.E.2d 838, 840 (1987)).

3 Plaintiffs do not allege a closing date or date when they first attempted to sell Lot 151.
4See Wells Fargo Bank, N.A. v. Julian, No. 10 CVS 7326 (N.C. Super. Ct. June 20, 2011)
(Williamson, J.) (order entering judgment in favor of Wells Fargo, as successor to Wachovia,
on defendants’ loan indebtedness). As discussed infra, the Court has not considered
evidence of this prior lawsuit in deciding Wells Fargo’s Motion to Dismiss.
{13} While adjudication of a motion to dismiss requires that “the complaint
must be liberally construed,” Dixon v. Stuart, 85 N.C. App. 338, 340, 354 S.E.2d
757, 758 (1987) (citation omitted), the court is not required to “accept as true
allegations that are merely conclusory, unwarranted deductions of fact, or
unreasonable inferences.” Strickland v. Hedrick, 194 N.C. App. 1, 20, 669 S.E.2d
61, 73 (2008) (quotation and citations omitted).
{14} Furthermore, “where the complaint alleges facts that defeat the claim,
the claim should be dismissed.” Hudson-Cole Dev. Corp. v. Beemer, 132 N.C. App.
341, 346, 511 S.E.2d 309, 312 (1999) (citing Raritan River Steel Co. v. Cherry,
Bekaert & Holland, 322 N.C. 200, 367 S.E.2d 609 (1988), rev’d on other grounds,
329 N.C. 646, 407 S.E.2d 178 (1991)).
IV.
WELLS FARGO’S MOTION
A.
SUMMARY OF ARGUMENTS
{15} Wells Fargo first argues in its brief that Plaintiffs’ claims must be
dismissed as compulsory counterclaims to Wells Fargo’s prior successful suit on
Plaintiffs’ loan indebtedness (hereinafter, the “Prior Action”), under Rule 13(a) of
the North Carolina Rules of Civil Procedure, because Plaintiffs’ claims inherently
challenge the validity of the contract on which the Prior Action awarded judgment
to Wells Fargo. Wells Fargo next advances the doctrine of collateral estoppel as
barring the present suit, also based on the adjudication of the loan indebtedness in
the Prior Action. Lastly, Wells Fargo attacks the Complaint as facially inadequate
to call forth a remedy at law against Wells Fargo pursuant to the pleading
standards of Rules 12(b)(6) and 9(b).
{16} Plaintiffs respond that their claims against Wells Fargo were not
compulsory counterclaims in the Prior Action because the appraiser of Lot 151, now
deceased, would have been a necessary party to such claims “whose presence is
excused by his . . . death in September 2010,” and over whom North Carolina did
not have personal jurisdiction. (Pls.’ Br. Opp. Wells Fargo’s Mot. Dismiss 5.)
Plaintiffs next argue that collateral estoppel does not bar the present suit because
the Prior Action “only addressed whether Wachovia lent money to Plaintiffs . . . and
whether Plaintiffs repaid that money as agreed,” but “did not . . . address the
validity of the underlying transaction.” (Pls.’ Br. Opp. Wells Fargo’s Mot. Dismiss
5.) Plaintiffs continue by defending the sufficiency of each of the individual claims
as pled in the Complaint.
B.
ANALYSIS
1.
PLAINTIFFS’ CLAIMS AS COMPULSORY COUNTERCLAIMS UNDER RULE 13(a)
{17} Rule 13(a) provides that “[a] pleading shall state as a counterclaim any
claim which at the time of serving the pleading the pleader has against any
opposing party, if it arises out of the transaction or occurrence that is the subject
matter of the opposing party’s claim,” so long as the claim “does not require for its
adjudication the presence of third parties [over] whom the court cannot acquire
jurisdiction.” N.C. R. Civ. P. 13(a). A claim is not compulsory if “[a]t the time the
action was commenced the claim was the subject of another pending action,” or if
“[t]he opposing party brought suit upon his claim by attachment or other process by
which the court did not acquire jurisdiction to render a personal judgment on that
claim . . . .” N.C. R. Civ. P. 13(a)(1)–(2).
{18} “The purpose of Rule 13(a) . . . is to enable one court to resolve all
related claims in one action, thereby avoiding a wasteful multiplicity of litigation.”
Gardner v. Gardner, 294 N.C. 172, 176–77, 240 S.E.2d 399, 403 (1978) (quotation
and citation omitted). While the effect of failing to assert a compulsory
counterclaim is not dictated by Rule 13(a), see Jonesboro United Methodist Church
v. Mullins-Sherman Architects, LLP, 359 N.C. 593, 596, 614 S.E.2d 268, 270 (2005)
(citing Gardner, 294 N.C. at 176, 240 S.E.2d at 403), our courts have “‘consistently
held that a party who does not plead a compulsory counterclaim is, after
determination of the action in which it should have been pleaded, forever barred
from bringing a later independent action on that claim.’” Id. (quoting Gardner, 294
N.C. at 179, 240 S.E.2d at 404).
{19} Despite the potential merits of Wells Fargo’s arguments for dismissal
under Rule 13(a), it would be improper for the court to engage in a Rule 13(a)
analysis applying a Rule 12(b)(6) standard.
{20} In deciding a motion to dismiss under Rule 12(b)(6), the court’s inquiry
is limited to evaluating the sufficiency of the complaint. Kemp v. Spivey, 166 N.C.
App. 456, 462, 602 S.E.2d 686, 690 (2004) (“The trial court’s consideration of
evidence other than the pleading is contrary to the purpose of Rule 12(b)(6).” (citing
Eastway Wrecker Service v. City of Charlotte, 165 N.C. App. 639, 599 S.E.2d 410,
(2004) (McGee, J. dissenting))). A motion to dismiss is converted to one for
summary judgment pursuant to Rule 56 “when matters outside the pleadings are
presented to and not excluded by the court.” Stanback v. Stanback, 297 N.C. 181,
205, 254 S.E.2d 611, 627 (1979) (citing Kessing v. Mortgage Corp., 278 N.C. 523,
180 S.E. 2d 823 (1971)). Conversion of the Rule 12(b) motion, in turn, requires that
“all parties shall be given reasonable opportunity to present all material made
pertinent to such a motion by Rule 56.” N.C. R. Civ. P. 12(b); see also Kemp, 166
N.C. App. at 462, 602 S.E.2d at 690 (reversing and remanding order dismissing
claims under Rule 12(b)(6) where the trial court considered other evidence and “the
parties were not afforded a ‘reasonable opportunity to present all material made
pertinent to such a motion by Rule 56.’” (quoting N.C. R. Civ. P. 12(b)).
{21} The court may, in some instances, consider documents incorporated
into the complaint in deciding a Rule 12(b)(6) motion without converting the motion
to one for summary judgment. See Brooks Distrib. Co. v. Pugh, 91 N.C. App. 715,
718, 373 S.E.2d 300, 302, rev’d on other grounds, 324 N.C. 326, 378 S.E.2d 31 (1989)
(finding no error where the trial court considered a contract, attached to the
complaint, that formed the subject matter of the litigation). To properly consider
Wells Fargo’s contention that Rule 13(a) requires dismissal of Plaintiffs’ claims
against it, however, the Court would have to consider matters outside of (i.e., not
attached to or referenced in) the Complaint, including Judge Williamson’s Order
and Judgment in the Prior Action,5 which would in turn require the Court to permit
the parties to present any other evidence material to a summary judgment
determination pursuant to Rule 56.
{22} The Court, therefore, declines to consider Wells Fargo’s Rule 13(a)
arguments or evidence in deciding Wells Fargo’s Motion to Dismiss.
2.
COLLATERAL ESTOPPEL
{23} “Under collateral estoppel as traditionally applied, a final judgment on
the merits prevents relitigation of issues actually litigated and necessary to the
outcome of the prior action in a later suit involving a different cause of action
between the parties or their privies.” Thomas M. McInnis & Assoc., Inc. v. Hall, 318
N.C. 421, 428, 349 S.E.2d 552, 557 (1986) (citations omitted). For collateral
estoppel to defeat a plaintiff’s claims:
(1) The issues to be concluded must be the same as those involved in
the prior action; (2) in the prior action, the issues must have been
raised and actually litigated; (3) the issues must have been material
and relevant to the disposition of the prior action; and (4) the
determination made of those issues in the prior action must have been
necessary and essential to the resulting judgment.

King v. Grindstaff, 284 N.C. 348, 358, 200 S.E.2d 799, 806 (1973) (citations
omitted).
{24} It stands to reason that summary judgment against Plaintiffs in the
Prior Action would have required determination by the court that a valid loan
contract existed between the parties, Parker v. Glosson, 182 N.C. App. 229, 232, 641
S.E.2d 735, 737 (2007) (“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.” (quoting
Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000)), and that any contest
to a contract’s validity, such as that posed by Plaintiffs’ present claims of fraud and

5 Although the Complaint admits that “Plaintiffs’ loan with Wachovia ultimately went into

default, exposing them to substantial liability,” (Compl. ¶ 48), Plaintiffs do not attach or
incorporate by reference the court’s order in the Prior Action. Had Plaintiffs so much as
referenced the Prior Action in the Complaint, this Court’s Rule 13(a) analysis might take on
different dimensions.
misrepresentation, would invariably challenge Wells Fargo’s contractual rights
under the Wachovia loan.6
{25} The Court, however, declines to conduct a collateral estoppel analysis,
as such would conflict with the limited purpose and scope of Rule 12(b)(6).
{26} It is clear that, in deciding a motion to dismiss pursuant to Rule
12(b)(6), the court may consider (1) documents “attached to and incorporated within
a complaint,” and (2) “documents which are the subject of a plaintiff’s complaint and
to which the complaint specifically refers even though they are presented by the
defendant.” Weaver v. Saint Joseph of the Pines, Inc., 187 N.C. App. 198, 204, 652
S.E.2d 701, 707 (2007). Yet, as the Weaver court notes, “[t]he mandatory language
of these Rules is unambiguous and leaves no room for variance in practice.” Id.

6 There is ample precedent in our case law to suggest that an allegation of fraud or

misrepresentation surrounding contract formation necessarily challenges the validity of the
underlying contract, see Byham v. Nat’l Cibo House Corp., 265 N.C. 50, 60, 143 S.E.2d 225,
234 (1965) (holding, where plaintiff asserted a fraud claim with respect to an underlying
contract, that “[t]he validity of the contract is the matter which the complaint seeks to put
at issue”), and will, if proven, render the contract voidable at the election of the non-
culpable party or, alternatively, will allow the plaintiff equitable relief. See Furst &
Thomas v. Merritt, 190 N.C. 397, 403, 130 S.E. 40, 44 (1925) (stating that where one party’s
representation induces the other to contract, and “the representation turns out to be untrue
and fraudulently made, the party who relied upon it, to his injury, if he acted with
reasonable prudence in the matter, is not bound to him who deceived him into executing the
paper”); Kindred of North Carolina, Inc. v. Bond, 160 N.C. App. 90, 100, 584 S.E.2d 846,
853 (2003) (stating that a party which “supplies false information for the guidance of others
in their business transactions . . . is subject to [negligence] liability for pecuniary loss
caused to them by their justifiable reliance upon the information, if he fails to exercise
reasonable care or competence in obtaining or communicating the information” (quoting
Jordan v. Earthgrains Cos., Inc. 155 N.C. App. 762, 767, 576 S.E.2d 336, 340 (2003)); see
also Freeman v. Rothrock, 189 N.C. App. 31, 39, 657 S.E.2d 389, 394 (2008) (“[I]t has long
been a part of the common law that fraud in the inducement is a good defense to an action
on a contract by one of the contracting parties.” (quoting Ex parte S. Energy Homes, Inc.,
603 So.2d 1036, 1039 (Ala. 1992) (alteration original))); and RESTATEMENT (SECOND) OF
CONTRACTS § 164(1) (1981) (“If a party’s manifestation of assent is induced by either a
fraudulent or a material misrepresentation by the other party upon which the recipient is
justified in relying, the contract is voidable by the recipient.”). That a party’s claims of
fraud or misrepresentation inducing that party to contract are inherently entwined with an
opponent’s claims for breach of the same agreement is also borne out by the requirement of
Rule 8(c) of the North Carolina Rule of Civil Procedure that “[i]n pleading to a preceding
pleading, a party shall set forth affirmatively . . . failure of consideration, fraud, illegality,
. . . and any other matter constituting an avoidance or affirmative defense.” N.C. R. Civ. P.
8(c).
(citation omitted); see also Minor v. Minor, 70 N.C. App. 76, 78, 318 S.E.2d 865, 867,
disc. review denied, 312 N.C. 495, 322 S.E.2d 558 (1984) (citations omitted)
(holding, with respect to Rule 12(c) motions, that “[n]o evidence is to be heard, and
the trial judge is not to consider statements of fact in the briefs of the parties or the
testimony of allegations by the parties in different proceedings”).
{27} To apply the doctrine of collateral estoppel to Plaintiffs’ claims would
require the Court to determine, as an evidentiary matter not supported by the
Complaint, that the Prior Action decided the precise issues now raised by Plaintiffs.
Although the Court finds instances where our appellate courts have considered
evidence outside the complaint in reviewing Rule 12(b)(6) motions, see, e.g., Turner
v. Hammocks Beach Corp., 363 N.C. 555, 559–62, 681 S.E.2d 770, 774–75 (2009)
(considering, in the light most favorable to plaintiff, the terms of a consent order
from a prior action in reviewing the trial court’s denial of defendant’s 12(b)(6)
motion to dismiss), these cases do not enlighten the Court as to how admission of
such evidence conforms to the “unambiguous” and “mandatory language” of Rule 12.
See Weaver, 187 N.C. App. at 204, 652 S.E.2d at 707. In Turner, the North
Carolina Supreme Court reviewed the trial court’s denial of defendant’s Rule
12(b)(6) motion—which advanced the defense of collateral estoppel—despite the
interlocutory nature of defendant’s appeal, holding that “denial of a motion to
dismiss a claim for relief affects a substantial right when the motion to dismiss
makes a colorable assertion that the claim is barred under the doctrine of collateral
estoppel.” Turner, 363 N.C. at 558, 681 S.E.2d at 773. In revisiting defendant’s
motion, the Supreme Court considered the details of the consent order from the
prior proceeding, but without clearly articulating the terms on which such evidence
was properly before the trial court. Id. at 559–62, 681 S.E.2d at 774–75.
{28} This Court finds no incorporating reference in Plaintiffs’ Complaint
that would clearly invite consideration of Judge Williamson’s Order and Judgment
in the Prior Action7 under a Rule 12(b)(6) standard, see Weaver, 187 N.C. App. at
204, 652 S.E.2d at 707, and, therefore, declines to do so in the absence of clear
authority to support the use of such evidence where Rule 12(b)(6) otherwise “leaves
no room for variance in practice.” Id.

3.
RULE 12(b)(6) ANALYSIS
{29} For the reasons set forth below, the Court determines that the facts
pled in the Complaint are nevertheless insufficient to support Plaintiffs’ claims of
fraud, fraud in inducement, negligent misrepresentation, unfair and deceptive trade
practices, civil conspiracy, and punitive damages against Defendant Wells Fargo.
a.
FRAUD AND NEGLIGENT MISREPRESENTATION
{30} To state a claim for fraud, a plaintiff must allege a “(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.” Harrold v. Dowd, 149 N.C. App. 777, 782,
561 S.E.2d 914, 918 (2002) (citing Ragsdale v. Kennedy, 286 N.C. 130, 138, 209
S.E.2d 494, 500 (1974)).
{31} Claims of fraud are held to a heightened pleading standard pursuant
to Rule 9(b) of the North Carolina Rules of Civil Procedure. Specifically, the
complaint must allege with particularity the “time, place and content of the
fraudulent representation, identity of the person making the representation and
what was obtained as a result of the fraudulent act or representations.” Harrold,
149 N.C. App. at 782, 561 S.E.2d at 918 (quoting Terry v. Terry, 302 N.C. 77, 85,
273 S.E.2d 674, 678 (1981)). In stating a fraud claim, however, “[m]alice, intent,
knowledge, and other condition of mind . . . may be averred generally.” N.C. R. Civ.
P. 9(b).

7 The Court refers here to the fact that although Plaintiffs’ Complaint admits to Plaintiffs’

default on the Wachovia note, no allegation in the Complaint contains any reference to the
Prior Action or any resulting judgment. (see Compl. ¶ 48.)
{32} A viable claim for negligent misrepresentation requires allegations
that a plaintiff justifiably relied to his detriment “on information prepared without
reasonable care . . . by one who owed the relying party a duty of care.” Hospira Inc.
v. Alphagary Corp., 194 N.C. App. 695, 700, 671 S.E.2d 7, 12 (2009) (quoting
Raritan River Steel Co., 322 N.C. at 206, 367 S.E.2d at 612).
{33} Furthermore, “‘when the party relying on the false or misleading
representation could have discovered the truth upon inquiry, the complaint must
allege that he was denied the opportunity to investigate or that he could not have
learned the true facts by exercise of reasonable diligence.’” Oberlin Capital, L.P. v.
Slavin, 147 N.C. App. 52, 59, 554 S.E.2d 840, 846–47 (2001) (quoting Hudson-Cole,
132 N.C. App. at 346, 511 S.E.2d at 313).
{34} In their brief, Plaintiffs describe the sale of Cravens Grant properties
as a collaborative “pump and dump” scheme by Defendants to inflate property
values, then dump the property upon unsuspecting buyers. Plaintiffs’ Complaint,
however, does not allege that Wells Fargo predecessor Wachovia had any dealings
with Plaintiffs, or the other Defendants, prior to Plaintiffs’ decision to purchase Lot
151. For this reason, the Court’s reading of Plaintiffs’ claims of fraud or negligence
against Wells Fargo are necessarily confined to Wachovia’s conduct toward
Plaintiffs after Plaintiffs first contacted Wachovia regarding a loan, i.e., after
Plaintiffs had already agreed to the terms of sale for Lot 151, including the price.
{35} Plaintiffs’ allegations do not support claims of fraud or fraudulent
inducement against Wells Fargo for several reasons. First, Plaintiffs’ pleading of
these claims does not conform to the specificity requirements of Rule 9(b). The
Complaint does not allege the identity of an individual officer, employee, or agent of
the bank who made any deceptive or misleading representation to Plaintiffs. In
fact, Plaintiffs’ allegations of fraud and fraud in inducement fail to specifically name
Wachovia. Rather, Plaintiffs seek to incorporate Wells Fargo as a defendant in
these claims through vague, general references to “Defendants’ [collective]
fraudulent misrepresentations . . . [and] inducements.” (Compl. ¶¶ 55, 62.) These
conclusory allegations do not meet the particularity requirements of Rule 9(b).
{36} Second, Plaintiffs allege that the appraisal of Lot 151 ordered by
Wachovia was “considerably and artificially inflated,” and that Wachovia
“knowingly and willfully ignored” this fact. (Compl. ¶ 28.) The Complaint does not
allege, however, that Wachovia performed the appraisal for Plaintiffs’ benefit, or
that Wachovia was somehow obligated to Plaintiffs regarding the accuracy of the
appraisal. In the absence of such allegations, it is reasonable for the court to
conclude that Wachovia’s appraisal of Lot 151 was conducted for the benefit of the
bank, not Plaintiffs. See Allran v. Branch Banking & Trust Co., 2011 NCBC 21 ¶
42 (N.C. Super. Ct. July 6, 2011), http://www.ncbusinesscourt.net/opinions/2011_
NCBC_21.pdf (“Appraisals are not conducted for the benefit of borrowers, but
instead to protect banks from making under-secured loans.” (citing 12 C.F.R. §
353.5 (2011))).
{37} Third, the Complaint does not allege that Plaintiffs actually or
justifiably relied on representations made by Wachovia. Plaintiffs contracted to
purchase Lot 151 at an allegedly inflated price before contacting Wachovia for a
loan. Absent an allegation of actual reliance, Plaintiffs have failed to properly
allege a claim of fraud against Wells Fargo. See Walker v. Town of Stoneville, 712
S.E.2d 239, 244 (N.C. Ct. App. 2011) (holding that “[j]ustifiable reliance requires
actual reliance,” which the court in turn defines as “direct reliance on false
information” (citations and quotation omitted)). Even assuming, arguendo, that
Plaintiffs did in fact rely on Wachovia’s appraisal, they do not plead any
circumstances that would permit the Court to infer that such reliance was
reasonable. See Cobb v. Pennsylvania Life Ins. Co., 715 S.E.2d 541, 549 (N.C. Ct.
App. 2011) (“Reliance is not reasonable where the plaintiff could have discovered
the truth of the matter through reasonable diligence, but failed to investigate.”
(citing State Props., LLC v. Ray, 155 N.C. App. 65, 72, 574 S.E.2d 180, 186 (2002));
see also Allran, 2011 NCBC 21 ¶ 42.
{38} The absence of allegations of actual and justifiable reliance also
defeats Plaintiffs’ claim against Wells Fargo for negligent misrepresentation. See
Cobb, 715 S.E.2d at 549–50 (“‘Justifiable reliance is an essential element of both
fraud and negligent misrepresentation.’” (quoting Helms v. Holland, 124 N.C. App.
629, 635, 478 S.E.2d 513, 517 (1996)).
{39} For these reasons, Plaintiffs’ allegations against Wells Fargo for fraud,
fraud in inducement, and negligent misrepresentation are insufficient to satisfy the
liberal pleading standard applicable to 12(b)(6) motions. Plaintiffs’ pleading of the
fraud claims, furthermore, lack the specificity required by Rule 9(b). Wells Fargo’s
Motion to Dismiss these claims is, therefore, GRANTED.
GRANTED
b.
UNFAIR AND DECEPTIVE TRADE PRACTICES

{40} Pursuant to N.C. Gen. Stat. § 75–1.1 (hereinafter “UDTPA”), “[a] claim
for unfair and deceptive trade practices . . . must allege that: ‘(1) the [defendant]
committed 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 the [plaintiff’s] business.’” Sunset Beach Dev., LLC v.
AMEC, Inc., 196 N.C. App. 202, 211, 675 S.E.2d 46, 53 (2009) (quoting Walker v.
Sloan, 137 N.C. App. 387, 395, 529 S.E.2d 236, 243 (2000)) (alteration original).
“Whether a particular practice violates the UDTPA is typically a question of law for
the court.” McDonald’s Corp. v. Five Stars, Inc., 2010 N.C. App. LEXIS 2097, at *8
(N.C. Ct. App. Nov. 16, 2010) (unpublished opinion) (citing Dalton v. Camp, 353
N.C. 647, 656, 548 S.E.2d 704, 711 (2001)).

{41} “‘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
“proximately caused” the injury of which plaintiff complains.’” Sunset Beach Dev.,
LLC, 196 N.C. App. at 211, 675 S.E.2d at 53 (quoting Tucker v. Blvd. at Piper Glen
LLC, 150 N.C. App. 150, 154, 564 S.E.2d 248, 251 (2002)).
{42} Plaintiffs’ UDTPA claim against Wells Fargo fails because, as
previously noted, Plaintiffs do not allege actual reliance on any representations by
Wachovia in deciding to purchase Lot 151. Plaintiffs, therefore, cannot demonstrate
that Wells Fargo’s conduct proximately caused Plaintiffs’ injury. See id.
{43} Although Plaintiffs argue “Defendants’ unfair and deceptive trade
practices . . . go beyond mere fraud,” this assertion is supported only by Plaintiffs’
counsel’s explanation that “[n]ot only did Defendants conceal the true value of the
property, they purposely made it appear more valuable by inflating the price of
properties around it to unsustainable levels.” (Pls.’ Br. Opp. Wells Fargo’s Mot.
Dismiss 8.) Other than the conduct Plaintiffs allege as the basis for their claims of
fraud and negligence, they make no additional allegations of unfair or deceptive
acts in support of their UDTPA claim. See Strickland v. Hedrick, 194 N.C. App. at
20, 669 S.E.2d at 73 (holding that the court is not required to “accept as true
allegations that are merely conclusory, unwarranted deductions of fact, or
unreasonable inferences”). Plaintiffs, therefore, have not alleged any misconduct,
misstatement or misrepresentation by Wells Fargo upon which Plaintiffs justifiably
relied. See Cobb, 715 S.E.2d at 549–50.
{44} Plaintiffs’ allegations are, therefore, insufficient to state a claim for
unfair and deceptive trade practices against Wells Fargo. Accordingly, Well Fargo’s
motion to dismiss this claim is GRANTED.
GRANTED
c.
CIVIL CONSPIRACY AND PUNITIVE DAMAGES
{45} Upon the facts as pled, the insufficiency of Plaintiffs’ substantive
claims for fraud, negligence, and unfair and deceptive trade practices against Wells
Fargo dictates that Plaintiffs’ remaining claims for civil conspiracy and punitive
damages must also fail.
{46} A claim for civil conspiracy requires “(1) an agreement between two or
more individuals; (2) to do an unlawful act or to do a lawful act in an unlawful way;
(3) resulting in injury to plaintiff inflicted by one or more of the conspirators; and (4)
pursuant to a common scheme.” Piraino Bros., LLC v. Atl. Fin. Group, Inc., 712
S.E.2d 328, 333 (N.C. Ct. App. 2011) (quoting Privette v. Univ. of North Carolina,
96 N.C. App. 124, 139, 385 S.E.2d 185, 193 (1989)).
{47} “It is well established that ‘there is not a separate civil action for civil
conspiracy in North Carolina.’” Id. (quoting Dove v. Harvey, 168 N.C. App. 687,
690, 608 S.E.2d 798, 800 (2005)). “Instead, ‘civil conspiracy is premised on the
underlying act.’” Id. (quoting Harris v. Matthews, 361 N.C. 265, 273 n.2, 643 S.E.2d
566, 571 n.2 (2007)). Thus, where the court finds “judgment for the defendants on
the underlying tort claims to be proper, . . . a plaintiff’s claim for civil conspiracy
must also fail.” Id. at 333–34 (citations omitted).
{48} Because the Court has already rejected Plaintiffs’ substantive claims
against Wells Fargo, no allegations of underlying wrongful conduct by Wells Fargo
remain to support a claim for a conspiracy. Similarly, because the Court by this
Order and Opinion dismisses all the underlying tort claims alleged as to all
remaining defendants,8 no allegations of wrongful conduct by any defendant remain
upon which an agreement could be based. See State ex rel. Cooper v. Ridgeway
Brands Mfg., LLC, 362 N.C. 431, 444, 666 S.E.2d 107, 115 (2008) (“To create civil
liability for conspiracy there must have been a wrongful act resulting in injury to
another committed by one or more of the conspirators pursuant to the common
scheme and in furtherance of the objective.” (quoting Henry v. Deen, 310 N.C. 75,
87, 310 S.E.2d 326, 334 (1984))).
{49} Having dispatched all other claims against Wells Fargo, Plaintiffs’
claim for punitive damages against this Defendant also fails for want of an
independent cause of action. Iadanza v. Harper, 169 N.C. App. 776, 783, 611 S.E.2d
217, 223 (2005) (“[P]unitive damages do not and cannot exist as an independent
cause of action, but are mere incidents of the cause of action[.] . . . If the injured
party has no cause of action independent of a supposed right to recover punitive
damages, then he has no cause of action at all.” (quotation and citation omitted)
(alteration original)).
{50} For these reasons, the Court GRANTS Defendant Wells Fargo’s Motion
to Dismiss the claims for conspiracy and punitive damages..

8 See section V, dismissing all claims against Southeastern.
V.
SOUTHEASTERN’S MOTION
{51} Plaintiffs bring the same claims (fraud, fraud in inducement, negligent
misrepresentation, unfair and deceptive trade practices, civil conspiracy, and
punitive damages) against Defendant Southeastern that they brought against Wells
Fargo. Southeastern argues that Plaintiffs’ allegations are insufficient to state any
claim upon which relief can be granted pursuant to Rule 12(b)(6) and that Plaintiffs’
pleading of fraud and fraud in inducement fail due to an absence of the particularity
demanded by Rule 9(b). Although Southeastern’s position with respect to Plaintiffs
is somewhat different than Defendant Wells Fargo’s, the Court holds that Plaintiffs’
claims against Southeastern fail largely for the same reasons set forth in the
Court’s discussion of Wells Fargo’s Motion to Dismiss.
{52} First, as was the case with the fraud allegations against Wells Fargo,
Plaintiffs’ Complaint fails to identify any individual employee, officer, or agent of
Southeastern who made a fraudulent misrepresentation. Thus, on its face, the
Complaint does not meet the heightened pleading requirements of Rule 9(b) to
support a fraud-based claim against Southeastern. See Harrold, 149 N.C. App. at
782, 561 S.E.2d at 918 (holding that the complaint must allege with particularity
the “time, place and content of the fraudulent representation, identity of the person
making the representation and what was obtained as a result of the fraudulent act
or representations.”).
{53} Regarding Plaintiffs’ negligence claim, the Court recognizes that
Southeastern, unlike Wells Fargo, made direct representations to Plaintiffs that
Plaintiffs allege induced them to purchase Lot 151. The Court, however, need not
address whether Southeastern violated a duty to Plaintiffs in its capacity as sales
agent for Maryville, because Plaintiffs’ Complaint pleads a degree and type of
reliance on Southeastern’s alleged representations for which there is no recognized
legal or equitable remedy under North Carolina law.
{54} In their Complaint, Plaintiffs allege that they relied solely on
Southeastern’s “compelling” sales pitch in deciding to purchase Cravens Grant
property “as an investment.” Beyond the allegation that “properties in Cravens
Grant had already begun to sell at artificially inflated values,” (Compl. ¶ 23),
Plaintiffs do not allege that Southeastern withheld facts critical to Plaintiffs’
determination of the future value of property in Cravens Grant. Cf. Powell v. Wold,
88 N.C. App. 61, 68, 362 S.E.2d 796, 799 (1987) (holding sufficient to withstand a
motion to dismiss plaintiffs’ allegation that defendant, a real estate broker,
“misrepresented, or neglected to communicate, facts critical to the future value of
the property,” where defendant withheld knowledge of imminent plans for road
construction that would negatively affect the property’s future value).
{55} It is a long-standing principle of our common law that promises
relating to the future value of property, like the representations allegedly made by
Southeastern and relied on by Plaintiffs,9 even when offered as an inducement to
purchase, do not concern any subsisting fact that could form the basis of reasonable
reliance for claims of fraudulent (or, by extension, negligent) misrepresentation.
See, e.g., Williamson v. Holt, 147 N.C. 515, 520, 61 S.E. 384, 386 (1908)
(“‘[P]romissory representations,’ looking to the future as to what the vendee can do
with the property [and] how much he can make on it . . . are on a par with
false affirmations and opinions as to the value of property, and do not generally
constitute legal fraud.”); see also Cobb, 715 S.E.2d at 549–50 (holding that
justifiable reliance is an element of both fraud and negligent misrepresentation
claims).
{56} The Complaint, furthermore, does not contain allegations that
Plaintiffs were denied an opportunity to investigate whether the present value of
Lot 151 at the time of their purchase was less than that represented by
Southeastern. See Oberlin Capital, L.P. v. Slavin, 147 N.C. App. at 59, 554 S.E.2d
at 846–47; see also Allran, 2011 NCBC 21 ¶ 41 (“Even if the Complaint sufficiently
alleged that [the bank] had a duty to disclose [appraisal] information to Plaintiff, it fails

9 Plaintiffs concede that Plaintiffs purchased Lot 151 “as an investment,” (Compl. ¶ 24), and

that Mr. Julian began marketing the property for resale “[a]lmost immediately” after
closing in order to “capitalize on the returns promised by Maryville through its agent
[Southeastern].” (Compl. ¶ 41.)
to set forth facts explaining why Plaintiff’s reliance on [the bank’s] silence with respect
to the loan transaction and property purchase was both reasonable and detrimental.”).
{57} For these reasons, Plaintiffs’ pleading of negligent misrepresentation
against Southeastern is inadequate to support a claim for relief.
{58} As with Wells Fargo, Plaintiffs do not plead any additional conduct by
Southeastern, beyond that purported to constitute fraud or negligence, in support of
their claims for unfair and deceptive trade practices, civil conspiracy, or punitive
damages. For these reasons, the Court GRANTS Defendant Southeastern’s Motion
to Dismiss these claims.
VI.
CONCLUSION
{59} For the reasons stated herein, the Court GRANTS Defendant Wells
Fargo’s Motion to Dismiss Plaintiffs’ Complaint and GRANTS Defendant
Southeastern’s Motion to Dismiss. Accordingly, Plaintiffs’ claims against Wells
Fargo, as successor to Defendant Wachovia, and Plaintiffs’ claims against
Southeastern, are hereby DISMISSED with prejudice.
SO ORDERED,
ORDERED this the 22nd day of May, 2012.