                IN THE SUPREME COURT OF NORTH CAROLINA

                                     No. 375A14

                               Filed 18 December 2015
KENNETH ARNESEN, KRISTEN CHANEY, STEVE CHANEY, DEBORAH
CHARUK, WILLIAM CHARUK, MARIA CURATOLO, KATHLEEN JORDAN,
THOMAS JORDAN, TANNER MARKLEY, JOHN MERRITT, BARRY MCGOFF,
JOEL SCHENKEL, JOHN SWAN, LINDA SWAN, AUDREY VARNUM,
RICHARD VARNUM, ALAN WALBAUM, CAMILLE WALBAUM, and LUCAS
WILSON
               v.
RIVERS EDGE GOLF CLUB & PLANTATION, INC., RIVERS EDGE GOLF CLUB
& PLANTATION, LLC, COASTAL COMMUNITIES, INC., MARK A. SAUNDERS,
DONALD HOWARTH, MAS PROPERTIES, LLC, THE MORTGAGE COMPANY
OF BRUNSWICK, INC., BRENDAN GORDON, JAMES POWELL, JAMES
POWELL APPRAISALS, LLC, LYNN RABELLO, BRANCH BANKING AND
TRUST COMPANY, BB&T COLLATERAL SERVICE CORPORATION,
BAXLEYSMITHWICK PLLC, and DOUGLAS BAXLEY



        Appeal pursuant to N.C.G.S. § 7A-27(b)(1) from opinions and orders granting

motions to dismiss entered on 27 June 2011 and 13 June 2012 by Judge John R. Jolly,

Jr. in Superior Court, Brunswick County. On 10 October 2014, pursuant to N.C.G.S.

§ 7A-31(a) and (b)(2), and Rule 15(e)(2) of the North Carolina Rules of Appellate

Procedure, the Supreme Court on its own initiative certified the case for review prior

to determination in the Court of Appeals. Heard in the Supreme Court on 18 March

2015.


        Hodges & Coxe, P.C., by C. Wes Hodges, II and Sarah R. Buzzard, for plaintiff-
        appellants.

        Teague, Campbell, Dennis & Gorham, LLP, by Jacob H. Wellman and Natalia
        K. Isenberg, for defendant-appellees James Powell, James Powell Appraisals,
        LLC, and Lynn Rabello.
                              ARNESEN V. RIVERS EDGE

                                   Opinion of the Court



      Poyner Spruill LLP, by J. Nicholas Ellis and Caroline P. Mackie, for defendant-
      appellees Branch Banking and Trust Company and BB&T Collateral Service
      Corporation.


      NEWBY, Justice.

      In this case we consider whether plaintiffs, individual investors in undeveloped

real estate, may recover against a bank and its appraisers for their alleged

participation in a scheme to defraud investors by artificially inflating property values

in the years preceding the national real estate crisis. Plaintiffs allege, essentially,

that they would not have purchased certain real property but for faulty appraisal

information and that, in any event, the bank should have discovered and disclosed

the inflated appraised property values to them. The complaint reveals that plaintiffs

did not view, receive, order, or even inquire about an appraisal before purchasing the

property, nor that their purchases were contingent upon an appraisal, faulty or not.

Because no legal duty exists at law between a debtor and creditor, or between a bank’s

appraisers and a purchaser, plaintiffs’ claims, as pled, fail.      Moreover, because

plaintiffs fail to sufficiently allege justifiable reliance upon the faulty appraisal

information, or lack thereof, or that plaintiffs’ injuries were proximately caused by

either the bank or the appraisers, dismissal is proper.

      Plaintiffs are purchasers of undeveloped real property located in one of several

planned residential communities in Brunswick County, North Carolina, developed




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                                   Opinion of the Court



and marketed by defendant Mark A. Saunders (collectively, Coastal Communities).1

Like many others throughout the nation, plaintiffs invested in real property shortly

before the collapse of the real estate market. Taking the well-pled allegations in

plaintiffs’ complaint as true, the record reveals the following:

      In 2004 Saunders, a real estate developer, began marketing lots in the Coastal

Communities. Saunders purchased unimproved real property through his company,

MAS Properties, LLC, subdivided the property into lots, and then deeded the parcels

to various corporate entities for sale to investors. During the “pre-development stage”

of the proposed subdivisions, Saunders marketed the undeveloped lots with plans to

improve them within two years after purchase.

      On 8 August 2005, Saunders, acting through MAS Properties, purchased

approximately one hundred acres of land in Shallotte Township, Brunswick County,

North Carolina.    Eleven days later, MAS Properties transferred the property to

Rivers Edge Golf Club & Plantation, Inc. (Rivers Edge),2 which became the basis for

the investments at issue here.      Rivers Edge recorded various subdivision plats

thereafter, continuing through 2006.




      1   The communities include the following residential subdivisions located in
Brunswick County, North Carolina: Ocean Isle Palms, Ocean Ridge Plantation, Rivers
Edge, and SeaWatch at Sunset Harbor. Plaintiffs allege Saunders acted individually and
through his various corporate entities.
        2 Rivers Edge Golf Club & Plantation, LLC and Rivers Edge Golf Club & Plantation,

Inc. are referred to interchangeably as “Rivers Edge” throughout the complaint.

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                                  Opinion of the Court



      Saunders marketed the Rivers Edge property to potential investors through

various promotional materials and sales events, including invitation packages,

brochures, community maps, and artistic representations. These artistic renditions

included maps and sketches of planned community amenities, like “a southern style

clubhouse,” “pool, outdoor hot tub, [and] fitness center,” “walking/nature trails and

sidewalks,” and “other recreational amenities.” Saunders invited investors to special

predevelopment marketing events designed to drive sales. For example, he hosted a

“big tent” event with food and music to kick off the Rivers Edge development and

implemented a lottery system to give interested investors priority selection over lots.

“[P]rospective purchasers were urged to execute a ‘Homesite Reservation’ and submit

a ‘Reservation Deposit’ amounting to up to 10% of the purchase price of the property

selected in order to have their names placed in the Priority Selection drawings.”

According to the Homesite Reservation document, the ten-percent deposit would be

applied toward an earnest-money down payment for the purchase of the underlying

property.

      Saunders offered various financial incentives to promote business, including

“pre-development pricing,” payment by the developer of two years of interest on lot

financing, “and $400 to $500 toward closing costs.” Saunders furnished prospective

investors a detailed “HUD Property Report” and additional materials that disclosed

a variety of details including the development plans, construction guidelines, and

estimated timelines.    All of these documents were provided in a large binder

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                                   Opinion of the Court



containing several hundred pages. A series of property reports included the current

status of construction and amenities and many of these documents disclosed

significant delays. Investors were asked to sign a document acknowledging “that they

had received a copy of the Property Report and [had been] given an opportunity to

read the Property Report before signing any contract or agreement.” Plaintiffs state

that they purchased the vacant properties from Saunders, marketed for their “good

investment potential,” and relied on his representations that the undeveloped

properties were “a financially sound investment that offered little risk.”

      Plaintiffs characterize Saunders’s marketing strategies as creating a “false

sense of urgency for potential buyers to purchase the undeveloped property with

seemingly little risk.”   Plaintiffs assert that Saunders’s agents and employees

“encouraged the Plaintiffs and other prospective buyers to purchase more than one

lot” and that Saunders marketed the invitation events as “exclusive,” when in reality

“hundreds, if not thousands,” were invited. Plaintiffs allege Saunders “pushed” his

sales assistants “to go out in teams and pretend to be sales agents and interested

buyers during sales events and property showings” and that Saunders “required [his

sales assistants] to drive Range Rovers or other expensive Sports Utility Vehicles.”

      From 2004 to 2007, defendant Branch Banking and Trust Company (BB&T)3

served as primary lender for the majority of Saunders’s real estate investors who


      3 BB&T Collateral Service Corporation served as trustee on the deeds of trust
securing the loans issued by Branch Banking and Trust Company and also is a named

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                                    Opinion of the Court



sought bank financing, including plaintiffs.         As Saunders’s business grew, he

established The Mortgage Company of Brunswick, Inc. (TMC), a private mortgage

brokerage, to help facilitate the lending process. TMC thereafter assisted Saunders’s

investors through the loan application process and referred them to BB&T, which

then paid TMC a fee for each referral. Internally, BB&T engaged a local firm, James

Powell Appraisals, LLC (the Appraisers),4 to prepare appraisals on some of the

properties. The bank did not require full appraisals on the early lot sales with

transaction values less than $250,000. Of the limited number of appraisals that

BB&T did obtain, the bank used them for its own internal underwriting purposes.

      From May 2005 through the summer of 2006, each plaintiff reserved one or

more properties during a sales event at Rivers Edge and executed a sales contract.

After executing the sales contract and obligating themselves to purchase the

property, each plaintiff financed his or her investment with a loan through BB&T.

Plaintiffs received a full Property Report sometime during the transaction but deny

having the opportunity to read it before signing a sales contract.           Rivers Edge

provided plaintiffs financial incentives consisting of payments for two years of

interest and $400 to $500 credits at closing.




defendant. Both defendants are collectively referred to as “BB&T” throughout this opinion.
       4 James Powell Appraisals, LLC was formed in 2007. Prior to that time James

Powell Appraisals operated as a sole proprietorship. James Powell employed defendant
Lynn Rabello. Collectively these parties are referred to as “the Appraisers.”

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                                    Opinion of the Court



       On 26 March 2010, two years after the collapse of the national real estate

market and four to five years after their initial investment, plaintiffs commenced this

action asserting eighteen claims against Saunders, his various companies, BB&T,

and the Appraisers.5 Each of plaintiffs’ claims as stated incorporates by reference

and is based in part upon the following allegations:

                     40. The Defendant Saunders, through the corporate
              identity of the Defendant MAS Properties, purchased
              undeveloped and unimproved parcels of real property
              throughout Brunswick County, North Carolina and
              thereafter partitioned the property into lots of proposed
              subdivisions.      The Defendants Saunders and MAS
              Properties then deeded the property to one of the
              Defendant Saunders’ various corporate entities, including
              the Defendant Rivers Edge. Under the control and
              direction of the Defendant Saunders, the agents and
              employees of the various corporate entities, including the
              Defendants Rivers Edge and/or Coastal Communities,
              thereafter marketed the subdivisions and immediately
              resold the lots to purchasers at grossly inflated prices.
                     ....
                     84. Upon information and belief, the Defendant
              Saunders and/or the agents and employees of the various
              corporate entities under the control and direction of the
              Defendant Saunders, including the Defendants Coastal
              Communities and Rivers Edge, made an arrangement with
              a local appraiser, James Powell of James Powell
              Appraisals, LLC, to ensure that appraisals would be
              generated as described above, using comparable sales of
              other properties marketed and sold by the Defendant
              Coastal Communities, including property in Rivers Edge,
              at the inflated prices.



       5 Plaintiffs’ amended complaint includes eighteen causes of action. The Chief
Justice designated the action as a mandatory complex business case on 7 April 2010.

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                                  Opinion of the Court



                    ....
                   90. Upon information and belief, the Defendants
             Powell and Rabello thereby engaged in the fabrication and
             use of fraudulently overstated appraisals to justify the
             financing of Coastal Communities properties.
                    ....
                   98. The Plaintiffs and other property owners relied
             upon the Defendants’ misrepresentations when purchasing
             property, and paying inflated prices for the property,
             within one or more of the undeveloped subdivisions.
             Absent the Defendants’ misrepresentations, Plaintiffs and
             other property owners would not have purchased the
             property from the Defendants.
                    ....
                    99. Upon information and belief, the Defendant
             Saunders and/or the agents and employees of the various
             corporate entities under the control and direction of the
             Defendant Saunders, including the Defendants Coastal
             Communities and/or Rivers Edge, made an arrangement
             with local lenders, including the Brunswick County, North
             Carolina, regional office of BB&T, to ensure that the
             lenders would rely upon the previously described
             appraisals which manipulated property values.



      Plaintiffs assert the following claims against BB&T: (1) fraud, (2) unjust

enrichment, (3) violation of North Carolina’s RICO statute, (4) breach of duty of good

faith and fair dealing/negligent supervision, (5) unfair and deceptive trade practices,

(6) civil conspiracy, and (7) violation of North Carolina’s Mortgage Lending Act.

Plaintiffs assert the following claims against the Appraisers: (1) negligence, (2)

negligent misrepresentation, (3) fraud, (4) unjust enrichment, (5) violation of North

Carolina’s RICO statute, (6) civil conspiracy, and (7) unfair and deceptive trade


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                                      Opinion of the Court



practices.   In addition to compensatory damages, plaintiffs seek a preliminary

injunction to prevent foreclosure on the subject properties, rescission of the

underlying sales contracts, treble damages for unfair and deceptive trade practices,

and punitive damages against both parties.

       Plaintiffs premise each of their claims against BB&T on allegations that the

bank wrongfully omitted information about the loan and appraisal process, most

specifically, that faulty appraisals significantly overstated the value of the

investment properties and that the bank had a duty to discover and disclose this

information.6 Plaintiffs do not allege that BB&T or the Appraisers made any direct


       6  The complaint reveals, inter alia, that each of plaintiffs’ stated claims is “premised
upon wrongful omissions by BB&T regarding the loan and appraisal process” and relies
upon faulty appraisal information therein as follows:
        (1) Plaintiffs’ Mortgage Lending Act violation claim relies on allegations of BB&T’s
“misrepresenting or concealing material facts for the purpose of influencing, persuading, or
inducing the Plaintiffs to take a loan” and that BB&T “improperly influenc[ed] the . . .
reporting, result, and/or review of real estate appraisals.”
        (2) Plaintiffs’ duty of good faith and fair dealing claim relies on allegations that
“BB&T was aware, or should have been aware, of the fact that the Plaintiffs were being
misled and/or induced to enter into the contracts in ignorance of facts materially increasing
the risks,” and that BB&T was aware of “fraudulent and inflated appraisals,” but “failed to
inform the Plaintiffs of such facts as required by its duty of good faith and fair dealing.”
        (3) Plaintiffs’ RICO claim relies on allegations that BB&T’s “misrepresentations,
acts of concealment and failures to disclose were knowing and intentional, and made for the
purpose of deceiving the Plaintiffs and obtaining their money for . . . pecuniary gain,” and
that BB&T “rel[ied] upon fraudulent . . . appraisals of the property.”
        (4) Plaintiffs’ conspiracy claim relies on allegations that BB&T entered into an
agreement “to commit . . . unlawful acts, practices, plans, schemes, and transactions to
defraud and mislead Plaintiffs,” that the agreement ensured that BB&T “would rely upon
the [fraudulent] appraisals,” and that defendants would “control the appraisal and lending
process.”
        (5) Plaintiffs’ fraud claim relies on allegations that BB&T was “under a duty to
disclose the truth regarding all defendants’ misrepresentations and concealed material

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                                      Opinion of the Court



representations to them. Plaintiffs do not allege that they received, requested, or

inquired about an appraisal at any time before purchasing the investment properties

or that they were prevented from so doing. Plaintiffs do not allege that the sales were

contingent on financing or an appraisal. In fact, of the remaining properties at issue

in this action, the complaint reveals that BB&T ordered only two appraisals for their

own internal purposes.

       On 28 June 2010, BB&T and the Appraisers moved to dismiss the complaint

for failure to state a claim under Rule 12(b)(6) of the North Carolina Rules of Civil

Procedure. On 1 June 2011, the trial court denied plaintiffs’ motion for a preliminary

injunction to prevent foreclosure proceedings, concluding, inter alia, that plaintiffs

failed to demonstrate a likelihood of success on the merits of their claims because a

lender does not generally owe its borrower a duty beyond the lender’s contractual

obligations. Anderson v. Coastal Cmtys. at Ocean Ridge Plantation, Inc., No. 09 CVS

1042, ¶¶ 14-24 (N.C. Super. Ct. Brunswick County June 1, 2011).




facts of which only they knew or could have known, and to make a full and open disclosure
of all such information,” and that BB&T approved and disbursed money at closing
“notwithstanding their knowledge of and dependence upon the fraudulently overstated
appraisals.”
        (6) Plaintiffs’ unfair and deceptive trade practices claim relies on allegations that
BB&T’s “conduct, as alleged [in the aforementioned claims by reference], constitutes unfair
and/or deceptive acts or practices.”
        (7) Plaintiffs’ unjust enrichment claim relies on allegations that “inequitable
enrichment, benefits, and ill-gotten gains [were] acquired as a result of the” omissions alleged
in the aforementioned claims, and that plaintiffs’ purchases were at “inflated prices.”


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                                    Opinion of the Court



       On 27 June 2011, the trial court entered an opinion and order concluding that

all claims against BB&T were “premised upon wrongful omissions by BB&T

regarding the loan and appraisal process,” but that “BB&T did not owe Plaintiffs a

duty to disclose the details of the loan process not required to be disclosed under state

or federal law or under the terms of the loan agreements.” The trial court granted

BB&T’s motion to dismiss. Anderson, 2011 WL 2381781, ¶¶ 16-20 (N.C. Super. Ct.

June 3, 2011).      On 13 June 2012, the trial court entered an opinion and order

concluding, inter alia, that plaintiffs could not have relied upon appraisals they did

not receive, or that did not in fact exist, at the time of their decisions to purchase and

thus granted the Appraisers’ motion to dismiss on all claims. Anderson, 2012 WL

1948767, ¶¶ 59-61, 124 (N.C. Super. Ct. May 30, 2012).7 On 16 May 2014, plaintiffs

appealed, and on 10 October 2014, this Court certified the case for review prior to

determination in the Court of Appeals. N.C.G.S. § 7A-31(a), (b)(2) (2013); N.C. R.

App. P. 15(e)(2).




       7 The record indicates the following plaintiffs were voluntarily dismissed from this
action without prejudice: John Merritt on 10 July 2012; John Swann and Lisa Swann
(referred to in the amended complaint as plaintiffs “Swan”); Audrey Varnum, Richard
Varnum, and Lucas Wilson on 15 February 2013; and Steve Chaney and Barry McGoff on
21 March 2014. Deborah Charuk, William Charuk, Maria Curatolo, Kathleen Jordan,
Thomas Jordan, Tanner Markley, and Joel Schenkel voluntarily dismissed without
prejudice their claims against Saunders, TMC, and his corporate entities in April 2014. We
take notice of plaintiffs’ attorneys’ motion to withdraw as counsel for Kenneth Arnesen,
Alan Walbaum, and Camille Walbaum dated 3 May 2013, which appears to remain pending
at the trial court. N.C. R. App. P. 14(c)(1).

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                                   Opinion of the Court



      In essence, plaintiffs argue that they would not have purchased the properties

but for faulty appraisal information. Plaintiffs claim that the underlying appraisals

were the key to Saunders’s complex scheme to sell undeveloped real estate to

investors at “grossly inflated prices” and that, using this faulty information, Saunders

controlled the entire loan process from application to appraisal to closing. Plaintiffs

argue, essentially, that BB&T owed them a legal duty, resembling a fiduciary duty,

created either by the general relationship between a bank and its borrower, the duty

of good faith and fair dealing, or by the Mortgage Lending Act (MLA). Plaintiffs argue

BB&T breached this duty by, inter alia, “concealing material facts for the purpose of

influencing, persuading, or inducing the Plaintiffs to take a loan.”          Similarly,

plaintiffs assert that the Appraisers breached a duty of care owed to them when they

prepared faulty appraisals for the bank.

      It is undisputed, however, that plaintiffs decided to purchase the investment

properties without consulting an appraisal.               Moreover, plaintiffs obligated

themselves to purchase the properties independent of the loan process. Plaintiffs

have not alleged that they ordered, viewed, or requested appraisal information at any

time, or that they were prevented from doing so. Furthermore, of the properties

remaining at issue in this action, the complaint reveals that BB&T obtained only two

appraisals for its own internal underwriting purposes.                  As alleged, all

misrepresentations during the sales process, if any, were made by Saunders, not by

BB&T or the Appraisers.

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                                   Opinion of the Court



      As such, BB&T is entitled to dismissal of all claims because plaintiffs’

complaint reveals an absence of both law and facts necessary to establish that the

bank owed a duty to disclose the information that plaintiffs contend was wrongfully

omitted. Moreover, plaintiffs have failed to sufficiently allege justifiable reliance on

any omission by the bank before they purchased the investment properties and have

failed to sufficiently establish that any action by BB&T was the proximate cause of

their harm.

      Dismissal of an action under Rule 12(b)(6) is appropriate when the complaint

“fail[s] to state a claim upon which relief can be granted.” N.C.G.S. § 1A-1, Rule

12(b)(6) (2013). “[T]he well-pleaded material allegations of the complaint are taken

as true; but conclusions of law or unwarranted deductions of fact are not admitted.”

Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970) (quoting 2A James Wm.

Moore et al., Moore’s Federal Practice ¶ 12.08 (2d ed. 1968)). When the complaint on

its face reveals that no law supports the claim, reveals an absence of facts sufficient

to make a valid claim, or discloses facts that necessarily defeat the claim, dismissal

is proper. Wood v. Guilford County, 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002)

(citation omitted). We review appeals from dismissals under Rule 12(b)(6) de novo.

Bridges v. Parrish, 366 N.C. 539, 541, 742 S.E.2d 794, 796 (2013).

      In an ordinary debtor-creditor transaction, the lender’s duties are defined by

the loan agreement and do not extend beyond its terms. Dallaire v. Bank of Am.,

N.A., 367 N.C. 363, 368, 760 S.E.2d 263, 266-67 (2014) (citations omitted). This Court

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                                   Opinion of the Court



has held on many occasions that “[o]ne who executes a written instrument is

ordinarily charged with knowledge of its contents.” Ussery v. Branch Banking &

Trust Co., ___ N.C. ___, ___, 777 S.E.2d 272, 279 (2015) (citation omitted). A fiduciary

duty generally arises when one reposes a special confidence in another, and the other

“in equity and good conscience is bound to act in good faith and with due regard to

the interests of the one reposing confidence.” Dallaire, 367 N.C. at 367, 760 S.E.2d

at 266 (quoting, inter alia, Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707

(2001)). “[T]he law does not typically impose on lenders a duty to put borrowers’

interests ahead of their own,” id. at 368, 760 S.E.2d at 267, though “it is possible, at

least theoretically, for a particular bank-customer transaction to ‘give rise to a

fiduciary [relationship] given the proper circumstances,’ ” id. at 368, 760 S.E.2d at

267 (quoting Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 61, 418

S.E.2d 694, 699, disc. rev. denied, 332 N.C. 482, 421 S.E.2d 350 (1992)).          Here

plaintiffs fail to allege any special circumstances that could establish a fiduciary

relationship. Plaintiffs’ allegations establish nothing more than a typical debtor-

creditor relationship, wherein any duty would be created by contract through the loan

agreement.

       Even if a plaintiff can show circumstances giving rise to a duty beyond the four

corners of the loan agreement, absent a sufficient allegation and showing of

justifiable reliance, a plaintiff’s negligence claims fail. See id. at 369, 760 S.E.2d at

267.   “Reliance is not reasonable if a plaintiff fails to make any independent

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                                     Opinion of the Court



investigation,” id. at 369, 760 S.E.2d at 268 (quoting State Props., LLC v. Ray, 155

N.C. App. 65, 73, 574 S.E.2d 180, 186 (2002), disc. rev. denied, 356 N.C. 694, 577

S.E.2d 889 (2003)), or fails to demonstrate he was “prevented from doing so,” id. at

370, 760 S.E.2d at 268.        Further, a plaintiff must establish that the lender

proximately caused his injury. See, e.g., Bumpers v. Cmty. Bank of N. Va., 367 N.C.

81, 88-90, 747 S.E.2d 220, 226-27 (2013).

       The MLA, which was enacted by the General Assembly in 2001,8 applied solely

to loans “primarily for personal, family, or household use, primarily secured by either

a mortgage or a deed of trust on residential real property located in North Carolina.”

N.C.G.S. § 53-243.01(15) (2005) (repealed 2009); see also Fazzari v. Infinity Partners,

LLC, ___ N.C. App. ___, ___, 762 S.E.2d 237, 243 (2014) (“The MLA applied to

residential loans and was intended to protect residential borrowers.” (citation

omitted)). The operative provisions of the MLA during the relevant period here are:

              § 53-243.11. Prohibited activities.
                     In addition to the activities prohibited under other
              provisions of this Article, it shall be unlawful for any
              person in the course of any mortgage loan transaction:
              (1)   To misrepresent or conceal the material facts or
              make false promises likely to influence, persuade, or induce
              an applicant for a mortgage loan or a mortgagor to take a
              mortgage loan, or to pursue a course of misrepresentation
              through agents or otherwise.

       8Act of Aug. 23, 2001, ch. 393, sec. 2, 2001 N.C. Sess. Laws 1425, 1425-40, repealed
and recodified by Act of July 22, 2009, ch. 374, 2009 N.C. Sess. Laws 681 (titled “North
Carolina Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act”) (codified as
amended at N.C.G.S. §§ 53-244.010 to 53-244.121).

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                                  Opinion of the Court



             ....

             (8)    To engage in any transaction, practice, or course of
             business that is not in good faith or fair dealing or that
             constitutes a fraud upon any person, in connection with the
             brokering or making of, or purchase or sale of, any
             mortgage loan.
             ....

             (11) To influence or attempt to influence . . . the
             development, reporting, result, or review of a real estate
             appraisal sought in connection with a mortgage loan.

N.C.G.S. § 53-243.11 (2005) (repealed 2009).

      The MLA does not apply here because plaintiffs fail to allege that they

purchased the properties for “personal, family, or household use,” and the complaint

indicates they purchased nothing more than undeveloped real estate, characterized

as an “investment.” See Fazzari, ___ N.C. App. at ___, 762 S.E.2d at 243 (finding the

MLA inapplicable when the “Plaintiffs’ own complaint describes the sale of the

founders’ lots as an ‘Investment Scheme’ and consistently refers to the investment

purchasers as ‘investors’ ”). Plaintiffs purchased the undeveloped lots from Saunders,

marketed as an “investment” and for its “good investment potential.” In fact, some

individual plaintiffs purchased multiple, noncontiguous lots.     Further, plaintiffs

could not have used the property for residential purposes at the time of purchase, or

for some time thereafter, because infrastructure and amenities had yet to be built

and were delayed well into the future. Saunders informed plaintiffs of these delays

before plaintiffs closed on their loans with BB&T, as expressly acknowledged in their


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                                   Opinion of the Court



signed receipts of the Property Reports. Plaintiffs’ assertions that they did not read

the Property Reports, or that the Reports were buried in hundreds of pages of

disclosure material, are insufficient to bring their investment purchases within the

ambit of the MLA. See Ussery, ___ N.C. at ___, 777 S.E.2d at 279.

      BB&T could not have violated the MLA by acting in bad faith when it did not

disclose information it did not have, was not asked to provide, or was not

contractually obligated to produce. See Suntrust Bank v. Bryant/Sutphin Props.,

LLC, 222 N.C. App. 821, 833, 732 S.E.2d 594, 603 (concluding that the bank did not

breach the covenant of good faith and fair dealing when the claimant failed to

establish breach of the contract), disc. rev. denied, 366 N.C. 417, 735 S.E.2d 180

(2012); see also Bicycle Transit Auth. v. Bell, 314 N.C. 219, 228, 333 S.E.2d 299, 305

(1985) (“There is implied in every contract a covenant by each party not to do anything

which will deprive the other parties thereto of the benefits of the contract.” (emphasis

added) (quoting Harm v. Frasher, 5 Cal. Rptr. 367, 374, 181 Cal. App. 2d 405, 417

(1960))). Accordingly, plaintiffs’ attempts to establish a breach of duty under the

MLA or the duty of good faith and fair dealing fail.

      In sum, plaintiffs’ allegations are insufficient to establish that BB&T owed or

breached any duty. Plaintiffs have not alleged that their investment purchases were

contingent on an appraisal nor have they alleged breach of contract by the bank. The

complaint reveals that plaintiffs obligated themselves to purchase the properties

without consulting an appraisal. Because plaintiffs’ claims depend upon BB&T’s

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                                     Opinion of the Court



alleged omission of appraisal information, which BB&T had no duty to provide,

plaintiffs’ claims, as pled, fail.

       Even if we were to find here, for the first time, that debtor-creditor

relationships give rise to some heightened duty, plaintiffs have not alleged that they

inquired, or were prevented from inquiring, about the appraisal information, and

thus they have not established justifiable reliance. Dallaire, 367 N.C. at 370, 760

S.E.2d at 268 (concluding that when the borrowers “put forth no evidence that they

made inquiry or were prevented from doing so, they have failed to demonstrate [ ]

justified reliance”); see also Calloway v. Wyatt, 246 N.C. 129, 135, 97 S.E.2d 881, 886

(1957) (“A sale of land will not be vitiated by false representations of the seller . . .

where the purchaser had sufficient opportunity to examine the subject of the

representations but made no examination or investigation, and was not prevented

from so doing by any artifice of the seller . . . .” (quoting Hays v. McGinness, 208 Ga.

547, 547, 67 S.E.2d 720, 720 (1951) (syllabus by the court))).

       Moreover, plaintiffs fail to allege actual reliance upon an appraisal at all and

therefore, fail to establish proximate cause. Fazzari, ___ N.C. App. at ___, 762 S.E.2d

at 243-45 (finding it well established that “the plaintiff must show actual reliance on

the alleged misrepresentation in order to establish [proximate cause]” and denying

relief when “the purchase contracts were not subject to any appraisal contingencies”).

Accordingly, without establishing justifiable reliance or proximate cause, plaintiffs’

claims fail. See Bumpers, 367 N.C. at 88-90, 747 S.E.2d at 226-27 (requiring actual

                                            -18-
                                 ARNESEN V. RIVERS EDGE

                                      Opinion of the Court



reliance to establish proximate cause element of an unfair and deceptive trade

practices claim); Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 568-

71, 374 S.E.2d 385, 391-93 (1988) (noting that reasonable reliance must be shown to

make a case for actionable fraud); Booe v. Shadrick, 322 N.C. 567, 570, 369 S.E.2d

554, 555-56 (1988) (requiring a “measurable” benefit conferred upon and accepted by

the defendant for an unjust enrichment claim); Reid v. Holden, 242 N.C. 408, 414-15,

88 S.E.2d 125, 130 (1955) (implying that proximate cause is required for civil

conspiracy claim seeking damages caused by acts done by one or more conspirators);

Hoke v. E.F. Hutton & Co., 91 N.C. App. 159, 162-63, 370 S.E.2d 857, 859-60 (1988)

(requiring actual reliance on the “predicate act” alleged in a complaint to establish

proximate cause for federal RICO claim). Accordingly, BB&T is entitled to dismissal

on all claims.

       Similar to the allegations against BB&T, each of plaintiffs’ claims against the

Appraisers, as pled, depends on an alleged duty of care owed by the Appraisers,

coupled with assertions that plaintiffs justifiably relied on their faulty appraisals and

that the Appraisers proximately caused plaintiffs’ injury.9              Because plaintiffs’



       9  The complaint reveals, inter alia, that each of plaintiffs’ stated claims against the
Appraisers seeks to impose a duty, assert justifiable reliance, or establish proximate cause
as follows:
        (1) Plaintiffs’ negligence claim relies on allegations that the Appraisers “owed a duty
to the Plaintiffs to exercise due care in the performance of the appraisals,” that the
Appraisers “communicat[ed] a misleading or fraudulent report,” and that plaintiffs’
“damages were reasonably foreseeable to the [Appraisers] and were proximately cause [sic]
by the[ir] negligence.”

                                             -19-
                                 ARNESEN V. RIVERS EDGE

                                     Opinion of the Court



complaint reveals an absence of both law and facts necessary to sufficiently allege

that the Appraisers owed them a duty of care or to establish the substantive elements

of a legally recognized claim, dismissal for the Appraisers on all claims is proper.

       In Raritan River Steel Co. v. Cherry, Bekaert & Holland we reviewed in depth

the duty an accountant owes to nonclients who make use of an accountant’s prepared

financial reports, and we find that case instructive here. 322 N.C. 200, 207-16, 367

S.E.2d 609, 613-18 (1988); see also Ballance v. Rinehart, 105 N.C. App. 203, 206-08,

412 S.E.2d 106, 108-09 (1992) (applying the tenets of Raritan to liability in the real

estate appraisal context). An accountant who prepares financial reports for his client

clearly owes a duty of care to his client, Raritan, 322 N.C. at 210, 214, 367 S.E.2d at



        (2) Plaintiffs’ negligent misrepresentation claim relies on allegations that their
“interest in their . . . transaction places them within a limited class to whom the
[A]ppraisers . . . owe a duty of due care,” that plaintiffs “relied on the false and misleading
information supplied by the [Appraisers],” and that their “reliance was justifiable.”
        (3) Plaintiffs’ fraud claim relies on allegations that the Appraisers were “under a
duty to disclose the truth regarding their misrepresentations” and that they delivered “false
and misleading [appraisals].”
        (4) Plaintiffs’ RICO claim relies on allegations that, “[a]s a direct and proximate
result [of the Appraisers’ participation in the RICO scheme], the Plaintiffs have been
injured in their business or property” and that the Appraisers “conduct[ed] . . . misleading
and inflated appraisals of the property.”
        (5) Plaintiffs’ unfair and deceptive trade practices claim relies on allegations that
plaintiffs suffered damages “[a]s a proximate and direct result of the [Appraisers’] unfair
and/or deceptive acts or practices” as alleged in the aforementioned claims.
        (6) Plaintiffs’ unjust enrichment claim relies on allegations that “inequitable
enrichment, benefits, and ill-gotten gains [were] acquired as a result of the wrongful conduct”
alleged in the aforementioned claims and that plaintiffs’ purchases were “at inflated prices.”
       (7) Plaintiffs’ conspiracy claim relies on allegations that the damages they sustained
were “a direct and proximate result of the acts committed” by the Appraisers and that the
Appraisers “artificially manipulate[ed] the values of the properties.”

                                             -20-
                               ARNESEN V. RIVERS EDGE

                                   Opinion of the Court



614, 617; however, the duty may extend to “persons . . . whom [the accountant] knows

and intends will rely on his opinion, or whom [the accountant] knows his client

intends will so rely,” id. at 214, 367 S.E.2d at 617. In the latter circumstance, “the

accountant must know of his client’s intent at the time the accountant audits or

prepares the information.” Id. at 210, 367 S.E.2d at 614. The duty does not extend

“liability to all persons whom the accountant should reasonably foresee might obtain

and rely on the accountant’s work.” Id. at 210, 367 S.E.2d at 615; see id. at 214, 367

S.E.2d at 617.

      Further, liability will only extend if there is justifiable reliance. Id. at 209-10,

214, 367 S.E.2d at 614, 617.        “[A] party cannot show justifiable reliance on

information contained in audited financial statements without showing that he relied

upon the actual financial statements themselves . . . .” Id. at 206, 367 S.E.2d at 612

(emphasis added). As discussed previously, to establish justifiable reliance a plaintiff

must sufficiently allege that he made a reasonable inquiry into the misrepresentation

and allege that he “was denied the opportunity to investigate or that he could not

have learned [. . . the true facts] by exercise of reasonable diligence.” Dallaire, 367

N.C. at 369, 760 S.E.2d at 267 (quoting Pinney v. State Farm Mut. Ins. Co., 146 N.C.

App. 248, 256, 552 S.E.2d 186, 192 (2001), disc. rev. denied, 356 N.C. 438, 572 S.E.2d

788 (2002)).     Similarly, proximate cause in the appraisal context requires that

“plaintiffs actually relied on defendant’s appraisal report.” Alva v. Cloninger, 51 N.C.

App. 602, 611, 277 S.E.2d 535, 541 (1981). These limitations “hold accountants to a

                                          -21-
                               ARNESEN V. RIVERS EDGE

                                   Opinion of the Court



standard that accounts for their contemporary role in the financial world . . . [while

balancing] the need to protect them from liability that unreasonably exceeds the

bounds of their real undertaking.” Raritan, 322 N.C. at 215, 367 S.E.2d at 617.

      Plaintiffs here fail to establish that the Appraisers owed them a duty of care.

The complaint reveals that BB&T, not plaintiffs, hired the Appraisers to evaluate

properties for the bank’s own internal underwriting purposes; thus, BB&T, not

plaintiffs, was the Appraisers’ client. See Fazzari, ___ N.C. App. at ___, 762 S.E.2d

at 242 (“[A]ppraisals and underwriting are for the benefit of the lenders, not for the

borrowers.”). At no time did plaintiffs engage, communicate with, or deal with the

Appraisers directly, nor did plaintiffs receive, review, or request any information from

the Appraisers. Likewise, plaintiffs have not sufficiently alleged that the Appraisers

knew that BB&T intended to use the appraisals to benefit or influence plaintiffs in

any way when they prepared them. See Raritan, 322 N.C. at 213, 367 S.E.2d at 616

(“[A]ccountants should not be liable in circumstances where they are unaware of the

use to which their opinions will be put.”). Because plaintiffs fail to establish a legal

duty, their negligence claims against the Appraisers fail.

      Moreover, even if we were to find that the Appraisers did owe plaintiffs a duty

of care, plaintiffs fail to sufficiently allege that they justifiably relied upon any

representation by the Appraisers, or lack thereof, or that the Appraisers proximately

caused injury to plaintiffs. Plaintiffs assert, essentially, that they indirectly relied

upon the Appraisers’ faulty information because BB&T chose to close on their loans.

                                          -22-
                               ARNESEN V. RIVERS EDGE

                                   Opinion of the Court



Plaintiffs’ complaint fails to establish that they relied on actual appraisals; thus,

plaintiffs fail to establish justifiable reliance and their negligence claims must fail.

See id. at 205-07, 367 S.E.2d at 612-13. Further, because the complaint reveals that

plaintiffs chose to purchase the properties independent of an appraisal and

independent of their decision on whether and how to finance their purchases,

plaintiffs’ allegations are insufficient to establish that the Appraisers proximately

caused injury to plaintiffs. Accordingly, plaintiffs’ remaining claims fail. See Alva,

51 N.C. App. at 611, 277 S.E.2d at 541; see also Bumpers, 367 N.C. at 88-90, 747

S.E.2d at 226-27; Myers & Chapman, 323 N.C. at 568, 374 S.E.2d at 391; Booe, 322

N.C. at 570, 369 S.E.2d at 555-56; Reid, 242 N.C. at 414-15, 88 S.E.2d at 130; Hoke,

91 N.C. App. at 162-63, 370 S.E.2d at 859-60. In sum, dismissal of plaintiffs’ claims

against the Appraisers, as pled, was proper.

      In conclusion, the complaint reveals that plaintiffs chose to invest in

undeveloped real property without consulting an appraisal. For the properties at

issue here, the bank ordered only a limited number of appraisals, which were for its

own internal use. It is undisputed that plaintiffs did not view, request, or inquire

about an appraisal before deciding to purchase the properties. Any representations

regarding property development, investment potential, or the like were made by

developer Saunders, not the bank or the Appraisers. Taking the well-pled material

allegations of the complaint as true, BB&T and the Appraisers are entitled to




                                          -23-
                               ARNESEN V. RIVERS EDGE

                                   Opinion of the Court



dismissal on all claims set forth in plaintiffs’ complaint. Accordingly, we affirm the

decision of the trial court.

       AFFIRMED.




       Justice HUDSON, concurring in part and dissenting in part.

       I agree with the majority that these cases arose out of plaintiffs’ purchase of

certain real estate and that many of plaintiffs’ claims were properly dismissed under

Rule 12(b)(6).   However, with respect to plaintiffs’ claims against the appraiser

defendants (James Powell, James Powell Appraisals, LLC, and Lynn Rabello) and

the BB&T defendants (Branch Banking and Trust Company, and BB&T Collateral

Service Corporation), I conclude that the claims for negligent misrepresentation

(against appraiser defendants only), for unfair and deceptive acts and practices

(UDAP) under Article 1 of N.C.G.S. Chapter 75 (against BB&T defendants only), and

for fraud (against both groups) were sufficiently pleaded to survive dismissal. Finally,

the trial court dismissed plaintiffs’ claims for civil conspiracy against both sets of

defendants because no underlying claims remained.         Because I would hold that

several claims do survive, I would allow the civil conspiracy claims against these

defendants to go forward as well. Accordingly, I respectfully dissent as to these

claims only.

                           Plaintiffs’ Claims against Appraisers



                                          -24-
                                ARNESEN V. RIVERS EDGE

                    HUDSON, J., concurring in part and dissenting in part



        Among other claims against the appraiser defendants, plaintiffs alleged

negligent misrepresentation and fraud, both of which include reliance as an element.1

The majority repeatedly states that plaintiffs have failed to allege reliance; however,

review of the complaint shows otherwise. “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 asserting fraud claims plaintiffs must allege that the

actions were “made with intent to deceive,” Rowan Cty. Bd. of Educ. v. U.S. Gypsum

Co., 332 N.C. 1, 17, 418 S.E.2d 648, 658-59 (1992) (citations omitted). Defendants

here argue that without reliance, there can be no actionable deception.

        First, we must look at the critical allegations in the complaint related to

plaintiffs’ claims for negligent misrepresentation and fraud against the appraiser

defendants. For purposes of our Rule 12(b)(6) analysis, we take these allegations as

true:

                        SEVENTH CLAIM FOR RELIEF
               (Negligent Misrepresentation— Alternative Claim
               - Defendants Powell, James Powell Appraisals and
                                    Rabello)

                     366. Plaintiffs reallege and incorporate by reference


        Plaintiffs also alleged claims against the BB&T defendants for fraud and unfair acts
        1

and practices under N.C.G.S. Chapter 75. These claims are discussed more extensively
below, but any reliance elements contained in them should survive based on the following
discussion.

                                            -25-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



all prior allegations of this Amended Complaint.
       367. Alternatively, in the course of their business
and profession, and in a transaction in which they had a
financial interest, the Defendants James Powell
Appraisals, Powell and Rabello supplied information to the
Plaintiffs’ lender for the benefit of the Plaintiffs, and the
Defendants James Powell Appraisals, Powell and Rabello
intended for the Plaintiffs and the Plaintiffs’ lender to rely
on that information for guidance or benefit in the business
transaction.
       368. The Plaintiffs’ interest in their overall purchase
transaction places them within a limited class to whom the
appraisers, the Defendants James Powell Appraisals,
Powell and Rabello, owe a duty of due care.
       369. The information supplied by the Defendants
James Powell Appraisals, Powell and Rabello, in the form
of appraisals conducted, was false and misleading.
       370. The Defendants James Powell Appraisals,
Powell and Rabello failed to exercise reasonable care or
competence in obtaining or communicating this false and
misleading information.
       371. Injury to the Plaintiffs and the other property
purchasers in the Coastal Communities subdivisions, as a
result of the appraisals conducted, was foreseeable to the
Defendants James Powell Appraisals, Powell and Rabello.
       372. Through the acceptance of the appraisals by
their lender, the Defendant BB&T, the Plaintiffs relied on
the false and misleading information supplied by the
Defendants James Powell Appraisals, Powell and Rabello,
and the Plaintiffs’ reliance was justifiable.
       373. The Defendants James Powell Appraisals,
Powell and Rabello were aware and/or should have been
aware of the importance of the appraisals to the Plaintiffs
and the other property purchasers/borrowers in the
Coastal Communities subdivisions and the reliance that
the Plaintiffs and the other property purchasers/borrowers
in the Coastal Communities subdivisions would place
thereon.
       374. The Plaintiffs’ reliance caused the Plaintiffs to
incur financial damage. Had the Defendants James Powell
Appraisals, Powell and Rabello disclosed the true facts,


                              -26-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



including the actual market value of the properties, the
Plaintiffs would not have purchased the properties.
      375. As a direct and proximate result of the
negligent misrepresentation of the Defendants James
Powell Appraisals, Powell and Rabello, the Plaintiffs have
been damaged in an amount in excess of Ten Thousand
Dollars ($10,000.00), with the precise amount to be
determined at the trial of this matter.

             EIGHTH CLAIM FOR RELIEF
               (Fraud — All Defendants)

       376. The Plaintiffs reallege and incorporate by
reference all prior allegations of this Amended Complaint.
       377. Under the control and direction of the
Defendant Saunders, the agents and employees of various
planned residential subdivisions in Brunswick County,
North Carolina, including, but not limited to, Rivers Edge
sections 9-11, 13-15, 17-19, promised and promoted
seemingly legitimate investments in real estate while in
actuality operating a highly successful scheme designed for
the benefit of the Defendants Saunders, Gordon, Powell,
Rabello, certain employees and/or executives of the
Defendant BB&T and the various corporate entities of the
Defendant Saunders, including the Defendants Rivers
Edge, Coastal Communities, MAS Properties, and TMC, to
the damage of the Plaintiffs and countless other property
owners.
       378. The Plaintiffs were individually approached
and specifically targeted by the Defendants Coastal
Communities and/or Rivers Edge by direct mail solicitation
and special events as promotional techniques to induce
likely and prospective purchasers or lessees to visit the
subdivision or to purchase or lease a lot in the subdivision.

      ....

      381. In order to accomplish this scheme, under the
control and direction of the Defendant Saunders, the
agents and employees of the various corporate entities,
including the Defendants Rivers Edge, Coastal


                              -27-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



Communities, TMC, James Powell Appraisals and BB&T,
mislead [sic] potential purchasers throughout one or more
of the various facets of purchasing the property, arranged
for and/or procured the financing for the fraudulent
transactions.
        382. Each Defendant is joined in this action as a co-
conspirator. Liability arises from the fact that each
Defendant entered into an agreement with the other
Defendants to commit or to participate in the commission
of all or part of the unlawful acts, practices, plans, schemes,
and transactions to defraud and mislead Plaintiffs and
other Coastal Communities property purchasers by: (i)
artificially manipulating the values of the properties; (ii)
entering into an arrangement with a local appraiser and
lender in order to control the appraisal and lending
process; (iii) using a fraudulent marketing strategy to
create the false appearance of high demand and a false
sense of urgency to purchase unimproved and undeveloped
property with seemingly little risk; (iv) controlling the loan
application       and    settlement     process;     and    (v)
misrepresenting the infrastructure and amenities to be
developed.
        383. Upon information and belief, the agents and
employees of the various corporate entities under the
control and direction of the Defendant Saunders, including
the Defendants Coastal Communities and/or Rivers Edge,
employed a marketing strategy to fraudulently lure buyers
through the misrepresentation of: (i) the infrastructure and
amenities to be developed, (ii) the availability of the
property, and (iii) the degree of interest in the property.
        384. Upon the Coastal Communities property
owners’ visits to the subdivision of Rivers Edge prior to
their execution of the Sales Contracts, the Defendants
Coastal Communities and/or Rivers Edge presented the
Plaintiffs with various marketing materials, community
maps, plats and other artistic representations outlining the
Master Plan of the development. The information and
representations provided by the Defendants Coastal
Communities and/or Rivers Edge or their authorized
agents, including, but not limited to, the marketing
materials exhibited by the Defendants Coastal


                              -28-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



Communities and/or Rivers Edge at the location and
presented to the Plaintiffs, upon which the Plaintiffs relied,
indicated inter alia that the subdivision of Rivers Edge
offered various amenities, including a southern style
clubhouse, property owners clubhouse with outdoor Jr.
Olympic sized pool and heated indoor pool, outdoor hot tub,
fitness center with steam room and sauna, tennis courts,
27 acre fresh water Palmer Lake with canoeing and
kayaking, walking/nature trails and sidewalks through the
community, private beach club, and other recreational
amenities. Specifically, the new sections of Rivers Edge to
be referred to as “Fairway Crossing” would contain an
entrance gate, Palmer Lake and surrounding ponds,
walking/nature trails and sidewalks surrounding the 11th,
12th, 13th and 14th holes of the Arnold Palmer golf course at
Rivers Edge.

      ....

       386. Upon information and belief, the Defendant
Saunders and/or the agents and employees of the various
corporate entities under the control and direction of the
Defendant Saunders, including the Defendants Coastal
Communities and/or Rivers Edge, made an arrangement
with a local appraiser, the Defendant Powell of the
Defendant James Powell Appraisals, to ensure that
appraisals would be generated using comparable sales of
other properties marketed and sold by the Defendants
Coastal Communities and/or Rivers Edge, at inflated
prices.
       387. Upon information and belief, in order to justify
these sales prices for the Coastal Communities properties,
the Defendants Powell, Rabello and James Powell
Appraisals purposefully failed to consider sales prices for
comparable lots outside of the Coastal Communities
developments when establishing the appraised value of the
lots and appraisals were performed on the property as-is,
rather than subject to the extraordinary assumption that
the developments would be completed as planned and
promised, with infrastructure and amenities.
       388. Upon information and belief, the Defendants


                              -29-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



Powell, Rabello and James Powell Appraisals thereby
engaged in the fabrication and use of fraudulently
overstated appraisals to justify the financing of Coastal
Communities properties.
       389. Upon information and belief, the Defendant
Saunders conducted and controlled the appraisal process
with the Defendants Powell, Rabello and James Powell
Appraisals, through the Defendant TMC, a private
mortgage brokerage and corporate entity under the control
and direction of the Defendant Saunders and the
Defendant Gordon, Vice President and managing principal
of the Defendant TMC.
       390. Upon information and belief, the Defendants
concealed their practice of manipulating appraised values
from the Plaintiffs and other Coastal Communities
property purchasers and utilized this practice at each one
of their developments. Therefore, the Plaintiffs and other
Coastal Communities property purchasers did not know
and had no reason to know that the Defendants had
manipulated the appraised value of the property.

      ....

       393. Because the Defendant Saunders and/or the
agents and employees of the various corporate entities
under the control and direction of the Defendant Saunders,
including the Defendants Coastal Communities and/or
Rivers Edge, only offered the advertised financial
incentives to Plaintiffs who used the services of the
Defendants TMC and Gordon and thereafter controlled the
lending process through the Defendants TMC and Gordon,
it was certain that the Defendant BB&T, the lender
participating in the agreement to generate the inflated and
manipulated appraisals, would be used.
       394. Upon information and belief, the Defendant
BB&T approved, funded and handled the loans for the
Plaintiffs and the vast majority of Coastal Communities
property purchasers from 2004 until 2007 and distributed
over 400 million dollars in lot loans to Coastal
Communities property purchasers in Brunswick County,
North Carolina during this time.


                              -30-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



       395. Upon information and belief, the Defendant
BB&T did not follow either industry standards or their own
internal guidelines governing loan origination and
underwriting when handling the loan applications of the
Plaintiffs or other Coastal Communities property
purchasers. The Defendant BB&T approved the majority of
the loans without any contact to the applicants to justify
the information received and paid the Defendant TMC for
the referrals for each loan application, upon information
and belief.
       396. For several years, from on or about 2004 until
on or about 2007, BB&T regional bankers continued
issuing loans for Coastal Communities property owners in
the lot loan program in order to meet their own BB&T
expanding growth goals regardless of whether the loans
should have been approved and/or the properties were
being developed by the Defendant Saunders and his
various corporate entities as represented to property
owners.
       397. The Defendant BB&T ensured that the vast
majority of lot loans were approved and money disbursed
at the closing of the Coastal Communities lot sales,
notwithstanding their knowledge of and dependence upon
the fraudulently overstated appraisals performed by the
Defendant Rabello of the Defendant James Powell
Appraisals to justify the inflated amounts of the lot loans,
upon information and belief.
       398. Upon information and belief, the Defendant
BB&T’s regional branch managers and/or loan officers then
continued in bad faith to issue loans to the Plaintiffs and
other Coastal Communities property purchasers in the lot
loan program, relying on fraudulent appraisals, knowing
that the loans were under-collateralized and knowing that
the infrastructure and amenities of the developments were
not being completed as promised, in order to meet their
own BB&T expanding growth goals regardless of whether
the loans should have been approved and/or whether the
properties were being developed by the Defendant
Saunders and his various corporate entities as represented
to property owners.
       399. All of the Defendants were under a duty to


                              -31-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



disclose the truth regarding their misrepresentations and
concealed material facts of which only they knew or could
have known, and to make a full and open disclosure of all
such information.
        400. The silence and/or omission of the Defendants
related to material matters known by the Defendants
which they had a legal duty to disclose to the Plaintiffs and
other Coastal Communities property purchasers.
        401. In addition, the Defendants have taken
affirmative steps to conceal material facts regarding the
property purchase, appraisal process, and loan process
from the Plaintiffs and other Coastal Communities
property purchasers, who were unaware and unable to
discover these material facts through their reasonable
diligence.
        402. With regard to the Defendant BB&T, the
regional executives mentioned above (Glen Heintz, the
regional retail banking manager and Jeff Etheridge, the
regional president for BB&T) and local Brunswick County
branch managers and/or loan officers (specifically, Brian
Walker, Vi Jones, Connie Norton, and others) were under
a duty to make such disclosures to the Plaintiffs and other
Coastal Communities property purchasers. Instead, the
executives, branch managers, and/or loan officers forced
through the loan applications and benefited from the
increased production from the “lot loan program,” and
received higher salaries and/or large yearly bonuses
(anywhere from 30% to 100% of their salaries) through the
Defendant BB&T’s bonus system.
        403. By concealing their conduct designed to
artificially inflate the market for the sale of lots in the
subdivision, including but not limited to the high-pressure
and misleading sales tactics, appraisals that reached a pre-
determined result and were otherwise deficient and
designed to support an inflated purchase price, irregular
and deceptive brokerage and lending practices, and
affixing of excess revenue stamps to recorded deeds, as
alleged herein, all Defendants, in essence, together and by
their own acts and omissions, perpetrated a fraud on the
market, including the Plaintiffs, which in fact inflated the
market.


                              -32-
                               ARNESEN V. RIVERS EDGE

                   HUDSON, J., concurring in part and dissenting in part



                    404. All of the Defendants’ misrepresentations
             and/or concealments were reasonably calculated to deceive
             the Plaintiffs and other Coastal Communities property
             purchasers, in that all of the Defendants knew their
             representations and/or concealments were false or were
             made recklessly, without any knowledge of truth or falsity,
             as a positive assertion, and where all of the Defendants
             knew there was a duty to disclose all material facts, or
             where all of the Defendants were recklessly indifferent to
             their duty to disclose.
                    405. The Defendants’ misrepresentations and/or
             concealments were done with the intent to deceive the
             Plaintiffs, and the Plaintiffs were in fact deceived by these
             misrepresentations and/or concealments. The Plaintiffs’
             reliance on the Defendants’ false representations was
             reasonable.
                    406. The Plaintiffs have suffered actual damages as
             a result of their reliance on all of the Defendants’ false
             representations and/or concealments. Had any of the
             Defendants disclosed the true facts, the Plaintiffs would
             not have purchased the property.
                    407. As a direct and proximate result of the
             Defendants’ fraudulent conduct, the Plaintiffs have been
             damaged in an amount in excess of Ten Thousand Dollars
             ($10,000.00), with the precise amount to be determined at
             the trial of this matter.

In my view, these allegations are sufficient to withstand dismissal under existing

North Carolina law.

      The trial court found as follows:

                    [52] Plaintiffs in this case allege in substance that
             they indirectly relied on the appraisal reports. However,
             the North Carolina Supreme Court, in Raritan, held that
             indirect reliance will not support a claim for negligent
             misrepresentation. . . . (Footnote call number omitted.)

                   ....



                                           -33-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



      [Trial Court summarizes our opinion in Raritan.]

       [54] In sum, the court in Raritan affirmed dismissal
of the plaintiff’s negligent misrepresentation claim because
the plaintiff did not directly rely upon the audit report in
[sic] which it asserted was defective. Applying Raritan to
the present case, Plaintiffs must allege that they relied
directly on the appraisal reports themselves in order to
plead sufficiently a claim for negligent misrepresentation.
322 N.C. at 205-06. Post-Raritan, claims for negligent
misrepresentation that have failed to allege direct reliance
have been susceptible to dismissal. (Internal citations
omitted.)

      ....

      [Trial Court summarizes the precedent of the Court
of Appeals on this issue.]

       [59] Similar to the purchasers in Williams [v. United
Community. Bank, 218 N.C. App. 361, 724 S.E.2d 543
(2012)], Plaintiffs in the instant case purchased lots in
undeveloped, proposed residential communities. Further,
Plaintiffs allege that Coastal Defendants and the banks
controlled the loan and appraisal process. Indeed, the
banks procured the appraisals and subsequently approved
Plaintiffs’ loan applications. Plaintiffs do not allege that
they ever viewed or read the appraisal reports prior to
signing their purchase contracts or closing on their loans.
Instead, Plaintiffs’ [sic] argue, in conclusory fashion, that
they relied on the appraisals “regardless of whether they
viewed the appraisal report” because “if the appraisal
reports reflected fair market values below the purchase
price, none of the Plaintiffs would have moved forward and
closed the loan.” More specifically, Plaintiffs allege that
“[t]hrough the acceptance of the appraisals by their lender
[BB&T], the Plaintiffs relied on the false and misleading
information supplied by [Appraiser Defendants], and the
Plaintiffs’ reliance was justifiable.” In other words,
Plaintiffs contend that they indirectly relied on the
appraisal reports because BB&T presumably reviewed the


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                               ARNESEN V. RIVERS EDGE

                   HUDSON, J., concurring in part and dissenting in part



             reports and decided to close on their loans, implying that
             the lots appraised for the value of the loans. Thus, because
             BB&T decided to close on their loans, Plaintiffs assumed
             that the appraisal reports supported the loans and were
             not defective. (Footnote call numbers omitted.)
                    [60] Plaintiffs also allege, like the purchasers in
             Williams, that if Appraiser Defendants had disclosed any
             of the flaws in their appraisal reports or if Plaintiffs knew
             that the lots were overvalued, they would not have closed
             on their loans, and that they subsequently lost money as a
             result of the purchases. However, Plaintiffs’ Complaint
             makes it clear that they were not involved in the appraisal
             process, which was instead controlled by Coastal
             Defendants and BB&T. Further, Plaintiffs do not allege
             that they viewed any of the appraisals prior to signing the
             purchase contracts, which in any event were not contingent
             upon the appraised values for the lots. Consequently,
             Plaintiffs do not, and cannot, allege that they ever relied
             upon any appraisal of the property before they agreed to
             purchase said property. Moreover, Plaintiffs do not allege
             that they viewed the appraisals before closing on their
             loans with BB&T. Actual reliance is particularly lacking as
             to certain Plaintiffs who allege that their appraisal was
             performed after they closed on the loans. (Footnote call
             numbers omitted.)

      I do not agree with the trial court’s interpretation of Raritan River Steel,

although I recognize that it is the interpretation adopted by the Court of Appeals.

However, we are not bound by that precedent, and I conclude that common sense and

the plain language of our precedent lead to a contrary result. Consequently, I would

hold that the allegations of reliance here are adequate to support these claims.

      In 1981 the Court of Appeals decided Alva v. Cloninger, 51 N.C. App. 602, 277

S.E.2d 535 (1981). The plaintiffs there bought a house that turned out to have serious

structural defects. Id. at 603-05, 277 S.E.2d at 536-37. They filed suit against the


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                                ARNESEN V. RIVERS EDGE

                    HUDSON, J., concurring in part and dissenting in part



appraiser, seeking damages. Id. at 603, 277 S.E.2d at 536. The defendant argued

that he could not be liable for negligence because the plaintiffs were not in privity of

contract with him. Id. at 604, 277 S.E.2d at 537. The Court of Appeals disagreed,

noting that

                     [t]he evidence established prima facie that plaintiffs’
              reliance upon the appraisal was, or should reasonably have
              been, expected by defendant. The evidence also warrants
              an inference that plaintiffs actually relied on defendant’s
              appraisal report to NCNB and that defendant’s failure to
              discover and disclose the alleged defects in the house was
              a proximate cause of plaintiffs’ injury. Dr. Alva testified
              that the contract to purchase the house was conditioned
              upon his obtaining financing. . . . Dr. Alva also testified
              that he understood the loan was conditioned upon the
              appraisal and “assumed everything was all right when the
              loan was approved.” Dr. Alva’s assumption as to the import
              of the appraisal was substantiated by the testimony of
              witness McGhee, the lending officer, who said “[e]ither the
              repair work had to be done or we would have had to decline
              the loan application.”

Id. at 611, 277 S.E.2d at 541 (alteration in original). Under the reasoning in Alva,

plaintiffs here would have a claim against the appraiser defendants.

      The question then becomes whether this Court’s decision in Raritan River Steel

overturned Alva. In my view, the answer is no. First, the facts of each case are

distinguishable: Alva dealt with a situation similar to the one we have here—real

estate appraisals—whereas Raritan involved auditors and financial reports.           In

Raritan, the plaintiff alleged that it obtained the information it used to value a

company not from an actual audit of that company, but from information contained



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                                 ARNESEN V. RIVERS EDGE

                   HUDSON, J., concurring in part and dissenting in part



in a report prepared by a third party. Raritan, 322 N.C. at 205, 367 S.E.2d at 612.

Given those facts, this Court “conclude[d] that a party cannot show justifiable

reliance on information contained in audited financial statements without showing

that he relied upon the actual financial statements themselves to obtain this

information.” Id. at 206, 367 S.E.2d at 612. Second, that conclusion was based

             in part from an understanding of the audit report. . . .
             Isolated statements in the report, particularly the net
             worth figure, do not meaningfully stand alone; rather, they
             are interdependent and can be fully understood and
             justifiably relied on only when considered in the context of
             the entire report, including any qualifications of the
             auditor’s opinion and any explanatory footnotes included
             in the statements.

Id. at 207, 367 S.E.2d at 613.

      While the Court of Appeals has subsequently interpreted this precedent as

requiring direct reliance in all negligent misrepresentation claims, see, e.g., Fazzari

v. Infinity Partners, LLC, ___ N.C. App. ___, 762 S.E.2d 237 (2014), I am not convinced

our holding in Raritan should be read so narrowly. Instead, I am more inclined to

follow the reasoning in Alva. Nothing in Raritan mandates direct reliance—Raritan

only mandates actual reliance.       There the auditor relied on a summary of the

information contained in the report. Here the complaint alleges that the appraiser

defendants fabricated and overstated appraisals, and concealed from plaintiffs this

conduct, all of which became the basis for the approval of financing for plaintiffs’

purchases. In this way, plaintiffs allege they relied on the appraisals, regardless of



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                                ARNESEN V. RIVERS EDGE

                   HUDSON, J., concurring in part and dissenting in part



whether they personally viewed them. Additionally, unlike the summary report

relied upon by the plaintiff in Raritan, the appraisals here are more like the audit of

the original company that we concluded the plaintiff must have actually relied upon

there in order to establish a claim.       Plaintiffs here did not rely on “[i]solated

statements” from a summary but rather on “the entire report.” See Raritan, 322 N.C.

at 207, 367 S.E.2d at 613.

      Additionally, in Raritan, id. at 203, 209-10, 214-16, 367 S.E.2d at 611, 614-15,

617-18, this Court referenced the Restatement (Second) of Torts, a comment to which

is pertinent here and states:

             g. Information supplied directly and indirectly. The person
             for whose guidance the information is supplied is often the
             person who has employed the supplier to furnish it, in
             which case, if it is supplied for a consideration paid by that
             person, he has at his election either a right of action under
             the rule stated in this Section or a right of action upon the
             contract under which the information is supplied. In many
             cases, however, the information is supplied directly to the
             person who is to act upon it although it is paid for by the
             other party to the transaction. Thus, when a vendor of
             beans employs a public weigher to weigh beans, the
             weigher, who gives to the vendee a certificate which
             through his carelessness overstates the weight of the
             beans, is subject to liability to the vendee for the amount
             that he overpays in reliance upon the certificate. However,
             direct communication of the information to the person
             acting in reliance upon it is not necessary. In the situation
             above the liability of the weigher would not be affected by
             his giving the certificate to the vendor for communication
             to the vendee.




                                           -38-
                                 ARNESEN V. RIVERS EDGE

                     HUDSON, J., concurring in part and dissenting in part



Restatement (Second) of Torts § 552 (titled “Information Negligently Supplied for the

Guidance of Others”) (cmt. g (Am. Law Inst. 1977)) (emphasis added). Here the

appraisers are comparable to the “weigher” and their liability is “not . . . affected by

[their] giving the certificate [appraisal] to the vendor [BB&T] for communication to

the vendee [plaintiffs].”

       Further, this conclusion is bolstered by common sense and everyday

experience. When buying a house, parties commonly understand that unless the

house appraises for the contract price (at least), the lender will not approve a loan to

finance the purchase. Therefore, even though the appraisers here were hired by the

lender, to which it supplied the appraisals, plaintiffs allege that the appraisals were

essential to the transaction and were relied upon by the parties to the purchase. In

my view, the better reasoned approach allows such reliance to be either direct, if the

buyer actually sees the appraisal, or indirect, as here. And when, as here, the

plaintiffs have specifically and repeatedly alleged such reliance, I would hold that the

claims can proceed.

       Applying these principles here, I would allow plaintiffs’ claims for negligent

misrepresentation and fraud to go forward because plaintiffs have sufficiently

pleaded all necessary elements, including reliance.2 In my opinion, these allegations

are sufficient to survive a Rule 12(b)(6) motion to dismiss.



       2This reasoning does not apply to plaintiffs who closed on their loans before the
appraisal was completed. In that case, I do not include these plaintiffs as those who can

                                             -39-
                                   ARNESEN V. RIVERS EDGE

                     HUDSON, J., concurring in part and dissenting in part



                              Plaintiffs’ Claims against BB&T

       Because it appears that under the Mortgage Lending Act (MLA), N.C.G.S. 53-

243.11, the lender here owed a duty to these plaintiffs, I would allow several of

plaintiffs’ claims which allege this duty as a basis for liability on the part of BB&T to

go forward. N.C.G.S. § 53-243.11 (2005) (repealed 2009 and recodified as amended

at N.C.G.S. §§ 53-244.010 to 53-244.121).

       Initially, I disagree with the majority’s assertions that plaintiffs’ purchases of

these properties in residential communities fall outside the scope of the MLA. As

amended and recodified in N.C.G.S. § 53-244.020, the purpose of the MLA is as

follows:

                     (a) Purpose. – A primary purpose of this Article is to
              protect consumers seeking mortgage loans and to ensure
              that the mortgage lending industry operates without
              unfair, deceptive, and fraudulent practices on the part of
              mortgage loan originators. Therefore, the General
              Assembly establishes within this Article an effective
              system of supervision and enforcement of the mortgage
              lending industry by giving the Commissioner of Banks
              broad administrative authority to administer, interpret,
              and enforce this Article and adopt rules implementing this
              Article in order to carry out the intentions of the General
              Assembly.

                    (b) Construction. – It is the intent of the General
              Assembly that provisions of this Article be liberally
              construed to effect the purposes stated or clearly
              encompassed by the Article.




show reliance (even indirectly).

                                             -40-
                                 ARNESEN V. RIVERS EDGE

                     HUDSON, J., concurring in part and dissenting in part



Id. § 53-244.020 (2013).3      Plaintiffs allege in their complaint that they sought

mortgage loans for these purchases and that “BB&T at all times relevant herein was

acting as a mortgage lender pursuant to [the MLA].”

       The statute in effect during the events at issue here defined “[r]esidential real

property” as “[r]eal property located in the State of North Carolina upon which there

is located or is to be located one or more single-family dwellings or dwelling units.”

Id. § 53-243.01(19) (2005).     The majority opinion, as well as the complaint and the

trial court, repeatedly refer to plaintiffs’ purchases of real property in planned

residential developments. The majority’s assertion that the MLA does not apply

because plaintiffs “could not have used the property for residential purposes at the

time of purchase” cannot be accurate; people frequently buy lots upon which to build

residences, and the MLA surely applies to them. Additionally, despite the majority’s

repeated characterization of plaintiffs as “investors,” the complaint alleges no such

thing. None of the plaintiffs are described as an “investor” in the complaint; instead

each of the plaintiffs is described as an individual “citizen and resident” who

purchased property in a Brunswick County “subdivision” at issue here. The only



       3 Although this language was not included in the version of the MLA in effect at the
times pertinent to these events, most of the remaining language is identical or similar,
tending to indicate a similar remedial purpose. See, e.g., O & M Indus. v. Smith Eng'g Co.,
360 N.C. 263, 268, 624 S.E.2d 345, 348 (2006) (“A remedial statute must be construed
broadly ‘in the light of the evils sought to be eliminated, the remedies intended to be
applied, and the objective to be attained.’ Puckett v. Sellars, 235 N.C. 264, 267, 69 S.E.2d
497, 499 (1952).”).


                                             -41-
                                  ARNESEN V. RIVERS EDGE

                      HUDSON, J., concurring in part and dissenting in part



instances in which “investments” are mentioned are in plaintiffs’ allegations that

defendants marketed the lots as a “good investment.” That the lots, if properly

developed, could have been a sound investment does not deprive these purchases of

their residential nature, nor does it remove them from within the scope of the MLA.

In fact, for most people, their residence is their largest “investment,” and the MLA is

designed to protect that. Any duty arising out of the MLA should apply to the facts

alleged here.

      On this issue the trial court concluded:

                      [16] The gravamen of Plaintiffs’ Claims against
                BB&T is that the Bank had a duty under the MLA to
                appraise the collateral for the loans and inform Plaintiffs
                of the details of the loan process including Saunders’
                alleged involvement and selection of JPA as the appraiser.
                All of the Claims against BB&T are premised upon
                wrongful omissions by BB&T regarding the loan and
                appraisal processes, including Saunders’ alleged
                involvement and control over both.
                      [17] In the Preliminary Injunction Order, the court
                concluded that Plaintiffs failed to allege facts sufficient to
                show that BB&T acted improperly in issuing loans to
                purchasers of Coastal Communities Properties. The court
                noted that in an ordinary debtor-creditor relationship, a
                lender does not owe any duty to its borrower beyond the
                terms of the loan agreement. “[P]arties 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 . . . .” Branch Banking & Trust Co. v. Thompson,
                107 N.C. App. 53, 61 (1992). “A lender is only obligated to
                perform those duties expressly provided for in the loan
                agreement to which it is a party.” Lassiter v. Bank of North
                Carolina, 146 N.C. App. 264, 268 (2001). (Footnote call
                numbers omitted.)
                      [18] BB&T did not owe Plaintiffs a duty to disclose


                                              -42-
                               ARNESEN V. RIVERS EDGE

                   HUDSON, J., concurring in part and dissenting in part



            the details of the loan process not required to be disclosed
            under state or federal law or under the terms of the loan
            agreements. BB&T acted properly in issuing loans to
            Plaintiffs and did not violate any duties owed to Plaintiffs
            under the terms of the loan agreements. The court
            CONCLUDES that when measured under the standards of
            Rule 12(b)(6), the allegations in Plaintiffs’ Amended
            Complaints can not support their Claims against
            BB&T.

      I disagree. Under N.C.G.S. § 53-243.11, it was prohibited for a lender

            (1) To misrepresent or conceal the material facts or make
            false promises likely to influence, persuade, or induce an
            applicant for a mortgage loan or a mortgagor to take a
            mortgage loan, or to pursue a course of misrepresentation
            through agents or otherwise.

            ....

            (8) To engage in any transaction, practice, or course of
            business that is not in good faith or fair dealing or that
            constitutes a fraud upon any person, in connection with the
            brokering or making of, or purchase or sale of, any
            mortgage loan.

            ....

            (11) To influence or attempt to influence through coercion,
            extortion, or bribery, the development, reporting, result, or
            review of a real estate appraisal sought in connection with
            a mortgage loan.

N.C.G.S. § 53-241.11 (2005). The Court of Appeals has held that this statute created

a legal duty owed to buyers. Guyton v. FM Lending Servs., Inc., 199 N.C. App. 30,

681 S.E.2d 465 (2009). There the conduct alleged was that the lender had withheld

information that the property purchased by the plaintiffs lay in a flood plain. The



                                           -43-
                                ARNESEN V. RIVERS EDGE

                    HUDSON, J., concurring in part and dissenting in part



plaintiffs sued for fraud, negligent misrepresentation, and unfair and deceptive trade

practices.   Id. at 33, 681 S.E.2d at 469.         The Court of Appeals reasoned that,

“[a]lthough N.C. Gen. Stat. § 53-243.11 does not directly address the specific set of

factual circumstances present in this case, we conclude that this statutory provision

was intended to protect buyers against the sort of activity that is alleged to have

occurred here.” Id. at 43, 681 S.E.2d at 475. The court concluded:

              Assuming that Defendant did, in fact, engage in the
              conduct described in Plaintiffs’ complaint, Defendant
              would have clearly violated N.C. Gen. Stat. § 53-243.11. As
              a result, there is ample basis in North Carolina law . . . for
              concluding that Defendant would have violated a legal duty
              owed to Plaintiffs if it acted as described in Plaintiffs’
              complaint.

Id. at 44, 681 S.E.2d at 476. This reasoning equally applies here.

      Plaintiffs assert claims for fraud and unfair and deceptive trade practices

against BB&T, alleging that:

                     99. Upon information and belief, the Defendant
              Saunders and/or the agents and employees of the various
              corporate entities under the control and direction of the
              Defendant Saunders, including the Defendants Coastal
              Communities and/or Rivers Edge, made an arrangement
              with local lenders, including the Brunswick County, North
              Carolina, regional office of BB&T, to ensure that the
              lenders would rely upon the previously described
              appraisals which manipulated property values.
                     100. In addition, the Defendant BB&T financed
              early lot sales in the various undeveloped subdivisions with
              transactional values under $250,000.00, waiving the
              requirement of a full appraisal in most cases.
                     101. Upon information and belief, the Defendant
              BB&T’s waiver of a full appraisal for the lots with


                                            -44-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



transactional values of under $250,000.00 did not comply
with the requirements of the North Carolina
Administrative Code and/or the Defendant BB&T’s own
internal underwriting guidelines.

      ....

       112. Upon information and belief, the Defendant
BB&T approved, funded and handled the loans for the vast
majority of Coastal Communities property purchasers from
2004 until 2007 and distributed over 400 million dollars in
lot loans to Coastal Communities property purchasers in
Brunswick County, North Carolina during this time.
       113. Upon information and belief, the Defendant
BB&T did not follow either industry standards or their own
internal guidelines governing loan origination and
underwriting when handling the loan applications of the
Coastal Communities property purchasers.
       114. The Defendant BB&T employs a standard
practice whereby all loan applications submitted must be
approved through their Central Underwriting department
in Winston[-]Salem, North Carolina, upon information and
belief. Nevertheless, upon information and belief, the
decisions of the Defendant BB&T’s Central Underwriting
department may be overridden by the regional branches if
deemed necessary on a case-by-case basis.
       115. In the instant case, upon information and
belief, many of the loan applications of the Coastal
Communities property purchasers were turned down at
BB&T’s Central Underwriting department as a result of
gaps in information, debt to income ratio and/or credit
history in the loan applications of the Coastal Communities
property purchasers submitted by TMC.
       116. However, upon information and belief, Glen
Heintz, the regional retail banking manager for the
Defendant BB&T (for the region encompassing Brunswick
County, North Carolina) and/or Jeff Etheridge, the
regional president for the Defendant BB&T (for the region
encompassing Brunswick County, North Carolina), chose
to override the majority of the declines and approve the
loan applications regardless of any issues or concerns noted


                              -45-
                  ARNESEN V. RIVERS EDGE

      HUDSON, J., concurring in part and dissenting in part



in the applications by the Defendant BB&T’s Central
Underwriting department.
       117. As a result, in or about 2005, the Defendant
BB&T’s Central Underwriting department declined to
review the loan applications of the Coastal Communities
property purchasers from the Brunswick County region
altogether because they determined that the Brunswick
County region would override the majority of the declines
and approve the loan applications regardless of their
decisions, upon information and belief.
       118. Upon information and belief, following this
change in policy, BB&T Branch Managers throughout
Brunswick County, specifically, Brian Walker, Vi Jones
and Connie Norton, employed a “no phone call” policy in
order to handle the numerous faxed applications being
submitted by the Defendants TMC and Gordon (referred to
hereinafter as “the lot loan program”).
       119. Upon information and belief, the loan
applications were thereafter “forced through” and
approved by the Defendant BB&T without any contact to
the applicants to justify the information received.
       120. The Defendant BB&T thereafter paid the
Defendant TMC for the referrals for each loan application,
upon information and belief. At the height of the program,
the Defendant BB&T paid the Defendant TMC as much as
$15,000.00 to $20,000.00 per month for the referrals, upon
information and belief.
       121. The above mentioned BB&T executives
purposefully shifted the work with the “lot loan program”
to younger retail lenders that were less inclined to question
the internal adjustments made specifically for the
program, upon information and belief.

      ....

      125. Thereafter, upon information and belief, the
Defendant BB&T’s regional branch managers/loan officers
continued issuing loans for Coastal Communities property
owners in the lot loan program in order to meet their own
BB&T expanding growth goals regardless of whether the
loans should have been approved and/or the properties


                              -46-
                                ARNESEN V. RIVERS EDGE

                    HUDSON, J., concurring in part and dissenting in part



              were being developed by the Defendant Saunders and his
              various corporate entities as represented to property
              owners.

                     ....

                     127. Upon information and belief, the Defendant
              BB&T continued in bad faith to provide loans to the
              Plaintiffs and other Coastal Communities property owners
              in the lot loan program, relying on fraudulent appraisals
              and knowing that the infrastructure and amenities in all
              of the developments were not being completed as promised.

                     ....

                     135. Instead, the Defendant BB&T failed to
              maintain adequate and appropriate compliance reviews of
              the appraisals which would have easily alerted the
              Defendant BB&T that the appraisals were flawed and the
              lot prices were inflated, upon information and belief. If, in
              fact, compliance reviews were performed, the Defendant
              BB&T knew or should have known that the reviews were
              performed in an inadequate and inappropriate manner,
              upon information and belief.

Like in Guyton, if we take these allegations as true, they certainly suffice to support

a conclusion that BB&T breached a duty to plaintiffs here and therefore, any claims

requiring such a duty as an element, as well as claims under Chapter 75, should be

allowed to go forward.4

       In sum, for the above reasons, I would allow plaintiffs’ claims against the

appraiser defendants for negligent misrepresentation and fraud to proceed, as well



       4I am not inclined to go so far as to hold that the Mortgage Lending Act creates its
own cause of action, however. Thus, I would hold that plaintiffs’ claims on that cause were
properly dismissed.

                                            -47-
                                ARNESEN V. RIVERS EDGE

                    HUDSON, J., concurring in part and dissenting in part



as plaintiffs’ claims for fraud and for unfair and deceptive acts or practices under

Chapter 75 to go forward against the BB&T defendants. Moreover, based on reviving

these claims, I would allow the claims of civil conspiracy to proceed as to both sets of

defendants.

      Accordingly, I respectfully dissent from the majority opinion as to these claims

only. I concur with the majority’s decision regarding the remaining claims asserted

by plaintiffs and addressed in the majority opinion.



      Justice BEASLEY joins in this concurring in part, dissenting in part opinion.




      Justice EDMUNDS concurring in part; and dissenting in part.




      I join with that portion of the dissent that addresses plaintiffs’ claims against

defendants James Powell, James Powell Appraisers, LLC, and Lynn Rabello.

      I also join that portion of the dissent that would find that the MLA applies to

plaintiffs’ purchase of real property, even if made primarily for investment purposes.

However, because I do not believe that issue is dispositive of plaintiffs’ claims against

the BB&T defendants, I concur in the remainder of the majority opinion.




                                            -48-
