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Rosenthal v. Perkins

Filed: July 31, 1979.

DAVID ROSENTHAL AND WIFE, YONINA ROSENTHAL
v.
DOROTHY PERKINS, FINLEY GALLERY OF HOMES, INC., RICHARD GOLDBERG AND WIFE, JEAN GOLDBERG



Appeal by plaintiffs from Godwin, Judge. Order entered 10 July 1978 in Superior Court, Wake County. Heard in the Court of Appeals 24 May 1979.

Clark, Judge. Judges Vaughn and Carlton concur.

Clark

The plaintiffs in their complaint filed 31 October 1975, alleged three causes of action. The defendants Goldberg in their answer made eight defenses and two cross-claims. Defendants Perkins and Finley, Inc., in their answer made six defenses and a counterclaim. Plaintiffs filed a reply to the counterclaim. All parties agreed on a Proposed Order on Final Pretrial Conference in July 1978, but this Order was not submitted to the trial court because the motions of the defendants to dismiss all causes of action under Rule 12(b)(6) were heard and allowed on 10 July 1978.

First Cause Of Action

Plaintiffs' first cause of action is based on fraud. The essential elements of actionable fraud are as follows: (1) material misrepresentation of a past or existing fact; (2) the representation must be definite and specific; (3) made with knowledge of its falsity or in culpable ignorance of its truth; (4) that the misrepresentation was made with intention that it should be acted upon; (5)

that the recipient of the misrepresentation reasonably relied upon it and acted upon it; and (6) that there resulted in damage to the injured party. Cofield v. Griffin, 238 N.C. 377, 78 S.E.2d 131 (1953); Harding v. Southern Loan & Insurance Co., 218 N.C. 129, 10 S.E.2d 599 (1940).

The Rule 8 provision that pleadings are to be liberally construed under the notice theory of pleadings does not apply to fraud cases. Prior to the adoption of the Rules of Civil Procedure it was well-established that in a fraud cause the plaintiff must allege all material facts and circumstances constituting the fraud with particularity. Mangum v. Surles, 281 N.C. 91, 187 S.E.2d 697 (1972); Shuford, N.C. Civil Practice and Procedure, ยง 9-5. This established law was incorporated in G.S. 1A-1, Rule 9(b) which provides:

"(b) Fraud, duress, mistake, condition of the mind. -- In all averments of fraud, duress or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. . . ."

Plaintiffs allege that the misrepresentation consisted of the concealment of a material fact, i.e., "a drainage and flooding condition which caused flooding of the house from time to time." In some circumstances concealment or nondisclosure may be considered as a positive misrepresentation and serve as a basis for actionable fraud. Setzer v. Old Republic Life Insurance Co., 257 N.C. 396, 126 S.E.2d 135 (1962); Brantley v. Dunstan, 17 N.C. App. 19, 193 S.E.2d 423 (1972).

Assuming that the material fact concealed is alleged with sufficient specificity, we find no allegation that the concealment was done with the intent to induce plaintiffs to purchase the property. Nor do we find an allegation that plaintiffs reasonably relied upon the concealment and acted upon it. Plaintiffs have not alleged that they were denied the opportunity to investigate the premises or that they could not have discovered the flooding by the exercise of reasonable diligence. See Calloway v. Wyatt, 246 N.C. 129, 97 S.E.2d 881 (1957); Harding v. Southern Loan & Insurance Co., supra.

We conclude that plaintiffs' complaint fails to state a claim for relief based upon fraud and that the trial court did not err in ...


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