JACQUES A. DALLAIRE and wife, FERNANDE DALLAIRE
BANK OF AMERICA, N.A.; HOMEFOCUS SERVICES, LLC; and LANDSAFE SERVICES, LLC
Heard in the Supreme Court February 17, 2014
Ferguson, Scarbrough, Hayes, Hawkins & DeMay, P.A., by John F. Scarbrough and James E. Scarbrough, for plaintiff-appellees.
McGuire Woods, LLP, by Robert A. Muckenfuss, Lisa A. Lesner, Monica E. Webb, Justin T. Yedor, Elizabeth M.Z. Timmermans, for defendant-appellant Bank of America, N.A.
J.L. Pottenger, Jr. for Jerome N. Frank Legal Services Organization Mortgage Foreclosure Clinic, amicus curiae.
Poyner Spruill LLP, by Edwin M. Speas, Jr., David Dreifus, Andrew H. Erteschik, and Lynn C. Percival IV, for North Carolina Bankers Association, amicus curiae.
Laura E. Collins for University of North Carolina School of Law Consumer Financial Transactions Clinic, amicus curiae.
Justice BEASLEY did not
participate in the consideration or decision of this case.
On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision of the Court of Appeals,
__ N.C.App. __, 738 S.E.2d 731 (2012), affirming in part and reversing and remanding in part an order of summary judgment entered on 14 February 2012 by
Cabarrus County. No. 10CVS4366. W. David Lee, Judge in Superior Court.
In this case we consider whether a loan officer's statements about lien priority in a home mortgage transaction support a borrower's claims for breach of fiduciary duty and negligent misrepresentation against the lender. Generally, the home loan process is regarded as an arm's length transaction between parties of equal bargaining power and, absent exceptional circumstances, will not give rise to a fiduciary duty. Because a loan officer's initial discussion of lien priority in the context of an ordinary home mortgage transaction is not an exceptional circumstance, it does not create a fiduciary duty. In addition, a borrower cannot establish a claim for negligent misrepresentation based on a loan officer's statements about lien priority if the borrower fails to make reasonable inquiry into the validity of those statements. Because no fiduciary duty existed and plaintiffs did not forecast evidence that they made reasonable inquiry, the trial court correctly granted summary judgment for the lender on both claims. Accordingly, we reverse the decision of the Court of Appeals.
Jacques and Fernande Dallaire purchased a home as their primary residence in 1998 for $173,660. Seven years later the Dallaires filed Chapter 7 bankruptcy stemming from unrelated business debts. At that time the Dallaires' home was encumbered by three liens. Bank of America held a first priority deed of trust on a mortgage note for $138,900 and a second priority home equity line deed of trust for $25,000. Branch Banking & Trust (BB& T) held a third priority
lien securing a business loan in the amount of $241,449.37. The bankruptcy court's order discharged the Dallaires' personal liability on all three liens, but the liens remained attached to their home. In re ...