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Kaufman v. Bank of America, N.A.

United States District Court, W.D. North Carolina, Asheville Division

November 13, 2014

CATHY KAUFMAN and STACY KAUFMAN, Plaintiffs,
v.
BANK OF AMERICA, N.A., Defendant.

MEMORANDUM OF DECISION AND ORDER

MARTIN REIDINGER, District Judge.

THIS MATTER is before the Court on the Defendant's Motion for Summary Judgment [Doc. 33].

I. PROCEDURAL BACKGROUND

This action arises from the Plaintiffs' purchase of Lot 290 (the "Lot") in Grey Rock at Lake Lure ("Grey Rock"), a planned resort community in North Carolina. After meeting with Grey Rock's developer, LR Buffalo Creek, LLC (together with its parent company Land Resource, LLC, "Land Resource") and picking their Lot, the Plaintiffs turned to Bank of America to finance their purchase. Land Resource failed to complete the infrastructure and amenities in Grey Rock and subsequently became insolvent, leaving the Plaintiffs owning land with a value significantly lower than the original purchase price. The Plaintiffs now bring this action against Bank of America, seeking to hold their lender legally responsible for their losses.

The Plaintiffs initially brought suit in one mass action with other borrower-plaintiffs on December 8, 2011, but the Court severed all claims. Carter v. Bank of America, Civil Case No. 1:11-cv-00326 (W.D. N.C. Dec. 8, 2011). The Plaintiffs then refiled an individual Complaint. Following the Court's Order granting in part and denying in part Bank of America's Motion to Dismiss, only Plaintiffs' claims for fraud and for violations of the Interstate Land Sales Act ("ILSA") and the North Carolina Unfair and Deceptive Trade Practices Act ("Chapter 75") remain.

Bank of America now seeks summary judgment on the Plaintiffs' remaining claims. For the reasons that follow, the Bank's motion will be granted.

II. STANDARD OF REVIEW

In reviewing a party's motion for summary judgment, this Court is mindful that summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is "material" if it "might affect the outcome of the case." N&O Pub. Co. v. RDU Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). A "genuine dispute" exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

A party asserting that a fact cannot be genuinely disputed must support its assertion with citations to the record. Fed.R.Civ.P. 56(c)(1). "Regardless of whether he may ultimately be responsible for proof and persuasion, the party seeking summary judgment bears an initial burden of demonstrating the absence of a genuine issue of material fact." Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003). If this showing is made, the burden then shifts to the non-moving party who must convince the Court that a triable issue exists. Id . Finally, in considering the motion for summary judgment filed by the defendant, the Court must view the pleadings and materials presented in the light most favorable to the the non-movant and must draw all reasonable inferences in the non-movant's favor as well. Adams v. UNC Wilmington, 640 F.3d 550, 556 (4th Cir. 2011).

III. FACTUAL BACKGROUND

Viewing the forecast of evidence in the light most favorable to the Plaintiffs, the following is a summary of the relevant facts.

In the spring of 2005, the Plaintiffs Cathy and Stacy Kaufman worked with LR Buffalo Creek, LLC (together with its parent company Land Resource, LLC, "Land Resource") salesman Shannon Glover to find a lot to purchase at Grey Rock. [Doc. 33-3, Plaintiffs' Rule 26 Initial Disclosures at ¶ 1.B]. Glover informed the Plaintiffs that Grey Rock was part of a luxury mountain community, described the amenities that would be offered, and told them that their Lot was listed at a discount and lots in future phases of the development would be more expensive. [Id.].

On May 1, 2005, the Plaintiffs put down a $1, 000 deposit for the right to purchase up to two properties at Grey Rock. [Doc. 33-4, Certificate of Deposit and Agreement to Purchase Lot]. The next day, the Plaintiffs signed an Agreement for Lot Purchase for Lot 290. [Doc. 33-5, May 2, 2005 Purchase Agreement].[1] Under the Purchase Agreement, the Plaintiffs agreed to purchase the Lot from Land Resource for $224, 910.00. [Id.]. The Plaintiffs did not visit Grey Rock or obtain or review an appraisal of the Lot prior to purchasing it. [Doc. 33-7, Plaintiffs' Response to First Requests for Admission at ¶¶ 5-6, 12]. Bank of America is not mentioned in the Purchase Agreement and is not a signatory to the Purchase Agreement. [See Doc. 33-5, May 2, 2005 Purchase Agreement; Doc. 33-7, Plaintiffs' Response to First Requests for Admission at ¶ 8].

The Plaintiffs used Bank of America, which Glover had referred to as "a preferred lender, " to obtain financing for the Lot purchase. [Doc. 33-3, Plaintiffs' Rule 26 Initial Disclosures at ¶ 1.B]. On June 20, 2005, Bank of America Loan Officer Marie Sladky faxed Plaintiffs the details about the Bank's lot loan financing program. [Doc. 33-8, June 20, 2005 Fax].

The Plaintiffs claim that Sladky told them in conversations that: their lot was a good investment and that she wished she could buy one; that she told them if she could sell some other investment properties she owned, she would jump at the chance to buy a lot at Grey Rock; that buying in Grey Rock was a win-win situation because if the Kaufmans did build, they were buying at the right time in a great community and if they sold, the lot purchase would turn out to be a great investment; that the developers planned to construct amenities; that the Home & Garden Television Dream Home ("HGTV Dream Home")[2] was a big deal for Grey Rock and people wanted to live in a dream home community, which was a main driver for Grey Rock sales and price increases; that the property would only increase in value as the inventory went down and people had no choice but to purchase resales; that the inventory was low since lots were selling so quickly; that the Bank was financing multiple lots for more than one buyer because prices were going up fast and, therefore, Grey Rock was a great place to invest and make money; that the Kaufmans were fortunate to be buying in Phase II and to buy a lot that was reserved but fell through since Phase III lot prices were higher, as Phase IV lots would be; that the Kaufmans should act quickly and lock into the Bank of America NetFive Lot Loan as it was the best financing option the Bank would be offering and that if they waited to buy later, they would lose out so that it would cost more money to buy a lot and finance it; that the Kaufmans should not worry about converting the loan after five years because they would be able to sell it in the next couple of years before having to refinance and would never make an "actual mortgage payment"[3] if their intent was to sell. [Doc. 33-3, Plaintiffs' Rule 26 Initial Disclosures at ¶ 1.C].

In addition, the Plaintiffs claim that Sladky discussed with them the possibility of engaging in a Section 1031 Like Kind Exchange; that she told the Kaufmans that she had recently purchased a lot in another Land Resource community near Grey Rock called "Old Orchard" in Hendersonville North Carolina, which was sold out just before Grey Rock; that she asked the Kaufmans if they would be interested in buying her lot since they were already interested in the area and because it would be a wonderful investment; and that it was a wonderful and small community in a great town. The Plaintiffs further claim that Sladky communicated with them in September 2005 regarding whether a property in Texas could be financed in connection with a 1031 Like Kind Exchange and related topics around that transaction, including receiving terms similar to the Grey Rock terms. [Id.].

In Florida, on or about September 20, 2005, the Plaintiffs executed a note in the amount of $179, 928.00 secured by a deed of trust on the Lot. [Doc. 33-9, Adjustable Rate Note for Lot 290; Doc. 33-10, Deed of Trust for Lot 290 (collectively, the "Mortgage"); Doc. 33-11, Plaintiffs' Responses to First Set of Interrogatories at ¶5]. The Plaintiffs admit that Bank of America never prevented them from visiting the Lot. [Doc. 33-7, Plaintiffs' Responses to First Requests for Admission at ¶17].

The Plaintiffs subsequently became dissatisfied with their investment. On August 26, 2008, the Plaintiffs filed suit against Land Resource in the Middle District of Florida, asserting claims for violation of ILSA, fraud, negligent misrepresentation, and unfair and deceptive trade practices. See Goetz v. Land Resource, No. 6:08-cv-1471 (M.D. Fl. filed Aug. 26, 2008). In the Goetz lawsuit, the Plaintiffs and others alleged that they were induced to purchase lots in Grey Rock through aggressive sales tactics and misrepresentations regarding luxury amenities and development infrastructure. [Id. at ¶¶ 115-36].

As previously noted, the Plaintiffs initiated the present suit as part of a mass action with other borrower-plaintiffs on December 8, 2011. Carter v. Bank of America, Civil Case No. 1:11-cv-00326 (W.D. N.C. Dec. 8, 2011).

IV. DISCUSSION

A. Statute of ...


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