Dallaire v. Bank of America, N.A.
738 S.E.2d 731
N.C. Ct. App.2012Background
- In 2005, Plaintiffs filed Chapter 7 bankruptcy, which relieved personal liability on three mortgage liens by Bank of America (two liens) and BB&T (one lien).
- Bank of America held a first-priority deed of trust for $138,900 and a second-priority equity line deed of trust for $25,000; BB&T held a third-priority lien for $241,449.37; all liens remained valid against the property.
- In July 2007, Plaintiffs pursued a refinance with Bank of America, informing the agent of the bankruptcy and remaining liens and allegedly receiving assurances of first-priority status and advice to increase the loan amount to pay car notes.
- Plaintiffs obtained a refinance of about $166,000, receiving roughly $24,000 in cash and reducing monthly expenses; the loan was a first-m Mortgage loan, with a title search performed by Bank of America’s affiliates.
- A 2010 title search revealed BB&T’s lien had become first priority and Bank of America’s lien second; Plaintiffs filed suit December 15, 2010, alleging negligent misrepresentation, negligent title search, breach of contract, breach of fiduciary duty, and statutory violations.
- The trial court granted summary judgment in favor of Defendants and dismissed the claim against non-party LSI Title Agency; on appeal, the court affirmed in part and remanded in part, addressing fiduciary and statutory issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to maintain first-priority lien | Dallaires claim BAC owed a contractual duty to secure/maintain first priority. | Contract governs discretionary duties; no affirmative duty to inform about second-priority status. | No affirmative contractual duty to ensure first-priority lien. |
| Existence of fiduciary duty | Bank’s conduct creation of fiduciary relationship by pre-signing assurances. | No fiduciary duty arising from ordinary lender-borrower relations; relied on Branch Banking & Trust Co. precedent. | Question of fact whether fiduciary relationship existed; remanded. |
| Negligent misrepresentation liability | Bank negligently misrepresented loan priority. | No duty or misrepresentation established if fiduciary duty not present. | Remanded to determine duty and potential misrepresentation if fiduciary duty existed. |
| S.A.F.E. Act applicability | Act applies to mortgage lending conduct; authorizes statutory claims. | Act retroactive application is improper; claims arise from pre-act contract. | S.A.F.E. Act not retroactively applied; affirmed dismissal; MLA claim abandoned for lack of argument on duty. |
| Effect of MLA claims | MLA imposes disclosure duties similar to S.A.F.E. Act. | MLA does not apply or create the asserted duties; claims insufficiently argued. | MLA claim abandoned due to lack of argument on specific statutory duties. |
Key Cases Cited
- Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53 (1992) (no fiduciary duty arising from ordinary debtor-creditor relationship)
- Toone v. Adams, 262 N.C. 403 (1964) (duty of care implied in contractual performance)
- Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200 (1988) (negligent misrepresentation elements and duty of care)
- In re Will of Jones, 362 N.C. 569 (2008) (de novo standard for appeals from summary judgment)
- Estridge v. Ford Motor Co., 101 N.C. App. 716 (1991) (retroactivity considerations for statutes' application)