Dreamstreet Investments, Inc. v. MidCountry Bank
2016 U.S. App. LEXIS 21411
| 4th Cir. | 2016Background
- Dreamstreet sold a vacant lot to buyer Carl Ingraham for $115,000; Ingraham sought an owner‑builder loan from MidCountry which required a ~$43,000 down payment he could not make.
- Dreamstreet and MidCountry entered a seller‑holdback Agreement: MidCountry would retain $43,200 of the purchase price pending home completion and release it to Dreamstreet unless Ingraham defaulted or failed to complete construction. The terms were memorialized in a June 12, 2008 email.
- Concerned the holdback was improper, Dreamstreet’s principal (Pittman) consulted counsel, a banker, and an appraiser, and insisted on a promissory note from Ingraham secured by a deed of trust; the sale closed June 19, 2008.
- On June 16, 2009 Dreamstreet emailed MidCountry asserting the holdback was a sham, threatened regulatory complaints and litigation, and said it had hired counsel to begin the process.
- Ingraham later defaulted; county issued a certificate of compliance for the house on December 10, 2009; MidCountry foreclosed in 2012. Dreamstreet sued MidCountry on June 28, 2013 alleging UDTPA fraud and common‑law constructive fraud.
- The district court granted summary judgment to MidCountry: UDTPA claim time‑barred by the four‑year statute; constructive fraud failed because no fiduciary relationship existed. The Fourth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Dreamstreet’s UDTPA claim is timely | Dreamstreet: discovery occurred Dec. 10, 2009 (certificate of compliance), so suit filed within four years | MidCountry: Dreamstreet discovered or should have discovered the alleged fraud by June 16, 2009 when it threatened suit | Court: UDTPA claim is time‑barred — limitations began by June 16, 2009 |
| Whether constructive fraud claim survives absent fiduciary duty | Dreamstreet: MidCountry’s creation and control of holdback created a special relationship supporting constructive fraud | MidCountry: Parties negotiated at arm’s length; no special confidence, so no fiduciary duty | Court: No fiduciary relationship as a matter of law; constructive fraud fails |
Key Cases Cited
- Henry v. Purnell, 652 F.3d 524 (4th Cir.) (en banc) (summary judgment standard)
- Rothmans Tobacco Co. v. Liggett Group, 770 F.2d 1246 (4th Cir.) (fraud‑based claim discovery rule for limitations)
- Dallaire v. Bank of America, N.A., 760 S.E.2d 263 (N.C.) (borrower‑lender dealings do not ordinarily create fiduciary relationship)
- Branch Banking & Trust Co. v. Thompson, 418 S.E.2d 694 (N.C. Ct. App.) (fiduciary relationship requires special confidence and domination)
- Cash v. State Farm Mut. Auto. Ins. Co., 528 S.E.2d 372 (N.C. Ct. App.) (constructive fraud and presumption when superior party benefits)
- Grubb Props., Inc. v. Simms Inv. Co., 400 S.E.2d 85 (N.C. Ct. App.) (capacity and opportunity to discover fraud starts limitations)
- Strickland v. Lawrence, 627 S.E.2d 301 (N.C. Ct. App.) (no fiduciary status for parties bargaining at arm’s length)