Shallotte Partners, LLC v. Berkadia Commercial Mortg., LLC
775 S.E.2d 926
| N.C. Ct. App. | 2015Background
- Shallotte and Berkadia entered a 2008 agreement for HUD-insured loan underwriting and financing for a Brunswick County project.
- Berkadia procured HUD-required studies and submitted loan documents; Shallotte provided financials for closing and loan eligibility.
- Shallotte discovered an $873,000 impact fee in 2009; Berkadia allegedly concealed this fee from HUD.
- HUD approved and closed the loan on July 1, 2010; Shallotte defaulted years later and Berkadia accelerated and foreclosed.
- Shallotte sued Berkadia in 2014, alleging breach of fiduciary duty, constructive fraud, and other claims; trial court dismissed fiduciary and constructive fraud claims.
- On appeal, Shallotte challenges the dismissal; Berkadia cross-appeals to preserve dismissal of its breach-of-contract claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction over Shallotte's appeal | Interlocutory order affects related claims; risk of inconsistent verdicts justifies immediate review. | Interlocutory orders generally not appealable; no Rule 54(b) certification or substantial-right showing. | Shallotte's appeal jurisdiction is affirmed; cross-appeal dismissed. |
| Breach of fiduciary duty claim viability | HUD-related lender duties create a fiduciary relationship beyond ordinary borrower-lender. | Borrower-lender alone does not establish fiduciary duty; no special relationship shown. | Yes; complaint plausibly pleads a fiduciary duty arising from Berkadia's pre-closing HUD role; dismissal reversed. |
| Constructive fraud claim viability | Relationship of trust existed; Berkadia benefited from concealment of impact fees. | Constructive fraud requires pleading deception as a form of fraud; benefits to defendant not clearly shown. | Yes; constructive fraud adequately pled and cannot be dismissed at Rule 12(b)(6). |
| Statute of limitations | Ten-year constructive-fraud limitations apply; continuing-wrong doctrine may toll. | Limited three-year limit for non-constructive breach; no tolling shown. | Ten-year period governs constructive fraud; continuing-wrong doctrine not time-barred at pleading stage. |
| Judicial estoppel | Prior pleadings contradicting current claims do not mandate dismissal. | Inconsistent positions could require dismissal. | Not established; no dismissal based on judicial estoppel. |
Key Cases Cited
- Carcano v. JBSS, LLC, 200 N.C.App. 162 (2009) (overlapping factual issues may justify immediate appeal for fiduciary-related claims)
- Toomer v. Branch Banking & Trust Co., 171 N.C.App. 58 (2005) (constructive fraud under fiduciary duty; ten-year limitations apply)
- Williams v. Blue Cross Blue Shield of N.C., 357 N.C. 170 (2003) (continuing violation analysis for statute of limitations)
- Dallaire v. Bank of Am., N.A., 367 N.C. 363 (2014) (borrower-lender relationship may still yield fiduciary duties in proper circumstances)
- Lynn v. Fed. Nat. Mortg. Ass'n, 760 S.E.2d 372 (2014) (requires showing elevated relationship beyond typical debtor-creditor in some cases)
- Stein v. Asheville City Bd. of Educ., 360 N.C. 321 (2006) (Rule 12(b)(6) standard; pleadings tested liberally)
- White v. Consol. Planning, Inc., 166 N.C.App. 283 (2004) (constructive fraud elements and relationship of trust)
- Dawn v. Dawn, 122 N.C.App. 493 (1996) (12(b)(6) dismissal on statute of limitations requires facial time-barred complaint)
- Callanan v. Walsh, 743 S.E.2d 686 (2013) (interlocutory denial of Rule 12(b)(6) not appealable; final judgment rule)
- Multifamily Mortgage Trust 1996-1 v. Century Oaks Ltd., 532 S.E.2d 578 (2000) (HUD loan structure and related party roles)
- Pfeifer v. Countrywide Home Loans, Inc., 150 Cal.App.4th 1269 (2012) (HUD loan structure; three-party dynamics)