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COA: Lack of Reasonable Reliance Defeats Actual Reliance Element Required for UDTP Claim

By Sean E. Andrussier

Today the COA held that lack of reasonable reliance on a misrepresentation defeated the element of actual reliance required for an unfair and deceptive trade practices (UDTP) claim based on the misrepresentation. The case is Sunset Beach Development v. Amec Inc.

Sunset Beach Development bought a parcel of land on which it planned to build a residential development. In order to build the development the parcel could only contain a certain percentage of wetlands. The parcel's seller, GGSH Associates (GGSH), had hired an engineer named Ball to conduct a wetlands assessment of the GGSH tract. Ball told GGSH that the tract contained twenty-five acres of wetlands. The contract of sale for the tract contained certain environmental warranties in which GGSH represented that "[t]here are no known violations of environmental laws on or which have occurred with respect to the [tract.]" The contract of sale also stated that Plaintiff's obligation to close on the sale was contingent on GGSH's providing Plaintiff with a wetlands delineation approved by the Army Corps of Engineers.

Plaintiff's engineering firm and one of its majority members expressed some uncertainty about Ball's wetlands delineations. Plaintiff obtained a master wetlands map from Ball and proceeded to drain the wetlands on the tract. Plaintiff later received a letter from the Army Corps of Engineers stating that it never received a verified wetlands delineation from Ball, and that if Plaintiff didn't produce one within 10 days the wetlands Plaintiff had drained on the parcel had to be restored to their prior condition. Plaintiff sued GGSH, Ball, and others for breach of contract, fraud, and unfair and deceptive trade practices (UDTP).

The COA held that summary judgment was properly granted with regard to the fraud and unfair and deceptive trade practices claims. Plaintiff's claim that GGSH and Ball committed fraud by misrepresenting the extent of wetlands on the tract failed because Plaintiff "chose to purchase the GGSH tract despite clear deficiencies in the wetlands delineations and the Master Wetlands Map," and because Plaintiff had ample opportunity to inspect the property before purchasing it. Thus, the COA concluded, Plaintiff 's reliance on any representations about the wetlands was not reasonable. The COA further held that an UDTP claim based on a misrepresentation requires actual reliance on the misrepresentation, and the lack of reasonable reliance also defeated the UDTP's actual reliance requirement.

Full post as published by North Carolina Appellate Blog on April 07, 2009 (boomark / email).