Chicago Title v. Fisher ( 2007 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-1608
CHICAGO TITLE INSURANCE COMPANY,
Plaintiff - Appellant,
versus
JOHN FISHER,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Greenville. Malcolm J. Howard,
Senior District Judge. (5:04-cv-00815-H)
Argued: May 24, 2007 Decided: August 21, 2007
Before MICHAEL, Circuit Judge, WILKINS, Senior Circuit Judge, and
David C. NORTON, United States District Judge for the District of
South Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
Paul K. Sun, Jr., ELLIS & WINTERS, L.L.P., Raleigh, North Carolina,
for Appellant. John N. Hutson, Jr., HOWARD, STALLINGS, FROM &
HUTSON, P.A., Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Appellant Chicago Title Insurance Company (“Chicago Title”)
appeals from the district court’s award of summary judgment to
Appellee John Fisher (“Fisher”). See Chicago Title Insurance
Company v. John Fisher, No. 5:04-cv-815-H(2) (E.D.N.C. April 19,
2006) (the “Order”). As explained below, we affirm.
I.
A.
John Fisher was one of three member/managers of the Koury
Fisher Group, LLC, which was formed in 1996 to build residential
homes. Fisher served as the business manager for the LLC, Mike
Koury was a licenced real estate agent responsible for purchasing
and selling the lots, and Jeb Koury was a licensed general
contractor who focused on the construction of the homes. In
managing the LLC’s day-to-day activities, Fisher was directly and
personally involved in all financial transactions for the Koury
Fisher Group. Fisher secured the financing for the building
projects, worked directly with the LLC’s accountants, and oversaw
payment of subcontractors on the Koury Fisher Group’s various jobs,
including the lot and home at issue in this case. The LLC’s checks
were signed by the bookkeeper, using a rubber stamped facsimile of
Fisher’s signature.
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In November 2000, the Koury Fisher Group bought Lot 52 in the
Chatsworth Subdivision. In early 2001, the Koury Fisher Group
began construction of a house on Lot 52. The Koury Fisher Group
hired subcontractors for Lot 52 and was responsible for paying
their invoices. In August 2001, the Koury Fisher Group obtained
additional financing from Wachovia in the amount of $52,500, which
was secured, in part, by a second deed of trust on Lot 52. Fisher
executed this deed of trust as business manager of the Koury Fisher
Group, and also personally guaranteed the debt. The agreement with
Wachovia required the Koury Fisher Group to pay off this loan from
the proceeds of the first sale of a home.
In November 2001, the Koury Fisher Group agreed to sell Lot 52
and the home built thereon to Blaine Gerber and Elizabeth King (the
“Buyers”). Chicago Title issued title insurance in connection with
the sale of Lot 52. Execution of a lien waiver by the seller, the
Koury Fisher Group, was a prerequisite to issuance of the title
insurance policy. A lien waiver is an affidavit signed by the
seller of residential property that, inter alia, either states that
all contractors and subcontractors on the property have been fully
paid, or lists the contractors and subcontractors that have not
been fully paid.
Mike Koury, on behalf of the Koury Fisher Group, signed the
lien waiver in connection with, and in order to close, the sale of
Lot 52. The lien waiver identified the Koury Fisher Group as
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“Owner and General Contractor.” The lien waiver stated that all
contractors and subcontractors on Lot 52 had been paid in full.
When Koury signed the lien waiver at the closing, he knew that all
of the contractors and subcontractors had not been fully paid. The
Koury Fisher Group planned to use the proceeds from subsequent
sales of the LLC’s properties to pay the unpaid subcontractors on
Lot 52. Fisher was not present when Koury signed the lien waiver
nor did Fisher make any representations regarding the lien waiver
to Chicago Title.
On October 31, 2001, the Koury Fisher Group sold the improved
Lot 52 to Buyers for $824,080. Mike Koury was present at the
closing; Fisher was not. Following receipt of the closing
documents, Chicago Title, through its local agent, issued a title
insurance policy to Buyers. At the time, Chicago Title was unaware
that there were unpaid subcontractors who had performed work on Lot
52. Relying on the lien waiver, Chicago Title issued a title
insurance policy with no exception for unfiled liens.
The Koury Fisher Group’s plan to use the proceeds from the
sale of other properties to pay off the subcontractors quickly
collapsed. According to Fisher, “We were unable to sell our
remaining inventory (Lots 2, 17, 26, Richmond Hill) as hoped and
planned.” J.A. 183. Fisher faced an additional problem after the
Lot 52 closing because he had personally guaranteed the August 2001
loan from Wachovia. The Koury Fisher Group’s agreement with
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Wachovia required paying off the August 2001 loan immediately upon
the sale of any of the Koury Fisher Group’s properties, and Lot 52
was the first sale following this loan. The proceeds of the sale
of Lot 52, however, were not sufficient to repay the August 2001
loan. Because all of the Koury Fisher Group’s remaining properties
(Richmond Hill Lots 2, 17, and 26) were already encumbered to
Wachovia, Fisher explored other options to ensure the cancellation
of the August 2001 deed of trust. Ultimately, Fisher paid back
$25,000 of his loan from the Koury Fisher Group, which used these
funds along with an additional payment by Fisher to pay off the
Wachovia loan and release the Koury Fisher Group properties from
the encumbrance of the August 2001 deed of trust.
The Koury Fisher Group is now dissolved, leaving various
unpaid debts.
Subsequent to Chicago Title’s issuance of the title insurance
policy and the closing of the sale of Lot 52, numerous unpaid
subcontractors filed liens against the property. Some of these
unpaid subcontractors also filed lawsuits against the Buyers, and
asserted claims against Lot 52. Consistent with its policy
obligations, Chicago Title defended the Buyers against the lien
claimants. Chicago Title has paid in excess of $200,000 to defend
the Buyers and obtain cancellation of the subcontractors’ liens.
Chicago Title initially pursued claims of fraud and unfair and
deceptive trade practices against Mike Koury. On January 13, 2005,
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the United States Bankruptcy Court for the Eastern District of
North Carolina entered a Consent Judgment against Koury, holding
that Chicago Title “is entitled to the relief requested in the
Complaint filed in this action.” J.A. 177.
B.
On November 12, 2004, Chicago Title filed a Complaint against
John Fisher, asserting claims of (1) fraud and (2) unfair and
deceptive trade practices. On November 5, 2005, Fisher moved for
summary judgment, arguing that he could not be held liable for Mike
Koury’s execution of the fraudulent lien waiver. Chicago Title
responded that Fisher conspired with Mike Koury and agreed that
Koury would sign the false lien waiver. In the alternative,
Chicago Title asserted that Fisher participated in and/or ratified
Koury’s wrongful conduct.
On April 19, 2006, Judge Malcolm Howard of the United States
District Court for the Eastern District of North Carolina at
Greenville granted Fisher’s motion for summary judgment and
dismissed Chicago Title’s claims. In its Order, the district court
found there was insufficient evidence of conspiracy between Fisher
and Koury or of Fisher’s participation in or ratification of
Koury’s conduct to sustain liability against Fisher as an
individual. Accordingly, the district court granted Fisher’s
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motion and dismissed Chicago Title’s causes of action for fraud and
for unfair and deceptive trade practices.
II.
We review a district court’s grant of summary judgment de
novo, applying the same standard as the district court. Hinckle v.
City of Clarksburg, 81 F.3d 416, 421 (4th Cir. 1996). Summary
judgment is permissible when “there is no genuine issue as to any
material fact.” Fed. R. Civ. P. 56(c). We are not to weigh the
evidence but rather to determine if there is a genuine issue for
trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986). All evidence should be viewed in the light most favorable
to the non-moving party. See Perini Corp. v. Perini Constr., Inc.,
915 F.2d 121, 123-24 (4th Cir. 1990). “[W]here the record taken as
a whole could not lead a rational trier of fact to find for the
nonmoving party, disposition by summary judgment is appropriate.”
Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 119
(4th Cir. 1991).
“[T]he plain language of Rule 56(c) mandates the entry of
summary judgment, after adequate time for discovery and upon
motion, against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at
trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The
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“obligation of the nonmoving party is ‘particularly strong when the
nonmoving party bears the burden of proof.’” Hughes v. Bedsole, 48
F.3d 1376, 1381 (4th Cir. 1995) (quoting Pachaly v. City of
Lynchburg, 897 F.2d 723, 725 (4th Cir. 1990)).
III.
Chicago Title contends on appeal that the district court erred
in concluding it had produced insufficient evidence to create a
genuine issue of material fact that Fisher conspired with Michael
Koury to defraud Chicago Title and/or participated in and ratified
Koury’s wrongful act. Having thoroughly reviewed the record, the
Order, and the parties’ appellate briefs, and having heard and
considered oral arguments, we are satisfied that the court did not
so err.
We begin by noting that Chicago Title’s argument that Fisher
ratified and thereby became liable for Koury’s wrongful conduct is
without merit. Ratification is “‘the affirmance by a person of a
prior act which did not bind him but which was done or professedly
done on his account, whereby the act, as to some or all persons, is
given effect as if originally authorized by him.’” Walker v.
Sloan, 529 S.E.2d 236, 244 (N.C. Ct. App. 2000) (quoting In re
Espinosa v. Martin, 520 S.E.2d 108, 111 (N.C. Ct. App. 1999)); see
Edwards v. Southern States Finance Co., 146 S.E. 89 (N.C. 1929)
(“Ordinarily, a director of a corporation is liable for false and
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fraudulent representations made by him or his agent, within the
scope of his employment, or for such as were approved or
ratified.”). Central to the concept of ratification is that the
unauthorized conduct was performed by the agent of - or one
purporting to be the agent of - the person who later ratified the
conduct. In this case, Koury, the person who made the fraudulent
representations, was not the agent of Fisher; rather, Koury was the
agent of the Koury Fisher Group. Fisher cannot “ratify” and
thereby become liable for the fraudulent conduct of one who is not
his agent. Tate v. Chambers, 379 S.E.2d 681, 683 (N.C. Ct. App.
1989) (holding that “there is no question of ratification since
‘ratification is not possible unless the person making the
contract, in doing so, purported to act as the agent of the person
... claimed to be the principal’”). There is no authority for
Chicago Title’s contention that an officer of a corporation may
“ratify” and be personally liable for the torts of a fellow
officer. As such, absent evidence that Fisher participated in or
facilitated the fraudulent act, Fisher is not liable for the acts
of his fellow corporate officers.
Under North Carolina law, the essential elements of fraud are:
(1) a false representation or concealment of some material past or
existing fact; (2) that is reasonably calculated to deceive; (3)
that is made with the intent to deceive and (4) which does in fact
deceive and results in damage to the injured party. See Fakhoury
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v. Fakhoury, 613 S.E.2d 729, 733 (N.C. Ct. App. 2005). The law of
North Carolina also “permits one defrauded to recover from anyone
who facilitated the fraud by agreeing for it to be accomplished.”
Neugent v. Beroth Oil Co., 560 S.E.2d 829, 838-39 (N.C. Ct. App.
2002) (citing Nye v. Oates, 385 S.E.2d 529, 531 (N.C. Ct. App.
1989); see Dove v. Harvey, 608 S.E.2d 798, 800 (N.C. Ct. App.
2005), disc. rev. denied, 628 S.E.2d 249 (N.C. 2006); Esposito v.
Talbert & Bright, Inc., 641 S.E.2d 695, 698 (N.C. Ct. App. 2007).
The elements of facilitating fraud are: (1) that the defendant
agreed with another person to defraud plaintiff; (2) that either
defendant or the other person committed an overt tortious act in
furtherance of the agreement; and (3) that plaintiff suffered
damages from that act. See Oates, 385 S.E.2d at 531-32 (citing
Coleman v. Shirlen, 281 S.E.2d 431 (N.C. Ct. App. 1981)). Although
facilitation of fraud may be established by circumstantial
evidence, the evidence of the agreement must be more than a
suspicion or conjecture to justify submission of the issue to the
jury. Dickens v. Puryear, 276 S.E.2d 325, 337 (N.C. 1981); Di
Frega v. Pugliese, 596 S.E.2d 456, 461-62 (N.C. Ct. App. 2004).
Accordingly, to survive summary judgment on its claims, Chicago
Title must point to some evidence that Fisher either directly made
an affirmative misrepresentation to Chicago Title or agreed with
Koury to defraud Chicago Title.
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There is no evidence that Fisher participated directly in the
fraud; he did not sign the fraudulent lien waiver, see the lien
waiver prior to its execution, or make any representations to
Chicago Title whatsoever. The best evidence Chicago Title presents
in support of its claim that Fisher facilitated the fraud is the
deposition testimony of Mike Koury.* When viewed in the light most
*
In his deposition, Koury testified as follows:
Q: Prior to signing the lien waiver agreement, did you have any
discussions with anyone about it?
A: I probably talked to Jeb and John about it.
Q: When you say “probably,” can you remember those conversations?
A: No, not exactly.
Q: When you say “probably,” do you know what those conversations
would have consisted of?
A: If I can sign it and if I should sign it.
Q: When you say if you “could sign it,” what did you mean?
A: Because we did owe outstanding bills.
Q: Did you ever have a conversation like that with Jeb or John?
A: I think that’s what we talked about and probably just with
John.
J.A. 49 - 50.
Q: What did he tell you?
A: I don’t remember, other than, probably, it was conveyed that
we had other people interested in other houses, and we thought
they were going to sell, and we’d be able to pay these bills.
Q: Did you have any hesitancy about signing the lien waiver?
A: Yes.
Q: Why was that?
A: Because of the reason I talked to John.
Q: So were you aware when you signed this that there were
subcontractors or contractors that had not been paid?
A: I knew there were bills outstanding, yes.
Q: And is that what caused you to have some hesitancy about
signing the lien waiver?
A: Yes.
Q: And did you raise that issue with John Fisher?
A: I think that’s what we talked about, yes.
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favorable to Chicago Title and according it every reasonable
inference, this testimony only proves that, prior to the closing of
Lot 52, Koury and Fisher “probably” discussed the lien waiver and
J.A. 51.
Q: Based on your conversation with John Fisher, did you feel
comfortable signing the lien waiver?
A: I guess I did.
J.A. 52.
Q: Sure. What I’m wondering is, you stated you had some
hesitancy about signing the lien waiver based on the unpaid
contractors; is that correct?
A: Yes.
Q: And you also stated that there were some houses that y’all
were developing that might be sold in the near future at that
time?
A: Uh-huh (yes).
Q: So, what I’m wondering is why, then, did you talk with John
prior to signing this lien waiver?
A: Because I knew of the same, because I knew houses might sell.
So why did I go to him?
Q: Uh-huh (yes).
A: I knew the houses, because I was working on them. And I saw
customers looking at them, and I would get feedback from -
Actually, my ex-wife, the decorator, was over there quite a
bit working at Richmond Hill. And she was talking to some
people who had looked at the house six or seven times, one of
them. So, I communicated that to John, and that’s probably
when we talked about the lien waiver.
Q: Why did you talk to John prior to signing the lien waiver,
based on what you knew at the time?
A: He was pretty much our business manager.
Q: Would you have been able to sign the lien waiver without
talking to John?
A: Do you mean for the company?
Q: Uh-huh (yes).
A: I think I was entitled to.
Q: Did you ever sign lien waivers without talking to John?
A: I don’t remember.
J.A. 53-54.
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the fact that not all the subcontractors had been paid. Koury’s
recollection of this conversation - if it did occur - is vague;
however, Koury does not suggest that Fisher agreed with or knew
about Koury’s plan to issue a falsified document. As such, Chicago
Title has presented no evidence that Fisher participated in or
agreed to Koury’s fraudulent conduct. A fact finder’s conclusion
that Fisher encouraged or agreed with Koury’s act of fraud would be
mere suspicion or conjecture. See Dickens, 276 S.E.2d at 337
(holding that allegations of conspiracy in complaint and possible
speculation as to an agreement based on defendant’s presence at the
site where plaintiff was beaten and threatened, is not enough to
survive summary judgment). For this reason, we agree with the
district court’s finding that Fisher is entitled to summary
judgment.
IV.
In considering whether summary judgment was properly granted,
the critical question is whether “a fair-minded jury could return
a verdict for the plaintiff on the evidence presented.” Anderson,
477 U.S. at 252. Because Chicago Title has failed to present
evidence from which one could conclude that Fisher ratified,
participated in, or agreed with Koury’s wrongful conduct, we cannot
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answer this question in the affirmative. The decision below is
therefore affirmed.
AFFIRMED
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