Cummings v. Carroll

• Court: Supreme Court of North Carolina
• Decided: December 17, 2021
• Docket: 216A20
• Status: Published

Opinion

IN THE SUPREME COURT OF NORTH CAROLINA

2021-NCSC-147

No. 216A20

Filed 17 December 2021

JAMES CUMMINGS and wife, CONNIE CUMMINGS

v. ROBERT PATTON CARROLL; DHR SALES CORP. d/b/a RE/MAX COMMUNITY BROKERS; DAVID H. ROOS; MARGARET N. SINGER; BERKELEY INVESTORS, LLC; KIM BERKELEY T. DURHAM; GEORGE C. BELL; THORNLEY HOLDINGS, LLC; BROOKE ELIZABETH RUDD-GAGLIE f/k/a BROOK ELIZABETH RUDD; MARGARET RUDD & ASSOCIATES, INC.; and JAMES C. GOODMAN

Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of

the Court of Appeals, 270 N.C. App. 204 (2020), affirming, in part, and reversing and

remanding, in part, an order entered on 31 July 2018 by Judge Alma L. Hinton in

Superior Court, Brunswick County, granting summary judgment in favor of

defendants Robert Patton Carroll; DHR Sales Corp. d/b/a Re/Max Community

Brokers; Berkeley Investors, LLC; George C. Bell; Brooke Elizabeth Rudd-Gaglie

f/k/a Brooke Elizabeth Rudd; Margaret Rudd & Associates, Inc.; and James C.

Goodman. On 15 December 2020, the Supreme Court allowed defendants Berkeley

Investors’ and Mr. Bell’s petition for discretionary review as to additional issues.

Heard in the Supreme Court on 30 August 2021.

Chleborowicz Law Firm, PLLC, by Christopher A. Chleborowicz and Elijah A.T. Huston, for plaintiff-appellees. CUMMINGS V. CARROLL

Opinion of the Court

Wallace, Morris, Barwick, Landis & Stroud, P.A., by Stuart Stroud and Kimberly Connor Benton for defendants-appellants Brooke Elizabeth Rudd- Gaglie f/k/a Brooke Elizabeth Rudd; Margaret Rudd & Associates, Inc.; and James C. Goodman.

Alexander C. Dale and Ryal W. Tayloe for defendants-appellants George C. Bell and Berkeley Investors, LLC.

Crossley McIntosh Collier Hanley & Edes, PLLC, by Clay Allen Collier, for defendants-appellants Robert Patton Carroll and DHR Sales Corp. d/b/a Re/Max Community Brokers.

ERVIN, Justice.

¶1 This case stems from a dispute surrounding the purchase of an oceanfront

beach house located on Oak Island by plaintiffs James Cummings and his wife,

Connie Cummings. Several months after closing, plaintiffs discovered the existence

of significant structural damage to the house arising from past water intrusion,

prompting them to assert claims against defendants for negligence, negligent

misrepresentation, fraud, unfair and deceptive trade practices, breach of contract,

breach of the implied covenant of good faith and fair dealing, and breach of fiduciary

duty. After the conclusion of discovery, the trial court granted defendants’ motions

for summary judgment. On appeal, we have been asked to determine if the trial court

correctly granted summary judgment with respect to the claims of negligence and

fraud against Re/Max and Mr. Carroll, negligent misrepresentation and fraud

against Berkeley Investors and Mr. Bell, and breach of fiduciary duty against Rudd

& Associates, Ms. Rudd-Gaglie, and Mr. Goodman. After careful consideration of the CUMMINGS V. CARROLL

record in light of the applicable law, we affirm the decision of the Court of Appeals,

in part; reverse the decision of the Court of Appeals, in part; and remand this case to

Superior Court, Brunswick County, for a trial on the merits with respect to these

claims.

I. Factual Background

A. Substantive Facts

¶2 On 15 August 2014, plaintiffs purchased an oceanfront beach house located on

Oak Island from Berkeley Investors. Plaintiffs were represented in connection with

the transaction by Rudd & Associates, acting through Ms. Rudd-Gaglie and Mr.

Goodman. On the other hand, Berkeley Investors was represented by Re/Max, with

Mr. Carroll serving as the listing agent. At all times relevant to this case, Mr. Bell

and defendant Thornley Holdings, LLC, which is an entity owned by defendant Kim

Durham, each owned a fifty-percent interest in Berkeley Investors.

¶3 Berkeley Investors had purchased the house, which had been built in 2003, for

use as a short-term rental property.1 Berkeley Investors retained Oak Island

Accommodations, Inc., for the purpose of renting, cleaning, and otherwise

maintaining the property. According to maintenance records maintained by Oak

Island Accommodations, the house had experienced numerous maintenance-related

1 The house is elevated above the ground level by pilings, with the second floor, which

is used as a guest area, containing a living room and two bedrooms, while the third floor, which constitutes the main level, contains a central living area, a kitchen and dining area, and a master bedroom. CUMMINGS V. CARROLL

problems from 2005 through 2014, including water damage to the ceiling, a number

of internal water leaks, and mold growth.

¶4 On 2 January 2013, Berkeley Investors hired Mr. Carroll for the purpose of

listing the house for sale. Subsequently, on 20 January 2013, Berkeley Investors

executed a State of North Carolina Residential Property and Owners’ Association

Disclosure Statement, which residential property owners are required to provide to

prospective buyers in accordance with N.C.G.S. § 47E-4. Mr. Bell and Ms. Durham,

who completed the form on behalf of Berkeley Investors, answered the following

questions in the negative:

Regarding the [house] . . . to your knowledge is there any problem (malfunction or defect) with any of the following:

....

1. FOUNDATION, SLAB, FIREPLACES/CHIMNEYS, FLOORS, WINDOWS (INCLUDING STORM WINDOWS AND SCREENS), DOORS, CEILINGS, INTERIOR AND EXTERIOR WALLS, ATTACHED GARAGE, PATIO, DECK OR OTHER STRUCTURAL COMPONENTS including any modifications to them?

2. ROOF (leakage or other problem)?

3. WATER SEEPAGE, LEAKAGE, DAMPNESS OR STANDING WATER in the basement, crawl space or slab?

10. PRESENT INFESTATION, OR DAMAGE FROM PAST INFESTATION OF WOOD DESTROYING INSECTS OR ORGANISMS which has not been repaired? CUMMINGS V. CARROLL

According to the disclosure statement, if “something happens to the property to make

your [d]isclosure [s]tatement incorrect or inaccurate (for example, the roof begins to

leak), [the sellers] must promptly give the purchaser a corrected [d]isclosure

[s]tatement or correct the problem.”

¶5 Mr. Bell and Ms. Durham knew of and had discussed problems relating to

water intrusion into the house as early as January 2011, with Mr. Carroll having

been included in these discussions as early as 14 October 2013, following his

engagement as the listing agent. For example, in a 14 October 2013 e-mail to Ms.

Durham and Mr. Carroll, Mr. Bell stated that the owners needed to “trace the source

of the water leakage evident on the ceiling” of the guest room and “[f]ix the

separated/rotted wood in the guest room level from the water leakage.” In addition,

Mr. Bell noted that he had “[f]ound a small plumbing leak in the kitchen” that he had

“fixed with tape.”

¶6 On 20 January 2014, Mr. Bell sent an e-mail to Ms. Durham that contained a

list of repairs that needed to be made to the house and in which he noted that:

[t]here has been a lot of water-intrusion that has come into [the guest-level] ceiling from wind driven rain from above and has stained it badly about 15 feet into the room ceiling. It’s right in the center of the room and seems to originate on the upper level and flow down through the interior column between the doors.

Mr. Bell recommended that the owners “[f]ind and repair the source of this leak that

is causing the damage. We’ll need to get a few boards replaced on the columns as CUMMINGS V. CARROLL

well; they are buckled from the water-intrusion.” In addition, Mr. Bell suggested that

the owners paint the wooden trim around the doors leading to the lower deck because

it was “in real danger of beginning to rot.” Although records obtained from Oak Island

Accommodations dated 13 February 2014 indicate that it was seeking estimates

relating to the cost of the work needed to repair these problems, an entry in its records

dated 25 March 2014 notes that “[o]wner is having this work completed by another

vendor.”

¶7 In March 2014, Mr. Carroll enlisted the services of Randy Cribb, a painter who

had performed painting work on the house during the preceding year. In addition to

painting the living room walls and ceiling, an exterior wall, and the upper and lower

decks, Mr. Cribb agreed to repair “cracks” and “cracked caulk” in the ceiling. At some

time prior to 24 March 2014, Mr. Cribb sent a text message to Mr. Carroll in which

he stated that he was almost finished with the work that he had been engaged to

perform, that he “may have found that leak,” and that he “hope[d] that was it.” On

the other hand, Mr. Cribb’s deposition testimony indicated that he had not looked

behind the walls for the purpose of determining whether any water intrusion had

occurred.

¶8 In April 2014, plaintiffs contacted Ms. Rudd-Gaglie, with whom they had

worked in the past, for the purpose of assisting them in exploring the option of

purchasing the house. As a result, Ms. Rudd-Gaglie contacted Mr. Carroll and CUMMINGS V. CARROLL

arranged for an initial site visit, which she attended with plaintiffs. On 26 June 2014,

plaintiffs employed Rudd & Associates to represent them in connection with the

purchase of the house by executing an Exclusive Buyer Agency Agreement which

provided, among other things, that (1) Rudd & Associates had a duty to “disclos[e] to

[plaintiffs] all material facts related to the property or concerning the transaction of

which [Rudd & Associates] has actual knowledge” and would “exercise ordinary care,

comply with all applicable laws and regulations, and treat all prospective sellers

honestly” in the process; (2) plaintiffs were “advised to seek other professional advice

in matters of . . . wood-destroying insect infestation, structural soundness,

engineering, and other matters pertaining to any proposed transaction”; and (3),

although Rudd & Associates “may provide [plaintiffs] the names of providers who

claim to perform such services, [plaintiffs] understand[ ] that [it] cannot guarantee

the quality of service or level of expertise of any such provider.” The buyer agency

agreement also specified that plaintiffs “agree[d] to indemnify and hold [Rudd &

Associates] harmless” for any liability arising “either as a result of [plaintiffs’]

selection and use of any such provider or [plaintiffs’] election not to have one or more

of such services performed.”

¶9 On 12 July 2014, plaintiffs made an offer to purchase the house for $1.25

million, which was accepted on behalf of Berkeley Investors by Mr. Bell on 12 July

2014 and by Ms. Durham on 13 July 2014. The Offer to Purchase and Contract CUMMINGS V. CARROLL

between plaintiffs and Berkeley Investors included a 30-day due diligence period,

during which plaintiffs or their agents were entitled to “conduct all desired tests,

surveys, appraisals, investigations, examinations and inspections of the Property as

[plaintiffs’] deem[ ] appropriate” and specifically provided for the performance of

inspections “to determine . . . the presence of unusual drainage conditions or evidence

of excessive moisture adversely affecting any improvements on the Property” or

“evidence of wood-destroying insects or damage therefrom.” After noting that

plaintiffs acknowledged having received and reviewed the disclosure statement, the

purchase contract provided that “THE PROPERTY IS BEING SOLD IN ITS

CURRENT CONDITION” and that Berkeley Investors had not extended any

warranty to plaintiffs in connection with the sale.

¶ 10 Ms. Rudd-Gaglie recommended that plaintiffs employ Jeff Williams, a licensed

home inspector, to inspect the house. On 19 July 2014, Mr. Williams conducted his

inspection, with Mr. Cummings, Mr. Carroll, Ms. Rudd-Gaglie, and Mr. Goodman,

who was the broker-in-charge at Rudd & Associates, in attendance. Mr. Cummings

testified during his deposition that, after the conclusion of the inspection, he asked

Mr. Carroll if the house was “a good, watertight, sound house?” and that Mr. Carroll

had responded by stating that, “if [he] had the money, [he would] buy it.”

¶ 11 In the detailed report that he prepared for Ms. Rudd-Gaglie following the

completion of the inspection, Mr. Williams outlined the scope of the work that he had CUMMINGS V. CARROLL

performed by indicating that he would, among other things, (1) “[r]eport signs of

abnormal or harmful water penetration into the building or signs of abnormal or

harmful condensation on building components” and (2) “[p]robe structural

components where deterioration is suspected.” On the other hand, the report stated

that Mr. Williams would not “[e]nter any area or perform any procedure that may

damage the property or its components” and that he would not be required to “[m]ove

personal items, panels, furniture, equipment, plant life, soil, snow, ice or debris that

obstructs access or visibility” or “inspect[ ] behind furniture, area rugs or areas

obstructed from view.” At the end of each section, the report stated that, “[w]hile the

inspector makes every effort to find all areas of concern, some areas can go unnoticed”

and that “[i]t is recommended that qualified contractors be used in your further

inspection or repair issues as it relates to the comments in this inspection report.” In

addition, Section 1 of the report, which addressed issues relating to “Roofing,”

specifically noted that “[o]ur inspection makes an attempt to find a leak but

sometimes cannot.”

¶ 12 In the more structure-specific portions of his report, Mr. Williams noted the

existence of numerous problems with the house that needed to be repaired, including:

(1) the presence of minor damage to the roof; (2) the need for portions of the exterior

walls “to be sealed to keep water and insect[s] from entering the home”; (3) the

presence of certain doors that would not close or seal properly; (4) the difficulty of CUMMINGS V. CARROLL

opening certain sliding doors and windows and the presence of rust stains on some of

those fixtures; and (5) the presence of loose drywall tape near the guest-level

entryway, a condition that Mr. Williams attributed to a “lack of air movement” and

that led him to recommended the installation of a dehumidifier “to remove moisture.”

On the other hand, nothing in Mr. Williams’ report suggested that the house had

experienced significant water intrusion. In his deposition, Mr. Williams testified that

he had not seen any evidence of water intrusion; that, if he had, he “most definitely”

would have conducted a moisture test by using an awl to probe the wall and identify

spots in which the drywall had been softened by moisture; that no one had made him

aware that the house had a history of water intrusion; and that, had he been informed

that water intrusion had occurred at the house, he would have either conducted a

moisture test or declined to perform the inspection.

¶ 13 On 21 July 2014, Ms. Rudd-Gaglie e-mailed the inspection report to plaintiffs,

stating that Mr. Williams had told her that, while the issues that needed to be

addressed included “mostly small items,” “the bigger items were the doors and

windows.” Ms. Rudd-Gaglie advised plaintiffs to “look over the report” and then call

her to “discuss how [plaintiffs] would like to proceed with repairs.” In light of the

report, plaintiffs and Berkeley Investors amended the purchase contract to provide

that Berkeley Investors would pay $4,500 relating to plaintiffs’ “expenses associated

with the purchase of the Property,” with this amount having been intended, according CUMMINGS V. CARROLL

to Mr. Cummings, to cover the costs of making the repairs that had been identified

in Mr. Williams’ report. The sale of the house closed on 15 August 2014.

¶ 14 In November 2014, plaintiffs and various members of their family came to the

house for the purpose of celebrating Thanksgiving. At that time, which occurred

shortly after a major thunderstorm, plaintiffs observed evidence of significant water

intrusion extending approximately fifteen feet into the guest floor ceiling. After

cutting away a section of the sheetrock in the wall, Mr. Cummings and his son-in-law

discovered the presence of black mold and a large termite nest. Mr. Cummings

contacted Ms. Rudd-Gaglie to advise her of this discovery, and she recommended that

Mr. Cummings contact Craig Moore, a licensed general contractor, for the purpose of

getting him to inspect the house.

¶ 15 On the following morning, Mr. Moore conducted an initial inspection of the

house. In his deposition testimony, Mr. Moore stated that, at the time of his initial

visit to the house, he had observed that the ocean-side wall on the guest level

displayed signs of significant water and termite damage and “massive rot,” which he

described as a “structural issue.” Mr. Moore stated that such problems would “take[

] quite a while” to develop and that such extensive termite damage “doesn’t happen

in a couple of days.” After removing the interior sheetrock walls, Mr. Moore observed

the presence of more extensive water damage and rot and discovered that someone CUMMINGS V. CARROLL

had shoved newspaper into holes in the wall before caulking over the newspaper-

filled holes.

¶ 16 In the aftermath of at least one additional visit to the house, Mr. Moore sent

plaintiffs a letter dated 5 December 2014 in which he noted that the house had “many

active and substantial leaks, which need to be repaired as quickly as possible”;

warned that “[t]he structural integrity of the house is or will be compromised as the

combination of active leaks and active termite infestation worsen[s]”; and opined that

there appeared to have been some “recent aesthetic repairs made to many of the

questionable areas.” According to Mr. Moore, the extensive damage to the house that

he had discovered showed that, while the house had not been “properly maintained,”

“work had been done to make the house look better.” In addition, Mr. Moore

concluded that the “previous damage to the house, wherever it was, was carefully

painted and hidden so that the only way to discover that there was an ongoing water-

intrusion problem would have been to do extensive intrusion testing into the walls”

and opined that anyone performing minor paint and repair work at the house “could

[not] have done that work without knowing they were covering up a major problem.”

¶ 17 According to Mr. Moore, the conditions that he observed in the house would

not have given someone performing a visual inspection any reason to believe that

conducting intrusive testing for the presence of moisture would have been

appropriate. On the other hand, Mr. Moore also testified that, had he inspected the CUMMINGS V. CARROLL

house, he would have identified the moisture intrusion problems given that he had

been trained to recognize when cosmetic repairs had been performed. For this reason,

Mr. Moore had advised plaintiffs that they should always have a general contractor,

rather than a home inspector, perform any needed home inspections. Plaintiffs paid

Mr. Moore in excess of $300,000 to repair the damage that the house had sustained.

B. Procedural History

¶ 18 On 2 September 2015, plaintiffs filed a complaint asserting certain claims

arising from their purchase of the house. After obtaining leave of court, plaintiffs

filed an amended complaint on 12 September 2016 in which they asserted claims for

(1) negligence against Re/Max, Mr. Carroll, Rudd & Associates, Ms. Rudd-Gaglie, and

Mr. Goodman; (2) negligent misrepresentation against all defendants; (3) breach of

fiduciary duty against Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman; (4)

unfair and deceptive trade practices, pursuant to N.C.G.S. § 75-1.1 et seq., against

Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll; (5) breach of contract against

Berkeley Investors and Mr. Bell; (6) breach of the implied covenant of good faith and

fair dealing against Berkeley Investors and Mr. Bell; (7) fraud and fraud in the

inducement against Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll; (8) fraud

by concealment against Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll; and CUMMINGS V. CARROLL

(9) personal liability against Mr. Bell.2 In essence, plaintiffs alleged that defendants

had induced them to purchase the house in spite of its damaged condition, with the

damage having resulted from, among other things, undisclosed water-intrusion

problems and termite infestation, and sought to recover compensatory damages

related to the costs that they had incurred in repairing the house, treble damages

pursuant to N.C.G.S. §75-1.1 et seq., and punitive damages.

¶ 19 On 18 October 2016, 14 November 2016, and 30 November 2016, defendants

filed responsive pleadings in which they denied the material allegations of the

amended complaint, asserted various defenses, and sought the dismissal of the

amended complaint. On 24 and 31 May 2018, defendants filed motions seeking the

entry of summary judgment in their favor. Defendants’ summary judgment motions

were heard before the trial court at the 11 June 2018 civil session of Superior Court,

Brunswick County. On 31 July 2018, the trial court entered an order granting

defendants’ motions for summary judgment in their entirety. Plaintiffs noted an

appeal to the Court of Appeals from the trial court’s order.

C. Court of Appeals Decision

2Although plaintiffs asserted claims against defendants Thornley Holdings, LLC; David H. Roos; Margaret N. Singer; and Ms. Durham in their amended complaint, they voluntarily dismissed those claims prior to the entry of the trial court’s summary judgment order. As a result, we will refrain from discussing plaintiffs’ claims against these additional defendants in this opinion. CUMMINGS V. CARROLL

¶ 20 In seeking relief from the trial court’s order before the Court of Appeals,

plaintiffs argued that the trial court had erred by granting summary judgment in

favor of all defendants. After affirming the trial court’s decision to grant summary

judgment in defendants’ favor with respect to plaintiffs’ claims for (1) negligence

against Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman; (2) negligent

misrepresentation against Rudd & Associates, Ms. Rudd-Gaglie, Mr. Goodman,

Re/Max, and Mr. Carroll; (3) unfair and deceptive trade practices against Berkeley

Investors, Mr. Bell, Re/Max, and Mr. Carroll; (4) breach of contract against Mr. Bell;

(5) breach of the implied covenant of good faith and fair dealing against Berkeley

Investors and Mr. Bell; and (6) personal liability against Mr. Bell, the Court of

Appeals unanimously reversed the trial court’s decision to grant summary judgment

in favor of defendants with respect to plaintiffs’ claims for negligent

misrepresentation and fraud against Berkeley Investors and Mr. Bell. Cummings v.

Carroll, 270 N.C. App. 204, 235 (2020). Finally, although a majority of the Court of

Appeals voted to reverse the trial court’s decision to grant summary judgment in

favor of defendants with respect to plaintiffs’ claims for (1) negligence against Re/Max

and Mr. Carroll; (2) fraud and fraud in the inducement against Re/Max and Mr.

Carroll; (3) fraud by concealment against Re/Max and Mr. Carroll; and (4) breach of

fiduciary duty against Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman, id.,

Judge Arrowood dissented from this aspect of his colleagues’ decision. Re/Max, Mr. CUMMINGS V. CARROLL

Carroll, Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman noted an appeal to

this Court from the Court of Appeals’ decision based upon Judge Arrowood’s dissent.

This Court allowed a petition for discretionary review with respect to additional

issues filed by Berkeley Investors and Mr. Bell on 18 December 2020.3

II. Substantive Legal Analysis

A. Standard of Review

¶ 21 This Court reviews decisions arising from trial court orders granting or

denying motions for summary judgment using a de novo standard of review. Dallaire

v. Bank of Am., N.A., 367 N.C. 363, 367 (2014). The entry of an order granting

summary judgment in favor of a particular party is appropriate when “the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact and that

any party is entitled to a judgment as a matter of law.” N.C.G.S. § 1A-1; Rule 56(c)

(2019). In evaluating the appropriateness of a trial court’s decision to grant or deny

a summary judgment motion in a particular case, “we view the pleadings and all other

evidence in the record in the light most favorable to the nonmovant and draw all

reasonable inferences in that party’s favor.” N.C. Farm Bureau Mut. Ins. Co. v.

3 As a result of the fact that plaintiffs have not sought review of the Court of Appeals’

decision to affirm the trial court’s decision to grant summary judgment in favor of defendants with respect to certain claims that were asserted in their amended complaint, we will not consider the correctness of the relevant aspects of the Court of Appeals’ decision in this opinion. CUMMINGS V. CARROLL

Sadler, 365 N.C. 178, 182 (2011). Although the party seeking the entry of summary

judgment in its favor “bears the burden of establishing that there is no triable issue

of material fact,” the burden shifts to the nonmoving party to “produce a forecast of

evidence demonstrating that the [nonmoving party] will be able to make out at least

a prima facie case at trial” in the event that the moving party makes the necessary

preliminary showing. DeWitt v. Eveready Battery Co., 355 N.C. 672, 681–82 (2002)

(quoting Collingwood v. Gen. Elec. Real Est. Equities, Inc., 324 N.C. 63, 66 (1989))

(alteration in original).

B. Economic Loss Rule

¶ 22 As an initial matter, Berkeley Investors and Mr. Bell and Re/Max and Mr.

Carroll argue that certain claims that plaintiffs have asserted against them are

barred by the economic loss rule.4 In rejecting this contention, the Court of Appeals

held that the economic loss rule did not provide any protection against the claims

that plaintiffs had asserted against these defendants because none of the conduct

that allegedly underlay those claims implicated the terms of the purchase contract

between plaintiffs and Berkeley Investors. Cummings, 270 N.C. App. at 219. In

addition, the Court of Appeals concluded that Re/Max and Mr. Carroll were not

4 Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman did successfully invoke the

economic loss rule in opposition to certain claims that plaintiffs had asserted against them in light of the provisions of the buyer’s agency agreement. However, no party has sought or obtained review of the Court of Appeals’ decision with respect to these claims before this Court. CUMMINGS V. CARROLL

entitled to claim the protections of the economic loss rule because they lacked privity

of contract with plaintiffs. Id. We conclude that the Court of Appeals correctly

resolved this issue.

¶ 23 “[T]he economic loss rule bars recovery in tort by a plaintiff against a promisor

for his simple failure to perform his contract, even though such failure was due to

negligence or lack of skill.” Crescent Univ. City Venture, LLC v. Trussway Mfg., Inc.,

376 N.C. 54, 58 (2020) (cleaned up); see also N.C. State Ports Auth. v. Lloyd A. Fry

Roofing Co., 294 N.C. 73, 81 (1978) (observing that, “[o]rdinarily, a breach of contract

does not give rise to a tort action by the promisee against the promisor”). In such

situations, “[i]t is the law of contract and not the law of negligence which defines the

obligations and remedies of the parties,” Boone Ford, Inc. v. IME Scheduler, Inc., 262

N.C. App. 169, 174 (2018), with the purpose of the economic loss rule being to prevent

“contract law [from] drown[ing] in a sea of tort,” E. River S.S. Corp. v. Transamerica

Delaval, Inc., 476 U.S. 858, 866 (1986).

¶ 24 Plaintiffs’ remaining claims for negligent misrepresentation and fraud against

Berkeley Investors and Mr. Bell and for negligence and fraud against Re/Max and

Mr. Carroll center on the alleged failure of those defendants to disclose or adequately

repair any defects in the house and upon Berkeley Investors’ alleged

misrepresentations concerning the condition of the house. Specifically, plaintiffs

allege that the relevant defendants failed to disclose the existence of a long history of CUMMINGS V. CARROLL

water-intrusion issues at the house and unreasonably relied upon Mr. Cribb’s

assurances that he had fully repaired the problem prior to closing. In our view, the

Court of Appeals correctly concluded that none of these allegations rely upon the

relevant contractual provisions.

¶ 25 According to Berkeley Investors and Mr. Bell and Re/Max and Mr. Carroll, the

disclosure statement upon which these claims rely constitutes a part of the purchase

contract, so that claims relating to the disclosure statement implicate contractual

duties for purposes of the economic loss rule. In support of this assertion, the relevant

defendants direct our attention to N.C.G.S. § 47E-5(a), which authorizes the inclusion

of a residential property disclosure statement into a contract for the sale of real

estate, and point out that Paragraph 5 of the North Carolina Standard Form 2-T Offer

to Purchase and Contract relating to the “Buyer Representations,” which was used in

this transaction, explicitly incorporates the disclosure statement into the purchase

contract.

¶ 26 A careful examination of Standard Form 2-T reveals, however, that the

document in question simply acknowledges that “Buyer has received a signed copy of

the N.C. Residential Property and Owners’ Association Disclosure Statement prior to

the signing of this offer.” For that reason, the language upon which Berkeley

Investors and Mr. Bell and Re/Max and Mr. Carroll rely in support of their economic

loss rule arguments represents nothing more than an acknowledgement that the CUMMINGS V. CARROLL

owner had complied with its obligation to provide a residential disclosure statement

to the purchaser without addressing the substance of the disclosure statement. See

N.C.G.S. § 47E-5 (2019). As the Court of Appeals recognized, the disclosure

statement also indicates that purchasers “understand that this is not a warranty by

owners or owner’s agent,” with nothing in the contract serving to make the

representations contained in the disclosure statement part of the terms of the

purchase contract. Thus, since the substance of the disclosure statement is not

incorporated into the purchase contact, it cannot serve as the basis for the application

of the economic loss rule in this case.

¶ 27 In seeking to persuade us to reach a contrary conclusion, Berkeley Investors

and Mr. Bell and Re/Max and Mr. Carroll point to our statement in Crescent

University City Venture that:

[w]hen a plaintiff asserts that the subject matter of a contract has, in its operation or mere existence, caused injury to itself or failed to perform as bargained for, the damages are merely economic, and a purchaser has no right to assert a claim for negligence against the seller . . . for those economic losses under the economic loss rule.

376 N.C. at 62. The principle enunciated in Crescent University City Venture, which

involved a claim brought by the owner of a tract of real estate and a subcontractor

based upon the allegedly negligent construction of a critical component of an

apartment complex, does not control in this instance given that the present case arose

in the context of a subsequent sale of an existing residence between individuals or CUMMINGS V. CARROLL

privately held entities that the individual participants controlled rather than in the

context of a large commercial real estate transaction in which the rights and

responsibilities of the parties were comprehensively controlled by a series of inter-

related contracts and sub-contracts.

¶ 28 In its opinion in this case, the Court of Appeals referenced its own decision in

Bradley Woodcraft, Inc v. Bodden, in which it had held that, “while claims for

negligence are barred by the economic loss rule where a valid contract exists between

the litigants, claims for fraud are not so barred and, indeed, the law is, in fact, to the

contrary: a plaintiff may assert both claims.” 251 N.C. App. 27, 34 (2016) (cleaned

up). According to Berkeley Investors and Mr. Bell, Bradley Woodcraft should not be

understood as categorically excluding fraud claims from the reach of the economic

loss rule, citing decisions by the United States Court of Appeals in Broussard v.

Meineke Disc. Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998), and Legacy Data

Access, Inc. v. Cadrillion, LLC, 889 F.3d 158 (4th Cir. 2018), and pointing to the

Fourth Circuit’s statement in Legacy Data Access that “Bradley Woodcraft is simply

another application of the principle that the economic loss rule does not bar tort

claims based on an independent legal duty, which is identifiable and distinct from the

contractual duty,” Legacy Data Access, Inc., 889 F.3d at 166 (cleaned up).

¶ 29 Aside from the fact that this Court is not bound by the Fourth Circuit’s

interpretation of North Carolina state law, State ex rel. Martin v. Preston, 325 N.C. CUMMINGS V. CARROLL

438, 449–50 (1989), any decision to adopt the Fourth Circuit’s reasoning in Legacy

Data Access would not change the outcome in this case. As we have already noted,

the allegedly tortious conduct at issue in this case cannot have constituted a violation

of the purchase contract because the representations set out in the disclosure

agreement were not incorporated into that document. As a result, even if the Court

of Appeals did categorically exempt fraud claims from the economic loss rule in

Bradley-Woodcraft and even if Bradley-Woodcraft was decided in error, the adoption

of such a rule would not preclude the assertion of plaintiffs’ fraud and negligent

misrepresentation claims against Berkeley Investors and Mr. Bell in this case. As a

result, the Court of Appeals did not err by holding that the economic loss rule did not

bar the assertion of fraud claims against Berkeley Investors, Mr. Bell, Re/Max, and

Mr. Carroll and the negligent misrepresentation claim against Berkeley Investors

and Mr. Bell that rests upon the contents of the disclosure statement that was

provided to plaintiffs.

¶ 30 Although our conclusion that the disclosure statement was not a term of the

purchase contract seems to us to adequately support a decision to affirm the Court of

Appeals’ decision with respect to this issue, we will take this opportunity to address

the privity of contract issue as it relates to Re/Max and Mr. Carroll. The Court of

Appeals held that, even if the plaintiffs’ negligent misrepresentation and fraud claims

against Berkeley Investors and Mr. Bell were barred by the economic loss rule, CUMMINGS V. CARROLL

Re/Max and Mr. Carroll were not entitled to claim the protections of the economic

loss rule because they were not parties to the purchase contract. Cummings, 270

N.C. App. at 219. Arguing in reliance upon the Court of Appeals’ decision in Simmons

v. Cherry, 43 N.C. App. 499 (1979), Re/Max and Mr. Carroll assert that, in light of the

statements that Mr. Carroll had made and the conduct in which Mr. Carroll had

engaged for the purpose of ensuring that the transaction closed during the course of

his representation of Berkeley Investors and its owners, Mr. Carroll had bound

himself to the terms of the purchase contract and was entitled to the same economic

loss rule protections as Berkeley Investors and Mr. Bell. We are not, however,

persuaded that, aside from its status as a decision of the Court of Appeals rather than

of this Court, Simmons should be deemed controlling in this case.

¶ 31 In Simmons, the president of a corporation contracted with a real estate

appraiser for the purpose of obtaining the performance of a feasibility study. The

corporation’s president did not, at any point during the transaction, mention any

involvement on the part of the corporation and, instead, provided a personal

assurance that the appraiser’s bill would be paid. Simmons, 43 N.C. App. at 499–

500. In light of these facts, the Court of Appeals concluded that the record contained

sufficient support for a finding that the president had bound himself to the contract.

Id. at 501. In this case, on the other hand, the record contains no evidence suggesting

that Mr. Carroll had similarly bound “himself to performance of the contract and CUMMINGS V. CARROLL

personal liability therefore.” Id. As a result, we agree with the Court of Appeals’

determination that Re/Max and Mr. Carroll lacked the privity of contract necessary

to support the invocation of the economic loss rule.

C. Negligence

¶ 32 Next, we consider the viability of plaintiffs’ negligence claims against Re/Max

and Mr. Carroll. In reversing the trial court’s decision to grant summary judgment

in defendant’s favor with respect to these claims, the Court of Appeals held that the

record disclosed the existence of a genuine issue of material fact concerning the extent

to which Re/Max and Mr. Carroll had a duty to disclose the history of water intrusion

into the house given the equivocal nature of Mr. Cribb’s statements about the extent

to which he had repaired the leak that he had been hired to address. Cummings, 270

N.C. App. at 218. We agree.

¶ 33 “[U]nder established common law negligence principles, a plaintiff must offer

evidence of four essential elements in order to prevail: duty, breach of duty, proximate

cause, and damages,” Estate of Mullis v. Monroe Oil Co., 349 N.C. 196, 201 (1998),

with “[a]ctionable negligence [being] the failure to exercise that degree of care which

a reasonable and prudent person would exercise under similar conditions.” Hart v.

Ivey, 332 N.C. 299, 305 (1992). In their amended complaint and on appeal to the

Court of Appeals, plaintiffs asserted that Re/Max and Mr. Carroll owed them a

number of legal duties, including the duty to (1) “take all reasonable steps to ascertain CUMMINGS V. CARROLL

all known and readily available material facts about the condition” of the house; (2)

make specific inquiry of the owners, including Berkeley Investors and Mr. Bell, for

the purpose of obtaining information relating to facts or circumstances that may

materially affect plaintiffs’ decision to purchase the house; (3) “take all reasonable

steps” to ensure that any prior leaks or water-intrusion problems had been repaired

by a licensed professional; and (4) ensure that the disclosure statement was accurate,

that the house did not contain any defects and that Re/Max and Mr. Carroll had

breached those duties by, among other things, (1) failing to discover and correct any

material defects in the house or to disclose the defects to plaintiffs; (2) hiring Mr.

Cribb, who was a painter, to fix a suspected leak in the guest level living room; (3)

permitting Berkeley Investors to provide a disclosure statement that stated that the

house did not have any known defects; and (4) failing to disclose the history of water-

intrusion problems at the house.

¶ 34 We have previously held that a real estate broker:

who makes fraudulent misrepresentations or who conceals a material fact when there is a duty to speak to a prospective purchaser in connection with the sale of the principal’s property is personally liable to the purchaser notwithstanding that the broker was acting in the capacity of agent for the seller.

Johnson v. Beverly-Hanks & Assocs., Inc., 328 N.C. 202, 210 (1991) (quoting P.

Hetrick & J. McLaughlin, Webster’s Real Estate Law in North Carolina § 132, at 165

(3d ed. 1988)). Put another way, “[a] broker has a duty not to conceal from the CUMMINGS V. CARROLL

purchasers any material facts and to make full and open disclosure of all such

information.” Id. According to the Court of Appeals’ decision in Clouse v. Gordon, a

real estate broker’s duty to share information with a buyer is limited to “material

facts known to the broker and to representations made by the broker.” 115 N.C. App.

500, 508 (1994) (emphasis added).

¶ 35 Acting in reliance upon Clouse, the Court of Appeals rejected plaintiffs’

contention that the failure of Re/Max and Mr. Carroll to discover “ascertainable”

defects in the house rendered those defendants negligent given that “a seller’s agent

only has a duty to disclose material facts that are known to him.” Cummings, 270

N.C. App. at 217 (emphasis added). In addition, the Court of Appeals held that

Re/Max and Mr. Carroll “owed [p]laintiffs no duty to ensure that the [h]ouse was in

any particular condition at the time of closing” and could not, for that reason, be liable

in negligence for any failure to make necessary repairs. Id. Finally, the Court of

Appeals concluded that Re/Max and Mr. Carroll could not be found negligent based

upon the theory that they had provided plaintiffs with the disclosure statement

because (1) they did not sign it, (2) the disclosure statement provided that “the

representations are made by the owner and not the owner’s agent(s) or subagent(s),”

and (3) the disclosure statement included representations regarding the actual

knowledge possessed by Berkeley Investors. Id. CUMMINGS V. CARROLL

¶ 36 Although the Court of Appeals was correct in reaching all of these conclusions,

that fact does not completely resolve the issue of whether Re/Max and Mr. Carroll

can be held liable to plaintiffs on the basis of negligence. As we have already noted,

a real estate broker must disclose all material facts that he or she knows to the

potential buyer, with such “material facts” including those that an agent “knows or

should know would reasonably affect the [purchaser’s] judgment.” Brown v. Roth,

133 N.C. App. 52, 55 (1999) (quoting James A. Webster, Jr., Webster’s Real Estate

Law in North Carolina §§ 8–9, at 243 (4th ed. 1994)). In other words, Re/Max and

Mr. Carroll had a duty to disclose any fact of which they were aware that might

reasonably have impacted plaintiffs’ decision to purchase the house.

¶ 37 A careful review of the record discloses the existence of evidence tending to

show that Mr. Carroll knew of previous water-intrusion issues at the house and that

he had hired Mr. Cribb to, among other things, attempt to locate and repair the source

of a leak in the guest-level living room. After completing the required work, Mr. Cribb

sent a text message to Mr. Carroll informing Mr. Carroll that he “may have found

that leak” and that he “hope[d] that was it.” Re/Max and Mr. Carroll point to this

communication in arguing that Mr. Carroll “was told that the condition had been

repaired” and contend, in reliance upon Clouse, in which the Court of Appeals held

that a real estate agent could not be held liable for relying upon an opinion provided

by a professional surveyor whose survey map failed to indicate that the property was CUMMINGS V. CARROLL

located in a flood hazard zone, Clouse, 115 N.C. App. at 503, 509–10, that Mr. Carroll

had reasonably relied upon the assurance that he had received from Mr. Cribb, whom

Re/Max and Mr. Carroll describe as an “experienced professional,” in failing to

disclose the existence of the relevant incident of water intrusion to plaintiffs. In

response, plaintiffs challenge the adequacy of Mr. Cribb’s professional qualifications

and the reasonableness of Mr. Carroll’s reliance upon Mr. Cribb’s statements given

their ambiguous and uncertain nature.

¶ 38 A careful review of the record precludes us from holding that the

reasonableness of Mr. Carroll’s reliance upon Mr. Cribb’s statements has been

established as a matter of law. Despite Re/Max and Mr. Carroll’s characterization of

Mr. Cribb as an “experienced professional,” he was a painter and pressure washer

rather than a licensed contractor. Moreover, even if one was to accept Mr. Cribb’s

qualifications as sufficient, the equivocal nature of the statements made in the text

messages upon which Re/Max and Mr. Carroll rely raises a genuine issue of material

fact concerning the extent to which Mr. Carroll reasonably relied upon those

statements in failing to disclose to plaintiffs the existence of this instance of water

intrusion into the house. Thus, unlike the situation at issue in Clouse, in which the

qualifications of the relevant professional and the clarity of that professional’s

assurances do not appear to have been in question, the same cannot be said of either

Mr. Cribb or the statements that he made to Mr. Carroll. See Clouse, 115 N.C. App. CUMMINGS V. CARROLL

at 508–09. As a result, a rational juror could properly conclude that Mr. Carroll acted

unreasonably in relying upon the adequacy of Mr. Cribb’s performance in rectifying

the problems evidenced by the water intrusion into the house.

¶ 39 Both Re/Max and Mr. Carroll, in their brief, and Judge Arrowood, in his

dissenting opinion at the Court of Appeals, argue that the home inspection conducted

by Mr. Williams, in which the inspector failed to discover that the house had water-

intrusion problems, provided further evidence that Mr. Carroll had reasonably

concluded that the water-intrusion issue that Mr. Cribb had been hired to address

had been adequately repaired. Cummings, 270 N.C. App. at 238 (Arrowood, J.,

concurring, in part, and dissenting, in part). Although a home inspection might,

under other circumstances, suffice to preclude a finding of potential liability on the

part of the agent representing the seller in a real estate transaction, the record before

us in this case, which includes evidence tending to show that Mr. Cribb was primarily

hired to repaint, rather than repair, the affected area; that the damage to the home

was extensive and longstanding; that Mr. Moore testified that efforts had been made

to conceal the extent of the water intrusion that had occurred at the home, that the

nature and extent of the damage to the house was not immediately apparent, and

that there was no reason for either Mr. Williams or plaintiffs to have conducted

further investigation in light of that fact coupled with the fact that Mr. Williams

testified that he did not find any evidence of water intrusion or moisture damage that CUMMINGS V. CARROLL

would have prompted him to conduct moisture testing, precludes such a result in this

instance. Thus, the results of the inspection performed by Mr. Williams fail to justify

a determination that, as a matter of law, the record does not disclose the existence of

a genuine issue of material fact relating to plaintiffs’ negligence-based claimes resting

upon the failure of Re/Max and Mr. Carroll to disclose to plaintiffs the existence of

water intrusion into the house.

D. Negligent Misrepresentation

¶ 40 The Court of Appeals held, with respect to plaintiffs’ claim against Berkeley

Investors and Mr. Bell for negligent misrepresentation, that the record disclosed the

existence of a genuine issue of material fact concerning whether (1) Berkeley

Investors and Mr. Bell reasonably relied upon the work performed by Mr. Cribb and

(2) the inspection conducted by Mr. Williams amounted to “reasonable diligence”

entitling plaintiffs to rely upon the representations made in the disclosure statement.

Cummings, 270 N.C. App. at 223–24. We agree.

¶ 41 “The tort of negligent misrepresentation occurs when a party justifiably relies

to his detriment on information prepared without reasonable care by one who owed

the relying party a duty of care.” Dallaire, 367 N.C. at 369 (quoting Raritan River

Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 206 (1988)). However, “[a] party

cannot establish justified reliance on an alleged misrepresentation if the party fails

to make reasonable inquiry regarding the alleged statement.” Id. The extent to CUMMINGS V. CARROLL

which a party justifiably relied upon items of information is generally a question of

fact for the jury in the absence of a showing that “the facts are so clear as to permit

only one conclusion.” Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP, 350 N.C.

214, 225 (1999) (quoting Restatement (Second) of Torts § 552 cmt. e (1977)).

¶ 42 As an initial matter, Berkeley Investors and Mr. Bell argue that they did not

make any misrepresentations in the disclosure statement given that, in spite of their

knowledge that there had been a leak in the house, they reasonably relied upon the

assurances that had been received from Mr. Cribb, as conveyed to them by Mr.

Carroll, that the leak had been fixed. In support of this assertion, Berkeley Investors

and Mr. Bell direct our attention to the unpublished decision of the Court of Appeals

in Dykes v. Long, which addressed the issue of whether the seller of a house had

fraudulently represented in a disclosure statement that she had no knowledge of

defects in a house in spite of the fact that she had previously discovered the existence

of cracks in the front porch and had had them repaired by a general contractor. Dykes

v. Long, No. COA14-148, 2014 WL 2993986, at *3 (N.C. Ct. App. July 1, 2014)

(unpublished). In holding that the sellers’ conduct in failing to disclose the crack-

related problems of which they were aware did not constitute actionable fraud, the

Court of Appeals emphasized that the sellers had taken steps to address the problem,

had been assured by the contractor that the problem in question had been rectified,

and had observed no further problems with respect to the porch prior to closing. Id. CUMMINGS V. CARROLL

Similarly, Berkeley Investors and Mr. Bell contend that they cannot be held liable to

plaintiffs for negligent misrepresentation given that they had received assurances

from Mr. Carroll that the leak had been repaired, that Mr. Cribb was fully qualified

to repair the leak in light of his extensive experience in performing painting and

general repair work, and that no further problems had been observed in the house

after the performance of the relevant repair work.

¶ 43 As we have already indicated in addressing the negligence-related claims that

plaintiffs have asserted against Re/Max and Mr. Carroll, the record does, in fact,

contain evidence tending to show “that [Mr.] Cribb was not qualified to fix the leak

in the guest level ceiling,” including, but not limited to, the fact that Mr. Cribb was

not a licensed contractor and claimed to be engaged in the business of painting and

pressure washing, the fact that Mr. Cribb testified that he could not specifically

remember having identified and repaired any leaks in the house, and the fact that

Mr. Cribb acknowledged that he had not done any work that involved penetrating the

interior walls of the house. As a result, aside from the fact that Dykes has no

precedential value, N.C. R. App. P. 30(4)(3), this case is distinguishable from Dykes

given the existence of a conflict in the evidence concerning the nature and extent of

Mr. Cribb’s ability to repair leaks and the fact that, while the problems at issue in

Dykes did not reappear until sixteen years after performance of the necessary repair

work, only a few months had elapsed between the date upon which Mr. Cribb worked CUMMINGS V. CARROLL

on the house and the plaintiffs’ discovery that extensive water-related damage had

occurred to that structure. See Dykes, 2014 WL 2993986, at *3. As a result, we hold

that, when the evidence in the present record is taken in the light most favorable to

plaintiffs, it discloses the existence of genuine issues of material fact concerning the

reasonableness of Berkeley Investors’ and Mr. Bell’s reliance upon the repair work

that Mr. Cribb performed.

¶ 44 In addition, Berkeley Investors and Mr. Bell argue that, even if they were not

entitled to rely upon the repair work performed by Mr. Cribb in preparing the

disclosure statement that they delivered to plaintiffs, plaintiffs were not entitled to

rely upon the representations made in the disclosure statement given that they had

an obligation to perform their own investigation into the condition of the property

and failed to do so. In support of this assertion, Berkeley Investors and Mr. Bell

direct our attention to Stevens v. Heller, in which the Court of Appeals stated that a

purchaser of real estate is “not entitled to rely solely on the property disclosure

statement prepared by the seller and conduct no independent due diligence . . . unless

the buyer can show that the seller’s misrepresentations caused the lack of reasonable

diligence.” 268 N.C. App. 654, 660 (2019).

¶ 45 According to Berkeley Investors and Mr. Bell, plaintiffs should have been

aware of the need to conduct a further investigation into the condition of the house

for a number of reasons, including (1) the presence of language in the disclosure CUMMINGS V. CARROLL

statement disclaiming any warranties and recommending that plaintiffs retain a

licensed home inspector; (2) the existence of language in the purchase contract

indicating that the house was being sold in its “current condition” and disclaiming all

warranties; (3) the fact that Mr. Williams noted the need to seal areas on the exterior

of the house and to rectify problems with windows and doors that would either not

open and close or would not seal properly; and (4) the statement in Mr. Williams’

report that he had “attempt[ed] to find a leak but sometimes cannot” and his

“recommend[ation] that qualified contractors be used” to inspect and repair the

problems identified in the report. According to Berkeley Investors and Mr. Bell, this

information should have prompted plaintiffs to request that Mr. Williams conduct

additional testing for the presence of moisture and rendered plaintiffs’ reliance upon

the representations contained in the disclosure statement unreasonable as a matter

of law.

¶ 46 In light of the fact-intensive nature of the relevant inquiry, “[t]he

reasonableness of a party’s reliance is a question for the jury, unless the facts are so

clear that they support only one conclusion.” Forbis v. Neal, 361 N.C. 519, 527 (2007).

Unlike the plaintiffs in Stevens, who failed to conduct any inspection of the relevant

property prior to the closing, 268 N.C. App. at 656, plaintiffs hired a licensed home

inspector and general contractor for the purpose of performing a home inspection. As

a result, the operative question for the purpose of this case is whether obtaining the CUMMINGS V. CARROLL

performance of the inspection conducted by Mr. Williams constituted “reasonable

diligence” on the part of plaintiffs or whether plaintiffs should have obtained

additional inspections, including the performance of more intrusive moisture testing.

¶ 47 According to Mr. Williams, the absence of any visual evidence tending to

suggest the existence of a moisture problem with the house rendered the performance

of intrusive moisture testing unnecessary, a determination that Mr. Moore

characterized as reasonable. In addition, as the majority at the Court of Appeals

observed, the “alleged efforts [by Berkeley Investors and Mr. Bell] to conceal the

water-intrusion issues might have caused [p]laintiffs to forego moisture testing and

more reasonably rely upon the [d]isclosure [s]tatement where [p]laintiffs otherwise

might not have.” Cummings, 270 N.C. App. at 224. As a result, the record contains

ample evidence tending to show that plaintiffs reasonably relied upon Mr. Williams’

inspection report.

¶ 48 In seeking to persuade us to reach a different result, Berkeley Investors and

Mr. Bell, along with the dissenting opinion at the Court of Appeals, emphasize the

problems with the house that Mr. Williams identified in his report, including (1) the

presence of minor roof damage; (2) the need to seal certain locations on the exterior

of the house for the purpose of excluding water and insects; (3) the existence of doors

that failed to either close or seal property; (4) the presence of windows that exhibited

rust stains and would not open; and (5) the existence of minor leaks that could lead CUMMINGS V. CARROLL

to the development of mold and the recommendation that Mr. Williams made at

numerous locations in his report that “qualified contractors be used in your further

inspection or repair issues as it relates to the comments in this inspection report.”

However, we do not believe that any of this information would have necessarily put

plaintiffs on notice that the house might have a serious water-intrusion problem. For

example, the reference in the inspection report to leaks “causing mold to grow”

involved a condensation line that drained under the house, with mold having

developed on the concrete foundation, rather than anything relating to the structure’s

walls. Similarly, in discussing the areas on the exterior of the house that needed

sealing, Mr. Williams stated that “a handy-man can easily make these repairs,” a

comment that could reasonably be interpreted to suggest that a more in-depth

inspection of these areas was not required. In addition, none of the problems

mentioned in Mr. Williams’ report appear to have been related to either any repair

work that Mr. Cribb performed or the extensive water damage problem that Mr.

Moore identified. Finally, the recommendation that qualified contractors be used for

further inspection and repair work, aside from appearing to be generically applicable

“boilerplate” language rather than a recommendation that plaintiffs take any

particular action, relates to “the comments in this inspection report,” none of which

pertained to moisture intrusion into the walls of the house or the need for further

testing of the house for its presence. CUMMINGS V. CARROLL

¶ 49 In addition, Berkeley Investors and Mr. Bell, along with the dissenting opinion

at the Court of Appeals, rely upon MacFadden v. Louf, in which the Court of Appeals

held that a home buyer could not reasonably rely upon alleged misrepresentations

contained in a disclosure statement “because [the buyer] conducted a home inspection

before closing and that inspection report put her on notice of potential problems with

the home.” 182 N.C. App. 745, 748 (2007). MacFadden is distinguishable from this

case, however, given that the inspection report at issue there specifically instructed

the plaintiff to hire a roofing contractor in light of the existence of extensive evidence

tending to suggest that a potential for water to pond existed, with this evidence

including the presence of stains on the chimney and in the attic area; the fact that

the floor sagged, deflected, and was uneven; and the fact that other evidence of

moisture and pest infestation was present. Id. As we have already noted, the report

that Mr. Williams prepared concerning the house that is at issue in this case made

only generalized comments about the need for further inspections and did not suggest

that any significant amount of water intrusion had occurred.

¶ 50 Admittedly, plaintiffs could have engaged in additional investigative activities,

including requesting Oak Island Accommodations’ maintenance records or having

more intrusive moisture testing performed. On the basis of the present record,

however, the extent to which plaintiffs’ failure to take such additional steps

constituted a failure to exercise “reasonable diligence” is a question of fact for the jury CUMMINGS V. CARROLL

rather than a question of law for the Court. As a result, after viewing the record

evidence in the light most favorable to the plaintiffs, we hold that there are genuine

issues of material fact concerning the extent to which Berkeley Investors and Mr. Bell

reasonably relied upon Mr. Cribb’s repair work in representing in the disclosure

statement that they did not know of the existence of any water-intrusion problems

and the extent to which plaintiffs reasonably relied upon these statements in light of

the inspection performed by Mr. Williams.

E. Fraud

¶ 51 According to the Court of Appeals, the record also disclosed the existence of

genuine issues of material fact concerning the extent to which Berkeley Investors and

Mr. Bell defrauded plaintiffs by providing them with a disclosure statement that

contained untruthful information concerning the condition of the house and whether

Berkeley Investors, Mr. Bell, Re/Max and Mr. Carroll defrauded plaintiffs by failing

to disclose the existence of the history of water-intrusion problems at the house and

the nature and extent of the steps that had been taken for the purpose of addressing

those problems.5 Cummings, 270 N.C. App. at 233–34. Once again, we conclude that

the Court of Appeals reached the correct decision with respect to this issue.

5 Although plaintiffs identified Mr. Carroll’s assertion that he would buy the house as

evidence of fraud, the Court of Appeals concluded that this statement constituted “mere puffing” rather than actionable fraud, having reached this result in reliance upon Rowan County Board of Education v. United States Gypsum Co., 332 N.C. 1, 17 (1992). Plaintiffs CUMMINGS V. CARROLL

¶ 52 As an initial matter, plaintiffs asserted separate claims for “fraud and fraud in

the inducement” and “fraud by concealment” in their amended complaint. The Court

of Appeals concluded that, “[b]ecause: (1) the purportedly distinct causes of action

each allege false representations or omissions in inducing [p]laintiffs to purchase the

[h]ouse; and (2) the respective elements of fraud, fraud in the inducement, and

fraudulent concealment overlap on these facts,” it would analyze plaintiffs’ fraud

claims “as separate theories of a single cause of action alleging fraud in the

inducement.” Cummings, 270 N.C. App. at 229. We conclude that the approach

adopted by the Court of Appeals with respect to this issue was a reasonable one and

will adopt it as our own.

¶ 53 As we have previously stated, “[f]raud has no all-embracing definition”;

instead, as a general proposition, fraud “may be said to embrace all acts, omissions,

and concealments involving a breach of legal or equitable duty and resulting in

damage to another, or the taking of undue or unconscientious advantage of another.”

Vail v. Vail, 233 N.C. 109, 113 (1951) (cleaned up). The following essential elements

of actionable fraud are well established: “(1) False representation or concealment of

a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive,

(4) which does in fact deceive, (5) resulting in damage to the injured party.” Forbis,

did not seek further review of this aspect of the Court of Appeals’ decision by this Court, which renders it final for purposes of further proceedings in this case. See N.C. R. App. P. 28(b)(6). CUMMINGS V. CARROLL

361 N.C. at 526–27 (quoting Ragsdale v. Kennedy, 286 N.C. 130, 138 (1974)). On the

other hand, “any reliance on the allegedly false representations must be reasonable.”

Id. at 527 (citing Johnson v. Owens, 263 N.C. 754, 757 (1965)).

¶ 54 Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll argue that they are not

liable for fraud for the same essential reasons that cause them to contend that a

finding of liability on the basis of negligence would be inappropriate. Berkeley

Investors and Mr. Bell insist that (1) neither the record nor the applicable law provide

any support for a finding that they knowingly made a false statement in the

disclosure statement and that (2), even if they made such a statement, plaintiffs

cannot show that they reasonably relied upon the alleged misrepresentations. More

specifically, Berkeley Investors and Mr. Bell assert that Mr. Carroll, who represented

them in the relevant transaction, had no obligation to inform plaintiffs of the

existence of the leak that had been repaired by Mr. Cribb given Mr. Cribb’s

assurances that the leak had been successfully remediated and that it was reasonable

for everyone involved to rely upon Mr. Cribb’s professional judgment. In addition,

Berkeley Investors and Mr. Bell argue that plaintiffs could not reasonably rely on the

representations made in the disclosure statement given their failure to heed the

recommendations set out in that document, the purchase contract, and Mr. Williams’

report that they obtain additional inspections of the house. Similarly, Re/Max and

Mr. Carroll contend that Mr. Carroll “did not have a duty to disclose the condition of CUMMINGS V. CARROLL

the repaired leak because he justifiably relied on [Mr. Cribb’s] representations that

the leak was repaired and believed (also based on months of observation and the

findings of other professionals) the leak to be repaired.” In their view, plaintiffs could

not prove that Berkeley Investors, Mr. Bell, Re/Max, or Mr. Carroll knew of the

existence of any problems that had not been reported in the disclosure statement,

with plaintiffs having been put on notice of the existence of additional potential

problems that they failed to adequately investigate.

¶ 55 We are unable, for the reasons set forth above, to accept the validity of any of

these arguments. In our view, as the Court of Appeals correctly determined, the

record discloses the existence of genuine issues of material fact concerning (1) the

reasonableness of any reliance that Berkeley Investors, Mr. Bell, Re/Max, and Mr.

Carroll may have placed upon the repair work performed by Mr. Cribb and (2)

whether plaintiffs reasonably relied upon the inspection report prepared by Mr.

Williams. Although we have focused much of our discussion of this issue upon the

reasonableness of the reliance placed by Berkeley Investors, Mr. Bell, Re/Max, and

Mr. Carroll upon the repair work performed by Mr. Cribb and the reliance placed

upon Mr. Williams’ report by plaintiffs, we have not lost sight of the fact that the

record contains evidence tending to show that significant water intrusion had

occurred in the past and that Berkeley Investors and Mr. Bell knew of the existence

of this condition. After acknowledging that the maintenance records maintained by CUMMINGS V. CARROLL

Oak Island Accommodations showed that water intrusion had occurred at the house

in the past, Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll insist that the

records “also show that each and every issue was addressed and resolved” and that

plaintiffs had failed to request that they be provided with the relevant maintenance

records in spite of the fact that they knew of their existence. We agree, for the reasons

stated below, that none of defendants had a legal duty to obtain the Oak Island

Accommodations maintenance records and to provide them to plaintiffs. We also

conclude, however, that the existence of these records, coupled with the e-mails

exchanged between Mr. Bell, Mr. Carroll, and Ms. Durham concerning water-

intrusion problems at the house over the course of nearly a year prior to the closing,

provide additional support for our conclusion that the record discloses the existence

of a genuine issue of material fact concerning the validity of plaintiffs’ fraud claims

given that awareness of the existence of these problems tends to undercut the

accuracy of the representations contained in the disclosure statement concerning the

condition of the house.

¶ 56 We are not, obviously, holding that these facts compel a finding of liability or

that a jury would not be able, depending upon its evaluation of the evidence, to return

a verdict in favor of Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll or that

either sellers or real estate agents owe a fiduciary duty to buyers or to disclose defects

that do not exist. Instead, we are simply holding that, in light of the present record, CUMMINGS V. CARROLL

a reasonable jury could, but was not required, to find in plaintiffs’ favor with respect

to these fraud-related claims. As a result, for all of these reasons, we hold that the

Court of Appeals correctly held that the trial court had erred by entering summary

judgment in defendants’ favor with respect to the fraud claims that plaintiffs had

asserted against Berkeley Investors, Mr. Bell, Re/Max, and Mr. Carroll.

F. Inference Running Backwards

¶ 57 Finally, Berkeley Investors and Mr. Bell argue that the Court of Appeals erred

in reversing the trial court’s summary judgment order by violating the prohibition

against relying upon inferences that “r[a]n backward.” In support of this argument,

Berkeley Investors and Mr. Bell direct our attention to our decision in Childress v.

Nordman, which they claim enunciates a “general rule that mere proof of the

existence of a condition or state of facts at a given time does not raise an inference or

presumption that the same condition or state of facts existed on a former occasion.”

238 N.C. 708, 712 (1953). In light of this principle, Berkeley Investors and Mr. Bell

argue that the Court of Appeals erred by relying upon Mr. Moore’s testimony, which

rested upon an inspection of the house that he conducted three months after the

closing, given the absence of any “evidence before the Court of Appeals sufficient to

show that [the] representations concerning the [h]ouse’s condition [made by Berkeley

Investors and Mr. Bell] were false either when made by them or when acted on by CUMMINGS V. CARROLL

[plaintiffs]—despite [Mr.] Moore’s opinion . . . that the problems had been ‘going on

for quite some time.’ ”

¶ 58 As Berkeley Investors and Mr. Bell have conceded, however, subsequent

decisions of this Court and the Court of Appeals have held that the principle

articulated in Childress was “not of universal application” and that its application

was, instead, dependent upon the “facts and circumstances of the individual case, and

on the likelihood of intervening circumstances as the true origin of the present

existence or the existence at a given time,” Jenkins v. Hawthorne, 269 N.C. 672, 674–

75 (1967) (cleaned up) (holding that a reasonable jury could infer from evidence that

the house at issue in that case was in the same condition at the time that the

defendant made her allegedly false representations as it was when the problems were

discovered several months later), with this Court having stated in Jenkins that “so

much depends upon circumstances that it seems a mistake to think in terms of a ‘rule’

with respect to this or any other of the many factors that must be considered,” id. at

675 (quoting Stansbury, N.C. Evidence § 90 (2d ed. 1963)), and with the Court of

Appeals having described the Childress “rule” as being “riddled with exceptions” and

having stated that “[t]he trend is toward permitting the fact finder to consider the

subsequent condition or fact along with all of the surrounding circumstances in

arriving at its conclusion as to the existence of the condition or fact at the relevant

time,” Plow v. Bug Man Exterminators, Inc., 57 N.C. App. 159, 162 (1982). A careful CUMMINGS V. CARROLL

examination of the record that is before us in the present case satisfies us that a

reasonable jury could determine, based upon Mr. Moore’s testimony, that the damage

that he discovered had been in existence at the time of closing, particularly given the

emphasis that Berkeley Investors and Mr. Bell have placed upon Mr. Cribb’s repair

work and the absence of any evidence tending to show that any event that might have

caused the damage that Mr. Moore observed had occurred between August and

November 2014. As a result, we hold that the Court of Appeals did not violate any

rule against “inferences running backwards” in partially reversing the trial court’s

summary judgment order.

G. Breach of Fiduciary Duty

¶ 59 Finally, in addressing the validity of the Court of Appeals’ determination that

the record disclosed the existence of genuine issues of material fact concerning the

extent to which Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman breached a

fiduciary duty to plaintiffs by (1) failing to procure the Oak Island Accommodations

maintenance records on behalf of plaintiffs and (2) hiring Mr. Williams to inspect the

house given his failure to conduct intrusive moisture testing, we begin by noting that

the relationship between a real estate agent and his or her client is by, definition, one

of agency, with the agent owing a fiduciary duty to the buyer in all matters relating

to the relevant transaction. See Restatement (Third) of Agency § 8.01 (2006). More

specifically: CUMMINGS V. CARROLL

A real estate agent has the fiduciary duty to exercise reasonable care, skill, and diligence in the transaction of business entrusted to him, and he will be responsible to his principal for any loss resulting from his negligence in failing to do so. The care and skill required is that generally possessed and exercised by persons engaged in the same business. This duty requires the agent to make a full and truthful disclosure to the principal of all facts known to him, or discoverable with reasonable diligence and likely to affect the principal. The principal has the right to rely on his agent’s statements, and is not required to make his own investigation.

Brown, 133 N.C. App. at 54–55 (cleaned up). In the same vein, the North Carolina

Real Estate Manual, which is published by the North Carolina Real Estate

Commission, notes that real estate agents have a duty to disclose any material facts

known to the agent and to “discover and disclose to the principal all material facts

about which the agent should reasonably have known.” N.C. Real Est. Manual 209

(Patrick K. Hetrick, Larry A. Outlaw & Patricia A. Moylan, eds., 2013) (emphasis

omitted).

¶ 60 In arguing that they did not breach any fiduciary duty that they owed to

plaintiffs, Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman claim that the

duties that they owed to plaintiffs were “define[d]” by the Exclusive Buyer Agency

Agreement, which provided, in pertinent part, that Rudd & Associates, Ms. Rudd-

Gaglie, and Mr. Goodman had a duty to “disclos[e] to [plaintiffs] all material facts

related to the property or concerning the transaction of which [they] ha[d] actual

knowledge”; advised plaintiffs to “seek other professional advice in matters of . . . CUMMINGS V. CARROLL

surveying, wood-destroying insect infestation, structural soundness, engineering,

and other matters”; and warned plaintiffs that, while Rudd & Associates, Ms. Rudd-

Gaglie, and Mr. Goodman “may provide [plaintiffs] the names of providers who claim

to perform such services, [plaintiffs] understand[ ] that [Rudd & Associates, Ms.

Rudd-Gaglie, and Mr. Goodman] cannot guarantee the quality of service or level of

expertise of any such provider.” Finally, the agency agreement provided that

plaintiffs would “indemnify and hold [Rudd & Associates, Ms. Rudd-Gaglie, and Mr.

Goodman] harmless” from any claims or liability arising from plaintiffs’ selection of

any such service provider or their decision not to have a particular service performed.

¶ 61 As the Court of Appeals correctly held, “a real-estate agent’s fiduciary duty is

not prescribed by contract, but is instead imposed by operation of law.” Cummings,

270, N.C. App. at 225. The fiduciary duty that a real estate agent owes to his or her

principal arises from the agency relationship itself, Raleigh Real Est. & Tr. Co. v.

Adams, 145 N.C. 161 (1907), with the duties that flow from that relationship being

dependent upon the level of skill, knowledge, and professional practices in accordance

with which real estate professionals generally operate rather than upon the nature

of the contractual provisions governing any specific agent-principal relationship. See

Restatement (Third) of Agency § 8.08 cmt. c (2006); see also Firemen’s Mut. Ins. Co.

v. High Point Sprinkler Co., 266 N.C. 134, 142 (1966) (observing that, when a

professional undertakes to represent a principal, he or she “implies that he [or she] CUMMINGS V. CARROLL

possesses the degree of professional learning, skill and ability which others of that

profession ordinarily possess, he [or she] will exercise reasonable care in the use of

his [or her] skill and application of his [or her] knowledge to the assignment

undertaken, and will exercise his [or her] best judgment in the performance of the

undertaking”). Rudd & Associates, Ms. Rudd-Gagle, and Mr. Goodman have failed

to cite any authority for the proposition that a real estate agent may limit or “define”

his or her fiduciary duties by contract, and we know of none. As a result, we decline

to hold that the extent of the duties that Rudd & Associates, Ms. Rudd-Gaglie, and

Mr. Goodman owed to plaintiffs in connection with the transaction that is at issue in

this case hinged upon the language of the agency agreement rather than upon general

principles of North Carolina agency law.6

¶ 62 As we have already noted, the relevant Real Estate Commission guidelines

indicate that a real estate agent is obligated to “discover and disclose” those material

facts that “may affect [plaintiffs’] rights and interests or influence [plaintiffs’] decision

in the transaction” rather than to simply disclose those of which the agent has “actual

knowledge.” N.C. Real Est. Manual 209, 211. In view of the fact that plaintiffs do

not contend that Rudd & Associates, Ms. Rudd-Gaglie, or Mr. Goodman had actual

6 Although Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman contend that,

rather than “restrict[ing] or limit[ing their] fiduciary duty,” the Exclusive Buyer Agency Agreement simply “defines that duty,” this distinction strikes us as without legal effect to the extent that it defines the duties that Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman owed to plaintiffs as something less than what would otherwise be required by law. CUMMINGS V. CARROLL

knowledge of the water-intrusion problems that existed at the house, the relevant

issue with respect to plaintiffs’ breach of fiduciary duty claim against Rudd &

Associates, Ms. Rudd-Gaglie, and Mr. Goodman is whether the record discloses the

existence of a genuine issue concerning the extent to which Rudd & Associates, Ms.

Rudd-Gaglie, and Mr. Goodman exercised a level of diligence consistent with

applicable professional standards. See Brown, 133 N.C. App. at 54.

¶ 63 In attempting to persuade this Court that the record does not contain any

evidence tending to suggest that they failed to meet the applicable standard, Rudd &

Associates, Ms. Rudd-Gaglie, and Mr. Goodman begin by arguing that plaintiffs failed

to adduce evidence tending to show that they had an affirmative duty to obtain the

relevant Oak Island Accommodations maintenance records or that it was “customary

or necessary” for them to do so. In support of this argument, Rudd & Associates, Ms.

Rudd-Gaglie, and Mr. Goodman point out that, unlike the situation at issue in Brown,

in which a specific Real Estate Commission guideline required the agent to make his

or her own measurement of the square footage of the property rather than relying

upon the measurements provided by an appraiser, no guideline requires an agent to

procure prior maintenance records in the event that the house in question had

previously been used as a rental property. In addition, Rudd & Associates, Ms. Rudd-

Gaglie, and Mr. Goodman emphasize that Ms. Rudd-Gaglie obtained all of the CUMMINGS V. CARROLL

information that plaintiffs requested, with plaintiffs having failed to ask them to

obtain the relevant maintenance records.

¶ 64 In rejecting these arguments, the Court of Appeals concluded that, since Rudd

& Associates, Ms. Rudd-Gaglie, and Mr. Goodman had failed to cite any authority for

the proposition that “a real-estate agent’s duty to investigate and disclose is limited,

as a matter of law, by the [ ] Real Estate Commission [or] the requests made by the

agent’s client,” Cummings, 270 N.C. App. at 226, the record disclosed the existence of

a genuine issue of material fact concerning the extent to which Rudd & Associates,

Ms. Rudd-Gaglie, and Mr. Goodman had a duty to obtain the Oak Island

Accommodations maintenance records and provide them to plaintiffs. In our view,

however, the question that the Court of Appeals should have addressed is whether

the Oak Island Accommodations maintenance records encompassed material

information and, if so, whether Rudd & Associates, Ms. Rudd-Gaglie, and Mr.

Goodman had an independent duty to request these records in their exercise of

“reasonable diligence.” Brown, 133 N.C. App. at 55.

¶ 65 The only evidence that plaintiffs cite in support of their contention that Rudd

& Associates, Ms. Rudd-Gaglie, and Mr. Goodman had an independent duty to obtain

the relevant maintenance records is the deposition testimony of Walter LaRoque, a

real estate agent who served as an expert witness for Rudd & Associates, Ms. Rudd-

Gaglie, and Mr. Goodman. Although Mr. LaRoque acknowledged that the extent to CUMMINGS V. CARROLL

which particular facts are material can be buyer-specific and that Ms. Rudd-Gaglie

had an obligation to conduct an independent investigation into the condition of the

property, he never stated that the Oak Island Accommodations maintenance records

constituted material information for purposes of this transaction or that Ms. Rudd-

Gaglie had an independent duty to request them. On the contrary, while it is clear

from an analysis of his deposition testimony that Mr. LaRoque believed that the cost

of maintaining the house would be a material fact given the impact that such

information would have had upon the viability of the house as rental property, he did

not, as best we can ascertain, testify that Ms. Rudd-Gaglie had an affirmative

obligation to make an independent request for the relevant maintenance records

themselves. In the absence of such evidence, we hold that the record does not reveal

the existence of a disputed issue of material fact with respect to this issue and that

Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman are entitled to judgment as

a matter of law with respect to the issue of whether they breached their fiduciary

duty to plaintiffs by failing to obtain the relevant Oak Island Accommodations

maintenance records.

¶ 66 Secondly, Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman contend

that they fulfilled their fiduciary duty to plaintiffs by recommending that Mr.

Williams, who was a licensed home inspector, inspect the house and emphasize that,

despite plaintiffs’ contention before the Court of Appeals that the performance of CUMMINGS V. CARROLL

moisture testing was a “usual and customary” component of a home inspection, Mr.

Williams had testified that he only performed intrusive moisture testing when he

concluded that it was necessary to do so and that they reasonably relied upon his

determination that there was no need for him to conduct such testing in this case.7

In addition, Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman point to Mr.

Moore’s testimony that there was no reason for Mr. Williams to have performed such

moisture testing given the absence of readily apparent water damage.

¶ 67 In rejecting this aspect of the position espoused by Rudd & Associates, Ms.

Rudd-Gaglie, and Mr. Goodman, the Court of Appeals pointed to Mr. Moore’s

testimony that he would have identified the water-intrusion problem has he inspected

the property and the lack of clarity concerning the extent to which the performance

of a moisture test was a “usual and customary” component of a home inspection before

stating that it was “unable to conclude that [Mr.] Williams’ failure to conduct such a

test was unobjectionable.” Cummings, 270 N.C. App. at 226–27. However, the

undisputed record evidence tends to show that Rudd & Associates, Ms. Rudd-Gaglie,

and Mr. Goodman recommended Mr. Williams on the basis of his expertise in

detecting moisture-related problems, that neither Ms. Rudd-Gaglie nor Mr. Goodman

were licensed home inspectors or general contractors and did not know what the

7 Although plaintiffs emphasize the results of Mr. Williams’ inspection in the factual

statements set out in their brief, they do not mention it in discussing their breach of fiduciary duty claim against Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman. CUMMINGS V. CARROLL

components of a proper home inspection would be, and that, at the time of his

employment, Mr. Williams was a licensed home inspector, general contractor, and

insurance adjuster who had never been subject to any sort of professional discipline.

In addition, Mr. Moore corroborated Mr. Williams’ contention that there was no

reason, based upon what he had seen while inspecting the house, for the performance

of additional moisture testing given that the water damage that the house had

sustained was not readily apparent in light of the cosmetic repairs that had been

made. As a result of the fact that plaintiffs did not successfully impeach Mr. Williams’

qualifications or demonstrate that Rudd & Associates, Ms. Rudd-Gaglie, or Mr.

Goodman had any reason to conclude that Mr. Williams had failed to act in an

appropriate manner, the record contains no basis for concluding that Rudd &

Associates, Ms. Rudd-Gaglie, or Mr. Goodman failed to exercise “reasonable

diligence” in recommending that plaintiffs employ Mr. Williams or in relying upon

his expertise.8 See Clouse, 115 N.C. App. at 509 (holding that a real estate agent

reasonably relied upon the expert opinion of an independent surveyor). As a result,

we hold that the Court of Appeals erred by reversing the trial court’s decision to grant

8 Although plaintiffs have argued that the performance of a moisture test was “usual

and customary” and that Mr. Williams had failed to perform such a test, it seems to us that such an argument tends to support a claim against Mr. Williams relating to the manner in which he conducted his inspection rather than a claim for breach of fiduciary duty against Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman. CUMMINGS V. CARROLL

summary judgment in favor of Rudd & Associates, Ms. Rudd-Gaglie, and Mr.

Goodman with respect to this issue.

III. Conclusion

¶ 68 Thus, for the reasons set forth above, we hold that the Court of Appeals

correctly determined that the trial court had erred by granting summary judgment

in defendants’ favor with respect to plaintiffs’ claims for negligence and fraud against

Re/Max and Mr. Carroll and for negligent misrepresentation and fraud against

Berkeley Investors and Mr. Bell and that the Court of Appeals erred by reversing the

trial court’s decision to grant summary judgment in favor of Rudd & Associates, Ms.

Rudd-Gaglie, and Mr. Goodman. As a result, the Court of Appeals’ decision is

affirmed, in part, and reversed, in part, with this case being remanded to the Court

of Appeals for further remand to Superior Court, Brunswick County, for a trial on the

merits with respect to plaintiffs’ remaining claims against Berkeley Investors, Mr.

Bell, Re/Max, and Mr. Carroll and for the dismissal of the entirety of their claims

against Rudd & Associates, Ms. Rudd-Gaglie, and Mr. Goodman.

AFFIRMED, IN PART; REVERSED, IN PART; AND REMANDED. Justice BERGER concurring in part and dissenting in part.

¶ 69 I concur with the portion of the majority opinion that reverses the Court of

Appeals’ decision regarding plaintiffs’ agents and claims of negligent

misrepresentation and fraud against the sellers. For the reasons below, however, I

respectfully dissent from the majority opinion addressing the claims of negligence

and fraud against the sellers’ agents.

¶ 70 Summary judgment is appropriate when “there is no genuine issue as to any

material fact and . . . any party is entitled to a judgment as a matter of law.” Dallaire

v. Bank of Am., N.A., 367 N.C. 363, 367 (2014). To be a “genuine issue” for purposes

of summary judgment, an issue must be “maintained by substantial evidence.”

Kessing v. Nat’l Mortg. Corp., 278 N.C. 523, 534 (1971).

¶ 71 The duties owed by real estate agents are well settled in this state.

A real estate agent has the fiduciary duty to exercise reasonable care, skill, and diligence in the transaction of business entrusted to him, and he will be responsible to his principal for any loss resulting from his negligence in failing to do so. The care and skill required is that generally possessed and exercised by persons engaged in the same business. This duty requires the agent to make a full and truthful disclosure to the principal of all facts known to him, or discoverable with reasonable diligence and likely to affect the principal.

Brown v. Roth, 133 N.C. App. 52, 54–55 (1999) (cleaned up) (emphasis added).

¶ 72 In addition to the fiduciary duties owed by agents to their principals, real CUMMINGS V. CARROLL

Berger, J., concurring in part and dissenting in part

estate agents also owe duties to third parties. Specifically, “[a] broker has a duty not

to conceal from the purchasers any material facts and to make full and open

disclosure of all such information.” Johnson v. Beverly-Hanks & Assocs., Inc., 328

N.C. 202, 210 (1991) (citing Spence v. Spaulding & Perkins, Ltd., 82 N.C. App. 665

(1986)). This duty arises from N.C.G.S. § 93A-6(a), which states that the North

Carolina Real Estate Commission (the Commission) has the authority to discipline a

broker for “[m]aking any willful or negligent misrepresentation or any willful or

negligent omission of material fact.” N.C.G.S. § 93A-6(a) (2019). “Material fact” is

defined in the Commission’s Student Manual generally as “[a]ny fact that could affect

a reasonable person’s decision to buy, sell, or lease” the property in question. 2019–

2020 General Update Course, Student Manual 28 (N.C. Real Est. Comm’n, 2019),

https://www.superiorschoolnc.com/wp-content/uploads/2020/03/2019-20-General-

Update-version-9.2019.pdf. More specifically, when the fact in question involves the

condition of the property itself, as in the present case, the manual describes a

material fact as follows: “significant property defects or abnormalities such as[ ]

structural defect(s), malfunctioning system(s), [a] leaking roof, or drainage or flooding

problem(s).” Id. Where a defective condition is repaired, the prior defect need not be

disclosed because the condition is no longer “material.”

¶ 73 Here, the majority agrees with plaintiffs’ contention that (1) the adequacy of

Cribb’s qualifications and (2) the equivocal nature of his statements to Carroll that CUMMINGS V. CARROLL

he “may have found the leak” and that he “hope[d] that was it” raise an issue of

material fact as to whether Carroll’s belief that the leak had been fixed was

reasonable. Cribb’s qualifications, however, have no bearing on the present analysis.

Rather, Carroll’s reasonable conclusion that the leak had been fixed was bolstered by

the result of plaintiffs’ inspection. That inspection, which was conducted by a licensed

contractor just three days after it had rained, revealed no evidence of an ongoing leak.

¶ 74 At some time prior to March 24, 2014, Cribb completed several repairs to the

exterior of the home in an effort to fix a leak that had stained the ceiling. On July

12, 2014, plaintiffs made an offer to purchase the subject property. Nearly four

months after Cribb’s repairs, plaintiffs commissioned a property inspection to be

conducted by a licensed home inspector on July 19, 2014. Despite the rain that

occurred three days before the inspection, the inspector found no evidence of an

ongoing leak where the stain had previously been. Carroll was present during the

inspection and received a copy of the report. It was not until after a major

thunderstorm in November 2014 that further evidence of water intrusion emerged.

The relevant record evidence, viewed in the light most favorable to plaintiffs, thus

demonstrates that Carroll hired a handyman to repair a leak, the handyman

conducted repairs, and four months later, a licensed home inspector found no

evidence of an existing leak even after it had recently rained.

¶ 75 Under these circumstances alone, it was reasonable for Carroll to believe that CUMMINGS V. CARROLL

the leak had been remedied. As such, the fact that there had previously been a leak

was no longer “material.” See 2019–2020 General Update Course, Student Manual

28 (N.C. Real Est. Comm’n, 2019). Carroll was thus under no duty to disclose this

information to plaintiffs. Since plaintiffs have failed to forecast sufficient evidence to

show that the sellers’ agents owed a duty, plaintiffs cannot prevail on their negligence

claim. For similar reasons, I would also conclude that the sellers’ agents did not

commit fraud.

¶ 76 Moreover, the majority expands the duty a seller’s agent owes a purchaser to

the functional equivalent of a fiduciary duty. The obligations seller’s agents owe to

purchasers are fairly well established. At least they were. The majority opinion

seems to suggest a seller’s real estate broker is now a guarantor of the condition of

the subject property and faces potential liability for failure to disclose any potential

deficiency mentioned by the seller. Inevitably, the expansion of this duty will lead to

uncertainty as to the responsibilities of seller’s agent to the seller vis à vis this new

duty to the buyer.

Chief Justice NEWBY joins in this opinion.