Opinion of the Court
and reverse and remand.
I. Factual and Procedural Background
Plaintiff sold wood products to Flowers Flooring on 21 April 2023. Jeremy
Flowers wrote a check in the amount of $17,498.78 on behalf of Flowers Flooring and
Flowers Flooring delivered the check to Plaintiff. The check was not honored when
Plaintiff tried to cash it, leaving Plaintiff without those funds and an additional bank
service fee.
Less than a year later, Plaintiff filed a complaint and issuance of summons.
Shortly after, Defendants moved to dismiss the action for failure to state a claim upon
which relief can be granted.
On 3 September 2024, Judge Sasser entered an order dismissing Plaintiff’s
claims of fraud, conversion, and punitive damages while keeping its breach of
contract and unjust enrichment claims as to Flowers Flooring; and dismissing the
fraud, conversion, punitive damages, breach of contract, and unjust enrichment
claims as to Jeremy Flowers. About a month afterward, Plaintiff and Flowers
Flooring participated in arbitration for breach of contract and unjust enrichment,
where the arbitrator found for Plaintiff.
On 4 December 2024, Judge Walczyk entered judgment on the arbitrator’s
decision and the September 3 order, finalizing the dismissal of fraud, conversion, and
punitive damages claims. Plaintiff timely appeals.
II. Analysis
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Plaintiff argues the trial court erred in its dismissal of fraud, conversion, and
punitive damages claims against Flowers Flooring as well as in its dismissal of fraud,
conversion, and punitive damages claims against Jeremy Flowers.
A. Standard of Review
This Court reviews an appeal from a Rule 12(b)(6) motion to dismiss order
under a de novo standard of review to determine a pleading’s legal sufficiency and to
ensure the trial court ruled correctly on the motion to dismiss. Leary v. N.C. Forest
Prods., Inc., 157 N.C. App. 396, 400, 580 S.E.2d 1, 4 (2003). We then determine
whether the factual allegations of the complaint, when treated as true, sufficiently
state a claim upon which relief may be granted. Taylor v. Bank of America, N.A., 382
N.C. 677, 679, 878 S.E.2d 798, 800 (2022) (citation omitted). The complaint must be
liberally construed. Wells Fargo Bank, N.A. v. Corneal, 238 N.C. App. 192, 195, 767
S.E.2d 374, 377 (2014). Rule 12(b)(6) dismissal is proper when a complaint’s claim
on its face is unsupported by law, the complaint on its face shows a lack of sufficient
facts to make a claim, or the complaint discloses facts that undermine a claim. Howe
v. Links Club Condo. Ass’n, Inc., 263 N.C. App. 130, 137, 823 S.E.2d 439, 447 (2018)
(citation omitted).
B. Fraud
Plaintiff alleges the trial court erred in its dismissal of fraud claims for both
Flowers Flooring and Jeremy Flowers, as a corporate officer.
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An actual fraud claim must include (1) a false representation, (2) that was
reasonably designed to deceive, (3) made with intent to deceive, (4) that deceives, and
(5) damages the party who was deceived. Vanguard Pai Lung, LLC v. Moody, 387
N.C. 376, 383, 912 S.E.2d 788, 794 (2025) (citation omitted); Forbis v. Neal, 361 N.C.
519, 526–27, 649 S.E.2d 382, 387 (2007) (citation omitted). Fraud must be plead with
particularity, including the “‘alleg[ed] time, place, and content of the fraudulent
representation,’” the identity of the person who made the representation, and the
acquisition from the misrepresentation. Value Health Sols., Inc. v. Pharm. Rsch.
Assocs., Inc., 385 N.C. 250, 263, 891 S.E.2d 100, 112 (2023) (citation omitted). Mere
conclusory statements alleging fraud will be insufficient. Sharp v. Teague, 113 N.C.
App. 589, 597, 439 S.E.2d 792, 797 (1994) (citation omitted); Terry v. Terry, 302 N.C.
77, 85, 273 S.E.2d 674, 678 (1981).
Attempting to pay with checks unsupported by sufficient funds can qualify as
a sufficient fraud claim. Austin v. Tire Treads, Inc., 21 N.C. App 737, 739, 205 S.E.2d
615, 616 (1974) (citation omitted). Plaintiff should show that the alleged
insufficiently funded checks were not liquid when issued or collectable for a
reasonable period after the checks were issued. Id. at 740, 205 S.E.2d at 617.
A corporate officer, even when acting as an agent of an entity, may be
personally liable when he or she actively participated in fraud. Palomino Mills v.
Davidson Mills Corp., 230 N.C. 286, 292, 52 S.E.2d 915, 919 (1949); see Austin, 21
N.C. App. at 739–40, 205 S.E.2d at 616–17; Taft v. Brinley’s Grading Servs., Inc., 225
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N.C. App. 502, 520, 738 S.E.2d 741,752 (2013). For example, a corporate officer may
face personal liability for fraud when misrepresenting a company’s financial condition
causing damage to another party. Austin, 21 N.C. App. at 739, 205 S.E.2d at 616–17
(citation omitted).
Here, Plaintiff alleges Flowers Flooring, through Jeremy Flowers, delivered
Plaintiff a check not supported by sufficient funds, a plausible form of false
representation when treated as true. Plaintiff declares Defendants knew that the
amount in the check’s account was insufficient to pay for the goods. Further, Plaintiff
contends Defendants had no intention of paying Plaintiff. Moreover, Plaintiff asserts
Defendants intended to induce Plaintiff to rely on the validity of the check, and that
Plaintiff reasonably relied on their misrepresentation. Defendant’s check was then
dishonored, damaging Plaintiff by the check amount and the bank service fee.
Plaintiff sufficiently addresses each element of a fraud claim. These allegations,
when treated as true, sufficiently state a fraud claim upon which relief can be
granted.
Plaintiff not only alleged a sufficient fraud claim against Flowers Flooring, but
also sufficiently alleged a fraud claim against Jeremy Flowers, individually. It is
alleged Jeremy Flowers, as a corporate officer, actively participated in fraud when
misrepresenting Flowers Flooring’s financial condition. The complaint on its face
shows it is supported by law and facts and none of the facts defeat the claim; thus,
dismissal was not proper.
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Plaintiff pleaded the fraud claim with appropriate particularity including the
time, place, and content of the misrepresentation as well as the identities of the
culprits and the acquisition from the misrepresentation. In its complaint, Plaintiff
includes the date of the occurrence to be 21 April 2023, recognizes the fraudulent
representation content as the check not supported by sufficient funds, identifies
Jeremy Flowers made the misrepresentation in endorsing and delivering the
worthless check, and highlights that Defendants acquired Plaintiff’s expensive wood
products without proper payment. Plaintiff’s allegations satisfy the particularity
statement and meet the Rule 12(b)(6) standard.
C. Conversion
Conversion essentially consists of (1) a plaintiff’s ownership and (2) a
defendant’s wrongful possession. Variety Wholesalers, Inc. v. Salem Logistics Traffic
Servs., LLC, 365 N.C. 520, 523, 723 S.E.2d 744, 747 (2012) (citation omitted). In other
words, conversion is a tort consisting of unsanctioned control over goods or chattel
that belong to someone else, resulting in exclusion of the owner’s rights or in the
object’s alteration. Id.
The “economic loss rule prohibits recovery for purely economic loss in tort, as
such claims are instead governed by contract law.” Lord v. Customized Consulting
Specialty, Inc., 182 N.C. App. 635, 639, 643 S.E.2d 28, 30 (2007) (citation omitted).
Generally, a breach of contract does not amount to a tort claim by the promisee
against the promisor, but there are many exceptions including “a conversion of the
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property of the promisee, which was the subject of the contract, by the promisor.”
N.C. State Ports Authority v. Lloyd A. Fry Roofing Co., 294 N.C. 73, 82, 240 S.E.2d
345, 351 (1978) (citation omitted) (receiving negative treatment for a different
reason); see Lake Mary Ltd. Partnership v. Johnston, 145 N.C. App. 525, 532, 551
S.E.2d 546, 552 (2001) (showing that a conversion claim may coexist with a breach of
contract claim); Di Frega v. Pugliese, 164 N.C. App. 499, 509, 596 S.E.2d 456, 463–64
(2004) (holding the trial court did not err in denying the plaintiff’s motion to dismiss
the conversion claim, even with the existence of a lease agreement).
Plaintiff’s conversion claim arises from the same factual circumstance as
described in the fraud section: Defendants took control and ownership of Plaintiff’s
goods, the wood products, and failed to properly pay Plaintiff, resulting in Plaintiff’s
exclusion of its ownership rights. When treated as true, this allegation sufficiently
states a conversion claim upon which relief may be granted.
Defendants argue the economic loss rule bars Plaintiff’s conversion claim.
However, conversion claims are excepted from the general rule that a breach of
contract does not amount to a tort claim by the promisee against the promisor. Ports
Authority, 294 N.C. at 82, 240 S.E.2d at 351. Therefore, Plaintiff is not barred from
pursuing a conversion claim and sufficiently pled a compensable claim for conversion,
considering the complaint must be liberally construed.
D. Punitive Damages
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Punitive damages may be awarded if a claimant proves a defendant is liable
for compensatory damages where actual fraud was present and related to the injury.
N.C. Gen. Stat. § 1D-15(a)-(b) (2023); Estate of Long v. Fowler, 378 N.C. 138, 142, 861
S.E.2d 686, 691 (2021).
Plaintiff’s punitive damages claim turns on Defendants’ actual fraud, as
previously discussed, related to Plaintiff’s injury of $17,498.78 plus the $35 bank fee.
The punitive damages claims, when treated as true, are sufficiently stated such that
relief may be granted. Therefore, this claim should not be dismissed under Rule
12(b)(6).
III. Conclusion
At this stage, the allegations in Plaintiff’s complaint, when treated as true,
sufficiently state claims of fraud, conversion, and punitive damages on which relief
can be granted against both Defendants. We reverse the trial court’s dismissal of
each of those claims and remand.
REVERSED AND REMANDED.
Judges CARPENTER and MURRY concur.
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