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Anthony Taibi published in Trial Briefs Magazine
A Good Lawsuit Requires More Than a Bad Bargain by Anthony Taibi. Published June 13 in Trial Briefs Magazine, a pu ...

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Anthony Taibi published in Trial Briefs Magazine

30 Nov -0001

Trial Briefs Magazine • June 2013

A Good Lawsuit Requires More Than a Bad Bargain

by Tony Taibi

[T]he law will not relieve one who can read and write from liability upon a written contract, upon the ground that he did not understand the purport of the writing, or that he has made an improvident contract, when he could inform himself and has not done so. The law aids those who are vigilant, not those who sleep on their rights. This rule cannot be invoked, however, in behalf of one who induces sleep and lulls to security.

Leonard v. Southern Power Co., 155 N.C. 10, 11, 70 S.E. 1061, 1063 (1911).

It is true that a purchaser will not be allowed to rescind his trade, or recover damages, simply because he has not made a good one, but, where he has been tricked into making a trade he otherwise would not have made, the law generally affords some measure of relief.

Stewart v. Salisbury Realty & Ins. Co., 159 N.C. 230, 231, 74 S.E. 736, 737 (1912).

The policy of the courts is, on the one hand, to suppress fraud and, on the other, not to encourage negligence and inattention to one’s own interest. The question is whether it is better to encourage negligence in the foolish or fraud in the deceitful.

Johnson v. Owens, 263 N.C. 754, 757, 140 S.E.2d 311, 313 (1965).

Objectively Swindled or Buyer’s Remorse?

When a potential client comes in and tells us that he has been cheated out of money or property, he only has told us how he feels; we must figure out if he has a legal claim and if so, how it should be pursued. On one level, what clients typically mean is that someone convinced them voluntarily to enter into a deal or contract, which, after the fact, they have come to believe was not in their best interest. On the emotional level, the person feels fooled or tricked, that he would not have done the deal but for the cheater doing something underhanded, misleading, crooked, deceptive — wrongful. Buyer’s (or seller’s) remorse or the opprobrium of his family or friends combines with a sense or realization that the personwas overly influenced by the other party who got the better of the deal.1

A lawsuit is a blunt instrument for achieving justice, and despite the enactment of consumer protection laws, a now-universallyimplied covenantof “good faith and fair dealing” in contracts, 2 and the evolution of a more nuanced view of the bargaining process in common law analysis, the old “caveat emptor” paradigm still frames our common sense that autonomous grown-ups of sound mind should have the freedom to make decisions for themselves and be held to their promises. All this is to say that a good lawsuit requires more than a bad bargain, and — outside of areas of statutory or regulatory provision — the victim’s lawyer is always necessarily fighting to have his case understood as an exception to the general rules, that his client should be excused from what is ordinarily obligatory. As a result, claims require great specificity in pleading, and much more work to articulate them successfully. Understanding that you and your client must be able to specifically articulate what makes your particular case exceptional is the key to successful pleading and deposition preparation.

Special Rules of Pleading
No specific rule can be laid down as to what false representations will constitute fraud, as this depends upon the particular facts which have occurred in each case, the relativesituation of the parties and their means of information.
Walsh v. Hall, 66 N.C. 233 (1872).

The “general” rules of pleading require only “[a] short and plain statement of the claim sufficiently particular to give the court and the parties notice of the . . . transactions or occurrences, intended to be proved showing that the pleader is entitled to relief.”3 In contrast, claims of “fraud, duress or mistake” must “be stated with particularity.”4 A complaint based upon allegations consisting of “generalities and conclusory allegations of fraud” will be dismissed.5 Although this heightened requirement requires extra work and may expose the weaknesses of a claim, meeting the challenge by working with your client to understand exactly how she was convinced or pressured into making the bad deal, and exactly what was wrongful about what the other party did to convince or pressure her, will save you grief in the long run by focusing your claim, sharpening your discovery, and teaching your client what facts matter and how they must be put together so that she can explain what happened in a legally relevant way.

How Long is an Arm’s Length?
A first step in choosing your legal claims and framing your client’s case as an exception to the general rules requires determining whether or not your client’s unhappy agreement was formed at “arm’s length.” The Merriam-Webster
dictionary defines “arm’s length” as “the condition or fact that the parties to a transaction are independent and on an equal footing.” 6 This is a key issue because, under North Carolina law, 


When the parties deal at arms length and the purchaser has full opportunity to make inquiry but neglects to do so and the seller resorted to no artifice which was reasonably calculated to induce the purchaser to forego investigation action in deceit will not lie.7



Or, put another way,



when parties have dealt at arms length and contracted, the Court cannot relieve one of them because the contract has proven to be a hard one. Whether or not the consideration is adequate to the promise, is generally immaterial in the absence of fraud.8


Whether courts merely reflect prevailing standards of conduct or in fact help to shape them, our courts both expect and demand little in the way of behavioral constraint from the “morals of the marketplace,” 9 in Justice Cardozo’s famous phrase. In great contrast, however, courts demand “the duty of finest loyalty” be maintained by “those bound by fiduciary ties.” 10 Thus, many forms of business conduct permissible in the “workaday world for those acting at arm’s length,” limited only by the standards of “actual” fraud, are forbidden to those in a “relationship of confidence and trust,” when judged by the higher standards of “constructive” fraud and breach of fiduciary duty.


If your client’s case falls outside of the requisites of statutory Unfair and Deceptive Practices claims,11 and there is no way to plausibly allege that the wrongdoer had any kind of fiduciary relationship or special duty to your client (i.e., that the parties did not deal at “arm’s length”), then you must be able to specifically articulate in your pleadings and be prepared to prove all of the elements of common law fraud12 — an often formidable barrier. When dealing at arm’s length, one is required to be a “big boy” 13 and be responsible for one’s own due diligence.

A common law fraud claim, in keeping with the “freedom of contract” paradigm, requires pleading and proving that the defendant knew that his misrepresentation was untrue when made; that the defendant intended to mislead the victim at the time the misrepresentation was made; and, both that the victim “actually” relied upon the specific intentionally misleading representation that the defendant knowingly made, and that it was objectively “reasonable” for the victim to so rely upon the misrepresentation in entering into the complained-of transaction.14 Combined with the requirement of “particularity” in pleading fraud codified in Civil Procedure Rule 9, a victim’s lawyer cannot wait until discovery to find out precisely how his client was cheated.

The process of working with your client to articulate the specific misrepresentations and process by which she came to make the bad decision will often reveal that your case looks less like a specific premeditated scheme to mislead by a con artist working people at “arm’s length,” and more like your client trusting someone whom she knew and, perhaps not unreasonably, had reason to trust. When someone is unhappy with the outcome of a transaction with someone she had reason to trust, this is the province of “constructive” fraud, with a whole different frame of rules and expectations.


Constructive Fraud
Constructive fraud is the appropriate cause of action when the relationship of the parties appears to have been something other, and more morally duty-bound, than that of strangers conducting business at arm’s length. Unlike “actual” fraud, constructive fraud does not assume that parties to a transaction have no duties beyond abstaining from force or purposeful deception. Constructive fraud is based on the principle that people should not enrich themselves at the expense of those in whom they have induced trust. Thus, although North Carolina courts “will not relieve one who can read and write from liability upon a written contract, upon the ground that he did not understand the purport of the writing, or that he has made an improvident contract,” they may nonetheless grant relief against “one who induces sleep and lulls to security.” 15 An otherwise unexceptional transaction can be challenged when the relationship between the parties was such that the loser reasonably relied upon her trust in the winner not to take advantage.

Fraud must be pled with particularity because it literally is exceptional. The claimant’s lawyer must focus on why his particular case should be an exception to a general rule. This requires more than just noting the burden of proof and facts that need to be proven: this is about articulating the meaning of such facts, showing how your facts exemplify why exceptions to the rules must exist. The central issue around which an “actual” fraud case revolves is the “misrepresentation”: what it was, what it did, and why it falls outside of what can be tolerated — even in the moral jungle of the market place. In contrast, for constructive fraud it is not the particulars of the bargaining process that make a case exceptional; rather, it is the relationship between the parties that makes the transaction special. Once the special nature of the parties’ relationship has been established a whole different set of rules determines acceptable conduct: “something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” 16

Constructive fraud has a wholly different conceptual frame from “actual” fraud. The formal elements of constructive fraud are (1) a relationship of trust and confidence, (2) that the party charged took advantage of that position of trust in order to benefit himself, and (3) that claimant was, as a result, injured.17 As the North Carolina Supreme Court has explained:


constructive fraud differs from actual fraud in that it is based on a confidential relationship rather than a specific misrepresentation. Another difference is that intent to deceive is not an element of constructive fraud. When . . . the superior party obtains a possible benefit through the alleged abuse of the confidential or fiduciary relationship, the aggrieved party is entitled to a presumption that constructive fraud occurred.18

Thus, once a relationship of trust has been established, the burden shifts, as there is an automatic “presumption of fraud when the superior party obtains a possible benefit.” 19

Central to pleading constructive fraud and telling your client’s story is the “relationship of confidence and trust” upon which your client was entitled to rely — that which made it reasonable for her to expect that the other party would not just refrain from lying, but actively watch out for her interests. You must be able to articulate specific facts showing that the cheater had a (special) duty of loyalty to the victim before you can productively think about the breach of such duty.

In our legal culture it is paradigmatic that, ordinarily, the public interest requires strictly enforcing contracts, even where one party has taken advantage of his superior knowledge, bargaining power or cunning to benefit himself at another’s detriment. It is remarkable how utterly different the analysis becomes when the parties’ relationship is deemed something less than arm’s length. “Neither actual dishonesty nor intent to deceive is an essential element of constructive fraud.”20 A party in a relation of trust and confidence must affirmatively disclose all material facts about a prospective transaction.21 Regardless of intent, constructive fraud is “presumed” if the Court finds that a defendant benefitted from his position of trust in ways that would not even merit a second look in ordinary business.

What Relationships Create Fiduciary Duties?
Equity jurisprudence and North Carolina case law hold it constructive fraud when a person uses any “relationship of trust and confidence” for his or her pecuniary advantage. In North Carolina, “fiduciary” and “confidential” relationships appear to be synonymous. Such relationships can be either presumptive, in which the duties arise as matter of law from the legal nature of the relationship,22 or de facto, where the duties arise from the particular circumstances of the relationship between the parties. North Carolina courts recognize as de jure presumptive fiduciary relationships “all legal relations, such as attorney and client, broker and principal, executor or administrator and heir, legatee or devisee, factor and principal, guardian and ward, partners, principal and agent, trustee and cestui que trust.”23 Other relationships also deemed intrinsically non-arm’s length include joint venturers,24 directors and officers of a corporation to the corporation itself and its shareholders,25 and controlling or majority shareholders to their minority shareholders in a closely held corporation.26


Beyond those relationships deemed, as a matter of law, intrinsically fiduciary, “under our law a fiduciary relationship can be found to exist any time one person reposes a special confidence in another, in which event the one trusted is bound to act in good faith and with due regard to the interests of the other.”27 In this, as in many areas of equity jurisprudence, the courts will not carve out “safe harbors” or otherwise provide bright lines.

Courts of equity have carefully refrained from defining the particular instances of fiduciary relations in such a manner
that other and perhaps new cases might be excluded. It is settled by an overwhelming weight of authority that the principle extends to every possible case in which a fiduciary relation exists as a fact, in which there is confidence reposed on one side, and the resulting superiority and influence on the other. The relation and the duties involved in it need not be legal; it may be moral, social, domestic or merely personal.28

“The courts generally have declined to define the term ‘fiduciary relation’ and thereby exclude from this broad term any relation that may exist between two or more persons with respect to the rights of persons or the property of either.”29

Where the existence of a fiduciary duty is a trial question, it is proper for the court to simply define “fiduciary relationship” but leave to the jury the determination, as a matter of fact, whether such relationship existed between the parties.30 The North Carolina Pattern Jury Instructions provide a surprisingly sparse and potentially broad definition.

A fiduciary is a person in whom another person has placed special faith, confidence and trust. Because of the trust and confidence placed in him by another person, a fiduciary is required to act honestly, in good faith and in the best interests of that person. A fiduciary relationship may exist in a variety of circumstances. Any time one person places special faith, confidence and trust in another person to represent his best interests, a fiduciary relationship exists. It is not necessary that it be a technical or legal relationship.31

Once a relationship is found to have been “fiduciary,” any transaction between the parties — including an otherwise valid and recorded real property deed — will be overturned and damages imposed if the terms are found to have been at all more advantageous to the defendant.32

In order to get to the point at which a jury can determine if your client’s relationship with the defendant should be deemed “fiduciary,” you must plead and show with particularity “the facts and circumstances (1) which created the relation of trust and confidence, and (2) led up to and surrounded the consummation of the transaction in which defendant is alleged to have taken advantage of his position of trust to the hurt of plaintiff.”33 Pleadings that consist of a “general denunciation of the acts of the [defendant] as fraudulent . . . are fatally defective in not sufficiently particularizing the acts of defendant upon which the charge is based and do not, therefore, raise issues cognizable by the court.”34 Similarly, “it is not sufficient for plaintiff to allege merely that defendant had won his trust and confidence and occupied a position of dominant influence over him. Nor does it suffice for him to allege that the deed in question was obtained by fraud and undue influence.”35

Intimate Relationships and Fiduciary Duty
A long line of North Carolina cases, going back at least to the nineteenth century, indicate that when romantic relationships have led one to invest in the property of one’s putative partner, courts should balance the equities.36 In that regard, North Carolina courts have imposed fiduciary duties on even the most estranged of marital relationships with separated individuals. 37 However, despite the long equity tradition of finding fiduciary duties whenever “there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence,” until fairly recently our courts have refused to provide any remedy when a relation of trust and confidence emerged from a romantic but unmarried relationship.38

This “romance exception” to the duties equity otherwise demands from those in whom trust and confidence has been reposed was unequivocally laid to rest in this state by Suggs v. Norris.39 Since Suggs v. Norris,  North Carolina courts have applied the equity standards of informal implied partnerships and fiduciary duties in cases involving the property and business affairs of formerly romantically involved persons. For example, in Rhue v. Rhue, the Court of Appeals held cognizable a claim wherein it was alleged that a man made promises to his female cohabitant that they would “grow old together” and that he was buying property that they would have when they retired, and the female cohabitant relied on such promises and helped improve the property. The Court found evidence of a confidential relationship, and held that, although no formal partnership agreement existed, because the female cohabitant had paid some expenses from her personal account and provided manual labor for building the home, with the understanding that she would be taken care of by male cohabitant who had purchased the property for their retirement, an implied partnership could be found to have existed.40 Similarly, in Cury v. Mitchell, the Court of Appeals held a former domestic companion adequately stated a claim in alleging that her male companion breached the trust of their fiduciary relationship by refusing to reimburse her for contributions toward a residence titled exclusively in the male companion’s name. The Court explained that equity can provide a remedy “irrespective of the intent with which such party acquired the property,” including “[i]nequitable conduct short of actual fraud.” 41

Tell a Good (and Particular) Story

Aside from cases involving those relationships that the law presumes to be fiduciary, the victim’s lawyer must spell out facts specific to the particular parties’ unique relationship, and neither make assumptions based on family or other status relations, nor describe such facts through generalities, buzz words, or boilerplate assertions. For example, merely pleading a confidential relationship based upon status as a blood relation may not survive a motion to dismiss, but a familial and even a mere friendship relationship can be sufficient to support a claim based upon a fiduciary duty, if it is sufficiently pled.42

Do not accept that you cannot claim that a particular kind of relationship is fiduciary simply because it has failed in the past; for example, defense lawyers regularly cite our Supreme Court’s opinion in Dalton v. Camp, asserting that it “holds” that the employment relationship is not fiduciary, when the case actually holds only that our courts cannot presume that an employment relationship is a confidential relationship as a “general rule.” 43 To successfully plead that a particular relationship between parties who are employee and employer was one of confidence and trust, the victim’s lawyer must articulate the facts and circumstances that make a particular case’s relationship one of trust and confidence, and detail facts about how that particular special relationship led up to and surrounded the consummation of the transaction in which the cheater is alleged to have taken advantage of his position of trust to the hurt of your client.44

If you can successfully plead your case and make a factual showing as to its particulars, you will probably be able to get your constructive fraud case to the jury. “The existence or nonexistence of a fiduciary duty [is] a question of fact for the jury. The jury [has] to determine whether plaintiff had placed special confidence and faith in defendants to act in plaintiff’s interests.” 45 Further, if you have successfully articulated the wrongfulness of the defendant’s conduct sufficient to pass the procedural hurdles, it is likely that you have a persuasive case that will prove successful before a jury.

1. Gerard Bell, The Automobile Buyer after the Purchase, Journal of Marketing (July 1967), JSTOR 1249023 (“Buyer’s remorse is the sense of regret after having made a purchase. It is frequently associated with the purchase of an expensive item such as a car or house. It may stem from fear of making the wrong choice, guilt over extravagance, or a suspicion of having been overly influenced by the seller.”).
2. The implied covenant of good faith and fair dealing is a legal presumption that every contract necessarily includes the intended obligation (covenant) of good faith in its performance. Although the concept arose in the mid-19th
century, before adoption of the Uniform Commercial Code in the 1950s the common law of most states did not recognize implied covenants. Harold Dubroff, The Implied Covenant of Good Faith in Contract Interpretation and Gap-filling: Reviling a Revered Relic, 80 St. John’s L. Rev. 559 (2006).
3. N.C. Gen. Stat. § 1A-1, N.C. R. Civ. P. Rule 8. General rules of pleadings.
4. N.C. Gen. Stat. § 1A-1, N.C. R. Civ. P. Rule 9. Pleading special matters.
5. Sharp v. Teague, 113 N.C.App. 589, 597, 439 S.E.2d 792, 797 (1994) (quoting, Moore v. Wachovia Bank and Trust Co., 30 N.C.App. 390, 391, 226 S.E.2d 833, 835 (1976)).
6. www.merriam-webster. com/dictionary. Interestingly, the phrase’s first definition is “a distance discouraging personal contact or familiarity.”
7. Olivetti Corp. v. Ames Business Systems, Inc., 319 N.C. 534, 542-543, 356 S.E.2d 578, 583 (1987) (quoting, Calloway v. Wyatt, 246 N.C. 129, 134, 97 S.E.2d 881, 885-886 (1957), quoting, Harding v. Insurance Co., 218 N.C. 129, 134, 10 S.E.2d 599, 602 (1940), citing, Cash Register Co. v. Townsend, 137 N.C. 652 [50 S.E. 306], May v. Loomis, 140 N.C. 350 [52 S.E. 728] Frey v. Lumber Co., 144 N.C. 759 [57 S.E. 464], Tarault v. Seip, 158 N.C. 359 [74 S.E. 3] 23 A.J., 981.
8. Weyerhaeuser Co. v. Carolina Power & Light Co., 257 N.C. 717, 722, 127 S.E.2d 539, 543 (1962) (citing, Young v. Board of Commissioners of Johnston County, 190 N.C. 52, 57, 128 S.E. 401 (1925).
9. Trust Co. v. Johnson, 269 N.C. 701, 711, 153 S.E.2d 449, 457 (1967) (quoting, Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928)).
10. Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928). Cardozo writes, Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions. Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. 249 N.Y. at 463-464, 164 N.E. at 546 (citation omitted).
11. North Carolina’s UDTP statute, N.C. Gen. Stat. § 75-1.1, requires neither proof of intent to defraud (see, e.g., Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981) (whether defendant acted in bad faith not pertinent to Chapter 75); Concrete Service Corp. v. Investors Group, Inc., 79 N.C.App. 678, 686, 340 S.E.2d 755, 760 (1986) (“The narrow legal limits of the law of fraud do not describe the limits of what may constitute unfair or deceptive practices.”)), nor particularity in pleading. As to elements of UDTP pleading, see e.g., Gray v. North Carolina Ins. Underwriting Ass’n, 352 N.C. 61, 68, 529 S.E.2d 676, 681 (2000) (“In order to establish a violation of N.C.G.S. § 75-1.1 a plaintiff must show: (1) an unfair or deceptive act or practice, (2) in or affecting commerce, and (3) which proximately caused injury to plaintiffs.”). However, Chapter 75 cases can only be brought for acts “in or affecting commerce” and does not subject private vendors of realty to liability. Robertson v. Boyd, 88 N.C.App. 437, 443, 363 S.E.2d 672, 676 (1988) (“private parties engaged in the sale of a residence, were not involved in trade or commerce and cannot be held liable under the statute.”). Nor does UDTP otherwise protect people from being cheated by non-business actors such as family members, pastors, care givers, and others close to them.
12. The elements of fraud are: (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 injured party. See, e.g., Ragsdale v. Kennedy, 286 N.C. 130, 209 S.E.2d 494 (1974); see also, Johnson v. Owens, 263 N.C. 754, 756, 140 S.E.2d 311, 313 (1965) (“The oft-stated essential elements of fraud, or deceit, are: the representation,its falsity, scienter, deception, and injury. The representation must be definite and specific; it must be materially false; it must be made with knowledge of its falsity or in culpable ignorance of its truth; it must be made with fraudulent intent; it must be reasonably relied on by the other party; and he must be deceived and caused to suffer loss.”).
13. The so called “Big Boy” defense, often articulated in securities litigation, is that sophisticated investors are supposed to do their own due diligence and risk management and therefore should be held to a high standard when claiming they were misled into buying securities. See, e.g., Wall Street Bank Invokes ‘Big Boy’ Defense In $1 Billion WesCorp Suit, Credit Union Journal (SourceMedia, October 2, 2011). In private sales of publicly traded securities, buyers are often asked to sign what is commonly referred to as a “big boy letter,” attesting that the transaction is the product of arms-length negotiations between sophisticated, well-represented parties, and that the purchaser promises not to sue the seller who may well be in possession of undisclosed inside information. See, Joseph M. McLaughlin, Corporate Litigation: Big Boy Letters and Non-Reliance Provisions, Simpson Thacher & Bartlett LLP, (December 13, 2012).
14. See e.g., Johnson v. Owens, 263 N.C. 754, 758, 140 S.E.2d 311, 314 (1965) (“Just where reliance ceases to be reasonable and becomes such negligence and inattention that it will, as a matter of law, bar recovery for fraud is frequently very difficult to determine.”); RD & J Properties v. Lauralea-Dilton Enterprises, LLC, 165 N.C.App. 737, 744-745, 600 S.E.2d 492, 498 (2004) (“plaintiff’s reliance on any misrepresentations must be reasonable” to constitute common law fraud.).
15. Leonard v. Southern Power Co., 155 N.C. 10, 70 S.E. 1061, 1063 (1911) (upholding judgment setting aside deed because of oral misrepresentation as to its written terms).
16. Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928).
17. See, e.g., White v. Consolidated Planning, Inc., 166 N.C.App. 283, 294, 603 S.E.2d 147, 156 (2004) (citations omitted).
18. Forbis v. Neal, 361 N.C. 519, 528-29, 649 S.E.2d 382, 388 (2007) (citations omitted, punctuation altered).
19. Watts v. Cumberland County Hosp. System, Inc., 317 N.C. 110, 116, 343 S.E.2d 879, 884 (1986).
20. Miller v. First Nat. Bank of Catawba County, 234 N.C. 309, 316, 67 S.E.2d 362, 367-68 (1951) (quoting, 37 C.J.S., Fraud, § 2, p. 211).
21. See e.g., Stamm v. Salomon, 144 N.C.App. 672, 680, 551 S.E.2d 152, 157-58 (2001) (“Where a relation of trust and confidence exists between the parties, there is a duty to disclose all material facts, and failure to do so constitutes fraud.”).
22. Presumptive fiduciary relationships include, but are not limited to, (1) trustee and cestui que trust dealing in reference to the trust fund, (2) attorney and client, in respect of the matter wherein the relationship exists, (3) mortgagor and mortgagee in transactions affecting the mortgaged property, (4) guardian and ward, just after the ward arrives of age, and (5) principal and agent, where the agent has entire management so as to be, in effect, as much the guardian of his principal as the regularly appointed guardian of an infant. McNeill v. McNeill, 223 N.C. 178, 181, 25 S.E.2d 615, 617 (1943) (citation omitted).
23. Abbitt v. Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931), cited in, BDM Investments v. Lenhil, Inc., 2012 WL 194383, 16 (N.C. Super., 2012).
24. Pike v. Wachovia Bank & Trust Co., 274 N.C. 1, 8, 161 S.E.2d 453, 460 (1968) (“A joint venture is an association of persons with intent, by way of contract, express or implied, to engage in and carry out a single business adventure for joint profit, for which purpose they combine their efforts, property, money, skill, and knowledge, but without creating a partnership in the legal or technical sense of the term.”).
25. See, Meiselman v. Meiselman, 58 N.C.App. 758, 774, 295 S.E.2d 249, 259 (1982) (noting that “[d]irectors of a corporation are trustees of the property of the corporation for the benefit of the corporate creditors, as well as shareholders.”), modified and aff’d, 309 N.C. 279, 307 S.E.2d 551 (1983); N.C. Gen. Stat. § 55–8–30 (2009) (listing the fiduciary duties of a corporate director); N.C. Gen .Stat. § 55–8–42 (2009) (listing the fiduciary duties of corporate officers).
26. Loy v. Lorm Corp., 52 N.C.App. 428, 432, 278 S.E.2d 897, 901 (1981) (“[I]n North Carolina majority shareholders owe a fiduciary duty and obligation of good faith to minority shareholders as well as to the corporation.”). However, “[a]s a general rule, shareholders do not owe a fiduciary duty to each other or to the corporation.” Freese v. Smith, 110 N.C.App. 28, 37, 428 S.E.2d 841, 847 (1993).
27. Adams v. Moore, 96 N.C.App. 359, 362, 385 S.E.2d 799, 801 (1989) (citing, Abbitt v. Gregory, 201 N.C. 577, 160 S.E. 896 (1931)).
28. Abbitt v. Gregory, 201 N.C. 577, 160 S.E. 896, 906-907 (1931) (quoting, Pomeroy’s Equity Jurisprudence (3d Ed.), vol. 2, § 956).
29. Terry v. Terry, 302 N.C. 77, 84, 273 S.E.2d 674, 677 (1981) (citations omitted) (holding constructive fraud does not require element of misrepresentation, only that defendant used confidential relationship to purchase interest in business at price below market).
30. Will of Baitschora, 207 N.C.App. 174, 180-189, 700 S.E.2d 50, 60-62 (2010).
31. N.C.P.I. Civil 900.10 Definition of Fiduciary; Explanation of Fiduciary Relationship (North Carolina Pattern Jury Instructions for Civil Cases (2012)).
32. See, e.g., N.C.P.I. Civil 850.35 Deeds -Action to Set Aside -Constructive Fraud.
33. Rhodes v. Jones, 232 N.C. 547, 548-549, 61 S.E.2d 725, 726 -727 (1950).
34. Privette v. Morgan, 227 N.C. 264, 269, 41 S.E.2d 845, 848-849 (1947).
35. Rhodes v. Jones, 232 N.C. 547, 548-549, 61 S.E.2d 725, 726 -727 (1950) (citations omitted).
36. See e.g., Edwards v. Culbertson, 111 N.C. 342, 16 S.E. 233 (1892) (Defendant, by promising to marry plaintiff, obtained money which she invested in lands, and afterwards refused to marry him; defendant held as “trustee” for amount obtained, which was made charge on the lands so purchased).
37. Link v. Link, 278 N.C. 181, 193, 179 S.E.2d 697, 704 (1971) (“‘The relationship between husband and wife is the most confidential of all relationships, and transactions between them, to be valid, must be fair and reasonable.’ . . . [T]he fact that the transactions here in question occurred after the defendant’s departure from the home, following the disclosure by the plaintiff of her misconduct, did not show the previously established confidential relationship between them had terminated so as to free the defendant to deal with the plaintiff as if they were strangers.”) (quoting, Eubanks v. Eubanks, 273 N.C. 189, 159 S.E.2d 562 (1968)).
38. Cf., Pierce v. Cobb, 161 N.C. 300, 77 S.E. 350 (1913) (“In such cases the law leaves the parties where it finds them.”).
39. Suggs v. Norris, 88 N.C.App. 539, 542-543, 364 S.E.2d 159, 162 (1988) (“We now make clear and adopt the rule that agreements regarding the finances and property of an unmarried but cohabiting couple, whether express or implied, are enforceable as long as sexual services or promises thereof do not provide the consideration for such agreements.”).
40. Rhue v. Rhue, 189 N.C.App. 299, 306-307, 658 S.E.2d 52, 58-59 (2008).
41. Cury v. Mitchell, 202 N.C.App. 558, 561, 688 S.E.2d 825, 827-28 (2010).
42. See, Curl By and Through Curl v. Key, 311 N.C. 259, 316 S.E.2d 272, (1984) (reversed trial court conclusion of law that mere family friend could not be fiduciary with respect to otherwise valid deed execution; new trial ordered which voided otherwise valid deed). Confidential relationships are not limited to a purely legal setting but may be found to exist in situations which are moral, social, domestic, or merely personal. It is equally well settled that a course of dealing between persons so situated is watched with extreme jealousy and solicitude; and if there is found the slightest trace of undue influence or unfair advantage, redress will be given to the injured party. 311 N.C. at 265, 316 S.E.2d at 276 (citations omitted).
43. Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 708 (2001).
44. White v. Consolidated Planning, Inc., 166 N.C.App. 283, 294, 603 S.E.2d 147, 156 (2004) (“To survive a motion to dismiss, a cause of action for constructive fraud must allege (1) a relationship of trust and confidence, (2) that the defendant took advantage of that position of trust in order to benefit himself, and (3) that plaintiff was, as a result, injured.”).
45. HAJMM Co. v. House of Raeford Farms, Inc., 94 N.C.App. 1, 13, 379 S.E.2d 868, 875 (1989).