Monday, March 10, 2008, 6:04 PM

NC Supreme Court DIGs Lending Case

On Friday the NC Supreme Court dismissed as improvidently granted the petition for discretionary review (PDR) in Richardson v. Bank of America. Many issues were decided by the Court of Appeals (COA) in that case (its opinion is here), but the primary issue raised in the PDR concerned the COA's holding that plaintiff had a valid claim for breach of the covenant of good faith and fair dealing (see part III of the COA's opinion). The PDR contended that the COA had created a new tort by recognizing a duty of good faith and fair dealing (namely one of disclosure) outside the context of contractual performance (namely in pre-contract discussions, in the course of contract formation). It's not clear why the Supreme Court deemed review improvident, but perhaps the Attorney General's amicus brief had something to do with it. That brief contended that the judgment could be salvaged on the basis that it can be limited to the unique context of mortgage lending, where, the Attorney General maintained, there's a special duty of good faith and fair dealing applicable to mortgage lenders, a duty grounded in statute: The Mortgage Lending Act, enacted in 2001, imposes duties on mortgage brokers in the context of lending transactions and prohibits them to "engage in any transaction, practice, or course of business that is not in good faith or fair dealing." G.S. 53-243.11(8).

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