## Facts

- A general contractor entered a written HVAC subcontract with a corporate subcontractor for construction of a shopping center; the price was increased during performance.
- The subcontractor submitted periodic notarized applications for payment, signed by the corporation’s principal, certifying “to the best of his knowledge, information and belief” that the work and payment status stated in the application were accurate.
- In one application, the subcontractor sought payment for equipment represented as ordered and stored in a bonded warehouse, including specialty electronic items later not located.
- The general contractor paid in reliance on the application, then sued alleging fraud and gross negligence based on asserted misrepresentations about the equipment.
- At trial, evidence showed the corporate principal did not know the application statements were false and did not intend to deceive; the application had been prepared from internal information supplied by an employee.
- The corporation’s principal and spouse were the corporation’s sole officers/directors; the spouse notarized the payment applications.

## Issues

1. Whether a verdict for intentional common-law fraud can stand when the factfinder determines the defendant did not knowingly make a false representation and the evidence shows no intent to deceive.
2. Whether inaccurate payment-application statements in a construction subcontract support tort liability labeled “gross negligence” absent fraud scienter or an independent tort duty.
3. Whether a notary who signs only in a notarial capacity may be held personally liable for substantive misrepresentations contained in the notarized document.

## Decision

- The court set aside the intentional-fraud verdicts because fraud requires knowledge of falsity (or reckless disregard) and intent to deceive, and the findings/evidence did not establish those elements.
- The court rejected “gross negligence” tort liability premised on careless or mistaken statements in the payment application where the theory effectively substituted for missing fraud elements and no independent tort duty was shown.
- The court vacated the judgment against the notary because notarization authenticates the signature/acknowledgment and does not make the notary the speaker of the document’s substantive representations.
- The case was remanded for further proceedings consistent with these rulings, leaving the contractor to non-tort remedies supported by the remaining claims and proof.

## Legal Principles

- Common-law fraud requires a false representation made with knowledge of falsity (or reckless disregard for truth) and intent that the plaintiff rely, plus reasonable reliance and resulting damages.
- A fraud verdict cannot stand where the findings negate scienter and intent to deceive, even if the plaintiff relied and suffered loss.
- Tort remedies cannot be used to recharacterize contract-performance disputes based on inaccurate statements absent the elements of the tort alleged or an independent duty outside the contract.
- A notary’s act of notarization, without more, does not constitute adoption of the instrument’s substantive statements and does not create liability for misrepresentations in the document.

## Conclusion

The court held that mistaken payment-application certifications, without proof of knowing falsity or intent to deceive, do not support fraud or substitute tort liability, and that a notary who merely notarizes an application is not personally liable for the application’s substantive inaccuracies.


Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 374 S.E.2d 385 (N.C. 1988)