Abatemarco et al v. Legasus of North Carolina, LLC et al
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Transcript of Abatemarco et al v. Legasus of North Carolina, LLC et al
1
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
Asheville Division
GERALD ABATEMARCO, BEN )
ATKINSON, ANTHONY BARBIERI, )
CHRISTIAN BARSANTI, SUSAN )
BARSANTI, THOMAS BERITELLI, )
SHARON BERITELLI, EDGAR BOWLIN, )
PEGGY BOWLIN, EDGAR BOWLIN, )
PAUL BOYDELL, TIFFANY BOYDELL, )
BORIS BRAND, MARC BROWNER, )
ROBERT BURT, DIANE CARROLL, )
GREGORY CARTER, JOANNE CARTER, )
JANAKI CHANDRAMOULI, )
SRINIVASAN CHANDRAMOULI, )
JEFFREY CHAUS, JO ANN CHAUS, )
FREDERIC CLARK, CHRIS CRUZ, )
CYNTHIA CRUZ, CONSTANCE FONG, )
DAVID FONG, ANNA GIABOURANI, )
DAVID GRASSE, SHELBY GRASSE, )
CATHY GRUSSER, JOSEPH GRUSSER, )
EDITH HANSEN, JACK HERZBERG, )
KRISTINE HERZBERG, DONALD HILL, )
TRICIA HILL, DANIEL HINKSON, )
JULIAN HUTCHINS, LANE HUTCHINS, )
MARK IPPOLITO, MELISSA JADICK, )
RICHARD JADICK, ALISON JURGENS, )
DAN JURGENS, JAMES KARP, )
VIVIEN KARP, DENISE KEARY, )
GREGORY KEARY, ALAN KESSLER, )
SANDA KESSLER, SUSAN )
KORNFELD, KENNETH KOSCO, )
MICHELE KOSCO, CINDY LAMIR, )
JOSEPH LAMIR, STEVE LANIER, ERIC )
LAWRENCE, LENORA LAWRENCE, )
COLE MACKELPRANG, TRENT )
MACKIE, EUGENE MARKHAM )
JOHANNA MARKHAM, DAVE MARKS )
TERESA MARKS, CHRIS )
MATTAROLLO, TINA MATTAROLLO )
JOSEPH MCELROY, ANNE )
MELLENTHIN, MICHAEL )
Case 1:11-cv-00023-MR -DLH Document 1 Filed 02/04/11 Page 1 of 107
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MELLENTHIN, BETH MOSES, STEVEN )
MOSES, DONNA PANARELLO, )
JOHN PARK, PENELOPE PARK, )
SUSAN PAYNE, JENNIFER PINKHAM, )
ROGER PINKHAM, KATHLEEN )
POWELL, RICHARD POWELL, )
RANDAL PRICE, MEKO L. PRICE, )
PAMELA RATCLIFFE, BOYKIN )
ROBINSON, JENNIFER P. ROBINSON, )
DAVID SANDERS, KIM SANDERS, )
JUDY SCHUNN, ROBERT SCHUNN, )
CONNIE JOHNSON-SCOTT, ROBERT )
SCOTT, G. DANIEL SIEGEL, GERRY )
SMITH, JAMIE SMITH, JEFFREY )
SNYDER, BRIDGET STEEN, JOSEPH )
STEEN, PAUL TAFFE, TONYA TAFFE, )
LYNN TAMN, MARK TAMN, )
KATHRYN L. TRACY, KEVIN TRACY, )
PATRICIA TRACY, AUDREY TROIANO, )
MICHAEL TROIANO, CHRIS TURNER, )
PAMELA R. TURNER, JENNIFER )
ULLMAN, NEAL ULLMAN, EDWARD )
VARON, BARRON WALL, PETE )
WASILEWSKI, MICHAEL )
WHITEHOUSE, SYLVIA WHITEHOUSE, )
KATHERINE WILLIAMS, DARREN )
WISHNER, JILL WISHNER, BEVERLY )
WISHNER, EDWARD WISHNER, )
RUSSELL WISHNER, CASEY WOOD, )
JASON WOOD, DAVID WRIGHT, )
STACEY WISHNER, WILLIAM )
WRIGHT, AMANDA ZUMBRUN )
)
Plaintiffs ) Civil Action No.: ______________
v. )
)
LEGASUS OF NORTH CAROLINA, LLC,)
SYNOVUS BANK, MICHAEL WOLF, )
THEODORE C. MORLOK, )
STEPHEN R. KLORFEIN, )
AS PERSONAL REPRESENTATIVE OF )
THE ESTATE OF ROBERT A. CORLISS, )
JAMES R. PITTS, )
MARILYN MCCOY WOODS )
)
Defendants. )
Case 1:11-cv-00023-MR -DLH Document 1 Filed 02/04/11 Page 2 of 107
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COMPLAINT
Plaintiffs, by counsel, state as follows for their Complaint against Defendants, Legasus of
North Carolina, LLC (“Legasus”), Synovus Bank (the “Bank”), Michael Wolf, Theodore C.
Morlok, Stephen R. Klorfein as Personal Representative of the Estate of Robert A. Corliss,
James R. Pitts, and Marilyn McCoy Woods.
NATURE OF THE CASE
1. This case involves a real estate development marketed and sold to the Plaintiffs
by the Defendants through an elaborate scheme designed to artificially inflate the value of lots in
the River Rock subdivision. The Defendants accomplished this scheme through various
negligent and/or intentional misrepresentations made directly and through instrumentalities of
interstate commerce, including direct mailings, telephone calls, electronic mail, and internet
advertisements.
2. Among other claims, this action asserts claims arising from the Defendants'
breach of duty, neglect, error, misstatement, misleading statements, omissions, or acts by
Defendants in their capacities as directors, officers, or employees of the entities identified herein
and their affiliated entities. It also asserts negligence resulting in Plaintiffs' loss of use of
tangible property that has not been physically injured.
PRELIMINARY STATEMENT
3. Legasus, through its agents, represented to Plaintiffs that the River Rock
subdivision in Jackson County, North Carolina ("River Rock") would be a luxury resort
community with numerous amenities, as well as roads and utilities to serve the lots in the
subdivision.
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4. James R. Pitts, Theodore C. Morlok, and Robert A. Corliss, directly or indirectly
through one or more intermediaries, controlled Legasus. Legagus, James R. Pitts, Theodore C.
Morlok, and Robert A. Corliss with Stephen R. Klorfein as Personal Representative of the Estate
of Robert A. Corliss, are collectively referred to hereinafter as the “Legasus Defendants.”
5. For the reasons set forth below, Defendants, James R. Pitts, Theodore C. Morlok
and Robert A. Corliss are liable for the actions of Legasus, as well as their own actions.
6. At the same time that the Legasus Defendants were making representations
concerning the numerous amenities that would be built in the community, as well as the timing
of those amenities, they knew or should have known that developing the community was
impossible because, among other reasons, they were negligently or intentionally permitting or
causing the distribution of funds needed to construct the required infrastructure to themselves
and to other entities, without consideration, thus rendering Legasus insolvent and unable to meet
its financial obligations.
7. The Legasus Defendants, through their agents, offered significant concessions to
induce Plaintiffs to purchase lots in the River Rock subdivision that were in fact extraordinary,
including one hundred percent financing for raw land, ten percent down at closing that was
transferred to the National Bank of South Carolina for payment on each Plaintiff‟s loan, no
payments for almost two years, two thousand dollars ($2,000) in closing costs and a free Club
Membership that was represented to the Plaintiffs to be worth between thirty thousand dollars
($30,000) and fifty thousand dollars ($50,000).
8. As part of its scheme to induce Plaintiffs to purchase raw land in the River Rock
subdivision, Legasus teamed with several lending institutions, including the National Bank of
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South Carolina, to offer Plaintiffs extraordinary financing options on the purchase of raw land in
the River Rock subdivision that benefited both Legasus and those lending institutions.
9. The Legasus Defendants worked with the National Bank of South Carolina
(“NBSC” or the “National Bank of South Carolina”) to develop a loan program for the River
Rock subdivision that would allow each purchaser of a lot in River Rock to receive a loan for
ninety percent of the total purchase price of the lot in River Rock with no payments on that loan
for approximately eighteen (18) months with interest only payments for the term of the loan.
10. Legasus and NBSC agreed that at the closing on each lot purchase financed by
NBSC, Legasus would transfer the ten percent down payment made by each lot purchaser into an
account at NBSC to be used for the payment of the interest payments on NBSC‟s loan to
purchasers of lots in River Rock.
11. The Legasus Defendants developed this scheme to induce the Plaintiffs and other
buyers to purchase lots in the River Rock subdivision. They travelled across the country to find
unwitting buyers who largely came from New Jersey, California, and other states where buyers
had no knowledge of real estate values in Western North Carolina. As part of this scheme,
Legasus employees travelled to conventions across the country, including to a convention in
California, to sell the opportunity for these out of state buyers to purchase lots in River Rock.
12. Upon information and belief, the Legasus Defendants used straw purchasers,
including their own employees, friends and family members to purchase the first group of lots in
the River Rock subdivision at artificially inflated prices as part of their scheme to sell lots to
subsequent purchasers, including the Plaintiffs, at artificially inflated prices.
13. Upon information and belief, the Legasus Defendants utilized the services of
James S. Price & Associates, P.A. to conduct closings and prepare settlement statements on lots
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in the River Rock subdivision in part because James S. Price, Esq. was selling lots in River Rock
and encouraging individuals who worked at James S. Price & Associates, P.A. to purchase lots in
River Rock at inflated prices.
14. Upon information and belief, the Legasus Defendants hand-selected an appraiser,
Marilyn McCoy Woods, to conduct appraisals of lots at River Rock and informed her that she
had an opportunity to do a large number of appraisals in River Rock. Upon information and
belief, the Legasus Defendants and NBSC hand-selected Marilyn McCoy Woods to appraise lots
in River Rock because they knew that they could persuade Marilyn McCoy Woods to provide
inflated values in her appraisals to reach pre-determined values of lots based on each buyer‟s
contract purchase price.
15. Upon information and belief, Marilyn McCoy Woods intentionally or negligently
provided materially false appraisals in order to facilitate the sale of lots at artificially inflated
values in River Rock as part of the Defendants‟ scheme to defraud the Plaintiffs.
16. As a result of the actions of the Defendants, the sale prices of raw lots in River
Rock were artificially inflated thereby harming the Plaintiffs.
17. From August of 2005 through December of 2005, the Jackson County, North
Carolina average raw land sales price for lots between zero and four acres was one hundred and
thirty six thousand eight hundred and thirty seven dollars ($136,837), with most of these lots
being in established communities with amenities.
18. From August of 2005 through December of 2005, the average sale price for raw
lots in River Rock with no amenities was three hundred and thirteen thousand two hundred and
seventy-six dollars ($313,276).
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19. When comparing the average sale price of raw lots in the River Rock community
from August of 2005 through December of 2005 to the average sale price for raw lots in Jackson
County, North Carolina during that same time period, the River Rock raw lots sold for nearly
2.27 times the sale price of the raw land in Jackson County, North Carolina, even though that
land was largely in established communities with amenities.
20. Legasus and its agents sold raw lots at inflated prices to the Plaintiffs, including,
but not limited to, the sale of the 3.008 acre raw lot in the Bear Pen Section of River Rock on
June 5, 2006 to Plaintiff, Steven Moses, for four hundred and ninety-nine thousand nine hundred
dollars ($499,900) on June 5, 2006. This lot was originally appraised on May 22, 2006 by
Marilyn McCoy Woods and valued at five hundred thousand dollars ($500,000).
21. Legasus and its agents sold raw lots at inflated prices to the Plaintiffs, including,
but not limited to, the sale of the raw 2.060 acre Lot 90 in the Bear Pen Section of the River
Rock subdivision to Edward Varon and Rochelle Varon for four hundred and nineteen thousand
and nine hundred dollars ($419,900) on June 5, 2006. Marilyn McCoy Woods appraised Lot 90
in the Bear Pen Section on May 10, 2006 for four hundred and twenty thousand dollars
($420,000).
22. Legasus and its agents sold raw lots at inflated prices to the Plaintiffs, including,
but not limited to, the sale of the raw .63 acre Lot 15 in the Trout Creek Section of the River
Rock subdivision to Thomas Payne and Susan Payne for four hundred and ninety-five thousand
dollars ($495,000) on March 6, 2007.
23. From 2005 through 2007, the Defendants participated in a scheme that resulted in
the sale of over fifty-five (55) lots to the Plaintiffs that generated sales proceeds in excess of
eighteen million dollars ($18,000,000) for Legasus. As a result of the Legasus Defendants’ acts
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or omissions described herein and their actions in disbursing Legasus’ assets in the face of
millions of dollars of development obligations, the infrastructure and amenities were not
constructed.
24. Upon information and belief, Legasus and its agents sold over fifty-four million
dollars ($54,000,000) worth of real estate in River Rock at the Grand Opening weekend at River
Rock.
25. Upon information and belief, Legasus collected over seventy-five million dollars
($75,000,000) in proceeds from lot sales in the River Rock subdivision from January 1, 2005
through December 31, 2007. As a result of Defendants, James R. Pitts, Theodore C. Morlok and
Robert A. Corliss‟ negligent or intentional acts or omissions described herein and their actions in
disbursing Legasus’ assets in the face of millions of dollars of development obligations, the
infrastructure and amenities were not constructed.
26. Upon information and belief, Legasus‟ business model was to sell lots first and
build infrastructure later, or not at all.
27. During the period from 2004 to 2008, while simultaneously and actively
promoting the sale of lots at River Rock and despite massive contractual liabilities to construct
roads, utilities, and amenities for the community, Defendants, James R. Pitts, Theodore C.
Morlok and Robert A. Corliss negligently or intentionally caused Legasus to disburse millions of
dollars from the limited liability company, leaving it without sufficient funds to construct the
promised infrastructure and amenities.
28. During this same time period, upon information and belief, Defendants, James R.
Pitts, Theodore C. Morlok and Robert A. Corliss were paid millions of dollars from Legasus,
resulting in the transfer of Legasus’ assets to its members without consideration.
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29. Upon information and belief, the sales of lots in River Rock was the source of a
substantial amount of the funds that the Defendants, James R. Pitts, Theodore C. Morlok and
Robert A. Corliss, received or permitted others to receive.
30. Upon information and belief, Legasus was operated as a sham entity and as an
alter ego of the Defendants, James R. Pitts, Theodore C. Morlok and Robert A. Corliss, who
profited or allowed others to profit from these payments and distributions, while failing to insure
that sufficient funds were left in Legasus‟ possession to fulfill its contractual obligations.
31. None of the Defendants, James R. Pitts, Theodore C. Morlok and Robert A.
Corliss, is being sued solely because they participated in the management, control, or ownership
of Legasus. Instead, they are being sued for personally profiting or allowing others to profit
from the acts and conduct set forth in this Complaint, in circumstances that left Legasus as a
shell with no assets to perform its development obligations.
32. Upon information and belief, some of these disbursements occurred during a
period when Legasus was insolvent or was becoming insolvent, thereby giving rise to a fiduciary
duty to creditors such as the Plaintiffs, to whom the entity owed millions of dollars in
development obligations or, alternatively, the refund of their purchase money if the entity did not
intend to perform or could not perform those obligations. During the time period from at least
2005, and perhaps earlier, through the present, Legasus was not prosecuting its business in good
faith and it had no reasonable prospect or expectation of doing so given the continuing
defalcations and other obstacles to development described herein.
33. Further, Defendants, James R. Pitts, Theodore C. Morlok and Robert A. Corliss,
controlled and exercised complete domination over Legasus’ policies, finances, and business
practices such that piercing the corporate veil as to the claims stated herein is appropriate.
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34. The scheme to sell lots at inflated prices to the Plaintiffs not only enriched
Legasus and its members, but also enriched each of the Defendants in this action.
35. NBSC was enriched by this scheme to sell lots at inflated prices to the Plaintiffs
because a portion of the proceeds of lots sales to the Plaintiffs went directly to NBSC to pay
down its development loans to Legasus.
36. NBSC was enriched by this scheme to sell lots at inflated prices to the Plaintiffs
because Legasus transferred the ten percent down payment that each lot purchaser made at
closing to an account at NBSC and such funds were applied to the interest due on its loans to the
Bank Plaintiffs and other Plaintiffs with loans from NBSC.
37. NBSC was enriched by this scheme to sell lots at inflated prices to the Plaintiffs
because it received loan origination fees that were a percentage of the total amount of each loan
that NBSC issued to individuals who purchased lots in River Rock.
38. Marilyn McCoy Woods was enriched by this scheme to sell lots at inflated prices
to the Plaintiffs because Marilyn McCoy Woods received a fee for each lot that she appraised in
River Rock.
39. Each of the Defendants aided and abetted the commission of the various acts
described herein as they acted in concert with each other, they acted pursuant to a common
design, or they each knew that the other's conduct constituted a breach of duty to the Plaintiffs
and they gave substantial assistance or encouragement to the others.
PARTIES
40. Plaintiffs are all purchasers of lots in the River Rock subdivision. Each Plaintiff
relied upon representations that the River Rock subdivision would have certain amenities,
including, among others, the roads and utilities necessary to serve the individual lots. These
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representations were made both orally and in writing, in promotional materials, Property
Reports, and sales contracts.
41. Plaintiffs, Christian Barsanti, Marc Browner, Joseph Grusser, Catherine V.
Grusser, Donald Hill, Tricia Hill, Kenneth Kosco, Joseph McElroy, Michael Troiano, Edward
Wishner and Beverly Wishner (collectively referred to as the “Bank Plaintiffs”) each received a
loan or loans from the National Bank of South Carolina to purchase lots in the River Rock
subdivision and each are maintaining individual claims against its successor in interest Synovus
Bank in this action.
42. Legasus of North Carolina, LLC ("Legasus"), is a North Carolina Limited
Liability Company, and it is a Developer, as that term is defined by the Interstate Land Sales Full
Disclosure Act ("ILSA"), 15 U.S.C. $ 1701, et, seq., of real property located in North Carolina.
Legasus may be served at its registered agent, Theodore C. Morlok, 705 W. Main Street, Sylva,
North Carolina, 28779.
43. Michael Wolf (“Wolf”), is a citizen and resident of South Carolina and may be
served at the following address: 4107 Liberty Highway, Anderson, South Carolina 29621. Wolf
was an Agent for the Developer, as those terms are defined by ILSA, for real property located in
North Carolina.
44. Stephen R. Klorfein, Personal Representative of the Estate of Robert A. Corliss
("Corliss"), is a citizen and resident of Georgia. He is being named in his representative capacity
only. He may be served at the following address: Chaiken Klorfein, LLC, 140 Hightower Trail,
Building 2, Atlanta, Georgia 30350. At all times relevant hereto, Corliss was the Developer
and/or an Agent of the Developer, as those terms are defined by ILSA, for real property located
in North Carolina, and one of the principals and/or members of Legasus.
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45. Theodore C. Morlok ("Morlok") is a citizen and resident of South Carolina, and
he may be served at this the following address: 100 Topaz Point, Anderson, South Carolina
29626. At all times relevant hereto, Morlok was the Developer and/or an Agent of the
Developer, as those terms are defined by ILSA, for real properly located in North Carolina, and
one of the principals and/or members of Legasus.
46. James R. Pitts (“Pitts”) was the President of Legasus and at all times relevant
hereto, Pitts was the Developer and/or an Agent of the Developer, as those terms are defined by
ILSA, for real properly located in North Carolina, and one of the principals and/or members of
Legasus. Jim Pitts is currently the General Manager of Reynolds Blue Ridge, which is a
mountain, destination residential community located in Blowing Rock, North Carolina. Jim Pitts
can be served at 26 Montview Drive, Apt. 3, Asheville, North Carolina 28801
47. Synovus Bank (the “Bank”) is a Georgia corporation with its main offices located
at 1148 Broadway, Columbus, Georgia 31901. Synovus Bank as successor in interest to NBSC
provided loans to the Bank Plaintiffs and to several other Plaintiffs in this case, including Ben
Atkinson, Anthony Barbieri, Daniel Hinkson, Joseph Lamir, Cindy Lamir, G. Daniel Siegel,
Patricia Tracy, Kevin Tracy, Barron Wall, and Katherine Williams. Each of these other
Plaintiffs is currently involved in litigation with Synovus Bank.
48. Marilyn McCoy Woods was a certified residential appraiser who appraised at
least twenty-six (26) of the lots purchased by Plaintiffs in this action. Marilyn McCoy Woods
may be served at 234 Bailey Circle, Townville, South Carolina 29689.
49. Marilyn McCoy Woods appraised lots owned by the following Plaintiffs in this
action: Thomas Beritelli, Anthony Barbieri, Christian Barsanti, Marc J. Browner, Robert S.
Burt, Diane Carroll, Jeff Chaus, Joseph Grusser, Cathy Grusser, Edith Hansen, Dan Hinkson,
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Benjamin Atkinson , Alan Kessler, Gregory Keary, Kenneth Kosco, Eric Lawrence, Lenora
Lawrence, Joe Lamir, Cindy Lamir, Joseph McElroy, Steven Moses, Judy Schunn, Mark Tamn,
Andra Lynn Tamn, Audrey Troiano, Donna Panarello, Michael Troiano, Neal Ullman, Eddie
Varon, Barron S. Wall, Michael Whitehouse, Katherine Williams, Edward Wishner, Beverly
Wishner, Jason Wood (collectively referred to hereinafter as the “Woods Appraisal Plaintiffs”).
JURISDICTION AND VENUE
50. Jurisdiction is based on 28 U.S.C. § 1331 as this action arises under the laws of
the United States. This Court has supplemental jurisdiction over Plaintiffs' state law claims
pursuant to 28 U.S.C. § 1367.
51. Venue is proper under 28 U.S.C. § 1391(b)(2) as a substantial part of the events or
omissions giving rise to the claim occurred, and the property that is the subject of the action is
situated, in this judicial district.
FACTS
52. River Rock is a subdivision located in Cashiers, North Carolina, originally
consisting of approximately 4000 acres of undeveloped land.
53. Defendants developed an elaborate and expansive marketing plan to sell
undeveloped lots to consumers, including the Plaintiffs.
54. Defendants each played an integral role in the implementation of the overall
scheme to fraudulently induce the Plaintiffs to purchase undeveloped lots in the River Rock
subdivision.
55. Synovus Bank is legally responsible for all of the actions of the National Bank of
South Carolina as alleged in the Complaint as the successor in interest to the assets and liabilities
of the National Bank of South Carolina.
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56. Upon information and belief, the National Bank of South Carolina loaned Legasus
the money to purchase the approximately 4000 acres of undeveloped land.
57. The National Bank of South Carolina loaned Legasus money for the development
of the River Rock subdivision.
58. Upon information and belief, the National Bank of South Carolina loaned
$3,000,000 to Legasus or an entity related to Legasus in June of 2007.
59. Upon information and belief, the National Bank of South Carolina loaned
$9,500,000 to Legasus or an entity related to Legasus in October of 2007.
60. Pursuant to its loan agreement with Legasus, the National Bank of South Carolina
had a second deed of trust on the property referred to as Tuckaseegee II and III at the River Rock
subdivision.
61. Pursuant to its loan agreement with Legasus, the National Bank of South Carolina
would not release any lots from the second deed of trust on the property referred to as
Tuckaseegee II and III at the River Rock subdivision until the payment of $1.00 per lot at closing
as represented on the HUD 1 settlement statement.
62. By letter dated October 26, 2006, the National Bank of South Carolina stated to
James S. Price, Esq. of James S. Price & Associates, P.A. that once it became in the first deed of
trust position, it would release lots in the River Rock subdivision at closing upon the payment of
forty three percent of the gross selling price of each lot or one hundred thousand dollars
($100,000), whichever is greater, as represented on the HUD 1 settlement statement.
63. Michael Wolf, who was an employee and agent of the National Bank of South
Carolina, participated in off-site sales presentations to sell lots in the River Rock subdivision,
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including by participating in the Summer Sail event at Lake Glenville on June 10, 2006 and the
Grand Opening sales event in July of 2006 at the Mansion at Lake Glenville.
64. The Defendants acted together in various combinations to fraudulently induce
Plaintiffs to purchase lots in River Rock by engaging in high pressure, clearly false sales tactics,
rigged appraisals, and promises of instant equity in violation of a host of laws designed to protect
consumers like the Plaintiffs.
65. The Legasus Defendants engaged in a scheme to target individuals from New
Jersey, California and other states that were not near North Carolina in an effort to convince
unwitting buyers to purchase lots where the values of those lots were inflated through, upon
information and belief, the use of straw purchasers and rigged appraisals.
66. From 2005 through 2007, several of the Plaintiffs from New Jersey, including, but
not limited to Barron S. Wall, Anthony J. Barbieri, and Christian Barsanti purchased lots in the
River Rock subdivision that were appraised for amounts between two hundred thousand dollars
($200,000) and five hundred thousand dollars ($500,000), even though these lots were
undeveloped lots without the roads, sewer, electric, and other necessary utilities and
infrastructure to serve these lots.
67. During 2005 and 2006, Jackson County, North Carolina MLS statistics on
unimproved lots similar to those purchased at the River Rock subdivision show the values of
such lots to be between seventy-five thousand dollars ($75,000) and one hundred thousand
dollars ($100,000), even though the appraisals on lots in the River Rock subdivision were several
times higher than those figures and often equal to the lot sales price.
68. Upon information and belief, the Legasus Defendants, the National Bank of South
Carolina and Michael Wolf solicited appraisals from Marilyn McCoy Woods that were clearly
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false, as these appraisals were based on pre-determined values necessary to sell lots in the River
Rock subdivision, rather than an objective analysis of the value of lots based on comparable sales
of lots from outside of the River Rock subdivision.
69. Legasus worked in conjunction with the National Bank of South Carolina to offer
concessions to buyers of the lots in the River Rock subdivision designed to induce those buyers
to purchase lots in River Rock, including offering potential buyers of lots in River Rock no
payments on their loan for eighteen (18) months with a ten percent down payment to Legasus, as
well as a free Country Club membership that Legasus represented to be worth between thirty
thousand dollars ($30,000) and fifty thousand dollars ($50,000).
70. The National Bank of South Carolina hand-selected Marilyn McCoy Woods to do
the appraisals on its loans to several of the Bank Plaintiffs and other Plaintiffs.
SPECIFIC FACTUAL ALLEGATIONS AGAINST MARILYN MCCOY WOODS
71. Marilyn McCoy Woods conducted the appraisals for at least twenty-seven of the
Plaintiffs‟ lots and was repeatedly used by NBSC and other lenders as the appraiser for lots in
River Rock.
72. Upon information and belief, Marilyn McCoy Woods conducted appraisals of the
several of the Plaintiffs‟ lots by using the contract prices of those lots, which were given to her
by the Legasus Defendants, as well as by NBSC and Michael Wolf, as the basis for the value that
she provided for each lot in her appraisals.
73. Marilyn McCoy Woods‟ appraisals of lots in the River Rock subdivision
disregarded the significant financial incentives that were offered by Legasus and the National
Bank of South Carolina to lot purchasers and used comparables that were not correct.
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74. Marilyn McCoy Woods repeatedly used the listed purchase price for lots in River
Rock as a comparable value in her appraisals, all the while knowing that Legasus was returning
ten percent of the purchase price to the buyer and/or transferring that ten percent down payment
to financial institutions at closing to be applied to the loans on those lots. Marilyn McCoy
Woods thus should have reduced the listed purchase price in her sales comparables by ten
percent for each lot purchase where Legasus transferred ten percent of the purchase price to
NSBC for application to its loans to Plaintiffs.
75. Marilyn McCoy Woods failed to address known market risks in her appraisals,
did not provide analysis of market area communities in Jackson County, North Carolina in her
appraisals and did not provide information regarding the development timeline or risks inherent
in projecting value based on unfunded future development obligations in her appraisals of the
Woods Appraisal Plaintiffs‟ lots.
76. Within a ninety (90) day time period in 2008, Marilyn McCoy Woods appraised
eight lots in River Rock using the same three lots as comparables on each of these appraisals.
Specifically, Marilyn McCoy Woods used Lot 48 Bear Pen at River Rock, Lot 185 Boulders at
River Rock and Lot 20 Bear Pen at River Rock as comparables on each of these appraisals.
77. Even though these appraisals were all conducted within a ninety (90) day time
period, Marilyn McCoy Woods provided different values of each of Lot 48 Bear Pen at River
Rock, Lot 185 Boulders at River Rock and Lot 20 Bear Pen at River Rock in several of these
appraisals.
78. For example, in the appraisal of Plaintiff, Gregory Keary‟s Lot 16 at River Rock
Bear Pen dated June 24, 2008, Marilyn McCoy Woods concluded that the value of the
“comparable” Lot 48 Bear Pen at River Rock was three hundred and sixty-seven thousand four
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hundred and fifty dollars ($367,450), even though she concluded that the value of this same lot in
the appraisal of Plaintiff, Andrew Sweeney‟s Lot 19 at Bear Pen at River Rock that was also
dated June 24, 2008 was three hundred and seventy-four thousand three hundred and sixty-five
dollars ($374,365). In Marilyn McCoy Woods‟ appraisal of Plaintiff, Kenneth Kosco‟s Lot 55
Bear Pen at River Rock, which was also dated June 24, 2008, Marilyn McCoy Woods concluded
that the value of the “comparable” Lot 48 Bear Pen was three hundred and eighty-seven
thousand four hundred and fifty dollars ($387,450).
79. Marilyn McCoy Woods changed the value of Lot 48 Bear Pen at River Rock in
three different appraisals on the very same day in order to reach the desired value on each lot that
she was appraising, as she applied the lowest value to this lot in Gregory Keary‟s appraisal and
valued Gregory Keary‟s Lot 16 at River Rock Bear Pen at three hundred and eight thousand
dollars ($308,000). Marilyn McCoy Woods provided the highest “comparable” value of Lot 48
Bear Pen at River Rock amongst these three appraisals in the appraisal of Andrew Sweeney‟s
Lot 19 at Bear Pen at River Rock and concluded that the value of Lot 19 was three hundred and
sixty-five thousand dollars ($365,000).
80. Further, in the appraisal of Plaintiff, Gregory Keary‟s Lot 16 at River Rock Bear
Pen dated June 24, 2008, Marilyn McCoy Woods concluded that the value of “comparable” Lot
185 Boulders was three hundred and eighty-one thousand five hundred dollars ($381,500), while
she concluded that the value of this same “comparable” lot in the appraisal of Plaintiff, Andrew
Sweeney‟s Lot 19 at Bear Pen that was also dated June 24, 2008 was three hundred and eighty-
seven thousand four hundred and fifteen dollars ($387,415).
81. In the appraisal of Plaintiff, Gregory Keary‟s Lot 16 at River Rock at Bear Pen
dated June 24, 2008, Marilyn McCoy Woods concluded that the value of comparable Lot 20 at
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Bear Pen at River Rock was three hundred and seven thousand four hundred and eighty-five
dollars ($307,485), while she concluded that the value of this same lot in the appraisal of
Plaintiff, Andrew Sweeney‟s Lot 19 at Bear Pen that was also dated June 24, 2008 was three
hundred and fifty-three thousand four hundred dollars ($353,400).
82. In her appraisal of Plaintiff, Christian Barsanti‟s Lot 34 at Bear Pen at River Rock
dated April 23, 2008, Marilyn McCoy Woods valued differently the same “comparable” property
that she had used in her appraisals of Andrew Sweeney‟s Lot 19 at Bear Pen at River Rock and
Gregory Keary‟s Lot 16 at River Rock Bear Pen. For example, Marilyn McCoy Woods
appraised Lot 48 Bear Pen at River Rock at three hundred and forty thousand and fifty-four
dollars ($340,054), comparable Lot 185 at three hundred and eighty-nine thousand two hundred
dollars ($389,200) and comparable Lot 20 at three hundred and fifteen thousand two hundred
dollars ($315,200) in her appraisal of Christian Barsanti‟s Lot 34 at Bear Pen at River Rock. She
did so to conclude that the value of Christian Barsanti‟s lot was three hundred and twenty
thousand dollars ($320,000).
83. The Uniform Standards of Professional Appraisal Practice state that it is unethical
for an appraiser to accept an assignment that is contingent upon the reporting of a predetermined
result, the attainment of a specific amount of the value opinion or the attainment of a stipulated
result.
84. Upon information and belief, Marilyn McCoy Woods violated the ethical
standards as set forth in the Uniform Standards of Professional Appraisal Practice by appraising
several of the Plaintiffs‟ lots at the direction of one or more of the Defendants to obtain a
predetermined result, which was the attainment of a specific value for each lot as necessary to
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complete the purchase and loan transaction on each of the Plaintiffs‟ lots she appraised in the
River Rock subdivision.
85. Each Plaintiff entered into a Reservation and Convertible Contract for Sale of the
lot with Legasus when purchasing a lot in the River Rock subdivision.
LEGASUS DEFENDANTS‟ MISREPRESENTATIONS TO THE PLAINTIFFS IN THE
RESERVATION AND CONVERTIBLE CONTRACT FOR SALE
86. The Reservation and Convertible Contract for Sale promised to provide each
purchaser of a lot in the River Rock subdivision paved roads, electric service lines, telephone
line service, water line service and sewer service, among other things.
87. Paragraph 11(a) of the Reservation and Convertible Contract for Sale provided
that Legasus, as the Seller of a lot in the River Rock subdivision, would provide paved roads and
that those roads have been or will be extended to each lot and would be maintained by the
Homeowners Association.
88. Paragraph 11(b) of the Reservation and Convertible Contract for Sale provided
that Legasus, as the Seller of a lot in the River Rock subdivision, would provide as follows:
“[e]lectric service lines have been or will be extended to the above-described Lot and service is
to be provided and maintained by Duke Power Company.”
89. Paragraph 11(c) of the Reservation and Convertible Contract for Sale provided
that Legasus, as the Seller of a lot in the River Rock subdivision, would provide as follows:
“[t]elephone lines have been or will be extended to the above-described Lot and service is to be
provided and maintained by Verizon or some similar carrier.”
90. Paragraph 11(d) of the Reservation and Convertible Contract for Sale provided
that Legasus, as the Seller of a lot in the River Rock subdivision, would provide as follows:
“[w]ater service lines have been or will be extended to the Lot.”
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91. Paragraph 11(e) of the Reservation and Convertible Contract for Sale provided
that Legasus, as the Seller of a lot in the River Rock subdivision, would provide as follows:
“[s]ewage Service: Seller will deliver to Purchaser, within 365 days of closing on the lot, a
permit from the Jackson County Health Department for a sub-surface sewage disposal system on
the lot or seller will provide sewage disposal lines to the lot as provided below.”
92. Paragraph 11(e) also provided that, “[s]eller reserves the right, at the sole
discretion of seller, to install a common septic drain field and collection lines to the lot which
may serve one or more lots. In such event, Purchaser shall be responsible for all costs associated
with the installation and maintenance of the collection line on the lot and the on-lot collection
tank as may be required to connect to such common system.”
93. In Paragraph 11 (e) of the Reservation and Convertible Contract for Sale, Legasus
warranted that, “in the event Seller is unable to provide Purchaser with a permit for the
installation of an on lot sewage system or Seller is unable to provide Purchaser the ability to
connect to a „common drain field,‟ Seller will return to Purchaser the purchase price of the lot
hereunder and the Parties will be released of any further obligations or liabilities to
each other.”
94. Paragraph 11(f) of the Reservation and Convertible Contract for Sale stated that,
“proposed common recreational facilities to be installed by seller include walking trails and
walking trail facilities, swim facility, tennis courts, common park areas, library, overlook facility
and welcome station and outfitters cottage. These facilities will be owned and maintained by the
RiverRock Property Owners Association.”
95. Paragraph 11(g) of the Reservation and Convertible Contract for Sale stated that
the, “proposed private amenities and recreation facilities to be installed in Tuckaseegee at
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RiverRock include the Grand Lodge and Condominiums and Appalachian Spa and Spa
Condominiums. Both facilities will be built by the Developer and will be owned and operated
by private entities. These entities will be members of the RiverRock Property Owners
Association as provided in the The Declaration of Covenants, Conditions, and Restrictions for
RiverRock, Section 2.3. These amenities will be available for use by lot owners in RiverRock on
and individual fee basis and maintenance will not be paid by the RiverRock Property Owners
Association unless Covenants to Share Cost are entered into by the Private Amenity Owner and
The RiverRock Property Owners Association.”
96. Legasus did not provide the amenities, recreation facilities or the other
infrastructure that it promised to provide to the Plaintiffs in the Reservation and Convertible
Contract for Sale.
97. Legasus‟ failure to provide the amenities, recreation facilities, and infrastructure
that it promised to provide in the Reservation and Convertible Contract for Sale deprived the
Plaintiffs of the benefit of their bargain and effectively rendered the lots that each of the
Plaintiffs purchased to be nearly worthless.
MISREPRESENTTIONS MADE BY LEGASUS EMPLOYEE LEE BOYD
98. In April of 2006, Lee Boyd, acting as a sales agent on behalf of Legasus, sent the
owners of lots in the River Rock subdivision a letter stating that the Tuckasegee Lodge, which
was represented to be a residential lodge with common areas that would include The Erie
Restaurant and Bistro, a seminar and continuing education room and a theatre to seat between
fifteen and twenty-five people, as well as a reading room and game room, would be completed in
the River Rock subdivision.
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99. In May of 2006, Lee Boyd, acting in his capacity as a Legasus employee, stated to
Plaintiffs, Paul Taffe and Tonya Taffe, that a full service spa facility called the Orion Spa would
be completed at the River Rock subdivision. During that conversation, Lee Boyd also stated to
Paul and Tonya Taffe that the Trout Creek Meadow Pavilion, which was to be a recreation and
event facility located at the apex of the Trout Creek, would be completed in the River Rock
subdivision.
100. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that the Skillet Gap Village at Trout Creek, which
was to be the main street for the community and contain a General Store and Soda Fountain, as
well as the Copper John Restaurant, an adventure outfitter, a gaming building and a billiards
room, would be completed in the River Rock subdivision.
101. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that the Bear Pen Club House, which was to have
an intimate pool area with a covered porch and adjacent lawn for outdoor activities, would be
completed in the River Rock subdivision.
102. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that the Bear Pen Star Gazer Observatory would
be completed in the River Rock subdivision.
103. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that the Webster Creek Golf Course, which was to
be a signature golf venue for all of the club members and would be Phil Mickelson golf course,
would be completed in the River Rock subdivision.
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104. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that they had to purchase the Sports Membership
Certificate to use the Webster Creek Golf Course at a cost of fifty thousand dollars ($50,000),
but that Legasus would give them this membership as part of their purchase of a lot in the River
Rock subdivision because they were early buyers in the subdivision.
105. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that the King‟s Grant club house, adjacent to the
King‟s Grant short course and tennis facility, with a common pool area with restrooms and a
changing area, would be completed in the River Rock subdivision.
106. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of
Legasus, stated to Paul Taffe and Tonya Taffe that the Cullowhee Stables would be completed in
the River Rock subdivision.
107. In May of 2006, Lee Boyd stated to Paul and Tonya Taffe that the Artesian Barn
lakeside clubhouse and the club house at Summer Sail would be completed in the River Rock
subdivision.
108. Paul and Tonya Taffe relied on the false statements of material fact made by Lee
Boyd, who made those statements while working in his capacity as an employee and agent of
Legasus, and other false statements in May of 2006 in deciding to purchase Tuckasegee at River
Rock, lot number 60 (the “Taffe Lot”), on December 5, 2006 in the amount of two hundred and
twenty-four thousand nine hundred dollars ($224,900).
109. Paul and Tonya Taffe would not have purchased the Taffe Lot if they had known
that the statements made by Lee Boyd, who made those statements while acting as an agent for
Legasus in May of 2006, were materially false.
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110. Legasus employees showed Plaintiff, Michael Troiano, maps of where the roads
were going to be in River Rock on each of his six (6) trips to the River Rock subdivision
between 2006 through 2008, even though these roads were never built in the River Rock
subdivision. Upon information and belief, these Legasus employees knew that these roads
would never be built and paved in the River Rock subdivision when they were showing Michael
Troiano maps of the road network, but were showing Michael Troiano this road network as part
of the scheme to defraud Michael Troiano.
LEGASUS AND JAMES R. PITTS‟ MISREPRESENTATIONS TO PLAINTIFFFS IN THE
2007 LEGASUS PROPERTY REPORT
111. By letter dated January 13, 2007 (the “2007 Legasus Report”), James R. Pitts
stated to the Plaintiffs who were then property owners of lots in the River Rock subdivision that
the construction of the roads in the River Rock subdivision began on October 30, 2006.
112. Legasus, through its President James R. Pitts, sent the 2007 Legasus Report to
each of the Plaintiffs who owned lots in River Rock and to other lot owners in the River Rock
subdivision.
113. In the 2007 Legasus Report, James R. Pitts wrote to the Plaintiffs who owned lots
in the River Rock subdivision that several homeowners expressed a desire to proceed
immediately with the design and construction of their homes, so “Legasus will work closely with
any homeowners to provide temporary power, sewer and water, as needed, to construct their
homes.” Upon information and belief, Legasus had no intention or ability to provide
homeowners with temporary power, sewer and water.
114. Upon information and belief, the 2007 Legasus Report, contained several
misstatements of material fact, including, but not limited to that, “Legasus has inked a deal with one
of the world's finest golfers to be the signature architect for the River Rock Webster Creek Golf Course.”
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115. In the 2007 Legasus Report, Legasus stated that, the “sheer size of the River Rock
project necessitates a comprehensive approach to utilities design. While Envision Engineers is
commissioned to prepare a utilities master plan, Legasus is also working directly with Duke
Power (electric provider), Aqua America (water and waste water provider), Balsam West (fiber
optic provider) and other utility agencies to determine the best ways to consistently and
efficiently service this project.”
116. Upon information and belief, Legasus and Jim Pitts both knew in 2007 that
Legasus would not be able to provide sufficient utilities to service the lots in the River Rock
subdivision and that it would not be able to provide utilities through Duke Power, Acqua
America and Balsam West.
117. In the 2007 Legasus Report, Legasus made several misstatements of material fact
relating to the roadways and dry utilities in the River Rock subdivision, including, but not
limited to the statement that in Bear Pen Village, “new roadway construction will begin in the
summer of 2007.” Legasus also stated that Envision Engineers is preparing the detail utility
design for Bear Pen and this “package will also be available for construction early in 2007,” even
though, upon information and belief, Legasus knew that utility construction would not
commence in early 2007 in the Bear Pen section.
118. Upon information and belief, Legasus made several misstatements of material fact
in the 2007 Legasus Report relating to the roadways and dry utilities in the River Rock
subdivision, including, but not limited to the statement that in Tuckasegee Village roadway
“construction is already underway. The Phase II construction documents are being finalized and
construction will continue without delay.”
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119. In the 2007 Legasus Report, Legasus made several misstatements of material fact
relating to the community water system for the River Rock subdivision, including, but not
limited to that, “Legasus will begin construction on the Tuckasegee and Bear Pen systems during
the second and third quarters of 2007.”
120. Upon information and belief, Legasus made several misstatements of material fact
in the 2007 Legasus Report relating to the status of the infrastructure work to be completed at the
Tuckasegee section of the River Rock subdivision, including, but not limited to that, the
amenities and trails master plan for Tuckasegee village was complete. Further, Legasus stated
that Design Workshop and Moss Creek Designs had finalized the site plans and architectural
plans for several components, including, Hunter Jim Creek Park, Hunter Jim Pavilion, River Top
Pavilion, and the Highway 107 gateway entrance.
121. Upon information and belief, Legasus made several misstatements of material fact
in the 2007 Legasus Report relating to the status of the infrastructure work to be completed at the
Tuckasegee section of the River Rock subdivision, including, but not limited to that Design
Workshop and Moss Creek Designs were finalizing the site plans and architectural designs for
several park and structural components in the Bear Pen Section, including the main entry
gateway, the wildlife and bird watching pavilion, the Stargazer Pavilion, the Wolf Knob Pavilion
and the Bear Pen Clubhouse and Pool Complex.
122. Upon information and belief, Legasus made the misstatements of material fact in
the 2007 Legasus Property Report with the intent to mislead the Plaintiffs both prior to and after
their purchases of lots in the River Rock subdivision as part of their scheme to defraud the
Plaintiffs. Upon information and belief, these misstatements were part of a scheme devised by
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the Legasus Defendants and NBSC to mislead Plaintiffs into obtaining loans from NBSC and re-
financing or modifying existing loans with NBSC.
LEGASUS DEFENDANTS‟ MISREPRESENTATIONS TO PLAINTIFFS IN THE AUGUST
2008 PROGRESS SUMMARY
123. By letter dated August 5, 2008, Legasus provided a River Rock progress summary
(the “August 2008 Progress Summary”) that, upon information and belief, contained numerous
misstatements of material facts designed to mislead the Plaintiffs and other purchasers of lots in
the River Rock subdivision.
124. The August 2008 Progress Summary stated, among other things, that, “[i]n 2008
and early 2009 Legasus‟ intention is to move to the finish line with the implementation of
community infrastructure at both the Bear Pen and Tuckasegee/The Glades neighborhoods and to
make significant progress towards establishing inventory at Webster Creek and Summer Sail,”
even though Legasus in fact had no intention of accomplishing any of these things.
125. The August 2008 Progress Summary stated, among other things, that,
“Legasus is working with the Corp of Engineers on agency approval for both golf courses at
Webster Creek and are excited to launch the construction of the River Rock Golf Course,
designed by Phil Mickelson and the King's Grant Golf Course, designed by Rick Smith, as soon
as the permitting process is complete. The tee boxes, greens and fairways have been surveyed
and the centerline clearing for the River Rock golf course has been completed.” Upon
information and belief, Legasus had neither completed the activities set forth above, nor had any
intention to complete the activities set forth above.
126. The August 2008 Progress Summary stated, among other things, that, “[w]hile
sales revenue contributes to the funding for the project, it is important to note that sufficient
construction funding is available for roads and infrastructure within existing neighborhoods.”
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Upon information and belief, Legasus knew that it was not using the sales revenue to construct
the promised infrastructure and amenities at the River Rock subdivision and that it did not have
sufficient construction funding for roads and infrastructure within the existing neighborhoods.
127. In the August 2008 Progress Summary, Legasus stated that, “[a]s of this update,
River Rock now has approximately 18 miles of road constructed in our Bear Pen, Glades and
Tuckasegee neighborhoods. All of the roads throughout The Glades are completed and ready for
paving.” Upon information and belief, Legasus made this statement even though the roads were
not complete in an effort to deceive the Plaintiffs and to further their scheme to defraud the
Plaintiffs.
128. In the August 2008 Progress Summary Report, Legasus stated that, “[a]s
mentioned previously, stayed [sic] tuned for the announcement of the start of the Webster Creek
Parkway to the Phil Mickelson Golf Course in the next few weeks!” Upon information and
belief, Legasus made this statement even though it had no intention to construct the Webster
Creek Parkway, nor did it have a deal in place with Phil Mickelson for a golf course.
129. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to the development and status of the water system for
the River Rock subdivision that it knew to be false, including, but not limited to that, “the first
phase of the community system is already well under construction and will be operational in the
next 60 days!”
130. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to the sewer system for the River Rock subdivision that
it knew to be false, including, but not limited to that, “[c]onstruction of the collection system will
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begin in synchronization with the water line installations while construction of the treatment
facility will begin in early fall.”
131. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to the sewer system for the River Rock subdivision that
it knew to be false, including, but not limited to that, “Duke Energy is in the process of
completing the design for the second phase of underground power. The Glades and Tuckasegee
neighborhoods will be the first to receive power and Legasus is awaiting final plans from Duke
to begin construction. Legasus will begin and construction within 30 days of receiving final
plans.”
132. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to telecommunications systems for the River Rock
subdivision that it knew to be false, including, but not limited to that, “suffice it to say that we
are confident River Rock will be able to receive fiber service and very high level connectivity
that is not necessarily available to other communities on the plateau.”
133. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to planned infrastructure that it was to complete by
August of 2009 that it knew to be false, including, but not limited to that it planned to complete
the infrastructure for the Bear Pen section of the River Rock subdivision, including the
community water, electric and septic permitting, as well as the road paving, stargazing pavilion
and the primary entrance by August of 2009.
134. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to planned infrastructure that it was to complete by
August of 2009 that it knew to be false, including, but not limited to that it planned to complete
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the infrastructure for the Tuckasegee section of the River Rock subdivision, including the
community water, sewer collection and treatment, electric and telecommunications by August of
2009. Legasus also represented that it planned to complete the road rough-in for the Tuckasegee
section at River Rock, as well as do road paving in this section and the highway 107 entrance
and gatehouse by August of 2009.
135. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to planned infrastructure that it was to complete by
August of 2009 that it knew to be false, including, but not limited to that it planned to complete
the Webster Creek preliminary infrastructure engineering for water, sewer and electric, as well as
the neighborhood master plan, the Phase 1 neighborhood roads, the Phase 1 platting and the
Phase 1 golf construction.
136. Upon information and belief, Legasus made certain representations in the August
2008 Progress Summary Report relating to planned infrastructure that it was to complete by
August of 2009 that it knew to be false, including, but not limited to that it planned to complete
the Summer Sail neighborhood master plan, preliminary infrastructure engineering for water,
sewer and electric and Phase 1 Lake Club construction by August of 2009.
137. Upon information and belief, Legasus made misrepresentations in the August
2008 Progress Summary Report as part of its scheme to defraud the Plaintiffs and as part of its
scheme with NBSC to induce Plaintiffs with loans from NBSC to modify or extend those loans.
LEGASUS AND TONY CORLISS‟ MISREPRESENTATIONS TO PLAINTIFFS IN THE
RIVER ROCK SNEAK PEEK
138. Legasus, through its founder Tony Corliss, prepared and disseminated numerous
advertising brochures to the Plaintiffs, including, but not limited to, the River Rock Sneak Peek,
designed to induce the Plaintiffs and others to purchase lots in the River Rock subdivision.
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139. Upon information and belief, the Sneak Peek advertising brochure contained
numerous false statements designed to mislead the Plaintiffs and others to purchase lots in the
River Rock subdivision, including, but not limited to, the statement that, “Pioneering Mountain
Golf lives at Webster Creek on a signature 18-hole golf course by Phil Mickelson Design. . . ,”
even though, upon information and belief, Tony Corliss and others at Legasus knew that there
would not be a Phil Mickelson Golf Course at Webster Creek or at any other location in the
River Rock subdivision.
140. The Sneak Peek advertising brochure contained numerous false statements, that,
upon information and belief, were designed to mislead the Plaintiffs and others to purchase lots
at the River Rock subdivision, including, but not limited to, the statement that, “fine dining is
savored at any of the community‟s six culinary experiences,” even though there were no
restaurants at the River Rock subdivision.
141. The Sneak Peek advertising brochure contained numerous false statements that,
upon information and belief, were designed to mislead the Plaintiffs and others to purchase lots
at the River Rock subdivision, including, but not limited to, Legasus‟ statements regarding
amenities in the River Rock subdivision. The Sneak Peak advertising brochure represented that
Tucksasegee at River Rock would have the Orion Spa, which was advertised as a full service spa
for the exclusive use of River Rock members, as well as the Grand Tuckasegee Lodge, which
was to have an infinity pool, fusion restaurant, culinary school, wine cellar, cinema, games room,
terrace, lounge and library. Upon information and belief, Legasus and Tony Corliss made these
statements regarding amenities, even though they knew that these amenities would never be
provided in the River Rock subdivision.
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142. Legasus, through Tony Corliss, represented to the Plaintiffs and others through
the Sneak Peek advertising brochure that Trout Creek at River Rock would have amenities
including the Sunset Pavilion, the Trout Creek Lodge, as well as the Trout Creek Village, which
would feature the Stirling Café, General Store, the Grizzly Poodle Pet Groomer, River Rock Post
Office, Ampitheater and much more. Upon information and belief, Legasus and Tony Corliss
made these statements regarding amenities, even though they knew that these amenities would
never be provided in the River Rock subdivision.
143. Legasus, through Tony Corliss, represented through the Sneak Peek advertising
brochure that Bear Pen at River Rock would have amenities including the River Rock Stargazing
Pavilion, a bird and wildlife sanctuary, as well as three miles of nature trails with bird watching
pavilion even though, upon information and belief, they knew that these amenities would never
be provided in the River Rock subdivision.
144. The Sneak Peek advertising brochure contained numerous false statements
designed to mislead the Plaintiffs and others to purchase lots at the River Rock subdivision,
including, but not limited to, its statements regarding amenities at Webster Creek in the River
Rock subdivision. Legasus, through Tony Corliss, represented in the Sneak Peak advertising
brochure that Webster Creek at River Rock would be home to the River Rock Golf Club, which
was advertised to be an 18 hole golf course designed by Phil Mickelson Designs, as well as the
King‟s Grant nine hole executive golf course designed by Rick Smith. In addition, Legasus
represented that Webster Creek would be the site of a professional indoor-outdoor tennis facility,
the Pisgah Stables Equestrian Center, Phil‟s Grill and the Bear & Bridle Gourmet Pub. Upon
information and belief, Legasus, through Tony Corliss, made these statements regarding
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amenities, even though they knew that these amenities would never be provided in the River
Rock subdivision.
LEGAGUS DEFENDANTS‟ ADDITIONAL MISREPRESENTATIONS REGARDING
AMENITIES TO PLAINITFFS
145. Legasus, through Tony Corliss, expressly recognized the significance of the
amenities as inducements to the Plaintiffs and others to buy lots in the River Rock subdivision by
stating in the Sneak Peek advertising brochure that, “[y]ou will choose your River Rock home
based on the nature you wish to find in your backyard, the amenities you want to be closest to . .
. .”
146. Legasus informed Plaintiffs, including, but not limited to, Michael Troiano and
Audrey Troiano, that forty thousand dollars ($40,000) from the sale of each lot in the River Rock
subdivision would be put in escrow to build roads and utilities in the River Rock subdivision.
147. Upon information and belief, Legasus did not put forty thousand dollars ($40,000)
from the sale of each lot in the River Rock subdivision in escrow to build roads and utilities in
the River Rock subdivision.
148. Upon information and belief, Legasus did not put any amount of money from
each lot sale in the River Rock subdivision into escrow to build roads and utilities in the River
Rock subdivision.
149. Legasus, through James R. Pitts, sent Michael Troiano and Audrey Troiano a
Sports Membership Certificate dated October 16, 2006 stating that this membership was worth
fifty thousand dollars ($50,000), but that charter members like the Troianos would be joining for
free. This Sports Membership Certificate purportedly entitled owners to use, “RiverRock's
equestrian complex, tennis center, nature trails, proposed Par 3 golf short course, chipping and
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putting greens, organic gardens, fly fishing, coffeehouses, bowling, movie theaters, special
events, festivals and programs, and much more.”
150. Upon information and belief, Legasus, through James R. Pitts, offered the Sports
Membership Certificate to potential purchasers of lots in the River Rock subdivision as an
inducement to individuals to purchase lots, even though, upon information and belief, Legasus
and James R. Pitts knew that the amenities set forth in that Sports Membership Certificate would
not ever be built. The fact that Legasus used this Sports Membership Certificate as an
inducement to individuals to purchase lots in the River Rock subdivision is demonstrated by
Legasus and James R. Pitts‟ statement that, “we appreciate your joining us at this early stage of
the project and want to express our appreciation by sharing this special club membership offer.
Just sign and initial the attached contract and HUD forms where noted and send them back to our
office this week accompanied by a check for the noted amount, if applicable.”
151. Legasus and its agents, including sales agent Matthew Mull, made presentations
at trade shows to potential buyers in California and other locations, including making
presentations at a trade show in California to several Plaintiffs including, but not limited to,
Plaintiffs, Donald Hill and Tricia Hill.
152. Matthew Mull of Legasus made statements to Donald Hill and Tricia Hill, as well
as other purchasers of lots in the River Rock subdivision promising electrical service, telephone
lines, water service lines, waste water disposal and that the Tuckasegee Lodge, and the Orion
Spa at Tuckasegee Lodge would be built in the River Rock subdivision at a presentation in
California.
153. During Donald Hill and Tricia Hill‟s visit to the River Rock subdivision in
November of 2006, Matthew Mull of Legasus made statements to Donald Hill and Tricia Hill
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promising that certain amenities would be built in the River Rock subdivision including
electrical service, telephone lines, water service lines, waste water disposal, the Tuckasegee
Lodge, and the Orion Spa at Tuckasegee Lodge, Trout Creek Meadow Pavilion, Skillet Gap
Village at Trout Creek, and the Bear Pen Club House
154. During Donald Hill and Tricia Hill‟s visit to the River Rock subdivision in
November of 2006, Matthew Mull of Legasus made statements to Donald Hill and Tricia Hill
promising certain amenities would be built in the River Rock subdivision, including, but not
limited to amenities such as River Bend Park, West Fork Pavilion, Mother Jones Overlook
Pavilion, Hot Tub Hunter Jim Park, Great Lawn Pavilion, Wolf Knob Pavilion, Cherry Knob
Overlook, Park Horse Meadow Pavilion, Rock Chute Climb Park, Boulders Park and Bell Coney
Mountain Sunset Pavilion.
155. During Donald Hill and Tricia Hill‟s visit to the River Rock subdivision in
November of 2006, Matthew Mull of Legasus stated prior to the closing on their lot that it was
already worth three hundred and fifty thousand dollars ($350,000), which was in excess of the
amount that Donald Hill and Tricia Hill paid for their lot in the River Rock subdivision.
156. On September 22, 2006, Matthew Mull of Legasus sent Donald Hill and Tricia
Hill an interstate electronic mail communication stating that, “I think it's great that you guys
were able to get into the Phase One offering and I look forward to showing you guys the property
soon. We are taking Reservations daily for the next release and this is just the beginning. After
our official announcement of the PGA Pro that's designing the Golf Course it's going to get even
crazier around here.”
157. Legasus sales agent Lee Boyd made several statements to Plainitff, Joseph
McElroy, designed to induce Mr. McElroy into purchasing the McElroy Lot, including, but not
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limited to that the McElroy Lot was a great investment and one of the best lots, as well as that it
was a great value and that he needed to commit immediately because of a sales event the
following weekend.
158. Legasus sales agent Jason Wallace stated to Plaintiff, Marc J. Browner, that
purchasing a lot in the River Rock subdivision was a great investment and that lots in other
communities that were being developed around the area were worth over one million dollars
($1,000,000). Jason Wallace and other River Rock salespersons also stated that if Mr. Browner
did the interest free financing loan for eighteen months, at the end of eighteen months he could
sell the Browner Lot and made good money on it.
LEGASUS AND JAMES R. PITTS‟ MISREPRESENTATIONS TO PLAINTIFFS IN THE
JULY 2009 LEGASUS UPDATE
159. On July 15, 2009 (the “July 2009 Legasus Update”), Legasus, through James R.
Pitts, sent an update to the Plaintiffs stating, among other things, that, “Legasus' primary goals
are to recapitalize River Rock and maintain the integrity of the project work completed to date.
While project construction is temporarily postponed our efforts in seeking new sources of
funding are nonstop.”
160. In the July 2009 Legasus Update, Legasus, through James R. Pitts, stated to the
Plaintiffs that they may have noticed, “an increase in banking and legal activity around the River
Rock project, namely a foreclosure sale of the Lacy tract in the Webster Creek neighborhood and
the sale of the Summer Sail neighborhood and Cherry Knob tract at Webster Creek. . . .
Legasus‟ responses to these actions are structured to provide much needed short-term financial
relief. Specifically, the Summer Sail neighborhood and Cherry Knob tract were sold
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to a cooperative investor as a land banking strategy.” Jim Pitts further wrote in the 2009 Legasus
Update that this sale was a way of “creating a future opportunity to repurchase the land holdings
once the recapitalization is in place.”
161. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs that, “[a]nother
banking move that occurred on July 9, 2009 was the foreclosure and sale of the Lacy tract at
Webster Creek by Macon Bank. Legasus has been working closely with Macon Bank to find
another capital funding source but was unable to secure the necessary funds by the foreclosure
date. While we are disappointed that Macon Bank proceeded with the sale, we continue to stay
in contact with bank officers to arrange for a repurchase once the River Rock recapitalization is
in place.” Legasus and James R. Pitts made this statement, even though, upon information and
belief, they knew that Legasus would not be able to secure the funding necessary to purchase the
Lacy tract at Webster Creek.
162. In the July 2009 Legasus Update, James R. Pitts wrote to the Plaintiffs that,
“[w]hile the Lacy tract makes up part of the River Rock golf course there are alternate routing
plans that can be used if needed. We remain in contact with Phil Mickelson Design and his
management company and they continue to be very active partners.” Upon information and
belief, Legasus and James R. Pitts made this statement, even though they knew that Phil
Mickelson Design would not be designing a golf course in the River Rock subdivision.
163. In the July 2009 Legasus Update, James R. Pitts wrote to the Plaintiffs that,
“[s]ince the end of 2007 we have been looking for ways to right-size the company and the
project to respond to the economic conditions. Strategies have included selling land, reorganizing
staff, managing maintenance, reducing direct expenses, etc.” This statement clearly
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demonstrates that Legasus recognized that it had serious financial problems in 2007 despite its
regular dissemination of information to the Plaintiffs making statements to the contrary.
164. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs that, “as I have
previously reported, Legasus closed a significant construction loan with a private lender in April,
2008. With that loan Legasus was able to make considerable progress in the construction of the
dry and wet utility infrastructure in the Tuckasegee/Glades neighborhoods.” Jim Pitts and
Legasus made this statement despite the fact that it did not make considerable progress in these
sections of the River Rock subdivision or any other section of the River Rock subdivision.
165. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs that progress in
the infrastructure in the Tuckasegee/Glades neighborhoods was robust, “up until December 2008
when the lender failed to make the required construction draw for several previous months of
work per the contract agreement. Without any communication, the lender ceased funding the
project under the contract obligations. Unknowingly, Legasus proceeded with construction
which resulted in a funding shortfall for some completed work.” Legasus and Jim Pitts made
this statement despite the fact that Legasus neither made robust progress on the infrastructure
after the alleged construction loan, nor did it make substantial progress in the development of
infrastructure prior to the time of this construction loan, even though it received millions of
dollars from the proceeds of Plaintiffs‟ purchases of lots in the River Rock subdivision.
166. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs and other
owners of lots in the River Rock subdivision that, “[i]n closing I would like to let you know that
Legasus continues to be fully committed to satisfying our obligations to you, the owners.” Upon
information and belief, Jim Pitts and Legasus made this statement even though they knew that
Legasus had no intention of fulfilling its obligations to the Plaintiffs.
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167. The Legasus Defendants sent the Plaintiffs, via interstate communication, the
2007 Legasus Report, August 2008 Progress Summary Report, the Sneak Peek, the 2009
Legasus Update, and other documents and advertising materials, upon information and belief, as
part of their scheme to defraud Plaintiffs into purchasing lots in the River Rock subdivision and
entering into loan agreements with lenders, including NBSC, with respect to these lots.
LEGASUS DEFENDANTS‟ MISREPRENTATIONS TO PLAINTIFFS
IN THE LEGASUS PROPERTY REPORT
168. In the Legasus Property Report dated August 26, 2006 (the “Legasus Property
Report”), Legasus made certain representations about utilities and infrastructure that were
materially false, including, but not limited to, that water service would be available to the
individual lots in the River Rock subdivision by March of 2008. Upon information and belief,
Legasus made these statements even though it knew that it could not provide such roads by
March of 2008.
169. In the Legasus Property Report, Legasus made certain representations about
utilities and infrastructure that were materially false, including that roads would be constructed
and paved in the Tuckasegee and Glades sections of the River Rock subdivision by April of
2008. Upon information and belief, Legasus made these statements even though it knew that it
could not provide such roads by April of 2008.
170. In the Legasus Property Report, Legasus stated, “[w]e will escrow $15,000 from
the sale of each lot to construct the central water system and central sewer collection system.”
Legasus made this statement, even though, upon information and belief, it did not intend to
escrow $15,000 from the sale of each lot to construct the central water system and the central
sewer collection system.
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171. Upon information and belief, Legasus did not escrow any amount of money from
the sale of each lot to construct the central water system and central sewer collection system.
172. In the Legasus Property Report, Legasus stated, “[w]e will escrow $40,000 from
the sale of each lot to design and construct the roads, electrical and telecommunications utilities
and common area improvements.” Legasus made this statement, even though, upon information
and belief, it did not intend to escrow $40,000 from the sale of each lot to design and construct
the roads, electrical and telecommunications utilities and common area improvements
173. Upon information and belief, Legasus did not escrow any amount of money from
the sale of each lot to design and construct the roads, electrical and telecommunications utilities
and common area improvements.
174. In the Legasus Property Report, Legasus stated, “[t]he estimated starting date for
commencement of construction of the electrical service lines to serve all of The Glades Phase
lots is April 2007 and it is anticipated that service will be available to all lots subject to this
Property Report by March 2008.” Upon information and belief, Legasus knew that it would not
be able to provide electric service to all of the subject lots by March 2008.
175. In the Legasus Property Report, Legasus represented that all of the recreational
facilities in the River Rock subdivision would be completed by June of 2009. Upon information
and belief, Legasus knew that it would not complete these recreational facilities by the dates set
forth in the Legasus Property Report.
176. As for the August 31, 2006 draft date of the Legasus Property Report, Legasus
represented that no homes were occupied on a full or part time basis in the River Rock
subdivision.
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177. Plaintiffs purchased the River Rock lots with a reasonable belief that such lots
could be built upon and with a reasonable belief that Legasus would install roads, wells, utilities,
and other infrastructure that was essential to allow the issuance of an occupancy permit.
178. Plaintiffs purchased the River Rock lots with a reasonable belief that the pools,
tennis center, equestrian center, clubhouses, golf courses, restaurants, and other amenities would
be constructed.
179. Upon information and belief, the Legasus Defendants developed their scheme to
defraud the Plaintiffs for the purpose of enriching themselves by utilizing the proceeds from lot
sales to enrich themselves, as they had no intention of ever building the utilities and
infrastructure that they promised Plaintiffs that they would build.
THE BANK‟S RELATIONSHIP WITH THE LEGASUS DEFENDANTS
180. Upon information and belief, Legasus had operating accounts related to the River
Rock subdivision at the National Bank of South Carolina.
181. Upon information and belief, James R. Pitts had a personal banking account at
NBSC.
182. Upon information and belief, Theodore Morlok had a personal banking account at
NBSC.
183. Upon information and belief, Robert A. Corliss had a personal banking account at
NBSC.
184. NBSC financed some or all of Legasus‟ acquisition of the property that became
the River Rock subdivision.
185. NBSC financed some or all of the development of the River Rock subdivision.
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186. Legasus‟ related entities, Legasus, LTD and T&T Properties, executed a Deed of
Trust to the National Bank of South Carolina dated January 7, 2005 that is recorded in Deed
Book 1465, Page 33, of the Jackson County Registry (the “NBSC Deed”), concerning property
within the River Rock subdivision.
187. Legasus and T&T Properties, Inc. had a Deed of Trust to the National Bank of
South Carolina dated November 30, 2005 recorded in Deed Book Page 1553, Page 581 of the
Jackson County Registry (the “NBSC Number 2 Deed”) on property within the River Rock
subdivision.
188. As stated in the Legasus Property Report for the River Rock subdivision, the
release provisions in the NBSC Deed allowed lots to be released upon the payment by Legasus to
the National Bank of South Carolina of an amount equal to either 35 percent (35%) or 50 percent
(50%) of the gross sales price of the individual lot to be released from the NBSC Deed,
depending on the lot being released, provided, such payment to NBSC shall not be in an amount
less than $83,350 or $100,000, depending on the lot being released.
189. As stated in the Legasus Property Report for the River Rock subdivision,
“[n]either the NBSC Number 2 Deed nor the Community South Deed contain any provisions for
the release of an individual lot when the full purchase price of the lot has been paid. Therefore,
if your lot is subject to either the NBSC Number 2 Deed or the Community South Deed, you
may not be able to obtain clear title to your lot until we have paid the NBSC Number 2 Deed or
the Community South Deed in full, even though you may have received a deed and paid the full
purchase price of the lot.”
190. Legasus and the National Bank of South Carolina were motivated to work
together to sell lots in the River Rock subdivision at the highest possible prices to pay off the
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loans that the National Bank of South Carolina had provided Legasus as secured by the NBSC
Deed and the NBSC Number 2 Deed.
191. Upon information and belief, the Legasus Defendants and the National Bank of
South Carolina worked out a scheme to develop a lot sales program where Legasus and NBSC
would induce Plaintiffs to purchase lots in the River Rock subdivision by offering to apply each
of the Plaintiff‟s ten percent down payment to the first approximately eighteen months of interest
payments on loans made to the Plaintiffs from the National Bank of South Carolina.
192. Upon information and belief, the National Bank of South Carolina‟s officers and
directors encouraged Michael Wolf and other employees to make as many loans as possible in
the River Rock subdivision because the National Bank of South Carolina was receiving ten
percent of the sale price of each lot at closing for each lot that it loaned money on to the
Plaintiffs and other buyers of lots in River Rock.
193. Upon information and belief, the National Bank of South Carolina engaged in a
scheme to defraud the Bank Plaintiffs and others into purchasing lots in the River Rock
subdivision.
CHRISTIAN BARSANTI‟S SPECIFIC FACTUAL ALLEGATIONS AGAINST THE BANK
194. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Christian Barsanti (“Barsanti”) to purchase an undeveloped lot in the
River Rock subdivision and Barsanti did purchase Lot 34 in the Bear Pen section of the River
Rock subdivision in Cullowhee, North Carolina (the “Barsanti Lot”) on March 10, 2006 for two
hundred and twenty-nine thousand and nine hundred dollars ($229,900).
195. The National Bank induced Barsanti to purchase the Barsanti Lot by offering him
a two year interest only loan at a rate of 6.68% with the total finance charges over the two year
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term of the loan to be in the amount of twenty-seven thousand six hundred and seventy-three
dollars and ninety cents ($27,673.90) on NBSC‟s two hundred and six thousand nine hundred
and ten dollar ($206,910) loan to Barsanti.
196. The National Bank of South Carolina induced Barsanti to sign a Deposit Account
Agreement that would open an account at the National Bank of South Carolina for the twenty
thousand dollars ($20,000) that was transferred by Legasus into this account to be used to pay for
interest payments on the National Bank of South Carolina‟s loan to Barsanti.
197. On February 22, 2006, Michael Wolf sent Barsanti an interstate electronic mail
communication from South Carolina to Barsanti in New Jersey requesting two years of personal
financial statements.
198. On or about March of 2006, Barsanti had an interstate telephone communication
from New Jersey with Michael Wolf in South Carolina and during that interstate telephone
communication Michael Wolf stated that the purchase of the Barsanti Lot was a great deal.
199. On March 16, 2006, Lauren Casey, Legal Assistant to James S. Price, Esq., sent
an interstate electronic mail to Christian Barsanti stating, “I wanted to check-in with you to see if
you had a chance to execute and send back the loan documents for the purchase of Lot 34
BearPen at RiverRock.”
200. On March 16, 2006, Lauren Casey, Legal Assistant to James S. Price, Esq., sent
an interstate electronic mail to Christian Barsanti stating, “[p]lease remember all documents need
to be dated for 3/10.”
201. On March 23, 2006, Michael Wolf sent Barsanti an interstate electronic mail
communication from South Carolina to Barsanti in New Jersey stating, “your rate went down to
6.25% did you send the package to James Price office?”
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202. In March of 2006, Michael Wolf provided Barsanti with a copy of the appraisal of
the Barsanti Lot that showed the Barsanti Lot was worth two hundred and fifty thousand dollars
($250,000). During a March of 2006 interstate telephone communication between Michael Wolf
and Barsanti, Michael Wolf stated to Christian Barsanti that he had “already made money” on
the Barsanti Lot because he was paying less than the appraised value of the Barsanti Lot.
203. Christian Barsanti paid the Highlands Appraisal Service the amount of four
hundred and fifty dollars ($450) for the 2006 appraisal on the Barsanti Lot at the closing on the
Barsanti Lot.
204. Christian Barstanti paid James S. Price & Associates, P.A. the amount of five
hundred dollars ($500) in attorney‟s fees to represent him at the closing on the Barsanti Lot, as
well as sixty dollars ($60) in courier fees.
205. Christian Barsanti paid the National Bank of South Carolina a loan origination fee
of .5000% in the amount of one thousand and thirty-four dollars and fifty-five cents ($1034.55)
at the closing on the Barsanti Lot.
206. On or about March of 2008, Barsanti had an interstate telephone communication
from New Jersey with Michael Wolf in South Carolina and during that interstate telephone
communication Michael Wolf stated that the purchase of the Barsanti Lot was a great deal and
that Barsanti would be selling the Barsanti Lot within two years for a profit. Michael Wolf also
stated during that interstate telephone communication that Barsanti should do a two year loan
with the Bank because he would be selling the Barsanti Lot at a profit within two years.
207. When Christian Barstanti‟s loan with the NBSC became due in March of 2008,
the National Bank of South Carolina, through its employee Michael Wolf, offered to extend this
loan for two years. However, Michael Wolf informed Barsanti via interstate telephone
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communication that the extension was delayed because he and the National Bank of South
Carolina did not like the first 2008 appraisal on the Barsanti Lot and that they would order a
second appraisal.
208. In 2008, the National Bank of South Carolina requested and received a second
appraisal (the “2008 Barsanti Lot Appraisal”) on the Barsanti Lot that came back with the
Barsanti Lot appraised at three hundred and twenty thousand dollars ($320,000), which was
ninety thousand dollars ($90,000) more than what Barsanti had originally paid for the Barsanti
Lot.
209. The 2008 Barsanti Lot Appraisal provided a value of the Barsanti Lot that
demonstrated an increase in value of nearly forty percent (40%) during a time period when real
estate values in Western North Carolina, including Jackson County, were in a rapid decline.
210. On May 2, 2008, Michael Wolf sent Barsanti the 2008 Barsanti Appraisal via
interstate electronic mail and Barsanti relied on the value of the Barsanti Lot in that appraisal, as
well as the other information contained in the 2008 Barsanti Lot Appraisal in deciding to execute
the Modification and Amendment of Note and Deed of Trust with NBSC dated May 12, 2008.
211. The Modification and Amendment of Note and Deed of Trust provided that
Barsanti would pay NBSC two hundred and six thousand nine hundred and ten dollars
($206,910) at a rate of 4.5% over a five year loan term. Barsanti would not have entered into this
agreement but for the fact that he relied upon information contained in the 2008 Barsanti Lot
Appraisal.
212. Marilyn McCoy Woods conducted the 2008 Barsanti Lot Appraisal and failed to
use lots outside of the River Rock subdivision as comparables to determine the value of the
Barsanti Lot and failed to account for the fact that there were not sufficient infrastructure and
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utilities in the River Rock subdivision to support the value placed on the Lot in the 2008 Barsanti
Lot Appraisal.
213. The 2008 Barsanti Appraisal used Lot 48 and Lot 20 in the Bear Pen Section of
the River Rock subdivision and Lot 185 in the Boulders Section of the River Rock subdivision as
comparables to the Barsanti Lot to determine the value of the Barsanti Lot, even though those
lots were all within the River Rock subdivision and were all undeveloped lots.
214. The 2008 Barsanti Lot Appraisal stated that there were, “no known factors to the
appraiser that adversely affect value or marketability within the defined Highland Cashiers
mountain resort market area with excellent marketability and appeal,” even though Marilyn
McCoy Woods knew or should have known that the lack of infrastructure at the River Rock
subdivision adversely affected both the value and the marketability of the Lot.
215. The 2008 Barsanti Lot Appraisal indicated that the adequacy of utilities was
average in River Rock, even though there were no utilities that served the Barsanti Lot. In fact,
the 2008 Barsanti Appraisal stated that proposed amenities included underground utilities, paved
roads with curb and gutters, clubhouse, hiking trails, hot tub/spa, picnic area, wildlife education,
yoga and bouldering.
216. The 2008 Barsanti Appraisal did not indicate whether Marilyn McCoy Woods had
actually ever been to the Barsanti Lot, even though there are boxes on the 2008 Barsanti
Appraisal that the appraiser was to check to indicate whether she ever visited the Barsanti Lot.
217. The 2008 Barsanti Lot Appraisal valued the Barsanti Lot at three hundred and
twenty thousand dollars ($320,000), even though the Barsanti Lot was .94 acres of undeveloped
land in the River Rock subdivision and this subdivision contained no water, no sewer and no gas,
while not containing any roads to serve the Lot.
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218. Upon information and belief, in April and May of 2008, the National Bank of
South Carolina knew that there were significant problems with the development of the
infrastructure in the River Rock subdivision and that this infrastructure had not been provided as
promised to the purchasers of lots in the River Rock subdivision.
219. In April and May of 2008, the National Bank of South Carolina knew that there
were significant problems with the funding of the infrastructure and utilities in the River Rock
subdivision.
220. Upon information and belief, in April and May of 2008, the National Bank of
South Carolina knew that the Barsanti Lot was not worth three hundred and twenty thousand
dollars ($320,000).
221. Marilyn McCoy Woods submitted an invoice for the Barsanti Lot Appraisal to the
National Bank of South Carolina dated June 1, 2008 and Michael Wolf signed that invoice, while
indicating that the National Bank of South Carolina should pay that invoice. This demonstrates
Michael Wolf‟s role in ordering the Barsanti Lot Appraisal and approving the payment to
Marilyn McCoy Woods for this appraisal.
222. In April of 2008, Christian Barsanti asked Michael Wolf if there was a thirty year
fixed loan option for the loan on the Barsanti Lot and Michael Wolf said that he should not
pursue such a long term loan because the lot would sell within two years.
223. Upon information and belief, the National Bank of South Carolina knew that the
Barsanti Lot was not worth three hundred and twenty thousand dollars ($320,000) in April of
2008, but it extended this loan to continue to show short term income and move known loan
losses into a date uncertain in the future.
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MICHAEL TROIANO AND AUDREY TROIANO‟S
SPECIFIC FACTUAL ALLEGATIONS AGAINST THE BANK
224. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Michael Troiano and Audrey Troiano to purchase an undeveloped lot
in the River Rock subdivision and Michael and Audrey Troiano did purchase Lot 113 in the
Tuckasegee section of the River Rock subdivision in Cullowhee, North Carolina (the “Troiano
Lot”) on November 20, 2006 for two hundred and sixty-nine thousand nine hundred and ten
dollars ($269,910).
225. On July 15, 2006, at the Grand Opening Sales event at the River Rock
subdivision, Michael Townsend of Legasus introduced Michael Troiano to Michael Wolf and
stated that Mr. Wolf would “take care of you.” Michael Townsend of Legasus also stated to
Michael Troiano that NBSC had a vested interest in River Rock because it had underwritten a
significant portion of the development of River Rock. Legasus did not introduce Michael
Troiano to any other lenders at the Grand Opening Sales event and it appeared clear to Michael
Troiano that Legasus preferred that buyers of lots use NBSC to finance the purchase of lots in
River Rock.
226. On July 15, 2006, at the Grand Opening Sales event at the River Rock
subdivision, Michael Wolf expressed a lot of confidence in the River Rock subdivision to
Michael Troiano and stated to Michael Troiano that he had worked with Legasus before and that
regardless of whether the Troianos decided to sell the Troiano Lot or build on the Troiano Lot
themselves, they would be able to sell it for a profit because they were getting in on the ground
floor of the deal.
227. On July 15, 2006, at the Grand Opening Sales event at the River Rock subdivision
and during subsequent interstate telephone communications with Michael Troiano, Michael Wolf
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stated to Michael Troiano that purchasing a lot in the River Rock subdivision was a good deal
because of the ability to re-sell the Troiano lot at a later date.
228. On July 15, 2006, Legasus and Michael Wolf stated to Michael Troiano that the
Grand Opening Sales event dinner was held for the first one hundred (100) buyers in the River
Rock subdivision. On July 15, 2006, Michael Wolf stated to Michael Troiano that if the
Troianos decided to sell the lot at a later date, they could pretty much name their price on the lot
because subsequent phases of the development would be released at higher selling prices, as
Phase 2 lots were to be released at a ten percent premium to Phase 1 lots. Michael Wolf stated
that this built in profit had already been realized by the initial lot owners.
229. At the Grand Opening Sales event on July 15, 2006, Michael Wolf stated to
Michael Troiano that the National Bank of South Carolina had a significant investment in the
River Rock subdivision and the fact that the Bank was behind the project provided significant
comfort to Michael Troiano with respect to his decision to purchase a lot in the River Rock
subdivision.
230. During the Grand Opening sales event, Michael Wolf acted as both an employee
and representative of the National Bank of South Carolina and a salesperson for the River Rock
subdivision. During the Grand Opening sales event, it appeared to Michael Troiano that Michael
Wolf could have been part of either the River Rock sales team or of the National Bank of South
Carolina.
231. On July 18, 2006, Michael Wolf sent Michael Troiano an interstate electronic
mail communication from South Carolina to Michael Troiano in Georgia with a loan application
and Michael Troiano sent the loan application back to Michael Wolf on July 19, 2006.
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232. On August 14, 2006, Michael Wolf sent Michael Troiano an electronic mail
communication from South Carolina to Michael Troiano in Georgia stating, “all paper work is
approved.”
233. Michael and Audrey Troiano paid the National Bank of South Carolina a loan
origination fee of .5002 percent in the amount of one thousand two hundred and fifteen dollars
($1,215) at the closing on the Troiano Lot on November 20, 2006, as shown on the U.S.
Department of Housing and Urban Development Settlement Statement used in conjunction with
the closing on the Troiano Lot.
234. Michael and Audrey Troiano paid Marilyn McCoy Woods two hundred and fifty
dollars ($250) for an appraisal on the Troiano Lot as shown on the U.S. Department of Housing
and Urban Development Settlement Statement used in conjunction with the closing on the
Troiano Lot.
235. Even though Michael and Audrey Troiano paid for an appraisal on the Troiano
Lot, they did not receive a copy of the appraisal prior to their purchase of the lot.
236. Upon information and belief, the National Bank of South Carolina did not provide
Michael and Audrey Troiano with a copy of the appraisal conducted by Marilyn McCoy Woods
on the Troiano Lot because the National Bank of South Carolina knew that if Michael and
Audrey Troiano knew of the information in the appraisal, they would not have purchased the
Troiano Lot.
237. Michael and Audrey Troiano paid James S. Price & Associates, P.A. the amount
of five hundred dollars ($500) in attorney‟s fees to represent them at the closing on their lot, as
well as fifty ($50) dollars in title document retrieval fees, sixty dollars ($60) in courier fees, and
thirty-five dollars ($35) in copy-wire fees.
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DONALD HILL AND TRICIA HILL SPECIFIC FACTUAL ALLEGATIONS
AGAINST THE BANK
238. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Donald Hill and Tricia Hill to purchase an undeveloped lot in the
River Rock subdivision and Donald Hill and Tricia Hill did purchase Lot 155 in the Tuckasegee
section of the River Rock subdivision in Cullowhee, North Carolina (the “Hill Lot”) on
December 12, 2006 for two hundred and fifty-two thousand dollars ($252,000).
239. Donald Hill and Tricia Hill chose the National Bank of South Carolina to finance
the purchase of the Hill Lot because it offered an eighteen month no payment loan or a ten
percent principal reduction. In addition, Donald and Tricia Hill chose the National Bank of
South Carolina because when Donald Hill spoke to Michael Wolf via interstate telephone
communication during the loan application process, Michael Wolf informed Donald Hill that he
had closed many lots in the last six months in the River Rock subdivision and reselling the lot
that they would purchase in River Rock should be easy.
240. The National Bank of South Carolina induced Donald Hill and Tricia Hill into
purchasing the Hill Lot by offering to provide them with a two year interest only loan at a rate of
6.37 % with no payment for the first eighteen months of the loan.
241. Michael Wolf acted as a salesperson of lots in the River Rock subdivision when
speaking with Donald Hill during the loan application process because he made every effort to
make Mr. Hill feel good about buying a lot in the River Rock subdivision.
242. River Rock salesperson Matthew Mull met with Donald Hill at a trade show in
Los Angeles and gave him a piece of paper with three banks on it as possible lenders for the
purchase of a lot in the River Rock subdivision and those lenders were National Bank of South
Carolina, Wachovia and Bank of America.
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243. Michael Wolf sent Donald Hill and Tricia Hill an interstate electronic mail
communication on November 13, 2006 informing Donald and Tricia Hill to let him know if they
had any questions regarding their loan.
244. Donald Hill and Tricia Hill paid the National Bank of South Carolina a Loan
Origination Fee of .5000% in the amount of one thousand one hundred and twenty-five dollars
($1,125) at the closing on the Hill Lot, as shown on the U.S. Department of Housing and Urban
Development Settlement Statement used in conjunction with the closing on their lot.
245. Donald Hill and Tricia Hill paid the National Bank of South Carolina three
hundred dollars ($300) in an appraisal fee at the closing on the Hill Lot as shown on the U.S.
Department of Housing and Urban Development Settlement Statement used in conjunction with
the closing on the Hill Lot, but never received a copy of the appraisal from the National Bank of
South Carolina.
246. Upon information and belief, the National Bank of South Carolina did not provide
a copy of the appraisal on the Hill Lot to Donald Hill and Tricia Hill before they purchased the
Hill Lot because the National Bank of South Carolina knew that if Donald Hill and Tricia Hill
knew the information contained in that appraisal, they would not have purchased the Hill Lot and
would not have entered into a loan with the National Bank of South Carolina.
247. Donald Hill and Tricia Hill paid James S. Price & Associates, P.A. the amount of
five hundred dollars ($500) in attorney‟s fees to represent them at the closing on their lot, as well
as fifty dollars ($50) in title document retrieval fees, sixty dollars ($60) in courier fees, and
thirty-five dollars ($35) in copy-wire fees.
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JOSEPH E. MCELROY‟S SPECIFIC FACTUAL ALLEGATIONS
AGAINST THE BANK
248. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Joseph E. McElroy to purchase an undeveloped lot in the River Rock
subdivision and Joseph E. McElroy did purchase Lot 83 in the Tuckasegee section of the River
Rock subdivision in Cullowhee, North Carolina (the “McElroy Lot”) on November 17, 2006 for
four hundred and forty-nine thousand and nine hundred dollars ($449,900).
249. In June of 2006, Lee Boyd of Legasus and Joseph McElroy met in person to
discuss the financing options for the purchase of lots in the River Rock subdivision and Lee
Boyd recommended that he use the National Bank of South Carolina and Michael Wolf to
finance the purchase of the McElroy Lot.
250. In June of 2006, Michael Wolf made several interstate telephone communications
from his office in South Carolina to Joseph E. McElroy in Florida and during those
communications Michael Wolf stated that purchasing the McElroy Lot was a great investment,
that Legasus was a solid developer and that the National Bank of South Carolina held some of
the senior debt for the River Rock subdivision.
251. Joseph E. McElroy paid the National Bank of South Carolina a loan origination
fee of .5000 percent in the amount of two thousand and twenty-four dollars and fifty-five cents
($2024.55) at the closing on the McElroy Lot on November 17, 2006.
252. Joseph E. McElroy paid Marilyn McCoy Woods two hundred and fifty dollars
($250) for an appraisal as shown on the U.S. Department of Housing and Urban Development
Settlement Statement used in conjunction with the closing on the McElroy Lot.
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253. Even though Joseph E. McElroy paid for an appraisal on the McElroy Lot, he did
not receive a copy of the appraisal conducted by Marilyn McCoy Woods prior to their purchase
of the lot.
254. Upon information and belief, the National Bank of South Carolina did not provide
Joseph E. McElroy with a copy of the appraisal conducted by Marilyn McCoy Woods because
the National Bank of South Carolina knew that if Joseph E. McElroy knew of the information in
the appraisal, he would not have purchased the McElroy Lot.
255. Joseph E. McElroy paid James S. Price & Associates, P.A. the amount of five
hundred dollars ($500) in attorney‟s fees to represent him at the closing on the McElroy Lot, as
well as fifty dollars ($50) in title document retrieval fees, sixty dollars ($60) in courier fees, and
thirty-five dollars ($35) in copy-wire fees.
256. The National Bank of South Carolina induced Joseph E. McElroy to open a
money market account at the National Bank of South Carolina and to sign a Deposit Account
Agreement.
257. Legasus transferred thirty-nine thousand seven hundred and eighty-two dollars
and forty-one cents ($39,782.41) into a money market account at the National Bank of South
Carolina to pay for the first eighteen months of interest on NBSC‟s loan to McElroy. The
National Bank of South Carolina automatically debited this account each month to make interest
payments on its loan to Joseph E. McElroy until this money was depleted and then closed the
account.
258. The National Bank of South Carolina induced Joseph E. McElroy to purchase the
McElroy Lot by offering to provide Mr. McElroy with a short term, thirty-six month loan with
interest only payments at an annual percentage rate of 6.73%.
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259. The National Bank of South Carolina made its short term, interest only loan to
Joseph E. McEloy because the contemplated eighty-one thousand five hundred and eighty-nine
dollars and thirty-seven cents ($81,589.37) in finance charges on this loan was a significant short
term source of income for the National Bank of South Carolina.
260. The National Bank of South Carolina made its loan to Joseph E. McElroy because
it received thirty-nine thousand seven hundred and eighty-two dollars and forty-one cents
($39,782.41) at the closing on the Lot, which represented approximately forty-nine percent of the
eighty-one thousand five hundred and eighty-nine dollars and thirty-seven cents ($81,589.37) in
total finance charges due to the National Bank of South Carolina over the course of its loan to
Joseph E. McElroy.
261. The National Bank of South Carolina made its loan to Joseph E. McElroy because
it recognized that receiving approximately forty-nine percent of the total finance charges on a
loan at closing was unusual in the banking industry and provided a level of comfort with the loan
that made the National Bank of South Carolina‟s bank officers push loan officers and other
employees to do as many of these types of loans as possible.
MARC J. BROWNER‟S SPECIFIC FACTUAL ALLEGATIONS
AGAINST THE BANK
262. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Marc J. Browner to purchase an undeveloped lot in the River Rock
subdivision and Marc J. Browner did purchase Lot 36 in the Tuckasegee section of the River
Rock subdivision in Cullowhee, North Carolina (the “Browner Lot”) on December 6, 2006 for
two hundred and eighty-nine thousand nine hundred dollars ($289,900).
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263. The National Bank of South Carolina induced Marc J. Browner to purchase the
Browner Lot by offering him an interest only loan for thirty six months to purchase the Browner
Lot with no payments for the first eighteen months of the loan on the Browner Lot.
264. The National Bank of South Carolina required Marc J. Browner to open a money
market account at the National Bank of South Carolina and to establish an automatic payment
mechanism to pay its loan to Marc J. Browner from this account.
265. Legasus transferred twenty-two thousand seven hundred and thirty-eight dollars
($22,738.00) into a money market account at the National Bank of South Carolina that was used
to make payments on the National Bank of South Carolina‟s loan to Marc J. Browner.
266. Marc J. Browner paid the National Bank of South Carolina a loan origination fee
of .5002 percent in the amount of one thousand three hundred and five dollars ($1305.00) at the
closing on the Browner Lot on December 6, 2006, as shown on the U.S. Department of Housing
and Urban Development Settlement Statement used in conjunction with the closing on the
Browner Lot.
267. Marc J. Browner paid James S. Price & Associates, P.A. the amount of five
hundred dollars ($500) in attorney‟s fees to represent him at the closing on the Browner Lot, as
well as fifty dollars ($50) in title document retrieval fees, sixty dollars ($60) in courier fees, and
thirty-five dollars ($35) in copy-wire fees.
268. Marc J. Browner paid Marilyn McCoy Woods two hundred and fifty dollars
($250) for an appraisal as shown on the U.S. Department of Housing and Urban Development
Settlement Statement used in conjunction with the closing on the Browner Lot.
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269. Even though Marc J. Browner paid for an appraisal by Marilyn McCoy Woods,
he did not receive a copy of the appraisal prior to his purchase of the Browner Lot or at any time
thereafter.
270. Upon information and belief, the National Bank of South Carolina did not provide
Marc J. Browner with a copy of the appraisal conducted by Marilyn McCoy Woods because the
National Bank of South Carolina knew that if Marc J. Browner knew of the information in the
appraisal, he would not have purchased the Browner Lot.
271. The National Bank of South Carolina never provided Marc J. Browner with an
executed copy of the HUD-1 document associated with his purchase of the Browner Lot or any
of the other closing documents on the closing on the Browner Lot.
JOSEPH P. GRUSSER AND CATHERINE V. GRUSSER‟S SPECIFIC FACTUAL
ALLEGATIONS AGAINST THE BANK
272. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Joseph P. Grusser and Catherine V. Grusser (collectively referred to
hereinafter as the “Grussers”) to purchase two undeveloped lots in the River Rock subdivision
and the Grussers did purchase Lot 17 (“Grussers Lot 17”) in the Bear Pen Section of the River
Rock subdivision for two hundred and nineteen thousand dollars ($219,000) on April 6, 2006
and Lot 89 (“Grussers Lot 89”) in the Bear Pen Section of the River Rock subdivision for four
hundred and forty nine thousand ($449,000) dollars on April 6, 2006.
273. In April of 2006, Michael Wolf stated to Joseph P. Grusser via interstate
telephone communication that Michael Wolf himself was buying a lot in the River Rock
subdivision.
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274. From April of 2006 through June of 2008, Michael Wolf stated to Joseph P.
Grusser via several interstate telephone communications that the Grussers Lot 17 and the
Grussers Lot 89 were both very sound investments.
275. In April of 2006, Michael Wolf stated to Joseph P. Grusser that lenders do not ask
on applications if any loans are currently "in process" because "they don't want to know or don't
care."
276. In April of 2006, Joseph P. Grusser stated to Michael Wolf that he could not
afford the loans on the Grussers Lot 17 and the Grussers Lot 89.
277. The National Bank of South Carolina induced Joseph P. Grusser to purchase the
Grussers Lot 17 as part of a scheme whereby Joseph P. Grusser would make a ten percent down
payment to Legasus for the purchase of the Grussers Lot 17 and Legasus would then transfer that
money to an account at the National Bank of South Carolina to be used to pay interest payments
on the National Bank of South Carolina‟s loan to Joseph P. Grusser until such funds were
depleted.
278. The National Bank of South Carolina received nineteen thousand one hundred
and fifty-one dollars ($19,151.00) from Legasus in seller paid interest at the closing on the
Grussers Lot 17 on April 7, 2006 as shown on the Additional Disbursements Exhibit that was
part of the closing documents at the closing on the sale of the Grussers Lot 17 to Joseph P.
Grusser.
279. The National Bank of South Carolina charged a .5002% loan origination fee in the
amount of one thousand dollars ($1,000) to Joseph P. Grusser and received this amount from
Joseph P. Grusser at the closing on the Grussers Lot 17 on April 7, 2006 as shown on the U.S.
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Department of Housing and Urban Development Settlement Statement used in conjunction with
the closing on the Grussers Lot 17.
280. The National Bank of South Carolina received nineteen thousand one hundred
and fifty-one dollars ($19,151.00) from Legasus in seller paid interest at the closing on the
Grussers Lot 17, which was approximately forty-nine percent of the total finance charges of
thirty-nine thousand two hundred and thirty-two dollars and seventy-nine cents ($39,232.79) that
the National Bank of South Carolina was to receive over the term of the loan.
281. The National Bank of South Carolina made its loan to Joseph P. Grusser, in part,
because it knew that receiving approximately forty-eight percent of the interest payments on a
loan at closing provided a level of payment certainty that was very unusual in the banking
industry and thus it was highly motivated to do loans that involved Legasus and purchasers of
lots in River Rock.
282. The National Bank of South Carolina made its loan to Joseph P. Grusser, in part,
because it received a loan origination fee of one thousand dollars ($1,000) at closing, which
when added to all of the many loans that it was funding in the River Rock subdivision, provided
an additional substantive source of short term accounting income for the National Bank of South
Carolina.
283. Joseph P. Grusser paid two hundred and fifty dollars ($250) to Marilyn McCoy
Woods for an appraisal of the Grussers Lot 17 as shown on the Settlement Statement that was
used in conjunction with the closing on the sale of the Grussers Lot 17 to Joseph P. Grusser.
284. Even though Joseph P. Grusser paid for an appraisal of the Grussers Lot 17, he
did not receive a copy of this appraisal before his purchase of the Grussers Lot 17.
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285. Upon information and belief, the National Bank of South Carolina did not provide
Joseph P. Grusser with a copy of the appraisal conducted by Marilyn McCoy Woods on the
Grussers Lot 17 because the National Bank of South Carolina knew that if Joseph P. Grusser
knew of the information in the appraisal, he would not have purchased the Grussers Lot 17.
286. Joseph P. Grusser paid James S. Price & Associates, P.A. the amount of five
hundred dollars ($500) in attorney‟s fees to represent him at the closing on the Grussers Lot 17,
as well as sixty dollars ($60) in courier fees as shown on the Settlement Statement that was used
in conjunction with the closing on the sale of the Grussers Lot 17 to Joseph P. Grusser.
KENNETH KOSCO‟S SPECIFIC FACTUAL ALLEGATIONS AGAINST THE BANK
287. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Kenneth Kosco (“Kosco”) to purchase two undeveloped lots in the
River Rock subdivision and Kosco and Kathleen Thyne did purchase Lot 4 (“Kosco Lot 4”) in
the Bear Pen Section of the River Rock subdivision on May 3, 2006 for two hundred and ninety-
nine thousand nine hundred dollars ($299,900) and Kosco did purchase Lot 55 (“Kosco Lot 55”)
in the Bear Pen Section of the River Rock subdivision for two hundred and eighty-nine thousand
nine hundred dollars ($289,900) on April 6, 2006.
288. The National Bank of South Carolina induced Kosco into purchasing the Kosco
Lot 4 by offering Kosco and Kathleen Thyne a two year, interest only loan at a rate of 6.52% for
the purchase of the Kosco Lot 4.
289. The National Bank of South Carolina induced Kosco to purchase the Kosco Lot 4
as part of a scheme whereby Kosco and Kathlyn Thyne would make a ten percent down payment
to Legasus for the purchase of the Kosco Lot 4 and Legasus would then transfer that money to an
account at the National Bank of South Carolina to be used to pay interest payments on the
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National Bank of South Carolina‟s loan to Kosco and Kathleen Thyne until such funds were
depleted.
290. The National Bank of South Carolina received twenty-seven thousand nine
hundred and ninety dollars ($27,990) from Legasus in seller paid interest at the closing on the
Kosco Lot 4 on May 3, 2006 as shown on the Additional Disbursements Exhibit.
291. The National Bank of South Carolina charged a .5000% loan origination fee in the
amount of one thousand three hundred and forty-nine dollars and fifty-five cents ($1349.55) to
Kosco and Kathleen Thyne and received this amount from Kosco and Kathleen Thyne at the
closing on the Kosco Lot 4 on May 3, 2006.
292. The National Bank of South Carolina received twenty-seven thousand nine
hundred and ninety dollars ($27,990) from Legasus at the closing on the Kosco Lot 4, which was
approximately eighty percent of the thirty-five thousand one hundred and eighteen dollars and
ninety-nine cents ($35,118.99) in total finance charges that the National Bank of South Carolina
was to receive over the term of the loan.
293. The National Bank of South Carolina made its loan to Kosco and Kathleen Thyne,
in part, because it knew that receiving approximately eighty percent of the interest payments on a
loan at closing provided a level of repayment certainty that was very unusual in the banking
industry, while providing significant short term income to the National Bank of South Carolina.
294. The National Bank of South Carolina made its loan on the Kosco Lot 4 to Kosco
and Kathleen Thyne, in part, because it received a loan origination fee in the amount of one
thousand three hundred and forty-nine dollars and fifty-five cents ($1349.55) from Kosco and
Kathlyn Thyne at the closing on the Kosco Lot 4, which when added to all of the many loans it
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was doing in the River Rock subdivision, provided an additional substantive source of short term
accounting income for the National Bank of South Carolina.
295. Kosco and Kathleen Thyne paid two hundred and fifty dollars ($250) to Marilyn
McCoy Woods for an appraisal of Kosco Lot 4 as shown on the U.S. Department of Housing and
Urban Development Settlement Statement that was used in conjunction with the closing on the
sale of Kosco Lot 4.
296. Even though Kosco and Kathleen Thyne paid for an appraisal of the Kosco Lot 4,
they did not receive a copy of this appraisal before their purchase of the Kosco Lot 4.
297. Upon information and belief, the National Bank of South Carolina did not provide
Kosco and Kathleen Thyne with a copy of the appraisal conducted by Marilyn McCoy Woods
because the National Bank of South Carolina knew that if Kosco and Kathleen Thyne knew of
the information in the appraisal, they would not have purchased the Kosco Lot 4.
298. Kosco and Kathleen Thyne paid James S. Price & Associates, P.A. the amount of
five hundred dollars ($500) in attorney‟s fees to represent them at the closing on the Kosco Lot
4, as well as forty dollars ($40) in courier fees.
299. The National Bank of South Carolina induced Kosco into purchasing the Kosco
Lot 55 by offering him a two year, interest only loan at a rate of 6.52% for the purchase of the
Kosco Lot 55.
300. The National Bank of South Carolina induced Kosco to purchase the Kosco Lot
55 as part of a scheme whereby Kosco would make a ten percent down payment to Legasus for
the purchase of the Kosco Lot 55 and Legasus would then transfer that money to an account at
the National Bank of South Carolina to be used to pay interest payments on the National Bank of
South Carolina‟s loan to Kosco until such funds were depleted.
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301. The National Bank of South Carolina received twenty-six thousand nine hundred
and ninety dollars ($26,990) from Legasus in seller paid interest at the closing on the Kosco Lot
55 on April 7, 2006, as shown on the Additional Disbursements Exhibit.
302. The National Bank of South Carolina charged a .5000% loan origination fee in the
amount of one thousand three hundred and three hundred and four dollars and fifty-five cents
($1304.55) to Kosco and received this amount from Kosco at the closing on the Kosco Lot 55 on
April 7, 2006, as shown on the U.S. Department of Housing and Urban Development Settlement
Statement used in conjunction with the closing on the Kosco Lot 55.
303. The National Bank of South Carolina received twenty-six thousand nine hundred
and ninety dollars ($26,990) from Legasus at the closing on the Kosco Lot 55, which was
approximately eighty percent of the thirty three thousand nine hundred and fifty-one dollars and
fourteen cents ($33,951.14) in total finance charges that the National Bank of South Carolina
was to receive over the term of the loan.
304. The National Bank of South Carolina made its loan to Kosco on Kosco Lot 55, in
part, because it knew that receiving approximately eighty percent of the interest payments on a
loan at closing provided a level of repayment certainty that was very unusual in the banking
industry and thus it was highly motivated to do loans that involved Legasus and purchasers of
lots in River Rock.
305. The National Bank of South Carolina made its loan to Kosco on the Kosco Lot
55, in part, because it received a loan origination fee in the amount of one thousand three
hundred and three hundred and four dollars and fifty-five cents ($1304.55) from Kosco at the
closing on the Kosco Lot 55, which when added to all of the many loans it was doing in the
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River Rock subdivision, provided an additional substantive source of short term accounting
income for the National Bank of South Carolina.
306. Kosco paid four hundred and fifty dollars ($450) to Highlands Appraisal
Company for an appraisal of Kosco Lot 55 as shown on the Settlement Statement that was used
in conjunction with the closing on the sale of Kosco Lot 55.
307. Even though Kosco paid for an appraisal of the Kosco Lot 55, he did not receive a
copy of this appraisal before his purchase of the Kosco Lot 55.
308. Upon information and belief, the National Bank of South Carolina did not provide
Kosco with a copy of the appraisal conducted by Highlands Appraisal Company because the
National Bank of South Carolina knew that if Kosco knew of the information provided in the
appraisal on Kosco Lot 55, he would not have purchased Kosco Lot 55.
309. Kosco paid James S. Price & Associates, P.A. the amount of five hundred dollars
($500) in attorney‟s fees to represent him at the closing on the Kosco Lot 55, as well as sixty
dollars ($60) in courier fees as shown on the U.S. Department of Housing and Urban
Development Settlement Statement used in conjunction with the closing on Kosco Lot 55.
EDWARD WISHNER AND BEVERLY J. WISHNER‟S SPECIFIC FACTUAL
ALLEGATIONS AGAINST THE BANK
310. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Edward Wishner and Beverly J. Wishner (collectively referred to
hereinafter as the “Wishners”) to purchase undeveloped lots in the River Rock subdivision and
the Wishners did purchase Lot 43 (“Wishner Lot 43”) in the Tuckasegee Section of the River
Rock subdivision on December 12, 2006 for five hundred and seventy-four thousand nine
hundred dollars ($574,900).
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311. NBSC induced the Wishners to purchase Lot 43 by offering them a three year
interest only loan to purchase Wishner Lot 43 at a rate of 6.73%.
312. The National Bank of South Carolina induced the Wishners to purchase Wishner
Lot 43 as part of a scheme whereby the Wishners would make a ten percent down payment to
Legasus for the purchase of the Wishner Lot 43 and Legasus would then transfer that money into
an account at the National Bank of South Carolina to be used to pay interest payments on the
National Bank of South Carolina‟s loan to the Wishners until such funds were depleted.
313. Legasus transferred fifty thousand eight hundred and thirty-five dollars and fifty-
three cents ($50,835.53) into an account at the National Bank of South Carolina in the name of
the Wishners at the closing on the Wishner Lot 43 on December 12, 2006 as shown on the
Additional Disbursements Exhibit used in conjunction with the closing on the Wishner Lot 43.
314. The National Bank of South Carolina charged a .5000% loan origination fee in the
amount of two thousand five hundred and eighty-seven dollars ($2,587.00) and received this
amount from the Wishners at the closing on the Wishner Lot 43 on December 12, 2006.
315. The National Bank of South Carolina received fifty thousand eight hundred and
thirty-five dollars and fifty-three cents ($50,835.53) from Legasus at the closing on the Wishner
Lot 43, which was approximately forty-nine percent of the one hundred and four thousand two
hundred and fifty-eight dollars and six cents ($104,258.06) in total finance charges that the
National Bank of South Carolina was to receive over the term of the loan.
316. The National Bank of South Carolina made its loan to the Wishners on the
Wishner Lot 43, in part, because it knew that receiving approximately forty-nine percent of the
interest payments on a loan at closing provided a level of repayment certainty that was very
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unusual in the banking industry and thus it was highly motivated to do loans that involved
Legasus and purchasers of lots in River Rock.
317. The National Bank of South Carolina made its loan on the Wishner Lot 43, in
part, because it received a loan origination fee in the amount of two thousand five hundred and
eighty-seven dollars ($2,587.00) from the Wishners at the closing on the Wishner Lot 43, which
when added to all of the many loans it was doing in the River Rock subdivision, provided an
additional source of short term accounting income for the National Bank of South Carolina.
318. The Wishners paid two hundred and fifty dollars ($250) to Marilyn McCoy
Woods for an appraisal of the Wishner Lot 43 as shown on the Settlement Statement that was
used in conjunction with the closing on the sale of the Wishner Lot 43.
319. Even though the Wishners paid for an appraisal of the Wishner Lot 43, they did
not receive a copy of this appraisal before their purchase of the Wishner Lot 43.
320. Upon information and belief, the National Bank of South Carolina did not provide
the Wishners with a copy of the appraisal conducted by Marilyn McCoy Woods because the
National Bank of South Carolina knew that if the Wishners knew of the information in the
appraisal, they would not have purchased the Wishner Lot 43.
321. The Wishners paid James S. Price & Associates, P.A. the amount of five hundred
dollars ($500) in attorney‟s fees to represent him at the closing on the Wishner Lot 43, sixty
dollars ($60) in courier fees, thirty-five dollars ($35) in courier-wire fees, and fifty dollars ($50)
in title documents retrieval fees as shown on the Settlement Statement that was used in
conjunction with the closing on the sale of the Wishner Lot 43 to the Wishners.
322. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Edward Wishner and Beverly J. Wishner to purchase an undeveloped
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lot in the River Rock subdivision and the Wishners did purchase Lot 35 (“Wishner Lot 35”) in
the Tuckasegee Section of the River Rock subdivision on December 7, 2006 for three hundred
and forty-nine thousand and nine hundred dollars ($349,900).
323. NBSC induced the Wishners to purchase Wishner Lot 35 by offering them a three
year interest only loan to purchase the Wishner Lot at a rate of 6.75%.
324. The National Bank of South Carolina induced the Wishners to purchase the
Wishner Lot 35 as part of a scheme whereby the Wishners would make a ten percent down
payment to Legasus for the purchase of the Wishner Lot 35 and Legasus would then transfer that
money to an account at the National Bank of South Carolina to be used to pay interest payments
on the National Bank of South Carolina‟s loan to the Wishners until such funds were depleted.
325. The National Bank of South Carolina charged a .4998% loan origination fee in
the amount of one thousand five hundred and seventy-four dollars ($1,574.00) and received this
amount from the Wishners at the closing on the Wishner Lot 35 on December 7, 2006.
326. The National Bank of South Carolina received thirty-one thousand eight hundred
and eighty-four dollars and sixty-four cents ($31,884.64) from Legasus at the closing on the
Wishner Lot 35.
327. The National Bank of South Carolina made its loan on the Wishner Lot 35, in
part, because it received a loan origination fee of one thousand five hundred and seventy-four
dollars ($1,574.00) from the Wishners at the closing on the Wishner Lot 35, which when added
to all of the many loans it was doing in the River Rock subdivision, provided an additional
substantive source of short term accounting income for the National Bank of South Carolina.
328. The National Bank of South Carolina made its loan to the Wishners on the
Wishner Lot 43, in part, because it knew that receiving thirty-one thousand eight hundred and
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eighty-four dollars and sixty-four cents ($31,884.64) at closing on Wishner Lot 35 provided a
level of repayment certainty that was very unusual in the banking industry and thus it was highly
motivated to do loans that involved Legasus and purchasers of lots in River Rock.
329. The Wishners paid two hundred and fifty dollars ($250) to Marilyn McCoy
Woods for an appraisal of the Wishner Lot 35 as shown on the Settlement Statement that was
used in conjunction with the closing on the sale of the Wishner Lot 35.
330. Even though the Wishners paid for an appraisal of the Wishner Lot 35, they did
not receive a copy of this appraisal before their purchase of the Wishner Lot 35.
331. Upon information and belief, the National Bank of South Carolina did not provide
the Wishners with a copy of the appraisal conducted by Marilyn McCoy Woods because the
National Bank of South Carolina knew that if the Wishners knew of the information in the
appraisal, they would not have purchased the Wishner Lot 35.
332. The Wishners paid James S. Price & Associates, P.A. the amount of five hundred
dollars ($500) in attorney‟s fees to represent them at the closing on the Wishner Lot 35, sixty
dollars ($60) in courier fees, thirty-five dollars ($35) in courier-wire fees, and fifty dollars ($50)
in title documents retrieval fees as shown on the Settlement Statement that was used in
conjunction with the closing on the sale of the Wishner Lot 35 to the Wishners.
MARK TAMN AND ANDRA LYNN TAMN‟S SPECIFIC FACTUAL ALLEGATIONS
AGAINST THE BANK
333. Upon information and belief, the National Bank of South Carolina implemented a
plan to fraudulently induce Mark Tamn and Andra Lynn Tamn (collectively referred to
hereinafter as the “Tamns”) to purchase an undeveloped lot in the River Rock subdivision and
the Tamns did purchase Lot 110 (“Tamn Lot 110”) in the Tuckasegee Section of the River Rock
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subdivision for three hundred and twenty-four thousand and nine hundred dollars ($324,900) on
January 3, 2007.
334. In June of 2006, Legasus sales representative Jason Wallace informed Mark Tamn
that the National Bank of South Carolina was offering lot purchasers in River Rock a loan
program where lot purchasers made no payments for eighteen month, with interest only
financing and a ten percent down payment to Legasus. Jason Wallace told Mark Tamn to
contact Michael Wolf at NBSC to discuss this financing program in more detail.
335. In June of 2006, Legasus sales representative Jason Wallace stated to Mark Tamn
via interstate telephone communication that all of the amenities at River Rock would be
completed by the loan maturity date and that all of the values in River Rock would increase
significantly then.
336. In June of 2006, Michael Wolf made an interstate telephone communication from
his office in South Carolina to Mark Tamn in North Carolina and during that communication he
described the no payment for eighteen month, interest only, ten percent down payment loan that
NBSC was offering.
337. In June of 2006, Michael Wolf made an interstate telephone communication
from his office in South Carolina to Mark Tamn in North Carolina and stated that the Tamns Lot
110 was already worth more than what they were going to pay for it and that it was a great
investment opportunity.
338. In June of 2006, Michael Wolf made an interstate telephone communication from
his office in South Carolina to Mark Tamn in North Carolina and stated that the Tamns Lot 110
had kept going up in value during the loan application process.
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339. In June of 2006, Michael Wolf made an interstate telephone communication from
his office in South Carolina to Mark Tamn in North Carolina and during that communication
stated to Mark Tamn that it would be no problem to convert the contemplated Tamn Lot 100
acquisition loan into a construction loan.
340. The National Bank of South Carolina induced the Tamns to purchase the Tamn
Lot 110 as part of a scheme whereby the Tamns would make a ten percent down payment to
Legasus for the purchase of the Tamn Lot 110 and Legasus would then transfer that money to an
account at the National Bank of South Carolina to be used to pay interest payments on the
National Bank of South Carolina‟s loan to the Tamns until such funds were depleted.
341. The National Bank of South Carolina induced the Tamns into purchasing the
Tamn Lot 110 by provided the Tamns with a three year, interest only loan at a rate of 6.73% to
purchase the Tamn Lot 110.
342. The National Bank of South Carolina received twenty-eight thousand seven
hundred and twenty-nine dollars and twenty-nine cents ($28,729.29) from Legasus in seller paid
interest at the closing on the Tamn Lot 110 on January 3, 2006 as shown on the Additional
Disbursements Exhibit that was part of the closing documents at the closing on the sale of the
Tamn Lot 110 to the Tamns.
343. The National Bank of South Carolina charged a .5000% loan origination fee in the
amount of one thousand dollars four hundred and eighty-two dollars ($1,482) at the closing on
the Tamn Lot 110 on January 3, 2007, as shown on the U.S. Department of Housing and Urban
Development Settlement Statement used in conjunction with the closing on the Tamns Lot 110.
344. The National Bank of South Carolina received twenty-eight thousand seven
hundred and twenty-nine dollars and twenty-nine cents ($28,729.29) from Legasus in seller paid
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interest at the closing on the Tamns Lot 110 on January 3, 2006, which was approximately forty-
nine percent of the total finance charges of fifty-eight thousand nine hundred and twenty dollars
and fifty-seven cents ($58,920.57) that the National Bank of South Carolina was to receive over
the term of the loan.
345. The National Bank of South Carolina made its loan to Tamns, in part, because it
knew that receiving approximately forty-nine percent of the interest payments on a loan at
closing provided a level of payment certainty that was very unusual in the banking industry and
thus it was highly motivated to do loans that involved Legasus and purchasers of lots in River
Rock.
346. The National Bank of South Carolina made its loan to the Tamns, in part, because
it received a loan origination fee in the amount of one thousand dollars four hundred and eighty-
two dollars ($1,482) at the closing on the Tamn Lot 110, which when added to all of the many
loans that it was funding in the River Rock subdivision, provided an additional substantive
source of short term accounting income for the National Bank of South Carolina.
347. The Tamns paid two hundred and three hundred dollars ($300) to NBSC for an
appraisal of the Tamn Lot 110, as shown on the Settlement Statement that was used in
conjunction with the closing on the sale of the Tamn Lot 110.
348. Even though the Tamns paid for an appraisal of the Tamn Lot 110, they did not
receive a copy of this appraisal before his purchase of the Tamn Lot 110.
349. Upon information and belief, the National Bank of South Carolina did not provide
the Tamns with a copy of the appraisal conducted on the Tamn Lot 110 because the National
Bank of South Carolina knew that if the Tamns knew of the information in the appraisal, they
would not have purchased the Tamn Lot 110.
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350. The Tamns paid James S. Price & Associates, P.A. the amount of five hundred
dollars ($500) in attorney‟s fees to represent him at the closing on the Tamn Lot 110, sixty
dollars ($60) in courier fees, thirty-five dollars ($35) in courier-wire fees, and fifty dollars ($50)
in title documents retrieval fees as shown on the Settlement Statement that was used in
conjunction with the closing on the sale of the Tamn Lot 110.
351. In July of 2009, Travis Andrews of NBSC had an interstate telephone
communication from his office in South Carolina with Mark Tamn in North Carolina and during
that communication Mark Tamn discussed modifying the Tamns‟ original loan with NBSC.
During that interstate communication, Mark Tamn requested a copy of the appraisal that was to
be conducted in conjunction with the loan modification and Travis Andrews refused to provide
them with a copy of the appraisal. Travis Andrews also stated to Mark Tamn during that
conversation that the appraisal of the Tamn Lot 110 was done as a group with the other lots at
River Rock and that there was not an appraisal done individually on the Tamn Lot 110.
352. In July of 2009, NBSC and its employees, including Travis Andrews, stated via
interstate telephone communication to Mark Tamn that they would not proceed with a loan
modification of the loan on the Tamn Lot 110 unless the Tamns agreed to sign a Modification
and Amendment of Note and Deed of Trust agreement containing a provision releasing NBSC
from all liability associated with its loan to the Tamns.
353. In July of 2009, the Tamns contacted other lending institutions to determine
whether those lending institutions would re-finance their loan and there were no lending
institutions who were interested in providing financing on the Tamn Lot 110.
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354. The Tamns contacted other lending institutions to determine whether those
lending institutions would re-finance the loan on Tamn Lot 110 because they did not want to sign
any document releasing NBSC from liability for its action related to the loan on Tamn Lot 110.
355. After determining that no other lending institution would re-finance the Tamn Lot
110, the Tamns were left with the option of either paying the balloon payment on the loan, which
they could not afford to do, defaulting on the loan or signing the Modification and Amendment
of Note and Deed of Trust.
356. By August of 2009, the Tamn Lot 110 was virtually worthless and the Tamns had
no option other than signing the Modification and Amendment of Note and Deed of Trust, so
they signing this agreement under duress on August 3, 2009.
BANK PLAINTIFFS‟ ALLEGATIONS DEMONSTRATING THE PLAUSIBILITY OF THE
BANK‟S ACTIONS
357. In 2005-2007, the National Bank of South Carolina was attempting to take
advantage of the rapid increase in inflation adjusted real estate prices that occurred in the United
States from 2003 through 2006, which time period has been widely described as a real estate
boom (the “Real Estate Boom”), by rapidly increasing the number of loans that it made to
borrowers to increase its short term profitability through the collection of interest payments and
fees.
358. The National Bank of South Carolina reports loans as assets on its balance sheet
and thus used its rapid increase in lending volume as a mechanism to demonstrate on its balance
sheet that the National Bank of South Carolina‟s asset base and corresponding profitability were
rapidly increasing in 2005-2007.
359. The National Bank of South Carolina provided the Bank Plaintiffs with loans to
purchase lots in the River Rock subdivision even though it knew that these loans posed a high
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level of long term risk to the National Bank of South Carolina due to the fact these lots were
undeveloped and the River Rock subdivision did not have sufficient amenities or infrastructure
to support the amount of money that it was loaning on each of these lots because NBSC was
participating in a very competitive lending market and was attempting to maximize the short
term financial growth of the National Bank of South Carolina.
360. The National Bank of South Carolina provided each of the Bank Plaintiffs with a
loan to purchase lots in the River Rock subdivision even though it new that these loans posed a
high level of long term risk to the National Bank of South Carolina due to the fact that these lots
were undeveloped and the River Rock subdivision did not have sufficient amenities or
infrastructure to support the amount of money that it was loaning on these lots because NBSC
was attempting to grow rapidly by making loans that were of low quality and charging borrowers
a premium yield.
361. The National Bank of South Carolina instituted a compensation system that was
designed to incentivize loan officers like Michael Wolf to make high volume, high yield loans in
order to increase the National Bank of South Carolina‟s short term revenue and thus increase the
appearance of the National Bank of South Carolina‟s profitability on its financial statements.
362. The National Bank of South Carolina‟s compensation system caused Michael
Wolf and other loan officers and employees of NBSC to make false statements to borrowers,
including, but not limited to the Bank Plaintiffs, designed to mislead the Bank Plaintiffs and
other borrowers into obtaining loans and purchasing lots in the River Rock subdivision to
increase the loan officer‟s volume and employee compensation even though Michael Wolf and
other employees of the National Bank of South Carolina knew that the loans the National Bank
of South Carolina was offering the Bank Plaintiffs were very high risk loans.
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363. The National Bank of South Carolina‟s compensation system caused Michael
Wolf and other loan officers and employees to omit material facts and conceal information from
the Bank Plaintiffs for the purpose of misleading those borrowers into obtaining loans and
purchasing lots in the River Rock subdivision to increase the loan officer and employee‟s volume
and compensation even though Michael Wolf and other loan officers knew that the loans the
National Bank of South Carolina was offering the Bank Plaintiffs were very high risk loans.
364. The National Bank of South Carolina made its loans to the Bank Plaintiffs during
a time period when the real estate market was very active and characterized by rapid price
appreciation and thus the National Bank of South Carolina participated in the then common
industry practice of providing high risk, short term loans with very high leverage like its loans to
the Bank Plaintiffs to promote its rapid growth by lending at a high yield to borrowers who were
frequently unqualified to repay such loans.
365. The National Bank of South Carolina made short term, high yield loans that posed
substantial long term risk to the National Bank of South Carolina because it believed that rapid
real estate price appreciation would continue to occur in the short term and thus provide a market
that would yield a third party purchaser to buy the lots from the Bank Plaintiffs with funds from
a third party lender or market conditions would allow the re-finance of Bank Plaintiffs‟ lots with
funds from a third party lender.
366. Upon information and belief, the National Bank of South Carolina pursued a loan
strategy like the one that it employed with the Bank Plaintiffs that would allow it to grow rapidly
during and immediately after the Real Estate Boom, which would in turn enrich its loan officers,
as well as other employees, officers, and directors of the National Bank of South Carolina in the
short term.
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367. Upon information and belief, the National Bank of South Carolina implemented a
strategy of rapidly increasing the amount of loans that it provided during the Real Estate Boom
and reducing its loss reserves on such loans to maximize the appearance of the National Bank of
South Carolina‟s profits on its financial statements.
368. The National Bank of South Carolina‟s short term approach to lending resulted in
a culture where loan officers and underwriters failed to utilize proper underwriting standards
because they were compensated for loan production, not for denying loans for failure to meet
basic underwriting standards.
369. The National Bank of South Carolina‟s short term approach to lending that is
characterized by a collapse of underwriting standards was similar to the approach instituted by
many banks across the United States of America and similar to the lending approach that caused
a significant number of bank failures in the past three years.
370. During the time period from 2003-2007, only eleven banks in the United States
failed and were taken over by the Federal Deposit Insurance Corporation, demonstrating the fact
that banks were thriving during the Real Estate Boom and aggressively lending money to
increase profits during this time period. During the years of 2005 and 2006, zero banks failed in
the United States, as this was the peak of both the housing market and the lending market in the
United States.
371. In 2008, twenty-five banks (25) in the United States failed and were taken over by
the Federal Deposit Insurance Corporation, while one hundred and forty (140) banks failed and
were taken over by the Federal Deposit Insurance Corporation in 2009 in the United States.
372. The National Bank of South Carolina‟s aggressive lending strategy designed to
maximize short term profits during and immediately after the Real Estate Boom caused the long
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term failure of the National Bank of South Carolina that resulted in its merger with Synovus
Bank.
373. The National Bank of South Carolina selected Marilyn McCoy Woods to perform
appraisals on lots in the River Rock subdivision and pressured her to reach a certain amount for
the value of the lot in each appraisal as part of its strategy to do as many high yield mortgage
loans as possible with supporting appraisals without regard to credit quality because this strategy
maximized short term accounting income.
374. The National Bank of South Carolina‟s use of inflated appraisals caused higher
sales prices for lots in the River Rock subdivision which generated higher interest payments to
the National Bank of South Carolina on loans that it made in the River Rock subdivision and
higher fees to the National Bank of South Carolina than it would have yielded if the lots in the
River Rock subdivision would have been appraised at their true values.
375. The National Bank of South Carolina‟s use of inflated appraisals caused
artificially inflated sales prices for the lots in the River Rock subdivision and these artificially
inflated lot sales prices caused a corresponding increase in the lot release prices for the lots that
were secured by the development loans that the National Bank of South Carolina provided
Legasus to develop the River Rock subdivision. Due to the existence of other lenders providing
loans for the purchase of lots at the River Rock subdivision, these higher lot release prices
caused the National Bank of South Carolina to receive more funds from third party lenders who
financed the purchase of lots at the River Rock subdivision than it would have otherwise
received, which allowed its development loans to Legasus to be paid off more quickly.
376. During the Real Estate Boom and its immediate aftermath, loan loss reserves were
at the lowest levels since 1985 at American lending institutions due to the pattern and practice of
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attempting to maximize short term income. Upon information and belief, National Bank of
South Carolina similarly failed to maintain sufficient loan loss reserves during the period of time
from 2005-2009.
377. During the time period beginning in 2008, the National Bank of South Carolina
began offering loan extensions and/or modifications to Bank Plaintiffs and other Plaintiffs at low
interest rates even though it knew that these loans were severely under-collateralized because the
value of the subject lots was substantially less than the loan amount.
378. Upon information and belief, NBSC offered the Bank Plaintiffs and others loan
extension and modifications because it chose to attempt to continue to realize short term
accounting income on these loans, rather than taking losses on loans that it knew were severely
impaired due to the value of the underlying real estate.
379. Upon information and belief, NBSC offered the Bank Plaintiffs and others loan
extension and modifications as part of its continued strategy to attempt to show gains in short
term income, while pushing known loan losses off until some future uncertain date.
380. The National Bank of South Carolina knew or reasonably should have known that
loaning ninety percent of the putative value of undeveloped lots in the River Rock subdivision
was not a sustainable business practice and would cause the Bank Plaintiffs to own lots that were
not capable of being re-financed except through the National Bank of South Carolina at the end
of the loan term thereby damaging the Bank Plaintiffs.
381. The National Bank of South Carolina used various tactics to induce the Bank
Plaintiffs to purchase lots in the River Rock subdivision by using high pressure and rigged
appraisals in violation of several laws designed to protect consumers like Bank Plaintiffs.
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382. The Bank is legally responsible for all of the acts and omissions of the National
Bank of South Carolina as alleged in the Complaint as the successor in interest to the assets and
liabilities of the National Bank of South Carolina.
383. The Bank is legally responsible for the acts and omissions of its employees
Michael Wolf, Ashia Woodruff, and other employees committed during the course and scope of
their employment.
384. The National Bank of South Carolina was working closely with the Legasus
Defendants, the agents of Legasus and entities related to Legasus in selling lots in the River
Rock subdivision.
385. The Bank is a “Developer” as defined in 15 U.S.C. § 1701(5) because it engaged
directly or indirectly in the sale and offered to sell a lot in a subdivision, as well as participated in
the advertising of lots for sale in the subdivision known as River Rock.
386. River Rock is a "Subdivision" as that term is defined by the Interstate Land Sales
Full Disclosure Act (“ILSA”).
387. The sale of the lots to the Plaintiffs was not exempt from ILSA.
388. The National Bank of South Carolina had extensive involvement in the
development, marketing and sale of lots in the River Rock subdivision, by among other things,
participating in sales events with Legasus to offer the sale of lots in the River Rock subdivision
and holding itself out to be a significant financial backer of the River Rock subdivision.
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COUNT 1: VIOLATION OF 15 U.S.C § 1703(a)(2)
(All Defendants)
389. The previous allegations are incorporated herein.
390. As set forth more fully above, the Defendants, as co-developers of the
subdivision, with respect to the sale or offer to sell a lot or lots not exempt under ILSA,
employed a device, scheme, or artifice to defraud; obtained money or property by means of an
untrue statement of a material fact, or an omission to state a material fact necessary in order to
make the statements made (in light of the circumstances in which they were made and within the
context of the overall offer and sale) misleading, with respect to any information pertinent to the
lot or subdivision; engaged in a transaction, practice, or course of business which operated or
would operate as a fraud or deceit upon a purchaser; and represented that roads, sewers, water,
gas, or electric service, or recreational amenities would be provided or completed by the
developer without stipulating in the contract of sale that such services or amenities would be
provided or completed.
391. As set forth more fully above, Defendants, as co-developers of the subdivision,
made use of instrumentalities of interstate commerce including telephone communications,
mailing, electronic mail, and internet communications to the Plaintiffs and others in furtherance
of the scheme to defraud.
392. Defendants' violations of ILSA caused damages to Plaintiffs.
COUNT 2: VIOLATION OF THE NORTH CAROLINA DECEPTIVE TRADE
PRACTICES ACT
(The Legasus Defendants)
393. The previous allegations are incorporated herein.
394. The Legasus Defendants participated in unfair or deceptive acts or practices in a
scheme to sell lots at the subdivision, by, among other things:
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(a) falsely representing to Plaintiffs that roads, utilities, and various amenities would
be constructed while they knew or should have known they could not do so;
(b) making false representations related to the roads, utilities, amenities, development
timeline and other information related to River Rock in various advertising and
marketing materials, as well as other publications, including, but not limited to the
2007 Legasus Report, August 2008 Progress Summary Report, the Sneak Peek,
and the 2009 Legasus Update;
(c) falsely representing to Plaintiffs that roads, utilities, and various amenities would
be constructed while the funds available to construct them were being diverted by
Defendants;
(d) using deceptive and false advertising; and
(e) breaching their fiduciary duty to Plaintiffs to disclose all material facts regarding
the transactions, including the facts identified above, the diversion of funds that
were supposed to be used for the construction of infrastructure and other promised
improvements in River Rock, and Legasus‟ resulting financial inability to
complete infrastructure and other promised improvements.
395. The sales of the lots at the subdivision were in or affecting commerce.
396. As a direct and proximate result of Legasus Defendants' actions, the Plaintiffs
were damaged in an amount to be determined at trial, with their damages to be trebled pursuant
to N.C. General Statute 75-16.
COUNT 3: VIOLATION OF THE NORTH CAROLINA
DECEPTIVE TRADE PRACTICES ACT
(The Bank)
397. The previous allegations are incorporated herein.
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398. The Bank participated in unfair or deceptive acts or practices in a scheme to sell
lots at River Rock as set forth more fully above, by, among other things:
(a) the use of inflated and exaggerated appraisals to artificially inflate lot purchase
prices to facilitate the repayment of development loans, to maximize fees and to maximize the
transfer of funds to the Bank at the closing on lots in River Rock, all in conjunction with selling
lots in River Rock;
(b) participating in sales events with Legasus to sell lots in the River Rock
subdivision;
(c) churning the Bank Plaintiffs through the lending process for the purpose of
maximizing fees, commissions and interest paid by the Bank Plaintiffs;
(d) engaging in improper loan origination, underwriting and closing procedures;
(e) structuring an agreement with Legasus to transfer ten percent of the proceeds
from the sale of each lot to the Bank Plaintiffs to itself at the closing on those lots without
disclosing the terms of that agreement to the Bank Plaintiffs;
(f) directing Bank Plaintiffs to use James S. Price & Associates, P.A. for the closing
on his purchase of the Lot, even though the Bank knew that James S. Price was representing
Legasus at the closing, selling lots in the River Rock subdivision and receiving sales
commissions on lots in the River Rock subdivision;
(g) engaging in a scheme to artificially inflate the price of lots at the River Rock
subdivision;
(h) inducing the Bank Plaintiffs to enter into loan agreements and purchase lots in the
River Rock subdivision because the Bank had an agreement with Legasus to transfer ten percent
of the purchase price of each lot the Bank financing to the Bank at closing;
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(i) inducing the Bank Plaintiffs to enter into loan agreements and purchase lots in the
River Rock subdivision in order to receive a loan origination fee;
(j) failing to disclose the information contained in appraisals conducted by Marilyn
McCoy Woods to Bank Plaintiffs and the circumstances surrounding Marilyn McCoy Woods‟
appraisal of lots in River Rock to induce the Bank Plaintiffs to purchase lots in River Rock and
enter into loan agreements with the Bank;
(k) making false statements concerning lots in the River Rock subdivision and the
development of the River Rock subdivision to the Bank Plaintiffs; and
(l) otherwise engaging in unfair, unethical, unscrupulous, immoral, and substantially
injurious conduct as alleged herein.
399. The sale of the lots at the subdivision was in or affecting commerce.
400. As a direct and proximate result of the Bank‟s actions, the Plaintiffs were
damaged in an amount to be determined at trial, with their damages to be trebled pursuant to
N.C. General Statute 75-16.
COUNT 4: VIOLATION OF THE MORTGAGE LENDING ACT
N.C. GENERAL STATUTE §§ 53-243.11(1) and (8)
(The Bank)
401. The previous allegations are incorporated.
402. N.C. General Statute 53.243.11(1) makes it unlawful to misrepresent or conceal
material facts or make false promises likely to influence, persuade or induce an application for a
mortgage loan, or to pursue a course of misrepresentation through agents or otherwise.
403. The Bank has misrepresented and/or concealed material facts relating to the loan
transaction for the purchase of the Bank Plaintiffs‟ lots in the River Rock subdivision, by, among
other things, misrepresenting and/or concealing material facts relating to the nature and condition
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of the infrastructure and amenities in the River Rock subdivision, misrepresenting and/or
concealing material facts relating to the appraisals on those lots, misrepresenting and/or
concealing material facts relating to the closing on Bank Plaintiffs‟ purchases of their lots in the
River Rock subdivision, misrepresenting and/or concealing material facts relating to the
development of the River Rock subdivision and the Bank‟s financing of the development of the
River Rock subdivision, and misrepresenting and/or concealing material facts relating to the
value of the lots in the River Rock subdivision and the River Rock subdivision to influence,
persuade, or induce each of the Bank Plaintiffs, each as an applicant for a loan, to pursue a
course based on those misrepresentations and/or concealed material facts in violation of N.C.
General Statute 53-243.11(1).
404. N.C. General Statute 53.243.11(8) makes it unlawful to engage in any transaction,
practice, or course of business that is not in good faith or fair dealing or that constitutes a fraud
upon any person, in connection with the brokering or making of, or purchase or sale of, any
mortgage loan.
405. By using appraisals that it knew or should have known were materially false,
concealing material facts related to the appraisals on the Bank Plaintiffs‟ lots, participating in
sales presentations with Legasus for lots at the River Rock subdivision, directing Bank Plaintiffs
to use James S. Price & Associates, P.A. to conduct the closing on each Bank Plaintiff‟s
purchase of each Bank Plaintiff‟s lot and making false statements to each of the Bank Plaintiffs
in connection with the making of a mortgage loan, the Bank has engaged in practices, or courses
of business that are not in good faith or fair dealing, or that constitute fraud upon each of the
Bank Plaintiffs in connection with the brokering, making, purchase or sale of mortgage loans in
violation of N.C. General Statute 53.243.11(8).
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406. The Bank‟s violation of N.C. Gen. Stat. § 53-243.11(1) and N.C. Gen. Stat. 53-
243.11(8) proximately and legally caused each of the Bank Plaintiffs to sustain damages in an
amount to be determined at trial.
COUNT 5: CONSTRUCTIVE FRAUD
The Legasus Defendants
407. The previous allegations are incorporated.
408. As Legasus was approaching insolvency, the Legasus Defendants owed the
Plaintiffs a fiduciary duty.
409. As noted above, Legasus was not prosecuting its business in good faith and it had
no reasonable prospect or expectation of doing so given the continuing defalcations and other
obstacles to development described herein.
410. The Legasus Defendants breached their fiduciary duty, causing Plaintiffs
damages.
411. This breach of duty constituted constructive fraud.
COUNT 6: NEGLIGENT MISREPRESENTATION
The Legasus Defendants
412. The previous allegations are incorporated.
413. Legasus, at the direction of Defendants, Pitts, Morlok and Corliss, supplied false
information to the Plaintiffs during the course of their business.
414. Legasus, at the direction of Defendant, Pitts, Morlok and Corliss, supplied this
false information for the guidance of the Plaintiffs in the purchase of the lots.
415. The Plaintiffs justifiably relied to their detriment upon the false information
provided by Legasus, at the direction of Defendants, Pitts, Morlok and Corliss, in deciding to
purchase the lots.
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416. The Legasus Defendants failed to exercise reasonable care or competence in
communicating information concerning the Plaintiff‟s purchase of the lots, in an area that
involved subject matter requiring expertise and/or investigation beyond the scope of the
Plaintiffs' knowledge, opportunity, and capacity to discover in the exercise of reasonable
diligence, and involving particular areas of expertise of the Legasus Defendants. The Legasus
Defendants were obligated to disclose the facts stated above and were in the business of
disclosing such information to persons in the position of the Plaintiffs.
417. The Legasus Defendants undertook a duty to the Plaintiffs when, in the course of
their business, they supplied or caused to be supplied false information to the Plaintiffs for
the guidance of the Plaintiffs in a business transaction.
418. The Legasus Defendants owed a duty to the Plaintiffs and breached that duty by,
as alleged in more detail above, and by, among other things, the following:
(a) falsely representing to Plaintiffs that roads, utilities, and various amenities would
be constructed while they knew or should have known they could not do so;
(b) making false representations to the Plaintiffs related to the roads, utilities,
amenities, development timeline and other information related to River Rock in
various advertising and marketing materials, as well as other publications,
including, but not limited to the 2007 Legasus Report, August 2008 Progress
Summary Report, the Sneak Peek, the 2009 Legasus Update; and
(c) falsely representing to Plaintiffs that roads, utilities, and various amenities would
be constructed while the funds available to construct them were being diverted by
Legasus Defendants;
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419. The Legasus Defendants therefore owed a duty to the Plaintiffs and breached that
duty.
420. Legasus‟ negligent misrepresentations, made or caused to be made at the direction
of Defendants, Pitts, Morlok and Corliss, proximately and legally caused and continue to
cause the Plaintiffs damages in an amount to be determined at trial.
421. For the reasons stated above, Defendants, Pitts, Morlok and Corliss, are liable for
the acts and omissions of Legasus.
COUNT 7: NEGLIGENT MISREPRESENTATION
The Bank
422. The previous allegations are incorporated herein.
423. The Bank, through its employee Michael Wolf, supplied false information to the
Bank Plaintiffs and omitted material facts from statements to the Bank Plaintiffs during the
course of its business in the process of a loan transaction to which the Bank has a pecuniary
interest.
424. The Bank, through its employee Michael Wolf, supplied this false information
and omitted material facts for the guidance of the purchase of each of the Bank Plaintiff‟s lots in
the River Rock subdivision, which was a business transaction.
425. Each of the Bank Plaintiffs justifiably relied to his or her detriment upon the false
information provided by the Bank‟s employee, Michael Wolf, in deciding to purchase a lot in the
River Rock subdivision and/or deciding to enter into a loan modification or extension with the
Bank.
426. The Bank and its employee Michael Wolf failed to exercise reasonable care or
competence in communicating information concerning the present and future value of each of
the Bank Plaintiff‟s lots and the River Rock subdivision to each of the Bank Plaintiffs, as well as
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the nature and circumstances of the appraisals of Marilyn McCoy Woods and the nature and
circumstances of James S. Price, Esq.‟s representation of each of the Bank Plaintiffs at the
closings on their lots, in an area which involved subject matter which required expertise and
investigation beyond the scope of each of the Bank Plaintiff‟s knowledge, opportunity and
capacity in the exercise of reasonable diligence and involving subject matter within particular
areas of expertise by the Bank, which was obligated to disclose and in the business of disclosing
such information to persons in the position of the Bank Plaintiffs.
427. The Bank undertook a duty to each of the Bank Plaintiffs when the Bank, in the
course of its business, supplied false information to each of the Bank Plaintiffs for the guidance
of the Bank Plaintiffs in a business transaction.
428. The Bank owed a duty to the Bank Plaintiffs and breached that duty by as alleged
in more detail above, and by, among other things, the following:
(a) concealing the material facts contained in the appraisals of the lots purchased by
the Bank Plaintiffs;
(b) misrepresenting and/or concealing material facts relating to Marilyn McCoy
Woods‟ role in appraising lots in the River Rock subdivision for the Bank;
(c) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s
representation of the Bank Plaintiffs at the closing on the purchase of each of the Bank
Plaintiff‟s lots;
(d) misrepresenting and/or concealing material facts relating to the nature and quality
of each of the Bank Plaintiff‟s investment in each of the Bank Plaintiff‟s lots and the River Rock
subdivision;
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(e) misrepresenting to Michael Troiano that regardless of whether the Troianos
decided to sell the Troiano Lot or build on the Troiano Lot themselves, the Troianos would be
able to sell the Troiano for a profit because they were getting in on the ground floor of the deal;
(f) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;
(g) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two
years for a profit;
(h) misrepresenting to Donald Hill that he had closed many lots in the last six months
in the River Rock subdivision and that reselling the lot that they would purchase in River Rock
should be easy;
(i) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a
great investment and that Legasus was a solid developer;
(j) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the
River Rock subdivision; and
(k) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers
Lot 89 were both very sound investments;
429. The Bank is liable for the actions of Michael Wolf because the Bank expressly or
impliedly authorized the actions of Michael Wolf.
430. The Bank is liable for the misrepresentations and omissions of Michael Wolf
because Michael Wolf‟s misrepresentations and omissions were committed within the course and
scope of his employment and in furtherance of the Bank‟s business.
431. The Bank is liable for the misrepresentations and omissions of Michael Wolf
because Michael Wolf‟s actions were ratified by the Bank.
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432. The Bank‟s negligent misrepresentations proximately and legally caused and
continue to cause the Bank Plaintiffs damages in an amount to be determined at trial.
COUNT 8: FRAUD
The Bank
433. The previous allegations are incorporated herein.
434. The Bank, through its employee Michael Wolf, intentionally and falsely
represented and concealed material facts relative to the purchase of each of the Bank Plaintiff‟s
lots, as set forth more fully above, specifically:
(a) misrepresenting to Michael Troiano that regardless of whether the Troianos
decided to sell the Troiano Lot or build on the Troiano Lot themselves, the Troianos would be
able to sell the Troiano for a profit because they were getting in on the ground floor of the deal;
(b) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;
(c) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two
years for a profit;
(d) misrepresenting to Donald Hill that he had closed many lots in the last six months
in the River Rock subdivision and that reselling the lot that they would purchase in River Rock
should be easy;
(e) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a
great investment and that Legasus was a solid developer;
(f) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the
River Rock subdivision;
(g) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers
Lot 89 were both very sound investments;
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(h) concealing material facts contained in the appraisals of the lots of the Bank
Plaintiffs;
(i) misrepresenting and/or concealing material facts relating to Marilyn McCoy
Woods‟ role in appraising lots in the River Rock subdivision for the Bank;
(j) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s
representation of the Bank Plaintiffs at their closings on the purchases of lots in the River Rock
subdivision; and
(k) misrepresenting and/or concealing material facts relating to the nature and quality
of Bank Plaintiffs‟ investments in their lots in the River Rock subdivision.
435. The Bank, through its employee Michael Wolf, reasonably calculated that the
misrepresentations and/or omissions listed in this Complaint, and other misrepresentations and/or
omissions, would deceive the Bank Plaintiffs. Had each of the Bank Plaintiffs been aware of
these misrepresentations and/or omissions, none of the Bank Plaintiffs would have purchased his
or her lot in the River Rock subdivision, nor would the Bank Plaintiffs have entered into any loan
modifications or extensions with the Bank.
436. The Bank, through its employee Michael Wolf, made the aforementioned
misrepresentations and/or omissions of material fact with the intent of deceiving the Bank
Plaintiffs.
437. Each of the Bank Plaintiffs was deceived by the misrepresentations and omissions
set forth in this Complaint.
438. Each of the Bank Plaintiffs could not discover the truth about the
misrepresentations and omissions through the exercise of reasonable diligence.
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439. Each of the Bank Plaintiffs was induced to forego additional investigation of his
or her lot purchase by the Bank‟s misrepresentations and high pressure sales tactics.
440. The Bank is liable for the actions of Michael Wolf because the Bank expressly or
impliedly authorized the actions of Michael Wolf.
441. The Bank is liable for the misrepresentations of Michael Wolf because Michael
Wolf‟s misrepresentations were committed within the scope of his employment and in
furtherance of the Bank‟s business.
442. The Bank is liable for the misrepresentations of Michael Wolf because Michael
Wolf‟s misrepresentations were ratified by the Bank.
443. The Bank proximately and legally caused the Bank Plaintiffs harm and damages
in an amount to be determined at trial through its intentional misrepresentations and/or omissions
of material fact upon which it intended that each of the Bank Plaintiffs rely, who did in fact
reasonably rely on said misrepresentations and/or omissions to each of the Bank Plaintiff‟s
detriment, in an amount to be proved at trial.
COUNT 10: NEGLIGENT MISREPRESENTATION
Michael Wolf
444. The previous allegations are incorporated herein.
445. Michael Wolf made false representations or concealed material facts that he had a
duty to disclose relative to the purchase of lots in the River Rock subdivision by the Bank
Plaintiffs.
446. Michael Wolf supplied this false information and omitted material facts for the
guidance of the purchase of each of the Bank Plaintiff‟s lots in the River Rock subdivision,
which was a business transaction.
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447. Each of the Bank Plaintiffs justifiably relied to his or her detriment upon the false
information provided by Michael Wolf, in deciding to purchase a lot in the River Rock
subdivision and/or deciding to enter into a loan modification or extension with the Bank.
448. Michael Wolf failed to exercise reasonable care or competence in communicating
information concerning the present and future value of each of the Bank Plaintiff‟s lots and the
River Rock subdivision to each of the Bank Plaintiffs, as well as the nature and circumstances of
the appraisals of Marilyn McCoy Woods and the nature and circumstances of James S. Price,
Esq.‟s representation of each of the Bank Plaintiffs at the closings on the purchases of their lots,
in an area which involved subject matter which required expertise and investigation beyond the
scope of each of the Bank Plaintiff‟s knowledge, opportunity and capacity in the exercise of
reasonable diligence and involving subject matter within particular areas of expertise of Michael
Wolf, which he was obligated to disclose and in the business of disclosing such information to
persons in the position of the Bank Plaintiffs.
449. Michael Wolf undertook a duty to each of the Bank Plaintiffs when Michael
Wolf, in the course of his business, supplied false information to each of the Bank Plaintiffs for
the guidance of the Bank Plaintiffs in a business transaction.
450. Michael Wolf undertook this duty to each of the Bank Plaintiffs when he provided
investment advice to each of the Bank Plaintiffs.
451. Michael Wolf owed a duty to the Bank Plaintiffs and breached that duty by as
alleged in more detail above, and by, among other things, the following:
(a) concealing the material facts contained in the appraisals of the lots purchased by
the Bank Plaintiffs;
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(b) misrepresenting and/or concealing material facts relating to Marilyn McCoy
Woods‟ role in appraising lots in the River Rock subdivision for the Bank;
(c) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s
representation of the Bank Plaintiffs at the closings on the purchases of each of the Bank
Plaintiff‟s lots;
(d) misrepresenting and/or concealing material facts relating to the nature and quality
of each of the Bank Plaintiff‟s investment in each of the Bank Plaintiff‟s lots and the River Rock
subdivision;
(e) misrepresenting to Michael Troiano that regardless of whether the Troianos
decided to sell the Troiano Lot or build on the Troiano Lot themselves, the Troianos would be
able to sell the Troiano for a profit because they were getting in on the ground floor of the deal;
(f) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;
(g) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two
years for a profit;
(h) misrepresenting to Donald Hill that he had closed many lots in the last six months
in the River Rock subdivision and that reselling the lot that they would purchase in River Rock
should be easy;
(i) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a
great investment and that Legasus was a solid developer;
(j) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the
River Rock subdivision; and
(k) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers
Lot 89 were both very sound investments;
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452. The false representations made by Michael Wolf directly relate to the underlying
purchase and sale of lots in the River Rock subdivision.
453. Michael Wolf made false representations and/or omitted material facts with the
intent to deceive each of the Bank Plaintiffs
454. Each of the Bank Plaintiffs reasonably relied on these representations and
omissions of material fact and acted upon them by borrowing the money to purchase and
entering into the agreement to purchase each of their lots or re-finance their lots in the River
Rock subdivision.
455. Michael Wolf proximately and legally caused each of the Bank Plaintiffs harm
and damages in an amount to be determined at trial through his negligent misrepresentations
and/or omissions of material fact upon which he intended that each of the Bank Plaintiffs rely,
who did in fact reasonably rely on said misrepresentations and/or omissions of material fact to
each of the Bank Plaintiff‟s detriment, in an amount to be proved at trial.
COUNT 11: FRAUD
Michael Wolf
456. The previous allegations are incorporated herein.
457. Michael Wolf, intentionally and falsely represented and concealed material facts
relative to the purchase of each of the Bank Plaintiff‟s lots, as set forth more fully above, by,
among other things, the following:
(a) misrepresenting to Michael Troiano that regardless of whether the Troianos
decided to sell the Troiano Lot or build on the Troiano Lot themselves, the Troianos would be
able to sell the Troiano for a profit because they were getting in on the ground floor of the deal;
(b) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;
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(c) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two
years for a profit;
(d) misrepresenting to Donald Hill that he had closed many lots in the last six months
in the River Rock subdivision and reselling the lot that they would purchase in River Rock
should be easy;
(e) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a
great investment and that Legasus was a solid developer;
(f) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the
River Rock subdivision;
(g) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers
Lot 89 were both very sound investments;
(h) concealing material facts contained in the appraisals of the lots of the Bank
Plaintiffs;
(i) misrepresenting and/or concealing material facts relating to Marilyn McCoy
Woods‟ role in appraising lots in the River Rock subdivision for the Bank;
(g) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s
representation of the Bank Plaintiffs at their closings on the purchases of lots in the River Rock
subdivision; and
(h) misrepresenting and/or concealing material facts relating to the nature and quality
of Bank Plaintiffs‟ investments in their lots in the River Rock subdivision.
458. Michael Wolf reasonably calculated that the misrepresentations and/or omissions
listed in this Complaint, and other misrepresentations and/or omissions, would deceive the Bank
Plaintiffs because had each of the Bank Plaintiffs been aware of these misrepresentations and/or
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omissions, there is no question that each of the Bank Plaintiffs would not have purchased his or
her lot in the River Rock subdivision.
459. Michael Wolf made the aforementioned misrepresentations and/or omissions of
material fact with the intent of deceiving each of the Bank Plaintiffs.
460. Each of the Bank Plaintiffs was deceived by the misrepresentations and omissions
set forth in this Complaint.
461. Each of the Bank Plaintiffs could not discover the truth about the
misrepresentations and omissions through the exercise of reasonable diligence.
462. Each of the Bank Plaintiffs was induced to forego additional investigation of his
or lot purchase by Michael Wolf‟s misrepresentations and high pressure sales tactics.
463. Michael Wolf proximately and legally caused the Bank Plaintiffs harm and
damages in an amount to be determined at trial through his misrepresentations and/or omissions
of material fact upon which he intended that each of the Bank Plaintiffs rely, who did in fact
reasonably rely on said misrepresentations and/or omissions to each of the Bank Plaintiff‟s
detriment, in an amount to be proved at trial.
COUNT 12: NEGLIGENT MISREPRESENTATION
Marilyn McCoy Woods
464. The previous allegations are incorporated herein.
465. Marilyn McCoy Woods made false representations and concealed material facts
in the appraisals that she conducted of lots in the River Rock subdivision for the Woods
Appraisal Plaintiffs.
466. Marilyn McCoy Woods supplied this false information and concealed material
facts for the guidance of the purchase of each of the Woods Appraisal Plaintiffs‟ lots in the River
Rock subdivision, which was a business transaction.
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467. Each of the Woods Appraisal Plaintiff justifiably relied to his or her detriment
upon the false information provided by Marilyn McCoy Woods, in deciding to purchase a lot in
the River Rock subdivision and/or deciding to enter into a loan modification or extension with
the Bank.
468. Marilyn McCoy Woods failed to exercise reasonable care or competence in
communicating information concerning the value of each of the Woods Appraisal Plaintiffs‟ lots
in the River Rock subdivision to each of the Woods Appraisal Plaintiffs, as well as the other
information that she provided in these appraisals, in an area which involved subject matter which
required expertise and investigation beyond the scope of each of the Woods Appraisal Plaintiffs‟
knowledge, opportunity and capacity in the exercise of reasonable diligence and involving
subject matter within particular areas of expertise of Marilyn McCoy Woods. She was obligated
to disclose and was in the business of disclosing such information to persons in the position of
the Plaintiffs and breached her duties to do so.
469. Marilyn McCoy Woods undertook a duty to each of the Woods Appraisal
Plaintiffs when Marilyn McCoy Woods held herself out to be a Certified Residential Appraiser
and in the course of her business, supplied false information to each of the Woods Appraisal
Plaintiffs for the guidance of the Woods Appraisal Plaintiffs in a business transaction.
470. Marilyn McCoy Woods owed a duty to the Woods Appraisal Plaintiffs and
breached that duty, as alleged in more detail above, and by, among other things, the following:
(a) failing to provide information in her appraisals that acknowledged the significant
financial incentives that were being offered by Legasus and its agents to lot purchasers in River
Rock;
(b) misrepresenting the values of comparables used in her appraisals;
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(c) misrepresenting that the listed purchase price for lots in River Rock was the actual
purchase price, when Marilyn McCoy Woods knew that Legasus was returning ten percent of the
purchase price to the buyer and/or transferring that ten percent down payment to financial
institutions at closing to be applied to the loans on those lots;
(d) concealing known market risks in her appraisals;
(e) misrepresenting the value of comparable lots used in the appraisal of the lot
owned by Christian Barsanti;
(f) misrepresenting the value of comparable lots used in the appraisal of the lot
owned by Andrew Sweeney;
(g) misrepresenting the value of comparable lots used in the appraisal of the lot
owned by Gregory Keary;
(h) misrepresenting that there were, “no known risk factors to the appraiser that
adversely affect value or marketability within the defined Highland Cashiers market area” in
each of her appraisals, even though she knew that the lack of amenities in the River Rock
subdivision and failure of Legasus to provide utilities, amenities and infrastructure to the lots in
River Rock rendered this statement materially false; and
(i) misrepresenting the value of the Barsanti Lot in the 2008 Barsanti Lot Appraisal.
471. The false representations made by Marilyn McCoy Woods directly relate to the
underlying purchase and sale of lots in the River Rock subdivision.
472. Marilyn Woods reasonably calculated that the misrepresentations and/or
omissions listed in this Complaint, and other misrepresentations and/or omissions, would deceive
the Woods Appraisal Plaintiffs because had each of the Woods Appraisal Plaintiffs been aware
of these misrepresentations and/or omissions, there is no question that each of the Woods
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Appraisal Plaintiffs would not have purchased his or her lot in the River Rock subdivision, nor
would the Woods Appraisal Plaintiffs have entered into loan agreements and/or loan
modifications with the Bank.
473. Marilyn McCoy Woods made the aforementioned misrepresentations and/or
omissions of material fact with the intent of deceiving each of the Woods Appraisal Plaintiffs.
474. Each of the Woods Appraisal Plaintiffs was deceived by the misrepresentations
and omissions set forth in this Complaint.
475. Each of the Woods Appraisal Plaintiffs could not discover the truth about the
misrepresentations and omissions through the exercise of reasonable diligence.
476. Each of the Woods Appraisal Plaintiffs was induced to forego additional
investigation of his or lot purchase by Marilyn McCoy Woods‟ misrepresentations.
477. Marilyn McCoy Woods proximately and legally caused the Woods Appraisal
Plaintiffs harm and damages in an amount to be determined at trial through misrepresentations
and/or omissions of material fact upon which she intended that each of the Woods Appraisal
Plaintiffs rely, who did in fact reasonably rely on said misrepresentations and/or omissions to
each of the Woods Appraisal Plaintiff‟s detriment, in an amount to be proved at trial.
COUNT 13: PROFESSIONAL NEGLIGENCE
Marilyn McCoy Woods
478. The previous allegations are incorporated herein.
479. Marilyn McCoy Woods, when holding herself out as a Certified Residential
Appraiser, had a duty to the Woods Appraisal Plaintiffs to provide an appraisal that conformed in
every way with the standards of her practice and as set forth in the Uniform Standards of
Professional Appraisal Practice.
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480. Uniform Standards of Professional Practice Rule 1-1(b) states that an appraiser
cannot commit a substantial error of omission that significantly affects an appraisal.
481. Marilyn McCoy Woods violated Uniform Standards of Professional Practice Rule
1-1(b), by, among other things, failing to provide information in each appraisal regarding the
significant financing incentives provided by Legasus to lot purchasers and failing to provide
information in each appraisal concerning the risks inherent in buying raw land.
482. Marilyn McCoy Woods violated Uniform Standards of Professional Practice Rule
1-1(b), by, among other things, failing to provide a development timeline in each appraisal and
failing to provide information stating that the value placed on the property depended upon
infrastructure, amenities and utilities being provided in River Rock.
483. Uniform Standards of Professional Practice Rule 1-1(b) provides that appraisers
cannot render appraisal services in a careless or negligent manner, such as by making a series of
errors that, although individually might not significantly affect the results of an appraisal, in the
aggregate affects the credibility of those results.
484. Marilyn McCoy Woods breached her duty to the Woods Appraisal Plaintiffs by
negligently providing appraisals on property being purchased by the Woods Appraisal Plaintiffs
Without limitation, her acts and omissions included the following:
(a) stating in each of her appraisals that there were, “no known factors to the
appraiser that adversely affect value or marketability within the defined Highland Cashiers
mountain resort market area with excellent marketability and appeal,” even though Marilyn
McCoy Woods knew or should have known that the lack of infrastructure at the River Rock
subdivision adversely affected both the value and the marketability of the Lot;
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(b) stating in her appraisals that the adequacy of utilities was average in River Rock,
even though there were no utilities to serve any of the lots in River Rock;
(c) failing to indicate in any of her appraisals whether she had actually been to the
lots that she was appraising;
(d) assigning different values to lots that she was appraising on the same date, even
though she appraised those lots by using the same comparable lots;
(e) assigning different values to the same comparable lots on the same date and using
those different values on the same lots for different appraisals;
(f) failing to indicate in her appraisals that the listed purchase price for lots in River
Rock was not the actual purchase price, because Legasus was returning ten percent of the
purchase price to the buyer and/or transferring that ten percent down payment to financial
institutions at closing to be applied to the loans on those lots.
485. Marilyn McCoy Woods breached her duty to the Woods Appraisal Plaintiffs and
proximately caused the Woods Appraisal Plaintiffs damages in an amount to be determined at
trial.
COUNT 14: BREACH OF CONTRACT
Legasus
486. The previous allegations are incorporated herein.
487. Each Plaintiff entered into a Reservation and Convertible Contract for Sale of a
lot with Defendant Legasus, which was a valid contract supported by valid consideration.
488. Defendant Legasus breached that contract, by, among other things, failing to
provide the roads, other infrastructure, and amenities as promised in the Reservation and
Convertible Contract for Sale.
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489. As a direct and proximate result of the breaches of contract, Plaintiffs have been
damaged in an amount to be proved at trial.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs request the following relief:
(a) That Plaintiffs be awarded compensatory damages in an amount to be determined
at trial;
(b) That Plaintiffs be awarded treble damages under N.C. Gen. Stat. 75-16;
(c) That this Court award Plaintiffs pre-judgment and post-judgment interest as
provided by law;
(d) That this Court pierce the corporate veil of Legasus and hold its agents and
members liable for the acts and omissions of Legasus;
(e) That this Court hold Defendants Corliss, Morlok and Pitts liable for the actions of
Legasus; and
(f) That this Court award Plaintiffs their attorneys' fees and costs of this action.
JURY DEMAND
Trial by jury is demanded as to all issues so triable.
This the 4th
day of February, 2011.
GERALD ABATEMARCO, BEN
ATKINSON, ANTHONY BARBIERI,
CHRISTIAN BARSANTI, SUSAN
BARSANTI, THOMAS BERITELLI,
SHARON BERITELLI, EDGAR BOWLIN,
PEGGY BOWLIN, EDGAR BOWLIN,
PAUL BOYDELL, TIFFANY BOYDELL,
BORIS BRAND, MARC BROWNER,
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106
ROBERT BURT, DIANE CARROLL,
GREGORY CARTER, JOANNE CARTER,
JANAKI CHANDRAMOULI,
SRINIVASAN CHANDRAMOULI,
JEFFREY CHAUS, JO ANN CHAUS,
FREDERIC CLARK, CHRIS CRUZ,
CYNTHIA CRUZ, CONSTANCE FONG,
DAVID FONG, ANNA GIABOURANI,
DAVID GRASSE, SHELBY GRASSE,
CATHY GRUSSER, JOSEPH GRUSSER,
EDITH HANSEN, JACK HERZBERG,
KRISTINE HERZBERG, DONALD HILL,
TRICIA HILL, DANIEL HINKSON,
JULIAN HUTCHINS, LANE HUTCHINS,
MARK IPPOLITO, MELISSA JADICK,
RICHARD JADICK, ALISON JURGENS,
DAN JURGENS, JAMES KARP,
VIVIEN KARP, DENISE KEARY,
GREGORY KEARY, ALAN KESSLER,
SANDA KESSLER, SUSAN
KORNFELD, KENNETH KOSCO,
MICHELE KOSCO, CINDY LAMIR,
JOSEPH LAMIR, STEVE LANIER, ERIC
LAWRENCE, LENORA LAWRENCE,
COLE MACKELPRANG, TRENT
MACKIE, EUGENE MARKHAM
JOHANNA MARKHAM, DAVE MARKS
TERESA MARKS, CHRIS
MATTAROLLO, TINA MATTAROLLO
JOSEPH MCELROY, ANNE
MELLENTHIN, MICHAEL
MELLENTHIN, BETH MOSES, STEVEN
MOSES, DONNA PANARELLO,
JOHN PARK, PENELOPE PARK,
SUSAN PAYNE, JENNIFER PINKHAM,
ROGER PINKHAM, KATHLEEN
POWELL, RICHARD POWELL,
RANDAL PRICE, MEKO L PRICE,
PAMELA RATCLIFFE, BOYKIN
ROBINSON, JENNIFER P. ROBINSON,
DAVID SANDERS, KIM SANDERS,
JUDY SCHUNN, ROBERT SCHUNN,
CONNIE JOHNSON-SCOTT, ROBERT
SCOTT, G. DANIEL SIEGEL, GERRY
SMITH, JAMIE SMITH, JEFFREY
SNYDER, BRIDGET STEEN, JOSEPH
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STEEN, PAUL TAFFE, TONYA TAFFE,
LYNN TAMN, MARK TAMN,
KATHRYN L. TRACY, KEVIN TRACY,
PATRICIA TRACY, AUDREY TROIANO,
MICHAEL TROIANO, CHRIS TURNER,
PAMELA R. TURNER, JENNIFER
ULLMAN, NEAL ULLMAN, EDWARD
VARON, BARRON WALL, PETE
WASILEWSKI, MICHAEL
WHITEHOUSE, SYLVIA WHITEHOUSE,
KATHERINE WILLIAMS, DARREN
WISHNER, JILL WISHNER, BEVERLY
WISHNER, EDWARD WISHNER,
RUSSELL WISHNER, CASEY WOOD,
JASON WOOD, DAVID WRIGHT,
STACEY WISHNER, WILLIAM
WRIGHT, AMANDA ZUMBRUN
By Counsel
/s/Edward L. Bleynat, Jr.
Edward L. Bleynat, Jr.[SB#16558]
FERIKES & BLEYNAT, PLLC
21 Broad Street
Asheville, NC 28801
Brian C. Athey
(upon admission pro hac vice)
Webster Book, LLP
300 N. Washington Street, Suite 404
Alexandria, VA 22314
Attorneys for Plaintiffs
Case 1:11-cv-00023-MR -DLH Document 1 Filed 02/04/11 Page 107 of 107