Raritan River Steel Co. v. Cherry, Bekaert & Holland, SIDBEC-DOSC
| Citation | 339 S.E.2d 62,79 N.C.App. 81 |
| Decision Date | 04 February 1986 |
| Docket Number | SIDBEC-DOSC,INC,Nos. 8526SC811,8526SC812,s. 8526SC811 |
| Court | Court of Appeal of North Carolina (US) |
| Parties | RARITAN RIVER STEEL COMPANY v. CHERRY, BEKAERT & HOLLAND, a General Partnership; Gary J. Wolfe; S. Donald Blanton; Herman O. Coleman; C. Cline Comer; W. Douglas Serriss; Joe R. Nantz; Clarence Eugene Williams, Sr.; Preston Clark; Howard J. Kies; Harrace M. Rolnick; Peter A. Caprise; Jerry P. Fox; Eric C. Pressley; R. Turner Rivenbark; Wayne Comstock; Tony W. Warfford; Wit Brown; Louis Eddie Dutton; William Lanier, Jr.; David Whaley; T. Ernest Sievelkorn; James Laney; Harold B. Henderson; Albry Shaw; J. Arley Rowe, Jr.; William Blankenship; Robert Holman; Don Holland; Anthony G. Campas; John Compton; Donald Leonard; Michael Newhouse; Charles Weathersby; Wallace Permenter; Clyde Fussell; Wayne Busey; Jerry Lloyd; David Bolton; John Cordell; Ralph Davis; Harry Stolte, Jr.; Charles Brown; Wayne Grier; Harry Griggs, Jr.; Ralph Harold; Frances Koger; Kenneth Litton, Jr.; Charles Young; Bobby Black; William Flurry; Jack Moody; Rudolph Ohme, Jr.; E.A. Thomas, Jr.; Raymond Warco; E.C. Blackburn; Anthony Morris; W.H. Peterson; J. Dominquez; Robert Harter; Lloyd Brammer; Henry Colbreth; Patrick Callen; W.H. Huff; Jeffrey McClanathan; Richard Roberts; Wilburn Robertson; George Tornwall; and Robert White, partners. and, v. CHERRY, BEKAERT & HOLLAND, a General Partnership; Gary J. Wolfe; S. Donald Blanton; Herman O. Coleman; C. Cline Comer; W. Douglas Serriss; Joe R. Nantz; Clarence Eugene Williams, Sr.; Preston Clark; Howard J. Kies; Harrace M. Rolnick; Peter A. Caprise; Jerry P. Fox; Eric C. Pressley; R. Turner Rivenbark; Wayne Comstock; Tony W. Warfford; Wit Brown; Louis Eddie Dutton; William Lanier, Jr.; David Whaley; T. Ernest Sievelkorn; James Laney; Harold B. Henderson; Albry Shaw; J. Arley Rowe, Jr.; William Blankenship; Robert Holman; Don Holland; Anthony G. Campas; John Compton; Donald Leonard; Michael Newhouse; Charles Weathersby; Wallace Permenter; Clyde Fussell; Wayne Busey; Jerry Lloyd; David Bolton; John Cordell; Ralph Davis; Harry Stolte, Jr.; Charles Brown; Wayne |
Grier and Grier by Joseph W. Grier, III, and Richard C. Belthoff, Jr., Charlotte, for plaintiff-appellant Raritan River Steel Co.
Golding, Crews, Meekins, Gordon & Gray by Rodney Dean, Charlotte, for plaintiff-appellant Sidbec-Dosco, Inc.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan by James G. Billings and Martha Jones Mason, Raleigh, for defendants-appellees.
Plaintiffs appeal from the granting of defendants' motions to dismiss the complaints for failure to state claims upon which relief can be granted. N.C.Gen.Stat. 1A-1, Rule 12(b)(6). The issue is whether the complaints state claims based on third-party beneficiary contract doctrine and the tort doctrine of negligent misrepresentation. More particularly, we must decide whether a third person not in privity of contract with a certified public accountant has a claim against that accountant for negligent misrepresentation which allegedly results in loss to the third person.
We hold that plaintiff Raritan River Steel Company (Raritan) has stated claims based on both third-party beneficiary contract doctrine and negligent misrepresentation. We hold that plaintiff Sidbec-Dosco, Inc. (Sidbec) has stated a claim based on negligent misrepresentation but has not stated a claim based on third-party beneficiary contract doctrine. In particular, we hold that the law implies privity of contract for an alleged intended third-party beneficiary like Raritan and that such a plaintiff may bring an action in tort for negligent performance of the underlying contract. We also hold that under the facts alleged in Sidbec's complaint a third person not in privity of contract with a certified public accountant has a claim against that accountant for negligent misrepresentation.
Accordingly, we reverse the orders except for the portion dismissing Sidbec's third-party beneficiary claim, which we affirm.
Raritan's complaint alleged, in pertinent part, that:
Intercontinental Metals Corporation (IMC) engaged defendant Cherry, Bekaert & Hollard (Cherry), a general partnership of certified public accountants, pursuant to a valid and enforceable contract, to provide an audit of IMC for the years ending 30 September 1980 and 30 September 1981. The individual defendants are all general partners in Cherry. Cherry published its audit on or about 30 January 1982. Cherry was negligent in the preparation of this audit in that the published report showed IMC with a net worth of approximately $7,000,000, when in actuality, IMC's net worth was substantially less. Dun & Bradstreet published a report on IMC which made specific reference to Cherry's audit.
Raritan regularly supplied raw steel to IMC on credit. Relying on information in the Dun & Bradstreet report, which was supplied by defendant Cherry, Raritan extended credit to IMC in excess of $2,247,844. IMC is in bankruptcy and cannot pay this debt in any substantial amount. Accordingly, as a direct and proximate result of defendants' negligence, Raritan, relying on Cherry's audit, extended credit to IMC and consequently suffered losses in excess of $10,000.
In Raritan's second claim it alleged that it is a third-party beneficiary to IMC's contract with Cherry and may therefore recover damages resulting from Cherry's breach.
Sidbec's complaint contains essentially the same allegations as Raritan's. Sidbec also extended credit to IMC based on the Cherry audit. Sidbec, however, did not specifically allege that it relied on the Dun & Bradstreet report for its information. Rather, it simply alleged that it "has incurred ... damages as a direct result of its extension of credit to IMC ... in reliance on [IMC's] reported financial condition ...." Sidbec's damages resulted directly and proximately from Cherry's negligence in showing IMC with a net worth of approximately $7,000,000, when in actuality IMC's net worth was at least "a negative" $10,000,000.
Sidbec, like Raritan, alleged in its second claim that it is a third-party beneficiary of IMC's contract with Cherry.
" '[A] complaint should not be dismissed for insufficiency unless it appears to a certainty that plaintiff[s] [are] entitled to no relief under any state of facts which could be proved in support of the claim.' " Morrow v. Kings Department Stores, 57 N.C.App. 13, 16-17, 290 S.E.2d 732, 734, disc. rev. denied, 306 N.C. 385, 294 S.E.2d 210 (1982), quoting Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161, 166. See also Brad Ragan, Inc. v. Callicut Enterprises, Inc., 73 N.C.App. 134, 135, 326 S.E.2d 62, 63 (1985). " 'A claim for relief must still satisfy the requirements of the substantive laws which gave rise to the pleadings,' " however. Morrow, 57 N.C.App. at 17, 290 S.E.2d at 735. Specifically, plaintiffs must state enough to give the substantive elements of a legally recognized claim. Id.
Under the "notice theory" of pleading contemplated by Rule 8(a)(1), detailed fact-pleading is no longer required. A pleading complies with the rule if it gives sufficient notice of the events or transactions which produced the claim to enable the adverse party to understand the nature of it and the basis for it, to file a responsive pleading, and--by using the rules provided for obtaining pretrial discovery--to get any additional information he may need to prepare for trial.
Sutton, 277 N.C. at 104, 176 S.E.2d at 167. " '[W]ell-pleaded material allegations of the complaint[s] are taken as admitted; but conclusions of law or unwarranted deductions of fact are not admitted.' " Id. at 98, 176 S.E.2d at 163.
For claims based on third-party beneficiary contract doctrine to withstand a Rule 12 (b)(6) motion to dismiss, plaintiffs' allegations must show: "(1) the existence of a contract between two other persons; (2) that the contract was valid and enforceable; and (3) that the contract was entered into for his direct, and not incidental, benefit." Leasing Corp. v. Miller, 45 N.C.App. 400, 405-06, 263 S.E.2d 313, 317, disc. rev. denied, 300 N.C. 374, 267 S.E.2d 685 (1980); see also Brad Ragan Inc., 73 N.C.App. at 138, 326 S.E.2d at 65 (1985). Raritan alleges the existence of "a valid and enforceable contract" between defendants and IMC "entered into for the direct, and not incidental, benefit of plaintiff and other trade creditors." Since this includes all the allegations required by Leasing Corp., the complaint adequately states a claim based on third-party beneficiary contract doctrine. The court thus erred in dismissing this portion of Raritan's complaint.
Sidbec alleges that defendant "pursuant to contracts, prepared audited financial statements for [IMC]." It then alleges that "[d]efendants' contract with IMC was entered into for the direct benefit of the [p]laintiff and other creditors...." This complaint fails to allege that the contract(s) between defendants and IMC were valid and enforceable. Hence, it omits the second of the "essential allegations" and thus "leaves to conjecture that which must be stated." Leasing Corp., 45 N.C.App. at 406, 263 S.E.2d at 317; see also Howell v. Fisher, 49 N.C.App. 488, 493, 272 S.E.2d 19, 23 (1980), disc. rev. denied, 302 N.C. 218, 277 S.E.2d 69 (1981).
Accordingly, we hold that Sidbec's complaint fails to state a claim based on third-party beneficiary contract doctrine. The court thus properly dismissed this portion of Sidbec's complaint. Upon remand Sidbec may move to vacate this portion...
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