Stanback v. Stanback

Citation297 N.C. 181,254 S.E.2d 611
Decision Date17 May 1979
Docket NumberNo. 94,94
PartiesVanita B. STANBACK v. Fred J. STANBACK, Jr.
CourtUnited States State Supreme Court of North Carolina

Brinkley, Walser, McGirt, Miller & Smith by Walter F. Brinkley and Benjamin G. Philpott, Lexington, for plaintiff-appellant.

Hudson, Petree, Stockton, Stockton & Robinson by Norwood Robinson and George L. Little, Jr., Winston-Salem, and Kluttz & Hamlin by Wm. Clarence Kluttz, Salisbury, for defendant-appellee.

BROCK, Justice.

The motion to dismiss under N.C.R.Civ.P. 12(b)(6) tests the legal sufficiency of the complaint. Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970). In ruling on the motion the allegations of the complaint must be viewed as admitted, and on that basis the court must determine as a matter of law whether the allegations state a claim for which relief may be granted. Newton v. Standard Fire Ins. Co., 291 N.C. 105, 229 S.E.2d 297 (1976). The motion performs substantially the same function as the old common law demurrer, Sutton v. Duke, supra, and in applying the rule we look to the interpretation of the federal rule for guidance. As a general rule, "a complaint should not be dismissed for insufficiency Unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim." 2A Moore's Federal Practice, § 12.08, pp. 2271-74 (2d ed. 1975). The motion to dismiss the claims in Count Number I in this case was directed to the absence of any law to support the requests for relief. We therefor are required to examine the various requests for relief set forth in the claims in Count Number I and determine whether or not the law of this jurisdiction offers support for the requests made.

Count Number I Breach of Contract
a. Actual Damages

Plaintiff's request for actual general damages was not dismissed by the trial court, and the sufficiency of that part of the claim is not before us. Count Number I Breach of Contract

b. Consequential Damages

In addition to her request for actual general damages under Count Number I, plaintiff requested that the court award her $250,000.00 in consequential damages as compensation for the "great mental anguish and anxiety (she suffered) as a result of the failure of the defendant to comply with his agreement." In support of this request plaintiff alleged: That she had insufficient resources to pay the deficiency assessed when the I.R.S. disallowed the major portion of her attempted deduction of the total amount paid to her attorneys; that upon her failure to pay, the I.R.S. filed a tax lien against her home, which became a matter of public record; that subsequently the I.R.S. came to her home and seized the property, posting a formal notice of seizure on the front door, visible to her neighbors and the public; that the I.R.S. subsequently levied on the property and published notice of sale of her home at public auction; that all the foregoing actions taken by the I.R.S. were given publicity in the local media thereby causing her to suffer great embarrassment, humiliation, and degradation in the eyes of her friends and the public in that "this information has been interpreted by the members of the public as indicating that she has failed to pay taxes which were justly due the Internal Revenue Service and indicating a lack of public responsibility and personal integrity"; that she was forced to borrow the sum needed to pay the deficiency, and because she is unable to pay off that loan, the private lender is in the process of foreclosing on a deed of trust given on her home to secure the loan.

The trial court's action in granting defendant's motion to dismiss this request for relief raises the following issue on appeal: In an action based on an alleged breach of a tax deficiency indemnification agreement supplementing a general marital separation agreement is the plaintiff entitled to recover damages for mental anguish suffered as a result of the defendant's alleged breach?

When an action for breach of contract is brought, the damages recoverable are those which may reasonably be supposed to have been in the contemplation of the parties at the time they contracted. Price v. Goodman, 226 N.C. 223, 37 S.E.2d 592 (1946); Troitino v. Goodman, 225 N.C. 406, 35 S.E.2d 277 (1945). This limitation on the recovery of damages for breach of contract was first enunciated in the famous English case of Hadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145 (1854). In applying this test we have often relied on the following declaration of it in the Restatement of the Law of Contracts, § 330, p. 509:

"Foreseeability of harm as a Requisite for Recovery. In awarding damages, compensation is given for only those injuries that the defendant had reason to foresee as a probable result of his breach when the contract was made. If the injury is one that follows the breach in the usual course of events, there is sufficient reason for the defendant to foresee it; otherwise, it must be shown specifically that the defendant had reason to know the facts and to foresee the injury."

Damages for injury that follows the breach in the usual course of events are always recoverable provided the plaintiff proves that such injury actually occurred as a result of the breach. Whether damages are recoverable for injury that does not follow breach of a particular contract in the usual course of events (special damages) depends upon the information communicated to or the knowledge of the breaching party at the time of contracting. Troitino v. Goodman, supra; Iron Works Co. v. Cotton Oil Co., 192 N.C. 442, 135 S.E. 343 (1926); 22 Am.Jur.2d, Damages, § 59, p. 90. The test is generally described as one of foreseeability. In the first instance the damages recoverable are foreseeable because they are such that will follow in the ordinary course of events from breach of the particular kind of contract. In the second instance the damages recoverable are foreseeable because the party contracting had knowledge at the time he entered into the particular contract of the special circumstances giving rise to special damages upon breach, I. e., damages that would not be expected to follow in the ordinary course of events from breach of the contract. This test of foreseeability generally achieves its purpose, I. e., providing a workable method of imposing limitations on contractual liability, when strictly commercial contracts are involved and only damages for pecuniary loss are sought.

When recovery is sought for mental anguish suffered as the result of breach of contract, however, the rule has proven to be less than adequate, and courts as a general rule have denied recovery on policy grounds of limiting contractual risk with or without formal application of the Hadley v. Baxendale test. See, e. g., Hall v. Encyclopaedia Britannica, Inc., 325 Mich. 35, 37 N.W.2d 702 (1949); Seidenbach's Inc. v. Williams, Okl., 361 P.2d 185 (1961). See D. Dobbs, Remedies, § 12.4, p. 819; McCormick on Damages, § 145, p. 592; Comment, Recovery for Mental Anguish from Breach of Contract: The Need for an Enabling Statute, 5 Cal.West.L.Rev. 88 (1968); 38 Am.Jur.2d, Fright, Shock, and Mental Disturbance, § 33, p. 40; Annot. 23 A.L.R. 361; Annot. 44 A.L.R. 428; Annot. 56 A.L.R. 657.

It is generally acknowledged that financial loss inflicted on an individual by breach of contract may often cause the party to suffer disappointment and mental anguish. McCormick on Damages, supra, at § 145, pp. 592-93. Despite the probability of such mental anguish damages, recovery for them has been routinely denied in contract actions, generally on the stated grounds that mental anguish damages are too remote to have been in the contemplation of the parties to the contract. E. g., Brunson v. Ranks Army Store, 161 Neb. 519, 73 N.W.2d 803 (1955). This judicial reluctance to award damages for mental anguish in contract actions is reflected in the Restatement of the Law of Contracts, § 341, p. 559:

"In actions for breach of contract, damages will not be given as compensation for mental suffering, except where the breach was wanton or reckless and caused bodily harm and where it was the wanton or reckless breach of a contract to render a performance of such a character that the defendant had reason to know when the contract was made that the breach would cause mental suffering for reasons other than mere pecuniary loss."

The rule set forth in this section of the Restatement incorporates most of the exceptions which courts have created to the general rule against recovery of mental anguish damages in a breach of contract action. The earliest exceptions to the general rule came in cases involving breach of contract to convey a telegraph message. SoRelle v. Western Union Telegraph Co., 55 Tex. 308 (1881), the first case in the United States to hold that mental anguish damages were recoverable for breach of contract, involved the defendant's failure to transmit a message to plaintiff announcing his mother's death, which prevented him from attending her funeral. This Court adopted this limited exception for cases involving failure to transmit messages concerned with death or illness in Young v. Telegraph Co., 107 N.C. 370, 11 S.E. 1044 (1890) and applied it in subsequent decisions. Russ v. Telegraph Co., 222 N.C. 504, 23 S.E.2d 681 (1943); Betts v. Telegraph Co., 167 N.C. 75, 83 S.E. 164 (1914); Cashion v. Telegraph Co., 123 N.C. 267, 31 S.E. 493 (1898). Recovery in those cases was not limited by a requirement that the plaintiff suffer bodily harm as well as mental anguish. Young v. Telegraph Co., supra.

Other exceptions to the general rule against mental anguish damages in contract actions have been created. In Allen v. Baker, 86 N.C. 91 (1882), this Court held that such damages may be recovered for breach of contract to marry. Courts of other jurisdictions have allowed recovery of mental anguish damages when the breach amounts in substance to a wilful or...

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