White v. Collins Bldg. Inc.

• Decision Date: 04 January 2011
• Docket Number: No. COA10–216.,COA10–216.
• Court: North Carolina Court of Appeals
• Parties: Andrew C. WHITE and Wife, Barbara W. White, Plaintiffs,v.COLLINS BUILDING, INC., Edwin E. Collins, Jr., Kersey Corporation, Johnny Kersey, Joseph Lee Williams, and AEA & L, LLC, Defendants.

704 S.E.2d 307

Andrew C. WHITE and Wife, Barbara W. White, Plaintiffs,

v.COLLINS BUILDING, INC., Edwin E. Collins, Jr., Kersey Corporation, Johnny Kersey, Joseph Lee Williams, and AEA & L, LLC, Defendants.

No. COA10–216.

Court of Appeals of North Carolina.

Jan. 4, 2011.

OPINION TEXT STARTS HERE

Appeal by Plaintiffs from order entered 6 October 2009 by Judge W. Allen Cobb, Jr. in New Hanover County Superior Court. Heard in the Court of Appeals 2 September 2010.

Ward and Smith, P.A., by Ryal W. Tayloe and Michael J. Parrish, for Plaintiffs.

Chleborowicz & Theriault, LLP, by Christopher M. Theriault and Christopher A. Chleborowicz, for Defendant Edwin E. Collins, Jr.

STEPHENS, Judge.

I. Procedural History

On 7 May 2009, Plaintiffs Andrew C. White and Barbara W. White filed a complaint in New Hanover County Superior Court seeking damages related to alleged construction defects in Plaintiffs' home. Plaintiffs brought various claims against the builder of the home, Collins Building, Inc. (“Collins Building”), Collins Building's president, Edwin E. Collins, Jr. (“Defendant”) in his individual capacity, plumbing subcontractors Kersey Corporation and Johnny Kersey, framing subcontractor Joseph Lee Williams (“Mr. Williams”), and the developer of the home, AEA & L, LLC (“AEA”). On 29 July 2009, Defendant filed a motion pursuant to N.C. Gen.Stat. § 1A–1, Rule 12(b)(6) to dismiss Plaintiffs' negligence claim against him in his individual capacity. On 6 October 2009, the trial court heard the motion and entered an order dismissing Plaintiffs' negligence claim against Defendant. Plaintiffs filed notice of appeal from the trial court's order on 5 November 2009. On 5 January 2010, Plaintiffs voluntarily dismissed all claims against Collins Building, Kersey Corporation, Johnny Kersey, Mr. Williams, and AEA without prejudice pursuant to N.C. Gen.Stat. § 1A–1, Rule 41(a).

II. Factual Background

Plaintiffs' complaint alleges the following: In May of 2003, Plaintiffs purchased a newly constructed oceanfront home in Wrightsville Beach, North Carolina from AEA, the developer of the home. AEA had contracted with Collins Building to construct the residence. Defendant, the qualifier for Collins Building on its general contractor's license and president and sole shareholder of Collins Building, oversaw and personally supervised construction of the residence.

In October of 2006, Plaintiffs began having problems with the windows and doors in the main living area of their home. Plaintiffs noticed a slight buckling of the floors underneath the glass doors and windows as well as water intrusion around the windows after a storm. Plaintiffs contacted Defendant, who informed them that the doors needed caulking. Defendant had someone apply caulk around the doors and also advised Plaintiffs to clean any sand out of the window sills to ensure a tight seal.

In late 2008 and early 2009, Plaintiffs noticed more significant water damage to the hardwood floors and trim around the windows as well as rusting window sashes and springs. When Plaintiffs had the windows professionally inspected in April and May of 2009, they discovered severe damage to the windows and surrounding areas that required replacement of the windows.

In addition to the damaged windows, Plaintiffs' home suffered significant damage to several walls and a ceiling when four different water pipes burst between July 2007 and February 2009. In each instance, hot water pipes joined by copper fittings separated. Upon professional inspection of the plumbing system, Plaintiffs discovered that all of the hot water lines in their home had to be replaced.

Plaintiffs allege that the damage to their home and the cost of the resulting repairs were proximately caused by the negligence of Defendant in failing to properly supervise the construction of Plaintiffs' home.

III. Discussion

By Plaintiffs' sole argument on appeal, Plaintiffs contend that the trial court erred in dismissing their negligence claim against Defendant in his individual capacity. For the reasons stated herein, we agree with Plaintiffs.

A. Standard of Review

“On a Rule 12(b)(6) motion to dismiss, the question is whether, as a matter of law, the allegations of the complaint, treated as true, state a claim upon which relief can be granted.” Allred v. Capital Area Soccer League, Inc., 194 N.C.App. 280, 282, 669 S.E.2d 777, 778 (2008) (citation and quotation marks omitted). “Under Rule 12(b)(6), a claim should be dismissed where it appears that plaintiff is not entitled to relief under any set of facts which could be proven.” Miller v. Nationwide Mut. Ins. Co., 112 N.C.App. 295, 299, 435 S.E.2d 537, 541 (1993) (citation omitted), disc. review denied, 335 N.C. 770, 442 S.E.2d 519 (1994). “This occurs where there is a lack of law to support a claim of the sort made, an absence of facts sufficient to make a good claim, or the disclosure of some fact which will necessarily defeat the claim.” Id. “This Court must conduct a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct.” Craven v. SEIU COPE, 188 N.C.App. 814, 816, 656 S.E.2d 729, 732 (2008) (citation and quotation marks omitted).

B. Individual Liability

“Actionable negligence occurs [ ] where there is a failure to exercise proper care in the performance of some legal duty which the defendant owed the plaintiff, under the circumstances in which they were placed.” Wood v. Guilford Cty., 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002) (citation and quotation marks omitted). “The law imposes upon the builder of a house the general duty of reasonable care in constructing the house to anyone who may foreseeably be endangered by the builder's negligence, including a subsequent owner who is not the original purchaser.” Everts v. Parkinson, 147 N.C.App. 315, 333, 555 S.E.2d 667, 679 (2001) (citing Oates v. JAG, Inc., 314 N.C. 276, 280–81, 333 S.E.2d 222, 225–26 (1985) (plaintiffs, the third purchasers of a house, were allowed to bring an action against the builder for negligent construction of the house)); see also Floraday v. Don Galloway Homes, 340 N.C. 223, 456 S.E.2d 303 (1995) (owner of a house who was not the original purchaser had a cause of action against the builder for negligence in the construction of a backyard retaining wall that materially affected the structural integrity of the house). The lack of privity between a subsequent purchaser of a home and the builder of the home does not bar the purchaser's negligence claim against the builder. Oates, 314 N.C. at 281, 333 S.E.2d at 226. This is because although the “duty owed by a defendant to a plaintiff may have sprung from a contractual promise made to another[,] ... the duty sued on in a negligence action is not the contractual promise but the duty to use reasonable care in affirmatively performing that promise. The duty exists independent of the contract.” Id. at 279, 333 S.E.2d at 225 (citation and quotation marks omitted).

In this case, Plaintiffs purchased a newly constructed home from AEA, the developer of the home. AEA had contracted with Collins Building to construct the home. Even though Plaintiffs were not in privity of contract with Collins Building, under Oates, the lack of privity does not bar Plaintiffs from bringing an action for negligent construction against the builder. Id. at 281, 333 S.E.2d at 226.

Defendant argues that Plaintiffs may not bring a negligence action against him individually because any action that he took was done on behalf of, and as an agent for, Collins Building. Defendant misapprehends the law.

It is well settled that an individual member of a limited liability company or an officer of a corporation may be individually liable for his or her own torts, including negligence. See Wilson v. McLeod Oil Co., 327 N.C. 491, 518, 398 S.E.2d 586, 600 (1990) (an officer of a corporation “can be held personally liable for torts in which he actively participates[,]” even though “committed when acting officially” (citation and quotation marks omitted)); Strang v. Hollowell, 97 N.C.App. 316, 318, 387 S.E.2d 664, 666 (1990) (“It is well settled that one is personally liable for all torts committed by him, including negligence, notwithstanding that he may have acted as agent for another or as an officer for a corporation.”); Esteel Co. v. Goodman, 82 N.C.App. 692, 348 S.E.2d 153 (1986) (an officer of a corporation who commits a tort is individually liable for that tort, even though acting on behalf of the corporation in committing the act), disc. rev. denied, 318 N.C. 693, 351 S.E.2d 745 (1987); Palomino Mills, Inc. v. Davidson Mills Corp., 230 N.C. 286, 52 S.E.2d 915 (1949); ¹ Wachovia Bank & Trust Co. v. Southern R. Co., 209 N.C. 304, 308, 183 S.E. 620, 622 (1935) (“[I]n this State an agent or servant, under proper allegations of negligence, which is the proximate or one of the proximate causes of the injury, plaintiff being free from blame, and proof to that effect, is liable to third parties for acts of malfeasance or nonfeasance—commission or omission—done in the scope of his employment.”). Although a properly formed and maintained business entity, like a limited liability company or corporation, may provide a shield or “veil” of protection from personal liability for an individual member or officer, see Statesville Stained Glass v. T.E. Lane Constr. & Supply Co., 110 N.C.App. 592, 430 S.E.2d 437 (1993), this protection is not absolute. The two most common methods of establishing personal liability in a business setting are “piercing the corporate veil” and individual responsibility for torts, such as breach of fiduciary duty, negligence, fraud, and misrepresentation. See Glenn v. Wagner, 313 N.C. 450, 454, 329 S.E.2d 326, 330 (1985) (“[C]ourts will disregard the corporate form or ‘pierce the corporate veil,’ and extend liability for corporate obligations beyond the confines of a corporation's separate...