Appeal by plaintiff from orders entered 17 May 1999 and 31 May
1999 by Judge William C. Gore, Jr., in Columbus County Superior
Court. Heard in the Court of Appeals 17 October 2000.
Kathleen Shannon Glancy, and Patterson, Harkavy & Lawrence,
L.L.P., by Martha A. Geer, for plaintiff-appellant.
Crossley, McIntosh, Prior & Collier, by Clay A. Collier and
Samuel H. MacRae, for defendant-appellees O. Richard Wright,
Jr., Michael Kent Jones, and Wall Street Investment Company.
Hedrick & Blackwell, L.L.P., by Jeffrey H. Blackwell, for
defendant-appellee United States Fidelity and Guaranty
Company.
MARTIN, Judge.
On 1 May 1996, Rodney Strickland (Mr. Strickland) entered into
a residential lease agreement with Wall Street Investment
Corporation, which was co-owned by O. Richard Wright and Michael
Kent Jones, (defendant-landlords). Mr. Strickland moved into the
house with Terri Strickland (Ms. Strickland) and her two children,
Brittany and Joshua Hinson. On 5 September 1996, Hurricane Fran
caused significant damage to the roof which resulted in water
leaks. Three days later, a heavy rainstorm caused further water
damage. Mr. Strickland notified defendant-landlords of the damage
to the house on 13 September 1996. On 16 October 1996, defendant
United States Fidelity and Guaranty Company (USF&G), which insured
the property for defendant-landlords, undertook to inspect the
house and, according to the complaint, claimed to conduct a
thorough investigation. After the inspection, however, no repairs
were made, nor were the tenants warned of any dangerous conditions
on the premises. Four days following the inspection, on 20 October1996, a fire broke out in the house, killing seventeen-month-old
Joshua and injuring Brittany. At the time of the fire, no smoke
detectors had been installed in the rental house. On 21 October
1996, USF&G caused to be prepared through NEMAX Claims Services an
“Origin & Cause Investigation” report. Bernice Prince (plaintiff),
the guardian ad litem for Brittany and the personal representative
for the estate of Joshua, alleges that USF&G intentionally or
negligently misrepresented or concealed facts and evidence
regarding the fire in this report. Ms. Strickland was subsequently
arrested and charged with the murder of her son, the attempted
murder of her daughter, and first-degree arson; as a result of
these charges, Brittany was taken from her mother and placed with
the Department of Social Services. The charges were later dropped,
and Brittany was returned to her mother. Finally, on 16 October
1998, Ms. Strickland filed an action on behalf of herself and her
children against defendants; she subsequently filed a voluntary
dismissal and resigned as guardian ad litem for Brittany and as
personal representative for Joshua's estate. On 8 February 1999,
plaintiff filed a First Amended Complaint representing Brittany
Hinson and the estate of Joshua Hinson. In May 1999, the trial
judge granted defendants' motions to dismiss. Plaintiff appeals.
_______________
[1]We first note that plaintiff has appealed from an
interlocutory order. The trial court's order dismisses all claims
against defendant USF&G and some but not all claims against
defendant-landlords. Further, there is no certification in the
order that there is “no just reason for delay” which would
facilitate an immediate appeal. N.C. Gen. Stat. § 1A-1, Rule
54(b). Generally, no immediate appeal lies from an interlocutory
order.
Auction Co. v. Myers, 40 N.C. App. 570, 253 S.E.2d 362(1979). However, when the order appealed from affects a
substantial right, a party has a right to an immediate appeal.
N.C. Gen. Stat. § 1-277(a); 7A-27(d)(1). An interlocutory order
affects a substantial right when the order "deprive[s] the
appealing party of a substantial right which will be lost if the
order is not reviewed before a final judgment is entered."
Cook v.
Bankers Life & Cas. Co., 329 N.C. 488, 491, 406 S.E.2d 848, 850
(1991) (citation omitted). In
Driver v. Burlington Aviation, Inc.,
this Court held that the trial court's dismissal of plaintiff's
claims against one defendant affected “a substantial right to have
determined in a single proceeding whether plaintiffs have been
damaged by the actions of one, some or all defendants where their
claims arise upon the same series of transactions.” 110 N.C. App.
519, 524, 430 S.E.2d 476, 480 (1993) (citation omitted).
Similarly, in this case, plaintiff seeks relief against multiple
defendants based on negligence, violation of the statutory duty of
a landlord to repair premises, unfair and deceptive trade
practices, and wrongful death, all arising from the single
occurrence of a fire in a rental home. Plaintiff has the right to
have all her claims adjudicated in a single proceeding. We
therefore consider plaintiff's appeal.
I.
[2]Plaintiff first assigns error to the trial court's grant
of USF&G's motion to dismiss plaintiff's negligence claim.
Plaintiff alleges that USF&G assumed responsibility for inspecting
the home for hazards and thus violated a duty of care owed to
plaintiff by failing to warn the family that a dangerous condition
existed on the premises.
In reviewing a trial court's dismissal pursuant to N.C.R. Civ.
P. 12(b)(6), “[t]he question for the court is whether, as a matterof law, the allegations of the complaint, treated as true, are
sufficient to state a claim upon which relief may be granted under
some legal theory, whether properly labeled or not.”
Miller v.
Nationwide Mutual Ins. Co., 112 N.C. App. 295, 300, 435 S.E.2d 537,
541 (1993) (citation omitted),
disc. review denied, 335 N.C. 770,
442 S.E.2d 519 (1994). Under this rule, a claim is properly
dismissed “'if no law exists to support the claim made, if
sufficient facts to make out a good claim are absent, or if facts
are disclosed which will necessarily defeat the claim.'”
Claggett
v. Wake Forest University, 126 N.C. App. 602, 608, 486 S.E.2d 443,
446 (1997) (citation omitted). In actions for negligence, the
plaintiff must allege that the defendant breached a duty owed the
plaintiff, and that this breach caused actual injury to the
plaintiff.
Davis v. North Carolina Dept. of Human Resources, 121
N.C. App. 105, 465 S.E.2d 2 (1995). Negligence “'presupposes the
existence of a legal relationship between the parties by which the
injured party is owed a duty which either arises out of a contract
or by operation of law.'”
Sinning v. Clark, 119 N.C. App. 515,
518, 459 S.E.2d 71, 73,
disc. review denied, 342 N.C. 194, 463
S.E.2d 242 (1995) (citation omitted). “If there is no duty, there
can be no liability.”
Id. (citation omitted).
In
Olympic Products Co. v. Roof Systems, Inc., 88 N.C. App.
315, 363 S.E.2d 367,
disc. review denied, 321 N.C. 744, 366 S.E.2d
862 (1988), this Court held that privity of contract is not
required to recover against a person “who negligently performs
services for another and thus injures a third party.”
Id. at 322,
363 S.E.2d at 371-72. In
Olympic Products, the plaintiff entered
into a contract with Roof Systems to install a roof. Roof Systems
then entered into a contract with manufacturer Carlisle to install
a “Carlisle” roof. Carlisle, in its contract with Roof Systems,required that the installer comply with all Carlisle
specifications; further, Carlisle committed itself to inspect the
roof to ensure that the installer adhered to all necessary
specifications and procedures. Shortly after the job was
completed, the roof collapsed. Under these facts, this Court held
that Carlisle owed a duty to the property owner to use reasonable
care.
Id. at 324-25, 363 S.E.2d at 373.
“[U]nder certain circumstances, one who
undertakes to render services to another which
he should recognize as necessary for the
protection of a third person, or his property,
is subject to liability to the third person
for injuries resulting from his failure to
exercise reasonable care in such undertaking.
”
Id. at 323, 363 S.E.2d at 372 (quoting
Quail Hollow East
Condominium Ass'n v. Donald A. Scholz Co., 47 N.C. App. 518, 522,
268 S.E.2d 12, 15,
disc. review denied, 301 N.C. 527, 273 S.E.2d
454 (1980)).
This duty to protect third parties from harm
arises under circumstances where the party is
in a position so that “anyone of ordinary
sense who thinks will at once recognize that
if he does not use ordinary care and skill in
his own conduct with regard to those
circumstances, he will cause danger of injury
to the person or property of the other.”
Id. (quoting
Davidson & Jones, Inc. v. County of New Hanover, 41
N.C. App. 661, 666, 255 S.E.2d 580, 584,
disc. review denied, 298
N.C. 295, 259 S.E.2d 911 (1979)).
In the case
sub judice, USF&G contracted to provide insurance
coverage for defendant-landlords. In her complaint, plaintiff
alleges that USF&G, on 16 October 1996, expressly undertook to
conduct an inspection “for the purpose of detecting and detailing
the suitability of the house for residential purposes, including
but not limited to, damage or potential damage to the electrical
system due to the presence of wind driven water or moisture.”
During this inspection, the complaint alleges that Ms. Stricklandfully cooperated with USF&G and “requested notice of any dangerous
conditions discovered as a result of said inspection.” The
complaint alleges that plaintiff “relied upon USF&G's express
undertaking of the inspection to warn them of any dangerous
conditions, including fire hazards, as a result of the presence of
moisture and wind driven water and possible damage to the
electrical system.” Finally, plaintiff alleges that USF&G failed
to warn the residents of the potential fire hazard created by the
water damage to the electrical wiring. Taking these factual
allegations in plaintiff's complaint as true, as we are required to
do in reviewing motions to dismiss, we conclude that the trial
court's grant of USF&G's motion to dismiss was error. Plaintiff's
complaint alleges that USF&G undertook to inspect the property and
gave the impression to the family living therein that it would
determine whether the premises was suitable for residential
purposes; further, Ms. Strickland cooperated with USF&G inspectors
and alleges reliance on USF&G's alleged representation that it
would advise her of any dangerous condition existing. As mentioned
above, there is no requirement that plaintiff and defendant be in
privity of contract when defendant explicitly holds itself out to
perform a duty which it then breaches. Under these facts, USF&G
may have created for itself a duty to plaintiff which it breached
by first expressly undertaking to conduct an inspection of the
suitability of the house for residential purposes and then by
failing to warn tenants of the dangerous conditions it discovered
during that inspection. We therefore reverse the dismissal of
plaintiff's negligence claim against USF&G.
II.
[3]Plaintiff next alleges the trial court erred when it
dismissed plaintiff's claim against USF&G for unfair and deceptivepractices in or affecting commerce. We disagree.
To establish a
prima facie claim for unfair and deceptive
practices, plaintiff must show that: “(1) defendant committed an
unfair or deceptive act or practice, (2) the action in question was
in or affecting commerce, N.C. Gen. Stat. § 75-1.1 and (3) the act
proximately caused injury to the plaintiff.”
Pleasant Valley
Promenade v. Lechmere, Inc., 120 N.C. App. 650, 664, 464 S.E.2d 47,
58 (1995) (citation omitted). Unfair and deceptive practices tend
to involve buyer and seller relationships.
Holley v. Coggin
Pontiac, Inc., 43 N.C. App. 229, 259 S.E.2d 1,
disc. review denied,
298 N.C. 806, 261 S.E.2d 919 (1979). Nevertheless, courts have
also recognized actions based on other types of commercial
relationships, including those outside of contract.
J.M. Westall
& Co., Inc. v. Windswept View of Asheville, Inc., 97 N.C. App. 71,
387 S.E.2d 67,
disc. review denied, 327 N.C. 139, 394 S.E.2d 175
(1990).
In
Westall, the defendant-developer entered into a contract
with a builder-contractor to construct condominiums.
Id. at 72,
387 S.E.2d at 67-68. The plaintiff supplied materials for the
contractor. When the contractor was delinquent in making payments
to the supplier, the supplier contacted the developer, who assured
the supplier that the job was bonded and thus the supplier would be
paid even if the contractor failed to pay.
Id. at 72-73, 387
S.E.2d at 68. The developer then asked the plaintiff to continue
supplying materials.
Id. at 73, 387 S.E.2d at 68. The contractor,
as it turned out, was not bonded, and the supplier was not paid for
the materials.
Id. This Court held that the supplier could bring
an action under G.S. § 75-1.1 against the developer even though the
supplier had no contract with the developer: “In this case, the
defendants' alleged misrepresentations to the plaintiff related tothe delivery of building materials to a third party, and as such
the misrepresentations at least affect commerce while arguably they
are also 'in commerce.'”
Id. at 75, 387 S.E.2d at 69. The proper
inquiry, therefore, “is not whether a contractual relationship
existed between the parties, but rather whether the defendants'
allegedly deceptive acts
affected commerce. A contractual
relationship is not required in order to affect commerce.”
Id. at
75, 387 S.E.2d at 69 (citations omitted).
“'Commerce' in its broadest sense comprehends intercourse for
the purpose of trade in any form.”
Id. (quoting
Johnson v. Phoenix
Mut. Life Ins. Co., 300 N.C. 247, 261, 266 S.E.2d 610, 620 (1980)).
The unfair and deceptive practices statute provides that commerce
“includes all business activities, however denominated.” N.C. Gen.
Stat. § 75-1.1(b). Nevertheless, the fundamental purpose of G.S.
§ 75-1.1 is to “protect the consuming public.”
Skinner v. E.F.
Hutton & Co., Inc., 314 N.C. 267, 275, 333 S.E.2d 236, 241 (1985)
(quoting
Lindner v. Durham Hosiery Mills, Inc., 761 F.2d 162, 167-
68 (4th Cir. 1985)). North Carolina courts have defined the
insurance business as affecting commerce, “when an insurer provides
insurance to a consumer purchasing a policy.”
Murray v. Nationwide
Mutual Ins. Co., 123 N.C. App. 1, 10, 472 S.E.2d 358, 363 (1996),
disc. review denied, 345 N.C. 344, 483 S.E.2d 172 (1997).
The actions of USF&G in the case
sub judice cannot be said to
be “in or affecting commerce.” USF&G's actions are distinguishable
from the actions of the developer giving rise to a claim under G.S.
§ 75-1.1 in
Westall. USF&G contracted through NEMAX Claims
Services to prepare a fire investigation report. This report was
prepared for the mutual benefit of USF&G and its insured:
defendant-landlords. Although plaintiff's allegations, taken as
true, indicate that USF&G may have acted in bad faith in having thereport prepared, these actions cannot be construed as “intercou
rse
for the purpose of trade” with plaintiff.
Westall, 97 N.C. App. at
75, 387 S.E.2d at 69. The tenants in this case were not encouraged
to act in any commercial manner as a result of the report, nor did
they change their position in reliance on the report. Indeed,
there was no commercial relationship between the tenants and USF&G
which can be said to have affected commerce. Plaintiff argues that
Brittany Hinson was removed from her mother's home and placed with
the Department of Social Services as a consequence of the false
report, but there is no indication in the complaint how this
outcome, even if taken as true, involved or affected commerce.
Under these facts, USF&G's alleged actions, as they relate to
plaintiff, cannot be characterized as “in or affecting commerce.”
Additionally, in
Wilson v. Wilson, 121 N.C. App. 662, 468
S.E.2d 495 (1996), this Court held that “North Carolina does not
recognize a cause of action for third-party claimants against the
insurance company of an adverse party based on unfair and deceptive
trade practices under N.C.G.S. § 75-1.1.”
Id. at 665, 468 S.E.2d
at 497. This is true, however, only when the plaintiff is neither
an insured nor in privity with the insurer.
See Murray v.
Nationwide, 123 N.C. App. at 15, 472 S.E.2d at 367 (allowing
plaintiff's unfair and deceptive practices claim because “[t]he
injured party in an automobile accident is an intended third-party
beneficiary to the insurance contract between insurer and the
tortfeasor/insured party,” and was thus in contractual privity with
the insurance company). Accordingly, while a plaintiff generally
cannot sue the insurance company of an adverse party under G.S. §
75-1.1, if the plaintiff achieves the status of an intended third-
party beneficiary arising from the contractual relationship between
the adverse party and the adverse party's insurance company, theplaintiff may then bring a claim against the insurance company for
violating the unfair and deceptive practices statute.
In the present case, USF&G contracted for an “Origin & Cause
Investigation” report to be prepared as a result of the house fire
which occurred on 20 October 1996. Plaintiff contends USF&G made
intentional misrepresentations, concealed facts and evidence, and
acted in bad faith in the investigation and reporting of the causes
of the house fire. Plaintiff, however, was not the intended third-
party beneficiary of the contractual relationship between
defendant-landlords and USF&G. USF&G insured the property against
loss or damage for the benefit of the owners of the property. As
part of its contractual obligations to its insured, USF&G
contracted with NEMAX Claims Services to produce a report on the
house fire. This report was not intended to benefit the tenants
living on the property, but to fulfill contractual obligations with
the property owners. Additionally, defendant-landlords did not
enter into the insurance policy with USF&G with the intent to
benefit potential tenants living in the residence, but rather paid
for the coverage to reduce or eliminate loss caused by
circumstances such as a house fire. Because plaintiff was not an
intended third-party beneficiary in the actions taken by USF&G,
there is no privity between USF&G and plaintiff, and plaintiff may
not assert a claim against USF&G for unfair and deceptive trade
practices. This assignment of error is overruled, and we affirm
the trial court's order dismissing plaintiff's claim under G.S. §
75-1.1.
III.
[4]Finally, plaintiff asserts the trial court erred when it
dismissed plaintiff's claim against defendant-landlords. Because
landlords have a common law duty to warn tenants of hazardousconditions of which they know or should know, we reverse the trial
court's order.
Landlords owe a statutory duty of care to tenants. According
to the Residential Rental Agreement Act, landlords shall “make all
repairs and do whatever is necessary to put and keep the premises
in a fit and habitable condition.” N.C. Gen. Stat. § 42-42(a)(2).
This Act, however, was not intended to supplant existing common law
remedies available to tenants.
Collingwood v. General Elec. Real
Estate Equities, Inc., 324 N.C. 63, 68, 376 S.E.2d 425, 428 (1989).
“The common-law standard of care is a generalized one of 'due care'
on the part of the defendant. The standard of due care is always
the conduct of a reasonably prudent person under the
circumstances.”
Id. (citation omitted)
. Although the North
Carolina Supreme Court has recently disposed of the traditional
invitee-licensee distinctions in premises liability cases in favor
of the reasonably prudent person standard,
Nelson v. Freeland, 349
N.C. 615, 507 S.E.2d 882 (1998), North Carolina case law has
consistently held that tenants were invitees of landlords and that
landlords had a duty to warn invitees of hazardous conditions. “A
tenant is normally seen as an invitee and the liability of a
landlord for physical harm to its tenant depends on if it knows of
the danger.”
Shepard v. Drucker & Falk, 63 N.C. App. 667, 669, 306
S.E.2d 199, 201 (1983). Thus, “[a] landlord owes a duty to an
invitee to use reasonable care to keep the premises safe and
to
warn of hidden dangers, but he is not an insurer of the invitee's
safety.”
Clary v. Alexander County Board of Education, 19 N.C.
App. 637, 639, 199 S.E.2d 738, 739 (1973),
rev'd on other grounds,
286 N.C. 525, 212 S.E.2d 160 (1975) (emphasis added).
In the instant case, a fire broke out in the leased home on 20
October 1996, killing Joshua Hinson and injuring Brittany Hinson. Plaintiff alleges the fire was caused by unsafe conditions in the
home which defendant-landlords knew or should have known existed.
Prior to this house fire, defendant-landlords never warned the
tenants of the potential fire hazard; they also failed to advise
the tenants to vacate the premises because of the hazardous
conditions. Defendant-landlords had a duty to warn tenants of any
danger about which they knew or had reason to know. We therefore
find the trial court's order granting defendants' motion to dismiss
on this issue was improper, and we reverse.
Reversed in part, affirmed in part.
Judge EDMUNDS concurs.
Judge GREENE concurs in a separate opinion.
NO. COA99-1528
NORTH CAROLINA COURT OF APPEALS
Filed: 29 December 2000
BERNICE B. PRINCE,
as GUARDIAN AD LITEM FOR
BRITTANY HINSON, A MINOR CHILD,
and as PERSONAL REPRESENTATIVE
FOR JOSHUA HINSON, DECEASED,
Plaintiff,
v
.
&
nbsp;Columbus County
&
nbsp; No. 98 CVS 1280
O. RICHARD WRIGHT, JR., MICHAEL
KENT JONES, WALL STREET INVESTMENT
CORPORATION, and UNITED STATES
FIDELITY AND GUARANTY COMPANY,
Defendants.
GREENE, Judge, concurring.
Unfair or deceptive trade practices claim
A claim for unfair or deceptive trade practices “may not be
asserted by a third-party claimant against the insurer of an
adverse party.”
Wilson v. Wilson, 121 N.C. App. 662, 665, 468
S.E.2d 495, 497 (1996);
see also Lee v. Mutual Community Sav. Bank,
136 N.C. App. 808, 811, 525 S.E.2d 854, 857 (2000). I, therefore,
agree with the majority for this reason that plaintiff, a third-
party, may not assert an unfair or deceptive trade practices claim
against USF&G, the insurer of an adverse party. Accordingly, the
trial court properly dismissed plaintiff's claim against USF&G for
unfair or deceptive trade practices.
Failure to warn claim against landlords
In
Nelson v. Freeland, 349 N.C. 615, 507 S.E.2d 882 (1998),
the North Carolina Supreme Court “eliminated the distinctions
between licensees and invitees, and established 'a standard of
reasonable care toward all lawful visitors.'”
Lorinovich v. K MartCorp., 134 N.C. App. 158, 161, 516 S.E.2d 643, 646 (quoting
Nelson,
349 N.C. at 631, 507 S.E.2d at 892),
cert. denied, 351 N.C. 107,
--- S.E.2d --- (1999). Pursuant to
Nelson, a landowner is
“required to exercise reasonable care to provide for the safety of
all lawful visitors on his property.”
Id. A landowner, therefore,
must “take reasonable precautions to ascertain the condition of the
property
and to either make it reasonably safe or give warnings as
may be reasonably necessary to inform the [lawful visitor] of any
foreseeable danger.”
Id. at 161-62, 516 S.E.2d at 646.
In this case, Joshua Hinson and Brittany Hinson, as tenants of
the landlords, were lawful visitors on the landlords' property.
The landlords, therefore, had a duty to make the property
reasonably safe or to warn the Hinsons of any forseeable dangers.
Accordingly, I agree with the majority for this reason that the
trial court erred by dismissing plaintiff's claim against the
landlords for failure to warn.
I otherwise fully concur with the majority.
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