Negligence--purchase of stock--contributory negligence
The trial court did not err by entering summary judgment in favor of defendant on
plaintiffs' negligence claims arising from their purchases of certain stock, because the doctrine of
contributory negligence precludes any recovery by plaintiffs on these facts when: (1) none of the
three plaintiffs reviewed or even requested financial data for the two companies before
purchasing at least tens of thousands of dollars of stock in one or both corporations; and (2) each
plaintiff signed an investment letter stating, in effect, that his decision to purchase the stocks was
not made based upon any representation as to the stock's likely performance, but rather upon his
independent examination and judgment of the company's prospects with the understanding that
there was an inherent economic risk involved.
Womble Carlyle Sandridge & Rice, P.L.L.C., by Allan R. Gitter
and Douglas R. Vreeland, for plaintiffs-appellants.
Poyner & Spruill L.L.P., by E. Fitzgerald Parnell, III and
Rebecca B. Wofford, for defendant-appellee.
ELMORE, Judge.
Lutz Hahne, Willie M. Easterwood, and Raymond Monroe
(collectively, plaintiffs) appeal from entry of summary judgment in
favor of John F. Hanzel (defendant) on their negligence claims
arising from their purchases of certain stock. Because we conclude
the doctrine of contributory negligence precludes any recovery by
plaintiffs on these facts, we affirm. On 26 January 2001, plaintiffs Easterwood and Monroe filed an
action asserting claims against defendant and others for violation
of state and federal securities law, legal malpractice, and
negligence, all in connection with the purchase of stock in
Invinca-Shield, Inc. (Invinca-Shield) by Easterwood and Monroe. On
18 April 2002, plaintiff Hahne filed an action alleging a single
cause of action, negligence, against defendant, arising from
Hahne's purchases of stock in Invinca-Shield and another
corporation, Golf Pro Savings, Inc. (Golf Pro). On 22 April 2002,
Easterwood and Monroe voluntarily dismissed without prejudice all
their claims against all defendants, save the negligence claim
against Hanzel. Defendant thereafter filed motions for summary
judgment in each case, and on 21 August 2002 a consent order was
entered allowing consolidation of the cases for pretrial purposes.
Thus, at the time defendant's motions for summary judgment were
heard, the only remaining claims against defendant in either case
were for negligence arising out of plaintiffs' purchases of stock
in either Invinca-Shield, Golf Pro, or both.
On 4 November 2002, the trial court granted summary judgment
in defendant's favor on all of plaintiffs' remaining claims. From
this judgment, plaintiffs now appeal.
The record evidence reveals that plaintiff Monroe engaged
defendant, an attorney, to incorporate various businesses and
handle other legal matters unrelated to the purchase of securities,
beginning in 1996. At his deposition, Monroe testified that while
visiting defendant's office to talk about “some other matter,”
defendant encouraged him to invest in Invinca-Shield. Monroetestified that defendant characterized Invinca-Shield as being in
“excellent financial condition,” but Monroe did not ask to see any
financial statements of Invinca-Shield prior to making his
investment. On 16 February 2000, Monroe purchased $70,000.00 worth
of Invinca-Shield stock by delivering to defendant a check, made
payable to defendant as trustee for Invinca-Shield. On 18 February
2000, Monroe executed a share subscription agreement and an
accompanying investment letter, which provided in pertinent part as
follows:
2. Subscriber is not acquiring the Shares based upon
any representation, oral or written, by any person with
respect to the future value of, or income from, the
Shares but rather upon an independent examination and
judgment as to the prospects of [Invinca-Shield]; and,
. . . .
Subscriber acknowledges that Subscriber must continue
to bear the economic risk of the investment in the Shares
for an indefinite period . . . .
. . . .
. . . . Acceptance by Subscriber of the certificate
representing the Shares shall constitute a confirmation
by Subscriber that all agreements and representations
made herein shall be true and correct at such time.
(See footnote 1)
. . . .
Monroe testified that defendant did not try to keep him from
reading these documents, and also that Monroe did not tell
defendant he disagreed with any of the investment letter's terms.
At his deposition, plaintiff Easterwood testified that he met
defendant twice prior to purchasing Invinca-Shield stock; each time
they discussed matters unrelated to the purchase of securities. Easterwood regularly trades stocks online through E-trade, without
the assistance of a broker, and has invested at least tens of
thousands of dollars per year in stocks over the past decade.
Easterwood testified that he decided to invest $30,000.00 in
Invinca-Shield based solely on information given to him by
plaintiff Monroe, and that he never spoke with defendant about
Invinca-Shield prior to his investment. Easterwood was never a
party to any discussions between Monroe and defendant regarding
Invinca-Shield. Like Monroe, Easterwood did not ask to see any
financial statements of Invinca-Shield prior to making his
investment. On 18 February 2000, Easterwood also signed a share
subscription agreement and an investment letter identical to the
one executed by Monroe. Easterwood testified that defendant did
not try to prevent him from reading the investment letter, and that
he did not object to any of its terms.
Plaintiff Hahne testified at his deposition that he engaged
defendant to incorporate several of his businesses, handle multiple
real estate closings, and perform other legal services unrelated to
the purchase of securities, beginning in 1997. Hahne testified
that in late 1999, defendant encouraged him to invest in Invinca-
Shield, and that he subsequently purchased $200,000.00 of Invinca-
Shield stock “totally relying upon [defendant's] representations .
. . . without having seen any financials, without having met
anyone, because [defendant] says this is the greatest thing and
they are going to go public . . . and this is going to be a
tremendous investment.” On or about 11 January 2000, Hahne signed
a share subscription agreement and an investment letter identicalto those executed by Monroe and Easterwood. Hahne testified that
he did not read the investment letter before signing it, and that
defendant did not prevent him from reading the document. Hahne
neither requested nor reviewed any financial data regarding
Invinca-Shield prior to investing. Hahne testified that in June
2000 defendant encouraged him to invest an additional $350,000.00
in Invinca-Shield, but that after he gave defendant the money,
defendant invested it in Golf Pro Savings instead. Hahne signed a
share subscription agreement and investment letter with terms
identical to the Invinca-Shield documents, again without reading
them. Hahne testified that during the time between his first
investment in Invinca-Shield and his subsequent purchase of Golf
Pro stock, he neither requested nor reviewed any financial data for
either corporation.
“In a negligence action, summary judgment for defendant is
proper where the evidence fails to establish negligence on the part
of defendant, establishes contributory negligence on the part of
plaintiff, or establishes that the alleged negligent conduct was
not the proximate cause of the injury.” Williams v. Power & Light
Co., 36 N.C. App. 146, 147, 243 S.E.2d 143, 144 (1978), rev'd on
factual grounds, 296 N.C. 400, 250 S.E.2d 255 (1979) (emphasis
added).
Our Supreme Court has explained the doctrine of contributory
negligence as follows:
Every person having the capacity to exercise ordinary
care for his own safety against injury is required by law
to do so, and if he fails to exercise such care, and such
failure, concurring and cooperating with the actionable
negligence of defendant contributes to the injury
complained of, he is guilty of contributory negligence.Ordinary care is such care as an ordinarily prudent
person would exercise under the same or similar
circumstances to avoid injury.
Clark v. Roberts, 263 N.C. 336, 343, 139 S.E.2d 593, 597 (1965).
The defendant has the burden of proving contributory negligence,
and the existence of contributory negligence is “rarely appropriate
for summary judgment, and only where the evidence establishes a
plaintiff's negligence so clearly that no other reasonable
conclusion may be reached.” Martishius v. Carolco Studios, Inc.,
355 N.C. 465, 479, 562 S.E.2d 887, 896 (2002). After carefully
considering the record, the parties' deposition testimony, and the
arguments of counsel, we conclude that this is such a case.
The record evidence shows that each of the three plaintiffs
were experienced investors who were actively seeking investment
opportunities involving substantial sums of money when defendant
encouraged plaintiffs Monroe and Hahne to purchase Invinca-Shield
stock in late 1999-early 2000. By his own admission, plaintiff
Easterwood never even spoke to defendant about Invinca-Shield prior
to purchasing $30,000.00 worth of stock in the company, instead
relying solely on information given to him by plaintiff Monroe.
None of the three plaintiffs reviewed, or even requested, financial
data for Invinca-Shield or Golf Pro before purchasing at least tens
of thousands of dollars of stock in one or both corporations. Only
plaintiff Monroe made any effort to speak with Invinca-Shield
management or inspect the company's facilities prior to investing,
and Monroe testified that he invested $70,000.00 based on what he
saw and heard while touring the facility and speaking with an
Invinca-Shield employee. Each plaintiff signed an investmentletter stating, in effect, that his decision to purchase the stock
was not made based upon any representation as to the stock's likely
performance, but rather upon his independent examination and
judgment of the company's prospects, with the understanding that
there was an inherent economic risk involved. Plaintiff Hahne, by
his own admission, did not even read the share subscription
agreement or investment letter before signing off on a $200,000.00
stock purchase, and he subsequently made an additional $350,000.00
investment, again without undertaking any independent investigation
or even reading the transaction documents.
Because we conclude that on these facts, the contributory
negligence of all three plaintiffs has been so clearly established
that no other reasonable conclusion may be reached, the trial
court's order granting summary judgment in defendant's favor is
affirmed. Carolco Studios, Inc., 355 N.C. at 479, 562 S.E.2d at
896.
Affirmed.
Judges WYNN and TIMMONS-GOODSON concur.
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