An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Proced ure.

NO. COA02-923

NORTH CAROLINA COURT OF APPEALS

Filed: 6 May 2003

SHERRILL W. SHAW and
ELLA JUNE SHAW,
            Plaintiffs,

    v .                             Guilford County
                                No. 02 CVS 4632
PRICEWATERHOUSECOOPERS, LLP
a/k/a PRICEWATERHOUSECOOPERS
L.L.P.,
            Defendant.

    Appeal by plaintiffs from order filed 6 June 2002 by Judge W. Douglas Albright in Guilford County Superior Court. Heard in the Court of Appeals 26 March 2003.

    Wyatt Early Harris Wheeler LLP, by William E. Wheeler and Frederick G. Sawyer, for plaintiff appellants.

    Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Jim W. Phillips, Jr. and Jessica M. Marlies, for defendant appellee.

    BRYANT, Judge.

    Sherrill W. Shaw and Ella June Shaw (collectively plaintiffs) appeal an order entered 6 June 2002 dismissing their complaint against PricewaterhouseCoopers, LLP (defendant) for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure.
    In their complaint filed 6 March 2002, plaintiffs presented claims based on defendant's involvement in the accounting aspects of a purchase agreement between plaintiffs and Living.com, anInternet-based business, for (1) negligent misrepresentation, (2) breach of contract on the basis of third-party beneficiary liability, (3) negligence, and (4) unfair and deceptive practices. The complaint alleged that, on 26 March 1999, plaintiffs, the former sole shareholders of Shaw Furniture Galleries, Inc. (Shaw Furniture), executed a purchase agreement with Living.com in which Living.com agreed to buy all the outstanding shares of Shaw Furniture. Pursuant to the purchase agreement, Living.com was to pay $5.6 million for the shares, with a price adjustment dependent on the net worth of Shaw Furniture on the closing date.
    The purchase agreement assigned to defendant, Living.com's accounting firm, the task of preparing the closing date balance sheet (CDBS) reflecting Shaw Furniture's net worth. The purchase agreement further specified that, in preparing the CDBS, defendant was to use the “historical accounting policies” utilized by Shaw Furniture rather than the “generally accepted accounting principles” (GAAP). The CDBS dated 31 May 1999 and delivered to plaintiffs and Living.com, however, stated that defendant had conducted the audit “in conformity with generally accepted accounting principles.” As a result, plaintiffs alleged, the CDBS did not accurately reflect Shaw Furniture's net worth. According to plaintiffs:
        [H]ad [defendant] prepared . . . [Shaw Furniture's] CDBS in accordance with the basis of accounting required by the [p]urchase [a]greement, [Shaw Furniture's net worth] would have been $3,047,352.00[, which] would have resulted in an adjustment of the [p]urchase [p]rice of $247,352.00 inplaintiffs' favor, plus the return of escrow funds of $1.1 million.

The complaint further stated that, “[a]fter receiving the CDBS, plaintiffs utilized the dispute resolution procedure in the [p]urchase [a]greement to contest [defendant's] determination of [Shaw Furniture's net worth].”   (See footnote 1)  In August 2000, Living.com filed for bankruptcy, and plaintiffs were only able to recover $600,000.00 of the escrow funds.
    On 7 May 2002, defendant filed a motion to dismiss plaintiffs' complaint for failure to state a claim upon which relief could be granted. The trial court granted the motion in an order filed 6 June 2002.

___________________________

    The issues are whether: (I) plaintiffs relied on defendant's preparation of the CDBS; (II) plaintiffs were intended beneficiaries of defendant's auditing contract with Living.com; and (III) plaintiffs suffered foreseeable harm.
I

            The essential question on a motion under Rule 12(b)(6) “is whether the complaint, when liberally construed, states a claim upon which relief can be granted on any theory.” Thetrial court must treat the allegations in the complaint as true, but the court is not required to accept as true any conclusions of law or unwarranted deductions of fact. When the complaint fails to allege the substantive elements of some legally cognizable claim, or where it alleges facts which defeat any claim, the complaint must be dismissed.

Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 56, 554 S.E.2d 840, 844 (2001) (citations omitted). With respect to claims for negligent misrepresentation, this State has “adopted the Restatement 2d [of Torts] definition of negligent misrepresentation.” Driver v. Burlington Aviation, Inc., 110 N.C. App. 519, 525, 430 S.E.2d 476, 480 (1993). Section 552 of the Restatement 2d provides:
        (1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

        (2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered

        (a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

        (b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

Restatement (Second) of Torts § 552 (1977) (emphasis added). “[T]owithstand [a] motion to dismiss, plaintiffs . . . must [thus] be able to show that they justifiably relied -- to their detriment -- on the information provided them by defendant[].” Simms v. Prudential Life Ins. Co. of Am., 140 N.C. App. 529, 532-33, 537 S.E.2d 237, 240 (2000) (emphasis omitted).
    In this case, the purchase agreement explicitly granted plaintiffs the right to review and reject the CDBS prepared by defendant. Moreover, plaintiffs admitted in their complaint that they in fact exercised this right by contesting defendant's determination of Shaw Furniture's net worth. Accordingly, there was no reliance by plaintiffs on either defendant's representation to use a certain accounting method or defendant's actual calculations. As the complaint clearly alleges facts that defeat plaintiffs' claim for negligent misrepresentation, the trial court properly dismissed this cause of action. See Oberlin Capital, 147 N.C. App. at 56, 554 S.E.2d at 844.
II

    Plaintiffs also pursued an action against defendant for breach of contract. In order to establish a breach of contract claim based on the third-party beneficiary doctrine, a plaintiff's allegations must show: (1) the existence of a valid and enforceable contract (2) between two other persons, (3) which was entered into for the plaintiff's direct, and not incidental, benefit. Leasing Corp. v. Miller, 45 N.C. App. 400, 405-06, 263 S.E.2d 313, 317 (1980). “A person is a direct beneficiary of [a] contract if the contracting parties intended to confer a legally enforceablebenefit on that person.” Holshouser v. Shaner Hotel Grp. Props. One, 134 N.C. App. 391, 400, 518 S.E.2d 17, 25 (1999), aff'd, 351 N.C. 330, 524 S.E.2d 568 (2000). It does not suffice that a contract benefits the plaintiff in some way “if, when the contract was made, the contracting parties did not intend it to benefit the plaintiff directly.” Id. In ascertaining the intent of the contracting parties, the court should not only consider the actual language of the contract but also the circumstances surrounding the transaction. Id. In addition, in analyzing a plaintiff's complaint under Rule 12(b)(6), “'the contract must be construed strictly against the party seeking enforcement.'” Id. (quoting Chemical Realty Corp. v. Home Fed'l Savings & Loan, 84 N.C. App. 27, 34, 351 S.E.2d 786, 791 (1987)).
    The record in this case does not include the auditing agreement between Living.com and defendant; however, the terms of the purchase agreement between plaintiffs and Living.com lend sufficient insight to determine defendant's and Living.com's intent. As noted above, the purchase agreement granted plaintiffs the right, exercised by plaintiffs, to review and reject the CDBS prepared by defendant. Because the purchase agreement thus reveals that plaintiffs were not intended to rely on the figures provided by defendant, they were also not intended to directly benefit from them. Moreover, any disagreement with regard to the accounting terms in the CDBS, including Shaw Furniture's net worth, was to be settled between plaintiffs and Living.com, or if this could not be accomplished, by an independent accounting firm. As such,plaintiffs' complaint fails to show that Living.com and defendant “intended to confer a legally enforceable benefit on [plaintiffs].” Id. Accordingly, the trial court did not err in dismissing plaintiffs' breach of contract claim.
III

    We now consider plaintiffs' negligence claim and whether plaintiffs suffered foreseeable harm as a result of defendant's actions. “A defendant is liable for his negligence if the negligence is the proximate cause of injury to a person to whom the defendant is under a duty to use reasonable care.” Hart v. Ivey, 332 N.C. 299, 305, 420 S.E.2d 174, 178 (1992). Even assuming defendant in this case bore a duty of care with respect to plaintiffs when it prepared the CDBS, plaintiffs have failed to show foreseeable harm in light of the fact that the purchase agreement granted them the power to reject defendant's work and also provided a mechanism for dispute resolution. Any economic loss plaintiffs may have suffered in this case was due to Living.com's bankruptcy filing. Defendant, however, cannot be made to bear responsibility for this intervening factor. See Muse v. Charter Hosp. of Winston-Salem, 117 N.C. App. 468, 476, 452 S.E.2d 589, 595 (no proximate cause where the defendant is negligent but “[t]he intervening cause . . . produces a result which would not otherwise have followed, and which could not have been reasonably anticipated”), aff'd, 342 N.C. 403, 464 S.E.2d 44 (1995). The same rationale applies to plaintiffs' unfair and deceptive practices claim. See Walker v. Branch Banking & Tr. Co., 133 N.C. App. 580,585, 515 S.E.2d 727, 730 (1999) (“even assuming arguendo that [the] defendants engaged in an unfair trade practice, [the] plaintiff has failed to show how [the] defendants' conduct proximately caused actual injury to [the] plaintiff or his business”). The trial court therefore properly dismissed plaintiffs' claims for negligence and unfair and deceptive practices.   (See footnote 2) 
    Affirmed.
    Judges TIMMONS-GOODSON and GEER concur.
    Report per Rule 30(e).


Footnote: 1
    The purchase agreement granted plaintiffs “the right, upon written notice to [Living.com] within fifteen (15) days following receipt by [plaintiffs] of the Closing Date Balance Sheet, to review and accept or reject the [CDBS].” It further provided that, “[i]n the event [plaintiffs] reject the [CDBS], . . . [and Living.com] and [plaintiffs] fail to resolve any such disagreement within thirty (30) days after [plaintiffs'] receipt of the written notice of rejection, [the issue] shall be determined within sixty (60) days thereafter by a nationally recognized independent accounting firm.”
Footnote: 2
    Because plaintiffs' additional claim for punitive damages is dependent on the underlying claims properly dismissed by the trial court, we do not reach this issue. See N.C.G.S. § 1D-15(a) (2001) (criteria for award of punitive damages).

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