Meyer v. McCARLEY AND COMPANY, INC.

215 S.E.2d 583 (1975)

Vincent S. MEYER et al. v. McCARLEY AND COMPANY, INC., et al.

No. 106.

Supreme Court of North Carolina.

June 26, 1975.

*586 Newsom, Graham, Strayhorn, Hedrick, Murray & Bryson, by E. C. Bryson, Jr., Durham, for defendant appellants.

Powe, Porter, Alphin & Whichard, P. A., by J. G. Billings, Durham, for plaintiff appellees.

LAKE, Justice.

The record reveals no material issue of fact between Wheat on the one hand and Anne Meyer and Elizabeth Meyer on the other. It is not controverted that each of them fully paid the purchase price of the 200 shares of Levitz stock held in her account by McCarley. The plaintiffs allege McCarley was given an order to sell such stock at a price, which could have been obtained on the day the order was given, while McCarley denies that it received an order to sell the stock owned by Anne Meyer and Elizabeth Meyer, but that is not a matter at issue as between these plaintiffs and Wheat. It is further not controverted that prior to the opening of their accounts with McCarley, these plaintiffs and Vincent S. Meyer each had an account with Wheat in each of which there was a cash balance due the customer; Vincent S. Meyer ordered these accounts closed as he was authorized to do; he instructed Wheat to deposit the amount so due him in the bank in Richmond upon which he was about to draw a check and Wheat told him it would do so; by its error, Wheat failed so to deposit all of the balance due Vincent S. Meyer and, as a result, the check given by him to McCarley in payment of his 200 shares of Levitz stock was dishonored by the drawee bank.

Summary judgment is appropriate, upon motion therefor duly made, when when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." Rule 56 of *587 the Rules of Civil Procedure, G.S. § 1A-1; McNair v. Boyette, 282 N.C. 230, 192 S.E.2d 457; Blades v. City of Raleigh, 280 N.C. 531, 187 S.E.2d 35; Kessing v. National Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823.

The plaintiffs contend that they sustained a loss by reason of Wheat's negligence in failing to follow the instructions given it by Vincent S. Meyer in making payment of the money which Wheat owed him. They also contend that such failure by Wheat was a breach of its contractual obligation.

The first prerequisite for recovery of damages for injury by negligence is the existence of a legal duty, owed by the defendant to the plaintiff, to use due care. McNair v. Boyette, supra; Moody v. Kersey, 270 N.C. 614, 155 S.E.2d 215; Luttrell v. Mineral Co., 220 N.C. 782, 18 S.E.2d 412; 86 C.J.S. Torts, § 6; 74 Am.Jur.2d, Torts, § 8. The second prerequisite is a breach of that duty. The plaintiffs, Anne and Elizabeth Meyer, have not alleged or shown any interest in, or right to, the balance owed by Wheat to Vincent S. Meyer, their father. Their accounts with Wheat were separate and distinct from his. They could not have maintained an action against Wheat to collect the balance due him. They do not contend that Wheat failed to pay to them, or either of them, the full amount owed by Wheat in accordance with the instructions given Wheat by their agent, Vincent S. Meyer. Whatever negligent failure there may have been by Wheat in carrying out the instructions of Vincent S. Meyer, concerning the payment of the balance due him, was not a violation of a duty owed to his daughters, or either of them.

The third prerequisite to a right of action for damages for negligence is that the alleged negligent act or omission by the defendant was the proximate cause of the injury of which the plaintiff complains. McNair v. Boyette, supra; Moody v. Kersey, supra. Assuming, for the moment, that Wheat owed a legal duty to Anne and Elizabeth Meyer to use due care to send to the designated bank in Richmond the full amount owed by Wheat to Vincent S. Meyer and that Wheat defaulted in the performance of that duty, Wheat would be liable for no loss sustained by Anne and Elizabeth Meyer if a wrongful act by another person, not reasonably foreseeable by Wheat, intervened between Wheat's default and the injury of which these plaintiffs complain and if the injury would not have occurred but for such intervening wrong. Butner v. Spease, and Spease v. Butner, 217 N.C. 82, 6 S.E.2d 808. See also: McNair v. Boyette, supra; Riddle v. Artis, 243 N.C. 668, 91 S.E.2d 894; Potter v. Frosty Morn Meats, Inc., 242 N.C. 67, 86 S.E.2d 780; Loving v. Whitton, 241 N.C. 273, 84 S.E.2d 919; McLaney v. Motor Freight, Inc., 236 N.C. 714, 74 S.E.2d 36; Strong, N.C. Index 2d, Negligence, § 10.

The plaintiffs, Anne and Elizabeth Meyer, allege in their complaint that, through their agent, Vincent S. Meyer, they ordered McCarley to sell their Levitz stock, held by McCarley, and that the sale price specified by them in such instruction could have been obtained at the time the instruction was given. They allege that McCarley refused to carry out this instruction for the reason that Vincent S. Meyer had not paid for his own shares of the Levitz stock. If, as McCarley contends, no such "sell order" was given, the alleged default by Wheat in its procedure for paying its indebtedness to Vincent S. Meyer had no causal relation to any loss sustained by Anne and Elizabeth Meyer through the decline of the Levitz stock on the market. If such "sell order" was given, the failure of McCarley to sell the stock of Anne and Elizabeth Meyer was an intervening wrong by McCarley which could not reasonably have been foreseen by Wheat as a probable result of Wheat's own negligence in disregarding Vincent S. Meyer's instruction to it concerning the payment of its indebtedness to him.

As between Wheat and the plaintiffs, the giving and failure to follow the "sell order" *588 are not in controversy. It is likewise uncontroverted, between them, that Anne and Elizabeth Meyer had paid in full for the Levitz shares held by McCarley for their account. Furthermore, it is conceded by the deposition of the president of McCarley that even had the stock held for these plaintiffs not been paid for that circumstance would not prevent the execution of a "sell order." Our attention has been called to no rule, regulation or custom of any stock exchange or of any regulatory agency which would require, or even justify, the rejection by a broker of his customer's "sell order" for the reason that the customer had not paid for the purchase of such stock. We are aware of no rule of law which would have that effect. The alleged failure of McCarley to comply with the "sell order" given it by Vincent S. Meyer with reference to the stock held by McCarley for the accounts of Anne and Elizabeth Meyer was, therefore, not reasonably foreseeable by Wheat at the time it allegedly failed to carry out the instructions given it by Vincent S. Meyer with reference to the payment of its indebtedness to him. It was an intervening wrongful act of a third party (if the plaintiffs' allegations be true) which insulated the alleged negligence of Wheat. Wheat, therefore, cannot be held liable for the resulting loss sustained by the plaintiffs Anne and Elizabeth Meyer on the theory of negligence.

Assuming that Wheat was under a contractual duty to Vincent S. Meyer to pay its indebtedness to him by transmission of its check to his bank and that Wheat failed to perform this duty, the plaintiffs, Anne and Elizabeth Meyer, were not parties to that contract nor were they third-party beneficiaries thereof. Consequently, they have no standing to sue for its breach. Vogel v. Supply Co., and Supply Co. v. Developers, Inc., 277 N.C. 119, 177 S.E.2d 273; Trust Co. v. Processing Co., 242 N.C. 370, 88 S.E.2d 233; Land Co. v. Realty Co., 207 N.C. 453, 177 S.E. 335. Nothing whatever in the pleadings, or in the depositions and affidavits filed for consideration of the court at the hearing on the motion for summary judgment, indicates that the parties to such contract intended it to be for the benefit of Anne or Elizabeth Meyer. Their accounts with Wheat were separate and distinct from that of Vincent S. Meyer. The balances due them upon such accounts were paid to them by Wheat in accordance with instruction of their agent.

In Williston on Contracts, 3rd Ed., § 402, it is said: "It sometimes happens that a person who is neither the promisee of a contract nor the party to whom performance is to be rendered will derive a benefit from its performance. Such a person is neither a donee beneficiary nor a creditor beneficiary, but belongs to the third typethe incidental beneficiary. An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee." In Kelly v. Richards, 95 Utah 560, 83 P.2d 731, 129 ALR 164, the Court said, "A third person cannot maintain an action upon a simple contract merely because he would receive a benefit from its performance or because he is injured by the breach thereof." In 17A CJS Contracts § 518, it is said: "As a general rule, one who is not a party to a contract, but who has been injured by a breach thereof, cannot maintain an action for such breach or derive any benefit therefrom." In 17 Am. Jur.2d, Contracts, § 297, it is said:

"Ordinarily, the obligations arising out of a contract are due only to those with whom it is made; a contract cannot be enforced by a person who is not a party to it or in privity with it, except under a real party in interest statute, or under certain circumstances, by a third-party beneficiary. As a general rule, whenever a wrong is founded upon a breach of contract, the plaintiff suing in respect thereof must be a party or privy to the contract, and none but a party to a contract has the right to recover damages for its breach against any of the parties thereto. It has been said that he alone to whom a promise is made or in whom its *589 legal interest is vested can enforce performance or complain of its breach."

Nothing in the pleadings or in the depositions or affidavits contained in the record suggests any intent by Vincent S. Meyer or Wheat that the alleged contract, whereby Wheat was to pay its indebtedness to Vincent S. Meyer by sending the amount of the balance in his account with Wheat to the bank designated by him for deposit therein to his credit, was intended to benefit in any way either Anne or Elizabeth Meyer. Neither his statement to Wheat that he wanted to buy other stock nor his statement that he needed his money to cover a check he was about to issue indicates any intent to benefit them by such transfer of the balance due him.

It follows that no cause of action in favor of either Anne or Elizabeth Meyer against Wheat has been alleged in their complaint and, the facts being uncontroverted as between these parties, the Superior Court properly granted Wheat's motion for summary judgment against the plaintiffs Anne K. Meyer and Elizabeth S. Meyer and dismissed their action against Wheat. The Court of Appeals erred in reversing that portion of the judgment of the Superior Court. That portion of the judgment of the Court of Appeals is, therefore, reversed.

Reversed.