# Energy Investors Fund, L.P. v. Metric Constructors, Inc.

> Court of Appeals of North Carolina · June 15, 1999 · 133 N.C. App. 522

URL: https://www.frixlaw.com/law-library/cases/8894779

## Case

- **Full name:** ENERGY INVESTORS FUND, L.P. v. METRIC CONSTRUCTORS, INC., KVAERNER ASA, KVAERNER ENVIRONMENTAL TECHNOLOGIES, INC., METRIC/KVAERNER FAYETTEVILLE, J.V., J.A. JONES, INC., and LOCKWOOD GREENE ENGINEERS, INC.
- **Court:** Court of Appeals of North Carolina
- **Decided:** June 15, 1999
- **Citations:** 133 N.C. App. 522; 516 S.E.2d 399; 1999 N.C. App. LEXIS 614
- **Precedential status:** Published
- **Opinion:** Dissent by Horton
- **Judges:** Goodson, Horton, Lewis, Timmons
- **Cited by:** 4 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

Judge Horton
dissenting.
The focal point of this appeal is whether plaintiff, one of a number of limited partners in a Delaware limited partnership, has standing to assert claims for its allegedly individual injuries. I agree with the majority that it is appropriate to refer to North Carolina case law concerning the standing of shareholders in a corporation to bring individual claims arising from corporate losses. As a general rule, a stockholder may not sue for injuries to his corporation nor may a limited partner sue for injuries to its general partner which results in *528 diminution or destruction of the value of its investment. Jordan v. Hartness, 230 N.C. 718, 719 , 55 S.E.2d 484, 485 (1949). Our Supreme Court has, however, recently reaffirmed two broad exceptions to the general rule:
There are two major, often overlapping, exceptions to the general rule that a shareholder cannot sue for injuries to his corporation: (1) where there is a special duty, such as a contractual duty, between the wrongdoer and the shareholder, and (2) where the shareholder suffered an injury separate and distinct from that suffered by other shareholders. We adopt these exceptions to the general rule and hold that a shareholder may maintain an individual action against a third party for an injury that directly affects the shareholder, even if the corporation also has a cause of action arising from the same wrong, if the shareholder can show that the wrongdoer owed him a special duty or that the injury suffered by the shareholder is separate and distinct from the injury sustained by the other shareholders or the corporation itself.
Barger v. McCoy Hillard & Parks, 346 N.C. 650, 658-59 , 488 S.E.2d 215, 220 (1997) (citations omitted). The two exceptions are stated in the disjunctive, so that if plaintiff proves that defendants owe it a “special duty,” it is not necessary that plaintiff also prove that its injury is distinct from the injury sustained by other shareholders or by the corporation.
This appeal is not before us in a summary judgment or trial context, but on a motion to dismiss. This Court has frequently stated the appellate standard of review of a grant of a motion to dismiss as follows:
The test on a motion to dismiss for failure to state a claim upon which relief can be granted is whether the pleadings, when taken as true, are legally sufficient to satisfy the elements of at least some legally recognized claim. In ruling upon a Rule 12(b)(6) motion, the trial court should liberally construe the complaint and should not dismiss the action unless it appears to a certainty that plaintiff is entitled to no relief under any statement of facts which could be proved in support of the claim.
Arroyo v. Scottie’s Professional Window Cleaning, 120 N.C. App. 154, 158 , 461 S.E.2d 13, 16 (1995) (citations omitted) (emphasis *529 added), disc. review improvidently allowed, 343 N.C. 118 , 468 S.E.2d 58 (1996).
Here, plaintiff alleged that defendants owed it a “special duty” because defendants induced plaintiffs $16 million investment in the project by misrepresenting their expertise and experience in planning and constructing similar projects to plaintiff, and by assuring plaintiff that the plant would be constructed to meet designated performance criteria, when in fact defendants did not have such specialized ability and experience. Plaintiff further alleged that defendants’ misrepresentations were made to induce plaintiff to invest in the project, that plaintiff relied on defendants’ misrepresentations, and did invest heavily in the project. Treating those allegations as true, as we must, plaintiff has clearly alleged sufficient facts to demonstrate that defendants owed it a special duty. Certainly, we cannot say “to a certainty” that plaintiff is entitled to no relief based on its allegations.
The majority seem to say that there is no “special duty” owed plaintiff by defendants because plaintiff was already a member of BCH, the limited partnership, when it invested in the project in question. However, plaintiff’s claim is not based upon misrepresentations which caused it to become a partner in BCH, but upon misrepresentations which caused it to invest an additional $16 million in this energy conversion project. In Howell v. Fisher, 49 N.C. App. 488 , 272 S.E.2d 19 (1980), disc. review denied, 302 N.C. 218 , 277 S.E.2d 69 (1981), we held in part that “a corporation is not a necessary party when stockholders seek damages in their own right for negligent misrepresentations made to them before they were stockholders for the purpose of inducing their investment.” Id. at 498, 272 S.E.2d at 26 . While the Howell plaintiffs were not shareholders before the misrepresentations of those defendants, I see no logical distinction between the misrepresentations which induced them to purchase stock in an existing corporation and those which induced plaintiff in the case before us to make an additional substantial investment in the limited partnership to fund defendants’ energy conversion project.
In further support of its position that it may bring a separate action in its own behalf, plaintiff relies on Browning v. Levien & Co., 44 N.C. App. 701 , 262 S.E.2d 355 , disc. reviews denied, 300 N.C. 371 , 267 S.E.2d 673 (1980). Browning was an action by limited partners in a development consortium who sued an architect and other defendants to recover their lost investment. The Browning plaintiffs brought suit on behalf of themselves and on behalf of the limited part *530 nership. This Court held that the limited partners had no standing to sue in the name of the limited partnership because N.C. Gen. Stat. § 59-26 as then written prevented limited partners from instituting an action on behalf of the limited partnership of which they were members. Id. at 703 , 262 S.E.2d at 357 . However, the limited partners could maintain the action to recover their individual investments:
In this case the plaintiffs are suing for damages to their interest in the partnership based on the negligence of the defendants. There is no necessity that they be allowed to sue on behalf of the limited partnership.
Id. at 704 , 262 S.E.2d at 357 (emphasis added). N.C. Gen. Stat. § 59-26 has since been repealed, and limited partners can now bring a derivative action on behalf of the limited partnership under certain limited circumstances. See N.C. Gen. Stat. § 59-1001 (1989).
In addition, N.C. Gen. Stat. § 59-1006 also seems to recognize that limited partners have rights individual to them in addition to the right to bring derivative actions. It provides that “[t]he provisions of this Article shall not be construed to deprive a partner of whatever rights of action he may possess in his individual capacity. ” Id. (emphasis added). We further note that Browning was decided in 1980, and that the General Assembly has not seen fit to change its result by statutory amendment. The Revised Uniform Limited Partnership Act was enacted by the 1985 Session Laws (Regular Session 1986), but did not change the Browning result. See generally, N.C. Gen. Stat. § 59-101 , et. seq. (1989).
Finally, the majority are also concerned that plaintiff might receive a double recovery if allowed to bring a separate action. Initially, defendants moved to dismiss the complaint in this matter pursuant to Rules 12(b)(7), 17, and 19 on the grounds that plaintiff failed to join BCH as a necessary party and that plaintiff is not the real party in interest, in addition to the Rule 12(b)(6) grounds of failure to state a claim. Defendants further argued that the action should be abated because substantially similar actions involving the same parties, issues, and relief sought in this case are pending in a court of competent jurisdiction. The trial court, however, did not rule on defendants’ contentions that BCH should have been joined as a necessary party and that plaintiff is not the real party in interest or defendants’ contention that this action should be abated because of prior pending actions. Unfortunately, those issues are not properly before us, and we may not consider them.
*531 Although the majority do not reach the issue, I have carefully considered the allegations of the complaint, and conclude that plaintiff alleged sufficient facts to state claims against defendants for negligence, negligent misrepresentation, and breach of warranty. I respectfully dissent, therefore, from the holding of the majority that plaintiff has not alleged sufficient facts to demonstrate that it has standing to pursue its claims. I vote to reverse the decision of the trial court and to remand the matter to the trial court with directions to rule on defendants’ remaining motions.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8894779. Public record. Not legal advice.