First-impression: Builder faces personal liability for negligence

By PAUL THARP, Staff Writer

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“The corporate veil was not pierced here,” Wilmington attorney Ryal Tayloe told Lawyers Weekly.

But the president and sole shareholder of Wrightsville Beach-based Collins Building, Inc., will still face plaintiffs in his individual capacity after the Court of Appeals reversed a New Hanover County Superior Court judge’s dismissal of claims against Collins.

The Jan. 4 first-impression decision is White v. Collins Bldg., Inc. (Lawyers Weekly No. 11-07-0030, 18 pp.).

North Carolina appellate courts had not previously addressed whether officers or employees of a corporation could be subject to personal liability for negligence in the construction context, according to Tayloe.

The White court said they could.

Tayloe represented the plaintiffs, Andrew and Barbara White, who sued Eddie Collins, Collins Building and multiple other defendants after water seepage and bursting pipes caused significant damage to their beachfront home.

They had purchased the home from a developer, AEA & L, LLC. The developer had contracted with Collins Building to build the home.

“The law imposes upon the builder of a house the general duty of reasonable care in constructing the house to anyone who may foreseeably be endangered by the builder’s negligence, including a subsequent owner who is not the original purchaser,” Judge Linda Stephens wrote for the court, citing Everts v. Parkinson, 147 N.C. App. 315 (2001), and Oates v. JAG, Inc., 314 N.C. 276 (1985).

The lack of privity between the Whites and Collins did not bar them from bringing an action against Collins. That is because “it is thoroughly well settled that a man is personally liable for all torts committed by him, consisting in misfeasance, as fraud, conversion, acts done negligently, etc.,” Judge Stephens wrote.

The same principle applies in tort actions for negligent construction against a builder, Tayloe said.

“From a baseline perspective, you have to determine whether this is a breach of contract or breach of implied warranty, or whether this is a negligence claim against the builder,” Tayloe said. “The initial analysis is whether the cause of action is in contract or in tort.”

The Whites didn’t have a contract with Collins Building nor with Collins individually, so they had to bring a negligence claim, he said.

If the Whites had had a contract with Collins, Tayloe said they would have been limited to the relief spelled out in the contract.

“That’s the distinction that has to be made here,” he said. “If you are bringing a tort claim against the builder, the building company can be held liable and also any employees who are personally responsible for faulty construction.”

Tayloe said Collins was not just a figurehead in a faraway office. “He was involved in the day-to-day construction of the house. He was personally negligent.”

Tayloe said it is only in the tort context that both an individual and a company can be held liable for damages incurred while an individual is working in the course and scope of his or her business.

The court agreed.

“[A]n individual member of a limited liability company or an officer of a corporation may be individually liable for his or her own torts, including negligence,” Judge Stephens wrote.

The court distinguished “[t]he two most common methods of establishing personal liability in a business setting … piercing the corporate veil and individual responsibility for torts. …”

An individual tortfeasor, Judge Stephens wrote, is not shielded from responsibility by the potential for corporate liability. Instead, the injured party has “a choice as to which party to hold liable for the tort.”

Tayloe said the principle is easy to envision in the motor vehicle context. An employee operating a vehicle in the course and scope of his employment whose negligence causes injury to a claimant may be sued individually for negligence.

The claimant may also sue the company for whom the employee was working at the time he caused the accident.

The claimant, Tayloe said, can sue the employee, the company or both. “It is the claimant’s choice,” he said.

Tayloe said the Whites had voluntarily dismissed AEA & L and other defendants from the suit while they appealed the issue of whether Collins could face personal liability.

The Whites re-filed the lawsuit against those defendants on Jan. 4, the day before the one-year anniversary of the voluntary dismissals.

The Court of Appeals remanded the case to New Hanover County.

An attorney for Collins had not returned Lawyers Weekly’s request for comment by deadline.

Opinion Brief

Case name: White v. Collins Bldg., Inc.

Court: N.C. Court of Appeals

Judges: Judge Linda Stephens; Judges Rick Elmore and Barbara Jackson, concurring

Date: Jan. 4, 2011

Plaintiff-appellant’s attorney: Ryal Tayloe of Ward & Smith (Wilmington)

Defendant-appellee’s attorney: Christopher M. Theriault and Christopher Chleborowicz, both of Chleborowicz & Theriault (Wilmington)

Issue: Did the trial court err in granting dismissal of a suit against a home builder in his personal capacity where the plaintiffs alleged negligence against him and the company?

Holding: Yes, one is personally liable for all torts committed by him, including negligence, notwithstanding that he may have acted as agent for another or as an officer for a corporation. The trial court’s dismissal of the plaintiffs’ claims against the defendant in his individual capacity is reversed.

Opinion digest: See Page 8.