CHESAPEAKE MICROFILM v. Eastern Microfilm Sales and Service, Inc.

372 S.E.2d 901, 91 N.C. App. 539, 1988 N.C. App. LEXIS 900
CourtCourt of Appeals of North Carolina
DecidedOctober 18, 1988
Docket8821SC227
StatusPublished
Cited by16 cases

This text of 372 S.E.2d 901 (CHESAPEAKE MICROFILM v. Eastern Microfilm Sales and Service, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CHESAPEAKE MICROFILM v. Eastern Microfilm Sales and Service, Inc., 372 S.E.2d 901, 91 N.C. App. 539, 1988 N.C. App. LEXIS 900 (N.C. Ct. App. 1988).

Opinion

BECTON, Judge.

This appeal is from an order dismissing the amended counterclaim of defendants David Wright and Eastern Microfilm Sales and Service, Inc., under N.C. Gen. Stat. Sec. 1A-1, R. Civ. P. 12(b)(6) (1983) for failure to state a claim upon which relief can be granted. We affirm the trial court’s dismissal of defendants’ amended counterclaim.

I

Defendant Eastern Microfilm (Eastern) is a Virginia corporation with offices located in Bassett, Virginia. Defendant Wright is Eastern’s principal stockholder and its president. Plaintiff, Chesapeake Microfilm, Inc. (Chesapeake), is a North Carolina corporation whose president and sole stockholder is Ronnie Cox. Both businesses perform microfilming services for customers drawn from approximately the same geographic area.

In September 1986, Chesapeake filed suit against Wright and Eastern. Defendants counterclaimed, and, following an initial dismissal under Rule 12(b)(6), they filed an amended counterclaim on 31 August 1987.

*541 Defendants alleged in count one of their amended counterclaim that Chesapeake, beginning in 1978,> carried on a “fraudulent scheme” by submitting low bids for microfilming contracts, winning those contracts, and then overcharging the customers when it performed its services. These “fraudulent and deceptive practices,” defendants averred, allowed Chesapeake to “[obtain] some of Eastern’s customers and [to obtain] contracts which Eastern had bid upon.” Defendants claimed to have lost $120,000 per year in gross revenues and alleged $15,000 to $20,000 in annual lost profits from 1978 until the commencement of the lawsuit.

Count two of the counterclaim stated that in December 1985, Cox contacted Wright “in an ostensible effort to sell [Chesapeake] to Wright.” Defendants charged that Cox invited negotiations about the purchase because Cox had learned of Wright’s interest “in expanding Eastern’s operation in North Carolina and . . . that Wright and/or Eastern might be opening a business in Forsyth [County].” Count two averred that during the course of the negotiations, Cox concealed “the true condition of the accounts and books of Chesapeake” and the existence of “serious pending claims against Chesapeake, which . . . would have fallen upon Eastern to pay had Eastern purchased Chesapeake.” In addition, defendants claimed that Cox “reneged on the key ingredient of the contract [for the purchase of Chesapeake],” an ingredient apparently involving an “indefinite purchase price formula.” The gist of count two was that Cox used the negotiations as a ruse “to hinder and delay Wright and Eastern from opening a business in the Winston-Salem, North Carolina, area” and to prevent defendants from bidding upon “an extremely lucrative” microfilming contract which ultimately went to Chesapeake. Defendants cited the lawsuit as an additional device employed by Cox to impede defendants’ entry into the North Carolina market.

Both counts of the amended counterclaim charged that Cox had perpetrated fraud and had engaged in unfair and deceptive trade practices in violation of N.C. Gen. Stat. ch. 75 (1985). The trial court dismissed defendants’ amended counterclaim following a second 12(b)(6) motion by plaintiff. We now are asked to determine whether the trial court properly ruled that the amended counterclaim stated no claim upon which relief could have been granted.

*542 II

An inquiry into the sufficiency of a counterclaim to withstand a motion to dismiss under Rule 12(b)(6) is identical to that regarding the sufficiency of a complaint to survive the same motion. See Barnaby v. Boardman, 70 N.C. App. 299, 302, 318 S.E. 2d 907, 909 (1984), rev’d on other grounds, 313 N.C. 565, 330 S.E. 2d 600 (1985). For purposes of a motion to dismiss, defendants’ allegations in the counterclaim must be treated as true. See, e.g., Jenkins v. Wheeler, 69 N.C. App. 140, 142, 316 S.E. 2d 354, 356 (1984), disc. rev. denied, 311 N.C. 758, 321 S.E. 2d 136 (1984). Finally, the counterclaim “must state enough to satisfy the requirements of the substantive law giving rise to the claim.” Braun v. Glade Valley School, Inc., 77 N.C. App. 83, 86, 334 S.E. 2d 404, 406 (1985). Within this framework, we turn first to defendants’ assertion on appeal that the amended counterclaim states a cause of action for fraud.

A. Fraud: Count I

To make out their claim of actual fraud, the defendants must have alleged with particularity: 1) that plaintiff made a false representation or concealment of a material fact; 2) that the representation or concealment was reasonably calculated to deceive defendants; 3) that plaintiff intended to deceive them; 4) that defendants were deceived; and 5) that defendants suffered damage resulting from plaintiffs misrepresentation or concealment. See, e.g., Terry v. Terry, 302 N.C. 77, 83, 273 S.E. 2d 674, 677 (1981). Count one alleges neither misrepresentation nor concealment on the part of plaintiff. Defendants failed, in other words, to offer the first ingredient necessary to a fraud charge, and thus we conclude, without further discussion, that count one states no cause of action for fraud.

B. Fraud: Count II

Allegations of fraud are subject to more exacting pleading requirements than are generally demanded by “our liberal rules of notice pleading.” Stanford v. Owens, 76 N.C. App. 284, 289, 332 S.E. 2d 730, 733, disc. rev. denied, 314 N.C. 670, 336 S.E. 2d 402 (1985) (citations omitted). Rule 9(b) of the North Carolina Rules of Civil Procedure provides in relevant part that:

*543 (b) . . . In all averments of fraud . . . the circumstances constituting fraud . . . shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.

N.C. Gen. Stat. Sec. 1A-1, R. Civ. P. 9(b) (1983). In Terry, our Supreme Court instructed that “in pleading actual fraud the particularity requirement is met by alleging time, place, and content of the fraudulent representation, identity of the person making the representation and what was obtained as a result of the fraudulent act or representation.” 302 N.C. at 85, 273 S.E. 2d at 678. Terry’s formula ensures that the requisite elements of fraud will be pleaded with the specificity required by Rule 9(b).

In our view, count two of the amended counterclaim fails to make out a claim for fraud under the Terry test. The allegations of count two are notably anemic concerning the content of the fraudulent statements attributed to plaintiff. For example, defendants’ assertion that Cox concealed facts about Chesapeake’s financial condition is framed thus:

17.

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Bluebook (online)
372 S.E.2d 901, 91 N.C. App. 539, 1988 N.C. App. LEXIS 900, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chesapeake-microfilm-v-eastern-microfilm-sales-and-service-inc-ncctapp-1988.