759 S.E.2d 724
S.C.2014Background
- Skywaves, a SC telecom technology corp., entered an expanded factoring (financing) agreement with BB&T in March 2007 after BB&T branch employee Edahl represented BB&T would fund Skywaves’ short- and long-term capital needs and honor the new agreement.
- In July 2007 Edahl repeated assurances in a presentation to several Skywaves directors/officers/shareholder-investors, who allege they relied on those statements and made additional investments/loans.
- BB&T funded Skywaves under the agreement through January 2008, then accused Skywaves of default, ceased further funding, and Skywaves later filed bankruptcy.
- Skywaves sued BB&T (not part of this appeal). The individual investors (Appellants) sued BB&T and Edahl for negligence, negligent misrepresentation, and fraudulent inducement seeking their investment losses.
- The trial court (treating motions as converted to summary judgment) dismissed the investors’ claims; the Supreme Court affirmed, holding no duty was owed to noncustomers and the investors were not intended third‑party beneficiaries of the bank–customer contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BB&T owed investors a duty of care supporting negligence/ negligent misrepresentation claims | Investors: Edahl’s direct statements induced reliance and investment; BB&T assumed a duty to them | BB&T: Duty runs to customer (Skywaves) only; investors are noncustomers and not intended beneficiaries | Court: No duty owed to noncustomer investors; claims fail |
| Whether investors can sue separately for harms that arise from bank’s alleged breach of contract with its customer | Investors: Their claims are torts directed at them personally, distinct from the corporate contract claim | BB&T: Claims are essentially attempts to enforce/relify contract rights belonging to Skywaves | Court: Investors cannot maintain separate tort suits when claims depend on disputed contractual obligations to the customer |
| Whether investors had a right to rely on BB&T’s statements given their sophistication | Investors: They relied on BB&T’s assurances in making investments | BB&T: Investors were sophisticated parties and should have protected their interests; no reasonable reliance | Court: Investors were sophisticated; no special relationship to justify reliance |
| Whether choice‑of‑law or lender statute defenses alter analysis for nonparty investors | Investors: Contract’s North Carolina choice-of-law or statute of frauds might not preclude tort claims | BB&T: Choice-of-law and lender statute are irrelevant because investors are nonparties/not intended beneficiaries | Court: Choice-of-law and lender statute do not save the investors’ claims; they are nonparties |
Key Cases Cited
- Burwell v. S.C. Nat’l Bank, 288 S.C. 34, 340 S.E.2d 786 (S.C. 1986) (bank–customer relationship is not fiduciary absent affirmative undertaking to advise)
- Regions Bank v. Schmauch, 354 S.C. 648, 582 S.E.2d 432 (Ct. App. 2003) (if fiduciary relationship exists, bank must disclose material facts affecting customer)
- Florentine Corp. v. PEDA I, Inc., 287 S.C. 382, 339 S.E.2d 112 (S.C. 1985) (no right to rely in arm’s‑length transactions among sophisticated parties absent confidential or fiduciary relationship)
- Thomasko v. Poole, 349 S.C. 7, 561 S.E.2d 597 (S.C. 2002) (duty is an element of negligence; reliance required for negligent misrepresentation)
- Sea Cove Dev., L.L.C. v. Harbourside Cmty. Bank, 387 S.C. 95, 691 S.E.2d 158 (S.C. 2010) (lender statute of frauds limits certain claims between lenders and borrowers)
- Poco‑Grande Invs. v. C & S Family Credit, Inc., 301 S.C. 323, 391 S.E.2d 735 (Ct. App. 1990) (sophisticated investors lack right to rely on alleged misrepresentations)