Nationwide Mut. Ins. Co. v. Canada Dry Bottling Co.

Annotate this Case

151 S.E.2d 14 (1966)

268 N.C. 503


No. 123.

Supreme Court of North Carolina.

November 23, 1966.

*15 Williams, Williams & Morris and J. N. Golding, Asheville, for plaintiff appellee.

Roy W. Davis, Jr., and Van Winkle, Walton, Buck & Wall, Asheville, for defendant appellant.

BOBBITT, Justice.

Canada Dry asserts the court erred (1) in overruling, by the order of January 28, 1966, its motion to strike the amended complaint and dismiss the action, and (2) in striking, by the order of July 18, 1966, its alleged second further answer and defense.

Canada Dry contends Nationwide made no motion for leave to amend within thirty days after Judge Martin's order of August 10, 1965, as provided in G.S. § 1-131. The amended complaint was filed August 31, 1965. The exceptions to Judge Martin's order of January 28, 1966, do not challenge the recital to the effect leave to amend had been granted. All of the successive hearings were before Judge Martin. Under these circumstances, defendant's exception to that portion of Judge Martin's order of January 28, 1966, in which he denied defendant's motion to strike the amended complaint and dismiss the action, is considered unsubstantial and without merit. Hence, said order will not be disturbed.

Nationwide's motion to strike Canada Dry's second further answer and defense is in substance a demurrer thereto and will be so considered. Mercer v. Hilliard, 249 N.C. 725, 107 S.E.2d 554; Galloway v. Lawrence, 263 N.C. 433, 139 S.E.2d 761. Hence, the factual allegations in Canada Dry's second further answer and defense must be taken as true. Jewell v. Price, 259 N.C. 345, 130 S.E.2d 668.

Canada Dry, in its second further answer and defense, alleges in substance: Nationwide paid Wilson $439.14, this being $50.00 less than their agreed evaluation ($489.14) of the damage to the Wilson car. Thereafter, on February 27, 1963, Wilson instituted an action against Canada Dry in the Superior Court of Haywood County, North Carolina, for all damages to her car, and prayed that she recover $1,300.00. Canada Dry answered, denying negligence and pleading "various defenses." Canada Dry moved that the court join Nationwide as a party to said action because of the settlement it had made with Wilson under said collision insurance policy. Upon objection *16 by Wilson, the court in its discretion denied Canada Dry's motion. Nationwide "acquiesced in the denial of said motion." Canada Dry entered into a settlement agreement with Wilson for all damages to her car, "the same representing a compromise settlement with respect to the interests of Doris A. Wilson, the plaintiff, and this defendant." The terms of said settlement were embodied in a consent judgment. Wilson was awarded judgment against Canada Dry for $400.00 and Canada Dry was taxed with the costs. The judgment contains this provision: "That the defendant, or its agents or successors or assigns, be and it is hereby released of and from any and all claims, demands and causes of action which the plaintiff, or any person acting by, through or for her, now has or may later have arising upon or in any way connected with the matters and things alleged in the plaintiff's complaint." Canada Dry pleads said judgment in the Haywood County suit as "a full and final bar to the cause of action now alleged by the plaintiff against this defendant."

Defendant did not allege Nationwide had knowledge or notice of the pendency of the Haywood County action unless the allegation that Nationwide "acquiesced in the denial of said motion" is accepted as a sufficient allegation that Nationwide had such knowledge or notice. Canada Dry alleges Nationwide was not made a party to that action. Moreover, the only reasonable inference to be drawn from Canada Dry's allegations is that Nationwide did not participate in the compromise of said action set forth in said judgment. The written consent to the judgment in the Haywood County action is signed by Wilson and her attorney and by Canada Dry and its attorneys. Whether Canada Dry has paid the consent judgment in the Haywood County action is not disclosed by its pleading.

Since Canada Dry alleges it moved that Nationwide be joined as a party in the Haywood County action "because of the plaintiff's settlement with (Wilson) under said insurance policy," it appears clearly that Canada Dry had knowledge of Nationwide's subrogation rights when it negotiated the settlement with Wilson.

Wilson's right to maintain an action in Haywood Superior Court, without the joinder of Nationwide, for the recovery of the full amount of the damages to her car is well established. Burgess v. Trevathan, 236 N.C. 157, 72 S.E.2d 231, and subsequent decisions based thereon. It is noted that Wilson sued Canada Dry to recover damages in the amount of $1,300.00. The evaluation of Wilson's damages at $489.14 was for the purpose of settlement as between Nationwide and Wilson.

The question is whether the consent judgment, setting forth a compromise settlement made by Canada Dry with Wilson, with knowledge of Nationwide's subrogation rights but without Nationwide's consent, is a bar to Nationwide's right to maintain this action. Decisions in this jurisdiction and elsewhere impel a negative answer.

In Phillips v. Alston, 257 N.C. 255, 125 S.E.2d 580, Phillips and his collision insurance carrier, as coplaintiffs, alleged the insured car of Phillips was damaged in the amount of $490.00 by the negligence of Alston; and that the insurer, by reason of its policy provision, had paid to Phillips the sum of $390.00. The plaintiffs prayed for judgment in the total amount of $490.00. Alston denied negligence and pleaded as a bar the release theretofore executed by Phillips and his wife. A jury trial was waived and decision was based on the court's findings of fact, viz.: Phillips's insured car was damaged by the negligence of Alston in the amount of $490.00. The insurer paid Phillips $390.00 pursuant to its obligation under its policy. Alston's insurance liability carrier paid $3,100.00 for the release. The $3,100.00 was paid as compensation to Mrs. Phillips on account of her personal injuries and hospital expenses. The release, which was executed by both Mr. Phillips and Mrs. Phillips, purported to release Alston "from all *17 claims and demands, actions and causes of action, damages, cost, loss of service, expenses and compensation on account of, or in any way growing out of bodily injuries and property damages" resulting from the collision. When the $3,100.00 settlement payment was made and the release obtained, Alston's liability insurance carrier, which had negotiated the settlement with Mr. and Mrs. Phillips, had notice of the subrogation rights of Phillips's insurer. A judgment (1) that Phillips recover nothing, and (2) that Phillips's insurer recover $390.00 and costs, was affirmed by this Court.

Rodman, J., for this Court, said: "While a tort-feasor is entitled to have the total damage ascertained in one action, he cannot, when he has knowledge of insurer's rights by virtue of its payment to the owner, defeat those rights by making payment to and taking a full release from the owner. The payment so made and release taken will be construed as a mere adjustment of the uncompensated portion of the loss. Insurer may then assert its right against the tort-feasor. (Citations)"

In the later case of Nationwide Mutual Insurance Co. v. Spivey, 259 N.C. 732, 131 S.E.2d 338, the factual situation is distinguishable on the ground the defendants' settlement with the insurer related solely and expressly to the insured's uncompensated loss of $100.00. Even so, this excerpt from the opinion of Rodman, J., is significant:

"It is said in 46 C.J.S. Insurance § 1211, p. 179, cited with approval in Burgess v. Trevathan, supra: `After the loss has been paid by insurer, or the insurance is in the process of adjustment, a third person, having knowledge of the fact, cannot make settlement with insured for the loss, his liability being to insurer to the extent of the insurance paid; and if a third person makes such settlement it is no defense to a suit by insurer against him.'

"The right of a tort-feasor to defeat the claims of an insurer who has been subrogated to the rights of its insured was again considered in Phillips v. Alston, 257 N.C. 255, 125 S.E.2d 580. We there reaffirmed the conclusion reached in Powell [& Powell] v. [Wake] Water Co. [171 N.C. 290, 88 S.E. 426], that the tort-feasor who has knowledge of insurer's rights cannot, by settling with claimant for the rights remaining in him, defeat the insurer's rights. 29A Am.Jur. 810-811."

Phillips v. Alston, supra, and Nationwide Mutual Insurance Co. v. Spivey, supra, are in accord with authority in other jurisdictions.

In Vance on Insurance (Hornbook Series 3d Ed.), § 134, p. 794, it is stated: "After the insured has received payment under a policy, the tort-feasor, having knowledge of this fact, cannot defeat the insurer's right to subrogation by any settlement with the insured. If with knowledge of the previous payment by the insurer the tort-feasor does procure a release from the insured, such release will constitute no defense as against the insurer, nor will the insurer be allowed to recover the payment made to the insured. But a tort-feasor who in good faith and without any knowledge of any payment by the insurer to the insured does settle with the insured, may set up this fact as a bar to the insurer's action for subrogation." Accord: 46 C.J.S. Insurance § 1211a(2), p. 179; 29A Am.Jur., Insurance § 1733; 6 Appleman, Insurance Law and Practice § 4092, p. 584; Annotation, 92 A.L.R.2d 102, 124.

It should be noted that we are not presently concerned with a factual situation where the insured prosecutes an action to recover full damages to final judgment. In this connection, see Fidelity Insurance Co. v. Atlantic Coast Line R.R. Co., 165 N.C. 136, 80 S.E. 1069, and Ocean Acc. & Guar. Corp. v. Hooker Electro-Chemical Co., 240 N.Y. 37, 147 N.E. 351 (1925).

The fact that the terms of settlement are incorporated in a consent judgment in a pending action is immaterial. Such a judgment is a contract and must be so interpreted. *18 Nationwide Mutual Insurance Co. v. Spivey, supra, and cases cited.

The conclusion reached is that the alleged compromise settlement made by Canada Dry with Wilson and embodied in the consent judgment in the Haywood County action is not a bar to Nationwide's action. Hence, the order striking paragraphs 1-14, inclusive, of Canada Dry's second further answer and defense was proper.