Brown v. Lumbermens Mut. Cas. Co.

• Decision Date: 21 June 1988
• Docket Number: No. 8722SC426,8722SC426
• Citation: 369 S.E.2d 367,90 N.C.App. 464
• Court: North Carolina Court of Appeals
• Parties: Doyle BROWN and Coleen B. Brown v. LUMBERMENS MUTUAL CASUALTY COMPANY and General Motors Corporation.

Page 367

369 S.E.2d 367

90 N.C.App. 464

Doyle BROWN and Coleen B. Brown v. LUMBERMENS MUTUAL CASUALTY COMPANY and General Motors Corporation.

No. 8722SC426.

Court of Appeals of North Carolina.

June 21, 1988.

Franklin Smith, Elkin, for plaintiffs-appellants.

Parker, Poe, Thompson, Bernstein, Gage & Preston by Irvin W. Hankins III, Charlotte, for defendant-appellee Lumbermens Mutual Casualty Company.

Petree Stockton & Robinson by G. Gray Wilson, Winston-Salem, for defendant-appellee General Motors Corp.

GREENE, Judge.

This appeal arises from the claims of plaintiffs Doyle Brown and wife Coleen ("plaintiffs" or the "Browns") alleging: (1) that General Motors Corporation ("GMC") negligently designed the brakes on plaintiffs' 1979 Cadillac, fraudulently concealed such defects and made certain other fraudulent misrepresentations; 2) that Lumbermens Mutual Casualty Company ("LMCC") was liable for the alleged negligence of attorneys it hired to defend the Browns after an accident involving their automobile; and (3) that LMCC violated the terms of its insurance policy by refusing to provide the Browns a defense after it paid the $25,000 limits of liability coverage.

LMCC moved for summary judgment and GMC moved to dismiss for failure to state a claim upon which relief could be granted. In response, the Browns amended their pleadings and introduced affidavits which tended to show Ms. Brown was driving a 1979 Cadillac owned by her husband when she collided with an automobile driven by Joan Hinson ("Hinson"). The collision injured both Hinson and her passenger. At the time of the collision, LMCC provided liability insurance coverage on the 1979 Cadillac in the amount of $25,000 per person with a total coverage of $50,000.

On 28 March 1984, Hinson sued the Browns for injuries she sustained in the collision. Pursuant to its insurance contract, LMCC employed Tuggle, Duggins, Mescham & Elrod ("Tuggle Duggins" or the "attorneys") to represent the Browns who claimed the collision was caused by GMC's defective design of the brakes on their Cadillac automobile. On 1 June 1984, Tuggle Duggins filed an answer for the Browns denying any negligence. Over the Browns' objection, the attorneys subsequently offered judgment in the amount of $25,000. Hinson refused the offer of judgment and LMCC later secured a release of its own liability to Hinson in exchange for an advance payment of $25,000 pursuant to N.C.G.S. Sec. 1-540.3 (1983). After thus paying its $25,000 policy limit, LMCC elected to terminate the Browns' defense and therefore discharged Tuggle Duggins. The attorneys requested and received the permission of the court to withdraw as counsel for the Browns. A copy of the court order allowing the withdrawal was mailed to the Browns along with a letter from the attorneys informing the Browns they were no longer represented by counsel and should employ their own counsel. Although the court granted them a continuance, the Browns did not employ new counsel because they allegedly relied on GMC's representation that it would provide counsel. When the Hinson trial resumed, no counsel appeared for the Browns and a $45,000 judgment was rendered against them in May 1985. The judgment credited the Browns with the $25,000 LMCC had previously paid Hinson. Plaintiffs also allege the existence of a pending action by the other passenger injured in the Hinson collision.

The court dismissed all plaintiffs' claims as amended pursuant to a judgment which recited in part that the court granted GMC's motion to dismiss "pursuant to Rules 12 and 8 of the North Carolina Rules of Civil Procedure," and that it granted LMCC's summary judgment motion "having considered, for the purposes of ruling on the motion of [LMCC], affidavits filed in support of and in opposition to the motion...." Plaintiffs appeal.

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The issues presented are: I) whether plaintiffs' amended pleadings stated a claim for products liability or fraud against GMC; II) whether LMCC may be sued for the alleged negligence of the attorneys it employed to defend the Browns; and III) whether LMCC's liability policy obligated it to provide a defense for the Browns after it paid the limits of its liability coverage.

At the outset, we note plaintiffs' counsel has failed to comply with numerous rules of appellate procedure. In particular, counsel has failed to properly file exceptions under Appellate Rule 10 and instead brings forward only a "broadside" exception to the court's judgment. However, plaintiffs' notice of appeal is sufficient to raise the limited issues of law relevant to our review of Rule 12(b)(6) motions and summary judgments. See Ellis v. Williams, 319 N.C. 413, 355 S.E.2d 479 (1987) (non-compliance with Appellate Rule 10(a) not fatal in summary judgment appeal). We will therefore disregard the admittedly rambling nature of counsel's brief and address plaintiffs' basic contention that the face of the record shows that neither LMCC nor GMC were entitled to judgment as a matter of law.

I

GMC moved to dismiss plaintiffs' original complaint under N.C.G.S. Sec. 1A-1, Rule 12(b)(6) on the grounds the claims alleged were barred by the applicable statute of repose, the complaint was too "prolix" under N.C.G.S. Sec. 1A-1, Rule 8 (1983) and the complaint in any event failed to state claims upon which relief could be granted. Dismissal under Rule 12(b)(6) is proper when: (1) on its face the complaint reveals no law supports plaintiff's claim; (2) on its face the complaint reveals the absence of a fact sufficient to make a good claim; and (3) some fact disclosed in the complaint necessarily defeats plaintiff's claim. Oates v. JAG, Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985); see generally Johnson v. Bollinger, 86 N.C.App. 1, 3-4, 356 S.E.2d 378, 380-81 (1987).

Plaintiffs first claim against GMC arises from GMC's allegedly defective design of the brakes on plaintiffs' automobile. As the original complaint in this action was filed on 13 October 1986 and stated the automobile was originally purchased on 21 December 1979, it is apparent that plaintiffs' "design defect" claim against GMC was already barred by Section 1-50(6) which sets forth a six-year statute of repose for such actions. N.C.G.S. Sec. 1-50(6) (1983). Thus, the court properly dismissed this claim.

Plaintiffs also claim that GMC knew the braking system of the 1979 Cadillac was defective but fraudulently concealed this fact from plaintiffs. Although plaintiffs' complaint alleges GMC's "fraud," a fraudulent concealment claim on these facts is arguably also barred by Section 1-50(6). Cf. Davidson v. Volkswagenwerk, A.G., 78 N.C.App. 193, 195, 336 S.E.2d 714, 716 (1985), disc. rev. denied, 316 N.C. 375, 342 S.E.2d 892 (1986) (indicating claims, including "tortious concealment" of defect, would be barred). However, we need not decide this issue since plaintiffs also allege facts showing that, despite GMC's alleged concealment, plaintiffs knew the brakes did not work properly and were defective prior to the Hinson collision. Thus, the alleged misrepresentation of fact as to the brakes' condition did not actually deceive plaintiffs and therefore cannot support an action for fraudulent concealment. See Watts v. Cumberland County Hospital System, Inc., 317 N.C. 110, 117, 343 S.E.2d 879, 884 (1986) (fraudulent concealment in malpractice action barred since plaintiff not deceived as to fact of which she was already aware); Cox v. Johnson, 227 N.C. 69, 70, 40 S.E.2d 418, 419 (1946) (one cannot be deceived by representation which he knows to be false); see also Terry v. Terry, 302 N.C. 77, 83, 273 S.E.2d 674, 677 (1981).

However, plaintiffs' amended complaint also states:

That the Plaintiffs made requests upon [GMC], its agents and employees, to pay off the judgment acquired against them by either one of the ladies injured in the automobile accident ... and was assured by [GMC] representatives ... that they would look into the matter and that the plaintiffs' interest would be protected. The plaintiffs were eventually referred to the Assistant Zone Manager, A.J. Laird of the Cadillac division of General Motors Corporation and ... [were] advised that their insurance carrier [was being informed]. That after the plaintiffs were in court ... in January, 1985, and after the attorney [provided by LMCC] was allowed to withdraw ... and pay the $25,000 policy limits into the court, the plaintiffs again contacted A.J. Laird in Rockville, Maryland and told him what had happened in court. At this time Mr. Laird represented to the plaintiffs that the corporate defender would make good any defective products that they had and that they stood behind and guaranteed the products for seven years and told the plaintiffs that this also applied to their 1979 Cadillac. ... [A]fter ... talking with Mr. Laird, the plaintiffs were assured that General Motors Corporation would provide an attorney to represent the plaintiffs in the case in Surry County arising out of the accident ... [Plaintiffs] have incurred an exposure above and beyond their liability coverage in one lawsuit in the amount of $20,000 plus interest and attorneys' fees in an amount exceeding $10,000. [emphasis added].

Plaintiffs elsewhere allege that the above actions were taken by GMC "for the specific purpose to allow time for the running of North Carolina General Statute 1-50 ... and [were] made with the specific intent of deceiving the plaintiffs ..." Plaintiffs claim that, but for this representation, plaintiffs would have secured their own counsel during the continuance granted in the Hinson proceeding.

The claim above properly alleges the elements of fraud which are: "(1) a false representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive, and (5) resulting in damage to the injured party." Terry, 302 N.C. at 83, 273 S.E.2d at 677; Johnson v. Phoenix...