J & B Slurry Seal Co. v. Mid-South Aviation, Inc.

Decision Date15 December 1987
Docket NumberMID-SOUTH,No. 8620SC1319,8620SC1319
Citation362 S.E.2d 812,88 N.C.App. 1
CourtNorth Carolina Court of Appeals
PartiesJ & B SLURRY SEAL COMPANY v.AVIATION, INC. and Resort Air Service, Inc.

Gunter & Clayton, P.A. by Woodrow W. Gunter II and Tamela G. Clayton, Rockingham, for plaintiff-appellant.

Van Camp, Gill, Bryan & Webb, P.A. by James R. Van Camp, and Lord, Pinehurst, Bissell & Brook by E. Glenn Parr, Thomas J. Strueber and Kathryn L. Johnson, Atlanta, for defendants-appellees.

GREENE, Judge.

Plaintiff sued defendants for actual and consequential damages arising from the disappearance of plaintiff's aircraft while in defendants' possession pursuant to an alleged charter/lease and service agreement. Plaintiff alleged defendants' negligence and breach of contract caused $1,250,000 in damages, which sum represented the aircraft's alleged fair market value of $850,000 as well as business expenses and lost profits arising from the aircraft's loss. Defendants denied these claims and counterclaimed for allegedly unpaid fees for service and maintenance of the aircraft.

After discovery, defendants moved for summary judgment on all plaintiff's claims. Based upon plaintiff's execution of a subrogation receipt after payment of its insurance claim by Insurance Company of the State of Pennsylvania (hereinafter called "Insurer"), defendants asserted the aircraft's fair market value was only $600,900, the amount of plaintiff's insurance recovery. More important, defendants asserted the subrogation receipt demonstrated plaintiff had assigned all its claims to Insurer. Defendants also alleged Insurer had waived all subrogation rights against defendants pursuant to an Amendatory Endorsement of Insurer's policy with plaintiff. Defendants therefore moved that all claims be dismissed since: (1) plaintiff could not sue as the "real party in interest" under N.C.G.S. Sec. 1-57 (1983) and N.C.G. S. Sec. 1A-1, Rule 17(a) (1986); and (2) Insurer could not sue in its own name since it had waived its subrogation rights to sue defendants.

The "Proof of Loss/Subrogation Receipt" provided:

Received from [Insurer] the sum of $600,000 ... being full settlement of all claims and demands for loss and damage occurring on [the date the aircraft disappeared] to the [aircraft] ... and in consideration of such payment [plaintiff] hereby assigns and transfers to [Insurer] each and all claims and demands against any other person, or corporation, arising from or connected with such loss and damage (and [Insurer] is hereby subrogated in the place of and to the claims and demands of [plaintiff] against said person or corporation in the premises), to the extent of the amount above named, and [Insurer] is hereby authorized and empowered to sue, compromise or settle in [its] name or otherwise to the extent of the money paid as aforesaid above.

The Amendatory Endorsement provided that Insurer waived "its right of subrogation against [defendants] as respects loss or damage under Physical Damage Coverage as set forth under this policy; provided, however, that this waiver shall not prejudice the [Insurer's] right of recourse for damages arising from the manufacturer, repair, sale or servicing of the aircraft by [defendants]." (Emphasis added.)

Plaintiff contended that the subrogation receipt was a partial assignment which only assigned those claims arising from losses insured under plaintiff's insurance policy. Since plaintiff claimed losses exceeding the policy's coverage of mere physical damage, plaintiff contended it did not assign to Insurer its claims for business expenses and lost profits. Plaintiff also moved for a continuance in order to join Insurer if the trial court found it was not the "real party in interest" under Rule 17(a). Without ruling on plaintiff's motion for continuance, the court granted summary judgment for defendants and dismissed plaintiff's action. Plaintiff appeals.

These facts specifically present the following issues: (I) Since the court's summary judgment did not determine defendants' counterclaim, whether the partial summary judgment affects plaintiff's "substantial right" under N.C.G.S. Sec. 1-277(a) (1983) and N.C.G.S. Sec. 7A-27(d)(1) (1986); and (II) where plaintiff assigned its claims to Insurer "to the extent of" its insurance reimbursement, (A) whether plaintiff's assignment was a partial assignment of plaintiff's interest in all its claims; if so, (B) whether the common law rule against "claim-splitting" would invalidate such a partial assignment; and (C) whether factual disputes over the extent of plaintiff's entire loss precluded the trial court's summary determination that plaintiff's assignment divested it of "real party in interest" status under N.C.G.S. Sec. 1A-1, Rule 17(a) (1983) and N.C.G.S. Sec. 1-57 (1983).


In general, only final orders and judgments may be appealed. Our Supreme Court distinguished final and interlocutory judgments in Veazey v. City of Durham, 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950):

A final judgment is one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court.... An interlocutory order is one made during the pendency of an action, which does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy.

As the trial court's summary judgment did not adjudicate defendants' counterclaims, we note the court failed to determine there was no just reason for delay of the appeal under N.C.G.S. Sec. 1A-1, Rule 54(b) (1983). The court's partial summary judgment is therefore interlocutory, see N.C.G. S. Sec. 1A-1, Rule 56(c) (1983), and not otherwise appealable "except as expressly provided by these rules or other statutes." Rule 54(b). Section 7A-27(d) authorizes an appeal of right

from any interlocutory order or judgment of a superior court or district court in a civil action or proceeding which (1) Affects a substantial right, or (2) In effect determines the action and prevents a judgment from which appeal might be taken, or (3) Discontinues the action, or (4) Grants or refuses a new trial.

Compare Sec. 7A-27(d) with Sec. 1-277(a) (allowing appeal of any order or determination meeting identical four criteria of Section 7A-27(d)); see Survey of Developments in North Carolina Law, 1978--Civil Procedure, 57 N.C.L.Rev. 827, 907 n. 101 (1979) (noting both statutes allow interlocutory appeals on grounds other than "substantial right" exception); but see Waters v. Qualified Personnel, Inc., 294 N.C. 200, 207, 240 S.E.2d 338, 343 (1978) (stating both Section 1-277 and Section 7A-27 "in effect provide that no appeal" of "interlocutory" orders allowed unless substantial right affected).

With respect to those interlocutory orders which allegedly do affect a substantial right, our Supreme Court has additionally long required that the interlocutory "ruling or order deprive ... the appellant of a substantial right which he would lose if the ruling or order is not reviewed before final judgment." Waters, 294 N.C. at 207, 240 S.E.2d at 343 (emphasis added) (quoting North Carolina Consumers Power, Inc. v. Duke Power Co., 285 N.C. 434, 437, 206 S.E.2d 178, 181 (1974)); Faircloth v. Beard, 320 N.C. 505, 358 S.E.2d 512, 513 (1987) (no appeal unless deprives party of substantial right which would be lost absent immediate review); Veazey, 231 N.C. at 362, 57 S.E.2d at 381 (no interlocutory appeal unless order affects substantial right and will work injury if not corrected before final judgment); accord Welch v. Kinsland, 93 N.C. 281, 282 (1885).

There has thus evolved a two-part test of the appealability of interlocutory orders under the "substantial right" exception provided in Section 1-277(a) and Section 7A-27(d)(1). First, the right itself must be "substantial." E.g., Green v. Duke Power Co., 305 N.C. 603, 606, 290 S.E.2d 593, 595 (1982) (court accepts as general proposition that right to avoid one trial is not substantial right but specifically states avoiding possibility of two trials on same "issues" can be substantial right); but cf. Oestreicher v. American National Stores, Inc., 290 N.C. 118, 130, 225 S.E.2d 797, 805 (1976) (irrespective of issues, plaintiff had substantial right to have all "causes" tried at same time by same judge and jury). Second, the enforcement of the substantial right must be lost, prejudiced or be less than adequately protected by exception to entry of the interlocutory order. See Waters, 294 N.C. at 207, 240 S.E.2d at 343 (substantial right must be "lost"); Green, 305 N.C. at 607-08, 290 S.E.2d at 596 (right must be prejudiced or not fully and adequately preserved by exception to order's entry); Love v. Moore, 305 N.C. 575, 579, 291 S.E.2d 141, 145 (1982) (objection would preserve right to review and delay would not injure plaintiff).

Justice Exum stated in Waters that, "Admittedly, the 'substantial right' test ... is more easily stated than applied." 294 N.C. at 208, 240 S.E.2d at 343. Our review of the case law suggests the substantial right test is in some respects as difficult to state as it is to apply. For example, some decisions have apparently blurred or otherwise failed to distinguish the two requirements of appealability under the substantial right exception. E.g., New Bern Assoc. v. Celotex Corp., 87 N.C.App. 65, 359 S.E.2d 481, 483 (1987) (defining "substantial right" as "one which will be lost").

More important, some decisions have completely omitted the requirement that the right be lost or prejudiced if not immediately appealed. This omission has produced two occasionally incompatible lines of authority governing the appealability of partial summary judgments. Compare Green, 305 N.C. at 608, 290 S.E.2d at 596 (possibility of second trial affects substantial right if presence of same "issue" in second trial creates possibility party will be prejudiced by different juries rendering...

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