Thomas v. Ray, 8311SC911

• Decision Date: 03 July 1984
• Docket Number: No. 8311SC911,8311SC911
• Citation: 69 N.C.App. 412,317 S.E.2d 53
• Court: North Carolina Court of Appeals
• Parties: M.G. THOMAS v. W.H. RAY, Jr., Bankingport, Inc., and Great American Insurance Company.

Page 53

317 S.E.2d 53

69 N.C.App. 412

M.G. THOMAS v. W.H. RAY, Jr., Bankingport, Inc., and Great American

Insurance Company.

No. 8311SC911.

Court of Appeals of North Carolina.

July 3, 1984.

J. Douglas Moretz, P.A., Sanford, for plaintiff-appellant.

Patterson, Dilthey, Clay, Cranfill, Sumner & Hartzog by D. James Jones, Jr., and Theodore B. Smyth, Raleigh, for defendants-appellees.

BECTON, Judge.

Plaintiff appeals from summary judgment against him, which denied his claim that defendants were estopped to deny coverage under an automobile collision policy. We hold that plaintiff could not assert estoppel, and we affirm.

I

The facts of the case, although not really in dispute, are rather complicated. We have arranged them chronologically as follows:

1. In July 1979, Roy Herring purchased a new Cadillac from Doug Wilkinson of Wilkinson Cadillac-Oldsmobile (Wilkinson) for approximately $18,000.00. Financing was through General Motors Acceptance Corporation (GMAC), which received the installment contract by assignment from Wilkinson. Wilkinson had a repurchase obligation in the event of Herring's default, and GMAC had recourse against Wilkinson.

2. In 1980, Herring's insurance agent, William Ray of Bankingport, Inc., transferred the collision coverage on the Cadillac to Great American Insurance Company (GAIC).

3. In January 1981, Herring and M.G. Thomas orally agreed that Thomas would sell Herring a house. Herring would assume the mortgage on the house, and, in exchange, Thomas would receive cash and the Cadillac. Herring allowed Thomas to use the Cadillac prior to closing, with the provision that Herring would meet the payments and keep up insurance coverage.

4. In February 1981, Herring, through Ray, obtained a renewal collision policy with GAIC effective until August 1981. Herring did not pay any premium at this time.

5. On 10 March 1981, GAIC notified Herring that he had to pay his premium by 28 March 1981 to "continue" insurance protection.

6. On 30 March 1981, having received a check from Herring, GAIC rescinded its notice of cancellation, stating that the insurance continued in effect.

7. On 27 April 1981, GAIC prepared a "reversal notice," which informed Herring that his check had been returned for insufficient funds. The notice demanded payment of premium by 15 May 1981 to "continue" coverage. The record is unclear when Herring received the notice.

8. On 29 April 1981, Thomas was driving the Cadillac when it left the road in a curve and rolled over into an open field. The Cadillac sustained about $8,000 worth of damage; no other cars were involved and no other injury to persons or property occurred.

9. Shortly after the accident Herring asked about payment of the damage to the Cadillac under the GAIC policy. Ray said there was no coverage because of nonpayment of premiums.

10. Thereafter, on 19 May 1981, a final notice of cancellation was issued by GAIC.

11. Also on 19 May 1981, Thomas and Herring closed their deal. Thomas took title to the Cadillac. Herring still owed GMAC $12,763.18, and Thomas placed that amount in escrow, to be paid over to Herring upon acknowledgement by GAIC that the claim would be paid. Herring ceased making payments on the Cadillac at about this time.

12. Ray discussed the claim with GAIC. In addition, Wilkinson, who under the original sale contract was obligated to buy the Cadillac if the loan was not paid, began inquiring of Ray and Herring if GAIC would honor the claim.

13. On 17 June 1981 Ray wrote to Wilkinson and Herring informing them that there was no coverage.

14. On 14 July 1981, after further discussions with GAIC, GMAC, Wilkinson and Herring, Ray sent the following letter to Wilkinson:

Re: Roy Herring Claim

Dear Doug [Wilkinson]:

Per our phone conversation this date, this letter is to inform you that Great American Insurance Company is going to honor the above claim.

If I can be of any other help, please let me know.

15. Wilkinson informed Herring, who got a copy of the letter and took it to Thomas. Thomas authorized release of the $12,763.18 from escrow. The escrow agent issued a check in that amount jointly to Herring and GMAC; Herring delivered the check to Wilkinson, who forwarded it to GMAC which negotiated the check.

16. GAIC thereafter refused to pay the claim, on the basis that its obligation lay only to the lienholder, GMAC. Since GMAC had received payment in full, that obligation was extinguished and GAIC refused to pay.

17. Thomas thereupon brought the present action against GAIC, Ray, and Bankingport, Inc., Ray's agency, to recover the amount of the unpaid claim, as well as treble damages for unfair and deceptive trade practices. Neither Herring, GMAC nor Wilkinson was made a defendant. From summary judgment against him on all claims, Thomas appeals.

II

This appeal presents one major issue: Was Thomas unable, as a matter of law, to assert estoppel against defendants? Thomas argues that summary judgment was inappropriate, contending that the evidence raised a genuine issue of fact as to his justifiable reliance on the 14 July 1981 letter. Therefore, Thomas argues, the applicability of equitable estoppel, requiring defendants to honor the claim, must be resolved by a jury. Defendants, on the other hand, argue that Thomas' own negligence as a matter of law precludes him from proceeding on an estoppel theory.

A

In a case such as this, summary judgment is appropriate when the defendants as the moving parties establish the absence of any genuine issue of fact as to a complete defense to the opponent's claim. Kidd v. Early, 289 N.C. 343, 222 S.E.2d 392 (1976); Ballinger v. Dept. of Revenue, 59 N.C.App. 508, 296 S.E.2d 836 (1982), disc. rev. denied, 307 N.C. 576, 299 S.E.2d 645 (1983). If the factual evidence, taken in the light most favorable to the non-movant, allows no inferences inconsistent with the defense, the movant has satisfied his burden, and summary judgment in its favor will be affirmed. Id. This is true even when the facts raise difficult questions of law. Kessing v. Nat'l Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971).

B

Our Supreme Court has authoritatively set forth the elements of an equitable estoppel:

[T]he essential elements of an equitable estoppel as related to the party estopped are: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is reasonably calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party afterwards attempts to assert; (2) intention or expectation that such conduct shall be acted upon by the other party, or conduct which at least is calculated to induce a reasonably prudent person to believe such conduct was intended or expected to be relied and acted upon; (3) knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, they are: (1) lack of knowledge and the means of knowledge of the truth as to the facts in question; (2) reliance upon the conduct of the party sought to be estopped; and (3) action based thereon of such a character as to change his position prejudicially.

Hawkins v. M & J Finance Corp., 238 N.C. 174, 177-78, 77 S.E.2d 669, 672 (1953). The element of lack of knowledge and means of knowledge on the part of the party asserting estoppel imports principles of negligence, and hence contributory negligence, into its application. Absent some fraud, estoppel is not available to protect a party against the consequences of his own negligence. Wachovia Bank & Trust Co. v. Wayne Finance Co., 262 N.C. 711, 138 S.E.2d 481 (1964); Peek v. Wachovia Bank & Trust Co., 242 N.C. 1, 86 S.E.2d 745 (1955). For the following reasons, we conclude that summary judgment was proper, since Thomas' own negligence as a matter of law precluded him from successfully asserting estoppel.

C

The uncontradicted record discloses that neither Herring nor Thomas ever paid a single penny in premiums to GAIC under the renewal policy. Giving a worthless check does not constitute payment. Cauley v. Gen'l American Life Ins. Co., 219 N.C. 398, 14 S.E.2d 39 (1941). Unless payment of the premium is waived, it is a condition precedent to coverage. Engelberg v. Home Ins. Co., 251 N.C. 166, 110 S.E.2d 818 (1959) (per curiam) (payment by agent does not constitute payment by insured). And nonpayment of premium when due, or within the period of grace thereafter, has repeatedly been held to automatically avoid the policy. Allen v. Nat'l Accident & Health Ins. Co., 215 N.C. 70, 1 S.E.2d 94 (1938). This is true for the simple reason that insurance companies are businesses, and they rely on premiums for their existence. See Hay v. Ass'n, 143 N.C. 256, 55 S.E. 623 (1906).

We are aware that insurance companies have wrongfully denied coverage in some cases in which bad faith or careless business practices might reasonably be imputed to them. See e.g., Gaston-Lincoln Transit, Inc. v. Maryland Cas. Co., 285 N.C. 541, 206 S.E.2d 155 (1974) (company estopped to deny coverage when it attached limiting rider without notifying insured). Here, however, the insurance company allowed Herring substantial latitude in making his payments. Having received no premium two weeks after issuance, GAIC indicated it would still continue coverage if Herring paid within 18 days. It rescinded the notice of cancellation upon receipt of Herring's check. Four weeks later, when Herring's check bounced, GAIC still was willing to continue coverage upon receipt of certified payment in 18 days. By the same notice GAIC warned Herring that the law imposed a duty upon him to maintain financial responsibility coverage. Even after the accident on 29 April 1981 had resulted in thousands of dollars in damage to the Cadillac, payment of only $197 by 15 May 1981 would have assured coverage for that damage, but neither Herring nor Thomas ever paid GAIC anything. Only after almost three months did GAIC finally...