Opinion
No. COA10-706
Filed 3 May 2011 This case not for publication
Appeal by plaintiff from judgment entered 15 March 2010 by Judge W. Osmond Smith, III in Caswell County Superior Court. Heard in the Court of Appeals 12 January 2011.
Daggett, Shuler, Koontz, Nauman Bell, P.L.L.C., by Douglas E. Nauman, for plaintiff-appellant. Moreau Marks, PLLC, by Daniel C. Marks, for defendant-appellees.
Caswell County No. 09 CVS 115.
Joshua Lewis James ("plaintiff") appeals from the trial court's order granting summary judgment to First National Insurance Company of America ("First National") and Safeco
Insurance Company of America (collectively "defendants"). We affirm.
Safeco is the parent company of First National.
I. Background
On 18 April 2003, plaintiff's father, Donnie James ("Mr. James"), obtained an insurance policy through Atlantic Indemnity Company ("Atlantic"). The Atlantic policy insured a 1987 Honda Prelude ("the Prelude") that was titled in the name of Mr. James, but operated and maintained by plaintiff. The Atlantic policy was purchased from the Summit Insurance Agency in Reidsville, North Carolina. The transaction was handled by insurance agent Donnie Huffman ("Huffman"). Mr. James was the only named insured on the policy, but plaintiff was listed as a driver. Plaintiff personally paid all of the insurance premiums on this policy.
In July 2003, plaintiff purchased a 2001 Dodge Dakota ("the Dakota"). In order for plaintiff to obtain financing for the Dakota, Mr. James was required to co-sign the loan for the purchase. However, the title for the Dakota was issued solely in plaintiff's name. Neither plaintiff nor Mr. James were aware of whose name appeared on the Dakota's title.
At the direction of Mr. James, Huffman removed the Prelude from the Atlantic policy and replaced it with the Dakota. Because Mr. James was the owner of the Prelude, Huffman assumed that Mr. James was also the owner of the Dakota. Consequently, Mr. James remained the only named insured on the Atlantic policy. However, plaintiff, who was a named driver on the Atlantic policy, paid all of the insurance premiums on the policy and was the sole operator of the Dakota.
Prior to the 18 April 2004 policy period, plaintiff contacted Huffman and requested that Huffman find plaintiff a lower insurance premium on the Dakota. Huffman located a policy issued by First National that reduced plaintiff's monthly premium payment by several hundred dollars. Huffman then prepared an application for the First National policy ("the application"), for which he used the information he had on file for the Atlantic policy from Mr. James. As a result, Mr. James was listed as the sole applicant on the application. However, Huffman and Mr. James never discussed this transaction.
On 16 April 2004, plaintiff came to the Summit Insurance Agency and executed the application in his own name, even though the application named Mr. James as the sole applicant. In addition, plaintiff executed an uninsured/underinsured ("UM/UIM") selection/rejection form, indicating that he had selected combined UM/UIM coverage of $50,000 per person and $100,000 per occurrence for bodily injury. Huffman submitted the application to First National, which issued a policy listing Mr. James as the sole named insured. Mr. James was not aware of this change in policies, as he required plaintiff to handle all of the affairs relating to the Dakota.
Plaintiff continued to renew the First National policy every six months, making all the premium payments himself. On 5 March 2006, while the Dakota was still covered by the First National policy, plaintiff was injured while driving his motorcycle. Plaintiff was struck by an automobile driven by Carentan Swain Kiskis ("Ms. Kiskis"), who crossed the center line into his lane of traffic. As a result of the injuries he sustained, plaintiff's left leg was amputated and his left arm required extensive reconstructive surgery.
Ms. Kiskis' insurance was insufficient to cover the costs of plaintiff's injuries. As a result, plaintiff sought to recover from the underinsured provision of his First National policy. On 27 February 2009, plaintiff filed a declaratory judgment action in Caswell County Superior Court. Plaintiff's complaint contended that because Mr. James was the named insured on the
First National policy and he had not completed a valid UM/UIM selection/rejection form, plaintiff was entitled to the statutory maximum of $1,000,000 of UIM coverage.
Defendants filed a motion for summary judgment on 18 November 2009. A hearing on defendants' motion was conducted on 5 January 2010. Both parties stipulated that there were no genuine issues of material fact, and thus, summary judgment was appropriate. On 15 March 2010, the trial court issued an order granting summary judgment to defendants and declaring that the First National policy provided plaintiff with UIM coverage of $50,000 per person. Plaintiff appeals.
II. Summary Judgment
Plaintiff's sole argument on appeal is that the trial court erred by granting summary judgment to defendants. Plaintiff contends that the First National policy should be construed so that Mr. James is the sole named insured. We disagree.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2009).
The party moving for summary judgment ultimately has the burden of establishing the lack of any triable issue of fact.
A defendant may show entitlement to summary judgment by (1) proving that an essential element of the plaintiff's case is non-existent, or (2) showing through discovery that the plaintiff cannot produce evidence to support an essential element of his or her claim, or (3) showing that the plaintiff cannot surmount an affirmative defense. Summary judgment is not appropriate where matters of credibility and determining the weight of the evidence exist.
Once the party seeking summary judgment makes the required showing, the burden shifts to the nonmoving party to produce a forecast of evidence demonstrating specific facts, as opposed to allegations, showing that he can at least establish a prima facie case at trial.
Edwards v. GE Lighting Sys., Inc., ___ N.C. App. ___, ___, 685 S.E.2d 146, 148 (2009) (citation omitted). We review an order allowing summary judgment de novo. Id. A. Meeting of the Minds
In North Carolina, "an insurance policy is a contract and its provisions govern the rights and duties of the parties thereto." Fidelity Bankers Life Ins. Co. v. Dortch, 318 N.C. 378, 380, 348 S.E.2d 794, 796 (1986). Plaintiff's claim can only succeed if the First National policy constituted a valid contract between First National and Mr. James.
It is essential to the formation of any contract that there be mutual assent of both parties to the terms of the agreement so as to establish a meeting of the minds. Mutual assent is normally established by an offer by one party and an acceptance by the other, which offer and acceptance are essential elements of a contract.
Creech v. Melnik, 347 N.C. 520, 527, 495 S.E.2d 907, 911-12 (1998) (internal quotations and citations omitted). In the instant case, there is no evidence of a meeting of the minds between Mr. James and First National regarding the First National policy. In his deposition, Mr. James repeatedly testified that he had not procured the First National policy, that he did not know how his name came to be on the First National policy, that he was not present when plaintiff obtained the First National policy, and that plaintiff was solely responsible for insuring the Dakota.
In addition, plaintiff testified in his deposition that he was the one who initially contacted Huffman about switching to a new policy. Plaintiff also testified that Mr. James was not present when the First National application was executed and that Mr. James was not involved in any way with purchasing the First National policy. Finally, the First National application itself was only executed by plaintiff. There is no evidence that Mr. James was ever involved with the purchase of the First
National policy or that there was a meeting of the minds between Mr. James and First National that would be sufficient to form a contract between those parties.
However, plaintiff contends that it is unnecessary to analyze the First National policy as a separate contract between Mr. James and First National because the policy should instead be treated as a novation of the previous Atlantic policy issued to Mr. James.
North Carolina recognizes several methods by which a contract may be discharged, including a novation, which is the substitution of a new contract. It is well established that
[t]he essential requisites of a novation are [1] a previous valid obligation, [2] the agreement of all the parties to the new contract, [3] the extinguishment of the old contract, and [4] the validity of the new contract. . . . Ordinarily . . . in order to constitute a novation, the transaction must have been so intended by the parties.
Medical Staffing Network, Inc. v. Ridgway, 194 N.C. App. 649, 653, 670 S.E.2d 321, 325 (2009) (internal quotations and citations omitted).
It is true that the First National policy replaced the Atlantic policy as the sole insurance contract for the Dakota. Nonetheless, the First National policy cannot be considered a novation of the Atlantic policy because there was neither evidence of any agreement by the holder of the Atlantic policy, Mr. James, to the First National policy nor evidence that Mr. James intended to substitute the First National Policy for the Atlantic policy. Thus, the elements of a novation were not satisfied and novation cannot be used to validate the First National policy as a contract between Mr. James and First National.
The First National policy constituted a separate contract from the Atlantic policy. Since there was no direct meeting of the minds between Mr. James and First National and only plaintiff signed the First National application, the only method by which the First National policy could constitute a valid insurance contract between Mr. James and First National is if plaintiff was acting as Mr. James' agent. However, plaintiff specifically argues that he was not acting as Mr. James' agent, and Mr. James specifically testified in his deposition that he did not give plaintiff any authority to sign documents on his behalf. Consequently, the First National policy did not constitute a valid contract between Mr. James and First National. Plaintiff's argument is overruled.
B. Mutual Mistake
Although the First National policy was not a valid contract between Mr. James and First National, the trial court's order declared that plaintiff was entitled to $50,000 UIM coverage under the policy. In order for this portion of the trial court's order to be correct, the First National policy, which named Mr. James as the sole named insured, would need to constitute a valid contract between plaintiff and First National. Defendants argue that this result can be obtained through reformation of the First National policy on the basis of a mutual mistake. We agree.
"Reformation is a well-established equitable remedy used to reframe written instruments where, through mutual mistake or the unilateral mistake of one party induced by the fraud of the other, the written instrument fails to embody the parties' actual, original agreement." Metropolitan Property and Cas. Ins. Co. v. Dillard, 126 N.C. App. 795, 798, 487 S.E.2d 157, 159 (1997) (internal quotations and citation omitted). "A mutual mistake exists when both parties to a contract proceed under the same misconception respecting a material fact, the terms of the agreement, or the provisions of the written instrument designed to embody such agreement." Smith v. First Choice Servs., 158 N.C. App. 244, 249, 580 S.E.2d 743, 748 (2003) (internal quotations and citations omitted). "`[N]egligence on the part of one party [which induces the mistake] does not preclude a finding of mutual mistake.'" Metropolitan Property, 126 N.C. App. at 798, 487 S.E.2d at 159 (quoting Moreland v. State Farm Fire and Casualty Co., 662 S.W.2d 556, 563 (Mo. App. 1983)).
In the instant case, plaintiff approached Huffman and requested that Huffman attempt to reduce his insurance premiums for the Dakota. Huffman located a policy from First National which would cost significantly less than the Atlantic policy which was in place at that time. Huffman then prepared an application for the First National policy for plaintiff, using the information that was already on file from the Atlantic policy. Plaintiff's brief stresses that Huffman testified that he intentionally listed Mr. James as the named insured on the First National application, and that this demonstrates the lack of a mutual mistake in the First National policy. However, while plaintiff accurately recites Huffman's testimony regarding the application, it is immaterial to the mutual mistake analysis. The contract at issue, the First National policy, was not formed by Huffman tendering the application to plaintiff. Instead, it was formed after plaintiff signed the application and tendered it to Huffman, who accepted the application and issued the actual policy on behalf of First National. Thus, Huffman's intention in preparing the application has no bearing on whether the First National policy should be reformed on the basis of mutual mistake.
Plaintiff testified in his deposition that he was applying for the First National policy on his own behalf and that Mr. James was not involved in the transaction in any way. Plaintiff further testified that he signed and initialed the application where it was appropriate to do so. The application contained the following statement above plaintiff's signature: "Applicant's Statement: I have read the above application and I declare that to the best of my knowledge and belief all of the foregoing statements are true."
"[A] person signing a written instrument is under a duty to read it for his own protection, and ordinarily is charged with knowledge of its contents." Biesecker v. Biesecker, 62 N.C. App. 282, 285, 302 S.E.2d 826, 828-29 (1983) (internal quotation and citation omitted). Plaintiff failed to fulfill this duty when he tendered his First National application to Huffman with Mr. James, rather than plaintiff, listed as the applicant. Huffman was entitled to rely on plaintiff's signature and statement on the application that the application, including the name of the applicant, was completely accurate. Plaintiff's negligence in failing to correct this mistake on the application induced Huffman to incorrectly issue the First National policy in Mr. James' name, rather than in plaintiff's name, as plaintiff testified he intended. Therefore, the First National policy should be reformed to reflect that plaintiff was the named insured on the basis of mutual mistake. See Metropolitan Property, 126 N.C. App. at 799, 487 S.E.2d at 159 (reforming a homeowner's insurance policy on the basis of mutual mistake to reflect the correct address of the property insured when the insurance policy listed the wrong address due to the applicant providing the wrong address on the insurance application).
Once the application is reformed to accurately reflect plaintiff as the named insured, the record contains a valid UM/UIM selection/rejection form executed by plaintiff in conjunction with the First National application. Plaintiff does not dispute that he executed this form. Since plaintiff expressly indicated that he selected combined UM/UIM coverage of $50,000 per person and $100,000 per occurrence for bodily injury, the trial court correctly issued a declaratory judgment that plaintiff was entitled to UIM coverage in that amount. Accordingly, the trial court's order is affirmed.
Affirmed.
Judges STROUD and HUNTER, Jr., Robert N. concur.
Report per Rule 30(e).