Opinion
No. COA09-1694
Filed 3 August 2010 This case not for publication
Appeal by plaintiffs from an order entered 22 September 2009 by Judge Jack Thompson in Cumberland County Superior Court. Heard in the Court of Appeals 24 May 2009.
Law Offices of James M. Johnson, by James M. Johnson, Esq., and Brent Adams Associates, by Brenton D. Adams, Esq., for plaintiff-appellants. McAngus, Gouldelock Courie, PLLC, by John P. Barringer and Jennifer M. Arno, for defendant-appellee.
Cumberland County No. 09 CVS 2353 .
Where the claims in the underlying action for negligence were not the same as the claims in the subsequent action based on unfair claim settlement practices and, where many of plaintiffs' subsequent claims did not exist and therefore could not have been brought in the negligence action, defendant's N.C. Gen. Stat. § 1A-1, Rule 12 (b)(6) motion to dismiss based on res judicata should have been denied.
Facts
The pleadings of record in the instant case reveal the following facts. On 28 July 2004, Thomas A. Matuseski (Matuseski) crashed his vehicle into the rear of a stopped vehicle causing that vehicle to crash into the rear of plaintiff Ellis Corbett Lee's vehicle. The impact of the collision damaged Lee's vehicle and caused injury to Lee's passenger, plaintiff Ruby P. Lee. Plaintiffs' vehicle was insured by defendant Allstate Insurance Company (Allstate) pursuant to a policy which provided $100,000.00 of underinsured motorist (UIM) coverage and allowed arbitration for disputed claims. Plaintiff filed a UIM claim with Allstate in early January 2007. Allstate acknowledged receipt, but did not pay the claim at that time. Thereafter, on 21 May 2007, plaintiffs filed a complaint for negligence against Matuseski and issued Allstate a summons as an unnamed defendant. Matuseski, through his insurer, Nationwide Insurance Company, paid the limit of his coverage, $30,000.00, to plaintiffs in September 2007. After numerous efforts by plaintiffs to collect under their UIM policy with Allstate, including requesting that Allstate appoint an arbitrator, on 29 November 2007, plaintiffs filed a motion to compel arbitration.
On 11 March 2008, the trial court granted plaintiffs' motion to compel arbitration. On 2 January 2009, arbitrators awarded plaintiff Ruby Lee $125,000.00 but submitted to the trial court the issue of whether prejudgment interest would be allowed. On 26 January 2009, plaintiffs received a letter from Allstate which contained a proposed order of dismissal against Matuseski and release agreements. Plaintiffs did not execute the releases or the dismissal. On 6 February 2009, plaintiffs moved for entry of judgment upon the arbitration award in trial court and requested prejudgment interest as well as reimbursement for arbitration fees and costs.
While plaintiffs' motion was pending in that action, on 9 March 2009, plaintiffs filed the complaint in the present action alleging that Allstate breached its insurance contract with plaintiffs by failing to arbitrate and by failing to pay the arbitration award; engaged in unfair trade practices and unfair claim settlement practices in its bad faith failure to settle plaintiffs' claim; and willfully and wantonly breached the covenant of good faith and fair dealing, for which plaintiffs requested punitive damages.
Following the filing of plaintiffs' complaint against Allstate, on 25 March 2009, the trial court entered judgment upon the arbitrators' award in plaintiffs' original negligence action, ordering that Allstate pay plaintiffs $70,000.00, the difference between the UIM coverage limit of $100,000.00 and the $30,000.00 plaintiffs had already received; granting plaintiffs' motion for prejudgment interest; denying plaintiffs' request for payment of arbitration fees and costs; and ordering that Allstate "shall have no liability to the Plaintiff beyond the $70,000.00 in underinsured motorist coverage policy limits available." The trial court amended its order on 2 April 2009 to correct clerical errors.
Following that, plaintiffs received another letter from Allstate, a check for $70,000.00, and a notice of dismissal with prejudice, which Allstate directed plaintiffs to execute. Plaintiffs did not negotiate the check nor did they execute the dismissal, and instead, returned the $70,000.00 check to Allstate. On 13 April 2009, plaintiffs sought an order amending the 25 March 2009 order pursuant to N.C. Gen. Stat. § 1A-1, Rules 59 and 60 to allow plaintiffs' claim against Allstate to proceed. On 18 May 2009, the trial court issued a memorandum stating that "the issue of the status of the `bad faith' claim now brought . . . should be adjudicated in the 09 CVS 2353 file number" and that "[e]ither the foreclosure or the right to move forward can be determined in that action." On 26 May 2009, the trial court denied plaintiffs' motion for Rule 59 and Rule 60 relief without prejudice, ordering that "the affect of the . . . Order . . . be determined in the bad faith case now pending." Allstate answered plaintiffs' complaint on 29 May 2009, moving to dismiss plaintiffs' complaint "pursuant to Rule 12(b)(6)" and including as a defense that the trial court's amended order of 2 April 2009 barred plaintiffs' lawsuit against Allstate under the doctrine of res judicata. In July 2009, plaintiffs received a check from Allstate without the condition that plaintiffs execute a notice of dismissal. On 20 July 2009, plaintiffs filed a motion for partial summary judgment, and on 22 September 2009, the trial court dismissed the case on the basis of res judicata.
Plaintiffs present one issue on appeal: whether the trial court erred by granting defendant's Rule 12(b)(6) motion to dismiss on the basis of res judicata. For the reasons set forth below, we reverse.
Standard of Review
Because this appeal is solely from the trial court's Rule 12(b)(6) dismissal, we review it accordingly. Plaintiff urges our review of this appeal as one from an order granting summary judgment. However, because nothing in the record, including the trial court's order, indicates that the trial court considered matters beyond the pleadings in its Rule 12(b)(6) dismissal, we treat this as an appeal from an order granting a Rule 12(b)(6) motion to dismiss. See Charlotte Motor Speedway, Inc. v. Tindall Corp., 195 N.C. App. 296, 300, 672 S.E.2d 691, 694, disc. review denied, 363 N.C. 580, 682 S.E.2d 208 (2009) (holding that a motion to dismiss is not converted to a motion for summary judgment when "the trial court's order indicates that it dismissed the complaint under N.C. R. Civ. P. 12(b)(6), . . . [the order] does not mention any of the evidentiary matter appropriately considered on a motion for summary judgment[,] . . . [and] nothing in the record establishes that the trial court considered matters beyond the pleadings").
"On a Rule 12(b)(6) motion to dismiss, the question is whether, as a matter of law, the allegations of the complaint, treated as true, state a claim upon which relief can be granted." Allred v. Capital Area Soccer League, Inc., 194 N.C. App. 280, 282, 669 S.E.2d 777, 778 (2008) (citation omitted). "This Court must conduct a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct." Craven v. Seiu Cope, 188 N.C. App. 814, 816, 656 S.E.2d 729, 732 (2008) (internal quotation marks and citation omitted). "Under Rule 12(b)(6), a claim should be dismissed where it appears that plaintiff is not entitled to relief under any set of facts which could be proven." Miller v. Nationwide Mut. Ins. Co., 112 N.C. App. 295, 299, 435 S.E.2d 537, 541 (1993), disc. review denied, 335 N.C. 770, 442 S.E.2d 519 (1994) (citation omitted). "This occurs where there is a lack of law to support a claim of the sort made, an absence of facts sufficient to make a good claim, or the disclosure of some fact which will necessarily defeat the claim." Id. (citation omitted).
I
Plaintiffs contend that the trial court erred in concluding that res judicata barred their lawsuit for two reasons: "the claims in the underlying action were not the same as the claims" here; and "plaintiffs' unfair settlement practices and unfair trade practices claims did not exist prior to the time plaintiffs' complaint in the underlying action was filed." We agree.
"Under the doctrine of res judicata, a final judgment on the merits in a prior action in a court of competent jurisdiction precludes a second suit involving the same claim between the same parties or those in privity with them." Bockweg v. Anderson, 333 N.C. 486, 491, 428 S.E.2d 157, 161 (1993) (citation omitted). Thus, "to successfully assert the doctrine of res judicata, a litigant must prove the following essential elements: (1) a final judgment on the merits in an earlier suit, (2) an identity of the causes of action in both the earlier and the later suit, and (3) an identity of the parties or their privies in the two suits." Moody v. Able Outdoor, Inc., 169 N.C. App. 80, 84, 609 S.E.2d 259, 262 (2005).
The trial court's 2 April 2009 final order which incorporated the arbitrators' award was a final decision on the merits in the underlying lawsuit. See Rodgers Builders, Inc. v. McQueen, 76 N.C. App. 16, 22, 331 S.E.2d 726, 730 (1985), disc. review denied, 315 N.C. 590, 341 S.E.2d 29 (1986) ("The doctrine of res judicata applies to a judgment entered on an arbitration award as it does to any other final judgment."). Because plaintiffs joined Allstate as an unnamed defendant in the underlying lawsuit against Matuseski, there is also an identity of parties in the two lawsuits. Therefore, the only element of res judicata at issue in this appeal is whether there is identity as to the causes of action in plaintiffs' earlier suit and the current suit.
In determining whether there is an identity of the causes of action in both the earlier and the later suit, this Court has held that "[s]trict identity of issues . . . is not absolutely required[;]" "the doctrine of res judicata . . . [also] appl[ies] to those issues which could have been raised in the prior action." Caswell Realty Assoc. v. Andrews Co., 128 N.C. App. 716, 720, 496 S.E.2d 607, 610 (1998) (internal quotation marks and citation omitted) (emphasis added). "[T]he common law rule against claim-splitting is based on the principle that all damages incurred as the result of a single wrong must be recovered in one lawsuit." Bockweg, 333 N.C. at 492, 428 S.E.2d at 161 (citation and emphasis omitted).
In Country Club of Johnston County, Inc. v. U.S. Fidelity and Guarantee, Co., 150 N.C. App. 231, 241, 563 S.E.2d 269, 276 (2002), we held that a prior judgment concerning insurance coverage did not bar a subsequent action for claims of bad faith and unfair and deceptive practices against the insurer in the handling of the claim. There, the insurer initially defended under a reservation of rights regarding coverage, and then subsequently instituted a declaratory judgment action seeking a determination that an exclusion in the insurance policy precluded coverage. Id. at 233-34, 563 S.E.2d at 271-72. During the pendency of the appeal of the insurer's declaratory judgment action, the insured filed a lawsuit which included a claim for bad faith and unfair and deceptive practices in the handling of its claim after the accident. Id. at 234, 563 S.E.2d at 272. In holding that the subsequent complaint did not involve the same claim as the prior complaint, we reasoned that it "contain[ed] factual allegations far exceeding those in the declaratory judgment action, including several allegations regarding [the insurer's] handling of the [insured's] claim, which were neither plead nor at issue in the declaratory judgment action." Id. at 240, 563 S.E.2d at 275. We further noted that because the insured only "began to discover the facts surrounding [the insurer's] handling of its policy and its claim as discovery proceeded in the declaratory judgment action[,]" "logic and common sense require the conclusion that the [insured] cannot be required to have brought a claim of which it could not have reasonably known at the time of the first action." Id.
The same principles apply here. Plaintiffs' complaint in the underlying negligence action sought coverage under plaintiffs' UIM policy, whereas in the instant action, plaintiffs seek damages based on Allstate's "conduct . . . in ignoring the plaintiffs' rights under the insurance policy," including its alleged refusal to arbitrate and refusal to settle. Specifically at issue in the underlying action was the "the causal relationship between the Plaintiffs' injuries and the subject accident," which would determine whether coverage was available. In fact, the arbitrators' award in the underlying matter determined that "Plaintiff Ruby Lee was injured as a proximate result of the negligence of Defendant," and as a result, awarded plaintiffs "$125,000.00 for compensatory damages." Accordingly, we do not believe that plaintiffs' prior action, which involved coverage under plaintiffs' UIM policy, is identical to the present action, which involves recovery of damages for unfair trade practices as a result of Allstate's handling of plaintiffs' claim. For these reasons, we find defendant's argument, that both suits seek "damages for the same wrong-Defendant Allstate's handling of Plaintiffs' underinsured motorist claim," unconvincing. While it is certainly true that "all damages incurred as the result of a single wrong must be recovered in one lawsuit," "[w]here a plaintiff has suffered multiple wrongs at the hands of a defendant, a plaintiff may normally bring successive actions[.]" Bockweg, 333 N.C. at 492, 428 S.E.2d at 161 (citations and emphasis omitted). In the instant case, plaintiffs' initial claim "involved issues of coverage . . . and not the issues presented in this suit, namely, bad faith and unfair and deceptive practices." See Country Club, 150 N.C. App. at 240, 563 S.E.2d at 275.
Furthermore, most of the conduct giving rise to plaintiffs' claims in the instant action occurred after plaintiffs filed the original complaint. In Northwestern Financial Group, Inc. v. County of Gaston, 110 N.C. App. 531, 538-39, 430 S.E.2d 689, 694 (1993), we recognized that
[a]lthough] [i]t is well established that all of a party's damages resulting from a single wrong must be recovered in a single action[,] . . . for this rule to apply, logic and common sense require that both remedies must have been available at the time the first action was commenced. To hold otherwise would require plaintiffs to include claims for damages not yet incurred for fear that future claims would be forever barred. Such a result would not be consistent with the notions of justice and fair play.
(internal citations omitted); see also Country Club, 150 N.C. App. at 240, 563 S.E.2d at 276 ("the [insured] cannot be required to have brought a claim of which it could not have reasonably known at the time of the first action."). Plaintiffs' complaint against Allstate is based on Allstate's conduct both before and after the filing of the original complaint: in addition to Allstate's conduct in handling plaintiffs' UIM claim prior to the filing of the original lawsuit, plaintiffs' complaint in the instant case is based on Allstate's alleged refusal to appoint an arbitrator, which prompted plaintiffs to file a motion to compel arbitration on 29 November 2008, six months following the filing of the original complaint, and on Allstate's alleged refusal to settle the claim during the period extending from Allstate's initial notice of the UIM claim on 3 January 2007, until the filing of the complaint in this action, on 9 March 2009, at which time plaintiffs had not yet received unconditional payment of their UIM claim.
Accordingly, the doctrine of res judicata does not bar plaintiffs' claims based on unfair trade practices and breach of the covenant of good faith and fair dealing. We reverse the trial court's Rule 12(b)(6) dismissal and remand for further proceedings
We note that plaintiffs' breach of contract claim based on Allstate's failure to arbitrate and failure to pay the arbitration award was satisfied when plaintiffs received unconditional payment of $70,000.00 from Allstate in July 2009, following the filing of plaintiffs' complaint on 9 March 2009.
Reversed.
Chief Judge MARTIN and ELMORE concur.
Report per Rule 30(e).