NO. COA02-1202

NORTH CAROLINA COURT OF APPEALS

Filed: 05 August 2003

    Appeal by plaintiff from judgment entered 17 July 2002 by Judge William Z. Wood, Jr. in Forsyth County Superior Court. Heard in the Court of Appeals 21 May 2003.

    Horton and Gsteiger, PLLC, by Urs R. Gsteiger, for plaintiff- appellant.

    Thornton, Burge & Laws, LLP, by Robert B. Laws, for intervenor defendant-appellee Nationwide Mutual Insurance Company.

    STEELMAN, Judge.

    Plaintiff, State Auto Property and Casualty Insurance Company, appeals an order granting summary judgment in favor of intervenor- defendant Nationwide Mutual Insurance Company. For the reasons discussed herein, we affirm.
    In April 1997, defendant James Lee Rankin was the owner of a1988 Mack dump truck. Plaintiff, State Auto Property and Casualty Insurance Company, had issued a commercial insurance policy to Rankin that covered vehicles used in his business operations. The policy included the dump truck and was effective from 2 February 1997 until 2 February 1998.
    In April 1997, Rankin entered a verbal “gentlemen's agreement” with Kenneth J. Painter, president of defendant Iron Horse Grading, Inc. Rankin and Painter agreed that Painter would pay the two lease payments then due and make future lease payments on the dump truck. The truck was to belong to Iron Horse. Rankin and Painter filled out paperwork, but title to the truck was not transferred to Iron Horse until 21 August 1998. Iron Horse immediately assumed possession of the truck in April 1997.
    On 15 April 1997, defendant David B. Smith, an employee of Iron Horse, was operating the truck when he was involved in a motor vehicle accident with defendant Michelle Russell. Iron Horse had no insurance on the dump truck at the time of the accident. Intervenor, Nationwide Insurance Company, had issued a policy of insurance providing uninsured or underinsured motorists coverage to Russell at the time of the accident.
    Russell sued Smith, Iron Horse, and Rankin, asserting claims of negligence and negligent entrustment in case number 00 CVS 1738 in Mecklenburg County. On 2 July 2001, the Mecklenburg CountySuperior Court granted Rankin's summary judgment motion and dismissed him from that suit with prejudice.    
    On 20 July 2001, plaintiff filed a complaint in Forsyth County in the present case, 01 CVS 6633, seeking a declaratory judgment that its insurance policy provided no coverage for Russell's injuries in the 15 April 1997 accident. Default was entered against defendants Rankin and Russell for failure to plead. Defendant Nationwide Mutual Insurance Company filed a motion to intervene, which was allowed by the trial court. Both plaintiff and intervenor filed motions for summary judgment. Plaintiff's motion was denied and intervenor's motion was granted. The trial court found, as a matter of law, that the insurance policy issued to Rankin by plaintiff afforded coverage to satisfy any award in favor of Russell up to the full limits of liability in Mecklenburg County case 00 CVS 1738. Plaintiff appeals.
    In its first and third assignments of error, plaintiff argues the trial court erred by granting defendant's motion for summary judgment contending that there are materials facts in dispute and that the policy which it had issued to Rankin was void as a result of Rankin's misrepresentations. We disagree.
    Summary judgment is appropriate only “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuineissue 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) (2001). The purpose of this rule is to avoid a formal trial where only questions of law remain and where an unmistakable weakness in a party's claim or defense exists. Dalton v. Camp, 353 N.C. 647, 650, 548 S.E.2d 704, 707 (2001).
    In actions for benefits arising from an insurance policy, “the burden is on the insured to show coverage.” Nationwide Mut. Ins. Co. v. McAbee, 268 N.C. 326, 328, 150 S.E.2d 496, 497 (1966). “The interpretation of language used in an insurance policy is a question of law, governed by well-established rules of construction.” North Carolina Farm Bureau Mut. Ins. Co. v. Mizell, 138 N.C. App. 530, 532, 530 S.E.2d 93, 95, disc. review denied, 352 N.C. 590, 544 S.E.2d 783 (2000). Where a policy is not ambiguous, the court must strictly construe the policy without resort to extrinsic evidence. Metric Constructors, Inc. v. Industrial Risk Insurers, 102 N.C. App. 59, 401 S.E.2d 126, aff'd, 330 N.C. 439, 410 S.E.2d 392 (1991).
    In this case, the material facts are not in dispute, nor are the terms of plaintiff's insurance policy ambiguous.
    Plaintiff contends that Rankin was not the owner of the truck at the time of the accident, and therefore, its insurance policy provides no coverage for Russell's alleged injuries. In Jenkins v.Aetna Casualty & Surety Co., 324 N.C. 394, 398, 378 S.E.2d 773, 776 (1989), the Supreme Court held that:
N.C.G.S. § 20-72 requires proper execution of an assignment and delivery of the certificate of title before “legal” title and ownership pass. Applying the statutory definition of “owner,” the statutory requirements for passing title and the statutory requirements for liability insurance, we have held that for purposes of tort law and liability insurance coverage, no ownership passes to the purchaser of a motor vehicle which requires registration until: (1) the owner executes, in the presence of a person authorized to administer oaths, an assignment and warranty of title on the reverse of the certificate of title, including the name and address of the transferee; (2) there is an actual or constructive delivery of the motor vehicle; and (3) the duly assigned certificate of title is delivered to the transferee (or lienholder in secured transactions). (Citation and footnote omitted.)

    In the instant case, there was no transfer of the title from Rankin to Iron Horse until approximately sixteen months after the accident. Further, section 20-4.01(26) provides that an “owner” is a person holding legal title to a vehicle. N.C. Gen. Stat. § 20- 4.01(26) (2003). Thus, Rankin was the owner of the truck on the date of the accident.
    Plaintiff further argues that in no event should it be liable for coverage in excess of the coverage mandated by N.C. Gen. Stat. § 20-279.21(b)(2). It contends that any coverage beyond that mandate is controlled by the policy's provisions. Plaintiff'spolicy contains the following provisions:
A. Coverage

We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto”.
. . . .
1. WHO IS AN INSURED
The following are “insureds”:
    a. You for any covered “auto”.
    b. Anyone else while using with your permission a covered “auto” you own, hire or borrow [with exceptions.]

Here, the evidence shows that Smith and Iron Horse were using the dump truck with Rankin's permission. Smith was thus an insured under the policy. No exceptions to the definition of “insureds” under the policy are applicable to the facts of this case. Plaintiff's coverage is therefore not limited to the statutorily mandated coverage.
    Plaintiff further argues that Rankin's material misrepresentations voided the policy, citing Smith v. State Farm Fire & Casualty Co., 109 N.C. App. 276, 426 S.E.2d 457 (1993). In Smith, the plaintiff listed a computer that she was considering buying on a personal property inventory form as stolen from her apartment. An investigation found that the plaintiff did not own the computer. The defendant insurance company refused to pay theentire claim because of the plaintiff's misrepresentation that she owned the computer. This Court upheld the trial court's granting of summary judgment for the defendant.
    In the instant case, paragraph 2 of the General Conditions of plaintiff's policy provides that:
2. CONCEALMENT, MISREPRESENTATION OR FRAUD
This Coverage Form is void in any case of fraud by you at any time as it relates to this Coverage Form. It is also void if you or any other “insured”, at any time, intentionally conceal or misrepresent a material fact concerning:
    a. This Coverage Form;
    b. The covered “auto”;
            c. Your interest in the covered “auto”; or
    d. A claim under this Coverage Form.

There is no evidence that Rankin made any affirmative misrepresentation, concealment or fraud as to any material fact to plaintiff. Plaintiff alleges only that Rankin failed to inform it of the agreement with Painter concerning the dump truck. As discussed above, because there was no transfer of title from Rankin to Iron Horse at the time in question, there had been no sale of the truck and Rankin was still its owner. Further, there is no language in the policy that places an affirmative duty on an owner to advise of such agreements. This assignment of error is without merit.
    In its second assignment of error, plaintiff argues the trialcourt erred by granting summary judgment in favor of defendants based upon the doctrines of res judicata and collateral estoppel. We disagree.
    Under the doctrine of res judicata, “a final judgment on the merits in a prior action will prevent a second suit based on the same cause of action 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). For res judicata to apply, there must have been a prior adjudication on the merits of an action involving the same parties and issues as the action in which the defense of res judicata is asserted. King v. Grindstaff, 284 N.C. 348, 200 S.E.2d 799 (1973).
    The doctrine of collateral estoppel precludes the relitigation of an issue when the issue has previously been litigated and judicially determined. State ex rel. Tucker v. Frinzi, 344 N.C. 411, 474 S.E.2d 127 (1996).
A party asserting collateral estoppel is required to show that the earlier suit resulted in a final judgment on the merits, that the issue in question was identical to an issue actually litigated and necessary to the judgment, and that both [the party asserting collateral estoppel and the party against whom collateral estoppel is asserted] were either parties to the earlier suit or were in privity with parties.

Thomas M. McInnis & Associates, Inc. v. Hall, 318 N.C. 421, 429,349 S.E.2d 552, 557 (1986).
    In the previous action, Russell v. Smith, 152 N.C. App. 718, 568 S.E.2d 337 (2002), Russell filed a negligence claim against Smith, the operator of the truck, and Rankin, the owner of the truck. Russell alleged that: (1) Smith's negligence was imputed to Rankin; and (2) Rankin was negligent in entrusting the vehicle to Smith. Summary judgment was granted in favor of Rankin. In the present action, plaintiff seeks a declaration that it did not afford coverage to Rankin for any damages arising out of case 00 CVS 1738 pending in Mecklenburg County.
    The causes of action in the Mecklenburg County case for negligence are different from those pending in this lawsuit. Thus, the doctrine of res judicata is not applicable to this case. We now consider whether collateral estoppel is applicable.
    Plaintiff contends that “[s]ince the Russell court (00 CVS 1738) granted Rankin's motion for summary judgment and found that [intervenor's] UIM coverage is in dispute, it necessarily found that [plaintiff's] policy did not provide coverage to Russell above minimum limits.” This is not correct. In case 00 CVS 1738, the trial court dismissed the negligence claims against Rankin. It made no rulings concerning intervenor's UIM policy, nor did it make any rulings on the applicability of plaintiff's coverage to any recovery by Russell in that lawsuit. The issues decided by thetrial court in case 00 CVS 1738 (negligence) are different from those in the instant case (01 CVS 6633). The doctrine of collateral estoppel is therefore not applicable. This assignment of error is without merit.
    AFFIRMED.
    Judges TIMMONS-GOODSON and HUDSON concur.
    Report per Rule 30(e).
    

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