Appeal by plaintiffs-appellants from order entered 12 August2003 by Judge Russell G. Walker, Jr. in Superior Court, Yadkin
County. Heard in the Court of Appeals 25 January 2005.
George Francisco, PC, by George Francisco, for plaintiffs-
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Brian
J. McMillan; Leonard, Street & Deinard, P.A., by Donald T.
Campbell, for defendants-appellees.
Plaintiffs appeal from the trial court's order entering
summary judgment in favor of defendants LifeUSA Insurance Company
and Allianz Life Insurance Company of North America (collectively
(See footnote 1)
LifeUSA, an insurance and securities broker, offers a variety
of insurance products, including fixed annuities. LifeUSA sold its
products through state-licensed independent insurance agents
(agents) with whom LifeUSA entered into agent agreements. The
agent agreements authorized agents to solicit applications for
Defendant Select Marketing Plans, Inc. (SMP) was engaged in
the business of serving as a field representative for several
insurance companies. SMP selected agents to market variousinsurance products, including insurance products offered by
LifeUSA. Defendant Thomas Welborn (Welborn) was an officer,
director, and shareholder of SMP. Welborn also acted as an
independent agent of SMP, and sold insurance products from
companies represented by SMP. Defendant Roger Russell (Russell)
acted as a subagent for SMP and Welborn.
Welborn and Russell entered into agent agreements with
LifeUSA. The agent agreements contained the following provisions:
2. AGENT RIGHTS AND RESPONSIBILITIES
a. INDEPENDENCE. As an independent
contractor, you are free to exercise
your discretion and judgment as to
time, place, and means of performing
all acts hereunder. Nothing in this
AGREEMENT is intended to create a
relationship of employer and
employee between us and you.
b. FREEDOM OF CHOICE. You are free to
contract with other insurance
. . . .
d. AUTHORITY. We authorize you,
subject to the provisions of
1. to solicit personally and
through your properly
licensed agents, who have
entered into an Agent
Agreement with us at your
request (your agents),
applications for policies
described in the SCHEDULE
OF COMMISSIONS and
commission guidelines and
promptly to forward the
applications to us for
2. to collect the fullinitial premium for
policies to be issued and
promptly to submit all
premium[s] collected to
3. to deliver policies in
accordance with any
delivery requirements of
the Company on a timely
4. to make reasonable
efforts to maintain your
and the Company's
policies in force and to
assistance to your and
e. COMMISSIONS. We will pay you, as
full compensation for all services
rendered and expenses incurred by
you, first year and renewal
commissions at the rates provided
and subject to the terms and
conditions contained in the attached
SCHEDULE OF COMMISSIONS and
commission guidelines. These
commissions will accrue on premiums
paid in cash to us for policies
issued from applications procured by
you while this AGREEMENT is in
. . . .
3. COMPANY RIGHTS AND RESPONSIBILITIES
a. RESERVATION OF AUTHORITY. The
Company reserves and retains
the exclusive authority, and
your authority does not permit
. . . .
10. exercise any authority on
our behalf other than as
authorized by paragraph
Russell began selling the LifeUSA annuities that are the
subject of this action to plaintiffs in 1993. The applications for
the annuities contained the following provision:
Full or Partial Surrender - Prior to the
Annuity Date, you may request a full surrender
of this policy for its Cash Value. A partial
surrender of the Cash Value may also be
requested. A table of Cash Surrender Values
is included in the policy.
The Annuitization Value will be reduced
proportionately to the reduction in the Cash
Value as a result of any partial surrenders.
Plaintiffs contacted Russell in 1997 and inquired about
alternative investments that would yield a higher rate of return
than the LifeUSA annuities. Russell put plaintiffs in contact with
Welborn. Both Welborn and Russell met with plaintiffs and Welborn
talked with plaintiffs about investing in ETS Payphones, Inc.
(ETS). Under the terms of this investment, plaintiffs purchased
payphones from BEE Communications, LLC, and then leased the
payphones back to ETS. Plaintiffs made five investments in ETS, as
follows: $84,000 on 3 October 1997; $54,000 on 2 December 1997;
$6,000 on 15 July 1998; $196,000 on 10 February 1999; and $196,000
on 17 March 1999. Plaintiffs obtained the funds for the last two
investments by surrendering their LifeUSA annuities.
When plaintiffs opted to surrender their LifeUSA annuities,
they received "Conservation Letters" from LifeUSA, which stated in
[W]e have enjoyed servicing your annuity
needs. We are disappointed to learn of your
recent request to terminate your policy. We feel it is important for you to know what
you will forfeit by surrendering your policy.
You may decide to surrender this policy at any
time. However, if you decide to annuitize
this contract for at least a [five or ten]
year period, you will receive the much higher
. . . .
If you wish to keep your policy, contact us at
[telephone number]. If we don't hear from
you, your check will be mailed in
approximately three weeks.
Each letter stated the dollar value penalty for the early surrender
of the annuity policies.
ETS filed for bankruptcy in September 2000. As a result, ETS
stopped making lease payments to plaintiffs and plaintiffs'
investments in the payphones became worthless. Plaintiffs filed
suit against, inter alia, Welborn, Russell, and LifeUSA. The
causes of action against Welborn and Russell relevant to this
appeal are negligence, negligent misrepresentation, and unfair and
deceptive trade practices pursuant to N.C. Gen. Stat. § 58-63-15(1)
(2003). Plaintiffs sought recovery against LifeUSA on the theory
that LifeUSA was vicariously liable for Welborn's and Russell's
tortious actions. In an order entered 12 August 2003, the trial
court granted LifeUSA's motion for summary judgment disposing of
all claims against LifeUSA.
 We must first determine whether this case is properly
before this Court. An appeal from a trial court's order of summary
judgment for less than all the defendants in a case is ordinarilyinterlocutory, and therefore untimely. Draughon v. Harnett Cty.
Bd. of Educ.
, 158 N.C. App. 208, 211, 580 S.E.2d 732, 734 (2003),
aff'd per curiam
, 358 N.C. 131, 591 S.E.2d 521 (2004). However, an
order is immediately appealable when it affects a substantial
right. State ex rel. Easley v. Rich Food Servs., Inc.
, 139 N.C.
App. 691, 695, 535 S.E.2d 84, 87 (2000). A substantial right is
affected when "(1) the same factual issues would be present in both
trials and (2) the possibility of inconsistent verdicts on those
issues exists." N.C. Dept. of Transportation v. Page
, 119 N.C.
App. 730, 735-36, 460 S.E.2d 332, 335 (1995); see also Camp v.
, 133 N.C. App. 554, 558, 515 S.E.2d 909, 912 (1999).
In this case, the trial court granted LifeUSA's motion for
summary judgment disposing of all claims against LifeUSA. However,
claims still existed against the remaining defendants, including
Welborn and Russell. Since plaintiffs' theory of LifeUSA's
liability is that LifeUSA is vicariously liable for Welborn's and
Russell's actions, many of the same factual issues would apply to
the claims against defendants and inconsistent verdicts could
result from separate trials. Therefore, we find that a substantial
right is affected and that this appeal is properly before this
In order to prevail on a motion for summary judgment, the
movant has the burden of proving that "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as toany 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) (2003);
Livingston v. Adams Kleemeier Hagan Hannah & Fouts
, 163 N.C. App.
397, 402, 594 S.E.2d 44, 48, disc. review denied
, 359 N.C. 190, 607
S.E.2d 275 (2004). This burden can be met "(1) by showing an
essential element of the opposing party's claim is nonexistent or
cannot be proven, or (2) by showing through discovery that the
opposing party cannot produce evidence to support an essential
element of his or her claim." Belcher v. Fleetwood Enters., Inc.
162 N.C. App. 80, 84, 590 S.E.2d 15, 18 (2004).
Once a party has come forward with a forecast of evidence
tending to support the party's motion for summary judgment, the
burden shifts to the opposing party to show that the opposing party
"will be able to make out at least a prima facie case at trial."
Collingwood v. G.E. Real Estate Equities
, 324 N.C. 63, 66, 376
S.E.2d 425, 427 (1989). In addition, the party "must set forth
specific facts showing that there is a genuine issue for trial."
N.C. Gen. Stat. § 1A-1, Rule 56(e) (2003). "An issue is deemed
genuine 'if it is supported by substantial evidence,' and 'a fact
is material if it would constitute or would irrevocably establish
any material element of a claim or a defense.'" Finley Forest
Condo. Ass'n v. Perry
, 163 N.C. App. 735, 738, 594 S.E.2d 227, 230
(2004) (citations omitted). When evaluating a motion for summary
judgment, the trial court must take the evidence in the light most
favorable to the non-moving party, and "[a]ll inferences of fact
must be drawn against the movant and in favor of the nonmovant." Roumillat v. Simplistic Enterprises, Inc.
, 331 N.C. 57, 63, 414
S.E.2d 339, 342 (1992).
 Plaintiffs argue that the trial court erred in granting
summary judgment in favor of LifeUSA because a genuine issue of
material fact existed regarding whether LifeUSA was vicariously
liable for the actions of Welborn and Russell.
When an employee commits a tort while acting within the scope
of employment, the tort can be imputed to the employer under the
doctrine of respondeat superior
. MGM Transport Corp. v. Cain
N.C. App. 428, 430-31, 496 S.E.2d 822, 824 (1998). However, "the
rule is well settled in North Carolina" that the torts committed by
an independent contractor are not imputed to the employer. Market
America, Inc. v. Christman-Orth
, 135 N.C. App. 143, 152, 520 S.E.2d
570, 577 (1999), disc. review denied
, 351 N.C. 358, 542 S.E.2d 213
(2000); see also
David A. Logan & Wayne A. Logan, North Carolina
233 (1996). Although a contract may designate that an
employer-independent contractor, rather than an employer-employee,
relationship exists, the terms of the contract are not controlling.
Johnson v. News & Observer Pub. Co.
, 167 N.C. App. 86, 89, 604
S.E.2d 344, 347 (2004). Rather, "[w]hether a party is an
independent contractor is a mixed question of law and fact." Id
at 88, 604 S.E.2d at 346. While determining the terms of the
agreement is a question of fact, whether or not that agreement
establishes an independent contractor relationship is a question of
law. Yelverton v. Lamm
, 94 N.C. App. 536, 538, 380 S.E.2d 621, 623(1989). "'[W]here the facts are undisputed or the evidence is
susceptible of only a single inference and a single conclusion, the
court must determine whether a party is an employee or an
independent contractor as a matter of law.'" Johnson
, 167 N.C.
App. at 88, 604 S.E.2d at 346 (alteration in original) (citation
Our Supreme Court has established the factors that must be
considered when determining whether an employee is an independent
[Whether] [t]he person employed (a) is engaged
in an independent business, calling, or
occupation; (b) is to have the independent use
of his special skill, knowledge, or training
in the execution of the work; (c) is doing a
specified piece of work at a fixed price or
for a lump sum or upon a quantitative basis;
(d) is not subject to discharge because he
adopts one method of doing the work rather
than another; (e) is not in the regular employ
of the other contracting party; (f) is free to
use such assistants as he may think proper;
(g) has full control over such assistants; and
(h) selects his own time.
Hayes v. Elon College
, 224 N.C. 11, 16, 29 S.E.2d 137, 140 (1944).
In addition, we have held that "[a] life insurance agent who is
employed solely to bring about contractual relations between his
principal and others on his own initiative, without being subject
to the principal's direction as to how he shall accomplish results,
is ordinarily held to be an independent contractor." Little v.
, 11 N.C. App. 597, 602, 182 S.E.2d 206, 209-10 (1971).
We find that the evidence in this case only supports the
conclusion that Welborn and Russell were independent contractors,
and not employees, of LifeUSA. The facts are undisputed thatWelborn and Russell acted with complete autonomy and used their
independent skills when selling products for LifeUSA. Welborn and
Russell were independently licensed by the State of North Carolina
as insurance agents and were not paid a salary, but rather
commissions based "upon a quantitative basis." Hayes
, 224 N.C. at
16, 29 S.E.2d at 140. Welborn and Russell were permitted to sell
the products of any other insurance company, and indeed testified
at their depositions that they did sell other insurance companies'
products. Welborn also had full autonomy in recruiting,
supervising, training and supporting his subagents. Therefore,
even assuming arguendo
that Welborn and Russell committed torts,
LifeUSA cannot be vicariously liable for these torts because
Welborn and Russell were independent contractors of LifeUSA.
 Plaintiffs argue that even if Welborn and Russell are
determined to be independent contractors of LifeUSA, LifeUSA is
nevertheless vicariously liable for their actions because Welborn
and Russell were LifeUSA's actual or apparent agents. Again, even
that Welborn and Russell committed torts, we find
that plaintiffs have failed to present sufficient evidence to
establish a genuine issue of material fact of whether Welborn and
Russell were LifeUSA's actual or apparent agents. A third party
acquires no rights against a principal when the third party has
either actual or constructive knowledge of what the principal has
authorized his agent to do. Branch v. High Rock Lake Realty, Inc.
151 N.C. App. 244, 250, 565 S.E.2d 248, 253 (2002), disc. review
, 356 N.C. 667, 576 S.E.2d 330 (2003); Rollins v. MillerRoofing Co.
, 55 N.C. App. 158, 161, 284 S.E.2d 697, 700 (1981); see
also Investment Properties v. Allen
, 283 N.C. 277, 285-86, 196
S.E.2d 262, 267 (1973).
In this case, the evidence is undisputed that plaintiffs knew
that Welborn and Russell were not acting as representatives of
LifeUSA when plaintiffs invested in ETS. Plaintiff Blanche Redding
gave the following testimony at her deposition:
Q. You understand that ETS -- ETS and
LifeUSA are not the same, correct?
Q. You agree with me that they are
completely different companies?
Q. You understand that LifeUSA does not sell
pay phones, correct?
Q. Did you -- were you ever presented with
any documentation from Mr. Welborn or
from Mr. Russell that would suggest --
that suggested to you that LifeUSA and
ETS or BEE Communications were affiliated
in any way?
Q. And did either [Mr. Welborn or Mr.
Russell] make any representations to you
that LifeUSA and BEE Communications or
ETS were affiliated in any way?
Similarly, plaintiff Rebecca Redding's testimony shows an
understanding that Welborn and Russell were not acting within their
scope as LifeUSA agents when plaintiffs purchased the ETS
investments: Q. So you knew that LifeUSA was a completely
different entity than ETS pay phones,
A. Oh, yes.
. . . .
Q. [A]t the meeting that you attended Mr.
Russell and Mr. Welborn weren't
conducting business on behalf of LifeUSA,
A. No, sir.
Q. In fact, they were selling ETS pay
[ATTORNEY FOR RUSSELL]: Object to
. . . .
Q. Is that your understanding?
Q. And you understand ETS and LifeUSA are
not the same thing?
A. That's correct.
Q. Now, do you have any idea why it would be
in LifeUSA's benefit to have their agents
surrendering their policies? What
benefit would they derive from that?
A. I would say they have no benefit.
Furthermore, the "Conservation Letters" sent by LifeUSA to
plaintiffs clearly gave plaintiffs notice that Welborn and Russell
were not acting within any authority conferred by LifeUSA when they
helped plaintiffs surrender the annuities to invest in the
payphones. Blanche Redding admitted receiving these letters and
understanding their content:
Q. And would you agree that these lettersfrom LifeUSA are advising you that
they're disappointed to learn of your
decision to terminate the policy and they
explain to you what the damages or the
potential loss will be if you decide to
forfeit these policies?
A. Yes, uh-huh.
Q. Do you . . . as you sit here recall
receiving these letters?
Q. And would you also agree with me that the
last paragraph of . . . each of those
seven letters indicates that if you
should change your mind, if you wish to
keep the policy, to please contact them
at the 1-800 number?
. . . .
Q. After you received these letters,
. . . apparently you didn't change your
mind on your decision to surrender those
Q. You still went forward with the
Since plaintiffs knew that Welborn and Russell were not acting
as LifeUSA agents when plaintiffs purchased the payphones, we find
that there is no genuine issue of material fact as to whether
plaintiffs had knowledge that Welborn and Russell's actions were
outside the scope of what LifeUSA had authorized them to do. As a
result, plaintiffs can acquire no rights against LifeUSA.
 We also reject plaintiffs' argument that Welborn and
Russell were LifeUSA's "statutory agents" by virtue of Chapter 58of the North Carolina General Statutes. N.C. Gen. Stat. § 58-33-
20(a) (2003) states:
Every agent or limited representative who
solicits or negotiates an application for
insurance of any kind
, in any controversy
between the insured or his beneficiary and the
insurer, is regarded as representing the
insurer and not the insured or his
beneficiary. This provision does not affect
the apparent authority of an agent
(emphases added). Similarly, N.C. Gen. Stat. § 58-58-30 (2003)
provides: "A person who solicits an application for insurance upon
the life of another, in any controversy relating thereto between
the insured or his beneficiary and the company issuing a policy
upon such application, is the agent of the company and not of the
In interpreting these statutory provisions, we find our
Supreme Court's interpretation of N.C. Gen. Stat. § 58-197, the
predecessor to N.C. Gen. Stat. § 58-58-30, instructive:
We note that a majority of states have a
statute similar to [N.C.]G.S. 58-197. Many of
those statutes were enacted in the early part
of this century to curb abusive practices on
the part of insurance companies which would
issue policies but avoid paying benefits
provided under the terms of the policies by
finding technical defects in agents' authority
to bind the companies.
Northern Nat'l Life Ins. v. Miller Machine Co.
, 311 N.C. 62, 71,
316 S.E.2d 256, 262 (1984) (citations omitted). We also note that
the only reported case interpreting N.C. Gen. Stat. § 58-33-20
involved a dispute over an insurance company's obligation to pay
benefits when the agent filled out the application for insurance.
Webster Enterprises, Inc. v. Selective Insurance Co.
, 125 N.C. App.36, 45, 479 S.E.2d 243, 249 (1997). In the present case, LifeUSA
is not attempting to avoid paying benefits under an insurance
policy, nor does the dispute involve the application or
solicitation of insurance. Therefore, we find that Chapter 58 does
not create a "statutory agency" whereby LifeUSA would be
vicariously liable for Welborn's or Russell's actions.
 Finally, we consider plaintiffs' argument that the trial
court erred in entering summary judgment for LifeUSA because the
separate cause of action "negligent servicing of annuities" exists
against LifeUSA. We disagree. Plaintiffs have failed to support
this argument with any North Carolina case law, but rather rely on
an unpublished opinion from the United States District Court for
the Northern District of Texas. American Automobile Insurance Co.
(No. Civ.A.5:02-CV066-C) (10 February 2004).
Furthermore, we disagree with plaintiffs' interpretation of Grimes
, the plaintiff insurance provider sought a declaratory
judgment for a determination of whether the plaintiff was obligated
to defend and indemnify an insurance agent under the agent's "Life
Insurance Agents Errors and Omissions Liability Insurance Policy."
The insurance agent had been successfully sued for negligently
advising his clients to transfer the clients' annuity funds into a
payphone leasing scheme and for negligently and fraudulently
misrepresenting the nature of the payphone scheme. However, the
annuity provider was never made a party to any of the lawsuits, nor
did the court consider any possibility of liability that theannuity provider may have had. Therefore, Grimes
does not support
the proposition that LifeUSA may be liable for the negligent
servicing of its annuities, and we reject plaintiffs' argument.
Judges HUDSON and TYSON concur.