MARGARET S. POWE v. A. G. ODELL, JR. AND ODELL ASSOCIATES, INC.
No. 88PA84
IN THE SUPREME COURT OF NORTH CAROLINA
4 December 1984
312 N.C. 410
We agree that a corporation may be held liable for torts committed by its employees; however, we disagree with the above statement to the extent that it suggests that a corporation may not be held liable for torts committed by its employees, unless they are parties to the lawsuit or found by the jury to have committed a specific tort. However, we find it unnecessary to consider the evidence concerning the other employees’ actions, since the evidence of Mr. Gwynne‘s “reckless and wanton” investigation was sufficient to warrant the submission of the punitive damages issue against McDonald‘s to the jury.
In summary, we affirm the conclusion reached in the Court of Appeals’ opinion that no error occurred in the proceedings leading to the jury award of compensatory damages to the plaintiff. However, we reverse that portion of the Court of Appeals’ opinion which vacated the judgment of the trial court to the extent that it awarded the plaintiff punitive damages. Therefore, the opinion of the Court of Appeals is affirmed in part and reversed in part. This case is remanded to the Court of Appeals for further remand to the Superior Court, Cumberland County, for reinstatement of the judgment entered by the trial court.
Affirmed in part; reversed in part.
MARGARET S. POWE v. A. G. ODELL, JR. AND ODELL ASSOCIATES, INC.
No. 88PA84
(Filed 4 December 1984)
1. Insurance § 110.1; Interest § 2; Judgments § 55- prejudgment interest- claims covered by liability insurance- constitutionality of statute
The statute providing for prejudgment interest on non-contract claims covered by liability insurance, G.S. 24-5, does not violate the equal protection provisions of the Fourteenth Amendment to the U. S. Constitution or Art. I, § 19 of the N. C. Constitution.
2. Appeal and Error § 3- review of constitutional questions
The Supreme Court will not pass upon a constitutional question unless it affirmatively appears that such question was raised and passed upon in the court below.
Justices COPELAND and MITCHELL join in this dissenting opinion.
ON discretionary review, prior to determination by the Court of Appeals, of the order signed by Allen, J., on 15 November 1983 in Superior Court, MECKLENBURG County.
Plaintiff seeks prejudgment interest on an award of damages for personal injuries which were sustained as the result of an automobile collision involving a vehicle owned and operated by defendants. After a jury trial, judgment was entered on 25 October 1983 awarding plaintiff $100,000 in damages, plus $432 in court costs. On the same date plaintiff filed a motion to amend the judgment to include prejudgment interest pursuant to
Parker, Poe, Thompson, Bernstein, Gage & Preston, by William E. Poe and Christian R. Troy, for plaintiff.
Boyle, Alexander, Hord and Smith, by B. Irvin Boyle, for defendants.
Henson, Henson & Bayliss, by Paul D. Coates, Perry C. Henson, and Perry C. Henson, Jr., for Samuel Ingham Tarble and ARA Services, Inc., amici curiae.
MARTIN, Justice.
[1] The sole question properly before the Court for review is whether the trial court erred in holding that
All sums of money due by contract of any kind, excepting money due on penal bonds, shall bear interest, and when a jury shall render a verdict therefor they shall distinguish the principal from the sum allowed as interest; and the principal sum due on all such contracts shall bear interest from the time of rendering judgment thereon until it is paid and satisfied. The portion of all money judgments designated by the fact-finder as compensatory damages in actions other than contract shall bear interest from the time the action is instituted until the judgment is paid and satisfied, and the judgment and decree of the court shall be rendered accordingly. The preceding sentence shall apply only to claims covered by liability insurance. The portion of all money judgments designated by the fact-finder as compensatory damages in actions other than contract which are not covered by liability insurance shall bear interest from the time of the verdict until the judgment is paid and satisfied, and the judgment and decree of the court shall be rendered accordingly.
In determining whether a statute violates the equal protection clause of the fourteenth amendment to the United States Constitution or article I, section 19 of the North Carolina Constitution, we must decide whether the legislative classification in the statute could provide a reasonable means to a legitimate state objective. As this Court stated in Glusman v. Trustees and Lamb v. Board of Trustees, 281 N.C. 629, 638, 190 S.E. 2d 213, 219 (1972), vacated on other grounds, 412 U.S. 947 (1973):
The traditional equal-protection test does not require the very best classification in the light of a legislative or regulatory purpose; it does require that such classification in relation to such purpose attain a minimum (undefined and undefinable) level of rationality. “In the area of economics and social welfare, a state does not violate the Equal Protection Clause merely because the classifications made by its
laws are imperfect. If the classification has some ‘reasonable basis,’ it does not offend the Constitution simply because the classification ‘is not made with mathematical nicety or because in practice it results in some inequality.‘” Dandridge v. Williams, 397 U.S. 471, 485, 25 L.Ed. 2d 491, 501-02, 90 S.Ct. 1153, 1161 (1970).
As long as a legislative classification in a statute concerning matters of economics or social welfare has a reasonable basis and is rationally related to a governmental objective which is permissible under the state and federal constitutions, this Court will defer to the wisdom of the legislature.
Defendants concede that the probable goals of
(a) to compensate a plaintiff for loss of the use value of a damage award or compensation for delay in payment;2
(b) to prevent unjust enrichment to a defendant for the use value of the money, and
(c) to promote settlement.3
However, defendants argue that
Although no precise formula has been developed, the Court has held that the Fourteenth Amendment permits the States a wide scope of discretion in enacting laws which affect some groups of citizens differently than others. The constitutional safeguard is offended only if the classification rests on grounds wholly irrelevant to the achievement of the State‘s objective. State legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality. A statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it.
McGowan v. Maryland, 366 U.S. 420, 425-26, 6 L.Ed. 2d 393, 399 (1961).
Defendants contend that there is no rational reason why claims against self-insurers should not be subject to prejudgment interest to the same extent that claims covered by liability insurance are so subject. Defendants argue that the claim holders in both instances are similarly situated with respect to litigating claims and paying judgments and thus should not be treated differently. Either all defendants in non-contract actions should be required to pay prejudgment interest, or none should be.
In so arguing defendants overlook the fundamental differences between self-insurers and liability insurance companies. Self-insurers are basically concerned with the operation of their businesses, e.g., sales, manufacturing, utilities. The business of liability insurance companies is the receiving and investing of insurance premiums and the settling and payment of insurance claims. Self-insurers only incidentally settle claims; it is the business of liability carriers.
The General Assembly could have taken note that insurance companies have an incentive to delay litigation involving claims
Providing for prejudgment interest on claims covered by liability insurance is thus a rational step to achieve the legitimate state goals enunciated above. “[T]hose challenging the legislative judgment must convince the court that the legislative facts on which the classification is apparently based could not reasonably be conceived to be true by the government decisionmaker.” Vance v. Bradley, 440 U.S. 93, 111, 59 L.Ed. 2d 171, 184 (1979). Accord Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 469, 66 L.Ed. 2d 659, 672. Defendants have failed to meet this burden.5 Because there is a rational basis upon which the legislature could have classified defendants as it did in
Appellees in their brief attempt to raise the issue that the statute is unconstitutional as violating substantive due process rights under the fourteenth amendment to the Constitution of the
[2] Neither of these issues was presented to or passed upon by the trial court. The trial court‘s order was based solely upon the finding that the statute is unconstitutional because it violates the requirements of equal protection of the law. It is a well settled rule of this Court that we will not pass upon a constitutional question unless it affirmatively appears that such question was raised and passed upon in the court below. State v. Woods, 307 N.C. 213, 297 S.E. 2d 574 (1982); City of Durham v. Manson, 285 N.C. 741, 208 S.E. 2d 662 (1974); State v. Cumber, 280 N.C. 127, 185 S.E. 2d 141 (1971); Wilcox v. Highway Comm., 279 N.C. 185, 181 S.E. 2d 435 (1971). This is in accord with the decisions of the United States Supreme Court. Irvine v. California, 347 U.S. 128, 98 L.Ed. 561 (1954); Edelman v. California, 344 U.S. 357, 97 L.Ed. 387 (1953). While it is true that the question of the constitutionality of the statute based upon equal protection grounds was determined by the trial court, the two additional constitutional issues were not before the trial court. Nor did the defendants make cross-assignments of error.
The order of the trial court is reversed and the case is remanded to Superior Court, Mecklenburg County, for proceedings not inconsistent with this opinion.
Reversed and remanded.
Justice MEYER dissenting.
I respectfully dissent from both the reasoning and the result reached in the majority opinion. In my view the majority has effectively abrogated its responsibility to ensure that our legislature refrains from enacting laws which arbitrarily and unfairly discriminate against classes of persons in violation of their constitutional rights to equal protection. While the majority‘s analysis may possess the attribute of simplicity, it is that very
1. The statute at issue,
2. There is a “fundamental” difference between liability insurance companies and self insurers: liability insurance companies are in the “business” of insurance; self insurers “only incidentally settle claims.”
3. There is a legitimate State purpose in promoting settlement of cases.
4. Insurance companies “have an incentive to delay litigation involving claims they insure,” because they are “required by statute to establish loss reserves, which are invested for profit until specific claims are paid off.”
5. Therefore there is a rational relation between the classification, liability insurance companies, and the objective sought, to promote settlement.
A careful analysis of the above “reasoning” leads inexorably to the conclusion that the majority has discovered an excuse rather than a rational basis for this legislation.
It is true that our courts have traditionally deferred to legislative judgment in reviewing equal protection challenges involving statutes of an economic nature. See, e.g., Glusman v. Trustees, 281 N.C. 629, 190 S.E. 2d 213 (cited by the majority). The authority of the legislature to enact such statutes is not, however, unlimited and it is the duty of the reviewing court to determine whether the limits have been transgressed. The equal protection clauses of the United States Constitution and the North Carolina Constitution require that in making classifications such as the legislature has made in this case, no arbitrary distinction be drawn between similarly situated persons. See, e.g., Cheek v. City of Charlotte, 273 N.C. 293, 160 S.E. 2d 18 (1968). The test under the equal protection clauses, is whether the difference in treatment made by the law has a rea-
I find neither significant nor helpful the “fundamental” difference between liability insurance companies and self insurers observed by the majority. The question, of course, is whether this difference has a reasonable basis in relation to the goal of the legislature. In the present case, the fact that liability insurance companies are in the business of settling claims bears no relation whatsoever to the State‘s goal of promoting settlements.1 Rather, it is the majority‘s position that the goal of promoting settlement might be somewhat enhanced because these insurance companies are required by law to establish loss reserves which could result in an incentive to delay litigation.2
In support of this tenuous conclusion, the majority explains that loss reserves are invested for profit. What the majority fails
On the other hand, as the majority recognizes, self insurers and other defendants can and do delay litigation. I would point out that plaintiffs, too, delay litigation. In fact, it is frequently the plaintiff‘s decision to “hold out” for amounts in excess of insurance coverage, amounts upon which prejudgment interest is presumably not due,3 that results in failure to settle and protracted litigation. I find it patently unfair that our laws penalize a discrete minority of insurers who, with no demonstrable certainty, are charged with purposefully delaying litigation for financial gain when others similarly situated can be, and frequently are, equally dilatory. That the law is arbitrary and unreasonable with respect to liability insurance companies is demonstrated by the fact that these companies are subject to the additional assessment of prejudgment interest while others similarly situated, for no apparent reason, are not.
Furthermore, the law unreasonably discriminates against defendants covered by liability insurance who will undoubtedly bear the burden of higher insurance rates to compensate for the additional cost of prejudgment interest.
The statute also clearly discriminates amongst similarly situated plaintiffs. The law excludes:
(b) Persons or corporations obtaining bonds executed by surety companies or bonds executed by two individual sureties each owning real estate within the state (
(c) Persons or corporations meeting the requirements of the Motor Vehicles Safety and Financial Responsibility Act of 1953, by depositing $60,000.00 in cash or securities (
(d) Persons or corporations in whose name more than 25 motor vehicles are registered, who qualify as self insurers under the provisions of
(e) Governmental bodies.
As a result of these exclusions, the law arbitrarily discriminates against the class of plaintiffs who are injured by the acts of a defendant who falls into one of the above categories. The converse, of course, is that the law favors those plaintiffs who are fortunate enough to be injured by the acts of a defendant who is covered by liability insurance.4
In my opinion, this aspect of the statutory classification results in the grant of “exclusive or separate emoluments or privileges” to certain plaintiffs in violation of our constitution. See Lowe v. Tarble, 312 N.C. 467, 323 S.E. 2d 19 (1984) (Meyer, J., dissenting) (holding to the contrary). In this regard, I would simply point out that this Court would not be so eager to dismiss the equal protection challenge had the pertinent part of
The portion of all money judgments designated by the fact-finder as compensatory damages in actions other than contract shall bear interest from the time of the verdict until the
judgment is paid and satisfied EXCEPT AS TO ANY PLAINTIFF whose claim is covered by liability insurance in which event that plaintiff is entitled to interest from the time the action is instituted until the judgment is paid.
Under this language the result would be no different than it stands now under the majority‘s holding, and in my view would be unsupportable as granting to one class of plaintiffs exclusive privilege.
In conclusion,
I vote to affirm the order of the trial court denying plaintiff‘s motion for prejudgment interest.
Justices COPELAND and MITCHELL join in this dissenting opinion.