Court Opinion

ID: 9575781
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:17:08.448011+00
Date Added: 2024-06-11T12:50:03.404887
License: Public Domain

Justice FRYE
dissenting in part.
I respectfully dissent from that part of the Court’s opinion which holds the surety liable for only one-third of the judgment entered against the principal, Camel City Motors. For the reasons outlined below, I believe the surety is liable for the full damage award of $10,379.16.
It is hornbook law that a surety is one who is “primarily liable for the payment of the debt or the performance of the obligation of another.” Branch Banking & Trust Co. v. Creasy, 301 N.C. 44, 52, 269 S.E.2d 117, 122 (1980). Having conceded it is the surety for defendant Camel City Motors, defendant Lawyers Surety Corporation (Lawyers Surety) is liable for the entire judgment unless it is somehow relieved of its duty by statute, contract or other legally enforceable limitation. The Court correctly points out that the only limitation of liability under N.C.G.S. § 20-288(e) is the $15,000 bond amount. Defendant Lawyers Surety does not argue any contract limitation.
The Court, however, recognizes a well-established public policy exception to the general rule that a surety is liable for the debts *83and obligations of its principal. Many courts have held, for obvious policy reasons, that a surety is not liable for punitive, exemplary or statutory penal damages. See, e.g., Darr v. Long, 313 N.W.2d 215 (Neb. 1981); Butler v. United Pacific Ins. Co., 509 P.2d 1184 (Or. 1973). The Court today joins these courts because “enforcing the exemplary and punitive damages against the surety would not produce the deterrent effect that is the purpose behind the statute [N.C.G.S. § 75-16].” Tomlinson v. Camel City Motors, 330 N.C. 76, 408 S.E.2d 853. I do not disagree. The issue in this case, however, is whether the disputed portion of the damage award, i.e., $6,919.44, is an award for exemplary and punitive damages, and therefore within the public policy exception. I do not believe it is, and therefore conclude that the surety is liable for the entire judgment entered against Camel City Motors.
Punitive damages have been consistently allowed in North Carolina “on the basis of its policy to punish intentional wrongdoing and deter others from similar behavior.” Newton v. Standard Fire Ins. Co., 291 N.C. 105, 113, 229 S.E.2d 297, 301 (1976) (emphasis added). The trebling statute in this case, by contrast, requires no evil intent and is only partially punitive in nature. Marshall v. Miller, 302 N.C. 539, 546, 276 S.E.2d 397, 402 (1981). As the Court said in Marshall-.
To begin with, it is an oversimplification to characterize G.S. 75-16 as punitive. The statute is partially punitive in nature in that it clearly serves as a deterrent to future violations. But it is also remedial for other reasons, among them the fact that it encourages private enforcement and the fact that it provides a remedy for aggrieved parties. It is, in effect, a hybrid.
Id. See also Holley v. Coggin Pontiac, Inc., 43 N.C. App. 229, 237, 259 S.E.2d 1, 6-7, disc. rev. denied, 298 N.C. 806, 261 S.E.2d 919 (1979) (“Having multiple objectives of which some are not penal in nature, the statute cannot be deemed a penal statute . . . .”). While noting, that many of our sister states require a finding of intentional wrongdoing to trigger treble damages for unfair trade practices, such damages under N.C.G.S. § 75-16 are “automatic once a violation is shown.” Marshall v. Miller, 302 N.C. at 547, 276 S.E.2d at 402. The intent of the actor is irrelevant under N.C.G.S. § 75-16. Id. at 548, 276 S.E.2d at 403. To treat N.C.G.S. § 75-16 as primarily a penal statute, and therefore within the public policy *84exception to general surety principles, is, I believe, inconsistent with this Court’s previous holdings.
The Court seizes upon the word “suffers” in N.C.G.S. § 20-288(e), and points to Darr v. Long, 313 N.W.2d 215, to support its holding that the surety is not liable for treble damages in this case. A careful reading of Darr, however, belies this conclusion.
In Darr, treble damages were assessed against a car dealer for rolling back the mileage on used cars. The judgment was entered pursuant to 15 U.S.C. § 1989, which mandates treble damages for anyone who, “with intent to defraud, violates any requirement imposed under this subchapter . . . .” Darr v. Long, 313 N.W.2d at 217; 15 U.S.C. § 1989 (1982) (emphasis added). The subchapter violated in Darr was 15 U.S.C. § 1984, which makes it illegal for anyone to reset or alter odometers with intent to change the mileage. Id.-, 15 U.S.C. § 1984 (1982). Under Neb. Rev. Stat. § 60-1419, a motor vehicle dealer is required to furnish a surety bond to indemnify any person for “any loss suffered” because of fraudulent practices. Darr v. Long, 313 N.W.2d at 216; Neb. Rev. Stat. § 60-1419 (Reissue 1978). After reviewing federal case law, the Nebraska Supreme Court concluded that 15 U.S.C. § 1989 is designed to punish or deter fraudulent auto dealers and to reward customers for bringing suit. Darr v. Long, 313 N.W.2d at 220. Thus, the court held that the surety was not liable for treble damages because 15 U.S.C. § 1989 is not designed to compensate an injured party for a “loss suffered.”
The statute at issue in this case, N.C.G.S. § 20-288(e), also speaks of loss “suffered.” Thus, reasons the Court, the same result should follow in this case as in Darr. What the Court fails tó recognize, however, is that the Nebraska statute in Darr was interpreted in light of a federal trebling statute which requires evil intent and is primarily punitive in nature. By contrast, N.C.G.S. § 75-16 does not require bad faith and is not primarily a penal statute.
To decide this case, we must interpret N.C.G.S. § 20-288(e) in light of the automatic trebling provision of N.C.G.S. § 75-16. When this is done, we come to the inescapable conclusion that the losses “suffered” by the plaintiff under N.C.G.S. § 20-288(e) in this case equal the entire amount of the judgment entered against Camel City Motors. The public policy exception relied on in Darr is simply not applicable to a situation such as this in which good faith is irrelevant and deterrence is not the overriding goal.
*85Having determined that this case does not fall within the public policy exception to general surety principles, I would hold Lawyers Surety liable for the full default judgment. I concur with all other portions of the Court’s opinion.