Court Opinion

ID: 9585269
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:58:28.771541+00
Date Added: 2024-06-11T15:37:35.063282
License: Public Domain

MITCHELL, Justice.
Northern National Life Insurance Company (hereinafter “Northern”), the plaintiff-appellant, contends in this appeal that the majority in the Court of Appeals erred in upholding the trial court’s refusal to grant the plaintiffs motion for a directed verdict and judgment notwithstanding the verdict. Since we find that the trial court was correct in submitting this case to the jury, we affirm the decision of the Court of Appeals.
The Lacy J. Miller Machine Company (hereinafter “Miller Company”) is a North Carolina corporation in which the decedent, Lacy J. Miller, was a majority shareholder. Miller also served on the board of directors and as president of the company. Miller was removed from office on January 28, 1980 by the board of directors. James T. Donley and Joseph Buie were members of the board of directors and minority shareholders in the corporation. Until the removal of Miller on January 28, 1980, they served as vice president and secretary-treasurer respectively.
At trial the evidence tended to show that Roger C. Brooks was an insurance agent affiliated with Equitable Life Insurance Company (hereinafter “Equitable”). When Brooks visited the Miller Company corporate offices early in 1979, Buie and Donley informed him that the company was interested in purchasing insurance on the life of Lacy J. Miller. Brooks learned from Buie and Donley that the company had a mandatory stock purchase plan whereby the company agreed to purchase shares of stock *65held by officers of the company in the event of those officers’ deaths. Brooks attempted to procure life insurance coverage for the Miller Company from Equitable on the life of Miller, but Equitable refused to issue such coverage because Miller suffered from a heart condition. Brooks testified that he continued to look for an insurance program to fund the Miller Company’s stock purchase plan.
Brooks stated that in September 1979 he placed a group hospitalization insurance policy with Equitable for the Miller Company, and that after September he visited the corporate headquarters of the company on an average of once a month. Brooks stated that late in 1979 he learned of policies offered by Northern and by Manhattan Life Insurance Company. Brooks believed that the policies might suit the Miller Company’s needs. He learned that both insurance companies offered “key man” policies to employers on the lives of important employees without requiring physical examinations for the insured employees. Brooks learned about the policies from Barney Haynes, General Agent for Manhattan and for Northern.
Brooks spoke to Buie and Donley about the Manhattan and Northern policies in January 1980. Brooks stated that Buie and Donley were “skeptical” about the likelihood that insurance could be issued on the life of Miller because of his heart condition. Brooks told Buie and Donley that the requirements under Northern’s policy were that the employer pay all premiums, that the insured not be known to be terminally ill at the time of the application or issuance of the policy, that the insured be actively involved in the fulltime pursuit of the duties of his employment, and that the insured be an employee of the employer. Brooks said he told Buie and Donley they should submit applications to Northern.
Brooks testified that he personally had questions about Miller’s eligibility for the policies because he knew from previous experience that Miller had had a heart attack and a drinking problem. Brooks stated, however, that with regard to Miller, the requirement of active fulltime employment concerned him more than any other requirement. He stated that he knew that Miller was not in his office on a forty hour a week basis but that he thought Miller was president of the company and active in deci*66sion making. Brooks told Haynes about Miller’s irregular schedule, and Haynes said that as long as Miller had a decision making role in the firm he would qualify under the plan.
Brooks testified that in late January or early February 1980 he received blank applications for the policy from Northern. He delivered a Northern application to Don R. House, attorney for the Miller Company, and he explained to House the requirements for eligibility for the policy. When that application was returned to Brooks, it was blank except for Lacy J. Miller’s signature. Brooks testified that he received at the same time nine other applications from the Miller Company for Northern’s “key man” life insurance. The applications other than the one seeking insurance on Miller’s life were signed by Buie or by Donley on behalf of the corporation. The application for insurance on Miller’s life was signed only by Miller. Brooks stated that on February 5, 1980 he filled out the remainder of the application for insurance on the life of Miller, using as his source of information his own knowledge about Miller and his experience in trying to place another policy for the Miller Company in September 1979. Brooks stated that he had also obtained information from Northern’s files and from the conversations he had with Buie and Donley in late December 1979 and early to mid-January 1980. The application completed by Brooks included the statements that Lacy J. Miller was currently an active and fulltime employee of the Miller Company and that his position was that of president with office and public relations duties. Brooks signed the application as “Licensed Resident Agent.” The completed application bore his signature and that of Lacy J. Miller, but no others.
The information on the application was inaccurate as of February 5, 1980, the day it was completed by Brooks. The application failed to disclose that on January 22, 1980 a temporary restraining order had been issued at the request of Buie, Donley and the Miller Company enjoining Miller from “taking or attempting to take any action whatsoever with regard to the assets, funds, obligations, rights, [or] employees of the corporation.” The order was issued pursuant to a lawsuit filed January 21, 1980 in Davidson County in which the plaintiffs, Buie, Donley, and the Miller Company, sought to enjoin Lacy Miller from further involvement with the corporation. In affidavits in support of the restraining order, Donley and Buie stated that Miller had been in*67active in the business since 1975, and that he had neglected his corporate duties and responsibilities. On January 28, 1980, Miller was removed as president and replaced by Donley in a meeting of the Miller Company’s Board of Directors.
After completing the application for the Northern policy on the life of Miller, Brooks submitted that application and the nine others to Barney Haynes. He stated that he did not know when he completed the application that Miller had been removed as president of the corporation, that a restraining order had been issued or that Buie and Donley had filed affidavits.
Northern received applications for the policy insuring the lives of Miller and nine other employees of the corporation on February 19, 1980. Terry L. Anderson, Chief Underwriter for Northern, stated in a deposition which was read to the jury that the applications were reviewed and approved by Northern. Before issuing the policy, however, Northern licensed Brooks as its agent. The policies were then typed and mailed to Haynes by Northern with a request for an additional premium. On April 4, 1980 the additional premium was received and found sufficient. On April 17, 1980 the insurance was considered issued by Northern, according to the testimony of Anderson. The policy was backdated to February 5, 1980, the date of application. Lacy J. Miller died May 13, 1980.
Northern brought this declaratory judgment action seeking a cancellation of the policy because of the false statements in the application. Northern sought to show that Brooks was an agent of the Miller Company and not an agent of Northern and that whatever knowledge Brooks had of the falsity of the statements was to be imputed to the Miller Company. At the close of all the evidence at trial, both Northern and the Miller Company made motions for directed verdict which the trial court denied. The following were the stipulated issues submitted to the jury and the jury’s verdicts.
1. Was Roger C. Brooks the agent of Lacy J. Miller Machine Co., Inc., in obtaining the insurance policy on the life of Lacy J. Miller?
Answer: No
*682. Was there a false statement of a material fact in the application for insurance on the life of Lacy J. Miller?
Answer: Yes
3. Was Roger C. Brooks the agent of Northern National Life Insurance Company in obtaining the insurance policy on the life of Lacy J. Miller?
Answer: Yes
4. As such, did Roger C. Brooks know or have reason to know of a false statement of a material fact in the application of the insurance on the life of Lacy J. Miller?
Answer: Yes
5. Was a false statement of material fact inserted in the application by Roger C. Brooks without the actual or implied knowledge of the Lacy J. Miller Machine Co.?
Answer: Yes
Northern moved for a judgment notwithstanding the verdict and the motion was denied. From the jury verdict and judgment awarding the Miller Company the full amount of coverage on the policy, Northern appealed.
The Court of Appeals held that there was no error in the trial court. One judge dissented on the ground that the disposition of a related case, Manhattan Life Insurance Company v. Lacy J. Miller Co., 60 N.C. App. 155, 298 S.E. 2d 190 (1982), disc. review denied, 307 N.C. 697, 301 S.E. 2d 389 (1983), governed this case and that a directed verdict for Northern should therefore have been granted. We affirm the holding of the majority in the Court of Appeals.
I.
The plaintiff-appellant Northern contends the Court of Appeals erred in holding that the trial court properly denied Northern’s motions for directed verdict and judgment notwithstanding the verdict. Northern contends there was insufficient evidence that Brooks “solicited” the Miller Company for insurance business in any manner sufficient to make him Northern’s agent. Northern further argues that, even if Brooks was its agent, there was insuf*69ficient evidence to show that he had any knowledge of the falsity of any statements in the application for the policy on the life of Miller. Northern finally contends the Court of Appeals erred by failing to follow precedent it had established in Manhattan. After considering each argument, we affirm the Court of Appeals.
We begin by reviewing familiar principles governing motions for directed verdict and motions for judgment notwithstanding the verdict. A motion for directed verdict under Rule 50 of the North Carolina Rules of Civil Procedure tests the legal sufficiency of the evidence, considered in the light most favorable to the nonmovant, to take the case to the jury. Kelly v. International Harvester Co., 278 N.C. 153, 179 S.E. 2d 396 (1971). It is only when the evidence is insufficient to support a verdict in the nonmovant’s favor that the motion for directed verdict should be granted. Snow v. Duke Power Company, 297 N.C. 591, 256 S.E. 2d 227 (1979). A verdict may never be directed when there is conflicting evidence on contested issues of fact. Cutts v. Casey, 278 N.C. 390, 180 S.E. 2d 297 (1971).
A motion for judgment notwithstanding the verdict is technically a renewal of a motion for a directed verdict. It is a motion that judgment be entered in accordance with the movant’s earlier motion for directed verdict, notwithstanding the contrary verdict actually rendered by the jury. Summey v. Cauthen, 283 N.C. 640, 197 S.E. 2d 549 (1973). The test for determining the sufficiency of the evidence when ruling on a motion for judgment notwithstanding the verdict is the same as that applied when ruling on a motion for directed verdict. Id.
It is proper to direct a verdict for a moving party with the burden of proof only if the credibility of the movant’s evidence is manifest as a matter of law. North Carolina National Bank v. Burnette, 297 N.C. 524, 256 S.E. 2d 388 (1979). In Burnette this Court recognized that, although it is futile to state a general rule for use in the determination of manifest credibility, recurring situations where credibility is manifest include:
(1) Where the nonmovant establishes proponent’s case by admitting the truth of the basic facts upon which the claim of proponent rests.
*70(2) Where the controlling evidence is documentary and nonmovant does not deny the authenticity or the correctness of the documents.
(3) Where there are only latent doubts as to the credibility of oral testimony and the opposing party has “failed to point to specific areas of impeachment and contradictions.”
297 N.C. at 537-38, 256 S.E. 2d at 396 (citations omitted).
The movant in this case was the plaintiff Northern, the party with the burden of proof. Northern contends that, since the determination whether Brooks was agent for the Miller Company or for Northern is the crucial issue in this case, Northern was entitled to a directed verdict because the record is devoid of any evidence to impeach Brooks or contradict his assertions that he acted as agent for the Miller Company. Northern points to the third situation in which credibility may be manifest and argues that there was at best only latent doubt as to Brooks’ agency with the Miller Company. We do not agree.
Since we find that there was substantial evidence that Brooks solicited the insurance business of the Miller Company and was therefore the agent of the insurance company under G.S. 58-197, we do not find Brooks’ declarations that he was agent for the Miller Company controlling on the question of agency. Although testimony by an insurance agent as to his authority to bind an insurance company is competent on that question, it is not conclusive. Wiles v. Mullinax, 275 N.C. 473, 168 S.E. 2d 366 (1969). We are not persuaded that this case presents the kind of situation in which credibility is manifest and in which a verdict should be directed in favor of the party with the burden of proof.
Even without reliance on principles which advise against directing verdicts for parties with the burden of proof, we find the trial court properly refused to grant a directed verdict or judgment notwithstanding the verdict for Northern. Northern seeks to avoid liability on the policy on Miller’s life because of the false material representations in the application. Both parties acknowledge that the dispositive question in this appeal is whether the misrepresentations in the application should be attributed to Northern or to the Miller Company. An insurance *71company is not bound by a contract for insurance where the insured makes representations that are false and material. Tolbert v. Mutual Benefit Life Insurance Co., 236 N.C. 416, 72 S.E. 2d 915 (1952). But it is well established that an insurance company cannot avoid liability on a policy on the basis of facts known to it at the time the policy went into effect. Cox v. Equitable life Assurance Society, 209 N.C. 778, 185 S.E. 12 (1936); Willetts v. Integon Insurance Corp., 45 N.C. App. 424, 263 S.E. 2d 300, disc. review denied, 300 N.C. 562, 270 S.E. 2d 116 (1980). Furthermore, the knowledge of its agent is imputed to the insurer, absent collusion and fraud. Cox v. Equitable Life Assurance Society, 209 N.C. 778, 185 S.E. 12 (1936).
Since it is undisputed in this case that Brooks completed the blank application over Miller’s signature, the dispositive question is whether Brooks was the agent for the Miller Company or for Northern. G.S. 58-197 provides that:
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 insured.
The plaintiff argues that the Court of Appeals erred when it held that the evidence that Brooks “solicited” the Miller Company’s application and was therefore agent of the insurance company was sufficient to take to the jury. We do not agree.
We note that a majority of states have a statute similar to G.S. 58-197. See R. Anderson, 3 Couch on Insurance 2d, § 26:15 (1960). 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. See, e.g. Paulson v. Western Life Insurance Co., 292 Or. 38, 636 P. 2d 935 (1981) (analyzing the history and purpose of an almost identical statute).
Other jurisdictions have interpreted the term “solicit” in solicitation statutes in a variety of ways, generally finding solicitation where a person holds himself or herself out as an in*72surance agent, inviting or receiving insurance business, delivering policies and receipts, or where a person procures an application for insurance upon which an insurer issues a policy. R. Anderson, 3 Couch on Insurance 2d, § 26:17 (1960). As the Court of Appeals majority pointed out, the term “solicit” is defined neither by statute nor by case law in this State. The Court of Appeals appropriately determined that “solicit” must therefore be interpreted to further the intent of the legislature and, absent a special definition, that the term must be given its ordinary meaning. Because there was sufficient evidence that Brooks “solicited,” using the ordinary meaning of the term, we find it unnecessary to reach a precise definition of solicitation as it is used in G.S. 58-197.
Northern argues that the evidence precluded any reasonable inference that Brooks solicited the Miller Company within the meaning of the statute. Northern points out that Brooks was not licensed with Northern, had never done any business with Northern and in fact had never heard of it until he sought key man life insurance policies for the Miller Company. Also, Brooks testified that he acted “per se” as an agent for the Miller Company in trying to service the company as one of his better clients. We find the plaintiffs argument unpersuasive.
In deciding that there was sufficient evidence of solicitation on the part of Brooks to take the case to the jury, we note that he regularly called upon the Miller Company on an average of once per month. He acknowledged that he first learned of the Miller Company’s need for key man policies when he visited the headquarters in March 1979. Brooks tried to find a suitable policy and when he learned of the Northern plan he approached Buie and Donley, corporate officers of the Miller Company, and told them about that plan. He obtained more information and sought and received blank applications for insurance policies with Northern from Northern’s General Agent Barney Haynes. Brooks delivered the applications, completed one for insurance on Miller and others, and signed the one for insurance on Miller as “Licensed Registered Agent.” Brooks also collected the premiums for Northern and sent them to Haynes. After Northern approved the applications, it licensed Brooks as its agent and paid him a commission. Brooks testified that the Miller Company never paid him a commission.
*73Using the ordinary meaning of the term “solicit” we find that where, as here, there is evidence that a person actively participated in the placement of a life insurance policy by approaching corporate officers with information about the policy, obtaining and completing blank applications for the policy, collecting premiums, distributing policies, and collecting a commission, there is ample evidence that the person has “solicited” an application for insurance upon the life of another within the meaning of G.S. 58-197. We find that the evidence was sufficient in this case to submit to the jury the question whether Brooks was the agent of Northern.
Although the point has not been raised on appeal, we note that throughout the briefs and records of this case, Brooks is referred as as an “insurance broker.” A broker is statutorily defined by G.S. 58-39.4(b) as follows:
An insurance broker is hereby defined to be an individual who being a licensed agent, procures insurance through a duly authorized agent of an insurer for which the broker is not authorized to act as agent.
The authority of a broker is defined by G.S. 58-40.3(a) as follows:
A broker, as such, is not an agent or other representative of an insurer, and does not have the power, by his own act, to bind an insurer for which he is not agent upon any risk or with reference to any insurance contract.
There is some authority in this State that a broker is the agent for an insured rather than for the insurance company. See, e.g., Collins v. Quincy Mutual Fire Insurance Co., 39 N.C. App. 38, 249 S.E. 2d 461 (1978), aff'd, 297 N.C. 680, 256 S.E. 2d 718 (1979); Williams v. Canal Insurance Company, 21 N.C. App. 658, 205 S.E. 2d 331 (1974). In Collins this Court implied in dicta that a broker is an agent of the insured and not the insurer when we stated that the question presented in that case would not have arisen
had the broker, through whom plaintiff sought insurance, been an agent of defendant. In such case, the agent’s knowledge that plaintiff was acting on behalf of himself and his co-tenants would have been imputed to the [defendant] insurer. . . .
297 N.C. at 686, 256 S.E. 2d at 721 (emphasis original).
*74The view of a broker’s authority found in G.S. 58-40.3 and in the Collins dicta does not conflict with our interpretation of the solicitation statute, G.S. 58-197. Although G.S. 58-40.3 states that a broker as such is not the agent of an insurance company, a broker or other person who “solicits an application for insurance upon the life of another” is an agent of the insurance company by the express terms of G.S. 58-197. Likewise, although this Court in Collins stated that the broker was not the agent of the insurer, Collins does not stand for the proposition that a broker may not be an agent of an insurer. Where a broker “solicits” within the meaning of G.S. 58-197, he is deemed an agent of the insurer in situations covered by that statute. The evidence in this case was sufficient to permit the jury to find that Brooks was Northern’s agent even if he was a broker.
II.
The plaintiff Northern next contends that the evidence did not support the conclusion that Brooks had any knowledge of the falsity of the statements in the application. Northern argues that the Court of Appeals’ failure to reverse the trial court was therefore error. Northern acknowledges that Brooks stated that he knew Miller had had a heart attack in 1977 and was often absent from work. It is Northern’s contention, however, that Brooks did not know that Miller had been removed from office or that Buie and Donley had sworn in affidavits that Miller was inactive. Brooks stated that he received some of the information he placed on the application from Buie and Donley. Northern argues that those officers of the Miller Company acted in bad faith in failing to tell Brooks the true facts.
Whether answers on an application for insurance are attributable to the agent of the insurer or to the insured must be resolved by the factfinder. Chavis v. Home Security Life Insurance Co., 251 N.C. 849, 112 S.E. 2d 574 (1960). Furthermore, where incorrect answers are inserted by an agent of the insurer without the knowledge of the applicant the answers will not vitiate the policy absent fraud or collusion on the part of the applicant. Heilig v. Home Security Life Insurance Co., 222 N.C. 231, 22 S.E. 2d 429 (1942); see also Mathis v. Minnesota Mutual Life Insurance Co., 302 F. Supp. 998 (M.D.N.C. 1969) (interpreting North Carolina law).
*75In the case before us, Brooks stated that he completed the application for insurance on the life of Miller using information he had obtained from personal knowledge he had gained when dealing with the Miller Company in September of 1979. He also obtained information from Northern files and from Buie and Donley. Brooks testified that although he was not sure about when he confirmed from Buie and Donley that Miller was president of the corporation, he thought it was in mid-January during the investigational stages of placing the policy. Miller was removed from office on January 28, 1980. Brooks testified that he did not remember asking questions related to Miller’s employment status at the time he completed the application. We believe there was sufficient evidence that Brooks completed the application without properly soliciting information from the Miller Company to submit to the jury the question whether the misrepresentations were attributable to Brooks or to the Miller Company.
Additionally, evidence was introduced from which the jury could have inferred that Brooks was put on actual notice that Miller did not work fulltime. The knowledge of an agent is imputed to the insurer when the agent acts within the scope of his authority and in the absence of fraud or collusion. Cox v. Equitable Life Assurance Society, 209 N.C. 778, 185 S.E. 12 (1936). Knowledge of facts which the insurer has or should have had constitutes notice of whatever an inquiry into such facts would have disclosed and is binding on the insurer. Whatever puts a person on inquiry amounts in law to “notice” of such facts as an inquiry pursued with reasonable diligence and understanding would have disclosed. Gouldin v. Inter-Ocean Insurance Co., 248 N.C. 161, 102 S.E. 2d 846 (1958).
The facts of this case disclose that Brooks was aware that Miller was rarely in his office. Brooks testified that the Equitable Life Insurance Company for whom he was an agent had waived its “actively at work” requirement for Miller on one of its policies issued for the Miller Company. As a result of Brooks’ exposure to the Miller Company and Miller, Brooks made a specific inquiry of Northern’s General Agent Haynes to find out precisely how “full-time” was defined under Northern’s fulltime work requirement. Brooks stated that that requirement was the one which troubled him most with regard to Miller. Furthermore, when the application on Miller’s life came to Brooks, it was blank except for the *76signature of Miller. The other applications were signed either byBuie or by Donley as corporate officers of the corporation. The only application bearing Miller’s signature was the policy insuring Miller himself.
We conclude that, considering the facts in the light most favorable to the defendant, the jury could have found Brooks knew or had reason to know that Miller was not a fulltime employee. Since the evidence also would support a jury finding that Brooks’ actions amounted to solicitation and that he was an agent for Northern, the jury properly could have imputed Brooks’ actual or constructive knowledge to Northern.
III.
The plaintiff Northern argues that stare decisis compelled the Court of Appeals to follow the precedent established by another panel of the Court of Appeals which upheld summary judgment for the insurance company in a related case, Manhattan Life Insurance Company v. Lacy J. Miller Machine Company, 60 N.C. App. 155, 298 S.E. 2d 190 (1982), disc. rev. denied, 307 N.C. 697, 301 S.E. 2d 389 (1983). We disagree.
We note at the outset that the doctrine of stare decisis is not determinative on the appeal to this Court of the case at hand. It is fundamental that the highest court of a jurisdiction may overrule precedents established by decisions of intermediate appellate courts. 20 Am. Jur. 2d Courts, § 231 (1965). This Court is not bound by precedents established by the Court of Appeals. Although this Court denied a petition for discretionary review in Manhattan, we have often stated that such a denial does not constitute approval of the decision of the Court of Appeals. It may mean only that no harmful result is likely to arise from the Court of Appeals’ opinion. See Peaseley v. Virginia Iron, Coal and Coke Co., 282 N.C. 585, 194 S.E. 2d 133 (1973).
Northern argues, however, that the panel of the Court of Appeals which decided this case was bound by Manhattan. In rejecting this argument, we find it suffices to say that the procedural issues in this case are substantially different from those in Manhattan, and that the doctrine of stare decisis did not compel a different decision by the Court of Appeals than that it reached.
*77Holding that the trial court correctly denied both the defendant’s and the plaintiffs motions for directed verdict and judgment notwithstanding the verdict, we affirm the decision of the Court of Appeals for the reasons previously stated herein.
Affirmed.